Exhibit 10.2

 

INVESTOR RIGHTS AGREEMENT

 

This INVESTOR RIGHTS AGREEMENT, dated as of March 16, 2010 (this “Agreement”),
is entered into by and among Southwest Water Company, a Delaware corporation
(the “Company”), and SW Merger Acquisition Corp. (the “Stockholder”).

 

RECITALS

 

WHEREAS, pursuant to the Securities Purchase Agreement, dated as of March 16,
2010 (the “Purchase Agreement”), by and between the Company and the Stockholder,
the Company issued 2,700,000 (two million, seven hundred thousand) shares of its
common stock, par value $0.01 per share (the “Company Common Stock”) (the number
of such shares of Company Common Stock, the “Shares”), to the Stockholder, and
the Stockholder owns the Shares;

 

WHEREAS, in connection with the consummation of the transactions contemplated by
the Purchase Agreement, each of the Company and the Stockholder desires to enter
into this Agreement to set forth certain rights and obligations of the Company
and the Stockholder with respect to the ownership by the Stockholder of the
Shares and certain other matters, all in accordance with the terms and
conditions set forth herein; and

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.1.      DEFINITIONS. IN ADDITION TO THE TERMS DEFINED ELSEWHERE IN
THIS AGREEMENT: (A) CAPITALIZED TERMS THAT ARE NOT OTHERWISE DEFINED HEREIN HAVE
THE MEANINGS GIVEN TO SUCH TERMS IN THE MERGER AGREEMENT, AND (B) THE FOLLOWING
TERMS HAVE THE MEANINGS SET FORTH IN THIS SECTION 1.1:

 

“Affiliate”, with respect to any Person, shall have the meaning set forth in
Rule 12b-2 of the Exchange Act as in effect on the date hereof.

 

“Agreement” has the meaning specified in the Introduction.

 

“Blackout Notice” has the meaning specified in Section 2(c) of Exhibit A.

 

“Blackout Period” has the meaning specified in Section 2(c) of Exhibit A.

 

“Company” has the meaning specified in the Introduction.

 

“Company Common Stock” has the meaning specified in the Recitals.

 

“Company Subsidiary” means a Subsidiary of the Company.

 

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“Demand Notice” has the meaning specified in Section 2(b) of Exhibit A.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Holder” has the meaning specified in Section 10 of Exhibit A.

 

“Losses” has the meaning specified in Section 7(a) of Exhibit A.

 

“Merger Agreement” means the Agreement and Plan of Merger, dated as of March 2,
2010, by and among Stockholder, SW Merger Sub Corp. and the Company.

 

“Person” means any natural person, corporation, general or limited partnership,
limited liability company, joint venture, trust, association or entity of any
kind.

 

“Registrable Shares” means the Shares that are not Transferable Shares, and any
Company Common Stock or other securities of the Company or any successor entity
which may be issued or distributed in respect of the Registrable Shares by way
of stock dividend or stock split or other distribution, recapitalization,
merger, conversion or reclassification.

 

“Registration Rights” has the meaning specified in Section 2.1.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Selling Stockholders” has the meaning specified in Section 3 of Exhibit A.

 

“Shares” has the meaning specified in the Recitals.

 

“Shelf Registration Statement” has the meaning specified in Section 2(a) of
Exhibit A.

 

“Standstill Period” means the period commencing on the date hereof and ending on
the date of the termination of the Merger Agreement.

 

“Stockholder” has the meaning specified in the Introduction.

 

“Subsidiary” of a Person means any other Person of which at least a majority of
the voting power represented by the outstanding capital stock or other voting
securities or interests having voting power under ordinary circumstances to
elect directors or similar members of the governing body of such corporation or
entity or fifty percent (50%) or more of the equity interests in such
corporation or entity shall at the time be owned or controlled, directly or
indirectly, by such Person and/or by one or more of its Subsidiaries.

 

“Transfer” has the meaning specified in Section 3.1.

 

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“Transferable Shares” means all or a portion of the Shares that are eligible for
resale in compliance with Rule 144 of the Securities Act (including the
requirement that the Shares meet the one-year holding period specified in
Rule 144(d)).

 

ARTICLE II

 

REGISTRATION RIGHTS

 

SECTION 2.1.      REGISTRATION RIGHTS. THE STOCKHOLDER SHALL HAVE THE RIGHTS TO
REGISTRATION UNDER THE SECURITIES ACT OF THE REGISTRABLE SHARES, ON THE TERMS
AND SUBJECT TO THE CONDITIONS SET FORTH IN EXHIBIT A (THE “REGISTRATION
RIGHTS”); PROVIDED, HOWEVER, THAT SUCH REGISTRATION RIGHTS SHALL NOT BECOME
EFFECTIVE UNTIL THE DATE OF TERMINATION OF THE MERGER AGREEMENT.

 

ARTICLE III

 

TRANSFER RESTRICTIONS

 

SECTION 3.1.      LOCK-UP PERIOD. EXCEPT AS PERMITTED BY SECTION 3.2, THE
STOCKHOLDER SHALL NOT (I) SELL, CONTRACT TO SELL, SELL ANY OPTION OR CONTRACT TO
PURCHASE, PURCHASE ANY OPTION OR CONTRACT TO SELL, GRANT ANY OPTION, RIGHT OR
WARRANT TO PURCHASE, LEND, OR OTHERWISE TRANSFER OR DISPOSE OF, DIRECTLY OR
INDIRECTLY, ANY SHARES (EACH, A “TRANSFER”) OR (II) ENTER INTO ANY SWAP OR OTHER
ARRANGEMENT THAT TRANSFERS TO ANOTHER THE ECONOMIC CONSEQUENCES OF OWNERSHIP OF
THE SHARES PRIOR TO THE EARLIER OF (A) THE EFFECTIVE TIME OF THE MERGER, (B) THE
TERMINATION OF THE MERGER AGREEMENT UPON THE MUTUAL WRITTEN CONSENT OF THE
COMPANY AND PARENT OR (C) THE TERMINATION OF THE MERGER AGREEMENT IN ACCORDANCE
WITH ITS TERMS UNDER ANY OTHER CIRCUMSTANCES, PROVIDED THAT IF IN CONNECTION
WITH A TERMINATION OF THE MERGER AGREEMENT UNDER THIS SUBCLAUSE (C) A REVERSE
TERMINATION FEE OR EXPENSES ARE PAYABLE TO THE COMPANY, THEN SUCH REVERSE
TERMINATION FEE OR EXPENSES SHALL HAVE BEEN PAID TO THE COMPANY (THE DATE OF THE
OCCURRENCE OF AN EVENT IN SUBCLAUSE (A), (B) OR (C), THE “EXPIRATION DATE”).

