Document:

Exhibit 10.10

 

FIFTH
AMENDMENT TO

1993 STOCK
COMPENSATION PLAN OF

CLAYTON
WILLIAMS ENERGY, INC.

 

 

Adopted by the
Board of Directors of Clayton Williams Energy, Inc. on November 1, 2005.

 

 

Section 17 of
the 1993 Stock Compensation Plan of Clayton Williams Energy, Inc. (the “Plan”)
is restated in its entirety as follows:

 

“17.         Termination of the Plan. The
Plan shall continue in effect until terminated by the Board of Directors of the
Company pursuant to Section 18 hereof. Options may be granted under this Plan
at any time and from time to time prior to its termination. Any Option
outstanding under the Plan at the time of its termination shall remain in
effect until the Option shall have been exercised or shall have expired.”Exhibit 10.13

 

SECOND
AMENDMENT TO

OUTSIDE
DIRECTORS STOCK OPTION PLAN OF

CLAYTON
WILLIAMS ENERGY, INC.

 

 

Adopted by the
Board of Directors of Clayton Williams Energy, Inc. on November 1, 2005.

 

1.             Section
5 of the Outside Directors Stock Option Plan of Clayton Williams Energy, Inc.
(the “Plan”) is restated in its entirety as follows:

 

“5.           Terms and Conditions of Options.
All Options granted pursuant to this Plan must be granted prior to the
termination of the Plan.

 

(a)           Number of Shares. Each Option shall represent 1000
shares of Common Stock.

 

(b)           Exercise Price. The purchase price for each share of
Common Stock purchased upon exercise of an Option shall be equal to the fair
market value of a share of Common Stock at the time the Option is granted. The “fair
market value” per share of Common Stock shall be equal to the closing sales
price of the Common Stock as reported on the NASDAQ National Market on the day
the Option is granted, so long as the Common Stock is quoted thereon. If no
sale is reported on the day the Option is granted, the “fair market value”
shall be equal to the closing sales price reported on the next preceding day on
which a sale of Common Stock is reported.

 

(c)           Vesting. Each Option shall be fully vested and
exercisable six (6) months from the date such Option is granted.

 

(d)           Option Period.

 

(1)           General. Each Option shall state the date upon which it
is granted and the period during which it is exercisable, which period shall
not exceed ten (10) years from the date of grant.

 

(2)           Termination of Status as Outside Director. In the event
an optionee’s status as an Outside Director is terminated for any reason, other
than the death of such optionee or a Change of Control (as hereinafter
defined), prior to the full exercise of an Option, such optionee may exercise
the Option at any time within ninety (90) days after such termination to the
extent the optionee was entitled to exercise such option on the date of such
termination; provided, however, that the Option may not be exercised after the
expiration of the term of the Option.

 

(3)           Death. If an optionee dies while an Outside Director of
the Company and held unexercised Options granted pursuant to the Plan, such
Options may 

 

 

be exercised
in whole or in part at any time within one (1) year after the optionee’s death
by the executors or administrators of the optionee’s estate or by any person or
persons who acquire the Options directly from the optionee by bequest or
inheritance, but only to the extent that the Outside Director was entitled to
exercise such Option at the date of his death; provided, however, that no
Option shall be exercisable after the expiration of the term of the Option.

 

(4)           Acceleration and Exercise Upon Change of Control. Notwithstanding
the preceding provisions of this Section 5, the six (6) month vesting period
for the Options shall be accelerated upon the occurrence of a Change of Control
of the Company so that such Option shall thereupon become exercisable
immediately in its entirety by the holder thereof, as such holder shall elect,
subject to the condition that no Option shall be exercisable after the
expiration of the term of the Option, and provided that a period of at least
six (6) months expire between the date the Option was granted and the date the
shares of Common Stock acquired upon exercise are disposed of in any manner. For
the purposes of this Plan, a “Change of Control” shall be deemed to have
occurred if:

 

(i)            Any
“person”, including a “group” as determined in accordance with Section 13(d)(3)
of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and
regulations promulgated thereunder, is or becomes, through one or a series of
related transactions or through one or more intermediaries, the beneficial
owner, directly or indirectly, of securities of the Company representing 25% or
more of the combined voting powers of the Company’s then outstanding
securities, other than a person who is such a beneficial owner on the Effective
Date of the Plan and any affiliate of such person;

 

(ii)           As
a result of, or in connection with, any tender offer or exchange offer, merger
or other business combination, sale of assets or contested election, or any
combination of the foregoing transactions (a “Transaction”), the persons who
were directors of the Company before the Transaction shall cease to constitute
a majority of the Board of Directors of the Company or any successor to the
Company;

 

(iii)          Following
the Effective Date of the Plan, the Company is merged or consolidated with
another corporation and as a result of such merger or consolidation less than
40% of the outstanding voting securities of the surviving or resulting
corporation shall then be owned in the aggregate by the former stockholders of
the Company, not including any former stockholder who is a party to such merger
or consolidation or any affiliates of any such party;

 

(iv)          A
tender offer or exchange offer is made and consummated for the ownership of
securities of the Company representing 25% or more of the combined voting power
of the Company’s then outstanding voting securities; or

 

2

 

(v)           The
Company or a subsidiary transfers more than 50% of its assets, or the last of a
series of transfers result in the transfer of more than 50% of the assets of
the Company, to another corporation the capital stock of which is not
wholly-owned by the Company. For purposes of this subsection 5(d)(4)(v), the
determination of what constitutes more than 50% of the assets of the Company
shall be determined as of the date of the transfer based on the sum of the
values attributed to (A) the oil and gas reserves of the Company as reflected
by the most recent reserve report prepared or audited by the Company’s
independent petroleum engineers, (B) the Company’s undeveloped oil and gas
properties as determined by an independent appraisal thereof and (C) the net
book value of all other assets of the Company.

 

(e)           Exercise of Options. To the extent that a holder of an
Option has a current right to exercise the Option, said Option may be exercised
from time to time by written notice to the attention of the Secretary of the
Company at its principal place of business. Such notice shall state the
election to exercise the Option and the number of shares in respect of which it
is being exercised, and shall be signed and dated by the person or persons so
exercising the Option. Such notice shall be accompanied by payment of the full
purchase price of such shares. The Company shall deliver a certificate or
certificates representing such shares as soon as practicable after such notice
and payment are received. The certificate or certificates for the shares as to
which the Option is exercised shall be registered on the books of the Company
in the name of the person or persons exercising the Option.

 

(f)            Non-Transferability of Options. An Option granted
pursuant to the Plan is exercisable only by the optionee during his or her
lifetime and is not assignable or transferable by him or her other than by will
or the laws of descent and distribution.

 

(g)           Compliance with Securities Laws. At the time of exercise
of any Option, the Company may require the optionee to execute any documents or
take any action which may be necessary to comply with the Securities Act of
1933, as amended (the “Securities Act”) and the rules and regulations
promulgated thereunder, or any other applicable federal or state laws
regulating the sale and issuance of securities; and the Company may, if it
deems necessary, include provisions in the option agreements authorized under
the Plan to assure such compliance. The Company may, from time to time, change
its requirements with respect to enforcing compliance with federal and state
securities laws, including without limitation the request for and enforcement
of agreements of investment intent, such requirements to be determined by the
Company in its judgment as necessary to assure compliance with such laws. Such
changes may be made with respect to any particular Option or stock issued upon
exercise thereof.”

 

2.             Section
17 of the Plan is restated in its entirety as follows:

 

“17.         Termination of the Plan. The
Plan shall continue in effect until terminated by the Board of Directors of the
Company pursuant to Section 18 hereof. Options may be granted under this Plan
at any time and from time to time prior to its termination. Any Option
outstanding under the Plan at the time of its termination shall remain in
effect until the Option shall have been exercised or shall have expired.”

