FIRST MODIFICATION AGREEMENT
Exhibit 10.5.2
FIRST MODIFICATION AGREEMENT
DATE:
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July 1, 2006 | |||
PARTIES: |
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| Borrower: | GLOBAL WATER RESOURCES, LLC. a Delaware limited liability company, GLOBAL WATER MANAGEMENT, LLC. a Delaware limited liability company, and GLOBAL WATER, INC. (f/k/a GLOBAL WATER RESOURCES, INC.), a Delaware corporation | |||
| Borrower | 00000 X. 00xx Xxxxxx, Xxxxx 000 | |||
| Address: | Xxxxxxx, XX 00000 Attn: Xxxxxx Xxxx |
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| Bank: | XXXXX FARGO BANK, NATIONAL ASSOCIATION, a national banking association |
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| Bank | 000 X. Xxxxxxxxxx Xxxxxx | |||
| Address: | MAC S4101-251 Xxxxxxx, XX 00000 Attn: Xxxx Xxxxxxx, Vice President |
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RECITALS: |
A. Bank has extended to Borrower a revolving line of credit (the “Line of
Credit”) in the maximum principal amount of Thirty-Five Million and No/100
Dollars ($35,000,000.00). pursuant to that certain Amended and Restated Credit Agreement, dated
December 9, 2005 (the “Credit Agreement”), and evidenced by that certain
$35,000,000 Amended and Restated Revolving Line of Credit Note dated December 9, 2005 (the
“Note”). The unpaid principal outstanding under the Note as of the date hereof is $30,331,405.20.
Capitalized terms not otherwise defined herein shall have the same
meaning as set forth
in the Credit Agreement.
B. The Line of Credit is secured by, among other things, the collateral as
more particularly referenced in Section 1.3 of the Credit Agreement.
C. Borrower has requested that Lender modify the Line of Credit and the
Loan Documents as provided herein to, inter alia, increase the maximum amount of the
Line of Credit to Fifty-Six Million and No/100 Dollars ($56,000,000.00) in order to fund
Borrower’s
increased working capital and other financing needs. Bank is willing to so modify the Line of
Credit and the Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
For good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows:
2.1.1 The maximum amount of the Line of Credit is hereby increased from
THIRTY-FIVE MILLION AND NO/100 Dollars ($35,000,000.00) to FIFTY-SIX
MILLION AND NO/100 Dollars ($56,000,000.00). Borrower may obtain, and Bank
shall be obligated to make. Advances, subject to the terms and conditions of the
Loan Documents applicable to Advances up to the increased amount. Any and all references
to the maximum amount of the Line of Credit Amount in the Loan Documents are
hereby revised to reflect the amount of FIFTY-SIX MILLION AND NO/100 Dollars
($56,000,000.00).
2.1.2 Section 1.1 of the Credit Agreement is hereby deleted in its entirely and
the following is inserted in plate thereof:
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and
conditions of this Agreement Bank hereby agrees to make advances
to Borrower from time to time up to and including December 9, 2007
(the “Maturity Date”), not to exceed at any time the aggregate
principal amount of Fifty-Six Million Dollars ($56,000,000.00)
(“Line of Credit”), the proceeds of which shall be used to
refinance existing debt (including, but not limited to the Term
Loan), working capital purposes and for the acquisition of utility
companies including ownership interests therein. Borrower’s
obligation to repay advances under the Line of Credit shall be
evidenced by that certain Second Amended and Restated Revolving
Line of Credit Note, dated as of July 1, 2006 (“Line of Credit
Note”), all terms of which are incorporated herein by this
reference, which Line of Credit Note shall amend and restate that
certain Amended and Restated Revolving Line of Credit Note dated
December 9, 2005.
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(b) Limitation on Borrowings. The sum of (i) outstanding borrowings under the Line of
Credit, (ii) amounts due under the Revenue Bonds and (iii) the face amount of letters of credit
issued under this Agreement (collectively, “Aggregate Borrowings”) shall not at any time exceed an
aggregate of six (6) times Annualized Recurring EBITDA (as defined in Section 4.9(b)) (the
“Maximum Amount”) as determined in accordance with the Borrowing Base Certificate attached hereto
as Exhibit A. the terms of which are herein incorporated by this reference. If at any time the
Aggregate Borrowings exceed the Maximum Amount (the “Excess Borrowings”). Borrower shall pay to
Bank the amount of any Excess Borrowings within 10 days of Borrower’s receipt of notice thereof.
