SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
...X..Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
June 30, 1995
For the quarterly period ended.............................................
Or
......Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________________ to _______________________
Commission File Number 1-3779
SAN DIEGO GAS & ELECTRIC COMPANY
............................................................................
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-1184800
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 ASH STREET, SAN DIEGO, CALIFORNIA 92101
................................................................................
(Address of principal executive offices) (Zip Code)
(619) 696-2000
Registrant's telephone number, including area code..............................
No Change
................................................................................
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes...X... No......
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
116,538,035
Common Stock outstanding July 31, 1995 ........................................
PART I - FINANCIAL INFORMATION
SAN DIEGO GAS & ELECTRIC COMPANY
STATEMENTS OF CONSOLIDATED INCOME
(In thousands except per share amounts)
Three Months Ended
June 30,
1995 1994
----------- -----------
(Unaudited)
Operating Revenues
Electric . . . . . . . . . . . . . . $ 354,716 $ 352,013
Gas . . . . . . . . . . . . . . . . . 76,745 78,260
Diversified operations . . . . . . . 13,778 13,777
----------- -----------
Total operating revenues . . . . . 445,239 444,050
----------- -----------
Operating Expenses
Electric fuel . . . . . . . . . . . . 20,481 33,490
Purchased power . . . . . . . . . . . 84,937 81,442
Gas purchased for resale . . . . . . 28,477 31,071
Maintenance . . . . . . . . . . . . . 17,425 16,209
Depreciation and decommissioning . . 68,027 65,008
Property and other taxes . . . . . . 11,191 11,119
General and administrative . . . . . 44,630 61,762
Other . . . . . . . . . . . . . . . . 52,547 50,481
Income taxes . . . . . . . . . . . . 38,036 29,659
----------- -----------
Total operating expenses . . . . . 365,751 380,241
----------- -----------
Operating Income . . . . . . . . . . . 79,488 63,809
----------- -----------
Other Income and (Deductions)
Writedown of real estate. . . . . . . - (25,000)
Allowance for equity funds used
during construction . . . . . . . . 1,453 2,155
Taxes on nonoperating income . . . . 1,398 10,038
Other - net . . . . . . . . . . . . . (3,350) (1,072)
----------- -----------
Total other income and (deductions) (499) (13,879)
----------- -----------
Income Before Interest Charges. . . . . 78,989 49,930
----------- -----------
Interest Charges
Long-term debt . . . . . . . . . . . 25,355 22,782
Short-term debt and other . . . . . . 4,411 3,406
Allowance for borrowed funds used
during construction . . . . . . . . (671) (1,064)
----------- -----------
Net interest charges . . . . . . . 29,095 25,124
----------- -----------
Income from Continuing Operations . . . 49,894 24,806
Discontinued Operations, Net
of Income Taxes . . . . . . . . . . . (678) (58,025)
----------- -----------
Net Income (Loss) (before preferred
dividend requirements) . . . . . . . . 49,216 (33,219)
Preferred Dividend Requirements . . . . 1,915 1,915
----------- -----------
Earnings (Loss) Applicable
to Common Shares . . . . . . . . . . . $ 47,301 $ (35,134)
=========== ===========
Average Common Shares Outstanding . . . 116,534 116,473
=========== ===========
Earnings Per Common Share - Continuing
Operations. . . . . . . . . . . . . . $ 0.41 $ 0.20
=========== ===========
Earnings (Loss) Per Common Share. . . . $ 0.41 $ (0.30)
=========== ===========
Dividends Declared Per Common Share . . $ 0.39 $ 0.38
=========== ===========
See notes to consolidated financial statements.
2
PART I - FINANCIAL INFORMATION
SAN DIEGO GAS & ELECTRIC COMPANY
STATEMENTS OF CONSOLIDATED INCOME
(In thousands except per share amounts)
Six Months Ended
June 30,
1995 1994
----------- -----------
(Unaudited)
Operating Revenues
Electric . . . . . . . . . . . . . . $ 734,004 $ 727,917
Gas . . . . . . . . . . . . . . . . . 161,323 177,110
Diversified operations . . . . . . . 27,867 27,002
----------- -----------
Total operating revenues . . . . . 923,194 932,029
----------- -----------
Operating Expenses
Electric fuel . . . . . . . . . . . . 44,329 68,366
Purchased power . . . . . . . . . . . 171,201 162,967
Gas purchased for resale . . . . . . 63,142 80,745
Maintenance . . . . . . . . . . . . . 36,708 32,570
Depreciation and decommissioning . . 135,845 129,067
Property and other taxes . . . . . . 22,679 22,496
General and administrative . . . . . 85,587 107,023
Other . . . . . . . . . . . . . . . . 104,483 102,726
Income taxes . . . . . . . . . . . . 86,077 78,178
----------- -----------
Total operating expenses . . . . . 750,051 784,138
----------- -----------
Operating Income . . . . . . . . . . . 173,143 147,891
----------- -----------
Other Income and (Deductions)
Writedown of real estate . . . . . . - (25,000)
Allowance for equity funds used
during construction . . . . . . . . 3,013 4,840
Taxes on nonoperating income . . . . 1,177 9,502
Other - net . . . . . . . . . . . . . (2,945) (341)
----------- -----------
Total other income and (deductions) 1,245 (10,999)
----------- -----------
Income Before Interest Charges. . . . . 174,388 136,892
----------- -----------
Interest Charges
Long-term debt . . . . . . . . . . . 49,646 45,290
Short-term debt and other . . . . . . 8,891 6,252
Allowance for borrowed funds used
during construction . . . . . . . . (1,383) (2,238)
----------- -----------
Net interest charges . . . . . . . 57,154 49,304
----------- -----------
Income from Continuing Operations 117,234 87,588
Discontinued Operations, Net
of Income Taxes. . . . . . . . . . . . (6,168) (61,011)
----------- -----------
Net Income (before preferred dividend
requirements) . . . . . . . . . . . . 111,066 26,577
Preferred Dividend Requirements . . . . 3,831 3,831
----------- -----------
Earnings Applicable to Common Shares. . $ 107,235 $ 22,746
=========== ===========
Average Common Shares Outstanding . . . 116,533 116,482
=========== ===========
Earnings Per Common Share - Continuing
Operations. . . . . . . . . . . . . . $ 0.97 $ 0.72
=========== ===========
Earnings Per Common Share . . . . . . . $ 0.92 $ 0.20
=========== ===========
Dividends Declared Per Common Share . . $ 0.78 $ 0.76
=========== ===========
See notes to consolidated financial statements.
3
SAN DIEGO GAS & ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
June 30, December 31,
1995 1994
------------ ------------
(Unaudited)
ASSETS
Utility plant - at original cost . . . . . . . . $5,406,667 $5,329,179
Accumulated depreciation and decommissioning . . (2,299,220) (2,180,087)
------------ ------------
Utility plant-net . . . . . . . . . . . . . . 3,107,447 3,149,092
------------ ------------
Investments and other property . . . . . . . . . 502,429 465,918
------------ ------------
Current assets
Cash and temporary investments . . . . . . . . 52,629 25,405
Funds held for debt retirement . . . . . . . . 74,632 -
Accounts receivable . . . . . . . . . . . . . 160,948 187,988
Notes receivable . . . . . . . . . . . . . . . 33,194 31,806
Inventories . . . . . . . . . . . . . . . . . 78,382 75,607
Other . . . . . . . . . . . . . . . . . . . . 35,957 34,022
------------ ------------
Total current assets . . . . . . . . . . . 435,742 354,828
------------ ------------
Deferred taxes recoverable in rates . . . . . . 290,535 305,717
------------ ------------
Deferred charges and other assets . . . . . . . 334,418 322,881
------------ ------------
Total . . . . . . . . . . . . . . . . . . $4,670,571 $4,598,436
============ ============
CAPITALIZATION AND LIABILITIES
Capitalization
Common equity . . . . . . . . . . . . . . . . $1,490,719 $1,474,430
Preferred stock:
Not subject to mandatory redemption . . . . 93,493 93,493
Subject to mandatory redemption . . . . . . 25,000 25,000
Long-term debt . . . . . . . . . . . . . . . . 1,381,086 1,339,201
------------ ------------
Total capitalization . . . . . . . . . . . 2,990,298 2,932,124
------------ ------------
Current liabilities
Short-term borrowings . . . . . . . . . . . . - 89,325
Long-term debt redeemable within one year . . 189,350 115,000
Current portion of long-term debt . . . . . . 45,115 35,031
Accounts payable . . . . . . . . . . . . . . . 86,878 130,157
Dividends payable . . . . . . . . . . . . . . 47,364 46,200
Taxes accrued . . . . . . . . . . . . . . . . 45,442 5,519
Interest accrued . . . . . . . . . . . . . . . 21,115 23,372
Regulatory balancing accounts
overcollected-net. . . . . . . . . . . . . . 122,742 111,731
Other . . . . . . . . . . . . . . . . . . . . 113,866 113,815
------------ ------------
Total current liabilities . . . . . . . . 671,872 670,150
------------ ------------
Customer advances for construction . . . . . . . 34,549 36,250
------------ ------------
Accumulated deferred income taxes-net . . . . . 501,898 513,592
------------ ------------
Accumulated deferred investment tax credits . . 106,507 109,161
------------ ------------
Deferred credits and other liabilities . . . . . 365,447 337,159
------------ ------------
Total . . . . . . . . . . . . . . . . . . $4,670,571 $4,598,436
============ ============
See notes to consolidated financial statements.
4
SAN DIEGO GAS & ELECTRIC COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In thousands of dollars)
Six Months Ended
June 30,
1995 1994
-------- --------
(Unaudited)
Cash Flows from Operating Activities
Income from Continuing Operations. . . . . . . . . . . . $117,234 $ 87,588
Adjustments to reconcile income from continuing
operations to net cash provided by operating activities
Writedown of real estate and other assets . . . . . . -- 37,000
Depreciation and decommissioning. . . . . . . . . . . 135,845 129,067
Amortization of deferred charges and other assets . . 6,392 6,704
Amortization of deferred credits
and other liabilities . . . . . . . . . . . . . . . (16,147) (16,149)
Allowance for equity funds used during construction . (3,013) (4,840)
Deferred income taxes and investment tax credits . . (4,511) (16,074)
Other-net . . . . . . . . . . . . . . . . . . . . . . 19,811 27,925
Changes in working capital components
Accounts and notes receivable . . . . . . . . . . . . 25,652 15,950
Regulatory balancing accounts . . . . . . . . . . . . 11,011 6,507
Inventories . . . . . . . . . . . . . . . . . . . . . (2,775) (9,864)
Other current assets. . . . . . . . . . . . . . . . . (1,935) 333
Accrued interest and taxes . . . . . . . . . . . . . 36,623 31,679
Accounts payable and other current liabilities. . . . (43,228) (42,113)
Cash flows provided (used) by discontinued operations. . (168) 4,873
--------- ---------
Net cash provided by operating activities . . . . . 280,791 258,586
--------- ---------
Cash Flows from Financing Activities
Dividends paid. . . . . . . . . . . . . . . . . . . . (93,563) (91,140)
Short-term borrowings-net . . . . . . . . . . . . . . (89,325) (47,197)
Issuance of long-term debt. . . . . . . . . . . . . . 124,641 --
Repayment of long-term debt . . . . . . . . . . . . . (26,063) (16,029)
Funds held for debt retirement. . . . . . . . . . . . (74,632) --
Redemption of common stock. . . . . . . . . . . . . . (50) (938)
--------- ---------
Net cash used by financing activities . . . . . . . (158,992) (155,304)
--------- ---------
Cash Flows from Investing Activities
Utility construction expenditures . . . . . . . . . . (91,225) (134,690)
Withdrawals from construction trust funds . . . . . . -- 58,042
Contributions to decommissioning funds . . . . . . . (11,016) (11,016)
Other-net . . . . . . . . . . . . . . . . . . . . . . 2,544 (1,925)
Discontinued operations . . . . . . . . . . . . . . . 5,122 (15,391)
--------- ---------
Net cash used by investing activities . . . . . . . (94,575) (104,980)
--------- ---------
Net increase (decrease). . . . . . . . . . . . . . . . . . 27,224 (1,698)
Cash and temporary investments, beginning of period . . . 25,405 12,711
--------- ---------
Cash and temporary investments, end of period . . . . . . $ 52,629 $ 11,013
========= =========
Supplemental Disclosure of Cash Flow Information
Income tax payments . . . . . . . . . . . . . . . . . $ 47,240 $ 39,041
========= =========
Interest payments, net of amounts capitalized . . . . $ 59,411 $ 49,756
========= =========
Supplemental Schedule of Noncash Investing
and Financing Activities
Real estate investments . . . . . . . . . . . . . . . $ 25,303 $ 5,586
Cash paid . . . . . . . . . . . . . . . . . . . . . . (250) (52)
--------- ---------
Liabilities assumed . . . . . . . . . . . . . . . . . $ 25,053 $ 5,534
========= =========
See notes to consolidated financial statements.
5
SAN DIEGO GAS & ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. GENERAL
SDG&E believes all adjustments necessary to present a fair
statement of the consolidated financial position and results
of operations for the periods covered by this report,
consisting of recurring accruals, have been made. Certain
prior year amounts have been reclassified for comparability.
SDG&E's significant accounting policies are described in the
notes to consolidated financial statements in its 1994
Annual Report to Shareholders. SDG&E follows the same
accounting policies for interim reporting purposes.
This report should be read in conjunction with SDG&E's 1994
Annual Report on Form 10-K and its Quarterly Report on Form
10-Q for the three months ended March 31, 1995. The
consolidated financial statements and Management's
Discussion & Analysis of Financial Condition and Results of
Operations included in SDG&E's 1994 Annual Report to
Shareholders were incorporated by reference into SDG&E's
1994 Annual Report on Form 10-K and filed as an exhibit
thereto.
2. MATERIAL CONTINGENCIES
INDUSTRY RESTRUCTURING - CALIFORNIA PUBLIC UTILITIES
COMMISSION
On May 24, 1995 the CPUC voted 3-1 approving a tentative
plan for restructuring California's electric industry with a
wholesale power pool to begin by January 1997. The plan
would allow the state's investor-owned utilities to remain
in the business of owning and operating power plants for
utility-owned generation. The pool, operated by an
independent party, would provide for economic dispatch of
competing generation facilities based on spot-market
clearing prices similar to a commodities market. After two
years, if jurisdictional and market power issues are
resolved and transition cost recovery mechanisms are in
place, retail consumers would be able to buy electricity
directly from specific generators. The dissenting
commissioner presented an alternative plan calling for
direct power sales to all customers, including residential
customers, by 1997.
The proposed majority plan supports the continued
development of performance-based ratemaking. In addition,
the CPUC stated that it is committed to industry
restructuring in a manner that "...does not compromise the
financial integrity of the utilities and continues to
provide them with a reasonable opportunity to earn a fair
profit...." Additional hearings will be held prior to the
issuance of the CPUC's final policy decision. The CPUC's
timetable provides that its policy decision will be issued
no sooner than August 23, 1995 and become effective no
sooner than 100 days after the issuance of its final
decision. SDG&E and the CPUC believe that no state or
federal laws need to be changed in order for the CPUC's
proposal to go forward, although the California legislature
does not agree. The California legislature is currently
reviewing the CPUC's proposal and plans to hold hearings
commencing in August 1995. On July 24, 1995 SDG&E filed
comments in support of the CPUC's majority plan.
At June 30, 1995 SDG&E had approximately $960 million of net
utility plant (including approximately $750 million of
nuclear facilities) and $60 million of deferred taxes and
regulatory assets (included in "Deferred Charges and Other
Assets" on the Consolidated Balance Sheets) relating to
generating facilities currently being recovered in rates
over various periods of time. In addition, SDG&E has long-
term purchased-power commitments totaling $3.9 billion with
various utilities and other providers. Further, the CPUC's
recent Biennial Resource Plan Update decision requires SDG&E
to contract for an additional 500 megawatts of power over 17
to 30-year terms at an estimated cost of $4.8 billion
beginning in 1997. Prices under these contracts are
estimated to exceed future market prices by $500 million.
SDG&E challenged the decision and petitioned the Federal
Energy Regulatory Commission to overrule it. In February
1995 the FERC ruled favorably on SDG&E's petition. However,
the CPUC and others are unwilling to accept the FERC
decision as either appropriate or final. See additional
discussion of the BRPU proceeding in Management's Discussion
and Analysis of Financial Condition and Results of
Operations.
6
SAN DIEGO GAS & ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
If the CPUC proceeds with the move to a more competitive
environment, if the prices of competing suppliers are as
anticipated, and if the regulatory process does not provide
for complete recovery of those costs that are in excess of
what will otherwise be recoverable via market-based pricing
structures, SDG&E would incur a charge against earnings for
a significant portion of its generating facilities, the
related regulatory assets and the long-term commitments.
However, the CPUC has indicated that any otherwise
unrecovered amounts will be provided for in the new
environment. SDG&E cannot at this time predict the impact of
the CPUC's tentative decision and the transition to a more
competitive environment on SDG&E's financial condition and
results of operations.
SDG&E believes that changes in the California utility
industry and the movement toward a more competitive
marketplace will require SDG&E to change its corporate
structure. SDG&E is presently considering various strategies
for the separation of its power generation and transmission
assets from its other utility assets, much of which is
dependent on the outcome of the CPUC industry restructuring
proceedings and the FERC wholesale open access rule-making
proceedings (see below). In connection with the proposed
industry restructuring, SDG&E has applied to the CPUC for
permission to form a holding company. A holding company
structure would, among other things, provide a platform for
the separation of SDG&E's generation and transmission
assets. The CPUC's Division of Ratepayer Advocates has
recommended against approval of the holding company or, in
the alternative, that approval include several conditions,
some of which are onerous. To date, the holding company
proposal has been approved by the FERC, the Nuclear
Regulatory Commission and SDG&E shareholders. SDG&E
anticipates forming the holding company shortly after
receiving final approval from the CPUC, whose decision is
expected in the fourth quarter of 1995. See additional
discussion concerning the holding company application in
Management's Discussion and Analysis of Financial Condition
and Results of Operations.
INDUSTRY RESTRUCTURING - FEDERAL ENERGY REGULATORY
COMMISSION
On March 29, 1995 the FERC issued a proposed rule that if,
adopted, would require all public utilities to offer
wholesale "open access" transmission service on a
nondiscriminatory basis. In addition, public utilities would
be required to functionally unbundle their generation and
transmission services, i.e. pricing them separately from
each other. The FERC also stated its belief that, in this
more competitive period, utilities should be allowed to
recover the costs of assets and obligations made uneconomic
by the changed regulatory environment. Although SDG&E's cost
recovery mechanisms are not currently under the jurisdiction
of the FERC, the recognition by the FERC of the propriety of
such cost recovery supports the CPUC's similar position, as
stated in its tentative decision (see above).
On August 3, 1995 SDG&E filed its initial comments endorsing
the FERC's proposed rulemaking. SDG&E committed to filing at
the FERC during early 1996 its open access tariffs. Approval
of the tariffs of SDG&E and the other participating
utilities, and final approval of the CPUC's industry
restructuring plan would result in the creation of a bid-
based wholesale electricity spot market with open-access transmission.
Participating utilities would transfer complete operating control over
their transmission assets to an independent system operator,
which would be responsible for directing the operation of
the transmission system. At least at the outset, retail
customers would not participate directly as buyers in the
wholesale market. SDG&E has also proposed a single entity
that would ultimately own and/or lease the transmission
facilities within a broad geographic area. The creation of
such an entity could involve the sale, lease or other
disposition of SDG&E's transmission facilities. Reply
comments will be filed this fall. A final rule is expected
during early 1996.
7
SAN DIEGO GAS & ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
SAN ONOFRE NUCLEAR GENERATING STATION UNITS 2 & 3
In November 1994 SDG&E, Southern California Edison and the
CPUC's Division of Ratepayer Advocates signed a settlement
agreement on the accelerated recovery of SONGS Units 2 and 3
capital costs. It is anticipated that the rates in the
agreement would be sufficient for SDG&E to recover
approximately $750 million over an eight-year period
beginning in February 1996, rather than over the anticipated
operational life of the units, which may extend to 2013.
During the eight-year period, the authorized rate of return
would be reduced from the authorized weighted average cost
of capital (currently 9.76 percent) to 7.52 percent (SDG&E's
1995 authorized cost of debt). The agreement also includes a
performance incentive plan that would encourage continued,
efficient operation of the plant. However, continued
operation of SONGS beyond the eight-year period would be at
the owners' discretion. Under the plan, customers would pay
about four cents per kilowatt-hour for energy delivered from
SONGS during the eight-year period. This pricing plan would
replace the traditional method of recovering the units'
operating expenses and capital improvements. This is
intended to make the plants more competitive with other
sources. SDG&E is unable at this time to predict the impact
of this proposal, if approved, on the results of its
operations. Hearings were concluded in May 1995. A CPUC
decision is expected in the fourth quarter of 1995.
NUCLEAR INSURANCE
Public liability claims that could arise from a nuclear
incident are limited by law to $9 billion for each licensed
nuclear facility. For this exposure, SDG&E and the co-owners
of SONGS have purchased primary insurance of $200 million,
the maximum amount available. The remaining coverage is
provided by secondary financial protection required by the
Nuclear Regulatory Commission and provides for loss sharing
among utilities owning nuclear reactors if a costly accident
occurs. SDG&E could be assessed retrospective premium
adjustments of up to $32 million in the event of a nuclear
incident involving any of the licensed, commercial reactors
in the United States, if the amount of the loss exceeds $200
million.
Insurance coverage is also provided for up to $2.8 billion
of property damage and decontamination liability, and the
cost of replacement power, which includes indemnity payments
for up to two years, after a waiting period of 21 weeks.
Coverage is provided primarily through mutual insurance
companies owned by utilities with nuclear facilities. If
losses at any of the nuclear facilities covered by the risk-
sharing arrangements were to exceed the accumulated funds
available for these insurance programs, SDG&E could be
assessed retrospective premium adjustments of up to $9
million.
3. WRITEDOWNS
In June 1994 SDG&E recorded writedowns related to the
utility and its subsidiaries. SDG&E recorded a $25 million
writedown of various commercial properties, including $19
million of subsidiary properties in Colorado Springs and in
San Diego, to reflect continuing declines in commercial real
estate values. As a result of the California Public
Utilities Commission's proposal to restructure the electric
utility industry and the uncertainty concerning the impact
of competition, SDG&E also recorded a $12 million writedown
of various non-earning utility assets, including the South
Bay Repower project. Additional writedowns associated with
discontinued operations are described in Note 4. Additional
information on the CPUC's proposed industry restructuring
and its potential impacts on SDG&E is provided in Note 2.
8
SAN DIEGO GAS & ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
4. DISCONTINUED OPERATIONS -- WAHLCO ENVIRONMENTAL SYSTEMS,
INC.
On June 6, 1995 SDG&E sold its investment in Wahlco
Environmental Systems, Inc. for $5 million. The sale of
Wahlco is being accounted for as a disposal of a segment of
business and SDG&E's prior periods' financial statements
have been restated to reflect Wahlco as a discontinued
operation. Discontinued operations consist of the following:
Six Months Ended Year Ended
June 30, December 31,
___________ ________________
1995 1994 1994 1993 1992
______________________________________________________________________________
(millions of dollars)
Revenues $24 $35 $70 $82 $82
Loss from operations before
income taxes -- (64) (70) (14) (13)
Loss on disposal before
income taxes (10) -- -- -- --
Income tax benefits 4 3 7 5 3
________________________________________________________________________________
The loss on disposal of Wahlco was recorded in 1995 and
includes the writedown of SDG&E's investment in Wahlco in
March 1995 to reflect Wahlco's estimated realizable value
under a proposed agreement (subsequently terminated) with a
potential buyer (see Note 2 of the notes to financial
statements in SDG&E's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995) and Wahlco's net operating
losses after 1994. The loss from discontinued operations for
the six months ended June 30, 1994 was primarily due to the
$59 million writedown of Wahlco's goodwill and other
intangible assets as a result of the depressed air
pollution-control market and increasing competition.
