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EXHIBIT 10
STRATEGIC RELATIONSHIP AGREEMENT
This Strategic Relationship Agreement (the "Agreement") is made and entered
into as of the 13th day of October 1998 by and between Western Water Company, a
Delaware corporation (the "Company") and Sociedad General de Aguas de Barcelona,
S.A., a Spanish corporation ("Agbar").
RECITALS
1. The Company and Agbar desire to establish a strategic relationship to
facilitate the development of the Company's and Agbar's water-related
businesses.
2. As part of this relationship, Agbar has agreed, subject to the terms of
this Agreement, to acquire up to 25,000 shares of the Company's
newly-established Series D Convertible Redeemable Preferred Stock, the rights,
preferences and privileges of which are set forth in the Certificate of
Designations attached to this Agreement as Exhibit A (the "Preferred Stock").
The proceeds from Agbar's purchase of shares of Preferred Stock will be used to
provide capital for water-related projects undertaken by the Company and
approved by Agbar.
3. The Company has also agreed to assist Agbar in the development of its
water-related business and to grant Agbar certain registration, preemptive,
Board, approval and other rights as set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. INITIAL SALE AND PURCHASE OF PREFERRED STOCK. Subject to the terms and
conditions hereof and in reliance upon the representations and warranties
contained herein, the Company agrees to sell to Agbar, and Agbar agrees to
purchase from the Company, 10,000 shares of Preferred Stock at a cash purchase
price of $1,000 per share. The initial sale to and purchase by Agbar of the
Preferred Stock (the "Initial Closing") shall take place on or before October
31, 1998, or on such other date as the Company and Agbar shall mutually
determine. At the Initial Closing, the Company will execute and deliver to
Agbar, or to Agbar's representative, a stock certificate or certificates dated
as of the date of the Initial Closing for 10,000 shares of Preferred Stock
registered in Agbar's name, against delivery to the Company of a bank cashier's
check or a confirmation of the wire transfer of funds in the amount of
$10,000,000 in payment of the total purchase price of the Preferred Stock
initially being pur-
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chased by Agbar. Agbar may assign its rights to acquire shares of Preferred
Stock pursuant to this Section 1 to any of its majority-owned subsidiaries.
2. CONDITIONS TO THE INITIAL CLOSING; USE OF PROCEEDS. Agbar's obligation
to purchase the shares of Preferred Stock at the Initial Closing shall be
subject to (i) the accuracy and completeness as of the date of the Initial
Closing of the representations and warranties of the Company as set forth in
this Agreement, (ii) the delivery to Agbar of a legal opinion substantially in
the form attached hereto as Exhibit B and (iii) the receipt by Agbar of all
necessary approvals from relevant governmental agencies or departments in Spain.
Exhibit C to this Agreement sets forth a description together with a proposed
budget for the water-related projects approved by Agbar that are to be financed
utilizing the proceeds for the initial sale of Preferred Stock.
3. SUBSEQUENT SALES AND PURCHASES OF PREFERRED STOCK. Subject to the terms
and conditions set forth in Section 4 hereof and following the request of the
Company, during the two-year period ending on October 31, 2000, the Company
agrees to sell to Agbar, and Agbar agrees to purchase from the Company, up to an
additional 15,000 shares of Preferred Stock at a cash purchase price of $1,000
per share. Any such purchase shall be for a minimum of 5,000 additional shares
of Preferred Stock and shall be made within 45 days of Agbar's receipt of
written request from the Company that Agbar purchase such shares. At the
consummation of any such subsequent sale and purchase of Preferred Stock, the
Company will execute and deliver to Agbar, or to Agbar's representative, a stock
certificate or certificates dated as of the date of the consummation of such
subsequent sale for the number of shares of Preferred Stock being purchased by
Agbar, registered in Agbar's name, against delivery to the Company of a bank
cashier's check or a confirmation of the wire transfer of funds in the amount of
the total purchase price of the additional shares of Preferred Stock being
purchased by Agbar. Agbar may elect to cause any of its affiliates to purchase
all or any portion of the Preferred Stock to be purchased by Agbar pursuant to
the provisions of this Section 3. The two-year period referred to in the initial
sentence of this Section 3 can be extended for up to an additional two years
upon the mutual agreement of Agbar and the Company.
4. CONDITIONS TO AGBAR'S OBLIGATION TO PURCHASE ADDITIONAL SHARES OF
PREFERRED STOCK; USE OF PROCEEDS. Agbar's obligation to purchase additional
shares of Preferred Stock pursuant to the provisions of Section 3 shall be
subject to (i) the approval by the Company's Board of Directors and each of
Agbar's designees to the Company's Board of Directors of the water-related
projects to be funded utilizing the proceeds from Agbar's purchase of such
additional shares of Preferred Stock (which approval such Agbar designees can
grant or withhold in their sole discretion), (ii) the absence of any material
adverse change with respect to the Company from and after the date of this
Agreement through the date of such purchase of additional shares of Preferred
Stock, (iii) the absence of any dispute between the Company and Agbar with
respect to the use of the proceeds from Agbar's prior purchases of shares of
Preferred Stock, (iv) the Company's material compliance with the covenants and
agreements of the Company set forth in this Agreement and (v) the obtaining of
any required governmental or other third party consents, including, as
necessary, the consent of the Company's stockholders and clearance under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX Xxx").
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The Company shall (i) circulate, at its expense, a proxy statement among its
stockholders to obtain any necessary consent of such stockholders to the
purchase by Agbar of additional shares of Preferred Stock pursuant to the
provisions of Section 3 and (ii) pay all legal, filing and other fees and
expenses incurred by Agbar in connection with the preparation and filing of any
materials under the HSR Act. The Company and Agbar shall take the steps
necessary to prepare and make the necessary filing to obtain clearance under the
HSR Act within 45 days of the date of the Initial Closing and, in connection
with such filing, request early termination of the relevant waiting period under
the HSR Act.
At the time the Company submits its written request to Agbar that Agbar
purchase additional shares of Preferred Stock pursuant to the provisions of
Section 3, the Company shall provide Agbar with a written summary of the
water-related project(s) that the Company intends to finance utilizing the
proceeds from any such subsequent issuance and sale of shares of Preferred Stock
to Agbar. Such written summary shall include (i) the location, nature, and
description of such water-related project(s), (ii) the revenues and
profits/losses anticipated to be generated from such water-related project(s),
including the estimated time period when such revenues and profits/losses are
expected to be realized, (iii) a budget for each of such water-related
project(s), including a reasonable itemization of the categories and related
amounts of expenses that the Company expects to incur in connection with such
project(s), (iv) the anticipated financing that the Company expects to obtain in
connection with such project(s) and the related capital costs and (v) the
identity and general business background and experience of any third party that
will play a meaningful role in the development of any such project(s). The
Company will also promptly provide Agbar with any additional information that
Agbar may reasonably request with respect to any such project(s). The Company
shall provide all such information not less than 10 days prior to the date of
any meeting of the Company's Board of Directors called to review and approve
such project(s).
