EXHIBIT 99.1
STOCKHOLDER LOAN AND SECURITY AGREEMENT
THIS STOCKHOLDER LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), dated as
of March 16, 2004, is entered into by and between Western Water Company, a
Delaware corporation ("WESTERN WATER"), and the preferred stockholders listed on
EXHIBIT A to this Agreement (the "SERIES C STOCKHOLDERS").
RECITALS
A. The Series C Stockholders collectively own 7,708.3682 shares of Western
Water's Series C Convertible Redeemable Preferred Stock, par value $.001 per
share (the "SERIES C PREFERRED STOCK"), representing all of the shares of Series
C Preferred Stock that were issued and outstanding on July 15, 2003, on January
15, 2004, and all of the shares of Series C Preferred Stock that are outstanding
as of the date of this Agreement;
X. Xxxxxxx Capital Management, Inc. acts as the investment advisor and
nominee of the holders of the Series C Preferred Stock listed on EXHIBIT B to
this Agreement, and as the investment advisor and nominee is empowered to enter
into this Agreement on behalf of the Series C Stockholders listed on EXHIBIT B;
C. Under the terms of the Certificate of Designations of the Series C
Preferred Stock, the holders of the outstanding Series C Preferred Stock are
entitled to receive, when, as and if declared by Western Water's Board of
Directors dividends at the annual rate of 7.25% of the stated value per share of
the Series C Preferred Stock, which dividends are payable semi-annually in
January and July of each year;
D. On March 16, 2004, Western Water declared dividends in the aggregate
amount of $558,856.69 to the Series C Stockholders, which dividends represented
the total of the semi-annual dividends payable on July 15, 2003 and on January
15, 2004; and
E. The July 15, 2003 and on January 15, 2004 dividends were declared and
payable to the Series C Stockholders on the condition that the Series C
Stockholders agree to (i) loan the entire proceeds from the $558,856.69 dividend
payments to Western Water on the terms set forth herein, and (ii) loan any
future dividends declared for each of the semi-annual periods ending July 15,
2004, January 15, 2005 and July 15, 2005, if and when declared and paid by the
Board of Directors, to Western Water on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto, and of good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows: :
ARTICLE 1.
LOAN
1.1. Loan. The Series C Stockholders agree to lend to Western Water, and
Western Water agrees to borrow from the Series C Stockholders, up to an
aggregate of $1,397,141.75 (the "LOAN"). The Loan will be made from the Series C
Preferred Stock dividends declared and paid by Western Water for the periods
ending July 15, 2003 and January 15, 2004, and any additional dividends that may
be declared and paid for the periods ending July 15, 2004, January 15, 2005 and
July 15, 2005.
1.2. Initial Advance for the July 15, 2003 and January 15, 2004 Dividends.
Subject to and upon the terms and conditions set forth in this Agreement, the
Series C Stockholders hereby agree to advance to Western Water under the Loan,
the principal amount of $558,856.69 (the "INITIAL ADVANCE"). The Initial
Advance, and any subsequent advances under the Loan, will be represented by a
Secured Promissory Note, the form of which is attached hereto as EXHIBIT C (the
"NOTE"). The Initial Advance shall bear interest at the rate of eight percent
(8%) per annum, which shall be compounded semi-annually. The unpaid principal
balance of the Initial Advance, plus all accrued but unpaid interest thereon,
shall be due and payable on August 31, 2005 (the "MATURITY DATE"). The Loan and
each advance thereunder shall be secured by the assets, property and property
rights described in EXHIBIT D hereto.
1.3. Future Advances under the Loan. In the event that the Board of
Directors declares and pays a dividend which is due on July 15, 2004, January
15, 2005 and/or July 15, 2005, the Series C Stockholders hereby agree that the
entire amount of each such dividend payment shall, concurrently with the payment
thereof, be advanced to Western Water on the same terms as the as the Initial
Advance. In order to effect such future advances, upon the declaration of any
such future dividend to the Series C Stockholders, Western Water shall be
entitled to withhold the payment of the dividend and shall, in lieu of the cash
payment, prepare and issue to the Series C Stockholders an additional promissory
note that shall evidence the additional advance in the amount of such dividend
payment. Each new promissory note shall be in the form of the Note and shall
have the same interest rate and Maturity Date as the Note. In addition, each
additional advance shall be secured by the same assets, property and property
rights as those that secure the Initial Advance. Western Water shall issue a new
promissory note for each of the July 15, 2004, January 15, 2005 and July 15,
2005 dividend payments, if dividends are declared as of the respective dividend
payment date. The Series C Stockholders hereby acknowledge and agree that
nothing in this Agreement shall obligate the Board of Directors of Western Water
to declare dividends on the Series C Preferred Stock, and that there is no
agreement or understanding between Western Water and the Series C Stockholders
that any such future dividends will be declared or paid. (The Note issued
pursuant to Section 1.2 above, together with any and all additional promissory
notes that Western Water may issue to evidence the Loan pursuant to this Section
1.3 are herein collectively referred to as the "NOTES.")