Wahlco's net assets (included in "Investments and Other
Property" on the Consolidated Balance Sheets) at December
31, 1994 are summarized as follows:
Current assets $ 40.2
Non-current assets 18.9
Current liabilities (27.1)
Long-term debt and other
liabilities (24.2)
-------
$ 7.8
=======
9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
EARNINGS
Earnings per share from continuing operations for the three
months ended June 30, 1995 were $0.41, up from $0.20 per
share during the same period in 1994. Earnings per share
from continuing operations for the six months ended June 30,
1995 were $0.97, up from $0.72 per share during the same
period in 1994. The changes in earnings result primarily
from a $0.20 per share June 1994 writedown associated with
utility and real estate assets. Additional information
concerning the writedowns is provided in Note 3 of the notes
to consolidated financial statements.
OPERATING REVENUES AND EXPENSES
Gas revenues, gas purchased for resale, and electric fuel
expense decreased for the six months ended June 30, 1995
from the corresponding period in 1994 primarily due to lower
natural gas prices. Purchased power expense for the six
months ended June 30, 1995 was up over the corresponding
1994 period, primarily due to increased purchases of short-
term energy to replace lower-cost nuclear generation as a
result of the scheduled refueling of San Onofre Nuclear
Generating Station Unit 2.
General and administrative expenses decreased for the six
months ended June 30, 1995 compared with 1994 primarily due
to the June 1994 writedowns of various non-earning utility
assets described in Note 3 of the notes to consolidated
financial statements.
REGULATORY MATTERS:
CALIFORNIA PUBLIC UTILITIES COMMISSION'S PROPOSED INDUSTRY
RESTRUCTURING
On May 24, 1995 the CPUC voted 3-1 approving a tentative
plan for restructuring California's electric industry with a
wholesale power pool to begin by January 1997. See
additional discussion of industry restructuring in Note 2 of
the notes to consolidated financial statements. SDG&E cannot
at this time predict the impact of the CPUC's final decision
and the transition to a more competitive environment on
SDG&E's financial condition and results of operations.
HOLDING COMPANY
In November 1994 SDG&E filed an application with the CPUC to
form a holding company. Under the proposed structure, SDG&E
would become a subsidiary of the parent company, as would
SDG&E's existing subsidiaries. A CPUC decision on SDG&E's
application is expected in the fourth quarter of 1995.
To date, the holding company proposal has been approved by
the FERC, the Nuclear Regulatory Commission and SDG&E
shareholders. See additional discussion of industry
restructuring and the proposed holding company plan in Note
2 of the notes to consolidated financial statements.
BIENNIAL RESOURCE PLAN UPDATE PROCEEDING
In December 1994 the CPUC issued a decision ordering SDG&E,
Pacific Gas & Electric and Southern California Edison to
proceed with the BRPU auction. SDG&E was ordered to begin
negotiating contracts (ranging from 17 to 30 years) to
purchase 500 mw of power from qualifying facilities at an
estimated cost of $4.8 billion beginning in 1997. SDG&E
contended that prices for BRPU energy would be significantly
higher than market prices. When the CPUC was not responsive,
SDG&E petitioned the FERC, claiming the BRPU auction was
illegal under the Public Utility Regulatory Policies Act of
1978. The FERC's February 1995 order declared the BRPU
auction procedures unlawful.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On June 21,1995 the CPUC discussed the FERC's decision, but
was unwilling to accept the FERC decision as either
appropriate or final. The CPUC concluded that SDG&E, PG&E
and Edison should attempt to reach settlements with the
auction winners and reminded the utilities that contract
buyouts should be reasonable and should not overlook the
ratepayers' interests. The Assigned Commissioner Ruling
issued on July 6, 1995 encourages settlement and reiterates
what was discussed on June 21. No deadline was established
for the completion of negotiations, although the utilities
are required to provide the CPUC with monthly status reports
summarizing negotiations.
GAS RATES
On July 19, 1995 the CPUC issued its decision on SDG&E's
June 1995 application to lower core gas rates by $16.4
million, effective August 1, 1995. This decrease is based on
the decline in gas prices to levels below the Biennial Cost
Allocation Proceeding's price forecast that became effective
January 1, 1995. The decrease lowers the gas portion of a
typical residential SDG&E natural gas bill by $1.60 per
month or 6.5 percent.
COST OF CAPITAL
On July 31, 1995 the CPUC's Division of Ratepayer Advocates
issued its report on the 1996 Cost of Capital proceeding.
The DRA is recommending a return on equity for SDG&E of
11.10 percent for an overall rate of return of 9.21 percent.
SDG&E has requested an increase in its return on equity from
1995's 12.05 percent to 12.25 percent for 1996 and an
increase in its overall rate of return from 9.76 percent
authorized to 9.83 percent. A CPUC decision is expected in
late 1995 with any authorized changes effective January 1,
1996.
LIQUIDITY AND CAPITAL RESOURCES:
Sources of cash for 1995 through 1999 are expected to
consist of income from operations and issuances of stock and
debt. Cash requirements for 1995 through 1999 include the
construction program and retirements of long-term debt.
SDG&E conducts a continuing review of its construction,
investment and financing programs. They are revised in
response to changes in competition, customer growth,
inflation, customer rates, the cost of capital, and
environmental and regulatory requirements.
FINANCING ACTIVITIES
SDG&E anticipates that it will continue to have short-term
and intermediate-term borrowings in 1995. At December 31,
1994 SDG&E had various short-term bank lines aggregating
$170 million and two $50 million long-term bank lines,
related to which $58 million in short-term bank loans was
outstanding. During June 1995 SDG&E renegotiated the terms
of these bank lines. At June 30, 1995 SDG&E had short-term
bank lines of $30 million (none outstanding) and long-term
bank lines of $280 million ($50 million outstanding).
Commitment fees are paid on the unused portion of the lines;
there are no requirements for compensating balances.
SDG&E does not expect any issuances of long-term debt or
preferred stock in 1995 other than refinancings. On June 6,
1995 SDG&E issued $74 million of Industrial Development
Bonds through the City of San Diego to refinance the 9-1/4
percent bonds issued in 1985. The new bonds were issued at
par, due September 1, 2020. The interest rates are variable,
ranging from 3.05 percent to 3.40 percent on the tax-exempt
segments and 5.95 percent to 5.97 percent on the federally
taxable segments. The proceeds were placed in an escrow fund
to be used to call the 1985 bonds on September 1, 1995.
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SDG&E periodically enters into interest rate swap and cap
agreements to moderate its exposure to interest rate changes
and to lower its overall cost of borrowing. These swap and
cap agreements generally remain off the balance sheet as
they involve the exchange of fixed- and variable-rate
interest payments without the exchange of the underlying
principal amounts. The related gains or losses are reflected
in the income statement as part of interest expense. SDG&E's
policy is to use derivatives only as a hedge.
CAPITAL STRUCTURE
SDG&E maintains its utility capital structure so as to
obtain long-term financing at the lowest possible rates. The
following table lists key financial ratios for SDG&E's
utility operations.
June 30, December 31,
1995 1994
or the twelve or the year
months then ended then ended
----------------- ------------
Pretax interest coverage 4.8 X 4.7 X
Internal cash generation 112 % 85 %
Construction expenditures as
a percent of capitalization 7.6 % 9.1 %
Capital structure:
Common equity 48 % 48 %
Preferred stock 4 % 4 %
Debt and leases 48 % 48 %
SDG&E's employee savings and common stock investment plans
permit SDG&E to issue common stock or to purchase it on the
open market. Currently, SDG&E is purchasing the stock on the
open market for these plans.
CAPITAL REQUIREMENTS
Quarterly cash dividends of $0.39 per share have been
declared the first two quarters of 1995. The dividend pay-
out ratio for the 12 months ended June 30, 1995 and December
31, 1994, 1993, 1992 and 1991 were 82%, 130%, 82%, 81% and
79%, respectively. The increase for the year ended December
31, 1994 was due to the writedowns recorded during 1994.
Additional information regarding the writedowns is provided
in Notes 3 and 4 of the notes to consolidated financial
statements. The payment of future dividends is within the
discretion of the SDG&E Board of Directors and dependent
upon future business conditions, earnings and other factors.
Net cash flows provided by operating activities currently
are sufficient to maintain the payment of dividends at the
present level.
Construction expenditures were $264 million in 1994 and are
expected to be approximately $240 million in 1995. The level
of expenditures in the next few years will depend on the
CPUC's proposed industry restructuring (as described in
"Regulatory Matters" above), the timing of expenditures to
comply with air emission reduction and other environmental
requirements, and SDG&E's proposal to transport natural gas
to Mexico. (Additional information concerning SDG&E's
proposal to transport gas to Mexico is provided in SDG&E's
1994 Annual Report.)
OTHER
Besides the effects of items discussed in the preceding
pages, the only significant change in cash flows for the six
months ended June 30, 1995 compared to the corresponding
1994 period was related to the change in utility accounts
receivable due to varying levels of customer receivables
attributable to differences in
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
weather. In addition, besides
the items discussed in the preceding pages, the only
significant changes to the balance sheet at June 30, 1995
compared to December 31, 1994 were in accounts payable and
taxes accrued. Accounts payable decreased due to lower
expense accruals at June 30, 1995. The increase in taxes
accrued was due to the timing of payments.
13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no significant subsequent developments in
the American Trails, Public Service Company of New Mexico
and North City West proceedings. Background information
concerning these and the following proceedings is contained
in SDG&E's 1994 Annual Report on Form 10-K and in its March
31, 1995 Quarterly Report on Form 10-Q.
Century Power
On July 19, 1995 the Federal Energy Regulatory Commission
dismissed SDG&E's request for a rehearing of the FERC's
dismissal of SDG&E's February 11, 1993 audit complaint
against Tucson and Century. SDG&E may appeal this decision.
SDG&E is unable to predict the ultimate outcome of these
proceedings.
Canadian Natural Gas
On July 17, 1995 the United States Federal District Court,
Southern District of California, rejected motions by Summit
and Canadian Hunter to dismiss SDG&E's complaint. However,
the Court granted a separate motion of Summit on other
grounds, and dismissed SDG&E's lawsuit against Summit only.
SDG&E has thirty days to appeal this decision. SDG&E is
unable to predict the ultimate outcome of these proceedings.
McCartin
Plaintiffs dismissed their appeal in exchange for SDG&E's
waiver of its right to recover costs.
Covalt
The California Supreme Court granted the plaintiffs' request
for review of the California Court of Appeal decision to
dismiss the case. A decision is not expected until 1996.
SDG&E is unable to predict the ultimate outcome of this
proceeding.
SONGS Personal Injury Litigation
On July 7, 1995 Jason Mettler filed a complaint in the
United States District Court for the Southern District of
California against Southern California Edison, SDG&E,
Combustion Engineering and the Institute of Nuclear Power
Operations. The allegations in the complaint are
substantially identical to those contained in the complaints
of R. C. Tang, Glen James, and Linda McLandrich, described
in SDG&E's 1993 and 1994 Annual Report on Form 10-K and its
Quarterly Report on Form 10-Q for the three months ended
March 31, 1995. Plaintiff Mettler died shortly thereafter
and his complaint was converted into a wrongful-death
lawsuit. The lawsuit alleges that Mettler's death was the
result of the emission of radiation while he was an Edison
nuclear equipment operator at SONGS between 1982 and 1990.
Plaintiffs have asked for general compensatory damages. The
Tang, James, McLandrich and Mettler complaints were all
filed by the same attorneys. There have been no significant
subsequent developments in the James or McLandrich cases.
SDG&E is unable to predict the ultimate outcome of these
proceedings.
Wood Poles Preservatives
On June 20, 1995 the Pacific Justice Center filed a
complaint in San Francisco County Superior Court, against
Pacific Bell, Pacific Gas & Electric and two wood-pole
manufacturers claiming violations of the California Safe
Drinking Water and Toxic Enforcement Act (Proposition 65)
for failure to warn individuals who may be exposed to wood
poles treated with wood preservatives, some of which are
14
PART II - OTHER INFORMATION
included on the list of chemicals known to cause cancer or
reproductive harm. Proposition 65 requires that prior
warning be given to individuals who may be exposed to such
chemicals unless the exposure will not pose a significant
risk. SDG&E believes, on the basis of studies and other
information, that exposures to wood poles containing such
preservatives do not give rise to a significant risk and
that no warning is required. Violations of the Proposition
65 warning requirement can result in penalties of up to
$2,500 per violation. Although SDG&E and Southern
California Edison were not named in this lawsuit, it is
anticipated that the Pacific Justice Center, to the extent
it prevails in the present lawsuit, will file a separate
lawsuit against Edison and SDG&E on the same grounds. SDG&E
is unable to predict the ultimate outcome of these
proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10 - Material Contracts
10.1 Amended 1986 Long-Term Incentive Plan, amended
and restated effective April 25, 1995
(incorporated by reference from SDG&E's
Amendment No. 2 to Form S-4 filed February 28,
1995).
10.2 Loan Agreement with the City of San Diego in
connection with the issuance of $16.7 million of
Industrial Development Revenue Refunding Bonds,
dated as of June 1, 1995.
10.3 Loan Agreement with the City of San Diego in
connection with the issuance of $57.7 million of
Industrial Development Revenue Refunding Bonds,
dated as of June 1, 1995.
10.4 Stock Purchase Agreement dated May 15, 1995
among WES Acquisition Corp., Pacific Diversified
Capital Company and Wexford Capital Corporation,
as indemnitor.
Exhibit 12 - Computation of Ratios
12.1 Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends as
required under SDG&E's August 1993 registration
of 5,000,000 shares of Preference Stock
(Cumulative).
Exhibit 27 - Financial Data Schedule
27.1 SDG&E Financial Data Schedule for the six months
ended June 30, 1995.
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on May 30, 1995
announcing the electric industry restructuring
proposal made by the California Public Utilities
Commission; the appointment of David Kuzma as senior
vice president and chief financial officer; and the
retirement of Nad Peterson as senior vice president,
general counsel and corporate secretary.
A Current Report on Form 8-K was filed on April 3,
1995 announcing negotiations of an agreement with an
unrelated third party for an option to acquire from
Pacific Diversified Capital Company (a subsidiary of
SDG&E and an 81 percent owner of Wahlco) its
investment in and receivables from Wahlco.
15
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act
of 1934, the registrant has duly caused this quarterly
report to be signed on its behalf by the undersigned
thereunto duly authorized.
SAN DIEGO GAS & ELECTRIC COMPANY
(Registrant)
Date: August 7, 1995 By: /s/ F.H. Ault
--------------- -----------------------------
(Signature)
F. H. Ault
Vice President and Controller
16
Exhibit 10.2
LOAN AGREEMENT
Between
THE CITY OF SAN DIEGO
And
SAN DIEGO GAS & ELECTRIC COMPANY
Dated as of June 1, 1995
Relating to
$16,700,000
The City of San Diego
Industrial Development Revenue Refunding Bonds
(San Diego Gas & Electric Company)
1995 Series C
LOAN AGREEMENT
TABLE OF CONTENTS
Page
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PREAMBLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITION OF TERMS. . . . . . . . . . . . . . . 2
SECTION 1.2. NUMBER AND GENDER. . . . . . . . . . . . . . . . 2
SECTION 1.3. ARTICLES, SECTIONS, ETC. . . . . . . . . . . . . 2
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS OF THE CITY. . . . . . . . . . . 2
SECTION 2.2. REPRESENTATIONS OF THE BORROWER. . . . . . . . . 3
ARTICLE III
ISSUANCE OF THE BONDS; APPLICATION OF PROCEEDS
SECTION 3.1. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND
PROCEEDS . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.2. INVESTMENT OF MONEYS IN FUNDS. . . . . . . . . . 5
SECTION 3.3. AMENDMENT OF DESCRIPTION OF THE PROJECT. . . . . 5
ARTICLE IV
LOAN TO BORROWER; REPAYMENT PROVISIONS
SECTION 4.1. LOAN TO BORROWER . . . . . . . . . . . . . . . . 5
SECTION 4.2. REPAYMENT AND PAYMENT OF OTHER AMOUNTS PAYABLE . 5
SECTION 4.3. UNCONDITIONAL OBLIGATION . . . . . . . . . . . . 7
SECTION 4.4. ASSIGNMENT OF CITY'S RIGHTS. . . . . . . . . . . 8
SECTION 4.5. AMOUNTS REMAINING IN FUNDS . . . . . . . . . . . 8
SECTION 4.6. CREDIT FACILITY . . . . . . . . . . . . . . . . 9
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1. RIGHT OF ACCESS TO THE PROJECT . . . . . . . . . 9
SECTION 5.2. THE BORROWER'S MAINTENANCE OF ITS EXISTENCE;
ASSIGNMENTS. . . . . . . . . . . . . . . . . . . 9
SECTION 5.3. RECORDS AND FINANCIAL STATEMENTS OF BORROWER . . 10
i
SECTION 5.4. MAINTENANCE AND REPAIR . . . . . . . . . . . . . 11
SECTION 5.5. QUALIFICATION IN CALIFORNIA. . . . . . . . . . . 11
SECTION 5.6. TAX EXEMPT STATUS OF BONDS . . . . . . . . . . . 11
SECTION 5.7. NOTICE OF RATE PERIODS . . . . . . . . . . . . . 12
SECTION 5.8. REMARKETING OF THE BONDS . . . . . . . . . . . . 13
SECTION 5.9. NOTICES TO TRUSTEE AND CITY. . . . . . . . . . . 14
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . 14
SECTION 6.2. REMEDIES ON DEFAULT. . . . . . . . . . . . . . . 16
SECTION 6.3. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. . 18
SECTION 6.4. NO REMEDY EXCLUSIVE. . . . . . . . . . . . . . . 18
SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER . . . 18
ARTICLE VII
PREPAYMENT
SECTION 7.1. REDEMPTION OF BONDS WITH PREPAYMENT MONEYS . . . 18
SECTION 7.2. OPTIONS TO PREPAY INSTALLMENTS . . . . . . . . . 18
SECTION 7.3. MANDATORY PREPAYMENT . . . . . . . . . . . . . . 19
SECTION 7.4. AMOUNT OF PREPAYMENT . . . . . . . . . . . . . . 19
SECTION 7.5. NOTICE OF PREPAYMENT . . . . . . . . . . . . . . 19
ARTICLE VIII
NON-LIABILITY OF CITY; EXPENSES; INDEMNIFICATION
SECTION 8.1. NON-LIABILITY OF CITY. . . . . . . . . . . . . . 20
SECTION 8.2. EXPENSES . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.3. INDEMNIFICATION. . . . . . . . . . . . . . . . . 21
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NOTICES. . . . . . . . . . . . . . . . . . . . . 22
SECTION 9.2. SEVERABILITY . . . . . . . . . . . . . . . . . . 22
SECTION 9.3. EXECUTION OF COUNTERPARTS. . . . . . . . . . . . 22
SECTION 9.4. AMENDMENTS, CHANGES AND MODIFICATIONS. . . . . . 23
SECTION 9.5. GOVERNING LAW. . . . . . . . . . . . . . . . . . 23
SECTION 9.6. AUTHORIZED BORROWER REPRESENTATIVE . . . . . . . 23
SECTION 9.7. TERM OF THE AGREEMENT. . . . . . . . . . . . . . 23
SECTION 9.8. BINDING EFFECT . . . . . . . . . . . . . . . . . 23
ii
TESTIMONIUM. . . . . . . . . . . . . . . . . . . . . . . . . . 25
SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . 25
EXHIBIT A Description of the Project . . . . . . . . . . . .A-1
iii
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of June 1, 1995, by and
between THE CITY OF SAN DIEGO, a municipal corporation and
charter city duly organized and existing under the laws and
Constitution of the State of California (the "City"), and SAN
DIEGO GAS & ELECTRIC COMPANY, a corporation organized and
existing under the laws of the State of California (the
"Borrower"),
W I T N E S S E T H :
WHEREAS, the City is a municipal corporation and
charter city, duly organized and existing under a freeholders'
charter pursuant to which the City has the right and power to
make and enforce all laws and regulations in accordance with and
as more particularly provided in Sections 3, 5 and 7 of Article
XI of the Constitution of the State of California and Section 2
of the Charter of the City (the "Charter"); and
WHEREAS, the City Council of the City, acting under and
pursuant to the powers reserved to the City under Sections 3, 5
and 7 of Article XI of the Constitution and Section 2 of the
Charter, has enacted the City of San Diego Economic Development
Revenue Bond Law, comprising Article 7 of Chapter IX of the San
Diego Municipal Code, pursuant to Ordinance No. 0-15586 (New
Series), adopted on September 14, 1981, as amended from time to
time (the "Law"), establishing a program to provide financial
assistance for the acquisition, construction and installation of
facilities for industrial, commercial or public utility purposes;
and
WHEREAS, the Borrower has duly requested that the City
assist in the refunding or replacement of certain outstanding
bonds previously issued by the City (the "Prior Bonds") to
provide the Borrower with financial assistance to acquire,
construct and install certain facilities for the local furnishing
of electric energy and gas (the "1985 Project"); and
WHEREAS, the City after due investigation and
deliberation has adopted its ordinance authorizing the issuance
of The City of San Diego Industrial Development Revenue Refunding
Bonds (San Diego Gas & Electric Company) 1995 Series C (the
"Bonds") to refund and redeem a portion of the Prior Bonds; and
WHEREAS, the City proposes to assist in refinancing the
portion of the 1985 Project which constitutes facilities for the
local furnishing of gas (the "Project") upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and
the respective representations and covenants herein contained,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITION OF TERMS. Unless the context
otherwise requires, the terms used in this Agreement shall have
the meanings specified in Section 1.01 of the Indenture of Trust,
of even date herewith relating to the Bonds (the "Indenture"), by
and between the City and Bank of America National Trust and
Savings Association, as Trustee (the "Trustee"), as originally
executed or as it may from time to time be supplemented or
amended as provided therein.
SECTION 1.2. NUMBER AND GENDER. The singular form of
any word used herein, including the terms defined in Section 1.01
of the Indenture, shall include the plural, and vice versa. The
use herein of a word of any gender shall include all genders.
SECTION 1.3. ARTICLES, SECTIONS, ETC. Unless
otherwise specified, references to Articles, Sections and other
subdivisions of this Agreement are to the designated Articles,
Sections and other subdivisions of this Agreement as originally
executed. The words "hereof," "herein," "hereunder" and words of
similar import refer to this Agreement as a whole. The headings
or titles of the several articles and sections, and the table of
contents appended to copies hereof, shall be solely for
convenience of reference and shall not affect the meaning,
construction or effect of the provisions hereof.
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS OF THE CITY. The City
makes the following representations as the basis for its
undertakings herein contained:
(a) The City is a municipal corporation and charter
city in the State of California. Under the provisions of the
Law, the City has the power to enter into the transactions
contemplated by this Agreement and to carry out its obligations
hereunder. The Project constitutes a "facility" as that term is
defined in the Law. By proper action, the City has been duly
authorized to execute, deliver and duly perform this Agreement
and the Indenture.
2
(b) To refinance the cost of the Project, the City
will issue the Bonds which will mature, bear interest and be
subject to redemption as set forth in the Indenture.
(c) The Bonds will be issued under and secured by the
Indenture, pursuant to which the City's interest in this
Agreement (except certain rights of the City to give approvals
and consents and to receive payment for expenses and
indemnification and certain other payments) will be pledged to
the Trustee as security for payment of the principal of, premium,
if any, and interest on the Bonds.
(d) The City has not pledged and will not pledge its
interest in this Agreement for any purpose other than to secure
the Bonds under the Indenture.
