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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 27, 1998
WESTERN WATER COMPANY
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE
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(State or Other Jurisdiction of Incorporation)
0-18756 33-0085833
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(Commission File Number) (I.R.S. Employer Identification No.)
4660 LA JOLLA VILLAGE DRIVE, SUITE 825, SAN DIEGO, CALIFORNIA 92122
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(Address of Principal Executive Offices) (Zip Code)
(619) 535-9282
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Registrant's Telephone Number, Including Area Code
NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On October 13, 1998, Western Water Company (the "Corporation") entered
into a certain Strategic Relationship Agreement (the "Agreement") with Sociedad
General de Aguas de Barcelona, a Spanish corporation ("Agbar") to sell to Agbar,
or to a subsidiary of Agbar, $10,000,000 of Series D Convertible Redeemable
Preferred Stock, par value $.001 per share ("Series D Preferred"), at a cash
purchase price of $1,000 per share. In accordance with the terms of the
Agreement, Agbar assigned its right purchase the shares to Interagua, Servicios
Integrales del Agua, S.A., a Spanish corporation, 50% of whose outstanding
equity securities are owned by Agbar ("Interagua"). On October 27, 1998,
pursuant to the Agreement, Interagua purchased 10,000 shares of the Series D
Preferred for an aggregate cash purchase price of $10,000,000.
Under the terms of the Agreement, Agbar has also agreed to purchase from
the Corporation, during the two-year period ending October 31, 2000, up to an
additional 15,000 shares of Series D Preferred at a cash purchase price of
$1,000 per share, subject to satisfaction of the conditions set forth in the
Agreement. Agbar also has the right to assign the right to purchase these
additional shares of Series D Preferred to any of its affiliates. Pursuant to
the terms of the Agreement, the Corporation has appointed Agbar's designee, Juan
Ras, to the Corporation's Board of Directors, and has agreed to expand its Board
of Directors in the future by an additional member and to appoint an additional
Agbar designee to the Corporation's expanded Board of Directors following the
date on which Agbar or its affiliates have made a total of $15,000,000 of direct
investments in the Corporation.
Under the terms of the Agreement, the Corporation has agreed to assist
Agbar to develop Agbar's water-related business in the United States, and has
granted Agbar certain preemptive, registration and other rights.
The 10,000 shares of Series D Preferred that Interagua has purchased are
initially convertible into shares of the Corporation's Common Stock at a
conversion price of $8.99 per share (or 1,112,347 shares of Common Stock). Based
on the number of shares currently outstanding, if all shares of Series D
Preferred purchased by Interagua were converted, the 1,112,347 shares of Common
Stock that Interagua would receive upon conversion would represent 11.9% of the
total number of such shares of the Corporation's Common Stock outstanding after
the conversion. The initial dividend rate for the Series D Preferred is 7.5% per
annum. The dividend rate for additional shares of Series D Preferred that may
hereafter be issued will be based on the average annual yield on the 10-year
U.S. Treasury Bond. Dividends are payable quarterly in cash.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired:
Not applicable.
(b) Pro forma financial statements:
Not applicable
(c) Exhibits:
(4) Certificate of Designations of Series D Convertible
Redeemable Preferred Stock.
(10) Strategic Relationship Agreement, dated October 13, 1998,
by and between Western Water Company and Sociedad General
de Aguas de Barcelona, S.A.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WESTERN WATER COMPANY
(Registrant)
Date: November 25, 1998 By: /s/ Ronald I. Simon
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Ronald I. Simon
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
4 Certificate of Designations of Series D Convertible Redeemable
Preferred Stock.
10 Strategic Relationship Agreement, dated October 13, 1998, by and
between Western Water Company and Sociedad General de Aguas de
Barcelona, S.A.
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Exhibit 4
WESTERN WATER COMPANY
CERTIFICATE OF DESIGNATIONS
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Pursuant to Section 151
of the General Corporation Law of the State of Delaware
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Western Water Company (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware does hereby
certify that pursuant to the provisions Section 151 of the General Corporation
Law of the State of Delaware, its Board of Directors, by unanimous written
consent adopted the following resolution, which resolution remains in full force
and effect as of the date hereof:
WHEREAS, the Board of Directors of the Corporation (the "Board of
Directors") is authorized, within the limitations and restrictions stated in the
Corporation's Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), to fix by resolution or resolutions the designation, powers,
preferences, voting rights and other rights of each series of preferred stock,
and the qualifications, limitations or restrictions thereof, and such other
subjects or matters as may be fixed by resolution or resolutions of the Board of
Directors under the General Corporation Law of Delaware;
WHEREAS, the Corporation has previously designated a series of preferred
stock called Series C Convertible Redeemable Preferred Stock ("Series C
Preferred Stock") and authorized 15,000 shares with a value of $1,000 per share
of such Series C Preferred Stock;
WHEREAS, other than the shares of the Series C Preferred Stock, there
are no other series of preferred stock currently issued or outstanding; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of a new series of
preferred stock and the number of shares constituting such series:
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such
series of preferred stock on the terms and with the provisions herein set forth:
1. DESIGNATION OF SERIES. The designation of such series of preferred stock is
Series D Convertible Redeemable Preferred Stock ("Series D Preferred Stock").
The number of shares constituting such series is 25,000, with a value of $1,000
per share for the purpose of calculating dividends and amounts payable upon
liquidation, dissolution or
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winding up ("stated value"). Shares of Series D Preferred Stock redeemed or
purchased by the Corporation shall be canceled and shall revert to authorized
but unissued shares of preferred stock undesignated as to series.
2. RANK. The Series D Preferred Stock shall, with respect to payment of
dividends, redemption payments and rights upon liquidation, dissolution or
winding up of the affairs of the Corporation, rank (a) senior and prior to the
Common Stock, par value $.001 per share (the "Common Stock"), and any additional
series of preferred stock which may in the future be issued by the Corporation,
except and to the extent the holders of the Series D Preferred Stock vote to
permit any such series of preferred stock to rank on a parity with or senior to
the shares of the Series D Preferred Stock; and (b) pari passu with the shares
of the Series C Preferred Stock with respect to the payment of dividends,
redemption payments and rights upon liquidation, dissolution or winding up of
the affairs of the Corporation. Any shares of the Corporation's capital stock
that are junior to the shares of the Series D Preferred Stock with respect to
the payment of dividends are hereinafter referred to as "Junior Dividend Shares"
and any shares which are junior to the shares of the Series D Preferred Stock
with respect to redemption, payment and rights upon liquidation, dissolution or
winding up of the affairs of the Corporation are hereinafter referred to as
"Junior Liquidation Shares;" the shares of the Series C Preferred Stock and any
other shares of capital stock that the Corporation may hereafter issue, with the
consent of the holders of the Series D Preferred Stock, which are pari passu
with the shares of the Series D Preferred Stock with respect to the payment of
dividends are hereinafter referred to as "Parity Dividend Shares," and the
shares of Series C Preferred Stock and any additional shares that the
Corporation may hereafter issue, with the consent of the holders of the Series D
Preferred Stock, which are pari passu with the shares of the Series D Preferred
Stock with respect to redemption, payment and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation are hereinafter
referred to as "Parity Liquidation Shares;" and any shares of the Corporation's
capital stock that the Corporation may hereafter issue, with the consent of the
holders of the Series D Preferred Stock, which are senior to the shares of the
Series D Preferred Stock with respect to the payment of dividends are
hereinafter referred to as "Senior Dividend Shares" and any shares which are
senior to the shares of the Series D Preferred Stock with respect to redemption,
payment and rights upon liquidation, dissolution or winding up of the affairs of
the Corporation are hereinafter referred to as "Senior Liquidation Shares." The
Corporation may issue additional shares of capital stock ranking junior to the
Series D Preferred Stock as to the payment of dividends and as to voting rights
and rights in liquidation, dissolution or winding up of the affairs of the
Corporation without the consent of the holders of the Series D Preferred Stock.
