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                                                                    EXHIBIT 10.4


                             RESIGNATION AGREEMENT


            This Resignation Agreement ("Agreement"), entered into by and
between Western Water Company, a Delaware corporation, ("Western Water"), on the
one hand, and Peter L. Jensen an individual ("Jensen"), on the other hand
(Western Water and Jensen are sometimes hereinafter referred to individually as
a "Party" and collectively as the "Parties"), is made with respect to the
following facts:

                                 R E C I T A L S

            A. Western Water and Jensen entered into an Employment Agreement
dated August 15, 1997, as amended (the "Employment Agreement").

            B. Jensen and Western Water desire to terminate the Employment
Agreement.

            C. The Parties now intend to fully and finally settle and compromise
any and all other Claims (as defined below) of any type, whether known or
unknown, arising prior to the date hereof, and to execute and deliver this
Agreement.

            NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Parties agree as follows:

                              OPERATIVE PROVISIONS

            1. Resignation and Termination. On the Effective Date, the
Employment Agreement shall be terminated and Jensen shall resign in all
capacities as an officer, employee and as a member of the Board of Directors of
Western Water by executing and delivering Exhibit A attached hereto.

            2. Consideration. Western Water and Jensen agree to the following
actions in full discharge of any and all of Western Water's obligations to
Jensen including, without limitation, any possible Claims of Jensen:

                (a) Western Water shall continue to pay to Jensen the
semi-monthly compensation of $10,606 on the 15th day and the last business day
of each month until April 15, 2000, less deductions required by law, including
without limitation FICA, State and Federal withholding, and SDI ("appropriate
withholdings").

                (b) Western Water shall cooperate with Jensen in effecting his
rights under COBRA and until April 15, 2000, Western Water shall continue to pay
all premiums for Jensen's health insurance currently being paid by Western
Water.


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                (c) On the Effective Date Western Water shall pay to Jensen an
amount of $26,406.92 in full payment of accrued vacation to which Jensen is
entitled, less appropriate withholdings. No vacation pay shall accrue in the
future.

                (d) On the Effective Date Western Water shall pay to Jensen a
lump sum amount of $106,062 as a severance payment, less appropriate
withholdings.

                (e) Jensen hereby agrees that he will act as a consultant to
Western Water until September 15, 2000 for up to ten (10) hours per month on a
non-cumulative basis in the City and County of San Diego without additional
charge, provided that Western Water shall pay all of Jensen's out-of-pocket
expenses in performing such consulting services.

                (f) On the Effective Date, Jensen shall instruct Western Water
to deduct $4,247.95 representing personal expenses charged to Western Water.

                (g) As of the Effective Date, Western Water shall vest in full
all of Jensen's outstanding Western Water stock options, but such options shall
not be otherwise changed or amended in any other respect.

                (h) On the Effective Date Jensen shall return to Western Water a
personal computer owned by Western Water presently in Jensen's possession.

                (i) In the event Jensen hereafter desires, at any time, or from
time to time, to transfer or assign any of the securities of Western Water owned
beneficially or of record by him, Western Water shall use reasonable business
practices to cooperate in such transfer or assignment as promptly as
practicable, including arranging for the issuance of such legal opinions and
securities filings as may be necessary to confirm or establish the free
transferability of Jensen's securities. Nothing herein contained shall limit or
abridge Jensen's existing rights to include Western Water securities owned by
him in any registration statement filed or to be filed by Western Water with the
Securities and Exchange Commission.

            3. Intentionally Omitted.

            4. Intentionally Omitted.

            5. Intentionally Omitted.

            6. Intentionally Omitted.

            7. Intentionally Omitted.

            8. Age Discrimination Waiver. Jensen understands and hereby agrees
that, by entering into this Agreement, he is expressly waiving any and all
Claims he may have arising under the Age Discrimination in Employment Act of
1967, as amended, in existence on or before the date hereof. Jensen expressly
acknowledges and agrees he: (a) will receive compensation

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beyond that which he was already entitled to receive before entering into this
Agreement; (b) has been represented by an attorney of his choice in negotiating
this Agreement; (c) is hereby advised in writing to consult with an attorney
before signing this Agreement; (d) was given a copy of this Agreement on October
13, 1999 and informed that he has twenty-one (21) days within which to consider
the Agreement; and (e) was informed that he has seven (7) days following the
date of execution of the Agreement in which to revoke the Agreement. By mutual
agreement Western Water and Jensen voluntarily waive the protection of the
OWBPA.