(e) The City is not in default under any of the
provisions of the laws of the State of California or the City's
Charter which default would affect its existence or its powers
referred to in subsection (a) of this Section 2.1.
(f) The City has found and determined and hereby finds
and determines that all requirements of the Law with respect to
the issuance of the Bonds and the execution of this Agreement and
the Indenture have been complied with and that refinancing the
Project by issuing the Bonds, refunding or replacing the Prior
Bonds and entering into this Agreement and the Indenture will be
in furtherance of the purposes of the Law.
(g) On August 3, 1992, the City Council of the City
adopted Ordinance No. 0-17813 (New Series), and on March 29,
1993, the City Council adopted Ordinance No. 0-17903 (New Series)
authorizing the issuance of the Bonds, and on May 1, 1995, the
City Council adopted Resolution No. R-285683, authorizing the
sale of the Bonds.
SECTION 2.2. REPRESENTATIONS OF THE BORROWER. The
Borrower makes the following representations as the basis for its
undertakings herein contained:
(a) The Borrower is a corporation duly formed under
the laws of the State of California, is in good standing in the
State of California and has the power to enter into and has duly
authorized, by proper corporate action, the execution and
delivery of this Agreement, the Mortgage Bonds and all other
documents contemplated hereby to be executed by the Borrower.
(b) Neither the execution and delivery of this
Agreement or the Mortgage Bonds, the consummation of the
transactions contemplated hereby, nor the fulfillment of or
compliance with the terms and conditions hereof and thereof,
conflicts with or results in a breach of any of the terms,
conditions or provisions of the Borrower's Articles of
3
Incorporation or By-laws or of any corporate actions or of any
agreement or instrument to which the Borrower is now a party or
by which it is bound, or constitutes a default (with due notice
or the passage of time or both) under any of the foregoing, or
results in the creation or imposition of any prohibited lien,
charge or encumbrance whatsoever upon any of the property or
assets of the Borrower under the terms of any instrument or
agreement to which the Borrower is now a party or by which it is
bound.
(c) The Project consists and will consist of those
facilities described in Exhibit A hereto, and the Borrower shall
make no changes to such portion of the Project or to the
operation thereof which would affect the qualification of the
Project as a "facility" under the Law or, subject to Section
5.6(d) hereof, impair the exemption from gross income of the
interest on the Bonds for federal income tax purposes. In
particular, the Borrower shall comply with all requirements of
the San Diego Gas & Electric Company Engineering and Financial
Certificate, dated the Issue Date (the "Engineering
Certificate"), which is hereby incorporated by reference herein.
The Project consists of facilities for the local furnishing of
gas as described in the Engineering Certificate. Subject to
Section 5.6(d) hereof, the Borrower intends to utilize such
portion of the Project as facilities for the local furnishing of
gas throughout the foreseeable future.
(d) The Borrower has and will have title to the
Project sufficient to carry out the purposes of this Agreement.
(e) The economic useful life of the Project is as set
forth in the Engineering Certificate.
(f) All certificates, approvals, permits and
authorizations with respect to the construction of the Project of
agencies of applicable local governmental agencies, the State of
California and the federal government have been obtained; and
pursuant to such certificates, approvals, permits and
authorizations the Project has been constructed and is in
operation.
ARTICLE III
ISSUANCE OF THE BONDS; APPLICATION OF PROCEEDS
SECTION 3.1. AGREEMENT TO ISSUE BONDS; APPLICATION OF
BOND PROCEEDS. To provide funds to refinance a portion of the
cost of the Project, the City agrees that it will issue under the
Indenture, sell and cause to be delivered to the purchasers
thereof, the Bonds, bearing interest as provided and maturing on
the date set forth in the Indenture. The City will thereupon
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apply the proceeds received from the sale of the Bonds as
provided in the Indenture.
SECTION 3.2. INVESTMENT OF MONEYS IN FUNDS. Any
moneys in any fund held by the Trustee shall, at the written
request of an Authorized Borrower Representative, be invested or
reinvested by the Trustee as provided in the Indenture. Such
investments shall be held by the Trustee and shall be deemed at
all times a part of the fund from which such investments were
made, and the interest accruing thereon and any profit or loss
realized therefrom shall, except as otherwise provided in the
Indenture, be credited or charged to such fund.
SECTION 3.3. AMENDMENT OF DESCRIPTION OF THE PROJECT.
In the event that the Borrower desires to amend or supplement the
Project, as described in Exhibit A hereto, and the City approves
of such amendment or supplement, the City will enter into, and
will instruct the Trustee to consent to, such amendment or
supplement upon receipt of:
(i) a certificate of an Authorized Borrower
Representative describing in detail the proposed changes and
stating that they will not have the effect of disqualifying
any component of the Project as a facility that may be
financed pursuant to the Law;
(ii) a copy of the proposed form of amended or
supplemented Exhibit A hereto; and
(iii) an Opinion of Bond Counsel that such proposed
changes will not affect the exclusion from gross income of
interest on the Bonds for federal income tax purposes.
ARTICLE IV
LOAN TO BORROWER; REPAYMENT PROVISIONS
SECTION 4.1. LOAN TO BORROWER. The City and the
Borrower agree that the application of the proceeds of sale of
the Bonds to refund and retire a portion of the Prior Bonds and
the first mortgage bonds of the Borrower relating thereto will be
deemed to be and treated for all purposes as a loan to the
Borrower of an amount equal to the principal amount of the Bonds.
SECTION 4.2. REPAYMENT AND PAYMENT OF OTHER AMOUNTS
PAYABLE. To evidence, secure and provide for the repayment of
the loan made hereunder, the Borrower hereby and concurrently
herewith delivers to the Trustee its Mortgage Bonds, of like
principal amount, maturity date, interest rates and redemption
provisions as the Bonds. In addition, the Borrower agrees to
make the payments required by subsection (a) (to the extent such
payments are not timely provided for by the payment of principal
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of and interest on the Mortgage Bonds) through (d) of this
Section as Repayment Installments on such loan.
(a) The Borrower covenants and agrees to pay to the
Trustee as a Repayment Installment on the loan to the Borrower
pursuant to Section 4.1 hereof, on each date provided in or
pursuant to the Indenture for the payment of principal (whether
at maturity or upon redemption or acceleration) of, premium, if
any, and/or interest on the Bonds, until the principal of,
premium, if any, and interest on the Bonds shall have been fully
paid or provision for the payment thereof shall have been made in
accordance with the Indenture, in immediately available funds,
for deposit in the Bond Fund, a sum equal to the amount then
payable as principal (whether at maturity or upon redemption or
acceleration), premium, if any, and interest upon the Bonds as
provided in the Indenture.
Each payment pursuant to the Mortgage Bonds, together
with any other payments required to be made pursuant to this
Section 4.2(a), shall at all times be sufficient to pay the total
amount of interest and principal (whether at maturity or upon
redemption or acceleration) and premium, if any, then payable on
the Bonds; provided that any amount held by the Trustee in the
Bond Fund on any due date for a Repayment Installment hereunder
shall be credited against the installment due on such date to the
extent available for such purpose; and provided further that,
subject to the provisions of this paragraph, if at any time the
amounts held by the Trustee in the Bond Fund are sufficient to
pay all of the principal of and interest and premium, if any, on
the Bonds as such payments become due, the Borrower shall be
relieved of any obligation to make any further payments under the
provisions of this Section. Notwithstanding the foregoing, if on
any date the amount held by the Trustee in the Bond Fund is
insufficient to make any required payments of principal of
(whether at maturity or upon redemption or acceleration) and
interest and premium, if any, on the Bonds as such payments
become due, the Borrower shall forthwith pay such deficiency as a
Repayment Installment hereunder.
(b) The Borrower also agrees to pay to the Trustee
until the principal of, premium, if any, and interest on the
Bonds shall have been fully paid or provision for the payment
thereof shall have been made as required by the Indenture,
(i) the annual fee of the Trustee for its ordinary services
rendered as trustee, and its ordinary expenses incurred under the
Indenture, as and when the same become due, (ii) the reasonable
fees, charges and expenses of the Trustee, the Registrar and the
reasonable fees of any paying agent on the Bonds as provided in
the Indenture, as and when the same become due, (iii) the
reasonable fees, charges and expenses of the Trustee for the
necessary extraordinary services rendered by it and extraordinary
expenses incurred by it under the Indenture, as and when the
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same become due. The Borrower shall also pay the cost of
printing any Bonds required to be furnished by the City.
(c) The Borrower also agrees to pay, within 60 days
after receipt of request for payment thereof, all expenses
required to be paid by the Borrower under the terms of the
private placement agreement executed by it in connection with the
sale of the Bonds, and all expenses of the City related to the
financing of the Project which are not otherwise required to be
paid by the Borrower under the terms of this Agreement; provided
that the City shall have obtained the prior written approval of
the Authorized Borrower Representative for any expenditures other
than those provided for herein or in said Bond Purchase
Agreement.
The Borrower also agrees to pay to the City (i) on or
before the Issue Date an origination fee for the Bonds in the
amount of $41,750 and (ii) annually in arrears on September 1 of
each year during which any Bonds are outstanding, an annual
administration fee equal to .025% of the weighted average
principal amount of the Bonds outstanding during the prior twelve
(12) months, as calculated by the Borrower and confirmed by the
City.
(d) The Borrower hereby agrees to provide or cause to
be provided in immediately available funds, for deposit into the
Bond Purchase Fund maintained by the Tender Agent, all amounts
necessary to purchase Bonds tendered for purchase in accordance
with Sections 2.01(d) and 2.01(e) of the Indenture.
(e) In the event the Borrower should fail to make any
of the payments required by subsections (a) through (d) of this
Section, such payments shall continue as obligations of the
Borrower until such amounts shall have been fully paid. The
Borrower agrees to pay such amounts, together with interest
thereon until paid, to the extent permitted by law, at the rate
of one percent (1%) per annum over the rate borne by any Bonds in
respect of which such payments are required to be made pursuant
to said subsection (a), and one percent (1%) per annum over the
average rate then borne by the Bonds as to all other payments.
Interest on overdue payments required under subsection (a) or (d)
above shall be paid to Bondholders as provided in the Indenture.
(f) Upon written request of the Trustee, the Borrower
shall pay any Repayment Installment directly to the Paying Agent.
SECTION 4.3. UNCONDITIONAL OBLIGATION. The
obligations of the Borrower to make the payments required by
Section 4.2 hereof (including payments on the Mortgage Bonds) and
to perform and observe the other agreements on its part contained
herein shall be absolute and unconditional, irrespective of any
defense or any rights of set-off, recoupment or counterclaim it
might otherwise have against the City, and during the term of
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this Agreement, the Borrower shall pay absolutely net the
payments to be made on account of the loan as prescribed in
Section 4.2 and all other payments required hereunder, free of
any deductions and without abatement, diminution or set-off.
Until such time as the principal of, premium, if any, and
interest on the Bonds shall have been fully paid, or provision
for the payment thereof shall have been made as required by the
Indenture, the Borrower (i) will not suspend or discontinue any
payments provided for in Section 4.2 hereof; (ii) will perform
and observe all of its other covenants contained in this
Agreement; and (iii) will not terminate this Agreement for any
cause, including, without limitation, the occurrence of any act
or circumstances that may constitute failure of consideration,
destruction of or damage to the Project, commercial frustration
of purpose, any change in the tax or other laws of the United
States of America or of the State of California or any political
subdivision of either of these, or any failure of the City or the
Trustee to perform and observe any covenant, whether express or
implied, or any duty, liability or obligation arising out of or
connected with this Agreement or the Indenture, except to the
extent permitted by this Agreement.
SECTION 4.4. ASSIGNMENT OF CITY'S RIGHTS. As security
for the payment of the Bonds, the City will assign to the Trustee
the City's rights, but not its obligations, under this Agreement,
including the right to receive payments hereunder (except (i) the
rights of the City to receive notices under this Agreement, (ii)
the right of the City to receive certain payments, if any, with
respect to fees, expenses and indemnification and certain other
purposes under Sections 4.2(c), 4.2(e), 6.3, 8.2 and 8.3 hereof,
and (iii) the right of the City to give approvals or consents
pursuant to this Agreement) and any such rights under the
Mortgage Bonds, and the City hereby directs the Borrower to make
the payments required hereunder (except such payments for fees,
expenses and indemnification) directly to the Trustee. The
Borrower hereby assents to such assignment and agrees to make
payments directly to the Trustee without defense or set-off by
reason of any dispute between the Borrower and the City or the
Trustee.
SECTION 4.5. AMOUNTS REMAINING IN FUNDS. It is agreed
by the parties hereto that after payment in full of (i) the
Bonds, or after provision for such payment shall have been made
as provided in the Indenture, (ii) the fees and expenses of the
City in accordance with this Agreement, (iii) the fees, charges
and expenses of the Trustee, the Registrar and Paying Agents in
accordance with the Indenture and this Agreement and (iv) all
other amounts required to be paid under this Agreement and the
Indenture, any amounts remaining in any fund held by the Trustee
under the Indenture shall belong, subject to the requirements of
Section 6.06 of the Indenture, to the Borrower and be paid to the
Borrower by the Trustee.
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SECTION 4.6. CREDIT FACILITY. The Borrower may
provide and subsequently terminate or remove a Credit Facility
with respect to the Bonds, pursuant to the provisions of
Section 5.07 of the Indenture; provided, however, that, except in
connection with the redemption of Bonds, the Borrower shall not
intentionally cause the termination of, any Credit Facility with
respect to Bonds during a Term Rate Period. Not less than
twenty-five days prior to the termination, removal or
substitution of any Credit Facility with respect to the Bonds,
the Borrower shall mail written notice of such termination,
removal or substitution to the Trustee. Not less than fifteen
days prior to the delivery of any substitute Credit Facility for
the Bonds, the Borrower shall mail written notice of such
substitution to each Rating Agency.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1. RIGHT OF ACCESS TO THE PROJECT. The
Borrower agrees that during the term of this Agreement the City,
the Trustee and the duly authorized agents of either of them
shall have the right at all reasonable times during normal
business hours to enter upon the site of the Project described in
Exhibit A hereto to examine and inspect such Project; provided,
however, that this right is subject to federal and State of
California laws and regulations applicable to such site. The
rights of access hereby reserved to the City and the Trustee may
be exercised only after such agent shall have executed release of
liability (which release shall not limit any of the Borrower's
obligations hereunder) and secrecy agreements if requested by the
Borrower in the form then currently used by the Borrower, and
nothing contained in this Section or in any other provision of
this Agreement shall be construed to entitle the City or the
Trustee to any information or inspection involving the
confidential know-how of the Borrower.
SECTION 5.2. THE BORROWER'S MAINTENANCE OF ITS
EXISTENCE; ASSIGNMENTS. (a) The Borrower agrees that during the
term of this Agreement it will maintain its corporate existence
in good standing and will not dissolve or otherwise dispose of
all or substantially all of its assets and will not consolidate
with or merge into another corporation or permit one or more
other corporations to consolidate or merge into it; provided,
that the Borrower may (subject to any applicable restrictions
otherwise imposed by law or contract, including the Borrower's
franchises and the City's Charter), without violating the
covenants contained in this Section, consolidate with or merge
into another corporation, or permit one or more other
corporations to consolidate with or merge into it, or sell or
otherwise transfer to another corporation all or substantially
all of its assets and thereafter dissolve, provided that
9
(1) either (A) the Borrower is the surviving corporation or
(B) the surviving, resulting or transferee corporation, as the
case may be, (i) assumes and agrees in writing to pay and perform
all of the obligations of the Borrower hereunder and under the
Mortgage Bonds, and (ii) qualifies to do business in the State of
California; and (2) the Borrower shall deliver to the Trustee an
Opinion of Bond Counsel to the effect that such consolidation,
merger or transfer and dissolution does not in and of itself
adversely affect the exclusion from gross income for federal
income tax purposes of interest on the Bonds, except that no such
opinion shall be required in the case of the reorganization
described in the proxy statement of the Borrower dated March 1,
1995.
(b) The rights and obligations of the Borrower under
this Agreement may be assigned by the Borrower, with the written
consent of the City, in whole or in part subject, however, to
each of the following conditions:
(i) No assignment (other than pursuant to a
merger, consolidation or combination described in Section 5.2(a))
shall relieve the Borrower from primary liability for any of its
obligations hereunder, and in the event of any assignment not
pursuant to Section 5.2(a), the Borrower shall continue to remain
primarily liable for the payments specified in Section 4.2
hereof, including payments pursuant to the Mortgage Bonds, and
for performance and observance of the other agreements on its
part herein provided to be performed and observed by it.
(ii) Any assignment from the Borrower shall retain
for the Borrower such rights and interests as will permit it to
perform its obligations under this Agreement, and any assignee
from the Borrower shall assume the obligations of the Borrower
hereunder to the extent of the interest assigned.
(iii) The Borrower shall, within thirty days after
delivery of such assignment, furnish or cause to be furnished to
the City and the Trustee a true and complete copy of each such
assignment together with an instrument of assumption.
(iv) The Borrower shall cause to be delivered to
the City and the Trustee an Opinion of Bond Counsel that such
assignment will not, in and of itself, result in the interest on
the Bonds being determined to be includable in the gross income
for federal income tax purposes of the owners thereof (other than
a "substantial user" of the Project or a "related person" within
the meaning of Section 103(b)(13) of the 1954 Code).
(c) The Borrower acknowledges that Section 103 of the
City's Charter specifies in part as follows: "No franchises shall
be transferable except with the approval of the Council expressed
by ordinance."
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SECTION 5.3. RECORDS AND FINANCIAL STATEMENTS OF
BORROWER. The Borrower agrees (a) to keep and maintain full and
accurate accounts and records of its operations in accordance
with generally accepted accounting principles, (b) to permit the
Trustee for itself or on behalf of the holders of the Bonds and
its designated officers, employees, agents and representatives to
have access to such accounts and records and to make examinations
thereof at all reasonable times and (c) upon request of the
Trustee, to provide the Trustee with the Borrower's most recent
audited financial statements.
SECTION 5.4. MAINTENANCE AND REPAIR. The Borrower
agrees that as long as it owns the Project it will (i) maintain,
or cause to be maintained, the Project in as reasonably safe
condition as its operations shall permit and (ii) maintain, or
cause to be maintained, the Project in good repair and in good
operating condition, ordinary wear and tear excepted, making from
time to time all necessary repairs thereto and renewals and
replacements thereof.
SECTION 5.5. QUALIFICATION IN CALIFORNIA. The
Borrower agrees that throughout the term of this Agreement it, or
any successor or assignee as permitted by Section 5.2, will be
qualified to do business in the State of California.
SECTION 5.6. TAX EXEMPT STATUS OF BONDS. (a) It is
the intention of the parties hereto that interest on the Bonds
shall be and remain excluded from gross income for federal income
tax purposes. To that end, the covenants and agreements of the
City and the Borrower in this Section and in the Tax Certificate
are for the benefit of the Trustee and each and every person who
at any time will be a holder of the Bonds. Without limiting the
generality of the foregoing, the Borrower and the City agree that
there shall be paid from time to time all amounts required to be
rebated to the United States pursuant to Section 148(f) of the
Code and any temporary, proposed or final Treasury Regulations as
may be applicable to the Bonds from time to time. This covenant
shall survive payment in full or defeasance of the Bonds. The
Borrower specifically covenants to pay or cause to be paid for
and on behalf of the City to the United States at the times and
in the amounts determined under Section 6.06 of the Indenture the
Rebate Requirement as described in the Tax Certificate.
(b) The City covenants and agrees that it has not
taken and will not take any action which results in interest to
be paid on the Bonds being included in gross income of the
holders of the Bonds for federal income tax purposes, and the
Borrower covenants and agrees that it has not taken or permitted
to be taken and will not take or permit to be taken any action
which will cause the interest on the Bonds to become includable
in gross income for federal income tax purposes; provided that
neither the Borrower nor the City shall have violated these
covenants if interest on any of the Bonds becomes taxable to a
11
person solely because such person is a "substantial user" of the
Project or a "related person" within the meaning of
Section 103(b)(13) of the 1954 Code; and provided further that
none of the covenants and agreements herein contained shall
require either the Borrower or the City to enter an appearance or
intervene in any administrative, legislative or judicial
proceeding in connection with any changes in applicable laws,
rules or regulations or in connection with any decisions of any
court or administrative agency or other governmental body
affecting the taxation of interest on the Bonds. The Borrower
acknowledges having read Section 6.06 of the Indenture and agrees
to perform all duties imposed on it by such Section, by this
Section and by the Tax Certificate. Insofar as Section 6.06 of
the Indenture and the Tax Certificate impose duties and
responsibilities on the City or the Borrower, they are
specifically incorporated herein by reference.
(c) Notwithstanding any provision of this Section 5.6
or Section 6.06 of the Indenture, if the Borrower shall provide
to the City and the Trustee an Opinion of Bond Counsel to the
effect that any specified action required under this Section 5.6
and Section 6.06 of the Indenture is no longer required or that
some further or different action is required to maintain the
exclusion from federal income tax of interest on the Bonds, the
Borrower, the Trustee and the City may conclusively rely on such
opinion in complying with the requirements of this Section, and
the covenants hereunder shall be deemed to be modified to that
extent.
(d) Notwithstanding any provision of Section 2.2(c) of
this Agreement, or this Section 5.6 or Section 6.06 of the
Indenture, unless and until the City shall have received an
Opinion of Bond Counsel to the effect that interest on the Bonds
is Tax-Exempt, the Borrower shall not be required to comply with
any covenant in said sections relating to the Bonds or to the
Project nor shall the Borrower be required to act consistently
with any representation or warranty contained therein with
respect to the Bonds or the Project. Notwithstanding any
provision of Sections 3.3(iii), 5.2(a), 5.2(b)(iv) or 5.7 of this
Agreement, the Borrower shall not be required to furnish an
Opinion of Bond Counsel to the effect that some proposed action
or omission to act will not adversely affect the Tax-Exempt
status of interest on the Bonds unless and until the City shall
have received an Opinion of Bond Counsel to the effect that
interest on the Bonds is Tax-Exempt.
SECTION 5.7. NOTICE OF RATE PERIODS. The Borrower
shall designate and give timely written notice to the Trustee as
required by the Indenture prior to any change in Rate Periods for
the Bonds. In addition, if the Borrower shall elect to change
Rate Periods in accordance with the Indenture and the Bonds under
circumstances requiring the delivery of an Opinion of Bond
Counsel, the Borrower shall deliver such opinion to the Trustee
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concurrently with the giving of notice with respect thereto, and
no such change shall be effective without an Opinion of Bond
Counsel to the effect that such change is authorized or permitted
by the Indenture and the Law and will not adversely affect the
Tax-Exempt status of the interest on the Bonds.
SECTION 5.8. REMARKETING OF THE BONDS.
(a) The Borrower agrees to perform all obligations and
duties required of it by the Indenture with respect to the
remarketing of the Bonds, and, to appoint as set forth below a
Remarketing Agent and a Tender Agent meeting the qualifications
and otherwise meeting the requirements set forth in this
Section 5.8.
(b) Tender Agent.
(i) Appointment and Duties: In order to carry out the
duties and obligations of the Tender Agent contained in the
Indenture, the Borrower shall appoint a Tender Agent or Tender
Agents in order to carry out such duties and obligations, subject
to the conditions set forth below. Each Tender Agent shall
designate to the Trustee its principal office and signify its
acceptance of the duties and obligations imposed upon it under
the Indenture by entering into a Tender Agreement with the
Borrower and such other parties as shall be appropriate, which
may be combined with a Remarketing Agreement into a single
document, delivered to the City, the Trustee, the Borrower and
the Remarketing Agent, under which the Tender Agent shall agree,
particularly (but without limitation): (A) to perform the duties
and comply with the requirements imposed upon it by the Tender
Agreement, the Indenture and this Agreement; and (B) to keep such
books and records with respect to its activities as Tender Agent
as shall be consistent with prudent industry practice and to make
such books and records available for inspection by the City, the
Trustee and the Borrower at all reasonable times.