 

SECTION 3.2.      PERMITTED TRANSFERS. PROVIDED THAT AT ALL TIMES PRIOR TO THE
EXPIRATION DATE THE STOCKHOLDER MAINTAINS NET WORKING CAPITAL NECESSARY TO
TIMELY ADDRESS ANY CLAIM BY THE COMPANY FOR THE PAYMENT OF A REVERSE TERMINATION
FEE OR EXPENSES UNDER THE TERMS OF THE MERGER AGREEMENT (AND SUBJECT TO THE
STOCKHOLDER’S CONTINUING COMPLIANCE PRIOR TO THE TERMINATION OF THE MERGER
AGREEMENT WITH THE TERMS OF THE MERGER AGREEMENT, INCLUDING
SECTION 5.4(D) THEREOF), THE RESTRICTIONS ON TRANSFER IN SECTION 3.1 SHALL NOT
APPLY TO THE FOLLOWING TRANSFERS OF SHARES (EACH OF WHICH EXCEPTIONS SHALL BE
SEPARATE AND NOT REDUCE THE SCOPE OR AVAILABILITY OF ANY OTHER EXCEPTION):

 

(A)        (I) TO THE COMPANY, (II) TO ANY AFFILIATE OF THE STOCKHOLDER,
(III) TO ANY PARTY TO THE MERGER AGREEMENT OR (IV) TO ANY EQUITY HOLDER OR
INVESTOR IN THE STOCKHOLDER OR ITS AFFILIATES, INCLUDING ANY NEW EQUITY HOLDER
OR INVESTOR IN THE STOCKHOLDER OR ITS AFFILIATES AFTER THE DATE HEREOF;
PROVIDED, IN EACH CASE (OTHER THAN A TRANSFER TO THE COMPANY), THAT THE
TRANSFEREE AGREES IN WRITING TO THE RESTRICTIONS ON FURTHER TRANSFERS OF SUCH
SECURITIES TO THE EXTENT PROVIDED IN THIS ARTICLE III AND THE COVENANTS
APPLICABLE TO STOCKHOLDER IN ARTICLE IV; OR

 

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(B)        IN SALES PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.

 

Any transfer made pursuant to this Section 3.2 shall comply with all applicable
federal and state securities laws and regulations.

 

ARTICLE IV

 

COVENANTS

 

SECTION 4.1.      REGISTRATION RIGHTS. THE COMPANY AND THE STOCKHOLDER SHALL
COMPLY WITH THE PROVISIONS CONTAINED IN EXHIBIT A REGARDING THE REGISTRATION
RIGHTS.

 

SECTION 4.2.      FORM S-3 ELIGIBILITY. UNTIL SUCH TIME AS ALL OF THE SHARES ARE
TRANSFERABLE SHARES, THE COMPANY SHALL USE ITS COMMERCIALLY REASONABLE BEST
EFFORTS TO REGAIN ITS ELIGIBILITY TO USE FORM S-3 UNDER THE CRITERIA SET FORTH
IN INSTRUCTION I.A. THERETO, AND IF IT REGAINS SUCH ELIGIBILITY, TO CONTINUE TO
USE COMMERCIALLY REASONABLE BEST EFFORTS TO REMAIN SO ELIGIBLE TO USE FORM S-3.

 

SECTION 4.3.      EXPENSES. THE COMPANY AND THE STOCKHOLDER SHALL EACH BEAR ITS
OWN EXPENSES AND LEGAL FEES WITH RESPECT TO THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

SECTION 4.4.      BOARD SEAT. THE STOCKHOLDER SHALL BE PERMITTED TO APPOINT ONE
MEMBER OF THE BOARD OF DIRECTORS OF THE COMPANY (THE “BOARD”) WHO SATISFIES THE
COMPANY’S BOARD MEMBERSHIP CRITERIA SET FORTH IN ITS CORPORATE GOVERNANCE
GUIDELINES.  ONCE APPOINTED BY THE STOCKHOLDER AND SEATED ON THE BOARD, ITS
DESIGNATED MEMBER OF THE BOARD WILL BE SUBJECT TO THE SAME ELECTION REQUIREMENTS
TO WHICH ALL OTHER MEMBERS OF THE BOARD ARE SUBJECT.

 

SECTION 4.5.      STANDSTILL. DURING THE STANDSTILL PERIOD, EXCEPT IN RESPECT OF
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND BY THE MERGER AGREEMENT, THE
STOCKHOLDER AGREES THAT IT WILL NOT NOR WILL IT CAUSE ANY OF ITS SUBSIDIARIES TO
ACQUIRE BENEFICIAL OWNERSHIP OF ANY ADDITIONAL SHARES OF COMPANY COMMON STOCK,
UNLESS SPECIFICALLY CONSENTED TO BY THE BOARD OF DIRECTORS OF THE COMPANY.

 

ARTICLE V

 

TERMINATION

 

This Agreement shall terminate (A) upon the Effective  Time of the Merger,
(B) by mutual agreement of the Company and the Stockholder, or (C) upon the
later of (i) the Expiration Date and (ii) such time as the Holders no longer own
any Shares.

