FIRST AMENDMENT TO LOAN AGREEMENT THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PIMA, as Issuer GLOBAL WATER RESOURCES, LLC as Company and amending a Loan Agreement dated as of December 1, 2006 pertaining to $54,135,000 The Industrial...
EXHIBIT 10.13
EXECUTION COPY
FIRST AMENDMENT TO LOAN AGREEMENT
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA,
as Issuer
OF THE COUNTY OF PIMA,
as Issuer
GLOBAL WATER RESOURCES, LLC
as Company
as Company
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
as Trustee
$54,135,000
The Industrial Development Authority
of the County of Pima
Water and Wastewater Revenue Bonds
(Global Water Resources, LLC Project)
Series 2007
The Industrial Development Authority
of the County of Pima
Water and Wastewater Revenue Bonds
(Global Water Resources, LLC Project)
Series 2007
Dated as of November 1, 2007
TABLE OF CONTENTS
| Page | ||||||
| ARTICLE I | ||||||
| DEFINITIONS | ||||||
Section 1.1.
|
Definitions | 2 | ||||
Section 1.2.
|
Proposed Amendment to Definitions of “Debt Service Coverage Ratio” and “Maximum Annual Debt Service” | 3 | ||||
| ARTICLE II | ||||||
| REPRESENTATION AND COVENANTS | ||||||
Section 2.1.
|
Representations of the Issuer | 4 | ||||
Section 2.2.
|
Representations of Covenants of the Company | 5 | ||||
| ARTICLE III | ||||||
| ISSUANCE OF THE SERIES 2007 BONDS AND DISBURSEMENT OF BOND PROCEEDS | ||||||
Section 3.1.
|
Issuance of the Series 2007 Bonds; Application of Proceeds | 10 | ||||
Section 3.2.
|
Disbursements from the Project Fund | 11 | ||||
| ARTICLE IV | ||||||
| LOAN BY ISSUER; REPAYMENT OF THE LOAN; LOAN PAYMENTS AND ADDITIONAL PAYMENTS | ||||||
Section 4.1.
|
Loan Repayment; Delivery of Notes | 13 | ||||
| ARTICLE V | ||||||
| MISCELLANEOUS | ||||||
Section 5.1.
|
Effect of this First Amendment to Loan Agreement | 15 | ||||
Section 5.2.
|
Notice of A.R.S. Section 38-511 — Cancellation | 15 | ||||
Section 5.3.
|
Counterparts | 15 | ||||
Section 5.4.
|
Consent | 15 | ||||
EXHIBIT A
|
FORM OF SERIES 2007 PROJECT NOTE | |||||
EXHIBIT B
|
PALO VERDE WATER FACILITY PROJECT DESCRIPTION | |||||
EXHIBIT C
|
SANTA XXXX WATER FACILITY PROJECT DESCRIPTION | |||||
EXHIBIT D
|
COST OF ISSUANCE | |||||
EXHIBIT E
|
FORM OF DISBURSEMENT SCHEDULE | |||||
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT, (the “First Amendment to Loan Agreement”) dated as of
November 1, 2007, by and among THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PIMA (the
“Issuer”), a nonprofit corporation designated as a political subdivision of the State of Arizona
(the “State”), GLOBAL WATER RESOURCES LLC, a Delaware limited liability company duly organized and
validly existing under the laws of the State (the “Company”), and U.S. BANK NATIONAL ASSOCIATION
(the “Trustee”) amends and modifies that certain Loan Agreement dated as of December 1, 2006 (the
“Loan Agreement”) among the Issuer, the Company and Trustee.
WHEREAS, the Issuer has heretofore issued its Water and Wastewater Revenue Bonds (Global Water
Resources, LLC Project) Series 2006 (the “Series 2006 Bonds”), pursuant to a Trust Indenture dated
as of December 1, 2006 (the “Indenture”) by and between the Issuer and U.S. Bank National
Association (the “Trustee”), the proceeds of which were used to fund a loan made to the Company, by
the Issuer, pursuant to the terms of the Loan Agreement to provide financing or refinancing the
costs of the acquisition, expansion, construction, improvement and equipping of facilities for
wastewater treatment and water treatment, as well as water reclamation pipelines, water pipelines,
and wastewater collection pipelines, consisting of water, wastewater and reclaimed water
infrastructure for water and wastewater treatment, including water mains, sewer mains, reclaimed
water mains, water treatment facilities, water distribution centers, wastewater lift stations,
wastewater treatment facilities, and reclaimed water mixing and distribution centers as well as
related information and management systems, located at 00000 Xxxx Xxxxxx Xxxx, Xxxxxxxx, Xxxxxxx
00000 in the City of Maricopa, Arizona (collectively, the “Series 2006 Project”); and
WHEREAS, Section 11.01 of the Indenture, permits for the amendment of the Loan Agreement not
requiring consent of Holders in connection with the issuance of Additional Bonds as specified in
Section 2.04 of the Indenture; and
Supplemental Trust Indenture of even date herewith by and between the Issuer and Trustee (the
“First Supplemental Indenture”), has authorized the issuance of its revenue bonds designated as
“Water and Wastewater Revenue Bonds (Global Water Resources, LLC Project) Series 2007” in the
principal amount of $54,135,000 (the “Series 2007 Bonds” and together with the Series 2006 Bonds
and any Additional Bonds, the “Bonds”); and
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms used in this First Amendment to Loan Agreement
and not otherwise defined herein shall have the meanings ascribed thereto in the Indenture, the
Loan Agreement or the First Supplemental Indenture. The following definitions are hereby added to
the Loan Agreement:
“First Supplemental Indenture” means that certain First Supplemental Trust Indenture dated as
of November 1, 2007 by and between the Issuer and the Trustee providing for the issuance of the
Series 2007 Bonds.
“Series 2007 Bonds” means the Issuer’s Water and Wastewater Revenue Bonds (Global Water
Resources, LLC Project) Series 2007.
“Series 2007 Project Note” means the non-negotiable Promissory Note of the Company, dated
November 28, 2007, in the form attached hereto as Exhibit A and in the principal amount of
$54,135,000 evidencing the obligation of the Company to make Loan Payments, as it may be amended or
restated hereunder.