As used in this Agreement. “Revenue Bonds” shall be defined as the Industrial Development
Authority of the County of Pima Revenue Bonds (Global Water
Resources). Series 2006, to be issued
subsequent to Borrower and Bank entering into this Agreement and shall be approved and authorized
by Bank as “Other Indebtedness” pursuant to Section 5.2 of the Loan Agreement.
(c) Letter of Credit Subfeature. As a subfeature under the Line of Credit. Bank agrees
from time to time during the term thereof to issue or cause an affiliate to issue standby letters
of credit for the account of Borrower (each, a “Letter of Credit” and collectively. “Letters of
Credit”); provided however, that the aggregate undrawn amount of all outstanding Letters of Credit
shall not at any time exceed Fifteen Million Dollars ($15,000,000.00). The form and substance of
each Letter of Credit shall be subject to approval by Bank, in its sole discretion. Letters of
Credit may be issued for a period which extends beyond the Maturity Date but no Letter of Credit
shall be issued for a period exceeding one (1) year. The undrawn amount of all Letters of
Credit shall be reserved under the Line of Credit and shall not be available for borrowings
thereunder. Each Letter of Credit shall be subject to the additional terms and conditions of the
Letter of Credit agreements, applications and any related documents required by Bank in connection
with the issuance thereof. Each drawing paid under a Letter of Credit shall be deemed an advance
under the Line of Credit and shall be repaid by Borrower in accordance with the terms and
conditions of this Agreement applicable to such advances: provided however, that if advances under
the Line of Credit are not available, for any reason, at the time any drawing is paid then Borrower
shall immediately pay to Bank the full amount drawn, together with interest thereon from the date
such drawing is paid to the date such amount is fully repaid by
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Borrower at the rate of interest applicable to advances under the
Line of Credit. In such event Borrower agrees that Bank, in its
sole discretion, may debit any account maintained by Borrower
with Bank for the amount of any such drawing.
(d) Borrowing and Repayment. Borrower may from time
to time during the term of the Line of Credit borrow, partially or
wholly repay its outstanding borrowings, and reborrow, subject to
all of the limitations, terms and conditions contained herein or
in the Line of Credit Note; provided however, that the total
outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as
set forth above.
2.1.3 Section 4.9 of the Credit Agreement is hereby deleted in its entirely and
the following is inserted in place thereof:
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower’s financial condition, on a consolidated basis (such
consolidation, for purposes of these covenants, to include
Borrower and its subsidiaries and its subsidiaries, if any), as
follows using generally accepted accounting principles
consistently applied and used consistently with prior practices
(except to the extent modified by the definitions herein), with
compliance determined quarterly:
(a) Net Worth. Net Worth not at any time less than
$10,000,000.00. with “Net Worth” defined as total equity.
(b) Annualized Recurring EBITDA Coverage.
Annualized Recurring EBITDA Coverage Ratio as of each fiscal
quarter end not less than 1.50 to 1.0. with “Annualized Recurring
EBITDA” defined as net profit before tax plus interest expense
(net of capitalized interest expense). depreciation expense and
amortization expense: provided, however, Bank shall exclude from
the foregoing calculation the amount of any “impact fees” and any
expenses related thereto and any cash flows pledged to any entity
other than Bank (except for cash flows pledged in connection with
the Revenue Bonds) for the fiscal quarter then ended multiplied by
four (4). “Annualized Recurring EBITDA Coverage Ratio” defined as
Annualized Recurring EBITDA divided by the aggregate of annualized
interest expense based on the most recent fiscal quarter plus
current maturities of long-term debt. If Borrower acquires a
utility company during the term of any credit hereunder.
Borrower’s Annualized Recurring EBITDA shall be
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adjusted to include the Annualized Recurring EBITDA of the
acquired entity which shall be subject to adjustment and
qualification by Bank.
(c) Total Senior Funded Debt to Annualized Recurring EBITDA.
