-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qk2tOlVVDnGt5meIT/Xigc/+3aMYWMc1OlLWD4WcaK/tZdW29YzmHALd4+rOYgsj 0aAoitDu85tsHlRvdQ1HDw== 0000898430-98-003978.txt : 19981201 0000898430-98-003978.hdr.sgml : 19981201 ACCESSION NUMBER: 0000898430-98-003978 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHWEST WATER CO CENTRAL INDEX KEY: 0000092472 STANDARD INDUSTRIAL CLASSIFICATION: 4941 IRS NUMBER: 951840947 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08176 FILM NUMBER: 98745543 BUSINESS ADDRESS: STREET 1: 225 N BARRANCA AVE STE 200 CITY: WEST COVINA STATE: CA ZIP: 91791-1605 BUSINESS PHONE: 8189151551 MAIL ADDRESS: STREET 1: 225 N BARRANCA AVENUE STREET 2: SUITE 200 CITY: WEST COVINA STATE: CA ZIP: 91791-1605 FORMER COMPANY: FORMER CONFORMED NAME: SUBURBAN WATER SYSTEMS DATE OF NAME CHANGE: 19751202 10-Q 1 FORM 10-Q DATED 9/30/1998 UNITED STATES 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 For the quarterly period ended September 30, 1998 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: 0-8176 [LOGO] SOUTHWEST WATER COMPANY (Exact name of registrant as specified in its charter) Delaware 95-1840947 (State or other jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 225 North Barranca Avenue, Suite 200 West Covina, California 91791-1605 (Address of Principal executive offices) (Zip Code) (626) 915-1551 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 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. On November 12, 1998, there were 4,218,676 common shares outstanding. SOUTHWEST WATER COMPANY AND SUBSIDIARIES INDEX
Part I. Financial Information: Page No. - - ------- ---------------------- -------- Item 1. Financial Statements: Condensed Consolidated Balance Sheets - September 30, 1998 and December 31, 1997 2 Condensed Consolidated Statements of Income - Three and nine months ended September 30, 1998 and 1997 3 Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 1998 and 1997 4 Notes to Condensed Consolidated Financial Statements 5 - 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 - 11 Part II. Other Information: - - -------- ------------------ Item 1. Legal Proceedings 12 - 13 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5 Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15
SOUTHWEST WATER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, December 31, - - ------------------------------------------------------------------------------------------------------------------ ASSETS 1998 1997 - - ------------------------------------------------------------------------------------------------------------------ (unaudited) (in thousands) CURRENT ASSETS: Cash and cash equivalents $ 798 $ 1,237 Customers' accounts receivable, net 9,838 7,286 Other current assets 2,621 2,976 - - ------------------------------------------------------------------------------------------------------------------ 13,257 11,499 PROPERTY, PLANT AND EQUIPMENT: Utility property, plant and equipment -- at cost 140,992 133,936 Contract operations property, plant and equipment -- at cost 4,957 4,854 - - ------------------------------------------------------------------------------------------------------------------ 145,949 138,790 Less accumulated depreciation and amortization 39,736 36,654 - - ------------------------------------------------------------------------------------------------------------------ 106,213 102,136 OTHER ASSETS 9,040 9,465 - - ------------------------------------------------------------------------------------------------------------------ $128,510 $123,100 - - ------------------------------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY - - ------------------------------------------------------------------------------------------------------------------ CURRENT LIABILITIES: Current portion of bank notes payable and long-term debt $ 1,393 $ 900 Accounts payable 1,943 1,214 Other current liabilities 10,250 8,912 - - ------------------------------------------------------------------------------------------------------------------ 13,586 11,026 OTHER LIABILITIES AND DEFERRED CREDITS: Bank notes payable 4,711 7,131 Long-term debt 29,800 29,800 Advances for construction 7,774 7,931 Contributions in aid of construction 30,748 27,822 Deferred income taxes 4,555 4,130 Other liabilities and deferred credits 2,731 2,833 - - ------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES AND DEFERRED CREDITS 93,905 90,673 STOCKHOLDERS' EQUITY Cumulative preferred stock 517 517 Common stock 42 33 Paid-in capital 30,004 29,469 Retained earnings 4,045 2,420 Unamortized value of restricted stock issued (3) (12) - - ------------------------------------------------------------------------------------------------------------------ TOTAL STOCKHOLDERS' EQUITY 34,605 32,427 - - ------------------------------------------------------------------------------------------------------------------ $128,510 $123,100 - - ------------------------------------------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements. 2 SOUTHWEST WATER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, - - -------------------------------------------------------------------------------------------------------------------- 1998 1997 1998 1997 - - -------------------------------------------------------------------------------------------------------------------- (in thousands except per share data) OPERATING REVENUES $19,960 $19,975 $54,238 $53,876 OPERATING EXPENSES: Direct operating expenses 14,148 14,590 39,575 40,020 Selling, general and administrative 2,724 2,658 8,369 8,221 - - -------------------------------------------------------------------------------------------------------------------- 16,872 17,248 47,944 48,241 OPERATING INCOME 3,088 2,727 6,294 5,635 OTHER INCOME (EXPENSE): Interest expense (715) (807) (2,299) (2,397) Interest income 30 28 68 91 Other 10 106 197 227 - - -------------------------------------------------------------------------------------------------------------------- (675) (673) (2,034) (2,079) INCOME BEFORE INCOME TAXES 2,413 2,054 4,260 3,556 Provision for income taxes 965 862 1,704 1,493 - - -------------------------------------------------------------------------------------------------------------------- NET INCOME 1,448 1,192 2,556 2,063 Dividends on preferred shares 7 6 21 20 - - -------------------------------------------------------------------------------------------------------------------- NET INCOME AVAILABLE FOR COMMON SHARES $ 1,441 $ 1,186 $ 2,535 $ 2,043 - - -------------------------------------------------------------------------------------------------------------------- EARNINGS PER COMMON SHARE (NOTE 8): Basic $ 0.34 $ 0.29 $ 0.61 $ 0.50 Diluted $ 0.34 $ 0.28 $ 0.59 $ 0.49 - - -------------------------------------------------------------------------------------------------------------------- CASH DIVIDENDS PER COMMON SHARE(NOTE 8) $ 0.080 $ 0.069 $ 0.224 $ 0.206 - - -------------------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE OUTSTANDING COMMON SHARES(NOTE 8) Basic 4,206 4,129 4,191 4,121 Diluted 4,295 4,180 4,288 4,172 - - --------------------------------------------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements. 3 SOUTHWEST WATER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, - - --------------------------------------------------------------------------------------------- 1998 1997 - - --------------------------------------------------------------------------------------------- (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES, NET $ 6,555 $ 3,662 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (5,936) (7,928) - - --------------------------------------------------------------------------------------------- Net cash used in investing activities (5,936) (7,928) - - --------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Contributions in aid of construction 1,597 1,583 Net proceeds from dividend reinvestment and employee stock purchase plans 349 292 Net borrowing on (repayment of) bank notes payable (1,927) 3,151 Dividends paid (923) (866) Payments on advances for construction, net of additions (154) (145) - - --------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (1,058) 4,015 - - --------------------------------------------------------------------------------------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (439) (251) Cash and cash equivalents at beginning of period 1,237 790 - - --------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 798 $ 539 - - --------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 2,037 $ 2,151 Income taxes $ 845 $ 539 Depreciation and amortization $ 3,307 $ 3,139 Non-cash contributions in aid of construction conveyed to Company by developers $ 1,775 $ 4,276
