**Exhibit3.1**

 

RESTATED CERTIFICATEOF INCORPORATION OF

 

SOUTHWEST WATERCOMPANY

 

A Delawarecorporation

 

The undersigned, Peter J. Moerbeek,hereby certifies that:

 

1. He is the duly elected and acting President of Southwest Water Company,a Delaware corporation (this “Corporation”).

 

2. This Corporation was originally incorporated under the name “SouthwestWater Company,” and the original Certificate of Incorporation of thisCorporation was filed with the Secretary of State of Delaware on February 2,1988 (the “Original Certificate of Incorporation”).

 

3. This Restated Certificate of Incorporation (the “Restated Certificate ofIncorporation”) has been duly adopted by this Corporation’s Board of Directorsand stockholders in accordance with the applicable provisions of Section 242and 245 of the General Corporation Law of the State of Delaware.  This Certificate of Incorporation restates,amends and supersedes the provisions of the Original Certificate ofIncorporation and all prior amendments and restatements thereto.

 

4. Upon filing with the Secretary of State of the State of Delaware, thisCertificate of Incorporation shall be amended and restated to read in full asfollows:

 

FIRST: The name of the corporation is SOUTHWESTWATER COMPANY (hereinafter referred to as the “Corporation”).

 

SECOND: The address of the registered office ofthe Corporation in the State of Delaware is 2711 Centerville Road, Suite 400,County of New Castle, Wilmington, Delaware 19808. The name of the registeredagent at that address is Corporation Service Company.

 

THIRD: The purpose of the Corporation is toengage in any lawful act or activity for which a corporation may be organizedunder the General Corporation Law of the State of Delaware.

 

FOURTH:

 

A. The total number of shares of all classes ofstock which the Corporation shall have authority to issue is seventy-fivemillion two hundred fifty thousand (75,250,000), consisting of the following:

 

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(1) two hundred fifty thousand (250,000)shares of preferred stock, with a par value of $.01 per share (the “PreferredStock”); and

 

(2) seventy-five million (75,000,000)shares of common stock, with a par value of $.01 per share (the “Common Stock”).”

 

B. The shares of Preferred Stock may be issuedfrom time to time in one or more series. Except for the Series A PreferredStock and subject to the rights, preferences, privileges, and restrictions ofthe Series A Preferred Stock, the Board of Directors is authorized, byfiling a certificate of designations pursuant to the General Corporation Law ofthe State of Delaware, to fix the number of shares of any series of PreferredStock; to determine the designation of any series of Preferred Stock; todetermine or alter the rights, preferences, privileges, and restrictions(including voting, dividend, registration, conversion, redemption, andliquidation rights, preferences, privileges, and restrictions) granted to orimposed upon any wholly unissued series of Preferred Stock, and, within thelimits and restrictions stated in any resolution of the Board of Directorsoriginally fixing the number of shares constituting any series of PreferredStock, to increase or decrease (but not below the number of shares of suchseries of Preferred Stock then outstanding) the number of shares of any suchseries subsequent to the issuance of shares of Preferred Stock of that series.Each share of a series of Preferred Stock shall be identical in all respects toevery other share of that series of Preferred Stock. The number of authorizedshares of Preferred Stock may be increased or decreased (but not below thenumber of shares of Preferred Stock then outstanding) by the affirmative voteof the holders of a majority of the shares of Common Stock, without a vote ofthe holders of the shares of Preferred Stock, or of any series thereof, unlessa vote of any such holders of the shares of Preferred Stock is requiredpursuant to the certificate or certificates of designation establishing theseries of Preferred Stock.

 

C. The rights, preferences, privileges, andrestrictions relating to ten thousand three hundred seventy-three andone-fourth (10,373.25) shares of Preferred Stock are as follows:

 

(1) Designation and Number of Shares. Tenthousand three hundred seventy-three and one-fourth (10,373.25) shares ofPreferred Stock shall be designated and known as the “Series A PreferredStock.”

 

(2) Dividends. The holders of the Series A5-1/4% $.01 par value Preferred Stock shall be entitled to receive out of anyfunds of the Corporation at the time legally available for the declaration ofdividends, dividends at the rate of Two Dollars and Sixty Two and one-half cent($2.625) per share per annum, and no more, payable in cash, annually, or atsuch intervals as the Board of Directors may from time to time determine, whenand as declared by the Board of Directors.

 

All such dividends shall accrue from therespective dates of issuance of the shares of the Series A Preferred Stock(and shall include any accrued and unpaid dividends on the shares of Series APreferred Stock of Southwest Water Company, a California

 

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corporation and predecessor in interest to theCorporation, converted into, or redeemed for, the Series A Preferred Stockof the Corporation) and shall accrue from day to day, whether or not earned ordeclared. Such dividends shall be payable before any dividends shall bedeclared or paid upon or set apart for the Common Stock, and shall becumulative, so that if in any year or years dividends upon the issued andoutstanding shares of the Series A Preferred Stock as herein providedshall not have been paid thereon or declared and set apart therefor, the amountof the deficiency shall be fully paid or declared and set apart for payment,but without interest, before any distribution, whether by way of dividend orotherwise, shall be declared or paid upon, or set apart for payment on, theCommon Stock. Each share of the Series A Preferred Stock shall rank on aparity with each other share of the Series A Preferred Stock with respectto dividends.