Total Senior Funded Debt to Annualized Recurring EBITDA not
greater than 6.00 to 1.0. As used herein “Total Senior Funded
Debt” defined as the sum of all obligations for borrowed money
(including the outstanding principal balance of the Line of Credit
and the Revenue Bonds), plus the aggregate face amount of letters
of credit issued under this Agreement, plus all capital lease
obligations of Borrower; less subordinated debt, and with
Annualized Recurring EBITDA defined in Section 4.9(b).
2.2 Each of the Loan Documents is modified to provide that it shall be a default or an event
of default thereunder if Borrower shall fail to comply with any of the covenants of Borrower herein
or if any representation or warranty by Borrower herein or by any guarantor in any related Consent
and Agreement of Guarantor(s) is materially incomplete, incorrect, or misleading as of the date
hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents shall be a reference to
such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL
The Loan Documents are ratified and affirmed by Borrower and shall remain in full force and
effect as modified herein. Any property or rights to or interests in property granted as security
in the Loan Documents shall remain as security for the Line of Credit and the obligations of
Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Lender:
4.1 No default or event of default under any of the Loan Documents as modified herein, nor
any event, that, with the giving of notice or the passage of time or both, would he a default or
an event of default under the Loan Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial condition of Borrower or any
other person whose financial statement has been delivered to Lender in connection with the Line of
Credit from the most recent financial statement received by Lender.
4.3 Each and all representations and warranties of Borrower in the Loan Documents are
accurate on the date hereof.
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4.4 Borrower has no claims, counterclaims, defenses, or set-offs with respect to the Line of
Credit or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and binding obligation of
Borrower, enforceable against Borrower in accordance with their terms.
4.6 Borrower is validly existing under the laws of the State of its formation or organization
and has the requisite power and authority to execute and deliver this Agreement and to perform the
Loan Documents as modified herein. The execution and delivery of this Agreement and the performance
of the Loan Documents as modified herein have been duly authorized by all requisite action by or on
behalf of Borrower. This Agreement has been duly executed and delivered on behalf of Borrower. The
certifications, representations and warranties made to Bank in those certain Corporate Resolutions
and Limited Liability Certificates of Borrower, dated December 9, 2005 remain true and correct as
of the date of this Agreement.
5. BORROWER COVENANTS.
Borrower covenants with Lender:
5.1 Borrower shall execute, deliver, and provide to Lender such additional agreements,
documents, and instruments as reasonably required by Lender to effectuate the intent of this
Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Lender and its successors,
assigns, directors, officers, employees, agents, and representatives from any and all actions,
causes of action, claims, debts, demands, liabilities, obligations, and suits, of whatever kind or
nature, in law or equity of Borrower, whether now known or unknown to Borrower, (i) in respect of
the Line of Credit, the Loan Documents, or the actions or omissions of Lender in respect of the
Line of Credit or the Loan Documents and (ii) arising from events occurring prior to the date of
this Agreement.
5.3 Pursuant to Section 4.2 of the Loan Agreement. Borrower’s execution of this Agreement
shall serve as notice to Bank of the name change of GLOBAL WATER RESOURCES, INC. to GLOBAL WATER,
INC. Borrower hereby authorized Bank to file any UCC financing statement amendments in connection
with such name change and Borrower further agrees to execute any agreements, documents or
instruments reasonably requested by Bank in connection with such name change.
5.4 Contemporaneously with the execution and delivery of this Agreement. Borrower has paid to
Lender:
5.4.1 All the external costs and expenses incurred by Lender in connection
with this Agreement (including, without limitation, outside attorneys’ fees).
5.5 Contemporaneously with the execution and delivery of this Agreement. Borrower
shall have delivered an executed Second Amended and Restated Revolving Line of Credit Note
in the maximum principal amount of FIFTY-SIX MILLION AND NO/100 Dollars
(S56,000,000.00) (the “Second Amended Note”).
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6. EXECUTION AND DELIVERY OF AGREEMENT BY LENDER.
Lender shall not be bound by this Agreement until (i) Lender has executed and delivered this
Agreement, (ii) Borrower has performed all of the obligations of Borrower under this Agreement to
be performed contemporaneously with the execution and delivery of
this Agreement, if any, and
(iii) each guarantor of the Line of Credit and each pledgor of collateral has executed and
delivered to Lender a Consent and Agreement of Guarantor(s) and Xxxxxxx(s).
