EXHIBIT 3
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-
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").
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
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,
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
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
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
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
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.
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
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
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
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
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
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
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.
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.
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
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
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
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