 

ARTICLE VI

 

GENERAL PROVISIONS

 

SECTION 6.1.      NOTICES.  ALL NOTICES AND OTHER COMMUNICATIONS REQUIRED OR
PERMITTED BY THIS AGREEMENT SHALL BE IN WRITING AND SHALL BE EFFECTIVE, AND ANY
APPLICABLE TIME PERIOD SHALL

 

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COMMENCE, WHEN (A) DELIVERED TO THE FOLLOWING ADDRESSES BY HAND OR BY A
NATIONALLY RECOGNIZED OVERNIGHT COURIER SERVICE (COSTS PREPAID AND WITH PROOF OF
DELIVERY) ADDRESSED TO THE FOLLOWING ADDRESSES OR (B) TRANSMITTED ELECTRONICALLY
TO THE FOLLOWING FACSIMILE NUMBERS OR E-MAIL ADDRESSES (RECEIPT OF WHICH IS
CONFIRMED) IN EACH CASE MARKED TO THE ATTENTION OF THE PERSONS (BY NAME OR
TITLE) DESIGNATED BELOW (OR TO SUCH OTHER ADDRESS, FACSIMILE NUMBER, E-MAIL
ADDRESS, OR PERSON AS A PARTY MAY DESIGNATE BY NOTICE GIVEN IN ACCORDANCE WITH
THIS SECTION 6.1 TO THE OTHER PARTIES):

 

if to Stockholder:
c/o IIF Subway Investment LP
245 Park Avenue, 2nd Floor
New York, NY 10167
Facsimile No.: (212) 648-2033
E-mail: andrew.f.walters@jpmorgan.com
             christian.p.porwoll@jpmorgan.com
Attention: Andrew F. Walters
                 Christian P. Porwoll

 

and

 

Water Asset Management, LLC
509 Madison Avenue, Suite 804
New York, NY 10022
Facsimile No.: (212) 754-5101
E-mail: m.robert@waterinv.com
Attention: Marc Robert

 

with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 455-2502
E-mail: aklein@stblaw.com
Attention: Alan Klein

 

if to the Company:
Southwest Water Company
One Wilshire Building
624 South Grand Avenue, Suite 2900
Los Angeles, California 90017-3782
Facsimile No.: (213) 929-1888
E-mail: mswatek@swwc.com
Attention: Mark A. Swatek

 

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with a copy to:
Locke Lord Bissell & Liddell LLP
300 S. Grand Avenue, Suite 2600
Los Angeles, California 90071
Facsimile No.: (213) 341-6774
E-mail: nbrockmeyer@lockelord.com
Attention: Neal H. Brockmeyer

 

SECTION 6.2.      ENTIRE AGREEMENT. THIS AGREEMENT AND THE PURCHASE AGREEMENT
SET FORTH THE ENTIRE AGREEMENT OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER
HEREOF.  NOTWITHSTANDING ANYTHING CONTAINED HEREIN, THIS AGREEMENT IS NOT
INTENDED TO, AND SHALL IN NO WAY, MODIFY OR SUPPLEMENT THE TERMS OF THE MERGER
AGREEMENT.  THIS AGREEMENT SUPERSEDES THE TERMS OF THAT CERTAIN BINDING LETTER
OF INTENT DATED MARCH 2, 2010 BY AND AMONG THE COMPANY, THE STOCKHOLDER AND
CERTAIN AFFILIATES OF THE STOCKHOLDER, AND ALL OTHER PRIOR AGREEMENTS AND
UNDERSTANDINGS, BOTH WRITTEN AND ORAL, BETWEEN THE PARTIES WITH RESPECT TO THE
SUBJECT MATTER HEREOF (OTHER THAN THE MERGER AGREEMENT).

 

SECTION 6.3.      SEVERABILITY. IF ANY PROVISION OR PROVISIONS OF THIS AGREEMENT
SHALL BE HELD TO BE INVALID, ILLEGAL OR UNENFORCEABLE FOR ANY REASON (A) SUCH
PROVISION OR PROVISIONS SHALL BE DEEMED REFORMED TO THE EXTENT NECESSARY TO
CONFORM TO APPLICABLE LAW AND TO GIVE THE MAXIMUM EFFECT TO THE INTENT OF THE
PARTIES; (B) THE VALIDITY, LEGALITY AND ENFORCEABILITY OF THE REMAINING
PROVISIONS OF THIS AGREEMENT SHALL NOT BE AFFECTED OR IMPAIRED THEREBY; AND
(C) TO THE FULLEST EXTENT POSSIBLE, THE PROVISIONS OF THIS AGREEMENT SHALL BE
CONSTRUED TO GIVE THE MAXIMUM EFFECT TO THE INTENT OF THE PARTIES.

 