“Series 2007 Project Facilities” means, collectively, the Global Water — Palo Verde Utilities
Company Series 2007 Project Facilities and the Global Water — Santa Xxxx Water Company Series 2007
Project Facilities described in Exhibit B and Exhibit C hereto (and more
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particularly described in the Plans and Specifications), together with any additions,
modifications and substitutions to those facilities.
“Series 2007 Project Purposes” means constructing, installing, equipping or improving real
and personal property comprising, Series 2007 Project Facilities to be used to furnish water and to
collect sewage, or such use as may result from a change in the Plans and Specifications authorized
by Section 3.2 of the Loan Agreement or which may otherwise be permitted by the Loan Agreement.
Section 1.2. Proposed Amendment to Definitions of “Debt Service Coverage Ratio” and “Maximum
Annual Debt Service”.
(a) The current definition of “Debt Service Coverage Ratio” in the Loan Agreement,
being that set forth or incorporated in Section 1.1 of the Loan Agreement is as follows:
“Debt Service Coverage Ratio” means, for any period of time, the ratio of Income Available For
Debt Service (with respect to Additional Bonds issued subsequent to the issuance of the Series 2006
Bonds, such amount adjusted as provided in the next sentence) to Maximum Annual Debt Service. For
purposes of this definition only, with respect to Additional Bonds issued subsequent to the
issuance of the Series 2006 Bonds, Income Available for Debt Service may be increased by including
at the time of issuance of Additional Bonds, anticipated annual earnings on additional moneys
required to be deposited in the Bond Reserve Fund as a result of the issuance of the Additional
Bonds, provided that at the time of delivery of the Additional Bonds:
(i) All of such moneys have been deposited in an investment agreement meeting
the requirements of clause (vi) of the definition of “Eligible Investments”;
(ii) such investment agreement has a term equal to the longest maturity of the
Additional Bonds, and is not subject to early termination at the option of the
investment agreement provider except upon the occurrence of an event of default
thereunder; and
(iii) the Original Purchaser certifies the estimated annual earnings to be
derived from such deposit.
The following amended and restated definition of “Debt Service Coverage Ratio” shall become
effective immediately upon the delivery of the Series 2007 Bonds, such delivery and acceptance
thereof by the purchasers to evidence the consent of the Holders of not less than a majority in
aggregate principal amount of the Bonds at the time outstanding and with the consent of the
Company, such consent evidenced as provided in the Indenture and the Loan Agreement:
“Debt Service Coverage Ratio” means, for any period of time, the ratio of Income Available For
Debt Service to Maximum Annual Debt Service.
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(b) The current definition of “Maximum Annual Debt Service” in the Indenture, being
that set forth in Section 1.01 of the Indenture is as follows:
“Maximum Annual Debt Service” means the greatest scheduled amount of principal (including
mandatory sinking fund payments) and interest payable on Long Term Indebtedness (but, excluding
Subordinated Indebtedness incurred in compliance with the Agreement) of the Company during the
current or any future 12 month period ending December 1.”
The following amended and restated definition of “Maximum Annual Debt Service” shall become
effective immediately upon the delivery of the Series 2007 Bonds, such delivery and acceptance
thereof by the purchasers to evidence the consent of the Holders of not less than a majority in
aggregate principal amount of the Bonds at the time outstanding and with the consent of the
Company, such consent evidenced as provided in the Indenture and the Loan Agreement:
“Maximum Annual Debt Service” means the greatest scheduled amount of principal (including
mandatory sinking fund payments) and interest payable on Long Term Indebtedness (but excluding
Subordinated Indebtedness incurred in compliance with the Loan Agreement) of the Company, such
amount to be reduced by the amount of all investment earnings derived from the Bond Reserve Fund,
provided, however, that investment earnings derived on the Bond Reserve Fund shall be included in
such reduction only to the extent that amounts on deposit in the Bond Reserve Fund are no less than
the Bond Reserve Requirement at the time of such calculation, during the current or any future
12-month period ending December 1, provided, however, for purposes of determining the amount of
principal payable on each series of Bonds issued for the 12-month period ending with the final
retirement of such series, there shall be excluded the amount by which the Bond Reserve Requirement
may be reduced as a result of the final retirement of such series of Bonds.”
By execution of this First Amendment to Loan Agreement, the Company hereby consents to the
amendment reflected in this Section 1.2.
ARTICLE II
REPRESENTATION AND COVENANTS
Section 2.1. Representations of the Issuer. The Issuer represents that:
(a) The Issuer is a nonprofit corporation designated as a political subdivision of the
State, created and existing under the Constitution and laws of the State;
(b) The Issuer has found and hereby declares that the issuance of the Series 2007 Bonds
to assist the financing of the Series 2007 Project is in furtherance of the public purposes
set forth in the Act;
(c) In order to finance the costs of the Series 2007 Project, in an amount estimated by
the Company, the Issuer has duly authorized the execution, delivery, and performance on its
part of the Purchase Contract, the First Supplemental Indenture and this First Amendment to
Loan Agreement;
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(d) To accomplish the foregoing, the Issuer proposes to issue $54,135,000, in an
aggregate principal amount of its Series 2007 Bonds immediately following the execution and
delivery of this First Amendment of Loan Agreement. The date, denomination or
denominations, and other pertinent provisions with respect to the Series 2007 Bonds are set
forth in the First Supplemental Indenture;
(e) The Issuer makes no representation or warranty that the amount of the Loan will be
adequate or sufficient to finance the Series 2007 Project or that the Series 2007 Project
will be adequate or sufficient for the purposes of the Company; and
(f) The Issuer has not pledged, assigned, or granted, and will not pledge, assign, or
grant any of its rights or interest in or under the Loan Agreement, as amended by the First
Amendment to Loan Agreement for any purpose other than as provided in the Indenture, as
supplemented by the First Supplemental Indenture and any pledge, assignment or grant in
violation of this (f) shall, to the extent permitted by law, be invalid.
Section 2.2. Representations of Covenants of the Company. The Company represents and
covenants that:
(a) It is a limited liability company duly organized and validly existing under the
laws of the State of Delaware and qualified to transact business in the State.