            9. Insurance and Indemnification. Western Water has provided Jensen
with a full and correct copy of its current officers and directors insurance
policy ("O&D Policy") and agrees that it will not change the O&D Policy to
exclude Jensen. Western Water further agrees that (1) if a replacement for the
O&D Policy is obtained or another such policy is obtained by Western Water ("New
Policy"), and (2) if the New Policy covers former officers and/or directors,
Western Water shall not take any action to exclude Jensen as an insured under
the New Policy. Nothing contained in this Agreement shall be interpreted or
construed or deemed to be interpreted or construed as preventing Jensen from
obtaining indemnification from Western Water if such indemnification otherwise
would be available to Jensen in accordance with Article 11 of the Bylaws of
Western Water and applicable common or statutory law.

            10. Confidential Information. Jensen acknowledges that by reason of
his position with Western Water he has been given access to Confidential
Information. "Confidential Information" means proprietary techniques and
confidential information that Western Water has developed, compiled, or owned,
or that Western Water received under conditions of confidentiality, including,
by way of example and without limitation, all information on trade secrets,
research, data, marketing plans, business plans, strategies, forecasts,
unpublished financial information, budgets, projections and information the
disclosure of which could be to the competitive disadvantage of Western Water.
Confidential Information includes not only information disclosed by Western
Water to Jensen in the course of Jensen's employment with Western Water, but
also information developed or learned by Jensen during the course of his
employment with Western Water. Jensen represents and warrants that as of the
Effective Date he will not have in his possession, nor will he have failed to
return, any Confidential Information or copies of such information, or other
documents or materials, equipment, or other property belonging to Western Water.
Jensen agrees that he shall preserve as confidential and not use any
Confidential Information or other information that has commercial value or other
utility in the business in which Western Water is engaged.

            11. Taxes. Subject in all respects to Western Water's agreement to
undertake "appropriate withholdings" Jensen shall be exclusively liable for the
payment of all federal and state taxes which may be due as a result of payments
of Western Water to Jensen.

            12. No Duress. Each of the Parties hereto acknowledges that he or it
has been advised by or has had the opportunity to consult legal counsel in
connection with the granting of the releases contained in this Agreement and
that this Agreement is entered into freely, without duress, coercion, menace or
other undue influence.


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            13. Voluntary Execution. Each of the Parties hereto: (a) voluntarily
and knowingly executes this Agreement and the Mutual General Release as
described in Section 16(c) hereof with the intent of effecting the
extinguishment of Claims; (b) has read this Agreement and understands all of its
terms; and (c) has executed this Agreement, with full knowledge of its
significance.

            14. Representations and Warranties. Each of the Parties hereto
represents and warrants that: (a) the person executing this Agreement on behalf
of such Party has the authority to execute and deliver this Agreement; (b) he or
it has taken all necessary action to authorize the execution and delivery of
this Agreement; and (c) he or it has all requisite power to consummate the
transactions contemplated by this Agreement and to perform the obligations under
this Agreement.

            15. No Admission of Liability. This Agreement is a compromise of
disputed claims, and the execution of this Agreement shall not be considered or
treated at any time or for any purpose as an admission of liability by any of
the Parties to this Agreement. No past or present wrongdoing on the part of any
of the Parties shall be implied from the negotiation or the consummation of this
Agreement.

            16. Effectiveness of Agreement and Releases.

                (a) From the date of execution hereof ("Date of Execution"),
which is October 28, 1999, until 5:00 P.M. on November 5, 1999 ("Effective
Date"), Jensen has the right to revoke his assent to this Agreement in its
entirety. The time period between the Date of Execution and the Effective Date
is hereafter referred to as the "Revocation Period."