 

3Exhibit 10.24.1

 

 

 

 

SOUTHWEST WATER COMPANY

 

INVESTORS’ RIGHTS AGREEMENT

 

February 25, 2000

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
  1.

  	
  Registration
  Rights

  	
   

  	
  1

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
  1.2

  	
  Company
  Registration

  	
   

  	
  2

  
	
   

  	
  1.3

  	
  Obligations
  of the Company

  	
   

  	
  2

  
	
   

  	
  1.4

  	
  Furnish
  Information

  	
   

  	
  4

  
	
   

  	
  1.5

  	
  Expenses
  of Registration

  	
   

  	
  4

  
	
   

  	
  1 6

  	
  Underwriting
  Requirements

  	
   

  	
  4

  
	
   

  	
  1.7

  	
  Delay
  of Registration

  	
   

  	
  5

  
	
   

  	
  1.8

  	
  Indemnification

  	
   

  	
  5

  
	
   

  	
  1.9

  	
  Reports
  Under Securities Exchange Act of 1934

  	
   

  	
  7

  
	
   

  	
  1.10

  	
  Assignment
  of Registration Rights

  	
   

  	
  7

  
	
   

  	
  1.11

  	
  Limitations
  on Subsequent Registration Rights

  	
   

  	
  8

  
	
   

  	
  1.12

  	
  Market-Standoff
  Agreement

  	
   

  	
  8

  
	
   

  	
  1.13

  	
  Termination
  of Registration Rights

  	
   

  	
  9

  
	
  2.

  	
  Covenants of the Company

  	
   

  	
  9

  
	
   

  	
  2.1

  	
  Delivery
  of Financial Statements

  	
   

  	
  9

  
	
   

  	
  2.2

  	
  Inspection

  	
   

  	
  9

  
	
   

  	
  2.3

  	
  Termination
  of Covenants

  	
   

  	
  9

  
	
  3.

  	
  Representations and
  Warranties of the Company

  	
   

  	
  9

  
	
   

  	
  3.1

  	
  Organization,
  Good Standing and Qualification

  	
   

  	
  9

  
	
   

  	
  3.2

  	
  Authorization

  	
   

  	
  9

  
	
   

  	
  3.3

  	
  Valid
  Issuance of Securities

  	
   

  	
  10

  
	
  4.

  	
  Representations and
  Warranties of the Investors

  	
   

  	
  10

  
	
   

  	
  4.1

  	
  Authorization

  	
   

  	
  10

  
	
   

  	
  4.2

  	
  Purchase
  Entirely for Own Account

  	
   

  	
  10

  
	
   

  	
  4.3

  	
  Disclosure
  of Information

  	
   

  	
  10

  
	
   

  	
  4.4

  	
  Restricted
  Securities

  	
   

  	
  11

  
	
   

  	
  4.5

  	
  Legends

  	
   

  	
  11

  
	
   

  	
  4.6

  	
  Accredited
  Investor

  	
   

  	
  11

  
	
  5.

  	
  Miscellaneous

  	
   

  	
  11

  
	
   

  	
  5.1

  	
  Successors
  and Assigns

  	
   

  	
  11

  
	
   

  	
  5.2

  	
  Amendments
  and Waivers

  	
   

  	
  12

  
	
   

  	
  5.3

  	
  Notices

  	
   

  	
  12

  
	
   

  	
  5.4

  	
  Severability

  	
   

  	
  12

  
	
   

  	
  5.5

  	
  Governing
  Law

  	
   

  	
  12

  
	
   

  	
  5.6

  	
  Counterparts

  	
   

  	
  12

  
	
   

  	
  5.7

  	
  Titles
  and Subtitles

  	
   

  	
  12

  
	
   

  	
  5.8

  	
  Aggregation
  of Stock

  	
   