(b) It has full corporate power to cause the Series 2007 Project to be developed,
constructed, operated, equipped, and maintained by Global Water — Palo Verde Utilities
Company and by Global Water — Santa Xxxx Water Company so that it is, and continues to be, a
“project” within the meaning of the Act. It is doing business in and is in good standing in
the State and in each other jurisdiction where its ownership or lease of property or conduct
of its business requires such qualification.
(c) It has full power and authority to execute, deliver and perform this First
Amendment to Loan Agreement and the Series 2007 Project Note and to enter into and carry out
the transactions contemplated by those documents. This First Amendment to Loan Agreement
and the Series 2007 Project Note have, by proper action, been duly authorized, and delivered
by the Company and all steps necessary have been taken to constitute this First Amendment to
Loan Agreement and the Series 2007 Project Note valid and binding obligations of the
Company.
(d) The execution and delivery of this First Amendment to Loan Agreement, the Series
2007 Project Note, the Security Agreement, the Intercreditor Agreement, the Continuing
Disclosure Undertaking of the Company dated as of November 28, 2007, and the Bond Purchase
Agreement dated November 19, 2007 among the Issuer, the Company and Hutchinson, Shockey,
Erley & Co. (collectively the “Company Documents”), and the consummation of the transactions
therein contemplated, including the application of the proceeds of the Series 2007 Bonds as
so contemplated, subject to the execution and delivery of the Intercreditor Agreement will
not conflict with, or constitute a breach of, or default by the Company under its articles
of organization, its operating agreement or any
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resolution of its Board of Directors in effect on the date hereof, indenture, mortgage,
deed of trust, lease, note, loan agreement, or other agreement or instrument to which it is
a party or by which it or its properties are bound, any order or opinion of the Arizona
Corporation Commission, and will not constitute a violation of any other statute, order,
rule, or regulation of any court or governmental agency or body having jurisdiction over it
in existence on the date hereof or any of its activities or properties which would have an
adverse effect on its activities or properties. It is not in breach, default, or in
violation of any statute, indenture, mortgage, deed of trust, note, loan agreement, or other
agreement or instrument which would allow the obligee or obligees thereof to take any action
which would adversely affect its performance under the Company Documents and covenants that
it will cause Global Water — Palo Verde Utilities Company and Global Water — Santa Xxxx
Water Company to comply with all conditions and requirements imposed on it by the ACC.
(e) There are no actions, suits, or proceedings of any type whatsoever pending, or to
its knowledge, threatened against or affecting the Company or Global Water — Palo Verde
Utilities Company or Global Water — Santa Xxxx Water Company or the assets, properties, or
operations of any of them which, if determined adversely to the Company or its interests,
would have a material adverse effect upon its operations or finances, except as disclosed in
the Company Documents or the Preliminary Limited Offering Memorandum dated October 30, 2007
for the Series 2007 Bonds, or upon the validity or enforceability of the Company Documents
and none of the Company or Global Water — Palo Verde Utilities Company or Global Water —
Santa Xxxx Water Company is in default with respect to any order or decree of any court or
any order, regulation, or decree of any federal, state, municipal, or other governmental
agency, which default would materially and adversely affect its operations, properties or
its finances.
(f) Neither the representations of the Company contained in the Company Documents nor
any oral or written statement furnished by the Company to the Issuer or the Original
Purchaser in connection with the transactions contemplated hereby, contain any untrue
statement of a material fact or omit to state a material fact necessary to make the
statements contained herein or therein not misleading. There is no fact that the Company
has not disclosed to the Issuer or the Original Purchaser of the Series 2007 Bonds in
writing that materially and adversely affects the properties, business, prospects, profits,
or condition (financial or otherwise) of the Company or the ability of the Company to
perform its obligations under the Company Documents or any documents or transactions
contemplated hereby or thereby.
(g) The Series 2007 Project as designed and as proposed to be operated or caused to be
operated by the Global Water — Palo Verde Utilities Company or Global Water — Santa Xxxx
Water Company, when constructed in accordance with such design, will meet all material
requirements of existing law, including material requirements of any federal, State, county,
city or other governmental authority having jurisdiction over the Series 2007 Project or its
use and operation and will be consistent with the Act.
(h) The Company’s federal employer identification number is 00-0000000.
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(j) All representations of the Company contained herein or in any certificate or other
instrument delivered by the Company pursuant hereto, or to the Indenture as supplemented by
the First Supplemental Indenture, shall survive the execution and delivery thereof and the
issuance, sale, and delivery of the Series 2007 Bonds as representations of facts existing
as of the date of such execution and delivery of the instrument containing such
representation.
(k) The Series 2007 Project is and will be located within the limits of the City of
Maricopa, Arizona and in an unincorporated area of Pinal County, Arizona.
(l) The Series 2007 Project was commenced no earlier than October 6, 2006. 100% of the
proceeds ($47,148,650) of the Bonds in the Construction Account of the Series 2007 Project
Fund will be used to reimburse the Company for expenses incurred in connection with the
Series 2007 Project.
(m) There are no existing liens or encumbrances on property owned by the Company,
Global Water — Palo Verde Utilities Company or Global Water — Santa Xxxx Water Company
(except for the Xxxxx Fargo Credit Agreement) which now or could in the future materially
adversely affect the property owned by the Company, Global Water — Palo Verde Utilities
Company or Global Water — Santa Xxxx Water Company or which could result in the property
owned by the Company, Global Water — Palo Verde Utilities Company or Global Water — Santa
Xxxx Water Company being transferred to any other entity.
(n) The Company presently intends to cause the Series 2007 Project to be used or
operated in a manner consistent with the Series 2007 Project Purposes until the date on
which the Bonds have been fully paid and knows of no reason why the Series 2007 Project will
not be so operated. If, in the future, there is a cessation of that operation, it will use
its best efforts to resume that operation or accomplish an alternate use by the Company,
Global Water — Palo Verde Utilities Company or Global Water — Santa Xxxx Water Company or
others which will be consistent with the Act; provided, however, that this provision does
not require the Company, Global Water — Palo Verde Utilities Company or Global Water — Santa
Xxxx Water Company to operate any portion of the Series 2007 Project after the Company shall
determine in its discretion that such operations are no longer economic and does not
prohibit the Company, Global Water — Palo Verde Utilities Company or Global Water — Santa
Xxxx Water Company from selling the Series 2007 Project or from merging into or
consolidating with another corporation in accordance with Section 5.3 of the Loan Agreement.
