8-K

UNITED STATES

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):  March 16, 2010

SouthWest Water Company

(Exact name of Registrant as specified in its charter)

Delaware	0-8176	95-1840947
(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification No.)

One Wilshire Building, 624 South Grand Avenue, Suite 2900, Los Angeles, California		90017-3782
	(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code:  (213) 929-1800

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

ý            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

SouthWest Water Company (the “Company”) has entered into a Securities Purchase Agreement and Investor Rights Agreement, each dated as of March 16, 2010 (collectively, the “Transaction Documents”), with SW Merger Acquisition Corp. (the “Parent”).  As previously disclosed, the Company, Parent and SW Merger Sub Corp., a direct wholly-owned subsidiary of Parent (“Merger Sub”), entered into an Agreement and Plan of Merger, dated as of March 2, 2010 (the “Merger Agreement”), pursuant to which Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation in such merger as a direct wholly-owned subsidiary of Parent (the “Merger”).  Parent and Merger Sub are entities controlled by institutional investors advised by J.P. Morgan Asset Management and Water Asset Management, L.L.C.

Under the terms of the Transaction Documents, Parent has purchased 2,700,000 shares of the Company’s common stock (the “Purchased Stock”) at a price of $6.00 per share, for an aggregate purchase price of $16.2 million.  As permitted under the terms of the Transaction Documents, the Company intends to apply the proceeds derived from this transaction to debt reduction and/or capital expenditures, debt redemption and working capital purposes.  The Transaction Documents entitle the Parent to appoint a designee to serve on the Company’s board of directors, and also to certain registration rights with respect to the Purchased Stock in the event of the termination of the Merger Agreement.  The Transaction Documents restrict the Parent’s ability to sell or otherwise transfer the Purchased Stock prior to the earlier of (i) the consummation of the Merger and (ii) the termination of the Merger Agreement in some circumstances.  Except as contemplated by the Merger Agreement, the Parent and Merger Sub are also prohibited from acquiring any additional shares of the Company’s common stock until the termination of the Merger Agreement.

As the offering and sale of the Purchased Stock pursuant to the Transaction Documents was not registered under the Securities Act of 1933 or applicable state securities laws, the Purchased Stock may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.  This disclosure is being issued pursuant to and in accordance with Rule 135c under the Securities Act of 1933 and does not constitute an offer to sell or a solicitation of an offer to buy the Purchased Stock.

The foregoing description of the Transaction Documents does not purport to be complete and is qualified in its entirety by reference to the full text of the Transaction Documents, which are filed as Exhibits 10.1 and 10.2 hereto.  The Transaction Documents are included to provide investors and security holders with information regarding their terms.  They are not intended to provide any other factual information about the Company or the other parties thereto.  The Securities Purchase Agreement contains representations and warranties the parties thereto made to each other and are solely for the benefit of each other. The assertions embodied in the Company’s representations and warranties are qualified by information in a confidential disclosure schedule that the Company delivered upon signing the Securities Purchase Agreement. Accordingly, investors and security holders should not rely on the representations and warranties as characterizations of the actual state of facts, since they were only made as of the date of the Securities Purchase Agreement and are modified by the underlying disclosure schedule. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Securities Purchase Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.  The Company agrees to furnish supplementally a copy of the omitted disclosure schedule to the Securities Purchase Agreement to the Securities and Exchange Commission upon request.

Forward-Looking Statements

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, including, but not limited to, statements relating to the proposed Merger, involve risks and uncertainties, as well as assumptions that, if they prove incorrect or never materialize, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.  For instance, the closing of the Merger may be delayed, or may never occur.  Actual results may differ materially from the expectations expressed in “forward-looking statements” due to changes in regulatory, political, weather, economic, business, competitive, market, environmental and other factors. More detailed information about these factors is contained in the Company’s filings with the Securities and Exchange Commission, including under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The Company assumes no obligation to update these forward-looking statements to reflect any change in future events.

Additional Information

In connection with the proposed Merger, the Company will file a proxy statement with the Securities and Exchange Commission (SEC). Before making any voting or investment decision, investors and security holders are urged to carefully read the entire proxy statement and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information about the proposed transaction. A definitive proxy statement will be sent to shareholders in connection with the proposed transaction. Investors and security holders may obtain a free copy of the proxy statement (when available) and other documents filed at the SEC’s website at www.sec.gov. The proxy statement and such other documents may also be obtained at no cost from the Company by directing the request to SouthWest Water Company, 624 S. Grand Avenue, Suite 2900, Los Angeles, CA, 90017, Attention: Investor Relations, or by going to the Company’s website at www.swwc.com.

The Company and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from the security holders of the Company in connection with the proposed Merger.  Information concerning the special interests of these directors, executive officers and other members of the Company’s management and employees in the proposed transaction will be included in the Company’s proxy statement referenced above.  Information regarding the Company’s directors and executive officers is also available in its Annual Report on Form 10-K for the year ended December 31, 2009 and in its proxy statement for its 2009 Annual Meeting of Stockholders, which documents are filed with the SEC.  These documents are available free of charge at the SEC’s website at www.sec.gov and from the Company at the address provided above.

Item 9.01 Financial Statements and Exhibits:

(d)	Exhibits
	Exhibit
	Number	Description
	10.1	Securities Purchase Agreement, dated March 16, 2010, by and between SouthWest Water Company and SW Merger Acquisition Corp.
	10.2	Investor Rights Agreement, dated March 16, 2010, by and between SouthWest Water Company and SW Merger Acquisition Corp.

SIGNATURE

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 hereunto duly authorized.

	SOUTHWEST WATER COMPANY
	(Registrant)
	By:	/s/ William K. Dix
		Name:	William K. Dix
			Vice President, General
			Counsel and Corporate Secretary
Date: March 16, 2010

EXHIBIT INDEX

Exhibit
Number	Description
10.1	Securities Purchase Agreement, dated March 16, 2010, by and between SouthWest Water Company and SW Merger Acquisition Corp.
10.2	Investor Rights Agreement, dated March 16, 2010, by and between SouthWest Water Company and SW Merger Acquisition Corp.

EX-10.1

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of March 16, 2010 between SouthWest Water Company, a Delaware corporation (the “Company”), and SW Merger Acquisition Corp., a Delaware corporation (the “Parent”).

WHEREAS, the Company, the Parent and SW Merger Sub Corp., a Delaware corporation, are parties to that certain Agreement and Plan of Merger dated March 2, 2010 (the “Merger Agreement”); and

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act, and Rule 506 promulgated thereunder, the Company desires to issue and sell to the Parent, and the Parent desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Parent agree as follows:

ARTICLE I.

DEFINITIONS

1.1       Definitions.  In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Merger Agreement, and (b) the following terms have the meanings set forth in this Section 1.1:

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Closing” means the closing of the purchase and sale of the Purchased Stock pursuant to Section 2.1.

“Closing Date” means the date of this Agreement, which is the date upon which the Closing shall occur.

“Commission” means the Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.01 per share.

“Company Disclosure Schedule” shall mean the Company’s disclosure schedule attached to the Merger Agreement, as defined in the introductory paragraph of Article III of the Merger Agreement.

“Company Material Adverse Effect” shall have the meaning ascribed to such term in the Merger Agreement, except that the references in such definition to “the Merger” or “this Agreement” shall instead be deemed to refer to “the sale of the Purchased Stock” and “this Agreement,” as such terms are defined herein, respectively.

“Effective Date” means the date that the initial Registration Statement filed by the Company pursuant to the Investor Rights Agreement is first declared effective by the Commission.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Indemnified Party” shall have the meaning ascribed to such term in Section 4.5.

“Investor Rights Agreement” means the Investor Rights Agreement, dated the date hereof, between the Company and the Parent.

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Purchase Price” shall have the meaning ascribed to such term in Section 2.1.

“Purchased Stock” shall have the meaning ascribed to such term in Section 2.1.