5. USE OF PROCEEDS FROM THE SALE OF PREFERRED STOCK. The proceeds from the
sale of Preferred Stock pursuant to the provisions of Sections 2 or 4 of this
Agreement shall be used only to finance the water-related projects approved by
Agbar, as set forth in Sections 2 and 4 of this Agreement, or as otherwise
provided in this Section 5. Except as otherwise provided in this Section 5, the
Company shall not use any of such proceeds to finance any activity of the
Company not within the scope of the water-related projects approved by Agbar
pursuant to the provisions of Sections 2 and 4 of this Agreement.
The Company shall provide Agbar with monthly status reports with respect to each
water-related project that Agbar has approved pursuant to the provisions of
Sections 2, 4 and 5 of this Agreement and that is being financed out of the
proceeds from the sale of Preferred Stock. Such monthly reports shall, on a
project specific basis, identify the costs, including the related capital costs,
that have been incurred through the end of the reporting period with a
reasonable degree of detail, provide an updated good-faith estimate of the costs
that remain to be incurred to completion of such project and compare such costs
to the amounts budgeted with respect to each such project. The Company shall
also provide Agbar with any additional information concerning the status of any
such project, and the expenditure of the proceeds from the sale of Preferred
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Stock, that Agbar reasonably requests. The Company shall notify Agbar, as
promptly as possible, if the Company reasonably believes that the costs to be
incurred in connection with any such project will exceed by 15% or more the
budgeted costs for such project. The Company may not expend any portion of the
proceeds from the sale of Preferred Stock if such expenditure(s) exceed by 15%
or more the budgeted costs for any water-related project approved by Agbar
without the prior written approval of each of Agbar's designees to the Company's
Board of Directors, which approval such Agbar designees may grant or withhold in
their sole discretion. The Company shall provide such designees with any
information that such designees reasonably request in connection with a proposed
change in a budget for a water-related project approved by Agbar. If such Agbar
designees approve such budget change, the Company may not expend any portion of
the proceeds from the sale of Preferred Stock if such expenditures exceed by 15%
or more the revised budgeted costs for any water-related project without again
obtaining the prior written approval of each of Agbar's designees to the
Company's Board of Directors in the manner set forth above.
6. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. Except as otherwise
indicated on the attached Schedules to this Agreement, the Company represents
and warrants to Agbar that as of the date hereof, the date of the Initial
Closing and as of the date of any subsequent purchase by Agbar of shares of
Preferred Stock pursuant to the provisions of this Agreement:
6.1 ORGANIZATION, GOOD STANDING, ETC.
(a) 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 own its properties and to carry
on its business as now being conducted.
(b) The Company is duly qualified, licensed or domesticated as a
foreign corporation in good standing in each jurisdiction in which the nature of
the business conducted by it or the properties owned, leased or operated by it
make such qualification, licensing or domestication necessary and failure to be
so qualified, licensed or domesticated would have a material adverse effect upon
the Company.
6.2 CAPITAL STOCK. The authorized capital stock of the Company
consists of (i) 20,000,000 shares of common stock, par value $.001 per share
(the "Common Stock"), of which 8,239,816 shares are issued and outstanding; and
(ii) 1,000,000 shares of preferred stock, par value $.001 per share, of which
9,809.2915 shares of Series C Convertible Redeemable Preferred Stock ("Series C
Preferred") are issued and outstanding. All issued and outstanding shares of
Common Stock and Series C Preferred of the Company are duly authorized, validly
issued, fully paid and nonassessable. Except as set forth in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1998 or the
Company's Definitive Proxy Statement circulated in connection with the Company's
September 15, 1998 Annual Meeting of Stockholders, there are no outstanding
options,
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warrants, rights, convertible securities or other agreements or plans under
which the Company may become obligated to issue, sell or transfer shares of its
capital stock or other securities. All prior issuances of capital stock by the
Company have been made in compliance with applicable federal and state
securities laws.
6.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The execution, delivery and
performance of, and compliance with, this Agreement and the sale and issuance of
the Preferred Stock (and the Common Stock issuable upon the conversion of such
Preferred Stock) have been duly authorized by all necessary corporate action on
the part of the Company, and this Agreement is a valid and binding agreement of
the Company, enforceable in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization
or other laws relating to or affecting the enforcement of creditors' rights
generally and general principles of equity (whether enforcement is sought by
proceedings in equity or at law). Except as otherwise indicated in Section 3 of
this Agreement, no consent, license, approval or authority of, or registration
or declaration with, any governmental authority, bureau or agency is required in
connection with the execution, delivery and performance of this Agreement by the
Company or the issuance of the Preferred Stock hereunder (or the Common Stock
issuable upon the conversion of such Preferred Stock), except under Regulation D
under the Securities Act of 1933 (the "Act") and applicable state securities
laws. Neither the execution nor the delivery of this Agreement, the performance
by the Company of its obligations hereunder nor the consummation of the
transactions contemplated hereby will conflict with, or, with or without the
giving of notice or passage of time, result in a breach of the terms, conditions
or provisions of, or constitute a default under, or result in the imposition of
any lien or encumbrance upon any asset or property of the Company pursuant to,
any applicable law, administrative regulation or judgment, order or decree of
any court or governmental body, any contract or agreement to which the Company
is a party or by which it or any of its properties, assets or rights is bound or
affected, or the Certificate of Incorporation or Bylaws of the Company. The
Company is not party to, and the assets of the Company are not subject to, any
agreement, contract, judgment, order or decree that could interfere, in any
material respect, with the performance by the Company of its obligations
hereunder. Upon delivery of the Preferred Stock under this Agreement and payment
of the purchase price thereof, good and marketable title thereto, free and clear
of all pledges, liens, claims, encumbrances and restrictions, except for the
transfer restrictions set forth in Sections 7.1 and 7.5 of this Agreement, will
pass to Agbar. At the time of delivery, the Preferred Stock (and the Common
Stock issuable upon the conversion of such Preferred Stock) will be duly
authorized, validly issued, fully paid and nonassessable.
