AMENDED AND RESTATED SECURITY AGREEMENT
EXHIBIT 10.7
AMENDED AND RESTATED SECURITY AGREEMENT
1. GRANT OF SECURITY INTEREST. For valuable consideration, the undersigned GLOBAL WATER
RESOURCES L.L.C., a Delaware limited liability company, GLOBAL WATER MANAGEMENT, LLC, a Delaware
limited liability company and GLOBAL WATER RESOURCES, INC., a Delaware corporation (each
individually and collectively, the “Debtor”), hereby grants and transfers to XXXXX FARGO BANK,
NATIONAL ASSOCIATION (“Bank”) a security interest in all of the property of Debtor described as
follows (collectively, the “Collateral”):
(a) all accounts, deposit accounts, contract rights, chattel paper (whether electronic or
tangible), instruments, promissory notes, documents, general intangibles, payment intangibles,
software, letter of credit rights, health-care insurance receivables and other rights to payment of
every kind now existing or at any time hereafter arising;
(b) all inventory, goods held for sale or lease or to be furnished under contracts for
service, or goods so leased or furnished, raw materials, component parts, work in process and other
materials used or consumed in Debtor’s business, now or at any time hereafter owned or acquired by
Debtor, wherever located, and all products thereof, whether in the possession of Debtor, any
warehousemen, any bailee or any other person, or in process- of delivery, and whether located at
Debtor’s places of business or elsewhere;
(c) all warehouse receipts, bills of sale, bills of lading and other documents of every kind
(whether or not negotiable) in which Debtor now has or at any time hereafter acquires any interest,
and all additions and accessions thereto, whether in the possession or custody of Debtor, any
bailee or any other person for any purpose;
(d) all money and property heretofore, now or hereafter delivered to or deposited with Bank or
otherwise coming into the possession, custody or control of Bank (or any agent or bailee of Bank)
in any manner or for any purpose whatsoever during the existence of this Agreement and whether held
in a general or special account or deposit for safekeeping or otherwise;
(e) all right, title and interest of Debtor under licenses, guaranties, warranties, management
agreements, marketing or sales agreements, escrow contracts, indemnity agreements, insurance
policies, service or maintenance agreements, supporting obligations and other similar contracts of
every kind in which Debtor now has or at any time hereafter shall have an interest;
(f) all goods, tools, machinery, furnishings, furniture and other equipment and fixtures of
every kind now existing or hereafter acquired, and all improvements, replacements, accessions and
additions thereto and embedded software included therein, whether located on any property owned or
leased by Debtor or elsewhere, including without limitation, any of the foregoing now or at any
time hereafter located at or installed on the land or in the improvements at any of the real
property owned or leased by Debtor, and all such goods after they have been severed and removed
from any of said real property; and
(g) all motor vehicles, trailers, mobile homes, manufactured homes, boats, other rolling stock
and related equipment of every kind now existing or hereafter acquired and all
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additions and accessories thereto, whether located on any property owned or leased by Debtor or
elsewhere;
together with whatever is receivable or received when any of the foregoing or the proceeds thereof
are sold, leased, collected, exchanged or otherwise disposed of, whether such disposition is
voluntary or involuntary, including without limitation, all rights to payment, including returned
premiums, with respect to any insurance relating to any of the foregoing, and all rights to payment
with respect to any claim or cause of action affecting or relating to any of the foregoing
(collectively, “Proceeds”).
2. OBLIGATIONS SECURED. The obligations secured hereby are the payment and performance of: (a)
all present and future Indebtedness of Debtor to Bank with respect to that certain Thirty-Five
Million and No/100 Dollar ($35,000,000.00) Revolving Line of Credit transaction as more fully
described in that certain Amended and Restated Credit Agreement of even date herewith (the “Credit
Agreement”); and (c) all obligations of Debtor and rights of Bank under this Agreement. The word
“Indebtedness” is used herein in its most comprehensive sense and includes any and all advances,
debts, obligations and liabilities of Debtor heretofore, now or hereafter made, incurred or created
in connection with the Credit Agreement, whether voluntary or involuntary and however arising,
whether due or not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, and whether Debtor may be liable individually or jointly with others, or whether
recovery upon such Indebtedness may be or hereafter becomes unenforceable.
3. TERMINATION. This Agreement will terminate upon the performance of all obligations of
Debtor to Bank, including without limitation, the payment of all Indebtedness of Debtor to Bank,
and the termination of all commitments of Bank to extend credit to Debtor, existing at the time
Bank receives written notice from Debtor of the termination of this Agreement.
