EXHIBIT INDEX

Exhibit          Description                       Located in
No.                                                Sequentially
                                                   Numbered Copy

2       Plan of Acquisition, Reorganization,
        Arrangement, Liquidation or Succession:

2.5     Agreement and Plan of Merger dated as of
        October 28, 1999 among American Water Works
        Company, Inc., SJW Acquisition Corporation
        and SJW Corp.                                    13 - 79

10.12   Sixth Amendment to San Jose Water Company's
        Executive Supplemental Retirement Plan           80 - 81

10.13   Amendment to SJW Corp.'s Executive Severance
        Plan                                             82 - 85

10.14   SJW Corp.'s Transaction Incentive and
        Retention Program for Key Employees              86 - 95

10. 15  Resolution for Directors' Retirement Plan
        adopted by SJW Corp. Board of Directors as
        amended on September 22, 1999                         96

10.16   Resolution for Directors' Retirement Plan
        adopted by San Jose Water Company's Board of
        Directors as amended on September 22, 1999            97

10.17   Resolution for Directors' Retirement Plan
        adopted by SJW Land Company Board of Directors
        on September 22, 1999                                 98


10.18   Limited Partnership Agreement of 444 West
        Santa Clara Street, L. P. executed between
        SJW Land Company and Toeniskoetter & Breeding,
        Inc. Development                                99 - 213

AGREEMENT AND PLAN OF MERGER

DATED AS OF OCTOBER 28, 1999

among

AMERICAN WATER WORKS COMPANY, INC.,

SJW ACQUISITION CORP.

and

SJW CORP.

                        TABLE OF CONTENTS

                                                             Page

ARTICLE I THE MERGER                                           1
     1.1.      The Merger                                      1
     1.2.      Closing                                         1
     1.3.      Effective Time                                  2
     1.4.      Effects of the Merger                           2
     1.5.      Articles of Incorporation                       2
     1.6.      By-Laws                                         2
     1.7.      Officers and Directors of Surviving Corporation 2
     1.8.      Effect on Capital Stock.                        2
     1.9.      Further Assurances                              3

ARTICLE II EXCHANGE OF CERTIFICATES                            4
     2.1.      Exchange Fund                                   4
     2.2.      Exchange Procedures                             4
     2.3.      No Further Ownership Rights in SJW Common Stock 4
     2.4.      Termination of Exchange Fund                    5
     2.5.      No Liability                                    5
     2.6.      Investment of the Exchange Fund                 5
     2.7.      Lost Certificates                               5
     2.8.      Withholding Rights                              5
     2.9.      Stock Transfer Books                            6

ARTICLE III REPRESENTATIONS AND WARRANTIES                     6
     3.1.      Representations and Warranties of SJW           6
     3.2.      Representations and Warranties of Parent       17
     3.3.      Representations and Warranties of Parent and
               Merger Sub                                     19

ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS          20
     4.1.      Covenants of SJW                               20
     4.2.      Covenants of Parent                            24
     4.3.      Advice of Changes; Governmental Filings        24
     4.4.      Transition Planning; Continued Operations of
               SJW                                            24
     4.5.      Control of SJW's Business                      25

ARTICLE V ADDITIONAL AGREEMENTS                               25
     5.1.      Preparation of SJW Proxy Statement; SJW
               Shareholders Meeting.                          25
     5.2.      Access to Information                          26
     5.3.      Reasonable Best Efforts.                       27
     5.4.      Acquisition Proposals.                         28
     5.5.      Employee Benefits Matters.                     30
     5.6.      Fees and Expenses                              31
     5.7.      Directors' and Officers' Indemnification and
               Insurance.                                     31
     5.8.      Public Announcements                           33
     5.9.      Disclosure Schedule Supplements                33

ARTICLE VI CONDITIONS PRECEDENT                               33
     6.1.      Conditions to Each Party's Obligation to Effect
               the Merger                                     33
     6.2.      Additional Conditions to Obligations of Parent and
               Merger Sub                                     34
     6.3.      Additional Conditions to Obligations of SJW    35

ARTICLE VII TERMINATION AND AMENDMENT                         35
     7.1.      Termination                                    35
     7.2.      Effect of Termination.                         37
     7.3.      Amendment                                      37
     7.4.      Extension; Waiver                              38

ARTICLE VIII GENERAL PROVISIONS                               38
     8.1.      Non-Survival of Representations, Warranties and
               Agreements                                     38
     8.2.      Notices                                        38
     8.3.      Interpretation                                 39
     8.4.      Counterparts                                   39
     8.5.      Entire Agreement; No Third Party Beneficiaries.40
     8.6.      Governing Law                                  40
     8.7.      Severability                                   40
     8.8.      Assignment                                     40
     8.9.      Submission to Jurisdiction; Waivers            40
     8.10.     Enforcement                                    41
     8.11.     Definitions                                    41
     8.12.     Other Agreements                               42

Definition                             Location of Definition

1935 Act                                      Section 3.1(t)
Acquisition Proposal                          Section 5.4
Agreement                                     Preamble
AMEX                                          Section 3.1(c)(iii)
Benefit Plans                                 Section 8.11(a)
Board of Directors                            Section 8.11(b)
Business Day                                  Section 8.11(c)
CCC                                           Section 1.1
Certificate                                   Section 1.8(b)
Closing                                       Section 1.2
Closing Date                                  Section 1.2
Code                                          Section 2.8
Confidentiality Agreement                     Section 5.2
Contracts                                     Section 3.1(c)(ii)
Delaware Certificate of Merger                Section 1.3
Delaware General Corporation Law              Section 1.1
Dissenting Shares                             Section 1.8(e)
DOJ                                           Section 5.3(b)
DRIP                                          Section3.1(b)(i)
Encumbrances                                  Section 3.1(b)(iv)
Effective Time                                Section 1.3
Environmental Claim                           Section 3.1(g)(v)(A)
Environmental Law                             Section 3.1(g)(v)(B)
ERISA                                         Section 3.1(h)(i)
Exchange Act                                  Section 3.1(c)(iii)
Exchange Agent                                Section 2.1
Exchange Fund                                 Section 2.1
Expenses                                      Section 5.6
Final Order                                   Section 6.1(c)
GAAP                                          Section 3.1(d)
Governmental Entity                           Section 3.1(c)(iii)
Hazardous Materials                           Section 3.1(g)(v)(C)
Health Agencies                               Section 3.1(c)(iii)
HSR Act                                       Section 3.1(c)(iii)
Indemnified Parties                           Section 5.7(a)
knowledge                                     Section 8.11(d)
Laws                                          Section 3.1(c)(ii)
Material Adverse Effect                       Section 8.11(e)
Merger                                        Recitals
Merger Consideration                          Section 1.8(a)
Merger Sub                                    Preamble
Orders                                        Section 3.1(c)(ii)
Parent                                        Preamble
Parent Financial Advisor                      Section 3.2(e)
Parent Ordinary Shares                        Section 3.1(v)
Person                                        Section 8.11(g)
PUCs                                          Section 3.1(c)(iii)
Release                                       Section 3.1(g)(v)(D)
Required SJW Vote                             Section 3.1(p)
Rights                                        Section 3.1(b)(i)
Rights Plan                                   Section 3.1(b)(i)
SEC                                           Section 3.1(d)
Significant Subsidiary                        Section 8.11(h)
SJW                                           Preamble
SJW Board Approval                            Section 3.1(o)
SJW Common Stock                              Recitals
SJW Disclosure Schedule                       Section 3.1
SJW     Employees                             Section 5.5(b)(i)
SJW Financial Advisor                         Section 3.1(r)
SJW Proxy Statement                           Section 5.1(a)
SJW    Required   Consents.                   Section 3.1(c)(iii)
SJW SEC Reports                               Section 3.1(d)
SJW Shareholders Meeting                      Section 5.1(b)
SJW    Voting   Debt                          Section 3.1(b)(ii)
Subsidiary                                    Section 8.11(h)
Superior Proposal.                            Section 8.11(i)
Surviving Corporation                         Section 1.1
Tax     Return                                Section 3.1(k)(vi)
Taxes                                         Section 3.1(k)(vi)
Termination Date                              Section 7.1(b)
Termination Fee                               Section 7.2(b)
Violation                                     Section 3.1(c)(ii)

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of October 28, 1999 (this "Agreement"), among American Water Works Company, Inc., a Delaware corporation ("Parent"), SJW Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and SJW Corp., a California corporation ("SJW").

W I T N E S S E T H :

WHEREAS, the respective Boards of Directors of the Parent, Merger Sub and SJW have each determined that this Agreement and the merger of Merger Sub with and into SJW (the "Merger") in accordance with the provisions of this Agreement are advisable and in the best interests of their respective shareholders, and such Boards of Directors have approved such Merger, upon the terms and subject to the conditions set forth in this Agreement, pursuant to which the holders of shares of common stock, $3.125 par value, of SJW ("SJW Common Stock") will be converted into the right to receive the Merger Consideration (as defined in Section 1.8) for each share of SJW Common Stock issued and outstanding immediately prior to the Effective Time (as defined in Section 1.3) (other than shares of SJW Common Stock that are owned or held directly or indirectly by Parent or SJW which shall be canceled as provided in Section 1.8, and Dissenting Shares (as defined in Section 1.8)), and SJW will become a wholly-owned subsidiary of Parent;

WHEREAS, Parent, Merger Sub and SJW desire to make certain representations, warranties, covenants and agreements in connection with the transactions contemplated hereby and also to prescribe various conditions to the transactions contemplated hereby;

WHEREAS, as an inducement for Parent to enter into this Agreement, certain stockholders of SJW have entered into voting support agreements; and

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I

THE MERGER

1.1. The Merger.

Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the California Corporation Code (the "CCC") and Delaware General Corporation Law (the "DGCL"), Merger Sub shall be merged with and into SJW at the Effective Time. Following the Merger, the separate corporate existence of Merger Sub shall cease and SJW shall continue as the surviving corporation (the "Surviving Corporation").

1.2. Closing.

The closing of the Merger (the "Closing") will take place at 10:00 a.m., Pacific time, as soon as practicable, but in any event not later than the third Business Day, after the satisfaction or waiver (subject to any applicable Law or Order (each as defined in Section 3.1(c)) of the conditions (excluding conditions that, by their terms, cannot be satisfied until the Closing Date) set forth in Article VI (the "Closing Date"), unless another time or date is agreed to in writing by the parties hereto. The Closing shall be held at the offices of Brobeck, Phleger & Harrison LLP, Spear Street Tower, One Market, San Francisco, CA 94105, unless another place is agreed to in writing by the parties hereto.

1.3. Effective Time.

On the Closing Date, the parties shall (i) file agreements of merger (or like instruments) (collectively, the "Agreement of Merger") in such form as is required by and executed in accordance with the relevant provisions of the CCC and DGCL and (ii) make all other filings or recordings required under the CCC and DGCL. The Merger shall become effective at such time as the Agreement of Merger has been duly filed with the California Secretary of State and the Delaware Secretary of State or at such subsequent time as Parent and SJW shall agree and be specified in the Agreement of Merger (the date and time the Merger becomes effective being the "Effective Time").

1.4. Effects of the Merger.

At and after the Effective Time, the Merger will have the effects set forth in the CCC. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of SJW and Merger Sub shall be vested in the Surviving Corporation, and all debts, liabilities and duties of SJW and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

1.5. Articles of Incorporation.

At the Effective Time, the articles of incorporation of the Surviving Corporation shall be amended in accordance with *the CCC to read in its entirety as set forth in Exhibit 1.5 hereto until thereafter amended as provided therein and under the CCC.

1.6. By-Laws.

The by-laws of Merger Sub as in effect at the Effective Time shall be the by-laws of the Surviving Corporation until thereafter changed or amended as provided therein and under applicable Law or Order.

1.7. Officers and Directors of Surviving Corporation.

The officers of SJW as of the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or otherwise ceasing to be an officer or until their respective successors are duly elected and qualified, as the case may be. The directors of Merger Sub as of the Effective Time shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or otherwise ceasing to be a director or until their respective successors are duly elected and qualified.

1.8. Effect on Capital Stock.

(a) At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, each share of SJW Common Stock issued and outstanding immediately prior to th Effective Time (other than shares of SJW Common Stock that are 100% owned or held directly or indirectly by Parent or SJW, which shall be canceled as provided in Section 1.8(c) and Dissenting Shares) shall be converted into the right to receive, subject to the provisions of Article II, $128.00 in cash (the "Merger Consideration"), without any interest or dividends thereon, except as provided in Section 2.3.

(b) As a result of the Merger and without any action on the part of the holders thereof, at Effective Time, all shares of SJW Common Stock shall cease to be outstanding and shall be canceled and shall cease to exist, and each holder of a certificate which immediately prior to the Effective Time represented any such shares of SJW Common Stock (a "Certificate") shall thereafter cease to have any rights with respect to such shares of SJW Common Stock, except the right to receive the applicable Merger Consideration, other than with respect to SJW Common Stock to be canceled in accordance with Section 1.8(c) and Dissenting Shares, in accordance with Article II upon the surrender of such Certificate.

(c) Each share of SJW Common Stock issued that is 100% owned or held directly or indirectly by Parent or SJW at the Effective Time shall, by virtue of the Merger, cease to be outstanding and shall be canceled and no payment or other consideration shall be delivered in exchange therefor.

(d) Each share of common stock, par value $.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time, shall be converted into one share of common stock, par value $.01 per share, of the Surviving Corporation as of the Effective Time.

(e) Notwithstanding any other provision of this Agreement shares of SJW Common Stock issued and outstanding immediately prior to the Effective Time and held by a holder who has voted against the approval of this Agreement and who has demanded the payment of such shares at fair value in accordance with
Section 1301 of the CCC ("Dissenting Shares") shall not be converted into a right to receive the Merger Consideration but shall be converted into the right to receive such consideration as may be determined to be due to such holder pursuant to the CCC, unless such holder fails to perfect such demand for payment within the period prescribed by the CCC or withdraws or otherwise loses such holder's right to payment under the CCC. If, after the Effective Time, such holder fails to perfect such demand for payment or withdraws or loses such holder's right to payment, such Dissenting Shares shall be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration, without interest or dividends thereon, except as provided in Section 2.3. SJW shall give Merger Sub prompt notice of any written demands received by SJW for payment of fair value for shares of SJW Common Stock, withdrawals of such demands, and other instruments served pursuant to the CCC and received by SJW and relating thereto. Parent shall direct all negotiations and proceedings with respect to such demands for payment. Prior to the Effective Time, SJW shall not, except with the prior written consent of Merger Sub or as required under applicable law, make any payment with respect to, or settle or offer to settle, any such demands.

1.9. Further Assurances.

At and after the Effective Time, the officers and directors of the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of SJW or Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of SJW or Merger Sub, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger.

ARTICLE II

EXCHANGE OF CERTIFICATES

2.1. Exchange Fund.

Prior to the Effective Time, Parent shall designate a commercial bank or trust company selected by Parent and reasonably acceptable to SJW to act as exchange agent hereunder for the purpose of exchanging Certificates for the Merger Consideration (the "Exchange Agent"). At or prior to the Effective Time, Parent shall deposit or cause to be deposited with the Exchange Agent, in trust for the benefit of holders of shares of SJW Common Stock, the aggregate amount of cash to be paid pursuant to Section 1.8 in exchange for outstanding shares of SJW Common Stock (other than shares of SJW Common Stock that are 100% owned or held directly or indirectly by Parent or SJW which shall be canceled as provided in Section 1.8(c) and Dissenting Shares). Parent shall, or shall cause the Surviving Corporation to make available to the Exchange Agent from time to time as needed, cash sufficient to pay any dividends pursuant to
Section 2.3. Any cash deposited with the Exchange Agent shall hereinafter be referred to as the "Exchange Fund".

2.2. Exchange Procedures

As soon as reasonably practicable after the Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail to each holder of a Certificate (i) a letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent, and which letter shall be in customary form and have such other provisions as Parent may reasonably specify and (ii) instructions for effecting the surrender of such Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate to the Exchange Agent together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor a check in the aggregate amount equal to (A) the Merger Consideration multiplied by the number of shares of SJW Common Stock formerly represented by such Certificate and (B) any dividends payable in accordance with Section 2.3 less any required withholding of taxes as provided in Section 2.8. No interest will be paid or will accrue on any cash payable pursuant to the preceding sentence. In the event of a transfer of ownership of SJW Common Stock which is not registered in the transfer records of SJW, a check in the proper amount of cash for the appropriate Merger Consideration and any dividends payable in accordance with Section 2.3 may be paid with respect to such SJW Common Stock to such a transferee if the Certificate formerly representing such shares of SJW Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid or are not payable. The Exchange Fund shall not be used for any purpose other than as set forth in this Article II.

2.3. No Further Ownership Rights in SJW Common Stock

Cash paid upon conversion of shares of SJW Common Stock in accordance with the terms of Article I and this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of SJW Common Stock, subject, however, to the Surviving Corporation's obligation, if any, to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by SJW on such shares of SJW Common Stock prior to the date of this Agreement and which remain unpaid at the Effective Time.