3. DIVIDENDS. a. The dividend rate on the first 10,000 shares of Series D
Preferred Stock issued (the "Initial 10,000 Shares") shall be 7.50% per annum.
The annual dividend rate for any shares of the Series D Preferred Stock issued
after the issuance of the Initial 10,000 Shares shall be set at the time such
additional shares of Series D Preferred Stock are issued and shall be equal to
the average annual yield on the 10-year U.S. Treasury Bond in effect for the 20
business-day period preceding the date of issuance of such additional shares,
plus 220 basis points, rounded to the nearest 1/8%.
2.
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Dividends on shares of the Series D Preferred Stock shall be fully cumulative,
accruing from the date of original issuance of the shares of Series D Preferred
Stock through the date of redemption or conversion thereof, and shall be payable
quarterly in arrears, when, as and if declared by the Board of Directors out of
funds legally available for the payment of dividends, on March 15, June 15,
September 15 and December 15 of each year, commencing December 15, 1998, except
that if such date is not a business day then the dividend shall be payable on
the first immediately succeeding business day (as used herein, the term
"business day" shall mean any day except a Saturday, Sunday or day on which
banking institutions are legally authorized to close in San Diego, California)
(each such period being hereinafter referred to as a "Quarterly Dividend
Period"). Dividends shall be payable in cash. Unless the holders of more than
50% of the outstanding shares of Series D Preferred Stock otherwise agree, the
Board of Directors shall declare such dividends each such quarter provided that
the Corporation has the legal authority to pay such dividend pursuant to Section
170 of the General Corporation Law of the State of Delaware. Each dividend shall
be paid to the holders of record of shares of the Series D Preferred Stock as
they appear on the stock register of the Corporation on the record date, not
less than 10 nor more than 60 days preceding the payment date thereof, as shall
be fixed by the Board of Directors. Dividends payable for each Quarterly
Dividend Period shall be computed on the basis of a 360-day year of twelve
30-day months. Dividends on account of arrearages for any past Quarterly
Dividend Period may be declared and paid at any time, without reference to any
regular dividend payment date, to holders of record on such date, not exceeding
45 days preceding the payment date thereof, as may be fixed by the Board of
Directors of the Corporation. Dividends shall accrue regardless of whether the
Corporation has earnings, whether there are funds legally available therefor and
whether declared. Dividend payments that may be in arrears shall accrue interest
at the dividend rate applicable to such shares until paid in full. Holders of
shares of the Series D Preferred Stock called for redemption between the close
of business on a dividend payment record date and the close of business on the
corresponding dividend payment date shall, in lieu of receiving such dividend on
the dividend payment date fixed therefor, receive such dividend payment on the
date fixed for redemption together with all other accrued and unpaid dividends
to the date fixed for redemption. The holders of shares of the Series D
Preferred Stock shall not be entitled to any dividends other than the cash
dividends provided for in this Paragraph 3.
b. No dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any Parity Dividend Shares
for any period unless full cumulative dividends have been or contemporaneously
are declared and paid or declared and set aside for payment for all accrued
dividends with respect to the Series D Preferred Stock through the most recent
quarterly dividend period ending on or prior to the date of payment. Unless
dividends accrued and payable but unpaid on shares of the Series D Preferred
Stock and any Parity Dividend Shares at the time outstanding have been paid in
full, all dividends declared by the Corporation upon shares of the Series D
Preferred Stock or Parity Dividend Shares shall be declared and paid pro rata
with respect to all such shares, so that the amounts of any dividends declared
on shares of the Series D Preferred Stock and the Parity Dividend Shares shall
in all cases bear to each other the
3.
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same ratio that, at the time of the declaration, all accrued but unpaid
dividends on shares of the Series D Preferred Stock and the other Parity
Dividend Shares, respectively, bear to each other.
c. If at any time the Corporation has failed to pay or set apart for
payment all accrued dividends on any shares of the Series D Preferred Stock
through the then most recent quarterly dividend period, the Corporation shall
not, and shall not permit any corporation or any other entity directly or
indirectly controlled by the Corporation to:
(i) declare or pay or set aside for payment any dividend or other
distribution on or with respect to the Junior Dividend Shares, whether in cash,
securities, obligations or otherwise (other than dividends or distributions paid
in shares of Junior Stock, or options, warrants or rights to subscribe for or
purchase shares of Junior Stock); or
(ii) redeem, purchase or otherwise acquire, or pay into, set
apart money or make available for a sinking or other analogous fund for the
redemption, purchase or other acquisition of, any shares of Parity Dividend
Shares, Parity Liquidation Shares or Shares of Junior Stock for any
consideration (except by conversion into or exchange for Junior Stock), unless,
in each such case, all dividends accrued on shares of the Series D Preferred
Stock through the most recent quarterly dividend period and on any Parity
Dividend Shares have been or contemporaneously are declared and paid in full.
d. Any reference to "distribution" contained in this Paragraph 3 shall
not be deemed to include any distribution made in connection with any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary.
4. LIQUIDATION.
a. The liquidation value per share of shares of the Series D Preferred
Stock, in case of the voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Corporation, shall be $1,000 per share, plus an
amount equal to the dividends accrued and unpaid thereon, whether or not
declared, to the payment date (such aggregate amount being hereinafter referred
to as the "Liquidation Preference"). For purposes of using the definition of
Liquidation Preference in connection with any redemption of shares of Series D
Preferred Stock, the date of redemption shall be substituted for the payment
date referred to in the preceding sentence.
b. In the event of any voluntary or involuntary liquidation, Deemed
Liquidation (as defined in subparagraph 4c, below), dissolution or winding-up of
the Corporation, the holders of shares of the Series D Preferred Stock (i) shall
not be entitled to receive the liquidation value of the shares held by them
until the liquidation value of all Senior Liquidation Shares shall have been
paid in full and (ii) shall be entitled to receive out of the assets of the
Corporation, whether such assets are capital or surplus of any
4.