  	
  12

  

 

 

i

 

	
   

  	
  5.9

  	
  Investor
  Representations

  	
   

  	
  12

  
	
   

  	
  5.10

  	
  Finder’s
  Fee

  	
   

  	
  13

  
	
   

  	
  5.11

  	
  Attorney’s
  Fees

  	
   

  	
  13

  
	
   

  	
  5.12

  	
  Entire
  Agreement

  	
   

  	
  13

  

 

 

ii

 

SOUTHWEST
WATER COMPANY

 

INVESTORS’
RIGHTS AGREEMENT

 

 

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

 

RECITALS

 

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

 

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

 

AGREEMENT

 

                                                The parties
hereby agree as follows:

 

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

 

                                                                                                1.1                               Definitions. For purposes
of this Section 1:

 

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

 

 

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

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

                                                                                                                                                (h)                                 Provide a
transfer agent and registrar for all Registrable Securities registered pursuant
to this Section 1 and a CUSIP number for all such Registrable Securities, in
each case not later than the effective date of such registration.

 

                                                                                                                                                (i)                                     Use its best
efforts to furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, if such securities are being
sold through underwriters, or, if such

 

 

3

 

securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities.

 

                                                                                                1.4                               Furnish
Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Securities of any selling Holder that
such Holder shall furnish to the Company such information regarding himself or
itself, the Registrable Securities held by him or it, and the intended method
of disposition of such securities as shall be required to effect the
registration of such Holder’s Registrable Securities.

 

                                                                                                1.5                               Expenses
of Registration. All expenses including
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications of Registrable Securities pursuant to
this Section 1 for each Holder (which right may be assigned as provided in
Section1.10), including (without limitation) all registration, filing, and
qualification fees, printers’ and accounting fees, fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one
counsel for the selling Holder or Holders selected by them with the approval of
the Company, which approval shall not be unreasonably withheld, shall be borne
by the Company. Provided,  however, that each Holder with
Registrable Securities included in any registration statement pursuant to this
Section 1 shall reimburse the Company for his or its pro rata share of (a) all
costs and expenses of such registration described in this Section 1.5 and (b)
all underwriting discounts and commissions incurred in connection with such
registration, but in an amount not to exceed One Dollar ($1.00) per share of
Registrable Securities sold by such Holder. As used herein, and subject to the
limitation set forth in the immediately preceding sentence, the pro rata share
of any Holder shall be equal to that portion of the total amount determined
pursuant to clauses (a) and (b) which bears the same relation to the total as
the number of shares of Registrable Securities sold by such Holder bears to the
number of shares covered by such registration statement.

 

                                                                                                1.6                               Underwriting
Requirements. In connection with any
offering involving an underwriting of shares of the Company’s capital stock,
the Company shall not be required under this Section 1 to include any of the
Holders’ securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it (or by other persons entitled to select the underwriters), and then only
in such quantity as the underwriters determine in their sole discretion will
not jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters

 

 

4

 

determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling shareholders according to the total
amount of securities entitled to be included therein owned by each selling
shareholder or in such other proportions as shall mutually be agreed to by such
selling shareholders). For purposes of the preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single “selling shareholder,”
and any pro-rata reduction with respect to such “selling shareholder” shall be
based upon the aggregate amount of shares carrying registration rights owned by
all entities and individuals included in such “selling shareholder,” as defined
in this sentence.

 

                                                                                                1.7                               Delay
of Registration. No Holder shall have any
right to obtain or seek an injunction restraining or otherwise delaying any
such registration as the result of any controversy that might arise with
respect to the interpretation or implementation of this Section 1.

 

                                                                                                1.8                               Indemnification. In the event
any Registrable Securities are included in a registration statement under this
Section 1:

 

                                                                                                                                                (a)                                  To the extent
permitted by law, the Company will indemnify and hold harmless each Holder, any
underwriter (as defined in the Securities Act) for such Holder and each person,
if any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a “Violation”): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) 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, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and the Company will pay to each
such Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.8(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable to any Holder, underwriter or controlling person for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.

 

 

5

 

 

                                                                                                                                                (b)                                 To the extent
permitted by law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the Company within
the meaning of the Securities Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any
such underwriter or other Holder, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this subsection 1.8(b), in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained
in this subsection 1.8(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that in no event shall any indemnity under this
subsection 1.8(b) exceed the net proceeds from the offering received by such
Holder, except in the case of willful fraud by such Holder.

 

                                                                                                                                                (c)                                  Promptly after
receipt by an indemnified party under this Section 1.8 of notice of the
commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 1.8, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified
parties which may be represented without conflict by one counsel) shall have
the right to retain one separate counsel, with the reasonable fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.8, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.8.

 

                                                                                                                                                (d)                                 If the
indemnification provided for in this Section 1.8 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect
to any loss, liability, claim, damage or expense referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions that

 

 

6

 

resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations; provided,
that in no event shall any contribution by a Holder under this Subsection 1.8(d)
exceed the net proceeds from the offering received by such Holder, except in
the case of willful fraud by such Holder. The relative fault of the
indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.

 

                                                                                                                                                (e)                                  Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall control.

 

                                                                                                                                                (f)                                    The obligations
of the Company and Holders under this Section 1.8 shall survive the completion
of any offering of Registrable Securities in a registration statement under
this Section 1.

 

                                                                                                1.9                               Reports
Under Securities Exchange Act of 1934.  With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Securities Act 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:

 

                                                                                                                                                (a)                                  make and keep
public information available, as those terms are understood and defined in SEC
Rule 144, at all times so long as the Company remains subject to the periodic
reporting requirements under Section 13 or 15(d) of the Exchange Act;

 

                                                                                                                                                (b)                                 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

 

                                                                                                                                                (c)                                  furnish to any
Holder, so long as the Holder owns any Registrable Securities, forthwith upon
request (i) a written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144, the Securities Act and the Exchange
Act, or that it qualifies as a registrant whose securities may be resold
pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company,
and (iii) such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC which permits the selling of any
such securities without registration or pursuant to such form.

 

                                                                                                1.10                        Assignment
of Registration Rights.  The rights to cause the Company to register
Registrable Securities pursuant to this Section 1 may be assigned (but only
with all related obligations) by a Holder to a transferee or assignee of at
least 12,000 shares of such securities, provided the Company is, within
a reasonable time after such transfer, furnished with written notice of the
name and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned; and provided, further,
that such

 

 

7

 

assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Securities Act. For the
purpose of determining the number of shares of Registrable Securities held by a
transferee or assignee, the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership (including
spouses and ancestors, lineal descendants and siblings of such partners or
spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership; provided
that all assignees and transferees who would not qualify individually for
assignment of registration rights shall have a single attorney-in-fact for the
purpose of exercising any rights, receiving notices or taking any action under
Section 1.

 

                                                                                                1.11                        Limitations
on Subsequent Registration Rights.  From and after the date of this Agreement,
the Company shall not, without the prior written consent of the Holders of a
majority of the outstanding Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder (a) to include such securities in
any registration filed under this Section, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of his securities will
not reduce the amount of the Registrable Securities of the Holders which is
included or (b) to make a demand registration which could result in such
registration statement being declared effective within one hundred twenty (120)
days after the effective date of any registration effected pursuant to this
Section 1.

 

                                                                                                1.12                        Market-Standoff
Agreement.

 

                                                                                                                                                (a)                                  Market-Standoff
Period; Agreement.  In connection with any offering of the
Company’s securities and upon request of the Company or the underwriters
managing such offering of the Company’s securities, each Holder agrees not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any securities of the Company (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 90
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting
the foregoing as may be requested by the underwriters at the time of such
public offering.