2.4. Termination of Exchange Fund

Any portion of the Exchange Fund which remains undistributed to the holders of Certificates for twelve months after the Effective Time shall be delivered to the Surviving Corporation or otherwise on the instruction of the Surviving Corporation, and any holders of the Certificates who have not theretofore complied with this Article II shall thereafter look only to the Surviving Corporation and Parent for the Merger Consideration with respect to the shares of SJW Common Stock formerly represented thereby to which such holders are entitled pursuant to Section 1.8 and Section 2.2, and any dividends on shares of SJW Common Stock to which such holders are entitled pursuant to Section 2.3.

2.5. No Liability

None of Parent, Merger Sub, SJW, the Surviving Corporation or the Exchange Agent shall be liable to any Person in respect of any Merger Consideration or dividends from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.

2.6. Investment of the Exchange Fund

The Exchange Agent shall invest any cash included in the Exchange Fund only in one or more of the following investments as directed by the Surviving Corporation from time to time: (i) obligations of the United States government maturing not more than 180 days after the date of purchase; (ii) certificates of deposit maturing not more than 180 days after the date of purchase issued by a bank organized under the laws of the United States or any state thereof having a combined capital and surplus of at least $500,000,000; (iii) a money market fund having assets of at least $3,000,000,000; or (iv) tax-exempt or corporate debt obligations maturing not more than 180 days after the date of purchase given the highest investment grade rating by Standard & Poor's and Moody's Investor Service. Any interest and other income resulting from such investments shall promptly be paid to the Surviving Corporation.

2.7. Lost Certificates

If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will deliver in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration with respect to the shares of SJW Common Stock formerly represented thereby and unpaid dividends, if any, on shares of SJW Common Stock deliverable in respect thereof, pursuant to this Agreement.

2.8. Withholding Rights

Each of the Surviving Corporation and Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of SJW Common Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder (the "Code"), or any provision of state, local or foreign tax Law or Order. To the extent that amounts are so withheld by the Surviving Corporation or Parent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of SJW Common Stock in respect of which such deduction and withholding was made by the Surviving Corporation or Parent, as the case may be.

2.9. Stock Transfer Books

At the close of business, Pacific time, on the day Effective Time occurs, the stock transfer books of SJW shall be closed and there shall be no further registration of transfers of shares of SJW Common Stock thereafter on the records of SJW. From and after the Effective Time, the holders of Certificates shall cease to have any rights with respect to such shares of SJW Common Stock formerly represented thereby, except as otherwise provided herein or by Law. On or after the Effective Time, any Certificates presented to the Exchange Agent or Parent for any reason shall be exchanged for the Merger Consideration with respect to the shares of SJW Common Stock formerly represented thereby and any dividends to which the holders thereof are entitled pursuant to Section 2.3.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1. Representations and Warranties of SJW

Except as set forth in the Disclosure Schedule delivered by SJW to Parent prior to the execution of this Agreement (the "SJW Disclosure Schedule"), SJW represents and warrants to Parent as follows:

(a) Organization, Standing and Power. Each of SJW and its Subsidiaries (as defined in Section 8.11(h)) is a corporation duly incorporated or otherwise organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation or organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of SJW and its Subsidiaries is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary other than in such jurisdictions where the failure so to qualify or be in good standing would not, individually or in the aggregate, have a Material Adverse Effect (as defined in Section 8.11(e)) on SJW. Section 3.1(a) of the SJW Disclosure Schedule sets forth a complete and accurate list of each direct and indirect Subsidiary of SJW. The copies of the articles of incorporation and by-laws of SJW and its Subsidiaries that were previously furnished to Parent are true, complete and correct copies of such documents as in effect on the date of this Agreement.

(b) Capital Structure.

(i) As of the date of this Agreement, the authorized capital stock of SJW consisted of 6,000,000 shares of SJW Common Stock. As of October 28, 1999, 3,045,147 shares of SJW Common Stock wereissued and outstanding. All issued and outstanding shares of SJW Common Stock are duly authorized, validly issued, fully paid and nonassessable, and holders of SJW Common Stock are not entitled to preemptive rights. There are outstanding no options, warrants or other rights to acquire capital stock from SJW. No options or warrants or other rights to acquire capital stock from SJW have been issued or granted and remain outstanding.

(ii) No bonds, debentures, notes or other indebtedness of SJW or any of its Subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders may vote ("SJW Voting Debt") are issued or outstanding.

(iii) There are no securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which SJW or any of its Subsidiaries is a party, or by which any of them is bound, obligating SJW or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other securities of SJW or any of its Subsidiaries or, securities convertible into or exchangeable for shares of capital stock or securities of SJW or any of its Subsidiaries, or obligating SJW or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. There are no outstanding obligations of SJW or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of SJW or any of its Subsidiaries or to provide funds to, or make any investment in any other Person, other than a wholly owned Subsidiary of SJW, or to vote or to dispose of any shares of the capital stock of any of the Subsidiaries.

(iv) All of the outstanding shares of capital stock of each Subsidiary of SJW are duly authorized, validly issued, fully paid and nonassessable and, along with any equity interest in any Subsidiary that is a partnership, limited liability company or other similar entity, are owned, beneficially and of record, by SJW or a Subsidiary, which is wholly owned, directly or indirectly, by SJW, free and clear of any liens, claims, mortgages, encumbrances, pledges, security interests, or any other restrictions with respect to the transferability or assignability thereof (collectively, "Encumbrances").

(c) Authority; No Violations.

(i) SJW has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby, subject in the case of the consummation of the Merger to the approval of this Agreement by the Required SJW Vote (as defined in Section 3.1(p)). The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of SJW, and no other corporate or shareholder proceedings on the part of SJW are necessary to authorize this Agreement or to consummate the transactions contemplated hereby (other than in the case of the consummation of the Merger, the approval of this Agreement by the Required SJW Vote). This Agreement has been duly and validly executed and delivered by SJW and constitutes a valid and binding agreement of SJW, enforceable against it in accordance with its terms.

(ii) The execution and delivery of this Agreement by SJW do not or will not, as the case may be, and the performance of the Agreement and the consummation of the Merger by SJW and the other transactions contemplated hereby will not, result in any violation of, conflict with or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, amendment, cancellation or acceleration of any obligation or the loss of a benefit under, or the creation of an Encumbrance on any assets of SJW or any of its Subsidiaries (any such violation, default, right of termination, amendment, cancellation or acceleration, loss or creation, a "Violation") pursuant to: (A) any provision of the articles of incorporation or by-laws or similar organizational document of SJW or any Subsidiary of SJW or (B) except as would not, individually or in the aggregate, have a Material Adverse Effect on SJW, subject to obtaining or making the consents, approvals, orders, authorizations, registrations, declarations and filings referred to in paragraph (iii) below, any loan or credit agreement, note, mortgage, bond, indenture, lease, benefit plan or other agreement, obligation, instrument, permit, concession, franchise, or license to which SJW or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound (collectively, "Contracts"), or any statute, law, ordinance, rule, regulation, whether federal, state, local or foreign (collectively, "Laws"), or any judgment, order, writ, injunction or decree, whether federal, state, local or foreign (collectively, "Orders") applicable to SJW or any Subsidiary of SJW or their respective properties or assets.

(iii) No consent, approval, permit, order or authorization of, or registration, declaration or filing with, or notice to, any foreign, supranational, national, state, municipal or local government, any instrumentality, subdivision, court, administrative agency or commission or other authority thereof, or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi governmental authority (a "Governmental Entity"), is required by or with respect to SJW or any Subsidiary of SJW in connection with the execution and delivery of this Agreement by SJW or the performance of this Agreement and the consummation of the Merger and the other transactions contemplated hereby, except for those required under or in relation to (A) the Hart Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (B) the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (C) the CCC with respect to the filing of the Agreement of Merger, (D) Laws, practices and Orders of any state public utility control or public service commissions or similar state regulatory bodies ("PUCs"), each of which is identified in
Section 3.1(c)(iii)(D) of the SJW Disclosure Schedule, (E) Laws, practices and Orders of any state or local departments of public health or departments of health or similar state or local regulatory bodies or of any federal, state or local regulatory body having jurisdiction over environmental protection or environmental conservation or similar matters ("Health Agencies"), each of which is identified in Section 3.1(c)(iii)(E) of the SJW Disclosure Schedule, (F) rules and regulations of the American Stock Exchange, Inc. (the "AMEX"), and (G) such consents, approvals, permits, Orders, authorizations, registrations, declarations and filings the failure of which to make or obtain would not, individually or in the aggregate, have a Material Adverse Effect on SJW and would not reasonably be expected to prevent or materially delay the consummation of the Merger. Consents, approvals, permits, Orders, authorizations, registrations, declarations and filings required under or in relation to any of the foregoing clauses (A) through (F) are hereinafter referred to as "SJW Required Consents." The parties hereto agree that references in this Agreement to "obtaining" SJW Required Consents means obtaining such consents, approvals or authorizations, making such registrations, declarations or filings, giving such notices, and having such waiting periods expire as are necessary to avoid a violation of Law or an Order.

(d) Reports and Financial Statements.

SJW has filed all required reports, schedules, forms, statements and other documents required to be filed by it under the Exchange Act or the Securities Act (together with the rules and regulations thereunder) with the Securities and Exchange Commission (the "SEC") since January 1, 1998 (collectively, including all exhibits thereto, the "SJW SEC Reports"). No Subsidiary of SJW is required to file any form, report or other document with the SEC, any stock exchange or any comparable Governmental Entity. None of SJW SEC Reports including, without limitation, any financial statements or schedules included therein, as of their respective dates (and, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), contained or will contain any untrue statement of a material fact or omitted or will omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the audited consolidated financial statements and unaudited interim financial statements (including the related notes) included in the SJW SEC Reports presents fairly, in all material respects, the consolidated financial position and consolidated results of operations and cash flows of SJW and its Subsidiaries as of the respective dates or for the respective periods set forth therein, all in conformity with United States generally accepted accounting principles ("GAAP") consistently applied during the periods involved except as otherwise noted therein, and subject, in the case of the unaudited interim financial statements, to normal and recurring year-end adjustments that have not been and are not expected to be material in amount. All of such SJW SEC Reports, as of their respective dates (and as of the date of any amendment to the respective SJW SEC Report), complied in all material respects with the applicable requirements of the Securities Act of 1933, as amended, and the Exchange Act and the rules and regulations promulgated thereunder.

(e) Absence of Liabilities.

Except for liabilities or obligations which are accrued or reserved against in SJW's most recent financial statements dated prior to the date hereof (or in the related notes thereto) included in the SJW SEC Reports or which were incurred in the ordinary course of business and consistent with past practices since the date of SJW's most recent financial statements included in the SJW SEC Reports, SJW and each of its Subsidiaries do not have any material, known liabilities or obligations (whether absolute, accrued, contingent or otherwise) of a nature required by GAAP to be reflected in a consolidated balance sheet (or reflected in the notes thereto) of SJW.

(f) Compliance.

(i) Except as set forth in the SJW SEC Reports filed prior to the date hereof, neither SJW nor any of its Subsidiaries is in violation of, is, to the knowledge of SJW, under investigation with respect to any violation of, or has been given notice or threatened with any violation of, any Laws or Orders (excluding for purposes of this Section 3.1(f) Environmental Laws), except for violations or possible violations which would not, individually or in the aggregate, have a Material Adverse Effect on SJW. SJW and its Subsidiaries have all permits, licenses, franchises and other governmental authorizations, consents and approvals ("Permits") necessary to conduct their businesses as presently conducted, except for such Permits, the absence of which would not, individually or in the aggregate, have a Material Adverse Effect on SJW. Neither SJW nor any of its Subsidiaries is in breach or violation of, or in default in the performance or observance of (i) any provision of its article of incorporation or by-laws, or (ii) except as would not, individually or in the aggregate, have a Material Adverse Effect on SJW or would not reasonably be expected to prevent or materially delay the consummation of the Merger, any Contract or Permit applicable to SJW or any Subsidiaries of SJW or their respective properties or assets.

(ii) All filings required to be made by SJW or any of its Subsidiaries since December 31, 1997, under any applicable Laws or Orders relating to the regulation of public utilities, have been filed with the appropriate PUC or Health Agency or any other appropriate Governmental Entity (including, without limitation, to the extent required, the state public utility regulatory agencies in California), as the case may be, including all forms, statements, reports, agreements (oral or written) and all documents, exhibits, amendments and supplements appertaining thereto, including but not limited to all rates, tariffs, franchises, service agreements and related documents and all such filings complied, as of their respective dates, in all material respects with all applicable requirements of the appropriate Laws or Orders, except for such filings or such failures to comply that would not, individually or in the aggregate, have a Material Adverse Effect on SJW.

(g) Environmental Matters.

(i) SJW and each of its Subsidiaries are in compliance with all applicable Environmental Laws (as defined in Section 3.1(g)) (which compliance includes, but is not limited to, the possession by SJW of all Permits and other governmental authorizations required under applicable Environmental Laws ("Environmental Permits"), and compliance with the terms and conditions thereof), except where the failure to be in compliance would not, individually or in the aggregate, have a Material Adverse Effect on SJW. SJW has not received any written communication, whether from a Governmental Entity, citizens group, employee or otherwise, alleging that SJW or any of its Subsidiaries are not in such compliance, and there are no past or present (or to the knowledge of SJW, future) actions, activities, circumstances, conditions, events or incidents that may prevent or interfere with such compliance in the future, except for such failure to be in compliance and such actions, activities, circumstances, conditions, events or incidents that would not, individually or in the aggregate, have a Material Adverse Effect on SJW.

(ii) There are no Environmental Claims (as defined in Section 3.1(g)) pending or, to the knowledge of SJW, threatened, against SJW or any of its Subsidiaries, or any Person whose liability for any such Environmental Claim SJW or any of its Subsidiaries has retained or assumed either contractually or by operation of Law or Order.

(iii) To the knowledge of SJW, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the Release (as defined in Section 3.1(g)), threatened Release or presence of any Hazardous Material (as defined in Section 3.1(g)), that could form the basis of any Environmental Claim against SJW or any of its Subsidiaries, or to the best knowledge of SJW against any Person whose liability for any Environmental Claim SJW or any of its Subsidiaries has or may have retained or assumed either contractually or by operation of Law or Order, except for such liabilities which would not, individually or in the aggregate, have a Material Adverse Effect on SJW.

(iv) As used in this Agreement:

(A) "Environmental Claim" means any suit, proceeding, action, cause of action, investigation or written claim or notice by any Person alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, diminution of value, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence, or Release of any Hazardous Materials at any location, whether or not owned or operated by SJW, or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.

(B) "Environmental Law" means all Laws relating to pollution or protection of human health or the environment, including without limitation, Laws relating to Releases or threatened Releases of Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, disposal, transport or handling of Hazardous Materials and all Laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials.

(C) "Hazardous Materials" means all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. (S) 300.5, natural gas, liquified natural gas, natural gas liquids, gas useable fuels, or Hazardous Substances, Oils, Pollutants or Contaminants defined as such by, or regulated as such under, any Environmental Law.

(D) "Release" means any release, spill, emission, discharge,leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration into the indoor or outdoor environment (including, without limitation, ambient air, surface water, groundwater and surface or subsurface strata) or into or out of any property or structure, including the movement of Hazardous Materials through or in the air, soil, surface water, groundwater or property.

(h) Employee Benefit Plans; ERISA.

(i) Section 3.1(h)(i) of the SJW Disclosure Schedule contains a true and complete list of each deferred compensation and each bonus or other incentive compensation, stock purchase, stock option and other equity compensation or ownership plan, program, agreement or arrangement, each severance or termination pay, medical, surgical, hospitalization, life insurance and other "welfare" plan, fund or program (within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder ("ERISA")) (excluding any payroll practices, compensation arrangements and fringe benefits or perquisites which, individually or in the aggregate, are not material); each profit- sharing, stock bonus or other "pension" plan, fund or program (within the meaning of Section 3(2) of ERISA); each employment, retention, consulting, termination or severance agreement with any officer or director or any other employee (if the cash severance amount payable to such employee under such agreement could be reasonably expected to exceed $200,000); and each other material employee benefit plan, fund, program, agreement or arrangement, in each case, that is sponsored, maintained or contributed to or required to be contributed to by SJW or by any trade or business, whether or not incorporated (an "ERISA Affiliate"), that together with SJW would be deemed a "single employer" within the meaning of section 4001(b) of ERISA, or to which SJW or an ERISA Affiliate is party for the benefit of any employee or former employee of SJW or any Subsidiary of SJW, in respect of which SJW or any Subsidiary of SJW will have continuing liability on or after the Effective Time (the "SJW Benefit Plans"). Notwithstanding the foregoing, at any time prior to the twentieth Business Day following the date of this Agreement, SJW may amend or supplement the list set forth in
Section 3.1(h)(i) of the SJW Disclosure Schedule, so long as such changes are made in respect of actions permitted in accordance with Section 4.1(h).