ARTICLE 2.
CREATION OF A SECURITY INTEREST
2.1. Grant of Security Interest. In order to secure prompt repayment of
the Notes and the performance by Western Water of each of its covenants and
duties under this Agreement, the Notes and any and all additional documents and
instruments that are given by Western Water to or for the benefit of the Series
C Preferred Stockholders to evidence, secure or otherwise pertaining to Loan,
Western Water hereby grants to the Series C Stockholders a security interest in
all of the assets, property and property rights owned by it and described in
attached Exhibit D which are located in Xxxxxxx County, State of Colorado (the
"COLLATERAL") pursuant to Division 9 of the Revised Commercial Code as adopted
in the State of Colorado.
2.2. Delivery of Deed of Trust and Additional Documentations. Western
Water hereby agrees to execute and deliver to or for the benefit of the Series C
Stockholders, concurrently with its execution and delivery of this Agreement and
the Note and at any time thereafter at the request of the Series C Stockholders,
a Deed of Trust (the "DEED OF TRUST") in the form attached hereto as EXHIBIT E,
together with all UCC financing statements, fixture filings, assignments,
notices to third parties, and any other documents that the Series C Stockholders
may reasonably request, in form and substance reasonably satisfactory to the
Series C Stockholders, to perfect and continue perfected their security
interests in the Collateral and in order to fully consummate the terms of this
Agreement.
2.3. Partial Release of Collateral. The Series C Stockholders recognize
and acknowledge that Western Water currently is marketing "Water Delivery
Contract Units" ("WDCUs") as contract rights to an undivided portion of the
water production capacity of certain of Western Water's Colorado water rights,
which water rights constitute part of the Collateral. In addition, Western Water
may otherwise sell or lease the various water rights that it owns in Colorado,
which water rights also are a part of the Collateral. The Series C Stockholders
agree that Western Water may, without the prior consent of the Series C
Stockholders, (i) sell WDCUs if the price of the WDCUs equals or exceeds $4,500
per acre foot of water production capacity, and (ii) sell or lease water arising
under its water rights (other than as WDCUs) if the price for such water equals
or exceeds $1.00 per 1,000 gallons. The Series C Stockholders hereby agree to,
release from the lien imposed thereon by this Agreement and by the Deed of Trust
the water rights associated with any such permitted sale of WDCUs. In the event
that Western Water consummates a transaction described in subsection (i) or (ii)
of this Section 2.3, the Series C Stockholders shall execute and deliver, or
cause the trustee of the Deed of Trust to execute and deliver, any and all
documents and instruments necessary to release the sold WDCUs or other water
from this Agreement or the Deed of Trust, including all instruments of
conveyance. Western Water shall pay all costs of recordation of such partial
release or conveyance instruments. The foregoing release shall be granted
without any payment to the Series C Stockholders on account of the Loan or
without any release fee.
ARTICLE 3.
DEFAULTS AND REMEDIES
3.1. Default. The occurrence of any one or more of the following will
constitute an event of default ("Default") under this Agreement and under the
Notes, the Deed of Trust and all of the other documents and instruments which
evidence or secure the Loan:
(a) Non-Payment. Western Water's failure to pay, within three (3) business
days after its due date, any liquidated sum or uncontested portion of any
unliquidated sum required to be paid under this Agreement, the Notes, the Deed
of Trust or any other of the other documents or instruments which evidence or
secure the Loan.
(b) Other Monetary Default. Western Water's failure to perform any
material monetary obligation under this Agreement, the Notes, the Deed of Trust,
or any other documents or instruments which evidence or secure the Loan within
ten (10) business days after the Series C Stockholders or any of them gives
Western Water a written notice of such failure or such shorter cure period, if
any, as is specified in the relevant document or instrument.
(c) Cross-Default. Western Water's breach or default under or with respect
to any liability in excess of $100,000 to any third party including, without
limitation, under any indenture, mortgage, deed of trust, lease, agreement or
other instrument with any third party.
(d) Voluntary Bankruptcy, Insolvency, Dissolution. Any: (i) filing of a
petition by Western Water for relief under the Bankruptcy Code or under any
other current or future law regarding bankruptcy, reorganization or other
creditor relief law, (ii) filing of any pleading or answer by Western Water in
any involuntary proceeding under the Bankruptcy Code or other such law which
admits the jurisdiction of the court or the petition's material allegations
regarding Western Water's insolvency, (iii) general assignment by Western Water
for the benefit of creditors, (iv) application by Western Water for, or the
appointment of, a receiver, trustee, custodian or liquidator of or for, Western
Water's or any of its assets or (v) any liquidation or dissolution, or election
to liquidate or dissolve, by Western Water, its board of directors or any of its
stockholders.
(e) Involuntary Bankruptcy. The failure of Western Water to effect a full
dismissal of any involuntary petition under the Bankruptcy Code or under any
other creditor relief law that is filed against Western Water or in any way
restrains or limits Western Water or the Series C Stockholders regarding the
Loan before the earlier of the entry of any court order granting relief sought
in the involuntary petition or 30 days after the filing of the involuntary
petition.