 

(3) Liquidation. In the event of theliquidation, dissolution, or winding up of the Corporation, whether voluntaryor involuntary, each holder of shares of the Series A Preferred Stockshall be entitled to receive out of the assets of the Corporation, whether suchassets are capital or surplus of any nature, Fifty Dollars ($50.00) per share,and, in addition, a further amount equal to the dividends unpaid andaccumulated thereon as provided in paragraph (2) of this Section C,respectively, to the date of distribution, whether or not earned or declared,and no more, before any payment shall be made or any assets distributed to theholders of shares of the Common Stock. If upon the liquidation, dissolution, orwinding up of the Corporation, whether voluntary or involuntary, the assets tobe distributed among the holders of shares of the Series A Preferred Stockshall be insufficient to permit the payment to such holders of the fullpreferential amounts aforesaid, then the entire assets of the Corporation to bedistributed shall be distributed ratably among the holders of shares of the Series APreferred Stock.

 

For the purposes of this Section C, in theevent of any liquidation, dissolution, or winding up of the Corporation,whether voluntary or involuntary, subject to all of the preferential rights ofthe holders of shares of the Series A Preferred Stock on distribution orotherwise, the holders of shares of the Common Stock shall be entitled toreceive, ratably, all remaining assets of the Corporation. A consolidation ormerger of the Corporation with or into any other corporation or corporationsshall be deemed not to be a liquidation, dissolution, or winding up of theCorporation, within the meaning of this paragraph (3).

 

(4) Redemption Provisions. The Corporation,at the option of the Board of Directors, may redeem the whole, or from time totime any part, of the shares of the Series A Preferred Stock on anydividend date by paying in cash therefor Fifty-two Dollars ($52.00) per share,and, in addition to the aforementioned amount, an amount in cash equal to alldividends on such shares of the Series A Preferred Stock unpaid andaccumulated as provided in paragraph (2) of this Section C, whetheror not earned or declared, to and including the date fixed for redemption, suchrespective sums being hereinafter sometimes referred to as the “Series APreferred Stock redemption price.” In case of the redemption of only a part ofthe outstanding shares of the Series A Preferred Stock, the Corporationshall designate by lot, in such manner as the Board of Directors may determine,the shares of the Series A Preferred Stock to be redeemed, or shall effectsuch redemption pro rata. Less than all of the shares of the Series APreferred Stock at any

 

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time outstanding may not be redeemed until alldividends accrued and in arrears upon all issued and outstanding shares of the Series APreferred Stock shall have been paid for all past dividend periods, and untilfull dividends for the then current dividend period on all issued andoutstanding shares of the Series A Preferred Stock, other than the shares ofthe Series A Preferred Stock to be redeemed, shall have been paid ordeclared and the full amount thereof set apart for payment. At least thirty(30) days previous notice by mail, postage prepaid, shall be given to theholders of record of shares of the Series A Preferred Stock to beredeemed, such notice to be addressed to each such stockholder at his lastoffice address as shown on the records of the Corporation. On or after the datefixed for redemption and stated in such notice, each holder of shares of the Series APreferred Stock called for redemption shall surrender his certificateevidencing such shares of the Series A Preferred Stock to the Corporationat the place designated in such notice and shall thereupon be entitled toreceive payment of the Series A Preferred Stock redemption price. In caseless than all of the shares of the Series A Preferred Stock represented byany such surrendered certificates are redeemed, a new certificate shall beissued representing the unredeemed shares of the Series A Preferred Stock.If such notice of redemption shall have been duly given and if on the datefixed for redemption funds necessary for the redemption shall be availabletherefor, then notwithstanding that the certificates evidencing any shares ofthe Series A Preferred Stock so called for redemption shall not have beensurrendered, the dividends with respect to the shares of the Series APreferred Stock so called for redemption shall forthwith after such date cease,except only the right of the holders to receive the Series A PreferredStock redemption price, without interest, upon the surrender of the certificatestherefor.

 

If, on or prior to any date fixed for redemptionof shares of the Series A Preferred Stock, the Corporation deposits withany bank or trust company in the City of Los Angeles, State of California, as atrust fund, a sum sufficient to redeem, on the date fixed for redemptionthereof, the shares of the Series A Preferred Stock called for redemption,with irrevocable instructions to give the notice of redemption thereof if suchnotice shall not previously have been given by the Corporation, or to completethe giving of such notice if theretofore commenced, and to pay, on and afterthe date fixed for redemption (or prior thereto), the Series A PreferredStock redemption price to the holders thereof upon the surrender of the stockcertificates therefor, then from and after the date of the deposit (althoughprior to the date fixed for redemption), the shares of the Series APreferred Stock called for redemption shall be deemed to be redeemed anddividends on those shares shall cease to accrue after the date fixed forredemption. The deposit shall be deemed to constitute full payment for theshares of the Series A Preferred Stock to the holders thereof, and, fromand after the date of such deposit, the shares of the Series A PreferredStock shall be deemed to be redeemed and no longer outstanding, and the holdersthereof shall cease to be stockholders with respect to the shares of the Series APreferred Stock so redeemed and shall have no rights with respect theretoexcept the right to receive from the bank or trust company with which suchdeposit has been made payment of the Series A Preferred Stock redemptionprice, without interest, upon the surrender of the certificates therefor.

 

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(6) Voting Rights. Each issued andoutstanding share of the Series A Preferred Stock shall have five (5) votes.

 

FIFTH: Each issued and outstanding share of theCommon Stock shall have one (1) vote. Except as otherwise expresslyprovided by the Board of Directors pursuant to Section B of Article FOURTHor as expressly provided in this Certificate of Incorporation or by law, allclasses of the capital stock of the Corporation with the right to vote shallvote together as a single class and not as separate classes.

