INVESTORS' RIGHTS AGREEMENT

 

TABLE OF CONTENTS

 

				Page
1.	Registration Rights			1
	1.1	Definitions		1
	1.2	Company Registration		2
	1.3	Obligations of the Company		2
	1.4	Furnish Information		4
	1.5	Expenses of Registration		4
	1 6	Underwriting Requirements		4
	1.7	Delay of Registration		5
	1.8	Indemnification		5
	1.9	Reports Under Securities Exchange Act of 1934		7
	1.10	Assignment of Registration Rights		7
	1.11	Limitations on Subsequent Registration Rights		8
	1.12	Market-Standoff Agreement		8
	1.13	Termination of Registration Rights		9
2.	Covenants of the Company			9
	2.1	Delivery of Financial Statements		9
	2.2	Inspection		9
	2.3	Termination of Covenants		9
3.	Representations and Warranties of the Company			9
	3.1	Organization, Good Standing and Qualification		9
	3.2	Authorization		9
	3.3	Valid Issuance of Securities		10
4.	Representations and Warranties of the Investors			10
	4.1	Authorization		10
	4.2	Purchase Entirely for Own Account		10
	4.3	Disclosure of Information		10
	4.4	Restricted Securities		11
	4.5	Legends		11
	4.6	Accredited Investor		11
5.	Miscellaneous			11
	5.1	Successors and Assigns		11
	5.2	Amendments and Waivers		12
	5.3	Notices		12
	5.4	Severability		12
	5.5	Governing Law		12
	5.6	Counterparts		12
	5.7	Titles and Subtitles		12
	5.8	Aggregation of Stock		12

 

 

i

 

	5.9	Investor Representations		12
	5.10	Finder’s Fee		13
	5.11	Attorney’s Fees		13
	5.12	Entire Agreement		13

 

 

ii

 

SOUTHWEST WATER COMPANY

 

INVESTORS’ RIGHTS AGREEMENT

 

 

                                                This Investors’ Rights Agreement (the “Agreement”) is made as of the 25^th day of February, 2000, by and among SOUTHWEST WATER COMPANY, a Delaware corporation (the “Company”) and the persons listed on Exhibit A hereto, each of which is herein referred to as an “Investor,” with respect to the following:

 

RECITALS

 

                                                A.                                   Concurrently with the execution and delivery of this Agreement, the Company is issuing to each Investor a warrant (each, a “Warrant” herein) to purchase certain common stock, $0.01 par value of the Company (the “Common Stock”).

 

                                                B.                                     As a part of the agreement pursuant to which the Warrants are being issued to the Investors, the Company and the Investors enter into this Agreement in order to provide the Investors with (i) certain rights to register shares of the Common Stock issuable upon exercise of the warrants and (ii) certain rights to receive or inspect information pertaining to the Company.  The Company and Investors also desire to set forth certain representations and warranties of Investors applicable with respect to all Common Stock issued to each Investor upon exercise of a Warrant.

 

AGREEMENT

 

                                                The parties hereby agree as follows:

 

                                                1.                                      Registration Rights.  The Company and the Investors covenant and agree as follows:

 

                                                                                                1.1                               Definitions. For purposes of this Section 1:

 

                                                                                                                                                (a)                                  The terms “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act of 1933, as amended (the “Securities Act”), and the declaration or ordering of effectiveness of such registration statement or document;

 

 

                                                                                                                                                (b)                                 The term “Registrable Securities” means (i) the share of Common Stock issuable or issued upon exercise of the Warrants and (ii) any other shares of Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares listed in (i); provided, however, that the foregoing definition shall exclude in all cases any Registrable Securities sold by a person in a transaction in which his or her rights under this Agreement are not assigned.  Notwithstanding the foregoing, Common Stock or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public

 

 

 

distribution or a public securities transaction, or (B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions, and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale;

 

                                                                                                                                                (c)                                  The number of shares of “Registrable Securities then outstanding” shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable Warrants which are, Registrable Securities;

 

                                                                                                                                                (d)                                 The term “Holder” means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.10 of this Agreement;

 

                                                                                                                                                (e)                                  The term “Form S-3” means such form under the Securities Act as in effect on the date hereof or any successor form under the Securities Act; and

 

                                                                                                                                                (f)                                    The term “SEC” means the Securities and Exchange Commission.

 

                                                                                                1.2                               Company Registration.  If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Holders) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan, stock purchase plan or dividend reinvestment plan or a transaction covered by Rule 145 under the Securities Act, a registration in which the only stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered, or any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities), the Company shall, at such time, promptly give each Holder written notice of such registration.  Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 5.3, the Company shall, subject to the provisions of Section 1.6, cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered.  The so-called “piggyback” registration rights granted to the Holders pursuant to this Section are the only registration rights granted by the Company to the Holders, and the Holders shall have no so-called “demand” registration rights as to the Registrable Securities.

 

                                                                                                1.3                               Obligations of the Company.  Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

                                                                                                                                                (a)                                  Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to one hundred twenty

 

 

2

 

(120) days.  The Company shall not be required to file, cause to become effective or maintain the effectiveness of any registration statement that contemplates a distribution of securities on a delayed or continuous basis pursuant to Rule 415 under the Securities Act.

 

                                                                                                                                                (b)                                 Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for up to one hundred twenty (120) days.

 

                                                                                                                                                (c)                                  Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

 

                                                                                                                                                (d)                                 Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as condition thereto to qualify to do business or to file general consent to service of process in any such states or jurisdictions.

 

                                                                                                                                                (e)                                  In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering.  Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

 

                                                                                                                                                (f)                                    Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, such obligation to continue for one hundred twenty (120) days.

 

                                                                                                                                                (g)                                 Cause all such Registrable Securities registered pursuant to this Section 1 to be listed on each securities exchange on which similar securities issued by the Company are then listed.