(ii) With respect to each SJW Benefit Plan, (A) no amendments have been made thereto since the date hereof, or in the case of a pension benefit plan intended to be "qualified" under Section 401(a) of the Code, since the date of its most recent favorable determination letter from the Internal Revenue Service (other than as required by applicable Law or as would not result in any increased cost that would have a Material Adverse Effect), and (B) SJW has heretofore delivered or made available to Parent true and complete copies of the SJW Benefit Plans, any related trust or other funding vehicle, the most recent annual report on Form 5500, the current summary plan description and the most recent determination letter received from the IRS with respect to each SJW Benefit Plan intended to qualify under Section 401 of the Code.

(iii) No liability under Title IV has been incurred by SJW or any ERISA Affiliate that has not been satisfied in full, and, to the knowledge of SJW, no condition exists that presents a material risk to SJW or any ERISA Affiliate of incurring any such liability, other than liability for premiums due the Pension Benefit Guaranty Corporation (which premiums have been paid when due), where any such liability has had, or would have a Material Adverse Effect.

(iv) No SJW Benefit Plan that is subject to Title IV (a "SJW Title IV Plan") is a "multiemployer pension plan," as defined in section 3(37) of ERISA, nor is any SJW Title IV Plan a plan described in section 4063(a) of ERISA. At no time since December 31, 1992, have SJW or any ERISA Affiliate, been required to contribute to, or incurred any withdrawal liability, within the meaning of Section 4201 of ERISA to any multiemployer pension plan nor does SJW or any ERISA Affiliate have any potential withdrawal liability arising from a transaction described in
Section 4204 of ERISA. Any withdrawal liability incurred with respect to any multiemployer plan has been fully paid as of the date hereof.

(v) Each SJW Benefit Plan has been operated and administered in accordance with its terms, the terms of any applicable collective bargaining agreement and applicable Law, including but not limited to ERISA and the Code, except as would not be reasonably expected to result in a Material Adverse Effect, and each SJW Benefit Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service.

(vi) None of the terms of the SJW Benefit Plans provide that the consummation of the transactions contemplated by this Agreement will, either alone or in combination with another event, (A) entitle any current or former employee or officer of SJW or any ERISA Affiliate to severance pay, unemployment compensation or any other payment, except as expressly provided in this Agreement, or (B) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee or officer.

(vii) There are no pending, or to the knowledge of SJW, threatened or anticipated claims by or on behalf of any SJW Benefit Plan, by any employee or beneficiary covered under any such SJW Benefit Plan, or otherwise involving any such SJW Benefit Plan (other than routine claims for benefits) that would be reasonably expected to result in liability that would have a Material Adverse Effect.

(viii) Neither the Company nor any ERISA Affiliate has incurred or is reasonably likely to incur any liability with respect to any plan or arrangement that would be included within the definition of "Benefit Plan" hereunder but for the fact that such plan or arrangement was terminated before the date of this Agreement.

(i) Absence of Certain Changes or Events.

Except as disclosed in the SJW SEC Reports filed with the SEC prior to the date hereof, since June 30, 1999 (a) the businesses of SJW and its Subsidiaries have been conducted in the ordinary course, consistent with past practices and (b) there has not been any event, occurrence, development or state of circumstances or facts that has had, or would have, individually or in the aggregate, a Material Adverse Effect on SJW.

(j) Year 2000.

The computer software operated by SJW and its Subsidiaries which is used in the conduct of their businesses is,as of the date hereof, capable of providing or being adapted to provide, and as of the Effective Time will provide, uninterrupted millennium functionality to record, store, process and present calendar dates falling on or after January 1, 2000 in substantially the same manner and with the same functionality as such software records, stores, processes and presents such calendar dates falling on or before December 31, 1999, other than such interruptions in millennium functionality that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on SJW. SJW believes that the remaining cost of adaptions referred to in the foregoing sentence is not reasonably likely to have a Material Adverse Effect on SJW.

(k) Taxes.

(i) SJW and its Subsidiaries have (A) duly filed (or there has been filed on their behalf) with the appropriate Governmental Entities all Tax Returns (as defined in Section 3.1(k)(vii)(B)) required to be filed by them on or prior to the date hereof, other than those Tax Returns the failure of which to file would not, individually or in the aggregate, result in a Material Adverse Effect on SJW, and such Tax Returns are true, correct and complete in all material respects, and (B) duly paid in full (or there has been paid) all Taxes (as defined in Section 3.1(k)(vii)(A)) shown to be due on such Tax Returns.

(ii) Except as set forth in Section 3.1(k) of the SJW Disclosure Schedule, there are no ongoing federal, state, local or foreign audits or examinations of any Tax Return of SJW or any of its Subsidiaries.

(iii) There are no outstanding requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment of any Taxes or deficiencies against SJW or any of its Subsidiaries, and no power of attorney granted by either SJW or any of its Subsidiaries with respect to any Taxes is currently in force.

(iv) Neither SJW nor any of its Subsidiaries is a party to any agreement providing for the allocation or sharing of Taxes.

(v) No consent under Section 341(f) of the Code has been filed with respect to SJW or any of its Subsidiaries.

(vi) The accruals for Taxes reflected in SJW's most recent balance sheet included in the SJW SEC Reports are adequate to cover all liabilities for Taxes of SJW and its Subsidiaries for all periods ending on or before the date of such balance sheet and nothing has occurred subsequent to the date of such balance sheet to make any of such accruals inadequate.

(vii) For purposes of this Agreement:

(A) "Taxes" means any and all federal, state, local, foreign or other taxes of any kind (together with any and all interest, penalties,additions to tax and additional amounts imposed with respect thereto) imposed by any taxing authority, including, without limitation,taxes or other charges on or with respect to income,franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation or net worth, and taxes or other charges in the nature of excise, withholding, ad valorem or value added, and (B) "Tax Return" means any return, report or similar statement (including the attached schedules) required to be filed with respect to any Tax, including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax.

(l) Insurance.

Each of SJW and its Subsidiaries is, and has been continuously since January 1, 1994, insured with financially responsible insurers in such amounts and against such risks and losses as are customary in all material respects for companies in the United States conducting the business conducted by SJW and its Subsidiaries during such time period, except for such insurance the absence of which would not have a Material Adverse Effect. Neither SJW nor any of its Subsidiaries has received any notice of cancellation or termination with respect to any material insurance policy of SJW or any Subsidiary of SJW. SJW has fulfilled all of its obligations under each material insurance policy, including the timely payment of premiums, other than such failures to fulfill its obligations that would not reasonably be expected, individually or in the aggregate, to reduce or nullify the benefits under such policy.

(m) Property Franchises.

SJW and its Subsidiaries own or have sufficient rights and consents to use under existing franchises,easements, leases, and license agreements all properties, rights and assets necessary for the conduct of their businesses and operations as currently conducted, except where the failure to own or have sufficient rights and consents to use such properties, rights and assets would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on SJW.

(n) Water Quality.

The quality of water supplied by SJW and its Subsidiaries to their respective customers complies in all material respects with all applicable standards for quality and safety of water imposed by applicable Laws and Orders.

(o) Board Approval.

The Board of Directors of SJW, by resolutions duly and unanimously adopted at a meeting duly called and held and not subsequently rescinded or modified in any way (the "SJW Board Approval"), has duly (i) determined that this Agreement and the Merger are advisable and in the best interests of SJW and its shareholders, (ii) approved this Agreement and the Merger and (iii) recommended that the shareholders of SJW approve and adopt this Agreement. Assuming the accuracy of the representations and warranties set forth in Sections 3.2(g) and 3.3(e), the Board of Directors of SJW has taken the necessary action to make inapplicable the restrictions on business combinations set forth in Section 203 of the CCC and any other similar applicable antitakeover Laws.

(p) Vote Required.

The affirmative vote of the holders of a majority of the outstanding shares of SJW Common Stock to adopt this Agreement (the "Required SJW Vote") is the only vote of the holders of any class or series of SJW capital stock necessary to adopt this Agreement and approve the transactions contemplated hereby.

(q) Brokers or Finders.

No agent, broker, investment banker,financial advisor or other firm or Person is or will be entitled to any broker's or finder's fee or financial advisor's fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement, except Morgan Stanley & Co. Incorporated (the "SJW Financial Advisor"), whose fees and expenses will be paid by SJW in accordance with SJW's agreement with such firm, based upon arrangements made by or on behalf of SJW and previously disclosed to Parent in writing.

(r) Opinion of SJW Financial Advisor.

SJW has received the opinion of SJW Financial Advisor, dated the date of this Agreement, to the effect that, as of such date, the Merger Consideration is fair, from a financial point of view, to the holders of SJW Common Stock and such opinion has not been withdrawn or modified.

(s) Regulation as a Utility.

Certain Subsidiaries of SJW are regulated as public utilities in California. Neither SJW nor any "subsidiary company" or "affiliate" (as such terms are defined in the Public Utility Holding Company Act of 1935, as amended (the"1935 Act")) of SJW is subject to regulation as a public utility or public service company (or similar designation) by any other state in the United States, by the United States or any agency or instrumentality of the United States or by any foreign country. SJW is not a holding company under the 1935 Act. From December 31, 1989 to the date of this Agreement no Governmental Entity has denied the request of SJW or any of its Subsidiaries to include any asset then in utility service in rate base for recovery in the amount of $500,000 or more.

(t) Litigation.

Except for claims, actions, suits, proceedings or investigations that would not have a Material Adverse Effect on SJW (collectively, "Claims"), there are no claims, actions,suits, proceedings or investigations pending or, to SJW's knowledge, threatened against SJW or any of its Subsidiaries, or any properties or rights of SJW or any of its Subsidiaries, by or before any Governmental Entity. Section 3.1(a) of the SJW Disclosure Schedule sets forth all Claims which are pending or, to SJW's knowledge, threatened against any of SJW or its Subsidiaries. Neither SJW nor any of its Subsidiaries is subject to any outstanding Order that could reasonably be expected to have a Material Adverse Effect on SJW or prevent or materially delay the consummation of the Merger.

(u) No Parent Capital Stock.

SJW does not own or hold directly or indirectly any capital stock of Parent, or any options,warrants or other rights to acquire any capital stock of Parent, or in each case, any interests therein.

(v) Contracts.

All contracts which are material to the Company and its Subsidiaries ("Material Contracts") have been provided to Parent. All Material Contracts to which SJW or any of its Subsidiaries are a party or by which its assets are bound are a valid and binding obligation of SJW or such Subsidiary and, to the knowledge of SJW, the valid and binding obligation of each other party thereto. Neither SJW nor any of its Subsidiaries,nor to the knowledge of SJW or any other party thereto, is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation or default under) any Material Contract, except for such violations or defaults that could not be reasonably expected to result in a Material Adverse Effect.

(w) Real Estate.

Except for such matters that would not,individually or in the aggregate, have a Material Adverse Effect on SJW:

(i) All structures and other improvements on such properties are within the lot lines and do not encroach on the properties of any other person. Neither SJW nor any of its Subsidiaries has received any written or oral notice for assessments for public improvements against SJW Real Property which remains unpaid, and to the knowledge of SJW, no such assessment has been proposed.

(ii) SJW and each of its Subsidiaries has obtained all authorizations, permits, easements and rights of way, including proof of dedication ("Access Rights"), which are necessary to ensure continued uninterrupted (1) vehicular and pedestrian ingress and egress to and from SJW Real Property and
(2) continued use, operation, maintenance, repair and replacement of all existing and currently committed water lines used by SJW and each of its Subsidiaries in connection with their respective businesses. All Access Rights are in full force and effect. Neither SJW nor any of its Subsidiaries is in breach or default under the easement rights and rights of way enjoyed by SJW or its Subsidiaries, and to the knowledge of SJW, none of the grantors of such rights are in breach or default thereunder. There are no restrictions on entrance to or exit from SJW Real Property to adjacent public streets, and no conditions exist which will or with the giving of notice, the passage of time or both, could materially and adversely affect such Access Rights.

(iii) As of the Effective Time, SJW Real Property will be adequate to operate the businesses of SJW and its Subsidiaries consistent with past practice.

(iv) SJW Real Property has adequate arrangements for supplies of electricity, gas, oil, coal and sewer for all operations at the 1998 or current operating levels, whichever is greater. There are no actions or proceedings pending or, to SJW's knowledge, threatened that would adversely affect the supply of electricity, gas, coal or sewer to SJW Real Property.

(v) There are no pending, or to SJW's knowledge, threatened eminent domain, condemnation or other governmental action affecting or taking of any SJW Real Property.

(x) Intellectual Property.

SJW or its Subsidiaries owns, leases or licenses free and clear of all Encumbrances all Intellectual Property Rights necessary to conduct the business of SJW, except where the failure to own, lease or license would not have,individually or in the aggregate, a Material Adverse Effect on SJW. Except for such claims, infringements and misappropriations that would not have, individually or in the aggregate, a Material Adverse Effect on SJW, (i) there has been no claim made against SJW or any of its Subsidiaries asserting the invalidity, misuse or unenforceability of any Intellectual Property Rights, (ii) SJW is not aware of any infringement or misappropriation of any of the Intellectual Property Rights, and (iii) neither SJW nor any of its Subsidiaries has infringed or misappropriated any intellectual property or proprietary right of any other entity. As used herein, "Intellectual Property Rights" mean any trademark, servicemark, registration therefor or application for registration therefor, trade name, invention, patent, patent application, trade secret, know-how, copyright, copyright registration, application for copy registration, or any other similar type of proprietary intellectual property, in each case owned, leased or licensed and used or held for use by the SJW or any Subsidiary.

(y) Product Liability.

Except for such matters that would not,individually or in the aggregate, have a Material Adverse Effect on SJW, there are no
(i) liabilities of SJW or any of its Subsidiaries, fixed or contingent, asserted or, to the knowledge of SJW, unasserted, with respect to any product liability or similar claim that relates to any product or service sold by SJW or any of its Subsidiaries or (ii) liabilities of SJW or any of its Subsidiaries, fixed or contingent, asserted or, to the knowledge of SJW unasserted, with respect to any claim for the breach of any express or implied product warranty or a similar claim with respect to any product or service sold by SJW or any of its Subsidiaries to others.

(z) Condition of Assets.

The buildings, machinery, equipment,tools, furniture, improvements and other fixed intangible assets of SJW and its Subsidiaries are structurally sound and free from known defects, subject to ordinary wear and tear, and shall be maintained by SJW or such Subsidiaries in such good operating condition and repair through the Effective Time so as to have the capacity to permit the operation of SJW's or such Subsidiaries' business as presently conducted. The assets and properties of SJW and its Subsidiaries include all assets, rights, properties and contracts, the use of which is necessary to the continued conduct after the Effective Time of SJW's and each of its Subsidiaries' business by the Surviving Corporation substantially in the manner as it is presently conducted.

3.2. Representations and Warranties of Parent

Parent represents and warrants to SJW as follows:

(a) Organization, Standing and Power.

Parent is a corporation duly incorporated and validly existing under the Laws of its jurisdiction of incorporation or organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary other than in such jurisdictions where the failure so to qualify or to be in good standing would not, individually or in the aggregate, have a Material Adverse Effect on Parent.

(b) Authority; No Violations.

(i) Parent has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Parent. This Agreement has been duly and validly executed and delivered by Parent and constitutes a valid and binding agreement of Parent, enforceable against it in accordance with its terms.

(ii) The execution and delivery of this Agreement by Parent do not or will not, as the case may be, and the performance of this Agreement and the consummation by Parent of the Merger and the other actions contemplated hereby will not, result in a Violation pursuant to: (A) any provision of the articles of incorporation or by-laws of Parent or any Subsidiary of Parent or (B) except as would not, individually or in the aggregate, have a Material Adverse Effect on Parent, subject to obtaining or making the consents, approvals, orders, authorizations, registrations, declarations and filings referred to in paragraph (iii) below, any Contract, Laws or Orders applicable to Parent or any Subsidiary of Parent or their respective properties or assets.

(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Governmental Entity is required by or with respect to Parent or any Subsidiary of Parent in connection with the execution and delivery of this Agreement by Parent or the performance of this Agreement and the consummation of the Merger and the other transactions contemplated hereby, except for those required under or in relation to (A) the HSR Act, (B) Laws of any PUCs and set forth in Section 3.1 (c)(iii)(D) of the SJW Disclosure Schedule,
(C) rules and regulations of the New York Stock Exchange, and (D) such consents, approvals, orders, authorizations, registrations, declarations and filings the failure of which to make or obtain would not, individually or in the aggregate, have a Material Adverse Effect on Parent. Consents, approvals, orders, authorizations, registrations, declarations and filings required under or in relation to the foregoing clauses (A) through (D) are hereinafter referred to as the "Parent Required Consents". The parties hereto agree that references in this Agreement to "obtaining" Parent Required Consents means obtaining such consents, approvals or authorizations, making such registrations, declarations or filings, giving such notices; and having such waiting periods expire as are necessary to avoid a violation of Law or an Order.

