false2021Q10001434728--12-31falsefalse22,587,9960.010.0160,000,00060,000,00022,691,10522,690,477103,109102,711P10YP20YEQUITY METHOD INVESTMENTIn 2018, the Company had an investment in a limited partnership, FATHOM Water Management Holdings, LLP, which, through subsidiaries, owned Global Water Management, LLC ("GWM"). This investment was accounted for under the equity method due to the investment being considered more than minor. In December of 2019, GWM ceased to provide substantially all of the billing, customer service, and other support services previously provided to its customers, including the Company's regulated utilities. The carrying value of this investment is zero as of both March 31, 2021 and December 31, 2020.zerozeroACQUISITIONS
Acquisition of Turner
On May 30, 2018, the Company acquired all of the equity of Turner, a rate regulated non-potable irrigation water utility in Mesa, Arizona, for total consideration of $2.8 million. This acquisition is consistent with the Company's declared strategy of making accretive acquisitions. At the time of acquisition, Turner had 963 residential irrigation connections and approximately seven square miles of service area. The acquisition was accounted for as a business combination under ASC 805, "Business Combinations." The purchase price was allocated to the acquired utility assets and liabilities assumed based on the seller's book value at acquisition as the historical cost of these assets and liabilities will be the amounts that will continue to be reflected in customer rates.

Final purchase price allocation of the net assets acquired in the transaction is as follows (in thousands):
Net assets acquired:
Cash $ 176 
Accounts receivable 121 
Gross property, plant and equipment 4,495 
Construction work-in-progress 92 
Accumulated depreciation (3,554)
Accounts payable (30)
Accrued expenses (49)
Total net assets assumed 1,251 
Goodwill 1,549 
Total purchase price $ 2,800 
The revenue and earnings recognized post acquisition and the pro forma effect of the business acquired are not material to the Company's financial position or results of operations.
Acquisition of Red Rock
On October 16, 2018, the Company acquired Red Rock, a rate-regulated operator of a water and a wastewater utility with service areas in the Pima and Pinal counties of Arizona, for total consideration of $5.9 million. This acquisition is consistent with the Company's declared strategy of making accretive acquisitions. The acquisition added over 1,650 connections and approximately nine square miles of service area. The acquisition was accounted for as a business combination under ASC 805, "Business Combinations." The purchase price was allocated to the acquired utility assets and liabilities assumed based on the seller's book value at acquisition as the historical cost of these assets and liabilities will be the amounts that will continue to be reflected in customer rates.
Under the terms of the purchase agreement, the Company is obligated to pay to the seller a growth premium equal to $750 for each new account established within three specified growth premium areas, commencing in each area on the date of the first meter installation and ending on the earlier of ten years after such first installation date or twenty years from the acquisition date. The three specified growth premium areas are located in Pima County, Arizona where Red Rock has not yet begun operating, and where Red Rock is authorized to provide water utility services only. As of March 31, 2021, no meters have been installed and no accounts have been established in any of the three growth premium areas. The fair value of the acquisition liability was determined based on management's estimates and assumptions regarding the probability that connection growth will be achieved during the growth premium period. Any subsequent adjustments to the fair value estimate will be recorded to earnings. Refer to Note 11 — "Fair Value" of the notes to the unaudited condensed consolidated financial statements for additional information.
Final purchase price allocation of the net assets acquired in the transaction, reflecting additional information discussed above is as follows (in thousands):
Net assets acquired:
Accounts receivable $ 111 
Gross property, plant and equipment 19,841 
Construction work-in-progress 748 
Accumulated depreciation (6,084)
Prepaids 12 
Intangibles1
196 
Accounts payable (26)
Other taxes (14)
Other accrued liabilities (47)
Customer and meter deposits (76)
AIAC (3,423)
CIAC - Net (7,397)
Acquisition liability (838)
Total net assets assumed 3,003 
Goodwill 2,848 
Total purchase price $ 5,851 
1 Intangibles consist of franchise contract rights and organizational costs. Refer to Note 8 — "Goodwill & Intangible Assets" of the notes to the unaudited condensed consolidated financial statements for additional discussion.
The revenue and earnings recognized post acquisition and the pro forma effect of the business acquired are not material to the Company's financial position or results of operations.2.8963seven
Final purchase price allocation of the net assets acquired in the transaction is as follows (in thousands):
Net assets acquired:
Cash $ 176 
Accounts receivable 121 
Gross property, plant and equipment 4,495 
Construction work-in-progress 92 
Accumulated depreciation (3,554)
Accounts payable (30)
Accrued expenses (49)
Total net assets assumed 1,251 
Goodwill 1,549 
Total purchase price $ 2,800 
1761214,495923,55430491,2511,5492,8005.91,650nine750P10YP20Yno
Final purchase price allocation of the net assets acquired in the transaction, reflecting additional information discussed above is as follows (in thousands):
Net assets acquired:
Accounts receivable $ 111 
Gross property, plant and equipment 19,841 
Construction work-in-progress 748 
Accumulated depreciation (6,084)
Prepaids 12 
Intangibles1
196 
Accounts payable (26)
Other taxes (14)
Other accrued liabilities (47)
Customer and meter deposits (76)
AIAC (3,423)
CIAC - Net (7,397)
Acquisition liability (838)
Total net assets assumed 3,003 
Goodwill 2,848 
Total purchase price $ 5,851 
1 Intangibles consist of franchise contract rights and organizational costs. Refer to Note 8 — "Goodwill & Intangible Assets" of the notes to the unaudited condensed consolidated financial statements for additional discussion.
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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549 
_____________________________________________________________
FORM 10-Q 
_____________________________________________________________
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number: 001-37756 
______________________________________________________________
Global Water Resources, Inc.
(Exact Name of Registrant as Specified in its Charter) 
______________________________________________________________
Delaware 90-0632193
(State or other jurisdiction of
incorporation or organization) 		(I.R.S. Employer
Identification No.)
21410 N. 19th Avenue #220
Phoenix, Arizona 85027
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code: (480) 360-7775
Securities registered pursuant to Section 12(b) of the Act:
______________________________________________________________
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.01 per share GWRS The NASDAQ Stock Market, LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   ☐   Accelerated filer   ☐
Non-accelerated filer   x   Smaller reporting company   x
        Emerging growth company   x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No
As of May 3, 2021, the registrant had 22,587,996 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents
TABLE OF CONTENTS
 
PART I.  
Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II.  
Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
GLOBAL WATER RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
  March 31, 2021 December 31, 2020
ASSETS    
PROPERTY, PLANT AND EQUIPMENT:  
Property, plant and equipment 345,897  340,193 
Less accumulated depreciation (103,624) (101,302)
Net property, plant and equipment 242,273  238,891 
CURRENT ASSETS:
Cash and cash equivalents 18,209  18,033 
Accounts receivable — net 1,735  2,147 
Customer payments in-transit 155  306 
Unbilled revenue 2,499  2,304 
Prepaid expenses and other current assets 694  665 
Total current assets 23,292  23,455 
OTHER ASSETS:
Goodwill 4,591  4,600 
Intangible assets — net 11,185  11,185 
Regulatory asset 2,086  2,036 
Restricted cash 3,934  3,272 
Other noncurrent assets 9  9 
Total other assets 21,805  21,102 
TOTAL ASSETS 287,370  283,448 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 533  531 
Accrued expenses 10,131  8,261 
Deferred revenue 2  4 
Customer and meter deposits 1,564  1,558 
Long-term debt and capital leases — current portion 2,032  2,035 
Total current liabilities 14,262  12,389 
NONCURRENT LIABILITIES:
Long-term debt and capital leases 112,641  112,659 
Deferred revenue - ICFA 18,121  17,843 
Regulatory liability 8,002  7,986 
Advances in aid of construction 80,025  76,384 
Contributions in aid of construction — net 14,488  14,632 
Deferred income tax liabilities — net 3,574  3,652 
Acquisition liability 1,773  1,773 
Other noncurrent liabilities 3,892  3,942 
Total noncurrent liabilities 242,516  238,871 
Total liabilities 256,778  251,260 
Commitments and contingencies (Refer to Note 16)
SHAREHOLDERS' EQUITY:
Common stock, $0.01 par value, 60,000,000 shares authorized; 22,691,105 and 22,690,477 shares issued as of March 31, 2021 and December 31, 2020, respectively.
227  227 
Treasury stock, 103,109 and 102,711 shares at March 31, 2021 and December 31, 2020, respectively.
(1) (1)
Paid in capital 30,366  31,962 
Retained earnings —  — 
Total shareholders' equity 30,592  32,188 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 287,370  283,448 
See accompanying notes to the condensed consolidated financial statements
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GLOBAL WATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
 
  Three Months Ended March 31,
  2021 2020
REVENUES:    
Water services $ 3,986  $ 3,388 
Wastewater and recycled water services 5,243  4,823 
Unregulated revenues 29  19 
Total revenues 9,258  8,230 
OPERATING EXPENSES:    
Operations and maintenance 2,499  2,232 
General and administrative 3,490  2,088 
Depreciation and amortization 2,226  2,113 
Total operating expenses 8,215  6,433 
OPERATING INCOME 1,043  1,797 
OTHER INCOME (EXPENSE):    
Interest income 5  52 
Interest expense (1,325) (1,338)
Other 15  49 
Total other expense (1,305) (1,237)
INCOME (LOSS) BEFORE INCOME TAXES (262) 560 
INCOME TAX BENEFIT (EXPENSE) 45  (206)
NET INCOME (LOSS) $ (217) $ 354 
Basic earnings (loss) per common share $ (0.01) $ 0.02 
Diluted earnings (loss) per common share $ (0.01) $ 0.02 
Dividends declared per common share $ 0.07  $ 0.07 
Weighted average number of common shares used in the determination of:    
Basic 22,587,766  22,333,425 
Diluted 22,587,766  22,391,930 
 
See accompanying notes to the condensed consolidated financial statements

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GLOBAL WATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except share and per share amounts)
(Unaudited)

  Common Stock Shares Common Stock Treasury Stock Shares Treasury Stock Paid-in Capital Retained Earnings Total Equity
BALANCE - December 31, 2019 21,636,420  $ 216  (99,039) $ (1) $ 24,457  $ —  $ 24,672 
Dividend declared $0.07 per share
—  —  —  —  (1,274) (354) (1,628)
Issuance of common stock 1,000,000  10  —  —  11,511  —  11,521 
Stock compensation —  —  —  —  115  —  115 
Net income —  —  —  —  —  354  354 
BALANCE - March 31, 2020 22,636,420  $ 226  (99,039) $ (1) $ 34,809  $ —  $ 35,034 
BALANCE - December 31, 2020 22,690,477  $ 227  (102,711) $ (1) $ 31,962  $ —  $ 32,188 
Dividend declared $0.07 per share
—  —  —  —  (1,650) —  (1,650)
Treasury Stock —  —  (398) —  —  —  — 
Stock option exercise 628  —  —  —  —  —  — 
Stock compensation —  —  —  —  271  —  271 
Net income (loss) —  —  —  —  —  (217) (217)
BALANCE - March 31, 2021 22,691,105  $ 227  (103,109) $ (1) $ 30,583  $ (217) $ 30,592 

See accompanying notes to the condensed consolidated financial statements

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GLOBAL WATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
  Three Months Ended March 31,
  2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income (loss) $ (217) $ 354 
Adjustments to reconcile net income to net cash provided by operating activities:    
Deferred compensation 775  (582)
Depreciation and amortization 2,226  2,113 
Amortization of deferred debt issuance costs and discounts 11  14 
Other (gains) and losses —  2 
Provision for doubtful accounts receivable 42  40 
Deferred income tax (benefit) expense (79) 210 
Changes in assets and liabilities    
Accounts receivable 370  (111)
Other current assets (74) 21 
Accounts payable and other current liabilities 798  587 
Other noncurrent assets (50) 20 
Other noncurrent liabilities 999  502 
Net cash provided by operating activities 4,801  3,170 
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures (3,269) (3,525)
Other cash flows from investing activities —  (9)
Net cash used in investing activities (3,269) (3,534)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Dividends paid (1,650) (1,629)
Advances in aid of construction 987  280 
Principal payments under capital lease (31) (26)
Loan repayments —  (17)
Proceeds from sale of stock —  11,739 
Debt issuance costs paid —  — 
Payments of offering costs for sale of stock —  (218)
Net cash (used) provided by financing activities (694) 10,129 
INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 838  9,765 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period 21,305  9,095 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH – End of period $ 22,143  $ 18,860 
 
See accompanying notes to the condensed consolidated financial statements

Supplemental disclosure of cash flow information:
March 31, 2021 March 31, 2020
Cash and cash equivalents $ 18,209  $ 17,137 
Restricted Cash 3,934  1,723 
Total cash, cash equivalents, and restricted cash $ 22,143  $ 18,860 

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GLOBAL WATER RESOURCES, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
1. BASIS OF PRESENTATION, CORPORATE TRANSACTIONS, SIGNIFICANT ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS
Basis of Presentation and Principles of Consolidation
The condensed consolidated financial statements of Global Water Resources, Inc. (the “Company”, “GWRI”, “we”, “us”, or “our”) and related disclosures as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 are unaudited. The December 31, 2020 condensed consolidated balance sheet data was derived from the Company’s audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These financial statements follow the same accounting policies and methods of their application as the Company’s most recent annual consolidated financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020. In our opinion, these financial statements include all normal and recurring adjustments necessary for the fair statement of the results for the interim period. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year, due to the seasonality of our business.
The Company prepares its financial statements in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The Company qualifies as an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), under the rules and regulations of the SEC. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. The Company elected to take advantage of these provisions for up to five years or such earlier time that the Company is no longer an emerging growth company. The Company has elected to take advantage of some of the reduced disclosure obligations regarding financial statements. Also, as an emerging growth company the Company can elect to delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has chosen to take advantage of this extended accounting transition provision.
Corporate Transactions
Stipulated Condemnation of the Operations and Assets of Valencia Water Company, Inc.
On July 14, 2015, the Company closed the stipulated condemnation to transfer the operations and assets of Valencia Water Company, Inc. ("Valencia") to the City of Buckeye. Terms of the condemnation were agreed upon through a settlement agreement and stipulated final judgment of condemnation wherein the City of Buckeye acquired all the operations and assets of Valencia and assumed operation of the utility upon close. The City of Buckeye is obligated to pay the Company a growth premium equal to $3,000 for each new water meter installed within Valencia’s prior service areas in the City of Buckeye, for a 20-year period ending December 31, 2034, subject to a maximum payout of $45.0 million over the term of the agreement. The Company received growth premiums of less than $0.1 million for the three months ended March 31, 2021 and $0.1 million for the three months ended March 31, 2020.
Private Letter Ruling
On June 2, 2016, the Company received a Private Letter Ruling from the Internal Revenue Service ("IRS") that, for purposes of deferring the approximately $19.4 million gain realized from the condemnation of the operations and assets of Valencia, determined that the assets converted upon the condemnation of such assets could be replaced through certain reclamation facility improvements contemplated by the Company under Internal Revenue Code §1033 as property similar or related in service or use. As of December 31, 2020, the Company fully deferred this gain pursuant to Internal Revenue Code §1033.
Acquisition of Red Rock Utilities
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On October 16, 2018, the Company completed the acquisition of Red Rock Utilities ("Red Rock"), an operator of a water and a wastewater utility with service areas in the Pima and Pinal counties of Arizona, for a purchase price of $5.9 million. The acquisition added over 1,650 connections and approximately 9 square miles of service area. The Company is obligated to pay to the seller a growth premium equal to $750 for each new account established within three specified growth premium areas, commencing in each area on the date of the first meter installation and ending on the earlier of ten years after such first installation date or twenty years from the acquisition date. The three specified growth premium areas are located in Pima County, Arizona where Red Rock has not yet begun operating, and where Red Rock is authorized to provide water utility services only. As of March 31, 2021, no meters have been installed and no accounts have been established in any of the three growth premium areas.
Arizona Corporation Commission (the “ACC”) Tax Docket
The Company had regulatory assets of $2.1 million and $2.0 million at March 31, 2021 and December 31, 2020, respectively, and regulatory liabilities of $0.7 million at both March 31, 2021 and December 31, 2020, related to the Federal Tax Cuts and Jobs Act (the "TCJA") signed into law on December 22, 2017. Under ASC 740, Income Taxes, the tax effects of changes in tax laws must be recognized in the period in which the law is enacted. ASC 740 also requires deferred income tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Thus, at the date of enactment, the Company’s deferred income taxes were re-measured based upon the new tax rate. For the Company’s regulated entities, substantially all of the change in deferred income taxes is recorded as an offset to either a regulatory asset or liability because the impact of changes in the rates are expected to be recovered from or refunded to customers.
On December 20, 2017, the ACC opened a docket to address the utility ratemaking implications of the TCJA. The ACC subsequently approved an order in February 2018 requiring Arizona utilities to apply regulatory accounting treatment, which includes the use of regulatory assets and regulatory liabilities, to address all impacts from the enactment of the TCJA.
On September 20, 2018, the ACC issued Rate Decision No. 76901, which set forth the reductions in revenue for our Santa Cruz, Palo Verde, Greater Tonopah and Northern Scottsdale utilities due to the lower corporate tax rates under the TCJA.  Rate Decision No. 76901 adopted a phase-in approach for the reductions to match the phase-in of our revenue requirement under Rate Decision No. 74364 enacted in February 2014. In 2020, the aggregate annual reductions in revenue for our Santa Cruz, Palo Verde, Greater Tonopah, and Northern Scottsdale utilities was approximately $1.0 million. In 2021, the final year of the phase-in, the aggregate annual reductions in revenue for our Santa Cruz, Palo Verde, Greater Tonopah, and Northern Scottsdale utilities will be approximately $415,000, $669,000, $16,000, and $5,000, respectively. The ACC also approved a carrying cost of 4.25% on regulatory liabilities resulting from the difference of the fully phased-in rates to be applied in 2021 versus the phased-in rates refunded in the years leading up to 2021 (i.e., 2018 through 2020). 
Rate Decision No. 76901, however, did not address the impacts of the TCJA on accumulated deferred income taxes (“ADIT”), including excess ADIT (“EADIT”).  Following the ACC's request for a proposal, the Company made its proposal in filings on December 19, 2018 and July 1, 2019. ACC Staff reviewed the Company's filing and requested that the Company defer tariff revisions until such revisions can be considered in the next rate case. ACC Staff also requested that the Company defer consideration of the regulatory assets and regulatory liabilities associated with 2018 EADIT amortization. On July 18, 2019, the Company made a filing proposing these items be deferred to the next rate case. Refer to " — Corporate Transactions — ACC Rate Case" for additional information regarding the Company's next rate case.

On November 27, 2018, February 20, 2019, February 28, 2019, and January 23, 2020, the ACC adopted orders relating to the funding for income taxes on contributions in aid of construction (“CIAC”) and advances in aid of construction (“AIAC”) (which became taxable for our regulated utilities under the TCJA). Those orders 1) require that under the hybrid sharing method, a contributor will pay a gross-up to the utility consisting of 55% of the income tax expense with the utility covering the remaining 45% of the income tax expense; 2) remove the full gross-up method option for Class A and B utilities and their affiliates (which includes all of our utilities); 3) ensure proper ratemaking treatment of a utility using the self-pay method; 4) clarify that pass-through entities that are owned by a “C” corporation can recover tax expense according to methods allowed; and 5) require Class A and B utilities to self-pay the taxes associated with hook-up fee contributions but permit using a portion of the hook-up fees to fund these taxes. The Company's utilities have adopted the hybrid sharing method for income tax on CIAC and AIAC.

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ACC Rate Case

On August 28, 2020, 12 of our 16 regulated utilities each filed a rate case application with the ACC for water, wastewater, and recycled water rates, which proposed a collective revenue requirement increase of $4.6 million (relative to expected revenues in 2021, which is the final year of the rate phase-in from the last rate case) based on a 2019 test year. Certain of our utilities, including Santa Cruz and Palo Verde, have also requested that the rate increases be phased in over three years, beginning January 1, 2022. The consolidated rate increase, if approved by the ACC, would result in the estimated average monthly residential bill for Santa Cruz and Palo Verde customers increasing approximately $4.93, $5.72, and $4.12 in the aggregate in each of 2022, 2023, and 2024, respectively.

We also requested the consolidation of water and/or wastewater rates for our Red Rock, Santa Cruz, Palo Verde, Picacho Water, and Picacho Utilities. These utilities are all located in Pinal County; make up approximately 97% of the Company's active service connections; provide or will provide water, wastewater, and recycled water services; and are expected to create economies of scale that are beneficial to all customers if consolidated.

There can be no assurance, however, that the ACC will approve the requested rate increase or any increase or the consolidation of water and wastewater rates described above, and the ACC could take other actions as a result of the rate case. Further, it is possible that the ACC may determine to decrease future rates. There can also be no assurance as to the timing of when an approved rate increase (if any) would go into effect.

2020 Common Stock Offering

On January 21, 2020, the Company completed a public offering of 870,000 shares of common stock at a public offering price per share of $12.50, for gross proceeds of $10.9 million. On January 30, 2020, an additional 130,000 shares of common stock were issued at the public offering price of $12.50 per share, for gross proceeds of $1.6 million, resulting in total proceeds from the offering of approximately $12.5 million. The issuance of the additional shares was completed pursuant to the exercise in full of the underwriter's over-allotment option. Total net proceeds of approximately $11.5 million were received after deducting underwriting discounts and commissions and offering expenses payable by us, which collectively totaled approximately $1.0 million.
Significant Accounting Policies
Basic and Diluted Earnings per Common Share
Diluted EPS is based upon the weighted average number of common shares, including both outstanding shares and shares potentially issuable in connection with stock options and restricted stock awards granted.
As of March 31, 2021, the Company had 623,351 options outstanding to acquire an equivalent number of shares of GWRI common stock. For the three months ended March 31, 2021, the 623,351 options outstanding were not included within the calculation of diluted earnings per share as the Company incurred losses in this period and to include them would be antidilutive. As of March 31, 2021, there were 128,327 restricted stock awards outstanding. The 128,327 restricted stock awards outstanding were not included within the calculation of diluted earnings per share as the Company incurred losses in this period and to include them would be antidilutive.
As of March 31, 2020, the Company had 632,500 options outstanding to acquire an equivalent number of shares of GWRI common stock. The 386,896 options outstanding from the 2017 option grant equated to 58,505 common share equivalents for the three months ended March 31, 2020, which were included within the calculation of diluted earnings per share for the three months ended March 31, 2020. The remaining 245,604 options outstanding from the 2019 option grant were not included for the three months ended March 31, 2020 dilutive earnings per share calculation, as to do so would be antidilutive.
Refer to Note 13 – “Deferred Compensation Awards” for additional information regarding the option grants.
Customer payments in-transit
Customer payments in-transit represent funds received by our third-party payment processor related to customer payments, a majority of which were paid for with debit cards, credit cards, and checks, to which the Company does not have immediate access but settles within a few days of the payment transaction.
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Recent Accounting Pronouncements
Recently Adopted Accounting Standards
In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”, or "ASC 842"). ASC 842 requires lessees to record a right-of-use asset and corresponding lease obligation for lease arrangements with a term of greater than twelve months and requires additional disclosures about leasing arrangements. The Company implemented Topic 842 on January 1, 2021. The implementation did not result in material changes to our consolidated financial statements. Refer to Note 4 — "Leases" of the notes to the unaudited condensed consolidated financial statements for additional information.
In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Topic 350) ("ASU 2018-15"). ASU 2018-15 amends ASC 350 to include in its scope implementation costs of a Cloud Computing Arrangement ("CCA") that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in a CCA that is considered a service contract. The Company implemented Topic 350 on January 1, 2021. The implementation did not result in material changes to our consolidated financial statements.
Future Adoption of Accounting Standards
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 eliminates Step 2 from the impairment test which requires entities to determine the implied fair value of goodwill to measure if any impairment expense is necessary. Instead, entities will record impairment expenses based on the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2019-10 extended the effective date for this ASU. Due to qualifying as an emerging growth company, the Company is required to adopt the ASU on January 1, 2023. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.

2. REGULATORY DECISION AND RELATED ACCOUNTING AND POLICY CHANGES
Our regulated utilities and certain other balances are subject to regulation by the ACC and meet the requirements for regulatory accounting found within Accounting Standards Codification 980, Regulated Operations ("ASC 980").
In accordance with ASC 980, rates charged to utility customers are intended to recover the costs of the provision of service plus a reasonable return in the same period. Changes to the rates are made through formal rate applications with the ACC, which we have done for all of our operating utilities as described below.
On July 9, 2012, we filed formal rate applications with the ACC to adjust the revenue requirements for seven utilities representing a collective rate increase of approximately 28% over 2011 revenue levels. In August 2013, the Company entered into a settlement agreement with ACC Staff, the Residential Utility Consumers Office, the City of Maricopa, and other parties to the rate case. The settlement required approval by the ACC’s Commissioners before it could take effect. In February 2014, the rate case proceedings were completed and the ACC issued Rate Decision No. 74364, effectively approving the settlement agreement. The rulings of the decision include, but are not limited to, the following:
•For the Company’s utilities, adjusting for the condemnation of the operations and assets of Valencia and sale of Willow Valley Water Co., Inc. ("Willow Valley"), which occurred in 2015 and 2016, respectively, a collective revenue requirement increase of $3.6 million based on 2011 test year service connections, phased-in over time, with the first increase in January 2015 as follows (in thousands, not updated for the TCJA, refer to Note 1 — "Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions— ACC Tax Docket" for further details):
  Incremental Cumulative
2015 $ 1,083  $ 1,083 
2016 887  1,970 
2017 335  2,305 
2018 335  2,640 
2019 335  2,975 
2020 335  3,310 
2021 335  3,645 
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Whereas this phase-in of additional revenues was determined using a 2011 test year, to the extent that the number of active service connections increases from 2011 levels, the additional revenues may be greater than the amounts set forth above. On the other hand, if active connections decrease or we experience declining usage per customer, we may not realize all of the anticipated revenues.
•Full reversal of the imputation of CIAC balances associated with funds previously received under infrastructure coordination and financing agreements ("ICFAs"), as required in the Company’s last rate case. The reversal restored rate base or future rate base and had a significant impact of restoring shareholder equity on the balance sheet.
•The Company has agreed to not enter into any new ICFAs. Existing ICFAs will remain in place, but a portion of future payments to be received under the ICFAs will be considered as hook-up fees, which are accounted for as CIAC once expended on plant.
•A 9.5% return on common equity was adopted.
On September 20, 2018, the ACC issued Rate Decision No. 76901, which set forth the reductions in revenue for our Santa Cruz, Palo Verde, Greater Tonopah, and Northern Scottsdale utilities due to the TCJA. Rate Decision No. 76901 adopted a phase-in approach for the reductions to match the phase-in of our revenue requirements under Rate Decision No. 74364. Refer to Note 1 — "Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions — ACC Tax Docket" for details regarding Rate Decision No. 76901.
On August 28, 2020, 12 of our 16 regulated utilities each filed a rate case application with the ACC for water, wastewater, and recycled water rates, as well as the consolidation of water and/or wastewater rates for certain of the utilities. Refer to Note 1 — "Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions— ACC Rate Case" for additional information.
The following provides additional discussion on accounting and policy changes resulting from Rate Decision No. 74364.
Infrastructure Coordination and Financing Agreements – ICFAs are agreements with developers and homebuilders whereby GWRI, the indirect parent of the operating utilities, provides services to plan, coordinate, and finance the water and wastewater infrastructure that would otherwise be required to be performed or subcontracted by the developer or homebuilder.
Under the ICFAs, GWRI has a contractual obligation to ensure physical capacity exists through its regulated utilities for water and wastewater to the landowner/developer when needed. This obligation persists regardless of connection growth. Fees for these services are typically a negotiated amount per equivalent dwelling unit for the specified development or portion of land. Payments are generally due in installments, with a portion due upon signing of the agreement, a portion due upon completion of certain milestones, and the final payment due upon final plat approval or sale of the subdivision. The payments are non-refundable. The agreements are generally recorded against the land and must be assumed in the event of a sale or transfer of the land. The regional planning and coordination of the infrastructure in the various service areas has been an important part of GWRI’s business model.
In February 2014, the ACC issued Rate Decision No. 74364, and concluded ICFA funds already received would no longer be deemed CIAC for rate making purposes. ICFA funds already received or which had become due prior to the date of Rate Decision No. 74364 were recognized as revenue once the obligations specified in the ICFA were met. Rate Decision No. 74364 prescribes that of the ICFA funds which come due and are paid subsequent to December 31, 2013, 70% of the ICFA funds will be recorded in the associated utility subsidiary as a hook-up fee (“HUF”) liability, with the remaining 30% to be recorded as deferred revenue, which the Company accounts for in accordance with the Company's ICFA revenue recognition policy. A HUF tariff, specifying the dollar value of a HUF for each utility, was approved by the ACC as part of Rate Decision No. 74364. The Company is responsible for assuring the full HUF value is paid from ICFA proceeds, and recorded in its full amount, even if it results in recording less than 30% of the ICFA fee as deferred revenue.
The Company will account for the portion allocated to the HUF as a CIAC contribution. However, in accordance with the ACC directives the CIAC is not deducted from rate base until the HUF funds are expended for utility plant. Such funds will be segregated in a separate bank account and used for plant. A HUF liability will be established and will be amortized as a reduction of depreciation expense over the useful life of the related plant once the HUF funds are utilized for the construction of plant. For facilities required under a HUF or ICFA, the utilities must first use the HUF moneys received, after which, it may use debt or equity financing for the remainder of construction. The Company will record 30% of the funds received, up until the HUF liability is fully funded, as deferred revenue, which is to be recognized as revenue once the obligations specified within the ICFA are met, including construction of sufficient operating capacity to serve the customers for which revenue was deferred.
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As of March 31, 2021 and December 31, 2020, ICFA deferred revenue recorded on the consolidated balance sheet totaled $18.1 million and $17.8 million, respectively, which represents deferred revenue recorded for ICFA funds received on contracts that had become due prior to Rate Decision No. 74364. Refer to Note 3 — "Revenue Recognition" of the notes to the unaudited condensed consolidated financial statements for additional discussion regarding ICFA revenue.
Intangible assets / Regulatory liability – Pursuant to Rate Decision No. 74364, approximately 70% of ICFA funds to be received in the future will be recorded as a HUF, until the HUF is fully funded at the Company’s applicable utility subsidiary. The remaining approximate 30% of future ICFA funds will be recorded at the parent company level and will be subject to the Company’s ICFA revenue recognition accounting policy. As the Company now expects to experience an economic benefit from the approximately 30% portion of future ICFA funds, 30% of the regulatory liability, or $3.4 million, was reversed in 2014. The remaining 70% of the regulatory liability, or $7.9 million, will continue to be recorded on the balance sheet.
The intangible assets amortize when the corresponding ICFA funds are received in proportion to the amount of total cash expected to be received under the underlying agreements. The recognition of amortization expense will be partially offset by a corresponding reduction of the regulatory liability.
As of March 31, 2021, regulatory liability recorded on the consolidated balance sheet totaled $8.0 million, of which $6.7 million relates to the offset of intangible assets related to ICFA contracts obtained in connection with our Santa Cruz, Palo Verde, and Sonoran acquisitions, and the remaining $1.3 million relates to the TCJA rate reduction mandated by the ACC pursuant to Rate Decision No. 76901.

3. REVENUE RECOGNITION
Regulated Revenue
The Company's operating revenues are primarily attributable to regulated services based upon tariff rates approved by the ACC. Regulated service revenues consist of amounts billed to customers based on approved fixed monthly fees and consumption fees, as well as unbilled revenues estimated from the last meter reading date to the end of the accounting period utilizing historical customer data recorded as accrued revenue. The measurement of sales to customers is generally based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, the Company estimates consumption since the date of the last meter reading and a corresponding unbilled revenue is recognized. The unbilled revenue estimate is based upon the number of unbilled days that month and the average daily customer billing rate from the previous month (which fluctuates based upon customer usage). The Company applies the invoice practical expedient and recognizes revenue from contracts with customers in the amount for which the Company has a right to invoice. The Company has the right to invoice for the volume of consumption, service charge, and other authorized charges.
The Company satisfies its performance obligation to provide water, wastewater, and recycled services over time as the services are rendered. Regulated services may be terminated by the customers at will, and, as a result, no separate financing component is recognized for the Company's collections from customers, which generally require payment within 15 days of billing. The Company applies judgment, based principally on historical payment experience, in estimating its customers' ability to pay.
The Company has elected to apply the sales tax practical expedient, whereby qualifying excise and other taxes collected from customers and remitted to governmental authorities are not included in reported revenues.
Unregulated Revenue
Unregulated revenues represent those revenues that are not subject to the ratemaking process of the ACC. Unregulated revenues are limited to rental revenue and imputed revenues resulting from a portion of ICFA funds received. ICFAs are agreements with developers and homebuilders where the Company provides services to plan, coordinate, and finance the water and wastewater infrastructure that would otherwise be required to be performed or subcontracted by the developer or homebuilder. In return, the developers and homebuilders pay the Company an agreed-upon amount per dwelling unit for the specified development or portion of land. In addition, under ICFA agreements, the Company has a contractual obligation to ensure physical capacity exists through its regulated utilities for water and wastewater to the developer when needed. This obligation persists regardless of connection growth.
The Company believes that these services are not distinct in the context of the contract because they are highly interdependent with the Company’s ability to provide fitted capacity for water and wastewater services. The Company concluded that the goods and services provided under ICFA contracts constitute a single performance obligation.
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ICFA revenue is recognized at a point in time when the Company has the necessary capacity in place within its infrastructure to provide water/wastewater services to the developer. The Company exercises judgment when estimating the number of equivalent dwelling units that the Company has capacity to serve.
Disaggregated Revenues
For the three months ended March 31, 2021 and 2020, disaggregated revenues from contracts with customers by major source and customer class are as follows (in thousands):
  Three Months Ended March 31,
  2021 2020
REGULATED REVENUE
Water Services    
Residential $ 3,081  $ 2,694 
Irrigation 453  321 
Commercial 180  208 
Construction 152  68 
Other water revenues 120  97 
Total water revenues 3,986  3,388 
Wastewater and recycled water services
Residential 4,780  4,430 
Commercial 249  239 
Recycled water revenues 156  94 
Other wastewater revenues 58  60 
Total wastewater and recycled water revenues 5,243  4,823 
TOTAL REGULATED REVENUE 9,229  8,211 
UNREGULATED REVENUE
Rental revenues 29  19 
TOTAL UNREGULATED REVENUE 29  19 
TOTAL REVENUE $ 9,258  $ 8,230 

Contract Balances
Our contract assets and liabilities consist of the following (in thousands):
  March 31, 2021 December 31, 2020
CONTRACT ASSETS
Accounts receivable
Water services $ 997  $ 1,203 
Wastewater and recycled water services 961  1,149 
Total contract assets(1)
$ 1,958  $ 2,352 
CONTRACT LIABILITIES
Deferred revenue - ICFA $ 18,121  $ 17,843 
Refund liability - regulated(2)
740  733 
Deferred revenue - other 2  4 
Total contract liabilities $ 18,863  $ 18,580 
(1)The decrease in accounts receivable was primarily due to the reimplementation of disconnection notices and disconnections during the three months ended March 31, 2021, which had previously been temporarily suspended due to the COVID-19 pandemic.
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(2)The increase in refund liability is due to the phase-in approach approved in Rate Decision No. 76901. Refer to Note 1—"Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions — ACC Tax Docket" of the notes to the unaudited condensed consolidated financial statements for further details.
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted revenue expected to be recognized in future periods was approximately $18.1 million and $17.8 million at March 31, 2021 and December 31, 2020, respectively. Deferred revenue - ICFA is recognized as revenue once the obligations specified within the applicable ICFA are met, including construction of sufficient operating capacity to serve the customers for which revenue was deferred. Due to the uncertainty of future events, the Company is unable to estimate when to expect recognition of deferred revenue - ICFA. Deferred revenue - other is recognized as revenue once the obligations specified with the rental contract are met. The Company expects to recognize the full amount in the next three months.
4. LEASES
On January 1, 2021, the Company adopted ASC 842 using the modified retrospective method. The Company elected the practical expedient package when scoping and identifying leases. As such, the Company has not reassessed: 1) whether any expired or existing contracts are or contain leases; 2) the lease classification for any expired or existing leases; and 3) the initial direct costs for any existing leases. The Company notes that this practical expedient applies to all expired or existing contracts as of the effective date of the Company's adoption. The Company elected this practical expedient package for all lessee and lessor arrangements. In addition, the Company’s leases do not provide an implicit borrowing rate (“IBR”), and as such, we applied judgment when estimating our IBR. We assessed and reviewed factors related to our credit risk, recent debt issuances, and publicly available data for instruments with similar characteristics. The Company elected to use the portfolio approach and applied a single discount rate of approximately 5% to the portfolio. This election was based on the fact that all leases are of similar terms and our credit rating and interest rate environment are stable.
ASC 842 requires the Company to record a right-of-use asset (“ROU”) and a corresponding lease obligation for all operating leases with a term greater than twelve months. The current portion of the ROU asset is included in the “Prepaid expenses and other current assets” line item on the Company’s consolidated balance sheet. The remaining noncurrent balance of the ROU asset is included in the line item “Other noncurrent assets” on the Company’s consolidated balance sheet. In addition, the corresponding lease liabilities current and noncurrent portion are included on the Company’s consolidated balance sheet line items “Other current liabilities” and “Other noncurrent liabilities,” respectively.

The adoption of ASC 842 resulted in the initial recognition of ROU assets of $189,000 and related lease liabilities of $210,000.