“Registration Statement” means a registration statement meeting the requirements set forth in the Investor Rights Agreement and covering the resale of the Purchased Stock by the Parent, as provided for in the Investor Rights Agreement.

“Representatives” means, with respect to any Person, such Person’s officers, directors, employees, accountants, auditors, attorneys, consultants, legal counsel, agents, investment bankers, financial advisors and other representatives.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

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“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).

“Subsidiary” means any subsidiary of the Company.

“Trading Day” means a day on which the NASDAQ Global Select Market is open for trading.

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question:  the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market, or the New York Stock Exchange.

“Transaction Documents” means this Agreement, the Investor Rights Agreement, all exhibits and schedules hereto and thereto and any other documents or agreements executed in connection with the sale of the Purchased Stock.

“Transfer Agent” means the Company’s then current transfer agent.

ARTICLE II.

PURCHASE AND SALE

2.1       Closing.  On the Closing Date, the Company agrees to sell, and the Parent agrees to purchase, 2,700,000 shares of Common Stock (the “Purchased Stock”) for a per share purchase price of Six Dollars ($6.00), or an aggregate purchase price of Sixteen Million Two Hundred Thousand Dollars ($16,200,000) (the “Purchase Price”).  The Parent shall deliver to the Company, via wire transfer, immediately available funds equal to the Purchase Price and the Company shall deliver to the Parent the Purchased Stock, and the Company and the Parent shall deliver the other items set forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of Locke Lord Bissell & Liddell LLP, 300 S. Grand Avenue, Suite 2600, Los Angeles, California  90071, or such other location as the parties shall mutually agree.

2.2       Deliveries.On the Closing Date, the Company shall deliver or cause to be delivered to the Parent the following:

(i)         this Agreement duly executed by the Company;

(ii)        the Investor Rights Agreement duly executed by the Company;

(iii)       the certificate referenced in Section 2.3(b)(i), executed by the Company’s chief executive officer and chief financial officer; and

(iv)       the stock certificate or other instrument evidencing the Purchased

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Stock.

(b)        On the Closing Date, the Parent shall deliver or cause to be delivered to the Company the following:

(i)         this Agreement duly executed by the Parent;

(ii)        the Purchase Price by wire transfer to such account as is specified in writing by the Company; and

(iii)       the Investor Rights Agreement duly executed by the Parent.

2.3       Closing Conditions.

(a)         The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

(i)         the accuracy in all material respects on the Closing Date of the representations and warranties of the Parent contained in Section 3.2 hereof;

(ii)        all obligations, covenants and agreements of the Parent required to be performed under this Agreement at or prior to the Closing Date shall have been performed in all material respects; and

(iii)       the delivery by the Parent of the items set forth in Section 2.2(b) of this Agreement.

(b)         The obligations of the Parent hereunder in connection with the Closing are subject to the following conditions being met:

(i)         Except as set forth on Schedule A attached hereto and subject to the qualifications and modifications set forth in the introductory paragraph of Article III of the Merger Agreement and without giving effect to the  Transaction Documents and the transactions contemplated thereby, each of the representations and warranties of the Company (i) set forth in Section 3.8 of the Merger Agreement (Absence of Certain Changes or Events) shall be true and correct in all respects as of the Closing Date as if made at and as of the Closing Date, (ii) set forth in Section 3.1(a) of the Merger Agreement (Organization and Qualification) and Section 3.3 of the Merger Agreement (Capitalization), disregarding all qualifications contained therein relating to materiality or Company Material Adverse Effect, shall be true and correct in all material respects as of the Closing Date as if made at or as of the Closing Date (or, if given as of a specific date, at and as of such date), and (iii) set forth in Article III of the Merger Agreement (other than the Sections of Article III of the Merger Agreement described in clauses (i) and (ii) above, and other than Sections 3.4, 3.5, 3.18, 3.19, 3.20, 3.21 and 3.25 of the Merger Agreement (with respect to which no representations or warranties are made herein)), disregarding all qualifications contained therein relating to materiality or Company Material Adverse Effect, shall have been true

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and correct when made and shall be true and correct at and as of the Closing Date as if made at and as of the Closing Date (except for any such representations and warranties that expressly speak only as of a specific date or time, which only need to be so true and correct as of such date or time), in each case except where the failure of such representations and warranties to be so true and correct has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, and the Parent shall have received a certificate signed on behalf of the Company by its chief executive officer and its chief financial officer to such effect;

(ii)        the accuracy of the representations and warranties of the Company contained in Section 3.1 hereof, in each case except where the failure of such representations and warranties to be accurate has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

(iii)       all obligations, covenants and agreements of the Company required to be performed under this Agreement at or prior to the Closing Date shall have been performed in all material respects; and

(iv)       the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1       Representations and Warranties of the Company.  The Company hereby makes the following representations and warranties as of the Closing Date to the Parent:

(a)        Issuance of the Purchased Stock.  The Purchased Stock is duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company, other than the restrictions on transfer provided for in this Agreement, the Investor Rights Agreement and the Merger Agreement.

(b)        Authority Relative to the Sale of the Purchased Stock.  The Company has all necessary corporate power and authority to execute and deliver the Transaction Documents, to perform its obligations thereunder, and to consummate the sale of the Purchased Stock and other transactions contemplated thereby.  The execution and delivery by the Company of the Transaction Documents and the consummation by the Company of the purchase of the Purchased Stock and other transactions contemplated thereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize the Transaction Documents or to consummate the sale of the Purchased Stock and other transactions contemplated thereby.  The Transaction Documents have been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the Parent, constitute the legal, valid and binding obligation of

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the Company, enforceable against the Company in accordance with their terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally, the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity) and discretion of any Governmental Authority (as hereinafter defined) before which a proceeding is brought.  The Board of Directors, at a meeting duly called and held, has (i) approved and declared advisable the Transaction Documents and the sale of the Purchased Stock and other transactions contemplated thereby (such approval and declaration having been made in accordance with the DGCL) and (ii) approved the execution, delivery and performance of the Transaction Documents and the consummation by the Company of the transactions contemplated thereby, including the issuance, sale and delivery of the Purchased Stock.

(c)        No Conflict.  The execution and delivery by the Company of the Transaction Documents do not, and the performance by the Company of the Transaction Documents will not, (i) conflict with or violate the charter of the Company (as currently in effect, the Restated Certificate of Incorporation dated May 12, 2005, as amended by the Certificate of Amendment to the Restated Certificate of Incorporation dated May 20, 2008), the bylaws of the Company (as currently in effect, the Amended and Restated Bylaws dated December 31, 2001, as amended by Amendment No. 2 effective February 12, 2004, Amendment No. 3 effective May 16, 2006, Amendment No. 4 effective December 11, 2006, Amendment No. 5 effective May 20, 2008 and Amendment No. 6 effective August 10, 2009) or the charter or bylaws or similar organizational document of any Subsidiary, (ii) conflict with or violate any statute, law, ordinance, regulation, rule or code (each, a “Law”) or any order, judgment or decree (each, an “Order”) applicable to the Company or any Subsidiary or by which any property, right or asset of the Company or any Subsidiary is bound or affected, or (iii) except as set forth in Section 3.5(a) of the Company Disclosure Schedule, result in any breach of, constitute a default (or an event which, with notice or lapse of time or both, would become a default), or loss of a benefit,  under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in an alteration of the rights under, or the creation of a Lien on any property, right or asset of the Company or any Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any property, right or asset of either of them is bound or affected, except, with respect to clause (iii), for any such conflicts, violations, breaches, defaults or other occurrences which has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(d)        Required Filings and Consents.  The execution and delivery by the Company of the Transaction Documents do not, and the performance by the Company of the Transaction Documents and the transactions contemplated thereby will not, require any consent, approval, order, registration with, declaration,  authorization or permit of, or filing with or notification to, any United States federal, state, county or local government, governmental, regulatory or administrative authority, agency, instrumentality or commission or any court, tribunal, or judicial or arbitral body (including (x) a state public utility commission, state public service commission or similar state regulatory body or

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(y) any departments of public health or departments of health or similar state regulatory bodies or body having jurisdiction over environmental protection or environmental conservation or similar matters under applicable Laws) (any of the foregoing, a “Governmental Authority”), except (i) filings required pursuant to Section 4.3, (ii) the filing with the Commission of the Registration Statement (and any amendments or other filings related thereto, including a prospectus or prospectus supplement), (iii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Purchased Stock and the listing of the Purchased Stock for trading thereon in the time and manner required thereby, (iv) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws.