 

SIXTH: The following provisions are inserted forthe management of the business and the conduct of the affairs of theCorporation, and for further definition, limitation, and regulation of thepowers of the Corporation and of its directors and stockholders:

 

A. The business and affairs of the Corporationshall be managed by or under the direction of the Board of Directors (the “Board”).In addition to the powers and authority expressly conferred upon the Board bystatute or by this Certificate of Incorporation or the bylaws of theCorporation, the Board is hereby empowered to exercise all such powers and doall such acts and things as may be exercised or done by the Corporation.

 

B. The Board of Directors shall have theauthorized number of Directors as provided in the Bylaws of this Corporation,as the Bylaws may be constituted from time to time.

 

The Board of Directors shall be divided intothree classes, designated as Class I, Class II and Class III.The number of directors in each class shall be determined by the Board ofDirectors and shall consist of as nearly equal a number of directors aspracticable. The term of the Class I directors initially shall expire atthe first annual meeting of stockholders ensuing after the 1998 Annual Meetingof Stockholders; the term of Class II directors initially shall expire atthe second Annual Meeting of Stockholders ensuing after the 1998 Annual Meetingof Stockholders; and the term of Class III directors initially shallexpire at the third Annual Meeting of Stockholders ensuing after the 1998Annual Meeting of Stockholders. In the case of each class, the directors shallserve until their respective successors are duly elected and qualified. At eachAnnual Meeting of Stockholders, directors of the respective class whose term expiresshall be elected, and the directors chosen to succeed those whose terms shallhave expired shall be elected to hold office for a term to expire at the thirdensuing Annual Meeting of Stockholders after their election, and until theirrespective successors are elected and qualified.

 

Any vacancy in the office of a director shall befilled by the vote of the majority of the remaining directors, regardless ofany quorum requirements set forth in the Bylaws of the corporation. Anydirector appointed to fill a vacancy in the office of director shall serveuntil the next Annual Meeting of Stockholders at which directors of the classfor which such director shall have been chosen are to be elected, and until hisor her successor is elected and qualified. Newly created directorships shall befilled by the Board of Directors.

 

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C. Unless otherwise provided by the bylaws ofthe Corporation, the directors of the Corporation need not be elected bywritten ballot.

 

D. Any action required or permitted to be takenby the stockholders of the Corporation must be effected at a duly called annualor special meeting of stockholders of the Corporation and may not be effectedby any consent in writing by the stockholders of the Corporation.

 

E. Special meetings of stockholders of theCorporation may be called only by the Board pursuant to a resolution adopted bya majority of the total number of authorized directors (whether or not thereexist any vacancies in previously authorized directorships at the time any suchresolution is presented to the Board for adoption) or by one or more holders ofat least 20% of the voting power of all of the then outstanding shares of thecapital stock of the Corporation entitled to vote at any meeting of thestockholders, and not by any other person or persons.

 

SEVENTH: The Board is expressly empowered toadopt, amend, or repeal bylaws of the Corporation. Any adoption, amendment, orrepeal of bylaws of the Corporation by the Board shall require the approval ofa majority of the total number of authorized directors (whether or not thereexist any vacancies in previously authorized directorships at the time anyresolution providing for adoption, amendment, or repeal of bylaws of theCorporation is presented to the Board). In addition, the bylaws of theCorporation may be adopted, amended, or repealed by the affirmative vote of theholders of at least 66-2/3% of the voting power of all of the then outstandingshares of the capital stock of the Corporation entitled to vote generally inthe election of directors (the “Voting Stock”), voting together as a singleclass (it being understood that, for purposes of this Certificate ofIncorporation, each share of the Voting Stock shall have the number of votesgranted to it pursuant to Articles FOURTH and FIFTH of this Certificate ofIncorporation or any designation of the rights, privileges, preferences, andrestrictions of any class or series of Preferred Stock made pursuant to Article FOURTHof this Certificate of Incorporation (a “Preferred Stock Designation”)).

 

EIGHTH: The stockholder vote required to approveany Business Combination (as hereinafter defined) shall be as set forth in thisArticle EIGHTH.

A. (1) Except as otherwise expresslyprovided in Section B of this Article EIGHTH:

 

(a) any merger or consolidation of theCorporation or any Subsidiary (as hereinafter defined) with (x) any InterestedStockholder (as hereinafter defined) or (y) any other corporation (whether ornot it is itself an Interested Stockholder) which is, or after such merger orconsolidation would be, an Affiliate (as hereinafter defined) of an InterestedStockholder; or

 

(b) any sale, lease, exchange, mortgage,pledge, transfer, or other disposition (in one transaction or a series oftransactions) to or with any Interested Stockholder or any Affiliate of anyInterested Stockholder of any assets of the Corporation or any Subsidiaryhaving an aggregate Fair Market Value (as hereinafter defined) of ten percent(10%) of

 

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the total value of the assets of the Corporationand its consolidated subsidiaries as reflected in the most recent balance sheetof the Corporation; or

 

(c) the issuance or transfer by theCorporation or any Subsidiary (in one transaction or a series of transactions)of any securities of the Corporation or any Subsidiary to any InterestedStockholder or any Affiliate of any Interested Stockholder in exchange forcash, securities, or other property (or a combination thereof) having anaggregate Fair Market Value of $5,000,000 or more; or

 

(d) the adoption of any plan or proposalfor the liquidation or dissolution of the Corporation proposed by or on behalfof any Interested Stockholder or any Affiliate of any Interested Stockholder;or

 