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nature, an amount per share equal to the Liquidation Preference of such shares
held by them in preference to and in priority over any distributions upon the
Junior Liquidation Shares. Upon payment in full of the Liquidation Preference to
which the holders of shares of the Series D Preferred Stock are entitled, the
holders of shares of the Series D Preferred Stock will not be entitled to any
further participation in any distribution of assets by the Corporation. If, in a
liquidation other than Deemed Liquidation (as defined in subparagraph 4c.
below), the assets of the Corporation are not sufficient to pay in full the
Liquidation Preference payable to the holders of shares of the Series D
Preferred Stock and the liquidation value payable to the holders of any Parity
Liquidation Shares, the holders of all such shares shall share ratably in such
distribution of assets in accordance with the amounts that would be payable on
the distribution if the amounts to which the holders of shares of the Series D
Preferred Stock and the holders of Parity Liquidation Shares are entitled were
paid in full.
c. Except in a Deemed Liquidation (as defined below), neither a
consolidation or merger of the Corporation with or into any other entity, nor a
merger of any other entity with or into the Corporation, nor a sale or transfer
of all or any part of the Corporation's assets for cash or securities or other
property shall be considered a liquidation, dissolution or winding-up of the
Corporation within the meaning of this Paragraph 4. However, a merger,
consolidation, sale of assets or other transaction that results in a Change of
Control (as defined below) will be deemed, for the purposes of this Paragraph 4,
to be a liquidation (a "Deemed Liquidation") unless (i) 50% of the then
outstanding shares of the Series D Preferred Stock agree otherwise, or (ii) the
Series C Amendment (as defined below) has occurred prior to the date of such
merger, consolidation, sale of assets or other transaction. A "Change of
Control" with respect to the Corporation shall be deemed to have occurred (i)
upon consummation of a merger, consolidation, sale of or transfer of the
Corporation's assets or other similar transaction if, upon such consummation,
the holders of shares of the Corporation's capital stock immediately prior to
such transaction do not own shares of capital stock of the entity that results
from the consummation of any such transaction representing more than 50% of the
voting power of all shares of capital stock of such resulting entity or (ii) at
such time as any person (within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), including a
group (within the meaning of Rule 13d-5 under the Exchange Act), together with
any of such person's affiliates or associates, is or becomes the direct or
indirect beneficial owner (as defined in Section 13 of the Exchange Act and the
rules and regulations promulgated by the Securities and Exchange Commission
thereunder) of shares of capital stock of the Corporation representing in excess
of 50% of the total voting power of all shares of capital stock entitled to vote
in the election of directors of the Corporation under ordinary circumstances or
to elect a majority of the Board of Directors of the Corporation. The "Series C
Amendment" shall be deemed to have occurred when Paragraph 3(b) of the
certificate of designations for the Series C Preferred has been amended to
authorize the holders of Series D Preferred Stock to vote together with the
holders of the Series C Preferred Stock to elect a majority of the members of
the Corporation's Board of Directors in the event that the Corporation fails to
make the quarterly cash dividend
5.
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payments that holders of Series D Preferred Stock are entitled to for six
consecutive quarters.
d. Written notice of any liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when and the place or places
where the amounts distributable in such circumstances shall be payable, shall be
given by first class mail, postage prepaid, not less than 30 days prior to any
payment date stated therein, to the holders of shares of the Series D Preferred
Stock at their respective addresses as the same shall appear on the books of the
transfer agent with respect to the Series D Preferred Stock.
5. VOTING
a. General Voting Rights. The holders of Series D Preferred Stock shall
be entitled to vote upon all matters presented to the stockholders, together
with the holders of the Series C Preferred Stock and the Common Stock as one
class, except as otherwise required by law. Each share of Series D Preferred
Stock shall entitle the holder thereof to that number of votes equal to the
number of shares of Common Stock into which each such share of Series D
Preferred Stock would have been convertible, if such conversion had taken place
on the record date set for determining stockholders entitled to vote at a
meeting or the date of the consent of stockholders if action is being taken by
written consent.
b. Special Voting Rights. Upon the issuance of the Initial 10,000
Shares, the holders of Series D Preferred Stock shall have the right to
designate one member of the Corporation's Board of Directors, and the Board of
Directors shall take all steps necessary to appoint such designee to the Board
of Directors within three business days of the date the Corporation is informed
of the name of such designee by the holder(s) of more than 50% of the Initial
10,000 Shares. After giving effect to such appointment, the Corporation's Board
of Directors shall be comprised of no more than seven members. The initial
designee, and any substitute for such initial designee, shall serve on the Board
of Directors for an initial three-year term and shall serve on each of the
committees of the Corporation's Board of Directors. Within three business days
after the holder(s) of Series D Preferred Stock have made direct investments in
the Corporation of not less than $15,000,000, whether through the purchase of
Series D Preferred Stock, or otherwise, the Corporation and the Corporation's
Board of Directors shall take all steps necessary to increase the size of the
Board of Directors to provide for a Board of Directors with up to eight members
and to appoint an additional person designated by the holders of more than 50%
of the then outstanding shares of Series D Preferred Stock to serve on the Board
of Directors for an initial three-year term. Except as otherwise provided in
this paragraph, the Corporation shall not increase the size of its Board of
Directors unless such increase is approved by each of the designees to the Board
of the Directors identified by the holder(s) of more than 50% of the outstanding
shares of Series D Preferred Stock. Such holder(s) shall have the right to
identify a substitute designee to replace any of such holder's designees on the
Corporation's Board of Directors, and the Corporation and the
6.