SECTION 6.4.      INTERPRETATION. WHENEVER THE WORDS “INCLUDE,” “INCLUDES” OR
“INCLUDING” ARE USED IN THIS AGREEMENT, THEY SHALL BE DEEMED TO BE FOLLOWED BY
THE WORDS “WITHOUT LIMITATION.” THE WORDS “HERETO,” “HEREOF,” “HEREIN” AND
“HEREUNDER” AND WORDS OF SIMILAR IMPORT WHEN USED IN THIS AGREEMENT SHALL REFER
TO THIS AGREEMENT AS A WHOLE AND NOT TO ANY PARTICULAR PROVISION OF THIS
AGREEMENT. THE TERM “OR” IS NOT EXCLUSIVE. THE DEFINITIONS CONTAINED IN THIS
AGREEMENT ARE APPLICABLE TO THE SINGULAR AS WELL AS THE PLURAL FORMS OF SUCH
TERMS AND TO THE MASCULINE AS WELL AS TO THE FEMININE AND NEUTER GENDERS OF SUCH
TERMS.  ANY AGREEMENT OR INSTRUMENT DEFINED OR REFERRED TO HEREIN OR IN ANY
AGREEMENT OR INSTRUMENT THAT IS REFERRED TO HEREIN MEANS SUCH AGREEMENT OR
INSTRUMENT AS FROM TIME TO TIME AMENDED, MODIFIED OR SUPPLEMENTED.  REFERENCES
TO A PERSON ARE ALSO TO ITS PERMITTED SUCCESSORS AND ASSIGNS.  WHENEVER A
REFERENCE IS MADE IN THIS AGREEMENT TO AN ARTICLE OR SECTION, SUCH REFERENCE
SHALL BE TO AN ARTICLE OR SECTION OF THIS AGREEMENT UNLESS OTHERWISE INDICATED. 
WHENEVER A REFERENCE IS MADE IN THIS AGREEMENT TO PARTIES, SUCH REFERENCE SHALL
BE TO THE PARTIES TO THIS AGREEMENT UNLESS OTHERWISE INDICATED.  THE DESCRIPTIVE
HEADINGS CONTAINED IN THIS AGREEMENT ARE INCLUDED FOR CONVENIENCE OF REFERENCE
ONLY AND SHALL NOT AFFECT IN ANY WAY THE MEANING OR INTERPRETATION OF THIS
AGREEMENT.  EACH OF THE PARTIES HAS PARTICIPATED IN THE DRAFTING AND NEGOTIATION
OF THIS AGREEMENT.  IF AN AMBIGUITY OR QUESTION OF INTENT OR INTERPRETATION
ARISES, THIS AGREEMENT MUST BE CONSTRUED AS IF IT IS DRAFTED BY ALL THE PARTIES,
AND NO PRESUMPTION OR BURDEN OF PROOF SHALL ARISE FAVORING OR DISFAVORING ANY
PARTY BY VIRTUE OF AUTHORSHIP OF ANY OF THE PROVISIONS OF THIS AGREEMENT.

 

SECTION 6.5.      COUNTERPARTS; EFFECT. THIS AGREEMENT MAY BE EXECUTED IN TWO OR
MORE COUNTERPARTS, AND BY THE DIFFERENT PARTIES IN SEPARATE COUNTERPARTS, ALL OF
WHICH TAKEN TOGETHER

 

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SHALL CONSTITUTE ONE AND THE SAME AGREEMENT AND SHALL BECOME EFFECTIVE WHEN ONE
OR MORE COUNTERPARTS HAVE BEEN EXECUTED BY EACH OF THE PARTIES AND DELIVERED TO
THE OTHER PARTIES.  COPIES OF EXECUTED COUNTERPARTS TRANSMITTED BY TELECOPY OR
ELECTRONIC TRANSMISSION SHALL BE CONSIDERED ORIGINAL EXECUTED COUNTERPARTS FOR
PURPOSES OF THIS SECTION 6.5, PROVIDED THAT RECEIPT OF SUCH COUNTERPARTS IS
CONFIRMED.

 

SECTION 6.6.      NO THIRD-PARTY BENEFICIARIES. THIS AGREEMENT SHALL BE BINDING
UPON AND INURE SOLELY TO THE BENEFIT OF EACH PARTY HERETO AND EACH PERMITTED
ASSIGNEE HEREOF, AND NOTHING IN THIS AGREEMENT, EXPRESS OR IMPLIED, IS INTENDED
TO OR SHALL CONFER UPON ANY OTHER PERSON ANY RIGHT, BENEFIT OR REMEDY OF ANY
NATURE WHATSOEVER UNDER OR BY REASON OF THIS AGREEMENT.

 

SECTION 6.7.      GOVERNING LAW; WAVIER OF JURY TRIAL. THIS AGREEMENT, AND ALL
CLAIMS OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT) THAT MAY BE BASED UPON,
ARISE OUT OF OR RELATE TO THIS AGREEMENT, OR THE NEGOTIATION, EXECUTION OR
PERFORMANCE OF THIS AGREEMENT, SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
EXECUTED IN AND TO BE PERFORMED IN THAT STATE, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.  ALL ACTIONS AND PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT SHALL BE HEARD AND DETERMINED EXCLUSIVELY IN THE
COURT OF CHANCERY OF THE STATE OF DELAWARE.  THE PARTIES HEREBY (A) SUBMIT TO
THE EXCLUSIVE JURISDICTION OF SUCH COURT FOR THE PURPOSE OF ANY ACTION ARISING
OUT OF OR RELATING TO THIS AGREEMENT BROUGHT BY ANY PARTY HERETO, (B) AGREE THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
ONLY IN SUCH COURT, (C) AGREE NOT TO BRING ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT IN ANY OTHER COURT AND (D) IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT
BY WAY OF MOTION, DEFENSE, OR OTHERWISE, IN ANY SUCH ACTION, ANY CLAIM THAT IT
IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF SUCH COURT, THAT ITS PROPERTY
IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE ACTION IS BROUGHT IN
AN INCONVENIENT FORUM, THAT THE VENUE OF THE ACTION IS IMPROPER, OR THAT THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY NOT BE ENFORCED IN OR BY
SUCH COURT.  EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

 

SECTION 6.8.      ASSIGNMENT. NEITHER THIS AGREEMENT NOR ANY OF THE RIGHTS,
INTERESTS OR OBLIGATIONS HEREUNDER SHALL BE ASSIGNED BY ANY PARTY HERETO
(WHETHER BY OPERATION OF LAW OR OTHERWISE) WITHOUT THE PRIOR WRITTEN CONSENT OF
THE OTHER PARTY; PROVIDED, HOWEVER, THAT STOCKHOLDER MAY, WITHOUT THE CONSENT OF
THE COMPANY, ASSIGN ITS REGISTRATION RIGHTS TO ANY TRANSFEREE OF ITS SHARES TO
THE EXTENT PERMITTED UNDER THE TERMS OF SECTION 3.2 HEREOF.