(e) any reclassification of securities(including any reverse stock split) or recapitalization of the Corporation, orany merger or consolidation of the Corporation with any of its Subsidiaries orany other transaction (whether or not with or into or otherwise involving anyInterested Stockholder) which has the effect, directly or indirectly, ofincreasing the proportionate share of the outstanding shares of any class ofequity or convertible securities of the Corporation or any Subsidiary which isdirectly or indirectly owned by any Interested Stockholder or any Affiliate ofany Interested Stockholder shall require (x) the affirmative vote of theholders of at least 66-2/3% of the voting power of all of the then outstandingshares of Voting Stock, voting together as a single class and (y) theaffirmative vote of the holders of at least a majority of the voting power ofall of the then outstanding shares of Voting Stock other than the Voting Stockof which an Interested Stockholder or an Affiliate is the beneficial owner,voting together as a single class. Such affirmative votes shall be requirednotwithstanding any other provisions of this Certificate of Incorporation, anyPreferred Stock Designation, any provision of law or of any agreement with anynational securities exchange which might otherwise permit a lesser vote or novote, but such affirmative vote shall be required in addition to and not inlieu of any affirmative vote of the holders of any particular class or seriesof the Voting Stock required by this Certificate of Incorporation, anyPreferred Stock Designation, or any provision of law.

 

(2) The term “Business Combination,” asused in this Article EIGHTH, shall mean any transaction which is referredto in any one or more of subparagraphs (a) through (e) of paragraph (1) ofthis Section A.

 

B. The provisions of Section A of this Article EIGHTHshall not be applicable to any particular Business Combination, and suchBusiness Combination shall require only such affirmative vote as is required bylaw, any other provision of this Certificate of Incorporation, any PreferredStock Designation, or any agreement with any national securities exchange, if,in the case of a Business Combination that does not involve any cash or otherconsideration being received by the stockholders of the Corporation, solely intheir respective capacities as stockholders of the Corporation, the conditionspecified in the following paragraph (1) is met, or, in the case of anyother Business Combination, the conditions specified in either of the followingparagraphs (1) or (2) are met:

 

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(1) The Business Combination shall havebeen approved by a majority of the Continuing Directors (as hereinafterdefined), it being understood that this condition shall not be capable ofsatisfaction unless at the time of consideration of such matter by the Boardthere is at least one Continuing Director.

 

(2) All of the following conditions shallhave been met:

 

(a) the consideration to be received byholders of shares of a particular class of outstanding Voting Stock shall be incash or in the same form as the Interested Stockholder has paid for shares ofsuch class of Voting Stock within the two-year period ending on and including thedate on which the Interested Stockholder became an Interested Stockholder (the “DeterminationDate”). If, within such two-year period, the Interested Stockholder has paidfor shares of any class of Voting Stock with varying forms of consideration,the form of consideration to be received per share by holders of shares of suchclass of Voting Stock shall be either cash or the form used to acquire thelargest number of shares of such class of Voting Stock acquired by theInterested Stockholder within such two-year period.

 

(b) the aggregate amount of (x) the cashand (y) the Fair Market Value, as of the date of the consummation of theBusiness Combination (the “Consummation Date”), of the consideration other thancash to be received per share by holders of Common Stock in such BusinessCombination shall be at least equal to the higher of the following (it beingintended that the requirements of this subparagraph (b) shall be requiredto be met with respect to all shares of Common Stock outstanding whether or notthe Interested Stockholder has previously acquired any shares of Common Stock):

 

(i) (if applicable) the highest per shareprice (including any brokerage commissions, transfer taxes, and solicitingdealers’ fees) paid by the Interested Stockholder for any shares of CommonStock acquired by it within the two-year period immediately prior to the dateof the first public announcement of the proposal of the Business Combination(the “Announcement Date”) or in the transaction in which it became an InterestedStockholder, whichever is higher, plus interest compounded annually from theDetermination Date through the Consummation Date at the prime rate of interestof Security Pacific National Bank (or such other major bank headquartered inthe State of California as may be selected by a majority of the ContinuingDirectors) from time to time in effect in the City of Los Angeles, less theaggregate amount of any cash dividends paid, and the Fair Market Value of anydividends paid in other than cash, on each share of Common Stock from theDetermination Date through the Consummation Date in an amount up to but notexceeding the amount of interest so payable per share of Common Stock; or

 

(ii) the Fair Market Value per share ofCommon Stock on the Announcement date.

 

(c) the aggregate amount of (x) the cashand (y) the Fair Market Value, as of the Consummation Date, of theconsideration other than cash to be received per share by

 

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holders of shares of any class, other thanCommon Stock, of outstanding Voting Stock shall be at least equal to thehighest of the following (it being intended that the requirements of thissubparagraph (c) shall be required to be met with respect to every suchclass of outstanding Voting Stock, whether or not the Interested Stockholderhas previously acquired any shares of a particular class of Voting Stock):

 

(i) (if applicable) the highest per shareprice (including any brokerage commissions, transfer taxes, and solicitingdealers’ fees) paid by the Interested Stockholder for any shares of such classof Voting Stock acquired by it within the two-year period immediately prior tothe Announcement Date or in the transaction in which it became an InterestedStockholder, whichever is higher, plus interest compounded annually from theDetermination Date through the Consummation Date at the prime rate of interestof Security Pacific National Bank (or such other major bank headquartered inthe State of California as may be selected by a majority of the ContinuingDirectors) from time to time in effect in the City of Los Angeles, less theaggregate amount of any cash dividends paid and the Fair Market Value of anydividends paid in other than cash, on each share of such class of Voting Stockfrom the Determination Date through the Consummation Date in an amount up tobut not exceeding the amount of interest so payable per share of such class ofVoting Stock; or

 

(ii) the Fair Market Value per share ofsuch class of Voting Stock on the Announcement Date; or

 

(iii) the highest preferential amount pershare to which the holders of shares of such class of Voting Stock are entitledin the event of any voluntary or involuntary liquidation, dissolution, orwinding up of the Corporation.