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
The Loan Documents as modified herein contain the complete understanding and agreement of
Borrower and Lender in respect of the Line of Credit and supersede all prior representations,
warranties, agreements, arrangements, understandings, and negotiations. No provision of the Loan
Documents as modified herein may be changed, discharged. supplemented, terminated, or waived
except in a writing signed by the parties thereto.
8. BINDING EFFECT.
The Loan Documents, as modified herein, shall be binding upon and shall inure to the benefit
of Borrower and Lender and their successors and assigns and the executors, legal administrators,
personal representatives, heirs, devisees, and beneficiaries of Borrower: provided. however.
Borrower may not assign any of its rights or delegate any of its obligations under the Loan
Documents and any purported assignment or delegation shall be void.
9.
CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of
Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same document. Signature pages may
be detached from the counterparts and attached to a single copy of this Agreement to physically
form one document.
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DATED as
of the date first above stated.
| GLOBAL WATER RESOURCES, LLC. a Delaware limited liability company |
XXXXX FARGO BANK. NATIONAL ASSOCIATION |
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By:
|
/s/ Xxxxxxx X. Xxxxxx | By: | /s/ Xxxx Xxxxxxx | |||||||
| Xxxxxxx X. Xxxxxx, Manager | Xxxx Xxxxxxx, Vice President | |||||||||
| GLOBAL WATER MANAGEMENT, LLC. a Delaware limited liability company |
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By: |
/s/ Xxxxxxx X. Xxxxxx | |||||||||
| Xxxxxxx X. Xxxxxx, Manager | ||||||||||
| GLOBAL WATER, INC. a Delaware corporation |
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By: |
Xxxxxx Xxxx | |||||||||
| Xxxxxx Xxxx, President | ||||||||||
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CONSENT AND AGREEMENT OF GUARANTORS AND PLEDGORS
With
respect to the First Modification Agreement, dated July 1, 2006 (“Agreement”),
among GLOBAL WATER RESOURCES, LLC, a Delaware limited liability
company. GLOBAL WATER MANAGEMENT,
LLC, a Delaware limited liability company, and GLOBAL WATER. INC., (f/k/a GLOBAL WATER RESOURCES,
INC.), a Delaware corporation (collectively.
“Borrower”), and XXXXX FARGO BANK. NATIONAL
ASSOCIATION, a national banking association (“Bank”). XXXXXXX X. XXXXXX and XXXXXX INVESTMENTS
LIMITED PARTNERSHIP, an Arizona limited partnership (collectively. “Guarantors”) and
XXXXXX XXXX, XXX XXXXXXXXXX, XXXXXX XXXXXXXXXX, XXXXXX XXXX, XXXXXX XXXXXXXX and XXXXX XXXXX
(collectively. “Pledgors”) agree for the benefit
of Bank as follows:
1. Guarantors acknowledge (i) receiving a copy of and reading the Agreement, (ii) the
accuracy of the Recitals in the Agreement, and (iii) the effectiveness of (A) those certain
Continuing Guaranties dated December 9, 2005 (collectively the “Guaranty”), by the
undersigned Guarantors for the benefit of Bank, as modified herein, and (B) any other agreements,
documents, or instruments securing or otherwise relating to the Guaranty, as modified herein. The
Guaranty and such other agreements, documents, and instruments, as modified herein, are referred
to individually and collectively as the “Guarantor Documents”. All capitalized terms used
herein and not otherwise defined shall have the meaning given to such terms in the Agreement.
2. Pledgors acknowledge (i) receiving a copy of and reading the Agreement. (ii) the accuracy
of the Recitals in the Agreement, and (iii) the effectiveness of (A) those certain Collateral
Assignments of Member Interest dated December 9, 2005
(collectively the “Assignment”), by
the undersigned Pledgors for the benefit of Bank, as modified herein, and (B) any other
agreements, documents, or instruments relating to the Assignment, as modified herein. The
Assignment and such other agreements, documents, and instruments, as modified herein, are referred
to individually and collectively as the “Pledgor Documents”. All capitalized terms used
herein and not otherwise defined shall have the meaning given to such terms in the Agreement.