(c) Board Approval.

The Board of Directors of Parent, by resolutions duly adopted at a meeting duly called and held and not subsequently rescinded or modified in any way, has duly (i) determined that this Agreement and the Merger are in the best interests of Parent and its shareholders and
(ii) approved this Agreement and the Merger.

(d) Vote Required.

No vote of the holders of any class or series of Parent capital stock is necessary to approve this Agreement, the Merger or the other transactions contemplated hereby.

(e) Brokers or Finders.

No agent, broker, investment banker,financial advisor or other firm or Person is or will be entitled to any broker's or finder's fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent, except Greenhill & Company (the "Parent Financial Advisor"), whose fees and expenses will be paid by Parent in accordance with Parent's agreement with such firm based upon arrangements made by or on behalf of Parent.

(f) Litigation.

As of the date hereof, there are no claims, actions, suits, proceedings or investigations pending or, to Parent's knowledge, threatened against Parent or any of its Subsidiaries, or any properties or rights of Parent or any of its Subsidiaries, before any Governmental Entity that (i) seek to materially delay or prevent the consummation of the Merger or the other transactions contemplated hereby or (ii) could reasonably be expected to affect adversely the ability of Parent to fulfill its obligations hereunder, including Parent's obligations under Article I and Article II.

(g) No SJW Capital Stock.

Except for 400 shares of SJW Common Stock, Parent does not own or hold directly or indirectly any shares of SJW Common Stock or any other capital stock of SJW, or any options, warrants or other rights to acquire any shares of SJW Common Stock or any other capital stock of SJW, or in each case, any interests therein, other than pursuant to the Merger as contemplated by this Agreement.

(h) Financing.

Parent has or will have available, prior to the Effective Time, sufficient funds to pay the Merger Consideration pursuant to this Agreement and otherwise to satisfy its obligations hereunder.

3.3. Representations and Warranties of Parent and Merger Sub Parent and Merger Sub represent and warrant to SJW as follows:

(a) Organization, Standing and Power.

Merger Sub is a corporation duly incorporated, validly existing and in good standing under the Laws of Delaware. Merger Sub is a wholly-owned subsidiary of Parent.

(b) Authority; No Violations.

(i) Merger Sub has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by Merger Sub of this Agreement and the consummation by Merger Sub of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate and shareholder action on the part of Merger Sub. This Agreement has been duly and validly executed and delivered by Merger Sub and constitutes a valid and binding agreement of Merger Sub, enforceable against it in accordance with its terms.

(ii) The execution and delivery of this Agreement by Merger Sub do not or will not, as the case may be, and the performance of this Agreement and the consummation by Merger Sub of the Merger and the other transactions contemplated hereby will not, result in a Violation pursuant to: (A) any provision of the articles ofincorporation or by-laws of Merger Sub or (B) except as would not, individually or in the aggregate, have a Material Adverse Effect on Parent, subject to obtaining or making the consents, approvals, orders, authorizations, registrations, declarations and filings referred to in paragraph (iii) below, any Contract, Laws or Orders applicable to Merger Sub or its properties or assets.

(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Merger Sub in connection with the execution and delivery of this Agreement by Merger Sub or the consummation of the Merger and the other transactions contemplated hereby, except for the Parent Required Consents, the filing of the Agreement of Merger pursuant to the CCC and DGCL and such consents, approvals, orders, authorizations, registrations, declarations and filings the failure of which to make or obtain would not, individually or in the aggregate, have a Material Adverse Effect on Parent.

(c) Board and Shareholder Approval. The Board of Directors of Merger Sub, by resolutions duly adopted without a meeting by unanimous consent thereto in writing and not subsequently rescinded or modified in any way, has duly

(i) determined that this Agreement and the Merger are advisable and in the best interest of Merger Sub and its shareholder,

(ii) approved this Agreement and the Merger and

(iii) recommended that the shareholder of Merger Sub adopt this Agreement. Following the adoption of such resolutions by the Board of Directors of Merger Sub, the sole shareholder of Merger Sub, without a meeting by consent in writing, has duly adopted this Agreement.

(d) No Business Activities. Merger Sub has not conducted any activities other than in connection with its organization, the negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby. Merger Sub has no Subsidiaries.

(e) No SJW Capital Stock. Merger Sub does not own or hold directly or indirectly any shares of SJW Common Stock or any other capital stock of SJW, or any options, warrants or other rights to acquire any shares of SJW Common Stock or any other capital stock of SJW, or in each case, any interests therein.

ARTICLE IV

COVENANTS RELATING TO CONDUCT OF BUSINESS

4.1. Covenants of SJW

During the period from the date of this Agreement and continuing until the Effective Time, SJW agrees as to itself and its Subsidiaries that (except as expressly contemplated or permitted by this Agreement or as otherwise indicated in Section 4.1 of the SJW Disclosure Schedule or as required by a Governmental Entity of competent jurisdiction (written notice of which will be given promptly to Parent) or to the extent that Parent shall otherwise consent in writing):

(a) Ordinary Course.

(i) SJW and each of its Subsidiaries shall carry on their respective businesses in the usual, regular and ordinary course, in all material respects, in substantially the same manner as heretofore conducted, and shall use all reasonable efforts to preserve intact their present lines of business, business organizations and reputations, maintain their rights, franchises and permits, keep available the services of their officers and key employees, maintain their assets and properties in good working order and condition, ordinary wear and tear excepted, and preserve their relationships with customers, suppliers and others having business dealings with them to the end that their ongoing businesses shall not be impaired in any material respect at the Effective Time; provided, however, that no action by SJW or its Subsidiaries with respect to matters specifically addressed by any other provision of this Section 4.1 shall be deemed a breach of this Section 4.1(a)(i) unless such action would constitute a breach of one or more of such other provisions.

(ii) Other than with the consent of Parent, which shall not be unreasonably withheld, SJW shall not, and shall not permit any of its Subsidiaries to, (A) enter into any new material line of business or (B) incur or commit to any capital expenditures other than capital expenditures contemplated in SJW's capital budget,reasonable amounts required to meet emergencies, and such additional amounts as may be required to comply with Laws and Orders then in effect or required by a Governmental Entity.

(b) Dividends; Changes in Share Capital.

SJW shall not, and shall not permit any of its Subsidiaries to, and shall not propose to, (i) declare, set aside or pay any dividends on or make other distributions (whether in cash or otherwise) in respect of any of its capital stock,except (x) dividends by wholly-owned Subsidiaries of SJW to such Subsidiary's parent or another wholly-owned Subsidiary of SJW and (y) the regular quarterly dividends on SJW Common Stock in the amount of $0.60 per share of SJW Common Stock payable in the third and fourth quarter of 1999, and $0.615 per share of SJW Common Stock per quarter thereafter,(ii) split, combine, subdivide or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, except for any such transaction by a wholly owned Subsidiary of SJW which remains a wholly owned Subsidiary of SJW after consummation of such transaction, (iii) adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such liquidation or a dissolution, merger, consolidation, restructuring, recapitalization or other reorganization or (iv) directly or indirectly repurchase, redeem or otherwise acquire any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock.

(c) Issuance of Securities.

SJW shall not, and shall not permit any of its Subsidiaries to, issue, deliver or sell, pledge or encumber, or authorize or propose the issuance, delivery or sale,pledge or encumbrance of, any shares of its capital stock of any class, any SJW Voting Debt or any securities convertible into or exercisable for, or any rights, warrants or options to acquire,any such shares or SJW Voting Debt, or enter into any agreement with respect to any of the foregoing, other than issuances by a wholly owned Subsidiary of SJW of capital stock to such Subsidiary's Parent or another wholly owned Subsidiary of SJW.

(d) Governing Documents.

Except to the extent required to comply with their respective obligations hereunder or, following written notice to Parent, as may be required by Law or Order or required by the rules and regulations of the AMEX, SJW shall not, and shall not permit any of its Subsidiaries to, amend or propose to amend their respective articles of incorporation, by-laws or other governing documents.

(e) No Acquisitions.

Other than with the consent of Parent, which shall not be unreasonably withheld, SJW shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets other than the acquisition of assets as are used in the operations of the business of SJW and its Subsidiaries in the ordinary course, consistent with past practice.

(f) No Dispositions.

Other than (i) with the consent of Parent, which shall not be unreasonably withheld, (ii) as set forth in Section 4.1(f) of the Disclosure Schedule and (iii) transfers between SJW and the wholly-owned Subsidiaries of SJW and between the wholly-owned Subsidiaries of SJW. SJW shall not, and shall not permit any Subsidiary of SJW to, sell, lease, transfer, encumber or otherwise dispose of, or agree to sell, lease, transfer, encumber or otherwise dispose of, any of its assets (including capital stock of Subsidiaries of SJW) which are material to SJW.

(g) Investments; Indebtedness.

SJW shall not, and shall not permit any of its Subsidiaries to, (i) other than as set forth on Schedule 4.1(g) of the Disclosure Schedule, make any loans, advances or capital contributions to, or investments in, any other Person, other than loans, advances, capital contributions and investments by SJW or a Subsidiary of SJW to or in SJW or any wholly owned Subsidiary of SJW, (ii) pay, discharge, settle or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than payments, discharges, settlements or satisfactions incurred or committed to in the ordinary course of business consistent with past practice or reflected in the most recent consolidated financial statements (or the notes thereto) of SJW included in the most recent SJW SEC Reports filed prior to the date of this Agreement or (iii) other than as set forth on Schedule 4.1(g) of the Disclosure Schedule, create, incur, assume or suffer to exist any indebtedness, guarantees, loans or advances or any debt securities or any warrants or rights to acquire any debt securities not in existence as of the date of this Agreement except for short-term indebtedness incurred under SJW's current short-term facilities (and any replacements thereof) in the ordinary course of business, consistent with past practices, and which shall not exceed $20,000,000 in the aggregate without the consent of Parent, which shall not be unreasonably withheld, in each case as such facilities and other existing indebtedness may be amended, extended, modified, refunded, renewed, refinanced or replaced after the date of this Agreement, but only if the aggregate principal amount thereof is not increased thereby, the term thereof is not extended thereby (or, in the case of replacement indebtedness, the term of such indebtedness is not for a longer period of time than the period of time applicable to the indebtedness so replaced) and the other terms and conditions thereof, taken as a whole, are not less advantageous to SJW and its Subsidiaries than those in existence as of the date of this Agreement.

(h) Compensation.

Except as otherwise agreed by Parent, SJW shall not, and shall not permit any of its Subsidiaries to, (i) materially increase the amount of compensation of any executive officer, director or employee,
(ii) make any material increase in or commitment to increase any employee benefits, (iii) issue any equity-based awards or shares of SJW Common Stock pursuant to SJW Benefit Plans, adopt or make any commitment to enter into, adopt,amend in any material manner or terminate any SJW Benefit Plan,or any other agreement, arrangement, plan or policy between SJW or one of its Subsidiaries and one or more of its directors, officers or employees, or (iv) make any contribution, other than regularly scheduled contributions, to any SJW Benefit Plan.

(i) Other Actions.

SJW shall not, and shall not permit any ofits Subsidiaries to take any action that would, or fail to take any action which failure would, or that could reasonably be expected to, result in, (i) a material breach of any provision of this Agreement, or (ii) any of the conditions to the Merger set forth in Article VI not being satisfied.

(j) Accounting Methods; Income Tax Matters.

Except as disclosed in the SJW SEC Reports filed prior to the date of this Agreement, or as required by a Governmental Entity, SJW shall not, nor shall it permit any of its Subsidiaries to, change its methods of accounting or accounting practices in effect at December 31,1998, except as required by GAAP. SJW shall not, nor shall it permit any of its Subsidiaries to, (i) change its fiscal year,(ii) make or rescind any material tax election, (iii) settle or compromise any claim, action, suit, litigation, proceeding,arbitration, investigation, audit, or controversy in respect of Taxes for any amount in excess of the amount reserved therefor and reflected in the most recent consolidated financial statements (or the notes thereto) of SJW included in the most recent SJW SEC Report, or (iv) change in any material respect any of its methods of reporting income, deductions or accounting for federal income Tax purposes from those employed in the preparation of its federal income Tax Return for the taxable year ending December 31, 1998.

(k) Contracts.

SJW shall not, nor shall it permit any of its Subsidiaries, except in the ordinary course of business consistent with past practice (i) to modify, amend, terminate or fail to use commercially reasonable efforts to renew any material Contract or waive, release or assign any material rights or claims under a Contract to which SJW or any of its Subsidiaries is a party or (ii) to enter into any new material Contracts.

(l) Regulatory Matters.

Except for filings in the ordinary course of business consistent with past practice that would not have a Material Adverse Effect on SJW, SJW shall inform Parent reasonably in advance of making a filing to implement any changes in any of its or its Subsidiaries' rates or surcharges for water service or executing any agreement with respect thereto that is otherwise permitted under this Agreement and shall, and shall cause its Subsidiaries to, deliver to Parent a copy of each such filing or agreement. SJW shall, and shall cause its Subsidiaries to, make all such filings (A) only in the ordinary course of business consistent with past practice or (B) as required by a Governmental Entity.

(m) Compromise; Settlement.

Neither SJW nor any of its Subsidiaries shall settle or compromise any pending or threatened claims or arbitrations (other than any Claims or arbitrations relating to matters set forth in the SJW SEC Reports), other than settlements which involve solely the payment of money (without admission of liability) that would not result in an uninsured payment by or liability of SJW in excess of $300,000 in the aggregate above the reserves established specifically therefor on the books of SJW as of the date hereof.

4.2. Covenants of Parent

During the period from the date of this Agreement and continuing until the Effective Time, Parent agrees as to itself and its Subsidiaries that (except as expressly contemplated or permitted by this Agreement or as required by a Governmental Entity of competent jurisdiction (written notice of which will be given promptly to SJW) or to the extent that SJW shall otherwise consent in writing) Parent shall not, and shall not permit any of its Subsidiaries to, take any action that would, or fail to take any action which failure would impair Parent's ability to have available sufficient funds to pay the Merger Consideration pursuant to this Agreement and otherwise to satisfy its obligations hereunder.

4.3. Advice of Changes; Governmental Filings

Each party shall (a) confer on a regular and frequent basis with the other, with respect to matters relevant to the Merger and
(b) report (to the extent permitted by Law,Order or any applicable confidentiality agreement) on operational matters with respect to SJW and its Subsidiaries, and SJW shall promptly advise Parent, orally and in writing, of any material change or event affecting its business or operations, including any complaint, investigation or hearing by any Governmental Entity (or communication indicating the same may be contemplated) or the institution or threat of material litigation. SJW shall timely file all reports required to be filed by it with the SEC (and all other Governmental Entities) between the date of this Agreement and the Effective Time and shall (to the extent permitted by Law, Order or any applicable confidentiality agreement) deliver to Parent copies of all such reports,announcements and publications promptly after the same are filed. Except as otherwise required by Section 4.1(l) and subject to applicable Laws and Orders relating to the exchange ofinformation, each of SJW and Parent shall have the right to review in advance, and will consult with the other with respect to, all the information relating to the other party and each of their respective Subsidiaries, which appears in any filings, announcements or publications made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties hereto agrees to act reasonably and as promptly as practicable. Each party agrees that, to the extent practicable and as timely as practicable, it will consult with, and provide all appropriate and necessary assistance to, the other party with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other party apprised of the status of matters relating to completion of the transactions contemplated hereby.

4.4. Transition Planning; Continued Operations of SJW.

(a) SJW and Parent shall each appoint three (3) officers to serve from time to time as their respective representatives on a committee that will be responsible for coordinating transition planning and implementation relating to the Merger. The initial representatives of SJW shall be W. Richard Roth, Angela Yip and Scott Yoo. The initial representatives of Parent shall be Daniel Kelleher, W. Timothy Pohl and Ellen Wolf.

(b) Between the date of this Agreement and the Effective Time, Parent at its discretion may locate up to two of itsrepresentatives at the offices of SJW (it being understood that such representatives shall not interfere with the business and operations of SJW or its Subsidiaries and shall have no authority whatsoever with respect to the operation of the business of SJW or any of its subsidiaries). During such period SJW shall cause one or more of its designated representatives to consult as requested by Parent with such representatives of Parent and to discuss the general status of the business of SJW and its Subsidiaries consistent with Sections 4.4 and 5.2 hereof.

4.5. Control of SJW's Business

Nothing contained in this Agreement shall be deemed to give Parent, directly or indirectly, the right to control or direct SJW's operations prior to the Effective Time. Prior to the Effective Time, SJW shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its operations.