(o) The use of the Series 2007 Project as it is proposed to be operated, complies with
all currently applicable material requirements of zoning, development, pollution control,
water conservation, environmental, and other laws, regulations, rules and ordinances of the
federal government and the State and the respective agencies thereof and the political
subdivisions in which the Series 2007 Project is to be located.
7
(p) The Company has obtained all necessary approvals of and licenses, permits, consents
and franchises from federal, state, county, municipal or other governmental authorities
having jurisdiction over the Series 2007 Project to acquire, construct, improve and equip
the Series 2007 Project, and to enter into, and execute and perform its obligations under
this Agreement and the other Company Documents, in each case under presently applicable law
and regulations, other than permits and licenses which are not now required.
(q) To the best of the Company’s actual knowledge, none of the current Issuer
Indemnified Parties has any significant or conflicting interest, financial, employment or
otherwise, in the Company, Global Water — Palo Verde Utilities Company or Global Water —
Santa Xxxx Water Company the Series 2007 Project or in any of the transactions contemplated
under the Company Documents.
(r) There has been no material adverse change in the financial condition, prospects or
business affairs of the Company, Global Water — Palo Verde Utilities Company or Global Water
— Santa Xxxx Water Company or the feasibility or physical condition of the Series 2007
Project subsequent to the date on which the Issuer granted its resolution approving the
issuance of the Bonds.
(s) The Company (a) understands the nature of the structure of the transactions related
to the financing of the Series 2007 Project; (b) is familiar with all of the provisions of
the Indenture, as supplemented by the First Supplemental Indenture and all documents and
instruments related to such financing to which the Company or the Issuer is a party or to
which the Company is a beneficiary; (c) understands the risk inherent in such transactions,
including without limitation, the risk of loss of the Series 2007 Project; and (d) has not
relied upon the Issuer for any guidance or expertise in analyzing the financial consequences
of such financing transactions or otherwise relied upon the Issuer in any manner, except to
issue the Series 2007 Bonds in order to provide funds for the Loan.
(t) The Company hereby acknowledges receipt of the Indenture, as supplemented by the
First Supplemental Indenture and agrees to be bound by their terms.
(u) All representations of the Company contained herein or in any certificate or other
instrument delivered by the Company pursuant hereto, to the Indenture, as supplemented by
the First Supplemental Indenture or in connection with the transactions contemplated hereby
or thereby, shall survive the execution and delivery hereof and thereof and the issuance,
sale and delivery of the Series 2007 Bonds as representations of facts existing as of the
date of execution and delivery of the instrument containing such representations.
(v) At least 95% of the net proceeds of the Series 2007 Bonds (as defined in Section
150 of the Code) will be used to provide land or property of a character subject to the
allowance for depreciation under Section 167 of the Code and to provide facilities which
constitute “facilities for the furnishing of water” within the meaning of Section 142(a)(4)
and/or facilities which constitute “sewage facilities” within the meaning of
8
Section 142(a)(5) of the Code. The Company will not request or authorize any
disbursement pursuant to Section 3.4 hereof, which, if paid, would result in less than 95%
of the net proceeds of the Series 2007 Bonds being spent.
(w) The costs of issuance financed by the Series 2007 Bonds will not exceed 2% of the
aggregate face amount of the Series 2007 Bonds (within the meaning of Section 147(g) of the
Code), and the Company will not request or authorize any disbursement pursuant to Section
3.4 of the Loan Agreement or otherwise, which, if paid, would result in more than 2% of the
aggregate face amount of the Series 2007 Bonds being so used. None of the proceeds of the
Series 2007 Bonds will be used to provide working capital.
(x) In accordance with Section 147(b) of the Code, the average maturity of the Series
2007 Bonds does not exceed 120% of the average reasonably expected economic life of the
facilities being financed by the Series 2007 Bonds, determined as of the later of the date
the Series 2007 Bonds are issued or the date the facilities are expected to be placed in
service.
(y) None of the proceeds of the Series 2007 Bonds will be used to provide any airplane,
skybox or other private luxury box, or health club facility; any facility primarily used for
gambling; or any store the principal business of which is the sale of alcoholic beverages
for consumption off premises.
(z) Less than 25% of the proceeds of the Series 2007 Bonds will be used directly or
indirectly to acquire land or any interest therein.
(aa) No portion of the proceeds of the Series 2007 Bonds will be used to acquire
existing property or any interest therein unless such acquisition meets the rehabilitation
requirements of Section 147(d) of the Code.
(bb) The information furnished by the Company and used by the Issuer in preparing the
certification pursuant to Section 148 of the Code and information statement pursuant to
Section 149(e) of the Code, both referred to in the Bond Legislation, as well as the federal
tax election referred to in the Bond Legislation, is accurate and complete as of the date of
the issuance of the Series 2007 Bonds.
(cc) In connection with any lease or grant by the Company of the use of the Series 2007
Project, the Company shall require that the lessee or user of any portion of the Series 2007
Project shall not (i) violate the covenant set forth in subsection (n) above and (ii) use
that portion of the Series 2007 Project in any manner which would violate the covenants set
forth in subsections (n), (o) and (v).
(dd) After the expiration of any applicable temporary period under Section 148(d)(3) of
the Code, at no time during any bond year will the aggregate amount of gross proceeds of the
Series 2007 Bonds invested in higher yielding investments (within the meaning of Section
148(b) of the Code) exceed 150 percent of the debt service on the Series 2007 Bonds for such
bond year and the aggregate amount of gross proceeds of the Series 2007 Bonds invested in
higher yielding investments, if any, will be
9
promptly and appropriately reduced as the amount of outstanding Series 2007 Bonds are reduced;
provided, however, that the foregoing shall not require the sale or disposition of any
investments in higher yielding investments if such sale or disposition would result in a
loss which exceeds the amount which would be paid to the United States pursuant to Section
5.09 of the Indenture (but for such sale or disposition) at the time of such sale or
disposition if a payment under Section 5.09 of the Indenture were due at such time.