6.4 TAX RETURNS AND AUDITS. All required federal, state and material
local tax returns of the Company have been filed, and all federal, state and
local taxes required to be paid with respect to such returns have been paid or
due provision for the payment thereof has been made and the Company is not
delinquent in the payment of any such tax or in the payment of any assessment or
governmental charge. The Company does not have any material tax deficiency
proposed or assessed against it and has not executed any waiver of any statute
of limitations on the assessment or collection of any tax. None of the Company's
federal income
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tax returns nor any state or local income or franchise tax return has been
audited by governmental authorities in a manner to bring such audit to the
Company's attention.
6.5 FINANCIAL STATEMENTS. The Company's Annual Report on Form 10-K for
the year ended March 31, 1998 includes certain financial statements, including
the audited consolidated balance sheets of the Company as of March 31, 1998 and
1997 and the audited consolidated statements of operations for the years ended
March 31, 1998, 1997 and 1996. The Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 includes the Company's consolidated balance
sheets as of June 30, 1998 (unaudited) and March 31, 1998, and the consolidated
statement of operations for the three months ended June 30, 1998 and 1997
(unaudited). All of the financial statements included within such Form 10-K and
Form 10-Q are herein collectively referred to as the "Financial Statements". The
Financial Statements are complete and accurate and present fairly, in all
material respects, the financial position of the Company and the results of its
operations and cash flow, all as of the dates of such Financial Statements. At
the respective dates of the balance sheets referred to in this Section 6.5, the
Company did not have any material liability or obligation of any nature, whether
accrued, absolute, fixed or contingent, and whether due or to become due, that,
in accordance with GAAP applied on a consistent basis, should have been shown or
reflected in the balance sheets but was not, except for the omission of notes in
unaudited balance sheets with respect to contingent liabilities that in the
aggregate did not materially exceed those so reported in the latest audited
balance sheets included in the Financial Statements and that were substantially
the same type as so reported. Since March 31, 1998, there has been no change in
the business or condition (financial or otherwise) of the Company which is
materially adverse to the Company, or to its business, operations, prospects or
condition (financial or otherwise), or any material increase in any contingent
liabilities of the Company, and no reports on Form 8-K have been filed by the
Company.
6.6 LITIGATION. There are no legal actions, suits, arbitrations,
investigations or any other legal, administrative or governmental proceedings
pending or, to the knowledge of the Company, threatened against the Company, its
properties, assets or business, which, if decided adversely, would have a
material adverse effect upon the business, properties, operations, prospects or
condition (financial or otherwise) of the Company. The Company is not in default
with respect to any judgment, order or decree of any court or any governmental
agency or instrumentality.
6.7 TITLE TO PROPERTIES AND ENCUMBRANCES. All property, including real
and personal property (tangible or intangible) that is used in, or available for
use in, the business or operations of the Company as now conducted, is owned,
leased or licensed by the Company, except for such property which if not owned,
leased or licensed by the Company, individually or in the aggregate, would not
have a material adverse effect upon the business, properties, operations,
prospects or condition (financial or otherwise) of the Company. The Company has
good and marketable title to all of its material properties and assets,
including, without limitation, the properties and assets reflected in the
Financial Statements, except for property disposed of in the ordinary course of
business since the date of the Financial
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Statements, subject to no mortgage, pledge, lien, charge, security interest,
encumbrance or restriction, except (a) those which are shown and described in
the Financial Statements or the notes thereto and (b) those which do not
materially affect the value of or interfere with the uses made of such
properties and assets.
6.8 SECURITIES LAWS. Based in part upon the representations and
warranties of Agbar contained in Section 7 of this Agreement, and except as
otherwise indicated in Section 3 of this Agreement, no consent, authorization,
approval, permit or order of, or filing with, any governmental or regulatory
authority is required under current laws and regulations in connection with the
execution and delivery of this Agreement, the performance by the Company of its
obligations hereunder or the offer, issuance, sale or delivery of the Preferred
Stock to Agbar, other than the filing of a Notice on Form D under the Act and
the qualification thereof, if required, under applicable state securities laws,
which qualification has been effected. Under the circumstances contemplated
hereby, the offer, issuance, sale and delivery of the Preferred Stock to Agbar
will not under current laws and regulations require compliance with the
prospectus delivery or registration requirements of the Act.
6.9 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
of its Certificate of Incorporation or its Bylaws, nor is it in violation of, or
in default under, any material lien, indenture, mortgage, lease, agreement,
instrument, commitment or arrangement, or subject to any restriction which would
prohibit the Company from entering into or performing its obligations under this
Agreement.
6.10 LICENSES AND PERMITS. The Company holds all material licenses,
permits and any other governmental approvals that are required to be held by the
Company or which are necessary to permit the Company to carry on its business as
now conducted.
6.11 DISCLOSURE. Neither the Report on Form 10-K for the year ended
March 31, 1998, the Report on Form 10-Q for the quarter ended June 30, 1998 nor
any representation or warranty of the Company in this Agreement or in any
writing furnished or to be furnished pursuant hereto or in connection herewith,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact required to be stated therein or herein or
necessary to make the statements therein or herein not misleading as of the date
of this Agreement.
7. REPRESENTATIONS AND WARRANTIES OF AGBAR. Agbar hereby represents and
warrants that:
7.1 INVESTMENT INTENT. The Preferred Stock (and the Common Stock into
which it is convertible) being acquired by Agbar hereunder is being acquired for
its own account and not with the view to, or for resale in connection with, any
distribution other than resales made in compliance with the registration and
prospectus delivery requirements of the Act. Agbar understands that neither the
Preferred Stock nor the Common Stock into which the Preferred Stock is
convertible has been registered under the Act by reason of exemptions from
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the registration and prospectus delivery requirements of the Act available
pursuant to Sections 3(b) or 4(2) thereof, that such shares must be held
indefinitely unless such shares are registered under the Act or unless any
transfer is exempt from registration, and that the reliance of the Company upon
this exemption is predicated in part upon this representation and warranty by
Agbar. Agbar understands that, unless such shares are registered under the Act,
Agbar may generally not sell the Preferred Stock or the Common Stock into which
the Preferred Stock is convertible pursuant to Rule 144, promulgated under the
Act by the Securities and Exchange Commission (the "Commission"), prior to the
expiration of the applicable holding period under Rule 144, and that any sales
pursuant to Rule 144 are limited in amount and can only be made in full
compliance with the provisions of Rule 144, which include specific requirements
that the Company is then providing certain information to the public with
respect to its business and financial affairs.