See accompanying notes to condensed consolidated financial statements. 4 SOUTHWEST WATER COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1998 (Unaudited) 1. Southwest Water Company ("the Company" or "Registrant") and its subsidiaries provide water management services through contract and utility operations. The unaudited condensed consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position of the Company as of September 30, 1998, and the Company's results of operations for the three and nine months ended September 30, 1998. All such adjustments are of a normal recurring nature. Certain reclassifications have been made to the 1997 financial statements to conform to the 1998 presentation. 2. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed consolidated financial statements should be read in conjunction with the financial statements and related notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 3. There is seasonality to the water management services industry; thus, the results of operations for the nine months ended September 30, 1998 are not necessarily indicative of the results to be expected for the full year. The first and fourth quarters of each year are normally the lowest in terms of average customer water usage for the Company's water utilities. Rainfall and weather conditions affect utility operations, and utility revenues usually peak during the third quarter of each year. The Company's contract operations business can also be seasonal in nature. Heavy rainfall during a quarter hampers the Company's ability to perform billable work such as pipeline maintenance, manhole rehabilitation and other outdoor services. Moderate rainfall may create opportunities for additional billable work outside the scope of existing contracts. 4. The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share," which is required for interim and annual financial statements issued after December 15, 1997. Under SFAS No. 128, basic earnings per share ("EPS") replaced the presentation of primary EPS, and diluted EPS replaced fully diluted EPS. For the three and nine months ended September 30, 1998 and 1997, basic EPS was calculated using the weighted average number of common shares outstanding during the period. Diluted EPS was calculated using the weighted average number of common shares and dilutive common stock equivalents. Common equivalent shares arise from stock options and reflect the potential dilution that could occur if common stock equivalents were exercised or converted into common stock that could share in the earnings of the Company. 5. The Company has implemented SFAS No. 130 "Reporting Comprehensive Income" which is required for interim and annual financial statements issued for periods beginning after December 15, 1997. SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components. The implementation of SFAS No. 130 did not have any effect on the Company's financial position or results of operations. 6. Beginning in 1998, the Company is subject to SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" for annual financial statements. The disclosure requirements of SFAS No. 131 are not required in interim financial statements in the initial year of application. SFAS No. 131 establishes standards for reporting financial and descriptive information regarding an enterprise's operating segments. SFAS No. 131 will require additional financial disclosure by the Company but will not have any effect on the Company's financial position or results of operations. 5 7. Beginning in 1998, the Company is subject to SFAS No. 132, "Employers' Disclosures about Pension and Other Postretirement Benefits," for annual financial statements. SFAS No. 132 requires certain changes in the financial disclosure by the Company but will not have any effect on the Company's financial position or results of operations. 8. The 1998 and 1997 earnings per common share, cash dividends per common share and weighted average outstanding common shares reflect a 5-for-4 stock split (in the form of a stock dividend) granted to stockholders of record on October 1, 1998, and a 5-percent stock dividend granted to stockholders of record on January 2, 1998. 9. In May 1998, the Company signed an amendment to the RTNT Right of First Refusal Agreement and RTNT Call Purchase Agreement ("the Agreements"). As discussed in the Company's 1997 Annual Report on Form 10-K, in 1996, the Company purchased a 49% interest in Windermere Utility Company ("Windermere"). The Agreements permit the majority shareholder to acquire the Company's interest at an agreed-upon price. If the majority shareholder does not exercise his option, then the Company has the right to acquire 100% of Windermere for an agreed-upon price. The amendment extends to December 31, 1998 the date by which the majority shareholder may exercise this right and increases the agreed-upon purchase price for the majority shareholder. 10. In August 1998, the Company was granted an Exclusive Negotiation Agreement for 120 days by the City of West Covina ("West Covina"), the purpose of which is for Suburban Water Systems ("Suburban") and West Covina to establish a price that will allow West Covina to divest itself of its water distribution system and facilities. Successful negotiations would enable Suburban to acquire the 7,000 customer connections served by West Covina's water system. The Exclusive Negotiation Agreement also provides for the consideration of lease and contract operation options in the event that the acquisition of all or part of the West Covina system is not feasible. While there can be no guarantee that the City and Suburban will reach any final agreement, the acquisition of 7,000 water customers would add 11% to Suburban's current customer base of 66,700 customers. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES: Liquidity and capital resources of the Company are influenced primarily by construction expenditures at Suburban for the replacement and renovation of existing water utility facilities and by construction expenditures for new water and wastewater utility facilities at New Mexico Utilities, Inc. ("NMUI"). The operations of ECO Resources, Inc. ("ECO") are currently generating positive cash flow for the Company; however, cash flow may be influenced from time to time by ECO's investments in operating and computer equipment, as well as new business development and acquisition costs. At September 30, 1998, the Company had cash and cash-equivalent balances totaling $798,000 and unused lines of credit of $10,796,000, with a total line of credit capacity of $16,000,000. The Company has three lines of credit from three commercial banks, one of which expires in 1999. The two remaining line of credit agreements were renewed in September 1998 and will not expire until 2000. The Company expects to renew its lines of credit in the normal course of business. During the first nine months of 1998, the Company repaid $1,927,000 on its lines of credit. The Company has remaining borrowing capacity under its First Mortgage Bond Indentures of approximately $34,049,000. However, the amount of additional borrowing available to the Company under its current lines of credit is limited by financial covenants that restricted additional borrowing at September 30, 1998 to the unused lines of credit amount. As of September 30, 1998, the Company was in compliance with all financial covenants as required by its line of credit agreements. 6 During the first nine months of 1998, the Company's additions to property, plant and equipment were $7,711,000, representing a decrease of $4,493,000 over the same period in 1997. Developers made contributions in aid of construction ("CIAC"), and advances totaling $3,372,000, of which $1,597,000 was received in cash. The cost of Company-financed capital additions was $5,936,000, which was paid for primarily by cash flow from operations. Capital expenditures are expected to decrease from $15,202,000 in 1997 to approximately $13,200,000 in 1998. This decrease is primarily due to the completion of certain major capital projects in 1997. The Company estimates that its capital additions will be approximately $10,000,000 in 1999. The Company anticipates borrowing approximately $3,500,000 under its lines of credit during the remainder of 1998 to meet construction requirements not funded by operations or CIAC. The Company anticipates that its available short-term borrowing capacity and its cash flow generated from operations will be sufficient to fund its activities over the next 12 months. If additional cash were needed, the Company would consider alternative sources, including long-term financing. The amount and timing of any future long-term financing would depend on various factors, including the timeliness and adequacy of rate increases, the availability of capital, and the Company's ability to meet interest and fixed charge coverage requirements. Regulatory approval is required for any long-term financing by Suburban and NMUI. If the Company were unable to renew its existing lines of credit or obtain additional long-term financing, capital spending would be reduced or delayed until new financing arrangements were secured. Such financing arrangements could include seeking equity financing through a private placement or a public offering. Similarly, if the Company were to need additional cash to fund an acquisition, financing arrangements could include long-term borrowing or equity financing. REGULATORY AFFAIRS: Regulation: The California Public Utilities Commission ("CPUC") and the New Mexico Public Utility Commission ("NMPUC") regulate the rates and operations of Suburban and NMUI, respectively. The rates allowed are intended to provide the utilities an opportunity to recover costs and earn a reasonable return on common equity. The Company anticipates that future construction expenditures and increased direct operating expenses will require periodic requests for rate increases. Suburban received CPUC approval for a 2.62% ($705,000) step rate increase effective January 1, 1997 and a 2.62% ($740,000) step rate increase effective January 1, 1998. This was the last step rate increase from the 1995 general rate case. As of September 30, 1998, Suburban has not filed for any further rate increases. Regulatory Developments: Legislative and CPUC developments are closely monitored by the Company and by the various water industry associations in which the Company actively participates. Whether legislative or CPUC changes will be enacted, or, if enacted, what the terms of any changes would be, are not known by the Company. Therefore, management cannot predict the impact, if any, of final legislative or CPUC developments on the Company's financial position or results of operations. In 1996, the residents of the state of New Mexico approved a constitutional amendment to combine the NMPUC and the New Mexico Corporation Commission ("NMCC") and create the New Mexico Public Regulatory Commission ("NMPRC"). Presently, the NMPUC consists of three appointed officials and the NMCC consists of three elected officials. Under the enacted legislation, the NMPRC consists of five elected officials who were elected in November 1998, and who will take office on January 1, 1999. A legislative committee is currently reviewing proposed changes to the Public Utilities Act (the "PUA"). The Company cannot predict if or when changes to the PUA will ultimately occur; or, if changes are enacted, the impact, if any, on NMUI's financial position or results of operations. 