(ii) Qualifications: Each Tender Agent shall be a
financial institution organized and doing business under the laws
of the United States or of a state thereof, authorized under such
laws to exercise corporate trust powers, having a combined
capital and surplus of at least Fifty Million Dollars
($50,000,000), and subject to supervision or examination by
federal or state authority. If such financial institution
publishes a report of condition at least annually, pursuant to
law or to the requirements of any supervising or examining
authority above referred to, then for the purposes of this
Section the combined capital and surplus of such banking
corporation or banking association shall be deemed to be its
combined capital and surplus as set forth in its most recent
report of condition so published.
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(c) Remarketing Agent. In order to carry out the
duties and obligations contained in the Indenture, the Borrower,
by an instrument in writing (which may be the Remarketing
Agreement) signed by an Authorized Borrower Representative, shall
select the Remarketing Agent for the Bonds subject to the
conditions set forth below. The Remarketing Agent shall
designate to the Trustee its principal office and signify its
acceptance of the duties and obligations imposed upon it under
the Indenture by a written instrument of acceptance (which may be
the execution of a Remarketing Agreement) delivered to the City,
the Trustee and the Borrower under which the Remarketing Agent
shall agree, particularly (but without limitation): (i) to
perform the duties and comply with the requirements imposed upon
it by the Remarketing Agreement, the Indenture and this
Agreement; and (ii) to keep such books and records with respect
to its activities as Remarketing Agent as shall be consistent
with prudent industry practice and to make such books and records
available for inspection by the City, the Trustee and the
Borrower at all reasonable times.
(d) Remarketing Agreement. In order to provide for
the remarketing of the Bonds, the Borrower shall enter into a
Remarketing Agreement with the Remarketing Agent and such other
parties as shall be appropriate, which may be combined with a
Tender Agreement into a single document. Each Remarketing
Agreement shall include the following: (i) a requirement that
such Remarketing Agreement shall not be terminated by the
Borrower without cause for a period of at least six months after
the effective date thereof; and (ii) a statement to the effect
that the Remarketing Agent is not acting in an agency capacity
with respect to the Borrower in establishing interest rates and
Rate Periods as described in Section 2.01 of the Indenture, but
is acting as agent of the City pursuant to the Law with respect
to such functions.
SECTION 5.9. NOTICES TO TRUSTEE AND CITY. The
Borrower hereby agrees to provide the Trustee and the City with
notice of any event of which it has knowledge which, with the
passage of time or the giving of notice, would be an Event of
Default, such notice to include a description of the nature of
such event and what steps are being taken to remedy such Event of
Default. The Borrower further agrees and covenants to notify the
City promptly upon receiving actual notice of any non-performance
by the Trustee of its duties and obligations under the Indenture
or this Agreement.
SECTION 5.10. INFORMATION AND REPORTS. During any
period that the Borrower is not subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended,
and unless and until the City has received an Opinion of Counsel
to the effect that, without compliance with the restrictions set
forth in the Bond form legend, the Bonds are not required to be
registered under the Securities Act, the Borrower agrees to make
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available to the Bondholders and the Remarketing Agent the
information and reports required by Rule 144A under the
Securities Act to enable resales of the Bonds to be made pursuant
to Rule 144A.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. Any one of the
following which occurs and continues shall constitute an Event of
Default pursuant to this Agreement:
(a) failure by the Borrower to pay any amounts
required to be paid under Section 4.2(a) or 4.2(d) hereof at
the times required to avoid causing an Event of Default
pursuant to the Indenture; or
(b) failure of the Borrower to observe and
perform any covenant, condition or agreement on its part
required to be observed or performed by this Agreement,
other than making the payments referred to in (a) above,
which continues for a period of 60 days after written
notice, which notice shall specify such failure and request
that it be remedied, given to the Borrower by the City or
the Trustee, unless the City and the Trustee shall agree in
writing to an extension of such time; provided, however,
that if the failure stated in the notice cannot be corrected
within such period, the City and the Trustee will not
unreasonably withhold their consent to an extension of such
time if corrective action is instituted within such period
and diligently pursued until the default is corrected; or
(c) occurrence of a "completed default" under and
as defined in the Borrower Indenture; or
(d) an Act of Bankruptcy of the Borrower; or
(e) a default under any Credit Facility if the
Credit Provider notifies the Trustee in writing that such
default shall be treated as an Event of Default hereunder.
The provisions of subsection (b) of this Section are subject to
the limitation that the Borrower shall not be deemed in default
if and so long as the Borrower is unable to carry out its
agreements hereunder by reason of strikes, lockouts or other
industrial disturbances; acts of public enemies; orders of any
kind of the government of the United States or of the State of
California or any of their departments, agencies, or officials,
or any civil or military authority; insurrections, riots,
epidemics, landslides; lightning; earthquake; fire; hurricanes;
storms; floods; washouts; droughts; arrests; restraint of
15
government and people; civil disturbances; explosions; breakage
or accident to machinery, transmission pipes or canals; partial
or entire failure of utilities; or any other cause or event not
reasonably within the control of the Borrower; it being agreed
that the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of the
Borrower, and the Borrower shall not be required to make
settlement of strikes, lockouts and other industrial disturbances
by acceding to the demands of the opposing party or parties when
such course is, in the judgment of the Borrower, unfavorable to
the Borrower. This limitation shall not apply to any default
under subsections (a), (c), (d) or (e) of this Section.
SECTION 6.2. REMEDIES ON DEFAULT. Whenever any Event
of Default shall have occurred and shall continue, the following
remedies may be pursued:
(a) The Trustee may, and upon the written request
of any Credit Provider or the holders of not less than 25%
in aggregate principal amount of Bonds then outstanding,
shall, by notice in writing delivered to the Borrower with
copies of such notice being sent to the City and each Credit
Provider, declare the unpaid balance of the loan payable
under Section 4.2(a) of this Agreement and the interest
accrued thereon to be immediately due and payable and such
principal and interest shall thereupon become and be
immediately due and payable. Upon any such acceleration,
the Bonds shall be subject to mandatory redemption as
provided in Section 4.01(b)(4) of the Indenture. After any
such declaration of acceleration, the Trustee shall
immediately take such actions as necessary to realize moneys
under any Credit Facility.
(b) The Trustee shall have access to and the
right to inspect, examine and make copies of the books and
records and any and all accounts, data and federal income
tax and other tax returns of the Borrower.
(c) The City or the Trustee may take whatever
action at law or in equity as may be necessary or desirable
to collect the payments and other amounts then due and
thereafter to become due or to enforce performance and
observance of any obligation, agreement or covenant of the
Borrower under this Agreement.
The provisions of clause (a) of the preceding
paragraph, however, are subject to the condition that if, at any
time after the loan shall have been so declared due and payable,
and before any judgment or decree for the payment of the moneys
due shall have been obtained or entered as hereinafter provided,
there shall have been deposited with the Trustee a sum sufficient
(together with any amounts held in the Bond Fund) to pay all the
principal of the Bonds matured prior to such declaration and all
16
matured installments of interest (if any) upon all the Bonds,
with interest on such overdue installments of principal as
provided herein, and the reasonable expenses of the Trustee, and
any and all other defaults known to the Trustee (other than in
the payment of principal of and interest on the Bonds due and
payable solely by reason of such declaration) shall have been
made good or cured to the satisfaction of the Trustee or
provision deemed by the Trustee to be adequate shall have been
made therefor, then, and in every such case, the holders of at
least a majority in aggregate principal amount of the Bonds then
outstanding, by written notice to the City and to the Trustee,
may, on behalf of the holders of all the Bonds, rescind and annul
such declaration and its consequences and waive such default;
provided that no such rescission and annulment shall extend to or
shall affect any subsequent default, or shall impair or exhaust
any right or power consequent thereon; and provided further that
there shall not be rescinded or annulled any such declaration
which follows an event described in Section 6.1(e) without the
written consent of the Credit Provider.
In case the Trustee or the City shall have proceeded to
enforce its rights under this Agreement and such proceedings
shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Trustee or the City, then,
and in every such case, the Borrower, the Trustee and the City
shall be restored respectively to their several positions and
rights hereunder, and all rights, remedies and powers of the
Borrower, the Trustee and the City shall continue as though no
such action had been taken (provided, however, that any
settlement of such proceedings duly entered into by the City, the
Trustee or the Borrower shall not be disturbed by reason of this
provision).
In case the Borrower shall fail forthwith to pay such
amounts upon demand of the Trustee, the Trustee shall be entitled
and empowered to institute any action or proceeding at law or in
equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final
decree, and may enforce any such judgment or final decree against
the Borrower and collect in the manner provided by law the moneys
adjudged or decreed to be payable.
In case proceedings shall be pending for the bankruptcy
or for the reorganization of the Borrower under the federal
bankruptcy laws or any other applicable law, or in case a
receiver or trustee shall have been appointed for the property of
the Borrower or in the case of any other similar judicial
proceedings relative to the Borrower, or the creditors or
property of the Borrower, then the Trustee shall be entitled and
empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount owing and
unpaid pursuant to this Agreement and, in case of any judicial
proceedings, to file such proofs of claim and other papers or
17
documents as may be necessary or advisable in order to have the
claims of the Trustee allowed in such judicial proceedings
relative to the Borrower, its creditors or its property, and to
collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute such amounts as
provided in the Indenture after the deduction of its charges and
expenses. Any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized to make such payments to the
Trustee, and to pay to the Trustee any amount due it for
compensation and expenses, including expenses and fees of counsel
incurred by it up to the date of such distribution.
SECTION 6.3. AGREEMENT TO PAY ATTORNEYS' FEES AND
EXPENSES. In the event the Borrower should default under any of
the provisions of this Agreement and the City or the Trustee
should employ attorneys or incur other expenses for the
collection of the payments due under this Agreement or the
enforcement of performance or observance of any obligation or
agreement on the part of the Borrower herein contained, the
Borrower agrees to pay to the City or the Trustee the reasonable
fees of such attorneys and such other expenses so incurred by the
City or the Trustee.
SECTION 6.4. NO REMEDY EXCLUSIVE. No remedy herein
conferred upon or reserved to the City or the Trustee is intended
to be exclusive of any other available remedy or remedies, but
each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement or now
or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon
any default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the City or the Trustee to
exercise any remedy reserved to it in this Article, it shall not
be necessary to give any notice, other than such notice as may be
herein expressly required. Such rights and remedies as are given
the City hereunder shall also extend to the Trustee, and the
Trustee and the holders of the Bonds shall be deemed third party
beneficiaries of all covenants and agreements herein contained.
SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE
WAIVER. In the event any agreement or covenant contained in this
Agreement should be breached by the Borrower and thereafter
waived by the City or the Trustee, such waiver shall be limited
to the particular breach so waived and shall not be deemed to
waive any other breach hereunder.
18
ARTICLE VII
PREPAYMENT
SECTION 7.1. REDEMPTION OF BONDS WITH PREPAYMENT
MONEYS. By virtue of the assignment of the rights of the City
under this Agreement to the Trustee as is provided in Section 4.4
hereof, the Borrower agrees to and shall pay directly to the
Trustee any amount permitted or required to be paid by it under
this Article VII. The Trustee shall use the moneys so paid to it
by the Borrower to effect redemption of the Bonds in accordance
with Article IV of the Indenture on the date specified for such
redemption pursuant to Section 7.5 hereof.
SECTION 7.2. OPTIONS TO PREPAY INSTALLMENTS. The
Borrower shall have the option to prepay the amounts payable
under Section 4.2 hereof by paying to the Trustee, for deposit in
the Bond Fund, the amount set forth in Section 7.4 hereof, under
the circumstances set forth in Section 4.01(a) of the Indenture;
provided, however, that if any event specified in Section
4.01(a)(1)(A) through (D) of the Indenture gives rise to the
Borrower's exercise of its option to prepay such amounts payable
hereunder, the amount of such loan payment prepaid shall not
exceed the original cost of the portion of the Project affected
by such event.
SECTION 7.3. MANDATORY PREPAYMENT. (a) The Borrower
shall have and hereby accepts the obligation to prepay Repayment
Installments to the extent mandatory redemption of the Bonds is
required pursuant to Section 4.01(b) of the Indenture. The
Borrower shall satisfy its obligation hereunder by prepaying such
Repayment Installments within one hundred eighty (180) days after
the occurrence of any event set forth in paragraphs (1) through
(3) of said Section 4.01(b) giving rise to such required
prepayment, and immediately upon the occurrence of any event set
forth in paragraph (4) thereof giving rise to such required
prepayment. The amount payable by the Borrower in the event of a
prepayment required by this Section shall be determined as set
forth in Section 7.4 and shall be deposited in the Bond Fund.
SECTION 7.4. AMOUNT OF PREPAYMENT. In the case of a
prepayment of the entire amount due hereunder pursuant to
Section 7.2 or 7.3 hereof, the amount to be paid shall be a sum
sufficient, together with other funds and the yield on any
securities deposited with the Trustee and available for such
purpose, to pay (1) the principal of all Bonds outstanding on the
redemption date specified in the notice of redemption, plus
interest accrued and to accrue to the payment or redemption date
of the Bonds, plus premium, if any, pursuant to the Indenture,
(2) all reasonable and necessary fees and expenses of the City,
the Trustee and any paying agent accrued and to accrue through
final payment of the Bonds, and (3) all other liabilities of the
Borrower accrued and to accrue under this Agreement.
19
In the case of partial prepayment of the Repayment
Installments, the amount payable shall be a sum sufficient,
together with other funds deposited with the Trustee and
available for such purpose, to pay the principal amount of and
premium, if any, and accrued interest on the Bonds to be
redeemed, as provided in the Indenture, and to pay expenses of
redemption of such Bonds.
SECTION 7.5. NOTICE OF PREPAYMENT. The Borrower shall
give forty-five days' prior written notice to the City and the
Trustee specifying the date upon which any prepayment pursuant to
this Article VII will be made. If, in the case of a mandatory
prepayment pursuant to Section 7.3 hereof, the Borrower fails to
give such notice of a prepayment required by this Section 7.5,
such notice may be given by the City or by any holder or holders
of ten percent (10%) or more in aggregate principal amount of the
Bonds Outstanding, and shall be given by the Trustee, but solely
at the times and under the circumstances provided in Section
4.01(b) of the Indenture. The City and the Trustee, at the
request of the Borrower or any such Bondholder or Bondholders,
shall forthwith take all steps necessary under the applicable
provisions of the Indenture (except that the City shall not be
required to make payment of any money required for such
redemption) to effect redemption of all or part of the then
outstanding Bonds, as the case may be, on the earliest
practicable date thereafter on which such redemption may be made
under applicable provisions of the Indenture.
Notwithstanding anything to the contrary in this
Agreement, each notice contemplated in this Section 7.5 that is
given with respect to an optional prepayment pursuant to Section
7.2 hereof may state that it is subject to and conditional upon
receipt by the Trustee on or prior to the proposed prepayment
date of amounts sufficient to effect such prepayment and, if a
notice so states, such notice shall be of no force and effect and
the prepayment need not be made and the Repayment Installments
will not become due and payable on the proposed prepayment date
unless such amounts are so received on or prior to the proposed
prepayment date.
ARTICLE VIII
NON-LIABILITY OF CITY; EXPENSES; INDEMNIFICATION
SECTION 8.1. NON-LIABILITY OF CITY. The City shall
not be obligated to pay the principal of, or premium, if any, or
interest on the Bonds, or to discharge any other financial
liability in connection herewith, except from Revenues. The
Borrower hereby acknowledges that the City's sole source of
moneys to repay the Bonds will be provided by the payments made
by the Borrower pursuant to this Agreement (excluding payments
pursuant to Section 4.2(b), 4.2(c), 5.6, 6.3, 8.2 and 8.3 of this
20
Agreement), together with other Revenues, including investment
income on certain funds and accounts held by the Trustee under
the Indenture, and hereby agrees that if the payments to be made
hereunder shall ever prove insufficient to pay all principal of,
and premium, if any, and interest on the Bonds as the same shall
become due (whether by maturity, redemption, acceleration or
otherwise), then upon notice from the Trustee, the Borrower shall
pay such amounts as are required from time to time to prevent any
deficiency or default in the payment of such principal, premium
or interest, including, but not limited to, any deficiency caused
by acts, omissions, nonfeasance or malfeasance on the part of the
Trustee, the Borrower, the City or any third party.
SECTION 8.2. EXPENSES. The Borrower covenants and
agrees to pay within fifteen (15) days after billing therefor and
to indemnify the City and the Trustee against all costs and
charges, including fees and disbursements of attorneys,
accountants, consultants, including financial consultants,
engineers and other experts incurred, in the absence of willful
misconduct, in connection with this Agreement, the Bonds or the
Indenture. The City shall notify the Borrower in writing prior
to engaging any professional or expert for which the City plans
to bill the Borrower, other than under the circumstances
described in Section 6.3 hereof.
SECTION 8.3. INDEMNIFICATION. The Borrower releases
the City and the Trustee from, and covenants and agrees that
neither the City nor the Trustee shall be liable for, and
covenants and agrees, to the extent permitted by law, to
indemnify, defend and hold harmless the City and the Trustee and
their officers, employees and agents from and against, any and
all losses, claims, damages, liabilities or expenses, of every
conceivable kind, character and nature whatsoever arising out of,
resulting from or in any way connected with (1) the Project, or
the conditions, occupancy, use, possession, conduct or management
of, or work done in or about, or from the planning, design,
acquisition, installation or construction of the Project or any
part thereof; (2) the issuance of any Bonds or any certifications
or representations made in connection therewith and the carrying
out of any of the transactions contemplated by the Bonds, the
Indenture and this Agreement; (3) the Trustee's acceptance or
administration of the trusts under the Indenture, or the exercise
or performance of any of its powers or duties under the
Indenture; or (4) any untrue statement or alleged untrue
statement of any material fact or omission or alleged omission to
state a material fact necessary to make the statements made, in
light of the circumstances under which they were made, not
misleading, in any official statement or other offering circular
utilized by the City or any underwriter or placement agent in
connection with the sale of any Bonds; provided that such
indemnity shall not be required for damages that result from
negligence or willful misconduct on the part of the party seeking
such indemnity. The indemnity of the Trustee required by this
21
Section shall be only to the extent that any loss sustained by
the Trustee exceeds the net proceeds the Trustee receives from
any insurance carried with respect to the loss sustained. The
Borrower further covenants and agrees, to the extent permitted by
law, to pay or to reimburse the City and the Trustee and their
officers, employees and agents for any and all costs, attorneys
fees, liabilities or expenses incurred in connection with
investigating, defending against or otherwise in connection with
any such losses, claims, damages, liabilities, expenses or
actions, except to the extent that the same arise out of the
negligence or willful misconduct of the party claiming such
payment or reimbursement. The provisions of this Section shall
survive the retirement of the Bonds or resignation or removal of
the Trustee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NOTICES. All notices, certificates or
other communications shall be deemed sufficiently given on the
second day following the day on which the same have been mailed
by first class mail, postage prepaid, addressed to the City, the
Borrower or the Trustee, as the case may be, as follows:
To the City: City Manager
City of San Diego
City Administration Building
202 C Street
San Diego, CA 92101
Attention: Economic Development Services
To the Borrower: San Diego Gas & Electric Company
101 Ash Street
P.O. Box 1831
San Diego, CA 92112
Attention: Treasurer
To the Trustee: Bank of America National Trust
and Savings Association
333 South Beaudry Avenue
Los Angeles, CA 90017
Attention: Corporate Trust Division #8510
A duplicate copy of each notice, certificate or other
communication given hereunder by either the City or the Borrower
to the other shall also be given to the Trustee. The City, the
Borrower and the Trustee may, by notice given hereunder,
22
designate any different addresses to which subsequent notices,
certificates or other communications shall be sent.
SECTION 9.2. SEVERABILITY. If any provision of this
Agreement shall be held or deemed to be, or shall in fact be,
illegal, inoperative or unenforceable, the same shall not affect
any other provision or provisions herein contained or render the
same invalid, inoperative, or unenforceable to any extent
whatever.
SECTION 9.3. EXECUTION OF COUNTERPARTS. This
Agreement may be simultaneously executed in several counterparts,
each of which shall be an original and all of which shall
constitute but one and the same instrument; provided, however,
that for purposes of perfecting a security interest in this
Agreement under Article 9 of the California Uniform Commercial
Code, only the counterpart delivered, pledged, and assigned to
the Trustee shall be deemed the original.
SECTION 9.4. AMENDMENTS, CHANGES AND MODIFICATIONS.
Except as otherwise provided in this Agreement or the Indenture,
subsequent to the initial issuance of Bonds and prior to their
payment in full, or provision for such payment having been made
as provided in the Indenture, this Agreement may not be
effectively amended, changed, modified, altered or terminated
without the written consent of the Trustee.
SECTION 9.5. GOVERNING LAW. This Agreement shall be
governed exclusively by and construed in accordance with the
applicable laws of the State of California.
SECTION 9.6. AUTHORIZED BORROWER REPRESENTATIVE.
Whenever under the provisions of this Agreement the approval of
the Borrower is required or the City or the Trustee is required
to take some action at the request of the Borrower, such approval
or such request shall be given on behalf of the Borrower by the
Authorized Borrower Representative, and the City and the Trustee
shall be authorized to act on any such approval or request and
neither party hereto shall have any complaint against the other
or against the Trustee as a result of any such action taken.
SECTION 9.7. TERM OF THE AGREEMENT. This Agreement
shall be in full force and effect from the date hereof and shall
continue in effect as long as any of the Bonds is outstanding or
the Trustee holds any moneys under the Indenture, whichever is
later. All representations and certifications by the Borrower as
to all matters affecting the Tax-Exempt status of the Bonds shall
survive the termination of this Agreement.
SECTION 9.8. BINDING EFFECT. This Agreement shall
inure to the benefit of and shall be binding upon the City, the
Borrower, the Trustee and their respective successors and
23
assigns; subject, however, to the limitations contained in
Section 5.2 hereof.
SECTION 9.9. EQUAL OPPORTUNITY AND NONDISCRIMINATION.
The Borrower agrees to use its best efforts to require any and
all of its contractors, subcontractors, independent contractors
and employees to comply with applicable federal, state or local
equal opportunity and nondiscrimination requirements imposed by
statute, ruling or regulation and to hold the City harmless from
any and all liability, claims, damages or injuries to any person
in connection with any failure by such contractors,
subcontractors, independent contractors or employees to act in
accordance with such requirements. The Borrower further agrees
to monitor such contractors, subcontractors, independent
contractors and employees for compliance with such equal
opportunity and nondiscrimination requirements. The Borrower
also agrees, upon request of the City, to provide the City with a
copy of the Borrower's Equal Employment Opportunity Policy and
any requested compliance information concerning any underwriters
or bond counsel employed by the Borrower in connection with this
Agreement.
24
IN WITNESS WHEREOF, The City of San Diego has caused
this Agreement to be executed in its name and its seal to be
hereunto affixed and attested by its duly authorized officers,
and San Diego Gas & Electric Company has caused this Agreement to
be executed in its name and its seal to be hereunto affixed by
its duly authorized officers, all as of the date first above
written.
THE CITY OF SAN DIEGO
By _______________________________
Director,
Economic Development Services
[SEAL]
Attest:
By ___________________________
Deputy City Clerk
APPROVED AS TO
FORM AND LEGALITY:
JOHN W. WITT,
City Attorney
By _____________________________
Deputy City Attorney
SAN DIEGO GAS & ELECTRIC COMPANY
By ___________________________________
[SEAL] Assistant Treasurer
Attest:
By ____________________________
Assistant Secretary
25
EXHIBIT A
Description of the Project
Local Gas Facilities
Acquisition and construction of additions and
improvements to the Borrower's gas distribution (operating at
pressures at or below 400 psig) facilities, located within its
gas retail service area in San Diego County, required for the
distribution of gas for delivery to the Borrower's customers
located therein. Such facilities include the acquisition and
construction of new, medium- and low-pressure distribution mains,
and new customer service lines or the extension, replacement or
relocation of existing such mains or portions or components
thereof, regulator stations controlling the passage of gas from
distribution mains of higher pressure to distribution mains of
lower pressure and the volume and pressure of gas within the
mains, together with all necessary valves, controls, meters, and
other measuring and regulating devices, and facilities, plant,
property, and other equipment and improvements (including land
and land-rights) necessary for the installation, protection,
maintenance, control and operation of the foregoing.