The Company's ROU assets and liabilities consist of the following (in thousands):
March 31, 2021
Office Rent $ 136 
Automotive Leases 31
Total $ 167 

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5. PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment at March 31, 2021 and December 31, 2020 consist of the following (in thousands):
  March 31, 2021 December 31, 2020 Average Depreciation Life (in years)
Mains/lines/sewers $ 148,435  $ 145,910  49
Plant 96,890  96,654  31
Equipment 37,478  37,347  14
Meters 14,798  14,548  13
Furniture, fixture and leasehold improvements 1,650  1,650  27
Computer and office equipment 1,203  1,108  6
Software 241  241  3
Land and land rights 1,159  1,159   
Other 699  699   
Construction work-in-process 43,344  40,877   
Total property, plant and equipment 345,897  340,193   
Less accumulated depreciation (103,624) (101,302)  
Net property, plant and equipment $ 242,273  $ 238,891   

6. ACCOUNTS RECEIVABLE
Accounts receivable as of March 31, 2021 and December 31, 2020 consist of the following (in thousands):
  March 31, 2021 December 31, 2020
Billed receivables $ 1,959  $ 2,352 
Less allowance for doubtful accounts (224) (205)
Accounts receivable – net $ 1,735  $ 2,147 

7. GOODWILL AND INTANGIBLE ASSETS
Goodwill
As of March 31, 2021, the goodwill balance of $4.6 million related to the Turner, Red Rock, Mirabell, Francesca, Tortolita, and Lyn Lee acquisitions. There were no indicators of impairment identified as a result of the Company's review of events and circumstances related to its goodwill subsequent to the acquisitions. Based on our annual impairment testing performed on November 1st, no impairment was recorded.
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Intangible Assets

As of March 31, 2021 and December 31, 2020, intangible assets consisted of the following (in thousands):
  March 31, 2021 December 31, 2020
Gross
Amount 		Accumulated
Amortization 		Net
Amount 		Gross
Amount 		Accumulated
Amortization 		Net
Amount
INDEFINITE LIVED INTANGIBLE ASSETS:        
CP Water Certificate of Convenience & Necessity service area $ 1,532  $ 1,532  $ 1,532  $ 1,532 
Intangible trademark 13  13  13  13 
Franchise contract rights 129  129  129  129 
Organizational costs 67  67  67  67 
  1,741  1,741  1,741  1,741 
DEFINITE LIVED INTANGIBLE ASSETS:        
Acquired ICFAs 17,978  (13,718) 4,260  17,978  (13,718) 4,260 
Sonoran contract rights 7,406  (2,222) 5,184  7,406  (2,222) 5,184 
  25,384  (15,940) 9,444  25,384  (15,940) 9,444 
Total intangible assets $ 27,125  $ (15,940) $ 11,185  $ 27,125  $ (15,940) $ 11,185 
A Certificate of Convenience & Necessity ("CC&N") is a permit issued by the ACC allowing a public service corporation to serve a specified area, and preventing other public service corporations from offering the same services within the specified area. The CP Water CC&N intangible asset was acquired through the acquisition of CP Water Company in 2006. CC&N permits are expected to be renewable indefinitely.
Franchise contract rights and organizational costs relate to our 2018 acquisition of Red Rock. Franchise contract rights are agreements with Pima and Pinal counties that allow the Company to place infrastructure in public right-of-way and permits expected to be renewable indefinitely. The organizational costs represent fees paid to federal or state governments for the privilege of incorporation and expenditures incident to organizing the corporation and preparing it to conduct business.
Acquired ICFAs and contract rights related to our 2005 acquisition of Sonoran Utility Services, LLC assets are amortized when cash is received in proportion to the amount of total cash expected to be received under the underlying agreements. Due to the uncertainty of the timing of when cash will be received under ICFA agreements and contract rights, we cannot reliably estimate when the remaining intangible assets' amortization will be recorded. No amortization was recorded for these balances during the three months ended March 31, 2021 or March 31, 2020.  
8. TRANSACTIONS WITH RELATED PARTIES
The Company provides medical benefits to our employees through our participation in a pooled plan sponsored by an affiliate of a shareholder and director of the Company. Medical claims paid to the plan were approximately $0.2 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively.
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9. ACCRUED EXPENSES
Accrued expenses at March 31, 2021 and December 31, 2020 consist of the following (in thousands): 
  March 31, 2021 December 31, 2020
Deferred compensation $ 1,311  $ 1,399 
Property taxes 645  1,191 
Income taxes 1,601  1,582 
Interest 1,775  472 
Dividend payable 550  550 
Asset retirement obligation 697  697 
Deferred phantom units eligible for exercise 968  — 
Accrued Bonus 232  569 
Other accrued liabilities 2,352  1,801 
Total accrued expenses $ 10,131  $ 8,261 

10. FAIR VALUE
Fair Value of Financial Instruments
FASB ASC 820 establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company's assumptions (unobservable inputs). The hierarchy consists of three levels, as follows:
•Level 1 - Quoted market prices in active markets for identical assets or liabilities
•Level 2 - Inputs other than Level 1 that are either directly or indirectly observable
•Level 3 - Unobservable inputs developed using the Company's estimates and assumptions, which reflect those that the Company believes market participants would use.
Financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 were as follows (in thousands):
March 31, 2021 December 31, 2020
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Asset/Liability Type:
HUF Funds - restricted cash(1)
$ —  $ 3,144  $ —  $ 3,144  $ —  $ 2,482  $ —  $ 2,482 
Demand Deposit(2)
2,135  —  —  2,135  2,135  —  —  2,135 
Certificate of Deposit - Restricted(1)
—  790  —  790  —  790  —  790 
Long-term debt(3)
—  123,334  —  123,334  —  127,724  —  127,724 
Acquisition Liability(4)
—  —  838  838  —  —  838  838 
Total $ 2,135  $ 127,268  $ 838  $ 130,241  $ 2,135  $ 130,996  $ 838  $ 133,969 

(1) HUF Funds - restricted cash and Certificate of Deposit - Restricted are presented on the Restricted cash line item of the Company's consolidated balance sheets and are valued at amortized cost, which approximates fair value.
(2) Demand Deposit is presented on the Cash and cash equivalents line item of the Company's consolidated balance sheets and is valued at amortized cost, which approximates fair value.
(3) The fair value of our debt was estimated based on interest rates considered available for instruments of similar terms and remaining maturities.
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(4) As part of the Red Rock acquisition, the Company is required to pay to the seller a growth premium equal to $750 for each new account established within three specified growth premium areas, commencing in each area on the date of the first meter installation and ending on the earlier of ten years after such first installation date, or twenty years from the acquisition date. The fair value of the acquisition liability was calculated using a discounted cash flow technique which utilized unobservable inputs developed using the Company's estimates and assumptions. Significant inputs used in the fair value calculation are as follows: year of the first meter installation, total new accounts per year, years to complete full build out, and discount rate.
11. DEBT
The outstanding balances and maturity dates for short-term (including the current portion of long-term debt) and long-term debt as of March 31, 2021 and December 31, 2020 are as follows (in thousands):
  March 31, 2021 December 31, 2020
  Short-term Long-term Short-term Long-term
BONDS AND NOTES PAYABLE -        
4.38% Series A 2016, maturing June 2028 $ —  $ 28,750  $ —  $ 28,750 
4.58% Series B 2016, maturing June 2036 1,917  84,333  1,917  84,333 
4.65% Harquahala Loan, maturing January 2021(1)
—  —  3  — 
  1,917  113,083  1,920  113,083 
OTHER
Capital lease obligations 115  107  115  136 
Debt issuance costs —  (549) —  (560)
Total debt $ 2,032  $ 112,641  $ 2,035  $ 112,659 
(1) Represents a loan that was payable to Harquahala Valley Community Benefits Foundation, which was assumed in connection with the Company’s acquisition of Eagletail Water Company in May 2017. The loan was paid off in January 2021.
 2016 Senior Secured Notes
On June 24, 2016, the Company issued two series of senior secured notes with an aggregate total principal balance of $115.0 million at a blended interest rate of 4.55%. Series A carries a principal balance of $28.8 million and bears an interest rate of 4.38% over a twelve-year term, with the principal payment due on June 15, 2028. Series B carries a principal balance of $86.3 million and bears an interest rate of 4.58% over a 20-year term. Series B is interest only for the first five years, with $1.9 million principal payments paid semiannually thereafter. The proceeds of the senior secured notes were primarily used to refinance the previously outstanding long-term tax exempt bonds, which were subject to an early redemption option at 103%, plus accrued interest, as a result of our initial public offering in the United States. As part of the refinancing of the long-term debt, the Company paid a prepayment penalty of $3.2 million and wrote off the remaining $2.2 million in capitalized loan fees related to the tax exempt bonds, which were recorded as additional interest expense in the second quarter of 2016. The senior secured notes are collateralized by a security interest in the Company’s equity interest in its subsidiaries, including all payments representing profits and qualifying distributions. Debt issuance costs as of March 31, 2021 and December 31, 2020 were $0.5 million and $0.6 million, respectively.
The senior secured notes require the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00. Consolidated EBITDA is calculated as net income plus depreciation and amortization, taxes, interest and other non-cash charges net of non-cash income. Consolidated debt service is calculated as interest expense, principal payments, and dividend or stock repurchases. The senior secured notes also contain a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25. However, for the quarter ending June 30, 2021 through the quarter ending March 31, 2024, the ratio drops to 1.20. The debt service ratio increases to 1.25 for any fiscal quarter during the period from and after June 30, 2024. As of March 31, 2021, the Company was in compliance with its financial debt covenants.
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Revolving Credit Line
On April 30, 2020, the Company entered into an agreement with The Northern Trust Company, an Illinois banking corporation (the “Northern Trust Loan Agreement”), for a two-year revolving line of credit up to $10.0 million with a maturity date of April 30, 2022. This credit facility, which may be used to refinance existing indebtedness, to acquire assets to use in and/or expand the Company’s business, and for general corporate purposes, bears an interest rate equal to LIBOR plus 2.00% and has no unused line fee. This credit facility replaced the previous revolving line of credit with MidFirst Bank, which was terminated in April 2020. As of March 31, 2021, the Company had no outstanding borrowings under this credit line. There were $34,000 and $46,000 unamortized debt issuance costs as of March 31, 2021 and December 31, 2020, respectively.
The Northern Trust Loan Agreement requires the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00. The Northern Trust Loan Agreement also contains a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25. However, for the quarter ending June 30, 2021 through the quarter ending March 31, 2022, the ratio drops to 1.20. As of March 31, 2021, the Company was in compliance with its financial debt covenants.
At March 31, 2021, the remaining aggregate annual maturities of debt and minimum lease payments under capital lease obligations for the years ended December 31 are as follows (in thousands):
  Debt Capital Lease
Obligations
Remaining nine months of 2021 $ 1,917  $ 87 
2022 3,833  88 
2023 3,833  47 
2024 3,833  1 
2025 3,833  — 
Thereafter 97,751  — 
Subtotal 115,000  223 
Less: amount representing interest —  (9)
Total $ 115,000  $ 214 

12. INCOME TAXES
During the three months ended March 31, 2021, the Company recorded a tax benefit of $45,000 on pre-tax loss of $0.3 million compared to a tax expense of $0.2 million on pre-tax income of $0.6 million for the three months ended March 31, 2020. The income tax provision was computed based on the Company’s estimated effective tax rate and forecasted income expected for the full year, including the impact of any unusual, infrequent, or non-recurring items.
13. DEFERRED COMPENSATION AWARDS
Stock-based compensation
Stock-based compensation related to option awards is measured based on the fair value of the award. The fair value of stock option awards is determined using a Black-Scholes option-pricing model. We recognize compensation expense associated with the options over the vesting period.
2017 stock option grant
Stock-based compensation expense of $65,000 and $67,000 was recorded for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, 13,904 options have been exercised and 64,625 options have been forfeited with 381,871 outstanding.
2019 stock option grant
Stock-based compensation expense of $47,000 and $49,000 was recorded for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, 1,772 options have been exercised and 6,748 options have been forfeited with 241,480 options outstanding.
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Phantom stock compensation/Restricted stock units
The following table details total awards granted and the number of units outstanding as of March 31, 2021 along with the amounts paid to holders of the phantom stock units ("PSUs") and/or restricted stock units ("RSUs") for the three months ended March 31, 2021 and 2020 (in thousands, except unit amounts):
Amounts Paid For the Three Months Ended March 31,
Grant Date Units Granted Units Outstanding 2021 2020
Q1 2017 22,712  —  —  24 
Q1 2018 30,907  —  39  33 
Q1 2019 32,190  10,730  40  35 
Q1 2020 22,481  7,494  28  — 
Q1 2021(1)
27,403  27,403  —  — 
Total 135,693  45,627  $ 107  $ 92 
(1)Pursuant to the Global Water Resources, Inc. 2020 Omnibus Incentive Plan, effective May 7, 2020, long-term incentive awards are no longer granted in the form of PSUs and are granted as RSUs instead.
Stock appreciation rights compensation
The following table details the recipients of the stock appreciation rights (“SARs”) awards, the grant date, units granted, exercise price, outstanding units as of March 31, 2021 and amounts paid during the three months ended March 31, 2021 and 2020 (in thousands, except unit and per unit amounts):
Amounts Paid For the Three Months Ended March 31,
Recipients Grant Date Units Granted Exercise Price Units Outstanding 2021 2020
Members of Management (1)(2)
Q1 2015 299,000  $ 4.26  70,500  269  — 
Key Executives (3)(4)
Q2 2015 300,000  $ 5.13  —  —  300 
Members of Management (1)(5)
Q3 2017 103,000  $ 9.40  54,750  —  — 
Members of Management (1)(6)
Q1 2018 33,000  $ 8.99  24,750  —  — 
Total   735,000    150,000  $ 269  $ 300 

(1)The SARs vest ratably over sixteen quarters from the grant date.
(2)The exercise price was determined to be the fair market value of one share of GWRC stock on the grant date of February 11, 2015.
(3)The SARs vest over sixteen quarters, vesting 20% per year for the first three years, with the remainder, 40%, vesting in year four.
(4)The exercise price was determined to be the fair market value of one share of GWRC stock on the grant date of May 8, 2015.
(5)The exercise price was determined to be the fair market value of one share of GWRI stock on the grant date of August 10, 2017.
(6)The exercise price was determined to be the fair market value of one share of GWRI stock on the grant date of March 12, 2018.

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For the three months ended March 31, 2021 and 2020, the Company recorded approximately $0.3 million of compensation expense and $0.5 million of negative compensation expense related to the PSUs/RSUs and SARs, respectively. Based on GWRI’s closing share price on March 31, 2021 (the last trading date of the quarter), deferred compensation expense to be recognized over future periods is estimated for the years ending December 31 as follows (in thousands):
  PSUs SARs
Remaining nine months of 2021 $ 342  $ 39 
2022 277  52 
2023 153  52 
2024 —  9 
Total $ 772  $ 152 

Restricted stock compensation

On May 7, 2020, the Company's stockholders approved the Global Water Resources, Inc. 2020 Omnibus Incentive Plan which allows restricted stock awards as a form of compensation. A restricted stock award ("RSA") represents the right to receive a share of the Company's common stock. RSAs vest over two to three years, beginning on the date of the grant. The Company assumes that forfeitures will be minimal and recognizes forfeitures as they occur, which results in a reduction in compensation expense. During the three months ended March 31, 2021 and 2020, no RSAs were issued. For the three months ended March 31, 2021, the Company recorded approximately $0.2 million of compensation expense related to the vesting of previously issued RSAs. No compensation expense was recorded for the three months ended March 31, 2020. The following table summarizes the RSA transactions as of the three months ended March 31, 2021:

Number of RSAs Weighted Average Fair Value
Granted 177,490  $ 11.25 
Stock units vested and issued 49,163  $ 11.32 
Forfeited —  — 
Nonvested RSAs at end of period 128,327  $ 11.22 


14. SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental cash flow information for the three months ended March 31, 2021 and 2020 (in thousands):

  For the Three Months Ended March 31,
  2021 2020
Supplemental cash flow information:
Cash paid for interest $ 6  $ 4 
Non-cash financing and investing activities:
Capital expenditures included in accounts payable and accrued liabilities $ 414  $ 1,046 
15. COMMITMENTS AND CONTINGENCIES
Commitments
In January 2019, the the Company's corporate office lease agreement was amended to extend the term of the lease, with a commencement date of March 1, 2019 and termination date of May 31, 2022. As such, the Company's monthly rent expense increased to approximately $15,000. Rent expense arising from the operating leases totaled approximately $44,000 for both the three months ended March 31, 2021 and 2020.
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Contingencies
From time to time, in the ordinary course of business, the Company may be subject to pending or threatened lawsuits in which claims for monetary damages are asserted. Management is not aware of any legal proceeding of which the ultimate resolution could materially affect our financial position, results of operations, or cash flows.

16. SUBSEQUENT EVENTS

Renewal of Revolving Credit Line

On April 30, 2021, the Company and The Northern Trust Company entered into an amendment to the Northern Trust Loan Agreement pursuant to which the maturity date for the Company’s revolving line of credit was extended from April 30, 2022 to April 30, 2024. All other terms of the Northern Trust Loan Agreement remain the same.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following management’s discussion and analysis of Global Water Resources, Inc.’s (the “Company”, “GWRI”, “we”, or “us”) financial condition and results of operations relates to the three months ended March 31, 2021 and should be read together with the condensed consolidated financial statements and accompanying notes included herein, as well as our audited annual financial statements and associated management’s discussion, which are available within our Annual Report on Form 10-K for the year ended December 31, 2020 available on our Company’s profile on the Securities and Exchange Commission (“SEC”) website, www.sec.gov. 
Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q (this “Form 10-Q”) of the Company and documents incorporated herein by reference are forward-looking in nature and may constitute “forward-looking information” within the meaning of applicable securities laws. Often, but not always, forward-looking statements can be identified by the words “believes”, “anticipates”, “plans”, “expects”, “intends”, “projects”, “estimates”, “objective”, “goal”, “focus”, “aim”, “should”, “could”, “may”, and similar expressions. These forward-looking statements include, but are not limited to, statements about our strategies; expectations about future business plans, prospective performance, and opportunities, including potential acquisitions; future financial performance; regulatory proceedings and approvals, including anticipated timing and outcomes; population and growth projections; technologies; revenues; metrics; operating expenses; market trends, including those in the markets in which we operate; liquidity; cash flows and uses of cash; dividends; amount and timing of capital expenditures; depreciation and amortization; tax payments; hedging arrangements; our ability to repay indebtedness and invest in initiatives; impact and resolutions of legal matters; the impact of tax changes; the impact of accounting changes and other pronouncements; and the anticipated impacts from the COVID-19 pandemic on the Company, including to our business operations, results of operations, cash flows, and financial position, and our future responses to the COVID-19 pandemic. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not, or the times at or by which, such performance or results will be achieved. Investors are cautioned not to place undue reliance on forward-looking information. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC, as updated from time to time in our subsequent filings with the SEC. Although the forward-looking statements are based upon what management believes to be reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward-looking statements, and the differences may be material. Further, any forward-looking statement speaks only as of the date of this Form 10-Q. Except as required by law, we undertake no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Overview
We are a water resource management company that owns, operates, and manages water, wastewater, and recycled water utilities in strategically located communities, principally in metropolitan Phoenix, Arizona. GWRI seeks to deploy an integrated approach, which the Company refers to as “Total Water Management". Total Water Management is a comprehensive approach to water utility management that reduces demand on scarce non-renewable water sources and costly renewable water supplies, in a manner that ensures sustainability and greatly benefits communities both environmentally and economically. This approach employs a series of principles and practices that can be tailored to each community:
•Reuse of recycled water, either directly or to non-potable uses, through aquifer recharge, or direct potable reuse;
•Regional planning;
•Use of advanced technology and data;
•Employing subject matter experts and remaining thought and application leaders;
•Leading outreach and educational initiatives to ensure all stakeholders including customers, development partners, regulators, and utility staff are knowledgeable on the principles and practices of our Total Water Management approach; and
•Establishing partnerships with communities, developers, and industry stakeholders to gain support of our Total Water Management principles and practices.
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Table of Contents
COVID-19 Update

In late 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the President of the United States declared COVID-19 a national emergency. The outbreak has resulted in government authorities around the world implementing numerous measures to try to reduce the spread of the COVID-19 pandemic, such as travel bans and restrictions, quarantines, shelter-in-place, stay-at-home, or total lock-down (or similar) orders and business limitations and shutdowns. For example, the State of Arizona has implemented, from time to time, several orders promoting physical distancing, limiting certain activities, and restricting the operations of certain businesses, including restaurants, bars, gyms, theaters, and water parks.

Our water and wastewater services are essential services and we intend to continue to provide those services for our customers. Further, we continue to monitor the impact of COVID-19 pandemic on our business and operations, including how it will impact our customers, employees, suppliers, vendors, and business partners. While the COVID-19 pandemic did not have a material effect on our business operations, results of operations, cash flows, and financial position for the three months ended March 31, 2021, we are unable to predict the ultimate extent to which our business operations, results of operations, cash flows, and financial position will ultimately be impacted by the COVID-19 pandemic.

As a result of the economic hardships caused by the COVID-19 pandemic, we voluntarily agreed not to disconnect customers or charge late fees during the year ended December 31, 2020. However, we resumed disconnections on February 9, 2021. In 2020, we expanded our customer assistance program to include a larger customer base, while increasing the annual maximum benefit and including additional qualifying categories to include disabled veterans, deployed service members, furloughed workers, and customers with a medical hardship. As of March 31, 2021, COVID-19 did not have a material impact on uncollectible accounts. However, we believe that we may be unable to collect a portion of billed revenue for some period of time, if at all. Therefore, we could see a negative impact to our revenue, earnings, and cash flows due to the COVID-19 pandemic as this continues through 2021. Further, our current results and financial condition discussed herein may not be indicative of future operating results and trends. Refer to “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 for additional risks we face due to the COVID-19 pandemic.
Business Outlook
2020 and the first quarter of 2021 continued the trend of positive growth in new connections. According to the 2010 U.S. Census Data, the Phoenix metropolitan statistical area (“MSA”) is the 14th largest MSA in the U.S. and had a population of 4.2 million, an increase of 29% over the 3.3 million people reported in the 2000 Census. Metropolitan Phoenix continues to grow due to its low-cost housing, excellent weather, large and growing universities, a diverse employment base, and business friendly environment. The Employment and Population Statistics Department of the State of Arizona predicts that the Phoenix metropolitan area will have a population of 5.7 million people by 2030 and 6.5 million by 2040. During the three months ended March 31, 2021, Arizona’s employment rate decreased by 2.9%, ranking the state in the top ten nationally for job growth.

We believe that our utilities and service areas are directly in the anticipated path of growth primarily in the Phoenix metropolitan area. Market data indicates that our service areas currently incorporate a large portion of the final platted lots, partially finished lots, and finished lots in the Phoenix metropolitan area. Management believes that we are well-positioned to benefit from growth in the Phoenix metropolitan area due to the availability of lots and existing infrastructure in place within our services areas.
Factors Affecting our Results of Operations
Our financial condition and results of operations are influenced by a variety of industry-wide factors, including but not limited to:
•population and community growth;
•economic and environmental utility regulation;
•economic environment;
•the need for infrastructure investment;
•production and treatment costs;
•weather and seasonality; and
•access to and quality of water supply.
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The COVID-19 pandemic may impact the degree to which these factors affect our financial condition and results of operations as discussed above under "COVID-19 Update."
We are subject to economic regulation by the state regulator, the Arizona Corporation Commission (“ACC”). The U.S. federal and state governments also regulate environmental, health and safety, and water quality matters. We continue to execute on our strategy to optimize and focus the Company in order to provide greater value to our customers and shareholders by aiming to deliver predictable financial results, making prudent capital investments, and focusing our efforts on earning an appropriate rate of return on our investments.
Population and Community Growth
Population and community growth in the metropolitan Phoenix area served by our utilities have a direct impact on our earnings. An increase or decrease in our active service connections will affect our revenues and variable expenses in a corresponding manner. Our total service connections, including both active service connections and connections to vacant homes, increased 3,813 connections, or 8.2% (10.1% annualized growth), from a total of 46,590 as of March 31, 2020 to 50,403 as of March 31, 2021. This increase is primarily due to organic growth in new connections.
As of March 31, 2021, active service connections increased 3,935, or 8.5% (10.3% annualized growth), to 50,162 compared to 46,227 active service connections as of March 31, 2020. As with the increase in total service connections, the increase is due to organic growth in new connections. Approximately 93.0% of the 50,162 active service connections are serviced by our Global Water - Santa Cruz Water Company, Inc. (“Santa Cruz”) and Global Water - Palo Verde Utilities Company, Inc. (“Palo Verde”) utilities as of March 31, 2021.
The graph below presents the historical change in active and total connections for our ongoing operations over the past five years.
GWRS-20210331_G1.JPG
Economic and Environmental Utility Regulation
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We are subject to extensive regulation of our rates by the ACC, which is charged with establishing rates based on the provision of reliable service at a reasonable cost while also providing an opportunity to earn a fair rate of return on rate base for investors of utilities. The ACC uses a historical test year to evaluate whether the plant in service is used and useful, to assess whether costs were prudently incurred, and to set “just and reasonable” rates. Rate base is typically the depreciated original cost of the plant in service (net of contributions in aid of construction (“CIAC”) and advances in aid of construction (“AIAC”) which are funds or property provided to a utility under the terms of a main extension agreement, the value of which may be refundable), that has been determined to have been “prudently invested” and “used and useful”, although the reconstruction cost of the utility plant may also be considered in determining the rate base. The ACC also decides on an applicable capital structure based on actual or hypothetical analyses. The ACC determines a “rate of return” on that rate base, which includes the approved capital structure and the actual cost of debt and a fair and reasonable cost of equity based on the ACC's judgment. The overall revenue requirement for rate making purposes is established by multiplying the rate of return by the rate base and adding “prudently” incurred operating expenses for the test year, depreciation, and any applicable pro forma adjustments.
To ensure an optimal combination of access to water and water conservation balanced with a fair rate of return for investors, our water utility operating revenue is based on two components: a fixed fee and a consumption or volumetric fee. For our water utilities, the fixed fee, or “basic service charge,” provides access to water for residential usage and has generally been set at a level to produce 50% of total revenue. The volumetric fee is based on the total volume of water supplied to a given customer after the minimum number of gallons, if any, covered by the basic service charge, multiplied by a price per gallon set by a tariff approved by the ACC. A discount to the volumetric rate applies for customers that use less than an amount specified by the ACC. For all investor-owned water utilities, the ACC requires the establishment of inverted tier conservation oriented rates, meaning that the price of water increases as consumption increases. For wastewater utilities, wastewater collection and treatment can be based on volumetric or fixed fees. Our wastewater utility services are billed based solely on a fixed fee, determined by the size of the water meter installed. Recycled water is sold on a volumetric basis with no fixed fee component.
We are required to file rate cases with the ACC to obtain approval for a change in rates. Rate cases and other rate-related proceedings can take a year or more to complete. As a result, there is frequently a delay, or regulatory lag, between the time of a capital investment or incurrence of an operating expense increase and when those costs are reflected in rates. In normal conditions, it would not be uncommon to see us file for a rate increase every three years based on year one being the test year, year two being the rate case filing year, and year three being the rate case award year. However, based on our settlement with the ACC in 2014 and extended new rate phase-in period, we have not initiated the next rate case on this timeline. On August 28, 2020, 12 of our 16 regulated utilities each filed a rate case application with the ACC for water, wastewater, and recycled water rates, as well as the consolidation of water and/or wastewater rates for certain of the utilities, using the year ended December 31, 2019 as the test year for the rate case. Refer to “—Rate Case Activity” for additional information.
Our water and wastewater operations are also subject to extensive United States federal, state, and local laws and regulations governing the protection of the environment, health and safety, the quality of the water we deliver to our customers, water allocation rights, and the manner in which we collect, treat, and discharge wastewater. We are also required to obtain various environmental permits from regulatory agencies for our operations. The ACC also sets conditions and standards for the water and wastewater services we deliver. We incur substantial costs associated with compliance with environmental, health and safety, and water quality regulation.
Environmental, health and safety, and water quality regulations are complex and change frequently, and they have tended to become more stringent over time. As newer or stricter standards are introduced, they could increase our operating expenses. We would generally expect to recover expenses associated with compliance for environmental and health and safety standards through rate increases, but this recovery may be affected by regulatory lag.
Economic Environment
The growth of our customer base depends almost entirely on the success of developers in developing residential and commercial properties within our service areas. Real estate development is a cyclical industry and development in our service areas is contingent upon construction or acquisition of major public improvements, such as arterial streets, drainage facilities, telephone and electrical facilities, recreational facilities, street lighting, and local in-tract improvements (e.g., site grading). Many of these improvements are built by municipalities with public financing, and municipal resources and access to capital may not be sufficient to support development in areas of rapid population growth.
Infrastructure Investment
Capital expenditures for infrastructure investment are a component of the rate base on which our regulated utility subsidiaries are allowed to earn an equity return. Capital expenditures for infrastructure provide a basis for earnings growth by expanding our “used and useful” rate base, which is a component of its permitted return on investment and revenue requirement. We are
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generally able to recover a rate of return on these capital expenditures (return on equity and debt), together with debt service and certain operating costs, through the rates we charge.
We have made significant capital investments in our territories within the last fifteen years, and because the infrastructure remains in the early stages of its useful life, we do not expect comparable capital investments to be required in the near term, either for growth or to maintain the existing infrastructure. Nevertheless, we have an established capital improvement plan to make targeted capital investments to repair and replace existing infrastructure as needed, address operating redundancy requirements, and improve our overall financial performance, by lowering expenses and increasing revenue.
Additionally, to reduce our deferred tax liability of approximately $19.4 million resulting from the gain on the condemnation of the operations and assets of Valencia, we have completed the planned investments within our capital improvement plan that we determined will qualify under the Internal Revenue Code §1033 re-investment criteria pursuant to a favorable Private Letter Ruling with the Internal Revenue Service (the "IRS"). Refer to “—Corporate Transactions—Private Letter Ruling” for additional information.

Production and Treatment Costs
Our water and wastewater services require significant production resources and therefore result in significant production costs. Although we are permitted to recover these costs through the rates we charge, regulatory lag can decrease our margins and earnings if production costs or other operating expenses increase significantly before we are able to recover them through increased rates. Our most significant costs include labor, chemicals used to treat water and wastewater, and power used to operate pumps and other equipment. Power and chemical costs can be volatile. However, we employ a variety of technologies and methodologies to minimize costs and maximize operational efficiencies. Additionally, with our Total Water Management approach, whereby we maximize the direct beneficial reuse of recycled water, we can realize significant treatment costs and power savings because smaller volumes of water are required for potable use. Many utilities require that all water be treated to potable standards irrespective of use. Total Water Management focuses on the right water for the right use. Potable water is needed for consumption and recycled water is acceptable for non-potable uses such as irrigation. Non-potable water does not need to be treated for commonly occurring and regulated constituents such as arsenic, or for other current or future human consumption health-based contaminants.
Weather and Seasonality
Our ability to meet the existing and future water demands of our customers depends on an adequate supply of water. Drought, overuse of sources of water, the protection of threatened species or habitats, or other factors may limit the availability of ground and surface water. Also, customer usage of water and recycled water is affected by weather conditions, particularly during the summer. Our water systems generally experience higher demand in the summer due to the warmer temperatures and increased usage by customers for irrigation and other outdoor uses. However, summer weather that is cooler or wetter than average generally suppresses customer water demand and can have a downward effect on our operating revenue and operating income. Conversely, when weather conditions are extremely dry, our business may be affected by government-issued drought-related warnings and/or water usage restrictions that would artificially lower customer demand and reduce our operating revenue. The limited geographic diversity of our service areas makes the results of our operations more sensitive to the effect of local weather extremes. The second and third quarters of the year are generally those in which water services revenue and wastewater services revenues are highest. Accordingly, interim results should not be considered representative of the results of a full year.
Access to and Quality of Water Supply
In many areas of Arizona (including certain areas that we service), water supplies are limited and, in some cases, current usage rates exceed sustainable levels for certain water resources. We currently rely predominantly (and are likely to continue to rely) on the pumping of groundwater and the generation and delivery of recycled water for non-potable uses to meet future demands in our service areas. At present, groundwater (and recycled water derived from groundwater) is the primary water supply available to us. In addition, regulatory restrictions on the use of groundwater and the development of groundwater wells, lack of available water rights, drought, overuse of local or regional sources of water, protection of threatened species or habitats, or other factors, including climate change, may limit the availability of ground or surface water.
Rate Case Activity
On July 9, 2012, we filed rate applications with the ACC to adjust the revenue requirements for seven utilities. In August 2013, we entered into a settlement agreement with the ACC staff, the Residential Utility Consumers Office, the City of Maricopa, and other parties to the rate case. The settlement required approval by the ACC before it could take effect. In February 2014, the
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rate case proceedings were completed and the ACC issued Rate Decision No. 74364, approving the settlement agreement. The collective rate increase included a 9.5% return on common equity which contributed to a 15% increase over revenue in 2011.
For our utilities, adjusting for the condemnation of the operations and assets of Valencia and the sale of Willow Valley, the settlement provided for a collective aggregate revenue requirement increase of $3.6 million based on 2011 test year service connections, phased-in over time, with the first increase in January 2015 as follows (in thousands, not updated for the Federal Tax Cuts and Jobs Act (the "TCJA"), refer to "—Corporate Transactions—ACC Tax Docket" for further details):
  Incremental Cumulative
2015 $ 1,083  $ 1,083 
2016 887  1,970 
2017 335  2,305 
2018 335  2,640 
2019 335  2,975 
2020 335  3,310 
2021 335  3,645 
Whereas this phase-in of additional revenues was determined using a 2011 test year, to the extent that the number of active service connections increases from 2011 levels, the additional revenues may be greater than the amounts set forth above. On the other hand, if active connections decrease or we experience declining usage per customer, we may not realize all of the anticipated revenues.
On September 20, 2018, the ACC issued Rate Decision No. 76901, which set forth the reductions in revenue for our Santa Cruz, Palo Verde, Greater Tonopah and Northern Scottsdale utilities due to the TCJA. Rate Decision No. 76901 adopted the phase-in approach for the reductions to match the phase-in of our revenue requirement under Rate Decision No. 74364. Refer to “— Corporate Transactions — ACC Tax Docket” for details regarding Rate Decision No. 76901.
On August 28, 2020, 12 of our 16 regulated utilities each filed a rate case application with the ACC for water, wastewater, and recycled water rates, as well as the consolidation of water and/or wastewater rates for certain of the utilities, using the year ended December 31, 2019 as the test year for the rate case. Refer to “— Corporate Transactions — ACC Rate Case” for additional information.
ICFA Treatment
From 2003 to 2008, we entered into approximately 154 infrastructure coordination and financing agreements (“ICFAs”) with developers and landowners covering approximately 275 square miles. Under these agreements, we have a contractual obligation to the developers and landowners to ensure that amongst other things, physical capacity exists through our regulated utilities for water and wastewater to the landowner/developer when needed. We receive fees from the landowner/developer for undertaking these obligations that typically are a negotiated amount per planned equivalent dwelling unit for the specified development or parcel of land. Payments are generally due to us from the landowner/developer based on progress of the development, with a portion due upon signing of the agreement, a portion due upon completion of certain milestones and the final payment due upon final plat approval or sale of the subdivision. The payments are non-refundable. Our investment can be considerable, as we may phase-in the construction of facilities in accordance with a regional master plan, as opposed to a single development.
With the issuance of Rate Decision No. 74364, in February 2014, the ACC changed how ICFA funds would be characterized and accounted for going forward. Most notably, the ACC changed the rate treatment of ICFA funds. ICFA funds already received or which had become due prior to the date of Rate Decision No. 74364 were accounted for in accordance with our ICFA revenue recognition policy that had been in place prior to the 2010 Regulatory Rate Decision, wherein the funds received are recognized as revenue once the obligations specified in the ICFA were met. Rate Decision No. 74364 prescribes that of the ICFA funds which come due and are paid subsequent to December 31, 2013, 70% of the ICFA funds will be recorded in the associated utility subsidiary as a hook-up fee (“HUF”) liability, with the remaining 30% to be recorded as deferred revenue, until such time that the HUF tariff is fully funded, after which the remaining funds will be recorded as deferred revenue in accordance with our ICFA revenue recognition policy. A HUF tariff, specifying the dollar value of a HUF for each utility, was approved by the ACC as part of Rate Decision No. 74364. We are responsible for assuring the full HUF value is paid from ICFA proceeds, and recorded in its full amount by predetermined milestones in Rate Decision No. 74364, even if it results in recording less than 30% of the ICFA fee as deferred revenue.
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We account for the portion of future payments received under these agreements allocated to HUF liability as CIAC. However, from the regulator’s perspective, HUFs do not impact rate base until the related funds are expended. These funds are segregated in a separate bank account and used to construct plant assets. The HUF liability is to be relieved once the funds are used for the construction of plant. For facilities required under a hook-up fee or ICFA, we must first use the HUF funds received, after which we may use debt or equity financing for the remainder of construction. The deferred revenue portion of these fees is recognized as revenue once the obligations specified within the applicable ICFA are met, including construction of sufficient operating capacity to serve the customers for which revenue was deferred.
Pursuant to Rate Decision No. 74364, we have agreed not to enter into any new ICFAs, and instead will utilize HUF tariffs, which have become an acceptable industry practice in Arizona. As part of the settlement, a HUF tariff was established for each utility. Existing ICFAs will remain in place, with 70% of future ICFA payments to be recorded as HUFs until the HUF liability is fully funded. The HUF liability is relieved as funds are expended to construct plant, at which time a corresponding amount is recorded to CIAC. The portion of ICFA proceeds not recorded as HUF will be recorded as revenue or deferred revenue, in accordance with our ICFA revenue recognition policy.
In addition to ICFAs, we have various line extension agreements with developers and builders, through which funds, water line extensions or wastewater line extensions are provided to us by the developers and are considered refundable advances for construction. These AIACs are subject to refund by us to the developers through annual payments that are computed as a percentage of the total annual gross revenue earned from customers connected to utility services constructed under the agreement over a specified period. Upon the expiration of the agreements’ refunding period, the remaining balance of the AIAC becomes nonrefundable and at that time is considered CIAC. CIAC is amortized as a reduction of depreciation expense over the estimated remaining life of the related utility plant. For rate-making purposes, a utility plant funded by AIAC and CIAC is excluded from rate base. The taxability of AIAC and CIAC was changed with the enactment of the TCJA. Previously, the majority of AIAC and CIAC that we collected were not taxable. However, with the enactment of the TCJA, they will be taxable going forward. On November 27, 2018, the ACC ruled that the utility may require that the contributor pay a gross-up to the utility consisting of 55% of the income tax expense with the utility covering the remaining 45% of the income tax expense. For more details regarding the ruling, refer to "—Corporate Transactions — ACC Tax Docket."
Corporate Transactions
Stipulated Condemnation of the Operations and Assets of Valencia
On July 14, 2015, we closed the stipulated condemnation to transfer the operations and assets of Valencia to the City of Buckeye. Terms of the condemnation were agreed upon through a settlement agreement and stipulated final judgment of condemnation wherein the City of Buckeye acquired all the operations and assets of Valencia and assumed operation of the utility upon close. The City of Buckeye paid the Company $55.0 million at close, plus an additional $0.1 million in working capital adjustments. The City of Buckeye is obligated to pay the Company a growth premium equal to $3,000 for each new water meter installed within Valencia’s prior service areas in the City of Buckeye, for a 20-year period ending December 31, 2034, subject to a maximum payout of $45.0 million over the term of the agreement.
Private Letter Ruling
On June 2, 2016, we received a Private Letter Ruling from the IRS that, for purposes of deferring the approximately $19.4 million gain realized from the condemnation of the operations and assets of Valencia, determined that the assets converted upon the condemnation of such assets could be replaced through certain reclamation facility improvements contemplated by the Company under Internal Revenue Code §1033 as property similar or related in service or use.
Pursuant to Internal Revenue Code §1033, we would have been able to defer the gain on condemnation through the end of 2017, which was subsequently extended through the end of 2020. The Company fully deferred the remaining tax liability during year ended December 31, 2020.
ACC Tax Docket

On December 20, 2017, the ACC opened a docket to address the utility ratemaking implications of the TCJA. The ACC subsequently approved an order in February 2018 requiring Arizona utilities to apply regulatory accounting treatment, which includes the use of regulatory assets and regulatory liabilities, to address all impacts from the enactment of the TCJA.

On September 20, 2018, the ACC issued Rate Decision No. 76901, which set forth the reductions in revenue for our Santa Cruz, Palo Verde, Greater Tonopah, and Northern Scottsdale utilities due to lower corporate tax rates under the TCJA. Rate Decision No. 76901 adopted a phase-in approach for the reductions to match the phase-in of our revenue requirement under the
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Rate Decision No. 74364 enacted in February 2014. In 2020, the aggregate annual reductions in revenue for our Santa Cruz, Palo Verde, Greater Tonopah, and Northern Scottsdale utilities was approximately $1.0 million. In 2021, the final year of the phase-in, the aggregate annual reductions in revenue for our Santa Cruz, Palo Verde, Greater Tonopah, and Northern Scottsdale utilities will be approximately $415,000, $669,000, $16,000, and $5,000, respectively. The ACC also approved a carrying cost of 4.25% on regulatory liabilities resulting from the difference of the fully phased-in rates to be applied in 2021 versus the phased-in rates refunded in the years leading up to 2021 (i.e., 2018 through 2020).

Rate Decision No. 76901, however, did not address the impacts of the TCJA on accumulated deferred income taxes (“ADIT”), including excess ADIT (“EADIT”). Following the ACC's request for a proposal, the Company made its proposal in filings on December 19, 2018 and July 1, 2019. ACC Staff reviewed the Company's filing and requested that the Company defer tariff revisions until such revisions can be considered in the next rate case. ACC Staff also requested that the Company defer consideration of the regulatory assets and regulatory liabilities associated with 2018 EADIT amortization. On July 18, 2019, the Company made a filing proposing these items be deferred to the next rate case. Refer to " — Corporate Transactions — ACC Rate Case" for additional information regarding the Company's next rate case.

On November 27, 2018, February 20, 2019, February 28, 2019, and January 23, 2020, the ACC adopted orders relating to the funding for income taxes on CIAC and AIAC (which became taxable for our regulated utilities under the TCJA). Those orders 1) require that under the hybrid sharing method, a contributor will pay a gross-up to the utility consisting of 55% of the income tax expense with the utility covering the remaining 45% of the income tax expense; 2) remove the full gross-up method option for Class A and B utilities and their affiliates (which includes all of our utilities); 3) ensure proper ratemaking treatment of a utility using the self-pay method; 4) clarify that pass-through entities that are owned by a “C” corporation can recover tax expense according to methods allowed; and 5) require Class A and B utilities to self-pay the taxes associated with hook-up fee contributions but permit using a portion of the hook-up fees to fund these taxes. The Company's utilities have adopted the hybrid sharing method for income tax on CIAC and AIAC.

2020 Common Stock Offering

On January 21, 2020, we completed a public offering of 870,000 shares of common stock at a public offering price per share of $12.50, for gross proceeds of $10.9 million. On January 30, 2020, we issued an additional 130,000 shares of common stock at the public offering price of $12.50 per share, for gross proceeds of $1.6 million, resulting in total proceeds from the offering of approximately $12.5 million. The issuance of the additional shares was completed pursuant to the exercise in full of the underwriter's over-allotment option. We received net proceeds of approximately $11.5 million after deducting underwriting discounts and commissions and offering expenses payable by us, which collectively totaled approximately $1.0 million.

ACC Rate Case

On August 28, 2020, 12 of our 16 regulated utilities each filed a rate case application with the ACC for water, wastewater, and recycled water rates, which proposed a collective revenue requirement increase of $4.6 million (relative to expected revenues in 2021, which is the final year of the rate phase-in from the last rate case) based on a 2019 test year. Certain of our utilities, including Santa Cruz and Palo Verde, have also requested that the rate increases be phased in over three years, beginning January 1, 2022. The consolidated rate increase, if approved by the ACC, would result in the estimated average monthly residential bill for Santa Cruz and Palo Verde customers increasing approximately $4.93, $5.72, and $4.12 in the aggregate in each of 2022, 2023, and 2024, respectively.

We also requested the consolidation of water and/or wastewater rates for our Red Rock, Santa Cruz, Palo Verde, Picacho Water, and Picacho Utilities. These utilities are all located in Pinal County; make up approximately 97% of the Company's active service connections; provide or will provide water, wastewater, and recycled water services; and are expected to create economies of scale that are beneficial to all customers if consolidated.