7 Contract Operations: ECO's pricing is not subject to regulation by a public utilities commission. Most contracts with municipal utility districts are short-term contracts and do not generally include inflation adjustments. Changes in prices are negotiated on a contract-by-contract basis. ECO's longer-term water and wastewater service contracts, primarily with municipalities, typically include annual inflation adjustments. In the United States, municipal employees perform the majority of water and wastewater utility operations. As a result, a significant portion of ECO's sales and marketing efforts require convincing elected officials and city staff persons that outsourcing of the utility operations is of benefit to the city. Typical sales efforts have an 18- to 36-month lead-time with no assurance that the city will select outsourcing or select ECO at the end of the sales effort. While industry renewal rates tend to be high, periodically cities change operators or terminate outsourcing at the end of a contract. As discussed in the Company's Form 10-Q for the period ending June 30, 1998, the City of Rio Rancho, New Mexico ("Rio Rancho") notified ECO that Rio Rancho would not renew ECO's $4 million annual operations and maintenance ("O&M") contract to operate Rio Rancho's water and wastewater facilities. This contract expired June 30, 1998 and is expected to result in reduced revenues of approximately $2 million in 1998. ECO has negotiated several new contracts in 1998, which should offset the impact on earnings of the loss of the Rio Rancho contract, although not necessarily the impact on revenues. Additionally, the Company is aggressively pursuing additional operating contracts as well as acquisition and joint venture opportunities which would offset the effect of the loss of earnings in the event other contracts are not renewed. ENVIRONMENTAL AFFAIRS: The Company's operations are subject to water and wastewater pollution prevention standards and water and wastewater quality regulations of the United States Environmental Protection Agency (the "EPA") and various state regulatory agencies. The EPA and state regulatory agencies continue to promulgate new regulations mandated by the Federal Water Pollution Control Act, the Safe Drinking Water Act (as reenacted in 1996), and the Resource Conservation and Recovery Act. Both the EPA and state regulatory agencies require periodic testing and sampling of water. To date, the Company has not experienced any material adverse effects upon its operations resulting from compliance with governmental regulations. In June 1998, the Company became aware that a substance called N-nitrosodimethylamine ("NDMA") had been detected in one of its wells in excess of the EPA reference dosage for health risks. Upon detection, the well was immediately removed from service. The Company believes that future incremental costs of complying with governmental regulations, including capital expenditures, will be recoverable through increased rates and contract operations revenues. However, there is no assurance that recovery of such costs will be allowed. YEAR 2000 ISSUE: The Year 2000 ("Y2K") issue is the result of software applications using a two-digit code instead of a four-digit code to identify the year. Such applications may be unable to interpret dates beyond 1999, which could result in system failure or other erroneous data in the year 2000 causing serious disruptions in operations. The Company began evaluating the Y2K issue in 1997 and has implemented a five-phase plan to assess its exposure from potential Y2K related failures in its internal systems and those of its significant suppliers, vendors and customers. The first phase of the plan is to conduct an inventory of all systems and programs to determine which might be affected by the Y2K issue. The second phase involves assessment and determination as to how to correct any Y2K issues that are identified in the first phase of the Company's plan. The third phase of the plan involves implementation and testing of the corrective measures. The fourth phase of the plan is to ensure that all significant Y2K issues have been properly corrected and all critical internal systems are Y2K compliant. The final phase of the plan is to assess whether the Company's principal suppliers, vendors and material customers have Y2K issues, which could adversely affect the Company. 8 The first phase of the plan, conducting an inventory of systems and programs that may be affected by Y2K has been substantially completed. The Company's billing and general ledger systems are already substantially Y2K compliant. For those systems that are not compliant, the second phase of the plan, identifying corrective measures, has been substantially completed with solutions identified to correct the existing system problems. The third phase of the plan, implementation and testing of corrective measures is currently in progress and is expected to be completed by the first quarter of 1999, with final critical internal systems Y2K compliant without material deviation by July 1999 (phase four). In the event compliance is not possible, the Company will consider replacing non-compliant software. Costs to be incurred in order for the Company to be Y2K compliant are not expected to have a material effect on the Company's financial position or results of operations. The fifth phase of the plan involves the Company contacting principal suppliers and vendors, all single source suppliers and vendors, and material customers including local governments and municipal utility districts to assess their readiness for Y2K. The Company is currently making inquiries with respect to Y2K compliance of these other systems; however; the Company has not received assurance that those other systems are Y2K compliant. If the systems of principal suppliers and vendors are found to be non-compliant, the Company will evaluate and consider appropriate contingency plans. The Company is unable to predict whether there will be a material adverse effect on the Company's financial position or results of operations since the final determination of the Y2K compliance of principal suppliers, vendors, and material customers is not known at this time. OUTLOOK: Certain statements in this Form 10-Q are forward looking and, as such, involve risk and uncertainty. Uncertainties arise from weather, environmental issues, legal contingencies and other matters which management cannot predict. Actual results may vary from those projected or implied. This Form 10-Q should be read in conjunction with the Company's 1997 Annual Report on Form 10-K which includes: consolidated financial statements and footnote disclosures prepared in accordance with generally accepted accounting principles; management's discussion and analysis of financial condition and results of operations; a detailed description of the Company's business and a discussion of various risks and uncertainties. RESULTS OF OPERATIONS: ALL EARNINGS PER SHARE AMOUNTS REFLECT A 5-FOR-4 STOCK SPLIT (PAYABLE IN THE FORM OF A STOCK DIVIDEND) GRANTED TO STOCKHOLDERS OF RECORD ON OCTOBER 1, 1998, AND A 5-PERCENT STOCK DIVIDEND GRANTED TO STOCKHOLDERS OF RECORD ON JANUARY 2, 1998. THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1997 Diluted earnings per common share were $.34 in 1998, compared to $.28 during the same period in 1997. Operating income increased $361,000 or 13%, and, as a percentage of operating revenues, was 15% in 1998 compared with 14% in 1997. Operating income at the utilities increased $284,000, due primarily to the positive effects of a step rate increase at Suburban and to the increase in new customers at NMUI. ECO's operating results improved $43,000, due primarily to new contracts, additional work performed outside the scope of existing contracts and aggressive cost containment measures. The improvement in operating income was partially offset by the loss of the Rio Rancho contract as discussed earlier, and an increase in marketing costs associated with new contracts. Parent company expenses decreased $34,000, due primarily to decreases in compensation-related expenses. 