7.2 RESIDENCE AND QUALIFICATION AS AN ACCREDITED INVESTOR. Agbar's
principal office is located in Barcelona, Spain. Agbar is an Accredited Investor
within the meaning of Rule 501 under the Act and has such knowledge and
experience in financial and business matters that Agbar is capable of evaluating
the merits and risks of the investment to be made hereunder by Agbar.
7.3 ACTS AND PROCEEDINGS. This Agreement has been duly authorized by
all necessary action on Agbar's part and has been duly executed and delivered by
Agbar, and is a valid and binding agreement upon Agbar enforceable in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other laws relating to or affecting
the enforcement of creditors' rights generally and general principles of equity
(whether enforcement is sought by proceedings in equity or at law).
7.4 RECEIPT OF INFORMATION. Agbar has received (i) the Company's
Annual Report on Form 10-K for the year ended March 31, 1998 and the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and (ii) a
copy of the Certificate of Designations of the Company that fixes and determines
the rights, preferences, privileges and restrictions relating to the Preferred
Stock, and has read and is familiar with the terms and provisions thereof. Agbar
has had access to all of the Company's material books and records and access to
the Company's officers has been provided to Agbar or to Agbar's qualified
agents. Agbar has not read or relied upon any newspaper articles about the
Company in making the investment in Preferred Stock hereunder.
7.5 LEGEND. Agbar acknowledges and agrees that the certificates
representing the Preferred Stock, and the certificates representing the Common
Stock into which the Preferred Stock may be converted, shall bear the following
(or substantially equivalent) legend on the face or reverse side thereof:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS
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AMENDED AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT OR UNLESS SOLD
PURSUANT TO RULE 144 PROMULGATED UNDER SAID ACT, OR UNLESS, IN THE OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE
OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
PROVISIONS OF SAID ACT.
Any stock certificate issued at any time in exchange or substitution for any
certificate bearing such legend shall also bear such (or substantially
equivalent) legend unless, in the, opinion of counsel for the Company, the
securities represented thereby need no longer be subject to restrictions
pursuant to the Act or applicable state securities laws. The Company shall not
be required to transfer on its books any certificate for securities in violation
of the provisions of such legend.
8. REGISTRATION. Within 60 days following Agbar's written request, the
Company shall commence preparing and shall thereafter file with the Commission,
as soon as practicable, a registration statement under the Act on Form S-3
covering all of the Preferred Stock acquired by Agbar and all of the Common
Stock into which such Preferred Stock is convertible (such Preferred Stock and
Common Stock is hereinafter collectively referred to as the "Registered Stock"),
and the Company shall use its best efforts to cause such registration statement
to be declared effective by the Commission under the Act as soon as practicable.
Agbar shall be entitled to four demand registrations, and only those demand
registrations for which the relevant registration statement is declared
effective by the Commission shall be taken into account for purposes of
determining if Agbar has had such four demand registrations. The provisions of
this Section 8 shall apply to the initial Form S-3 registration statement and to
any other Form S-3 registration statement filed pursuant to this Section 8. The
Company shall use its best efforts to keep each of such registration statements
effective until the earlier to occur of: (i) the third anniversary of the
declaration of effectiveness of such registration statement, (ii) the sale by
Agbar of all the Registered Stock in public sales, or (iii) all such Registered
Stock may be sold pursuant to Rule 144 under the Act without limitation on the
amount of securities that may be sold (taking into account any aggregation rules
that may be applicable under Rule 144); and the Company shall file amendments to
the registration statement and otherwise comply with all applicable federal and
state securities laws and regulations as necessary and as promptly as possible
to permit continuing sales by the original purchasers during the period the
registration statement is required to be effective hereunder. The Company shall
not, however, be required to qualify the sale of Preferred Stock in any state if
the filing fees to be incurred to file for such qualification under the
securities laws of such state exceed $1,000. If Agbar transfers any of the
shares of Registered Stock to any of its affiliates, such affiliate(s) shall be
entitled to the same rights provided to Agbar pursuant to this Section 8;
provided, however, that in no event will the Company's obligations increase, in
any material respect, as a result of any such transfer.
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8.1 REGISTRATION PROCEDURES. In connection with the foregoing
registration of the Registered Stock under the Act, the Company will:
(a) Furnish to Agbar and to brokers or dealers effecting
transactions in the shares of the Registered Stock on behalf of Agbar such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as Agbar or such brokers
or dealers may reasonably request in order to facilitate the public sale of such
securities;
(b) Use its reasonable best efforts to register or qualify the
securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as Agbar may reasonably request, except that
the Company shall not for any purpose be required to execute a general consent
to service of process or to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified;
(c) Promptly notify Agbar of the time when such registration
statement has become effective or when a supplement to any prospectus included
in such registration statement has been filed;
(d) Notify Agbar promptly of any request by the Commission for
the amending or supplementing of such registration statement or prospectus or
for additional information;
(e) Promptly advise Agbar of the issuance of any stop order by
the Commission suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
8.2 EXPENSES.
(a) With respect to each inclusion of shares of the Registered
Stock in a registration statement pursuant to this Section 8, any and all fees,
costs and expenses of or incidental to, or incurred in connection with such
registration (as specified in paragraph (b) below) shall be borne by the
Company; PROVIDED, however, that Agbar shall bear any commissions and transfer
taxes related to sales of Registered Stock by Agbar.
(b) The fees, costs and expenses of or incidental to each such
registration to be borne by the Company as provided in paragraph (a) above shall
include, without limitation, all registration, fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered or qualified, fees and disbursements of one counsel for Agbar, and
any other expenses reasonably incurred by Agbar. All such fees, costs and
expenses shall
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be paid, or reimbursed by the Company to Agbar, as and when such fees, costs and
expenses are incurred, against documentation evidencing the incurrence thereof.
(c) Except as set forth in this Section 8, nothing in this
Agreement shall obligate the Company to undergo an audit other than as required
under rules of the Commission applicable to the Company or to keep any
registration statement filed pursuant to this Agreement current and effective.