                (b) Any revocation by Jensen of his assent to this Agreement
must be in writing and hand-delivered to Western Water in care of Troy & Gould
during the Revocation Period.

                (c) If Jensen does not revoke his assent to this Agreement, as
aforesaid, at 5:01 P.M. on the Effective Date, the following shall occur
forthwith at the offices of Troy & Gould in Los Angeles, California:

                      i) Jensen shall deliver to Western Water the following: a)
a duly executed copy of the Mutual General Release in the form attached as
Exhibit B hereto ("Mutual General Release"); b) a duly executed copy of the
letter effecting Jensen's resignation as an officer and director and the
termination of the Employment Agreement (Exhibit A); c) the direction to Western
Water regarding the sum of $4,247.95 pursuant to Section 2(f) hereof; d) the
computer pursuant to Section 2(h) hereof; and e) the "Confidential Information"
specified in Section 10 hereof.

                      ii) Western Water shall deliver to Jensen the following:
a) a duly executed copy of the Mutual General Release; b) the sum of $106,062
pursuant to Section 2(d) hereof; and c) the sum of $26,406.92 pursuant to
Section 2(c) hereof.

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            17. No Transfer of Claims. Except as otherwise provided herein, each
Party warrants and represents to the other Party that it has not transferred,
assigned, sold, hypothecated or otherwise conveyed, or purported to transfer,
assign, sell, hypothecate or otherwise convey, any of the Jensen Released Claims
or Western Water Released Claims, as the case may be, that such Party may have
against the other Party, and each Party hereby agrees to save, hold harmless,
indemnify and defend (with counsel reasonably acceptable to the indemnified
Party) the other Party from and against any and all loss, cost, fees, claims,
damages or expenses (including without limitation reasonable attorneys' fees,
costs and disbursements) in any way arising out of a breach of the foregoing
representations.

            18. Confidentiality Agreement. Except for any public announcement
mutually agreed to by the parties in writing, no public announcement concerning
the negotiation, execution and/or delivery of this Agreement or the transactions
contemplated hereby, or concerning the facts and circumstances surrounding
Jensen's cessation of employment with Western Water (the "Settlement
Information"), shall be made by any Party, and all Settlement Information shall
be deemed confidential. Either Party's disclosure of the fact that the Parties
entered into this Agreement shall not be deemed a public announcement of
Settlement Information within the meaning of this Section 18.

                 a. Non-Defamatory and Disparaging Statements. Neither Party
shall make any defamatory statements concerning the other Party.

                 b. Disclosure Provision. Notwithstanding any provision to the
contrary contained herein, each Party shall be entitled to disclose the
Settlement Information: (a) to the extent the same shall have otherwise become
publicly available (unless made publicly available only by the Party seeking to
disclose the same); (b) to their spouses, attorneys, and accountants, provided
such persons are informed of this confidentiality provision and agree to be
bound hereby; (c) as required by federal or state law, including without
limitation federal or state securities laws; (d) as required by court order,
deposition or document subpoena or otherwise in truthful statements made under
oath or penalty of perjury; or (e) as necessary to enforce this Agreement or any
provision or term of this Agreement, or defend against the alleged breach of
this Agreement or any provision or term of this Agreement.

            19. Miscellaneous.

                 a. Fees, Costs, etc.. The prevailing party in any arbitration
pursuant to Section 19(n) hereof shall be entitled to recover all costs incurred
as a result of the arbitration, including, without limitation, filing fees,
attorneys' fees, compensation paid to the Arbitrator and costs of transcripts.
Unless otherwise agreed in writing, the Arbitrator's award shall not allocate
between the parties any such costs, expenses, fees or share of the Arbitrator's
compensation.

                 b. Controlling Law. This Agreement shall be governed by,
construed and interpreted in accordance with the laws of the State of
California, without giving effect to any choice-of-law or conflicts-of-laws rule
or principle that would result in application of any


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other laws, except that issues involving indemnification pursuant to Section 9
hereof shall be governed by, construed and interpreted in accordance with the
laws of the State of Delaware, provided, however, that nothing herein contained
shall be construed to limit or abridge Jensen's rights under Article XI, Section
45, subpart (e) of the Company's By-laws.

                 c. Headings. Headings, titles and captions are for convenience
only and shall not constitute a portion of this Agreement or be used for the
interpretation thereof.

                 d. Amendment. Neither this Agreement nor any provision hereof
may be waived, modified, amended, discharged, or terminated except by an
instrument in writing signed by the Party against which the enforcement of such
writing is sought, and then only to the extent set forth in such writing.

                 e. Waiver. Any waiver of any provision or of any breach of any
provision of this Agreement must be in writing, and any waiver by any Party of
any breach of any provision of this Agreement shall not operate as or be
construed to be a waiver of any other breach of that provision or of any breach
of any other provision of this Agreement. The failure of any Party to insist
upon strict adherence to any term of the Agreement on one or more occasions
shall not be considered or construed or deemed a waiver of any provision or any
breach of any provision of this Agreement or deprive that Party of the right
thereafter to insist upon strict adherence to that term or provision or any
other term or provision of this Agreement. No delay or omission on the part of
any of the Parties in exercising any right under this Agreement shall operate as
a waiver of any such right or any other right under this Agreement.

                 f. Liberal Construction. This Agreement constitutes a fully
negotiated agreement among commercially sophisticated parties, each assisted by
legal counsel, and the terms of this Agreement shall not be construed or
interpreted for or against any Party hereto. The Parties hereby agree that
California Civil Code Section 1654 shall not apply to the terms of this
Agreement.

                 g. Entire Agreement. This Agreement constitutes the entire
understanding between the Parties with respect to the matters set forth herein
and supersedes all prior or contemporaneous understandings or agreements between
the Parties with respect to the subject matter hereof, whether oral or written.

                 h. Notices. Any notice, approval, consent, waiver or other
communication required or permitted to be given or to be served upon any of the
Parties in connection with this Agreement shall be in writing. Such notice shall
be personally served, sent by facsimile, telegram, or cable, or sent prepaid by
registered or certified mail with return receipt requested, or sent by reputable
overnight delivery service, such as Federal Express, and shall be deemed given:
(a) if personally served, when delivered to the Party to whom such notice is
addressed; (b) if given by facsimile, telegram, or cable, when sent; (c) if
given by prepaid or certified mail with return receipt requested, on the date of
execution of the return receipt; or (d) if sent by reputable overnight delivery
service, such as Federal Express, when received. Any notice given by facsimile,
telegram, or cable shall be confirmed in writing by the Party sending

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such notice, and such confirmation shall be delivered or sent by any of the
other means of delivery set forth in this Section 19, within forty-eight (48)
hours after notice was sent by facsimile, telegram or cable. Such notices shall
be addressed to the Party to whom such notice is to be given at the Party's
address set forth below or as such Party shall otherwise direct in a writing to
all other Parties delivered or sent in accordance with this Section 18.8.

       If to Western Water,
       to:                                 Western Water Company
                                           4660 La Jolla Village Drive,
                                           Suite 825
                                           San Diego, California 92122
                                           Attn:  Ronald I. Simon
                                           Fax No. (858) 535-9260

       With a copy to:                     Troy & Gould Professional Corporation
                                           1801 Century Park East, 16th Floor
                                           Los Angeles, CA 90067
                                           Attn:  William D. Gould, Esq.
                                           Fax No. (310) 201-4746

       If to Jensen, to:                   Peter L. Jensen
                                           P. O. Box 70,000
                                           San Diego, CA 92167
                                           Fax No. 619 222-3393

       With a copy to:                     Bryan Cave LLP
                                           Attn:  Gerald E. Boltz, Esq. and
                                                  Edward M. Rosenfeld, Esq.
                                           120 Broadway
                                           Santa Monica, CA 90401
                                           Fax No. 310 576-2200


                 i. Binding Effect; Assignment. Neither this Agreement nor any
of the rights, interests, or obligations hereunder shall be assignable by any
Party without the prior written consent of all other Parties, which shall not be
unreasonably withheld. Subject to the foregoing restriction, the provisions of
this Agreement shall be binding upon and inure to the benefit of all affiliates,
parent corporations, subsidiaries, assigns, successors-in-interest, personal
representatives, administrators, spouses, family members, relatives, heirs,
devisees and legatees of the Parties hereto.