At no time will any funds constituting gross proceeds of the Series 2007 Bonds be used
in a manner as to constitute a prohibited payment under the applicable Regulations
pertaining to, or in any other fashion as would constitute failure of compliance with,
Section 148 of the Code.
For purposes of this subsection (dd), the terms “bond year,” “gross proceeds,” “higher
yielding investments,” “yield,” and “debt service” have the meanings assigned to them for
purposes of Section 148 of the Code.
(ee) The Series 2007 Bonds are not “federally guaranteed” within the meaning of Section
149(b) of the Code.
ARTICLE III
Section 3.1. Issuance of the Series 2007 Bonds; Application of Proceeds. To provide funds to
make the Loan for purposes of assisting in paying the Project Costs, the Issuer will issue, sell
and deliver the Series 2007 Bonds to the Original Purchaser. The Series 2007 Bonds will be issued
pursuant to the Indenture in the aggregate principal amount, will bear interest, will mature and
will be subject to redemption as set forth therein.
The Company hereby approves the terms and conditions of the First Supplemental Indenture and
the Series 2007 Bonds, and of the terms and conditions under which the Series 2007 Bonds will be
issued, sold and delivered.
The proceeds from the initial sale of the Series 2007 Bonds shall be paid over to the Trustee
and deposited as described in Section 2.09 of the First Supplemental Indenture.
Pending disbursement pursuant to Section 3.2 hereof, the proceeds deposited in the Project
Fund, together with any investment earnings thereon, shall constitute a part of the Revenues
assigned by the Issuer to the payment of Bond Service Charges as provided in the Indenture.
At the request of the Company, and for the purposes and upon fulfillment of the conditions
specified in the Indenture, the Issuer may provide for the issuance, sale and delivery of
Additional Bonds and loan the proceeds from the sale thereof to the Company.
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Section 3.2. Disbursements from the Project Fund. (a) Subject to the provisions below,
disbursements from the Project Fund shall be made only to reimburse or pay the Company, or any
person designated by the Company, for the following Project Costs:
(1) Costs incurred directly or indirectly for or in connection with the
construction, installation, equipment or improvement of the Series 2007 Project,
including costs incurred in respect of the Series 2007 Project for preliminary
planning and studies; architectural, legal, engineering, accounting, consulting,
supervisory and other services; labor, services and materials; permit fees; and
recording of documents and title work and acquisition of land. There shall be an
initial disbursement from the Project Fund to the Company in the approximate amount
of $47,148,650 in order to reimburse the Company for expenses incurred in connection
with the Series 2007 Project from and after October 8, 2006. This disbursement
shall take place immediately upon closing.
(2) Premiums attributable to any surety bonds and insurance taken out and
maintained during the Construction Period with respect to the Project Site and the
Project Facilities.
(3) Taxes, assessments and other governmental charges in respect of the Series
2007 Project that may become due and payable during the Construction Period.
(4) Costs incurred directly or indirectly in seeking to enforce any remedy
against any contractor or subcontractor in respect of any actual or claimed default
under any contract relating to the Project Facilities.
(5) Financial, legal, accounting, printing and engraving fees, charges and
expenses, and all other such fees, charges and expenses incurred in connection with
the authorization, sale, issuance, and delivery of the Series 2007 Bonds, including,
without limitation, the fees and expenses of the Trustee and any paying agent
properly incurred under the Indenture that may become due and payable during the
Construction Period; provided that the costs of issuance of the Series 2007 Bonds
financed by the Series 2007 Bonds shall not exceed 2% of the aggregate face amount
of the Series 2007 Bonds within the meaning of Section 147(g) of the Code and all
such costs in excess of such 2% limit shall be paid from funds deposited into the
Cost of Issuance Account of the Project Fund in the amounts set forth on Exhibit D
hereto upon receipt of an invoice from the payee
(6) Any other costs, expenses, fees and charges properly chargeable to the cost
of construction, installation, equipment or improvement of the Series 2007 Project.
(7) Payment of interest on the Series 2007 Bonds during the Construction
Period.
(8) Payments made to the Rebate Fund.
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(b) Any disbursements from the Project Fund for the payment of Project Costs shall be
made by the Trustee only upon the written order of the Authorized Company Representative.
Each such written order shall be in substantially the form of the disbursement request
attached hereto as Exhibit E and shall be consecutively numbered and accompanied by invoices
or other appropriate documentation supporting the payments or reimbursements requested.
(c) Any disbursement for any item not described in, or the cost for which item is other
than as described in, the information statement filed by the Issuer in connection with the
issuance of the Series 2007 Bonds as required by Section 149(e) of the Code and referred to
in Section 2.2 hereof, shall be accompanied by evidence satisfactory that the average
reasonably expected economic life of the facilities being financed by the Series 2007 Bonds
is not less than 5/6ths of the average maturity of the Series 2007 Bonds or, if such
evidence is not presented with the disbursement or, by an opinion of Bond Counsel to the
effect that such disbursement will not cause the interest on the Series 2007 Bonds to be
included in the gross income of the Holders for federal income tax purposes.
(d) In case any contract provides for the retention by the Company of a portion of the
contract price, there shall be paid from the Project Fund only the net amount remaining
after deduction of any such portion, and only when that retained amount is due and payable,
may it be paid from the Project Fund.
(e) Any moneys in the Project Fund remaining after the Completion Date and payment, or
provision for payment, in full of the Project Costs, at the direction of the Authorized
Company Representative, promptly shall be
(1) used to acquire, construct, install, equip and improve such additional real
or personal property in connection with the Series 2007 Project which shall
constitute part of the Series 2007 Project as is designated by the Authorized
Company Representative and the acquisition, construction, installation, equipment
and improvement of which will be permitted under the Act, provided that any such use
shall be accompanied by evidence satisfactory to the Holder that the average
reasonably expected economic life of such additional property, together with the
other property theretofore acquired with the proceeds of the Series 2007 Bonds, will
not be less than 5/6ths of the average maturity of the Series 2007 Bonds or, if such
evidence is not presented with the direction, an opinion of Bond Counsel to the
effect that the acquisition of such additional property will not cause the interest
on the Series 2007 Bonds to be included in the gross income of the Holders for
federal income tax purposes;
(2) used for the purchase of Series 2007 Bonds in the open market for the
purpose of cancellation at prices not exceeding the full market value thereof plus
accrued interest thereon to the date of payment therefor;
(3) paid into the Bond Fund to be applied to the redemption or payment of the
Series 2007 Bonds; or
12
(4) a combination of the foregoing as is provided in that direction.