3. Guarantors and Pledgors consent to the modification of the Loan Documents and all other
matters in the Agreement. Accordingly, the Guarantor Documents and the Pledgor Documents are
modified to increase the principal amount of indebtedness of Borrower to Lender from
$35,000,000.00 to $56,000,000.00.
4. Guarantors and Pledgors fully, finally, and forever release and discharge Bank and its
successors, assigns, directors, officers, employees, agents, and representatives from any and all
actions, causes of action, claims, debts, demands, liabilities, obligations, and suits of whatever
kind or nature, in law or equity, that Guarantor has or in the future may have, whether known or
unknown, (i) in respect of the Line of Credit, the Loan Documents, the Guarantor Documents, the
Pledgor Documents or the actions or omissions of Bank in respect of the Line of Credit, the Loan
Documents, the Guarantor Documents or the Pledgor Documents and (ii) arising from events occurring
prior to the date hereof.
5. Guarantors
and Pledgors agree that all references, if any, to the Note, the Credit
Agreement, and the other Loan Documents in the Guarantor Documents and the Pledgor Documents shall
be deemed to refer to such agreements, documents, and instruments as modified by the Agreement.
6. Guarantors reaffirm the Guarantor Documents and agree that the Guarantor Documents
continue in full force and effect and remain unchanged, except as specifically modified by this
Consent and Agreement of Guarantors and Pledgors. Any property or rights to or interests in
property granted as security in the Guarantor Documents shall remain as security for the Line of
Credit, the Guaranty and the obligations of Guarantors in the Guaranty.
7. Pledgors reaffirms the Pledgor Documents and agrees that the Pledgor Documents continue in
full force and effect and remain unchanged, except as specifically modified by this Consent and
Agreement of Guarantors and Pledgors. Any property or rights to or interests in property granted
as security in the Pledgor Documents shall remain as security for the Line of Credit.
8. Guarantors represent and warrant that the Loan Documents, as modified by the Agreement,
and the Guarantor Documents, as modified by this Consent and Agreement of Guarantors and Pledgors,
are the legal, valid, and binding obligations of Borrower and the Guarantors, respectively,
enforceable in accordance with their terms against Borrower and Guarantors, respectively.
9. Pledgors represent and warrant that the Loan Documents, as modified by the Agreement, and
the Pledgor Documents, as modified by this Consent and Agreement of Guarantors and Pledgors, are
the legal, valid, and binding obligations of Borrower and the Pledgors, respectively, enforceable
in accordance with their terms against Borrower and Pledgors, respectively.
10. Guarantors represent and warrant that Guarantors have no claims, counterclaims, defenses,
or off sets with respect to the enforcement against Guarantors of the Guarantor Documents.
11. Pledgors represent and warrant that Pledgors have no claims, counterclaims, defenses, or
off sets with respect to the enforcement against Pledgors of the Pledgor Documents.
12. Guarantors and Pledgors represent and warrant that there has been no material adverse
change in the financial condition of any Guarantor or Pledgor from the most recent financial
statement received by Bank.
13. Guarantors and Pledgors agree that this Consent and Agreement of Guarantors and Pledgors
may be executed in one or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same document. Signature and acknowledgment pages may
be detached from the counterparts and attached to a single copy of this Consent and Agreement of
Guarantors and Pledgors to physically form one document.
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| GUARANTORS: |
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| /s/ XXXXXXX X. XXXXXX | ||||
| XXXXXXX X. XXXXXX |
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| XXXXXX INVESTMENTS LIMITED PARTNERSHIP, an Arizona limited partnership |
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| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | General Partner | |||
| PLEDGORS: |
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| /s/ Xxxxxx Xxxx | ||||
| Xxxxxx Xxxx | ||||
| /s/ Xxx Xxxxxxxxxx | ||||
| Xxx Xxxxxxxxxx | ||||
| /s/ Xxxxxx Craechiolo | ||||
| Xxxxxx Craechiolo | ||||
| /s/ Xxxxxx Xxxx | ||||
| Xxxxxx Xxxx | ||||
| /s/ Xxxxxx Xxxxxxxx | ||||
| Xxxxxx Xxxxxxxx | ||||
| /s/ Xxxxx Xxxxx | ||||
| Xxxxx Xxxxx | ||||
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