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers of the parties hereto as of the date first written
above.

 

 

SOUTHWEST WATER COMPANY

 

 

 

 

 

By:

   /s/ Mark Swatek

 

 

 

Name: Mark Swatek

 

 

Title: Chief Executive Officer

 

 

 

 

 

 

 

SW ACQUISITION MERGER CORP.

 

 

 

 

 

 

 

By:

/s/ Andrew F. Walters

 

 

 

Name: Andrew F. Walters

 

 

Title: Authorized Signatory

 

 

Signature Page to Investor Rights Agreement

 

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EXHIBIT A

 

REGISTRATION RIGHTS

 

SECTION 1.         EFFECTIVENESS OF REGISTRATION RIGHTS. THE REGISTRATION RIGHTS
PURSUANT TO SECTIONS 2 AND 3 HEREOF SHALL BECOME EFFECTIVE ON THE DATE OF
TERMINATION OF THE MERGER AGREEMENT.

 

SECTION 2.         REGISTRATION RIGHTS GENERALLY.

 

(a)        Shelf Registration. Unless all of the Shares are Transferable Shares,
the Company shall cause to be filed no later than twenty (20) business days
after the termination of the Merger Agreement, a registration statement (the
“Shelf Registration Statement”) on Form S-1 (or any successor form), unless at
such time the Company qualifies to use Form S-3 (or any successor form), in
which case it shall use Form S-3, and such other documents as may be necessary
to permit offerings and sales of Registrable Shares by Holders pursuant to
Rule 415 under the Securities Act. Subject to the terms hereof, the Company
shall exercise its best efforts to cause the Shelf Registration Statement to be
declared effective as promptly as possible after the filing thereof.  Subject to
Section 2(c), the Company shall maintain such Shelf Registration Statement
effective and current until the earlier of (i) the time all Registrable Shares
are sold pursuant to such registration statement and (ii) the time when all
Shares are Transferable Shares. The Company shall supplement and amend the Shelf
Registration Statement if required by the rules, regulations or instructions
applicable to the registration form used for such Shelf Registration Statement
or if required by the Securities Act.

 

(b)        Contingent Demand Registration. In the event that the Company has
failed to or is unable to file and maintain a Shelf Registration Statement as
contemplated by Section 2(a) and until such failure or inability is remedied,
one or more Holders holding individually or in the aggregate at least 10% of the
Registrable Shares outstanding as of the Closing Date shall have the right to
make a written demand upon the Company (a “Demand Notice”) to have the Company
as promptly as practical register under the Securities Act for offer and sale
all Registrable Shares specified to the Company by such Holders within twenty
(20) business days of the date of the Demand Notice, and the Company agrees to
so register such Registrable Shares. If a Demand Notice has been made on the
Company, no subsequent Demand Notice may be made on the Company for ninety (90)
days unless the Company has failed to comply with its obligations with respect
to the Demand Notice. The Holders shall have the right to exercise registration
rights pursuant to this Section 2(b) up to three (3) times.

 

(c)        Blackout Period. Notwithstanding Section 2(a) above, if the Company
shall furnish to the Holders a certificate signed by the Chief Executive Officer
of the Company (each, a “Blackout Notice”) stating that (i) there is a
reasonable likelihood that such disclosure, registration statement or related
prospectus to be filed, amended or supplemented, or any other action to be taken
in connection with the prospectus, would materially and adversely affect or
interfere with any financing, acquisition, merger, disposition of assets
(outside the ordinary course of business), corporate reorganization or other
similar transaction involving the Company, or (ii) the occurrence or existence
of any pending corporate development with respect to the Company that the
Company reasonably believes could render the registration statement or any
related prospectus materially misleading, the Company shall be entitled to
suspend the use of the registration statement

 

A-1

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and related prospectus or delay the delivery or filing, but not the preparation,
of any amendment or supplement to the registration statement or otherwise delay
the completion of any sale of Registrable Shares pursuant to the registration
statement for a reasonable period of time, but not to exceed sixty (60) days
(the “Blackout Period”) within any 365-day period beginning on the first day of
a Blackout Period; and provided, further, that any Blackout Period shall only be
effective when and for so long as other holders, if any, of registration rights
with respect to the Company’s securities are restricted from exercising their
registration rights to the same or greater extent as the Holders. Upon receipt
of a Blackout Notice, the Holders shall not effect sales of Registrable Shares
pursuant to the registration statement. The Company shall promptly deliver
written notice to the Holders of the expiration or earlier termination of any
Blackout Period.

 