ARTICLE V

ADDITIONAL AGREEMENTS

5.1. Preparation of SJW Proxy Statement; SJW Shareholders Meeting.

(a) As promptly as practicable following the date hereof, SJW shall, in cooperation with Parent, prepare and file with the SEC preliminary proxy materials relating to the SJW Shareholders Meeting (such proxy statement, and any amendments or supplements thereto, the "SJW Proxy Statement"). The SJW Proxy Statement shall comply as to form in all material respects with the applicable provisions of the Exchange Act and the rules and regulations thereunder, and shall include a statement that the Board of Directors finds the Merger to be advisable, fair to and in the best interests of SJW. Each of SJW and Parent shall use all reasonable efforts to have the SJW Proxy Statement cleared by the SEC as promptly as practicable after filing with the SEC. SJW shall, as promptly as practicable after receipt thereof, provide copies of any written comments received from the SEC with respect to the SJW Proxy Statement to Parent and advise Parent of any oral comments with respect to the SJW Proxy Statement received from the SEC. If at any time prior to the SJW Shareholders Meeting there shall occur any event that should be set forth in an amendment or supplement to the SJW Proxy Statement, SJW shall promptly prepare and mail to its shareholders such an amendment or supplement. SJW shall cause the SJW Proxy Statement to be mailed to its shareholders at the earliest practicable date following clearance of the SJW Proxy Statement by the SEC and, subject to Section 5.4, shall include in the SJW Proxy Statement the recommendation of the Board of Directors of SJW that the shareholders of SJW vote in favor of the approval of the Merger Agreement.

Parent agrees that none of the information supplied or to be supplied by Parent for inclusion or incorporation by reference in the SJW Proxy Statement and each amendment or supplement thereto, at the time of mailing thereof and at the time of SJW Shareholders Meeting, will contain 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, in light of the circumstances under which they were made, not misleading. SJW agrees that none of the information supplied or to be supplied by SJW for inclusion or incorporation by reference in the SJW Proxy Statement and each amendment or supplement thereto, at the time of mailing thereof and at the time of SJW Shareholders Meeting, will contain 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, in light of the circumstances under which they were made, not misleading. SJW will provide Parent and its counsel with a reasonable opportunity to review and comment on the SJW Proxy Statement and all responses to requests for additional information by and replies to comments of the SEC prior to filing such with, or sending such to, the SEC, and will provide Parent and its counsel with a copy of all such filings made with the SEC. No amendment or supplement to the information supplied by Parent for inclusion in the SJW Proxy Statement shall be made without the approval of Parent, which approval shall not be unreasonably withheld or delayed.

(b) Subject to Sections 5.4 and 7.1(f), SJW shall, as promptly as practicable following the execution of this Agreement, duly call, give notice of, convene and hold a meeting of its shareholders (the "SJW Shareholders Meeting") for the purpose of obtaining the Required SJW Vote with respect to the transactions contemplated by this Agreement, shall take all lawful action to solicit the adoption of this Agreement by the Required SJW Vote and the Board of Directors of SJW shall recommend adoption of this Agreement by the shareholders of SJW.

5.2. Access to Information

Upon reasonable notice, SJW shall (and shall cause its Subsidiaries to) afford to the officers, employees, accountants, counsel, financial advisors and other representatives of Parent reasonable access during normal business hours, during the period prior to the Effective Time, to all its facilities, operations, officers, employees, agents and accountants and its properties, books, contracts, commitments and records (including, without limitation, Environmental Permits and environmental reports, audits and assessments) and, during such period, SJW shall (and shall cause its Subsidiaries to) furnish promptly to Parent (or in the case of the documents referred to in clause (a)(ii) below, make available to any representatives of Parent): (a) (i) a copy of each report, schedule, registration statement and other document filed, published, announced or received by it during such period pursuant to the requirements of Federal or state securities Laws, as applicable; and (ii) each report, schedule, statement and other document filed with or received by any other Governmental Entity (other than, in the case of clause (i) or
(ii), documents which such party is not permitted to disclose under applicable Law or Orders), and (b) all other information concerning its business, properties and personnel as Parent may reasonably request; provided, however,that SJW may restrict the foregoing access to the extent that (x)a Governmental Entity requires SJW or any of its Subsidiaries to restrict access to any properties or information reasonably related to any such contract on the basis of applicable Laws or Orders with respect to national security matters or (y) any Law or Order of any Governmental Entity applicable to SJW requires SJW or its Subsidiaries to restrict access to any properties orinformation. Parent will hold any information provided under this Section 5.2 or Sections 4.3 or 4.4 that is non-public in confidence to the extent required by, and in accordance with, the provisions of the letter dated August 5, 1999 between SJW and Parent (the "Confidentiality Agreement"). Any investigation by Parent shall not affect the representations and warranties of SJW.

5.3. Reasonable Best Efforts.

(a) Subject to the terms and conditions of this Agreement, each party will use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate the Merger and the other transactions contemplated by this Agreement as soon as practicable after the date hereof and to cause the conditions set forth in Article VI to be satisfied on or prior to Closing. In furtherance and not in limitation of the foregoing, each party hereto agrees to make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby as promptly as practicable after the date hereof and to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and to take all other actions necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable. Nothing contained in this Agreement (including but not limited to Sections 5.3(a) and 5.3(d)) will require or obligate the Parent or any of its Subsidiaries (i) to agree to or otherwise become subject to any adjustment in, or forbearance from requesting changes in, authorized rates of Parent or any of its respective Subsidiaries, or to any material limitations on (A) the right of Parent, Merger Sub, SJW or their affiliates to acquire, hold or effectively to control or operate the business, assets or operations of SJW or (B) the right of Parent to exercise full rights of ownership of the SJW Common Stock acquired by Parent including, without limitation, the right to vote any SJW Common Stock held by Parent on all matters properly presented to the shareholders, or (ii) to agree or otherwise be required to sell or otherwise dispose of, hold separate (through the establishment of a trust or otherwise), or divest itself of all or any portion (other than a de minimis portion) of the business, assets, or operations of SJW, Parent or any of their respective subsidiaries. Notwithstanding anything to the contrary contained herein, in no event will any party or their respective subsidiaries be required to waive any of the conditions to the Merger set forth in Article VI of this Agreement as they apply to such party.

(b) Each of Parent and SJW shall, in connection with the efforts referenced in Section 5.3(a) to obtain all requisite approvals and authorizations for the transactions contemplated by this Merger Agreement under the HSR Act or any other applicable Law or Order, use its reasonable best efforts to (i) make all appropriate filings and submissions with any PUC, Health Agency or other Governmental Entity that may be necessary, proper or advisable under applicable Laws or Orders in respect of any of the transactions contemplated by this Agreement,
(ii) cooperate in all respects with each other in connection with any such filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private party, (iii) promptly inform the other party of any communication received by such party from, or given by such party to, PUCs, Health Agencies, the Antitrust Division of the Department of Justice (the "DOJ") or any other Governmental Entity and of any material communication received or given in connection with any proceeding by a private party, in each case regarding any of the transactions contemplated hereby and (iv) permit the other party to review any communication given by it to, and consult with each other in advance of any meeting or conference with, PUCs, Health Agencies, the DOJ or any such other Governmental Entity or, in connection with any proceeding by a private party, with any other Person, in each case regarding any of the transactions contemplated hereby, and to the extent permitted by PUCs, Health Agencies, the DOJ or such other applicable Governmental Entity or other Person, give the other party the opportunity to attend and participate in such meetings and conferences.

(c) In furtherance and not in limitation of the covenants of the parties contained in Sections 5.3(a) and 5.3(b), if any administrative or judicial action or proceeding, including any proceeding by a private party, is instituted (or threatened to be instituted) challenging any transaction contemplated by this Agreement as violative of any applicable Law or Order, each of Parent and SJW shall cooperate in all respects with each other and use its respective reasonable best efforts to contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by this Agreement. Notwithstanding the foregoing or any other provision of this Agreement, nothing in this Section 5.3 shall limit a party's right to terminate this Agreement pursuant to Section 7.1(b) or 7.1(c) so long as such party has up to then complied in all respects with its obligations under this Section 5.3.

(d) If any objections are asserted with respect to the transactions contemplated hereby under any applicable Law or Order or if any suit is instituted by any Governmental Entity or any private party challenging any of the transactions contemplated hereby as violative of any applicable Law or Order, each of Parent and SJW shall use its reasonable best efforts to resolve any such objections or challenge as such Governmental Entity or private party may have to such transactions under such Law or Order so as to permit consummation of the transactions contemplated by this Agreement.

5.4. Acquisition Proposals.

(a) SJW shall, and shall instruct each of its Subsidiaries and Representatives (as defined below) to, immediately cease all existing discussions or negotiations, if any, with any parties conducted heretofore with respect to any Acquisition Proposal (as defined below). SJW shall not directly or indirectly, and it shall cause its Subsidiaries, officers, directors, employees,representatives, agents and affiliates, including any investment bankers, attorneys and accountants ("Representatives") retained by SJW or any of its Subsidiaries or affiliates, not to, directly or indirectly, (i) solicit, initiate, encourage or otherwise facilitate (including by way of furnishing information) any inquiries or proposals that constitute, or could reasonably be expected to lead to, any inquiry, proposal or offer (or any improvement, restatement, amendment, renewal or reiteration thereof) from any Person relating to any direct or indirect acquisition or purchase of SJW or any of its Subsidiaries, a merger, recapitalization, consolidation, business combination, sale of a significant portion of the assets of SJW and its Subsidiaries, taken as a whole, sale of 10% or more of the shares of capital stock (including by way of a tender offer, share exchange or exchange offer) or similar or comparable transactions involving SJW or any of its Subsidiaries, other than the transactions contemplated by this Agreement (any such inquiry, proposal or offer (or improvement, restatement, amendment,renewal or reiteration thereof) (other than made by Parent or an affiliate thereof) being herein referred to as an "Acquisition Proposal"), or (ii) engage in negotiations or discussions concerning, or provide any non-public information to any Person relating to, any Acquisition Proposal. Notwithstanding any other provision of this Agreement, the Board of Directors of SJW may, at any time prior to approval of this Agreement by the shareholders of SJW, furnish information (pursuant to a customary confidentiality agreement no more favorable, in the aggregate, to the party receiving information than the Confidentiality Agreement (it being understood that SJW may enter into a confidentiality agreement without a standstill or with a standstill provision less favorable to SJW if it waives or similarly modifies the standstill provision in the Confidentiality Agreement; provided that in no circumstances shall any such standstill provision in any such further confidentiality agreement be more favorable to the other Person with respect to the purchase of shares of SJW Common Stock)) to,or engage in discussions or negotiations with, any Person in response to such Person's Superior Proposal that did not otherwise result from a breach of this Section 5.4 (as defined in Section 8.11(i)) made by such Person if, and only to the extent that, prior to taking such action, (A) the Board of Directors of SJW consults in good faith with its independent legal counsel as to the advisability of furnishing information to, or engaging in discussions or negotiations with, such Person and determines in good faith based upon the advice of its independent legal counsel that the failure to take such action would constitute a breach by the Board of Directors of SJW of their fiduciary duties to the Company's shareholders under applicable law, and (B) SJW provides reasonable advance notice to Parent to the effect that it is taking such action.

(b) Except and only to the extent provided in paragraph (c) below, neither the Board of Directors of SJW nor any committee thereof shall (i) withdraw, modify or change, or propose to withdraw, modify or change, in any manner adverse to Parent, the approval or recommendation by such Board of Directors or such committee of the Merger or this Agreement, (ii) approve or recommend, or propose to approve or recommend, any Acquisition Proposal, or (iii) cause SJW to enter into any agreement (other than a confidentiality agreement entered into in accordance with
Section 5.4(a)), letter of intent, agreement in principle, acquisition agreement or other similar agreement relating to any Acquisition Proposal.

(c) Notwithstanding any other provision of this Agreement, in response to a Superior Proposal and after consulting in good faith with its independent legal counsel as to the advisability of such action and determines in good faith based upon the advice of its independent legal counsel that the failure to take such action would constitute a breach by the Board of Directors of SJW of their fiduciary duties to the Company's shareholders under applicable law, SJW's Board of Directors shall be permitted (subject to this and the following sentences), at any time prior to the adoption of this Agreement by the shareholders of SJW, (i) to withdraw, modify or change, or propose to withdraw, modify or change, the approval or recommendation by the Board of Directors of this Agreement, the Merger or the other transactions contemplated by this Agreement or (ii) to approve or recommend, or propose to approve or recommend, any Superior Proposal, but only in each case referred to in clauses (i) and (ii), after the third Business Day following Parent's receipt of written notice advising Parent that the Board of Directors of SJW has received a Superior Proposal, specifying the principal terms of such Superior Proposal and stating that it intends to take any action described in clause (i) or (ii) above. After providing such notice, SJW shall provide a reasonable opportunity to Parent within such three Business Day-period to make such adjustments in the terms and conditions of this Agreement as would enable SJW to proceed with its recommendation to the shareholders of SJW without taking any action described in clauses (i) or (ii) of the preceding sentence; provided that any such adjustments shall be at the discretion of Parent at such time.

(d) SJW shall immediately advise Parent of any request for information or any Acquisition Proposal, the material terms of such request or Acquisition Proposal (and in the case of a Superior Proposal, the identity of such Person making such proposal). SJW will keep Parent reasonably informed of the status and material terms (including amendments or proposed amendments) of any such request or Acquisition Proposal.

(e) Nothing contained in this Section 5.4 shall prohibit SJW or its Board of Directors (i) from taking and disclosing to its shareholders a position contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated under the Exchange Act or from making any legally required disclosure to the shareholders of SJW with regard to an Acquisition Proposal or (ii) prior to the adoption of this Agreement by the shareholders of SJW, from taking any action as contemplated by Section 7.1(f). Nothing in this
Section 5.4 shall (x) permit SJW to terminate this Agreement (except as specifically provided in Article VII hereof) or (y) affect any other obligation of SJW under this Agreement.

5.5. Employee Benefits Matters.

(a) Employee Benefits.

(i) Obligations of Parent; Comparability of Benefits. Parent shall cause the Surviving Corporation to assume all employment and other related Agreements with respect to any current employee of SJW, which shall be performed in accordance with their terms. In addition, the obligations under each SJW Benefit Plan (as defined in Section 8.11(a)) as to which SJW or any of its Subsidiaries has any obligation with respect to any current or former employee (the "SJW Employees") shall become the obligations of Parent and the Surviving Corporation at the Effective Time. Thereafter, Parent shall, or shall cause the Surviving Corporation to, provide benefits to SJW Employees under those of Parent's Benefit Plans that provide benefits that are most closely analogous to those provided by the SJW Benefit Plans, on terms and conditions substantially similar, in the aggregate, to those that apply to similarly situated employees of Parent's Subsidiaries. Nothing herein shall require the continuation of any particular SJW Benefit Plan or prevent the amendment or termination thereof (subject to the maintenance, in the aggregate, of the benefits as provided in the preceding sentence).

(ii) Pre-Existing Limitations; Deductible; Service Credit. With respect to any Benefit Plans of Parent or any Subsidiary of Parent in which SJW Employees participate effective as of the Closing Date, Parent shall, or shall cause the Surviving Corporation to: (A) not impose any limitations more onerous than those currently in effect as to pre-existing conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to SJW Employees under any Benefit Plan of Parent or any Subsidiary of Parent in which such employees may be eligible to participate after the Effective Time, (B) provide each SJW Employee with credit for any co- payments and deductibles paid prior to the Effective Time in satisfying any applicable deductible or out-of-pocket requirements under any welfare Benefit Plan of Parent or any Subsidiary of Parent in which such employees may be eligible to participate after the Effective Time, and (C) recognize all service of SJW Employees with SJW for purposes of eligibility to participate, vesting credit, eligibility for benefits and the amount of any such benefits (other than accruals under any defined benefit pension plan) in any Benefit Plan of Parent or any Subsidiary of Parent in which such employees may be eligible to participate after the Effective Time, to the same extent taken into account under a comparable SJW Benefit Plan immediately prior to the Closing Date.

(iii) Change of Control. SJW and Parent agree that, for purposes of the SJW Benefit Plans, the approval or consummation of the transactions contemplated by this Agreement, as applicable, shall constitute a "Change in Control", as applicable under such SJW Benefit Plans.

(iv) Certain Plans. Notwithstanding any other provision hereof, Parent shall, or shall cause the Surviving Corporation to, provide the benefits under the SJW Corp. Transaction Incentive and Retention Program for Key Employees and the SJW Corp. Executive Severance Plan, as amended ("Severance Plan"), including the Supplemental Executive Retirement Plan benefits provided under the Severance Plan, to those individuals covered by those plans on the Effective Time in accordance with the terms of such plans as of the date hereof.

5.6. Fees and Expenses

Whether or not the Merger is consummated, all Expenses (as defined below) incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such Expenses, except (a) if the Merger is consummated, the Surviving Corporation shall pay, or cause to be paid, any and all property or transfer taxes imposed on SJW or its Subsidiaries and (b) as provided in Section 7.2. As used in this Agreement, "Expenses" includes all out-of-pocket expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement and the transactions contemplated hereby, including the preparation, printing, filing and mailing of the SJW Proxy Statement and the solicitation of shareholder approvals and all other matters related to the transactions contemplated hereby.