9 Operating revenues Operating revenues decreased $15,000, when compared to the revenue for the same period in 1997. Suburban's revenues increased $63,000 or 1% due primarily to a step rate increase at Suburban, which was partially offset by a 2% decrease in water consumption. Revenues increased at NMUI by $182,000 or 12% primarily due to an increase in the number of customers. ECO's revenues decreased $260,000 or 3%, primarily as a result of the loss of an operating contract for the City of Rio Rancho. The loss of revenue was partially offset by new contracts and additional billable work outside the scope of existing contracts. Direct operating expenses Direct operating expenses decreased $442,000 or 3%. As a percentage of operating revenues, these expenses were 71% in 1998 and 73% in 1997. Suburban's direct operating expenses decreased $114,000, primarily reflecting a decrease in the cost of water produced because of the lower level of water consumption. NMUI's direct operating expenses increased $143,000 as a result of the increase in NMUI's customers. ECO's direct operating expenses decreased $470,000 primarily as a result of the loss of the Rio Rancho contract. The decrease was partially offset by higher expenses associated with new contracts. Selling, general and administrative Selling, general and administrative expenses for the third quarter of 1998 increased $66,000 as compared with the same period in 1997. As a percentage of operating revenues, these expenses were 14% in 1998 and 13% in 1997. General and administrative expenses at the utilities decreased $68,000, primarily as a result of decreased compensation-related expenses. ECO's selling, general and administrative expenses increased $168,000, primarily due to increased regional marketing costs associated with new business development opportunities. As discussed above, general and administrative expenses of the parent company decreased $34,000. NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997 Diluted earnings per common share were $.59 in 1998, compared to $.49 during the same period in 1997. Operating income increased $659,000 or 12% and, as a percentage of operating revenues, was 12% in 1998 and 10% in 1997. Operating income at the utilities decreased $114,000, due primarily to decreased water sales at Suburban because of inclement weather in California as a result of El Nino-generated storms. The decrease in operating income was partially offset by the addition of new customers and increased consumption at NMUI. The impact of the El Nino- generated storms on water utility revenue and operating income during 1998 may reduce the Company's earnings growth rate from the growth rate of the last few years. ECO's operating results improved $621,000, due to increased revenue from new contracts, additional work performed outside the scope of existing contracts, aggressive cost containment measures, and restructuring of marketing responsibilities. Parent company expenses decreased $152,000, due primarily to decreases in compensation-related expenses. Operating revenues Operating revenues increased $362,000 or 1%. Water utility revenues decreased $1,206,000 or 4%, due primarily to a 13% decrease in water consumption by Suburban's customers due to El Nino-generated storms. Revenues increased at NMUI by 12% due to an increase in the number of NMUI's customers and increased consumption. ECO's revenues increased $2,870,000, primarily as a result of new contracts and additional work performed outside the scope of existing contracts. This increase was partially offset by the loss of the Rio Rancho contract, resulting in a net revenue increase of $1,568,000. 10 Direct operating expenses Direct operating expenses for the nine months ended September 30, 1998 decreased $445,000 as compared with the same period in 1997. As a percentage of operating revenues, these expenses were 73% in 1998 and 74% in 1997. Suburban's direct operating expenses decreased $1,355,000, primarily reflecting a decrease in the cost of water produced because of the lower level of water consumption. NMUI's direct operating expenses increased $299,000 as a result of the addition of new NMUI customers and increased consumption. ECO's direct operating expenses increased $611,000, resulting primarily from higher expenses associated with the effects of new contracts and additional work performed outside the scope of existing contracts. Selling, general and administrative Selling, general and administrative expenses for the nine months ended September 30, 1998 increased $148,000 or 2% as compared with the same period in 1997. As a percentage of operating revenues, these expenses were 15% in 1998 and 1997. General and administrative expenses at the utilities decreased $47,000. ECO's selling, general and administrative expenses increased $347,000, primarily due to increased regional marketing costs associated with new business. As discussed above, general and administrative expenses of the parent company decreased $152,000. 11 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In October 1998, the Company and ECO were served with a summons and complaint in an action entitled Patrick K. Accrocco, et al vs. ECO Resources, Inc., et al in the District Court of Fort Bend County, Texas. The action relates to a fatal automobile accident that occurred in September 1998 and involved an ECO truck. The plaintiffs allege that the accident was caused by the driver's negligence and that ECO and the Company were negligent in hiring, training, monitoring, and supervising the driver. The plaintiffs seek damages for pecuniary loss, loss of companionship and society, loss of consortium, and mental anguish in an amount to be determined at trial. The Company and ECO maintain automobile liability insurance and umbrella liability policies in an aggregate amount which the Company believes to be in excess of any award which the plaintiffs may obtain. The Company, ECO and the ECO truck driver are being defended in this action by legal counsel appointed by the Company's automobile liability carrier, and will answer denying any liability to the plaintiffs. The Company believes that its maximum exposure in this action is limited to the self-insured retention under its umbrella liability policy. Based on the information available at this time, management does not expect that this action will have a material effect on the Company's financial position or results of operations. As discussed in the Company's 1997 Annual Report on Form 10-K, Suburban and the Company were served with a summons and an amended complaint in the Kristin Santamaria, et al vs. Suburban Water Systems, et al action ("Santamaria"). The amended complaint lists approximately 350 plaintiffs who contend, in essence, that they or deceased family members are or were long-time residents of the San Gabriel Valley ("the Valley") and that, by virtue of their residence in the Valley, they have suffered long-term exposure to various hazardous substances in their drinking water resulting in serious illness or, in some cases, wrongful death. Suburban and the Company filed demurrers (i.e. motions to dismiss the action) which alleged that the action must be dismissed because exclusive jurisdiction of the subject matter rests with the CPUC. On August 27, 1998, the Superior Court Judge agreed and dismissed the case as to all water utility defendants. The plaintiffs have appealed that decision. As discussed in the Company's Form 10-Q Report for the quarter ended June 30, 1998 (the "June Report"), the Company and Suburban were served with a summons and complaint in a second action entitled Christine Boswell et al vs. Suburban Water Systems, et al, in the Los Angeles County Superior Court. The plaintiffs allege complaints similar to that in Santamaria. Information as to the action is described in the June Report. Since the filing of the June Report, the Court of Appeal has issued an order setting forth a briefing schedule for a review of the plaintiffs' petition requesting that the trial court be required to terminate the stay and rule on the demurrers. The briefs of the water utilities were filed on October 26, 1998. The water utility defendants asked the Court of Appeal to order the trial court to dismiss these actions based on the exclusive jurisdiction of the CPUC. Oral Arguments in the Court of Appeal will begin on January 26, 1999. A third action, Anthony Anderson, et al vs. Suburban Water Systems, et al was filed in the Los Angeles County Superior Court. The action has not been served, although a copy of the complaint has been furnished to the Company. The allegations of the Anderson action are virtually identical to the Santamaria action and involve approximately 180 plaintiffs. A fourth action, Demciuc, et al vs. Suburban Water Systems, et al, was filed in the Los Angeles County Superior Court and was served in September 1998. That action is similar to the Boswell action and involves two other water purveyors and five industrial defendants. All of the parties to the Demciuc action have agreed to stay that action pending the outcome of the Boswell petitions. The Company and Suburban intend to vigorously defend all three pending actions, (and the Santamaria action if the dismissal is reversed) and have requested that their liability insurance carriers defend and indemnify the Company and Suburban. Several of the liability insurance carriers are currently contributing to the costs of defense of the lawsuits. Based upon information available at this time, 12 management does not expect that these actions will have a material effect on the Company's financial position or results of operations. As described in the June Report, Suburban has applied for and received CPUC authority to establish and maintain a memorandum or tracking account to accumulate all costs and fees incurred by Suburban in defense of these actions and any similar actions which may be filed, costs and fees incurred in legal actions against industrial potentially responsible parties ("PRPs"), and costs and fees incurred in seeking recovery against Suburban's insurance carriers of costs and fees incurred with respect to the underlying actions and those against PRPs. The Company and Suburban are unable to estimate or predict whether the CPUC will ultimately allow Suburban to recover these accumulated costs and fees from Suburban's customers or, if such recovery is allowed, how much of such costs and fees will be recoverable. As described in the June Report, in March 1998, the CPUC issued an order instituting investigation ("OII") directed to all Class A and B water utilities in California, including Suburban. Information about the OII is set forth in the June Report. At this time, the Company and Suburban are unable to predict what actions, if any, will be taken by the CPUC and/or the Department of Health Services ("DOHS") as the results of this investigation, or their impact on the operations or financial position of the Company and Suburban. At this time, it is also uncertain whether the CPUC and/or DOHS will attempt to intervene in the foregoing actions or assert exclusive jurisdiction on the likely results. As discussed in the Company's 1997 Annual Report on Form 10-K and