SECTION 3.         INCIDENTAL REGISTRATION RIGHTS. FOR A PERIOD OF TWO (2) YEARS
FOLLOWING THE TERMINATION OF THE MERGER AGREEMENT, IN THE EVENT THAT THE COMPANY
HAS FAILED TO OR IS UNABLE TO FILE AND MAINTAIN A SHELF REGISTRATION STATEMENT
AS CONTEMPLATED BY SECTION 2(A) AND UNTIL SUCH FAILURE OR INABILITY IS REMEDIED,
IF THE COMPANY PROPOSES TO REGISTER (INCLUDING FOR THIS PURPOSE A REGISTRATION
EFFECTED BY THE COMPANY FOR SECURITY HOLDERS OF THE COMPANY OTHER THAN ANY
HOLDER) ANY COMPANY COMMON STOCK FOR SALE UNDER THE SECURITIES ACT OR EFFECT OR
PARTICIPATE IN AN OFFERING OF COMPANY COMMON STOCK UNDER THE SECURITIES ACT
(OTHER THAN (I) PURSUANT TO SECTION 2 HEREOF, (II) SECURITIES TO BE ISSUED
PURSUANT TO A STOCK OPTION OR OTHER EMPLOYEE BENEFIT OR SIMILAR PLAN, OR
(III) SECURITIES PROPOSED TO BE ISSUED IN EXCHANGE FOR SECURITIES OR ASSETS OF,
OR IN CONNECTION WITH A MERGER OR CONSOLIDATION WITH, ANOTHER CORPORATION) THE
COMPANY SHALL, AS PROMPTLY AS PRACTICABLE, GIVE WRITTEN NOTICE TO THE HOLDERS OF
THE COMPANY’S INTENTION TO EFFECT SUCH REGISTRATION OR EFFECT OR PARTICIPATE IN
SUCH AN OFFERING. IF, WITHIN TEN (10) DAYS AFTER RECEIPT OF SUCH NOTICE, ANY
HOLDER SUBMITS A WRITTEN REQUEST TO THE COMPANY SPECIFYING THE AMOUNT OF
REGISTRABLE SHARES THAT IT PROPOSES TO SELL OR OTHERWISE DISPOSE OF IN
ACCORDANCE WITH THIS SECTION 3, THE COMPANY SHALL USE ITS REASONABLE BEST
EFFORTS TO INCLUDE THE REGISTRABLE SHARES SPECIFIED IN THE CONTEMPLATED
OFFERING. IF THE OFFERING IS TO BE MADE BY OR THROUGH UNDERWRITERS, THE COMPANY,
ANY SELLING HOLDER AND SUCH UNDERWRITER SHALL EXECUTE AN UNDERWRITING AGREEMENT
IN CUSTOMARY FORM; PROVIDED, HOWEVER, THAT IF THE COMPANY AND ANY SELLING HOLDER
ARE ADVISED IN WRITING IN GOOD FAITH BY THE LEAD UNDERWRITER OF THE COMPANY’S
SECURITIES THAT THE AMOUNT TO BE SOLD BY PERSONS OTHER THAN THE COMPANY
(COLLECTIVELY, “SELLING STOCKHOLDERS”) IS GREATER THAN THE AMOUNT THAT CAN BE
OFFERED WITHOUT ADVERSELY AFFECTING THE OFFERING (TAKING INTO CONSIDERATION THE
INTERESTS OF THE COMPANY AND THE HOLDERS), THE COMPANY MAY REDUCE THE AMOUNT
OFFERED FOR THE ACCOUNTS OF SELLING STOCKHOLDERS (INCLUDING SUCH HOLDERS OF
REGISTRABLE SHARES) TO A NUMBER REASONABLY DEEMED SATISFACTORY BY SUCH LEAD
UNDERWRITER; PROVIDED THAT THE SHARES THAT SHALL BE EXCLUDED SHALL BE EXCLUDED
IN THE FOLLOWING ORDER: (I) FIRST, SECURITIES HELD BY ANY PERSONS NOT HAVING ANY
CONTRACTUAL OR INCIDENTAL REGISTRATION RIGHTS IN RESPECT OF THE OFFERING
CONTEMPLATED BY THIS SECTION 3, (II) SECOND, REGISTRABLE SHARES HELD BY THE
HOLDERS SOUGHT TO BE INCLUDED IN THE OFFERING PURSUANT TO THIS SECTION 3 AND
COMPANY COMMON STOCK SOUGHT TO BE INCLUDED IN SUCH OFFERING BY PERSONS HAVING
CONTRACTUAL OR INCIDENTAL “PIGGY-BACK” RIGHTS, (III) THIRD, COMPANY COMMON STOCK
SOUGHT TO BE OFFERED AND SOLD BY OTHER PERSONS HAVING DEMAND REGISTRATION RIGHTS
WITH RESPECT TO SUCH AN OFFERING AND (IV) FOURTH, COMPANY COMMON STOCK SOUGHT TO
BE SOLD BY THE COMPANY. ANY REDUCTION OF THE NUMBER OF REGISTRABLE SHARES
INDICATED UNDER (II) SHALL BE MADE ON A PRO RATA BASIS BASED UPON THE AGGREGATE
NUMBER OF SHARES OF COMPANY COMMON STOCK SOUGHT TO BE REGISTERED PURSUANT TO
THIS SECTION BY THE RELEVANT HOLDERS AND OTHER PERSONS.

 

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SECTION 4.         UNDERWRITING AND BROAD DISTRIBUTION.

 

(a)        At the request of any Holder, with respect to a sale of Registrable
Shares by such Holder, the Company shall enter into an underwriting, agency,
placement, subscription or other agreement, in usual and customary form and
substance (including but not limited to usual and customary indemnities, the
provision by independent counsel to the Company of customary opinions and the
provision of customary certificates by officers of the Company and the provision
by the Company’s independent accountants of customary comfort letters as
reasonably requested by such Holder and the lead underwriters of such offering)
with managing underwriters to be selected by such Holder and not disapproved by
the Company acting reasonably, and the Company shall perform its obligations in
connection therewith.

 

(b)        The Company shall be required to enter into an underwriting, agency,
placement, subscription or other agreement pursuant to Section 4(a) only if such
Registrable Shares are to be offered and sold in a manner intended to result in
a broad distribution within or outside the United States (simultaneously or
both), such that no single purchaser of the Registrable Shares will acquire in
such offering more than two percent of the Company Common Stock outstanding at
the time of such purchase and sale.

 

SECTION 5.         REGISTRATION MECHANICS.