(e)        Certain Fees.  No brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement.  The Parent shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this paragraph that may be due in connection with the transactions contemplated by this Agreement

(f)         Private Placement.  Assuming the accuracy of the Parent’s  representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Purchased Stock by the Company to the Parent as contemplated hereby.

(g)        Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Purchased Stock, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act of 1940, as amended.

(h)        Listing and Maintenance Requirements.  The Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and except as contemplated by the Merger Agreement the Company has taken no action designed to terminate the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is currently contemplating terminating such registration.

(i)         Application of Takeover Protections.  The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents) or the laws of its state of incorporation or federal laws in the U.S. that is or could become applicable to the Parent as a result of the Parent and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Purchased Stock and the Parent’s ownership of the Purchased Stock.

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(j)         No Integrated Offering. Assuming the accuracy of the Parent’s representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Purchased Stock to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

(k)        No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Purchased Stock by any form of general solicitation or general advertising.  The Company has offered the Purchased Stock for sale only to the Parent.

(l)         No Other Representation or Warranty. The Company acknowledges and agrees that, except for the representations and warranties made by Parent that are expressly set forth in Section 3.2 of this Agreement, Parent does not make, and has not made, any representations or warranties in connection with the purchase of the Purchased Stock and the transactions contemplated hereby.  Except as expressly set forth herein, no Person has been authorized by Parent to make any representation or warranty relating to Parent or its respective businesses, or otherwise in connection with the purchase of the Purchased Stock and the transactions contemplated hereby and, if made, such representation or warranty may not be relied upon as having been authorized by Parent.

3.2       Representations and Warranties of the Parent.  The Parent represents and warrants as of the Closing Date to the Company as follows:

(a)        Organization; Authority.  The Parent is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations thereunder. The execution and delivery of the Transaction Documents and performance by the Parent of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate or similar action on the part of the Parent.  Each Transaction Document to which it is a party has been duly executed by the Parent, and when delivered by the Parent in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Parent, enforceable against it in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and subject to the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity).

(b)        Authority Relative to the Purchase of the Purchased Stock.  The Parent has all necessary corporate power and authority to execute and deliver the Transaction Documents, to perform its obligations thereunder, and to consummate the purchase of the Purchased Stock and other transactions contemplated thereby.  The execution and

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delivery by the Parent of the Transaction Documents and the consummation by the Parent of the purchase of the Purchased Stock and other transactions contemplated thereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Parent are necessary to authorize the Transaction Documents or to consummate the purchase of the Purchased Stock and other transactions contemplated thereby.  The Transaction Documents have been duly and validly executed and delivered by the Parent and, assuming the due authorization, execution and delivery by the Company, constitute the legal, valid and binding obligation of the Parent, enforceable against the Parent in accordance with their terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally, the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity) and discretion of any Governmental Authority before which a proceeding is brought.  The Parent’s board of directors, at a meeting duly called and held, has (i) approved and declared advisable the Transaction Documents and the purchase of the Purchased Stock and other transactions contemplated thereby (such approval and declaration having been made in accordance with the DGCL) and (ii) approved the execution, delivery and performance of the Transaction Documents and the consummation by the Parent of the transactions contemplated thereby, including the purchase of the Purchased Stock.

(c)        No Conflict.  The execution and delivery by the Parent of the Transaction Documents do not, and the performance by the Parent of the Transaction Documents will not, (i) conflict with or violate the charter or the bylaws of the Parent, (ii) conflict with or violate any Law or Order applicable to the Parent or by which any property, right or asset of the Parent is bound or affected, or (iii) result in any breach of, constitute a default (or an event which, with notice or lapse of time or both, would become a default), or loss of a benefit, under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in an alteration of the rights under, or the creation of a Lien on any property, right or asset of the Parent pursuant to, any contract or obligation to which the Parent is a party or by which the Parent or any property, right or asset of Parent is bound or affected.

(d)        Required Filings and Consents.  The execution and delivery by the Parent of the Transaction Documents do not, and the performance by the Parent of the Transaction Documents and the transactions contemplated thereby will not, require any consent, approval, order, registration with, declaration, authorization or permit of, or filing with or notification to, any Governmental Authority, except the filing with the Commission of an amendment to the Parent’s recently filed Schedule 13D and the filing of a Form 4.

(e)        Own Account.  The Parent understands that the Purchased Stock constitutes “restricted securities” within the meaning of the Securities Act and has not been registered under the Securities Act or any applicable state securities law, and the Parent is acquiring the Securities Act as principal for its own account and not with a view to or for distributing or reselling such Purchased Stock or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Purchased Stock in violation of the Securities Act or any

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applicable state securities law and has no direct or indirect arrangements or understandings with any other Persons to distribute or regarding the distribution of such Purchased Stock (this representation and warranty not limiting the Parent’s right to sell the Purchased Stock pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws) in violation of the Securities Act or any applicable state securities law.

(f)         Parent Status.  At the time the Parent was offered the Purchased Stock, it was, and at the date hereof it is:  (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  The Parent is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

(g)        General Solicitation.  The Parent is not purchasing the Purchased Stock as a result of any advertisement, article, notice or other communication regarding the Purchased Stock published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

(h)        Short Sales and Confidentiality Prior to the Date Hereof.  Other than consummating the transactions contemplated hereunder, the Parent has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with the Parent, executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing from the time that the Parent first proposed purchasing the Purchased Stock from the Company until the date hereof.

(i)         Brokers.  No broker, finder, investment banker or other firm or Person is entitled to any brokerage, finder’s or other fee or commission in connection with the offer and sale of the Purchased Stock or the other transactions contemplated herein based upon arrangements made by or on behalf of Parent for which the Company could have any liability.

(j)         Ownership of Company Stock.  As of the date of this Agreement, neither Parent nor any Affiliate of Parent beneficially owns any shares of Common Stock, except that Water Asset Management, LLC beneficially owns 1,173,969 shares of Common Stock.

(k)        Investigation and Agreement by Parent; No Other Representations or Warranties.  Parent acknowledges and agrees that it has made its own inquiry and investigation into, and, based thereon, has formed an independent judgment concerning the Company and its Subsidiaries and their businesses and operations.  Parent acknowledges and agrees that it has had an opportunity to ask all questions of and receive answers from the Company with respect to the Transaction Documents and the transactions contemplated by the Transaction Documents.  Parent acknowledges and agrees that, except as expressly set forth in the Transaction Documents, neither the Company or any of its Subsidiaries, nor any of their respective Representatives, will have or be subject to any liability or indemnification obligation to Parent, any of its

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Representatives, or any other Person resulting from the delivery, dissemination or any other distribution to Parent or any other Person, or the use by Parent or any other Person, of any such information provided or made available to them by or on behalf of the Company, its Subsidiaries, or their respective Representatives, including any information, documents, projections, forecasts, estimates, or other forward-looking information, business plans, or other material provided for or made available to Parent or any of its Representatives in any physical or on-line data rooms, confidential information memoranda or in-person presentations or teleconferences in connection with the transactions contemplated by the Transactions Documents.  Parent acknowledges and agrees that, except for the representations and warranties made by the Company pursuant to Section 2.3(b)(i) or 3.1 of this Agreement, the Company does not make, and has not made, and Parent has not relied upon, any representation, warranty or statements by any Person on behalf of the Company or any of its Subsidiaries in connection with the purchase of the Purchased Stock and the transactions contemplated hereby.  Except as expressly set forth herein, no Person has been authorized by the Company to make any representation or warranty relating to the Company or any of its Subsidiaries or their respective businesses, or otherwise in connection with the Transaction Documents and the transactions contemplated thereby, and, if made, such representation or warranty may not be relied upon as having been authorized by the Company.  Without limiting the generality of the foregoing, Parent acknowledges and agrees that, except as provided pursuant to Section 2.3(b)(i) or 3.1 hereof, neither the Company or any of its Subsidiaries, nor any of their respective Representatives, makes or has made any representation or warranty to Parent or any of its Representatives or affiliates with respect to:

(i)         any forward-looking information such as projections, forecasts, estimates, plans or budgets of future revenues, expenses or expenditures, future results of operations (or any component thereof), future cash flows (or any component thereof) or future financial condition (or any component thereof) of the Company or any of its Subsidiaries or the future business, operations or affairs of the Company or any of its Subsidiaries heretofore or hereafter delivered to or made available to Parent or its Representatives or affiliates; or

(ii)        any other information, statement or documents heretofore or hereafter delivered to or made available to Parent or its Representatives or affiliates, including the information in the on-line data room maintained by the Company through Intralinks, Inc., with respect to the Company or any of its Subsidiaries or the business, operations or affairs of the Company or any of its Subsidiaries, except to the extent and as expressly covered by a representation and warranty made by the Company pursuant to Section 2.3(b)(i) or 3.1 hereof.

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ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1       Transfer Restrictions.

(a)        The Purchased Stock may only be disposed of or resold in compliance with the terms of the Investor Rights Agreement and applicable state and federal securities laws, and cannot be disposed of or resold unless pursuant to an effective Registration Statement under the Securities Act or an exemption from registration is available.  In connection with any transfer of Purchased Stock other than pursuant to an effective registration statement or Rule 144 or to the Company, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Purchased Stock under the Securities Act.

(b)        The Parent agrees to the imprinting, so long as is required by this Section 4.1, of a legend on any certificate or other instrument evidencing the Purchased Stock in the following form:

THIS SECURITY IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN AN INVESTOR RIGHTS AGREEMENT DATED MARCH 16, 2010.  THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

(c)        Certificates or other instruments evidencing the Purchased Stock shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, or (ii) following the sale of the Purchased Stock pursuant to Rule 144, or (iii) if all of the applicable conditions under Rule 144 for sale of the Purchased Stock have been satisfied, including satisfaction of the one-year holding period provided for in Rule 144(d), or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder.

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(d)The Parent agrees that the Parent will sell any Purchased Stock pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Purchased Stock is sold pursuant to a Registration Statement, it will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Purchased Stock as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.

4.2       Integration.  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Purchased Stock to the Parent in a manner that would require the registration under the Securities Act of the sale of the Purchased Stock to the Parent or that would be integrated with the offer or sale of the Purchased Stock for purposes of the rules and regulations of the Trading Market.

4.3       Securities Laws Disclosure; Publicity.  The Company shall on the Trading Day following the Closing Date issue a Current Report on Form 8-K disclosing the material terms of the transactions contemplated hereby and attaching this Agreement and the Investor Rights Agreement as exhibits thereto.  The Company and the Parent shall consult with each other in issuing any press releases or other public statements or comments with respect to the transactions contemplated by the Transaction Documents to the same extent as provided in Section 6.9 of the Merger Agreement.

4.4       Use of Proceeds.  The Company shall use the net proceeds from the sale of the Purchased Stock hereunder either (a) to reduce indebtedness outstanding under that certain Amended and Restated Credit Agreement dated February 15, 2008, by and between the Company, the several lenders parties thereto, and Bank of America, N.A., as Administrative Agent (as amended to date, the “Credit Agreement”), provided that it shall be understood that the Company may subsequently redraw funds under the Credit Agreement for capital expenditures, debt redemption and working capital purposes or (b) directly for capital expenditures, debt redemption and working capital purposes.

4.5       Indemnification of Parent.

(a)        Subject to the provisions of this Section 4.5, the Company will indemnify and hold the Parent and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls the Parent (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling Person (each, an “Indemnified Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any the Indemnified Parties may suffer or incur as a result of or relating to any breach of any of the representations, warranties,

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covenants or agreements made by the Company in this Agreement.  If any action shall be brought against any Indemnified Party in respect of which indemnity may be sought pursuant to this Agreement, the Indemnified Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Indemnified Party.  Any Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Parent except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, (x) a material conflict on any material issue between the position of the Company and the position of the Indemnified Party or (y) that there may be legal defenses available to such Indemnified Party different from or in addition to those available to the other party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Indemnified Party under this Agreement for any settlement by an Indemnified Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed.

(b)        The Company shall have liability under Section 4.5 hereof only if within the applicable survival period specified in Section 5.1 hereof, an Indemnified Party notifies the Company of a claim as provided in Section 4.5(a), specifying the factual basis of the claim in reasonable detail to the extent known by the Indemnified Party.

4.6       Listing of Purchased Stock.  The Company shall, if applicable: (i) prepare and file with such Trading Market a listing of additional shares notification covering the number of shares of Purchased Stock, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing on such Trading Market as promptly thereafter, (iii) provide to the Parent evidence of such listing, and (iv) maintain the listing of such shares of Purchased Stock.

4.7       Form D; Blue Sky Filings.  The Company agrees to timely file a Form D with respect to the Purchased Stock as required under Regulation D of the Securities Act and to provide a copy thereof, promptly upon request of the Parent. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Purchased Stock for, sale to the Parent at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of the Parent.

4.8       Waiver.  Parent does hereby consent to the Company’s entry into the Transaction Documents and the consummation of the transactions contemplated thereby, including the issuance and sale of the Purchased Stock, notwithstanding any prohibitions or restrictions with respect thereto contained in the Merger Agreement.

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ARTICLE V.

MISCELLANEOUS

5.1       Survival. All representations and warranties contained in this Agreement shall survive the Closing for a period of the earlier of (i) six (6) months from the termination of the Merger Agreement pursuant to the terms thereunder or (ii) the Effective Date under the Merger Agreement, at which time all such representations and warranties will expire and terminate; provided that the representations and warranties set forth in Section 3.1(a) (Issuance of Purchased Stock), Section 3.1(b) (Authority Relative to the Sale of Purchased Stock), Section 3.1(c) (No Conflicts), Section 3.1(e) (Certain Fees), Section 3.2(b) (Authority Relative to the Purchase of Purchased Stock), Section 3.2(c) (No Conflicts) or Section 3.2(i) (Brokers ) shall survive the Closing indefinitely.

5.2       Termination.  This Agreement may be terminated by mutual agreement of the Company, and shall automatically terminate upon consummation of the Merger.

5.3       Fees and Expenses.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of the Transaction Documents.  The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of the Purchased Stock to the Parent.

5.4       Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto (and, to the extent referenced herein, the Merger Agreement), contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

5.5       Notices.  All notices and other communications required or permitted by this Agreement shall be in writing and shall be effective, and any applicable time period shall commence, when (a) delivered to the following addresses by hand or by a nationally recognized overnight courier service (costs prepaid and with proof of delivery) addressed to the following addresses or (b) transmitted electronically to the following facsimile numbers or e-mail addresses (receipt of which is confirmed) in each case marked to the attention of the Persons (by name or title) designated below (or to such other address, facsimile number, e-mail address, or Person as a party may designate by notice given in accordance with this Section 5.5 to the other party):

if to Parent :	c/o IIF Subway Investment LP
	245 Park Avenue, 2nd Floor
	New York, NY 10167
	Facsimile No.: (212) 648-2033
	E-mail:  andrew.f.walters@jpmorgan.com christian.p.porwoll@jpmorgan.com
	Attention:	Andrew F. Walters
		Christian P. Porwoll

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	and
	c/o Water Asset Management, LLC
	509 Madison Avenue, Suite 804
	New York, NY 10022
	Facsimile No.:  (212) 754-5101
	E-mail:  m.robert@waterinv.com
	Attention:  Marc Robert
with a copy to:	Simpson Thacher & Bartlett LLP
	425 Lexington Avenue
	New York, New York 10017
	Facsimile No.:  (212) 455-2502
	E-mail:  aklein@stblaw.com
	Attention:  Alan Klein
if to the Company:	Southwest Water Company
	One Wilshire Building
	624 South Grand Avenue, Suite 2900
	Los Angeles, California 90017-3782
	Facsimile No.:  (213) 929-1888
	E-mail:  mswatek@swwc.com
	Attention:  Mark A. Swatek
with a copy to:	Locke Lord Bissell & Liddell LLP
	300 S. Grand Avenue, Suite 2600
	Los Angeles, California 90071
	Facsimile No.:  (213) 341-6774
	E-mail:  nbrockmeyer@lockelord.com
	Attention:  Neal H. Brockmeyer

5.6       Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Parent, or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

5.7       Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

5.8       Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  Neither the Company nor the Parent may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party.