5.7. Directors' and Officers' Indemnification and Insurance.

(a) After the Effective Time through the sixth anniversary of the Effective Time, Parent and the Surviving Corporation shall, jointly and severally, indemnify and hold harmless each present (as of the Effective Time) or former officer, director or employee of SJW and its Subsidiaries (the "Indemnified Parties"), against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses (including attorneys' fees and expenses) incurred in connection with any claim, action, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to (i) the fact that the Indemnified Party is or was an officer, director or employee of SJW or any of its Subsidiaries to the extent that such claim, action, proceeding or investigation pertains to matters existing or occurring at or prior to the Effective Time (including this Agreement and the transactions and actions contemplated hereby) (a "Claim"), whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted under applicable Law or Order; provided that no Indemnified Party may settle any such claim without the prior approval of Parent (which approval shall not be unreasonably withheld or delayed). Each Indemnified Party will be entitled to advancement of expenses incurred in the defense of any claim, action, proceeding or investigation from Parent or the Surviving Corporation within ten Business Days of receipt by Parent or the Surviving Corporation from the Indemnified Party of a request therefor to the extent permitted under the CCC; provided that any Person to whom expenses are advanced provides an undertaking, to the extent required by the CCC , to repay such advances if it is ultimately determined that such Person is not entitled to indemnification.

(b) Unless a modification is required by law, the Surviving Corporation shall cause to be maintained in effect (i) in its articles of incorporation and by-laws for a period of six years after the Effective Time, the current provisions regarding elimination of liability of directors and indemnification of, and advancement of expenses to, officers, directors and employees contained in the articles of incorporation and by-laws of SJW on the date of this Agreement (provided that the Surviving Corporation may make any amendments or other modifications to such provisions that would not adversely affect the rights thereunder of persons who at any time prior to the Effective Time were identified as indemnitees under the articles of incorporation or by-laws of SJW with respect to matters existing or occurring at or prior to the Effective Time, and (ii) for a period of six years after the Effective Time, the current policies of directors' and officers' liability insurance and fiduciary liability insurance maintained by SJW (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are, in the aggregate, no less advantageous to the insured) with respect to claims arising from facts or events that occurred on or before the Effective Time; provided, however, that in no event shall the Surviving Corporation be required to expend in any one year an amount in excess of 200% of the annual premiums currently paid by SJW for such insurance; and, provided, further, that if the annual premiums of such insurance coverage exceed such amount, the Surviving Corporation shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount.

(c) Notwithstanding anything herein to the contrary, if any claim, action, proceeding or investigation (whether arising before, at or after the Effective Time) is made against any Indemnified Party on or prior to the sixth anniversary of the Effective Time, the provisions of this Section 5.7 shall continue in effect until the final disposition of such claim, action, proceeding or investigation. Parent or the Surviving Corporation shall have the right to assume the defense of any Claim for which indemnification is provided herein, and neither Parent nor the Surviving Corporation will be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred thereafter by such Indemnified Parties in connection with the defense thereof, except that an Indemnified Party will have the right to retain separate counsel, reasonably acceptable to Parent, at the expense of the indemnifying party if the named parties to any such proceeding include both the Indemnified Party and the Parent (or Surviving Corporation), or their respective successors, and counsel for Parent determines that the representation of such parties by the same counsel would be inappropriate due to a conflict of interest between them based upon the standards of professional responsibility applicable thereto.

(d) In the event that the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or 1entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors or assigns of the Surviving Corporation shall succeed to the obligations set forth in Section 5.5 and this Section 5.7.

5.8. Public Announcements

SJW and Parent shall use all reasonable efforts to develop a joint communications plan. Each of the parties agrees that it shall not, nor shall any of their respective affiliates, issue or cause to be issued, any press releases and other public statements with respect to this Agreement or the transactions contemplated hereby unless otherwise required by applicable Law or by obligations pursuant to any listing agreement with or rules of any securities exchange, provided that, if such disclosure is required by applicable law or by obligations pursuant to any listing agreement with or rules of any securities exchange, each of the parties agrees to consult with each other before issuing any press release or otherwise making any public statement with respect to this Agreement or the transactions contemplated hereby.

5.9. Disclosure Schedule Supplements

From time to time after the date of this Agreement and prior to the Effective Time, SJW will promptly supplement or amend the SJW Disclosure Schedule with respect to any matter hereafter arising which, if existing or occurring at or prior to the date of this Agreement, would have been required to be set forth or described in the SJW Disclosure Schedule or which is necessary to correct any information in a schedule or in any representation and warranty of SJW which has been rendered inaccurate thereby. From time to time after the date of this Agreement and prior to the Effective Time, Parent will promptly disclose in writing to SJW any matter hereafter arising which, if existing or occurring at or prior to the date of this Agreement, would have been required to be set forth or described in a disclosure schedule or which is necessary to correct any information in a schedule or in any representation and warranty of Parent or Merger Sub which has been rendered inaccurate thereby (including, for purposes of this Section 5.9 only, any representation or warranty set forth in Section 3.2(f) without regard to the words "As of the date hereof" therein). Each of SJW and Parent shall, within a reasonable period of time following any such disclosure, supplement or amendment, negotiate in good faith with respect to the consequences of any such disclosure, supplement or amendment. For purposes of determining the accuracy of the representations and warranties of SJW contained in this Agreement in order to determine the fulfillment of the conditions set forth in Section 6.2(a), the SJW Disclosure Schedule shall be deemed to include only that information contained therein on the date of this Agreement and shall be deemed to exclude any information contained in any subsequent supplement or amendment thereto. For purposes of determining the accuracy of the representations and warranties of Parent contained in this Agreement in order to determine the fulfillment of the conditions set forth in Section 6.3(a), there shall be deemed to be no disclosure schedule of Parent, and the information contained in any written disclosure by Parent pursuant to this provision shall not be considered.

ARTICLE VI

CONDITIONS PRECEDENT

6.1. Conditions to Each Party's Obligation to Effect the Merger

The respective obligations of SJW, Parent and Merger Sub to effect the Merger are subject to the satisfaction or waiver at or prior to the Closing of the following conditions:

(a) Shareholder Approval. SJW shall have obtained the Required SJW Vote for the adoption of this Agreement by the shareholders of SJW.

(b) No Injunctions or Restraints; Illegality. No federal, state, local or foreign, if any, Law shall have been adopted or promulgated, and no temporary restraining Order, preliminary or permanent injunction or other Order issued by a court or other Governmental Entity of competent jurisdiction shall be in effect, having the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger.

(c) Governmental Approvals. All Parent Required Consents and the SJW Required Consents shall have been obtained prior to the Effective Time, and shall have become Final Orders. The Final Orders shall not, individually or in the aggregate, impose terms and conditions that materially impair thexability of the parties to complete the Merger or the other transactions contemplated hereby. "Final Order" for purposes of this Agreement means action by the relevant regulatory authority which has not been reversed, stayed, enjoined, set aside or annulled, and with respect to which any waiting period prescribed by any Law or Order before the Merger and other transactions contemplated hereby may be consummated has expired, and as to which all conditions to be satisfied before the consummation of such transactions prescribed by Law or Order have been satisfied.

(d) HSR Act. The waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have been terminated or shall have expired.

6.2. Additional Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger are subject to the satisfaction of, or waiver by Parent, at or prior to the Closing of the following additional conditions:

(a) Representations and Warranties At the time of Closing:

(i) Each of the representations and warranties of SJW set forth in the first and last sentence of Section 3.1(a) and Sections 3.1(b), 3.1(c)(i), 3.1(o), 3.1(p) and 3.1(r) shall be true and correct in all material respects; and

(ii) Each of the other representations and warranties of SJW set forth in the Agreement shall be true and correct without giving effect to any qualification for Material Adverse Effect, materiality or correlative term, except to the extent that such failure to be true and correct would not, in the aggregate and when taken together with all such failures, have a Material Adverse Effect; as if such representations and warranties referred to in clauses (i) and (ii) above were made at the Effective Time except (A) to the extent any such representation or warranty speaks by its terms as of a certain date, and (B) for changes specifically permitted by this Agreement; and Parent shall have received a certificate of the chief executive officer and the chief financial officer of SJW to such effect.

(b) Performance of Obligations of SJW. SJW shall have performed or complied in all material respects with all agreements and covenants required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate of the chief executive officer and the chief financial officer of SJW to such effect.

(c) Final Orders. The Final Orders referred to in Section 6.1(c) shall not, individually or in the aggregate, impose terms and conditions that could reasonably be expected to result in a Material Adverse Effect on SJW or Parent.

(d) Product Liability. No event has occurred which could reasonably be likely to result in any liability of SJW or its Subsidiaries for death or serious personal injury, fixed or contingent, asserted or unasserted, with respect to any product or service sold by SJW or its Subsidiaries such that the reputation of SJW, Parent or any of their Subsidiaries might be significantly impaired.

6.3. Additional Conditions to Obligations of SJW

The obligations of SJW to effect the Merger are subject to the satisfaction of, or waiver by SJW, at or prior to the Closing of the following additional conditions:

(a) Representations and Warranties. Each of the representations and warranties of Parent and Merger Sub set forth in this Agreement shall be true and correct (other than any representation or warranty, or any portion of a representation or warranty, that is not qualified as to Material Adverse Effect,which representations and warranties shall be true and correct in all material respects), as if such representations or warranties were made as of the Effective Time, except (i) to the extent given as of a certain date and (ii) for changes specifically permitted by this Agreement, and SJW shall have received a certificate of the chief executive officer and the chief financial officer of Parent to such effect.

(b) Performance of Obligations of Parent. Parent shall have performed or complied in all material respects with all agreements and covenants required to be performed by it under this Agreement at or prior to the Closing Date, and SJW shall have received a certificate of the chief executive officer and the chief financial officer of Parent to such effect.

ARTICLE VII

TERMINATION AND AMENDMENT

7.1. Termination

This Agreement may be terminated at any time prior to the Effective Time, by action taken or authorized by the Board of Directors of the terminating party or parties, and except as provided below, whether before or after approval of the matters presented in connection with the Merger by the shareholders of SJW or Merger Sub:

(a) By mutual written consent of Parent and SJW, by action of their respective Boards of Directors;

(b) By either SJW or Parent, by written notice to the other party, if the Effective Time shall not have occurred on or before the first anniversary of the date of this Agreement (the "Termination Date"); provided, however, that the right to terminate this Agreement under this Section 7.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement (including without limitation Section 5.3) has been the cause of, or resulted in, the failure of the Effective Time to occur on or before the Termination Date; provided further that if, on such first anniversary, (i) the condition set forth in Section 6.1(c) has not been satisfied or waived, (ii) all of the other conditions to the consummation of the Merger set forth in Article VI have been satisfied or waived or can readily be satisfied and (iii) any approvals required in order for the condition set forth in Section 6.1(c) to be satisfied that have not yet been obtained are being pursued diligently and in good faith, then the Termination Date shall,without any action by any of the parties, be extended to the earlier of (x) the date that is six months after the first anniversary of the date hereof and (y) the date that such approvals are no longer being pursued diligently and in good faith by any party necessary to the prosecution thereof;

(c) By either SJW or Parent if any Governmental Entity
(i) shallhave issued an order, decree or ruling or taken any other action (which the parties shall have used their reasonable best efforts to resist, resolve or lift, as applicable, in accordance with Section 5.3) permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and nonappealable or (ii) shall have failed to issue an order, decree or ruling or to take any other action (which order, decree, ruling or other action the parties shall have used their reasonable best efforts to obtain, in accordance with Section 5.3), in each case (i) and (ii) that is necessary to fulfill the conditions set forth in subsections 6.1(c) and (d), as applicable, and such denial of a request to issue such order,decree, ruling or take such other action shall have become final and nonappealable; provided, however, that the right to terminate this Agreement under this Section 7.1(c) shall not be available to any party whose failure to comply with Section 5.3 has been the cause of such action or inaction;

(d) By either SJW or Parent if the approval by the shareholders of SJW required for the consummation of the Merger shall not have been obtained by reason of the failure to obtain the Required SJW Vote upon the taking of such vote at a duly held meeting of shareholders of SJW, or at any adjournment thereof;

(e) By Parent if the Board of Directors of SJW shall have taken or resolved to take any of the actions set forth in clauses (i) or (ii) of Section 5.4(b) or if the Board of Directors of SJW shall have refused to affirm its recommendation of the Merger and the transactions contemplated by this Agreement as promptly as practicable (but in any case within ten business days) after receipt of written request from Parent therefor;

(f) By SJW at any time prior to adoption of this Agreement by the shareholders of SJW if the Board of Directors of SJW (i) shall have approved a Superior Proposal or (ii) shall have entered into a definitive agreement with respect to a Superior Proposal; provided, however, that SJW shall have complied with Section 5.4;

(g) By Parent, upon a breach of any representation, warranty, covenant or agreement on the part of SJW set forth in this Agreement, or if any representation or warranty of SJW shall have become untrue, incomplete or incorrect, in either case such that the conditions set forth in Section 6.2(a) would not be satisfied (a "Terminating SJW Breach"); provided, however, that if such Terminating SJW Breach is curable by SJW through the exercise of its reasonable efforts within 10 days, Parent may not terminate this Agreement under this Section 7.1(g) until the expiration of such 10 day period or the time SJW fails to maintain reasonable efforts, whichever occurs earlier; and provided, further, that the preceding proviso shall not in any event be deemed to extend any date set forth in paragraph
(b) of this Section 7.1; or

(h) By SJW, upon breach of any representation, warranty, covenant or agreement on the part of Parent or Merger Sub set forth in this Agreement, or if any representation or warrant of Parent shall have become untrue, incomplete or incorrect, in either case such that the conditions set forth in Section 6.3(a) would not be satisfied ("Terminating Parent Breach"); provided,however, that if such Terminating Parent Breach is curable by Parent through the exercise of its reasonable efforts within 10 days and for so long as Parent continues to exercise such reasonable efforts, Company may not terminate this Agreement under this Section 7.1(h) until the expiration of such 10 day period or the time SJW fails to maintain reasonable efforts, whichever occurs earlier; and provided, further, that the preceding proviso shall not in any event be deemed to extend any date set forth in paragraph (b) of this Section 7.1.

7.2. Effect of Termination.

(a) In the event of termination of this Agreement by either SJW or Parent as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Merger Sub or SJW or their respective officers or directors except with respect to the second sentence of Section 5.2, Section 5.6, this
Section 7.2 and Article VIII; provided, however, that nothing herein shall relieve any party from liability for the willful breach of any of its representations, warranties, covenants or agreements set forth in this Agreement.

(b) Parent and SJW agree that SJW shall pay to Parent the sum of $17.5 million (the "Termination Fee") if (i) SJW or Parent shall terminate this Agreement pursuant to Section 7.1(d), Section 7.1(e), or
Section 7.1(f)(i), and at any time after the date of this Agreement and at or before the time of the event giving rise to such termination there shall exist an Acquisition Proposal with respect to SJW or any of its Subsidiaries and within 18 months following the termination of this Agreement, SJW enters into a definitive agreement with a third party with respect to an Acquisition Proposal or an Acquisition Proposal is consummated or (ii) SJW shall terminate this Agreement pursuant to Section7.1(f)(ii).

(c) The Termination Fee required to be paid to Parent pursuant to Section 7.2(b) shall be made to Parent not later than five Business Days after the entering into of a definitive agreement with respect to, or the consummation of, an Acquisition Proposal, as applicable. Payment under this Section 7.2 shall be made by wire transfer of immediately available funds to an account designated by Parent in the amount of the Termination Fee, plus interest, if any, accrued from the date when payment was due to the payment date at the prime rate in effect at Wells Fargo Bank, San Francisco.

7.3. Amendment

This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the shareholders of SJW and Merger Sub, but, after any such approval, no amendment shall be made which by Law or in accordance with the rules of any relevant stock exchange requires further approval by such shareholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

7.4. Extension; Waiver

At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights.

ARTICLE VIII

GENERAL PROVISIONS

8.1. Non-Survival of Representations, Warranties and Agreements

None of the representations, warranties, covenants and other agreements in this Agreement or in any instrument delivered pursuant to this Agreement, including any rights arising out of any breach of such representations, warranties,covenants and other agreements, shall survive the Effective Time,except for those covenants and agreements contained herein and therein that by their terms apply or are to be performed in whole or in part after the Effective Time and this Article VIII. Nothing in this
Section 8.1 shall relieve any party for any breach of any representation, warranty, covenant or other agreement in this Agreement occurring prior to termination.

8.2. Notices

All notices and other communications hereunder shall be in writing (including telecopy or other similar writing) and shall be deemed duly given (a) on the date of delivery if delivered personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service,
(c) on the tenth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid or
(d) if given by any other means, when received at the address specified in this Section 8.2, except, in each case, for a notice of a change of address, which shall be effective only upon receipt thereof. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

(a) if to Parent or Merger Sub, to

American Water Works Company, Inc. 1025 Laurel Oak Road P.O. Box 1770
Voorhees, NJ 08043
Fax: 856-346-8299
Attention: W. Timothy Pohl

with a copy to

     Fax: 215-994-2
     Attention:     John LaRocca

(b)  if to SJW to

     SJW Corp.