 

(a)        Company Obligations. In connection with any registration of
Registrable Shares pursuant to Section 2 or 3, the Company shall:

 

(i)         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 and the rules promulgated thereunder with respect to the sale or
other disposition of all of the securities proposed to be registered by such
registration statement;

 

(ii)        furnish to the Holders such number of copies of any prospectus
(including preliminary, amended and supplemental prospectuses and any “issuer
free writing prospectuses” (as such term is defined in Rule 433 under the
Securities Act)) and conformed copies of the registration statement (including
amendments or supplements thereto and, in each case, all exhibits) and such
other documents as it may reasonably request, but only while the Company shall
be required under the provisions hereof to cause the registration statement to
remain effective;

 

(iii)       (A)       use its best efforts to register or qualify the
Registrable Shares covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as the Holders or any
underwriter shall reasonably request, and do any and all other acts and things
which may be necessary or advisable to enable such Holders or any underwriter to
consummate the disposition of Registrable Shares in such jurisdictions and
(B) keep such registration or qualification in effect for so long as the
registration statement remains in effect; provided, however, that the Company
shall not be obligated to qualify to do business as a foreign corporation under
the laws of any jurisdiction in which it shall not then be qualified or to file
any general consent to service of process in any jurisdiction in which such a
consent has not been previously filed;

 

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(iv)       use reasonable efforts to furnish, or cause to be furnished, to the
Holders, addressed to them, (A) an opinion of counsel for the Company, dated the
date of the closing under the underwriting agreement relating to any
underwritten offering, and (B) a “cold comfort” letter signed by the independent
public accountants who have certified the Company’s financial statements
included in such registration statement, covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants’ letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer’s counsel and in accountants’ letters delivered to
underwriters in underwritten public offerings of securities and such other
matters as such Holders may reasonably request;

 

(v)        use its reasonable best efforts to cause all Registrable Shares
proposed to be registered by such registration statement to be registered with
or approved by such other federal or state government agencies or authorities as
may be necessary in the opinion of counsel to the Company to enable the Holders
to consummate the disposition of such Registrable Shares;

 

(vi)       within a reasonable time before each filing of the registration
statement or prospectus or amendments or supplements thereto with the SEC,
furnish to one counsel selected by the Holders copies of such documents proposed
to be filed, which documents shall be subject to the reasonable approval of such
counsel, and promptly provide such counsel with all written comments from the
SEC with respect to such documents;

 

(vii)      make available to the Holders, any underwriter participating in any
disposition pursuant to a registration statement, and any attorney, accountant
or other agent or representative retained by any selling Holder or underwriter,
upon request, all financial and other records, pertinent corporate documents and
properties of the Company and Company Subsidiaries, including access to due
diligence meetings involving the senior executives of the Company, as shall be
reasonably necessary to enable the Holders, representatives of the Holders and
the underwriters to conduct reasonable due diligence and cause the Company’s
officers, directors and employees to supply all information reasonably requested
by any such person in connection with such registration statement subject, in
each case, to such confidentiality agreements as the Company shall reasonably
request and that in the case of the Holders, this obligation shall only apply to
one attorney, accountant or other representative designated by the Requesting
Holders;

 

(viii)      make available executive officers and other members of senior
management of the Company (including the principal executive and financial
officers of the Company) at “road shows” or other investor presentations
conducted in connection with offerings of Registrable Shares (subject to such
executive officers and members of management being able to properly address
their other business responsibilities);

 

(ix)       notify the Holders any time a prospectus relating to the offering of
Registrable Shares is required to be delivered or filed under the Securities Act
upon discovery that, or upon the occurrence 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 any material
facts required to be stated therein or necessary to make the statements therein
not misleading, in light of the circumstances under which they were made, and
(subject to the good faith determination of the board of directors of the
Company as to whether to cease or

 

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temporarily halt all sales under such registration statement), at the request of
the Holders prepare and furnish to it a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit 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 under which they were made;

 

(x)        use reasonable efforts to comply with all applicable rules and
regulations of the SEC; and

 

(xi)       cause the Registrable Shares covered by such registration statement
to be listed on the Nasdaq Global Select Market or on any other principal
securities exchange on which Company securities of the same class as the
Registrable Shares are then listed.

 

(b)        Holder Obligations. Each Holder that holds shares covered by any
registration statement will furnish to the Company in writing such information
regarding itself as is required to be included in the registration statement,
the ownership of shares by such Holder and the proposed distribution by such
Holder of such shares as the Company may from time to time reasonably request in
writing.

 

SECTION 6.         EXPENSES. THE COMPANY SHALL PAY OR CAUSE TO BE PAID ALL OF
THE COMPANY’S FEES AND EXPENSES IN CONNECTION WITH ANY REGISTRATION AND SALE OF
REGISTRABLE SHARES PURSUANT TO THE REGISTRATION RIGHTS (INCLUDING, WITHOUT
LIMITATION, ALL REGISTRATION AND FILING FEES, ALL PRINTING COSTS, ALL FEES AND
EXPENSES OF COUNSEL AND INDEPENDENT ACCOUNTANTS FOR THE COMPANY AND ALL FEES AND
EXPENSES OF COMPLYING WITH SECURITIES OR BLUE SKY LAWS).  NOTWITHSTANDING
ANYTHING CONTAINED HEREIN, THE COMPANY SHALL NOT BE RESPONSIBLE FOR ANY BROKER,
UNDERWRITER OR SIMILAR FEES OR COMMISSIONS, OR ANY LEGAL EXPENSES OR COSTS OF
THE HOLDERS IN CONNECTION THEREWITH.

 

SECTION 7.         INDEMNIFICATION AND CONTRIBUTION.

 

(a)        Indemnification by the Company. With respect to any offering and sale
registered pursuant to these Registration Rights, the Company agrees to
indemnify and hold any selling Holder, each underwriter, if any, of the
Registrable Shares under such registration, and each Person who controls any of
the foregoing within the meaning of Section 15 of the Securities Act, and any
directors and officers of the foregoing, harmless against any and all losses,
claims, damages, or liabilities (including legal fees and other expenses
incurred in the investigation and defense thereof) to which they or any of them
may become subject under the Securities Act or otherwise (collectively
“Losses”), insofar as any such Losses shall arise out of or shall be based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the registration statement relating to the sale of such Registrable
Shares, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in the prospectus relating to the sale of such Registrable
Shares, or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any applicable
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act

 

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or any applicable state securities law; provided, however, that the
indemnification contained in this Section 7 shall not apply to such Losses which
shall arise out of or shall be based upon any such untrue statement, or any such
omission or alleged omission, which shall have been made in reliance upon and in
conformity with information furnished in writing to the Company by any selling
Holder or any underwriter, as the case may be, specifically for use in
connection with the preparation of the registration statement or prospectus
contained in the registration statement or any such amendment thereof or
supplement therein.