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Corporation's Board of Directors shall take all steps necessary to effect any
such substitution upon the request of such holder(s). The rights set forth in
this paragraph shall terminate if the initial purchaser of shares of Series D
Preferred Stock and any wholly-owned subsidiary of such purchaser hold less than
50% of the outstanding shares of Series D Preferred Stock.
c. Board Rights Upon a Dividend Default. Until the Series C Amendment
has occurred, if (i) the Corporation fails to make the quarterly cash dividend
payments that holders of Series D Preferred Stock are entitled to for six
consecutive quarters and (ii) holders of Series C Preferred Stock have the right
to elect a majority of the members of the Corporation's Board of Directors
pursuant to Paragraph 3(b) of the certificate of designations for the Series C
Preferred Stock, the holders of Series D Preferred Stock shall have the right to
elect all of the members of the Corporation's Board of Directors, other than
those elected by holders of Series C Preferred Stock. Such right in the Series D
Preferred Stock shall continue until cash dividends shall have been declared and
paid or set apart for at least four consecutive quarterly periods, after which
the right to elect directors shall revert to the Common Stock, the Series C
Preferred Stock and the Series D Preferred Stock voting as a single class
(subject to rights granted to holders of the Series D Preferred Stock pursuant
to paragraph 5b), subject to renewal of the voting right of the Series C
Preferred Stock and the Series D Preferred Stock from time to time in the event
of the nonpayment of dividends as described above. At any time after the right
to elect directors is vested in the Series D Preferred Stock, and at any time
after the exclusive right to elect directors shall revert to the Common Stock,
the Series C Preferred Stock and the Series D Preferred Stock (subject to rights
granted to holders of the Series D Preferred Stock pursuant to paragraph 5b),
the holders of 5% or more of the outstanding shares of Series D Preferred Stock,
the Series C Preferred Stock or Common Stock, as the case may be, have a right
to call a special meeting of stockholders for the purpose of electing all of the
members of the board of directors, such right to be exercisable by delivering a
request in writing for the calling of the special meeting to the President or
Secretary, or to the Chairman of the Board or a Vice President if there be such.
The officer receiving the request shall forthwith cause notice to be given to
the stockholders entitled to vote that a meeting will be held at a time
requested by the person or persons calling the meeting, not less than 35 or more
than 90 days after the receipt of the request. Upon the election of directors by
the Series D Preferred Stock at a special meeting, the terms of all persons who
were directors immediately prior thereto, other than those elected by holders of
Series C Preferred Stock, shall terminate and the directors elected by the
Series D Preferred Stock together with those elected at the special meeting by
the Series C Preferred Stock shall constitute the directors of the Corporation
until the next annual meeting. Upon the election of directors by the Common
Stock, the Series C Preferred Stock and the Series D Preferred Stock at a
special meeting after the exclusive right to elect directors has reverted to the
Common Stock, the Series C Preferred Stock and the Series D Preferred Stock
(subject to rights granted to holders of the Series D Preferred Stock pursuant
to paragraph 5b), the terms of all persons who were directors immediately prior
thereto pursuant to this paragraph shall terminate and the directors elected by
the Common Stock, the Series C Preferred Stock and Series D Preferred Stock
(subject to
7.
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rights granted to holders of the Series D Preferred Stock pursuant to paragraph
5b), at the special meeting shall constitute the directors of the Corporation
until the next annual meeting.
d. Protective Voting Rights. The consent of the holders of at least
66.67% of the shares of the Series D Preferred Stock outstanding at the time,
given in person, by written consent or by proxy at any special or annual
meeting, shall be necessary to permit, effect or validate any one or more of the
following:
(i) The authorization, creation or issuance of any class or
series of stock, or any security convertible into stock of such class of series,
ranking senior to or on parity with the Series D Preferred Stock as to voting
rights, dividends or the distribution of assets upon liquidation, dissolution or
winding up;
(ii) The merger or consolidation of the Corporation in which the
Corporation is not the surviving entity, the sale of all or substantially all of
the assets or stock of the Corporation, the liquidation of the Corporation or
other similar capital event with respect to the Corporation, or the issuance by
the Corporation of capital stock or other equity securities for consideration
other than cash, in one or a related series of transactions, where such issuance
represents more than 33.33% of the aggregate voting power of the Corporation's
outstanding capital stock immediately prior to such issuance;
(iii) Repurchases of Common Stock, or dividends or distributions
to the holders of Common Stock, other than repurchases in the ordinary course of
business of shares of Common Stock held by the Corporation's employees and such
additional repurchases that are effected pursuant to a share repurchase program
approved by the Corporation's Board of Directors if such repurchases do not
exceed, on a cumulative basis commencing on the date of the first issuance of
the Series D Preferred Stock, a total of (x) $500,000 plus (ii) 15% of the
Corporation's cumulative net income from the date of issuance of the Initial
10,000 Shares to the date of any such repurchase.
(iv) The amendment, alteration or repeal of any of the provisions
of the Certificate of Incorporation (including this Certificate of Designations)
which would (x) affect the number of shares of Series D Preferred Stock
authorized to be issued or any right, preference, privilege of the Series D
Preferred Stock, or (z) change the voting rights granted to any shares of the
Corporation's capital stock; or
(v) Any material transaction between the Corporation and any
officer, director, beneficial holder of 5% or more of the Corporation's
outstanding voting shares, if such transaction has not been approved by a
majority of the Disinterested Members. A director shall be considered a
"Disinterested Director" if the director (i) is not an officer or employee of
the Corporation, or (ii) does not have a relationship that, in the opinion of
the Board of Directors, would interfere with his exercise of independent
judgment in carrying out the responsibilities of a director.
8.
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The consent of the holders of the Series D Preferred Stock to any of the
transactions listed in subparagraph (d)(ii) above shall not be required if, at
the time of any such merger, consolidation, sale or other capital event, the
shares of capital stock owned by Sociedad General de Aguas de Barcelona, S.A.,
and any of its majority-owned subsidiaries, constitutes 5% or less of the
aggregate voting power of the Corporation.
e. Determination of Aggregate Voting Power. The aggregate voting power
of the Series D Preferred Stock shall be equal to the number of votes
represented by the outstanding shares of Series D Preferred Stock (on an
as-converted basis) as a percentage of the total number of votes represented by
the Corporation's outstanding Common Stock, Series C Preferred Stock, Series D
Preferred Stock and any other class of capital stock of the Corporation that
generally votes with holders of the Common Stock.
6. CONVERSION RIGHTS. The holder of any shares of Series D Preferred Stock shall
have the right at any time commencing from the date of issuance to convert any
of his or her shares of Series D Preferred Stock into duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock of the Corporation
at the Conversion Price, as defined herein, and upon the terms set forth herein.
7. CONVERSION PRICE. Each share of Series D Preferred Stock shall be converted
into a number of shares of Common Stock determined by dividing (i) $1,000 by
(ii) the Con version Price of such shares as in effect on the Conversion Date.
The initial Conversion Price for the Initial 10,000 Shares shall be $8.99 per
share. The initial Conversion Price for all additional shares of Series D
Preferred Stock shall be set at the time such shares of Series D Preferred Stock
are issued and shall be equal to 119% of the weighted average Trading Price (as
defined in Paragraph 14 below) for the 60 consecutive trading days prior to the
date such shares are issued. In no event, however, will (i) the initial
Conversion Price for the first 5,000 shares of Series D Preferred Stock issued
after the Initial 10,000 Shares exceed $11.50 per share, (ii) the initial
Conversion Price for the next 5,000 shares of Series D Preferred Stock issued
after the 5,000 shares referred to in clause (i) exceed $14.00 per share, or
(iii) the initial Conversion Price for the next 5,000 shares of Series D
Preferred issued after the 5,000 shares referred to in clause (ii) exceed $15.00
per share. The initial Conversion Price shall, in each case, be subject to
further adjustment as set forth in Paragraph 9 hereof.