 

(d) after such Interested Stockholder hasbecome an Interested Stockholder and prior to the consummation of such BusinessCombination, all of the following conditions shall have been satisfied:

 

(i) except as approved by a majority of theContinuing Directors, there shall have been no failure to declare and pay atthe regular date therefor any full quarterly dividends (whether or notcumulative) on any outstanding Preferred Stock;

 

(ii) there shall have been (x) no reductionin the annual rate of dividends paid on the Common Stock (except as necessaryto reflect any subdivision of the Common Stock), except as approved by amajority of the Continuing Directors; and (y) an increase in such annual rateof dividends as necessary to reflect any reclassification (including any reversestock split), recapitalization, reorganization, or any similar transactionwhich has the effect of reducing the number of outstanding shares of the CommonStock, unless the failure to so increase such annual rate is approved by amajority of the Continuing Directors;

 

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(iii) such Interested Stockholder shallhave not become the beneficial owner of any additional shares of Voting Stockexcept as part of the transaction which results in such Interested Stockholderbecoming an Interested Stockholder; and

 

(iv) none of the Continuing Directors shallhave been removed from office, except by the affirmative vote of the holders ofat least a majority of the voting power of all of the then outstanding sharesof Voting Stock other than the Voting Stock of which an Interested Stockholderor an Affiliate is the beneficial owner, voting together as a single class.

 

(e) after such Interested Stockholder hasbecome an Interested Stockholder, such Interested Stockholder shall not havereceived the benefit, directly or indirectly (except proportionately, solely insuch Interested Stockholder’s capacity as a stockholder of the Corporation), ofany loans, advances, guarantees, pledges, or other financial assistance or anytax credits or other tax advantages provided by the Corporation, whether inanticipation of, or in connection with, such Business Combination, orotherwise.

 

(f) a proxy or information statementdescribing the proposed Business Combination and complying with therequirements of the Securities Exchange Act of 1934 (the “1934 Act”) and the rules andregulations thereunder (or any subsequent provisions replacing the 1934 Act,rules, or regulations) and setting forth, as an exhibit thereto, the opinion ofan investment banking firm selected by a majority of the Continuing Directors,or, if there are no Continuing Directors, an opinion of the investment bankingfirm most recently retained by the Corporation before the InterestedStockholder became an Interested Stockholder, or any successor in interest tosuch investment banking firm, that the proposed Business Combination is fairfrom a financial point of view to the stockholders of the Corporation otherthan the Interested Stockholder, shall be mailed to all stockholders of theCorporation at least 30 days prior to the consummation of such BusinessCombination (whether or not such proxy or information statement is required tobe mailed pursuant to the 1934 Act or subsequent replacement provisions).

 

C. For the purposes of this Article EIGHTH:

 

(1) “Person” shall mean any individual,partnership, joint venture, firm, corporation, association, or other entity,and shall include any group of persons or entities required to file or deliverto the Corporation any statement pursuant to Section 13(d) of the1934 Act.

 

(2) “Interested Stockholder” shall mean anyperson (other than the Corporation or any Subsidiary) who or which:

 

(a) is the beneficial owner, directly orindirectly, of more than 20% of the voting power of the outstanding VotingStock; or

 

(b) is an Affiliate of the Corporation and,at any time within the two-year period immediately prior to the date inquestion, was the beneficial owner, directly or indirectly, of 20% or more ofthe voting power of the then outstanding Voting Stock; or

 

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(c) is an assignee of, or has otherwisesucceeded, to any shares of Voting Stock which were, at any time within thetwo-year period immediately prior to the date in question, beneficially ownedby any Interested Stockholder, if such assignment or succession shall haveoccurred in the course of a transaction or series of transactions not involvinga public offering within the meaning of the Securities Act of 1933.

 

(3) A person shall be a “beneficial owner”of any Voting Stock:

 

(a) which such person or any of itsAffiliates or Associates (as hereinafter defined) beneficially owns, directlyor indirectly; or

 

(b) which such person or any of itsAffiliates or Associates has (x) the right to acquire (whether such right isexercisable immediately or only after the passage of time), pursuant to anyagreement, arrangement, or understanding or upon the exercise of conversionrights, exchange rights, warrants, or options, or otherwise; or (y) the rightto vote pursuant to any agreement, arrangement, or understanding; or

 

(c) which are beneficially owned, directlyor indirectly, by any other person with which such person or any of itsAffiliates or Associates has any agreement, arrangement, or understanding forthe purpose of acquiring, holding, voting, or disposing of any shares of VotingStock.

 

(4) For the purposes of determining whethera person is an Interested Stockholder pursuant to paragraph (2) of this Section C,the number of shares of Voting Stock deemed to be outstanding shall includeshares deemed owned through application of paragraph (3) of this Section Cbut shall not include any other shares of Voting Stock which may be issuablepursuant to any agreement, arrangement, or understanding, or upon exercise ofconversion rights, warrants, options, or otherwise.