                 j. Severability. If any provision of this Agreement is invalid,
illegal or unenforceable, the balance of this Agreement shall remain in full
force and effect notwithstanding any such invalidity, illegality or
unenforceability; provided, however, it is understood and agreed that the
respective rights and duties of the Parties under and pursuant to


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the Mutual General Release are unconditional; are not dependent upon future
performance, and are not subject to severance hereunder.

                 k. Good Faith and Fair Dealing. The Parties hereto acknowledge
and agree that the performances required by the provisions of this Agreement
shall be undertaken in good faith, and with all Parties dealing fairly with each
other.

                 l. No Third Party Beneficiaries. This Agreement does not
create, and shall not be construed to create, any rights enforceable by any
person, partnership, corporation, joint venture, limited liability company or
other form of organization or association of any kind, not a Party to this
Agreement.

                 m. Costs and Fees of Litigation. Except as otherwise set forth
in this Agreement, each of the Parties acknowledges and agrees that each of the
Parties shall bear his or its own attorneys' fees and costs incurred on account
of, or in any way related to or arising from, any dispute and the negotiation
and execution of this Agreement.

                 n. Arbitration. Any dispute or controversy between the Parties
in any way arising out of, related to, or connected with this Agreement or the
subject matter thereof, otherwise in any way arising out of, related to, or
connected with Jensen's employment with Western Water, shall be resolved through
final and binding arbitration in San Diego, California, pursuant to California
Civil Procedure Code Sections 1282-1284.2. The arbitration shall be before the
American Arbitration Association Employee Dispute Panel and shall be governed by
the National Rules for the Resolution of Employment Disputes promulgated by the
American Arbitration Association. In the event of such arbitration, the
prevailing party shall be entitled to recover all reasonable costs and expenses
incurred by such party in connection therewith, including attorneys' fees. The
nonprevailing party shall also be solely responsible for all costs of the
arbitration, including, but not limited to, the arbitrator's fees, court
reporter fees, and any and all other administrative costs of the arbitration,
and promptly shall reimburse the prevailing party for any portion of such costs
previously paid by the prevailing party. Any dispute as to the reasonableness of
costs and expenses shall be determined by the arbitrator.

                 o. Competition and Non Solicitation. Jensen agrees that for a
period ending September 15, 2000, Jensen shall not, directly or indirectly,
without the prior written consent of Western Water:

                      (i) solicit, entice, persuade or induce any present
employee, consultant, agent or independent contractor of Western Water or of any
of the subsidiaries or affiliates of Western Water to terminate his or her
employment with Western Water, or such subsidiary or affiliate, to become
employed by any person, firm or corporation other than Western Water, or such
subsidiary or affiliate or approach any such employee, consultant, agent or
independent contractor for any of the foregoing purposes, or authorize or assist
in the taking of any such actions by any third party;


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                      (ii) except for the provision of water treatment services
(but in no event shall such water treatment services include the sale of water)
contact, solicit or enter into business dealings with any entity listed on
Exhibit B hereto.


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            IN WITNESS WHEREOF, this Agreement is executed as of the last date
below written.

                                       WESTERN WATER COMPANY


Dated: 10/27/99                        By:  /s/ MICHAEL PATRICK GEORGE
     ---------------------------          -------------------------------------
                                            Michael Patrick George, President



                                       "Jensen"


Dated: 10/28/99                             /s/ PETER L. JENSEN
      --------------------------       ----------------------------------------
                                            Peter L. Jensen



APPROVED AS TO FORM:

TROY & GOULD PROFESSIONAL CORPORATION
Attorneys for Western Water Company


By:    /s/ WILLIAM D. GOULD
   --------------------------------------
            William D. Gould


BRYAN CAVE LLP
Attorneys for Peter L. Jensen


By:    /s/ EDWARD M. ROSENFELD
   --------------------------------------
            Edward M. Rosenfeld


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