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5.9       No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.5.

5.10     Governing Law.  This Agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement, shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State, without giving effect to principles of conflicts of law.  All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in the Court of Chancery of the State of Delaware.  The parties hereby (a) submit to the exclusive jurisdiction of such court for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto, (b) agree that all claims in respect of such action or proceeding may be heard and determined only in such court, (c) agree not to bring any action or proceeding arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement in any other court and (d) irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of such court, that its property is exempt or immune from attachment or execution, that the action is brought in an inconvenient forum, that the venue of the action is improper, or that this Agreement may not be enforced in or by such court.  Each party hereto irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

5.11     Execution.  This Agreement may be executed in two counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

5.12     Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

5.13     Replacement of Purchased Stock.  If any certificate or instrument evidencing any Purchased Stock is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of

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evidence reasonably satisfactory to the Company of such loss, theft or destruction.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Purchased Stock.

5.14     Company Disclosure Schedule.  Parent shall not be entitled to claim that any fact or combination of facts constitutes a breach of any of the Company’s representations or warranties made pursuant to Section 2.3(b)(i) or 3.1 of  this Agreement if and to the extent that such fact or combination of facts has been disclosed in (i) any Section of the Company Disclosure Schedule, which shall be deemed to be disclosed with respect to any other Section of the Merger Agreement or this Agreement to the extent that it is reasonably apparent that such disclosure is applicable to such other Section or (ii) the Company SEC Reports filed prior to the date of this Agreement in sufficient detail to put a reasonable Person on notice of the relevance of the facts or circumstances so disclosed.  The inclusion of any information in the Company Disclosure Schedule shall not be deemed to be an admission or acknowledgement, in and of itself, that such information is required by the terms hereof to be disclosed, is material, has resulted or is reasonably expected to result in a Company Material Adverse Effect or is outside the ordinary course of business or that it would otherwise be appropriate to include any such information.

5.15     Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

5.16     Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto.

(Signature Pages Follow)

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

SOUTHWEST WATER COMPANY
By:	/s/ Mark Swatek
	Mark Swatek, Chief Executive Officer
SW MERGER ACQUISITION CORP.
By:	/s/ Andrew F. Walters
	Andrew F. Walters, Authorized Signatory

Signature Page to Securities Purchase Agreement

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EX-10.2

Exhibit 10.2

INVESTOR RIGHTS AGREEMENT

This INVESTOR RIGHTS AGREEMENT, dated as of March 16, 2010 (this “Agreement”), is entered into by and among Southwest Water Company, a Delaware corporation (the “Company”), and SW Merger Acquisition Corp. (the “Stockholder”).

RECITALS

WHEREAS, pursuant to the Securities Purchase Agreement, dated as of March 16, 2010 (the “Purchase Agreement”), by and between the Company and the Stockholder, the Company issued 2,700,000 (two million, seven hundred thousand) shares of its common stock, par value $0.01 per share (the “Company Common Stock”) (the number of such shares of Company Common Stock, the “Shares”), to the Stockholder, and the Stockholder owns the Shares;

WHEREAS, in connection with the consummation of the transactions contemplated by the Purchase Agreement, each of the Company and the Stockholder desires to enter into this Agreement to set forth certain rights and obligations of the Company and the Stockholder with respect to the ownership by the Stockholder of the Shares and certain other matters, all in accordance with the terms and conditions set forth herein; and

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1.      Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Merger Agreement, and (b) the following terms have the meanings set forth in this Section 1.1:

“Affiliate”, with respect to any Person, shall have the meaning set forth in Rule 12b-2 of the Exchange Act as in effect on the date hereof.

“Agreement” has the meaning specified in the Introduction.

“Blackout Notice” has the meaning specified in Section 2(c) of Exhibit A.

“Blackout Period” has the meaning specified in Section 2(c) of Exhibit A.

“Company” has the meaning specified in the Introduction.

“Company Common Stock” has the meaning specified in the Recitals.

“Company Subsidiary” means a Subsidiary of the Company.

“Demand Notice” has the meaning specified in Section 2(b) of Exhibit A.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Holder” has the meaning specified in Section 10 of Exhibit A.

“Losses” has the meaning specified in Section 7(a) of Exhibit A.

“Merger Agreement” means the Agreement and Plan of Merger, dated as of March 2, 2010, by and among Stockholder, SW Merger Sub Corp. and the Company.

“Person” means any natural person, corporation, general or limited partnership, limited liability company, joint venture, trust, association or entity of any kind.

“Registrable Shares” means the Shares that are not Transferable Shares, and any Company Common Stock or other securities of the Company or any successor entity which may be issued or distributed in respect of the Registrable Shares by way of stock dividend or stock split or other distribution, recapitalization, merger, conversion or reclassification.

“Registration Rights” has the meaning specified in Section 2.1.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Selling Stockholders” has the meaning specified in Section 3 of Exhibit A.

“Shares” has the meaning specified in the Recitals.

“Shelf Registration Statement” has the meaning specified in Section 2(a) of Exhibit A.

“Standstill Period” means the period commencing on the date hereof and ending on the date of the termination of the Merger Agreement.

“Stockholder” has the meaning specified in the Introduction.

“Subsidiary” of a Person means any other Person of which at least a majority of the voting power represented by the outstanding capital stock or other voting securities or interests having voting power under ordinary circumstances to elect directors or similar members of the governing body of such corporation or entity or fifty percent (50%) or more of the equity interests in such corporation or entity shall at the time be owned or controlled, directly or indirectly, by such Person and/or by one or more of its Subsidiaries.

“Transfer” has the meaning specified in Section 3.1.

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“Transferable Shares” means all or a portion of the Shares that are eligible for resale in compliance with Rule 144 of the Securities Act (including the requirement that the Shares meet the one-year holding period specified in Rule 144(d)).

ARTICLE II

REGISTRATION RIGHTS

Section 2.1.      Registration Rights. The Stockholder shall have the rights to registration under the Securities Act of the Registrable Shares, on the terms and subject to the conditions set forth in Exhibit A (the “Registration Rights”); provided, however, that such Registration Rights shall not become effective until the date of termination of the Merger Agreement.

ARTICLE III

TRANSFER RESTRICTIONS

Section 3.1.      Lock-up Period. Except as permitted by Section 3.2, the Stockholder shall not (i) sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Shares (each, a “Transfer”) or (ii) enter into any swap or other arrangement that transfers to another the economic consequences of ownership of the Shares prior to the earlier of (A) the Effective Time of the Merger, (B) the termination of the Merger Agreement upon the mutual written consent of the Company and Parent or (C) the termination of the Merger Agreement in accordance with its terms under any other circumstances, provided that if in connection with a termination of the Merger Agreement under this subclause (C) a Reverse Termination Fee or expenses are payable to the Company, then such Reverse Termination Fee or expenses shall have been paid to the Company (the date of the occurrence of an event in subclause (A), (B) or (C), the “Expiration Date”).