 

                                                                                                                                                (b)                               Limitations.  The obligations described in Section 1.12(a)
shall apply only if all officers and directors of the Company enter into
similar agreements, and shall not apply to a registration relating solely to
employee benefit or stock purchase or dividend reinvestment plans, or to a
registration relating solely to a transaction pursuant to Rule 145 under the
Securities Act.

 

                                                                                                                                                (c)                                  Stop-Transfer
Instructions.  In order to enforce the foregoing covenants,
the Company may impose stop-transfer instructions with respect to the
securities of each Holder (and the securities of every other person subject to
restrictions in Section 1.12(a)).

 

 

8

 

                                                                                                                                                (d)                                 Transferees
Bound.  Each Holder
agrees that it will not transfer securities of the Company unless each
transferee agrees in writing to be bound by all of the provisions of this
Section 1.12.

 

                                                                                                1.13                        Termination
of Registration Rights.  No Holder shall be entitled to exercise any
right provided for this Section 1 after February 24, 2015.

 

                                                2.                                      Covenants
of the Company.

 

                                                                                                2.1                               Delivery
of Financial Statements.  The Company shall deliver to each Holder of
at least 12,000 shares of Registrable Securities, within twenty (20) days after
receipt of written request by such Holder, copies of the Company’s most recent
annual report to shareholders, most recent Form 10-Q Report and most recent
Form 10-K Report.

 

                                                                                                2.2                               Inspection.  To and until a Holder exercises a Warrant, in
whole or in part, and becomes a shareholder of the Company, such Holder shall not
have any rights of inspection granted to shareholders of the Company. From and
after such exercise, such Holder shall have the same rights as any other
shareholder of the Company, at such Holder’s expense, to visit and inspect the
Company’s properties and to examine its books of account and records. Provided,
however, that the Company shall not be obligated pursuant to this Section
2.2 to provide access to any information which it reasonably considers to be a
trade secret or similar confidential information.

 

                                                                                                2.3                               Termination
of Covenants.  The covenants set forth in Section 2.1 and
2.2 shall terminate as to each Investor and be of no further force or effect
when the Company shall sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any other transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Company is disposed of,
provided that this subsection shall not apply to a merger effected exclusively
for the purpose of changing the domicile of the Corporation.

 

                                                3.                                      Representations
and Warranties of the Company.  The Company hereby represents and warrants to
each Investor that:

 

                                                                                                3.1                               Organization,
Good Standing and Qualification.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to carry on its business.
The Company is duly qualified to transact business and is in good standing in
the State of California and in each other jurisdiction in which the failure so
to qualify would have a material adverse effect on its business or properties.

 

                                                                                                3.2                               Authorization.  All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the Warrants, the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance and delivery of Common Stock issuable upon exercise

 

 

9

 

of the Warrants has been taken, and this Agreement and the Warrants,
when executed and delivered by the Company, shall constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and other laws
of general application affecting enforcement of creditors’ rights generally,
and as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, or (ii) to the extent the
indemnification provisions contained in this Agreement may be limited by
applicable federal or state securities laws.

 

                                                                                                3.3                               Valid Issuance of
Securities.  The Common Stock to be issued to the Investors
upon exercise of the Warrants, when issued, sold and delivered in accordance
with the terms thereof for the consideration expressed therein, will be duly
and validly issued, fully paid and nonassessable and free of restrictions on
transfer other than restrictions on transfer under this Agreement, the Warrants
and applicable state and federal securities laws. Based in part upon the
representations of the Investors in this Agreement, the Common Stock will be
issued in compliance with all applicable federal and state securities laws. The
Common Stock issuable upon exercise of the Warrants has been duly and validly
reserved for issuance.