There can be no assurance, however, that the ACC will approve the requested rate increase or any increase or the consolidation of water and wastewater rates described above, and the ACC could take other actions as a result of the rate case. Further, it is possible that the ACC may determine to decrease future rates. There can also be no assurance as to the timing of when an approved rate increase (if any) would go into effect.
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Acquisition of Red Rock Utilities

On October 16, 2018, we completed the acquisition of Red Rock, an operator of a water and a wastewater utility with service areas in Pima and Pinal counties of Arizona, for a purchase price of $5.9 million. The acquisition added over 1,650 connections and approximately 9 square miles of service area. The Company is obligated to pay to the seller a growth premium equal to $750 for each new account established within three specified growth premium areas, commencing in each area on the date of the first meter installation and ending on the earlier of ten years after such first installation date or twenty years from the acquisition date. The three specified growth premium areas are located in Pima County, Arizona where Red Rock has not yet begun operating, and where Red Rock is authorized to provide water utility services only. As of March 31, 2021, no meters have been installed and no accounts have been established in any of the three growth premium areas. We believe this acquisition is consistent with the Company's declared strategy of making accretive acquisitions.
Recent Events
Renewal of Revolving Credit Line

On April 30, 2021, the Company and The Northern Trust Company entered into an amendment to the Northern Trust Loan Agreement pursuant to which the maturity date for the Company’s revolving line of credit was extended from April 30, 2022 to April 30, 2024. All other terms of the Northern Trust Loan Agreement remain the same.
Segment Reporting
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing operating performance. In consideration of the Financial Accounting Standards Board’s Accounting Standards Codification 280, Segment Reporting, we are not organized around specific products and services, geographic regions, or regulatory environments. We currently operate in one geographic region within the State of Arizona, wherein each operating utility operates within the same regulatory environment.
While we report revenue, disaggregated by service type, on the face of our statement of operations, we do not manage the business based on any performance measure at the individual revenue stream level. We do not have any customers that contribute more than 10% to our revenues or revenue streams. Additionally, the chief operating decision maker uses consolidated financial information to evaluate our performance, which is the same basis on which he communicates our results and performance to our board of directors. It is upon this consolidated basis from which he bases all significant decisions regarding the allocation of our resources on a consolidated level. Based on the information described above and in accordance with the applicable literature, management has concluded that we are currently organized and operated as one operating and reportable segment.
Comparison of Results of Operations for the Three Months Ended March 31, 2021 and 2020
 
The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020 (in thousands, except per share amounts):
  For the Three Months Ended March 31,
  2021 2020
Revenues $ 9,258  $ 8,230 
Operating expenses 8,215  6,433 
Operating income 1,043  1,797 
Total other expense (1,305) (1,237)
Income (loss) before income taxes (262) 560 
Income tax benefit (expense) 45  (206)
Net income (loss) $ (217) $ 354 
Basic earnings (loss) per common share $ (0.01) $ 0.02 
Diluted earnings (loss) per common share $ (0.01) $ 0.02 

Revenues – The following table summarizes our revenues for the three months ended March 31, 2021 and 2020 (in thousands):
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  For the Three Months Ended March 31,
  2021 2020
Water services $ 3,986  $ 3,388 
Wastewater and recycled water services 5,243  4,823 
Unregulated revenues 29  19 
Total revenues $ 9,258  $ 8,230 
 
Total revenues increased $1.0 million, or 12.5%, to $9.3 million for the three months ended March 31, 2021 compared to $8.2 million for the three months ended March 31, 2020. This increase reflects the 8.5% increase in active service connections, combined with increases in consumption and the increase in rates related to Rate Decision No. 74364.

Water Services – Water services revenue increased $0.6 million, or 17.7%, to $4.0 million for the three months ended March 31, 2021 compared to $3.4 million for the three months ended March 31, 2020. The increase in water services revenues is primarily related to increased consumption and growth in connections.
Water services revenue based on consumption increased $0.4 million, or 40.7%, to $1.5 million for the three months ended March 31, 2021 compared to $1.1 million for the three months ended March 31, 2020. The increase was primarily driven by increased residential and irrigation consumption for the three months ended March 31, 2021 compared to the three months ended March 31, 2020.
Active water connections increased 8.8% to 26,094 as of March 31, 2021 from 23,983 as of March 31, 2020, primarily due to the growth in our service areas.
Water consumption increased 35.2% to 625 million gallons for the three months ended March 31, 2021 from 462 million gallons for the three months ended March 31, 2020. The increase in consumption was primarily related to an increase in irrigation and residential consumption.
Water services revenue associated with the basic service charge, excluding miscellaneous charges, increased $0.2 million, or 7.3%, to $2.4 million for the three months ended March 31, 2021 from $2.2 million for the three months ended March 31, 2020. The increase was primarily driven by an increase in active service connections, combined with an increase in rates related to Rate Decision No. 74364.
Wastewater and Recycled Water Services – Wastewater and recycled water services revenue increased $0.4 million, or 8.7%, to $5.2 million for the three months ended March 31, 2021 compared to $4.8 million for the three months ended March 31, 2020. The increase in wastewater and recycled water services revenue included a $0.4 million increase in wastewater services revenue. The increase in wastewater services revenue reflects the increase in active wastewater connections, which increased 8.2% to 24,068 as of March 31, 2021, from 22,244 as of March 31, 2020, as well as the increase in rates related to Rate Decision No. 74364.
Recycled water services revenue, which is based on the number of gallons delivered, increased $0.1 million, or 66.4%, to $0.2 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase in recycled water services revenue was primarily related to the increase in recycled water consumption, coupled with an increase in rates related to Rate Decision No. 74364. The volume of recycled water delivered increased 33 million gallons, or 53.9%, to 94 million gallons for the three months ended March 31, 2021 compared to 61 million gallons for the three months ended March 31, 2020.
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Operating Expenses – The following table summarizes our operating expenses for the three months ended March 31, 2021 and 2020 (in thousands):
  For the Three Months Ended March 31,
  2021 2020
Operations and maintenance $ 2,499  $ 2,232 
General and administrative 3,490  2,088 
Depreciation and amortization 2,226  2,113 
Total operating expenses $ 8,215  $ 6,433 
 
Operations and Maintenance – Operations and maintenance costs, consisting of personnel costs, production costs (primarily chemicals and purchased power), maintenance costs, and property tax, increased $0.3 million, or 12.0%, to $2.5 million for the three months ended March 31, 2021 compared to $2.2 million for the three months ended March 31, 2020.
Total personnel expenses increased $0.1 million, or 20.0%, to $0.8 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily due to an increase in employee medical expense.
Property tax expense increased $0.1 million, or 11.0%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Property taxes are calculated using a centrally valued property calculation, which derives property values based upon three-year historical average revenues. As revenues increase, we expect property taxes to also increase.
Utilities power and related expense increased $0.1 million, or 9.5%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase is primarily due to increased electric utility expense due to increased pump usage, which is in line with increased revenues.
General and Administrative – General and administrative costs include the day-to-day expenses of office operation, personnel costs, legal and other professional fees, insurance, rent, and regulatory fees. These costs increased $1.4 million, or 67.1%, to $3.5 million for the three months ended March 31, 2021 compared to $2.1 million for the three months ended March 31, 2020.
Deferred compensation expense increased $0.9 million to $0.6 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase was primarily driven by higher stock appreciation rights (“SARs”) expense for the current year period due to the increase in stock price for the three months ended March 31, 2021 compared to the decrease in stock price for the three months ended March 31, 2020. The increase was coupled with the restricted stock awards expense related to awards granted after the three months ended March 31, 2020. Refer to Note 14 — “Deferred Compensation Awards” of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for additional information.
Board compensation expense increased $0.4 million to $0.3 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase was primarily driven by higher deferred phantom units (“DPUs”) and restricted stock units ("RSUs") expense for the current year period due to the increase in stock price for the three months ended March 31, 2021 compared to the decrease in stock price for the three months ended March 31, 2020.
Depreciation and amortization - Depreciation and amortization expense increased $0.1 million, or 5.3%, to $2.2 million for the three months ended March 31, 2021, from $2.1 million for the three months ended March 31, 2020. The increase was primarily driven by increased depreciation due to the increase in fixed assets.
Other Expense – Other expense increased $0.1 million to $1.3 million for the three months ended March 31, 2021, from $1.2 million for the three months ended March 31, 2020. The increase in other expense was primarily attributed to the reduced amount of Valencia earnout earned coupled with lower interest income.
Income Tax Expense/Benefit – Income tax expense decreased $0.3 million to a tax benefit of less than $0.1 million for the three months ended March 31, 2021 compared to tax expense of $0.2 million for the three months ended March 31, 2020. The decrease was driven by pretax losses for the three months ended March 31, 2021 versus pretax income for the three months ended March 31, 2020.
Net Income/Loss – Net loss totaled $0.2 million for the three months ended March 31, 2021 compared to net income of $0.4 million for the three months ended March 31, 2020. The decrease was primarily attributed to the $0.8 million decrease in
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operating income, which was driven by increases in general and administrative expenses, primarily related to the fair value of our share-based payment liability awards due to the increase in stock price, partially offset by the increase in operating revenues.

Outstanding Share Data
As of May 3, 2021, there were 22,587,996 shares of our common stock outstanding and stock based awards to acquire an additional 753,871 shares of our common stock outstanding.
Liquidity and Capital Resources
Our capital resources are provided by internally generated cash flows from operations as well as debt and equity financing. Additionally, our regulated utility subsidiaries receive advances and contributions from customers, home builders, and real estate developers to partially fund construction necessary to extend service to new areas. We use our capital resources to:
•fund operating costs;
•fund capital requirements, including construction expenditures;
•pay dividends;
•fund acquisitions;
•make debt and interest payments; and
•invest in new and existing ventures.
Our utility subsidiaries operate in rate-regulated environments in which the amount of new investment recovery may be limited. Such recovery will take place over an extended period of time because recovery through rate increases is subject to regulatory lag.
As of March 31, 2021, we have no notable near-term cash expenditures, other than the first principal payment for our Series B senior secured notes in the amount of $1.9 million due in December 2021. While specific facts and circumstances could change, we believe that we have sufficient cash on hand, the ability to draw on our $10.0 million revolver, and will be able to generate sufficient cash flows to meet our operating cash flow requirements and capital expenditure plan as well as remain in compliance with our debt covenants for at least the next twelve months. However, our near term cash flow may be impacted by the COVID-19 pandemic. Refer to “—COVID-19 Update” and “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 for additional discussion relating to the COVID-19 pandemic.
In March 2014, we initiated a dividend program to declare and pay a monthly dividend. On November 5, 2020, we announced a monthly dividend increase from $0.0241 per share ($0.2892 per share annually) to $0.02434 per share ($0.29208 per share annually). Although we expect monthly dividends will be declared and paid for the foreseeable future, the declaration of any dividends is at the discretion of our board of directors and is subject to legal requirements and debt service ratio covenant requirements (refer to “—Senior Secured Notes" and "—Revolving Credit Line").
Cash from Operating Activities
Cash flows provided by operating activities are used for operating needs and to meet capital expenditure requirements. Our future cash flows from operating activities will be affected by economic utility regulation, infrastructure investment, growth in service connections, customer usage of water, compliance with environmental health and safety standards, production costs, weather, and seasonality.
For the three months ended March 31, 2021, our net cash provided by operating activities totaled $4.8 million compared to $3.2 million for the three months ended March 31, 2020. The $1.6 million increase in cash from operating activities was primarily driven by increases in accounts payable and other current and noncurrent liabilities coupled with a decrease in accounts receivables for the three months ended March 31, 2021 compared to March 31, 2020.
Cash from Investing Activities
Our net cash used in investing activities totaled $3.3 million for the three months ended March 31, 2021 compared to $3.5 million for the three months ended March 31, 2020. The $0.3 million decrease in cash used in investing activities was primarily driven by a decrease in capital expenditures of $0.3 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

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Cash from Financing Activities
Our net cash used in financing activities totaled $0.7 million for the three months ended March 31, 2021 compared to $10.1 million in cash provided by financing activities for the three months ended March 31, 2020. This change was primarily driven by the $11.5 million in net proceeds received from our public offering of stock in January 2020, partially offset by increased AIAC of $0.7 million for the three months ended March 31, 2021.
Senior Secured Notes
On June 24, 2016, we issued two series of senior secured notes with a total principal balance of $115.0 million at a blended interest rate of 4.55%. Series A carries a principal balance of $28.8 million and bears an interest rate of 4.38% over a twelve-year term, with the principal payment due on June 15, 2028. Series B carries a principal balance of $86.3 million and bears an interest rate of 4.58% over a 20-year term. Series B is interest only for the first five years, with $1.9 million principal payments paid semiannually thereafter. The proceeds of the senior secured notes were primarily used to refinance our long-term tax exempt bonds, pursuant to an early redemption option at 103%, plus accrued interest, as a result of the initial public offering of our common stock in May 2016.
The senior secured notes require the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00. Consolidated EBITDA is calculated as net income plus depreciation and amortization, taxes, interest and other non-cash charges net of non-cash income. Consolidated debt service is calculated as interest expense, principal payments, and dividend or stock repurchases. The senior secured notes also contain a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25. However, for the quarter ending June 30, 2021 through the quarter ending March 31, 2024, the ratio drops to 1.20. The debt service ratio increases to 1.25 for any fiscal quarter during the period from and after June 30, 2024. As of March 31, 2021, the Company was in compliance with its financial debt covenants.
Debt issuance costs as of March 31, 2021 and December 31, 2020 were $0.5 million and $0.6 million, respectively.
Revolving Credit Line
On April 30, 2020, the Company entered into an agreement with The Northern Trust Company, an Illinois banking corporation (the “Northern Trust Loan Agreement”), for a two-year revolving line of credit up to $10.0 million with a maturity date of April 30, 2022. This credit facility, which may be used to refinance existing indebtedness, to acquire assets to use in and/or expand the Company’s business, and for general corporate purposes, bears an interest rate equal to LIBOR plus 2.00% and has no unused line fee. This credit facility replaced the previous revolving line of credit with MidFirst Bank, which was terminated in April 2020.

Similar to the senior secured notes, the Northern Trust Loan Agreement requires the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00. The Northern Trust Loan Agreement also contains a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25. However, for the quarter ending June 30, 2021 through the quarter ending March 31, 2022, the ratio drops to 1.20. Additionally, the Northern Trust Loan Agreement contains certain restrictive covenants that limit, among other things, the Company’s ability to: create liens and other encumbrances; incur additional indebtedness; merge, liquidate or consolidate with another entity; dispose of or transfer assets; make distributions or other restricted payments (including dividends); engage in certain affiliate transactions; and change the nature of the business. The foregoing covenants were subject to various qualifications and limitations as set forth in the Northern Trust Loan Agreement. Pursuant to the Northern Trust Loan Agreement, the revolving credit facility is subject to certain customary events of default after which the revolving credit facility could be declared due and payable if not cured within the grace period or, in certain circumstances, could be declared due and payable immediately. Refer to Note 12 — "Debt" of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for additional information. As of March 31, 2021, the Company was in compliance with its financial debt covenants.
As of March 31, 2021, the Company had no outstanding borrowings under this credit line with Northern Trust Bank.
Insurance Coverage
We carry various property, casualty, and financial insurance policies with limits, deductibles, and exclusions consistent with industry standards. However, insurance coverage may not be adequate or available to cover unanticipated losses or claims. We are self-insured to the extent that losses are within the policy deductible or exceed the amount of insurance maintained. Such losses could have a material adverse effect on our short-term and long-term financial condition and the results of operations and cash flows.
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Critical Accounting Policies, Judgments, and Estimates
The application of critical accounting policies is particularly important to our financial condition and results of operations and provides a framework for management to make significant estimates, assumptions, and other judgments. Additionally, our financial condition, results of operations, and cash flow are impacted by the methods, assumptions, and estimates used in the application of critical accounting policies. Although our management believes that these estimates, assumptions, and other judgments are appropriate, they relate to matters that are inherently uncertain and that may change in subsequent periods. Accordingly, changes in the estimates, assumptions, and other judgments applied to these accounting policies could have a significant impact on our financial condition and results of operations as reflected in our financial statements.

There have been no significant changes to our critical accounting policies from those disclosed under “Managements’ Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies, Judgments, and Estimates” in our most recent Annual Report on Form 10-K filed with the SEC on March 4, 2021.
Off Balance Sheet Arrangements
As of March 31, 2021 and December 31, 2020, we did not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk associated with changes in commodity prices, equity prices, and interest rates. The Company uses fixed-rate long-term debt to reduce the risk from interest rate fluctuations. Although the Company’s currently outstanding long-term debt is based on fixed rates, changes in interest rates could impact the fair market value of such long-term debt.  As of March 31, 2021, the fair market value of the Company’s long-term debt was $123.3 million.  For additional information about the Company’s long-term debt, refer to Note 12 — “Debt” of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for additional information.
 
Other than interest-related risks, the Company believes the risks associated with price increases for chemicals, electricity, and other commodities are mitigated by the Company’s ability over the long-term to recover its costs through rate increases to its customers, though such recovery is subject to regulatory lag.
 
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, reviewed and evaluated our disclosure controls and procedures (as such term is defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2021, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Change in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as such term is defined under Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of business, we may, from time to time, be subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. To our knowledge, we are not involved in any legal proceeding which is expected to have a material effect on us.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes in our risk factors from those discussed in “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
a) Sales of Unregistered Securities
No unregistered securities were sold during the three months ended March 31, 2021.
b) Use of Proceeds
None.
c) Issuer Purchases of Equity Securities
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION

Item 1.01    Entry into a Material Definitive Agreement

Revolving Credit Line Extension

On April 30, 2020, the Company entered into the Northern Trust Loan Agreement with The Northern Trust Company, an Illinois banking corporation (“Northern Trust”), on the terms and subject to the conditions set forth in the Northern Trust Loan Agreement, for a revolving credit facility in the maximum principal amount of $10.0 million. On April 30, 2021, the Company entered into a modification agreement (the “Modification Agreement”) with Northern Trust, amending the terms and conditions set forth in the Northern Trust Loan Agreement to, among other things, (i) extend the scheduled maturity date from April 30, 2022 to April 30, 2024, and (ii) add Global Water Holdings, Inc., a wholly owned subsidiary of the Company, as a guarantor of the Company’s obligations under the Northern Trust Loan Agreement.

The Modification Agreement contains customary representations, warranties and covenants consistent with the Northern Trust Loan Agreement. As of April 30, 2021, no amount was drawn under the revolving credit facility.

On April 30, 2021, in connection with the Modification Agreement, Global Water Holdings, Inc. entered into (i) a guaranty agreement (the “Guaranty Agreement”) for the benefit of Northern Trust, pursuant to which Global Water Holdings, Inc., together with the existing guarantors consisting of Global Water, LLC and West Maricopa Combine, LLC, jointly and severally guaranteed the Company’s obligations under the Northern Trust Loan Agreement; and (ii) a pledge and security agreement (the “Pledge Agreement”) with U.S. Bank National Association, as collateral agent for Northern Trust, relating to the collateral securing the revolving credit facility under the Northern Trust Loan Agreement.

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The foregoing description of the Modification Agreement, the Guaranty Agreement and the Pledge Agreement is only a summary and is qualified in its entirety by reference to the full text of such agreements, which are filed as Exhibits 10.5, 10.6 and 10.7, respectively, to this Form 10-Q and are incorporated by reference herein.

Item 2.03    Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of
a Registrant

The information required by this item is included under “—Revolving Credit Line Extension” above and incorporated herein by reference.


Item 5.02    Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;         
Compensatory Arrangements of Certain Officers
New Employment Agreements
On May 5, 2021, the Company entered into new employment agreements (the “Agreements”) with each of Ron L. Fleming, the Company’s President and Chief Executive Officer, Michael J. Liebman, the Company’s Senior Vice President, Secretary and Chief Financial Officer, and Christopher D. Krygier, the Company’s Chief Strategy Officer. The Agreements replace the Company’s existing employment agreements with each of Mr. Fleming and Mr. Liebman, effective August 6, 2019, and with Mr. Krygier, effective May 7, 2020. Unless terminated earlier in accordance with its terms, each of the Agreements continues until May 5, 2024 and will automatically renew for one or more additional 12-month periods unless either the Company or the executive provides notice prior to the end of the then-current term.

The Agreements provide that Mr. Fleming will receive an annual base salary of $350,000; Mr. Liebman will receive an annual base salary of $280,000; and Mr. Krygier will receive an annual base salary of $220,000 during the one year period following the date of the Agreement, $240,000 during the following one year period, and $250,000 for each year thereafter. The Company’s Board (or its compensation committee) may review the base salaries on an annual basis to determine whether any increases are appropriate.

In addition, Mr. Fleming, Mr. Liebman and Mr. Krygier may be entitled to annual incentive compensation as determined (a) in the discretion of the Board (or its compensation committee) or (b) pursuant to any incentive compensation program adopted by the Company from time to time. For each calendar year, Mr. Fleming and Mr. Liebman will be eligible to receive up to 50% and 40%, respectively, of his base salary as incentive compensation in the form of a cash bonus. For the calendar years ending December 31, 2021, 2022 and 2023 (and any years thereafter), Mr. Krygier will be eligible to receive up to 17.5%, 20%, and 22.5%, respectively, of his base salary as incentive compensation in the form of a cash bonus.

For performance periods ending on and after December 31, 2021, Mr. Fleming and Mr. Liebman will be eligible to receive up to 50% and 40%, respectively, of his base salary in the form of restricted stock units or such other equity awards as may be issued pursuant to the Global Water Resources, Inc. 2020 Omnibus Incentive Plan (the “Omnibus Plan”). For performance periods ending December 31, 2021, 2022 and 2023 (and any years thereafter), Mr. Krygier will be eligible to receive up to 17.5%, 20%, and 22.5%, respectively, of his base salary in the form of restricted stock units or such other equity awards as may be issued pursuant to the Omnibus Plan. The actual number of restricted stock units or other equity will be based on the executive satisfying the performance goals established by the Board (or its compensation committee).

Subject to their continued employment, on May 5, 2022 (the “Grant Date”), Mr. Fleming, Mr. Liebman and Mr. Krygier are entitled to a grant of 30,000, 25,000 and 20,000 shares of restricted stock (the “Restricted Shares”), respectively. Such Restricted Shares shall vest in three substantially equal installments: one-third (1/3) of the Restricted Shares shall vest on May 8, 2023; one-third (1/3) of the Restricted Shares shall vest on May 8, 2024; and one-third (1/3) of the Restricted Shares shall vest on May 8, 2025. Notwithstanding the foregoing, no Restricted Shares shall be granted to any executives if his employment with the Company terminates for any reason prior to the Grant Date. The grant of Restricted Shares shall be subject to the terms of the Omnibus Plan and the award agreement granting the Restricted Shares.

The Company will provide to Mr. Fleming, Mr. Liebman and Mr. Krygier such fringe and other benefits as are regularly provided by the Company to members of its senior management team.

If either Mr. Fleming’s, Mr. Liebman’s or Mr. Krygier’s employment is:

•    voluntarily terminated by the executive without Good Reason (as defined in each Agreement) or if the Company terminates the executive’s employment for Cause (as defined in each Agreement), then (i) the Company will be obligated to pay
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the executive’s then current base salary through the date of termination and any incentive compensation earned in previous years but not yet paid; and (ii) no incentive compensation shall be payable for the year in which the termination occurs. In addition, any unvested equity-based awards shall be forfeited.

•    voluntarily terminated by the executive with Good Reason, or if the Company terminates the executive’s employment without Cause (including by providing notice of non-renewal), then (i) the Company will be obligated to pay the executive’s then current base salary through the date of termination and any incentive compensation earned in previous years but not yet paid; (ii) no incentive compensation shall be payable for the year in which the termination occurs (except if the termination occurs during the last six months of the Company’s fiscal year, the executive may be entitled to certain pro rata payments); (iii) if the executive timely and properly elects continuation coverage under COBRA, the Company shall reimburse the executive for the COBRA premiums as specified in the Agreements; (iv) any equity based awards previously granted will become fully vested and exercisable and all restrictions on restricted awards will lapse; and (v) (a) with respect to Mr. Fleming and Mr. Liebman, the Company will pay an amount equal to the sum of (A) three (3) times the executive’s current base salary as of the date of termination, and (B) six (6) times the maximum cash bonus that the executive could have earned in the year of the termination; and (b) with respect to Mr. Krygier, the Company will pay an amount equal to the sum of (A) one (1) times his current base salary as of the date of termination, and (B) two (2) times the maximum cash bonus that he could have earned in the year of the termination.

If Mr. Fleming or Mr. Liebman terminates his employment with the Company with Good Reason, or if the Company terminates the executive’s employment without Cause within 24 months following a Change of Control (as defined in the Agreements) of the Company, the executive will be entitled to a lump-sum cash payment equal to the sum of (i) three (3) times the executive’s current base salary as of the date of the Change of Control, and (ii) six (6) times the sum of the maximum cash bonus that the executive could have earned in the year of the Change of Control. In addition, all outstanding equity or stock price-based awards previously granted to Mr. Fleming or Mr. Liebman will become fully vested and exercisable and all restrictions on restricted awards will lapse upon any Change of Control, regardless of whether Mr. Fleming or Mr. Liebman remains employed by the Company or its successor following the Change of Control. If Mr. Krygier terminates his employment with the Company with Good Reason, or if the Company terminates his employment without Cause within 24 months following a Change of Control (as defined in his Agreement) of the Company, any outstanding equity or stock price-based awards previously granted to Mr. Krygier will vest and become exercisable and he will be entitled to a lump-sum cash payment equal to the sum of (i) two (2) times his current base salary as of the date of the Change of Control, (ii) four (4) times the sum of the maximum cash bonus that he could have earned in the year of the Change of Control. The Agreements also contain a “best-net” provision, which provides that if Internal Revenue Code Section 280G applies to the payments and such payments trigger an excise tax, then the payments may be reduced to an amount that will not trigger the excise tax, if such reduction would result in a greater amount paid to the executive.

The payments due on termination of employment and termination following a Change of Control to any executive are subject to the requirement that the executive executes the release agreement in the form attached as an exhibit to the Agreements.

Under the Agreements, Mr. Fleming, Mr. Liebman and Mr. Krygier have also agreed to post-employment undertakings regarding non-solicitation and non-competition for a period of one year thereafter.

The foregoing description of the Agreements is only a summary and is qualified in its entirety by reference to the full text of the Agreements, which are filed as Exhibits 10.2, 10.3 and 10.4 to this Form 10-Q and are incorporated by reference herein.


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ITEM 6. EXHIBITS
Exhibit
Number 		Description of Exhibit Method of Filing
     
3.1 Incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed May 4, 2016.
 
3.2 Incorporated by reference to Exhibit 3.2 of the Company’s Form 8-K filed May 4, 2016.
 
10.1 Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed March 24, 2021.
10.2 Filed herewith.
10.3 Filed herewith.
10.4 Filed herewith.
10.5 Filed herewith.
10.6 Filed herewith.
10.7 Filed herewith.
31.1 Filed herewith.
31.2 Filed herewith.
32.1 Furnished herewith.
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document Filed herewith.
101.SCH Inline XBRL Taxonomy Extension Schema Document Filed herewith.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document Filed herewith.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document Filed herewith.
101. PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith.
104 Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) Filed herewith.
* Management contract or compensatory plan or arrangement.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
    Global Water Resources, Inc.
       
Date: May 5, 2021 By: /s/ Michael J. Liebman
      Michael J. Liebman
      Chief Financial Officer and Corporate Secretary
      (Duly Authorized Officer and Principal Financial and Accounting Officer)