Section 3.2.      Permitted Transfers. Provided that at all times prior to the Expiration Date the Stockholder maintains net working capital necessary to timely address any claim by the Company for the payment of a Reverse Termination Fee or expenses under the terms of the Merger Agreement (and subject to the Stockholder’s continuing compliance prior to the termination of the Merger Agreement with the terms of the Merger Agreement, including Section 5.4(d) thereof), the restrictions on transfer in Section 3.1 shall not apply to the following Transfers of Shares (each of which exceptions shall be separate and not reduce the scope or availability of any other exception):

(a)        (i) to the Company, (ii) to any Affiliate of the Stockholder, (iii) to any party to the Merger Agreement or (iv) to any equity holder or investor in the Stockholder or its Affiliates, including any new equity holder or investor in the Stockholder or its Affiliates after the date hereof; provided, in each case (other than a transfer to the Company), that the transferee agrees in writing to the restrictions on further transfers of such securities to the extent provided in this Article III and the covenants applicable to Stockholder in Article IV; or

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(b)        in sales pursuant to Rule 144 under the Securities Act.

Any transfer made pursuant to this Section 3.2 shall comply with all applicable federal and state securities laws and regulations.

ARTICLE IV

COVENANTS

Section 4.1.      Registration Rights. The Company and the Stockholder shall comply with the provisions contained in Exhibit A regarding the Registration Rights.

Section 4.2.      Form S-3 Eligibility. Until such time as all of the Shares are Transferable Shares, the Company shall use its commercially reasonable best efforts to regain its eligibility to use Form S-3 under the criteria set forth in Instruction I.A. thereto, and if it regains such eligibility, to continue to use commercially reasonable best efforts to remain so eligible to use Form S-3.

Section 4.3.      Expenses. The Company and the Stockholder shall each bear its own expenses and legal fees with respect to this Agreement and the transactions contemplated hereby.

Section 4.4.      Board Seat. The Stockholder shall be permitted to appoint one member of the board of directors of the Company (the “Board”) who satisfies the Company’s Board membership criteria set forth in its Corporate Governance Guidelines.  Once appointed by the Stockholder and seated on the Board, its designated member of the Board will be subject to the same election requirements to which all other members of the Board are subject.

Section 4.5.Standstill. During the Standstill Period, except in respect of the transactions contemplated by this Agreement and by the Merger Agreement, the Stockholder agrees that it will not nor will it cause any of its Subsidiaries to acquire beneficial ownership of any additional shares of Company Common Stock, unless specifically consented to by the Board of Directors of the Company.

ARTICLE V

TERMINATION

This Agreement shall terminate (A) upon the Effective  Time of the Merger, (B) by mutual agreement of the Company and the Stockholder, or (C) upon the later of (i) the Expiration Date and (ii) such time as the Holders no longer own any Shares.

ARTICLE VI

GENERAL PROVISIONS

Section 6.1.      Notices.  All notices and other communications required or permitted by this Agreement shall be in writing and shall be effective, and any applicable time period shall

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commence, when (a) delivered to the following addresses by hand or by a nationally recognized overnight courier service (costs prepaid and with proof of delivery) addressed to the following addresses or (b) transmitted electronically to the following facsimile numbers or e-mail addresses (receipt of which is confirmed) in each case marked to the attention of the persons (by name or title) designated below (or to such other address, facsimile number, e-mail address, or person as a party may designate by notice given in accordance with this Section 6.1 to the other parties):

if to Stockholder:
c/o IIF Subway Investment LP
245 Park Avenue, 2nd Floor
New York, NY 10167
Facsimile No.: (212) 648-2033
E-mail: andrew.f.walters@jpmorgan.com
             christian.p.porwoll@jpmorgan.com
Attention: Andrew F. Walters
                 Christian P. Porwoll

and

Water Asset Management, LLC
509 Madison Avenue, Suite 804
New York, NY 10022
Facsimile No.: (212) 754-5101
E-mail: m.robert@waterinv.com
Attention: Marc Robert

with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 455-2502
E-mail: aklein@stblaw.com
Attention: Alan Klein

if to the Company:
Southwest Water Company
One Wilshire Building
624 South Grand Avenue, Suite 2900
Los Angeles, California 90017-3782
Facsimile No.: (213) 929-1888
E-mail: mswatek@swwc.com
Attention: Mark A. Swatek

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with a copy to:
Locke Lord Bissell & Liddell LLP
300 S. Grand Avenue, Suite 2600
Los Angeles, California 90071
Facsimile No.: (213) 341-6774
E-mail: nbrockmeyer@lockelord.com
Attention: Neal H. Brockmeyer

Section 6.2.      Entire Agreement. This Agreement and the Purchase Agreement set forth the entire agreement of the parties with respect to the subject matter hereof.  Notwithstanding anything contained herein, this Agreement is not intended to, and shall in no way, modify or supplement the terms of the Merger Agreement.  This Agreement supersedes the terms of that certain binding letter of intent dated March 2, 2010 by and among the Company, the Stockholder and certain Affiliates of the Stockholder, and all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof (other than the Merger Agreement).

Section 6.3.      Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason (a) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable Law and to give the maximum effect to the intent of the parties; (b) the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby; and (c) to the fullest extent possible, the provisions of this Agreement shall be construed to give the maximum effect to the intent of the parties.

Section 6.4.      Interpretation. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereto,” “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The term “or” is not exclusive. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms.  Any agreement or instrument defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified or supplemented.  References to a person are also to its permitted successors and assigns.  Whenever a reference is made in this Agreement to an Article or Section, such reference shall be to an Article or Section of this Agreement unless otherwise indicated.  Whenever a reference is made in this Agreement to parties, such reference shall be to the parties to this Agreement unless otherwise indicated.  The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.  Each of the parties has participated in the drafting and negotiation of this Agreement.  If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any of the provisions of this Agreement.

Section 6.5.      Counterparts; Effect. This Agreement may be executed in two or more counterparts, and by the different parties in separate counterparts, all of which taken together

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shall constitute one and the same agreement and shall become effective when one or more counterparts have been executed by each of the parties and delivered to the other parties.  Copies of executed counterparts transmitted by telecopy or electronic transmission shall be considered original executed counterparts for purposes of this Section 6.5, provided that receipt of such counterparts is confirmed.

Section 6.6.      No Third-Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and each permitted assignee hereof, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 6.7.      Governing Law; Wavier of Jury Trial. This Agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement, shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State, without giving effect to principles of conflicts of law.  All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in the Court of Chancery of the State of Delaware.  The parties hereby (a) submit to the exclusive jurisdiction of such court for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto, (b) agree that all claims in respect of such action or proceeding may be heard and determined only in such court, (c) agree not to bring any action or proceeding arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement in any other court and (d) irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of such court, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement or the transactions contemplated hereby may not be enforced in or by such court.  Each party hereto irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

Section 6.8.      Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto (whether by operation of law or otherwise) without the prior written consent of the other party; provided, however, that Stockholder may, without the consent of the Company, assign its Registration Rights to any transferee of its Shares to the extent permitted under the terms of Section 3.2 hereof.

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first written above.

SOUTHWEST WATER COMPANY
By:	/s/ Mark Swatek
		Name: Mark Swatek
		Title: Chief Executive Officer
SW ACQUISITION MERGER CORP.
By:		/s/ Andrew F. Walters
		Name: Andrew F. Walters
		Title: Authorized Signatory

Signature Page to Investor Rights Agreement

EXHIBIT A

REGISTRATION RIGHTS

Section 1.         Effectiveness of Registration Rights. The registration rights pursuant to Sections 2 and 3 hereof shall become effective on the date of termination of the Merger Agreement.

Section 2.         Registration Rights Generally.