8. CONVERSION PROCEDURE. The holder of any shares of the Series D Preferred
Stock may exercise his or her right to convert such shares into shares of Common
Stock by surrendering for such purpose to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation for that
purpose, a certificate or certificates representing the shares of Series D
Preferred Stock to be converted, accompanied by a written notice stating that
such holder elects to convert all or a specified whole number of such shares in
accordance with the provisions of this Paragraph 8 and specifying the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. In case such notice shall specify a name or names
other than that of such holder, such notice shall be accompanied by
9.
<PAGE> 10
payment of all transfer taxes payable upon the issuance of shares of Common
Stock in such name or names. As promptly as practicable, and in any event within
ten business days after the surrender of such certificates and the receipt of
such notice relating thereto and, if applicable, payment of all transfer taxes,
the Corporation shall deliver or cause to be delivered (i) certificates
representing the number of validly issued, fully paid and nonassessable shares
of Common Stock to which the holder of the Series D Preferred Stock so converted
shall be entitled and (ii) if less than the full number of shares of the Series
D Preferred Stock evidenced by the surrendered certificate or certificates are
being converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or certificates less
the number of shares converted. Such conversions shall be deemed to have been
made at the close of business on the date of giving of such notice and of such
surrender of the certificate or certificates representing the shares of the
Series D Preferred Stock to be converted so that the rights of the holder
thereof shall cease except for the right to receive Common Stock in accordance
herewith, and the converting holder shall be treated for all purposes as having
become the record holder of such Common Stock at such time.
Shares of the Series D Preferred Stock may not be converted after the
close of business of the third business day preceding the date fixed for
redemption of such shares pursuant to Paragraph 14 hereof.
Upon conversion of any shares of the Series D Preferred Stock, the
holder thereof shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted, including any dividends on such
shares of Series D Preferred Stock declared prior to such conversion if such
holder held such shares on the record date fixed for the determination of
holders of Series D Preferred Stock entitled to receive payment of such
dividend.
9. CONVERSION PRICE ADJUSTMENTS. The initial Conversion Price for each
respective issuance of shares of Series D Preferred Stock shall be subject to
adjustment from time to time upon the occurrence of certain events as follows:
a. Stock Dividends, Subdivisions, Reclassifications or Combinations. If
the Corporation shall (i) declare a dividend or make a distribution in shares of
Common Stock, (ii) subdivide or reclassify the outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify the
outstanding Common Stock into a smaller number of shares, the Conversion Price
in effect at the time of the record date of such dividend or distribution on the
effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any shares of Series D Preferred
Stock surrendered for conversion after such date shall be entitled to receive
the number of shares of Common Stock which he or she would have owned or been
entitled to receive had such Series D Preferred Stock been converted immediately
prior to such date. Successive adjustments in the Conversion Price shall be made
whenever any event specified above shall occur.
10.
<PAGE> 11
b. Other Distributions. In case the Corporation shall fix a record date
for the making of a distribution to all holders of shares of Common Stock, (i)
of shares of any class of capital stock of the Corporation other than shares of
Common Stock, or (ii) of evidences of indebtedness of the Corporation, or (iii)
of assets (excluding cash dividends or distributions, and dividends or
distributions referred to in subparagraph 9(a) hereof), or (iv) of rights or
warrants entitling the holders of Common Stock to subscribe for or purchase
shares of Common Stock at less than the Trading Price, as defined in Paragraph
14 hereof, on the record date fixed to determine stockholders entitled to
subscribe or purchase; in each such case, the Conversion Price in effect
immediately prior thereto shall be reduced immediately thereafter to the price
determined by dividing (1) an amount equal to the difference resulting from (A)
the number of shares of Common Stock outstanding on such record date multiplied
by the Conversion Price per share on such record date, less (B) the fair market
value (as determined by the Board of Directors in their reasonable discretion)
of said shares or evidences of indebtedness or assets or rights or warrants to
be so distributed by (2) the number of shares of Common Stock outstanding on
such record date. Such adjustment shall be made successively whenever such a
record date is fixed. In the event that such distribution is not so made, the
Conversion Price then in effect shall be readjusted, effective as of the date
when the Board of Directors determines not to distribute such shares, evidences
of indebtedness, assets, rights or warrants, as the case may be, to the
Conversion Price which was in effect prior to the fixing of the record date
(subject to any adjustments made pursuant to this Paragraph 9 since such record
date).
c. Rounding of Calculations; Minimum Adjustment. All calculations under
this Paragraph 9 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. No adjustment in the Conversion
Price shall be made if the amount of such adjustment would be less than $0.05,
but any such amount shall be carried forward and an adjustment with respect
thereto shall be made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate $0.05 or more.
d. Adjustments for Consolidation, Merger, etc. Subject to the rights of
holders of the Series D Preferred Stock in the event of a Deemed Liquidation
pursuant to the provisions of Paragraph 4, in case the Corporation, (i) shall
consolidate with or merge into any other person and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) shall permit any
other person to consolidate with or merge into the Corporation and the
Corporation shall be the continuing or surviving person, but, in connection with
such consolidation or merger, the Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any other
property, (iii) shall transfer all or substantially all of its properties or its
assets to any other person, or (iv) shall effect a capital reorganization or
reclassification of the Common Stock (other than a capital reorganization or
reclassification resulting in the issue of additional shares of Common stock for
which adjustment is provided in this Paragraph 9); then, and in each such case,
proper provision shall be made so that each share of Series D Preferred Stock
then out standing shall be converted into, or exchanged for, one share of
preferred stock of the acquiring corporation entitling the holder thereof to all
of the rights
11.
<PAGE> 12
(including voting rights), powers, privileges and preferences with respect to
the acquiring corporation to which the holder of a share of Series D Preferred
Stock is entitled with respect to the Corporation, and being subject with
respect to the acquiring corporation to the qualifications, limitations and
restrictions to which a share of Series D Preferred Stock is subject with
respect to the Corporation.
e. Issue or Sale of Shares Below Trading Price.
(i) In the event the Corporation at any time or from
time to time shall issue or sell (or be deemed to have issued or sold)
additional shares of Common Stock, other than as a dividend in Paragraph b.
above and other than upon a subdivision or combination of shares of Common Stock
as provided in Paragraph a. above, without consideration or for a consideration
per share less than the Trading Price (as defined in Paragraph 14 below) on the
date immediately prior to the date of such issuance, then and in each case the
then Conversion Price shall be reduced, as of the opening of business on the
date of such issue or sale, to a price determined by multiplying that Conversion
Price by a fraction the numerator of which shall be (A) the number of shares of
Common Stock outstanding at the close of business on the day preceding the date
of such issue or sale plus (B) the number of shares of Common Stock which the
aggregate consideration received by the Corporation for the total number of
additional shares of Common Stock so issued would purchase at such Trading
Price, and the denominator of which shall be the number of shares of Common
Stock outstanding at the close of business on the date of such issue or sale
after giving effect to the issuance of such additional shares of Common Stock.