 

(5) “Affiliate” and “Associate” shall havethe respective meanings ascribed to such terms in Rule 12b-2 of theGeneral Rules and Regulations under the 1934 Act, as in effect on February 1,1988.

 

(6) “Subsidiary” means any corporation ofwhich a majority of any class of equity security is owned, directly orindirectly, by the Corporation; provided, however, that for the purposes of thedefinition of Interested Stockholder set forth in paragraph (2) of this Section C,the term “Subsidiary” shall mean only a corporation of which a majority of eachclass of equity security is owned, directly or indirectly, by the Corporation.

 

(7) “Continuing Director” means any memberof the Board who is not an Affiliate or Associate of the Interested Stockholderand who was a member of the Board prior to the time that the InterestedStockholder became an Interested Stockholder, and any successor of a ContinuingDirector who is not an Affiliate or Associate of the Interested Stockholder andwho is recommended to succeed a Continuing Director by a majority of ContinuingDirectors then on the Board. For the purposes of this Article EIGHTH, theact of a majority of the Continuing Directors shall be the act of the Board.

 

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(8) “Fair Market Value” means:

 

(a) in the case of stock, the highestclosing sale price during the 30-day period immediately preceding the date inquestion of a share of such stock on the Composite Tape for the New York StockExchange - Listed Stocks, or, if such stock is not quoted on the CompositeTape, on the New York Stock Exchange, or, if such stock is not listed on theNew York Stock Exchange, on the principal United States securities exchangeregistered under the 1934 Act on which such stock is listed, or, if such stockis not listed on any such exchange, the highest closing bid quotation withrespect to a share of such stock during the 30-day period preceding the date inquestion on the National Association of Securities Dealers, Inc.,Automated Quotations System or any system then in use, or, if no suchquotations are available, the fair market value on the date in question of ashare of such stock as determined by a majority of the Continuing Directors ingood faith; and

 

(b) in the case of property other than cashor stock, the fair market value of such property on the date in question asdetermined by a majority of the Continuing Directors in good faith.

 

(9) In the event of any BusinessCombination in which the Corporation survives, the phrase “consideration otherthan cash to be received” as used in subparagraphs (b) and (c) ofparagraph (2) of Section B of this Article EIGHTH shall includethe shares of Common Stock and the shares of any other class of outstandingVoting Stock retained by the holders of such shares.

 

D. A majority of the Continuing Directors shallhave the power and duty to determine, on the basis of information known to themafter reasonable inquiry, all facts necessary to determine compliance with thisArticle EIGHTH, including, without limitation, (u) whether a person is anInterested Stockholder; (v) the number of shares of Voting Stockbeneficially owned by any person; (w) whether a person is an Affiliate orAssociate of another; (x) whether the applicable conditions set forth inparagraph (2) of Section B of this Article EIGHTH have been metwith respect to any Business Combination; (y) whether the assets which are thesubject of any Business Combination referred to in subparagraph (b) ofparagraph (1) of Section A of this Article EIGHTH have anaggregate Fair Market Value of 10% or more of the assets of the Corporation andits consolidated subsidiaries as reflected in the most recent balance sheet ofthe Corporation; and (z) whether the consideration to be received for theissuance or transfer of securities by the Corporation or any Subsidiary in anyBusiness Combination referred to in subparagraph (b) of paragraph (1) ofSection A of this Article EIGHTH has an aggregate Fair Market Valueof $5,000,000 or more.

 

E. Nothing contained in this Article EIGHTHshall be construed to relieve any Interested Stockholder from any fiduciaryobligation imposed by law.

 

F. The provisions of this Article EIGHTHshall not be altered, amended, or replaced except by (x) the affirmative voteof a majority of the Continuing Directors and (y) the

 

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affirmative vote of the holders of at least 66-2/3%of the voting power of all of the then outstanding shares of the Voting Stock,voting together as a single class.

 

NINTH: Except as expressly set forth in Section Eof this Article NINTH, the stockholder vote required to approve anyReorganization (as hereinafter defined) shall be the affirmative vote of theholders of at least 66-2/3% of the voting power of all the then outstandingshares of the Voting Stock, voting together as a single class.

 

A. As used in this Article NINTH, thefollowing terms shall have the following meanings:

 

(1) A “Reorganization” shall mean each ofthe following:

 

(a) any merger as to which the Corporationis a constituent corporation (as defined below) and as to which the holders ofthe outstanding Voting Stock of the Corporation immediately prior to such mergerdo not hold a majority of the voting power of the outstanding Voting Stock ofthe surviving corporation immediately subsequent to such merger.

 

(b) any acquisition by any person inexchange in whole or in part for its equity securities (or the equity securitiesof any other person) or its debt securities (or the debt securities of anyother person) for all or any portion of the outstanding Voting Stock of theCorporation if, immediately following such exchange, the person effecting suchexchange has control (as defined below) of the Corporation.

 

(c) any acquisition by any person inexchange in whole or in part for its equity securities (or the equitysecurities of any other person) or for its debt securities (or the debtsecurities of any other person) of assets of the Corporation having a FairMarket Value (as defined below) immediately prior to such acquisition equal toor in excess of 50% of the Fair Market Value of all assets of the Corporationimmediately prior to such acquisition.

 

(d) any liquidation, dissolution, orwinding up of the Corporation involving assets of the Corporation having a FairMarket Value (as defined below) immediately prior to such event equal to or inexcess of 50% of the Fair Market Value of all assets of the Corporation immediatelyprior to such event.

 

(2) A “constituent corporation” means acorporation which is merged with one or more other corporations, and includesthe surviving corporation.