4. OBLIGATIONS OF BANK. Bank has no obligation to make any loans hereunder. Any money received
by Bank in respect of the Collateral may be deposited, at Bank’s option, into a non-interest
bearing account over which Debtor shall have no control, and the same shall, for all purposes, be
deemed Collateral hereunder.
5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Bank that: (a) Debtor’s
legal name is exactly as set forth on the first page of this Agreement, and all of Debtor’s
organizational documents or agreements delivered to Bank are complete and accurate in every
respect; (b) Debtor is the owner and has possession or control of the Collateral and Proceeds; (c)
Debtor has the exclusive right to grant a security interest in the Collateral and Proceeds; (d) all
Collateral and Proceeds are genuine, free from liens, adverse claims, setoffs, default, prepayment,
defenses and conditions precedent of any kind or character, except the lien created hereby or as
otherwise agreed to by Bank, or as heretofore disclosed by Debtor to Bank, in writing; (e) all
statements contained herein and, where applicable, in the Collateral are true and complete in all
material respects; (f) no financing statement covering any of the Collateral or Proceeds, and
naming any secured party other than Bank, is on file in any public office; (g) where Collateral
consists of rights to payment, all persons appearing to be obligated on the Collateral and Proceeds
have authority and capacity to contract and are bound as they appear to be, all property subject to
chattel paper has been properly registered and filed in compliance with law and to perfect the
interest of Debtor in such property, and all such Collateral and Proceeds comply with all
applicable laws concerning form, content and manner of preparation and execution, including where
applicable Federal Reserve
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Regulation Z and any State consumer credit laws; and (h) where the Collateral consists of
equipment, Debtor is not in the business of selling goods of the kind included within such
Collateral, and Debtor acknowledges that no sale or other disposition of any such Collateral,
including without limitation, any such Collateral which Debtor may deem to be surplus, has been
consented to or acquiesced in by Bank, except as specifically set forth in writing by Bank.
6. COVENANTS OF DEBTOR
(a) Debtor agrees in general: (i) to pay Indebtedness secured hereby when due; (ii) to
indemnify Bank against all losses, claims, demands, liabilities and expenses of every kind caused
by property subject hereto; (iii) to pay all reasonable costs and expenses, including reasonable
attorneys’ fees, incurred by Bank in the perfection and preservation of the Collateral or Bank’s
interest therein and/or the realization, enforcement and exercise of Bank’s rights, powers and
remedies hereunder; (iv) to permit Bank to exercise its powers; (v) to execute and deliver such
documents as Bank reasonably deems necessary to create, perfect and continue the security interests
contemplated hereby; (vi) not to change its name, and as applicable, its chief executive office,
its principal residence or the jurisdiction in which it is organized and/or registered without
giving Bank prior written notice thereof; (vii) not to change the places where Debtor keeps any
Collateral or Debtor’s records concerning the Collateral and Proceeds without giving Bank prior
written notice of the address to which Debtor is moving same; and (viii) to cooperate with Bank in
perfecting all security interests granted herein and in obtaining such agreements from third
parties as Bank reasonably deems necessary, proper or convenient in connection with the
preservation, perfection or enforcement of any of its rights hereunder.
(b) Debtor agrees with regard to the Collateral and Proceeds, unless Bank agrees otherwise in
writing: (i) that Bank is authorized to file financing statements in the name of Debtor to perfect
Bank’s security interest in Collateral and Proceeds; (ii) where applicable, to insure the
Collateral with Bank named as loss payee, in form, substance and amounts, under agreements, against
risks and liabilities, and with insurance companies reasonably satisfactory to Bank; (iii) where
applicable, to operate the Collateral in accordance with all applicable statutes, rules and
regulations relating to the use and control thereof, and not to use any Collateral for any unlawful
purpose or in any way that would void any insurance required to be carried in connection therewith;
(iv) not to remove the Collateral from Debtor’s premises, except (A) for deliveries to buyers in
the ordinary course of Debtor’s business and (B) Collateral which consists of mobile goods as
defined in the Arizona Uniform Commercial Code, in which case Debtor agrees not to remove or permit
the removal of such Collateral from its state of domicile for a period in excess of thirty (30)
calendar days; (v) to pay when due all license fees, registration fees and other charges in
connection with any Collateral; (vi) not to permit any lien on the Collateral or Proceeds,
including without limitation, liens arising from repairs to or storage of the Collateral, except in
favor of Bank; (vii) not to sell, hypothecate or dispose of, nor permit the transfer by operation
of law of, any of the Collateral or Proceeds or any interest therein, except sales of inventory to
buyers in the ordinary course of Debtor’s business; (viii) to permit Bank to inspect the Collateral
at any time upon reasonable prior notice; (ix) to keep, in accordance with generally accepted
accounting principles, complete and accurate records regarding all Collateral and Proceeds, and to