(ii) For the purpose of making any adjustment in the
Conversion Price or number of shares of Common Stock purchasable on conversion
of Series D Preferred Stock as provided in clause (i) of this Paragraph e., the
consideration received by the Corporation for any issue or sale of securities
shall, (A) to the extent it consists of cash, be computed at the sales price
before deduction of any expenses payable by the Corporation and any underwriting
or similar commissions, compensations, or concessions paid or allowed by the
Corporation in connection with such issue or sale, (B) to the extent it consists
of property other than cash, be computed at the fair market value of that
property as determined in good faith by the Board of Directors of the
Corporation, irrespective of any accounting treatment; provided, however, that
the aggregate fair market value of such non-cash and cash consideration shall
not exceed the Trading Price of the shares of Common Stock, and (C) if
additional shares of Common Stock, "Convertible Securities" (as hereinafter
defined) or rights or options to purchase either additional shares of Common
Stock or Convertible Securities are issued or sold together with other stock or
securities or other assets of the Corporation for a consideration which covers
both, be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors of the Corporation
to be allocable to such additional shares of Common Stock, Convertible
Securities or rights or options.
(iii) For the purpose of the adjustment provided for in
clause
12.
<PAGE> 13
(i) of this Paragraph e., if at any time or from time to time the Corporation
shall issue any rights or options (other than options granted to the
Corporation's officers, directors, employees or agents under the Corporation's
stock option plans or otherwise) for the purchase of, or stock or other
securities convertible into or exchangeable for, additional shares of Common
Stock (such convertible stock or securities being hereinafter referred to as
"Convertible Securities"), then, in each case, if the "Effective Price" (as
hereinafter defined) of such rights, options or Convertible Securities shall be
less than the Trading Price, the Corporation shall be deemed to have issued at
the time of the issuance of such rights or options or Convertible Securities the
maximum number of additional shares of Common Stock issuable upon exercise,
conversion or exchange thereof and to have received as consideration for the
issuance of such shares an amount equal to the total amount of the
consideration, if any, received by the Corporation for the issuance of such
rights or options or Convertible Securities, plus, in the case of such options
or rights, the minimum amounts of consideration, if any, payable to the
Corporation upon the exercise of such options or rights, and, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Corporation for such Convertible Securities, plus the minimum amount of
consideration, if any, payable to the Corporation upon the conversion or
exchange of such Convertible Securities. "Effective Price" for this purpose
shall mean the quotient determined by dividing the total of all of such
consideration by such maximum number of additional shares of Common Stock. No
further adjustment of the Conversion Price adjusted upon the issuance of such
rights, options or Convertible Securities shall be made as a result of the
actual issuance of additional shares of Common Stock on the exercise of any such
rights or options or the conversion or exchange of any such Convertible
Securities.
If any such rights or options or the conversion privilege represented by
any such Convertible Securities shall expire without having been exercised, the
Conversion Price adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Conversion Price which would
have been in effect had an adjustment been made on the basis that the only
additional shares of Common Stock so issued were the additional shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion of such Convertible Securities, and such additional
shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Corporation upon such exercise, plus the consideration,
if any, actually received by the Corporation for the granting of all such rights
or options, whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted plus the
consideration, if any, actually received by the Corporation (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities.
10. VOLUNTARY ADJUSTMENT. The Corporation may make, but shall not be obligated
to make, such decreases in the Conversion Price so as to increase the number of
shares of Common Stock into which the Series D Preferred Stock may be converted,
in addition to those required by Paragraph 9 hereof, as it considers to be
advisable in order to avoid federal income tax treatment as a dividend of stock
or stock rights.
13.
<PAGE> 14
11. RESERVATION OF SHARES OF COMMON STOCK FOR CONVERSION. The Corporation shall
at all times reserve and keep available out of its authorized and unissued
shares of Common Stock such number of shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all shares of Series D
Preferred Stock that are then outstanding.
12. NOTICE OF ADJUSTMENT OF CONVERSION PRICE. Whenever the Conversion Price is
adjusted as herein provided, the Corporation shall forthwith file with any
transfer agent or agents for the Series D Preferred Stock, if any, and at the
principal office of the Corporation, a statement signed by the President or a
Vice President and by the Chief Financial Officer or the Secretary of the
Corporation setting forth the adjusted Conversion Price. The statement so filed
shall be open to inspection by any holder of record of shares of Series D
Preferred Stock. The Corporation shall also, at the time of filing any such
statement, mail notice to the same effect to the holders of shares of Series D
Preferred Stock at their addresses appearing on the books of the Corporation or
supplied by such holder to the Corporation for the purpose of notice.
13. FRACTIONAL SHARES IN CONVERSION. The Corporation shall not be required to
issue fractions of shares of Common Stock on the conversion of Series D
Preferred Stock. If any fraction of a share of Common Stock would be issuable
upon the conversion of a share, except for the provisions hereof, the
Corporation shall purchase such fraction for an amount in cash equal to the
Trading Price (as defined in Paragraph 14 hereof) multiplied by such fraction.
If more than one certificate for shares of Series D Preferred Stock shall be
presented for conversion at any one time by the same registered holder, the
number of shares of Common Stock which shall be issuable upon conversion thereof
shall be computed on the basis of the aggregate number of shares of Common Stock
issuable upon conversion of the shares so presented. All calculations under this
Paragraph 13 shall be made to the nearest one-hundredth of a share.
14. REDEMPTION AT OPTION OF CORPORATION. The shares of the Series D Preferred
Stock are not redeemable by the Corporation prior to the later of (i) October
15, 2001 or (ii) the termination of any obligation that the purchaser of the
Initial 10,000 Shares has to purchase additional shares of Series D Preferred
Stock upon satisfaction of all conditions to any such obligation. Commencing on
the later of such dates, shares of the Series D Preferred Stock may be redeemed,
in whole or in part at any time at the option of the Corporation by resolution
of its Board of Directors, for a cash redemption price equal to the total of (i)
all accrued but unpaid dividends with respect to the shares of Series D
Preferred Stock being redeemed plus (ii) an amount equal to the Liquidation
Preference for the shares of Series D Preferred Stock being redeemed, at the
date of such redemption, multiplied by the following percentage:
<TABLE>
<CAPTION>
Year Redeemed Redemption Price
------------- ----------------
<S> <C>
Oct. 15, 2001- Oct. 14, 2002 100% + (.7 x dy)
Oct. 15, 2002- Oct. 14, 2003 100% + (.6 x dy)
</TABLE>
14.