(a)        Shelf Registration. Unless all of the Shares are Transferable Shares, the Company shall cause to be filed no later than twenty (20) business days after the termination of the Merger Agreement, a registration statement (the “Shelf Registration Statement”) on Form S-1 (or any successor form), unless at such time the Company qualifies to use Form S-3 (or any successor form), in which case it shall use Form S-3, and such other documents as may be necessary to permit offerings and sales of Registrable Shares by Holders pursuant to Rule 415 under the Securities Act. Subject to the terms hereof, the Company shall exercise its best efforts to cause the Shelf Registration Statement to be declared effective as promptly as possible after the filing thereof.  Subject to Section 2(c), the Company shall maintain such Shelf Registration Statement effective and current until the earlier of (i) the time all Registrable Shares are sold pursuant to such registration statement and (ii) the time when all Shares are Transferable Shares. The Company shall supplement and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration Statement or if required by the Securities Act.

(b)        Contingent Demand Registration. In the event that the Company has failed to or is unable to file and maintain a Shelf Registration Statement as contemplated by Section 2(a) and until such failure or inability is remedied, one or more Holders holding individually or in the aggregate at least 10% of the Registrable Shares outstanding as of the Closing Date shall have the right to make a written demand upon the Company (a “Demand Notice”) to have the Company as promptly as practical register under the Securities Act for offer and sale all Registrable Shares specified to the Company by such Holders within twenty (20) business days of the date of the Demand Notice, and the Company agrees to so register such Registrable Shares. If a Demand Notice has been made on the Company, no subsequent Demand Notice may be made on the Company for ninety (90) days unless the Company has failed to comply with its obligations with respect to the Demand Notice. The Holders shall have the right to exercise registration rights pursuant to this Section 2(b) up to three (3) times.

(c)        Blackout Period. Notwithstanding Section 2(a) above, if the Company shall furnish to the Holders a certificate signed by the Chief Executive Officer of the Company (each, a “Blackout Notice”) stating that (i) there is a reasonable likelihood that such disclosure, registration statement or related prospectus to be filed, amended or supplemented, or any other action to be taken in connection with the prospectus, would materially and adversely affect or interfere with any financing, acquisition, merger, disposition of assets (outside the ordinary course of business), corporate reorganization or other similar transaction involving the Company, or (ii) the occurrence or existence of any pending corporate development with respect to the Company that the Company reasonably believes could render the registration statement or any related prospectus materially misleading, the Company shall be entitled to suspend the use of the registration statement

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and related prospectus or delay the delivery or filing, but not the preparation, of any amendment or supplement to the registration statement or otherwise delay the completion of any sale of Registrable Shares pursuant to the registration statement for a reasonable period of time, but not to exceed sixty (60) days (the “Blackout Period”) within any 365-day period beginning on the first day of a Blackout Period; and provided, further, that any Blackout Period shall only be effective when and for so long as other holders, if any, of registration rights with respect to the Company’s securities are restricted from exercising their registration rights to the same or greater extent as the Holders. Upon receipt of a Blackout Notice, the Holders shall not effect sales of Registrable Shares pursuant to the registration statement. The Company shall promptly deliver written notice to the Holders of the expiration or earlier termination of any Blackout Period.

Section 3.         Incidental Registration Rights. For a period of two (2) years following the termination of the Merger Agreement, in the event that the Company has failed to or is unable to file and maintain a Shelf Registration Statement as contemplated by Section 2(a) and until such failure or inability is remedied, if the Company proposes to register (including for this purpose a registration effected by the Company for security holders of the Company other than any Holder) any Company Common Stock for sale under the Securities Act or effect or participate in an offering of Company Common Stock under the Securities Act (other than (i) pursuant to Section 2 hereof, (ii) securities to be issued pursuant to a stock option or other employee benefit or similar plan, or (iii) securities proposed to be issued in exchange for securities or assets of, or in connection with a merger or consolidation with, another corporation) the Company shall, as promptly as practicable, give written notice to the Holders of the Company’s intention to effect such registration or effect or participate in such an offering. If, within ten (10) days after receipt of such notice, any Holder submits a written request to the Company specifying the amount of Registrable Shares that it proposes to sell or otherwise dispose of in accordance with this Section 3, the Company shall use its reasonable best efforts to include the Registrable Shares specified in the contemplated offering. If the offering is to be made by or through underwriters, the Company, any selling Holder and such underwriter shall execute an underwriting agreement in customary form; provided, however, that if the Company and any selling Holder are advised in writing in good faith by the lead underwriter of the Company’s securities that the amount to be sold by Persons other than the Company (collectively, “Selling Stockholders”) is greater than the amount that can be offered without adversely affecting the offering (taking into consideration the interests of the Company and the Holders), the Company may reduce the amount offered for the accounts of Selling Stockholders (including such holders of Registrable Shares) to a number reasonably deemed satisfactory by such lead underwriter; provided that the shares that shall be excluded shall be excluded in the following order: (i) first, securities held by any Persons not having any contractual or incidental registration rights in respect of the offering contemplated by this Section 3, (ii) second, Registrable Shares held by the Holders sought to be included in the offering pursuant to this Section 3 and Company Common Stock sought to be included in such offering by Persons having contractual or incidental “piggy-back” rights, (iii) third, Company Common Stock sought to be offered and sold by other Persons having demand registration rights with respect to such an offering and (iv) fourth, Company Common Stock sought to be sold by the Company. Any reduction of the number of Registrable Shares indicated under (ii) shall be made on a pro rata basis based upon the aggregate number of shares of Company Common Stock sought to be registered pursuant to this section by the relevant Holders and other Persons.

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Section 4.         Underwriting and Broad Distribution.

(a)        At the request of any Holder, with respect to a sale of Registrable Shares by such Holder, the Company shall enter into an underwriting, agency, placement, subscription or other agreement, in usual and customary form and substance (including but not limited to usual and customary indemnities, the provision by independent counsel to the Company of customary opinions and the provision of customary certificates by officers of the Company and the provision by the Company’s independent accountants of customary comfort letters as reasonably requested by such Holder and the lead underwriters of such offering) with managing underwriters to be selected by such Holder and not disapproved by the Company acting reasonably, and the Company shall perform its obligations in connection therewith.

(b)        The Company shall be required to enter into an underwriting, agency, placement, subscription or other agreement pursuant to Section 4(a) only if such Registrable Shares are to be offered and sold in a manner intended to result in a broad distribution within or outside the United States (simultaneously or both), such that no single purchaser of the Registrable Shares will acquire in such offering more than two percent of the Company Common Stock outstanding at the time of such purchase and sale.

Section 5.         Registration Mechanics.

(a)        Company Obligations. In connection with any registration of Registrable Shares pursuant to Section 2 or 3, the Company shall:

(i)         prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and the rules promulgated thereunder with respect to the sale or other disposition of all of the securities proposed to be registered by such registration statement;

(ii)        furnish to the Holders such number of copies of any prospectus (including preliminary, amended and supplemental prospectuses and any “issuer free writing prospectuses” (as such term is defined in Rule 433 under the Securities Act)) and conformed copies of the registration statement (including amendments or supplements thereto and, in each case, all exhibits) and such other documents as it may reasonably request, but only while the Company shall be required under the provisions hereof to cause the registration statement to remain effective;

(iii)       (A)       use its best efforts to register or qualify the Registrable Shares covered by such registration statement under such other securities or blue sky laws of such jurisdictions as the Holders or any underwriter shall reasonably request, and do any and all other acts and things which may be necessary or advisable to enable such Holders or any underwriter to consummate the disposition of Registrable Shares in such jurisdictions and (B) keep such registration or qualification in effect for so long as the registration statement remains in effect; provided, however, that the Company shall not be obligated to qualify to do business as a foreign corporation under the laws of any jurisdiction in which it shall not then be qualified or to file any general consent to service of process in any jurisdiction in which such a consent has not been previously filed;

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(iv)       use reasonable efforts to furnish, or cause to be furnished, to the Holders, addressed to them, (A) an opinion of counsel for the Company, dated the date of the closing under the underwriting agreement relating to any underwritten offering, and (B) a “cold comfort” letter signed by the independent public accountants who have certified the Company’s financial statements included in such registration statement, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities and such other matters as such Holders may reasonably request;