In all such cases, any payments made pursuant to this subparagraph (e) shall be made only to
the extent that such use or application will not, in the opinion of Bond Counsel or under a ruling
of the Internal Revenue Service, cause the interest on the Series 2007 Bonds to be included in the
gross income of the Holders for federal income tax purposes.
ARTICLE IV
Section 4.1. Loan Repayment; Delivery of Notes. (a) Upon the terms and conditions of the
Loan Agreement, as amended by the First Amendment to Loan Agreement, the Issuer will make the Loan
to the Company. In consideration of and in repayment of the Loan, the Company shall make, as Loan
Payments, payments which correspond, as to amount, to the Bond Service Charges payable on the
Bonds. All such Loan Payments shall be paid to the Trustee in accordance with the terms of the
Project Note and the Series 2007 Project Note, shall be paid to the Trustee in immediately
available funds on the Business Day prior to each day on which Bond Service Charges are payable on
any Bonds and shall be held and disbursed in accordance with the provisions of the Indenture and
this Agreement for application to the payment of Bond Service Charges. The Loan and the Series
2007 Project Note shall be additionally secured by and in accordance with the terms of the Security
Agreement on a parity with the Project Note. The Project Note and Series 2007 Project Note shall
be payable solely from and secured solely by the Company’s right to receive Income Available for
Debt Service.
The Company shall be entitled to a credit against the Loan Payments next required to be made
to the extent that the balance of the Bond Fund is then in excess of amounts required (1) for the
payment of Bonds theretofore matured or theretofore called for redemption, (2) for the payment of
interest for which checks or drafts have been drawn and mailed by the Trustee and (3) for the
payment of interest for which moneys were deposited in the Bond Fund pursuant to Section 2.03(c) of
the Indenture.
In any event, however, if on the Business Day prior to the date on which the Bond Service
Charges are payable, the balance in the Bond Fund is insufficient to make required payments of Bond
Service Charges, the Company forthwith will pay to the Trustee for deposit into the Bond Fund, any
deficiency.
(b) If the Trustee withdraws moneys from the Bond Reserve Fund as provided in the
Indenture due to a deficiency in the Bond Fund, or if upon a valuation of the amount on
deposit in the Bond Reserve Fund which is required by Section 5.04(b) of the Indenture the
Bond Reserve Value (as defined in the Indenture) is less than 90% of the Bond Reserve
Requirement, and in either such case upon notification by the Trustee to the Company of the
deficiency, the Loan Payments shall thereafter include such amounts, in equal monthly
installments due on the first day of each succeeding six months, as are necessary to cause
the Bond Reserve Value to be not less than the Bond Reserve Requirement within a period of 6
months from the date of such notice.
13
(c) In connection with the issuance of any Additional Bonds, the Company shall execute
and deliver to the Trustee one or more Additional Notes in a form substantially similar to
the form of the Project Note and the Series 2007 Project Note as set forth in Section 4.1
(a) above. All such Additional Notes shall:
(1) provide for payments of interest equal to the payments of interest on the
corresponding Additional Bonds;
(2) require payments of principal and redemption payments and any premium equal
to the payments of principal, prepayments and sinking fund payments and any premium
on the corresponding Additional Bonds;
(3) require all payments on any such Additional Notes to be made no later than
the due dates for the corresponding payments to be made on the corresponding
Additional Bonds; and
(4) contain by reference or otherwise optional and mandatory redemption
provisions and provisions in respect of the optional and mandatory acceleration or
prepayment of principal and any premium corresponding with the redemption and
acceleration provisions of the corresponding Additional Bonds.
All Notes shall secure equally and ratably all outstanding Bonds, except that, so long as no
Event of Default has occurred and is subsisting hereunder, payments by the Company on any of the
Notes shall be used by the Trustee to make a like payment of Bond Service Charges on the
corresponding Bonds in connection with which those Notes were delivered and shall constitute Loan
Payments made in respect of the related Bonds.
(d) Upon payment in full, in accordance with the Indenture, of the Bond Service Charges
on any or all Bonds, whether at maturity or by redemption or otherwise, or upon provision
for the payment thereof having been made in accordance with the provisions of the Indenture,
(i) the Notes issued concurrently with those corresponding Bonds, of the same maturity,
bearing the same interest rate and in an amount equal to the aggregate principal amount of
the Bonds so surrendered and canceled or for the payment of which provision has been made,
shall be deemed fully paid, the obligations of the Company thereunder shall be terminated,
and any of those Notes shall be surrendered by the Trustee to the Company, and shall be
canceled by the Company, or (ii) in the event there is only one of those Notes, an
appropriate notation shall be endorsed thereon evidencing the date and amount of the
principal payment or prepayment equal to the Bonds so paid, or with respect to which
provision for payment has been made, and that Note shall be surrendered by the Trustee to
the Company for cancellation if all Bonds shall have been paid (or provision made therefor)
and canceled as aforesaid. Unless the Company is entitled to a credit under express terms
of this Agreement or the Notes, all payments on each of the Notes shall be in the full
amount required thereunder.
(e) Except for such interest of the Company as may hereafter arise pursuant to Section
8.5 of the Loan Agreement or for such interest of the Issuer as may hereafter arise pursuant
to Section 5.07 of the Indenture, the Company and the Issuer each
14
acknowledge that neither the Company nor the Issuer has any interest in the Bond Fund
and Bond Reserve Fund and any moneys deposited therein shall be in the custody of and held
by the Trustee in trust for the benefit of the Holders pursuant to the terms of the
Indenture.
ARTICLE V
Section 5.1. Effect of this First Amendment to Loan Agreement. Except as expressly
supplemented and amended by this First Amendment to Loan Agreement, all of the terms and conditions
of the Loan Agreement shall remain in full force and effect. If a conflict exists between the
provisions of this First Amendment to Loan Agreement and the Loan Agreement, this First Amendment
to Loan Agreement shall control.