permit Bank to inspect the same and make copies thereof at any reasonable time; (x) if requested by
Bank, to receive and use reasonable diligence to collect Collateral consisting of accounts and
other rights to payment and Proceeds, in trust and as the property of Bank, and to immediately
endorse as appropriate and deliver such Collateral and Proceeds to Bank daily in the exact form in
which they are received together with a collection report in form satisfactory to Bank if Debtor is
in default hereunder; (xi) not to commingle Collateral or Proceeds, or collections thereunder, with
other property; (xii) to give
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only normal allowances and credits and to advise Bank thereof immediately in writing if they affect
any rights to payment or Proceeds in any material respect; (xiii) from time to time, when requested
by Bank, to prepare and deliver a schedule of all Collateral and Proceeds subject to this Agreement
and to assign in writing and deliver to Bank all accounts, contracts, leases and other chattel
paper, instruments, documents and other evidences thereof; (xiv) in the event Bank elects to
receive payments of rights to payment or Proceeds hereunder, to pay all reasonable expenses
incurred by Bank in connection therewith, including expenses of accounting, correspondence,
collection efforts, reporting to account or contract debtors, filing, recording, record keeping and
expenses incidental thereto; and (xv) to provide any service and do any other acts which may be
necessary to maintain, preserve and protect all Collateral and, as appropriate and applicable, to
keep all Collateral in good and saleable condition, to deal with the Collateral in accordance with
the standards and practices adhered to generally by users and manufacturers of like property, and
to keep all Collateral and Proceeds free and clear of all defenses, rights of offset and
counterclaims.
7. POWERS OF BANK. Debtor appoints Bank its true attorney in fact to perform any of the
following powers, which are coupled with an interest, are irrevocable until termination of this
Agreement and may be exercised from time to time by Bank’s officers and employees, or any of them,
upon an Event of Default: (a) to perform any obligation of Debtor hereunder in Debtor’s name or
otherwise; (b) to give notice to account debtors or others of Bank’s rights in the Collateral and
Proceeds, to enforce or forebear from enforcing the same and make extension and modification
agreements with respect thereto; (c) to release persons liable on Collateral or Proceeds and to
give receipts and acquittances and compromise disputes in connection therewith; (d) to release or
substitute security; (e) to resort to security in any order; (f) to prepare, execute, file, record
or deliver notes, assignments, schedules, designation statements, financing statements,
continuation statements, termination statements, statements of assignment, applications for
registration or like papers to perfect, preserve or release Bank’s interest in the Collateral and
Proceeds; (g) to receive, open and read mail addressed to Debtor with respect to the Collateral;
(h) to take cash, instruments for the payment of money and other property to which Bank is
entitled; (i) to verify facts concerning the Collateral and Proceeds by inquiry of obligors
thereon, or otherwise, in its own name or a fictitious name; (j) to endorse, collect, deliver and
receive payment under instruments for the payment of money constituting or relating to Proceeds;
(k) to prepare, adjust, execute, deliver and receive payment under insurance claims, and to collect
and receive payment of and endorse any instrument in payment of loss or returned premiums or any
other insurance refund or return, and to apply such amounts received by Bank, at Bank’s sole
option, toward repayment of the Indebtedness or, where appropriate, replacement of the Collateral;
(l) to exercise all rights, powers and remedies which Debtor would have, but for this Agreement,
with respect to all Collateral and Proceeds subject hereto; (m) to enter onto Debtor’s premises in
inspecting the Collateral upon reasonable prior notice; (n) to make withdrawals from and to close
deposit accounts or other accounts with any financial institution, wherever located, into which
Proceeds may have been deposited, and to apply funds so withdrawn to payment of the Indebtedness if
Debtor is in default hereunder; (o) to preserve or release the interest evidenced by chattel paper
to which Bank is entitled hereunder and to endorse and deliver any evidence of title incidental
thereto; and (p) to do all acts and things and execute all documents in the name of Debtor or
otherwise, deemed by Bank as necessary, proper and convenient in connection with the preservation,
perfection or enforcement of its rights hereunder.
8. PAYMENT OF PREMIUMS. TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor agrees to pay, prior to
delinquency, all insurance premiums, taxes, charges, liens and assessments against the Collateral
and Proceeds, and upon the failure of Debtor to do so, Bank
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at its option may pay any of them and shall be the sole judge of the legality or validity thereof
and the amount necessary to discharge the same. Any such payments made by Bank shall be obligations
of Debtor to Bank, due and payable immediately upon demand, together with interest at a rate
determined in accordance with the provisions of this Agreement, and shall be secured by the
Collateral and Proceeds, subject to all terms and conditions of this Agreement.
9. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an “Event of Default”
under this Agreement: (a) any default in the payment or performance of any obligation, or any
defined event of default this Agreement, the Credit Agreement or any of the Loan Documents (as
defined in the Credit Agreement; (b) any representation or warranty made by Debtor herein shall
prove to be incorrect, false or misleading in any material respect when made; (c) Debtor shall fail
to observe or perform any obligation or agreement contained herein; (d) any impairment of the
rights of Bank in any Collateral or Proceeds, or any attachment or like levy on any property of
Debtor; and (e) Bank, in good faith, believes any or all of the Collateral and/or Proceeds to be in
danger of misuse, dissipation, commingling, loss, theft, damage or destruction, or otherwise in
jeopardy or unsatisfactory in character or value.
10. REMEDIES. Upon the occurrence of any Event of Default, Bank shall have the right to
declare immediately due and payable all or any Indebtedness secured hereby and to terminate any
commitments to make loans or otherwise extend credit to Debtor. Bank shall have all other rights,
powers, privileges and remedies granted to a secured party upon default under the Arizona Uniform
Commercial Code or otherwise provided by law, including without limitation, the right (a) to
contact all persons obligated to Debtor on any Collateral or Proceeds and to instruct such persons
to deliver all Collateral and/or Proceeds directly to Bank, and (b) to sell, lease, license or
otherwise dispose of any or all Collateral. All rights, powers, privileges and remedies of Bank
shall be cumulative. No delay, failure or discontinuance of Bank in exercising any right, power,
privilege or remedy hereunder shall affect or operate as a waiver of such right, power, privilege
or remedy; nor shall any single or partial exercise of any such right, power, privilege or remedy
preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any
other right, power, privilege or remedy. Any waiver, permit, consent or approval of any kind by
Bank of any default hereunder, or any such waiver of any provisions or conditions hereof, must be
in writing and shall be effective only to the extent set forth in writing. It is agreed that public
or private sales or other disposition, for cash or on credit, to a wholesaler or retailer or
investor, or user of property of the types subject to this Agreement, or public auctions, are all
commercially reasonable since differences in the prices generally realized in the different kinds
of dispositions are ordinarily offset by the differences in the costs and credit risks of such
dispositions. While an Event of Default exists: (a) Debtor will deliver to Bank from time to time,
as requested by Bank, current lists of all Collateral and Proceeds; (b) Debtor will not dispose of
any Collateral or Proceeds except on terms approved by Bank; (c) at Bank’s request, Debtor will
assemble and deliver all Collateral and Proceeds, and books and records pertaining thereto, to Bank
at a reasonably convenient place designated by Bank; and (d) Bank may, without notice to Debtor,
enter onto Debtor’s premises and take possession of the Collateral. With respect to any sale or
other disposition by Bank of any Collateral subject to this Agreement, Debtor hereby expressly
grants to Bank the right to sell such Collateral using any or all of Debtor’s trademarks, trade
names, trade name rights and/or proprietary labels or marks. Debtor further agrees that Bank shall
have no obligation to process or prepare any Collateral for sale or other disposition.
11. DISPOSITION OF COLLATERAL AND PROCEEDS; TRANSFER OF INDEBTEDNESS. In disposing of
Collateral hereunder, Bank may disclaim all warranties of title, possession, quiet enjoyment and
the like. Any proceeds of any disposition of any
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Collateral or Proceeds, or any part thereof, may be applied by Bank to the payment of expenses
incurred by Bank in connection with the foregoing, including reasonable attorneys’ fees, and the
balance of such proceeds may be applied by Bank toward the payment of the Indebtedness in such
order of application as Bank may from time to time elect. Upon the transfer of all or any part of
the Indebtedness, Bank may transfer all or any part of the Collateral or Proceeds in accordance
with this Agreement and the Arizona Uniform Commercial Code and shall be fully discharged
thereafter from all liability and responsibility with respect to any of the foregoing so
transferred, and the transferee shall be vested with all rights and powers of Bank hereunder with
respect to any of the foregoing so transferred; but with respect to any Collateral or Proceeds not
so transferred, Bank shall retain all rights, powers, privileges and remedies herein given.