A-1
Exhibit 10.3
LOAN AGREEMENT
Between
THE CITY OF SAN DIEGO
And
SAN DIEGO GAS & ELECTRIC COMPANY
Dated as of June 1, 1995
Relating to
$57,650,000
The City of San Diego
Industrial Development Revenue Refunding Bonds
(San Diego Gas & Electric Company)
1995 Series A
1995 Series B
LOAN AGREEMENT
TABLE OF CONTENTS
Page
PARTIES 1
PREAMBLES 1
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITION OF TERMS 2
SECTION 1.2. NUMBER AND GENDER 2
SECTION 1.3. ARTICLES, SECTIONS, ETC. 2
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS OF THE CITY 2
SECTION 2.2. REPRESENTATIONS OF THE BORROWER 3
ARTICLE III
ISSUANCE OF THE BONDS; APPLICATION OF PROCEEDS
SECTION 3.1. AGREEMENT TO ISSUE BONDS; APPLICATION OF
BOND PROCEEDS 4
SECTION 3.2. INVESTMENT OF MONEYS IN FUNDS 5
SECTION 3.3. AMENDMENT OF DESCRIPTION OF THE
PROJECT 5
ARTICLE IV
LOAN TO BORROWER; REPAYMENT PROVISIONS
SECTION 4.1. LOAN TO BORROWER 5
SECTION 4.2. REPAYMENT AND PAYMENT OF OTHER AMOUNTS
PAYABLE 5
SECTION 4.3. UNCONDITIONAL OBLIGATION 7
SECTION 4.4. ASSIGNMENT OF CITY'S RIGHTS 8
SECTION 4.5. AMOUNTS REMAINING IN FUNDS 8
SECTION 4.6.CREDIT FACILITY 9
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1. RIGHT OF ACCESS TO THE PROJECT 9
i
SECTION 5.2. THE BORROWER'S MAINTENANCE OF ITS
EXISTENCE; ASSIGNMENTS 9
SECTION 5.3. RECORDS AND FINANCIAL STATEMENTS OF
BORROWER 10
SECTION 5.4. MAINTENANCE AND REPAIR 11
SECTION 5.5. QUALIFICATION IN CALIFORNIA 11
SECTION 5.6. TAX EXEMPT STATUS OF BONDS 11
SECTION 5.7. NOTICE OF RATE PERIODS 12
SECTION 5.8. REMARKETING OF THE BONDS 12
SECTION 5.9. NOTICES TO TRUSTEE AND CITY 14
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT 14
SECTION 6.2. REMEDIES ON DEFAULT 15
SECTION 6.3. AGREEMENT TO PAY ATTORNEYS' FEES AND
EXPENSES 17
SECTION 6.4. NO REMEDY EXCLUSIVE 17
SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE
WAIVER 18
ARTICLE VII
PREPAYMENT
SECTION 7.1. REDEMPTION OF BONDS WITH PREPAYMENT
MONEYS 18
SECTION 7.2. OPTIONS TO PREPAY INSTALLMENTS 18
SECTION 7.3. MANDATORY PREPAYMENT 18
SECTION 7.4. AMOUNT OF PREPAYMENT 19
SECTION 7.5. NOTICE OF PREPAYMENT 19
ARTICLE VIII
NON-LIABILITY OF CITY; EXPENSES; INDEMNIFICATION
SECTION 8.1. NON-LIABILITY OF CITY 20
SECTION 8.2. EXPENSES 20
SECTION 8.3. INDEMNIFICATION 20
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NOTICES 21
SECTION 9.2. SEVERABILITY 22
SECTION 9.3. EXECUTION OF COUNTERPARTS 22
ii
SECTION 9.4. AMENDMENTS, CHANGES AND
MODIFICATIONS 22
SECTION 9.5. GOVERNING LAW 22
SECTION 9.6. AUTHORIZED BORROWER REPRESENTATIVE 22
SECTION 9.7. TERM OF THE AGREEMENT 23
SECTION 9.8. BINDING EFFECT 23
TESTIMONIUM 24
SIGNATURES AND SEALS 24
EXHIBIT A Description of the Project A-1
iii
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of June 1, 1995, by and
between THE CITY OF SAN DIEGO, a municipal corporation and
charter city duly organized and existing under the laws and
Constitution of the State of California (the "City"), and SAN
DIEGO GAS & ELECTRIC COMPANY, a corporation organized and
existing under the laws of the State of California (the
"Borrower"),
W I T N E S S E T H :
WHEREAS, the City is a municipal corporation and
charter city, duly organized and existing under a freeholders'
charter pursuant to which the City has the right and power to
make and enforce all laws and regulations in accordance with and
as more particularly provided in Sections 3, 5 and 7 of Article
XI of the Constitution of the State of California and Section 2
of the Charter of the City (the "Charter"); and
WHEREAS, the City Council of the City, acting under and
pursuant to the powers reserved to the City under Sections 3, 5
and 7 of Article XI of the Constitution and Section 2 of the
Charter, has enacted the City of San Diego Economic Development
Revenue Bond Law, comprising Article 7 of Chapter IX of the San
Diego Municipal Code, pursuant to Ordinance No. 0-15586 (New
Series), adopted on September 14, 1981, as amended from time to
time (the "Law"), establishing a program to provide financial
assistance for the acquisition, construction and installation of
facilities for industrial, commercial or public utility purposes;
and
WHEREAS, the Borrower has duly requested that the City
assist in the refunding or replacement of certain outstanding
bonds previously issued by the City (the "Prior Bonds") to
provide the Borrower with financial assistance to acquire,
construct and install certain facilities for the local furnishing
of electric energy and gas (the "1985 Project"); and
WHEREAS, the City after due investigation and
deliberation has adopted its ordinance authorizing the issuance
of The City of San Diego Industrial Development Revenue Refunding
Bonds (San Diego Gas & Electric Company) 1995 Series A and 1995
Series B (collectively, the "Bonds") to refund and redeem a
portion of the Prior Bonds; and
WHEREAS, the City proposes to assist in refinancing the
portion of the 1985 Project which constitutes facilities for the
local furnishing of electric energy (the "Project") upon the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and
the respective representations and covenants herein contained,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITION OF TERMS. Unless the context
otherwise requires, the terms used in this Agreement shall have
the meanings specified in Section 1.01 of the Indenture of Trust,
of even date herewith relating to the Bonds (the "Indenture"), by
and between the City and Bank of America National Trust and
Savings Association, as Trustee (the "Trustee"), as originally
executed or as it may from time to time be supplemented or
amended as provided therein.
SECTION 1.2. NUMBER AND GENDER. The singular form of
any word used herein, including the terms defined in Section 1.01
of the Indenture, shall include the plural, and vice versa. The
use herein of a word of any gender shall include all genders.
SECTION 1.3. ARTICLES, SECTIONS, ETC. Unless
otherwise specified, references to Articles, Sections and other
subdivisions of this Agreement are to the designated Articles,
Sections and other subdivisions of this Agreement as originally
executed. The words "hereof," "herein," "hereunder" and words of
similar import refer to this Agreement as a whole. The headings
or titles of the several articles and sections, and the table of
contents appended to copies hereof, shall be solely for
convenience of reference and shall not affect the meaning,
construction or effect of the provisions hereof.
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS OF THE CITY. The City
makes the following representations as the basis for its
undertakings herein contained:
(a) The City is a municipal corporation and charter
city in the State of California. Under the provisions of the
Law, the City has the power to enter into the transactions
contemplated by this Agreement and to carry out its obligations
hereunder. The Project constitutes a "facility" as that term is
defined in the Law. By proper action, the City has been duly
authorized to execute, deliver and duly perform this Agreement
and the Indenture.
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(b) To refinance the cost of the Project, the City
will issue the Bonds which will mature, bear interest and be
subject to redemption as set forth in the Indenture.
(c) The Bonds will be issued under and secured by the
Indenture, pursuant to which the City's interest in this
Agreement (except certain rights of the City to give approvals
and consents and to receive payment for expenses and
indemnification and certain other payments) will be pledged to
the Trustee as security for payment of the principal of, premium,
if any, and interest on the Bonds.
(d) The City has not pledged and will not pledge its
interest in this Agreement for any purpose other than to secure
the Bonds under the Indenture.
(e) The City is not in default under any of the
provisions of the laws of the State of California or the City's
Charter which default would affect its existence or its powers
referred to in subsection (a) of this Section 2.1.
(f) The City has found and determined and hereby finds
and determines that all requirements of the Law with respect to
the issuance of the Bonds and the execution of this Agreement and
the Indenture have been complied with and that refinancing the
Project by issuing the Bonds, refunding or replacing the Prior
Bonds and entering into this Agreement and the Indenture will be
in furtherance of the purposes of the Law.
(g) On August 3, 1992, the City Council of the City
adopted Ordinance No. 0-17813 (New Series), and on March 29,
1993, the City Council adopted Ordinance No. 0-17903 (New Series)
authorizing the issuance of the Bonds, and on May 1, 1995, the
City Council adopted Resolution No. R-285683, authorizing the
sale of the Bonds.
SECTION 2.2. REPRESENTATIONS OF THE BORROWER. The
Borrower makes the following representations as the basis for its
undertakings herein contained:
(a) The Borrower is a corporation duly formed under
the laws of the State of California, is in good standing in the
State of California and has the power to enter into and has duly
authorized, by proper corporate action, the execution and
delivery of this Agreement, the Mortgage Bonds and all other
documents contemplated hereby to be executed by the Borrower.
(b) Neither the execution and delivery of this
Agreement or the Mortgage Bonds, the consummation of the
transactions contemplated hereby, nor the fulfillment of or
compliance with the terms and conditions hereof and thereof,
conflicts with or results in a breach of any of the terms,
conditions or provisions of the Borrower's Articles of
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Incorporation or By-laws or of any corporate actions or of any
agreement or instrument to which the Borrower is now a party or
by which it is bound, or constitutes a default (with due notice
or the passage of time or both) under any of the foregoing, or
results in the creation or imposition of any prohibited lien,
charge or encumbrance whatsoever upon any of the property or
assets of the Borrower under the terms of any instrument or
agreement to which the Borrower is now a party or by which it is
bound.
(c) The Project consists and will consist of those
facilities described in Exhibit A hereto, and the Borrower shall
make no changes to such portion of the Project or to the
operation thereof which would affect the qualification of the
Project as a "facility" under the Law or impair the exemption
from gross income of the interest on the Bonds for federal income
tax purposes. In particular, the Borrower shall comply with all
requirements of the San Diego Gas & Electric Company Engineering
and Financial Certificate, dated the Issue Date (the "Engineering
Certificate"), which is hereby incorporated by reference herein.
The Project consists of facilities for the local furnishing of
electric energy as described in the Engineering Certificate. The
Borrower intends to utilize such portion of the Project as
facilities for the local furnishing of electric energy throughout
the foreseeable future.
(d) The Borrower has and will have title to the
Project sufficient to carry out the purposes of this Agreement.
(e) The economic useful life of the Project is as set
forth in the Engineering Certificate.
(f) All certificates, approvals, permits and
authorizations with respect to the construction of the Project of
agencies of applicable local governmental agencies, the State of
California and the federal government have been obtained; and
pursuant to such certificates, approvals, permits and
authorizations the Project has been constructed and is in
operation.
ARTICLE III
ISSUANCE OF THE BONDS; APPLICATION OF PROCEEDS
SECTION 3.1. AGREEMENT TO ISSUE BONDS; APPLICATION OF
BOND PROCEEDS. To provide funds to refinance a portion of the
cost of the Project, the City agrees that it will issue under the
Indenture, sell and cause to be delivered to the purchasers
thereof, the Bonds, bearing interest as provided and maturing on
the date set forth in the Indenture. The City will thereupon
apply the proceeds received from the sale of the Bonds as
provided in the Indenture.
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SECTION 3.2. INVESTMENT OF MONEYS IN FUNDS. Any
moneys in any fund held by the Trustee shall, at the written
request of an Authorized Borrower Representative, be invested or
reinvested by the Trustee as provided in the Indenture. Such
investments shall be held by the Trustee and shall be deemed at
all times a part of the fund from which such investments were
made, and the interest accruing thereon and any profit or loss
realized therefrom shall, except as otherwise provided in the
Indenture, be credited or charged to such fund.
SECTION 3.3. AMENDMENT OF DESCRIPTION OF THE PROJECT.
In the event that the Borrower desires to amend or supplement the
Project, as described in Exhibit A hereto, and the City approves
of such amendment or supplement, the City will enter into, and
will instruct the Trustee to consent to, such amendment or
supplement upon receipt of:
(i) a certificate of an Authorized Borrower
Representative describing in detail the proposed changes and
stating that they will not have the effect of disqualifying
any component of the Project as a facility that may be
financed pursuant to the Law;
(ii) a copy of the proposed form of amended or
supplemented Exhibit A hereto; and
(iii) an Opinion of Bond Counsel that such proposed
changes will not affect the exclusion from gross income of
interest on the Bonds for federal income tax purposes.
ARTICLE IV
LOAN TO BORROWER; REPAYMENT PROVISIONS
SECTION 4.1. LOAN TO BORROWER. The City and the
Borrower agree that the application of the proceeds of sale of
the Bonds to refund and retire a portion of the Prior Bonds and
the first mortgage bonds of the Borrower relating thereto will be
deemed to be and treated for all purposes as a loan to the
Borrower of an amount equal to the principal amount of the Bonds.
SECTION 4.2. REPAYMENT AND PAYMENT OF OTHER AMOUNTS
PAYABLE. To evidence, secure and provide for the repayment of
the loan made hereunder, the Borrower hereby and concurrently
herewith delivers to the Trustee its Mortgage Bonds, of like
principal amount, maturity date, interest rates and redemption
provisions as the Bonds. In addition, the Borrower agrees to
make the payments required by subsection (a) (to the extent such
payments are not timely provided for by the payment of principal
of and interest on the Mortgage Bonds) through (d) of this
Section as Repayment Installments on such loan.
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(a) The Borrower covenants and agrees to pay to the
Trustee as a Repayment Installment on the loan to the Borrower
pursuant to Section 4.1 hereof, on each date provided in or
pursuant to the Indenture for the payment of principal (whether
at maturity or upon redemption or acceleration) of, premium, if
any, and/or interest on the Bonds, until the principal of,
premium, if any, and interest on the Bonds shall have been fully
paid or provision for the payment thereof shall have been made in
accordance with the Indenture, in immediately available funds,
for deposit in the Bond Fund, a sum equal to the amount then
payable as principal (whether at maturity or upon redemption or
acceleration), premium, if any, and interest upon the Bonds as
provided in the Indenture.
Each payment pursuant to the Mortgage Bonds, together
with any other payments required to be made pursuant to this
Section 4.2(a), shall at all times be sufficient to pay the total
amount of interest and principal (whether at maturity or upon
redemption or acceleration) and premium, if any, then payable on
the Bonds; provided that any amount held by the Trustee in the
Bond Fund on any due date for a Repayment Installment hereunder
shall be credited against the installment due on such date to the
extent available for such purpose; and provided further that,
subject to the provisions of this paragraph, if at any time the
amounts held by the Trustee in the Bond Fund are sufficient to
pay all of the principal of and interest and premium, if any, on
the Bonds as such payments become due, the Borrower shall be
relieved of any obligation to make any further payments under the
provisions of this Section. Notwithstanding the foregoing, if on
any date the amount held by the Trustee in the Bond Fund is
insufficient to make any required payments of principal of
(whether at maturity or upon redemption or acceleration) and
interest and premium, if any, on the Bonds as such payments
become due, the Borrower shall forthwith pay such deficiency as a
Repayment Installment hereunder.
(b) The Borrower also agrees to pay to the Trustee
until the principal of, premium, if any, and interest on the
Bonds shall have been fully paid or provision for the payment
thereof shall have been made as required by the Indenture,
(i) the annual fee of the Trustee for its ordinary services
rendered as trustee, and its ordinary expenses incurred under the
Indenture, as and when the same become due, (ii) the reasonable
fees, charges and expenses of the Trustee, the Registrar and the
reasonable fees of any paying agent on the Bonds as provided in
the Indenture, as and when the same become due, (iii) the
reasonable fees, charges and expenses of the Trustee for the
necessary extraordinary services rendered by it and extraordinary
expenses incurred by it under the Indenture, as and when the same
become due. The Borrower shall also pay the cost of printing any
Bonds required to be furnished by the City.
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(c) The Borrower also agrees to pay, within 60 days
after receipt of request for payment thereof, all expenses
required to be paid by the Borrower under the terms of the bond
purchase agreement executed by it in connection with the sale of
the Bonds, and all expenses of the City related to the financing
of the Project which are not otherwise required to be paid by the
Borrower under the terms of this Agreement; provided that the
City shall have obtained the prior written approval of the
Authorized Borrower Representative for any expenditures other
than those provided for herein or in said Bond Purchase
Agreement.
The Borrower also agrees to pay to the City (i) on or
before the Issue Date an origination fee for the Bonds in the
amount of $144,125 and (ii) annually in arrears on September 1 of
each year during which any Bonds are outstanding, an annual
administration fee equal to .025% of the weighted average
principal amount of the Bonds outstanding during the prior twelve
(12) months, as calculated by the Borrower and confirmed by the
City.
(d) The Borrower hereby agrees to provide or cause to
be provided in immediately available funds, for deposit into the
Bond Purchase Fund maintained by the Tender Agent, all amounts
necessary to purchase Bonds tendered for purchase in accordance
with Sections 2.01(d) and 2.01(e) of the Indenture.
(e) In the event the Borrower should fail to make any
of the payments required by subsections (a) through (d) of this
Section, such payments shall continue as obligations of the
Borrower until such amounts shall have been fully paid. The
Borrower agrees to pay such amounts, together with interest
thereon until paid, to the extent permitted by law, at the rate
of one percent (1%) per annum over the rate borne by any Bonds in
respect of which such payments are required to be made pursuant
to said subsection (a), and one percent (1%) per annum over the
average rate then borne by the Bonds as to all other payments.
Interest on overdue payments required under subsection (a) or (d)
above shall be paid to Bondholders as provided in the Indenture.
(f) Upon written request of the Trustee, the Borrower
shall pay any Repayment Installment directly to the Paying Agent.
SECTION 4.3. UNCONDITIONAL OBLIGATION. The
obligations of the Borrower to make the payments required by
Section 4.2 hereof (including payments on the Mortgage Bonds) and
to perform and observe the other agreements on its part contained
herein shall be absolute and unconditional, irrespective of any
defense or any rights of set-off, recoupment or counterclaim it
might otherwise have against the City, and during the term of
this Agreement, the Borrower shall pay absolutely net the
payments to be made on account of the loan as prescribed in
Section 4.2 and all other payments required hereunder, free of
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any deductions and without abatement, diminution or set-off.
Until such time as the principal of, premium, if any, and
interest on the Bonds shall have been fully paid, or provision
for the payment thereof shall have been made as required by the
Indenture, the Borrower (i) will not suspend or discontinue any
payments provided for in Section 4.2 hereof; (ii) will perform
and observe all of its other covenants contained in this
Agreement; and (iii) will not terminate this Agreement for any
cause, including, without limitation, the occurrence of any act
or circumstances that may constitute failure of consideration,
destruction of or damage to the Project, commercial frustration
of purpose, any change in the tax or other laws of the United
States of America or of the State of California or any political
subdivision of either of these, or any failure of the City or the
Trustee to perform and observe any covenant, whether express or
implied, or any duty, liability or obligation arising out of or
connected with this Agreement or the Indenture, except to the
extent permitted by this Agreement.
SECTION 4.4. ASSIGNMENT OF CITY'S RIGHTS. As security
for the payment of the Bonds, the City will assign to the Trustee
the City's rights, but not its obligations, under this Agreement,
including the right to receive payments hereunder (except (i) the
rights of the City to receive notices under this Agreement, (ii)
the right of the City to receive certain payments, if any, with
respect to fees, expenses and indemnification and certain other
purposes under Sections 4.2(c), 4.2(e), 6.3, 8.2 and 8.3 hereof,
and (iii) the right of the City to give approvals or consents
pursuant to this Agreement) and any such rights under the
Mortgage Bonds, and the City hereby directs the Borrower to make
the payments required hereunder (except such payments for fees,
expenses and indemnification) directly to the Trustee. The
Borrower hereby assents to such assignment and agrees to make
payments directly to the Trustee without defense or set-off by
reason of any dispute between the Borrower and the City or the
Trustee.
SECTION 4.5. AMOUNTS REMAINING IN FUNDS. It is agreed
by the parties hereto that after payment in full of (i) the
Bonds, or after provision for such payment shall have been made
as provided in the Indenture, (ii) the fees and expenses of the
City in accordance with this Agreement, (iii) the fees, charges
and expenses of the Trustee, the Registrar and Paying Agents in
accordance with the Indenture and this Agreement and (iv) all
other amounts required to be paid under this Agreement and the
Indenture, any amounts remaining in any fund held by the Trustee
under the Indenture shall belong, subject to the requirements of
Section 6.06 of the Indenture, to the Borrower and be paid to the
Borrower by the Trustee.
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SECTION 4.6. CREDIT FACILITY. The Borrower may
provide and subsequently terminate or remove a Credit Facility
with respect to a Series of Bonds, pursuant to the provisions of
Section 5.07 of the Indenture; provided, however, that, except in
connection with the redemption of Bonds, the Borrower shall not
intentionally cause the termination of, any Credit Facility with
respect to Bonds during a Term Rate Period. Not less than
twenty-five days prior to the termination, removal or
substitution of any Credit Facility with respect to a Series of
Bonds, the Borrower shall mail written notice of such
termination, removal or substitution to the Trustee. Not less
than fifteen days prior to the delivery of any substitute Credit
Facility for a Series of Bonds, the Borrower shall mail written
notice of such substitution to each Rating Agency.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1. RIGHT OF ACCESS TO THE PROJECT. The
Borrower agrees that during the term of this Agreement the City,
the Trustee and the duly authorized agents of either of them
shall have the right at all reasonable times during normal
business hours to enter upon the site of the Project described in
Exhibit A hereto to examine and inspect such Project; provided,
however, that this right is subject to federal and State of
California laws and regulations applicable to such site. The
rights of access hereby reserved to the City and the Trustee may
be exercised only after such agent shall have executed release of
liability (which release shall not limit any of the Borrower's
obligations hereunder) and secrecy agreements if requested by the
Borrower in the form then currently used by the Borrower, and
nothing contained in this Section or in any other provision of
this Agreement shall be construed to entitle the City or the
Trustee to any information or inspection involving the
confidential know-how of the Borrower.