<PAGE> 15
<TABLE>
<S> <C>
Oct. 15, 2003- Oct. 14, 2004 100% + (.5 x dy)
Oct. 15, 2004- Oct. 14, 2005 100% + (.4 x dy)
Oct. 15, 2005- Oct. 14, 2006 100% + (.3 x dy)
Oct. 15, 2006- Oct. 14, 2007 100% + (.2 x dy)
Oct. 15, 2007- Oct. 14, 2008 100% + (.1 x dy)
Thereafter 100%
</TABLE>
For purposes of this calculation, "dy" shall equal the dividend
yield for the shares of Series D Preferred Stock established pursuant to the
provisions of Paragraph 3 that are being redeemed by the Corporation.
Notwithstanding the foregoing, the Corporation may not redeem any shares
of the Series D Preferred Stock unless the Common Stock has had a Trading Price
(as hereinafter defined below in this Paragraph 14) of not less than 150% of the
Conversion Price for 20 consecutive trading days prior to the Corporation giving
notice to the holders thereof. In addition, the Corporation shall not have the
right to redeem more than 9,000 of the Initial 10,000 Shares without the consent
of the holders of the Initial 10,000 Shares so long as the shares of Series C
Preferred Stock are not subject to redemption at the option of the Corporation,
and any such redemption of shares of Series D Preferred Stock at the option of
the Corporation shall be done on a pro rata basis with a redemption of shares of
Series C Preferred Stock. The limitation on the number of shares that can be
redeemed by the Corporation if the Trading Price condition has been met, as set
forth in the preceding sentence, shall only apply to the Initial 10,000 Shares
and not to any of the other 15,000 shares of Series D Preferred Stock that may
be issued after the issuance of the Initial 10,000 Shares. In case of the
redemption of a part only of the outstanding shares of Series D Preferred Stock,
the shares so to be redeemed shall be selected pro rata.
At least 30 days' previous notice by mail, postage prepaid, shall be
given to the holders of record of the shares of Series D Preferred Stock to be
redeemed, such notice to be addressed to each such stockholder at the address of
such holder appearing on the books of the Corporation or given by such holder to
the Corporation for the purpose of notice, or if no such address appears or is
so given, at the place where the principal office of the Corporation is
located. Such notice shall state the date fixed for redemption and the
redemption price and shall call upon such holder to surrender to the Corporation
on said date at the place designated in the notice such holder's certificate or
certificates representing the shares to be redeemed. On or after the date fixed
for redemption and stated in such notice, each holder of shares of Series D
Preferred Stock called for redemption shall surrender the certificate evidencing
such shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the redemption price provided in
this Paragraph 14. If less than all the shares represented by any such
surrendered certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. If such notice of redemption shall have been
duly given, and if on the date fixed for redemption funds necessary for the
redemption shall be available therefor, then, notwithstanding that the
certificate evidencing any shares of Series D Preferred Stock so called for
redemption shall not have been surrendered, all
15.
<PAGE> 16
rights pertaining to such shares shall terminate, except only the right of the
holders to receive the redemption price to the date fixed for redemption,
without interest, upon surrender of their certificates therefor.
If, after notice of redemption has been given, the Corporation deposits,
on or prior to any date fixed for redemption of shares of Series D Preferred
Stock, with any bank or trust company in the State of California that has a
combined capital and surplus of not less than $100 million, as a trust fund, a
sum sufficient to redeem, on the date fixed for redemption thereof, the shares
called for redemption, with irrevocable instructions and authority to the bank
or trust company to give the notice of redemption thereof (or to complete the
giving of such notice if theretofore commenced) and to pay, on or after the date
fixed for redemption or prior thereto, the redemption price of the shares to
their respective holders upon the surrender of their share certificates, then
from and after the date of the deposit (although prior to the date fixed for
redemption), the shares shall no longer be outstanding, and the holders thereof
shall cease to be stockholders with respect to such shares, and shall have no
rights with respect thereto except the right to receive from the bank or trust
company payment of the redemption price of the shares without interest, upon the
surrender of their certificates therefor. The right to convert said shares as
provided herein at any time shall continue up to but not after the close of
business on the third day prior to the date fixed for redemption of such shares.
The deposit shall constitute full payment of the shares to the holders thereof.
Any moneys so deposited on account of the redemption price of Series D Preferred
Stock converted subsequent to the making of such deposit shall be repaid to the
Corporation forthwith upon the conversion of such shares of Series D Preferred
Stock. Any interest accrued on any funds so deposited shall be the property of,
and paid to, the Corporation. If the holders of Series D Preferred Stock so
called for redemption shall not, at the end of two years from the date fixed for
redemption thereof, have claimed any funds so deposited, such bank or trust
company shall thereupon pay over to the Corporation such unclaimed funds, and
such bank or trust company shall thereafter be relieved of all responsibility in
respect thereof to such holders and such holders shall look only to the
Corporation for payment of the redemption price.
The term "Trading Price" shall mean the price of the Common Stock
determined as follows: (i) If the Common Stock is listed or admitted to trade on
a national securities exchange, on the Nasdaq National Market System ("NMS"), or
on the Nasdaq SmallCap Market ("SmallCap"), the closing sales price of the
Common Stock on the composite tape of the principal national securities exchange
on which the Common Stock is so listed or admitted to trade or on the NMS or
SmallCap systems, as the case may be; (ii) If the Common Stock is not listed or
admitted to trade on an exchange or a system that publishes daily closing sales
prices, the average of the last bid and asked prices of the Common Stock quoted
on such other trading system. If the Common Stock is not quoted by any such
organization and no such closing prices are available, the Trading Price shall
be the price determined by the Disinterested Directors in good faith.
15. REDEMPTION AT OPTION OF HOLDER. Commencing on October 15, 2007
16.
<PAGE> 17
and continuing until October 14, 2008, each holder of shares of the Series D
Preferred Stock may, from time to time, during such period, at such holder's
option, cause the Corporation to redeem for cash, out of funds legally available
therefore, up to an aggregate of one-half of all shares of Series D Preferred
Stock owned by such holder on October 15, 2007. Commencing on October 15, 2008,
each holder of shares of Series D Preferred Stock may, from time to time
thereafter, at such holder's option, cause the Corporation to redeem for cash,
out of funds legally available therefore, some or all of such holder's shares of
Series D Preferred Stock. In addition, if at any time prior to October 15, 2008
any of the shares of Series C Preferred Stock have been tendered to the
Corporation for redemption by any of the holders of the Series C Preferred Stock
pursuant to the optional redemption provisions contained in Paragraph 14 of the
Certificate of Designations of the Series C Preferred Stock, each holder of
Series D Preferred Stock shall have the right to cause the Corporation to also
redeem an amount of such Series D Preferred Stock holder's shares equal to the
greater of (i) the number of shares of the Series D Preferred Stock that could
otherwise be redeemed at that time, if any, pursuant to this Paragraph 15 or
(ii) the Accelerated Redemption Amount. The "Accelerated Redemption Amount" for
each holder of Series D Preferred Stock is the number of shares obtained by
multiplying such holder's total number of Series D Preferred Stock then held by
the holder by the percentage representing the percentage of the then outstanding
shares of Series C Preferred Stock that have been submitted for redemption.