12. STATUTE OF LIMITATIONS. Until all Indebtedness shall have been paid in full and all
commitments by Bank to extend credit to Debtor under the Credit Agreement, if any, have been
terminated, the power of sale or other disposition and all other rights, powers, privileges and
remedies granted to Bank hereunder shall continue to exist and may be exercised by Bank at any time
and from time to time irrespective of the fact that the Indebtedness or any part thereof may have
become barred by any statute of limitations, or that the personal liability of Debtor may have
ceased, unless such liability shall have ceased due to the payment in full of all Indebtedness
secured hereunder.
13. MISCELLANEOUS. When there is more than one Debtor named herein: (a) the word “Debtor”
shall mean all or any one or more of them as the context requires; (b) the obligations of each
Debtor hereunder are joint and several; and (c) until all Indebtedness shall have been paid in
full, no Debtor shall have any right of subrogation or contribution, and each Debtor hereby waives
any benefit of or right to participate in any of the Collateral or Proceeds or any other security
now or hereafter held by Bank. Debtor hereby waives any right to require Bank to (i) proceed
against Debtor or any other person, (ii) proceed against or exhaust any security from Debtor or any
other person, (iii) perform any obligation of Debtor with respect to any Collateral or Proceeds,
and (d) make any presentment or demand, or give any notice of nonpayment or nonperformance,
protest, notice of protest or notice of dishonor hereunder or in connection with any Collateral or
Proceeds. Debtor further waives any right to direct the application of payments or security for any
Indebtedness of Debtor or indebtedness of customers of Debtor.
14. NOTICES. All notices, requests and demands required under this Agreement must be in
writing, addressed to Bank at the address specified in any other loan documents entered into
between Debtor and Bank and to Debtor at the address of its chief executive office (or principal
residence, if applicable) specified below or to such other address as any party may designate by
written notice to each other party, and shall be deemed to have been given or made as follows: (a)
if personally delivered, upon delivery; (b) if sent by mail, upon the earlier of the date of
receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c)
if sent by telecopy, upon receipt.
15. COSTS, EXPENSES AND ATTORNEYS’ FEES. Debtor shall pay to Bank immediately upon demand the
full amount of all reasonable payments, advances, charges, costs and expenses, including reasonable
attorneys’ fees (to include outside counsel fees and all allocated costs of Bank’s in-house
counsel), expended or incurred by Bank in exercising any right, power, privilege or remedy
conferred by this Agreement or in the enforcement thereof, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including without limitation, any adversary
proceeding, contested matter or motion brought by Bank or any
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other person) relating to Debtor or in any way affecting any of the Collateral or Bank’s ability to
exercise any of its rights or remedies with respect thereto. All of the foregoing shall be paid by
Debtor with interest from the date of demand until paid in full at a rate per annum equal to the
greater of ten percent (10%) or Bank’s Prime Rate in effect from time to time. No such payment
shall be due if Bank is at fault with respect to such matter, Bank has breached this Agreement, the
Credit Agreement, or any of the documents entered into as contemplated or required by the Credit
Agreement, or in the event of Bank’s gross negligence or willful misconduct. There shall likewise
be no payment due if it is determined that Bank wrongfully asserted a claim for enforcement
hereunder.
16. SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors, administrators, legal representatives, successors and assigns of
the parties, and may be amended or modified only in writing signed by Bank and Debtor.
17. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of such provision or
any remaining provisions of this Agreement.
18. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the
laws of the State of Arizona.
Debtor warrants that Debtor is an organization registered under the laws of the State of
Delaware or the State of Arizona, as applicable.
Debtor warrants that its chief executive office (or principal residence, if applicable) is
located at the following address: 00000 X. 00xx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx
00000, Attn: Xxxxxx Xxxx.
19. AMENDMENT AND RESTATEMENT. This Amended and Restated Security Agreement amends, restates
and replaces that certain Security Agreement dated July 7, 2005 in favor of Bank (the “Original
Security Agreement”). This Amended and Restated Security Agreement supersedes the Original Security
Agreement and to the extent that the obligations covered by the Original Security Agreement
constitute a single, ongoing obligation of Debtor they continue to be secured by this Amended and
Restated Security Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of December 9, 2005.
| DEBTOR: GLOBAL WATER RESOURCES, L.L.C., a Delaware limited liability company |
||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Xxxxxxx X. Xxxxxx, Manager | ||||
| GLOBAL WATER MANAGEMENT, LLC, a Delaware limited liability company |
||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Xxxxxxx X. Xxxxxx, Manager | ||||
| GLOBAL WATER RESOURCES, INC., a Delaware corporation |
||||
| By: | /s/ Xxxxxx Xxxx | |||
| Xxxxxx Xxxx, President | ||||
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