 

(3) “[C]ontrol” means the ownership,directly or indirectly, of outstanding shares of the Voting Stock of theCorporation possessing, in the aggregate, more than 50% of the voting power ofall outstanding Voting Stock of the Corporation.

 

(4) “[E]quity security” means any share ofstock, any security convertible (with or without consideration) into any shareof stock, and any warrant or other right to acquire,

 

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subscribe to, or purchase any share of stock orany security convertible into any share of stock.

 

(5) “[P]erson” shall have the same meaningascribed to such term in Article EIGHTH of this Certificate ofIncorporation.

 

(6) “Fair Market Value” means, in the caseof property other than cash, the fair market value of such property on the datein question as determined by a majority of the Disinterested Directors in goodfaith.

 

(7) “Disinterested Director” means anymember of the Board who, at the time the proposed Reorganization is consideredby the Board or at the time alteration, amendment, or repeal of this Article NINTHis considered by the Board, (x) is not, in the case of a Reorganization of thetype specified in subparagraph (a) of paragraph (1) of this Section A,an Affiliate of, or an officer of, director of, or the record or beneficialowner of one percent (1%) or more of any equity security of, any constituentcorporation to the proposed Reorganization (other than the Corporation or anywholly-owned subsidiary of the Corporation); (y) is not, in the case of aReorganization of the types specified in subparagraphs (b) and (c) ofparagraph (1) of this Section A, an Affiliate of, or an officer of,director of, or the record or beneficial owner of one percent (1%) or more ofany equity security of, either the person making the acquisition or of anyperson whose equity or debt securities are to be exchanged for the Voting Stockor assets of the Corporation; or (z) in the case of a Reorganization of thetype specified in subparagraph (d) of paragraph (1) of this Section Aor in the case of an alteration, amendment, or repeal of this Article NINTH,does not have any relationship described in clauses (x) or (y) of thisparagraph (7) to any person who has announced or presented forconsideration by the Board or who within six months after consideration of analteration, amendment, or repeal of this Article NINTH announces orpresents for consideration by the Board, any Reorganization. For the purposesof this Article NINTH, the act of a majority of the DisinterestedDirectors shall be the act of the Board.

 

(8) “Affiliate” shall have the same meaningascribed to such term in Article EIGHTH of this Certificate ofIncorporation.

 

B. For the purposes of subparagraph (a) ofparagraph (1) of Section A of this Article NINTH, in determiningwhether the holders of the outstanding Voting Stock of the Corporationimmediately prior to such merger (the “Original Holders”) hold a majority ofthe voting power of the outstanding Voting Stock of the surviving corporationafter the merger:

 

(1) All equity securities held by theOriginal Holders convertible into Voting Stock of the surviving corporation,all warrants, all rights to subscribe to, and all rights to purchase VotingStock of the surviving corporation held by the Original Holders shall beignored;

 

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(2) All equity securities held by personsother than the Original Holders convertible into Voting Stock of the survivingcorporation shall be deemed to have been converted on the effective date of themerger; and

 

(3) All warrants, all rights to subscribeto, and all rights to purchase Voting Stock of the surviving corporation heldby persons other than the Original Holders shall be deemed to have beenexercised on the effective date of the merger.

 

C. For the purposes of subparagraph (b) ofparagraph (1) of Section A of this Article NINTH, in determiningwhether the acquiring person has control of the Corporation immediatelyfollowing such exchange:

 

(1) All equity securities held by theOriginal Holders convertible into Voting Stock of the Corporation, allwarrants, all rights to subscribe to, and all rights to purchase Voting Stockof the Corporation held by the Original Holders shall be ignored;

 

(2) All equity securities held by personsother than the Original Holders convertible into Voting Stock of theCorporation shall be deemed held by the acquiring person and shall be deemed tohave been converted on the effective date of the exchange; and

 

(3) All warrants, all rights to subscribeto, and all rights to purchase Voting Stock of the Corporation held by personsother than the Original Holders shall be deemed to be held by the acquiringperson and shall be deemed to have been exercised on the effective date of theexchange.

 

D. Any series of transactions or proposedtransactions which are designed to achieve the result specified in eithersubparagraphs (b), (c), or (d) of paragraph (1) of Section A ofthis Article NINTH or which have the effect of achieving the resultspecified in either subparagraphs (b), (c), or (d) of paragraph (1) ofSection A of this Article NINTH shall be subject to all of theprovisions of this Article NINTH.

 

E. The provisions of this Article NINTH,other than the provisions of Sections F and G of this Article NINTH, shallnot be applicable to any particular Reorganization, and such Reorganizationshall require only such affirmative vote as is required by law, any otherprovision of this Certificate of Incorporation, any Preferred StockDesignation, or any agreement with any national securities exchange, if theReorganization shall have been approved by a majority of the DisinterestedDirectors, it being understood that this condition shall not be capable ofsatisfaction unless at the time of consideration of such matter by the Boardthere is at least one Disinterested Director.

 

F. The affirmative vote of the holders of theVoting Stock shall be required (unless the condition set forth in Section Eis satisfied) notwithstanding any other provisions of this Certificate ofIncorporation, Preferred Stock Designation, any provision of law, or of anyagreement with any national securities exchange which might otherwise permit alesser vote or no vote, but such affirmative vote shall be required in additionto and not in lieu of any affirmative vote of the holders of any particular classor series of the Voting Stock

 

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required by law, this Certificate ofIncorporation, or any Preferred Stock Designation. Nothing herein shall relieveany other constituent corporation or any acquiring person referred to insubparagraphs (b) and (c) of paragraph (1) of Section A ofthis Article NINTH from any fiduciary or other obligation imposed uponsuch constituent corporation or acquiring person by law, by any charterdocument of, or agreement or other instrument governing or regulating theactions of, such constituent corporation or other person.