 

(b)        Indemnification by the Holders. In the case of each offering and sale
registered pursuant to these Registration Rights, any selling Holder and each
underwriter, if any, participating therein shall severally indemnify and hold
harmless the Company and each Person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, and the directors and officers
of the Company, with respect to any statement in or omission from such
registration statement or prospectus contained in such registration statement
(as amended or as supplemented, if amended or supplemented as aforesaid) if such
statement or omission shall have been made in reliance upon and in conformity
with information furnished in writing to the Company by any selling Holder or
such underwriter, as the case may be, specifically for use in connection with
the preparation of such registration statement or prospectus contained in the
registration statement or any such amendment thereof or supplement thereto.

 

(c)        Notice. Each party indemnified under this Section 7 shall promptly
after receipt of notice of the commencement of any claim against such
indemnified party in respect of which indemnity may be sought hereunder, notify
the indemnified party in writing of the commencement thereof. The failure of any
indemnified party to notify an indemnifying party shall not relieve the
indemnifying party from any liability in respect of such action which it may
have to such indemnified party on account of the indemnity contained in this
Section 7, unless (and only to the extent) the indemnifying party was prejudiced
by such failure, and in no event shall such failure relieve the indemnifying
party from any other liability which it may have to such indemnified party. In
case any action in respect of which indemnification may be sought hereunder
shall be brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it may desire, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof through counsel reasonably satisfactory to the indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation (unless such
indemnified party reasonably objects to such assumption on the grounds that
there may be defenses available to it which are different from or in addition to
those available to such indemnifying party in which event the indemnifying party
shall not be entitled to assume the defense thereof with respect to such
defenses). No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any claim or pending or threatened
proceeding in respect of which the indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability arising out of such claim or proceeding.

 

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(d)        Contribution. If the indemnification provided for in this Section 7
is unavailable to an indemnified party or is insufficient to hold such
indemnified party harmless from any Losses in respect of which this Section 7
would otherwise apply by its terms (other than by reason of exceptions provided
herein), then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the one
hand, and such indemnified party, on the other hand, in connection with the
offering to which such contributions relates as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, each party’s relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
and the opportunity to correct and prevent any statement or omission. The amount
paid or payable by a party as a result of any Losses shall be deemed to include
any legal or other fees or expenses incurred by such party in connection with
any investigation or proceeding to the extent such party would have been
indemnified for such expenses if the indemnification provided for in this
Section 7 was available to such party. The parties hereto agree that it would
not be just and equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in the preceding
paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.

 

SECTION 8.         EXCHANGE ACT REPORTS. WITH A VIEW TO MAKING AVAILABLE TO THE
HOLDERS THE BENEFITS OF RULE 144 AND ANY OTHER RULE OR REGULATION OF THE SEC
THAT MAY AT ANY TIME PERMIT A HOLDER TO SELL SECURITIES OF THE COMPANY TO THE
PUBLIC WITHOUT REGISTRATION, THE COMPANY AGREES TO USE ITS REASONABLE BEST
EFFORTS TO:

 

(a)        make and keep public information available, as those terms are
understood and defined in Rule 144, at all times, and take all action as may be
required as a condition to the availability of Rule 144;

 

(b)        so long as a Holder owns any Registrable Shares, furnish to any
Holders upon its reasonable written request a written statement certifying the
Company’s compliance with the reporting requirements of Rule 144 or any similar
rule, and a copy of the most recent annual, periodic or current report of the
Company filed pursuant to the Exchange Act and such other reports and documents
as reasonably requested by such Holder in availing itself of any rule or
regulation of the SEC allowing the sale of the Registrable Shares without
registration;

 

(c)        file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and

 

(d)        facilitate and expedite transfers of Registrable Shares sold pursuant
to SEC Rule 144, including providing timely notice to its transfer agent to
expedite such transfers.

 

SECTION 9.         OTHER AGREEMENTS.

 

(a)        The Company shall not grant, and has not granted, any other Person
rights to register securities of the Company on terms that would be reasonably
likely to restrict the ability

 

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of the Company fully to perform its obligations to the Holders in connection
with the Registration Rights.

 

(b)        The Company shall not amend any registration rights agreement with
any other Person nor shall the Company waive any provision under any
registration rights agreement that it would be entitled to waive thereunder if
such waiver would be reasonably likely to adversely affect any Holder’s
Registration Rights.

 

SECTION 10.       BENEFITS OF REGISTRATION RIGHTS. THE STOCKHOLDER AND ANY
PERMITTED HOLDER OF THE SHARES UNDER THE INVESTOR RIGHTS AGREEMENT MAY EXERCISE
AND HAVE THE BENEFITS OF THE REGISTRATION RIGHTS INITIALLY GRANTED TO THE
STOCKHOLDER HEREUNDER IN SUCH MANNER AND IN SUCH PROPORTION AS SHALL BE
DETERMINED BY SUCH STOCKHOLDER (SUCH STOCKHOLDER AND SUCH HOLDERS EXERCISING
REGISTRATION RIGHTS EACH SHALL BE TERMED A “HOLDER” HEREUNDER); PROVIDED, THAT
EACH HOLDER SHALL ALSO BE SUBJECT TO THE OBLIGATIONS PROVIDED HEREUNDER.

 

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