8.3 INDEMNIFICATION.
(a) The Company shall indemnify, hold harmless and defend Agbar,
any underwriter (as defined in the Act), and each person, if any, who controls
Agbar or such underwriter within the meaning of the Act, from and against, and
will reimburse Agbar or such underwriter and each such controlling person with
respect to, any and all loss, damage, liability (joint and several), cost and
expense (as and when incurred), including without limitation, the costs of
investigation and defense of any legal action, proceeding or investigation, to
which Agbar or such underwriter or any such controlling person may become
subject under the Act, the Securities Exchange Act of 1934, as amended, or
otherwise, insofar as such losses, damages, liabilities, costs or expenses (i)
are caused by, arise out of, or are based upon any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto or any
other document incident to the registration of the Registered Stock under the
Act or the qualification of the Registered Stock under any state securities
laws, (ii) arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or (iii) arise out of or are based upon any federal or state
securities law, rule or regulation applicable to the Company and relating to
action or inaction by the Company in connection with any such registration or
qualification; PROVIDED, however, that the Company will not be liable in any
such case to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by Agbar, such underwriter or such controlling person in writing specifically
for use in the preparation thereof.
(b) Agbar will indemnify and hold harmless the Company, any
controlling person and any underwriter from and against, and will reimburse the
Company, any controlling person and any underwriter with respect to, any and all
loss, damage, liability, cost or expense to which the Company or any controlling
person and/or any underwriter may become subject under the Act, the Securities
Exchange Act of 1934, as amended, or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue or alleged untrue
statement of any material fact contained in such registration statement, any
prospectus contained therein or, any amendment or supplement thereto, or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light
12
of the circumstances in which they were made, not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by Agbar specifically for
use in the preparation thereof; and provided further, that the liability of
Agbar hereunder shall be limited to an amount equal to the aggregate public
offering price of such Registered Stock sold by Agbar in such offering.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this Section 8.3 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability hereunder, if such omission did not materially prejudice the
rights of the indemnifying party, or from any liability which it may have to any
indemnified party otherwise than hereunder. In case such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; PROVIDED, however, if the defendants in
any action include both the indemnifying party and the indemnified party and if
there is a conflict of interest which would prevent counsel for the indemnifying
party from also representing the indemnified party, or any of the indemnified
parties have available to them defenses or counterclaims not available to the
indemnifying party even though this does not result in a conflict of interest,
the indemnified parties shall have the right to select one separate counsel to
participate in the defense of such action on behalf of all such indemnified
party or parties at the expense of the Company. After notice from the
indemnifying party to such indemnified party of its election to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said paragraph (a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the proviso of
the preceding sentence, (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
of the action, or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
8.4 STAND-STILL OBLIGATIONS. If the Company offers shares of its
Common Stock to the public pursuant to a firm commitment underwriting, Agbar
shall, at the request of the relevant underwriters, agree not to sell any shares
of its Common Stock for a period of up to 120 days after the date of
effectiveness of the registration statement filed by the Company in connection
with its public offering. The period of any stand-still arrangement shall be
added to the period that the Company is obligated to maintain the effectiveness
of any registration statement(s) filed to register the shares of Preferred Stock
or Common Stock issuable
13
upon conversion of such shares of Preferred Stock pursuant to clause (i) of the
fifth sentence of Section 8.
9. PREEMPTIVE RIGHTS. So long as Agbar and its affiliates collectively hold
not less than 2.5% of the aggregate voting power of the Company (as defined
below), Agbar shall have the right to purchase Agbar's pro rata share of any new
issuances of capital stock or other equity securities, as follows:
9.1 ISSUANCES OF EQUITY SECURITIES FOR CASH. If the Company sells
Common Stock, any securities exchangeable for or convertible into Common Stock
or any warrants or options to acquire any Common Stock or any of such other
securities (collectively, "Equity Securities") for cash, Agbar shall have the
right to purchase its pro rata share of such Equity Securities upon the same
terms as such Equity Securities are being sold to other purchasers. In the case
of a sale of Equity Securities pursuant to a public offering registered under
the Act, the Company shall provide Agbar with written notice of such prospective
issuance at least 20 days prior to the initial filing of the related
registration statement. In the case of a sale of securities pursuant to a
private placement exempt from registration under the Act, the Company shall
provide Agbar with written notice of such prospective issuance at least 30 days
prior to the initial circulation of the private placement memorandum. Such
notice shall summarize the nature and amount of the Equity Securities that the
Company proposes to issue and the price and other terms with respect to such
prospective issuance. Agbar shall notify the Company of its election to purchase
all or any portion of its pro rata share of such Equity Securities not later
than the third business day preceding the public circulation of the preliminary
prospectus, with respect to a public offering of Equity Securities, or not later
than the third business day preceding the circulation of the private placement
memorandum to prospective investors, with respect to a private placement of
Equity Securities. Agbar shall have the right to assign it right to purchase
additional Equity Securities pursuant to the provisions of this Section 9.1 to
any of its affiliates.
9.2 ISSUANCES OF EQUITY SECURITIES FOR OTHER THAN CASH. If the Company
sells or issues Equity Securities for acquisitions of companies or properties,
or any other consideration other than cash, then at the time that the aggregate
dilution to Agbar's aggregate voting power (as calculated in the manner
contemplated by Section 9.4) caused by such transactions equals or exceeds 25%,
Agbar will have the right to purchase a sufficient amount of such Equity
Securities to restore its aggregate voting power to the level that existed prior
to the first of such issuances of Equity Securities for consideration other than
cash. If Agbar elects to purchase all or any portion of such Equity Securities,
the price that Agbar will pay will represent a weighted average, expressed in
cash, of the price of such Equity Securities at the time such transaction(s)
took place. To the extent that Common Stock was issued for consideration other
than cash, the price shall be equal to the last closing price of the Common
Stock on the date of such issuance(s). To the extent that Equity Securities
other than Common Stock were issued for consideration other than cash, the
price(s) shall be set in good faith by the Company's Board of Directors,
provided that such price(s) shall be subject to audit adjustment. In the event
of any audit adjustment, the purchase price paid by Agbar for any relevant
Equity
14
Securities shall be adjusted, and (i) Agbar shall pay additional consideration
to the Company within 10 days of receiving notice from the Company of an audit
adjustment resulting in an increase in such purchase price or (ii) the Company
shall pay to Agbar the amount of any reduction in such purchase price within 10
days of receiving notice from the Company's auditors of an audit adjustment
resulting in a decrease in such purchase price. The Company shall notify Agbar
when such 25% dilution threshold has been reached, and Agbar shall have 30 days
after receipt of such notice to notify the Company of its election to purchase
all or any portion of the Equity Securities Agbar has the right to purchase
pursuant to this paragraph, and Agbar shall pay the purchase price for such
securities within 10 days of such notice to the Company. Once Agbar has
indicated whether or not it will exercise its right to purchase securities
pursuant to this paragraph, and has, or has not, done so, a new period of
measurement of further dilution will begin, and Agbar will not be entitled to
make further purchases on account of such issuances of Equity Securities
pursuant to this paragraph until such future issuances shall have caused an
aggregate dilution to Agbar's aggregate voting power of 25% or more.
