WUC SHAREHOLDER AGREEMENT

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Exhibit 4.11

WUC SHAREHOLDER AGREEMENT

        THIS WUC SHAREHOLDER AGREEMENT (this " Agreement ") is made as of October 1, 2000 among Southwest Water Company, a Delaware corporation (" SWC "), SW Utility Company, a Texas corporation (" SWUC "), RTNT, Inc., a Texas corporation (" RTNT "), Thom W. Farrell (" Farrell ") and Windermere Utility Co., Inc., a Texas corporation (the " Company "). SWUC and RTNT are collectively referred to herein as the " Shareholders ."

W I T N E S S E T H:

        WHEREAS, upon the closing of that certain Merger Agreement and Plan of Reorganization of even date herewith (the " Merger Agreement "), and subsequent contribution of Company Common Stock by SWC to SWUC, SWUC will own 80% of the issued and outstanding capital stock of the Company and RTNT will own 20% of the issued and outstanding capital stock of the Company;

        WHEREAS, SWUC is a wholly owned subsidiary of SWC;

        WHEREAS, Farrell is the trustee of the Rollingwood Trust, the sole shareholder of RTNT; and

        WHEREAS, the Shareholders desire to more particularly set forth in writing their agreements with respect to (i) specific restrictions on the transfer of their interests in the Company and (ii) the terms under which SWUC may purchase, or may be required to purchase, RTNT's remaining shares of Company Common Stock.

        NOW, THEREFORE, in consideration of the premises and undertakings hereinafter set forth, the parties hereto agree as follows:

ARTICLE 1.
DEFINITIONS AND INTERPRETATION

        1.1     Definitions.     As used in this Agreement:

" Affiliate " of a Holder means (a) a Person directly or indirectly (through one or more intermediaries) controlling, controlled by or under common control with that Holder; (b) an officer, director, partner, shareholder or member of that Holder; or (c) a member of the immediate family of an officer, director, partner, shareholder, or member of that Holder. For these purposes "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Securities, by contract, or otherwise.

" Annual Election " means the annual election of Directors held in accordance with the Company's by-laws, including any such election by written consent.

" Business Day " means Mondays through Fridays other than days on which the United States Postal Service does not make regularly scheduled deliveries of first class mail.

" Board " means the Board of Directors of the Company.

" Closing Price " means the SWC Market Price calculated as of the Effective Date.

" Company Common Stock " means the common stock of the Company, $1.00 par value per share.

" Connection Count " means the total number of new water or wastewater connections per Fiscal Year measured at the date of full and final payment for the respective individual connection of any particular commitment. A single family residence connecting to both the water and wastewater systems shall be counted as two separate new connections. For purposes hereof, commercial connections shall be equivalent to the number of single family residential

connections as set forth in the respective Texas Utilities tariffs from time to time. Any wholesale service connections shall be translated to single family residence connections by calculating the single family residential connections on the wholesale connections end users using the methodology as set forth above.

" Director " means a member of the board of directors of the Company.

" Disposition " has the meaning given to such term in Section 3.1 .

" Effective Date " means the effective (date of this Agreement as first set forth above, which shall also be the closing date of the Merger Agreement.

" Fiscal Year " means the 365-day period year beginning July 1 in one calendar year and continuing through June 30 of the next calendar year.

" Holder " means a record and beneficial owner of any Company Common Stock.

" Market Price " means the lower of either (a) the average closing share price of the SWC Common Stock for the preceding five (5) business days prior to the closing date of the relevant transaction or (b) the average daily three (3) month closing share price of the SWC Common Stock prior to the closing date of the relevant transaction.

" Permitted Transferee " means (i) SWC or (ii) any Person to whom a Holder has transferred Company Common Stock with the consent of the other Holder or Holders; provided, however, that in each case the Permitted Transferee has become a party to and has agreed to be bound by this Agreement, amended as necessary to reflect the transfer of SWUC's shares of Company Common Stock to the Permitted Transferee, as to all shares of Company Common Stock then being transferred to it. "Permitted Transferee" includes successive transferees in transactions described in this definition.

" Person " means an individual, partnership, corporation, limited liability company, unincorporated organization or association, trust, government or department, unit or political subdivision of a government, or other such entity.

" Reorganization " means (i) any statutory or other form of merger or consolidation of one Person with or into any other Person; (ii) the sale of a majority of the Voting Securities of a Person; (iii) any recapitalization or reclassification of capital stock or other equity interests of a Person which results in the holders of Voting Securities prior to the Reorganization not having the power to elect a majority of the issuer's board of directors or other comparable body after the Reorganization; (iv) or any sale of all or substantially all of the assets of a Person in any one or a series of related transactions.

" Share Price " means the weighted average closing share price of the SWC Common Stock for each trading day of the thirty (30) day period prior to the Put Date or Call Date (as applicable).

" SWC Change of Control " means either of the following events:

        (a)   A change in control of SWC of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A, Regulation 240.l4a-101, promulgated under the Securities Exchange Act of 1934, as amended (the " Exchange Act "), as in effect on the date hereof, or, if Item 6(e) is no longer in effect, any regulation issued by the Securities and Exchange Commission pursuant to the Exchange Act which serves similar purposes (i.e., a change in the person or persons owning, directly or indirectly, sufficient Voting Securities to elect the Board of Directors or to take other significant shareholder actions for SWC);

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provided that, without limitation, an SWC Change of Control shall be deemed to have occurred if and when:

        (1)   Any "person" (as such term is used in 13(d) and 14(d)2 of the Exchange Act) who is not at the date hereof a beneficial owner, directly or indirectly, of securities of SWC representing fifty percent (50%) or more of the combined voting power of SWC's then outstanding Voting Securities becomes such a beneficial owner, or

        (2)   During any period of two (2) consecutive years, individuals who were members of the Board of Directors of SWC at the beginning of such period cease for any reason (other than death or disability) to constitute at least a majority of thereof unless the election, or the nomination for election by SWC's stockholders, of each new director, was approved by vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period; or

        (b)   Consummation of (A) any reorganization, consolidation, or merger of SWC in which SWC is not the continuing or surviving corporation or pursuant to which shares of SWC's Common Stock would be converted into cash, securities, or other property, other than a merger of SWC in which the holders of SWC's Common Stock immediately prior to such transaction, immediately following such transaction, own more than fifty percent (50%) of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged, or consolidated company or (B) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of SWC.