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EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is made as of the 5th day of May 2021, by and between Global Water Resources, Inc., a Delaware corporation (the “Company”), and Ron L. Fleming, a resident of the State of Arizona (the “Executive”) and shall be effective as of May 5, 2021 (the “Effective Date”).
RECITALS
WHEREAS, the Company desires to continue to employ the Executive as its President and Chief Executive Officer, as well as President of Global Water, LLC and all utility subsidiaries, and the Executive desires to continue such employment; and
WHEREAS, the Company and the Executive previously entered into an employment agreement dated as of August 6, 2019 (the “Superseded Agreement”); and
WHEREAS, the parties desire to enter into this Agreement to replace the Superseded Agreement and to set forth the terms and conditions of the Executive’s employment with the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and mutual agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in reliance upon the representations, covenants and mutual agreements contained herein, the Company and the Executive agree as follows:
1.Employment. Subject to the terms and conditions of this Agreement, the Company agrees to employ the Executive as its President and Chief Executive Officer, and as President of Global Water, LLC and all regulated utility subsidiaries, and the Executive agrees to diligently perform the duties associated with such positions, including (without limitation) those duties listed on Exhibit A attached hereto. The Executive shall perform his duties primarily at the Company’s headquarters located in Phoenix, Arizona. The Executive will report directly to the Company’s board of directors (the “Board”) and shall perform such other duties as the Board may assign from time to time, provided that such additional duties are reasonable and consistent with the scope of the positions held by the Executive. The Executive will devote substantially all of his business time, attention and energies to the business of the Company and will comply with the policies and guidelines established by the Company from time to time applicable to its senior management executives. During the term of this Agreement, the Executive shall not, without the Company’s prior written consent, be a director, officer, employee, consultant or advisor of or to any person, firm, association, syndicate, partnership, trust or corporation engaged in, concerned with or interested in a business substantially similar to the business of the Company. Notwithstanding the foregoing, the Executive may (a) serve on civic or charitable or not-for-profit industry-related organizations, (b) engage in charitable, civic, educational, professional community and/or industry activities without remuneration therefore, (c) manage personal and family investments, and (d) purchase securities in any corporation whose securities are regularly traded, provided that such purchase shall not result in the Executive beneficially owning 5% or more of the equity securities of any business in competition with the Company at any time.
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2.Term. The Executive will be employed under this Agreement from the Effective Date until May 5, 2024, unless the Executive’s employment is terminated earlier pursuant to Section 7 or Section 8. Thereafter, the Agreement and Executive’s employment under it will automatically renew for one or more additional 12-month periods (each a “Renewal Term”), unless on or before December 31, 2023 (or December 31st during the year of the then current Renewal Term, as applicable), either the Executive or the Company notifies the other party in writing that it wishes to terminate employment under this Agreement at the end of the term then in effect.
3.Base Salary. The Company will pay the Executive an annual base salary (“Base Salary”) of $350,000 during each calendar year during the term of this Agreement. The Board or its compensation committee (the “Compensation Committee”) may review the Base Salary on an annual basis to determine, in its sole and absolute discretion, whether any increases are appropriate based on a combination of factors, which shall include (without limitation) the Executive’s achievement of specified performance objectives and/or the amount of compensation paid to the Executive’s peers at other, similarly situated public companies. The Base Salary may not be reduced without the Executive’s consent. The Base Salary will be payable in accordance with the payroll practices of the Company in effect from time to time and will be subject to customary withholding for applicable taxes and other deductions.
4.Incentive Compensation. The Executive may be entitled to annual incentive compensation as determined (a) in the discretion of the Board (or the Compensation Committee) or (b) pursuant to any incentive compensation program adopted by the Company from time to time.
A.Cash Bonus. For each calendar year, the Executive will be eligible to receive up to 50% of his Base Salary as incentive compensation in the form of a cash bonus. The actual percentage shall be determined annually by the Board (or the Compensation Committee) based on the Executive satisfying the performance goals established by the Board (or the Compensation Committee). If the Executive is entitled to receive a cash bonus, such bonus shall be paid at such time as cash bonuses are otherwise payable to all employees under the incentive compensation program, but in no event later than March 15 of the year following the year in which the right to the cash bonus, if any, becomes vested.
B.Restricted Stock Units. For performance periods beginning on and after January 1, 2021, the Executive will be eligible to receive up to 50% of his Base Salary in the form of restricted stock units or such other equity awards as may be issued pursuant to the terms of the Global Water Resources, Inc. 2020 Omnibus Incentive Plan or such successor equity plan (the “Incentive Plan”). The actual number of restricted stock units or other equity will be based on the Executive satisfying the performance goals established by the Board (or the Compensation Committee) pursuant to the Incentive Plan. All equity awards shall be subject to the terms and conditions of the Incentive Plan and any award agreement issued pursuant to the Incentive Plan.
C.Restricted Stock. In addition, subject to the following, the Executive is entitled to a grant of 30,000 shares of restricted stock (the “Restricted Shares”) which shall have a grant date of May 5, 2022 (the “Grant Date”). Such Restricted Shares shall vest in three substantially equal installments: one-third (1/3) of the Restricted Shares shall vest on May 8, 2023; one-third (1/3) of the Restricted Shares shall vest on May 8, 2024; and one-third (1/3) of the Restricted Shares shall vest on May 8, 2025. Notwithstanding the foregoing, no Restricted
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Shares shall be granted to the Executive if the Executive’s employment with the Company terminates for any reason prior to the Grant Date. The grant of Restricted Shares shall be subject to the terms of the Incentive Plan and the award agreement granting the Restricted Shares.
5.Reimbursement of Business Expenses. The Executive shall be entitled to reimbursement of reasonable and customary business expenses, including for all authorized travel and all out of pocket expenses incurred by the Executive as authorized by the Company in the performance of his duties. The Executive shall furnish any statements, receipts, invoices and other documentation that the Company may reasonably require in connection with processing such reimbursements.
6.Other Benefits. The Company will provide to the Executive such fringe and other benefits as are regularly provided by the Company to members of its senior management team, including participation in the Company’s welfare plans (e.g., health, medical, dental, vision, etc.) and other benefit programs (e.g., profit-sharing, long-term incentive compensation, retirement, investment, life and disability insurance, etc.) in effect from time to time, in each case to the extent that the Executive is eligible for participation under the terms of such plans or programs. The Executive shall be entitled to five (5) weeks of paid vacation per year, which vacation shall be paid at a rate equal to the Executive’s then current Base Salary. The Executive may take such vacation at such time(s) as the Executive and the Company shall mutually agree to, acting reasonably.
7.Termination of Employment.
A.Voluntary Resignation by Executive without Good Reason. The Executive may voluntarily terminate his employment with the Company at any time by giving four (4) weeks advance written notice to the Company (which notice period the Company may waive in whole or in part in its sole discretion). If such voluntary termination is without Good Reason (as defined below), then (i) the Company will be obligated to pay the Executive’s then-current Base Salary through the Date of Termination (as defined below) and any incentive compensation earned in previous years but not yet paid; (ii) no incentive compensation shall be payable for the year in which the termination occurs; and (iii) the Company shall not pay or reimburse the Executive for COBRA (as defined below) premiums for the period that the Company is required to offer COBRA coverage as a matter of law. For the avoidance of doubt, any unvested phantom stock units, stock appreciation rights, shares of restricted stock, restricted stock units, or other equity-based awards shall be forfeited.
B.Voluntary Resignation by Executive with Good Reason; Termination without Cause by the Company. If the Executive terminates his employment with the Company with Good Reason, or if the Company terminates the Executive’s employment without Cause, including by providing the notice of non-renewal referenced in Section 2, provided Executive complies with the release requirements of Section7(F), then (i) the Company will be obligated to pay the Executive’s then current Base Salary through the Date of Termination and any incentive compensation earned in previous years but not yet paid; (ii) no incentive compensation shall be payable for the year in which the termination occurs unless the termination of employment occurs during the last six (6) months of the Company’s fiscal year, in which case the Executive will be paid a pro rata bonus based upon the Company’s performance for the fiscal year payable at such time as incentive compensation is otherwise payable to employees under the incentive compensation program; (iii) if Executive timely and properly
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elects continuation coverage under COBRA, the Company shall reimburse Executive for the COBRA premiums for the level of coverage that the Executive had elected prior to the Executive’s Separation from Service until the earliest of (A) 18 months following the date of Executive’s Separation from Service, (B) the date on which the Executive becomes employed by any other employer that provides health insurance coverage, regardless of whether such coverage is comparable to the coverage provided by the Company or (C) the date the Executive is no longer eligible to receive COBRA continuation coverage; (iv) notwithstanding the provisions in the Incentive Plan or in any equity, phantom stock, restricted stock, restricted stock unit, or stock appreciation right plan or award agreement to the contrary, any equity or stock price-based awards (including phantom stock units, shares of restricted stock, restricted stock units, and stock appreciation rights) previously granted will become fully vested and exercisable and all restrictions on restricted awards will lapse; and (v) the Company will pay the Executive an amount equal to the sum of (A) three (3) times the Executive’s current Base Salary as of the Date of Termination, and (B) six (6) times the maximum cash bonus that the Executive could have earned in the year of the Date of Termination. Unless otherwise provided in this Agreement, this amount shall be paid in a lump-sum payment within 60 days following the Executive’s Separation from Service.
C.Termination for Cause by the Company. If the Company terminates the Executive’s employment for Cause, then, (i) the Company will be obligated to pay the Executive’s then current Base Salary through the Date of Termination and any incentive compensation earned in previous years but not yet paid; and (ii) no incentive compensation shall be payable for the year in which the termination occurs. For the avoidance of doubt, any unvested phantom stock units, stock appreciation rights, shares of restricted stock, restricted stock units or other equity-based awards shall be forfeited.
D.Death or Disability. If Executive dies or becomes Disabled, then the Company will be obligated to pay (i) the Executive’s then current Base Salary through the date of death or the effective date of Disability and any incentive compensation earned in previous years but not yet paid, (ii) a pro-rated amount of the Executive’s actual incentive compensation for the year, payable at such time as incentive compensation is otherwise payable to employees under the incentive compensation program, (iii) if Executive or Executive’s qualified beneficiary timely and properly elects continuation coverage under COBRA, the Company shall reimburse Executive or Executive’s qualified beneficiary for the COBRA premiums for the level of coverage that the Executive had elected prior to the Executive’s death or Disability until the earliest of (A) 18 months following the date of Executive’s death or Disability, (B) the date on which the Executive or the Executive’s qualified beneficiary becomes employed by any other employer that provides health insurance coverage, regardless of whether such coverage is comparable to the coverage provided by the Company, or (C) the date the Executive or his qualified beneficiary is no longer eligible to receive COBRA continuation coverage; and (iv) notwithstanding the provisions in the Incentive Plan or in any equity, phantom stock, restricted stock, restricted stock unit, or stock appreciation rights plan or award agreement to the contrary, any equity or stock price-based awards previously granted will become fully vested and exercisable and all restrictions on restricted awards will lapse and, to the extent permitted under the applicable plan’s governing documents, the Executive (or the Executive’s beneficiary(ies)) shall have a period of one (1) year from the effective date of Death or Disability to exercise any such options (or if shorter, the expiration date of the option).
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E.Definitions. For purposes of this Agreement:
1.“Cause” shall occur if the Executive (a) has engaged in malfeasance, willful or gross misconduct, or willful dishonesty that materially harms the Company, its reputation, or its stockholders; (b) is convicted of a felony that is materially detrimental to the Company, its reputation, or the Company’s stockholders; (c) is convicted of or enters a plea of nolo contendere to a felony that materially damages the Company’s financial condition or reputation or to a crime involving fraud; (d) is in material violation of the Company’s ethics/policy code or employment policies, including willful breach of duty of loyalty in connection with the Company’s business; (e) willfully fails to perform his duties under this Agreement after written notice by the Company and a reasonable opportunity to cure; or (f) impedes, interferes or fails to reasonably cooperate with an investigation authorized by the Company or fails to follow a legal and proper Company directive. For purposes hereof, no act, or failure to act, by the Executive will be considered “willful” unless committed in bad faith and without a reasonable belief that the act or omission was in the best interests of the Company. No action shall be deemed Cause hereunder if undertaken by the Executive at the direction of the Board or upon following the advice of counsel to the Company or any of its affiliates. For the avoidance of doubt, poor performance shall not, by itself, constitute Cause hereunder. The Executive shall not be terminated for Cause (other than pursuant to clauses (b) or (c) of the preceding sentence due to conviction or entering a plea of nolo contendere) unless he is first given notice by the Board of its intention to terminate him for Cause and provided a period of at least thirty (30) days to cure (if capable of cure) the event or events alleged to constitute Cause hereunder. Executive shall have an opportunity to address the Board, with counsel present if he so elects, before being terminated and any termination for Cause shall be by a vote of a majority of the Board.
2.“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
3.“Code” means the Internal Revenue Code of 1986, as amended.
4.“Date of Termination” shall mean (a) if employment under this Agreement is terminated as a result of the Executive’s death, the date of the Executive’s death, (b) if employment under this Agreement is terminated by the Executive, the last day of his employment with the Company, (c) if this Agreement is terminated as a result of the Executive’s Disability, the effective date of the Disability, (d) if employment under this Agreement is terminated by the Company for Cause, the date a final determination is provided to the Executive by the Company, or (e) if this Agreement is terminated by the Company without Cause, the date notice of termination is given to the Executive by the Company.
5.“Disability” shall mean if, by reason of any medically determinable physical or mental impairment which actually hinders the Executive’s ability to perform his job and which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, the Executive is receiving income replacement benefits for a period of not less than six months under an accident and health plan established by the Company for its employees. The effective date of Executive’s Disability is the last day of the sixth month on which the Executive receives the income replacement benefits.
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6.“Good Reason” shall mean a Separation from Service within two (2) years following the occurrence of one or more of the following circumstances without Executive’s express consent: (a) a material diminution in the Executive’s authority, duties or responsibilities, (b) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report; (c) a material diminution in Executive’s Base Salary not consented to as required under Section 3; (d) a material change in the geographic location of Executive’s principal office; or (e) any other action or inaction that constitutes a material breach by the Company of this Agreement. Executive must provide written notice to Company of the existence of the Good Reason condition described in clauses (a) – (e) above within ninety (90) days of the Executive’s knowledge of the existence of the condition. Notwithstanding anything to the contrary, an event described in clauses (a) – (e) above will not constitute Good Reason if, within thirty (30) days after Executive gives Company notice of the occurrence or existence of an event that Executive believes constitutes Good Reason, Company has cured (if capable of cure) the event or events alleged to constitute Good Reason hereunder.
7.“Separation from Service” shall mean either (a) termination of the Executive’s employment with Company and all affiliates of the Company, or (b) a permanent reduction in the level of bona fide services the Executive provides to the Company and all affiliates to an amount that is 20% or less of the average level of bona fide services the Executive provided to the Company in the immediately preceding 36 months, with the level of bona fide service calculated in accordance with Treasury Regulations Section 1.409A-1(h)(1)(ii). Solely for purposes of determining whether the Executive has a Separation from Service, the Executive’s employment relationship is treated as continuing while the Executive is on military leave, sick leave, or other bona fide leave of absence (if the period of such leave does not exceed six months, or if longer, so long as the Executive’s right to reemployment with the Company or an affiliate is provided either by statute or contract). If the Executive’s period of leave exceeds six (6) months and the Executive’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed to terminate on the first day immediately following the expiration of such six (6)-month period. Whether a termination of employment has occurred will be determined based on all of the facts and circumstances and in accordance with regulations issued by the United States Treasury Department pursuant to Section 409A of the Code.
F.Release Agreement. Notwithstanding anything to the contrary herein, no payment shall be made under this Section 7 or Section 8(B) unless the Executive executes (and does not revoke) a release (“Release Agreement”), substantially in the form and substance attached hereto as Exhibit B. The Release Agreement shall be provided to the Executive within five (5) days following the Executive’s Separation from Service. The Release Agreement must be executed and returned to the Company within the 21- or 45-day (as applicable) period described in the Release Agreement and it must not be revoked by the Executive within the seven (7)- day revocation period described in the Release Agreement. Notwithstanding anything in this Section 7 or Section 8(B) to the contrary, if the 21- or 45-day consideration period, plus the seven-day revocation period, spans two calendar years, the first payment to which Executive is entitled shall be made to the Executive in the second calendar year.
G.Compliance with Section 409A of the Code. The Company believes that the payments due pursuant to this Agreement qualify for the short-term deferral exception or the separation pay exception to Section 409A as set forth in Treasury Regulation Section
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1.409A-1(b)(4). Notwithstanding anything to the contrary in this Agreement, if the Company determines that neither the short-term deferral exception, separation pay exception nor any other exception to Section 409A applies to the payments due pursuant to this Agreement, to the extent any payments are due on the Executive’s Separation from Service and if Executive is a “specified employee” (as defined in Treasury Regulation Section 1.409A-1(i)) at the time of Executive’s Separation from Service, then such payments shall be paid on the first business day following the expiration of the six-month period following the Executive’s Separation from Service along with accrued interest at the Bank of America, Arizona prime rate determined as of the date of the payment. This Agreement shall be operated in compliance with Section 409A or an exception thereto and each provision of this Agreement shall be interpreted, to the extent possible, to comply with Section 409A or to qualify for an applicable exception. Under no circumstances may the time or schedule of any payment made or benefit provided pursuant to this Agreement be accelerated or subject to a further deferral except as otherwise permitted or required pursuant to regulations and other guidance issued pursuant to Section 409A of the Code. Executive does not have any right to make any election regarding the time or form of any payment due under this Agreement. The reimbursement of the COBRA premiums provided for in the Agreement shall be paid to Executive on the fifth day of the month immediately following the month in which Executive timely remits the premium payment. Executive may not elect to receive cash or any other benefit in lieu of the benefits provided by this Agreement.
8.Change of Control Fee.
A.Notwithstanding the provisions of the Incentive Plan or any equity, phantom stock, restricted stock, restricted stock unit, or stock appreciation rights plan or award agreement to the contrary, any equity or stock price based awards (including phantom stock units, shares of restricted stock, restricted stock units, and stock appreciation rights) previously granted to the Executive will become fully vested and exercisable and all restrictions on restricted awards will lapse upon any Change of Control (as defined below), regardless of whether the Executive remains employed by the Company or its successor following the Change of Control.
B.If the Executive terminates his employment with the Company with Good Reason, or if the Company terminates the Executive’s employment without Cause within 24 months following a Change of Control of the Company, the Executive will be entitled to a lump-sum cash payment equal to the sum of (i) three (3) times the Executive’s current Base Salary as of the date of the Change of Control, and (ii) six (6) times the maximum cash bonus that the Executive could have earned in the year of the Change of Control. Such payment shall be made in a single lump sum payment within 60 days of the date of the Executive’s Separation from Service, provided that the Executive complies with the release requirements of Section 7(F). To the extent that any disputes arise involving the terms and conditions of this Agreement (or the termination of the Executive’s employment) following a Change of Control, the Executive shall be entitled to reimbursement by the Company for his reasonable attorneys’ fees and other legal fees and expenses incurred in connection with contesting or disputing any such termination or seeking to obtain or enforce any right or benefit provided for under this Agreement. Any such fees and expenses shall be reimbursed by the Company as they are incurred. All reimbursements will be made no later than December 31 of the calendar year following the calendar year in which the expense was incurred. The amounts reimbursed in one taxable year will not affect the amounts eligible for reimbursement by Company in a different taxable year. Executive may not
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elect to receive cash or any other benefit in lieu of the reimbursement of legal fees and expenses provided by this Section 8(B). If Executive is entitled to a payment pursuant to this Section 8, the Executive shall be ineligible for any payment due pursuant to Section 7.
C.For purposes of this Agreement, “Change of Control” shall mean (i) a “change in the ownership or effective control of a corporation” within the meaning of Code Section 409A (treating the Company as the relevant corporation) provided, however, that for purposes of determining a “change in the effective control,” “50 percent” shall be used instead of “30 percent,” (ii) a “change in the ownership of a substantial portion of the assets of a corporation” within the meaning of Code Section 409A (treating the Company as the relevant corporation) provided, however, that for purposes of determining a “substantial portion of the assets of the corporation,” “85 percent” shall be used instead of “40 percent,” or (iii) individuals who, as of the Effective Date of this Agreement constitute the Board and individuals whose election or nomination for election as a member of the Board of Directors was approved by the directors then in office (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest (as described in Rule 14a-11 under the Exchange Act) (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director (unless specifically deemed to be an Incumbent Director by a vote of at least a majority of the Incumbent Directors before the date of the appointment or election). Notwithstanding the foregoing, any payment that is subject to Section 409A of the Code that is to be made upon a Change of Control shall only be made upon an event that constitutes a change in ownership or control as described in Treasury Regulation 1.409A-3(i)(5).
D.The following limitations apply to payments pursuant to this Section 8.
(1)Section 4999 of the Code imposes an excise tax (currently 20%) on an employee if the total payments and certain other benefits received by the employee due to a “change in control”) (which for this purpose, has the meaning ascribed to it in Section 280G of the Code and the related regulations) exceed prescribed limits. In order to avoid this excise tax and the related adverse tax consequences for Company) the payments and benefits to which Executive will be entitled pursuant to Section 8 will be limited so that the sum of such payments and benefits, when combined with all other “payments in the nature of compensation” (as that term is defined in Section 280G of the Code and related regulations), the receipt of which is contingent on a change in control, will not exceed an amount equal to the maximum amount that can be payable without the imposition of the Section 4999 excise tax (which maximum amount is referred to below as the “Capped Benefit”).
(2)The limitation described in Section 8(D)(1) will not apply if the Executive’s “Uncapped Benefit” minus the Section 4999 excise taxes exceeds the Executive’s Capped Benefit. For this purpose, an Executive’s “Uncapped Benefit” is equal to the total payments to which the Executive will be entitled pursuant to this Agreement, or otherwise, without regard to the limitation described in Section 8(D)(1).
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(3)If the Company believes that Section 8(D)(1) may result in a reduction of the payments to which Executive is entitled under this Agreement, it will so notify Executive as soon as possible. The Company will then, at its expense, retain a “Consultant” (which shall be a certified public accounting firm and/or a firm of recognized executive compensation consultants working with a law firm or certified public accounting firm) to provide a determination concerning whether the Executive’s total payments and benefits under this Agreement or otherwise will result in the imposition of the Section 4999 excise tax and, if so, whether the Executive is subject to the limitations of Section 8 (D)(1) or, alternatively, whether the exception described in Section 8(D)(2) applies.
If the Company believes that the limitations of Section 8(D)(1) are applicable, it will nonetheless make payments to the Executive, at the times described in Section 8, in the maximum amount that it believes may be paid without exceeding such limitations. The balance, if any, will then be paid if due after the opinions called for above have been received.
If the amount paid to the Executive by the Company is ultimately determined by the Internal Revenue Service to have exceeded the limitations of this Section 8(D), the Executive must repay the excess promptly on demand of the Company. If it is ultimately determined by the Consultant or the Internal Revenue Service that a greater payment should have been made to the Executive, the Company shall pay the Executive the amount of the deficiency, together with interest thereon from the date such amount should have been paid to the date of such payment so that the Executive will have received or be entitled to receive the maximum amount to which the Executive is entitled under the Agreement. For purposes of this Section 8, the applicable interest rate shall be the Bank of America, Arizona prime rate from the date the amounts described in the preceding sentence should have been paid to the Executive.
As a general rule, the Consultant’s determination shall be binding on the Executive and the Company. Section 280G and the excise tax rules of Section 4999, however, are complex and uncertain and, as a result, the Internal Revenue Service may disagree with the Consultant’s conclusions. If the Internal Revenue Service determines that the Capped Benefit is actually lower than calculated by the Consultant, the Capped Benefit will be recalculated by the Consultant. Any payment over that revised Capped Benefit will then be repaid by the Executive to Company. If the Internal Revenue Service determines that the actual Capped Benefit exceeds the amount calculated by the Consultant, the Company shall pay the Executive any shortage.
The Company has the right to challenge any determinations made by the Internal Revenue Service. If the Company agrees to indemnify an Executive from any taxes, interest and penalties that may be imposed upon the Executive (including any taxes, interest and penalties on the amounts paid pursuant to the Company’s indemnification agreement), the Executive must cooperate fully with the Company in connection with any such challenge. The Company shall bear all costs associated with the challenge of any determination made by the Internal Revenue Service and the Company shall control all such challenges.
Executive must notify the Company in writing of any claim or determination by the Internal Revenue Service that, if upheld, would result in the payment of excise taxes. Such notice shall be given as soon as possible but in no event later than 15 days following the Executive’s receipt of notice of the Internal Revenue Service’s position.
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In the event that the provisions of Sections 280G and 4999 of the Code are repealed without succession, this Section 8(D) shall be of no further force or effect. Moreover, if the provisions of Sections 280G and 4999 of the Code do not apply to impose the excise tax on payments under this Agreement, then the provisions of this Section 8(D) shall not apply.
9.Non-Solicitation.
A.The Executive hereby covenants and agrees that for a period of one (1) year from the Date of Termination, Executive will not directly or indirectly, or in any individual or representative capacity, request or solicit any of the Company’s Clients to withdraw, curtail, cancel, or decrease the level of their business with the Company or request that they do business with any Competing Business. The Company’s Clients are any person or entity: (i) for whom Executive, at any time during the 12-month period prior to the time the Executive’s employment with the Company terminates, provided Company’s Services and with whom Executive had material contact; (ii) about whom Executive had Confidential Information; and/or (iii) with respect to whom Executive, at any time during the 12-month period prior to the time the Executive’s employment with the Company terminates, held supervisory, managerial, and/or oversight responsibilities for the provision of Company’s services.
B.The Executive hereby covenants and agrees that for a period of one (1) year from the Date of Termination, Executive will not directly or indirectly, or in any individual or representative capacity, request or solicit any of the Company’s Prospective Clients (defined as any person or entity who both (i) has been directly solicited to become a customer of the Company, and (ii) with whom Executive had material contact or about whom Executive has knowledge of such solicitation, within the 12-month period prior to the time Executive’s employment with the Company terminates) to forgo doing business with the Company or request that such prospective customer or client do business with any Competing Business.
C.The Executive hereby covenants and agrees that for a period of one (1) year from the Date of Termination, Executive will not directly or indirectly hire or solicit for employment for any other business entity other than the Company (whether as an employee, consultant, independent contractor, or otherwise) any person who is, or within the six (6)-month period preceding the date of such activity was, an employee, independent contractor or the like of the Company or any of its subsidiaries, unless Company gives its written consent to such offer of employment. Nothing herein shall prevent Executive, directly, or indirectly through the use of agents, employees or other representatives, from placing general advertisements in any widely-distributed media (such as newspapers, Internet postings, etc.) directed at the public at large (as opposed to directed specifically at the Company’s employees, contractors or the like that have the effect of inducing or influencing any of the Company’s employees, contractors, or the like to terminate their employment or business relationship with the Company.
D.The covenants set forth in this Section 9 and in Section 10 will survive the Executive’s termination of employment under Section 7.
10.Non-Disclosure of Confidential Information.
A.It is understood that in the course of the Executive’s employment with the Company, the Executive will become acquainted with Company Confidential Information (as defined below). The Executive recognizes that Company Confidential Information has been
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developed or acquired at great expense, is proprietary to the Company, and is and shall remain the exclusive property of the Company. Accordingly, the Executive agrees that he will not disclose to others, copy, make any use of, or remove from the Company’s premises any Company Confidential Information, except as the Executive’s duties may specifically require, without the express written consent of the Company, during the Executive’s employment with the Company and thereafter until such time as Company Confidential Information becomes generally known, or readily ascertainable by proper means by persons unrelated to the Company.
B.Upon any termination of employment, the Executive shall promptly deliver to the Company the originals and all copies of any and all materials, documents, notes, manuals, or lists containing or embodying Company Confidential Information, or relating directly or indirectly to the business of the Company, in the possession or control of the Executive.
C.“Company Confidential Information” shall mean confidential, proprietary information or trade secrets of the Company and its subsidiaries and affiliates including without limitation the following: (i) customer lists and customer information as compiled by the Company; (ii) the Company’s internal practices and procedures; (iii) the Company’s financial condition and financial results of operation; (iv) supply of materials information, including sources and costs, and current and prospective projects; (v) strategic planning, manufacturing, engineering, purchasing, finance, marketing, promotion, distribution, and selling activities; (vi) all other information which the Executive has a reasonable basis to consider confidential or which is treated by the Company as confidential; and (vii) all information having independent economic value to the Company that is not generally known to, and not readily ascertainable by proper means by, persons who can obtain economic value from its disclosure or use. Notwithstanding the foregoing provisions, the following shall not be considered “Company Confidential Information”: (1) the general skills of the Executive; (2) information generally known by senior management executives within the Company’s industry; (3) persons, entities, contacts or relationships of the Executive that are also generally known in the industry; and (4) information which becomes available on a non-confidential basis from a source other than the Executive which source is not prohibited from disclosing such confidential information by legal, contractual or other obligation.
D.Nothing in this Agreement shall prevent Executive from the disclosure of Confidential Information that: (A) is made: (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In the event that Executive files a lawsuit alleging retaliation by the Company for reporting a suspected violation of law, Executive may disclose Confidential Information related to the suspected violation of law or alleged retaliation to Executive’s attorney and use that Information in the court proceeding if Executive’s attorney: files any document containing Confidential Information under seal; and does not disclose the Confidential Information, except pursuant to court order. Executive understands and acknowledges that the Company provides this notice in compliance with the Defend Trade Secrets Act of 2016.
11.Waiver of Intellectual Property and Moral Rights. The Executive agrees that any and all ideas, concepts, processes, discoveries, improvements and inventions conceived,
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discovered, made, designed, researched or developed by the Executive either solely or jointly with others, during the Executive’s employment with the Company and for the six (6) months thereafter, which relate to the Company’s business or resulting from any work the Executive does for the Company (collectively the “Intellectual Property”), are the Intellectual Property of the Company. The Executive hereby irrevocably assigns and grants to the Company all his right, title and interest in and to such Intellectual Property (including any moral rights thereto). The Executive agrees to deliver to the Company all papers, documents, files, electronic data or media, reasonably requested by the Company in connection therewith. Without limiting the foregoing, the Executive acknowledges that any and all Intellectual Property, and any and all other property of the Company protectable by patent, copyright or trade secret law, developed in whole or in part by the Executive in connection with the performance of services to the Company as an employee, are the sole property of the Company.
12.Return of Company Property Following Termination. The Executive agrees that following the termination of his employment for any reason, he will promptly return all property of the Company, its affiliates and any divisions thereof he may have managed that is then in or thereafter comes into his possession, including, but not limited to, documents, contracts, agreements, plans, photographs, books, notes, electronically stored data and all copies of the foregoing, as well as any materials or equipment supplied by the Company to the Executive.
13.Cooperation; No Disparagement. During the one (1)-year period following the Executive’s Date of Termination, the Executive agrees to provide reasonable assistance to the Company (including assistance with litigation matters), upon the Company’s request, concerning the Executive’s previous employment responsibilities and functions with the Company. Additionally, at all times after the Executive’s employment with the Company has terminated, the Company and the Executive agree to refrain from making any disparaging or derogatory remarks, statements and/or publications regarding the other, the Company’s employees or its services. In consideration for such cooperation, the Company shall compensate the Executive for the time the Executive spends on such cooperative efforts (at an hourly rate based on the Executive’s total compensation during the year preceding the Date of Termination) and the Company shall reimburse the Executive for his reasonable out-of-pocket expenses the Executive incurs in connection with such cooperative efforts.
14.Non-Competition. The Executive agrees that during his employment by the Company hereunder and for a period of one (1) year thereafter, he will not (except on behalf of or with the prior written consent of the Company), within the State of Arizona either engage in or carry on any activities of the type conducted, authorized, offered, or provided to Company, whether directly or indirectly, on his own behalf or in the service or on behalf of others, as a member of a limited liability company, partner of a partnership, or as a stockholder, investor, officer, director, trustee, or as an employee, agent, associate, consultant or in any other capacity in the water and wastewater utility business (“Competing Business”). This restriction shall not apply to the Executive working for a non-competitive state agency or municipal provider, or for a general contractor whose company solely constructs utility infrastructure on behalf of municipalities and utilities. The parties intend that the covenants contained in this Section 14 shall be deemed to be a series of separate covenants one for each county in the State of Arizona and except for geographic coverage, each such separate covenant shall be identical to the
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covenants contained in this Section 14. This restriction shall not apply if the Executive resigns with Good Reason or is terminated without Cause.
15.Reasonableness of Restrictions, Equitable Relief, and Severability.
A.The Executive hereby agrees that the period of time and geographic scope provided for in the restrictions set forth herein do not impose an undue burden on Executive and are reasonable in subject matter and duration and necessary to protect the Company and its successors and assigns in the use and employment of the goodwill of the business conducted by the Company and to protect the Company’s legitimate business interests. The Executive further agrees that damages cannot compensate the Company in the event of a violation of Sections 9-14 and that, if such violation should occur, injunctive relief shall be essential for the protection of the Company and its successors and assigns. Accordingly, the Executive hereby covenants and agrees that, in the event any of the provisions of Sections 9-14 shall be violated or breached, the Company shall be entitled to obtain injunctive relief against the party or parties violating such covenants, without bond but upon due notice, in addition to such further or other relief as may be available at equity or law. Obtainment of such an injunction by the Company shall not be considered an election of remedies or a waiver of any right to assert any other remedies which the Company has at law or in equity. No waiver of any breach or violation hereof shall be implied from forbearance or failure by the Company to take action thereof. The prevailing party in any litigation, arbitration or similar dispute resolution proceeding to enforce this provision will recover any and all reasonable costs and expenses, including attorneys’ fees.
B.If any provision of this Agreement is held to be illegal, invalid, or unenforceable under any applicable law, then such provision will be deemed severed and this Agreement will be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties will be construed and enforced accordingly. Thereafter, the parties shall promptly and in good faith negotiate an equitable adjustment to the provisions of this Agreement with the view to effecting, to the greatest extent possible, the original purpose and intent of this Agreement.
16.Assignment. The Executive acknowledges that the services to be rendered by him are unique and personal in nature. Accordingly, the Executive may not assign any of his rights or delegate any of his duties or obligations under this Agreement. Nothing in this Agreement shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation or entity that assumes this Agreement and all obligations and undertakings hereunder. Upon such consolidation, merger or transfer of assets and assumption, the term “Company” as used herein shall mean such other corporation or entity, as appropriate, and this Agreement shall continue in full force and effect.
17.Entire Agreement; Amendment; Waivers. This Agreement embodies the complete agreement of the parties hereto with respect to the subject matter hereof and supersedes any prior written, or prior or contemporaneous oral, understandings or agreements between the parties that may have related in any way to the subject matter hereof. This Agreement may be amended only in writing executed by the Company and the Executive. The failure of either party to this Agreement to enforce any of its terms, provisions or covenants will not be construed as a waiver of the same or of the right of such party to enforce the same. Waiver by either party hereto of any breach or default by the other party of any term or provision of this Agreement will not operate as a waiver of any other breach or default.
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18.Governing Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement, shall be governed by and construed in accordance with the internal laws, and not the law of conflicts, of the State of Arizona.
19.Notices. Any notice required or permitted under this Agreement must be in writing and will be deemed to have been given when delivered personally or by overnight courier service or three days after being sent by mail, postage prepaid, at the address indicated below or to such changed address as such person may subsequently give such notice of:
if to the Company:    Global Water Resources, Inc.
21410 North 19th Avenue, Suite 220
Phoenix, AZ 85027
Attention: Board of Directors
Facsimile: (623) 518-4100
if to the Executive:    at the address then shown in the Executive’s employment records
20.Dispute Resolution. Except as otherwise provided in Section 10(D), any dispute, controversy, or claim, whether contractual or non-contractual, between the parties hereto arising directly or indirectly out of or connected with this Agreement, relating to the breach or alleged breach of any representation, warranty, agreement, or covenant under this Agreement, unless mutually settled by the parties hereto, shall be resolved by binding arbitration in accordance with the Employment Arbitration Rules of the American Arbitration Association (the “AAA”). The parties agree that before the proceeding to arbitration that they will mediate their disputes before the AAA by a mediator approved by the AAA. Any arbitration shall be conducted by arbitrators approved by the AAA and mutually acceptable to the Company and the Executive. All such disputes, controversies, or claims shall be conducted by a single arbitrator, unless the dispute involves more than $50,000 in the aggregate in which case the arbitration shall be conducted by a panel of three arbitrators. If the parties hereto are unable to agree on the mediator or the arbitrator(s), then the AAA shall select the arbitrator(s). The resolution of the dispute by the arbitrator(s) shall be final, binding, nonappealable, and fully enforceable by a court of competent jurisdiction under the Federal Arbitration Act. The arbitrator(s) shall award damages to the prevailing party. The arbitration award shall be in writing and shall include a statement of the reasons for the award. The arbitration shall be held in the Phoenix/Scottsdale metropolitan area. The Company shall pay all AAA, mediation, and arbitrator’s fees and costs. Except as otherwise provided in this Agreement, the arbitrator(s) shall award reasonable attorneys’ fees and costs to the prevailing party.
21.Withholding; Release; No Duplication of Benefits. All of the Executive’s compensation under this Agreement will be subject to deduction and withholding authorized or required by applicable law. The Company’s obligation to make any post-termination payments hereunder (other than salary payments and expense reimbursements through a given Date of Termination), shall be subject to receipt by the Company from the Executive of the Release Agreement described by Section 7(F), and compliance by the Executive with the covenants set forth in Sections 9, 10, 12, 13 and 14.
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22.Successors and Assigns. This Agreement is solely for the benefit of the parties and their respective successors, assigns, heirs and legatees. Nothing herein shall be construed to provide any right to any other entity or individual.
23.Each Party the Drafter. This Agreement and the provisions contained in it will not be construed or interpreted for or against any party to this Agreement because that party drafted or caused that party’s legal representative to draft any of its provisions.
24.Headings. All descriptive headings of sections and paragraphs in this Agreement are intended solely for convenience, and no provision of this Agreement is to be construed by reference to the heading of any section or paragraph.
25.Execution of Agreement. This Agreement may be executed via facsimile, .pdf or similar electronic transmission and in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] [SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.
COMPANY:

GLOBAL WATER RESOURCES, INC.,


By:    /s/ David Tedesco    
Name: David Tedesco
Title:    Lead Director


EXECUTIVE:

/s/ Ron L. Fleming    
Ron L. Fleming




[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT – RON FLEMING]

16


EXHIBIT A

Executive Job Description

The Executive shall continue to perform his current duties as Chief Executive Officer and the duties necessary to his position and those assigned by the Board.



A-1


EXHIBIT B
Form of Release

This Release and Waiver of Claims (“Release”) is entered into and delivered to Global Water Resources, Inc. , a Delaware corporation (the “Company”), as of this [●] day of __________, 202[_], by __________________(the “Executive”).
Reference is made to the Employment Agreement dated as of May 5, 2021 (the “Employment Agreement”), by and among the Company, and the Executive. Capitalized terms used herein without definition will have the meanings assigned to them in the Employment Agreement, a copy of which is attached hereto.
1.    Release.
(a)    General Waiver and Release by the Executive. In consideration of the parties’ respective obligations under the Employment Agreement in connection with and following the Executive’s termination of employment with the Company, and subject to the limitations set forth in Section 2 hereof, the Executive, on behalf of Executive and Executive’s heirs, executors, administrators, beneficiaries, personal representatives, and assigns, does hereby release, waive and forever discharge the Company, and its current, former and future shareholders, affiliates, direct and indirect parents, subsidiaries, predecessors, successors, directors, officers, employees, agents, attorneys, heirs and assigns (the “Company Parties”), from any and all claims, actions, causes of action, suits, costs, controversies, judgments, decrees, verdicts, damages, liabilities, attorneys’ fees, covenants, contracts, and agreements that the Executive may have against the Company Parties, or in the future may possess based on events occurring during the term of the Executive’s employment with the Company arising out of the Executive’s employment relationship with or service as an employee, officer or director of the Company and the Company’s subsidiaries and affiliates or the termination of such relationship or service, including any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date the Executive signs this Release, including, but not limited to, any claims arising under the following laws as amended: Fair Labor Standards Act of 1938 29 U.S.C. §§ 201 et seq.; Title VII of the Civil Rights Act of 1964 42 U.S.C. 2000e et seq.; the Rehabilitation Act of 1973, 29 U.S.C. §§ 701 et seq.; the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101 et seq.; the Civil Rights Act of 1866, 42 U.S.C. § 1981; the Civil Rights Act of 1991, 42 U.S.C. § 1981a; the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq.; the Family Medical Leave Act of 1993, 29 U.S.C. §§ 2601 et seq.; the Equal Pay Act of 1963, 29 U.S.C. §§ 206 et seq.; the Workers Adjustment and Retraining Notification Act of 1988, 29 U.S.C. §§ 2101 et seq.; the Immigration Reform and Control Act, 8 U.S.C. § 1101 et seq.; the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq.; the Sarbanes-Oxley Act of 2002; False Claims Act; the Fair Credit Reporting Act; the Consolidated Omnibus Budget Reconciliation Act (COBRA); Arizona Employment Protection Act; Arizona Civil Rights Act; Arizona wage payment and paid sick leave laws; and the anti-retaliation portion of the Arizona workers compensation law;; or any other federal, state or local law or any foreign jurisdiction, whether such claim arises under statute, common law or in equity, and whether or not the Executive is currently aware of the existence of such claim, damage, action or cause of action, suit or demand (collectively, including claims, actions and causes of action set forth in Section 1(b) below, the “Claims”). The Executive also does forever release, discharge and waive any right the Executive may have to recover in any proceeding brought by any federal, state or local agency against the Company Parties, respectively, to enforce any laws. Each of the parties


B-1


hereto agrees that the value received or to be received in the future as described in the Employment Agreement will be in full satisfaction of any and all claims, actions or causes of action for payment or other benefits of any kind that the Executive may have against the Company Parties.
(b)    ADEA Release. In further recognition of the above, the Executive hereby releases and forever discharges each of the Company Parties from any and all claims, actions and causes of action that he may have as of the date he signs and delivers to the Company this Release arising under the federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ADEA”).
2.    Limitations.
(a)    No Impact on Obligations Under the Employment Agreement or Other Agreements. The releases contained herein do not, are not intended to and will not be interpreted to serve as a release or waiver by the Executive or the Company Parties with respect to their respective rights and obligations set forth in the Employment Agreement. In particular, and without limiting the generality of the preceding sentence, the Executive does not waive or release any claim he might now or in the future have to be paid or receive the payments and benefits provided for in Sections 7 or 8 of the Employment Agreement, and the Company Parties do not waive or release any claim they might now or in the future have under Sections 9-14 of the Employment Agreement. In addition, the releases contained herein do not, are not intended to and will not be interpreted to serve as a release or waiver by the Executive of (i) his entitlement to vested accrued compensation and benefits under the Company’s applicable plans and arrangements and (ii) his rights as an equity stakeholder in the Company.
(b)    No Impact on Indemnification Rights. The releases contained herein do not, are not intended to, and will not be interpreted to serve as a release or waiver by the Executive with respect to any indemnification rights or directors’ and officers’ liability insurance policy (“D&O coverage”) he may have and such indemnification rights and D&O coverage will not be effected, modified or extinguished by the Executive’s execution of this Release.
3.    No Pending Litigation.
The Executive represents and agrees that he has not filed, and will not file, any action, complaint, charge, grievance or arbitration against any Company Party, except that such agreement will not apply to any claim based on any matter which, pursuant to Section 2, is excluded from the scope of this Release.
4.    Acknowledgment.
The Executive acknowledges and confirms that (a)  the Release does not bar claims that arise after the execution of the Release; (b) the consideration under this Release he is receiving is in addition to anything of value to which he was already entitled before he received the Employment Agreement which provides consideration conditioned upon the execution of this Release; (c) he has been advised in writing by the Company in connection with his resignation to consult with an attorney of his choice prior to signing this Release and to have such attorney explain to him the terms of the Release, including, without limitation, the terms relating to his release of Claims arising under ADEA; (d) he has read this Release carefully and completely and understands each of the terms hereof; and (e) he was given not less than twenty-one (21) days [or



forty-five (45) days, if applicable] to consider the terms of the Release and to consult with an attorney of his choosing with respect thereto; and (f) that for a period of seven (7) days following his signing of this Agreement, he will have the option to revoke this Agreement in accordance with the terms set forth in Section 6 below.
5.    Successors.
The rights and obligations under this Agreement will inure to any and all successors of the Company.
6.    Revocation.
The Executive have the right to revoke this Release during the seven (7)-day period commencing immediately following the date he signs and delivers this Agreement to the Company (the “Revocation Period”). The period will expire at 5:00 p.m., Mountain Time, on the last day of the seven (7)-day period; provided, however, that if such seventh (7th) day is not a business day, the period will extend to 5:00 p.m. on the next succeeding business day. In the event of any such revocation by the Executive, the obligations of the Company under this Release will terminate and be of no further force and effect as of the date of such revocation. No such revocation by the Executive will be effective unless it is in writing and signed by the Executive and received by a representative of the Company prior to the expiration of the Revocation Period. Executive understands and agrees that if he timely revokes this Release he forfeits any consideration provided for under the Employment Agreement conditioned upon this Release.
7.    Counterparts.
This Release may be executed in two (2) or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Release to be executed, as of the day and year first above written.
By:
Name:
Title:

ACCEPTED AND AGREED:
GLOBAL WATER RESOURCES, INC.
Name:
Title:



EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is made as of the 5th day of May 2021, by and between Global Water Resources, Inc., a Delaware corporation (the “Company”), and Michael J. Liebman, a resident of the State of Arizona (the “Executive”) and shall be effective as of May 5, 2021 (the “Effective Date”).
RECITALS
WHEREAS, the Company desires to continue to employ the Executive as its Senior Vice President, Secretary, and Chief Financial Officer, as well as Secretary/Treasurer of Global Water, LLC and all utility subsidiaries, and the Executive desires to continue such employment; and
WHEREAS, the Company and the Executive previously entered into an employment agreement dated as of August 6, 2019 (the “Superseded Agreement”); and
WHEREAS, the parties desire to enter into this Agreement to replace the Superseded Agreement and to set forth the terms and conditions of the Executive’s employment with the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and mutual agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in reliance upon the representations, covenants and mutual agreements contained herein, the Company and the Executive agree as follows:
1.    Employment. Subject to the terms and conditions of this Agreement, the Company agrees to employ the Executive as its Senior Vice President, Secretary, and Chief Financial Officer, and as Secretary/Treasurer of Global Water, LLC and all regulated utility subsidiaries, and the Executive agrees to diligently perform the duties associated with such positions, including (without limitation) those duties listed on Exhibit A attached hereto. The Executive shall perform his duties primarily at the Company’s headquarters located in Phoenix, Arizona. The Executive will report directly to the Company’s Chief Executive Officer and shall perform such other duties as the Chief Executive Officer may assign from time to time, provided that such additional duties are reasonable and consistent with the scope of the positions held by the Executive. The Executive will devote substantially all of his business time, attention and energies to the business of the Company and will comply with the policies and guidelines established by the Company from time to time applicable to its senior management executives. During the term of this Agreement, the Executive shall not, without the Company’s prior written consent, be a director, officer, employee, consultant or advisor of or to any person, firm, association, syndicate, partnership, trust or corporation engaged in, concerned with or interested in a business substantially similar to the business of the Company. Notwithstanding the foregoing, the Executive may (a) serve on civic or charitable or not-for-profit industry-related organizations, (b) engage in charitable, civic, educational, professional community and/or


industry activities without remuneration therefore, (c) manage personal and family investments, and (d) purchase securities in any corporation whose securities are regularly traded, provided that such purchase shall not result in the Executive beneficially owning 5% or more of the equity securities of any business in competition with the Company at any time.
2.    Term. The Executive will be employed under this Agreement from the Effective Date until May 5, 2024, unless the Executive’s employment is terminated earlier pursuant to Section 7 or Section 8. Thereafter, the Agreement and Executive’s employment under it will automatically renew for one or more additional 12-month periods (each a “Renewal Term”), unless on or before December 31, 2023 (or December 31st during the year of the then current Renewal Term, as applicable), either the Executive or the Company notifies the other party in writing that it wishes to terminate employment under this Agreement at the end of the term then in effect.
3.    Base Salary. The Company will pay the Executive an annual base salary (“Base Salary”) of $280,000 during each calendar year during the term of this Agreement. The Board of Directors of the Company (the “Board”) or its compensation committee (the “Compensation Committee”) may review the Base Salary on an annual basis to determine, in its sole and absolute discretion, whether any increases are appropriate based on a combination of factors, which shall include (without limitation) the Executive’s achievement of specified performance objectives and/or the amount of compensation paid to the Executive’s peers at other, similarly situated public companies. The Base Salary may not be reduced without the Executive’s consent. The Base Salary will be payable in accordance with the payroll practices of the Company in effect from time to time and will be subject to customary withholding for applicable taxes and other deductions.
4.    Incentive Compensation. The Executive may be entitled to annual incentive compensation as determined (a) in the discretion of the Board (or the Compensation Committee) or (b) pursuant to any incentive compensation program adopted by the Company from time to time.
A.    Cash Bonus. For each calendar year, the Executive will be eligible to receive up to 40% of his Base Salary as incentive compensation in the form of a cash bonus. The actual percentage shall be determined annually by the Board (or the Compensation Committee) based on the Executive satisfying the performance goals established by the Board (or the Compensation Committee). If the Executive is entitled to receive a cash bonus, such bonus shall be paid at such time as cash bonuses are otherwise payable to all employees under the incentive compensation program, but in no event later than March 15 of the year following the year in which the right to the cash bonus, if any, becomes vested.
B.    Restricted Stock Units. For performance periods beginning on and after January 1, 2021, the Executive will be eligible to receive up to 40% of his Base Salary in the form of restricted stock units or such other equity awards as may be issued pursuant to the terms of the Global Water Resources, Inc. 2020 Omnibus Incentive Plan or such successor equity plan (the “Incentive Plan”). The actual number of restricted stock units or other equity will be based on the Executive satisfying the performance goals established by the Board (or the Compensation


Committee) pursuant to the Incentive Plan. All equity awards shall be subject to the terms and conditions of the Incentive Plan and any award agreement issued pursuant to the Incentive Plan.
C.Restricted Stock. In addition, subject to the following, the Executive is entitled to a grant of 25,000 shares of restricted stock (the “Restricted Shares”) which shall have a grant date of May 5, 2022 (the “Grant Date”). Such Restricted Shares shall vest in three substantially equal installments: one-third (1/3) of the Restricted Shares shall vest on May 8, 2023; one-third (1/3) of the Restricted Shares shall vest on May 8, 2024; and one-third (1/3) of the Restricted Shares shall vest on May 8, 2025. Notwithstanding the foregoing, no Restricted Shares shall be granted to the Executive if the Executive’s employment with the Company terminates for any reason prior to the Grant Date. The grant of Restricted Shares shall be subject to the terms of the Incentive Plan and the award agreement granting the Restricted Shares.
5.    Reimbursement of Business Expenses. The Executive shall be entitled to reimbursement of reasonable and customary business expenses, including for all authorized travel and all out of pocket expenses incurred by the Executive as authorized by the Company in the performance of his duties. The Executive shall furnish any statements, receipts, invoices and other documentation that the Company may reasonably require in connection with processing such reimbursements.
6.    Other Benefits. The Company will provide to the Executive such fringe and other benefits as are regularly provided by the Company to members of its senior management team, including participation in the Company’s welfare plans (e.g., health, medical, dental, vision, etc.) and other benefit programs (e.g., profit-sharing, long-term incentive compensation, retirement, investment, life and disability insurance, etc.) in effect from time to time, in each case to the extent that the Executive is eligible for participation under the terms of such plans or programs. The Executive shall be entitled to five (5) weeks of paid vacation per year, which vacation shall be paid at a rate equal to the Executive’s then current Base Salary. The Executive may take such vacation at such time(s) as the Executive and the Company shall mutually agree to, acting reasonably.
7.    Termination of Employment.
A.    Voluntary Resignation by Executive without Good Reason. The Executive may voluntarily terminate his employment with the Company at any time by giving four (4) weeks advance written notice to the Company (which notice period the Company may waive in whole or in part in its sole discretion). If such voluntary termination is without Good Reason (as defined below), then (i) the Company will be obligated to pay the Executive’s then current Base Salary through the Date of Termination (as defined below) and any incentive compensation earned in previous years but not yet paid; (ii) no incentive compensation shall be payable for the year in which the termination occurs; and (iii) the Company shall not pay or reimburse the Executive for COBRA (as defined below) premiums for the period that the Company is required to offer COBRA coverage as a matter of law. For the avoidance of doubt, any unvested phantom stock units, stock appreciation rights, shares of restricted stock, restricted stock units, or other equity-based awards shall be forfeited.


B.    Voluntary Resignation by Executive with Good Reason; Termination without Cause by the Company. If the Executive terminates his employment with the Company with Good Reason, or if the Company terminates the Executive’s employment without Cause, including by providing the notice of non-renewal referenced in Section 2, provided Executive complies with the release requirements of Section 7(F), then (i) the Company will be obligated to pay the Executive’s then current Base Salary through the Date of Termination and any incentive compensation earned in previous years but not yet paid; (ii) no incentive compensation shall be payable for the year in which the termination occurs unless the termination of employment occurs during the last six (6) months of the Company’s fiscal year, in which case the Executive will be paid a pro rata bonus based upon the Company’s performance for the fiscal year payable at such time as incentive compensation is otherwise payable to employees under the incentive compensation program; (iii) if Executive timely and properly elects continuation coverage under COBRA, the Company shall reimburse Executive for the COBRA premiums for the level of coverage that the Executive had elected prior to the Executive’s Separation from Service until the earliest of (A) 18 months following the date of Executive’s Separation from Service, (B) the date on which the Executive becomes employed by any other employer that provides health insurance coverage, regardless of whether such coverage is comparable to the coverage provided by the Company or (C) the date the Executive is no longer eligible to receive COBRA continuation coverage; (iv) notwithstanding the provisions in the Incentive Plan or in any equity, phantom stock, restricted stock, restricted stock unit, or stock appreciation right plan or award agreement to the contrary, any equity or stock price-based awards (including phantom stock units, shares of restricted stock, restricted stock units, and stock appreciation rights) previously granted will become fully vested and exercisable and all restrictions on restricted awards will lapse; and (v) the Company will pay the Executive an amount equal to the sum of (A) three (3) times the Executive’s current Base Salary as of the Date of Termination, and (B) six (6) times the maximum cash bonus that the Executive could have earned in the year of the Date of Termination. Unless otherwise provided in this Agreement, this amount shall be paid in a lump-sum payment within 60 days following the Executive’s Separation from Service.
C.    Termination for Cause by the Company. If the Company terminates the Executive’s employment for Cause, then, (i) the Company will be obligated to pay the Executive’s then current Base Salary through the Date of Termination and any incentive compensation earned in previous years but not yet paid; and (ii) no incentive compensation shall be payable for the year in which the termination occurs. For the avoidance of doubt, any unvested phantom stock units, stock appreciation rights, shares of restricted stock, restricted stock units or other equity-based awards shall be forfeited.
D.    Death or Disability. If Executive dies or becomes Disabled, then the Company will be obligated to pay (i) the Executive’s then current Base Salary through the date of death or the effective date of Disability and any incentive compensation earned in previous years but not yet paid, (ii) a pro-rated amount of the Executive’s actual incentive compensation for the year, payable at such time as incentive compensation is otherwise payable to employees under the incentive compensation program, (iii) if Executive or Executive’s qualified beneficiary timely and properly elects continuation coverage under COBRA, the Company shall reimburse


Executive or Executive’s qualified beneficiary for the COBRA premiums for the level of coverage that the Executive had elected prior to the Executive’s death or Disability until the earliest of (A) 18 months following the date of Executive’s death or Disability, (B) the date on which the Executive or the Executive’s qualified beneficiary becomes employed by any other employer that provides health insurance coverage, regardless of whether such coverage is comparable to the coverage provided by the Company, or (C) the date the Executive or his qualified beneficiary is no longer eligible to receive COBRA continuation coverage; and (iv) notwithstanding the provisions in the Incentive Plan or in any equity, phantom stock, restricted stock, restricted stock unit, or stock appreciation rights plan or award agreement to the contrary, any equity or stock price-based awards previously granted will become fully vested and exercisable and all restrictions on restricted awards will lapse and, to the extent permitted under the applicable plan’s governing documents, the Executive (or the Executive’s beneficiary(ies)) shall have a period of one (1) year from the effective date of Death or Disability to exercise any such options (or if shorter, the expiration date of the option).
E.    Definitions. For purposes of this Agreement:
(1)    “Cause” shall occur if the Executive (a) has engaged in malfeasance, willful or gross misconduct, or willful dishonesty that materially harms the Company, its reputation or its stockholders; (b) is convicted of a felony that is materially detrimental to the Company, its reputation, or the Company’s stockholders; (c) is convicted of or enters a plea of nolo contendere to a felony that materially damages the Company’s financial condition or reputation or to a crime involving fraud; (d) is in material violation of the Company’s ethics/policy code or employment policies, including willful breach of duty of loyalty in connection with the Company’s business; (e) willfully fails to perform his duties under this Agreement after written notice by the Company and a reasonable opportunity to cure; or (f) impedes, interferes or fails to reasonably cooperate with an investigation authorized by the Company or fails to follow a legal and proper Company directive. For purposes hereof, no act, or failure to act, by the Executive will be considered “willful” unless committed in bad faith and without a reasonable belief that the act or omission was in the best interests of the Company. No action shall be deemed Cause hereunder if undertaken by the Executive at the direction of the Board or upon following the advice of counsel to the Company or any of its affiliates. For the avoidance of doubt, poor performance shall not, by itself, constitute Cause hereunder. The Executive shall not be terminated for Cause (other than pursuant to clauses (b) or (c) of the preceding sentence due to conviction or entering a plea of nolo contendere) unless he is first given notice by the Board of its intention to terminate him for Cause and provided a period of at least thirty (30) days to cure (if capable of cure) the event or events alleged to constitute Cause hereunder.
(2)    “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(3)    “Code” means the Internal Revenue Code of 1986, as amended.