 

G. A majority of the Disinterested Directorsshall have the power and the duty to determine, on the basis of informationknown to them after reasonable inquiry, all facts necessary to determinecompliance with this Article NINTH, including, without limitation, (t)whether a particular transaction or proposed transaction constitutes aReorganization, as defined in Section A of this Article NINTH; (u)the number of shares of Voting Stock of the Corporation or any survivingcorporation beneficially owned or deemed to be owned by any person pursuant tosubparagraphs (a) or (b) of paragraph 1 of Section A of this Article NINTHor pursuant to Sections B or C of this Article NINTH; (v) whether anacquiring person will, in any transaction described in subparagraph (b) ofparagraph 1 of Section A of this Article NINTH, obtain control of theCorporation as defined in paragraph 3 of Section A of this Article NINTH;(w) the Fair Market Value of any or all assets of the Corporation for thepurposes of subparagraph (c) of paragraph 1 of Section A andparagraph (6) of Section A of this Article NINTH; (x) whetherany series of transactions and/or proposed transactions are within the scope ofSection D of this Article NINTH; (y) whether the affirmative vote ofthe Disinterested Directors provided for in Section E has in fact beenobtained with respect to any proposed Reorganization pursuant to paragraph (1) ofSection A of this Article NINTH; and (z) whether the affirmative voteof holders of Voting Stock required by this Article NINTH has in fact beenobtained with respect to any proposed Reorganization pursuant to paragraph 1 ofSection A of this Article NINTH.

 

H. The provisions of this Article NINTHshall not be altered, amended, or repealed except by (x) the affirmative voteof a majority of the Disinterested Directors and (y) the affirmative vote ofthe holders of at least 66-2/3% of the voting power of all of the then outstandingshares of the Voting Stock, voting together as a single class.

 

TENTH: The Board, when evaluating any offer ofanother party, (x) to make a tender or exchange offer for any shares of theVoting Stock; (y) to effect a Business Combination (as defined in Article EIGHTH);or (z) to effect a Reorganization (as defined in Article NINTH), shall, inconnection with the exercise of its judgment in determining what is in the bestinterests of the Corporation as a whole, be authorized to consider such factorsas the Board determines in its sole discretion to be relevant. In connectionwith any such evaluation, the Board is authorized to conduct suchinvestigations and to engage in such legal proceedings as the Board maydetermine to be appropriate.

 

ELEVENTH: A director of the Corporation shallnot be personally liable to the Corporation or its stockholders for monetarydamages for breach of fiduciary duty as a director, except for (w) any breachof the director’s duty of loyalty to the Corporation or

 

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its stockholders; (x) for acts or omissions notin good faith or which involve intentional misconduct or a knowing violation oflaw; (y) liability under Section 174 of the General Corporation Law of theState of Delaware; or (z) any transaction from which the director derived animproper personal benefit. If the General Corporation Law of the State ofDelaware is hereafter amended to authorize the further elimination orlimitation of the liability of a director, then the liability of a director ofthe Corporation shall be eliminated or limited to the fullest extent permittedby the General Corporation Law of the State of Delaware, as so amended. Anyrepeal or modification of the foregoing provisions of this Article ELEVENTHby the stockholders of the Corporation shall be prospective only, and shall notadversely affect any right or protection of a director of the Corporationexisting at the time of such repeal or modification for or with respect to anyacts or omissions of a director occurring prior to such repeal or modification.

 

TWELFTH: The Corporation reserves the right toamend or repeal any provision contained in this Certificate of Incorporation inthe manner prescribed by the laws of the State of Delaware, and all rightsconferred upon stockholders are granted subject to this reservation; provided,however, that, notwithstanding any other provision of this Certificate ofIncorporation, any Preferred Stock Designation, or any provision of law whichmight otherwise permit a lesser vote or no vote, but in addition to and not inlieu of any affirmative vote of the holders of any particular class or seriesof the then outstanding shares of the Voting Stock required by this Certificateof Incorporation, any Preferred Stock Designation, or any provision of law, (x)the affirmative vote of the holders of at least 66-2/3% of the voting power ofall of the then outstanding shares of the Voting Stock, voting together as asingle class, shall be required to amend or repeal this Article TWELFTH, Article SIXTH,Article SEVENTH, Article EIGHTH, Article NINTH, Article TENTH,and Article ELEVENTH of this Certificate of Incorporation; and (y) inaddition to the vote specified in clause (x) of this Article TWELFTH, theaffirmative vote of the holders of at least a majority of the voting power ofall of the then outstanding shares of the Voting Stock, other than the VotingStock of which an Interested Stockholder (as defined in Article EIGHTH ofthis Certificate of Incorporation) is the beneficial owner, voting together asa single class, shall be required in order to amend or repeal this Article TWELFTH,Article EIGHTH, or Article TENTH of this Certificate ofIncorporation.

 

INWITNESS WHEREOF, the undersigned has executed this Restated Certificate ofIncorporation this 12th day of May, 2005.

 
|   | SOUTHWEST WATER COMPANY,  a Delaware corporation |
|--------|--------------------------------------------------|
|   |                                             |
|   |                                             |
|   | /s/ Peter J. Moerbeek                            |   |
|   | Peter J. Moerbeek,  President                    |

 

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