in the June Report, Suburban and the Company were served with a complaint in September 1995, wherein the plaintiff claimed that, while working in the 1950s and 1960s for an independent contractor hired by Suburban, he was exposed to asbestos fibers and contracted mesothelioma. Information as to the action is set forth in the Company's Form 10-Q Report for the quarter ended March 31, 1998. In June 1998, the plaintiffs filed a Case Report demanding $850,000 for damages suffered. A mandatory settlement conference has been set for January 1999, with a trial date set for March 1999. Suburban and the Company maintain that they have no responsibility for the death of the decedent and intend to contest these claims vigorously. Insurance carriers are currently paying all defense costs associated with this case, and the Company expects that they will pay for damages or settlement, if any. As discussed in the Company's 1997 Annual Report on Form 10-K and the June Report, the City of Albuquerque (the "City") initiated an action in eminent domain to acquire the operations of NMUI. At present, discussions are ongoing, but there are no certainties that these discussions will lead to a settlement of the legal action. The Company and its subsidiaries are the subjects of certain litigation arising from the ordinary course of operations. The Company believes the ultimate resolution of such matters will not materially affect its consolidated financial position, results of operations or cash flow. 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION As previously stated in the Company's April 24, 1998 Proxy Statement, any stockholder who desires to submit a proposal for consideration at the Company's 1999 Annual Meeting of Stockholders ("the annual meeting") must submit the proposal to the Company's Secretary in writing. Proposals received prior to December 25, 1998 will be considered for inclusion in the 1999 Proxy Statement. Proposals received after December 24, 1998 but prior to February 26, 1999 may not be included in the 1999 Proxy Statement but would be considered at the annual meeting. Proposals received after February 25, 1999 may be ruled untimely and not subject to action at the annual meeting. For proposals received after February 25, 1999, the Company may exercise discretionary authority to vote proxies held by the Company. All proposals should be submitted in writing to the Company's Secretary at: 225 North Barranca Ave., Suite 200, West Covina, CA 91791. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits furnished pursuant to Item 601 of Regulation S-K: 10.4H First Amendment to the Amended and Restated Credit Agreement dated September 1, 1998, between Registrant and Wells Fargo Bank, filed herewith. 10.4I Letter of Waiver to the Amended and Restated Credit Agreement dated September 18, 1998 between Registrant and Wells Fargo Bank, filed herewith. 10.13D First Amendment to the Amended and Restated Credit Agreement dated September 1, 1998, between Suburban Water Systems and Wells Fargo Bank, filed herewith. 10.17A First Amendment to the Amended and Restated Credit Agreement dated September 1, 1998, between Registrant and Mellon Bank, N.A., filed herewith. 10.17B Letter of Waiver to the Amended and Restated Credit Agreement dated September 18, 1998 between Registrant and Mellon Bank, N.A., filed herewith. 10.18A First Amendment to the Amended and Restated Credit Agreement dated September 1, 1998, between Suburban Water Systems and Mellon Bank, N.A., filed herewith. 27 Financial Data Schedule. (b) Reports on Form 8-K None. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. SOUTHWEST WATER COMPANY ----------------------- (Registrant) Dated: November 12, 1998 /s/ PETER J. MOERBEEK - - ------------------------ --------------------- Peter J. Moerbeek Vice President Finance and Chief Financial Officer 15 EX-10.4H 2 1ST AM. TO AM. & RESTATED CREDIT AGREEMENT EXHIBIT 10.4H FIRST AMENDMENT TO ------------------ AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the "Amendment"), dated as of September 1, 1998, is entered into between WELLS FARGO --------- BANK, NATIONAL ASSOCIATION ("Bank"), and SOUTHWEST WATER COMPANY, a Delaware ---- corporation ("Borrower"). -------- RECITAL ------- A. Borrower and Bank have previously entered into that certain Amended and Restated Credit Agreement dated as of December 23, 1997 (the "Credit ------ Agreement"), pursuant to which Bank has made certain loans and financial - - --------- accommodations available to Borrower. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. B. Borrower and Bank wish to (i) extend the "Maturity Date" as set forth in the Credit Agreement from July 1, 1999 to July 3, 2000 and (ii) add provisions to the Credit Agreement relating to Borrower's operations with respect to the Year 2000. C. Bank is willing to amend the Credit Agreement under the terms and conditions set forth in this Amendment. Borrower is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Bank's rights or remedies as set forth in the Credit Agreement is being waived or modified by the terms of this Amendment. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Amendments to Credit Agreement. ------------------------------ (a) The definition of "Maturity Date" as set forth in Section 1.01 of the Credit Agreement is hereby amended to read in its entirety as follows: "'Maturity Date': July 3, 2000." ------------- (b) Exhibit A to the Credit Agreement, the form of "Revolving Note", --------- is hereby replaced in its entirety with Exhibit A attached hereto and any --------- and all references to the "Revolving Note" in the Credit Agreement shall be a reference to the Revolving Note as amended hereby. (c) The following is hereby added to the Credit Agreement as Section 6.01(i): "(i) Year 2000 Compliance. Perform all acts reasonably -------------------- necessary to ensure that (a) Borrower and any business in which Borrower holds a substantial interest, and (b) all customers, suppliers and vendors that are material to Borrower's business, become Year 2000 Compliant in a timely manner. Such acts shall include, without limitation, performing a comprehensive review and assessment of all of Borrower's systems and adopting a detailed plan, with itemized budget, for the remediation, monitoring and testing of such systems. As used herein, 'Year 2000 Compliant' ------------------- shall mean, in regard to any entity, that all software, hardware, firmware, equipment, goods or systems utilized by or material to the business operations or financial condition of such entity, will properly perform date sensitive functions before, during and after the year 2000. Borrower shall, immediately upon request, provide to Bank such certifications or other evidence of Borrower's compliance with the terms hereof as Bank may from time to time require." 2. Effectiveness of this Amendment. Bank must have received the ------------------------------- following items, in form and content acceptable to Bank, before this Amendment is effective and before Bank is required to extend any credit to Borrower as provided for by this Amendment. (a) Amendment. This Amendment fully executed in a sufficient number of --------- counterparts for distribution to Bank and Borrower. (b) Authorizations. Evidence that the execution, delivery and -------------- performance by Borrower and each guarantor or subordinating creditor of this Amendment and any instrument or agreement required under this Amendment have been duly authorized. (c) Representations and Warranties. The representations and ------------------------------ warranties set forth in the Credit Agreement must be true and correct. (d) Second Amended and Restated Line of Credit Note. The Second ----------------------------------------------- Amended and Restated Line of Credit Note substantially in the form of Exhibit A, attached hereto, with any appropriate insertions and duly --------- executed by Borrower. (e) Other Required Documentation. All other documents and legal ---------------------------- matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded and shall be in form and substance satisfactory to Bank. 3. Representations and Warranties. The Borrower represents and warrants ------------------------------ as follows: (a) Authority. The Borrower has the requisite corporate power and --------- authority to execute and deliver this Amendment and to perform its obligations hereunder and under the Loan Documents (as amended or modified hereby) to which it is a party. The execution, delivery and performance by the Borrower of this Amendment and the performance by Borrower of each Loan Document (as amended or modified hereby) to which it is a party have been duly approved by all necessary corporate action of Borrower 2 and no other corporate proceedings on the part of Borrower are necessary to consummate such transactions. (b) Enforceability. This Amendment has been duly executed and -------------- delivered by the Borrower. This Amendment and each Loan Document (as amended or modified hereby) is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, and is in full force and effect. (c) Representations and Warranties. The representations and warranties ------------------------------ contained in each Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. (d) No Default. No event has occurred and is continuing that ---------- constitutes an Event of Default. 4. Choice of Law. The validity of this Amendment, its construction, ------------- interpretation and enforcement, the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the internal laws of the State of California governing contracts only to be performed in that State. 5. Counterparts. This Amendment may be executed in any number of ------------ counterparts and by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment or the Consent by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment or such Consent. 