(v)        use its reasonable best efforts to cause all Registrable Shares proposed to be registered by such registration statement to be registered with or approved by such other federal or state government agencies or authorities as may be necessary in the opinion of counsel to the Company to enable the Holders to consummate the disposition of such Registrable Shares;

(vi)       within a reasonable time before each filing of the registration statement or prospectus or amendments or supplements thereto with the SEC, furnish to one counsel selected by the Holders copies of such documents proposed to be filed, which documents shall be subject to the reasonable approval of such counsel, and promptly provide such counsel with all written comments from the SEC with respect to such documents;

(vii)      make available to the Holders, any underwriter participating in any disposition pursuant to a registration statement, and any attorney, accountant or other agent or representative retained by any selling Holder or underwriter, upon request, all financial and other records, pertinent corporate documents and properties of the Company and Company Subsidiaries, including access to due diligence meetings involving the senior executives of the Company, as shall be reasonably necessary to enable the Holders, representatives of the Holders and the underwriters to conduct reasonable due diligence and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such person in connection with such registration statement subject, in each case, to such confidentiality agreements as the Company shall reasonably request and that in the case of the Holders, this obligation shall only apply to one attorney, accountant or other representative designated by the Requesting Holders;

(viii)      make available executive officers and other members of senior management of the Company (including the principal executive and financial officers of the Company) at “road shows” or other investor presentations conducted in connection with offerings of Registrable Shares (subject to such executive officers and members of management being able to properly address their other business responsibilities);

(ix)       notify the Holders any time a prospectus relating to the offering of Registrable Shares is required to be delivered or filed under the Securities Act upon discovery that, or upon the occurrence of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material facts required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances under which they were made, and (subject to the good faith determination of the board of directors of the Company as to whether to cease or

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temporarily halt all sales under such registration statement), at the request of the Holders prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made;

(x)        use reasonable efforts to comply with all applicable rules and regulations of the SEC; and

(xi)       cause the Registrable Shares covered by such registration statement to be listed on the Nasdaq Global Select Market or on any other principal securities exchange on which Company securities of the same class as the Registrable Shares are then listed.

(b)        Holder Obligations. Each Holder that holds shares covered by any registration statement will furnish to the Company in writing such information regarding itself as is required to be included in the registration statement, the ownership of shares by such Holder and the proposed distribution by such Holder of such shares as the Company may from time to time reasonably request in writing.

Section 6.         Expenses. The Company shall pay or cause to be paid all of the Company’s fees and expenses in connection with any registration and sale of Registrable Shares pursuant to the Registration Rights (including, without limitation, all registration and filing fees, all printing costs, all fees and expenses of counsel and independent accountants for the Company and all fees and expenses of complying with securities or blue sky laws).  Notwithstanding anything contained herein, the Company shall not be responsible for any broker, underwriter or similar fees or commissions, or any legal expenses or costs of the Holders in connection therewith.

Section 7.         Indemnification and Contribution.

(a)        Indemnification by the Company. With respect to any offering and sale registered pursuant to these Registration Rights, the Company agrees to indemnify and hold any selling Holder, each underwriter, if any, of the Registrable Shares under such registration, and each Person who controls any of the foregoing within the meaning of Section 15 of the Securities Act, and any directors and officers of the foregoing, harmless against any and all losses, claims, damages, or liabilities (including legal fees and other expenses incurred in the investigation and defense thereof) to which they or any of them may become subject under the Securities Act or otherwise (collectively “Losses”), insofar as any such Losses shall arise out of or shall be based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement relating to the sale of such Registrable Shares, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the prospectus relating to the sale of such Registrable Shares, or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act

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or any applicable state securities law; provided, however, that the indemnification contained in this Section 7 shall not apply to such Losses which shall arise out of or shall be based upon any such untrue statement, or any such omission or alleged omission, which shall have been made in reliance upon and in conformity with information furnished in writing to the Company by any selling Holder or any underwriter, as the case may be, specifically for use in connection with the preparation of the registration statement or prospectus contained in the registration statement or any such amendment thereof or supplement therein.

(b)        Indemnification by the Holders. In the case of each offering and sale registered pursuant to these Registration Rights, any selling Holder and each underwriter, if any, participating therein shall severally indemnify and hold harmless the Company and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, and the directors and officers of the Company, with respect to any statement in or omission from such registration statement or prospectus contained in such registration statement (as amended or as supplemented, if amended or supplemented as aforesaid) if such statement or omission shall have been made in reliance upon and in conformity with information furnished in writing to the Company by any selling Holder or such underwriter, as the case may be, specifically for use in connection with the preparation of such registration statement or prospectus contained in the registration statement or any such amendment thereof or supplement thereto.

(c)        Notice. Each party indemnified under this Section 7 shall promptly after receipt of notice of the commencement of any claim against such indemnified party in respect of which indemnity may be sought hereunder, notify the indemnified party in writing of the commencement thereof. The failure of any indemnified party to notify an indemnifying party shall not relieve the indemnifying party from any liability in respect of such action which it may have to such indemnified party on account of the indemnity contained in this Section 7, unless (and only to the extent) the indemnifying party was prejudiced by such failure, and in no event shall such failure relieve the indemnifying party from any other liability which it may have to such indemnified party. In case any action in respect of which indemnification may be sought hereunder shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may desire, jointly with any other indemnifying party similarly notified, to assume the defense thereof through counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 7 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof, other than reasonable costs of investigation (unless such indemnified party reasonably objects to such assumption on the grounds that there may be defenses available to it which are different from or in addition to those available to such indemnifying party in which event the indemnifying party shall not be entitled to assume the defense thereof with respect to such defenses). No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any claim or pending or threatened proceeding in respect of which the indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability arising out of such claim or proceeding.

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(d)        Contribution. If the indemnification provided for in this Section 7 is unavailable to an indemnified party or is insufficient to hold such indemnified party harmless from any Losses in respect of which this Section 7 would otherwise apply by its terms (other than by reason of exceptions provided herein), then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the offering to which such contributions relates as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, each party’s relative knowledge and access to information concerning the matter with respect to which the claim was asserted, and the opportunity to correct and prevent any statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include any legal or other fees or expenses incurred by such party in connection with any investigation or proceeding to the extent such party would have been indemnified for such expenses if the indemnification provided for in this Section 7 was available to such party. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

Section 8.         Exchange Act Reports. With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration, the Company agrees to use its reasonable best efforts to:

(a)        make and keep public information available, as those terms are understood and defined in Rule 144, at all times, and take all action as may be required as a condition to the availability of Rule 144;

(b)        so long as a Holder owns any Registrable Shares, furnish to any Holders upon its reasonable written request a written statement certifying the Company’s compliance with the reporting requirements of Rule 144 or any similar rule, and a copy of the most recent annual, periodic or current report of the Company filed pursuant to the Exchange Act and such other reports and documents as reasonably requested by such Holder in availing itself of any rule or regulation of the SEC allowing the sale of the Registrable Shares without registration;

(c)        file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(d)        facilitate and expedite transfers of Registrable Shares sold pursuant to SEC Rule 144, including providing timely notice to its transfer agent to expedite such transfers.

Section 9.         Other Agreements.

(a)        The Company shall not grant, and has not granted, any other Person rights to register securities of the Company on terms that would be reasonably likely to restrict the ability

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of the Company fully to perform its obligations to the Holders in connection with the Registration Rights.

(b)        The Company shall not amend any registration rights agreement with any other Person nor shall the Company waive any provision under any registration rights agreement that it would be entitled to waive thereunder if such waiver would be reasonably likely to adversely affect any Holder’s Registration Rights.

Section 10.       Benefits of Registration Rights. The Stockholder and any permitted holder of the Shares under the Investor Rights Agreement may exercise and have the benefits of the Registration Rights initially granted to the Stockholder hereunder in such manner and in such proportion as shall be determined by such Stockholder (such Stockholder and such holders exercising Registration Rights each shall be termed a “Holder” hereunder); provided, that each Holder shall also be subject to the obligations provided hereunder.

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