In addition to the rights provided for in the preceding paragraph of this
Section 9.2, if, during any fiscal year, the Company issues Equity Securities
for acquisitions of companies or properties, or any other consideration other
than cash, which causes the aggregate dilution to Agbar's aggregate voting power
(as calculated in the manner contemplated by Section 9.4) during such fiscal
year to equal or exceed 15%, Agbar will have the right to purchase a sufficient
amount of such Equity Securities to restore its aggregate voting power to the
level that existed prior to the first of such issuances of such Equity
Securities for consideration other than cash. If Agbar elects to purchase all or
any portion of such Equity Securities, the price that Agbar will pay will
represent a weighted average, expressed in cash, of the price of such securities
at the time such transaction(s) took place, and such price shall be determined
(and, as appropriate, adjusted) in the manner contemplated in the preceding
paragraph of this Section 9.2. The Company shall notify Agbar when such 15%
dilution threshold has been reached, and Agbar shall have 30 days after receipt
of such notice to notify the Company of its election to purchase all or any
portion of the Equity Securities Agbar has the right to purchase pursuant to
this paragraph, and Agbar shall pay the purchase price for such securities
within 10 days of such notice to the Company. Once Agbar has indicated whether
or not it will exercise its right to purchase securities pursuant to this
paragraph, and has, or has not, done so, a new period of measurement of further
dilution will begin, and Agbar will not be entitled to make further purchases on
account of such issuances of Equity Securities pursuant to this paragraph until
such future issuances shall have caused an aggregate dilution to Agbar during
such fiscal year or any future fiscal year of 15% or more. Agbar shall have the
right to assign it right to purchase additional Equity Securities pursuant to
the provisions of this Section 9.2 to any of its affiliates.
9.3 LIMITATIONS ON AGBAR'S PREEMPTIVE RIGHTS. Agbar will not have the
right to purchase a pro rata share of any new issuances of Equity Securities by
the Company as a result of (i) securities that are issued to any employee of the
Company pursuant to stock options or pursuant to an employee benefit or stock
plan or agreement approved by the Company's Board of Directors, and (ii) shares
of Common Stock issuable upon conversion of
15
any outstanding capital stock or exercise of warrants or debentures that are
outstanding as of the date of this Agreement.
9.4 DETERMINATION OF AGGREGATE VOTING POWER. For purposes of this
Section 9, Agbar's aggregate voting power shall be equal to the number of votes
represented by the shares of Common Stock, Preferred Stock (on an as converted
basis) or other Equity Securities held by Agbar and any of Agbar's affiliates
(after taking into account any purchases of additional shares of Common Stock,
Preferred Stock or other Equity Securities by Agbar or its affiliates from and
after the date of this Agreement) as a percentage of the total number of votes
represented by the Company's outstanding Common Stock, Series C Preferred,
Preferred Stock and any other class of capital stock of the Company that
generally votes with holders of the Common Stock. Agbar's pro rata share of any
new issuance of Equity Securities shall be equal to that number or amount of
such other Equity Securities that Agbar would need to purchase to preserve
Agbar's and its affiliates' aggregate voting power at the same level that
existed prior to such issuance of Equity Securities, as set forth in Sections
9.1 and 9.2. Any issuance of Equity Securities for consideration other than cash
shall not result in the termination of any of Agbar's rights provided for in
this Agreement or in the Certificate of Designations for the Preferred Stock
until Agbar has had an opportunity to purchase additional Equity Securities
pursuant to Section 9.2.
10. AGBAR'S BOARD RIGHTS--GENERALLY. Within three business days of the
Initial Closing, the Company shall appoint Xxxx Ras, Agbar's initial designee,
to serve on the Company's Board of Directors for an initial three-year term.
After giving effect to such appointment, the Company's Board of Directors shall
be comprised of no more than seven members. Xxxx Ras, and any substitute for
such initial designee, shall serve on each of the committees of the Company's
Board of Directors. Within three business days after the date that Agbar and any
of its affiliates have made an aggregate of $15,000,000 of direct investments in
the Company, whether through the purchase of Preferred Stock pursuant to the
provisions of this Agreement or otherwise, the Company will use its best efforts
to increase its Board of Directors to provide for a Board of Directors with up
to eight members and to appoint an additional person designated by Agbar to
serve on the Board of Directors for an initial three-year term. The Company will
also use its best efforts to increase the size of its Board of Directors and to
appoint an additional representative(s) of Agbar if necessary to assure that the
number of Board members designated by Agbar is equal to the total number of
members of the Board of Directors multiplied by Agbar's aggregate voting power,
as calculated in the manner contemplated by Section 9.4, and rounded up to the
nearest whole number. Except as otherwise provided in this Section 10, the
Company shall not increase the size of its Board unless such increase is
approved by each of Agbar's designees to the Board. Agbar shall have the right
to identify a substitute designee to replace any existing Agbar designee on the
Board, and the Company shall use its best efforts to effect any such
substitution upon Agbar's request.
Agbar and the Company acknowledge that the Board rights provided for in
this Section 10 are set forth in the Certificate of Designations for the
Preferred Stock and shall be exercised by the holders of Preferred Stock, as a
class, so long as Agbar and any of its
16
majority-owned subsidiaries collectively hold more than 50% of the outstanding
shares of Preferred Stock. To the extent the Board representation rights set
forth in this Section 10 are held by the holders of Preferred Stock, as a class,
Agbar shall not vote any shares of Common Stock it receives upon conversion of
shares of Preferred Stock for the election of members of the Company's Board of
Directors. If Agbar and any of its majority-owned subsidiaries collectively hold
less than 50% of the outstanding shares of Preferred Stock, the board
representation rights provided for in this Section 10 will be exercised pursuant
to the provisions of this Section 10 and not pursuant to the provisions of the
Certificate of Designations for the Preferred Stock. If at any time Agbar's
aggregate voting power as determined in the manner set forth in Section 9.4,
constitutes less than 2.5% of the total outstanding voting power, Agbar's rights
pursuant to this Section 10 shall terminate, and any members of the Board of
Directors designated by Agbar shall remain on the Board through the end of their
respective terms.