6. Due Execution. The execution, delivery and performance of this ------------- Amendment are within the power of Borrower, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on Borrower. 7. Reference to and Effect on the Loan Documents. --------------------------------------------- (a) Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrower to Bank. 3 (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Bank under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. (d) To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby. 8. Ratification. Borrower hereby restates, ratifies and reaffirms each ------------ and every term and condition set forth in the Credit Agreement, as amended hereby, and the Loan Documents effective as of the date hereof. 9. Estoppel. To induce Bank to enter into this Amendment and to -------- continue to make advances to Borrower under the Credit Agreement, Borrower hereby acknowledges and agrees that, after giving effect to this Amendment, as of the date hereof, there exists no Event of Default and no right of offset, defense, counterclaim or objection in favor of Borrower as against Bank with respect to the Obligations. 4 IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. "BORROWER" SOUTHWEST WATER COMPANY, a Delaware corporation By: /s/ PETER J. MOERBEEK --------------------- Name: Peter J. Moerbeek Title: Vice President - Finance Chief Financial Officer and Secretary By: /s/ STEPHEN J. MUZI --------------------- Name: Stephen J. Muzi Title: Corporate Controller "BANK" WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ RANDALL J. REPP -------------------- Name: Randall J. Repp Title: Vice President 5 EX-10.4I 3 LETTER OF WAIVER TO AM. & RESTATED CREDIT AGREEMENT EXHIBIT 10.4I September 18, 1998 Mr. Peter J. Moerbeek Vice President and Chief Financial Officer Southwest Water Company 225 North Barranca Avenue, Suite 200 West Covina, California 91791 Re: Amended and Restated Credit Agreement ------------------------------------- Dear Mr. Moerbeek: Reference is hereby made to that certain Amended and Restated Credit Agreement dated as of December 23, 1997 (the "Credit Agreement") between ---------------- Southwest Water Company, a Delaware corporation ("Borrower"), and Wells Fargo -------- Bank, National Association ("Bank"). Pursuant to Section 6.02(h) of the Credit ---- Agreement, Borrower has asked that Bank consent to an advance by Borrower to the City of Sunland Park, New Mexico ("Sunland Park") in an amount not to exceed One ------------ Million Eight Hundred Thousand Dollars ($1,800,000). Bank hereby consents to such advance, provided, however (a) no Event of Default has occurred and is -------- ------- continuing, (b)such advance shall not exceed One Million Eight Hundred Thousand Dollars ($1,800,000), (c) Sunland Park shall enter into a management agreement with ECO Resources, Inc., a subsidiary of Borrower, (the "ECO - Sunland Park ------------------- Agreement") and (d) Borrower agrees to immediately notify Bank of any payment - - --------- defaults by Sunland Park under the ECO - Sunland Park Agreement. The foregoing consent is not a continuing consent, and Bank does not hereby amend the various terms and provisions of the Credit Agreement and shall be free to exercise any and all of its various rights and remedies under the Credit Agreement upon the conditions set forth therein. Southwest Water Company September 18, 1998 Page 2 of 2 Please indicate your agreement with the foregoing by signing in the space provided below. Very Truly Yours, WELLS FARGO BANK, NATIONAL ASSOCIATION /s/ RANDALL J. REPP - - ------------------- Randall J. Repp Vice President ACKNOWLEDGED AND AGREED: SOUTHWEST WATER COMPANY, A DELAWARE CORPORATION /s/ PETER J. MOERBEEK - - --------------------- Peter J. Moerbeek Vice President and Chief Financial Officer /s/ STEPHEN J. MUZI - - --------------------- Stephen J. Muzi Corporate Controller EX-10.13D 4 1ST AM. TO AM. & RESTATED CREDIT AGREEMENT EXHIBIT 10.13D FIRST AMENDMENT TO ------------------ AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the "Amendment"), dated as of September 1, 1998, is entered into between WELLS FARGO --------- BANK, NATIONAL ASSOCIATION ("Bank"), and SUBURBAN WATER SYSTEMS, a California ---- corporation ("Borrower"). -------- RECITAL ------- A. Borrower and Bank have previously entered into that certain Amended and Restated Credit Agreement dated as of December 23, 1997 (the "Credit ------ Agreement"), pursuant to which Bank has made certain loans and financial - - --------- accommodations available to Borrower. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. B. Borrower and Bank wish to (i) extend the "Maturity Date" as set forth in the Credit Agreement from July 1, 1999 to July 3, 2000 and (ii) add provisions to the Credit Agreement relating to Borrower's operations with respect to the Year 2000. C. Bank is willing to amend the Credit Agreement under the terms and conditions set forth in this Amendment. Borrower is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Bank's rights or remedies as set forth in the Credit Agreement is being waived or modified by the terms of this Amendment. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Amendments to Credit Agreement. ------------------------------ (a) The definition of "Maturity Date" as set forth in Section 1.01 of the Credit Agreement is hereby amended to read in its entirety as follows: "'Maturity Date': July 3, 2000." ------------- (b) Exhibit A to the Credit Agreement, the form of "Revolving Note", --------- is hereby replaced in its entirety with Exhibit A attached hereto and any --------- and all references to the "Revolving Note" in the Credit Agreement shall be a reference to the Revolving Note as amended hereby. (c) The following is hereby added to the Credit Agreement as Section 6.01(i): "(i) Year 2000 Compliance. Perform all acts reasonably -------------------- necessary to ensure that (a) Borrower and any business in which Borrower holds a substantial interest, and (b) all customers, suppliers and vendors that are material to Borrower's business, become Year 2000 Compliant in a timely manner. Such acts shall include, without limitation, performing a comprehensive review and assessment of all of Borrower's systems and adopting a detailed plan, with itemized budget, for the remediation, monitoring and testing of such systems. As used herein, 'Year 2000 Compliant' ------------------- shall mean, in regard to any entity, that all software, hardware, firmware, equipment, goods or systems utilized by or material to the business operations or financial condition of such entity, will properly perform date sensitive functions before, during and after the year 2000. Borrower shall, immediately upon request, provide to Bank such certifications or other evidence of Borrower's compliance with the terms hereof as Bank may from time to time require." 2. Effectiveness of this Amendment. Bank must have received the ------------------------------- following items, in form and content acceptable to Bank, before this Amendment is effective and before Bank is required to extend any credit to Borrower as provided for by this Amendment. (a) Amendment. This Amendment fully executed in a sufficient number of --------- counterparts for distribution to Bank and Borrower. (b) Authorizations. Evidence that the execution, delivery and -------------- performance by Borrower and each guarantor or subordinating creditor of this Amendment and any instrument or agreement required under this Amendment have been duly authorized. (c) Representations and Warranties. The representations and ------------------------------ warranties set forth in the Credit Agreement must be true and correct. (d) Second Amended and Restated Line of Credit Note. The Second ----------------------------------------------- Amended and Restated Line of Credit Note substantially in the form of Exhibit A, attached hereto, with any appropriate insertions and duly --------- executed by Borrower. (e) Other Required Documentation. All other documents and legal ---------------------------- matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded and shall be in form and substance satisfactory to Bank. 3. Representations and Warranties. The Borrower represents and warrants ------------------------------ as follows: (a) Authority. The Borrower has the requisite corporate power and --------- authority to execute and deliver this Amendment and to perform its obligations hereunder and under the Loan Documents (as amended or modified hereby) to which it is a party. The execution, delivery and performance by the Borrower of this Amendment and the performance by Borrower of each Loan Document (as amended or modified hereby) to which it is a party have been duly approved by all necessary corporate action of Borrower 2 and no other corporate proceedings on the part of Borrower are necessary to consummate such transactions. (b) Enforceability. This Amendment has been duly executed and -------------- delivered by the Borrower. This Amendment and each Loan Document (as amended or modified hereby) is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, and is in full force and effect. (c) Representations and Warranties. The representations and warranties ------------------------------ contained in each Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. (d) No Default. No event has occurred and is continuing that ---------- constitutes an Event of Default. 4. Choice of Law. The validity of this Amendment, its construction, ------------- interpretation and enforcement, the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the internal laws of the State of California governing contracts only to be performed in that State. 5. Counterparts. This Amendment may be executed in any number of ------------ counterparts and by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment or the Consent by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment or such Consent. 