(f) Attachment. The sequestration or attachment of, or any levy or
execution upon, any assets of Western Water which is not released, expunged or
dismissed before the earlier of 30 days or the sale of the assets affected
thereby.
(g) Material Adverse Effect. A Material Adverse Effect occurs. For the
purpose of this Agreement, a material adverse effect means any change, effect,
event, circumstance or occurrence that is, or can reasonably be expected to be,
material and adverse to the value of the Collateral taken as a whole or the
ability of Western Water to perform any of the payment obligations it has agreed
to perform under this Agreement. However, "Material Adverse Effect" shall not
include any change, event, circumstance or occurrence that affects the U.S., the
Colorado or the Greater Denver economy generally.
3.2. Acceleration and Other Remedies. Upon the occurrence of any Default,
the Series C Preferred Stockholders may, at their sole and absolute discretion,
declare all sums owing to them under the Notes, the Deed of Trust, this
Agreement and any other documents or instruments which evidence or secure the
Loan immediately due and payable. However, upon the occurrence of a Default
under Subsections 3.1(d), (e) or (f) above, all such sums will automatically
become immediately due and payable without any further action on the part of the
Series C Preferred Stockholders. Notwithstanding the first sentence of this
Section 3.2, in the case of a Default constituting a Material Adverse Effect, if
that Material Adverse Effect did not result from any act or failure to act by
Western Water, that Default shall entitle the Series C Preferred Stockholders to
terminate its obligation to make any further advances on the Loan, but shall
not, by itself, entitle the Series C Stockholders to accelerate Western Water's
obligation to repay the outstanding amounts under the Loan. Upon any
acceleration, the obligations of the Series C Preferred stockholders to make any
further advances on the Loan will terminate and the Series C Stockholders may,
in their discretion, exercise any and all remedies permitted under this
Agreement, the Notes, the Deed of Trust and any other documents or instruments
which evidence or secure the Loan, including, without limitation, the ability to
file suit and obtain judgment, and seek any ancillary remedies provided by law,
including levy of attachment and garnishment.
ARTICLE 4.
MISCELLANEOUS
4.1. Entire Agreement. This Agreement, the Notes, the Deed of Trust and
any other documents or instruments issued by Western Water to or for the benefit
of the Series C Preferred Stockholders evidencing, securing or pertaining to the
Loan constitute the sole and complete understanding of the parties with respect
to the subject matter hereof and supersede all prior oral or written agreements
with respect to the subject matter hereof.
4.2. Parties Bound by Agreement; Successors and Assigns. The terms,
conditions, and obligations of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and assigns.
4.3. Amendments and Waivers. No modification, termination, extension,
renewal or waiver of any provision of this Agreement shall be binding upon a
party unless made in writing and signed by such party. A waiver on one occasion
shall not be
construed as a waiver of any right on any future occasion. No delay or omission
by a party in exercising any of its rights hereunder shall operate as a waiver
of such rights.
4.4. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
4.5. Headings. The headings of the Sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
4.6. Expenses. Except as specifically provided herein, the Series C
Stockholders and Western Water shall each pay all of its own costs and expenses
incurred by it or on its behalf in connection with this Agreement and the
transactions contemplated hereby, including fees and expenses of its own
financial consultants, accountants, and counsel.
4.7. Governing Law. This Agreement and any and all documents and
instruments evidencing, securing and pertaining to the Loan shall be interpreted
and construed in accordance with and governed by the substantive laws of the
State of Colorado, without giving effect to the principles of choice of law
thereof.
4.8. Illegality. If any provision of this Agreement or any of the other
documents and instruments evidencing, securing and pertaining to the Loan are
held to be illegal, invalid or unenforceable under present or future laws of the
State of Colorado, the legality, validity and enforceability of the remaining
provision thereof shall not be affected thereby and in lieu of each such
illegal, invalid or unenforceable provision there shall be added automatically,
as part of this Agreement or the Notes or Deed of Trust, a provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible
to be legal, valid and enforceable.
4.9. Attorneys Fees. In the event of the bringing of any action or suit by
either party against the other by reason of any breach of any of the terms or
covenants by a party under this Agreement, the Notes, the Deed of Trust or any
other document or instrument given to evidence, secure or pertaining to the
Loan, the prevailing party shall be entitled to have and recover of and from the
other party all costs and expenses of the action or suit, including actual
attorneys' fees.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date first indicated above.
X. XXXX PRICE NEW ERA FUND INC. WESTERN WATER COMPANY,
a Delaware corporation
By: By:
--------------------------------- -----------------------------------
Name: Name:
Title: Title:
X. XXXX PRICE SMALL-CAP VALUE ASHFORD CAPITAL MANAGEMENT, INC.,
FUND, INC. as investment advisor and
attorney-in-fact for the holders
listed on Exhibit B
By: By:
--------------------------------- -----------------------------------
Name: Name:
Title: Title:
