THIRD MODIFICATION AGREEMENT
Exhibit 10.5.4
THIRD MODIFICATION AGREEMENT
DATE:
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April 20, 2007 | |||
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 Address: |
00000 X. 00xx Xxxxxx, Xxxxx 000 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 Address: |
000 X. Xxxxxxxxxx Xxxxxx 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 Fifty-Six Million and No/100 Dollars
($56,000,000.00), pursuant to that certain Amended and Restated Credit Agreement, dated
December 9, 2005, as modified by that certain First Modification Agreement, dated July 1,
2006
and that certain Second Modification Agreement, dated December 1, 2006 (as modified, the
“Credit Agreement”), and evidenced by that certain $56,000,000 Second Amended and
Restated
Revolving Line of Credit Note dated July 1, 2006 (the “Second Amended Note”). The
unpaid
principal outstanding under the Note as of the date hereof is $31,367,192.03. 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 Eighty Million and No/100 Dollars ($80,000,000.00) in order to fund Borrower’s
increased working capital and other financing needs, (ii) delete the borrowing base component of
the Line of Credit, (iii) extend the Maturity Date to March 31, 2008 and (iv) modify certain of the
covenants in the Credit Agreement. 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
FIFTY-SIX MILLION AND NO/100 Dollars ($56,000,000.00) to EIGHTY MILLION
AND NO/100 Dollars ($80,000,000.00). 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 EIGHTY MILLION AND NO/100 Dollars
($80,000,000.00).
2.1.2 Section 1.1 of the Credit Agreement is hereby deleted in its entirety and
the following is inserted in place 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 March 31, 2008
(the “Maturity Date”), not to exceed at any time the aggregate
principal amount of Eighty Million Dollars ($80,000,000.00)
(“Line of Credit”), the proceeds of which shall be used for
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 Third Amended and Restated Revolving
Line of Credit Note, dated as of April 20, 2007 (“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 Second Amended and Restated Revolving Line of Credit Note
dated July 1, 2006.
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(b) Maximum Principal Amount Reduction. Upon the 2007 Revenue Bond Closing, the
maximum principal amount of the Line of Credit shall be automatically decreased to Sixty Million
and No/100 Dollars ($60,000,000.00) without any further required action by Bank. Borrower shall
immediately pay to Bank any amount in excess of Sixty Million and No/100 Dollars ($60,000,000.00).
As used in this Section 1.1(b), “2007 Revenue Bond Closing” shall be defined as the
issuance of Industrial Development Authority of the County of Pima Revenue Bonds (Global Water
Resources), Series 2007, 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, provided, the maximum aggregate of all Revenue Bonds (as hereinafter
defined) does not excess One Hundred Twenty Million and No/100 Dollars ($120,000,000.00).
(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 Borrower, at
the rate of interest applicable to advances under the Line of Credit. In such event Borrower
agrees that Bank, in its
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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 entirety 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) Rolling Four Quarter EBITDA Coverage.
Rolling Four Quarter EBITDA Coverage Ratio as of each fiscal
quarter end not less than 1.50 to 1.0, with “Rolling Four Quarter
EBITDA” defined as net profit before tax plus interest expense
(net of capitalized interest expense), depreciation expense and
amortization expense for the most recent four (4) quarters;
provided, however, Bank shall exclude from the foregoing
calculation the amount of any “impact fees” and any expenses
related thereto, any cash flows pledged to any entity other than
Bank (except for cash flows pledged in connection with the Revenue
Bonds) and any non-recurring income (including, but not limited
to, interest income and gains (or losses) on the sale of any
utility company). “Rolling Four Quarter EBITDA Coverage Ratio”
defined as Rolling Four Quarter EBITDA divided by the aggregate of
interest expense based on the most recent four (4) quarters plus
current maturities of long-term debt. “Revenue Bonds” defined as
the “Bonds” as such term is defined in Section 5.7 of the
Credit Agreement and the revenue bonds issued pursuant to the 2007
Revenue Bond Closing. If Borrower either (i) acquires a utility
company during the term
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of any credit hereunder and/or (ii) divests itself of a utility
company during the term of any credit hereunder, Borrower’s
Rolling Four Quarter EBITDA shall be adjusted to either include
the Rolling Four Quarter EBITDA of the acquired entity or exclude
the Rolling Four Quarter EBITDA of the divested entity, as
applicable, which shall be subject to adjustment and qualification
by Bank.
2.1.4 Exhibit B attached to the Credit Agreement is hereby deleted in its
entirety and Exhibit B attached hereto is inserted in place thereof.
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 be 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.
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.
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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 Contemporaneously with the execution and delivery of this Agreement, Borrower has paid to
Lender:
5.3.1 All the external costs and expenses incurred by Lender in connection with this
Agreement (including, without limitation, outside attorneys’ fees).
5.4 Contemporaneously with the execution and delivery of this Agreement, Borrower
shall have delivered an executed Third Amended and Restated Revolving Line of Credit Note in
the maximum principal amount of EIGHTY MILLION AND NO/100 Dollars ($80,000,000.00)
(the “Third Amended Note”).
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 Pledgor(s).
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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.
| DATED as of the date first above stated. | ||||||||||
| GLOBAL WATER RESOURCES,
L.L.C. a Delaware limited liability company |
XXXXX FARGO BANK, NATIONAL ASSOCIATION |
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By:
|
/s/ Xxxxxxx X. Xxxxxx
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By: | /s/ Xxxx Xxxxxxx
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| GLOBAL WATER MANAGEMENT, LLC, a Delaware limited liability company |
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By:
|
/s/ Xxxxxxx X. Xxxxxx
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| GLOBAL WATER, INC., a Delaware corporation |
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By:
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/s/ Xxxxxx Xxxx
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