11. AGBAR'S BOARD RIGHTS UPON A DIVIDEND DEFAULT. The Company shall use its
best efforts to obtain the consent of the holders of Series C Preferred to an
amendment to Section 3(b) of the certificate of designations for the Series C
Preferred to authorize the holders of Preferred Stock to vote with holders of
the Series C Preferred to elect a majority of the members of the Company's Board
of Directors in the event that the Company fails to make the quarterly cash
dividend payments that holders of Preferred Stock are entitled to for six
consecutive quarters. The Company, at its expense, shall circulate a request for
such consent from the holders of Series C Preferred at such time as is mutually
agreed by Agbar and the Company. The form of the consent and the related
amendment to the certificate of designations for the Series C Preferred shall be
subject to Agbar's prior review and approval.
Until the Company has received the necessary consent of the holders of
Series C Preferred to the amendment to Section 3(b) of the certificate of
designations for the Series C Preferred, as contemplated by the preceding
paragraph, if (i) the Company fails to make the quarterly cash dividend payments
that holders of Preferred Stock are entitled to for six consecutive quarters and
(ii) holders of Series C Preferred have the right to elect a majority of the
members of the Company's Board of Directors pursuant to Section 3(b) of the
certificate of designations for the Series C Preferred, Agbar and the other
holders of the Preferred Stock shall have the right to elect all of the members
of the Company's Board of Directors, other than those elected by holders of
Series C Preferred. The Board rights provided for in this paragraph shall
continue until the Company has made the quarterly cash dividend payment that
holders of Preferred Stock are entitled to for four consecutive quarters. The
Company shall use its best efforts to obtain all resignations from members of
its Board of Directors necessary to give effect to the rights granted to holders
of Preferred Stock pursuant to the provisions of this paragraph. The rights
granted to holders of Preferred Stock set forth in the paragraph shall terminate
when the Company has received the necessary consent from the holders of Series C
Preferred to the amendment to Section 3(b) of the certificate of designations
for the Series C Preferred, as contemplated by the preceding paragraph.
17
Agbar and the Company acknowledge that the Board rights provided for in
this Section 11 are set forth in the Certificate of Designations for the
Preferred Stock and shall be exercised by the holders of Preferred Stock, as a
class.
12. DEVELOPMENT OF AGBAR'S WATER-RELATED BUSINESS. As a material
consideration to Agbar's agreement to enter into this Agreement, the Company has
agreed to assist Agbar to develop Agbar's water-related business in the United
States. The Company will provide such assistance to Agbar on an exclusive basis
with respect to all (i) water resource development, acquisition, storage or
distribution projects, (ii) water treatment and waste water treatment projects,
(iii) projects involving the development, maintenance or upgrading of other
water-related infrastructure assets and (iv) projects involving the development
or acquisition of any other water-related resource assets (collectively, the
"Projects") and shall do so in the following ways:
12.1 IDENTIFICATION OF OPPORTUNITIES. The Company expects that, in the
course of its activities in working with federal, state and municipal water
agencies and regulatory authorities and investor-owned water utilities, and in
dealing with owners of water resources and water rights, the Company may become
aware of opportunities for investment in or acquisition of Projects that may be
of interest to Agbar. The Company acknowledges that Agbar is interested in,
among other things, opportunities involving the retail sale and distribution of
water and water treatment projects and that the Company is not interested in
such business opportunities. The Company agrees that Agbar shall have the right
to expand this range of business opportunities that Agbar is interested in, and
the Company will assist Agbar in the development of such additional
opportunities in a manner that is consistent with the assistance that the
Company has agreed to provide Agbar pursuant to the provision of this Agreement.
From and after the date of this Agreement, the Company will promptly bring all
such Project opportunities exclusively to the attention of Agbar. To the extent
Agbar is interested in exploring and developing such opportunities, the Company
shall provide all reasonable assistance, including appropriate introductions, to
Agbar in connection with Agbar's pursuit of such opportunities, provided that
such assistance does not unreasonably interfere with the Company's activities in
developing its projects involving the wholesale distribution and storage of
water. In the event that such Projects are pursued by Agbar on a partnership
basis with other entities, it will give the Company an opportunity to
participate as a partner in such Projects, to the extent that the Company has
the financial capability and areas of expertise to participate in such
Project(s); provided, however, that Agbar shall not be required to have partners
in any such Projects. The Company shall provide the assistance to Agbar
contemplated by this Section 12 on an exclusive basis, and the Company will not
provide the same or any comparable type of assistance to any third party.
12.2 ADMINISTRATIVE SUPPORT. The Company will provide office space and
support for a reasonable number of Agbar employees, upon terms to be mutually
agreed upon by the Company and Agbar from time to time, who may be sent to the
United States, and will integrate such employees into its activities so that the
Agbar employees are trained and become familiarized with the U.S. water market
as a result of working at the Company.
18
12.3 AGBAR'S RIGHT OF FIRST REFUSAL TO PROVIDE EQUITY FOR CAPITAL
PROJECTS. In the event that the Company's Projects require capital investment in
facilities such as pipelines, water purification facilities, pumps or other
facilities, and the Company intends to seek external equity financing for such
facilities, it will give Agbar a right of first refusal to provide such
financing for such facilities on terms proposed by the Company. In connection
with its proposal to Agbar, the Company shall provide Agbar with information
concerning (i) the location, nature, and description of such Project, (ii) the
revenues and profits/losses anticipated to be generated from such Project,
including the estimated time period when such revenues and profits/losses are
expected to be realized, (iii) the anticipated amount and structure of the
proposed equity investment, including the proposed percentage ownership interest
in the Project, (iv) a budget for such Project, including a reasonable
itemization of the categories and related amounts of expenses that the Company
expects to incur in connection with such Project, (v) the anticipated
third-party debt financing that the Company expects to obtain in connection with
such Project and (vi) the identity and general business background and
experience of any third party that will play a meaningful role in the
development of the Project. The Company shall also provide Agbar with any such
additional information that Agbar reasonably requests. If, after a reasonable
period of time following receipt of such information, Agbar chooses not to
participate in such equity financing on the terms proposed by the Company, the
Company shall be free to seek equity financing from third parties on such terms
or on less favorable terms. If the Company thereafter chooses to seek equity
financing on terms that are more favorable than those first presented to Agbar,
or materially changes the nature of the Project from that first proposed to
Agbar, the Company will give Agbar a right of first refusal to provide such
equity financing on such more favorable terms. After Agbar has had a reasonable
period of time to evaluate any such revised proposal, Agbar shall notify the
Company whether Agbar elects to provide such equity financing on the revised
terms presented to Agbar. If Agbar elects not to provide such financing, the
Company shall be free to obtain such equity financing from a third party on such
terms or on less favorable terms. If the Company thereafter chooses to seek
equity financing on terms that are more favorable than the revised terms
presented to Agbar or if the Company materially changes the nature of the
Project from that subsequently proposed to Agbar, the Company shall again offer
Agbar the right to provide such equity financing in the manner provided for
above.