(4)    “Date of Termination” shall mean (a) if employment under this Agreement is terminated as a result of the Executive’s death, the date of the Executive’s death, (b) if employment under this Agreement is terminated by the Executive, the last day of his employment with the Company, (c) if this Agreement is terminated as a result of the Executive’s Disability, the effective date of the Disability, (d) if employment under this Agreement is terminated by the Company for Cause, the date a final determination is provided to the Executive by the Company, or (e) if this Agreement is terminated by the Company without Cause, the date notice of termination is given to the Executive by the Company.
(5)    “Disability” shall mean if, by reason of any medically determinable physical or mental impairment which actually hinders the Executive’s ability to perform his job and which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, the Executive is receiving income replacement benefits for a period of not less than six (6) months under an accident and health plan established by the Company for its employees. The effective date of Executive’s Disability is the last day of the sixth month on which the Executive receives the income replacement benefits.
(6)    “Good Reason” shall mean a Separation from Service within two (2) years following the occurrence of one or more of the following circumstances without Executive’s express consent: (a) a material diminution in the Executive’s authority, duties or responsibilities, (b) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report; (c) a material diminution in Executive’s Base Salary not consented to as required under Section 3; (d) a material change in the geographic location of Executive’s principal office; or (e) any other action or inaction that constitutes a material breach by the Company of this Agreement. Executive must provide written notice to Company of the existence of the Good Reason condition described in clauses (a) – (e) above within ninety (90) days of the Executive’s knowledge of the existence of the condition. Notwithstanding anything to the contrary, an event described in clauses (a) – (e) above will not constitute Good Reason if, within thirty (30) days after Executive gives Company notice of the occurrence or existence of an event that Executive believes constitutes Good Reason, Company has cured (if capable of cure) the event or events alleged to constitute Good Reason hereunder.
(7)    “Separation from Service” shall mean either (a) termination of the Executive’s employment with Company and all affiliates of the Company, or (b) a permanent reduction in the level of bona fide services the Executive provides to the Company and all affiliates to an amount that is 20% or less of the average level of bona fide services the Executive provided to the Company in the immediately preceding 36 months, with the level of bona fide service calculated in accordance with Treasury Regulations Section 1.409A-1(h)(1)(ii). Solely for purposes of determining whether the Executive has a Separation from Service, the Executive’s employment relationship is treated as continuing while the Executive is on military leave, sick leave, or other bona fide leave of absence (if the period of such leave does not exceed six months, or if longer, so long as the Executive’s right to reemployment with the Company or an affiliate is


provided either by statute or contract). If the Executive’s period of leave exceeds six (6) months and the Executive’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed to terminate on the first day immediately following the expiration of such six (6)-month period. Whether a termination of employment has occurred will be determined based on all of the facts and circumstances and in accordance with regulations issued by the United States Treasury Department pursuant to Section 409A of the Code.
F.    Release Agreement. Notwithstanding anything to the contrary herein, no payment shall be made under this Section 7 or Section 8(B) unless the Executive executes (and does not revoke) a release (“Release Agreement”), substantially in the form and substance attached hereto as Exhibit B. The Release Agreement shall be provided to the Executive within five (5) days following the Executive’s Separation from Service. The Release Agreement must be executed and returned to the Company within the 21- or 45-day (as applicable) period described in the Release Agreement and it must not be revoked by the Executive within the seven (7)-day revocation period described in the Release Agreement. Notwithstanding anything in this Section 7 or Section 8(B) to the contrary, if the 21- or 45-day consideration period, plus the seven-day revocation period, spans two calendar years, the first payment to which Executive is entitled shall be made to the Executive in the second calendar year.
G.    Compliance with Section 409A of the Code. The Company believes that the payments due pursuant to this Agreement qualify for the short-term deferral exception or the separation pay exception to Section 409A as set forth in Treasury Regulation Section 1.409A-1(b)(4). Notwithstanding anything to the contrary in this Agreement, if the Company determines that neither the short-term deferral exception, separation pay exception nor any other exception to Section 409A applies to the payments due pursuant to this Agreement, to the extent any payments are due on the Executive’s Separation from Service and if Executive is a “specified employee” (as defined in Treasury Regulation Section 1.409A-1(i)) at the time of Executive’s Separation from Service, then such payments shall be paid on the first business day following the expiration of the six-month period following the Executive’s Separation from Service along with accrued interest at the Bank of America, Arizona prime rate determined as of the date of the payment. This Agreement shall be operated in compliance with Section 409A or an exception thereto and each provision of this Agreement shall be interpreted, to the extent possible, to comply with Section 409A or to qualify for an applicable exception. Under no circumstances may the time or schedule of any payment made or benefit provided pursuant to this Agreement be accelerated or subject to a further deferral except as otherwise permitted or required pursuant to regulations and other guidance issued pursuant to Section 409A of the Code. Executive does not have any right to make any election regarding the time or form of any payment due under this Agreement. The reimbursement of the COBRA premiums provided for in the Agreement shall be paid to Executive on the fifth day of the month immediately following the month in which Executive timely remits the premium payment. Executive may not elect to receive cash or any other benefit in lieu of the benefits provided by this Agreement.


8.    Change of Control Fee.
A.    Notwithstanding the provisions of the Incentive Plan or any equity, phantom stock, restricted stock, restricted stock unit or stock appreciation rights plan or award agreement to the contrary, any equity or stock price based awards (including phantom stock units, shares of restricted stock, restricted stock units, and stock appreciation rights) previously granted to the Executive will become fully vested and exercisable and all restrictions on restricted awards will lapse upon any Change of Control (as defined below), regardless of whether the Executive remains employed by the Company or its successor following the Change of Control.
B.    If the Executive terminates his employment with the Company with Good Reason, or if the Company terminates the Executive’s employment without Cause within 24 months following a Change of Control of the Company, the Executive will be entitled to a lump-sum cash payment equal to the sum of (i) three (3) times the Executive’s current Base Salary as of the date of the Change of Control, and (ii) six (6) times the maximum cash bonus that the Executive could have earned in the year of the Change of Control. Such payment shall be made in a single lump sum payment within 60 days of the date of the Executive’s Separation from Service, provided that the Executive complies with the release requirements of Section 7(F). To the extent that any disputes arise involving the terms and conditions of this Agreement (or the termination of the Executive’s employment) following a Change of Control, the Executive shall be entitled to reimbursement by the Company for his reasonable attorneys’ fees and other legal fees and expenses incurred in connection with contesting or disputing any such termination or seeking to obtain or enforce any right or benefit provided for under this Agreement. Any such fees and expenses shall be reimbursed by the Company as they are incurred. All reimbursements will be made no later than December 31 of the calendar year following the calendar year in which the expense was incurred. The amounts reimbursed in one taxable year will not affect the amounts eligible for reimbursement by Company in a different taxable year. Executive may not elect to receive cash or any other benefit in lieu of the reimbursement of legal fees and expenses provided by this Section 8(B). If Executive is entitled to a payment pursuant to this Section 8, the Executive shall be ineligible for any payment due pursuant to Section 7.
C.    For purposes of this Agreement, “Change of Control” shall mean (i) a “change in the ownership or effective control of a corporation” within the meaning of Code Section 409A (treating the Company as the relevant corporation) provided, however, that for purposes of determining a “change in the effective control,” “50 percent” shall be used instead of “30 percent,” (ii) a “change in the ownership of a substantial portion of the assets of a corporation” within the meaning of Code Section 409A (treating the Company as the relevant corporation) provided, however, that for purposes of determining a “substantial portion of the assets of the corporation,” “85 percent” shall be used instead of “40 percent,” or (iii) individuals who, as of the Effective Date of this Agreement constitute the Board and individuals whose election or nomination for election as a member of the Board of Directors was approved by the directors then in office (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest (as described in


Rule 14a-11 under the Exchange Act) (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director (unless specifically deemed to be an Incumbent Director by a vote of at least a majority of the Incumbent Directors before the date of the appointment or election). Notwithstanding the foregoing, any payment that is subject to Section 409A of the Code that is to be made upon a Change of Control shall only be made upon an event that constitutes a change in ownership or control as described in Treasury Regulation 1.409A-3(i)(5).
D.    The following limitations apply to payments pursuant to this Section 8.
(1)    Section 4999 of the Code imposes an excise tax (currently 20%) on an employee if the total payments and certain other benefits received by the employee due to a “change in control”) (which for this purpose, has the meaning ascribed to it in Section 280G of the Code and the related regulations) exceed prescribed limits. In order to avoid this excise tax and the related adverse tax consequences for Company) the payments and benefits to which Executive will be entitled pursuant to Section 8 will be limited so that the sum of such payments and benefits, when combined with all other “payments in the nature of compensation” (as that term is defined in Section 280G of the Code and related regulations), the receipt of which is contingent on a change in control, will not exceed an amount equal to the maximum amount that can be payable without the imposition of the Section 4999 excise tax (which maximum amount is referred to below as the “Capped Benefit”).
(2)    The limitation described in Section 8(D)(1) will not apply if the Executive’s “Uncapped Benefit” minus the Section 4999 excise taxes exceeds the Executive’s Capped Benefit. For this purpose, an Executive’s “Uncapped Benefit” is equal to the total payments to which the Executive will be entitled pursuant to this Agreement, or otherwise, without regard to the limitation described in Section 8(D)(1).
(3)    If the Company believes that Section 8(D)(1) may result in a reduction of the payments to which Executive is entitled under this Agreement, it will so notify Executive as soon as possible. The Company will then, at its expense, retain a “Consultant” (which shall be a certified public accounting firm and/or a firm of recognized executive compensation consultants working with a law firm or certified public accounting firm) to provide a determination concerning whether the Executive’s total payments and benefits under this Agreement or otherwise will result in the imposition of the Section 4999 excise tax and, if so, whether the Executive is subject to the limitations of Section 8(D)(1) or, alternatively, whether the exception described in Section 8(D)(2) applies.
If the Company believes that the limitations of Section 8(D)(1) are applicable, it will nonetheless make payments to the Executive, at the times described in Section 8, in the


maximum amount that it believes may be paid without exceeding such limitations. The balance, if any, will then be paid if due after the opinions called for above have been received.
If the amount paid to the Executive by the Company is ultimately determined by the Internal Revenue Service to have exceeded the limitations of this Section 8(D), the Executive must repay the excess promptly on demand of the Company. If it is ultimately determined by the Consultant or the Internal Revenue Service that a greater payment should have been made to the Executive, the Company shall pay the Executive the amount of the deficiency, together with interest thereon from the date such amount should have been paid to the date of such payment so that the Executive will have received or be entitled to receive the maximum amount to which the Executive is entitled under the Agreement. For purposes of this Section 8, the applicable interest rate shall be the Bank of America, Arizona prime rate from the date the amounts described in the preceding sentence should have been paid to the Executive.
As a general rule, the Consultant’s determination shall be binding on the Executive and the Company. Section 280G and the excise tax rules of Section 4999, however, are complex and uncertain and, as a result, the Internal Revenue Service may disagree with the Consultant’s conclusions. If the Internal Revenue Service determines that the Capped Benefit is actually lower than calculated by the Consultant, the Capped Benefit will be recalculated by the Consultant. Any payment over that revised Capped Benefit will then be repaid by the Executive to Company. If the Internal Revenue Service determines that the actual Capped Benefit exceeds the amount calculated by the Consultant, the Company shall pay the Executive any shortage.
The Company has the right to challenge any determinations made by the Internal Revenue Service. If the Company agrees to indemnify an Executive from any taxes, interest and penalties that may be imposed upon the Executive (including any taxes, interest and penalties on the amounts paid pursuant to the Company’s indemnification agreement), the Executive must cooperate fully with the Company in connection with any such challenge. The Company shall bear all costs associated with the challenge of any determination made by the Internal Revenue Service and the Company shall control all such challenges.
Executive must notify the Company in writing of any claim or determination by the Internal Revenue Service that, if upheld, would result in the payment of excise taxes. Such notice shall be given as soon as possible but in no event later than 15 days following the Executive’s receipt of notice of the Internal Revenue Service’s position.
In the event that the provisions of Sections 280G and 4999 of the Code are repealed without succession, this Section 8(D) shall be of no further force or effect. Moreover, if the provisions of Sections 280G and 4999 of the Code do not apply to impose the excise tax on payments under this Agreement, then the provisions of this Section 8(D) shall not apply.
9.    Non-Solicitation.
A.    The Executive hereby covenants and agrees that for a period of one (1) year from the Date of Termination, Executive will not directly or indirectly, or in any individual or representative capacity, request or solicit any of the Company’s Clients to withdraw, curtail,


cancel, or decrease the level of their business with the Company or request that they do business with any Competing Business. The Company’s Clients are any person or entity: (i) for whom Executive, at any time during the 12-month period prior to the time the Executive’s employment with the Company terminates, provided Company’s Services and with whom Executive had material contact; (ii) about whom Executive had Confidential Information; and/or (iii) with respect to whom Executive, at any time during the 12-month period prior to the time the Executive’s employment with the Company terminates, held supervisory, managerial, and/or oversight responsibilities for the provision of Company’s services.
B.    The Executive hereby covenants and agrees that for a period of one (1) year from the Date of Termination, Executive will not directly or indirectly, or in any individual or representative capacity, request or solicit any of the Company’s Prospective Clients (defined as any person or entity who both (i) has been directly solicited to become a customer of the Company, and (ii) with whom Executive had material contact or about whom Executive has knowledge of such solicitation, within the 12-month period prior to the time Executive’s employment with the Company terminates) to forgo doing business with the Company or request that such prospective customer or client do business with any Competing Business.
C.    The Executive hereby covenants and agrees that for a period of one (1) year from the Date of Termination, Executive will not directly or indirectly hire or solicit for employment for any other business entity other than the Company (whether as an employee, consultant, independent contractor, or otherwise) any person who is, or within the six (6)-month period preceding the date of such activity was, an employee, independent contractor or the like of the Company or any of its subsidiaries, unless Company gives its written consent to such offer of employment. Nothing herein shall prevent Executive, directly, or indirectly through the use of agents, employees or other representatives, from placing general advertisements in any widely-distributed media (such as newspapers, Internet postings, etc.) directed at the public at large (as opposed to directed specifically at the Company’s employees, contractors or the like that have the effect of inducing or influencing any of the Company’s employees, contractors, or the like to terminate their employment or business relationship with the Company.
D.    The covenants set forth in this Section 9 and in Section 10 will survive the Executive’s termination of employment under Section 7.
10.    Non-Disclosure of Confidential Information.
A.    It is understood that in the course of the Executive’s employment with the Company, the Executive will become acquainted with Company Confidential Information (as defined below). The Executive recognizes that Company Confidential Information has been developed or acquired at great expense, is proprietary to the Company, and is and shall remain the exclusive property of the Company. Accordingly, the Executive agrees that he will not disclose to others, copy, make any use of, or remove from the Company’s premises any Company Confidential Information, except as the Executive’s duties may specifically require, without the express written consent of the Company, during the Executive’s employment with the Company and thereafter until such time as Company Confidential Information becomes generally known, or readily ascertainable by proper means by persons unrelated to the Company.


B.    Upon any termination of employment, the Executive shall promptly deliver to the Company the originals and all copies of any and all materials, documents, notes, manuals, or lists containing or embodying Company Confidential Information, or relating directly or indirectly to the business of the Company, in the possession or control of the Executive.
C.    “Company Confidential Information” shall mean confidential, proprietary information or trade secrets of the Company and its subsidiaries and affiliates including without limitation the following: (i) customer lists and customer information as compiled by the Company; (ii) the Company’s internal practices and procedures; (iii) the Company’s financial condition and financial results of operation; (iv) supply of materials information, including sources and costs, and current and prospective projects; (v) strategic planning, manufacturing, engineering, purchasing, finance, marketing, promotion, distribution, and selling activities; (vi) all other information which the Executive has a reasonable basis to consider confidential or which is treated by the Company as confidential; and (vii) all information having independent economic value to the Company that is not generally known to, and not readily ascertainable by proper means by, persons who can obtain economic value from its disclosure or use. Notwithstanding the foregoing provisions, the following shall not be considered “Company Confidential Information”: (1) the general skills of the Executive; (2) information generally known by senior management executives within the Company’s industry; (3) persons, entities, contacts or relationships of the Executive that are also generally known in the industry; and (4) information which becomes available on a non-confidential basis from a source other than the Executive which source is not prohibited from disclosing such confidential information by legal, contractual or other obligation.
D.    Nothing in this Agreement shall prevent Executive from the disclosure of Confidential Information that: (A) is made: (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In the event that Executive files a lawsuit alleging retaliation by the Company for reporting a suspected violation of law, Executive may disclose Confidential Information related to the suspected violation of law or alleged retaliation to Executive’s attorney and use that Information in the court proceeding if Executive’s attorney: files any document containing Confidential Information under seal; and does not disclose the Confidential Information, except pursuant to court order. Executive understands and acknowledges that the Company provides this notice in compliance with the Defend Trade Secrets Act of 2016.
11.    Waiver of Intellectual Property and Moral Rights. The Executive agrees that any and all ideas, concepts, processes, discoveries, improvements and inventions conceived, discovered, made, designed, researched or developed by the Executive either solely or jointly with others, during the Executive’s employment with the Company and for the six (6) months thereafter, which relate to the Company’s business or resulting from any work the Executive does for the Company (collectively the “Intellectual Property”), are the Intellectual Property of the Company. The Executive hereby irrevocably assigns and grants to the Company all his right, title and interest in and to such Intellectual Property (including any moral rights thereto). The


Executive agrees to deliver to the Company all papers, documents, files, electronic data or media, reasonably requested by the Company in connection therewith. Without limiting the foregoing, the Executive acknowledges that any and all Intellectual Property, and any and all other property of the Company protectable by patent, copyright or trade secret law, developed in whole or in part by the Executive in connection with the performance of services to the Company as an employee, are the sole property of the Company.
12.    Return of Company Property Following Termination. The Executive agrees that following the termination of his employment for any reason, he will promptly return all property of the Company, its affiliates and any divisions thereof he may have managed that is then in or thereafter comes into his possession, including, but not limited to, documents, contracts, agreements, plans, photographs, books, notes, electronically stored data and all copies of the foregoing, as well as any materials or equipment supplied by the Company to the Executive.
13.    Cooperation; No Disparagement. During the one (1)-year period following the Executive’s Date of Termination, the Executive agrees to provide reasonable assistance to the Company (including assistance with litigation matters), upon the Company’s request, concerning the Executive’s previous employment responsibilities and functions with the Company. Additionally, at all times after the Executive’s employment with the Company has terminated, the Company and the Executive agree to refrain from making any disparaging or derogatory remarks, statements and/or publications regarding the other, the Company’s employees or its services. In consideration for such cooperation, the Company shall compensate the Executive for the time the Executive spends on such cooperative efforts (at an hourly rate based on the Executive’s total compensation during the year preceding the Date of Termination) and the Company shall reimburse the Executive for his reasonable out-of-pocket expenses the Executive incurs in connection with such cooperative efforts.
14.    Non-Competition. The Executive agrees that during his employment by the Company hereunder and for a period of one (1) year thereafter, he will not (except on behalf of or with the prior written consent of the Company), within the State of Arizona either engage in or carry on any activities of the type conducted, authorized, offered, or provided to Company, whether directly or indirectly, on his own behalf or in the service or on behalf of others, as a member of a limited liability company, partner of a partnership, or as a stockholder, investor, officer, director, trustee, or as an employee, agent, associate, consultant or in any other capacity in the water and wastewater utility business (“Competing Business”). This restriction shall not apply to the Executive working for a non-competitive state agency or municipal provider, or for a general contractor whose company solely constructs utility infrastructure on behalf of municipalities and utilities. The parties intend that the covenants contained in this Section 14 shall be deemed to be a series of separate covenants one for each county in the State of Arizona and except for geographic coverage, each such separate covenant shall be identical to the covenants contained in this Section 14. This restriction shall not apply if the Executive resigns with Good Reason or is terminated without Cause.


15.    Reasonableness of Restrictions, Equitable Relief, and Severability.
A.    The Executive hereby agrees that the period of time and geographic scope provided for in the restrictions set forth herein do not impose an undue burden on Executive and are reasonable in subject matter and duration and necessary to protect the Company and its successors and assigns in the use and employment of the goodwill of the business conducted by the Company and to protect the Company’s legitimate business interests. The Executive further agrees that damages cannot compensate the Company in the event of a violation of Sections 9-14 and that, if such violation should occur, injunctive relief shall be essential for the protection of the Company and its successors and assigns. Accordingly, the Executive hereby covenants and agrees that, in the event any of the provisions of Sections 9-14 shall be violated or breached, the Company shall be entitled to obtain injunctive relief against the party or parties violating such covenants, without bond but upon due notice, in addition to such further or other relief as may be available at equity or law. Obtainment of such an injunction by the Company shall not be considered an election of remedies or a waiver of any right to assert any other remedies which the Company has at law or in equity. No waiver of any breach or violation hereof shall be implied from forbearance or failure by the Company to take action thereof. The prevailing party in any litigation, arbitration or similar dispute resolution proceeding to enforce this provision will recover any and all reasonable costs and expenses, including attorneys’ fees.
B.    If any provision of this Agreement is held to be illegal, invalid, or unenforceable under any applicable law, then such provision will be deemed severed and this Agreement will be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties will be construed and enforced accordingly. Thereafter, the parties shall promptly and in good faith negotiate an equitable adjustment to the provisions of this Agreement with the view to effecting, to the greatest extent possible, the original purpose and intent of this Agreement.
16.    Assignment. The Executive acknowledges that the services to be rendered by him are unique and personal in nature. Accordingly, the Executive may not assign any of his rights or delegate any of his duties or obligations under this Agreement. Nothing in this Agreement shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation or entity that assumes this Agreement and all obligations and undertakings hereunder. Upon such consolidation, merger or transfer of assets and assumption, the term “Company” as used herein shall mean such other corporation or entity, as appropriate, and this Agreement shall continue in full force and effect.
17.    Entire Agreement; Amendment; Waivers. This Agreement embodies the complete agreement of the parties hereto with respect to the subject matter hereof and supersedes any prior written, or prior or contemporaneous oral, understandings or agreements between the parties that may have related in any way to the subject matter hereof. This Agreement may be amended only in writing executed by the Company and the Executive. The failure of either party to this Agreement to enforce any of its terms, provisions or covenants will not be construed as a waiver of the same or of the right of such party to enforce the same. Waiver by either party hereto of any breach or default by the other party of any term or provision of this Agreement will not operate as a waiver of any other breach or default.


18.    Governing Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement, shall be governed by and construed in accordance with the internal laws, and not the law of conflicts, of the State of Arizona.
19.    Notices. Any notice required or permitted under this Agreement must be in writing and will be deemed to have been given when delivered personally or by overnight courier service or three days after being sent by mail, postage prepaid, at the address indicated below or to such changed address as such person may subsequently give such notice of:
if to the Company:    Global Water Resources, Inc.
21410 North 19th Avenue, Suite 220
Phoenix, AZ 85027
Attention: Board of Directors
Facsimile: (623) 518-4100
if to the Executive:    at the address then shown in the Executive’s employment records
20.    Dispute Resolution. Except as otherwise provided in Section 10(D), any dispute, controversy, or claim, whether contractual or non-contractual, between the parties hereto arising directly or indirectly out of or connected with this Agreement, relating to the breach or alleged breach of any representation, warranty, agreement, or covenant under this Agreement, unless mutually settled by the parties hereto, shall be resolved by binding arbitration in accordance with the Employment Arbitration Rules of the American Arbitration Association (the “AAA”). The parties agree that before the proceeding to arbitration that they will mediate their disputes before the AAA by a mediator approved by the AAA. Any arbitration shall be conducted by arbitrators approved by the AAA and mutually acceptable to the Company and the Executive. All such disputes, controversies, or claims shall be conducted by a single arbitrator, unless the dispute involves more than $50,000 in the aggregate in which case the arbitration shall be conducted by a panel of three arbitrators. If the parties hereto are unable to agree on the mediator or the arbitrator(s), then the AAA shall select the arbitrator(s). The resolution of the dispute by the arbitrator(s) shall be final, binding, nonappealable, and fully enforceable by a court of competent jurisdiction under the Federal Arbitration Act. The arbitrator(s) shall award damages to the prevailing party. The arbitration award shall be in writing and shall include a statement of the reasons for the award. The arbitration shall be held in the Phoenix/Scottsdale metropolitan area. The Company shall pay all AAA, mediation, and arbitrator’s fees and costs. Except as otherwise provided in this Agreement, the arbitrator(s) shall award reasonable attorneys’ fees and costs to the prevailing party.
21.    Withholding; Release; No Duplication of Benefits. All of the Executive’s compensation under this Agreement will be subject to deduction and withholding authorized or required by applicable law. The Company’s obligation to make any post-termination payments hereunder (other than salary payments and expense reimbursements through a given Date of Termination), shall be subject to receipt by the Company from the Executive of the Release Agreement described by Section 7(F), and compliance by the Executive with the covenants set forth in Sections 9, 10, 12, 13 and 14.


22.    Successors and Assigns. This Agreement is solely for the benefit of the parties and their respective successors, assigns, heirs and legatees. Nothing herein shall be construed to provide any right to any other entity or individual.
23.    Each Party the Drafter. This Agreement and the provisions contained in it will not be construed or interpreted for or against any party to this Agreement because that party drafted or caused that party’s legal representative to draft any of its provisions.
24.    Headings. All descriptive headings of sections and paragraphs in this Agreement are intended solely for convenience, and no provision of this Agreement is to be construed by reference to the heading of any section or paragraph.
25.    Execution of Agreement. This Agreement may be executed via facsimile, .pdf or similar electronic transmission and in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]


IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.
COMPANY:
GLOBAL WATER RESOURCES, INC.,
By:    ________________________________
Name:    ________________________________
Title:    ________________________________
EXECUTIVE:
______________________________________
Michael Liebman
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT – MICHAEL LIEBMAN]


EXHIBIT A
Executive Job Description
The Executive shall continue to perform his current duties as Senior Vice President, Secretary, and Chief Financial Officer and other duties necessary to his position and those assigned by the Board and the Chief Executive Officer.


EXHIBIT B
Form of Release
This Release and Waiver of Claims (“Release”) is entered into and delivered to Global Water Resources, Inc. , a Delaware corporation (the “Company”), as of this [●] day of __________, 202[_], by __________________(the “Executive”).
Reference is made to the Employment Agreement dated as of May 5, 2021 (the “Employment Agreement”), by and among the Company, and the Executive. Capitalized terms used herein without definition will have the meanings assigned to them in the Employment Agreement, a copy of which is attached hereto.
1.    Release.
(a)    General Waiver and Release by the Executive. In consideration of the parties’ respective obligations under the Employment Agreement in connection with and following the Executive’s termination of employment with the Company, and subject to the limitations set forth in Section 2 hereof, the Executive, on behalf of Executive and Executive’s heirs, executors, administrators, beneficiaries, personal representatives, and assigns, does hereby release, waive and forever discharge the Company, and its current, former and future shareholders, affiliates, direct and indirect parents, subsidiaries, predecessors, successors, directors, officers, employees, agents, attorneys, heirs and assigns (the “Company Parties”), from any and all claims, actions, causes of action, suits, costs, controversies, judgments, decrees, verdicts, damages, liabilities, attorneys’ fees, covenants, contracts, and agreements that the Executive may have against the Company Parties, or in the future may possess based on events occurring during the term of the Executive’s employment with the Company arising out of the Executive’s employment relationship with or service as an employee, officer or director of the Company and the Company’s subsidiaries and affiliates or the termination of such relationship or service, including any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date the Executive signs this Release, including, but not limited to, any claims arising under the following laws as amended: Fair Labor Standards Act of 1938 29 U.S.C. §§ 201 et seq.; Title VII of the Civil Rights Act of 1964 42 U.S.C. 2000e et seq.; the Rehabilitation Act of 1973, 29 U.S.C. §§ 701 et seq.; the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101 et seq.; the Civil Rights Act of 1866, 42 U.S.C. § 1981; the Civil Rights Act of 1991, 42 U.S.C. § 1981a; the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq.; the Family Medical Leave Act of 1993, 29 U.S.C. §§ 2601 et seq.; the Equal Pay Act of 1963, 29 U.S.C. §§ 206 et seq.; the Workers Adjustment and Retraining Notification Act of 1988, 29 U.S.C. §§ 2101 et seq.; the Immigration Reform and Control Act, 8 U.S.C. § 1101 et seq.; the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq.; the Sarbanes-Oxley Act of 2002; False Claims Act; the Fair Credit Reporting Act; the Consolidated Omnibus Budget Reconciliation Act (COBRA); Arizona Employment Protection Act; Arizona Civil Rights Act; Arizona wage payment and paid sick leave laws; and the anti-retaliation portion of the Arizona workers compensation law; or any other federal, state or local law or any foreign jurisdiction, whether such claim arises under statute, common law or in equity, and whether or not the Executive is currently aware of the existence of such claim, damage, action or cause of action, suit or demand (collectively, including claims, actions and causes of action set forth in Section 1(b) below, the “Claims”). The Executive also does forever release, discharge and waive any right the Executive may have to recover in any proceeding brought by any federal, state or
B-1

local agency against the Company Parties, respectively, to enforce any laws. Each of the parties hereto agrees that the value received or to be received in the future as described in the Employment Agreement will be in full satisfaction of any and all claims, actions or causes of action for payment or other benefits of any kind that the Executive may have against the Company Parties.
(b)    ADEA Release. In further recognition of the above, the Executive hereby releases and forever discharges each of the Company Parties from any and all claims, actions and causes of action that he may have as of the date he signs and delivers to the Company this Release arising under the federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ADEA”).
2.    Limitations.
(a)    No Impact on Obligations Under the Employment Agreement or Other Agreements. The releases contained herein do not, are not intended to and will not be interpreted to serve as a release or waiver by the Executive or the Company Parties with respect to their respective rights and obligations set forth in the Employment Agreement. In particular, and without limiting the generality of the preceding sentence, the Executive does not waive or release any claim he might now or in the future have to be paid or receive the payments and benefits provided for in Sections 7 or 8 of the Employment Agreement, and the Company Parties do not waive or release any claim they might now or in the future have under Sections 9-14 of the Employment Agreement. In addition, the releases contained herein do not, are not intended to and will not be interpreted to serve as a release or waiver by the Executive of (i) his entitlement to vested accrued compensation and benefits under the Company’s applicable plans and arrangements and (ii) his rights as an equity stakeholder in the Company.
(b)    No Impact on Indemnification Rights. The releases contained herein do not, are not intended to, and will not be interpreted to serve as a release or waiver by the Executive with respect to any indemnification rights or directors’ and officers’ liability insurance policy (“D&O coverage”) he may have and such indemnification rights and D&O coverage will not be effected, modified or extinguished by the Executive’s execution of this Release.
3.    No Pending Litigation. The Executive represents and agrees that he has not filed, and will not file, any action, complaint, charge, grievance or arbitration against any Company Party, except that such agreement will not apply to any claim based on any matter which, pursuant to Section 2, is excluded from the scope of this Release.
4.    Acknowledgment. The Executive acknowledges and confirms that (a)  the Release does not bar claims that arise after the execution of the Release; (b) the consideration under this Release he is receiving is in addition to anything of value to which he was already entitled before he received the Employment Agreement which provides consideration conditioned upon the execution of this Release; (c) he has been advised in writing by the Company in connection with his resignation to consult with an attorney of his choice prior to signing this Release and to have such attorney explain to him the terms of the Release, including, without limitation, the terms relating to his release of Claims arising under ADEA; (d) he has read this Release carefully and completely and understands each of the terms hereof; and (e) he was given not less than twenty-one (21) days [or forty-five (45) days, if applicable] to consider the terms of the Release and to


consult with an attorney of his choosing with respect thereto; and (f) that for a period of seven (7) days following his signing of this Agreement, he will have the option to revoke this Agreement in accordance with the terms set forth in Section 6 below.
5.    Successors. The rights and obligations under this Agreement will inure to any and all successors of the Company.
6.    Revocation. The Executive have the right to revoke this Release during the seven (7)-day period commencing immediately following the date he signs and delivers this Agreement to the Company (the “Revocation Period”). The period will expire at 5:00 p.m., Mountain Time, on the last day of the seven (7)-day period; provided, however, that if such seventh (7th) day is not a business day, the period will extend to 5:00 p.m. on the next succeeding business day. In the event of any such revocation by the Executive, the obligations of the Company under this Release will terminate and be of no further force and effect as of the date of such revocation. No such revocation by the Executive will be effective unless it is in writing and signed by the Executive and received by a representative of the Company prior to the expiration of the Revocation Period. Executive understands and agrees that if he timely revokes this Release he forfeits any consideration provided for under the Employment Agreement conditioned upon this Release.
7.    Counterparts. This Release may be executed in two (2) or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Release to be executed, as of the day and year first above written.
By:
Name:
Title:

ACCEPTED AND AGREED:
GLOBAL WATER RESOURCES, INC.
Name:
Title:



EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is made as of the 5th day of May 2021, by and between Global Water Resources, Inc., a Delaware corporation (the “Company”), and Christopher D. Krygier, a resident of the State of Arizona (the “Executive”) and shall be effective as of May 5, 2021 (the “Effective Date”).
RECITALS
WHEREAS, the Company desires to continue to employ the Executive as its Chief Strategy Officer, and the Executive desires to continue such employment; and
WHEREAS, the Company and the Executive previously entered into an employment agreement dated as of May 7, 2020 (the “Superseded Agreement”); and
WHEREAS, the parties wish to enter into this Agreement to replace the Superseded Agreement and to set forth the terms and conditions of the Executive’s employment with the Company.
NOW, THEREFORE, in consideration of the covenants and mutual agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in reliance upon the representations, covenants and mutual agreements contained herein, the Company and the Executive agree as follows:
AGREEMENT
1.    Employment. Subject to the terms and conditions of this Agreement, the Company agrees to employ the Executive as its Chief Strategy Officer and Executive also shall serve as the Chief Strategy Officer of Global Water, LLC and all regulated utility subsidiaries of the Company. The Executive agrees to diligently perform the duties associated with such positions, including (without limitation) those duties listed on Exhibit A attached hereto. The Executive shall perform his duties primarily at the Company’s headquarters located in Phoenix, Arizona. The Executive will report to the Company’s Chief Executive Officer and shall perform such other duties as the Chief Executive Officer may assign from time to time, provided that such additional duties are reasonable and consistent with the scope of the positions held by the Executive. The Executive will devote substantially all of his business time, attention and energies to the business of the Company and its affiliates and will comply with the policies and guidelines established by the Company from time to time applicable to its senior management executives. During the term of this Agreement, the Executive shall not, without the Company’s prior written consent, be a director, officer, employee, consultant or advisor of or to any person, firm, association, syndicate, partnership, trust or corporation engaged in, concerned with or interested in a business substantially similar to the business of the Company or its affiliates. Notwithstanding the foregoing, the Executive may (a) serve on civic or charitable or not-for-profit industry-related organizations, (b) engage in charitable, civic, educational, professional
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community and/or industry activities without remuneration therefore, (c) manage personal and family investments, and (d) purchase securities in any corporation whose securities are regularly traded, provided that such purchase shall not result in the Executive beneficially owning 5% or more of the equity securities of any business in competition with the Company or its affiliates at any time.
2.    Term. The Executive will be employed under this Agreement from the Effective Date until May 5, 2024, unless the Executive’s employment is terminated earlier pursuant to Section 7 or Section 8. Thereafter, the Agreement and Executive’s employment under it will automatically renew for one or more additional 12-month periods (each a “Renewal Term”), unless on or before December 31, 2023 (or December 31st during the year of the then current Renewal Term, as applicable), either the Executive or the Company notifies the other party in writing that it wishes to terminate employment under this Agreement at the end of the term then in effect.
3.    Base Salary. The Company will pay the Executive an annual base salary (“Base Salary”) of $220,000 for the one year period following the Effective Date, $240,000 for the following one year period, and $250,000 for each year thereafter during the term of this Agreement. The Board of Directors of the Company (the “Board”) or its compensation committee (the “Compensation Committee”) may review the Base Salary on an annual basis to determine, in its sole and absolute discretion, whether any increases are appropriate based on a combination of factors, which shall include (without limitation) the Executive’s achievement of specified performance objectives and/or the amount of compensation paid to the Executive’s peers at other, similarly situated public companies. The Base Salary may not be reduced without the Executive’s consent, unless such reduction is pursuant to a base salary reduction for substantially all of the Company’s officers and such reduction in Executive’s Base Salary is to the same extent and up to the same percentage as other officers of the Company. The Base Salary will be payable in accordance with the payroll practices of the Company in effect from time to time and will be subject to customary withholding for applicable taxes and other deductions.
4.    Incentive Compensation. In addition to Executive’s Base Salary, the Executive may be entitled to annual incentive compensation as determined (a) in the discretion of the Board (or the Compensation Committee) or (b) pursuant to any incentive compensation program adopted by the Company from time to time.
A.    Cash Bonus. For each calendar year ending December 31, 2021, 2022 and 2023 (and any years thereafter), the Executive will be eligible to receive up to 17.5%, 20% and 22.5%, respectively, of his Base Salary as incentive compensation in the form of a cash bonus. The actual percentage shall be determined annually by the Board (or the Compensation Committee) based on the Executive satisfying the performance goals established by the Board (or the Compensation Committee). If the Executive is entitled to receive a cash bonus, such bonus shall be paid at such time as cash bonuses are otherwise payable to all employees under
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the incentive compensation program, but in no event later than March 15 of the year following the year in which the right to the cash bonus, if any, becomes vested.
B.    Restricted Stock Units. For each performance period ending December 31, 2021, 2022 and 2023 (and any years thereafter), the Executive will be eligible to receive up to 17.5%, 20% and 22.5%, respectively, of his Base Salary in the form of restricted stock units or such other equity awards as may be issued pursuant to the terms of the Global Water Resources, Inc. 2020 Omnibus Incentive Plan or such successor equity plan (the “Incentive Plan”). The actual number of restricted stock units or other equity will be based on the Executive satisfying the performance goals established by the Board (or the Compensation Committee) pursuant to the Incentive Plan. All equity awards shall be subject to the terms and conditions of the Incentive Plan and any award agreement issued pursuant to the Incentive Plan.
C.    Restricted Stock. In addition, subject to the following, the Executive is entitled to a grant of 20,000 shares of restricted stock (the “Restricted Shares”) which shall have a grant date of May 5, 2022 (the “Grant Date”). Such Restricted Shares shall vest in three substantially equal installments: one-third (1/3) of the Restricted Shares shall vest on May 8, 2023; one-third (1/3) of the Restricted Shares shall vest on May 8, 2024; and one-third (1/3) of the Restricted Shares shall vest on May 8, 2025. Notwithstanding the foregoing, no Restricted Shares shall be granted to the Executive if the Executive’s employment with the Company terminates for any reason prior to the Grant Date. The grant of Restricted Shares shall be subject to the terms of the Incentive Plan and the award agreement granting the Restricted Shares.
5.    Reimbursement of Business Expenses. The Executive shall be entitled to reimbursement of reasonable and customary business expenses, including for all authorized travel and all out of pocket expenses incurred by the Executive as authorized by the Company in the performance of his duties. The Executive shall furnish any statements, receipts, invoices and other documentation that the Company requires in accordance with Company policy.
6.    Other Benefits. The Company will provide to the Executive such fringe and other benefits as are regularly provided by the Company to members of its senior management team, including participation in the Company’s welfare plans (e.g., health, medical, dental, vision, etc.) and other benefit programs (e.g., profit-sharing, long-term incentive compensation, retirement, investment, life and disability insurance, etc.) in effect from time to time, in each case to the extent that the Executive is eligible for participation under the terms of such plans or programs. The Executive shall be entitled to five (5) weeks of paid vacation per year, which vacation shall be paid at a rate equal to the Executive’s then current Base Salary. The Executive may take such vacation at such time(s) as the Executive and the Company shall mutually agree to, acting reasonably.
7.    Termination of Employment.
A.    Voluntary Resignation by Executive without Good Reason. The Executive may voluntarily terminate his employment with the Company at any time by giving
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four (4) weeks advance written notice to the Company (which notice period the Company may waive in whole or in part in its sole discretion). If such voluntary termination is without Good Reason (as defined below), then (i) the Company will be obligated to pay the Executive’s then current Base Salary through the Date of Termination (as defined below) and any incentive compensation earned in previous years but not yet paid; (ii) no incentive compensation shall be payable for the year in which the termination occurs; and (iii) the Company shall not pay or reimburse the Executive for COBRA (as defined below) premiums for the period that the Company is required to offer COBRA coverage as a matter of law. For the avoidance of doubt, any unvested equity-based awards shall be forfeited.
B.    Voluntary Resignation by Executive with Good Reason; Termination without Cause by the Company. If the Executive terminates his employment with the Company with Good Reason, or if the Company terminates the Executive’s employment without Cause, including by providing the notice of non-renewal referenced in Section 2, provided Executive complies with the release requirements of Section 7(F), then (i) the Company will be obligated to pay the Executive’s then current Base Salary through the Date of Termination and any incentive compensation earned in previous years but not yet paid; (ii) no incentive compensation shall be payable for the year in which the termination occurs, unless the termination of employment occurs during the last six (6) months of the Company’s fiscal year, in which case the Executive will be paid a pro rata bonus based upon the Company’s performance for the fiscal year payable at such time as incentive compensation is otherwise payable to employees under the incentive compensation program; (iii) if Executive timely and properly elects continuation coverage under COBRA, the Company shall reimburse Executive for the COBRA premiums for the level of coverage that the Executive had elected prior to the Executive’s Separation from Service until the earliest of (A) 12 months following the date of Executive’s Separation from Service, (B) the date on which the Executive becomes employed by any other employer that provides health insurance coverage, regardless of whether such coverage is comparable to the coverage provided by the Company or (C) the date the Executive is no longer eligible to receive COBRA continuation coverage; (iv) notwithstanding the provisions in the Incentive Plan or award agreement to the contrary, any equity awards previously granted will become fully vested and exercisable and all restrictions on restricted awards will lapse; and (v) the Company will pay the Executive an amount equal to the sum of (A) one (1) times the Executive’s current Base Salary as of the Date of Termination, and (B) two (2) times the maximum cash bonus that the Executive could have earned in the year of the Date of Termination. Unless otherwise provided in this Agreement, this amount shall be paid in a lump-sum payment within 60 days following the Executive’s Separation from Service.
C.    Termination for Cause by the Company. If the Company terminates the Executive’s employment for Cause, then, (i) the Company will be obligated to pay the Executive’s then current Base Salary through the Date of Termination and any incentive compensation earned in previous years but not yet paid; and (ii) no incentive compensation shall be payable for the year in which the termination occurs. For the avoidance of doubt, any unvested equity-based awards shall be forfeited.
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D.    Death or Disability. If Executive dies or becomes Disabled, then the Company will be obligated to pay the Executive’s then current Base Salary through the date of death or the effective date of Disability and any incentive compensation earned in previous years but not yet paid. If Executive dies or becomes Disabled, provided Executive complies with the release requirements of Section 7(F), the Executive (or the Executive’s beneficiary) also shall receive (i) a pro-rated amount of the Executive’s actual incentive compensation for the year, payable at such time as incentive compensation is otherwise payable to employees under the incentive compensation program, (ii) if Executive or Executive’s qualified beneficiary timely and properly elects continuation coverage under COBRA, the Company shall reimburse Executive or Executive’s qualified beneficiary for the COBRA premiums for the level of coverage that the Executive had elected prior to the Executive’s death or Disability until the earliest of (A) 18 months following the date of Executive’s death or Disability, (B) the date on which the Executive or the Executive’s qualified beneficiary becomes employed by any other employer that provides health insurance coverage, regardless of whether such coverage is comparable to the coverage provided by the Company, or (C) the date the Executive or his qualified beneficiary is no longer eligible to receive COBRA continuation coverage; and (iii) notwithstanding the provisions in the Incentive Plan or award agreement to the contrary, any equity based awards previously granted will become fully vested and exercisable and all restrictions on restricted awards will lapse and, to the extent permitted under the applicable plan’s governing documents, the Executive (or the Executive’s beneficiary(ies)) shall have a period of one (1) year from the effective date of Death or Disability to exercise any options (or if shorter, the expiration date of the option).
E.    Definitions. For purposes of this Agreement:
(1)    “Cause” shall occur if the Executive (a) has engaged in malfeasance, willful or gross misconduct, or willful dishonesty that materially harms the Company, its reputation or its stockholders; (b) is convicted of a felony that is materially detrimental to the Company, its reputation, or the Company’s stockholders; (c) is convicted of or enters a plea of nolo contendere to a felony that materially damages the Company’s financial condition or reputation or to a crime involving fraud; (d) is in material violation of the Company’s ethics/policy code or employment policies, including willful breach of duty of loyalty in connection with the Company’s business; (e) willfully fails to perform his duties under this Agreement after written notice by the Company and a reasonable opportunity to cure; or (f) impedes, interferes or fails to reasonably cooperate with an investigation authorized by the Company or fails to follow a legal and proper Company directive. For purposes hereof, no act, or failure to act, by the Executive will be considered “willful” unless committed in bad faith and without a reasonable belief that the act or omission was in the best interests of the Company. No action shall be deemed Cause hereunder if undertaken by the Executive at the direction of the Board or upon following the advice of counsel to the Company or any of its affiliates. For the avoidance of doubt, poor performance shall not, by itself, constitute Cause hereunder. The Executive shall not be terminated for Cause (other than pursuant to clauses (b) or (c)
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of the preceding sentence due to conviction or entering a plea of nolo contendere) unless he is first given notice by the Board of its intention to terminate him for Cause and provided a period of at least thirty (30) days to cure (if capable of cure) the event or events alleged to constitute Cause hereunder.
(2)    “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(3)    “Code” means the Internal Revenue Code of 1986, as amended.
(4)    “Date of Termination” shall mean (a) if employment under this Agreement is terminated as a result of the Executive’s death, the date of the Executive’s death, (b) if employment under this Agreement is terminated by the Executive, the last day of his employment with the Company, (c) if this Agreement is terminated as a result of the Executive’s Disability, the effective date of the Disability, (d) if employment under this Agreement is terminated by the Company for Cause, the date a final determination is provided to the Executive by the Company, or (e) if this Agreement is terminated by the Company without Cause, the date notice of termination is given to the Executive by the Company.
(5)    “Disability” shall mean if, by reason of any medically determinable physical or mental impairment which actually hinders the Executive’s ability to perform his job and which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, the Executive is receiving income replacement benefits for a period of not less than six (6) months under an accident and health plan established by the Company for its employees. The effective date of Executive’s Disability is the last day of the sixth month on which the Executive receives the income replacement benefits.
(6)    “Good Reason” shall mean a Separation from Service within two (2) years following the occurrence of one or more of the following circumstances without Executive’s express consent: (a) a material diminution in the Executive’s authority, duties or responsibilities, (b) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report; (c) a material diminution in Executive’s Base Salary not consented to as required under Section 3; (d) a material change in the geographic location of Executive’s principal office; or (e) any other action or inaction that constitutes a material breach by the Company of this Agreement. Executive must provide written notice to Company of the existence of the Good Reason condition described in clauses (a) – (e) above within ninety (90) days of the Executive’s knowledge of the existence of the condition. Notwithstanding anything to the contrary, an event described in clauses (a) – (e) above will not constitute Good Reason if, within thirty (30) days after Executive gives Company notice of the occurrence or existence of an event that Executive believes constitutes Good Reason, Company has cured (if capable of cure) the event or events alleged to constitute Good Reason hereunder.
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(7)    “Separation from Service” shall mean either (a) termination of the Executive’s employment with Company and all affiliates of the Company, or (b) a permanent reduction in the level of bona fide services the Executive provides to the Company and all affiliates to an amount that is 20% or less of the average level of bona fide services the Executive provided to the Company in the immediately preceding 36 months, with the level of bona fide service calculated in accordance with Treasury Regulations Section 1.409A-1(h)(1)(ii). Solely for purposes of determining whether the Executive has a Separation from Service, the Executive’s employment relationship is treated as continuing while the Executive is on military leave, sick leave, or other bona fide leave of absence (if the period of such leave does not exceed six months, or if longer, so long as the Executive’s right to reemployment with the Company or an affiliate is provided either by statute or contract). If the Executive’s period of leave exceeds six (6) months and the Executive’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed to terminate on the first day immediately following the expiration of such six (6)-month period. Whether a termination of employment has occurred will be determined based on all of the facts and circumstances and in accordance with regulations issued by the United States Treasury Department pursuant to Section 409A of the Code.
F.    Release Agreement. Notwithstanding anything to the contrary herein, no payment shall be made under this Section 7 or Section 8(B) unless the Executive executes (and does not revoke) a release (“Release Agreement”), substantially in the form and substance attached hereto as Exhibit B. The Release Agreement shall be provided to the Executive within five (5) days following the Executive’s Separation from Service. The Release Agreement must be executed and returned to the Company within the 21- or 45-day (as applicable) period described in the Release Agreement and it must not be revoked by the Executive within the seven (7)-day revocation period described in the Release Agreement. Notwithstanding anything in this Section 7 or Section 8(B) to the contrary, if the 21- or 45-day consideration period, plus the seven-day revocation period, spans two calendar years, the first payment to which Executive is entitled shall be made to the Executive in the second calendar year.
G.    Compliance with Section 409A of the Code. The Company believes that the payments due pursuant to this Agreement qualify for the short-term deferral exception or the separation pay exception to Section 409A as set forth in Treasury Regulation Section 1.409A-1(b)(4). Notwithstanding anything to the contrary in this Agreement, if the Company determines that neither the short-term deferral exception, separation pay exception nor any other exception to Section 409A applies to the payments due pursuant to this Agreement, to the extent any payments are due on the Executive’s Separation from Service and if Executive is a “specified employee” (as defined in Treasury Regulation Section 1.409A-1(i)) at the time of Executive’s Separation from Service, then such payments shall be paid on the first business day following the expiration of the six-month period following the Executive’s Separation from Service along with accrued interest at the Bank of America, Arizona prime rate determined as of the date of the payment. This Agreement shall be operated in compliance with Section 409A or
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an exception thereto and each provision of this Agreement shall be interpreted, to the extent possible, to comply with Section 409A or to qualify for an applicable exception. Under no circumstances may the time or schedule of any payment made or benefit provided pursuant to this Agreement be accelerated or subject to a further deferral except as otherwise permitted or required pursuant to regulations and other guidance issued pursuant to Section 409A of the Code. Executive does not have any right to make any election regarding the time or form of any payment due under this Agreement. The reimbursement of the COBRA premiums provided for in the Agreement shall be paid to Executive on the fifth day of the month immediately following the month in which Executive timely remits the premium payment. Executive may not elect to receive cash or any other benefit in lieu of the benefits provided by this Agreement.
8.    Change of Control Fee.
A.    If within 24 months following a Change of Control of the Company, the Executive terminates his employment with the Company with Good Reason, or the Company terminates the Executive’s employment without Cause, provided Executive complies with the release requirements of Section 7(F), the Executive will be entitled to (1) a cash payment equal to the sum of (i) two (2) times the Executive’s current Base Salary as of the date of the Change of Control, and (ii) four (4) times the maximum cash bonus that the Executive could have earned in the year of the Change of Control (collectively, the “Cash Payments”) and (2) except as otherwise provided in an award agreement, any equity or stock based awards previously granted to the Executive will become fully vested and exercisable and all restrictions on restricted awards will lapse. The Cash Payments shall be made in a single lump sum payment within 60 days of the date of the Executive’s Separation from Service. To the extent that any disputes arise involving the terms and conditions of this Agreement (or the termination of the Executive’s employment) following a Change of Control, the Executive shall be entitled to reimbursement by the Company for his reasonable attorneys’ fees and other legal fees and expenses incurred in connection with contesting or disputing any such termination or seeking to obtain or enforce any right or benefit provided for under this Agreement. Any such fees and expenses shall be reimbursed by the Company as they are incurred. All reimbursements will be made no later than December 31 of the calendar year following the calendar year in which the expense was incurred. The amounts reimbursed in one taxable year will not affect the amounts eligible for reimbursement by Company in a different taxable year. Executive may not elect to receive cash or any other benefit in lieu of the reimbursement of legal fees and expenses provided by this Section 8(A). If Executive is entitled to a payment pursuant to this Section 8, the Executive shall be ineligible for any payment due pursuant to Section 7.
B.    For purposes of this Agreement, “Change of Control” shall mean (i) a “change in the ownership or effective control of a corporation” within the meaning of Code Section 409A (treating the Company as the relevant corporation) provided, however, that for purposes of determining a “change in the effective control,” “50 percent” shall be used instead of “30 percent,” (ii) a “change in the ownership of a substantial portion of the assets of a corporation” within the meaning of Code Section 409A (treating the Company as the relevant corporation) provided, however, that for purposes of determining a “substantial portion of the
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assets of the corporation,” “85 percent” shall be used instead of “40 percent,” or (iii) individuals who, as of the Effective Date of this Agreement constitute the Board and individuals whose election or nomination for election as a member of the Board of Directors was approved by the directors then in office (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest (as described in Rule 14a-11 under the Exchange Act) (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director (unless specifically deemed to be an Incumbent Director by a vote of at least a majority of the Incumbent Directors before the date of the appointment or election). Notwithstanding the foregoing, any payment that is subject to Section 409A of the Code that is to be made upon a Change of Control shall only be made upon an event that constitutes a change in ownership or control as described in Treasury Regulation 1.409A-3(i)(5).
C.    The following limitations apply to payments pursuant to this Section 8.
(1)    Section 4999 of the Code imposes an excise tax (currently 20%) on an employee if the total payments and certain other benefits received by the employee due to a “change in control”) (which for this purpose, has the meaning ascribed to it in Section 280G of the Code and the related regulations) exceed prescribed limits. In order to avoid this excise tax and the related adverse tax consequences for Company) the payments and benefits to which Executive will be entitled pursuant to Section 8 will be limited so that the sum of such payments and benefits, when combined with all other “payments in the nature of compensation” (as that term is defined in Section 280G of the Code and related regulations), the receipt of which is contingent on a change in control, will not exceed an amount equal to the maximum amount that can be payable without the imposition of the Section 4999 excise tax (which maximum amount is referred to below as the “Capped Benefit”).
(2)    The limitation described in Section 8(D)(1) will not apply if the Executive’s “Uncapped Benefit” minus the Section 4999 excise taxes exceeds the Executive’s Capped Benefit. For this purpose, an Executive’s “Uncapped Benefit” is equal to the total payments to which the Executive will be entitled pursuant to this Agreement, or otherwise, without regard to the limitation described in Section 8(D)(1).
(3)    If the Company believes that Section 8(D)(1) may result in a reduction of the payments to which Executive is entitled under this Agreement, it will so notify Executive as soon as possible. The Company will then, at its expense, retain a “Consultant” (which shall be a certified public accounting firm and/or a firm of recognized executive compensation consultants working with a law firm or certified public accounting firm) to provide a determination concerning whether the Executive’s
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total payments and benefits under this Agreement or otherwise will result in the imposition of the Section 4999 excise tax and, if so, whether the Executive is subject to the limitations of Section 8(D)(1) or, alternatively, whether the exception described in Section 8(D)(2) applies.
If the Company believes that the limitations of Section 8(D)(1) are applicable, it will nonetheless make payments to the Executive, at the times described in Section 8, in the maximum amount that it believes may be paid without exceeding such limitations. The balance, if any, will then be paid if due after the opinions called for above have been received.
If the amount paid to the Executive by the Company is ultimately determined by the Internal Revenue Service to have exceeded the limitations of this Section 8(D), the Executive must repay the excess promptly on demand of the Company. If it is ultimately determined by the Consultant or the Internal Revenue Service that a greater payment should have been made to the Executive, the Company shall pay the Executive the amount of the deficiency, together with interest thereon from the date such amount should have been paid to the date of such payment so that the Executive will have received or be entitled to receive the maximum amount to which the Executive is entitled under the Agreement. For purposes of this Section 8, the applicable interest rate shall be the Bank of America, Arizona prime rate from the date the amounts described in the preceding sentence should have been paid to the Executive.
As a general rule, the Consultant’s determination shall be binding on the Executive and the Company. Section 280G and the excise tax rules of Section 4999, however, are complex and uncertain and, as a result, the Internal Revenue Service may disagree with the Consultant’s conclusions. If the Internal Revenue Service determines that the Capped Benefit is actually lower than calculated by the Consultant, the Capped Benefit will be recalculated by the Consultant. Any payment over that revised Capped Benefit will then be repaid by the Executive to Company. If the Internal Revenue Service determines that the actual Capped Benefit exceeds the amount calculated by the Consultant, the Company shall pay the Executive any shortage.
The Company has the right to challenge any determinations made by the Internal Revenue Service. If the Company agrees to indemnify an Executive from any taxes, interest and penalties that may be imposed upon the Executive (including any taxes, interest and penalties on the amounts paid pursuant to the Company’s indemnification agreement), the Executive must cooperate fully with the Company in connection with any such challenge. The Company shall bear all costs associated with the challenge of any determination made by the Internal Revenue Service and the Company shall control all such challenges.
Executive must notify the Company in writing of any claim or determination by the Internal Revenue Service that, if upheld, would result in the payment of excise taxes. Such notice shall be given as soon as possible but in no event later than 15 days following the Executive’s receipt of notice of the Internal Revenue Service’s position.
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In the event that the provisions of Sections 280G and 4999 of the Code are repealed without succession, this Section 8(D) shall be of no further force or effect. Moreover, if the provisions of Sections 280G and 4999 of the Code do not apply to impose the excise tax on payments under this Agreement, then the provisions of this Section 8(D) shall not apply.
9.    Non-Solicitation.
A.    The Executive hereby covenants and agrees that for a period of one (1) year from the Date of Termination, Executive will not directly or indirectly, or in any individual or representative capacity, request or solicit any of the Company’s Clients to withdraw, curtail, cancel, or decrease the level of their business with the Company or request that they do business with any Competing Business. The Company’s Clients are any person or entity: (i) for whom Executive, at any time during the 12-month period prior to the time the Executive’s employment with the Company terminates, provided Company’s Services and with whom Executive had material contact; (ii) about whom Executive had Confidential Information; and/or (iii) with respect to whom Executive, at any time during the 12-month period prior to the time the Executive’s employment with the Company terminates, held supervisory, managerial, and/or oversight responsibilities for the provision of Company’s services.
B.    The Executive hereby covenants and agrees that for a period of one (1) year from the Date of Termination, Executive will not directly or indirectly, or in any individual or representative capacity, request or solicit any of the Company’s Prospective Clients (defined as any person or entity who both (i) has been directly solicited to become a customer of the Company, and (ii) with whom Executive had material contact or about whom Executive has knowledge of such solicitation, within the 12-month period prior to the time Executive’s employment with the Company terminates) to forgo doing business with the Company or request that such prospective customer or client do business with any Competing Business.
C.    The Executive hereby covenants and agrees that for a period of one (1) year from the Date of Termination, Executive will not directly or indirectly hire or solicit for employment for any other business entity other than the Company (whether as an employee, consultant, independent contractor, or otherwise) any person who is, or within the six (6)-month period preceding the date of such activity was, an employee, independent contractor or the like of the Company or any of its subsidiaries, unless Company gives its written consent to such offer of employment. Nothing herein shall prevent Executive, directly, or indirectly through the use of agents, employees or other representatives, from placing general advertisements in any widely-distributed media (such as newspapers, Internet postings, etc.) directed at the public at large (as opposed to directed specifically at the Company’s employees, contractors or the like that have the effect of inducing or influencing any of the Company’s employees, contractors, or the like to terminate their employment or business relationship with the Company.
D.    The covenants set forth in this Section 9 and in Section 10 will survive the Executive’s termination of employment under Section 7.
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10.    Non-Disclosure of Confidential Information.
A.    It is understood that in the course of the Executive’s employment with the Company, the Executive will become acquainted with Company Confidential Information (as defined below). The Executive recognizes that Company Confidential Information has been developed or acquired at great expense, is proprietary to the Company, and is and shall remain the exclusive property of the Company. Accordingly, the Executive agrees that he will not disclose to others, copy, make any use of, or remove from the Company’s premises any Company Confidential Information, except as the Executive’s duties may specifically require, without the express written consent of the Company, during the Executive’s employment with the Company and thereafter until such time as Company Confidential Information becomes generally known, or readily ascertainable by proper means by persons unrelated to the Company.
B.    Upon any termination of employment, the Executive shall promptly deliver to the Company the originals and all copies of any and all materials, documents, notes, manuals, or lists containing or embodying Company Confidential Information, or relating directly or indirectly to the business of the Company, in the possession or control of the Executive.
C.    “Company Confidential Information” shall mean confidential, proprietary information or trade secrets of the Company and its subsidiaries and affiliates including without limitation the following: (i) customer lists and customer information as compiled by the Company; (ii) the Company’s internal practices and procedures; (iii) the Company’s financial condition and financial results of operation; (iv) supply of materials information, including sources and costs, and current and prospective projects; (v) strategic planning, manufacturing, engineering, purchasing, finance, marketing, promotion, distribution, and selling activities; (vi) all other information which the Executive has a reasonable basis to consider confidential or which is treated by the Company as confidential; and (vii) all information having independent economic value to the Company that is not generally known to, and not readily ascertainable by proper means by, persons who can obtain economic value from its disclosure or use. Notwithstanding the foregoing provisions, the following shall not be considered “Company Confidential Information”: (1) the general skills of the Executive; (2) information generally known by senior management executives within the Company’s industry; (3) persons, entities, contacts or relationships of the Executive that are also generally known in the industry; and (4) information which becomes available on a non-confidential basis from a source other than the Executive which source is not prohibited from disclosing such confidential information by legal, contractual or other obligation.
D.    Nothing in this Agreement shall prevent Executive from the disclosure of Confidential Information that: (A) is made: (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In the event that Executive files a lawsuit alleging retaliation by the Company for reporting a suspected
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violation of law, Executive may disclose Confidential Information related to the suspected violation of law or alleged retaliation to Executive’s attorney and use that Information in the court proceeding if Executive’s attorney: files any document containing Confidential Information under seal; and does not disclose the Confidential Information, except pursuant to court order. Executive understands and acknowledges that the Company provides this notice in compliance with the Defend Trade Secrets Act of 2016.
11.    Waiver of Intellectual Property and Moral Rights. The Executive agrees that any and all ideas, concepts, processes, discoveries, improvements and inventions conceived, discovered, made, designed, researched or developed by the Executive either solely or jointly with others, during the Executive’s employment with the Company and for the six (6) months thereafter, which relate to the Company’s business or resulting from any work the Executive does for the Company (collectively the “Intellectual Property”), are the Intellectual Property of the Company. The Executive hereby irrevocably assigns and grants to the Company all his right, title and interest in and to such Intellectual Property (including any moral rights thereto). The Executive agrees to deliver to the Company all papers, documents, files, electronic data or media, reasonably requested by the Company in connection therewith. Without limiting the foregoing, the Executive acknowledges that any and all Intellectual Property, and any and all other property of the Company protectable by patent, copyright or trade secret law, developed in whole or in part by the Executive in connection with the performance of services to the Company as an employee, are the sole property of the Company.
12.    Return of Company Property Following Termination. The Executive agrees that following the termination of his employment for any reason, he will promptly return all property of the Company, its affiliates and any divisions thereof he may have managed that is then in or thereafter comes into his possession, including, but not limited to, documents, contracts, agreements, plans, photographs, books, notes, electronically stored data and all copies of the foregoing, as well as any materials or equipment supplied by the Company to the Executive.
13.    Cooperation; No Disparagement. During the one (1)-year period following the Executive’s Date of Termination, the Executive agrees to provide reasonable assistance to the Company (including assistance with litigation matters), upon the Company’s request, concerning the Executive’s previous employment responsibilities and functions with the Company. Additionally, at all times after the Executive’s employment with the Company has terminated, the Company and the Executive agree to refrain from making any disparaging or derogatory remarks, statements and/or publications regarding the other, the Company’s employees or its services. In consideration for such cooperation, the Company shall compensate the Executive for the time the Executive spends on such cooperative efforts (at an hourly rate based on the Executive’s total compensation during the year preceding the Date of Termination) and the Company shall reimburse the Executive for his reasonable out-of-pocket expenses the Executive incurs in connection with such cooperative efforts.
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14.    Non-Competition. The Executive agrees that during his employment by the Company hereunder and for a period of one (1) year thereafter, he will not (except on behalf of or with the prior written consent of the Company), within the State of Arizona either engage in or carry on any activities of the type conducted, authorized, offered, or provided to Company, whether directly or indirectly, on his own behalf or in the service or on behalf of others, as a member of a limited liability company, partner of a partnership, or as a stockholder, investor, officer, director, trustee, or as an employee, agent, associate, consultant or in any other capacity in the water and wastewater utility business (“Competing Business”). This restriction shall not be interpreted to apply to businesses, including other regulated utilities that are not providing, considering providing, or involved in the water and/or wastewater utility business. This restriction shall not apply to the Executive working for a non-competitive state agency or municipal provider, or for a general contractor whose company solely constructs utility infrastructure on behalf of municipalities and utilities or a consulting firm providing utility regulatory, finance, lobbying or similar services, as long as for the one (1) year period Executive is not providing services for a direct Competing Business. The parties intend that the covenants contained in this Section 14 shall be deemed to be a series of separate covenants one for each county in the State of Arizona and except for geographic coverage, each such separate covenant shall be identical to the covenants contained in this Section 14. This restriction shall not apply if the Executive resigns with Good Reason or is terminated without Cause.
15.    Reasonableness of Restrictions, Equitable Relief, and Severability.
A.    The Executive hereby agrees that the period of time and geographic scope provided for in the restrictions set forth herein do not impose an undue burden on Executive and are reasonable in subject matter and duration and necessary to protect the Company and its successors and assigns in the use and employment of the goodwill of the business conducted by the Company and to protect the Company’s legitimate business interests. The Executive further agrees that damages cannot compensate the Company in the event of a violation of Sections 9-14 and that, if such violation should occur, injunctive relief shall be essential for the protection of the Company and its successors and assigns. Accordingly, the Executive hereby covenants and agrees that, in the event any of the provisions of Sections 9-14 shall be violated or breached, the Company shall be entitled to obtain injunctive relief against the party or parties violating such covenants, without bond but upon due notice, in addition to such further or other relief as may be available at equity or law. Obtainment of such an injunction by the Company shall not be considered an election of remedies or a waiver of any right to assert any other remedies which the Company has at law or in equity. No waiver of any breach or violation hereof shall be implied from forbearance or failure by the Company to take action thereof. The prevailing party in any litigation, arbitration or similar dispute resolution proceeding to enforce this provision will recover any and all reasonable costs and expenses, including attorneys’ fees.
B.    If any provision of this Agreement is held to be illegal, invalid, or unenforceable under any applicable law, then such provision will be deemed severed and this Agreement will be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties will be construed and enforced accordingly. Thereafter, the parties
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shall promptly and in good faith negotiate an equitable adjustment to the provisions of this Agreement with the view to effecting, to the greatest extent possible, the original purpose and intent of this Agreement.
16.    Assignment. The Executive acknowledges that the services to be rendered by him are unique and personal in nature. Accordingly, the Executive may not assign any of his rights or delegate any of his duties or obligations under this Agreement. Nothing in this Agreement shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation or entity that assumes this Agreement and all obligations and undertakings hereunder. Upon such consolidation, merger or transfer of assets and assumption, the term “Company” as used herein shall mean such other corporation or entity, as appropriate, and this Agreement shall continue in full force and effect.
17.    Entire Agreement; Amendment; Waivers. This Agreement embodies the complete agreement of the parties hereto with respect to the subject matter hereof and supersedes any prior written, or prior or contemporaneous oral, understandings or agreements between the parties that may have related in any way to the subject matter hereof. This Agreement may be amended only in writing executed by the Company and the Executive. The failure of either party to this Agreement to enforce any of its terms, provisions or covenants will not be construed as a waiver of the same or of the right of such party to enforce the same. Waiver by either party hereto of any breach or default by the other party of any term or provision of this Agreement will not operate as a waiver of any other breach or default.
18.    Governing Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement, shall be governed by and construed in accordance with the internal laws, and not the law of conflicts, of the State of Arizona.
19.    Notices. Any notice required or permitted under this Agreement must be in writing and will be deemed to have been given when delivered personally or by overnight courier service or three days after being sent by mail, postage prepaid, at the address indicated below or to such changed address as such person may subsequently give such notice of:
if to the Company:    Global Water Resources, Inc.
21410 North 19th Avenue, Suite 220
Phoenix, AZ 85027
Attention: Board of Directors
Facsimile: (623) 518-4100
if to the Executive:    at the address then shown in the Executive’s employment records
20.    Dispute Resolution. Except as otherwise provided in Section 10(D), any dispute, controversy, or claim, whether contractual or non-contractual, between the parties hereto arising directly or indirectly out of or connected with this Agreement, relating to the breach or alleged breach of any representation, warranty, agreement, or covenant under this Agreement, unless
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mutually settled by the parties hereto, shall be resolved by binding arbitration in accordance with the Employment Arbitration Rules of the American Arbitration Association (the “AAA”). The parties agree that before the proceeding to arbitration that they will mediate their disputes before the AAA by a mediator approved by the AAA. Any arbitration shall be conducted by arbitrators approved by the AAA and mutually acceptable to the Company and the Executive. All such disputes, controversies, or claims shall be conducted by a single arbitrator, unless the dispute involves more than $50,000 in the aggregate in which case the arbitration shall be conducted by a panel of three arbitrators. If the parties hereto are unable to agree on the mediator or the arbitrator(s), then the AAA shall select the arbitrator(s). The resolution of the dispute by the arbitrator(s) shall be final, binding, nonappealable, and fully enforceable by a court of competent jurisdiction under the Federal Arbitration Act. The arbitrator(s) shall award damages to the prevailing party. The arbitration award shall be in writing and shall include a statement of the reasons for the award. The arbitration shall be held in the Phoenix/Scottsdale metropolitan area. The Company shall pay all AAA, mediation, and arbitrator’s fees and costs. Except as otherwise provided in this Agreement, the arbitrator(s) shall award reasonable attorneys’ fees and costs to the prevailing party.
21.    Withholding; Release; No Duplication of Benefits. All of the Executive’s compensation under this Agreement will be subject to deduction and withholding authorized or required by applicable law. The Company’s obligation to make any post-termination payments hereunder (other than salary payments and expense reimbursements through a given Date of Termination), shall be subject to receipt by the Company from the Executive of the Release Agreement described by Section 7(F), and compliance by the Executive with the covenants set forth in Sections 9, 10, 12, 13 and 14.
22.    Successors and Assigns. This Agreement is solely for the benefit of the parties and their respective successors, assigns, heirs and legatees. Nothing herein shall be construed to provide any right to any other entity or individual.
23.    Each Party the Drafter. This Agreement and the provisions contained in it will not be construed or interpreted for or against any party to this Agreement because that party drafted or caused that party’s legal representative to draft any of its provisions.
24.    Headings. All descriptive headings of sections and paragraphs in this Agreement are intended solely for convenience, and no provision of this Agreement is to be construed by reference to the heading of any section or paragraph.
25.    Execution of Agreement. This Agreement may be executed via facsimile, .pdf or similar electronic transmission and in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] [SIGNATURE PAGE FOLLOWS]


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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.
COMPANY:
GLOBAL WATER RESOURCES, INC.,
By:    /s/ David Tedesco    
Name: David Tedesco
Title:    Lead Director

EXECUTIVE:
/s/ Christopher D. Krygier_________________
Christopher D. Krygier



[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT – CHRISTOPHER D. KRYGIER]






















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EXHIBIT A
Executive Job Description
Chief Strategy Officer
Our chief strategy officer, also known as a CSO, will be responsible for Arizona Corporation Commission regulatory matters and business development including business growth, acquisition management, and generally for creating and implementing short term and long-term strategic goals and change management activities for the company based on regional and public water company competitive markets. The CSO has the following job duties:
    Oversight of all ACC matters including rate cases, regulatory compliance, CCN permits, strategy, etc. (effective on or around January 1, 2022)
    Acquisitions (target identification, negotiations, financing, diligence, and consolidation)
    Developing new business ventures, water and wastewater related
    Collaborating with other executives for strategic initiatives
    Communicating organizational goals
    Determining areas of improvement or growth
    Managing marketing research initiatives and teams
Analyzing competitors and data
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EXHIBIT B
Form of Release
This Release and Waiver of Claims (“Release”) is entered into and delivered to Global Water Resources, Inc. , a Delaware corporation (the “Company”), as of this [●] day of __________, 202[_], by __________________(the “Executive”).
Reference is made to the Employment Agreement dated as of May 5, 2021 (the “Employment Agreement”), by and among the Company, and the Executive. Capitalized terms used herein without definition will have the meanings assigned to them in the Employment Agreement, a copy of which is attached hereto.
1.    Release.
(a)    General Waiver and Release by the Executive. In consideration of the parties’ respective obligations under the Employment Agreement in connection with and following the Executive’s termination of employment with the Company, and subject to the limitations set forth in Section 2 hereof, the Executive, on behalf of Executive and Executive’s heirs, executors, administrators, beneficiaries, personal representatives, and assigns, does hereby release, waive and forever discharge the Company, and its current, former and future shareholders, affiliates, direct and indirect parents, subsidiaries, predecessors, successors, directors, officers, employees, agents, attorneys, heirs and assigns (the “Company Parties”), from any and all claims, actions, causes of action, suits, costs, controversies, judgments, decrees, verdicts, damages, liabilities, attorneys’ fees, covenants, contracts, and agreements that the Executive may have against the Company Parties, or in the future may possess based on events occurring during the term of the Executive’s employment with the Company arising out of the Executive’s employment relationship with or service as an employee, officer or director of the Company and the Company’s subsidiaries and affiliates or the termination of such relationship or service, including any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date the Executive signs this Release, including, but not limited to, any claims arising under the following laws as amended: Fair Labor Standards Act of 1938 29 U.S.C. §§ 201 et seq.; Title VII of the Civil Rights Act of 1964 42 U.S.C. 2000e et seq.; the Rehabilitation Act of 1973, 29 U.S.C. §§ 701 et seq.; the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101 et seq.; the Civil Rights Act of 1866, 42 U.S.C. § 1981; the Civil Rights Act of 1991, 42 U.S.C. § 1981a; the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq.; the Family Medical Leave Act of 1993, 29 U.S.C. §§ 2601 et seq.; the Equal Pay Act of 1963, 29 U.S.C. §§ 206 et seq.; the Workers Adjustment and Retraining Notification Act of 1988, 29 U.S.C. §§ 2101 et seq.; the Immigration Reform and Control Act, 8 U.S.C. § 1101 et seq.; the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq.; the Sarbanes-Oxley Act of 2002; False Claims Act; the Fair Credit Reporting Act; the Consolidated Omnibus Budget Reconciliation Act (COBRA); Arizona Employment Protection Act; Arizona Civil Rights Act; Arizona wage payment and paid sick leave laws; and the anti-retaliation portion of the Arizona workers compensation law; or any other federal, state or local law or any foreign jurisdiction, whether such claim arises under statute, common law or in equity, and whether or not the Executive is currently aware of the existence of such claim, damage, action or cause of action, suit or demand
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(collectively, including claims, actions and causes of action set forth in Section 1(b) below, the “Claims”). The Executive also does forever release, discharge and waive any right the Executive may have to recover in any proceeding brought by any federal, state or local agency against the Company Parties, respectively, to enforce any laws. Each of the parties hereto agrees that the value received or to be received in the future as described in the Employment Agreement will be in full satisfaction of any and all claims, actions or causes of action for payment or other benefits of any kind that the Executive may have against the Company Parties.
(b)    ADEA Release. In further recognition of the above, the Executive hereby releases and forever discharges each of the Company Parties from any and all claims, actions and causes of action that he may have as of the date he signs and delivers to the Company this Release arising under the federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ADEA”).
2.    Limitations.
(a)    No Impact on Obligations Under the Employment Agreement or Other Agreements. The releases contained herein do not, are not intended to and will not be interpreted to serve as a release or waiver by the Executive or the Company Parties with respect to their respective rights and obligations set forth in the Employment Agreement. In particular, and without limiting the generality of the preceding sentence, the Executive does not waive or release any claim he might now or in the future have to be paid or receive the payments and benefits provided for in Sections 7 or 8 of the Employment Agreement, and the Company Parties do not waive or release any claim they might now or in the future have under Sections 9-14 of the Employment Agreement. In addition, the releases contained herein do not, are not intended to and will not be interpreted to serve as a release or waiver by the Executive of (i) his entitlement to vested accrued compensation and benefits under the Company’s applicable plans and arrangements and (ii) his rights as an equity stakeholder in the Company.
(b)    No Impact on Indemnification Rights. The releases contained herein do not, are not intended to, and will not be interpreted to serve as a release or waiver by the Executive with respect to any indemnification rights or directors’ and officers’ liability insurance policy (“D&O coverage”) he may have and such indemnification rights and D&O coverage will not be effected, modified or extinguished by the Executive’s execution of this Release.
3.    No Pending Litigation.
The Executive represents and agrees that he has not filed, and will not file, any action, complaint, charge, grievance or arbitration against any Company Party, except that such agreement will not apply to any claim based on any matter which, pursuant to Section 2, is excluded from the scope of this Release.
4.    Acknowledgment.
The Executive acknowledges and confirms that (a)  the Release does not bar claims that arise after the execution of the Release; (b) the consideration under this Release he is receiving is
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in addition to anything of value to which he was already entitled before he received the Employment Agreement which provides consideration conditioned upon the execution of this Release; (c) he has been advised in writing by the Company in connection with his resignation to consult with an attorney of his choice prior to signing this Release and to have such attorney explain to him the terms of the Release, including, without limitation, the terms relating to his release of Claims arising under ADEA; (d) he has read this Release carefully and completely and understands each of the terms hereof; and (e) he was given not less than twenty-one (21) days [or forty-five (45) days, if applicable] to consider the terms of the Release and to consult with an attorney of his choosing with respect thereto; and (f) that for a period of seven (7) days following his signing of this Agreement, he will have the option to revoke this Agreement in accordance with the terms set forth in Section 6 below.
5.    Successors.
The rights and obligations under this Agreement will inure to any and all successors of the Company.
6.    Revocation.
The Executive have the right to revoke this Release during the seven (7)-day period commencing immediately following the date he signs and delivers this Agreement to the Company (the “Revocation Period”). The period will expire at 5:00 p.m., Mountain Time, on the last day of the seven (7)-day period; provided, however, that if such seventh (7th) day is not a business day, the period will extend to 5:00 p.m. on the next succeeding business day. In the event of any such revocation by the Executive, the obligations of the Company under this Release will terminate and be of no further force and effect as of the date of such revocation. No such revocation by the Executive will be effective unless it is in writing and signed by the Executive and received by a representative of the Company prior to the expiration of the Revocation Period. Executive understands and agrees that if he timely revokes this Release he forfeits any consideration provided for under the Employment Agreement conditioned upon this Release.
7.    Counterparts.
This Release may be executed in two (2) or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Release to be executed, as of the day and year first above written.
By:
Name:
Title:

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ACCEPTED AND AGREED:
GLOBAL WATER RESOURCES, INC.
Name:
Title:
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MODIFICATION AGREEMENT
DATE:    As of April 30, 2021
PARTIES:    Borrower:    GLOBAL WATER RESOURCES, INC., a Delaware corporation (“Borrower”)
Borrower        21410 North 19th Avenue, Suite 220
Address:        Phoenix, Arizona 85027-2738
Bank:    THE NORTHERN TRUST COMPANY, an Illinois banking corporation (“Bank”)
Bank            2398 East Camelback Road, Suite 1100
Address:        Phoenix, Arizona 85016
RECITALS:
A.Bank has extended to Borrower a loan (the “Loan”) in the original principal amount of $10,000,000 pursuant to that certain Loan Agreement dated as of April 30, 2020 (the “Loan Agreement”), and evidenced by that certain Multiple Advance Note dated April 30, 2020 (the “Note”). The unpaid principal balance of the Loan as of April 28, 2021 was $0.00.
B.The Loan is secured by, among other things, (i) that certain Pledge and Security Agreement dated as of April 30, 2020, between Borrower and the Collateral Agent, for the benefit of Bank, (ii) that certain Pledge and Security Agreement dated as of April 30, 2020, between Global Water, LLC, a Delaware limited liability company, and the Collateral Agent, for the benefit of Bank (the “Global Water Security Agreement”), and (iii) that certain Pledge and Security Agreement dated as of April 30, 2020, between West Maricopa Combine, LLC, an Arizona limited liability company, and the Collateral Agent, for the benefit of Bank (the “West Maricopa Security Agreement”). The agreements, documents, and instruments securing the Loan and the Note are referred to individually and collectively as the “Security Documents”.
C.The Note, the Loan Agreement, the Security Documents, and all other agreements, documents, and instruments evidencing, securing, or otherwise relating to the Loan are sometimes referred to individually and collectively as the “Revolver Documents.”
D.Borrower has requested that Bank modify the Loan and the Revolver Documents as provided herein. Bank is willing to so modify the Loan and the Revolver Documents, subject to the terms and conditions of this Modification Agreement (this “Agreement”). Except as otherwise provided in this Agreement, all terms defined in the Revolver Documents shall have the same meaning when used in this Agreement. Such defined terms are denoted in the Revolver Documents and in this Agreement by initial capital letters.
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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 REVOLVER DOCUMENTS.
2.1The Revolver Documents are hereby modified as follows:
2.1.1The definition of “Scheduled Maturity Date” set forth in Paragraph 1 of the Note is hereby deleted in its entirety and replaced with the following:
“Scheduled Maturity Date” means April 30, 2024.
2.1.2The Scheduled Maturity Date of the Loan and the Note is changed from April 30, 2022 to April 30, 2024. On the Scheduled Maturity Date, Borrower shall pay to Bank all amounts payable by Borrower under the Revolver Documents as modified herein.
2.1.3The following definition is hereby added to Schedule A of the Loan Agreement:
“Global Water Holdings” means Global Water Holdings, Inc., an Arizona corporation.
2.1.4The following definitions set forth in Schedule A of the Loan Agreement are hereby deleted in their entirety and replaced with the following:
“Security Agreements” means (a) the Pledge and Security Agreement dated as of April 30, 2020, between the Company and the Collateral Agent, (b) the Pledge and Security Agreement dated as of April 30, 2020, between Global Water and the Collateral Agent, (c) the Pledge and Security Agreement dated as of April 30, 2020, between West Maricopa and the Collateral Agent, and (d) the Pledge and Security Agreement dated as of April 30, 2021, between Global Water Holdings and the Collateral Agent, in each case as supplemented, amended and restated or replaced from time to time.
“Subsidiary Guarantor” means each of Global Water, Global Water Holdings, West Maricopa and any other Subsidiary that has executed and delivered a Subsidiary Guaranty pursuant to Section 7.7.
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“Subsidiary Guaranties” (a) the Guaranty dated as of April 30, 2020, delivered by Global Water, (b) the Guaranty dated as of April 30, 2020, delivered by West Maricopa, and (c) the Guaranty dated as of April 30, 2021, delivered by Global Water Holdings, and any other guaranties delivered pursuant to Section 7.7(a), in each case as supplemented, amended and restated or replaced from time to time.
“Utility Subsidiary” means each of the following Arizona limited liability companies (a) Global Water - Balterra Utilities Company, Inc., (b) Global Water — Picacho Cove Water Company, Inc., (c) Global Water — Palo Verde Utilities Company, Inc., (d) Global Water — Picacho Cove Utilities Company, Inc., (e) Global Water — Santa Cruz Water Company, Inc., (f) Global Water — Hassayampa Utilities Company, Inc., (g) Global Water - Greater Tonopah Water Company, Inc., (h) Global Water - Northern Scottsdale Water Company, Inc., (i) Global Water - Eagletail Water Company, Inc., (j) Global Water – Red Rock Utilities Company, Inc., (k) Global Water – Turner Ranches Irrigation, Inc., (l) Global Water — Mirabell Water Company, Inc., (m) Global Water — Lyn Lee Water Company, Inc., (n) Global Water — Francesca Water Company, Inc., (o) Global Water — Tortolita Water Company, Inc., and any successors at Law of each of the foregoing entities.
2.1.5All references to “Subsidiary Guarantor” in the Revolver Documents are hereby amended to include Global Water Holdings, jointly and severally with Global Water and West Maricopa.
2.1.6In connection with the Loan Agreement and in conjunction with this Agreement, Global Water Holdings is entering into that certain Guaranty of even date herewith (the “Additional Guaranty”) and that certain Pledge and Security Agreement of even date herewith (the “Additional Security Agreement”). All references in the Revolver Documents to a “Subsidiary Guaranty” or the “Subsidiary Guaranties” are amended to include the Additional Guaranty. All references in the Revolver Documents to a “Security Agreement” or the “Security Agreements” are amended to include the Additional Security Agreement.
2.1.7Section 17.8 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
17.8    Collateral Account. Company has established with Bank Company’s deposit account, with the last four digits of such account number being 2231 (the “Collateral Account”). At the end of every Fiscal Quarter, all Consolidated Net Income shall be deposited in the Collateral Account.
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2.1.8New Pledged Companies Schedule – Global Water Security Agreement. Schedule 1 of the Global Water Security Agreement is hereby deleted in its entirety and replaced with Schedule 1 (Global Water) attached to this Agreement.
2.1.9New Pledged Companies Schedule – West Maricopa Security Agreement. Schedule 1 of the West Maricopa Security Agreement is hereby deleted in its entirety and replaced with Schedule 1 (West Maricopa) attached to this Agreement.
2.2Each of the Revolver 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 is materially incomplete, incorrect, or misleading as of the date hereof.
2.3Each reference in the Revolver Documents to any of the Revolver Documents shall be a reference to such document as modified herein.
3.RATIFICATION OF REVOLVER DOCUMENTS AND COLLATERAL.
The Revolver 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 Revolver Documents shall remain as security for the Loan and the obligations of Borrower in the Revolver Documents.
4.BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank:
4.1No default or event of default under any of the Revolver 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 Revolver Documents as modified herein has occurred and is continuing.
4.2There has been no material adverse change in the financial condition of Borrower or any other person whose financial statement has been delivered to Bank in connection with the Loan from the most recent financial statement received by Bank.
4.3Each and all representations and warranties of Borrower in the Revolver Documents are accurate on the date hereof.
4.4    Borrower has no claims, counterclaims, defenses, or setoffs with respect to the Loan or the Revolver Documents as modified herein.
4.5    The Revolver 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
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to perform the Revolver Documents as modified herein. The execution and delivery of this Agreement and the performance of the Revolver 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.
5.BORROWER COVENANTS.
Borrower covenants with Bank:
5.1    Borrower shall execute, deliver, and provide to Bank such additional agreements, documents, and instruments as reasonably required by Bank to effectuate the intent of this Agreement, including the Additional Guaranty and the Additional Security Agreement.
5.2    Borrower fully, finally, and forever releases and discharges 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 Borrower has or in the future may have, whether known or unknown, (a) in respect of the Loan, the Revolver Documents, or the actions or omissions of Bank in respect of the Loan or the Revolver Documents and (b) 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 Bank:
5.3.1    All principal and accrued and unpaid interest now due and payable under the Note and all amounts, other than interest and principal, now due and payable by Borrower under the Revolver Documents as of the date hereof.
5.3.2    All of the internal and external costs and expenses incurred by Bank and Collateral Agent in connection with this Agreement (including, without limitation, inside and outside attorneys, appraisal, appraisal review, processing, title, filing, and recording costs, expenses, and fees).
6.EXECUTION AND DELIVERY OF AGREEMENT BY BANK AND COLLATERAL AGENT.
Bank shall not be bound by this Agreement until each of the following shall have occurred: (a) Bank has executed and delivered this Agreement, (b) Borrower has performed all of the obligations of Borrower under this Agreement to be performed contemporaneously with the execution and delivery of this Agreement, (c) Global Water Holdings has executed and delivered to Bank the Additional Guaranty and the Additional Security Agreement, and (d) each Subsidiary Guarantor of the Loan has executed and delivered to Bank the Consent and Agreement of Subsidiary Guarantors attached to this Agreement. By its execution hereof, Bank authorizes and directs Collateral Agent to execute and deliver this Agreement and the Additional Security Agreement and acknowledges that Collateral Agent is not responsible for the validity or sufficiency of this Agreement, the Additional Security Agreement or the Additional Guaranty or
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for the enforceability of the security interest granted to the Collateral Agent under the Additional Security Agreement.
7.ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
The Revolver Documents as modified herein contain the entire understanding and agreement of Borrower and Bank in respect of the Loan and supersede all prior representations, warranties, agreements, arrangements, and understandings. No provision of the Revolver Documents as modified herein may be changed, discharged, supplemented, terminated, or waived except in a writing signed by Bank and Borrower.
8.BINDING EFFECT.
The Revolver Documents as modified herein shall be binding upon, and inure to the benefit of, Borrower and Bank and their respective successors and assigns.
9.GOVERNING LAW; JURISDICTION.
9.1    Except to any extent otherwise provided in the Collateral Agency Agreement, this Agreement shall be construed and enforced in accordance with, and the rights of the Parties shall be governed by, the law of the State of Arizona excluding choice of law principles of the Law of such state that would permit the application of the Law of a jurisdiction other than such state.
9.2    Except to any extent otherwise provided in the Collateral Agency Agreement, Borrower irrevocably submits to the non-exclusive jurisdiction of any Arizona state or federal court sitting in Maricopa County, Arizona, over any suit, action or proceeding arising out of or relating to any of the Revolver Documents. To the fullest extent permitted by Law, Borrower irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
10.JURY WAIVER.
THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE REVOLVER NOTE OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH.
11.COUNTERPART EXECUTION.
This Agreement may be executed in any number of counterparts, each of which will be an original but all of which together will constitute one agreement. Each counterpart may consist of a number of copies hereof, each signed by fewer than all, but together signed by both, Parties. Delivery of an executed counterpart of a signature page of this Agreement, whether with or
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without the remainder hereof, by facsimile or in electronic (e.g., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart hereof.
[Signature Page Follows]
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DATED as of the date first above stated.
GLOBAL WATER RESOURCES, INC., a Delaware corporation
By: /s/ Michael J. Liebman     
Name:    Michael J. Liebman
Title:    Senior Vice President, Chief Financial Officer and Secretary
“BORROWER”
Signature Page to Modification Agreement
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THE NORTHERN TRUST COMPANY, an Illinois banking corporation
By:/s/ Orlando Castaneda    
Name: Orlando Castaneda    
Title: Vice President    
“BANK”
Signature Page to Modification Agreement
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Acknowledged and agreed to by the undersigned as of the date of this Agreement:
COLLATERAL AGENT:
U.S. BANK NATIONAL ASSOCIATION, as Collateral Agent
By:    /s/ Mary Ambriz-Reyes                        
Name:        Mary Ambriz-Reyes                    
Title:        Vice President                    

Signature Page to Modification Agreement
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CONSENT AND AGREEMENT OF SUBSIDIARY GUARANTORS
With respect to the Modification Agreement dated as of April 30, 2021 (the “Agreement”), between GLOBAL WATER RESOURCES, INC., a Delaware corporation (“Borrower”), and THE NORTHERN TRUST COMPANY, an Illinois banking corporation (“Bank”), the undersigned (individually and collectively, the “Subsidiary Guarantor”) agree for the benefit of Bank as follows:
1.Subsidiary Guarantor acknowledges (i) receiving a copy of and reading the Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the effectiveness of (A) the Guaranty dated as of April 30, 2020, by Global Water for the benefit of Bank, and the Guaranty dated as of April 30, 2020, by West Maricopa for the benefit of Bank (together, the “Existing Guaranty”), and (B) any other agreements, documents, or instruments securing or otherwise relating to the Existing Guaranty, as modified herein. In connection with the Loan Agreement and in conjunction with this Agreement, Global Water Holdings is entering into the Additional Guaranty. The Existing Guaranty, the Additional Guaranty and any other agreements, documents, and instruments relating to the Existing Guaranty or the Additional Guaranty 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.Subsidiary Guarantor consents to the inclusion Global Water Holdings (“Additional Guarantor”) as a “Subsidiary Guarantor” under the Additional Guaranty and all other modifications of the Revolver Documents and other matters in the Agreement, including, without limitation, the extension of the Scheduled Maturity Date from April 30, 2022 to April 30, 2024.
3.Additional Guarantor has received a copy of the Revolver Documents and is familiar with the terms and conditions thereof. By its execution hereof, Additional Guarantor acknowledges and agrees that it shall be a Subsidiary Guarantor under the Revolver Documents and agrees to be bound by all of the terms, conditions and covenants set forth in the Revolver Documents applicable to each Subsidiary Guarantor in all respects as if Additional Guarantor had executed and delivered each of the Revolver Documents to which Subsidiary Guarantor is a party. Additional Guarantor assumes and agrees to pay and perform all existing and future payment and performance obligations of Borrower under the Revolver Documents and hereby joins in and makes all of the assignments and grants of security contained in the Revolver Documents, if any, with respect to its right, title and interest in the collateral. Additional Guarantor acknowledges and affirms that all of the obligations pursuant to the Additional Guaranty shall be joint and several obligations of the Additional Guarantor and each other Subsidiary Guarantor.
4.Each Subsidiary Guarantor, including Additional Guarantor, hereby represent and warrant to Bank that all of the representations and warranties of Subsidiary Guarantor set forth in the Revolver Documents are true and correct as of the date hereof and shall apply to Additional Guarantor. Additional Guarantor further represents and warrants to Bank that:
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4.1    As of the date hereof and after giving effect to the execution and delivery of this Consent and Agreement of Subsidiary Guarantors (this “Consent”) and the obligations assumed pursuant to this Consent, the sum of Additional Guarantor’s debts are less than all of Additional Guarantor’s assets at fair valuation.
4.2    Additional Guarantor is not entering into any agreement, granting any security in connection herewith, or otherwise making any transfer in connection herewith, with actual intent to hinder, delay or defraud any creditor of Additional Guarantor, whether such creditor now exists or may hereafter arise.
4.3    Additional Guarantor acknowledges that Bank’s commitment to lend certain amounts to Borrower pursuant to the Loan Agreement and to modify the Revolver Documents as set forth in the Agreement constitutes reasonably equivalent value in exchange for the execution and delivery by Additional Guarantor of this Consent, the granting of any security in connection with the Agreement and this Consent, and all transfers made by Subsidiary Guarantor in connection with the this Consent. Additional Guarantor agrees that the execution of this Consent, the joint nature of the guaranty obligations contemplated hereby, even though entailing some risks, have been determined by Additional Guarantor to be the in the best interests of Subsidiary Guarantor and Borrower.
4.4    Additional Guarantor is not engaged or about to be engaged in a business or transaction for which the assets of Additional Guarantor (after giving effect to the granting of any security in connection with the execution and delivery of this Consent and any other transfer made or contemplated to be made in connection with the execution and delivery of this Consent) would be unreasonably small in relation to the business or transaction.
4.5    Additional Guarantor does not intend to incur or believe that it will incur debts beyond its ability to pay such debts as they become due.
As used herein, the term “transfer” shall include every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset and includes payment of money, release, lease, and creation of a lien or other encumbrance.
5.Subsidiary Guarantor fully, finally, and forever releases and discharges 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 Subsidiary Guarantor has or in the future may have, whether known or unknown, (a) in respect of the Loan, the Revolver Documents, the Existing Guaranty, the Guarantor Documents, or the actions or omissions of Bank in respect of the Loan, the Revolver Documents, or the Guarantor Documents and (b) arising from events occurring prior to the date hereof.
6.Subsidiary Guarantor agrees that all references, if any, to the Note, the Loan Agreement, the Security Documents, and the other Revolver Documents in the Guarantor
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Documents shall be deemed to refer to such agreements, documents, and instruments as modified by the Agreement.
7.Any property or rights to or interests in property granted as security in the Guarantor Documents shall remain as security for the Additional Guaranty and the obligations of Subsidiary Guarantor in the Additional Guaranty.
8.Subsidiary Guarantor 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 Consent and to execute, deliver and perform the Guarantor Documents as modified herein. The execution and delivery of this Consent and the execution, delivery and performance of the Guarantor Documents as modified herein have been duly authorized by all requisite action by or on behalf of Subsidiary Guarantor. This Consent and the Additional Guaranty have been duly executed and delivered on behalf of Subsidiary Guarantor.
9.Subsidiary Guarantor represents and warrants that the Revolver Documents, as modified by the Agreement, and the Guarantor Documents, as modified by this Consent, are the legal, valid, and binding obligations of Borrower and the undersigned, respectively, enforceable in accordance with their terms against Borrower and the undersigned, respectively.
10.Subsidiary Guarantor represents and warrants that Subsidiary Guarantor has no claims, counterclaims, defenses, or off sets with respect to the enforcement against Subsidiary Guarantor of the Guarantor Documents.
11.Subsidiary Guarantor represents and warrants that there has been no material adverse change in the financial condition of any Subsidiary Guarantor from the most recent financial statement received by Bank.
12.JURY WAIVER.
TO THE FULLEST EXTENT PERMITTED BY LAW, SUBSIDIARY GUARANTOR AND (BY ITS ACCEPTANCE HEREOF AS EVIDENCED BY ITS EXTENSION OF ANY LIABILITIES) BANK VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT THEY OR ANY OF THEM MAY HAVE TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG SUBSIDIARY GUARANTOR AND BANK ARISING OUT OF OR IN ANY WAY RELATED TO THE AGREEMENT, THIS CONSENT, ANY OTHER REVOLVER DOCUMENT, OR ANY RELATIONSHIP BETWEEN BANK AND SUBSIDIARY GUARANTOR.
13.This Consent may be executed in any number of counterparts, each of which shall be considered an original for all purposes; provided, however, that all such counterparts shall together constitute one and the same instrument.
[Signature Page Follows]
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DATED as of the date of the Agreement.
GLOBAL WATER, LLC
By: /s/ Michael J. Liebman     
Name:    Michael J. Liebman
Title:    Manager
WEST MARICOPA COMBINE, LLC
By: /s/ Michael J. Liebman     
Name:    Michael J. Liebman
Title:    Manager
GLOBAL WATER HOLDINGS, INC.
By: /s/ Michael J. Liebman     
Name:    Michael J. Liebman
Title:    First Vice President, Secretary and Treasurer
“SUBSIDIARY GUARANTOR”

Signature Page to Consent and Agreement of Guarantors
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Schedule 1
PLEDGED COMPANIES
Global Water
1.Global Water - Balterra Utilities Company, Inc.*
2.Global Water - CP Water Company, Inc.*
3.Global Water - Eagletail Water Company, Inc.*
4.Global Water — 303 Utilities Company, Inc.*
5.Global Water — Palo Verde Utilities Company, Inc.*
6.Global Water — Picacho Cove Utilities Company, Inc.*
7.Global Water — Picacho Cove Water Company, Inc.*
8.Global Water — Santa Cruz Water Company, Inc.*
9.Global Water — Hassayampa Utilities Company, Inc.*
10.West Maricopa Combine, LLC**
11.Global Water – Red Rock Utilities Company, Inc.*
12.Global Water – Turner Ranches Irrigation, Inc.*

*All Arizona corporations 100% owned by Pledgor.
**An Arizona limited liability company 100% owned by Pledgor. Not a regulated utility.
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Schedule 1
PLEDGED COMPANIES*
West Maricopa Combine
1.Valencia Water Company, Inc.
2.Water Utility of Greater Buckeye, Inc.
3.Global Water - Greater Tonopah Water Company, Inc.
4.Global Water - Northern Scottsdale Water Company, Inc.
5.Willow Valley Water Company, Inc.

*All Arizona corporations 100% owned by Pledgor.
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GUARANTY
(GLOBAL WATER HOLDINGS, INC.)

April 30, 2021

    This Guaranty (as modified from time to time, the “Guaranty”) has been executed by GLOBAL WATER HOLDINGS, INC., an Arizona corporation (“Guarantor”), with Guarantor’s principal residence or office at 21410 North 19th Avenue, Suite 220, Phoenix, Arizona 85027, in favor of THE NORTHERN TRUST COMPANY, an Illinois banking corporation (“Lender“), with a banking office at 50 South LaSalle, Chicago, IL 60603. If more than one party executes this Guaranty, “Guarantor” refers to each of them individually and some or all of them collectively, and their obligations hereunder shall be joint and several. If any party comprising “Guarantor” is a trustee(s), “Trust Agreement” means the governing trust agreement and/or instruments governing the trust, as modified from time to time, and all related documents and instruments, and “Guarantor” also refers to the trustee(s) in its capacity as such and the trust individually and collectively. Various capitalized terms have the meanings set forth in the Section entitled “DEFINITIONS.”

    In consideration of Lender's extension of new financial accommodations or continuation of existing financial accommodations to GLOBAL WATER RESOURCES, INC., a Delaware corporation (such other person(s) or entity(ies), individually and collectively, the “Company”), and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor agrees as follows:

1.    DEFINITIONS.

    (a)    As used in this Guaranty the following terms shall have the indicated meanings:

    “Anti-Terrorism Law” means any law relating to terrorism or money-laundering, including Executive Order No. 13224 and the USA Patriot Act.

    “Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. §1 et. seq.), as amended from time to time, and any successor statute.

    “Constituent Documents” means the articles or certificate of incorporation, by-laws, partnership agreement, certificate of limited partnership, limited liability company operating agreement, limited liability company articles of organization or certificate of formation, trust agreement, and all other documents and instruments pertaining to the formation and ongoing existence of any person which is not a natural person.

    “Credit Support Party” means any person, or any persons severally, who now or hereafter guarantees payment or collection of all or any part of the Liabilities or provides any collateral to secure the Liabilities.

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    “Dollar” and “$” means lawful money of the United States of America, unless otherwise specified.

    “Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the guaranty hereunder of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the guaranty of such Guarantor or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guaranty hereunder or security interest is or becomes illegal.

    “Lender Affiliate” means Northern Trust Corporation or any direct or indirect subsidiary thereof (other than Lender itself).

    “Liabilities”—see Section entitled “LIABILITIES COVERED.”

    “Payment Event”—see Section entitled “WHEN PAYMENT BY GUARANTOR REQUIRED.”

    The term “person” means any individual, corporation, company, limited liability company, voluntary association, partnership, trust, estate, unincorporated organization, other entity, or government (or any agency, instrumentality, or political subdivision thereof).

    “Prohibited Person” means: (i) a person that is listed in the Annex to, or is otherwise subject to the provisions of, Executive Order No. 13224; (ii) a person owned or controlled by, or acting for or on behalf of, any person that is listed in the Annex to, or is otherwise subject to the provisions of, Executive Order No. 13224; (iii) a person with whom Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (iv) a person who commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224; (v) a person that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website or at any replacement website or at any other official publication of such list; and (vi) a person who is affiliated with a person described in clauses (i) – (v) above.

    “Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Guarantor that has total assets exceeding $10,000,000 at the time the relevant guaranty or grant of
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the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a “keepwell, support or other agreement” under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

    “Related Document(s)” means this Guaranty and any note, application and agreement for letter of credit (reimbursement agreement), Swap Agreement, mortgage, deed of trust, security or pledge agreement, or other agreement, document or instrument previously, now or hereafter delivered to Lender in connection with the Liabilities.

    “Related Party(ies)” means the Company, any Credit Support Party, any Subsidiary, and, in addition: (i) as to any Guarantor which is a natural person, trusts for the benefit of Guarantor; and (ii) as to any Guarantor which is not a natural person, to the extent applicable, any general or limited partner, controlling shareholder, joint venturer, member or manager, of Guarantor.

    “Subsidiary” means any corporation, partnership, limited liability company, joint venture, trust, or other legal entity of which Guarantor owns directly or indirectly 50% or more of the outstanding voting stock or interest, or of which Guarantor has effective control, by contract or otherwise.

    “Swap Agreement” means any agreement, document or instrument executed or delivered by the Company or Guarantor pertaining to any Swap Obligation.

    “Swap Obligation” means, with respect to the Company or any Guarantor, any obligation to pay or perform under any agreement, contract, or transaction that constitutes a “swap” within the meaning of section 1(a)(47) of the Commodity Exchange Act, as amended from time to time, if entered into with Lender or any Lender Affiliate.

    “USA Patriot Act” means the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001” (Public Law 107-56, signed into law on October 26, 2001), as amended from time to time.

    (b)    As used in this Guaranty, unless otherwise specified: the term “including” means “including without limitation”; the term “days” means “calendar days”; and terms such as “herein,” “hereof” and words of similar import refer to this Guaranty as a whole. Unless otherwise defined herein or the context requires otherwise, all terms (including those not capitalized) that are defined in the Uniform Commercial Code of New York shall have the same meanings herein as in such Code, as such Code may be amended from time to time (the “UCC”); however, no amendment to the UCC after the date hereof shall limit any rights of Lender hereunder or in connection herewith. Unless the context requires otherwise, wherever used herein the singular shall include the plural and vice versa, and
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the use of one gender shall also denote the others. Captions herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof; references herein to sections or provisions without reference to the document in which they are contained are references to this Guaranty.

2.    LIABILITIES COVERED.

    (a)    Guarantor hereby guarantee(s) absolutely and unconditionally the prompt payment and performance when due, whether at maturity, by declaration, by demand or otherwise, and at any and all times thereafter, of all indebtedness and other obligations of every kind and nature of the Company to Lender, direct or indirect, absolute or contingent, due or to become due, now or hereafter existing, joint, several or joint and several (all such indebtedness and other obligations being hereinafter collectively called the “Liabilities”). Notwithstanding the foregoing, the term “Liabilities” includes all Swap Obligations except for any Excluded Swap Obligations, which shall not be guaranteed pursuant to the terms hereof.

    (b)    Notwithstanding (a) of this Section, the right of recovery against Guarantor is limited as to principal to the amount of $UNLIMITED, plus the interest on such amount and any related amounts such as breakage and prepayment fees. The creation or existence from time to time of Liabilities in excess of the amount to which the right of recovery under this Guaranty is limited is hereby authorized without notice to Guarantor and shall in no way affect or impair this Guaranty. If the word “UNLIMITED” is inserted in the previous sentence after the dollar sign, Guarantor expressly agrees that the right of recovery against Guarantor hereunder is without limit.

    (c)    To the extent that (i) there is more than one guarantor of the Liabilities and (ii) Guarantor is a Qualified ECP Guarantor, Guarantor hereby jointly, severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other guarantor to honor all of its obligations under this Guaranty in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this subsection (c) for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this subsection (c), or otherwise under this Guaranty, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of any Qualified ECP Guarantor under this subsection (c) shall remain in full force and effect until the Liabilities have been paid and performed in full and Lender has no further commitment to lend to the Company. Such Qualified ECP Guarantor intends that this subsection (c) constitute, and this subsection (c) shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other guarantor for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

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    (d)    The right of recovery under this Guaranty is in addition to and not in contravention of the amounts Lender may recover against Guarantor under any and all other guaranties or other Related Documents previously, now or hereafter executed by Guarantor, whether pertaining to the Company or to any other person.

3.    WHEN PAYMENT BY GUARANTOR REQUIRED.

    (a)    For purposes of this Guaranty, “Payment Event” means the occurrence of any of the following:

        (i)    a default, event of default or similar event occurs under any note, mortgage, deed of trust, pledge agreement, security agreement, letter of credit reimbursement agreement, Swap Agreement, or other Related Document, and shall continue beyond any applicable notice, grace or cure period set forth in such Related Document; or Guarantor shall die or be declared legally incompetent; or

        (ii)    any bankruptcy, insolvency, reorganization, arrangement, readjustment, liquidation, dissolution, or similar proceeding, domestic or foreign, is instituted by or against Guarantor or the Company, and, if instituted against Guarantor or the Company, shall not be dismissed or vacated within sixty (60) days after the filing or other institution thereof; or

        (iii)    Guarantor or the Company shall become insolvent, generally shall fail or be unable to pay its debts as they mature, shall admit in writing its inability to pay its debts as they mature, shall make a general assignment for the benefit of its creditors, shall enter into any composition or similar agreement, or shall suspend the transaction of all or a substantial portion of its usual business.

    (b)    If a Payment Event occurs, Guarantor agrees to pay Lender immediately upon Lender’s demand the full amount of all Liabilities. If a Payment Event specified in (ii) or (iii) of subsection (a) of this Section occurs, Guarantor’s obligation to pay all Liabilities (principal, interest and other amounts) shall be immediately and automatically due and payable without notice, demand or other action of any kind.

4.    NO RELIANCE ON LENDER. Guarantor represents and warrants to Lender that in making its decision to enter into this Guaranty, Guarantor has independently taken whatever steps Guarantor considers necessary to evaluate the condition and affairs of the Company without reliance upon Lender, and has made an independent judgment. As long as this Guaranty remains in effect, Guarantor will continue to make an independent evaluation of the financial condition and affairs of the Company without reliance upon Lender. Lender has no obligation to provide to Guarantor any financial or other information concerning the Company.

5.    TERM OF GUARANTY; REINSTATEMENT. This Guaranty shall remain in full force and effect until all Liabilities have been paid and performed in full and until Lender has not
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extended to the Company any committed or uncommitted loan or other credit facility of any kind. This Guaranty and Guarantor’s obligations hereunder may not be amended or waived without the prior written consent of Lender, and shall remain in effect notwithstanding that at any particular time there shall be no Liabilities outstanding. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of the Liabilities to Lender is rescinded or must otherwise be returned by Lender upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment to Lender had not been made.

6.    WAIVERS OF DEFENSES AND COUNTERCLAIMS. Without limiting any other provision hereof, Guarantor irrevocably waives and relinquishes any setoff, defense or counterclaim that is or may be available to an accommodation party, co-signer, guarantor or surety at law or in equity. Without limiting the generality of the previous sentence or of any other protection to Lender hereunder or at law or in equity:

    (a)    Lender may at any time and from time to time, without notice to Guarantor, take any or all of the following actions without affecting or impairing the liability of Guarantor on this Guaranty: (i) renew or extend time of payment of the Liabilities; (ii) accept, substitute, release or surrender any security for the Liabilities; (iii) accept other guarantors; and (iv) release any person primarily or secondarily liable on the Liabilities (including the Company and any maker, indorser or guarantor).

    (b)    The liability of Guarantor under this Guaranty shall in no way be affected or impaired by any failure or delay in enforcing payment of the Liabilities or this Guaranty or any security therefor or herefor, or in exercising any right or power in respect thereto or hereto, or by any compromise, waiver, settlement, change, subordination, modification or disposition of the Liabilities or of any security for the Liabilities or for this Guaranty. In order to hold Guarantor liable hereunder, there shall be no obligation on the part of Lender, at any time, to resort for payment to the Company or any other guaranty or to any security for the Liabilities or this Guaranty, and Lender shall have the right to enforce this Guaranty irrespective of whether or not other proceedings or steps are being taken against any property securing the Liabilities or any other party primarily or secondarily liable on any of the Liabilities.

    (c)    Except as and if otherwise specifically set forth herein, Guarantor irrevocably waives notice of acceptance of this Guaranty, presentment, protest, notice of protest, notice of intent to accelerate, notice of acceleration, demand, diligence, grace, notice of dishonor or default, notice of nonpayment, notice of acceptance, notice of any loans made, extensions granted or other action taken in reliance hereon, and all other demands and notices of any kind in connection with this Guaranty or the Liabilities.

    (d)    Any and all payments upon the Liabilities made by the Company, by Guarantor, or by any other person, and the proceeds of any and all security for any of the Liabilities may be applied by Lender upon such of the items of the Liabilities as it may determine.
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    (e)    Until payment and performance in full of the Liabilities, Guarantor waives any claim or other right which Guarantor might now have or hereafter acquire against the Company or any other person primarily or contingently liable on the Liabilities (including any maker, indorser or guarantor) or that arises from the existence or performance of Guarantor’s obligations under this Guaranty, including any right of subrogation, reimbursement, exoneration, contribution or indemnification, or any right of participation in any claim or remedy of Lender against the Company or any security for the Liabilities which Lender now has or hereafter acquires, however arising.

(f)    If any person other than the Company (any such person, a “Third Party Obligor”) shall be obligated in respect of the Liabilities, as a pledgor, a guarantor or otherwise, and shall make any payment in respect of the Liabilities, Guarantor agrees, after payment in full of the Liabilities and termination of all commitments by Lender and Lender Affiliates to extend credit to the Company, to make a contribution to any such Third Party Obligor. The amount of the contribution made by Guarantor shall be an amount sufficient to cause the contributions for payments on the Liabilities made by Guarantor and all such Third Party Obligors to be proportionate to the respective benefits received by Guarantor and the Third Party Obligors. Nothing in this subsection (f) shall limit the obligations of Guarantor to Lender and Lender Affiliates hereunder.

7.    REPRESENTATIONS AND WARRANTIES.

    (a)    Guarantor represents and warrants to, and agrees in favor of, Lender that:

        (i)    (A)    If Guarantor is an organization (including a trust that is a registered organization), then Guarantor is an entity of the type, and is organized under the laws of the jurisdiction, specified in the preamble hereto. Guarantor’s name as shown in the preamble hereto is the full exact name that appears in Guarantor’s organizational documents. If Guarantor is a registered organization, Guarantor’s name as shown in the preamble hereto is as shown on the public organic record most recently filed with or issued or enacted by Guarantor’s jurisdiction of organization which purports to state, amend, or restate Guarantor’s name. If Guarantor is an organization but not a registered organization, if it has only one place of business that place of business is at Guarantor’s address indicated in the preamble hereto, but if it has more than one place of business, its chief executive office is at such address.

            (B)    If Guarantor is a trust which is not itself a registered organization, then: (1) if the Trust Agreement specifies a name for the trust, Guarantor’s name as shown in the preamble
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hereto is the name so specified; (2) Guarantor has provided the name of its settlor(s) or testator(s) to Lender; and (3) if Guarantor has only one place of business, that place of business is at Guarantor’s address indicated in the preamble hereto, but if it has more than one place of business, its chief executive office is at such address.

            (C)    If Guarantor is a natural person, then:

                (1)    Guarantor’s principal residence is located at the address shown in the preamble hereto; and

                (2)    i.    if Guarantor has a driver’s license or alternative identification that has not expired and that was issued by the state of Guarantor’s principal residence, Guarantor’s name shown in the preamble hereto is exactly the same as shown on that driver’s license or alternative identification card; or

                    ii.    if Guarantor does not have a driver’s license or alternative identification card that has not expired and that was issued by the state of Guarantor’s principal residence, then: (x) Guarantor’s first given name and surname are as shown in the preamble hereto; and (y) if Guarantor obtains a driver’s license or alternative identification card from the state of Guarantor’s principal residence, then Guarantor shall, within thirty (30) days of the issuance of such driver’s license or alternative identification card, provide Lender with a true and accurate copy of such driver’s license or alternative identification card, showing Guarantor’s name and address, the state of issuance and the expiration date thereof; and

                (3)    in any event, Guarantor shall provide Lender notice within thirty (30) days of the happening of each of the following events:

                    i.    Guarantor’s principal residence has changed;

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                    ii.    the name of Guarantor on Guarantor’s driver’s license or alternative identification card has changed in any manner, no matter how small;

                    iii.    Guarantor’s driver’s license or alternative identification has been surrendered, suspended, changed or terminated in any manner, no matter how small or for how short a time;

                    iv.    Guarantor’s driver’s license or alternative identification card has expired; or

                    v.    Guarantor has changed his or her first given name or surname, whether as a result of marriage, divorce, legal proceeding or otherwise.

            (D)    The representations and warranties made by Guarantor in (A)-(C) of this (i), as applicable, would have been accurate at all times during the five years and six months prior to the date hereof except as and if Guarantor has specifically notified Lender in writing prior to Guarantor’s execution of this Guaranty.

        (ii)     Guarantor (if Guarantor is not a natural person) and any Subsidiary are validly existing and in good standing under the laws of their state of organization or formation, and are duly qualified, in good standing and authorized to do business in each jurisdiction where failure to do so would reasonably be expected to have a material adverse impact on the assets, condition or prospects of Guarantor.

        (iii)    The execution, delivery and performance of this Guaranty and all Related Documents: are within Guarantor's powers and have been authorized by all necessary action required by law and (unless Guarantor is a natural person) Guarantor’s Constituent Documents; have received any and all necessary governmental approval; and do not and will not contravene or conflict with any provision of law, any Constituent Document or any agreement affecting Guarantor or its property. This Guaranty and all Related Documents are enforceable against Guarantor and/or the applicable Related Parties in accord with their terms, except to the extent, if any, that such enforceability may be limited by equitable principles, whether applied in a court of law or equity, or by bankruptcy, insolvency and other laws affecting creditors’ rights generally.
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        (iv)    There has been no material adverse change in the business, condition, properties, assets, operations or prospects of Guarantor since the date of the latest financial statements or other documentation provided by or on behalf of Guarantor to Lender.

        (v)    Guarantor has filed or caused to be filed all foreign, federal, state, and local tax returns that are required to be filed, and has paid or has caused to be paid all of its taxes, including any taxes shown on such returns or on any assessment received by it, to the extent that such taxes have become due.

    (vi)    The execution, delivery and performance of this Guaranty and all Related Documents are in Guarantor’s best interest in its current and future operations and will materially benefit Guarantor. Guarantor has received adequate, fair and valuable consideration, and at least reasonably equivalent value, to enter into and perform this Guaranty and all Related Documents. Guarantor’s assets at fair valuation exceed the sum of Guarantor’s debts. Guarantor is able to pay its debts as they become due. Guarantor does not have unreasonably small capital with which to conduct its business.

8.    GUARANTOR COVENANTS. Guarantor agrees that so long as this Guaranty remains in effect, it will:

    (a)    NOTIFY LENDER IN WRITING AT LEAST SIXTY (60) DAYS IN ADVANCE OF: (i) ANY CHANGE WHATSOEVER IN THE NAME OF GUARANTOR; (ii) ANY CHANGE WHATSOEVER IN THE STATE OR JURISDICTION IN WHICH GUARANTOR IS ORGANIZED OR FORMED OR, IF GUARANTOR IS A NATURAL PERSON, IN WHICH GUARANTOR’S PRINCIPAL RESIDENCE IS LOCATED; (iii) ANY NEW NAMES UNDER WHICH GUARANTOR INTENDS TO DO BUSINESS; OR (iv) ANY NEW ADDRESSES AT OR FROM WHICH GUARANTOR INTENDS TO DO BUSINESS. IF GUARANTOR IS A REGISTERED ORGANIZATION, SUCH AS A CORPORATION, LIMITED LIABILITY COMPANY, OR LIMITED PARTNERSHIP, GUARANTOR AGREES TO NOTIFY LENDER IMMEDIATELY IF GUARANTOR’S STATE OR JURISDICTION OF ORGANIZATION DISSOLVES, SUSPENDS OR TERMINATES GUARANTOR’S EXISTENCE OR PRIVILEGES, OR NOTIFIES GUARANTOR THAT IT IS NOT IN COMPLIANCE WITH ANY REQUIREMENTS OF SUCH STATE OR OTHER JURISDICTION. IF GUARANTOR IS A NATURAL PERSON THE FOREGOING PORTION OF THIS (a) DOES NOT LIMIT GUARANTOR’S AGREEMENTS IN SUBSECTION (a)(i)(C) OF THE SECTION ENTITLED “REPRESENTATIONS AND WARRANTIES.”

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    (b)    Furnish (or cause to be furnished) to Lender the financial statements and other information required pursuant to the Loan Agreement between the Company and Lender dated as of April 30, 2020.

    (c)    Furnish (or cause to be furnished) to Lender:

        (i)    Immediately upon the institution of, or any adverse determination in, any litigation, arbitration or governmental proceeding which is material to Guarantor or any Subsidiary on a consolidated basis, written notice describing the same and the steps being taken by Guarantor or any Subsidiary in respect thereof.

        (ii)    From time to time such other information, financial or otherwise, concerning Guarantor or any Related Party as Lender may reasonably request, including fully-completed personal financial statements of any Related Party who is a natural person on Lender's then-current form on and as of such dates as Lender may reasonably request.

    (d)    If Guarantor is not a natural person: (i) preserve and maintain its existence, rights, franchises, licenses and privileges; and (ii) not liquidate, dissolve, merge, or consolidate with or into any other entity, or sell, lease, transfer or otherwise dispose of all or a substantial part of its assets other than in the ordinary course of business as now conducted.

9.    RESERVED.

10.    LENDER MAY ALSO BE FIDUCIARY. Guarantor hereby irrevocably waives, releases and forever relinquishes any claim or right of any nature whatsoever based upon the fact that a trustee or other fiduciary of any Guarantor or Related Party is or may be Lender itself or a Lender Affiliate, and irrevocably consents to any such circumstance. The rights and powers of Lender shall not in any way be restricted by reason of any such present or future circumstance.

11.    ARM’S LENGTH TRANSACTIONS. Guarantor acknowledges and agrees that:

    (a)    The transactions contemplated by the Related Documents are arm's length commercial transactions among Guarantor, Lender and any other parties thereto.

    (b)    In connection with such transactions, Lender is acting solely as a principal and not as an agent or a fiduciary of Guarantor or any Related Party.

    (c)    With respect to any advances of Liabilities or the process leading thereto (whether or not Lender or any Lender Affiliate has advised or is currently advising Guarantor or any Related Party on other matters), Lender has not assumed a fiduciary responsibility in
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favor of Guarantor or any Related Party or any other obligation of Guarantor or any Related Party.

    (d)    Guarantor and the Related Parties have consulted with their own legal and financial advisors to the extent they deem appropriate in connection with the transactions contemplated by the Related Documents.

12.    NOTICES. Except as and if otherwise provided herein, all notices, requests and demands to or upon the respective parties pursuant hereto shall be in writing and shall be deemed to have been given or made five business days after a record has been deposited in the mail, postage prepaid, or one business day after a record has been deposited with a recognized overnight courier, charges prepaid or to be billed to the sender, or on the day of delivery if delivered manually with receipt acknowledged, in each case addressed or delivered:

    (a)    if to Lender to The Northern Trust Company, Attention: Credit Administration Team, IL-CD-BB-11, 50 South LaSalle, Chicago, IL 60603, with a copy to The Northern Trust Company, Attn: Chief Lending Officer, 2398 E. Camelback Road, Phoenix, AZ 85016; and

    (b)    if to Guarantor to its address indicated in the preamble hereto,

or to such other address as may be hereafter designated in writing by the respective parties hereto by a notice in accord with this Section.

13.    MISCELLANEOUS. Except as and if otherwise specifically agreed in any Related Document, and only as to such Related Document, and to the extent, if any, that the UCC or other law provides for the application of the law of a different state, this Guaranty and the Related Documents shall be: (i) governed by and construed in accordance with the internal law of the State of New York; and (ii) deemed to have been executed in the State of New York. This Guaranty shall bind Guarantor, its(his)(her) heirs, trustees (including successor and replacement trustees), executors, personal representatives, successors and assigns, except that Guarantor may not transfer or assign any rights or obligations hereunder without the prior written consent of Lender. Without limiting Guarantor’s obligations under any other provision hereof, Guarantor agrees to pay upon demand all expenses (including reasonable attorneys' fees, legal costs and expenses, and time charges of attorneys who may be employees of Lender, in each case whether in or out of court, in original or appellate proceedings or in bankruptcy) incurred or paid by Lender in connection with the enforcement or preservation of its rights hereunder or under any Related Document. This Guaranty may be executed in two or more counterparts, and (if there is more than one party) by each party on separate counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Guaranty, whether with or without the remainder hereof, by facsimile or in electronic (e.g., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart hereof. Time is of the essence in the performance of all obligations under this Guaranty. This Guaranty is, and is intended to take
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effect as, an instrument under seal. Whenever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective only to the extent and duration of such prohibition or invalidity without invalidating the remainder of such provision, the applicability of such provision in any other instance, or the remaining provisions of this Guaranty. To the maximum extent permitted by applicable law, Lender is hereby authorized by Guarantor without notice to Guarantor to fill in any blank spaces and dates herein or in any Related Document to conform to the terms of the transaction and/or understanding evidenced hereby. THIS GUARANTY AND THE RELATED DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AS TO THE SUBJECT MATTER HEREOF AND THEREOF, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

14.    NO PUNITIVE DAMAGES. NO PARTY HERETO MAY SEEK OR RECOVER PUNITIVE DAMAGES IN ANY PROCEEDING BROUGHT UNDER OR IN CONNECTION WITH THIS GUARANTY OR ANY RELATED DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO EXTEND CREDIT SUPPORTED BY THIS GUARANTY.

15.    AUTHORIZATION TO RECORD PHONE CALLS. FOR ITSELF AS WELL AS ANY RELATED PARTY AND ANY AGENT, DIRECTOR, EMPLOYEE, MANAGER, MEMBER, OFFICER, OR PARTNER OF GUARANTOR, AS APPLICABLE, GUARANTOR IRREVOCABLY CONSENTS TO LENDER’S RECORDING OF ANY TELEPHONE CONVERSATION PERTAINING TO THIS GUARANTY.

16.    ANTI-TERRORISM LAW.

    (a)    Lender hereby notifies Guarantor and any Related Party that, pursuant to the requirements of the USA Patriot Act, Lender may be required to obtain, verify and record information that identifies Guarantor and any Related Party, which information may include the name and address of Guarantor and any Related Party and other information that will allow Lender to identify Guarantor and any Related Party in accord with the USA Patriot Act. Guarantor hereby agrees to take any action necessary to enable Lender to comply with the requirements of the USA Patriot Act.