" SWC Common Stock " means the common stock of SWC, $0.01 par value per share.

" Voting Securities " means shares of capital stock or equity interests the holders of which are at the time entitled to elect a majority of the issuer's board of directors or other comparable body.

Additional terms are defined where used in this Agreement.

        1.2     Interpretation.     Each definition in this Agreement includes the singular and the plural, and references to the neuter gender include the masculine and feminine whenever appropriate. References to any statute mean such statute as amended at the time and include any successor legislation. The words "herein," "hereof" and "hereunder" refer to this Agreement as a whole. The headings of the Articles and Sections are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. Unless the context otherwise requires, references to Articles, Sections and Subsections mean the Articles, Sections and Subsections of this Agreement.

        1.3     Changes in Stock.     If during the term of this Agreement the outstanding shares of the Company Common Stock or the SWC Common Stock shall be changed into a different number of shares or a different class or classes of shares by reason of any Reorganization, split-up, combination, reclassification or other recapitalization, or if a stock dividend shall be declared on shares of such Common Stock with a record date during such term, the terms of this Agreement (including its definitions) shall be appropriately modified to give effect to such occurrence.

ARTICLE 2.
VOTING OF SHARES AND GOVERNANCE

        2.1     Composition of Board.     From and after the date hereof, so long as this Agreement remains in effect:

        (a)     Number.     The number of Directors comprising the Board shall initially be four (4), subject to change in accordance with the Company's Articles of Incorporation and bylaws.

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        (b)     Election.     Immediately after the Closing and at each Annual Election, SWUC shall nominate three (3) individuals to stand for election as Directors and RTNT shall nominate Farrell or one other individual to stand for election as Director. At all times during the term of this Agreement, RTNT shall have the right to nominate and have elected one (l) Director. Each Shareholder shall vote all of its shares (or sign a written consent in lieu thereof) at each Annual Election and at all other times when required to fill a vacancy on the Board, however arising, and to take all such other action as may be reasonably necessary to elect the Board candidates nominated by SWUC or RTNT.

        2.2     Officers.     The Board shall, at a minimum, appoint a president, secretary and treasurer of the Company.

ARTICLE 3.
RESTRICTIONS ON TRANSFERS OF SHARES

        3.1     No Dispositions.     No Holder shall, directly or indirectly, sell, assign, transfer by operation of law or otherwise, pledge, hypothecate, grant any security interest or other lien in or otherwise dispose of any of its shares of Company Common Stock (a " Disposition "), or agree or otherwise become obligated to take any of the foregoing actions; provided, however, that such restrictions shall not apply to (i) a Disposition to a Permitted Transferee, (ii) the hypothecation or pledge of the SWUC shares of Company Common Stock to a bank or other financial institution or under any indenture, (iii) the granting of a security interest in or other lien on the SWUC shares of Company Common Stock to a bank or other financial institution or under any indenture, or (iv) a Disposition pursuant to the Put Rights, Call Right or obligated purchases upon an SWC Change of Control.

        3.2     Remedies.     

        (a)   In the event that RTNT transfers its shares of Company Common Stock in violation of Section 3.1 , such transfer shall constitute a breach of this Agreement. In addition to any other remedy available to SWUC at law or in equity, SWUC may exercise its Call Right under Section 4.2 of this Agreement to buy all of the shares of Company Common Stock then owned by RTNT unless RTNT rescinds the purported Disposition within ten (10) business days after written notice of SWUC's intent to exercise this remedy is delivered to RTNT. RTNT shall defend, indemnify and hold the Company, SWC, SWUC and their Affiliates harmless for any breach by RTNT of this Article 3 .

        (b)   In the event that SWUC transfers its shares of Company Common Stock in violation of Section 3.1 , RTNT may exercise Put Rights in the manner contemplated by Section 4.1 of this Agreement to sell all of the shares of Company Common Stock then owned by RTNT unless SWUC rescinds the purported Disposition within ten (10) business days after written notice of RTNT's intent to exercise this remedy is delivered to SWUC. SWUC shall defend, indemnify and hold the Company, RTNT and their Affiliates harmless for any breach by SWUC of this Article 3 .

        3.3     Legend on Stock Certificates.     

        (a)   All certificates for shares of Company Common Stock shall bear the following legend:

The shares represented by this certificate (the "Shares") have not been registered under the Securities Act of 1933, as amended, and no sale, transfer or other disposition may be made of the Shares unless they have been so registered or Windermere Utility Co., Inc. (the "Company") has been furnished with a legal opinion from a national law firm satisfactory to it that such registration is not required. The Shares are also subject to significant restrictions on transfer and requirements as to voting contained in the WUC Shareholder Agreement dated as of September 1, 2000 among the Company and its shareholders, a copy of which is on file with the Secretary of the Company.

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        (b)   Upon the termination of this Agreement, each Holder shall be entitled to receive, in exchange for any certificate for the Company Common Stock bearing the legend set forth in subsection (a) of this S