12.4 FURTHER COOPERATION. In assisting Agbar in the development of its
U.S. business activities, the Company and Agbar shall act in good faith and in a
manner consistent with the intent and spirit of this Agreement. Agbar and the
Company recognize that the time constraints in completing business transactions,
or making irrevocable commitments to undertake business transactions, may
require some latitude in the time period of presenting an opportunity to the
other party to participate in a specific project or transaction. Both parties
recognize that the representation of Agbar on the Company's Board of Directors
will facilitate the delivery of sufficient notice to Agbar of transactions that
Agbar may have an interest in participating in. To the extent that any
transaction contemplated by this Agreement constitutes a "Business Combination",
as such term is defined in Article VII, Section A, paragraph (2) of the
Company's Certificate of Corporation, the Company and Agbar shall cooperate to
have such transaction presented for approval in the manner contemplated by such
Article VII. The
19
Company shall also provide Agbar and its designees to the Company's Board of
Directors with sufficient notice of matters to be presented to the Company's
Board of Directors or stockholders, and, to the extent necessary or appropriate,
such notices shall be provided sooner than the minimum advance time for any such
notices as set forth in the Company's Certificate of Incorporation or Bylaws.
12.5 TERMINATION OF AGBAR'S RIGHTS. Agbar's rights provided for in
this Section 12 shall terminate upon the earlier of (i) October 15, 2008 or (ii)
such time as Agbar's aggregate voting, determined in the manner provided for in
Section 9.4, constitutes less than 2.5% of the total outstanding voting power of
the Company; provided, however, that if, on October 15, 2008, Agbar holds at
least 15% of the aggregate voting power of the Company, determined in the manner
provided for in Section 9.4, Agbar's rights as provided for in this Section 12
shall continue until the earlier of (i) October 15, 2018 or (ii) such time as
Agbar's aggregate voting power, determined in the manner provided for in Section
9.4, constitutes less than 2.5% of the total outstanding voting power of the
Company.
13. RESTRICTIONS ON SALES OF EQUITY SECURITIES. If the Company's Board of
Directors has approved the Company's participation in a Project, but such
participation has not been approved by each of Agbar's designees to the Board,
the Company may pursue such Project and may sell shares of capital stock or
other Equity Securities as necessary to finance such Project subject to the
restrictions set forth in this Section 13 In that event, Agbar will not be
obligated to purchase shares of Preferred Stock pursuant to the provisions of
Section 3 of this Agreement but will retain the option to purchase its pro rata
share of any newly-issued Equity Securities pursuant to the provisions of
Section 9 of this Agreement. If, at the time the Company is seeking to sell
shares of capital stock or other Equity Securities as necessary to finance any
Project not approved by each of Agbar's designees to Western Water's Board of
Directors, Agbar and any of its affiliates have made an aggregate of $15,000,000
of direct investments in the Company, whether through the purchase of Preferred
Stock pursuant to the provisions of this Agreement or otherwise, (i) the Company
may not sell such shares of capital stock or other Equity Securities with a
total issue price of $10,000,000 or less, in one or a related series of
issuances, to any person or entity other than Agbar or any of Agbar's
affiliates, without Agbar's prior written consent, and (ii) the Company may only
sell such shares of capital stock or other Equity Securities with a total issue
price of $10,000,000 or more, in one or a related series of issuances, pursuant
to (a) any number of underwritten public offerings registered with the
Commission or (b) not more than one private placement of Equity Securities, and
no single purchaser, together with any affiliates of such purchaser, shall
acquire more than $5,000,000 of Equity Securities sold pursuant to such private
placement. In no event, however, shall the Company sell capital stock or other
Equity Securities to any individual, corporation, partnership or other entity
who or which is involved in the retail sale of water or other businesses that
are comparable to Agbar's lines of business. The restrictions on the Company's
right to sell capital stock or other Equity Securities pursuant to the
provisions of this Section 13 shall terminate at the earlier of (i) October 15,
2008 or (ii) such time as Agbar's aggregate voting, determined in the manner
provided for in Section 9.4, constitutes less than 2.5% of the total outstanding
voting power of the Company; provided, however, that the Company will continue
to be subject to the
20
restrictions set forth in this Section 13 if, on October 15, 2008, Agbar holds
at least 15% of the aggregate voting power of the Company, determined in the
manner provided for in Section 9.4, such restrictions shall continue until the
earlier of (i) October 15, 2018 or (ii) such time as Agbar's aggregate voting,
determined in the manner provided for in Section 9.4, constitutes less than 2.5%
of the total outstanding voting power of the Company.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All representations
and warranties contained herein shall survive the execution and delivery of this
Agreement and the sale and purchase of the Preferred Stock and payment therefor.
All statements contained in any certificate, instrument or other writing
delivered by or on behalf of the Company pursuant hereto or in connection with
or in contemplation of the transactions herein contemplated shall constitute
representations and warranties by the Company hereunder.
15. PARTIES IN INTEREST. Except as otherwise expressly provided herein, all
the terms and provisions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not, and, in particular, shall inure
to the benefit of and be enforceable by the holder or holders at the time of any
of the Preferred Stock.
16. HEADINGS. The headings of the Sections and paragraphs of this Agreement
have been inserted for convenience of reference only and do not constitute a
part of this Agreement.
17. CHOICE OF LAW. It is the intention of the parties that the validity of
this Agreement, the construction of its terms and the interpretation of the
rights and duties of the parties hereunder shall be governed by the laws of the
State of California without regard to the principles of conflicts of laws
thereof.
18. COUNTERPARTS. This Agreement may be executed concurrently 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
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date first written above.
WESTERN WATER COMPANY, SOCIEDAD GENERAL de AGUAS de
a Delaware corporation BARCELONA, S.A., a Spanish
corporation
By: /s/ By: /s/
-------------------------------- -------------------------------------
Name: Xxxxxxx Xxxxxxx Xxxxxx Name: Xxxx Ras
Title: President, CEO Title: Director General