SECTION 5.2. THE BORROWER'S MAINTENANCE OF ITS
EXISTENCE; ASSIGNMENTS. (a) The Borrower agrees that during the
term of this Agreement it will maintain its corporate existence
in good standing and will not dissolve or otherwise dispose of
all or substantially all of its assets and will not consolidate
with or merge into another corporation or permit one or more
other corporations to consolidate or merge into it; provided,
that the Borrower may (subject to any applicable restrictions
otherwise imposed by law or contract, including the Borrower's
franchises and the City's Charter), without violating the
covenants contained in this Section, consolidate with or merge
into another corporation, or permit one or more other
corporations to consolidate with or merge into it, or sell or
otherwise transfer to another corporation all or substantially
all of its assets and thereafter dissolve, provided that
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(1) either (A) the Borrower is the surviving corporation or
(B) the surviving, resulting or transferee corporation, as the
case may be, (i) assumes and agrees in writing to pay and perform
all of the obligations of the Borrower hereunder and under the
Mortgage Bonds, and (ii) qualifies to do business in the State of
California; and (2) the Borrower shall deliver to the Trustee an
Opinion of Bond Counsel to the effect that such consolidation,
merger or transfer and dissolution does not in and of itself
adversely affect the exclusion from gross income for federal
income tax purposes of interest on the Bonds, except that no such
opinion shall be required in the case of the reorganization
described in the proxy statement of the Borrower dated March 1,
1995.
(b) The rights and obligations of the Borrower under
this Agreement may be assigned by the Borrower, with the written
consent of the City, in whole or in part subject, however, to
each of the following conditions:
(i) No assignment (other than pursuant to a
merger, consolidation or combination described in Section 5.2(a))
shall relieve the Borrower from primary liability for any of its
obligations hereunder, and in the event of any assignment not
pursuant to Section 5.2(a), the Borrower shall continue to remain
primarily liable for the payments specified in Section 4.2
hereof, including payments pursuant to the Mortgage Bonds, and
for performance and observance of the other agreements on its
part herein provided to be performed and observed by it.
(ii) Any assignment from the Borrower shall retain
for the Borrower such rights and interests as will permit it to
perform its obligations under this Agreement, and any assignee
from the Borrower shall assume the obligations of the Borrower
hereunder to the extent of the interest assigned.
(iii) The Borrower shall, within thirty days after
delivery of such assignment, furnish or cause to be furnished to
the City and the Trustee a true and complete copy of each such
assignment together with an instrument of assumption.
(iv) The Borrower shall cause to be delivered to
the City and the Trustee an Opinion of Bond Counsel that such
assignment will not, in and of itself, result in the interest on
the Bonds being determined to be includable in the gross income
for federal income tax purposes of the owners thereof (other than
a "substantial user" of the Project or a "related person" within
the meaning of Section 103(b)(13) of the 1954 Code).
(c) The Borrower acknowledges that Section 103 of the
City's Charter specifies in part as follows: "No franchises shall
be transferable except with the approval of the Council expressed
by ordinance."
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SECTION 5.3. RECORDS AND FINANCIAL STATEMENTS OF
BORROWER. The Borrower agrees (a) to keep and maintain full and
accurate accounts and records of its operations in accordance
with generally accepted accounting principles, (b) to permit the
Trustee for itself or on behalf of the holders of the Bonds and
its designated officers, employees, agents and representatives to
have access to such accounts and records and to make examinations
thereof at all reasonable times and (c) upon request of the
Trustee, to provide the Trustee with the Borrower's most recent
audited financial statements.
SECTION 5.4. MAINTENANCE AND REPAIR. The Borrower
agrees that as long as it owns the Project it will (i) maintain,
or cause to be maintained, the Project in as reasonably safe
condition as its operations shall permit and (ii) maintain, or
cause to be maintained, the Project in good repair and in good
operating condition, ordinary wear and tear excepted, making from
time to time all necessary repairs thereto and renewals and
replacements thereof.
SECTION 5.5. QUALIFICATION IN CALIFORNIA. The
Borrower agrees that throughout the term of this Agreement it, or
any successor or assignee as permitted by Section 5.2, will be
qualified to do business in the State of California.
SECTION 5.6. TAX EXEMPT STATUS OF BONDS. (a) It is
the intention of the parties hereto that interest on the Bonds
shall be and remain excluded from gross income for federal income
tax purposes. To that end, the covenants and agreements of the
City and the Borrower in this Section and in the Tax Certificate
are for the benefit of the Trustee and each and every person who
at any time will be a holder of the Bonds. Without limiting the
generality of the foregoing, the Borrower and the City agree that
there shall be paid from time to time all amounts required to be
rebated to the United States pursuant to Section 148(f) of the
Code and any temporary, proposed or final Treasury Regulations as
may be applicable to the Bonds from time to time. This covenant
shall survive payment in full or defeasance of the Bonds. The
Borrower specifically covenants to pay or cause to be paid for
and on behalf of the City to the United States at the times and
in the amounts determined under Section 6.06 of the Indenture the
Rebate Requirement as described in the Tax Certificate.
(b) The City covenants and agrees that it has not
taken and will not take any action which results in interest to
be paid on the Bonds being included in gross income of the
holders of the Bonds for federal income tax purposes, and the
Borrower covenants and agrees that it has not taken or permitted
to be taken and will not take or permit to be taken any action
which will cause the interest on the Bonds to become includable
in gross income for federal income tax purposes; provided that
neither the Borrower nor the City shall have violated these
covenants if interest on any of the Bonds becomes taxable to a
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person solely because such person is a "substantial user" of the
Project or a "related person" within the meaning of Section
103(b)(13) of the 1954 Code; and provided further that none of
the covenants and agreements herein contained shall require
either the Borrower or the City to enter an appearance or
intervene in any administrative, legislative or judicial
proceeding in connection with any changes in applicable laws,
rules or regulations or in connection with any decisions of any
court or administrative agency or other governmental body
affecting the taxation of interest on the Bonds. The Borrower
acknowledges having read Section 6.06 of the Indenture and agrees
to perform all duties imposed on it by such Section, by this
Section and by the Tax Certificate. Insofar as Section 6.06 of
the Indenture and the Tax Certificate impose duties and
responsibilities on the City or the Borrower, they are
specifically incorporated herein by reference.
(c) Notwithstanding any provision of this Section 5.6
or Section 6.06 of the Indenture, if the Borrower shall provide
to the City and the Trustee an Opinion of Bond Counsel to the
effect that any specified action required under this Section 5.6
and Section 6.06 of the Indenture is no longer required or that
some further or different action is required to maintain the
exclusion from federal income tax of interest on the Bonds, the
Borrower, the Trustee and the City may conclusively rely on such
opinion in complying with the requirements of this Section, and
the covenants hereunder shall be deemed to be modified to that
extent.
SECTION 5.7. NOTICE OF RATE PERIODS. The Borrower
shall designate and give timely written notice to the Trustee as
required by the Indenture prior to any change in Rate Periods for
the Bonds. In addition, if the Borrower shall elect to change
Rate Periods in accordance with the Indenture and the Bonds under
circumstances requiring the delivery of an Opinion of Bond
Counsel, the Borrower shall deliver such opinion to the Trustee
concurrently with the giving of notice with respect thereto, and
no such change shall be effective without an Opinion of Bond
Counsel to the effect that such change is authorized or permitted
by the Indenture and the Law and will not adversely affect the
Tax-Exempt status of the interest on the Bonds.
SECTION 5.8. REMARKETING OF THE BONDS.
(a) The Borrower agrees to perform all obligations and
duties required of it by the Indenture with respect to the
remarketing of the Bonds, and, to appoint as set forth below a
Remarketing Agent and a Tender Agent meeting the qualifications
and otherwise meeting the requirements set forth in this
Section 5.8.
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(b) Tender Agent.
(i) Appointment and Duties: In order to carry out the
duties and obligations of the Tender Agent contained in the
Indenture, the Borrower shall appoint a Tender Agent or Tender
Agents in order to carry out such duties and obligations, subject
to the conditions set forth below. Each Tender Agent shall
designate to the Trustee its principal office and signify its
acceptance of the duties and obligations imposed upon it under
the Indenture by entering into a Tender Agreement with the
Borrower and such other parties as shall be appropriate, which
may be combined with a Remarketing Agreement into a single
document, delivered to the City, the Trustee, the Borrower and
each Remarketing Agent, under which the Tender Agent shall agree,
particularly (but without limitation): (A) to perform the duties
and comply with the requirements imposed upon it by the Tender
Agreement, the Indenture and this Agreement; and (B) to keep such
books and records with respect to its activities as Tender Agent
as shall be consistent with prudent industry practice and to make
such books and records available for inspection by the City, the
Trustee and the Borrower at all reasonable times.
(ii) Qualifications: Each Tender Agent shall be a
financial institution organized and doing business under the laws
of the United States or of a state thereof, authorized under such
laws to exercise corporate trust powers, having a combined
capital and surplus of at least Fifty Million Dollars
($50,000,000), and subject to supervision or examination by
federal or state authority. If such financial institution
publishes a report of condition at least annually, pursuant to
law or to the requirements of any supervising or examining
authority above referred to, then for the purposes of this
Section the combined capital and surplus of such banking
corporation or banking association shall be deemed to be its
combined capital and surplus as set forth in its most recent
report of condition so published.
(c) Remarketing Agent. In order to carry out the
duties and obligations contained in the Indenture, the Borrower,
by an instrument in writing (which may be the Remarketing
Agreement) signed by an Authorized Borrower Representative, shall
select the Remarketing Agent(s) for each series of Bonds subject
to the conditions set forth below. Each Remarketing Agent shall
designate to the Trustee its principal office and signify its
acceptance of the duties and obligations imposed upon it under
the Indenture by a written instrument of acceptance (which may be
the execution of a Remarketing Agreement) delivered to the City,
the Trustee and the Borrower under which the Remarketing Agent
shall agree, particularly (but without limitation): (i) to
perform the duties and comply with the requirements imposed upon
it by the Remarketing Agreement, the Indenture and this
Agreement; and (ii) to keep such books and records with respect
to its activities as Remarketing Agent as shall be consistent
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with prudent industry practice and to make such books and records
available for inspection by the City, the Trustee and the
Borrower at all reasonable times.
(d) Remarketing Agreement. In order to provide for
the remarketing of the Bonds, the Borrower shall enter into a
Remarketing Agreement with each Remarketing Agent and such other
parties as shall be appropriate, which may be combined with a
Tender Agreement into a single document. Each Remarketing
Agreement shall include the following: (i) a requirement that
the Remarketing Agreement shall not be terminated by the Borrower
without cause for a period of at least six months after the
effective date thereof; and (ii) a statement to the effect that
the Remarketing Agent is not acting in an agency capacity with
respect to the Borrower in establishing interest rates and Rate
Periods as described in Section 2.01 of the Indenture, but is
acting as agent of the City pursuant to the Law with respect to
such functions.
SECTION 5.9. NOTICES TO TRUSTEE AND CITY. The
Borrower hereby agrees to provide the Trustee and the City with
notice of any event of which it has knowledge which, with the
passage of time or the giving of notice, would be an Event of
Default, such notice to include a description of the nature of
such event and what steps are being taken to remedy such Event of
Default. The Borrower further agrees and covenants to notify the
City promptly upon receiving actual notice of any non-performance
by the Trustee of its duties and obligations under the Indenture
or this Agreement.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. Any one of the
following which occurs and continues shall constitute an Event of
Default pursuant to this Agreement:
(a) failure by the Borrower to pay any amounts
required to be paid under Section 4.2(a) or 4.2(d) hereof at
the times required to avoid causing an Event of Default
pursuant to the Indenture; or
(b) failure of the Borrower to observe and
perform any covenant, condition or agreement on its part
required to be observed or performed by this Agreement,
other than making the payments referred to in (a) above,
which continues for a period of 60 days after written
notice, which notice shall specify such failure and request
that it be remedied, given to the Borrower by the City or
the Trustee, unless the City and the Trustee shall agree in
writing to an extension of such time; provided, however,
14
that if the failure stated in the notice cannot be corrected
within such period, the City and the Trustee will not
unreasonably withhold their consent to an extension of such
time if corrective action is instituted within such period
and diligently pursued until the default is corrected; or
(c) occurrence of a "completed default" under and
as defined in the Borrower Indenture; or
(d) an Act of Bankruptcy of the Borrower; or
(e) a default under any Credit Facility if the
Credit Provider notifies the Trustee in writing that such
default shall be treated as an Event of Default hereunder.
The provisions of subsection (b) of this Section are subject to
the limitation that the Borrower shall not be deemed in default
if and so long as the Borrower is unable to carry out its
agreements hereunder by reason of strikes, lockouts or other
industrial disturbances; acts of public enemies; orders of any
kind of the government of the United States or of the State of
California or any of their departments, agencies, or officials,
or any civil or military authority; insurrections, riots,
epidemics, landslides; lightning; earthquake; fire; hurricanes;
storms; floods; washouts; droughts; arrests; restraint of
government and people; civil disturbances; explosions; breakage
or accident to machinery, transmission pipes or canals; partial
or entire failure of utilities; or any other cause or event not
reasonably within the control of the Borrower; it being agreed
that the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of the
Borrower, and the Borrower shall not be required to make
settlement of strikes, lockouts and other industrial disturbances
by acceding to the demands of the opposing party or parties when
such course is, in the judgment of the Borrower, unfavorable to
the Borrower. This limitation shall not apply to any default
under subsections (a), (c), (d) or (e) of this Section.
SECTION 6.2. REMEDIES ON DEFAULT. Whenever any Event
of Default shall have occurred and shall continue, the following
remedies may be pursued:
(a) The Trustee may, and upon the written request
of any Credit Provider or the holders of not less than 25%
in aggregate principal amount of Bonds then outstanding,
shall, by notice in writing delivered to the Borrower with
copies of such notice being sent to the City and each Credit
Provider, declare the unpaid balance of the loan payable
under Section 4.2(a) of this Agreement and the interest
accrued thereon to be immediately due and payable and such
principal and interest shall thereupon become and be
immediately due and payable. Upon any such acceleration,
the Bonds shall be subject to mandatory redemption as
15
provided in Section 4.01(b)(4) of the Indenture. After any
such declaration of acceleration, the Trustee shall
immediately take such actions as necessary to realize moneys
under any Credit Facility.
(b) The Trustee shall have access to and the
right to inspect, examine and make copies of the books and
records and any and all accounts, data and federal income
tax and other tax returns of the Borrower.
(c) The City or the Trustee may take whatever
action at law or in equity as may be necessary or desirable
to collect the payments and other amounts then due and
thereafter to become due or to enforce performance and
observance of any obligation, agreement or covenant of the
Borrower under this Agreement.
The provisions of clause (a) of the preceding
paragraph, however, are subject to the condition that if, at any
time after the loan shall have been so declared due and payable,
and before any judgment or decree for the payment of the moneys
due shall have been obtained or entered as hereinafter provided,
there shall have been deposited with the Trustee a sum sufficient
(together with any amounts held in the Bond Fund) to pay all the
principal of the Bonds matured prior to such declaration and all
matured installments of interest (if any) upon all the Bonds,
with interest on such overdue installments of principal as
provided herein, and the reasonable expenses of the Trustee, and
any and all other defaults known to the Trustee (other than in
the payment of principal of and interest on the Bonds due and
payable solely by reason of such declaration) shall have been
made good or cured to the satisfaction of the Trustee or
provision deemed by the Trustee to be adequate shall have been
made therefor, then, and in every such case, the holders of at
least a majority in aggregate principal amount of the Bonds then
outstanding, by written notice to the City and to the Trustee,
may, on behalf of the holders of all the Bonds, rescind and annul
such declaration and its consequences and waive such default;
provided that no such rescission and annulment shall extend to or
shall affect any subsequent default, or shall impair or exhaust
any right or power consequent thereon; and provided further that
there shall not be rescinded or annulled any such declaration
which follows an event described in Section 6.1(e) without the
written consent of the Credit Provider.
In case the Trustee or the City shall have proceeded to
enforce its rights under this Agreement and such proceedings
shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Trustee or the City, then,
and in every such case, the Borrower, the Trustee and the City
shall be restored respectively to their several positions and
rights hereunder, and all rights, remedies and powers of the
Borrower, the Trustee and the City shall continue as though no
16
such action had been taken (provided, however, that any
settlement of such proceedings duly entered into by the City, the
Trustee or the Borrower shall not be disturbed by reason of this
provision).
In case the Borrower shall fail forthwith to pay such
amounts upon demand of the Trustee, the Trustee shall be entitled
and empowered to institute any action or proceeding at law or in
equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final
decree, and may enforce any such judgment or final decree against
the Borrower and collect in the manner provided by law the moneys
adjudged or decreed to be payable.
In case proceedings shall be pending for the bankruptcy
or for the reorganization of the Borrower under the federal
bankruptcy laws or any other applicable law, or in case a
receiver or trustee shall have been appointed for the property of
the Borrower or in the case of any other similar judicial
proceedings relative to the Borrower, or the creditors or
property of the Borrower, then the Trustee shall be entitled and
empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount owing and
unpaid pursuant to this Agreement and, in case of any judicial
proceedings, to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the
claims of the Trustee allowed in such judicial proceedings
relative to the Borrower, its creditors or its property, and to
collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute such amounts as
provided in the Indenture after the deduction of its charges and
expenses. Any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized to make such payments to the
Trustee, and to pay to the Trustee any amount due it for
compensation and expenses, including expenses and fees of counsel
incurred by it up to the date of such distribution.
SECTION 6.3. AGREEMENT TO PAY ATTORNEYS' FEES AND
EXPENSES. In the event the Borrower should default under any of
the provisions of this Agreement and the City or the Trustee
should employ attorneys or incur other expenses for the
collection of the payments due under this Agreement or the
enforcement of performance or observance of any obligation or
agreement on the part of the Borrower herein contained, the
Borrower agrees to pay to the City or the Trustee the reasonable
fees of such attorneys and such other expenses so incurred by the
City or the Trustee.
SECTION 6.4. NO REMEDY EXCLUSIVE. No remedy herein
conferred upon or reserved to the City or the Trustee is intended
to be exclusive of any other available remedy or remedies, but
each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement or now
17
or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon
any default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the City or the Trustee to
exercise any remedy reserved to it in this Article, it shall not
be necessary to give any notice, other than such notice as may be
herein expressly required. Such rights and remedies as are given
the City hereunder shall also extend to the Trustee, and the
Trustee and the holders of the Bonds shall be deemed third party
beneficiaries of all covenants and agreements herein contained.
SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE
WAIVER. In the event any agreement or covenant contained in this
Agreement should be breached by the Borrower and thereafter
waived by the City or the Trustee, such waiver shall be limited
to the particular breach so waived and shall not be deemed to
waive any other breach hereunder.
ARTICLE VII
PREPAYMENT
SECTION 7.1. REDEMPTION OF BONDS WITH PREPAYMENT
MONEYS. By virtue of the assignment of the rights of the City
under this Agreement to the Trustee as is provided in Section 4.4
hereof, the Borrower agrees to and shall pay directly to the
Trustee any amount permitted or required to be paid by it under
this Article VII. The Trustee shall use the moneys so paid to it
by the Borrower to effect redemption of the Bonds in accordance
with Article IV of the Indenture on the date specified for such
redemption pursuant to Section 7.5 hereof.
SECTION 7.2. OPTIONS TO PREPAY INSTALLMENTS. The
Borrower shall have the option to prepay the amounts payable
under Section 4.2 hereof by paying to the Trustee, for deposit in
the Bond Fund, the amount set forth in Section 7.4 hereof, under
the circumstances set forth in Section 4.01(a) of the Indenture;
provided, however, that if any event specified in Section
4.01(a)(1)(A) through (D) of the Indenture gives rise to the
Borrower's exercise of its option to prepay such amounts payable
hereunder, the amount of such loan payment prepaid shall not
exceed the original cost of the portion of the Project affected
by such event.
SECTION 7.3. MANDATORY PREPAYMENT. (a) The Borrower
shall have and hereby accepts the obligation to prepay Repayment
Installments to the extent mandatory redemption of the Bonds is
required pursuant to Section 4.01(b) of the Indenture. The
Borrower shall satisfy its obligation hereunder by prepaying such
Repayment Installments within one hundred eighty (180) days after
18
the occurrence of any event set forth in paragraphs (1) through
(3) of said Section 4.01(b) giving rise to such required
prepayment, and immediately upon the occurrence of any event set
forth in paragraph (4) thereof giving rise to such required
prepayment. The amount payable by the Borrower in the event of a
prepayment required by this Section shall be determined as set
forth in Section 7.4 and shall be deposited in the Bond Fund.
SECTION 7.4. AMOUNT OF PREPAYMENT. In the case of a
prepayment of the entire amount due hereunder pursuant to Section
7.2 or 7.3 hereof, the amount to be paid shall be a sum
sufficient, together with other funds and the yield on any
securities deposited with the Trustee and available for such
purpose, to pay (1) the principal of all Bonds outstanding on the
redemption date specified in the notice of redemption, plus
interest accrued and to accrue to the payment or redemption date
of the Bonds, plus premium, if any, pursuant to the Indenture,
(2) all reasonable and necessary fees and expenses of the City,
the Trustee and any paying agent accrued and to accrue through
final payment of the Bonds, and (3) all other liabilities of the
Borrower accrued and to accrue under this Agreement.
In the case of partial prepayment of the Repayment
Installments, the amount payable shall be a sum sufficient,
together with other funds deposited with the Trustee and
available for such purpose, to pay the principal amount of and
premium, if any, and accrued interest on the Bonds to be
redeemed, as provided in the Indenture, and to pay expenses of
redemption of such Bonds.
SECTION 7.5. NOTICE OF PREPAYMENT. The Borrower shall
give forty-five days' prior written notice to the City and the
Trustee specifying the date upon which any prepayment pursuant to
this Article VII will be made. If, in the case of a mandatory
prepayment pursuant to Section 7.3 hereof, the Borrower fails to
give such notice of a prepayment required by this Section 7.5,
such notice may be given by the City or by any holder or holders
of ten percent (10%) or more in aggregate principal amount of the
Bonds of any Series Outstanding, and shall be given by the
Trustee, but solely at the times and under the circumstances
provided in Section 4.01(b) of the Indenture. The City and the
Trustee, at the request of the Borrower or any such Bondholder or
Bondholders, shall forthwith take all steps necessary under the
applicable provisions of the Indenture (except that the City
shall not be required to make payment of any money required for
such redemption) to effect redemption of all or part of the then
outstanding Bonds, as the case may be, on the earliest
practicable date thereafter on which such redemption may be made
under applicable provisions of the Indenture.
Notwithstanding anything to the contrary in this
Agreement, each notice contemplated in this Section 7.5 that is
given with respect to an optional prepayment pursuant to Section
19
7.2 hereof may state that it is subject to and conditional upon
receipt by the Trustee on or prior to the proposed prepayment
date of amounts sufficient to effect such prepayment and, if a
notice so states, such notice shall be of no force and effect and
the prepayment need not be made and the Repayment Installments
will not become due and payable on the proposed prepayment date
unless such amounts are so received on or prior to the proposed
prepayment date.
ARTICLE VIII
NON-LIABILITY OF CITY; EXPENSES; INDEMNIFICATION
SECTION 8.1. NON-LIABILITY OF CITY. The City shall
not be obligated to pay the principal of, or premium, if any, or
interest on the Bonds, or to discharge any other financial
liability in connection herewith, except from Revenues. The
Borrower hereby acknowledges that the City's sole source of
moneys to repay the Bonds will be provided by the payments made
by the Borrower pursuant to this Agreement (excluding payments
pursuant to Section 4.2(b), 4.2(c), 5.6, 6.3, 8.2 and 8.3 of this
Agreement), together with other Revenues, including investment
income on certain funds and accounts held by the Trustee under
the Indenture, and hereby agrees that if the payments to be made
hereunder shall ever prove insufficient to pay all principal of,
and premium, if any, and interest on the Bonds as the same shall
become due (whether by maturity, redemption, acceleration or
otherwise), then upon notice from the Trustee, the Borrower shall
pay such amounts as are required from time to time to prevent any
deficiency or default in the payment of such principal, premium
or interest, including, but not limited to, any deficiency caused
by acts, omissions, nonfeasance or malfeasance on the part of the
Trustee, the Borrower, the City or any third party.