374 W. Santa Clara St.

San Jose, CA 95113 (courier) or 95196 (mail)
Fax: (408) 279-7932
Attention: Richard Roth

with a copy to

Brobeck, Phleger & Harrison LLP
One Market, Spear Street Tower
San Francisco, CA 94105
Fax: (415) 442-1010
Attention: Ronald B. Moskovitz

8.3. Interpretation

When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents, glossary of defined terms and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 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 inclusion of any matter in the SJW Disclosure Schedule in connection with any representation, warranty, covenant or agreement that is qualified as to materiality or "Material Adverse Effect" shall not be an admission by SJW that such matter is material or would have a Material Adverse Effect. Notwithstanding anything to the contrary, in no event shall any risk factors or similar cautionary language included in any SJW SEC Reports under the heading "Forwarding Looking Statements" be disclosed or deemed disclosed for purposes of the representations, warranties, or covenants contained in this Agreement except as otherwise specifically disclosed herein or therein.

8.4. Counterparts

This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when each party shall have received counterparts hereof signed by all other parties hereto,it being understood that the parties need not sign the same counterpart.

8.5. Entire Agreement; No Third Party Beneficiaries.

(a) This Agreement together with the SJW Disclosure Schedule, and exhibits hereto constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, other than the Confidentiality Agreement, which shall survive the execution and delivery of this Agreement.

(b) This Agreement shall be binding upon and inure solely to the benefit of each party hereto, 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, other than Section 5.7 (which is intended to be for the benefit of the Persons covered thereby and may be enforced by such Persons).

8.6. Governing Law

This Agreement shall be governed and construed in accordance with the laws of the State of California, without regard to principles of conflict of laws.

8.7. Severability

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law, Order or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

8.8. Assignment

Neither this Agreement nor any of the rights,interests or obligations hereunder shall be assigned by any of the parties hereto, in whole or in part (whether by operation of Law, Order or otherwise), without the prior written consent of the other parties, and any attempt to make any such assignment without such consent shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. SJW agrees that, at the request of Parent and Merger Sub at any time prior to adoption of this Agreement by the shareholders of SJW, SJW will take all actions required by the CCC in order to effect, after all actions required by the CCC and DGCL are taken by Parent and Merger Sub, the substitution of another direct or indirect wholly-owned Subsidiary of Parent for Merger Sub in this Agreement; provided that each of Parent and such substitute Subsidiary shall represent and warrant to SJW, on the date such substitution is to be effective, the representations and warranties set forth in Section 3.3; and provided, further, that no action shall be taken that would require SJW to amend or supplement the SJW Proxy Statement at any time after the SJW Proxy Statement has first been mailed to SJW's shareholders.

8.9. Submission to Jurisdiction; Waivers

Each of Parent, Merger Sub and SJW irrevocably agrees that any legal action or proceeding with respect to this Agreement or for recognition and enforcement of any judgment in respect hereof brought by any party hereto or its successors or assigns may be brought and determined in the Santa Clara County Superior Court of the State of California, or in the United States Courts in or for the Northern District of California, in each case having subject matter jurisdiction, and each of Parent, Merger Sub and SJW hereby irrevocably submits with regard to any such action or proceeding for itself and in respect to its property, generally and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each of the parties hereto hereby agrees that service of any process, summons, notice or document by U.S. registered mail to its respective address set forth in Section 8.2 shall be effective service of process for any such legal action or proceeding brought against it in any such court. Each of Parent, Merger Sub and SJW hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to serve process in accordance with this Section 8.9, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and
(c) to the fullest extent permitted by applicable Law or Order, that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper and (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts. Notwithstanding anything contained herein to the contrary, SJW understands and agrees that this Section 8.9 is not intended to and shall not be deemed to be a consent by Parent to jurisdiction for any purpose other than the limited purpose of enforcing this Agreement in accordance with its terms.

8.10. Enforcement

The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at Law, Order or in equity.

8.11. Definitions

As used in this Agreement:

(a) "Benefit Plans" means, with respect to any Person, each employee or director benefit plan, program, arrangement and contract (including any "employee benefit plan," as defined in Section 3(3) of ERISA, and any bonus, deferred compensation, stock bonus, stock purchase, restricted stock, stock option, employment, termination, stay agreement or bonus, change in control and severance plan, program, arrangement and contract) in effect on the date of this Agreement or disclosed on Section 4.1(c) of the SJW Disclosure Schedule, to which such Person or its Subsidiary is a party, which is maintained or contributed to by such Person, or with respect to which such Person could incur material liability under Section 4069, 4201 or 4212(c) of ERISA.

(b) "Board of Directors" means the Board of Directors of any specified Person and any committees thereof.

(c) "Business Day" means any day on which banks are not required or authorized to close in the city of San Francisco.

(d) "knowledge" when used with respect to any party means the knowledge of any executive officer of such party after reasonable inquiry.

(e) "Material Adverse Effect" means, with respect to any Person, any change, circumstance or effect that would reasonably be expected to result in a materially adverse effect on the business, financial condition or results of operations of such Person and its Subsidiaries taken as a whole, other than any change, circumstance or effect relating (i) to reductions in consumer demand or reductions in supply sources solely as a result of unusual climatic conditions in the watersheds or in the areas serviced by SJW or any of its Subsidiaries or
(ii) to actions or omissions by either Parent or SJW, or any of their Subsidiaries, as the case may be, taken with the written permission of the other party in connection with the transactions contemplated hereby.

(f) "the other party" means, with respect to SJW, Parent and means, with respect to Parent, SJW.

(g) "Person" means an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization, other entity or group (as defined in the Exchange Act).

(h) "Subsidiary" when used with respect to any party means any corporation or other organization, whether incorporated or unincorporated, (i) of which such party or any other Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the voting interests in such partnership) or (ii) at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries.

(i) "Superior Proposal" means an unsolicited bona fide written Acquisition Proposal that the Board of Directors of SJW concludes in good faith (after consultation with its financial advisors) would, if consummated, provide greater aggregate value to SJW's shareholders (in their capacities as shareholders), from a financial point of view, than the transactions contemplated by this Agreement and for which any required financing is committed or which, in the good faith judgment of the Board of Directors of SJW (after consultation with its financial advisors), is reasonably capable of being financed by the Person making such Acquisition Proposal (provided that for purposes of this definition the term Acquisition Proposal shall have the meaning assigned to such term in Section 5.4 except that (x) the reference to "10% or more of the shares" in the definition of "Acquisition Proposal" shall be deemed to be a reference to "sale of 50% or more of the shares" and (y) "Acquisition Proposal" shall only be deemed to refer to a transaction involving SJW, or with respect to assets (including the shares of any Subsidiary of SJW) of SJW and its Subsidiaries, taken as a whole, and not any of its Subsidiaries alone.

8.12. Other Agreements

The parties hereto acknowledge and agree that, except as otherwise expressly set forth in this Agreement, the rights and obligations of SJW and Parent under any other agreement between the parties shall not be affected by any provision of this Agreement.

[Intentionally Left Blank]

IN WITNESS WHEREOF, Parent, SJW and Merger Sub have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the day and year first above written.

AMERICAN WATER WORKS COMPANY, INC.

By: /s/ W. Timothy Pohl_________

Name: W. Timothy Pohl
Title:    Secretary   and    General
Counsel

SJW ACQUISITION CORP.

By: /s/ W. Timothy Pohl_______

Name: W. Timothy Pohl
Title: Vice President

SJW CORP.

By: /s/ W. Richard Roth_______

 Name: W. Richard Roth
 Title: President

SIXTH AMENDMENT
TO
SAN JOSE WATER COMPANY
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
dated January 1, 1992

The San Jose Water Company Executive Supplemental Retirement Plan is hereby amended effective January 1, 1999 to read as follows:

FIRST: Effective January 1, 1999, Section 3.1 is amended to read as follows:

"3.1 The retirement benefits under this Plan to which a Participant shall be entitled, shall be an amount equal to the following:

"(a) Two and two tenths percent (2.2%) of the Final Average Compensation of a Participant multiplied by the Participant's Years of Service (not to exceed twenty (20) years) plus one and one-tenth percent (1.1%) of the Final Average Compensation of a Participant multiplied by the Participant's Years of Service in excess of 20 years (not to exceed an additional ten (10) years) up to a total not to exceed fifty-five percent (55%) of Final Average Compensation; less benefits payable to the Participant from the San Jose Water Company Retirement Plan. The one and one-tenth percent (1.1%) and fifty- five percent (55%) of Final Average Compensation percentages stated above shall be increased to one and six tenths percent (1.6%) and sixty percent (60%) respectively for Participants who are credited with an Hour of Service, as defined in the San Jose Water Company Retirement Plan, on or after November 1, 1999."

"(b) In addition to the benefit described in subsection (a) above, Mr. John Weinhardt shall receive an additional eight and one quarter tenths of one percent (.825%) of Final Average Compensation for each year of service as President and Chief Executive Officer of the Company.

"(c) In addition to the benefit described in subsection (a) above, Barbara Y. Nilsen shall receive the following benefit if she retires on March 1, 1998: $40,000 in the first year, $30,000 in the second year, and $20,000 in the third year of retirement. The benefit will be paid pro rata on a monthly basis. Actuarial reductions will apply if a form of payment with beneficiary rights is elected.

"(d) In addition, to the benefit described in subsection (a) above, Frederick Meyer shall receive an additional two and one-half (2 1/2) Years of Service credit and shall be deemed to be 2 (1/2) years of age older at the time he retires.

"(e) In addition to the benefit described in subsection (a) above, Participants who are entitled to a benefit under the SJW. Corp Executive Severance Plan (the "Severance Plan") and whose employment with the Company terminates within twenty-four (24) months after a Change in Control, as defined in the Severance Plan, shall receive an additional three (3) Years of Service and shall be deemed to be three (3) years of age older at the time of retirement.

"(f) Mr. W. Richard Roth shall be entitled to a retirement benefit hereunder, payable to him on a monthly basis, at the later of his attainment of fifty-five (55) years of age or his actual retirement in an amount equal to the greater of (i) the benefit to which he would otherwise be entitled under the Plan or (ii) fifty-five percent (55%) of Final Average Compensation less benefits payable to him from the San Jose Water Company Retirement Plan."

"The amount of the offset for benefits paid from the San Jose Water Company Retirement Plan contained in subsections
(a), (e) and (f) shall be the Actuarially Equivalent of a single life annuity commencing on the Participant's Normal Retirement Date."

SECOND: Except as provided herein, the San Jose Water Company Executive Supplemental Retirement Plan shall continue in full force and effect.

IN WITNESS WHEREOF, San Jose Water Company has caused its authorized officers to affix the corporate name and seal hereto this __ day of _____________, 1999.

SAN JOSE WATER COMPANY

By____________________________

By____________________________

EXECUTIVE SEVERANCE PLAN

AMENDMENT 1999-1

* * *

The SJW Corp. Executive Severance Plan (the "Plan") as previously adopted by SJW Corp. ("Company") for the benefit of the Officers (as defined therein) of Company and/or its Affiliates and Associates (as defined therein) is hereby amended effective September 21, 1999 as follows:

1. Section 1(f) is hereby amended to read in full as follows:

"(f) "Good Reason" shall exist with respect to an Officer if and only if, without the Officer's express written consent:

(1) there is a significant change in the nature or the scope of the Officer's authority or in his or her overall working environment;

(2) the Officer is assigned duties materially inconsistent with his or her present duties, responsibilities and status;

(3) there is a reduction in the Officer's rate of base salary or target bonus; or

(4) Employer changes by fifty-five (55) miles or more the principal location in which the Officer is required to perform services;

provided that, with respect to any voluntary termination of employment by Mr. Richard Roth during the sixty (60) day period beginning on the one year anniversary of a Change in Control, Good Reason shall automatically be deemed to have existed."

2. Subparagraph (3) of Section 2(a) is hereby amended in full to read as follows:

"(3) The Company will make provisions in its Supplemental Executive Retirement Plan ("SERP") so that each Officer (other than Mr. W. Richard Roth) will receive combined retirement benefits under the SERP and the Company's Retirement Plan equivalent to that which would be provided if such Officer had three additional years of service credit and were three years older on the date of his or her retirement. Solely for Mr. W. Richard Roth the Company shall, in lieu of the foregoing, adopt and implement the Sixth Amendment to the SERP in substantially the form attached as Exhibit A."

2. Sections 14(b) and (c) shall not apply to Mr. W. Richard Roth, and Mr. Roth's Change in Control Benefit under this Plan shall not be subject to the Benefit Limit of Section 14(b). Instead, there is hereby added the following new Section 14(d) solely and exclusively for the benefit of Mr. W. Richard Roth:

"(d) If Mr. Roth qualifies for a Change in Control Benefit hereunder, he shall receive an additional cash payment (the "Tax Gross-Up") sufficient to reimburse him on an after-tax basis for any excise tax imposed on such Officer with respect to such Change in Control Benefit pursuant to Section 4999 of the Internal Revenue Code or a successor provision or similar tax ("Excise Tax"), so that such Officer does not incur any out-of- pocket cost with respect to such Excise Tax. The amount of any such Tax Gross-Up will be determined pursuant to the following formula and will be subject to the Company's collection of all applicable federal, state and local income and employment withholding taxes and any Excise Tax:

X = Y / (1 - (A + B + C)), where

X is the total dollar amount of the Tax Gross-Up payable to Mr. Roth.

Y is the total Excise Tax imposed on Mr. Roth with respect to such Change in Control Benefit.

A is the Excise Tax rate in effect at the time.

B is the highest combined marginal federal income and applicable state income tax rate in effect for Mr. Roth, after taking into account the deductibility of state income taxes against federal income taxes to the extent allowable, for the calendar year in which the Tax Gross-Up is paid.

C is the applicable Hospital Insurance (Medicare) Tax Rate in effect for Mr. Roth for the calendar year in which the Tax Gross-Up is paid.

Within ninety (90) days after each determination is made by the Internal Revenue Service or Roth's tax advisor that one or more of the Change in Control Benefits paid to Roth constitute excess parachute payments under Code Section 280G for which Roth is liable for an Excise Tax, Roth shall identify the nature of those parachute payments to the Company and submit to the Company the calculation of the Excise Tax attributable to that payment and the Tax Gross-Up to which Roth is entitled with respect to such tax liability. The Company will pay such Tax Gross-Up to Roth (net of all applicable withholding taxes, including any taxes required to be withheld under Code Section 4999) within ten (10) business days after Roth's submission of the calculation of such Excise Tax and the resulting Tax Gross- Up, provided such calculations represent a reasonable interpretation of the applicable law and regulations.

In the event that Roth's actual Excise Tax liability is determined by a Final Determination to be greater than the Excise Tax liability taken into account for purposes of the Tax Gross-Up paid to Roth pursuant to this Section 14(b), then within ninety
(90) days following the Final Determination, Roth shall submit to the Company a new Excise Tax calculation based upon the Final Determination. Within ten (10) business days after receipt of such calculation, the Company shall pay Roth the additional Tax Gross-Up attributable to such excess Excise Tax liability.

In the event that Roth's actual Excise Tax liability is determined by a Final Determination to be less than the Excise Tax liability taken into account for purposes of the Tax Gross-Up paid to Roth pursuant to this Section 14(b), then Roth shall refund to the Company, promptly upon receipt, any federal or state tax refund attributable to the Excise Tax overpayment.

For purposes of this Section 14(b), a "Final Determination" means an audit adjustment by the Internal Revenue Service that is either (i) agreed to by both Roth (or his estate) and the Company (such agreement by the Company to be not unreasonably withheld) or (ii) sustained by a court of competent jurisdiction in a decision with which Roth and the Company concur
(such concurrence by the Company to be not unreasonably withheld)
or with respect to which the period within which an appeal may be filed has lapsed without a notice of appeal being filed."

3. Except as heretofore amended, the terms of the Plan shall continue in full force and effect.

IN WITNESS WHEREOF, Company has caused this instrument to be executed in its name by its duly authorized officer, all as of the day and year first above written.

SJW CORP.

By:________________

Its: ______________

SJW CORP.

TRANSACTION INCENTIVE AND RETENTION PROGRAM
FOR
KEY EMPLOYEES

I. PURPOSE OF THE PROGRAM

This Transaction Incentive and Retention Program for Key Employees is intended to promote the interests of SJW Corp., a California corporation (the "Company"), by providing members of the Company's senior management with a special incentive to remain in the Company's employ during any period in which the Company may be the subject of an acquisition offer and during a limited transition period following such an acquisition.