Prior to October 15, 2008, the Corporation shall give each holder of the Series
D Preferred Stock written notice of the Corporation's receipt of a request for
optional redemption submitted by a holder of the Series C Preferred Stock. The
foregoing written notice shall be delivered within 10 days after the receipt by
the Corporation of a redemption request and at least 20 days prior the
redemption of the Series C Preferred Stock, and shall state the number of shares
of Series C Preferred Stock that have been submitted for redemption, the
Accelerated Redemption Amount, and the number of shares that such holder of
Series D Preferred Stock is entitled to submit for redemption. In the event that
a holder of the Series D Preferred Stock requests that his Accelerated
Redemption Amount of shares be redeemed, such redemption shall take place
concurrently with the redemption of the Series C Preferred Stock. If the
Corporation does not have sufficient funds from which it can legally redeem all
shares of Series C Preferred Stock and Series D Preferred Stock that have been
tendered for redemption, the number of shares of each series that shall be
redeemed from the available funds shall be determined on a pro rata basis, based
on the relative amounts of the stated value of the shares of Series C Preferred
Stock and Series D Preferred Stock that have been tendered for redemption.
The redemption price for each share of Series D Preferred Stock shall be
$1,000 per share, plus, in each case, all declared and unpaid dividends, if any,
on such redeemed shares through the date of redemption. Each holder of shares of
Series D Preferred Stock may exercise his rights to have such shares redeemed
pursuant to this Paragraph 15 by surrendering for such purpose to the
Corporation, at its principal office or at such other office or agency
maintained by the Corporation for such purpose, a certificate or certificates
representing the shares to be redeemed accompanied by a written notice stating
that such holder elects to have redeemed the specified whole number of such
shares in
17.
<PAGE> 18
accordance with the provisions of this Paragraph 15 and, if less than the full
number of shares evidenced by the surrendered certificates are being redeemed,
specifying the name or names in which such holder wishes the certificates for
the balance of such shares to be issued. Within 10 calendar days after the
surrender of such certificate or certificates and the receipt of the required
written notice relating thereto, the Corporation shall deliver or cause to be
delivered to the holder (a) the redemption price of the shares being so redeemed
and (b) if less than the full number of shares evidenced by the surrendered
certificate or certificates are being redeemed, any certificate or certificates,
of like tenor, for the full number of shares evidenced by the surrendered
certificate or certificates, less the number of shares redeemed. Any redemption
notice delivered pursuant to this Paragraph 15 shall be irrevocable for 30 days.
During such 30-day period, or until the date on which the redemption price is
paid, whichever is earlier, the shares tendered to the Corporation for
redemption shall not be convertible by the holder pursuant to Paragraph 6, but
shall otherwise be entitled to all rights and privileges contained in this
Certificate of Designations.
16. MUTILATED OR MISSING PREFERRED STOCK CERTIFICATES. If any of the Series D
Preferred Stock certificates shall be mutilated, lost, stolen or destroyed, the
Corporation shall issue, in exchange and substitution for and upon cancellation
of the mutilated Series D Preferred Stock certificate, or in lieu of and in
substitution for the Series D Preferred Stock certificate lost, stolen or
destroyed, a new Series D Preferred Stock certificate of like tenor and
representing an equivalent amount of shares of Series D Preferred Stock, but
only upon receipt of evidence of such loss, theft or destruction of such Series
D Preferred Stock certificate and indemnity, if requested.
17. REISSUANCE OF PREFERRED STOCK. Shares of Series D Preferred Stock that have
been issued and reacquired in any manner, including shares purchased or redeemed
or exchanged, shall (upon compliance with any applicable provisions of the laws
of the State of Delaware) have the status of authorized and unissued shares of
preferred stock undesignated as to series and may be redesignated and reissued
as part of any series of preferred stock other than the Series D Preferred
Stock.
18. BUSINESS DAY. If any payment, redemption or exchange shall be required by
the terms hereof to be made on a day that banks are not open in the State of
California, such payment, redemption or exchange shall be made on the
immediately succeeding day on which such banks are open.
19. HEADINGS OF SUBDIVISIONS. The headings of various subdivisions hereof are
for convenience of reference only and shall not affect the interpretation of any
of the provisions hereof.
20. SEVERABILITY OF PROVISIONS. If any right, preference or limitation of the
Series D Preferred Stock set forth in these resolutions and the Certificate of
Designations filed pursuant hereto (as such resolution may be amended from time
to time) is invalid, unlawful or incapable of being enforced by reason of any
rule of law or public policy, all other rights, preferences and limitations set
forth in this resolution (as so amended) which
18.
<PAGE> 19
can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation unless so
expressed herein.
21. NOTICE TO THE COMPANY.
All notices and other communications required or permitted to be given
to the Corporation hereunder shall be made by courier to the Corporation at its
principal executive offices located at 4660 La Jolla Village Drive, Suite 825,
San Diego, California 92122, Attention: President. Minor imperfections in any
such notice shall not affect the validity thereof.
22. LIMITATIONS.
Except as may otherwise be required by law, the shares of Series D
Preferred Stock shall not have any powers, preferences or relative,
participating, optional or other special rights other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) or otherwise in the Certificate of Incorporation of the Corporation.
IN WITNESS WHEREOF, Western Water Company, has caused this certificate
to be executed by Michael P. George, as President and Chief Executive Officer,
and attested by Ronald I. Simon, as Secretary, this 22nd day of October 1998.
WESTERN WATER COMPANY
By /s/ MICHAEL P. GEORGE
--------------------------------------
Name: Michael P. George
Title: President, Chief Executive
Officer
Attest:
/s/ RONALD I. SIMON
- ---------------------------
Name: Ronald I. Simon
Title: Secretary
19.
<PAGE> 1
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-
<PAGE> 2
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
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act").
<PAGE> 3
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
<PAGE> 4
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,
<PAGE> 5
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
<PAGE> 6
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
<PAGE> 7
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
<PAGE> 8
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
<PAGE> 9
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.
<PAGE> 10
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
<PAGE> 11
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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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 Juan 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. Juan 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
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 21
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: Michael Patrick George Name: Juan Ras
Title: President, CEO Title: Director General