    (b)    Guarantor covenants, represents and warrants as follows:

        (i)    Neither Guarantor nor any Related Party is or, to the best of Guarantor’s knowledge, will be in violation of any Anti-Terrorism Law.

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        (ii)    Neither Guarantor nor any Related Party is or, to the best of Guarantor’s knowledge, will be a Prohibited Person.

        (iii)     Neither Guarantor nor any Related Party: (A) conducts any business or engages in any transaction or dealing with any Prohibited Person, including making or receiving any contribution of funds, goods or services to or for the benefit of any Prohibited Person; (B) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224; or (C) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

        (iv)    Neither Guarantor nor any Related Party will engage in any of the activities described in (iii) of this subsection (b) in the future.

        (v)    Guarantor and each Related Party will ensure that the proceeds of the Liabilities are not used to violate any foreign asset control regulations of the U.S. Office of Foreign Assets Control (“OFAC”) or of any enabling statute or any Executive Order relating thereto.

        (vi)     Guarantor will deliver to Lender any certification or other evidence requested from time to time by Lender in its sole reasonable discretion, confirming Guarantor’s and any Related Party’s compliance with this Section.

        (vii)     Guarantor has implemented procedures, and will consistently apply those procedures while this Guaranty is in effect, to ensure that the representations and warranties in this Section remain true and correct while this Guaranty is in effect.

17.    SAVINGS CLAUSE. Notwithstanding any provision herein contained to the contrary, Guarantor's liability under this Guaranty shall be limited to an amount not to exceed as of any date of determination the amount which could be claimed by Lender from Guarantor under this Guaranty without rendering such claim voidable or avoidable under Section 548 of the Bankruptcy Code (Title 11, U.S.C.) or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law (for purposes of this Section, the “Avoidance Provisions”) after taking into account, among other things, Guarantor's right of contribution and indemnification from each other guarantor, if any. To the end set forth above in this Section, but only to the extent that the obligations of Guarantor hereunder (for purposes of this Section, the “Guarantee Obligations”) would otherwise be subject to avoidance under the Avoidance Provisions, if Guarantor is not deemed to have received valuable consideration, fair value, fair consideration or reasonably equivalent value for the Guarantee Obligations, or if the Guarantee Obligations would render Guarantor insolvent, leave Guarantor
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with unreasonably small capital to conduct its business, or cause Guarantor to have incurred debts (or to have intended to have incurred debts) beyond its ability to pay such debts as they mature, in each case as of the time any of the Guarantee Obligations is deemed to have been incurred for the purposes of the Avoidance Provisions, then the maximum Guarantee Obligations shall be reduced to that amount which, after giving effect thereto, would not cause the Guarantee Obligations as so reduced to be subject to avoidance under the Avoidance Provisions.

18.    JURISDICTION AND VENUE. Except as and if otherwise specifically agreed in any Related Document, and only as to suits, actions or other proceedings pertaining to such Related Document, Guarantor and (by its acceptance hereof as evidenced by its extension of any Liabilities) Lender:

    (a)    agree irrevocably that all suits, actions or other proceedings with respect to, arising out of or in connection with this Guaranty or any Related Document shall be subject to litigation in courts having situs within or jurisdiction over the Borough of Manhattan, the State of New York;

    (b)    consent and submit to the jurisdiction of any such court; and

    (c)    waive any right to transfer or change the venue of any suit, action or other proceeding brought in accordance with this Section, or to claim that any such proceeding has been brought in an inconvenient forum.

19.    WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW, GUARANTOR AND (BY ITS ACCEPTANCE HEREOF AS EVIDENCED BY ITS EXTENSION OF ANY LIABILITIES) LENDER VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT THEY OR ANY OF THEM MAY HAVE TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG GUARANTOR AND LENDER ARISING OUT OF OR IN ANY WAY RELATED TO THIS GUARANTY, ANY RELATED DOCUMENT, OR ANY RELATIONSHIP BETWEEN LENDER AND GUARANTOR.


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To the extent applicable under any state law, Guarantor executed and Lender accepted this Guaranty as of the date stated at the top of the first page, intending to create an instrument executed under seal.


GUARANTOR:

GLOBAL WATER HOLDINGS, INC.


By: /s/ Michael J. Liebman         (SEAL)

Print Name: Michael J. Liebman

Title: First Vice President, Secretary and Treasurer
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PLEDGE AND SECURITY AGREEMENT
GLOBAL WATER HOLDINGS, INC.
THIS PLEDGE AND SECURITY AGREEMENT (this “Agreement”) dated for identification as of April 30, 2021, is made by: (a) GLOBAL WATER HOLDINGS, INC., an Arizona corporation (“Pledgor”); in favor of (b) U.S. BANK NATIONAL ASSOCIATION, a national banking association, in its capacity as collateral agent (with its successors and permitted assigns in such capacity the “Collateral Agent”); for the benefit of (c) The Northern Trust Company, an Illinois banking corporation (the “Bank” and/or any other holder of the Revolver Note at any relevant time the “Holder”), pursuant to the Amended and Restated Collateral Agency Agreement of even date herewith (the “Collateral Agency Agreement”) among and/or approved by the Collateral Agent, Noteholders, Bank and Global Water Resources, Inc., a Delaware corporation (“Company”).
PRELIMINARY STATEMENT
WHEREAS, Company and Bank are parties to a Loan Agreement dated as of April 30, 2020 (as amended, supplemented or restated at any relevant time the “Loan Agreement”), pursuant to which Bank has agreed to provide Company a multiple advance revolving credit facility in the initial maximum principal amount of $10,000,000 (the “Revolver”); and
WHEREAS, pursuant to Guaranty Agreements dated as of April 30, 2020 (the “Original Guaranty Agreements”), West Maricopa Combine, LLC, an Arizona limited liability company, and Global Water, LLC, a Delaware limited liability company, have guaranteed the Obligations of Company under the Loan Agreement and Revolver Note; and
WHEREAS, pursuant to a Guaranty Agreement of even date herewith (the “GW, Inc. Guaranty Agreement,” and, individually and collectively, with the Original Guaranty Agreements, the “Guaranty Agreements”), Pledgor has guaranteed the Obligations of Company under the Loan Agreement and Revolver Note; and
WHEREAS, Pledgor is the owner and holder of all of the Equity Interests of the Persons described in Schedule I hereto (the “Pledged Companies”); and
WHEREAS, it is a condition precedent to the obligation of Bank to provide the Revolver pursuant to the Commitment that Pledgor execute and deliver this Agreement to the Collateral Agent for the benefit of the Secured Parties; and
WHEREAS, Pledgor desires to execute this Agreement to satisfy such condition precedent and to secure its Obligations under its Guaranty Agreement;
NOW THEREFORE, to induce Bank to provide the Commitment pursuant to the Loan Agreement, Pledgor and the Collateral Agent agree as follows:
SECTION 1.    DEFINED TERMS.
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(a)Capitalized terms used at any place but not defined herein have the meanings set forth in the Loan Agreement.
(b)    “ACC Regulations” means the applicable regulations, orders and requirements of the Arizona Corporation Commission and applicable statutes administered by the Arizona Corporation Commission.
(c)“Applicable Law” means all applicable Laws, including all applicable provisions of constitutions, statutes, rules, ordinances, regulations and orders of all Governmental Authorities and all orders, rulings, writs and decrees of all courts, tribunals and arbitrators.
(d)    “Equity Interests” means with respect to any Person, all capital stock of (or other ownership or profit interest in) such Person, all warrants, options or other rights for the purchase or acquisition from such Person of capital stock of (or other ownership or profit interest in) such Person, all securities convertible into or exchangeable for capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or other interests), and all other ownership or profit interests in such Person (including partnership, membership and trust interests therein), voting or nonvoting, whether or not such shares, warrants, options, rights or other interests are outstanding on any date.
(e)    “Indemnified Liabilities” means, collectively, all liabilities, obligations, losses, damages, penalties, claims (including under Environmental Laws), actions, judgments, suits, costs (including reasonable costs of investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response necessary to remove, remediate, clean up or abate Hazardous Materials), expenses and disbursements of any kind (including reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding or hearing commenced or threatened by any Person, whether or not such Indemnitees are designated as a party or potential party thereto, and any reasonable fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct or indirect and whether based on any applicable Laws (including Environmental Laws), on common law or equitable cause or on contract or otherwise, imposed on, incurred by, or asserted against any such Indemnitee (regardless of whether any Indemnitee is a party thereof), in any manner relating to or arising out of: (i) this Agreement or any other Revolver Document or transactions contemplated hereby or thereby (including the use or intended use of the proceeds of the Revolver, or any enforcement of any of the Revolver Documents (including any sale of, collection from, or other realization on any Collateral)); or (ii) any claim under Environmental Laws or Hazardous Materials liability relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership or practice of Pledgor or any of its Subsidiaries.
(f)    “Noteholders” means the holders at any relevant time of the Notes.
(g)    “Pledged Companies” has the meaning set forth in the above preliminary statement.
(h)    “Secured Obligations” has the meaning provided by Section 2(c).

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(i)    “Secured Parties” means all Holders and the Collateral Agent.
(j)    “Specified Account” means the segregated account of Company maintained with The Northern Trust Company, with the last four digits of such account number being 2231, established to receive payments of dividends and distributions on Equity Interests owned by Company or any Subsidiary Guarantor, and all replacements or substitutions for such account established by the Company or any Subsidiary Guarantor, whether in the form of a deposit account or securities account. For the avoidance of doubt, a “Specified Account” shall not include any “collection account,” deposit account, securities account or other account in which the revenues of Utility Subsidiaries are remitted or consolidated.
(k)    “UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that if by mandatory provisions of Law, the perfection or the effect of perfection or non-perfection of the security interests granted pursuant to Section 2, as well as all other security interests created or assigned as additional security for the Secured Obligations pursuant to this Agreement, in any Collateral is governed by the UCC as in effect in any jurisdiction other than the State of New York, “UCC” means the UCC as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.
SECTION 2.     GRANT OF SECURITY INTEREST.
(a)    To secure the Secured Obligations, Pledgor grants to the Collateral Agent, for the benefit of the Secured Parties, a security interest in, and acknowledges and agrees that the Collateral Agent has and will continue to have a continuing security interest in, all right, title and interest of Pledgor, whether now owned or existing or hereafter created, acquired or arising, and regardless of where located, in and to all the following (collectively the “Collateral”):
(i)    all Equity Interests, including all Equity Interests in the Pledged Companies and all shares, ownership, economic and management interests, membership interests and/or partnership interests in any Person owned or held by Pledgor, all payments and distributions of whatever kind or character, in cash or other property, at any time made, owing or payable to Pledgor in respect of or on account of its present or hereafter acquired Equity Interests, whether due or to become due and whether representing profits, distributions pursuant to complete or partial liquidation or dissolution of the issuer of such Equity Interests, distributions representing the complete or partial redemption of Pledgor’s Equity Interests in any Person or complete or partial withdrawal of Pledgor from any Person, repayment of capital contributions made to or with respect to any Person in respect of Equity Interests in such Person held by Pledgor and the right to receive, receipt for, use, and enjoy all such payments and distributions, and all other rights and privileges incident to Pledgor’s interest in such Equity Interests, provided that prior to the occurrence of an Event of Default, Pledgor shall retain certain rights pursuant to Section 7;
(ii)    the Specified Account;
(iii)    all interest, dividends, cash, instruments, investment property, general intangibles and other property from time to time received, receivable or otherwise payable in respect of,·or in exchange for, any of the foregoing;

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(iv)    supporting evidence and documentation relating to any of the above- described property, including computer programs, disks, tapes, electronic archives, clouds and related data processing media, and all rights of Pledgor to retrieve the same from third parties, written applications, credit information, account cards, payment records, correspondence, delivery and installation certificates, invoice copies, delivery receipts, notes, and other evidences of indebtedness, insurance certificates and the like, together with all books of account, ledgers and cabinets in which the same are reflected or maintained; and
(v)    to the extent not covered by Sections 2(a)(i) through 2(a)(iv), all proceeds (as defined in the UCC) of any or all of the foregoing.
(b)    The Collateral Agent shall have with respect to the Collateral, in addition to the rights and remedies set forth herein and in the other Revolver Documents, all rights and remedies of a secured party under the UCC as if fully set forth herein.
(c)    The security interest herein granted is made and given to secure, and shall secure, the payment and performance of: (i) all Obligations of Pledgor to the Secured Parties (whether arising before or after the filing of a petition in bankruptcy), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, however held, evidenced or acquired, and whether several, joint, or joint and several; and (ii) all expenses and charges, legal or otherwise, suffered or incurred by the Secured Parties in collecting or enforcing any such Obligations or realizing on or protecting or preserving any Collateral or other security therefor, including the lien and security interest granted hereby (all of the foregoing being the “Secured Obligations”).
(d)    For the avoidance of doubt and notwithstanding anything in any Revolver Document to the contrary: (i) no Subsidiary of Pledgor that is now a regulated utility is a borrower or guarantor under any Revolver Document, nor is any such Subsidiary pledging any of its property as collateral for the Secured Obligations; and (ii) no regulated utility may declare distributions or dividends to its equity holders except in accordance with applicable Law (including ACC Regulations), and subject to each regulated utility’s obligations to maintain revenues and funds sufficient to fund direct and indirect operating and maintenance expenses (including general and administrative expenses and reasonable and necessary costs, fees and expenses for operation and maintenance of system utilities).
SECTION 3.     CERTIFICATES OR INSTRUMENTS. Any certificates or instruments representing or evidencing Collateral shall be delivered to and held by or on behalf of the Collateral Agent for the benefit of the Secured Parties pursuant hereto and to the Collateral Agency Agreement and be in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank, all in form reasonably satisfactory to the Collateral Agent and in form and substance reasonably satisfactory to Bank. Upon the occurrence and during the continuance of any Event of Default, the Collateral Agent will have the right at any time in its sole discretion and without notice to Pledgor to transfer to or to register in the name of the Collateral Agent or its nominees any or all of the Collateral, subject only to the revocable rights specified in Section 7(a) and compliance with ACC Regulations. In addition, on the occurrence and during the continuance of any Event of Default, the Collateral Agent will have the right to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations.

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SECTION 4.    SPECIFIED ACCOUNT COLLATERAL.
(a)    The Company has established the Specified Account as a deposit account (within the meaning of Section 9-102 of the UCC), with The Northern Trust Company. Pledgor shall promptly notify the Collateral Agent of any other Specified Account opened or maintained by the Company or Pledgor after the date hereof. To the extent requested by the Collateral Agent following the occurrence and continuation of any Default or the occurrence of any Event of Default, Pledgor shall, and shall cause the applicable depository or other institution to, execute and deliver to the Collateral Agent an account control agreement in form reasonably satisfactory to the Collateral Agent and in form and substance reasonably satisfactory to the Holder which provides among other things for the depository or other institution’s agreement that it will comply with: (i) instructions originated by the Collateral Agent directing the disposition of the funds in each such Specified Account that is a deposit account; or (ii) entitlement orders originated by the Collateral Agent with respect to each such Specified Account that is a securities account, in each case without further consent by Pledgor. Notwithstanding the foregoing, any account control agreement which requires the Collateral Agent in its individual capacity to indemnify the depository or other institution other than out of the Collateral will not be reasonably satisfactory to the Collateral Agent.
(b)    Subject to Section 2(d), Pledgor covenants and agrees that upon declaration and payment of any dividend or distribution by any Subsidiary, it will cause such dividend or distribution to be paid and segregated into the Specified Account. Prior to the occurrence and continuance of an Event of Default, amounts so deposited in the Specified Account may be withdrawn and used for corporate purposes, including investments in or loans to Subsidiaries permitted under the Loan Agreement.
SECTION 5.     REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS. Pledgor represents, warrants and covenants as follows:
(a)    The Equity Interests have been duly authorized and validly issued and are fully paid and non-assessable. No Equity Interests constituting interests in limited liability companies constitute or are evidenced by certificated securities, unless such certificates have been delivered to the Collateral Agent.
(b)    Pledgor is the legal and beneficial owner of the Collateral free and clear of any Lien or other encumbrance except for the Lien created by this Agreement and any other Liens created in favor of the Collateral Agent and described in the Collateral Agency Agreement. There is no existing agreement, option, right or privilege capable of becoming an agreement or option pursuant to which Pledgor would be required to sell or otherwise dispose of any Equity Interest, except as described in the Collateral Agency Agreement.
(c)    Except for the delivery of any certificates or instruments representing Collateral to the Collateral Agent pursuant to this Agreement, filing of an appropriate financing statement with the Arizona Secretary of State, and any control agreement contemplated by Section 4(a), no other action is required to create or maintain the Lien of the Collateral Agent as a valid and perfected first priority Lien (pari passu with the Noteholders) in the Collateral to secure the Secured Obligations.

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(d)    No authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body (except as set forth in Section 5(c)) is required either: (i) for the pledge by Pledgor of the Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Pledgor; or (ii) for the exercise by the Collateral Agent of its rights and the rights of any other Secured Parties provided for in this Agreement and the Collateral Agency Agreement or the remedies in respect of the Collateral pursuant to this Agreement and the Collateral Agency Agreement (except as may be required in connection with such disposition by Laws affecting the offering and sale of securities generally and except for compliance with requirements of the ACC Regulations as set forth in Sections 7(b) and 8).
(e)    The execution, delivery and performance of this Agreement does not and will not: (i) violate any provision of any Law (including Regulations T, U and X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award applicable to Pledgor; (ii) result in breach of, or constitute a default under, any indenture, credit or loan or note agreement or any other agreement, lease or instrument to which Pledgor presently is a party, or·by which it or its properties are bound or affected; or (iii) result in or require (other than pursuant to this Agreement) the creation or imposition of any Lien or other share or encumbrance upon or with respect to any properties now owned or hereafter acquired by Pledgor. Pledgor is not in violation of or default under any such Law or material provision of any such indenture, agreement, lease or instrument.
(f)    Schedule I correctly sets forth the name of the issuer and the percentage of Equity Interests of certain Equity Interests owned by Pledgor and pledged by this Agreement.
(g)    Except for any such agreements in favor of the Collateral Agent for the benefit of the Secured Parties and Noteholders, Pledgor shall not enter into any agreement providing any Person with “control” (within the meaning of Sections 9-104 or 9-106 of the applicable UCC) of any Specified Account.
(h)    Pledgor is a limited liability company duly formed under the laws of Arizona, and is validly existing and in good standing under the laws of such jurisdiction. Pledgor has its chief executive office in the State of Arizona. Pledgor agrees to give the Collateral Agent at least 30 days’ prior written notice before changing the state in which its chief executive office is located or the state in which it is organized, and prior to the effectiveness of any such change shall take all steps necessary to maintain the security interest provided for herein as a first-priority (pari passu with the Noteholders) perfected security interest, including filing additional UCC financing statements or amendments as may be necessary or requested by (and subject to the rights of) the Collateral Agent.
(i)    Pledgor shall not: (i) sell, assign (by agreement, operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any Collateral; or (ii) create or permit to exist any Lien or security interest on or with respect to any Collateral, except for the Lien·created by this Agreement and any other Lien in favor of the Collateral Agent for the benefit of the Secured Parties.
(j)    Pledgor shall not permit or cause to be issued any Equity Interests: (i) in substitution for any existing Equity Interests; and (ii) in addition to the existing Equity Interests, except following notice to the Collateral Agent and provided that immediately upon its acquisition (directly or indirectly) of any such substitute or additional securities, Pledgor will execute such documentation as is

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necessary to pledge or evidence the pledge or as may be requested by Collateral Agent or the Holder pledging, and evidencing the pledge hereunder of, such Equity Interests.
(k)    Pledgor shall, at its expense, protect and defend this Agreement, all rights of the Collateral Agent hereunder, and the Collateral against all claims and demands of other parties. Pledgor shall pay all Claims and charges that in the reasonable opinion of the Collateral Agent or the Holder might prejudice, imperil or otherwise affect Collateral or the security interest therein. Pledgor shall promptly notify the Collateral Agent of any levy, distraint or other seizure by legal process or otherwise of any Collateral and of any threatened or filed claims or proceedings that might affect or impair this Agreement.
SECTION 6.     FURTHER ASSURANCES. Pledgor authorizes the Collateral Agent to file any financing statements covering the Collateral or any part thereof as the Collateral Agent may desire. Pledgor agrees that from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further documentation and take all further actions that the Collateral Agent or Holder may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Pledgor will furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent or Holder may reasonably request, all in reasonable detail, Pledgor agrees, and agrees to cause each issuer of Equity Interests included in the Collateral, to mark its books and records to reflect the Lien of the Collateral Agent in the Collateral.
SECTION 7.     VOTING AND DIVIDENDS.
(a)    So long as no Event of Default has occurred and is continuing:
(i)    Pledgor will be entitled to exercise any voting and other consensual rights pertaining to any Collateral for any purpose not inconsistent with this Agreement or any other Revolver Documents.
(ii)    Pledgor will be entitled to receive and retain any dividends or distributions paid in respect of the Collateral; provided however, except as expressly permitted by the Loan Agreement, any (A) dividends or distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Collateral, (B) dividends and other distributions paid or payable in cash in respect of any Collateral in connection with a partial or total liquidation or dissolution, and (C) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Collateral, shall be forthwith delivered to the Col1ateral Agent to hold as Collateral and shall, if received by Pledgor, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of Pledgor, and be forthwith delivered to the · Collateral Agent as Collateral in the same form as so received (with any necessary endorsement).
(iii)    The Collateral Agent shall execute and deliver (or cause to be executed and delivered) to Pledgor all such proxies and other instruments as Pledgor may reasonably request for the purpose of enabling Pledgor to exercise the voting and other rights it is entitled to exercise pursuant

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to Section7(a)(i) and to receive dividends it is authorized to receive and retain pursuant to Section7(a)(ii).
(b)    Subject to any requirements of ACC Regulations, on the occurrence and during the continuation of an Event of Default:
(i)    All rights of Pledgor to exercise voting and other consensual rights it would otherwise be entitled to exercise pursuant to Section 7(a)(i) will automatically cease, and the Collateral Agent will thereupon have the sole right to exercise such rights.
(ii)    All rights of Pledgor to receive the distributions and dividends it would otherwise be entitled to receive and retain pursuant to Section 7(a)(ii) will automatically cease, and the Collateral Agent will thereupon have the sole right to receive and hold as Collateral such dividends, distributions and interest.
(iii)    Any distributions and dividends received by Pledgor contrary to the provisions of Section 7(b)(ii) will be received in trust for the benefit of the Collateral Agent on behalf of the Secured Parties, shall be segregated from other funds of Pledgor and shall be forthwith paid over to the Collateral Agent on behalf of the Secured Parties as Collateral in the same form as received (with any necessary endorsement).
SECTION 8.    REMEDIES. Subject to any requirements of ACC Regulations:
(a)    The Collateral Agent may exercise in respect of any Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral), and the Collateral Agent may also, without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker’s board or at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, and on such other terms as the Collateral Agent may claim commercially reasonable. Pledgor agrees that at least ten days’ notice to Pledgor of the time and place of any public sale or time after which any private sale is to be made will constitute reasonable notification. The Collateral Agent will not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.
(b)    Any cash held by the Collateral Agent as Collateral and all cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization on any Collateral shall be applied by the Collateral Agent against the Secured Obligations in such order as the Collateral Agent may elect, subject to the requirements of the Loan Agreement and Collateral Agency Agreement. Any surplus of such cash or cash proceeds held by the Collateral Agent and remaining after payment in full of all Secured Obligations and Notes shall be paid over to the Pledgor or to whomsoever may be lawfully entitled to receive such surplus.

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(c)    All rights and remedies of the Collateral Agent expressed herein are in addition to all other rights and remedies possessed by the Collateral Agent or the Holder in the Revolver Documents and any other agreement or instrument relating to the Secured Obligations.
(d)    In connection with a public or private sale of any Collateral, the Collateral Agent may disclose to prospective purchasers any non-public information available to the Collateral Agent which pertains to: (i) the issuer of any Collateral; or (ii) Pledgor, provided in the case of Pledgor such non-public information is material to said issuer, its financial condition or the Collateral.
(e)    Without in any way limiting the foregoing, on the occurrence and during the continuation of any Event of Default, the Collateral Agent shall have the right, in addition to all other rights provided herein or by Law, to direct the disposition of the funds in any Specified Account that is a deposit account, or entitlement orders originated by the secured party with respect to each such Specified Account that is a securities account, in each case without further consent by Pledgor.
(f)    If the Collateral Agent exercises its right to take possession of any Collateral, Pledgor shall also at its expense perform any other steps requested by the Collateral Agent or Holder to preserve and protect the security interest hereby granted in the Collateral, such as maintaining Collateral records and filing UCC financing and continuation statements.
SECTION 9.    WAIVERS; PRIVATE SALES.
(a)    Pledgor waives any right to require the Collateral Agent or Holder to: (i) proceed against any Person, including any other Obligor; or (ii) proceed against or exhaust any Collateral, or (iii) pursue any other remedy in Collateral Agent’s or the Holder’s power; and waives any defense arising by reason of any disability of Pledgor or any other Person. Until the Secured Obligations have been paid in full, Pledgor waives any right of subrogation, reimbursement, indemnification, and contribution (contractual, statutory or otherwise), including any right of subrogation under the Bankruptcy Code (Title 11, United States Code) or any successor statute, arising from the existence or performance of this Agreement, and Pledgor waives any right to enforce any remedy which the Collateral Agent now has or may hereafter have against Pledgor or any other Person, and waives any benefit of, and any right to participate in, any security now or hereafter held by the Collateral Agent. Pledgor authorizes the Collateral Agent, without notice or demand and without affecting Pledgor’s liability hereunder, from time to time to: (a) renew, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of, any Secured Obligations, including increase or decrease of any rate of interest thereon; (b) receive and hold security, other than the Collateral herein described, for the payment of any Secured Obligations, and exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any Collateral or other security; and (c) release or substitute the Company, or any other guarantors of such Secured Obligations or any part thereof, or any other parties thereto.
(b)    Pledgor recognizes that the Collateral Agent may be unable to effect a public sale of any of the Collateral by reason of ACC Regulations and/or certain prohibitions contained in the Laws of any jurisdiction outside the United States or in the Securities Act and applicable state securities Laws, but may instead be compelled to resort to one or more private sales thereof to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such Collateral for their own

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account for investment and not with a view to the distribution or resale thereof, or otherwise in accordance with the ACC Regulations. Pledgor agrees that any private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall, to the extent permitted by Law, be made in a commercially reasonable manner. The Collateral Agent will not be under any obligation to delay a sale of any Collateral for the period of time necessary to permit the issuer of such securities to register such securities under the Laws of any jurisdiction outside the United States, under the Securities Act or under any applicable state securities Laws, even if the issuer would agree to do so. If the Collateral Agent is able to lawfully effect a public sale without registration of the Collateral under the laws of any jurisdiction outside the United States, under the 1933 Act or under any applicable state securities Laws, then, subject to any applicable ACC Regulations, the Collateral Agent may, but will not be required to, conduct a public sale of the Collateral, rather than a private sale, if the Collateral Agent reasonably believes it would realize a higher sales price in a public sale.
SECTION 10.      COLLATERAL AGENT’S DUTIES.
(a)    The powers conferred on the Collateral Agent hereunder are solely to protect the interests of the Secured Parties in the Collateral and shall not impose any duty on the Collateral Agent to exercise any such powers. Except for reasonable care in the custody of any Collateral in its possession and accounting for moneys actually received by it hereunder, the Collateral Agent will have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Collateral Agent will have exercised reasonable care in the custody and preservation of Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property and collateral held for others in its capacity as a collateral agent, it being understood that the Collateral Agent will not have any responsibility for: (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Collateral Agent has or is deemed to have knowledge of such matters; or (ii) taking any necessary steps to preserve rights against any parties with respect to any Collateral.
(b)    Upon the appointment of a replacement collateral agent pursuant to the Collateral Agency Agreement, the Collateral Agent may transfer all of its interest and Liens in or any of the Collateral and be fully discharged thereafter from all liability and responsibility with respect to such Collateral so transferred, and the transferee shall be vested with all the rights and powers of the Collateral Agent hereunder with respect to such Collateral so transferred; but with respect to any of its interest and liens in Collateral not so transferred, the Collateral Agent will retain all rights and powers hereby given.
SECTION 11.     OTHER RIGHTS.
(a)    The rights, powers and remedies given to the Collateral Agent by this Agreement shall be in addition to all rights, powers and remedies given to the Collateral Agent by virtue of any statute or rule of Law. Any forbearance or failure or delay by the Collateral Agent in exercising any right, power or remedy hereunder shall not be a waiver of such right, power or remedy, and any single or partial exercise of any right, power or remedy hereunder shall not preclude the further exercise thereof; and every right, power and remedy of the Collateral Agent shall continue in full force and effect

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until such right, power or remedy is specifically waived by a writing executed by the Collateral Agent. The rights and remedies of the Collateral Agent under this Agreement shall be cumulative and not exclusive of any other right or remedy which the Collateral Agent or any Holder may have.
(b)    This Agreement constitutes an assignment of rights only and not an assignment of any duties or obligations of Pledgor in any way related to the Collateral, and the Collateral Agent will have no duty or obligation to discharge any such duty or obligation. The Collateral Agent will have no responsibility for taking any necessary steps to preserve rights against any parties with respect to any Collateral or initiating any action to protect any Collateral against the possibility of a decline in market value. Neither the Collateral Agent nor any party acting as attorney for the Collateral Agent will be liable for any acts or omissions or for any error of judgment or mistake of fact or Law other than its gross negligence or willful misconduct or negligence in the handling of funds.
(c)    In addition to any other powers of attorney contained herein, Pledgor hereby appoints the Collateral Agent, its nominee, and any other person whom the Collateral Agent may designate, as Pledgor’s attorney-in-fact, with full power and authority to sign Pledgor’s name on verifications of Collateral; to send requests for verification of Collateral to obligors; to endorse Pledgor’s name on any checks, notes, acceptances, money orders, drafts and other forms of payment or security that may come into the Collateral Agent’s possession or on any assignments, stock powers or other instruments of transfer relating to any Collateral; to sign Pledgor’s name on claims to enforce collection of any Collateral, on notices to and drafts against obligors, on schedules and assignments of Collateral, on notices of assignment and on public records; on the occurrence and during the continuance of an Event of Default to notify post office authorities to change the address for delivery of Pledgor’s mail to an address designated by the Collateral Agent; upon the occurrence and during the continuance of an Event of Default to receive, open and dispose of all mail addressed to Pledgor; and to do all things necessary to carry out this Agreement. Pledgor hereby ratifies and approves all acts of any such attorney and agrees that neither the Collateral Agent nor any such attorney will be liable for any acts or omissions nor for any error of judgment or mistake of fact or Law other than such person’s gross negligence or willful misconduct or negligence in the handling of funds. The foregoing powers of attorney, being coupled with an interest, are irrevocable until the Secured Obligations have been fully paid and satisfied and all agreements of any Secured Party to extend credit to or for the account of Pledgor have expired or otherwise been terminated.
SECTION 12.    INDEMNITY; WAIVER.
(a)    Pledgor agrees to indemnify, pay and hold harmless, the Collateral Agent and each other Secured Party and any of their Related Parties (each an “Indemnitee”), from and against any and all Indemnified Liabilities, IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE OR CONTRIBUTORY NEGLIGENCE OF SUCH INDEMNITEE; provided, Pledgor shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities (x) arise from the gross negligence or willful misconduct, as determined by a court of competent jurisdiction by final and nonappealable judgment, of that Indemnitee, or (y) result from a claim brought by Pledgor against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Revolver Document, as determined by a court of competent jurisdiction by final and nonappealable

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judgment. To the extent the undertakings to indemnify, pay and hold harmless in this Section 12 may be unenforceable in whole or in part because they are violative of any Law or public policy, Pledgor shall contribute the maximum portion it is permitted to pay and satisfy under applicable Laws to the payment and satisfaction of all Indemnified Liabilities incurred by any Indemnitees. All amounts due under this Section 12(a) shall be payable promptly after demand therefor. For purposes hereof, “Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, managers, directors, trustees, officers, employees or other personnel, counsel, agents and advisors of such Person and of such Person’s Affiliates.
(b)    To the extent not prohibited by applicable Law, Pledgor shall not assert, and Pledgor waives, any claim against the Collateral Agent and its respective Related Parties, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) (whether or not the claim therefor is based on contract, tort or duty imposed by any applicable legal requirement) arising out of, in connection with, as a result of, or in any way related to, this Agreement or any other Revolver Document or any agreement or instrument contemplated hereby or thereby or referred to herein or therein, the transactions contemplated hereby or thereby, or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and Pledgor waives, releases and agrees not to sue on any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to it through telecommunications, electronic or other information transmission systems in connection with this Agreement or any other Revolver Documents or the transactions contemplated hereby or thereby. In no event shall the Collateral Agent be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by; directly or indirectly, forces beyond its control, including strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services, it being understood that the Collateral Agent shall use reasonable best efforts which are consistent with accepted ·practices in the banking industry to resume performance as soon as practicable under the circumstances.
SECTION 13.    INTERPRETATION.
(a)    In this Agreement, unless a clear contrary intention appears:
i.the singular number includes the plural number and vice versa;
ii.reference to any gender includes each other gender;
iii.the words “herein,” “hereof” and “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;
iv.reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any

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other capacity or individually, provided that nothing in this Section 13(a)(iv) is intended to authorize any assignment not otherwise permitted by this Agreement;
v.reference to any agreement, document or instrument means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof, and reference to any note includes any note issued pursuant to any Revolver Document in extension or renewal thereof and in substitution or replacement therefor;
vi.unless the context indicates otherwise, reference to any Article, Section or Schedule means such Article or Section hereof or Schedule hereto;
vii.“including” (with its correlative meaning “include”) means including, without limiting the generality of any description preceding such term;
viii.with respect to the determination of any period of time, the word “from” means “from and including” and the word “to” means “to but excluding;”
ix.reference to any Law means such as modified, codified or reenacted, in whole or in part, and in effect from time to time; and
x.reference to the Collateral Agent are to it in its capacity as Collateral Agent for the Secured Parties and Noteholders under and as provided in the Collateral Agency Agreement.
(b)    Article and Section headings herein are for convenience only and shall not affect the construction hereof.
(c)    No provision of this Agreement shall be interpreted or construed against any Person because that Person or its legal representative drafted such provision.
SECTION 14.    AMENDMENTS. No amendment or waiver of any provision of this Agreement, nor consent to any departure by Pledgor herefrom, will be effective unless in writing and signed by Pledgor and the Collateral Agent, and then only in the specific instance and for the specific purpose for which given.
SECTION 15.    NOTICES. All notices and other communications provided for hereunder shall be in writing and sent: (a) by telecopy, facsimile or electronic mail if the sender on the same day sends a confirming copy of such notice by a nationally recognized overnight delivery service (charges prepaid); (b) by registered or certified mail with return receipt requested (postage prepaid); or (c) by a nationally recognized overnight delivery service (with charges prepaid). Any such notice must be sent:
a.if to the Bank or its nominee, to the Bank or nominee at the address specified for such communications in the Loan Agreement, or at such other address as the Bank or nominee shall have specified to the Company in writing;

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b.if to any other Holder, to such Holder at such address as such Holder shall have specified to the Company in writing;
c.if to Pledgor, to Pledgor at the following address: 21410 North 19th Avenue, Suite 220, Phoenix, Arizona 85027 to the attention of: Michael J. Liebman, or at such other address as Pledgor shall have specified to the Collateral Agent and each Holder in writing; or
d.if to the Collateral Agent, at 101 North First Avenue, Suite 1600, Phoenix, Arizona·85003, Attention: M. Ambriz-Reyes (Global Water Resources, Inc.), E-mail: Mary.ambrizreyes@usbank.com, or at such other address as the Collateral Agent shall have specified to Pledgor in writing.
Notices under this Section 15 will be effective only when actually received.

SECTION 16.    SEPARABILITY. If any clause, sentence, paragraph, subsection or Section of this Agreement is judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Agreement, and the part or parts of this Agreement so held to be invalid, unenforceable or void will be deemed to have been stricken herefrom by the parties hereto, and the remainder of this Agreement will have the same force and effect as if such stricken part or parts had never been included herein
SECTION 17.    COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed will be an original and all of which taken together will constitute one and the same Agreement. Signatures of parties transmitted by facsimile or electronic transmission will be their original signatures for all purposes.
SECTION 18.    CONTINUING LIEN. This Agreement shall create a continuing security interest in the Collateral and shall: (a) remain in effect until payment in full of the Secured Obligations; (b) be binding on Pledgor, its successors and assigns; and (c) inure to the benefit of the Collateral Agent and other Secured Parties and their successors, transferees and assigns. Without limiting the foregoing clause (c), any Holder may assign or otherwise transfer all or a portion of its interests, rights and obligations under the Revolver Note in accordance with the Revolver Documents. Upon the payment in full of the Secured Obligations and Notes, Pledgor will be entitled to the return, on its request and at its expense, of such Collateral as shall not have been disposed of.
SECTION 19.    SURVIVAL. All representations and warranties in this Agreement or made in writing by Pledgor in connection herewith will survive the execution and delivery of this Agreement and repayment of the Secured Obligations. Any investigation by any Secured Party will not diminish in any respect its right to rely on such representations and warranties.
SECTION 20.    LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF New York WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION EXCEPT TO THE

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EXTENT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF New York.
SECTION 21.    JURISDICTION WAIVER OF JURY TRIAL.
(a)Pledgor irrevocably submits to the non-exclusive jurisdiction of any New York State or federal court sitting in the Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or relating to the Revolver Documents. To the fullest extent permitted by applicable Law, Pledgor irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
(b)Pledgor consents to process being served by or on behalf of the Collateral Agent or any Holder in any suit, action or proceeding of the nature referred to in Section 21(a) by hand delivery, reputable overnight commercial delivery service or by mailing a copy thereof by registered or certified or express mail (or any substantially similar form of mail), postage prepaid; return receipt requested, in each case to it at its address described in Section 15 or at such other address of which the Collateral Agent or such Holder shall then have been notified pursuant to Section 15. Pledgor agrees that such service upon receipt: (i) will be in every respect effective service of process on it in any such suit, action or proceeding; and (ii) will, to the fullest extent permitted by applicable Law, be valid personal service on and personal delivery to it. Notices hereunder will be conclusively presumed received as evidenced by a delivery receipt furnished by the United States Postal Service or any reputable commercial delivery service.
(c)Nothing in this Section 21 shall affect the right of the Collateral Agent or any Holder to serve process in any manner permitted by Law, or limit any right the Collateral Agent or Holder may have to bring proceedings against Pledgor in the courts of any appropriate jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
(d)THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO OR RELATED TO ANY REVOLVER DOCUMENT.
SECTION 22.    FINAL AGREEMENT. THIS AGREEMENT AND ANY OTHER REVOLVER DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT (WITH THE COLLATERAL AGENCY AGREEMENT) THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 23.    LLC INTERESTS. Pledgor represents and warrants that: (a) any Pledged Company that is a limited liability company has not issued any certificate or other instrument to evidence any of

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Pledgor’s limited liability company interests in such Pledged Company; (b) the limited liability company interest in any such Pledged Company have not been dealt in or traded on any securities exchange or in securities markets; and (c) the operating agreement of any such Pledged Company does not provide that any limited liability company interest in any such Pledged Company shall be a security governed by Article 8 of the Uniform Commercial Code. Pledgor will not: (A) permit any Pledged Company that is a limited liability company to issue any certificate or other instrument to evidence any of Pledgor’s limited liability company interests in such Pledged Company; (B) permit the limited liability company interest in any such Pledged Company to be dealt in or traded on any securities exchange or in securities markets; or (C) allow the operating agreement of any such Pledged Company to provide that any limited liability company interest in any such Pledged Company shall be a security governed by Article 8 of the Uniform Commercial Code.


[SIGNATURE PAGE FOLLOWS]

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DATED as of the date first above written.

PLEDGOR:

GLOBAL WATER HOLDINGS, INC.



By:    /s/ Michael J. Liebman            
Name:    Michael J. Liebman
Title:    First Vice President, Secretary and Treasurer


COLLATERAL AGENT:

U.S. BANK NATIONAL ASSOCIATION, as Collateral Agent



By:    /s/ Mary Ambriz-Reyes                        
Name:    Mary Ambriz-Reyes                        
Title:    Vice President                         





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Schedule 1
PLEDGED COMPANIES*
Global Water—Mirabell Water Company, Inc.
Global Water—Lyn Lee Water Company, Inc.
Global Water—Francesca Water Company, Inc.
Global Water—Tortolita Water Company, Inc.




*All Arizona corporations 100% owned by Pledgor.




Schedule I
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EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Ron L. Fleming, certify that:
 
1. I have reviewed this Quarterly Report on Form 10-Q of Global Water Resources, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 


Date: May 5, 2021
     
By: /s/ Ron L. Fleming    
  Ron L. Fleming    
  President, Chief Executive Officer and Chairman of the Board    



EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Michael J. Liebman, certify that:
 
1. I have reviewed this Quarterly Report on Form 10-Q of Global Water Resources, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 


Date: May 5, 2021
       
By: /s/ Michael J. Liebman    
  Michael J. Liebman    
  Chief Financial Officer and Corporate Secretary    



EXHIBIT 32.1
 
Certification of Chief Executive Officer and Chief Financial Officer

PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Global Water Resources, Inc. (the “Company”) for the quarter ended March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Ron L. Fleming, as Chief Executive Officer of the Company, and Michael J. Liebman, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
       
By: /s/ Ron L. Fleming    
  Ron L. Fleming    
  President, Chief Executive Officer and Chairman of the Board    
  Date: May 5, 2021    
     
By: /s/ Michael J. Liebman    
  Michael J. Liebman    
  Chief Financial Officer and Corporate Secretary    
  Date: May 5, 2021