6. Due Execution. The execution, delivery and performance of this ------------- Amendment are within the power of Borrower, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on Borrower. 7. Reference to and Effect on the Loan Documents. --------------------------------------------- (a) Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrower to Bank. 3 (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Bank under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. (d) To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby. 8. Ratification. Borrower hereby restates, ratifies and reaffirms each ------------ and every term and condition set forth in the Credit Agreement, as amended hereby, and the Loan Documents effective as of the date hereof. 9. Estoppel. To induce Bank to enter into this Amendment and to -------- continue to make advances to Borrower under the Credit Agreement, Borrower hereby acknowledges and agrees that, after giving effect to this Amendment, as of the date hereof, there exists no Event of Default and no right of offset, defense, counterclaim or objection in favor of Borrower as against Bank with respect to the Obligations. 4 IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. "BORROWER" SUBURBAN WATER SYSTEMS, a California corporation By: /s/ DANIEL N. EVANS ------------------- Name: Daniel N. Evans Title: Vice President - Finance Chief Financial Officer By: /s/ PETER J. MOERBEEK --------------------- Name: Peter J. Moerbeek Title: Secretary "BANK" WELLS FARGO BANK, NATIONAL ASSOCIATION By:/s/ RANDALL J. REPP ------------------- Name: Randall J. Repp Title: Vice President 5 EX-10.17A 5 1ST AM. TO AM. & RESTATED CREDIT AGREEMENT EXHIBIT 10.17A FIRST AMENDMENT TO ------------------ AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the "Amendment"), dated as of September 1, 1998, is entered into between MELLON --------- BANK, N.A. a national association ("Bank"), and SOUTHWEST WATER COMPANY, a ---- Delaware corporation ("Borrower"). -------- RECITAL ------- A. Borrower and Bank have previously entered into that certain Amended and Restated Credit Agreement dated as of December 23, 1997 (the "Credit ------ Agreement"), pursuant to which Bank has made certain loans and financial - - --------- accommodations available to Borrower. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. B. Borrower and Bank wish to (i) extend the "Maturity Date" as set forth in the Credit Agreement from July 1, 1999 to July 3, 2000 and (ii) add provisions to the Credit Agreement relating to Borrower's operations with respect to the Year 2000. C. Bank is willing to amend the Credit Agreement under the terms and conditions set forth in this Amendment. Borrower is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Bank's rights or remedies as set forth in the Credit Agreement is being waived or modified by the terms of this Amendment. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Amendments to Credit Agreement. ------------------------------ (a) The definition of "Maturity Date" as set forth in Section 1.01 of the Credit Agreement is hereby amended to read in its entirety as follows: "'Maturity Date': July 3, 2000." ------------- (b) Exhibit A to the Credit Agreement, the form of "Revolving Note", --------- is hereby replaced in its entirety with Exhibit A attached hereto and any --------- and all references to the "Revolving Note" in the Credit Agreement shall be a reference to the Revolving Note as amended hereby. (c) The following is hereby added to the Credit Agreement as Section 6.01(i): "(i) Year 2000 Compliance. Perform all acts reasonably -------------------- necessary to ensure that (a) Borrower and any business in which Borrower holds a substantial interest, and (b) all customers, suppliers and vendors that are material to Borrower's business, become Year 2000 Compliant in a timely manner. Such acts shall include, without limitation, performing a comprehensive review and assessment of all of Borrower's systems and adopting a detailed plan, with itemized budget, for the remediation, monitoring and testing of such systems. As used herein, 'Year 2000 Compliant' -------------------- shall mean, in regard to any entity, that all software, hardware, firmware, equipment, goods or systems utilized by or material to the business operations or financial condition of such entity, will properly perform date sensitive functions before, during and after the year 2000. Borrower shall, immediately upon request, provide to Bank such certifications or other evidence of Borrower's compliance with the terms hereof as Bank may from time to time require." 2. Effectiveness of this Amendment. Bank must have received the ------------------------------- following items, in form and content acceptable to Bank, before this Amendment is effective and before Bank is required to extend any credit to Borrower as provided for by this Amendment. (a) Amendment. This Amendment fully executed in a sufficient number of --------- counterparts for distribution to Bank and Borrower. (b) Authorizations. Evidence that the execution, delivery and -------------- performance by Borrower and each guarantor or subordinating creditor of this Amendment and any instrument or agreement required under this Amendment have been duly authorized. (c) Representations and Warranties. The representations and warranties ------------------------------ set forth in the Credit Agreement must be true and correct. (d) Second Amended and Restated Line of Credit Note. The Second ----------------------------------------------- Amended and Restated Line of Credit Note substantially in the form of Exhibit A, attached hereto, with any appropriate insertions and duly --------- executed by Borrower. (e) Other Required Documentation. All other documents and legal ---------------------------- matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded and shall be in form and substance satisfactory to Bank. 3. Representations and Warranties. The Borrower represents and warrants ------------------------------ as follows: (a) Authority. The Borrower has the requisite corporate power and --------- authority to execute and deliver this Amendment and to perform its obligations hereunder and under the Loan Documents (as amended or modified hereby) to which it is a party. The execution, delivery and performance by the Borrower of this Amendment and the performance by Borrower of each Loan Document (as amended or modified hereby) to which it is a party have been duly approved by all necessary corporate action of Borrower 2 and no other corporate proceedings on the part of Borrower are necessary to consummate such transactions. (b) Enforceability. This Amendment has been duly executed and -------------- delivered by the Borrower. This Amendment and each Loan Document (as amended or modified hereby) is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, and is in full force and effect. (c) Representations and Warranties. The representations and warranties ------------------------------ contained in each Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. (d) No Default. No event has occurred and is continuing that ---------- constitutes an Event of Default. 4. Choice of Law. The validity of this Amendment, its construction, ------------- interpretation and enforcement, the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the internal laws of the State of California governing contracts only to be performed in that State. 5. Counterparts. This Amendment may be executed in any number of ------------ counterparts and by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment or the Consent by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment or such Consent. 6. Due Execution. The execution, delivery and performance of this ------------- Amendment are within the power of Borrower, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on Borrower. 7. Reference to and Effect on the Loan Documents. --------------------------------------------- (a) Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrower to Bank. 3 (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Bank under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. (d) To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby. 8. Ratification. Borrower hereby restates, ratifies and reaffirms each ------------ and every term and condition set forth in the Credit Agreement, as amended hereby, and the Loan Documents effective as of the date hereof. 9. Estoppel. To induce Bank to enter into this Amendment and to -------- continue to make advances to Borrower under the Credit Agreement, Borrower hereby acknowledges and agrees that, after giving effect to this Amendment, as of the date hereof, there exists no Event of Default and no right of offset, defense, counterclaim or objection in favor of Borrower as against Bank with respect to the Obligations. 