SECTION 8.2. EXPENSES. The Borrower covenants and
agrees to pay within fifteen (15) days after billing therefor and
to indemnify the City and the Trustee against all costs and
charges, including fees and disbursements of attorneys,
accountants, consultants, including financial consultants,
engineers and other experts incurred, in the absence of willful
misconduct, in connection with this Agreement, the Bonds or the
Indenture. The City shall notify the Borrower in writing prior
to engaging any professional or expert for which the City plans
to bill the Borrower, other than under the circumstances
described in Section 6.3 hereof.
SECTION 8.3. INDEMNIFICATION. The Borrower releases
the City and the Trustee from, and covenants and agrees that
neither the City nor the Trustee shall be liable for, and
covenants and agrees, to the extent permitted by law, to
indemnify, defend and hold harmless the City and the Trustee and
their officers, employees and agents from and against, any and
20
all losses, claims, damages, liabilities or expenses, of every
conceivable kind, character and nature whatsoever arising out of,
resulting from or in any way connected with (1) the Project, or
the conditions, occupancy, use, possession, conduct or management
of, or work done in or about, or from the planning, design,
acquisition, installation or construction of the Project or any
part thereof; (2) the issuance of any Bonds or any certifications
or representations made in connection therewith and the carrying
out of any of the transactions contemplated by the Bonds, the
Indenture and this Agreement; (3) the Trustee's acceptance or
administration of the trusts under the Indenture, or the exercise
or performance of any of its powers or duties under the
Indenture; or (4) any untrue statement or alleged untrue
statement of any material fact or omission or alleged omission to
state a material fact necessary to make the statements made, in
light of the circumstances under which they were made, not
misleading, in any official statement or other offering circular
utilized by the City or any underwriter or placement agent in
connection with the sale of any Bonds; provided that such
indemnity shall not be required for damages that result from
negligence or willful misconduct on the part of the party seeking
such indemnity. The indemnity of the Trustee required by this
Section shall be only to the extent that any loss sustained by
the Trustee exceeds the net proceeds the Trustee receives from
any insurance carried with respect to the loss sustained. The
Borrower further covenants and agrees, to the extent permitted by
law, to pay or to reimburse the City and the Trustee and their
officers, employees and agents for any and all costs, attorneys
fees, liabilities or expenses incurred in connection with
investigating, defending against or otherwise in connection with
any such losses, claims, damages, liabilities, expenses or
actions, except to the extent that the same arise out of the
negligence or willful misconduct of the party claiming such
payment or reimbursement. The provisions of this Section shall
survive the retirement of the Bonds or resignation or removal of
the Trustee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NOTICES. All notices, certificates or
other communications shall be deemed sufficiently given on the
second day following the day on which the same have been mailed
by first class mail, postage prepaid, addressed to the City, the
Borrower or the Trustee, as the case may be, as follows:
21
To the City: City Manager
City of San Diego
City Administration Building
202 C Street
San Diego, CA 92101
Attention: Economic Development Services
To the Borrower: San Diego Gas & Electric Company
101 Ash Street
P.O. Box 1831
San Diego, CA 92112
Attention: Treasurer
To the Trustee: Bank of America National Trust and
Savings Association
333 South Beaudry Avenue
Los Angeles, CA 90017
Attention: Corporate Trust Division, #8510
A duplicate copy of each notice, certificate or other
communication given hereunder by either the City or the Borrower
to the other shall also be given to the Trustee. The City, the
Borrower and the Trustee may, by notice given hereunder,
designate any different addresses to which subsequent notices,
certificates or other communications shall be sent.
SECTION 9.2. SEVERABILITY. If any provision of this
Agreement shall be held or deemed to be, or shall in fact be,
illegal, inoperative or unenforceable, the same shall not affect
any other provision or provisions herein contained or render the
same invalid, inoperative, or unenforceable to any extent
whatever.
SECTION 9.3. EXECUTION OF COUNTERPARTS. This
Agreement may be simultaneously executed in several counterparts,
each of which shall be an original and all of which shall
constitute but one and the same instrument; provided, however,
that for purposes of perfecting a security interest in this
Agreement under Article 9 of the California Uniform Commercial
Code, only the counterpart delivered, pledged, and assigned to
the Trustee shall be deemed the original.
SECTION 9.4. AMENDMENTS, CHANGES AND MODIFICATIONS.
Except as otherwise provided in this Agreement or the Indenture,
subsequent to the initial issuance of Bonds and prior to their
payment in full, or provision for such payment having been made
as provided in the Indenture, this Agreement may not be
effectively amended, changed, modified, altered or terminated
without the written consent of the Trustee.
22
SECTION 9.5. GOVERNING LAW. This Agreement shall be
governed exclusively by and construed in accordance with the
applicable laws of the State of California.
SECTION 9.6. AUTHORIZED BORROWER REPRESENTATIVE.
Whenever under the provisions of this Agreement the approval of
the Borrower is required or the City or the Trustee is required
to take some action at the request of the Borrower, such approval
or such request shall be given on behalf of the Borrower by the
Authorized Borrower Representative, and the City and the Trustee
shall be authorized to act on any such approval or request and
neither party hereto shall have any complaint against the other
or against the Trustee as a result of any such action taken.
SECTION 9.7. TERM OF THE AGREEMENT. This Agreement
shall be in full force and effect from the date hereof and shall
continue in effect as long as any of the Bonds is outstanding or
the Trustee holds any moneys under the Indenture, whichever is
later. All representations and certifications by the Borrower as
to all matters affecting the Tax-Exempt status of the Bonds shall
survive the termination of this Agreement.
SECTION 9.8. BINDING EFFECT. This Agreement shall
inure to the benefit of and shall be binding upon the City, the
Borrower, the Trustee and their respective successors and
assigns; subject, however, to the limitations contained in
Section 5.2 hereof.
SECTION 9.9. EQUAL OPPORTUNITY AND NONDISCRIMINATION.
The Borrower agrees to use its best efforts to require any and
all of its contractors, subcontractors, independent contractors
and employees to comply with applicable federal, state or local
equal opportunity and nondiscrimination requirements imposed by
statute, ruling or regulation and to hold the City harmless from
any and all liability, claims, damages or injuries to any person
in connection with any failure by such contractors,
subcontractors, independent contractors or employees to act in
accordance with such requirements. The Borrower further agrees
to monitor such contractors, subcontractors, independent
contractors and employees for compliance with such equal
opportunity and nondiscrimination requirements. The Borrower
also agrees, upon request of the City, to provide the City with a
copy of the Borrower's Equal Employment Opportunity Policy and
any requested compliance information concerning any underwriters
or bond counsel employed by the Borrower in connection with this
Agreement.
23
IN WITNESS WHEREOF, The City of San Diego has caused
this Agreement to be executed in its name and its seal to be
hereunto affixed and attested by its duly authorized officers,
and San Diego Gas & Electric Company has caused this Agreement to
be executed in its name and its seal to be hereunto affixed by
its duly authorized officers, all as of the date first above
written.
THE CITY OF SAN DIEGO
By_______________________________
Director,
Economic Development Services
[SEAL]
Attest:
By ___________________________
Deputy City Clerk
APPROVED AS TO FORM
AND LEGALITY:
JOHN W. WITT,
City Attorney
By __________________________
Deputy City Attorney
SAN DIEGO GAS & ELECTRIC COMPANY
By _____________________________
[SEAL] Assistant Treasurer
Attest:
By _____________________________
Assistant Secretary
EXHIBIT A
Description of the Project
Local Electric Facilities
Acquisition and construction of additions and
improvements to the Borrower's electric distribution facilities
(12 KV and under) and related substations, and customer service
connections located within the Borrower's electric retail service
area, required by the Borrower to provide for the transfer and
distribution of electric energy to its customers located therein,
including all necessary poles, foundations, cable, conduit,
transformers, switches, controls, meters, substations, land and
land-rights and other like facilities and equipment, as well as
necessary other equipment required for the proper installation,
protection, maintenance, control and operation of the foregoing
local electric distribution facilities. These facilities will be
required to meet the needs of new customers, maintain and improve
system capabilities, and make overhead to underground
conversions.
A-1
Exhibit 10.4
________________________________________________________
________________________________________________________
STOCK PURCHASE AGREEMENT
DATED AS OF MAY 15, 1995
AMONG
WES ACQUISITION CORP.,
PACIFIC DIVERSIFIED CAPITAL COMPANY
AND WEXFORD CAPITAL CORPORATION,
AS INDEMNITOR
________________________________________________________
________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I 1
TRANSACTIONS AT THE CLOSING 1
1.1 Shares and Purchased Loans 1
1.2 Closing 1
1.3 Purchase Price 1
1.4 Contribution to Capital 2
ARTICLE II 2
REPRESENTATIONS AND WARRANTIES 2
2.1 Representations and Warranties
of the Seller 2
2.2 Representations and Warranties
of the Buyer 3
ARTICLE III 5
CERTAIN COVENANTS AND AGREEMENTS 5
3.1 Consents 5
3.2 Efforts to Consummate 5
3.3 Confidential Information 5
3.4 Negotiation With Others 6
3.5 H-S-R Act Filings 6
ARTICLE IV 6
TAXES 6
4.1 Tax Indemnification 6
4.2 Procedures Relating to
Indemnification of Tax Claims 7
4.3 Section 338(h)(10) Election. 8
4.4 Survival of Tax Provisions 8
4.5 Real Property Taxes 9
4.6 Tax Return Filings 9
4.7 Termination of Tax Sharing
Agreements 9
ARTICLE V 10
CONDITIONS OF 10
5.1 Conditions of Obligations of the
Buyer 10
5.2 Conditions to Obligations of the
Seller 11
ARTICLE VI 12
INDEMNIFICATION 12
6.1 Indemnification by the Seller 12
6.2 Indemnification by the Indemnitor 12
i
6.3 Defense of Claims 13
6.4 Heller Claims 14
6.5 Remedies Cumulative 14
ARTICLE VII 14
SURVIVAL OF REPRESENTATION AND WARRANTIES;
AMENDMENT, MODIFICATION AND WAIVER 14
7.1 Survival of Representations and
Warranties, Etc. 14
7.2 Amendment, Modification and Waiver 15
ARTICLE VIII 15
TERMINATION 15
8.1 Right of Termination 15
8.2 Effect of Termination 15
ARTICLE IX 16
MISCELLANEOUS 16
9.1 Expenses 16
9.2 Entire Agreement 16
9.3 Publicity 16
9.4 Descriptive Headings 16
9.5 Notices 16
9.6 Counterparts 17
9.7 Governing Law 17
9.8 Benefits of Agreement 17
ii
STOCK PURCHASE AGREEMENT dated as of May 15, 1995,
among WES Acquisition Corp., a Delaware corporation (the
"Buyer"), Pacific Diversified Capital Company, a California
corporation (the "Seller"), and Wexford Capital Corporation, a
Delaware corporation, as indemnitor hereunder (the "Indemnitor").
The Seller owns an aggregate of 14,260,000 shares (the
"Shares") of common stock, par value $.01 (the "Common Stock"),
of Wahlco Environmental Systems, Inc., a Delaware corporation
(the "Company") and has outstanding $24,428,831.89 aggregate
principal amount in loans (the "Loans") to the Company. The
Seller desires to sell to the Buyer, and the Buyer desires to
purchase from the Seller the Shares, and $4,900,000 principal
amount of the Loans (the "Purchased Loans"), all upon the terms
and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual benefits
to be derived from this Agreement and of the representations,
warranties, conditions and promises hereinafter contained, the
Buyer, the Seller and the Indemnitor hereby agree as follows:
ARTICLE I
TRANSACTIONS AT THE CLOSING
1.1 Shares and Purchased Loans. Upon the terms and
subject to the conditions hereinafter set forth, at the Closing
(as hereinafter defined) the Seller agrees to sell and deliver to
the Buyer, and the Buyer agrees to purchase from the Seller, all
right, title and interest in and to the Shares and the Purchased
Loans, in each case, except as set forth on Schedule 1 hereto,
free and clear of all of the following (hereinafter collectively
referred to as "Claims"): security interests, liens, pledges,
claims, charges, escrows, encumbrances, options, rights of set-
off, rights of first refusal, mortgages, indentures, security
agreements or other agreements, arrangements, contracts,
commitments, understandings or obligations, of any nature
whatsoever, whether written or oral and whether or not relating
in any way to credit or the borrowing of money.
1.2 Closing. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at
the offices of O'Melveny & Myers, 610 Newport Center Drive, Suite
1700, Newport Beach, California 92660-6429 on a business day
which shall be no later than May 15, 1995 (the "Closing Date").
1.3 Purchase Price. The purchase price to be paid to
the Buyer for the Shares and the Purchased Loans shall be an
amount equal to $5,000,000 (the "Purchase Price"), of which
$4,900,000 shall be allocated to the Purchased Loans and $100,000
shall be allocated to the Shares. At the Closing, (i) against
delivery to the Buyer of evidence of the Purchased Loans, the
Buyer shall pay
to the Seller by wire transfer the amount of $4,900,000 and (ii)
against delivery to the Escrow Agent (as hereinafter defined) of
one or more stock certificates, endorsed by the Seller in blank
for transfer to the Buyer, representing the Shares, the Buyer
shall deliver to the Escrow Agent by wire transfer the amount of
$100,000 ("Stock Purchase Price"). At the Closing, the Buyer and
the Seller shall enter into a mutually acceptable escrow
agreement (the "Escrow Agreement") with a mutually acceptable
bank having capital and surplus of at least $100,000,000 (the
"Escrow Agent"). The Escrow Agreement shall provide that upon
the expiration of the applicable waiting period, including any
extension thereof, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "H-S-R Act"), the Escrow Agent
shall transfer (a) certificates representing the Shares endorsed
by the Seller in blank for transfer to the Buyer, and (b) the
Stock Purchase Price to the Seller by delivery of a certified
check or by wire transfer ("Stock Acquisition"). The parties
hereto intend to treat the Company and its Subsidiaries as part
of the Selling Consolidated Group for all periods up to and
including the date of the Stock Acquisition and shall file all
Federal income tax returns in accordance with such intention.
1.4 Contribution to Capital. Concurrently with the
Closing, Seller shall contribute to the capital of the Company
all Loans, together with any accrued but unpaid interest, fees or
other charges payable by the Company to Seller in connection with
the Loans (collectively, the "Contributed Loans") except for the
Purchased Loans. The documentation evidencing the foregoing
contribution to capital shall be satisfactory to Buyer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Seller. The
Seller represents and warrants to the Buyer as follows:
(a) Seller's Title to the Shares. Except as set
forth on Schedule 1 attached hereto, the Seller is the lawful
owner, of record and beneficially, of the Shares and the
Purchased Loans and has, and will transfer to the Buyer as
provided hereunder, good and marketable title to the Shares and
the Purchased Loans, free and clear of any Claims, and the Seller
has the absolute right and power to sell, assign, convey and
transfer the Shares and the Purchased Loans and all rights and
benefits incident to the ownership thereof. Delivery of the
Shares and the Purchased Loans to the Buyer as provided hereunder
will (i) pass good and marketable title to the Shares and the
Purchased Loans to the Buyer, free and clear of any Claims and
(ii) convey, free and clear of any Claims, any and all rights and
benefits incident to the ownership of the Shares or the Purchased
Loans. There are no
2
outstanding options, warrants or rights to purchase or otherwise
acquire any of the Shares or the Purchased Loans, and there are
no agreements, arrangements or undertakings between the Seller
and any other person or entity with respect to the voting, sale
or disposition of any of the Shares or the Purchased Loans or any
other matters relating to or affecting the Shares or the
Purchased Loans. The Seller acquired the Shares in transactions
exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), and in compliance with any
applicable state securities laws. The sale of the Shares by the
Seller to the Buyer is exempt from registration under the
Securities Act.
(b) Seller's Authority. The execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action by the Seller. This
Agreement is the legal, valid and binding obligation of the
Seller, enforceable in accordance with its own terms. Neither
the execution, delivery and performance of this Agreement, nor
compliance by the Seller with any of the provisions hereof will
except as set forth on Schedule 1 hereto, (i) conflict with or
result in a breach of the certificate of incorporation or the by-
laws of the Seller, (ii) conflict with or result in a default (or
give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of
any note, bond, lease, mortgage, indenture, license, agreement or
other instrument or obligation to which is a party, or by which
the Seller or any of its properties or assets may be bound or
affected, (iii) violate any law, statute, rule or regulation or
order, writ, injunction or decree applicable to the Seller any of
its properties or assets. Except as set forth on Schedule 1
attached hereto, no consent or approval by, or any notification
of or filing with, any person (governmental or private) is
required in connection with the execution, delivery and
performance by the Seller, or the consummation of the
transactions contemplated hereby.
(c) The principal amount of Loans outstanding
recited in the second paragraph of this Agreement constitutes the
entire principal amount of outstanding loans made by Seller to
the Company.
2.2 Representations and Warranties of the Buyer. The
Buyer represents and warrants to the Seller as follows:
(a) Organization, Standing and Power. The Buyer
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all
requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The Buyer
qualifies to make the Section 338(h)(10) election referred to in
Section 4.3 hereof. The Buyer has delivered to the Seller true,
complete and correct copies
3
of the certificate of incorporation and By-laws of the Buyer, in
each case as amended to the date hereof.
(b) Authority. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate action by the Buyer. This
agreement is the legal, valid and binding obligation of the
Buyer, enforceable in accordance with its terms. Neither the
execution, delivery and performance of this Agreement, nor
compliance by the Buyer with any of the provisions hereof or
thereof, will (i) conflict with or result in a breach of its
certificate of incorporation or by-laws, in each case amended to
the date hereof, or cause a default (or give rise to any right of
termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, lease,
mortgage, indenture, license, or other agreement to which the
Buyer is a party, or by which it or any of its properties or
assets may be bound, or (ii) violate any law, statute, rule or
regulation or order, writ, injunction or decree applicable to the
Buyer any of its properties or assets. Except for a notification
filing under the H-S-R Act and the expiration of the applicable
waiting period, including any extension thereof, thereunder, no
consent or approval by, or any notification of or filing with,
any person (governmental or private) is required in connection
with the execution, delivery and performance by the Buyer of this
Agreement or the consummation by the Buyer of the transactions
contemplated hereby, or if required, the same as been obtained or
effected on or prior to the Closing.
(c) Brokers. No agent, broker, investment
banker, person or firm acting on behalf of the Buyer or under the
authority of the Buyer is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or
indirectly from any of the parties hereto in connection with any
of the transactions contemplated hereby.
(d) Acquisition for Investment Purposes. The
Buyer is acquiring the Shares and the Purchased Loans (without
conceding that the Purchased Loans are securities) for its own
account, for investment and not with a view to distribution
thereof within the meaning of applicable Federal and state
securities laws. The Buyer understands that the Shares and the
Purchased Loans have not been registered under the Securities
Act, by reason of their issuance and sale in transactions exempt
from the registration requirements of the Securities Act or the
securities or blue sky laws of any state and that they must be
held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or applicable state
securities or blue sky laws or are exempt from the registration
requirements thereof.
4
ARTICLE III
CERTAIN COVENANTS AND AGREEMENTS
3.1 Consents. Prior to the Stock Acquisition, the
Seller will cause the Company to effect the notification filing
required under the H-S-R Act in order to permit the consummation
by of the transactions contemplated hereby.
3.2 Efforts to Consummate. Subject to the terms and
conditions of this Agreement, the parties hereto shall take or
cause to be taken all action and do or cause to be done all
things necessary or advisable, under applicable laws, regulations
and ordinances, in order to consummate and make effective, as
soon as practicable, the transactions contemplated hereby,
including the obtaining of all permits, authorizations, consents
and approvals of any third party (private or governmental) which
are required in connection with the consummation of the
transactions contemplated hereby; provided, however, that this
Section 3.2 shall not require any party to waive any condition to
its benefit under this Agreement, or to make any payment to a
third party or incur any undue burden in connection with the
obtaining of any third party consent.
3.3 Confidential Information. The Buyer will keep
confidential or proprietary information (as defined below)
previously furnished to it by the Company and in the Exhibits and
Schedules to this Agreement. If the Stock Acquisition does not
occur, the Buyer will return to the Company all documents,
instruments, work papers and other materials submitted to it or
any of its agents or representatives. The Buyer agrees that
prior to the Stock Acquisition it shall not directly or
indirectly use or disclose (except as provided for in this
Agreement) any confidential or proprietary information relating
to the Company to any person, firm, corporation, association or
other entity, nor shall the Buyer prior to the Stock Acquisition,
and thereafter if the Stock Acquisition shall not occur, make use
of any such confidential or proprietary information (except as
provided for in this Agreement) for its own purpose or for the
benefit of any person, firm, corporation or other entity. For
the purposes of this Section 3.3, the term "confidential or
proprietary information" shall mean all information disclosed to
the Buyer by the Company or the Seller or their respective
affiliates or to employees, consultants or others in a
confidential relationship with the Buyer, relating to specific
matters such as trade secrets, research and development
activities, books and records, customer lists, suppliers,
distribution channels, pricing information, private processes,
formulae, functional specifications, blueprints, know-how, data,
improvements, discoveries, designs, inventions, techniques,
marketing plans, strategies, forecasts, new products and
financial statements as they may exist from time to time except
for confidential or proprietary information which (i) becomes
5
generally available to the public, (ii) was known to the Buyer
prior to its disclosure by the Company or the Seller, (iii) was
heretofore available to the Buyer on a nonconfidential basis from
a source (other than the Company or the Seller) which was
entitled to disclose the same or (iv) is required by law,
governmental order or decree to be disclosed by the Buyer.
3.4 Negotiation With Others. From and after the date
hereof until the Stock Acquisition shall have occurred or this
Agreement shall have been terminated in accordance with Section
8.1 hereof, the Seller will not, directly or indirectly, (a)
solicit or initiate discussions or engage in negotiations with
any person relating to the possible acquisition of the Company
(whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any portion of the Company (whether such
negotiations are initiated by the Seller or the Company or
otherwise), other than the Buyer or its designees, (b) provide
information with respect to the Company to any person, other than
the Buyer and its designees, relating to the possible acquisition
of the Company (whether by way of merger, purchase of capital
stock, purchase of assets or otherwise) or any portion of the
Company or (c) enter into a transaction with any person, other
than the Buyer or its designees concerning the possible
acquisition of the Company (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any portion of
the Company.
3.5 H-S-R Act Filings. The Seller and the Buyer will
cooperate with one another in the preparation and filing of all
notices and reports required pursuant to the H-S-R Act and will
comply with the requirements for providing information made
pursuant thereto.
ARTICLE IV
TAXES
4.1 Tax Indemnification.
For purposes of this Agreement, each reference to:
(A) "Affiliate" shall mean, with respect to any
person, any entity or person that directly, or indirectly,
through one or more intermediaries, controls or is controlled by,
or is under common control with such person.
(B) "Code" shall mean the Internal Revenue Code of
1986, as amended;
(C) "Tax Return" shall mean any return, report,
information return, or other document (including elections,
6
declarations, disclosures, schedules, estimates, and other
returns or supporting documents) with respect to taxes;
(D) "Selling Consolidated Group" shall mean the
"affiliated group" (within the meaning of section 1504 of Code)
of which San Diego Gas & Electric Company ("SDG&E") is the common
parent filing U.S. consolidated federal income tax returns, which
include the Seller as an includible member.
(E) "Subsidiaries" shall mean, solely for purposes of
this Article IV, any direct or indirect subsidiary corporation of
Company.
Notwithstanding anything in this Agreement to the
contrary, Seller shall indemnify Buyer and any Affiliate of
Buyer, including the Company and its Subsidiaries and hold them
harmless for, from and against (a) all liability for all U.S.