Section 5.2. Notice of A.R.S. Section 38-511 — Cancellation. Notice is hereby given of the
provisions of Arizona Revised Statutes Section 38-511, as amended. By this reference, the
provisions of said statute are incorporated herein to the extent of their applicability to
contracts of the nature of this First Amendment to Loan Agreement under the law of the State.
Section 5.3. Counterparts. This First Amendment to Loan Agreement may be executed in one or
more counterparts, each of which shall be deemed an original instrument.
Section 5.4. Consent. The Company hereby consents to the execution of the First Amendment to
Loan Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
| THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PIMA, as Issuer |
||||
| By: | ||||
| Name: | Xxxxxxx Xxxxxx | |||
| Title: | Vice President | |||
| GLOBAL WATER RESOURCES, LLC, as Company |
||||
| By: | ||||
| Name: | Xxxxxx X. Xxxx | |||
| Title: | President/CEO | |||
| U.S. BANK NATIONAL ASSOCIATION,
as Trustee |
||||
| By: | ||||
| Name: | Xxxxxxx X. Xxxxxxx | |||
| Title: | Assistant Vice President | |||
[SIGNATURE PAGE TO FIRST AMENDMENT
TO LOAN AGREEMENT]
TO LOAN AGREEMENT]
EXHIBIT A
FORM OF
SERIES 2007 PROJECT NOTE
SERIES 2007 PROJECT NOTE
GLOBAL WATER RESOURCES, LLC (the “Company”), a limited liability company duly organized and
validly existing under the laws of the State of Delaware and qualified to transact business in the
State of Arizona, for value received, promises to pay to U.S. Bank National Association, as Trustee
(the “Trustee”) under the Indenture hereinafter referred to, the principal sum of:
FIFTY-FOUR MILLION ONE-HUNDRED THIRTY-FIVE THOUSAND DOLLARS
($54,135,000)
($54,135,000)
and to pay interest on the unpaid balance of such principal sum from and after November 28, 2007
(the date of original issuance and delivery of the Bonds (defined below)) at the interest rates
specified below until the payment of such principal sum has been made or provided for. Interest
shall be calculated on the basis of a 360-day year.
Additional Payments shall also be payable in the amounts and at the times provided in the
First Amendment to Loan Agreement, dated as of November 1, 2007, each between The Industrial
Development Authority of the County of Pima (the “Issuer”) and the Company (the “Agreement”).
This Note has been executed and delivered by the Company to the Trustee pursuant to the Loan
Agreement, dated as of December 1, 2006 and the Agreement between the Issuer and the Company.
Under the Agreement, the Issuer has loaned the Company the principal proceeds received from the
sale of the Issuer’s $54,135,000 aggregate principal amount of Water and Wastewater Revenue Bonds
(Global Water Resources, LLC Project), Series 2007, dated November 28, 2007 (the “Bonds”) to
assist in the financing of the Project (as defined in the Agreement), and the Company has agreed to
repay such loan by making payments (the “Loan Payments”) at the times and in the amounts set forth
on Schedule I attached hereto for application to the payment of the principal of and redemption
premium, if any, and interest on the Bonds as and when due and to maintain the Bond Reserve Fund as
required by Section 4.1 of the Agreement and Section 5.04 (b) of the Indenture (identified below),
subject to the credits permitted under Section 4.1 of the Agreement. The Bonds have been issued,
concurrently with the execution and delivery of this Note, pursuant to, and are secured by, the
Trust Indenture, dated as of December 1, 2006, as supplemented by the First Supplemental Trust
Indenture, dated as of November 1, 2007, between the Issuer and the Trustee (the “Indenture”).
All capitalized terms not otherwise defined in this Note shall have the meanings set forth in
the Indenture. The Bonds also bear interest from their date at the interest rates specified
below, payable June 1 and December 1 commencing June 1, 2008 and mature on December 1 in the years
and the principal amounts as set forth on Schedule II attached hereto.
To provide funds to pay the principal, redemption premium, if any, and interest on the Bonds
as and when due as above-specified, the Company hereby agrees to and shall make Loan Payments, in
immediately available funds, on or before each Business Day (as defined in the Loan Agreement)
prior to any date upon which any principal of, premium, if any, and interest on the Bonds is due,
in all events in amounts sufficient to pay principal of, premium, if any, and interest on the Bonds
when due and payable by their terms, whether at stated maturity, by acceleration, by redemption or
otherwise.
If payment or provision for payment in accordance with the Indenture is made in respect of the
principal of, and redemption premium, if any, and interest on the Bonds from moneys other than Loan
Payments, this Note shall be deemed paid to the extent such payments or provision for payment of
Bonds has been made. Subject to the foregoing, all Loan Payments shall be in the full amount
required hereunder.
All Loan Payments shall be payable in lawful money of the United States of America and shall
be made to the Trustee at its principal corporate trust office and deposited in the Bond Fund
created by the Indenture. Except as otherwise provided in the Indenture, such Loan Payments shall
be used by the Trustee to pay the principal of, redemption premium, if any, and interest on the
Bonds as and when due.
Except as allowed in the Agreement, the obligation of the Company to make the payments
required hereunder shall be absolute and unconditional and the Company shall make such payments
without abatement, diminution or deduction regardless of any cause or circumstances whatsoever
including, without limitation, any defense, set-off, recoupment or counterclaim which the Company
may have or assert against the Issuer, the Trustee or any other person.
This Note is subject to redemption prior to stated maturity, pursuant to the obligation of the
Company to give the Issuer and the Trustee sufficient notice of such redemption as shall enable the
Issuer and the Trustee to take all action necessary under the Indenture to redeem, on the date
specified for prepayment, a like principal amount of Bonds at the same redemption price.
Redemption of this Note prior to stated maturity can occur on the same conditions and at the same
time as the Bonds are subject to redemption, as set forth in the Bonds and the Indenture.