4 IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. "BORROWER" SOUTHWEST WATER COMPANY, a Delaware corporation By: /s/ PETR J. MOERBEEK -------------------- Name: Peter J. Moerbeek Title: Vice President - Finance Chief Financial Officer and Secretary By: /s/ STEPHEN J. MUZI --------------------- Name: Stephen J. Muzi Title: Corporate Controller "BANK" MELLON BANK, N.A., A National Association By: /s/ KEVIN D. KELLY ------------------ Name: Kevin D. Kelly Title: Vice President 5 EX-10.17B 6 LETTER OF WAIVER TO AM. & RESTATED CREDIT AGREEMENT EXHIBIT 10.17B September 18, 1998 Mr. Peter J. Moerbeek Vice President and Chief Financial Officer Southwest Water Company 225 North Barranca Avenue, Suite 200 West Covina, California 91791 Re: Amended and Restated Credit Agreement ------------------------------------- Dear Mr. Moerbeek: Reference is hereby made to that certain Amended and Restated Credit Agreement dated as of December 23, 1997 (the "Credit Agreement") between ---------------- Southwest Water Company, a Delaware corporation ("Borrower"), and Mellon Bank, -------- N.A., a national association ("Bank"). Pursuant to Section 6.02(h) of the ---- Credit Agreement, Borrower has asked that Bank consent to an advance by Borrower to the City of Sunland Park, New Mexico ("Sunland Park") in an amount not to ------------ exceed One Million Eight Hundred Thousand Dollars ($1,800,000). Bank hereby consents to such advance, provided, however (a) no Event of Default has occurred -------- ------- and is continuing, (b)such advance shall not exceed One Million Eight Hundred Thousand Dollars ($1,800,000), (c) Sunland Park shall enter into a management agreement with ECO Resources, Inc., a subsidiary of Borrower, (the "ECO - ------ Sunland Park Agreement") and (d) Borrower agrees to immediately notify Bank of - - ---------------------- any payment defaults by Sunland Park under the ECO - Sunland Park Agreement. The foregoing consent is not a continuing consent, and Bank does not hereby amend the various terms and provisions of the Credit Agreement and shall be free to exercise any and all of its various rights and remedies under the Credit Agreement upon the conditions set forth therein. Southwest Water Company September 18, 1998 Page 2 of 2 Please indicate your agreement with the foregoing by signing in the space provided below. Very Truly Yours, MELLON BANK, N.A A NATIONAL ASSOCIATION. /s/ KEVIN D. KELLY - - ------------------ Kevin D. Kelly Vice President ACKNOWLEDGED AND AGREED: SOUTHWEST WATER COMPANY, A DELAWARE CORPORATION /s/ PETER J. MOERBEEK - - --------------------- Peter J. Moerbeek Vice President and Chief Financial Officer /s/ STEPHEN J. MUZI - - --------------------- Stephen J. Muzi Corporate Controller EX-10.18A 7 1ST AM. TO AM. & RESTATED CREDIT AGREEMENT EXHIBIT 10.18A -------------- FIRST AMENDMENT TO ------------------ AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the "Amendment"), dated as of September 1, 1998, is entered into between MELLON --------- BANK, N.A. a national association ("Bank"), and SUBURBAN WATER SYSTEMBS, a ---- California corporation ("Borrower"). -------- RECITAL ------- A. Borrower and Bank have previously entered into that certain Amended and Restated Credit Agreement dated as of December 23, 1997 (the "Credit ------ Agreement"), pursuant to which Bank has made certain loans and financial - - --------- accommodations available to Borrower. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. B. Borrower and Bank wish to (i) extend the "Maturity Date" as set forth in the Credit Agreement from July 1, 1999 to July 3, 2000 and (ii) add provisions to the Credit Agreement relating to Borrower's operations with respect to the Year 2000. C. Bank is willing to amend the Credit Agreement under the terms and conditions set forth in this Amendment. Borrower is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Bank's rights or remedies as set forth in the Credit Agreement is being waived or modified by the terms of this Amendment. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Amendments to Credit Agreement. ------------------------------ (a) The definition of "Maturity Date" as set forth in Section 1.01 of the Credit Agreement is hereby amended to read in its entirety as follows: "`Maturity Date': July 3, 2000." ------------- (b) Exhibit A to the Credit Agreement, the form of "Revolving Note", --------- is hereby replaced in its entirety with Exhibit A attached hereto and any --------- and all references to the "Revolving Note" in the Credit Agreement shall be a reference to the Revolving Note as amended hereby. (c) The following is hereby added to the Credit Agreement as Section 6.01(i): "(i) Year 2000 Compliance. Perform all acts reasonably -------------------- necessary to ensure that (a) Borrower and any business in which Borrower holds a substantial interest, and (b) all customers, suppliers and vendors that are material to Borrower's business, become Year 2000 Compliant in a timely manner. Such acts shall include, without limitation, performing a comprehensive review and assessment of all of Borrower's systems and adopting a detailed plan, with itemized budget, for the remediation, monitoring and testing of such systems. As used herein, `Year 2000 Compliant' -------------------- shall mean, in regard to any entity, that all software, hardware, firmware, equipment, goods or systems utilized by or material to the business operations or financial condition of such entity, will properly perform date sensitive functions before, during and after the year 2000. Borrower shall, immediately upon request, provide to Bank such certifications or other evidence of Borrower's compliance with the terms hereof as Bank may from time to time require." 2. Effectiveness of this Amendment. Bank must have received the following ------------------------------- items, in form and content acceptable to Bank, before this Amendment is effective and before Bank is required to extend any credit to Borrower as provided for by this Amendment. (a) Amendment. This Amendment fully executed in a sufficient number of --------- counterparts for distribution to Bank and Borrower. (b) Authorizations. Evidence that the execution, delivery and -------------- performance by Borrower and each guarantor or subordinating creditor of this Amendment and any instrument or agreement required under this Amendment have been duly authorized. (c) Representations and Warranties. The representations and ------------------------------ warranties set forth in the Credit Agreement must be true and correct. (d) Second Amended and Restated Line of Credit Note. The Second ----------------------------------------------- Amended and Restated Line of Credit Note substantially in the form of Exhibit A, attached hereto, with any appropriate insertions and duly --------- executed by Borrower. (e) Other Required Documentation. All other documents and legal ---------------------------- matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded and shall be in form and substance satisfactory to Bank. 3. Representations and Warranties. The Borrower represents and warrants ------------------------------ as follows: (a) Authority. The Borrower has the requisite corporate power and --------- authority to execute and deliver this Amendment and to perform its obligations hereunder and under the Loan Documents (as amended or modified hereby) to which it is a party. The execution, delivery and performance by the Borrower of this Amendment and the performance by Borrower of each Loan Document (as amended or modified hereby) to which it is a party have been duly approved by all necessary corporate action of Borrower 2 and no other corporate proceedings on the part of Borrower are necessary to consummate such transactions. (b) Enforceability. This Amendment has been duly executed and -------------- delivered by the Borrower. This Amendment and each Loan Document (as amended or modified hereby) is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, and is in full force and effect. (c) Representations and Warranties. The representations and ------------------------------ warranties contained in each Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. (d) No Default. No event has occurred and is continuing that ---------- constitutes an Event of Default. 4. Choice of Law. The validity of this Amendment, its construction, ------------- interpretation and enforcement, the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the internal laws of the State of California governing contracts only to be performed in that State. 5. Counterparts. This Amendment may be executed in any number of ------------ counterparts and by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment or the Consent by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment or such Consent. 6. Due Execution. The execution, delivery and performance of this ------------- Amendment are within the power of Borrower, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on Borrower. 7. Reference to and Effect on the Loan Documents. --------------------------------------------- (a) Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrower to Bank. 3 (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Bank under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. (d) To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby. 8. Ratification. Borrower hereby restates, ratifies and reaffirms each ------------ and every term and condition set forth in the Credit Agreement, as amended hereby, and the Loan Documents effective as of the date hereof. 9. Estoppel. To induce Bank to enter into this Amendment and to continue -------- to make advances to Borrower under the Credit Agreement, Borrower hereby acknowledges and agrees that, after giving effect to this Amendment, as of the date hereof, there exists no Event of Default and no right of offset, defense, counterclaim or objection in favor of Borrower as against Bank with respect to the Obligations. 4 IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. "BORROWER" SUBURBAN WATER SYSTEMS, a California corporation By: /s/ DANIEL N. EVANS ------------------- Name: Daniel N. Evans Title: Vice President-Finance Chief Financial Officer By: /s/ PETER J. MOERBEEK ----------------------- Name: Peter J. Moerbeek Title: Secretary "BANK" MELLON BANK, N.A., A National Association By: /s/ KEVIN D. KELLY ------------------ Name: Kevin D. Kelly Title: Vice President 5 EX-27 8 FINANCIAL DATA SCHEDULE
5 1 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 798,000 0 9,838,000 984,000 0 13,257,000 145,949,000 39,736,000 128,510,000 16,547,000 29,800,000 0 517,000 42,000 34,046,000 128,510,000 0 54,238,000 0 47,944,000 (197,000) 96,000 2,299,000 4,260,000 1,704,000 2,556,000 0 0 0 2,535,000 0.61 0.59
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