 

                                                4.                                      Representations and
Warranties of the Investors.  Each Investor
hereby represents and warrants to the Company that:

 

                                                                                                4.1                               Authorization.  Such
Investor has full power and authority to enter into this Agreement. This
Agreement, when executed and delivered by the Investor, will constitute valid
and legally binding obligations of the Investor, enforceable in accordance with
its terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any other laws of
general application affecting enforcement of creditors’ rights generally, and
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, or (b) to the extent the
indemnification provisions contained in this Agreement may be limited by
applicable federal or state securities laws.

 

 

                                                                                                4.2                               Purchase Entirely for Own
Account.  This Agreement is made with the Investor in
reliance upon the Investor’s representation to the Company, which by the
Investor’s execution of this Agreement, the Investor hereby confirms, that the
Common Stock to be acquired by the Investor upon exercise of his or its Warrant
will be acquired for investment for the Investor’s own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and that the Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this
Agreement, the Investor further represents that the Investor does not presently
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of such Common Stock. The Investor has not been formed for
the specific purpose of acquiring such Common Stock.

 

                                                                                                4.3                               Disclosure of Information.  The
Investor has had an opportunity to discuss the Company’s business, management,
financial affairs and the terms and conditions of the Warrants with the Company’s
management and has had an opportunity to review the

 

 

10

 

Company’s facilities. The Investor understands that such discussions,
as well as any written information delivered by the Company to the Investor,
were intended to describe the aspects of the Company’s business which it
believes to be material.

 

                                                                                                4.4                               Restricted Securities.  The
Investor understands that the Common Stock issued upon exercise of the Warrant
has not been, and will not be, registered under the Securities Act, by reason
of a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Investor’s representations as expressed herein.
The Investor understands that the Common Stock will be “restricted securities”
under applicable U.S. federal and state securities laws and that, pursuant to
these laws, the Investor must hold such securities indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. The Investor acknowledges that the Company has no
obligation to register or qualify such securities for resale except as set
forth in this Agreement. The Investor further acknowledges that if an exemption
from registration or qualification is available, it may be conditioned on
various requirements including, but not limited to, the time and manner of
sale, the holding period for such securities, and on requirements relating to
the Company which are outside of the Investor’s control, and which the Company
is under no obligation and may not be able to satisfy.

 

                                                                                                4.5                               Legends.  The
Investor understands that the Common Stock issued upon exercise of the Warrant
may bear one or all of the following legends:

 

                                                                                                                                                (a)                                  “THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

                                                                                                                                                (b)                                 Any legend set forth in the Warrant.

 

                                                                                                                                                (c)                                  Any legend required by the Blue Sky laws
of any state to the extent such laws are applicable to the shares represented
by the certificate so legended.

 

                                                                                                4.6                               Accredited Investor.  The
Investor is an accredited investor as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.

 

                                                5.                                      Miscellaneous.

 

                                                                                                5.1                               Successors and Assigns.  Except as otherwise provided in this
Agreement, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective permitted successors and assigns
of the parties (including transferees of any of the Common Stock issued upon
exercise of the Warrants). Nothing in this Agreement,

 

 

11

 

express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.

 

                                                                                                5.2                               Amendments and Waivers.  Any
term of this Agreement may be amended or waived only with the written consent
of the Company and the holders of a majority of the Registrable Securities then
outstanding. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any Registrable Securities then outstanding,
each future holder of all such Registrable Securities, and the Company.

 

                                                                                                5.3                               Notices.  Unless
otherwise provided, any notice required or permitted by this Agreement shall be
in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or on the date
of receipt or refusal indicated on the return receipt if deposited in the U.S.
mail, as certified or registered mail, with postage prepaid and return receipt
requested, and addressed to the party to be notified at such party’s address or
fax number as set forth below or on Exhibit A hereto or as subsequently
modified by written notice.

 

                                                                                                5.4                               Severability.  If
one or more provisions of this Agreement are held to be unenforceable under
applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (a) such provision shall be excluded from
this Agreement, (b) the balance of this Agreement shall be interpreted as if
such provision were so excluded and (c) the balance of this Agreement shall be
enforceable in accordance with its terms.