Federal income taxes of Company and its Subsidiaries for all
taxable periods ending on or before the earlier of (i) the date
of the Stock Acquisition and (ii) the date the Shares are treated
as acquired by Buyer for U.S. Federal income tax purposes ("Pre-
Stock Acquisition Period"), including, without limitation, any
liability for U.S. Federal income taxes imposed upon Company and
its Subsidiaries pursuant to United States Treasury Regulation
1.1502-6 as a result of being a member of the Selling
Consolidated Group and (b) all liability for U.S. Federal income
taxes accruing on or before the end of the Pre-Stock Acquisition
Period which result from the Election (as defined in Section 4.3
of this Agreement).
4.2 Procedures Relating to Indemnification of Tax
Claims. If a claim for Taxes shall be made by any Tax authority
in writing, which, if successful, might result in an indemnity
payment to Buyer pursuant to Section 4.1 hereof, Buyer shall
promptly notify the Seller in writing of such claim (a "Tax
Claim").
With respect to any Tax Claim which might result in an
indemnity payment to Buyer pursuant to Section 4.1 hereof, Seller
shall be entitled to control all proceedings taken in connection
with such Tax Claim (including, without limitation, selection of
counsel) and, without limiting the foregoing, may at its sole
expense and, subject to the prior written consent of Buyers
pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with any Tax authority with respect
thereto, and, subject to the prior written consent of Buyer,
either settle the Tax Claim, pay the Tax claimed and sue for a
refund where applicable law permits such refund suits, or contest
such Tax Claim in any permissible manner.
7
4.3 Section 338(h)(10) Election.
(a) With respect to the acquisition of the Shares
hereunder (A) Seller and Buyer shall, and Seller shall use its
best efforts to cause the Selling Consolidated Group to, jointly
make a valid, timely and effective election under Section
338(h)(10) of the Code for the Company and all of its domestic
Subsidiaries (the "Election"), (ii) the Selling Consolidated
Group and the Buyer shall, as promptly as practicable following
the Stock Acquisition, cooperate with each other to take all
actions necessary and appropriate (including filing such forms,
returns, elections, schedules and other documents as may be re-
quired) to effect and preserve a timely Election in accordance
with the provisions of Treasury Regulation 1.338(h)(10)-l or
any successor provisions and (iii) Selling Consolidated Group and
the Buyer shall report the sale of the Shares pursuant to this
Agreement consistent with the Election and shall take no position
to the contrary thereto in any Tax Return or any proceeding
before any taxing authority; provided, however, the Election (or
the equivalent thereof) shall not be made by the parties under
the laws of any state or local jurisdiction, unless such election
(or its equivalent) is under such state or local jurisdiction
mandatory as a consequence of the Election having been made for
U.S. Federal income tax purposes.
(b) In connection with the Election, Buyer and
Seller and the Selling Consolidated Group will cooperate in good
faith to establish the Adjusted grossed-up basis and the modified
Aggregate Deemed Sales Price (each as defined under applicable
U.S. Treasury Regulations), and, the allocation of the modified
Aggregate Deemed Sales Price among the assets of Company. The
allocations of the Adjusted grossed-up basis and the modified
Aggregate Deemed Sales Price shall be made in accordance with
Section 338 of the Code and any applicable U.S. Treasury
Regulations. The Selling Consolidated Group and the Buyer (A)
shall be bound by such allocations for purposes of determining
any U.S. Federal Taxes; (B) shall prepare and file all U.S.
Federal Tax Returns to be filed with any taxing authority in a
manner consistent with such allocations; and (C) shall take no
position inconsistent with such allocations in any U.S. Federal
Tax Return, or any proceeding before any taxing authorities
except as described in 4.3(a) above. In the event that such
allocations are disputed by any taxing authorities, the party
receiving notice of such dispute shall promptly notify and
consult with the other party hereto concerning resolution of such
dispute.
4.4 Survival of Tax Provisions. Any claim to be made
pursuant to Sections 4.1 through 4.3 hereof must be made no later
than sixty (60) days after the expiration (with valid extensions)
of the applicable statute of limitations, if any, relating to the
U.S. Federal income taxes at issue.
8
4.5 Real Property Taxes. Real property Taxes, if any,
of Company and its Subsidiaries shall be treated as imposed on
the Company or the Subsidiary as the case may be.
4.6 Tax Return Filings.
(a) Seller and SDG&E, as the case may be (the
"Seller Filing Parties"), shall prepare or cause to be prepared
and file or cause to be filed on a timely basis (in each case, at
its own cost and expense and in a manner consistent with past
practice) all U.S. Federal income Tax Returns with respect to
Company and its Subsidiaries for taxable periods ending on or
prior to the close of the Pre-Stock Acquisition Period. Seller
and SDG&E shall pay all U.S. Federal income taxes shown on all
such U.S. Federal income Tax Returns.
(b) Buyer shall prepare or cause to be prepared
and shall file or cause to be filed on a timely basis all other
Tax Returns with respect to Company and its Subsidiaries.
(c) The parties hereto shall reasonably coop-
erate, and shall cause their respective Affiliates, officers, em-
ployees, agents, auditors and representatives reasonably to
cooperate, in preparing and filing all Tax Returns (including
amended returns and claims for refund), including maintaining and
making available to each other all records necessary in
connection with taxes and in resolving all disputes and audits
with respect to all taxable periods relating to taxes. The
parties hereto recognize that Seller and its Affiliates may need
access, from time to time, after the close of the Pre-Stock
Acquisition Period, to certain accounting and tax records and
information held by Company to the extent such records and infor-
mation pertain to events occurring prior to the close of the Pre-
Stock Acquisition Period; therefore, Buyer agrees that from and
after the close of the Pre-Stock Acquisition Period until the
expiration of the applicable statute of limitations, Buyer shall,
and shall cause Company to (A) properly retain and maintain such
records and (B) allow Seller to inspect, review and make copies
of such records as Seller may reasonably deem necessary or appro-
priate from time to time, such activities to be conducted during
normal business hours and at the expense of the requesting party.
4.7 Termination of Tax Sharing Agreements. The
parties hereby agree and covenant that, upon the Stock
Acquisition, all rights and obligations of each of Company and
its Subsidiaries and Seller pursuant to any tax sharing agreement
or similar arrangements shall be terminated as of the close of
business on December 31, 1994, and no payments pursuant to any
such tax sharing agreement or arrangements shall be made after
such termination.
9
ARTICLE V
CONDITIONS OF CLOSING
5.1 Conditions of Obligations of the Buyer. The
obligations of the Buyer to close this Agreement are subject to
the satisfaction of each of the following conditions, unless any
such condition is (to the extent that the same can be) waived by
the Buyer:
(a) Representations and Warranties. The
representations and warranties of the Seller set forth in Section
2.1 shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except as otherwise contemplated
by this Agreement; and the Buyer shall have received a
certificate to that effect signed by the Seller.
(b) Performance of Obligations. The Seller shall
have performed in all material respects the obligations required
to be performed by it under this Agreement prior to and at the
Closing, including without limitation, the Seller's delivery to
the Escrow Agent in accordance with the Escrow Agreement of one
or more stock certificates representing the Shares, duly endorsed
in blank by the Seller; and the Buyer shall have received
certificates to that effect signed by the Seller.
(c) Authorization. All corporate action
necessary to authorize the execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by the
Seller, and the Seller shall have all necessary corporate power
and authority to consummate the transactions contemplated hereby.
(d) Absence of Changes. There shall not have
occurred any material adverse change in the business, operations,
financial condition, results of operations, assets or liabilities
of the Company after the date hereof.
(e) Covenants and Approvals. The Buyer shall
have received duly executed copies of all consents and approvals
contemplated by Section 2.1(b) hereof (and Schedule 1 attached
hereto), in form and substance reasonably satisfactory to the
Buyer and Messrs. Berlack, Israels & Liberman, counsel to the
Buyer.
(f) Government Consents, Authorizations, Etc.
All consents, authorizations, orders or approvals of, and filings
or registrations with, any Federal, state, local or foreign
governmental commission, board or other regulatory body which are
required for or in connection with the execution, delivery and
performance by the Seller, as applicable, of this Agreement, of
the transactions contemplated hereby shall have been obtained or
made,
10
except for a notification filing under the H-S-R Act and the
expiration of the applicable waiting period, including any
extension thereof, thereunder.
(g) Escrow Agreement. The Seller and the Escrow
Agent shall have executed and delivered the Escrow Agreement.
(h) Opinions of Counsel. The Buyer shall have
received an opinion dated the Closing Date of Messrs. Gibson,
Dunn & Crutcher, counsel to the Seller, and an opinion of
O'Melveny & Myers, counsel to the Company, in each case
satisfactory in scope and substance to the Buyer and Messrs.
Berlack, Israels & Liberman, counsel to the Buyer, to the same
effect as Exhibits A and B, attached hereto, respectively.
(i) Representation Letter. The Company shall
have delivered to the Buyer a letter setting forth certain
representations and warranties of the Company, such letter to be
satisfactory in scope and substance to the Buyer.
(j) Commitment Letter. The Buyer and the Company
shall have entered into a commitment letter ("Commitment Letter")
setting forth the terms upon which the parties agree that the
Buyer shall commit to provide the Company with a secured term
loan in a principal amount not to exceed $2,000,000.
(k) Lender Consents. The Bank of America and
Sanwa Bank shall each have delivered its written consent, in form
satisfactory to the Buyer, to the transactions contemplated
hereby and by the Commitment Letter including the Stock
Acquisition and the creation of any liens on collateral required
by the transactions contemplated by the Commitment Letter, in
form satisfactory to the Buyer.
(l) Non-Foreign Status. At or prior to Closing,
Seller will furnish Buyer with an affidavit prepared in
accordance with section 1445(b) of the Code and applicable U.S.
Treasury Regulations stating, under penalties of perjury, that
Seller is not a foreign person and setting forth Seller's U.S.
taxpayer identification number.
5.2 Conditions to Obligations of the Seller. The
obligations of the Seller to close this Agreement are subject to
the satisfaction of each of the following conditions unless
waived by the Seller:
(a) Representations and Warranties. The
representations and warranties of the Buyer set forth in Section
2.2 shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except as otherwise contemplated
by
11
this Agreement; and the Seller shall have received certificates
to that effect signed by the Buyer.
(b) Performance of Obligations. The Buyer shall
have performed in all material respects the obligations required
to be performed by it under this Agreement prior to and at the
Closing, including without limitation, payment of the Purchase
Price, and the Seller shall have received a certificate to that
effect signed by the corporate secretary of the Buyer.
(c) Authorization. All corporate action
necessary to authorize the execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by the
Board of Directors of the Buyer, and the Buyer shall have full
power to consummate the transactions contemplated hereby and
thereby.
(d) Opinion of Counsel to the Buyer. The Seller
shall have received an opinion dated the Closing Date of Messrs.
Berlack, Israels & Liberman, counsel to the Buyer, satisfactory
in scope and substance to the Seller and Messrs. Gibson, Dunn &
Crutcher, counsel to the Seller, to the same effect as Exhibit C
attached hereto.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Seller. Except for Heller
Claims (as hereinafter defined) and Tax Claims, the Seller shall
indemnify and hold the Buyer harmless, from, against, for and in
respect of any and all damages, losses, obligations, liabilities,
claims, actions or causes of action (including, without
limitation, reasonable attorneys' fees and expenses) sustained or
suffered by the Buyer arising from the untruth, inaccuracy or
breach of any representation, warranty, covenant or agreement of
the Seller contained in or made pursuant to this Agreement or in
any certificate, instrument or agreement delivered by the Seller
pursuant hereto or in connection with the transactions
contemplated hereby, or any facts or circumstances constituting
such breach. No claim, demand, suit or cause of action shall be
brought against the Seller under or pursuant to this Section 6.1
unless the Buyer at any time prior to the Survival Date, as
defined below, gives the Seller written notice, with reasonable
specificity, of the existence of any such claim, demand, suit or
cause of action. Upon the giving of such written notice as
aforesaid, the Buyer shall have the right to commence legal
proceedings within 60 days thereafter for the enforcement of its
rights under this Agreement.
6.2 Indemnification by the Indemnitor. Except for
Heller Claims, from and after the date of the Stock Acquisition,
12
the Indemnitor shall indemnify and hold the Seller harmless,
from, against, for and in respect of any and all damages, losses,
obligations, liabilities, claims, actions or causes of action
(including, without limitation, reasonable attorneys' fees and
expenses) sustained or suffered by the Seller arising from the
untruth, inaccuracy or breach of any representation, warranty,
covenant or agreement of the Buyer contained in or made pursuant
to this Agreement or in any certificate, instrument or agreement
delivered by the Buyer pursuant hereto or in connection with the
transactions contemplated hereby, or any facts or circumstances
constituting such breach. No claim, demand, suit or cause of
action shall be brought against the Indemnitor under or pursuant
to this Section 6.2 unless the Seller, at any time prior to the
Survival Date, as defined below, gives the Buyer written notice,
with reasonable specificity, of the existence of any such claim,
demand, suit or cause of action. Upon the giving of such written
notice as aforesaid, the Seller shall have the right to commence
legal proceedings within 60 days thereafter for the enforcement
of its rights under this Agreement.
6.3 Defense of Claims. The obligations and
liabilities of the Seller to indemnify the Buyer and the
Indemnitor to indemnify the Seller under this Article VI with
respect to claims relating to third parties shall be subject to
the following terms and conditions:
(a) The party or parties to be indemnified
(whether one or more, the "Indemnified Party") will give the
Indemnitor or the Seller, as the case may be (the "Indemnifying
Party") prompt written notice of any such claim, and the
Indemnifying Party will undertake the defense thereof by
representatives chosen by it. Failure to give such notice shall
not affect the Indemnifying Party's duty or obligations under
this Article VI, except to the extent the Indemnifying Party is
prejudiced thereby. So long as the Indemnifying Party is
defending any such claim actively and in good faith, the
Indemnified Party shall not settle such claim. The Indemnified
Party shall make available to the Indemnifying Party or its
representatives all records and other materials required by them
and in the possession or under the control of the Indemnified
Party, for the use of the Indemnifying Party and its
representatives in defending any such claim, and shall in other
respects give reasonable cooperation in such defense.
(b) If the Indemnifying Party, within a
reasonable time after notice of any such claim, fails to defend
such claim actively and in good faith, the Indemnified Party will
(upon further notice) have the right to undertake the defense,
compromise or settlement of such claim or consent to the entry of
a judgment with respect to such claim, on behalf of and for the
account and risk of the Indemnifying Party, and the Indemnifying
Party shall thereafter have no right to challenge the Indemnified
Party's defense, compromise, settlement or consent to judgment
therein,
13
provided, however, that no such failure to defend shall be deemed
an admission that such claim is subject to indemnification
hereunder.
(c) Anything in this Section 6.3 to the contrary
notwithstanding, (i) if there is a reasonable probability that a
claim may materially and adversely affect the Indemnified Party
other than as a result of money damages or other money payments,
the Indemnified Party shall have the right to defend, compromise
or settle such claim, and (ii) the Indemnifying Party shall not,
without the written consent of the Indemnified Party, settle or
compromise any claim or consent to the entry of any judgment
which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnified Party
of a release from all liability in respect of such claim;
6.4 Heller Claims. Any claims made by Heller
Financial, Inc. or its affiliates ("Heller") arising from or
relating to prior negotiations among Heller, the Seller and the
Company shall be split between the Seller and the Company as
follows: (i) the first $135,000 of such claims shall be paid
solely by the Seller; (ii) the next $500,000 of such claims shall
be split 50% each between the Seller and the Company; and (iii)
all claims in excess of (i) and (ii) above (the "Excess Claims")
(i.e., in excess of the first $635,000 in claims) shall be paid
solely by the Seller, and the Seller hereby agrees to indemnify
Indemnitor, the Buyer, WES and their affiliates against all such
excess claims. Upon the Stock Acquisition, Indemnitor shall
indemnify the Seller and its affiliates from claims of Heller
that the Company has agreed to pay as set forth in clause (ii) of
the preceding sentence. The Seller and the Company hereby agree
to reasonably cooperate in deciding upon, and agreeing with
respect to, (i) what claims of Heller, if any, should be paid by
the Seller and the Company, (ii) the amount to be paid in
settlement of such claims, and (iii) the conduct and defense of
such claims.
6.5 Remedies Cumulative. The remedies provided for in
this Article VI shall be cumulative and shall not preclude
assertion by the Buyer or the Seller of any other rights or the
seeking of any other remedies against the Seller or the Buyer
respectively.
ARTICLE VII
SURVIVAL OF REPRESENTATION AND WARRANTIES;
AMENDMENT, MODIFICATION AND WAIVER
7.1 Survival of Representations and Warranties, Etc.
The representations and warranties of the Seller and the Buyer
contained in this Agreement shall under all circumstances survive
the Closing for a period of 24 months. The agreements of the
14
Seller, Buyer and Indemnitor contained in this Agreement shall in
each case survive the Closing until they are otherwise
terminated, whether by their terms or as a matter of applicable
law. The respective dates upon which the representations and
warranties and agreements contained in this Agreement shall
expire, shall be referred to herein as the "Survival Date".
7.2 Amendment, Modification and Waiver. This
Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by the parties
hereto, except that any party to this Agreement may waive any
obligation owed to it by another party under this Agreement. The
waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any
subsequent breach.
ARTICLE VIII
TERMINATION
8.1 Right of Termination. This Agreement may be
terminated at any time prior to the Closing by:
(a) The mutual written consent of the Buyer and
the Seller; or
(b) The Buyer, by delivery of a written notice
specifying the reasons for such termination, if the conditions
set forth in Section 5.1 hereof shall not have been met (or shall
not, in the reasonable judgment of the Buyer, be capable of being
met); or
(c) The Seller, by delivery of a written notice
specifying the reasons for such termination, if the conditions
set forth in Section 5.2 hereof shall not have been met (or shall
not, in the reasonable judgment of the Seller, be capable of
being met.
8.2 Effect of Termination. If this Agreement shall be
terminated by the mutual consent of the Buyer and the Seller
pursuant to Section 8.1(a), then neither party shall have any
claim or right of action against the other party for breach of
this Agreement. If this Agreement shall be terminated by the
Buyer pursuant to Section 8.1(b), then the Buyer may bring a suit
or proceeding against the Seller only for a breach of the
obligations of the Seller contained in this Agreement or a breach
by the Seller of the representations, warranties or covenants of
the Seller contained in this Agreement which occurred prior to
the date of such termination. If this Agreement shall be
terminated by the Seller pursuant to Section 8.1(c), then the
Seller may bring a suit or proceeding against the Buyer for the
Buyer's breach of the obligations of the Buyer contained in this
Agreement or a breach by
15
the Buyer of the representations, warranties or covenants of the
Buyer contained in this Agreement which occurred prior to the
date of such termination.
ARTICLE IX
MISCELLANEOUS
9.1 Expenses. Each party shall bear its own expenses
in connection with this transaction, except that the Buyer may
have its expenses reimbursed by the Company after the Stock
Acquisition.
9.2 Entire Agreement. This Agreement and the Exhibits
and Schedules attached hereto contain the entire agreement among
the parties hereto with respect to the transactions contemplated
hereby and supersede all prior agreements or understandings among
the parties with respect thereto.
9.3 Publicity. The parties hereto agree that, except
as otherwise required by law, they will advise and confer with
each other prior to the issuance of any public reports,
statements or releases pertaining to this Agreement or the
transactions contemplated hereby.
9.4 Descriptive Headings. Descriptive headings are
for convenience only and shall not control or affect the meaning
or construction of any provision of this Agreement.
9.5 Notices. all notices or other communications
which are required or permitted hereunder shall be in writing and
sufficient if delivered personally or sent by registered or
certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to the Buyer or the Indemnitor, to:
Wexford Capital Corporation
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Robert M. Davies
with copies to:
Berlack, Israels & Liberman
120 West 45th Street
New York, New York 10036
Attention: Stephen B. Selbst, Esq.
16
If to the Seller, to:
Pacific Diversified Capital Company
101 Ash Street
San Diego, California 92101
Attention: Stephen L. Baum, President
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Street
Los Angeles, California 90071
Attention: Richard Strong, Esq.
If to the Company:
Wahlco Environmental Systems, Inc.
3600 West Segerstrom Avenue
Santa Ana, California 92704-6495
Attention: Henry N. Huta
with a copy to:
O'Melveny & Myers
610 Newport Center Drive
Suite 1700
Newport Beach, California 92660
Attention: David Krinsky, Esq.
or to such other address as the party to whom notice is to be
given may have furnished to the other party in writing in
accordance herewith. any such communication shall be deemed to
have been given, in the case of personal delivery, on the date of
delivery and in the case of mailing, on the third business day
following that on which the piece of mail containing such
communication is posted.
9.6 Counterparts. This Agreement may be executed in
any number of counterparts, and each such counterpart hereof
shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
9.7 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York.
9.8 Benefits of Agreement. All the terms and
provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by the
Seller without the consent of the Buyer. The Buyer may assign
this Agreement without the
17
consent of the Seller, provided that such assignment shall not
release the Buyer from its obligations under this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on the day and year first above written.
WES ACQUISITION CORP.
By: ________________________________
Name:
Title:
PACIFIC DIVERSIFIED CAPITAL COMPANY
By: ________________________________
Name:
Title:
WEXFORD CAPITAL CORPORATION,
as Indemnitor
By: ________________________________
Name:
Title:
18
Exhibit 12.1 SAN DIEGO GAS & ELECTRIC COMPANY
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
6 Months
Ended
1990 1991 1992 1993 1994 6/30/95
--------- ---------- ---------- ---------- ---------- ----------
Fixed Charges:
Interest:
Long-Term Debt $ 97,894 $ 98,802 $100,776 $ 93,402 $ 93,076 $ 49,646
Short-Term Debt 12,301 8,234 6,242 7,980 10,322 6,413
Amortization of Debt
Discount and Expense,
Less Premium 2,465 2,471 2,881 4,162 4,604 2,478
Interest Portion of
Annual Rentals 20,898 18,067 14,677 19,206 21,998 11,367
---------- ---------- ----------- --------- ----------- ----------
Total Fixed
Charges 133,558 127,574 124,576 124,750 130,000 69,904
---------- ---------- ----------- --------- ----------- ----------
Preferred Dividends
Requirements 10,863 10,535 9,600 8,565 7,663 3,831
Ratio of Income Before
Tax to Net Income 1.75499 1.63017 1.72369 1.67794 1.90447 1.76441
---------- ----------- ----------- ---------- ---------- ----------
Preferred Dividends
for Purpose of Ratio 19,064 17,174 16,547 14,372 14,594 6,759
---------- ----------- ----------- ---------- ---------- ----------
Total Fixed Charges
and Preferred
Dividends for
Purpose of Ratio $152,622 $144,748 $141,123 $139,122 $144,594 $ 76,663
========== =========== ========= ======== ========== Earnings:
Net Income (before
preferred dividend
requirements) $207,841 $208,060 $210,657 $218,715 $143,477 $111,066
Add:
Fixed Charges
(from above) 133,558 127,574 124,576 124,750 130,000 69,904
Less: Fixed Charges
Capitalized 3,306 2,907 2,242 5,789 6,792 3,552
Taxes on Income 156,917 131,114 152,451 148,275 129,771 84,900
---------- ---------- ---------- ---------- ----------- ---------
Total Earnings for
Purpose of Ratio $495,010 $463,841 $485,442 $485,951 $396,456 $262,318
========== ========== ========== ========== =========== ==========
Ratio of Earnings
to Combined Fixed
Charges and Preferred
Dividends 3.24 3.20 3.44 3.49 2.74 3.42
========== ========== ========== ========== ========== ==========
UT
1,000
6-MOS
DEC-31-1995
JUN-30-1995
PER-BOOK
3,107,447
502,429
435,742
260,288
364,665
4,670,571
291,335
564,464
634,920
1,490,719
25,000
93,493
1,168,832
0
115,266
0
226,011
0
96,988
8,454
1,445,808
4,670,571
923,194
86,077
663,974
750,051
173,143
1,245
174,388
57,154
111,066
3,831
107,235
90,896
43,040
280,791
0.92
0.92