Whenever an event of default under Section 7.01 of the Indenture shall have occurred and, as a
result thereof, the principal of and any premium on all Bonds then outstanding, and interest
accrued thereon, shall have been declared to be immediately due and payable pursuant to Section
7.02 of the Indenture, the unpaid principal amount of and any premium and accrued interest on this
Note shall also be due and payable on the date on which the principal of and premium and interest
on the Bonds shall have been declared due and payable; provided that the annulment of a declaration
of acceleration with respect to the Bonds shall also constitute an annulment of any corresponding
declaration with respect to this Note. The remedies hereunder following any default of this Note
shall be limited as set forth in Section 4.1(a) of the Agreement (i.e., recourse against the
Company shall be limited to the Company’s rights to receive the Income Available for Debt Service
(as defined in the Agreement). The payment of amounts due under this Note and under the Agreement
are secured by an Amended and Restated Security Agreement, dated as of November 1, 2007 from the
Company to the Trustee.
| GLOBAL WATER RESOURCES, LLC |
||||
| By: | ||||
| Name: | Xxxxxx X. Xxxx | |||
| Title: | President/CEO | |||
SCHEDULE I
TO
PROJECT NOTE
Relating to
TO
PROJECT NOTE
Relating to
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
WATER AND WASTEWATER REVENUE BONDS
(GLOBAL WATER RESOURCES, LLC PROJECT)
SERIES 2007
OF THE COUNTY OF PIMA
WATER AND WASTEWATER REVENUE BONDS
(GLOBAL WATER RESOURCES, LLC PROJECT)
SERIES 2007
Loan Payment Schedule
| Loan | |||||||||||
| Payment | Principal | Interest | Payment | ||||||||
| Dates | Component | Component | Total | ||||||||
SCHEDULE II
TO
PROJECT NOTE
Relating to
TO
PROJECT NOTE
Relating to
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
WATER AND WASTEWATER REVENUE BONDS
(GLOBAL WATER RESOURCES, LLC PROJECT)
SERIES 2006
OF THE COUNTY OF PIMA
WATER AND WASTEWATER REVENUE BONDS
(GLOBAL WATER RESOURCES, LLC PROJECT)
SERIES 2006
| Dated: | November 28, 2007 | |
| Delivery: | November 28, 2007 |
| Maturity | CUSIP | |||||||||||
| (December 1) | Principal Amount | Interest Rate | (72177T) | |||||||||
2013 |
$ | 1,635,000 | ||||||||||
2037 |
52,500,000 | |||||||||||
EXHIBIT B
PALO VERDE WATER FACILITY
PROJECT DESCRIPTION
PROJECT DESCRIPTION
EXHIBIT C
SANTA XXXX WATER FACILITY
PROJECT DESCRIPTION
PROJECT DESCRIPTION
EXHIBIT D
COST OF ISSUANCE
EXHIBIT E
FORM OF DISBURSEMENT SCHEDULE
STATEMENT NO. REQUESTING DISBURSEMENT OF FUNDS FROM
PROJECT FUND PURSUANT TO SECTION 3.4 OF THE FIRST
AMENDMENT TO LOAN AGREEMENT
DATED AS OF NOVEMBER 1, 2007, BETWEEN
THE INDUSTRIAL DEVELOPMENT AUTHORITY OF
THE COUNTY OF PIMA
AND GLOBAL WATER RESOURCES, LLC
PROJECT FUND PURSUANT TO SECTION 3.4 OF THE FIRST
AMENDMENT TO LOAN AGREEMENT
DATED AS OF NOVEMBER 1, 2007, BETWEEN
THE INDUSTRIAL DEVELOPMENT AUTHORITY OF
THE COUNTY OF PIMA
AND GLOBAL WATER RESOURCES, LLC
Pursuant to Section 3.2 of the Loan Agreement (the “Agreement”) between The Industrial
Development Authority of the County of Pima (the “Issuer”) and Global Water Resources, LLC (the
“Company”), dated as of November 1, 2007, the undersigned Authorized Company Representative hereby
requests and authorizes U.S. Bank National Association, a national banking association validly
existing and duly organized under the laws of the United States, as trustee (the “Trustee”), as
depository of the Project Fund created by the Indenture and defined in the Agreement, to pay to the
Company or to the person(s) listed on the Disbursement Schedule attached hereto out of the moneys
deposited in the Project Fund the aggregate sum of $ to pay such person(s) or to
reimburse the Company in full, as indicated in the Disbursement Schedule, for the advances,
payments and expenditures made by it in connection with the items listed in the Disbursement
Schedule.
In connection with the foregoing request and authorization, the undersigned hereby certifies
that:
(a) Each item for which disbursement is requested hereunder is properly payable out of
the Project Fund in accordance with the terms and conditions of the Agreement and none of
those items has formed the basis for any disbursement heretofore made from said Project
Fund.
(b) Each such item is or was necessary in connection with the construction,
installation, equipment or improvement of the Project, as defined in the Agreement.
(c) The Company has received, or will concurrently with payment receive, appropriate
waivers of any mechanics’ or other liens with respect to each item for which disbursement is
requested hereunder.
(d) Check applicable provision(s): (i) Each item for which disbursement is
requested hereunder, and the cost for each such item, is as described in the information
statement filed by the Issuer in connection with the issuance of the Bonds (as defined in
the Agreement), as required by Section 149(e) of the Code. (ii) one or more of such
items is not as described in that information statement but, attached hereto is a
computation evidencing that the average reasonably expected economic life of the facilities
which have been and will be paid for with moneys in the Project Fund is not less than 5/6ths
of the average maturity of the Bonds or attached hereto is an Opinion of Bond
Counsel to the effect that the requested disbursement will not cause interest on the
Bonds to be included in federal gross income for tax purposes.
(e) This statement and all exhibits hereto, including the Disbursement Schedule, shall
be conclusive evidence of the facts and statements set forth herein and shall constitute
full warrant, protection and authority to the Trustee for its actions taken pursuant hereto.
(f) This statement constitutes the approval of the Company of each disbursement hereby
requested and authorized.
This day of , 2007.
Authorized Company Representative
E-2
DISBURSEMENT SCHEDULE
TO STATEMENT No. REQUESTING AND AUTHORIZING DISBURSEMENT OF FUNDS FROM PROJECT
FUND PURSUANT TO SECTION 3.2 OF THE FIRST AMENDMENT TO LOAN AGREEMENT DATED AS OF NOVEMBER 1, 2007,
BETWEEN THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PIMA AND GLOBAL WATER RESOURCES, LLC.
| PAYEE | AMOUNT | PURPOSE |
E-3