 

                                                                                                5.5                               Governing Law.  This
Agreement and all acts and transactions pursuant hereto shall be governed,
construed and interpreted in accordance with the laws of the State of Delaware,
without giving effect to principles of conflicts of laws.

 

                                                                                                5.6                               Counterparts.  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

 

                                                                                                5.7                               Titles and Subtitles.  The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

 

                                                                                                5.8                               Aggregation of Stock.  All
shares of the Common Stock held or acquired by affiliated entities or persons
shall be aggregated together for the purpose of determining the availability of
any rights under this Agreement.

 

                                                                                                5.9                               Investor Representations.  All
representations and warranties of the Investors contained in Article 4 of this
Agreement shall be deemed continuing representations and warranties made again
at the date of each exercise of a Warrant.

 

 

12

 

                                                                                                5.10                        Finder’s Fee.  Each
party represents that it neither is nor will be obligated for any finder’s fee
or commission in connection with this transaction.  Each Investor agrees to indemnify and to hold
harmless the Company from any liability for any commission or compensation in
the nature of a finder’s fee (and the costs and expenses of defending against
such liability or asserted liability) for which each Investor or any of its
officers, employees, or representatives is responsible. The Company agrees to
indemnify and hold harmless each Investor from any liability for any commission
or compensation in the nature of a finder’s fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company
or any of its officers, employees or representatives is responsible.

 

                                                                                                5.11                        Attorney’s Fees.  If
any action at law or in equity (including arbitration) is necessary to enforce
or interpret the terms of any of this Agreement or the Warrants, the prevailing
party shall be entitled to reasonable attorney’s fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.

 

                                                                                                5.12                        Entire Agreement.  This
Agreement and the Warrants constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof, and any and all other written
or oral agreements relating to the subject matter hereof existing between the
parties hereto are expressly superseded.

 

                                                The parties have executed this Investors’
Rights Agreement as of the date first above written.

 

	
  COMPANY:

  	
   

  	
  INVESTORS:

  
	
   

  	
   

  	
   

  
	
  SOUTHWEST WATER COMPANY,

  	
   

  	
   

  
	
  A Delaware corporation

  	
   

  	
  /s/ William L. McIntyre

  
	
   

  	
   

  	
  (Investor)

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/ Anton C. Garnier

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  President

  	
   

  	
  Name:

  	
  William L. McIntyre

  
	
   

  	
   

  	
  (print)

  
	
   

  	
   

  	
   

  
	
  By

  	
  Thomas C. Tekulve

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice Pres. Finance

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  (Investor)

  
	
   

  	
   

  	
   

  
	
  Southwest Water Company

  	
   

  	
  By

  	
   

  
	
  225 Barranca Avenue, Suite 200

  	
   

  	
   

  
	
  West Covina, CA 91791-1605

  	
   

  	
  Name:

  	
   

  
	
  Attn: President

  	
   

  	
  (print)

  
	
  Fax: (626) 915-1558

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
								

 

 

13

 

 

EXHIBIT
A

 

INVESTORS

 

	
  Name/Address/Fax No.

  	
   

  	
  No.
  of Shares

  
	
   

  	
   

  	
   

  
	
  Steven
  N. Reenders

  	
   

  	
  44,297*

  
	
  128
  Avenida Del Mar

  	
   

  	
   

  
	
  Suite
  2C

  	
   

  	
   

  
	
  San
  Clemente, CA 92672

  	
   

  	
   

  
	
  Fax:
  (949) 498-7284

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  William
  L. McIntyre

  	
   

  	
  44,297*

  
	
  370
  East Rowland Avenue

  	
   

  	
   

  
	
  Covina,
  CA 91723

  	
   

  	
   

  
	
  Fax:
  (626) 966-1274

  	
   

  	
   

  

 

* Assumes complete exercise of Warrants.

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