II. DEFINITIONS

For purposes of the Program, the following definitions apply:

Acquisition means any of the following transactions pursuant to which assets or securities of the Company are acquired for consideration paid in cash, securities or other property:

(i) any merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to the merger or consolidation, or

(ii) the sale, transfer or other disposition of all or substantially all (more than eighty percent (80%)) of the Company's assets in liquidation or dissolution of the Company, or

(iii) the direct sale or exchange by the Company's stockholders of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities to a person or persons different from the persons holding those securities immediately prior to such sale or exchange.

Acquisition Proceeds means the following items of consideration (in cash, securities or other property) paid by the acquiring company in effecting the Acquisition:

(i) if the Acquisition is effected by a merger or consolidation or the direct purchase of the Company's outstanding common stock, the aggregate amount of cash and other consideration (valued at fair market value) payable to the holders of the Company's outstanding common stock in acquisition of their common stock holdings, or

(ii) if the Acquisition is effected by the purchase of all or substantially all of the Company's assets in liquidation or dissolution, the sum of (A) the aggregate amount of cash and other consideration (valued at fair market value) paid to the Company in acquiring the Company's assets plus (B) the fair market value of other assets of the Company that remain available for distribution to stockholders, less the portion of such amount applied by the Company to the payment of any outstanding indebtedness of the Company (other than amounts owed under this Program).

No liability of the Company assumed or discharged by the acquiring company in the Acquisition (other than any liability under this Program) shall be taken into account in determining the amount of the Acquisition Proceeds.

Acquisition Proceeds Per Share shall be the amount determined in accordance with the following provisions:

(i) if the Acquisition is effected by a merger or consolidation or the direct purchase of the Company's outstanding common stock, the Acquisition Proceeds Per Share will be equal to the amount actually paid to the Company's stockholders per outstanding share of common stock.

(ii) if the Acquisition is effected by the purchase of all or substantially all of the Company's assets, the Acquisition Proceeds Per Share will be determined pursuant to the following formula:

X = AP / O, where

X is the dollar amount of the Acquisition Proceeds Per Share

AP is the aggregate amount of the Acquisition Proceeds, and

O is the total number of outstanding shares of the Company's common stock at the time of the Acquisition, determined on a fully- diluted basis, including the number of shares of common stock issuable upon any convertible equity or debt securities or upon the exercise of any outstanding warrants or other similar purchase rights.

Board means the Company's Board of Directors.

Bonus Award means a Retention Bonus Award or Incentive Bonus Award payable under the Program.

Bonus Payment Date means the later of (i) the expiration of the twelve (12) month period following the execution date of the definitive agreement for the Acquisition or
(ii) the closing of the Acquisition following the requisite approval of that Acquisition by the Public Utilities Commission of the State of California.

Code means the Internal Revenue Code, as amended from time to time.

Company means the SJW Corp., a California corporation, or successor entity.

Employee means an individual who is employed on a full- time basis by the Company, subject to the Company's control and direction as to both the work to be performed and the manner and method of performance.

Good Reason exists with respect to a Participant if and only if, without the Participant's express written consent:

(i) there is a significant change in the nature or the scope of the Participant's authority or in his or her overall working environment;

(ii) the Participant is assigned duties materially inconsistent with his or her present duties, responsibilities and status;

(iii) there is a reduction in the Participant's rate of base salary or target bonus; or

(iv) the Company changes by fifty-five (55) miles or more the principal location in which the Participant is required to perform services.

Incentive Bonus Award means the incentive bonus entitlement of each Participant under the Program as determined pursuant to the provisions of Article IV of the Program.

Involuntary Termination means the termination of Employee status by reason of (i) the individual's involuntary dismissal or discharge by the Company other than a Termination for Cause or (ii) the individual's death or permanent disability.

Participant means the members of senior management who are to participate in the Program. Each Participants is identified in attached Schedule A to the Program, which also specifies whether such Participant is entitled to a Retention Bonus Award, an Incentive Bonus Award or both.

Program means the Company's Transaction Incentive and Retention Program for Key Employees, as set forth in this document and any amendments thereto made from time to time.

Retention Bonus Award means the retention bonus entitlement of each Participant under the Program as determined in accordance with Article III of the Program.

Termination for Cause means the Company's termination of the Participant's status as an Employee for one or more of the following reasons: (i) commission of any act of fraud, embezzlement or dishonesty, (ii) unauthorized use or disclosure of confidential information, trade secrets or other proprietary information, (iii) continuing failure to perform the duties, functions and responsibilities of the individual's position with the Company after written warning in which the performance deficiencies are identified and a reasonable cure period of at least fifteen (15) days is provided, (iv) a material breach of the terms of any employment agreement in effect at the time or the terms of any confidentiality or proprietary information agreement or (v) any other intentional misconduct on the Participant's behalf which has a materially adverse effect upon the business or affairs of the Company.

III. RETENTION BONUS AWARD

A. Each Participant in the Program who is designated in Schedule A as eligible for a Retention Bonus Award and who either
(i) continues in Employee status through the Bonus Payment Date,
(ii) terminates his or her employment for Good Reason following the closing of an Acquisition and before the Bonus Payment Date or (iii) is terminated by reason of an Involuntarily Termination before the Bonus Payment Date will become eligible to receive a Retention Bonus Award under the Program upon the terms and conditions of this Article III. No Retention Bonus Award will be paid to any Participant who otherwise ceases employment before the Bonus Payment Date.

B. The amount of the potential Retention Bonus Award payable to each of Mr. Weinhardt and Mr. Roth shall be $1,250,000. The Retention Bonus Award for each other Participant shall be such Participant's base salary at the time of closing of the Acquisition.

C. The Retention Bonus Award determined for each Participant who qualifies for payment will become payable in one lump sum on the Bonus Payment Date. Payment of the Retention Bonus Award will be made in cash, subject to the Company's collection of all applicable federal, state and local income and employment withholding taxes and any excise tax imposed under Code Section 4999.

IV. INCENTIVE BONUS AWARD

A. Each Participant who is designated in Schedule A as eligible for an Incentive bonus Award and who either (i) continues in Employee status through the Bonus Payment Date, (ii) terminates his or her employment for Good Reason following the closing of an Acquisition and before the Bonus Payment Date or (iii) is terminated by reason of an Involuntarily Termination before the Bonus Payment Date will become eligible to receive an Incentive Bonus Award under the Program upon the terms and conditions of this Article IV. No Incentive Bonus Award will be paid to any Participant who otherwise ceases employment before the Bonus Payment Date.

B. The amount of the Incentive Bonus Award payable to each Participant will be determined in accordance with attached Schedule B.

C. The Incentive Bonus Award determined for each Participant who qualifies for payment will become payable in one lump sum on the Bonus Payment Date. Payment of the Incentive Bonus Award will be made in cash, except that, if all or any portion of the Acquisition Proceeds is paid in the form of freely-tradable securities, then the payment may, in the Board's discretion, be made in whole or in part in those securities. The payment will be subject to the Company's collection of all applicable federal, state and local income and employment withholding taxes and any excise tax imposed under Code Section 4999.

V. TAX GROSS-UP

A. Any Participant who qualifies for both a Retention Bonus Award and an Incentive Bonus Award shall receive an additional bonus amount under the Program (the "Tax Gross-Up") sufficient to reimburse such individuals on an after tax-basis for any excise tax imposed on such Participant with respect to the combined Bonus Award and any other compensation payable to such Participant by the Company or an affiliate or successor pursuant to Code Section 4999 or a successor provision or similar tax ("Excise Tax"), so that such Participant does not incur any out- of-pocket cost with respect to such Excise Tax. The amount of any such Tax Gross-Up will be determined pursuant to the following formula and will be subject to the Company's collection of all applicable federal, state and local income and employment withholding taxes and any Excise Tax:

X = Y (1 - (A + B + C)), where

X is the total dollar amount of the Tax Gross- Up payable to the Participant.

Y is the total Excise Tax imposed on the Participant with respect to the combined Bonus Award and any other compensation payable to the Participant by the Company or an affiliate or successor.

A is the Excise Tax rate in effect at the time.

B is the highest combined marginal federal income and applicable state income tax rate in effect for the Participant, after taking into account the deductibility of state income taxes against federal income taxes to the extent allowable, for the calendar year in which the Tax Gross-Up is paid.

C is the applicable Hospital Insurance (Medicare) Tax Rate in effect for the Participant for the calendar year in which the Tax Gross-Up is paid

B. Within ninety (90) days after each determination is made by the Internal Revenue Service or the Participant's tax advisor that the Retention Bonus Award/and or Incentive Bonus Award paid to the Participant under this Plan (alone or together with other compensation payable to the Participant by the Company or an affiliate or successor) constitutes an excess parachute payment under Code Section 280G for which the Participant is liable for an Excise Tax, the Participant shall identify the nature of the parachute payments (including those that are payable under this Plan and those that are not) and submit to the Company the calculation of the Excise Tax attributable to all such payments and the Tax Gross-Up to which the Participant is entitled with respect to such tax liability. The Company will pay such Tax Gross-Up to the Participant (net of all applicable withholding taxes, including any taxes required to be withheld under Code
Section 4999) within ten (10) business days after the Participant's submission of the calculation of such Excise Tax and the resulting Tax Gross-Up, provided such calculations represent a reasonable interpretation of the applicable law and regulations.

C. In the event that the Participant's actual Excise Tax liability is determined by a Final Determination to be greater than the Excise Tax liability taken into account for purposes of the Tax Gross-Up paid to the Participant pursuant to Section V.A of this Plan, then within ninety (90) days following the Final Determination, the Participant shall submit to the Company a new Excise Tax calculation based upon the Final Determination. Within ten (10) business days after receipt of such calculation, the Company will pay the Participant the additional Tax Gross-Up attributable to such excess Excise Tax liability.

D. In the event that the Participant's actual Excise Tax liability is determined by a Final Determination to be less than the Excise Tax liability taken into account for purposes of the Tax Gross-Up paid to the Participant pursuant to Section V.A of this Plan, then the Participant shall refund to the Company, promptly upon receipt, any federal or state tax refund attributable to the Excise Tax overpayment.

E. For purposes of this Section V, a "Final Determination" means an audit adjustment by the Internal Revenue Service that is either (i) agreed to by both the Participant (or his or her estate) and the Company (such agreement by the Company to be not unreasonably withheld) or (ii) sustained by a court of competent jurisdiction in a decision with which the Participant and the Company concur (such concurrence by the Company to be not unreasonably withheld) or with respect to which the period within which an appeal may be filed has lapsed without a notice of appeal being filed.

VI. PROGRAM DURATION AND AMENDMENT

A. The Program will become effective when adopted by the Board and will continue through the settlement date of all Bonus Awards or Tax Gross-Ups which become payable under the Program. However, this Program shall automatically terminate and no Bonus Awards or Tax Gross-Ups shall be payable hereunder if a definitive agreement to effect an Acquisition has not been executed before January 1, 2001.

B. The Board may amend the Program at any time; provided, however, that no such action shall adversely affect the rights of Participants with respect to their Bonus Award or Tax Gross-Up entitlements under the Program.

VII. NON-TRANSFERABILITY/DEATH

No rights or interests of a Participant with respect to his or her Bonus Awards or Tax Gross-Up hereunder may be transferred, assigned, pledged or encumbered, other than a transfer effected by will or the laws of descent and distribution following the Participant's death.

VII. NO EMPLOYMENT RIGHTS

No provision of the Program or any Bonus Award or Tax Gross-Up entitlement hereunder shall confer upon a Participant any right to continue as an Employee for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or of the Participant, which rights are expressly reserved by each (subject to the terms of any written employment agreement executed by both parties) to terminate the Participant's employment at any time for any reason, with or without cause.

VIII. GOVERNING LAW

The provisions of the Program shall be governed by and construed in accordance with the laws of the State of California without resort to that State's conflict-of-laws rules.

IX. SUCCESSORS AND ASSIGNS

The liabilities and obligations of the Company hereunder shall be binding upon any successor corporation or entity that succeeds to all or substantially all of the assets and business of the Company by merger or other transaction, whether or not such transaction qualifies as an Acquisition.

X. COSTS AND EXPENSES

The Company will pay all costs and expenses incurred in the administration of the Program.

XI. ARBITRATION

Any dispute between a Participant and the Company with respect to his or her Bonus Awards or other benefit entitlement under the Program shall be settled by arbitration proceedings conducted in Santa Clara County, California in accordance with the applicable rules of the American Arbitration Association. If the Participant and the Company cannot agree upon the individual to serve as arbitrator, then such Participant and the Company will request the Santa Clara County, California office of the American Arbitration Association to submit a list of five (5) potential arbitrators, and in the absence of any agreement as to which of the named individuals are to serve as arbitrator, the Participant and the Company will each have the right to remove two (2) of the named individuals from the list, and the last remaining individual on the list will accordingly serve as the arbitrator. If more than one individual remains on the list, the Santa Clara Office of the American Arbitration Association shall select the arbitrator from among those remaining on the list. Such arbitrator will have full power and authority to settle the dispute through interpretation and application of the express provisions of the Program, but will have no authority to amend, revise or supplement such provisions. The costs of such arbitration will be shared equally by the Participant and the Company, and the decision of the arbitrator shall be final and binding on both the Participant and the Company.

RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF SJW CORP
SEPTEMBER 22, 1999:

RESOLVED, that each Director when he ceases to be a Director shall receive a benefit equal to the annual retainer in effect at the time such Director ceases to be a Director. This benefit will be paid to the Director, his beneficiary or his estate, for the number of years the Director served on the Board up to a maximum of 10 years. These payments will be made with the same frequency as the ongoing Director's retainers. The Company reserves the right, by resolution adopted by the Board, to alter, amend, modify or terminate the benefits provided above at any time, except that no such resolution shall affect the benefits to which a Director shall have become entitled by reason of his having ceased to be a Director prior to the adoption of such resolution.

RESOLUTIONS PASSED BY THE BOARD OF DIRECTORS OF SAN JOSE WATER
COMPANY SEPTEMBER 22, 1999:

RESOLVED, that each Director when he ceases to be a Director shall receive a benefit equal to the annual retainer in effect at the time such Director ceases to be a Director. This benefit will be paid to the Director, his beneficiary or his estate, for the number of years the Director served on the Board up to a maximum of 10 years. These payments will be made with the same frequency as the ongoing Director's retainers. The Company reserves the right, by resolution adopted by the Board, to alter, amend, modify or terminate the benefits provided above at any time, except that no such resolution shall affect the benefits to which a Director shall have become entitled by reason of his having ceased to be a Director prior to the adoption of such resolution.

RECORD OF DIRECTOR RETIREMENT RESOLUTION
SJW LAND COMPANY

RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF SJW LAND COMPANY
SEPTEMBER 22, 1999:

RESOLVED, that each Director when he ceases to be a Director shall receive a benefit equal to the annual retainer in effect at the time such Director ceases to be a Director. This benefit will be paid to the Director, his beneficiary or his estate, for the number of years the Director served on the Board up to a maximum of 10 years. These payments will be made with the same frequency as the ongoing Director's retainers. The Company reserves the right, by resolution adopted by the Board, to alter, amend, modify or terminate the benefits provided above at any time, except that no such resolution shall affect the benefits to which a Director shall have become entitled by reason of his having ceased to be a Director prior to the adoption of such resolution.

LIMITED PARTNERSHIP AGREEMENT

OF

444 WEST SANTA CLARA STREET, L.P.

LIMITED PARTNERSHIP AGREEMENT
OF
444 WEST SANTA CLARA STREET, L.P.

TABLE OF CONTENTS

Article                                                     Page

  1 DEFINITIONS                                               1
  1.1 Adjusted Additional Capital                             1
  1.2 Adjusted Capital Account Deficit                        1
  1.3 Adjusted Invested Capital                               2
  1.4 Assignee                                                2
  1.5 Bankruptcy                                              2
  1.6 Capital Account                                         2
  1.7 Code                                                    3
  1.8 Consent of the Limited Partner                          3
  1.9 Depreciation                                            3
  1.10 General Partner                                        3
  1.11 Gross Asset Value                                      3
  1.12 Invested Capital                                       3
  1.13 Limited Partner                                        3
  1.14 Losses                                                 3
  1.15 Net Proceeds From Continuing Operations                3
  1.16 Net Proceeds From Sales or Refinancings                4
  1.17 Nonrecourse Deductions                                 4
  1.18 Nonrecourse Liability                                  4
  1.19 Partner Nonrecourse Debt                               4
  1.20 Partner Nonrecourse Debt Minimum Gain                  5
  1.21 Partner Nonrecourse Deductions                         5
  1.22 Partner                                                5
  1.23 Partnership                                            5
  1.24 Partnership Minimum Gain                               5
  1.25 Percentage Interest                                    5
  1.26 Preferred Return                                       5
  1.27 Priority Return                                        5
  1.28 Profits                                                6
  1.29 Project                                                6
  1.30 Property                                               6

2 FORMATION OF PARTNERSHIP 6

2.1 Limited Partnership                                     6
2.2 Name and Principal Place of Business                    6
2.3 Certificate of Limited Partnership                      6
2.4 Agent for Service of Process                            7

3 PURPOSES 7

4 TERM 7

5 ACCOUNTING 8