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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/[x]
Filed by a Party other than the Registrant / /[ ]
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Southern California Water Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
James B. Gallagher
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ /[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
/ /[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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SOUTHERN CALIFORNIA WATER COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS -- APRIL 25, 199529, 1997
Dear Shareholder:
The Annual Meeting of the Shareholders of Southern California Water Company
(the "Company") will be held at the Industry Hills Sheraton One Industry Hills Parkway, City of
Industry,Suites Fairplex, 601 West McKinley
Avenue, Pomona, California, on Tuesday, April 25, 1995,29, 1997, at 11:10:00 A.M., Pacific
time, for the following purposes:
1. To elect a boardseven directors to the Board of seven directorsDirectors to serve until the
next Annual Meeting of Shareholders and until their successors are
elected and qualified.
2. To ratify and approve a Key Executive Long-Term Incentive Plan.an amendment to the Company's Articles of Incorporation to
increase the number of authorized Common Shares from 10,000,000 to
30,000,000.
3. To transact any other business which may properly come before the
meeting or any adjournment thereof.
The Board of Directors has nominated the following individuals for election
as directors: J.E.James L. Anderson, Jean E. Auer, W.V.William V. Caveney, R.B. Clark, N.P. Dodge,
Jr., R.F.Robert F. Kathol, L.E.Lloyd E. Ross and F.E.Floyd E. Wicks.
The Board of Directors has fixed the close of business on February 28,
1995,March 3, 1997, as
the record date for the determination of shareholders entitled to notice of and
to vote at this meeting or any adjournment thereof.
It is important that every shareholder, whether owning one or more shares
and whether or not expecting to attend the meeting in person, sign, date and
promptly return the enclosed proxy. A return envelope, requiring no postage if
mailed in the United States, is enclosed for convenience. By returning your
signed proxy, you can help assure a quorum to transact the business of the
meeting.
By order of the Board of Directors
/s/ JAMES B. GALLAGHER
-----------------------------------(SIG)
James B. Gallagher
Secretary
San Dimas, California
March 17, 199521, 1997
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PROXY STATEMENT
SOUTHERN CALIFORNIA WATER COMPANY
630 EAST FOOTHILL BOULEVARD
SAN DIMAS, CALIFORNIA 91773
------------------------
SOLICITATION OF PROXY AND RIGHT OF REVOCATION
The accompanying proxy is solicited by and on behalf of the Board of
Directors (the "Board" or the "Board of Directors") of Southern California Water
Company (the "Company") for use at the Annual Meeting of Shareholders to be held
on April 25, 1995,29, 1997 (the "Annual Meeting"), or any adjournment thereof. Any
shareholder giving a proxy has the power to revoke it at any time before it is
exercised by attending the meeting and voting in person or by a writing
delivered to the Company stating that the proxy is revoked or by a subsequent
proxy executed by the shareholder and presented toat the meeting. All shares
represented by each properly executed, unrevoked proxy received in time for the
meeting will be voted as marked on the proxy. If the proxy is signed and
returned, but is not marked, it will be voted (i) for all nominees listed or, if
cumulative voting applies, at the discretion of the proxies named on the
accompanying proxy card, as described herein, and (ii) in favor of the Key
Executive Long-Term Incentive Plan, as described herein. You are encouraged to mark your
proxy carefully in accordance with the instructions appearing thereon.
Theits instructions. Proxy solicitation expense of soliciting proxies
will be paid by the Company. This proxy statement and the accompanying proxy
were mailed on or about March 17, 1995.21, 1997.
VOTING RIGHTS
The Company's voting securities of the Company outstanding as of February 28, 1995on March 3, 1997 were 88,00084,800
Preferred Shares and 7,845,0928,957,671 Common Shares. Each Preferred Share is entitled
to one vote and each Common Share is entitled to one-tenth of one vote. Except
as otherwise provided in the Company's Articles of Incorporation, as amended,
and under applicable law, Common and Preferred shareholders vote as a single
class.
Votes cast by proxy or in person at the meeting will be counted by an
inspector of election appointed by the Board of Directors to act as an election
inspector for the meeting. The election inspector will treat sharesShares represented by proxies that reflect
abstentions will be treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Abstentions, however, dowill not constitute
a vote "for" or "against" any matter and thus will be disregarded in the
calculation of a plurality or of votes cast on any matter submitted to the
shareholders for a vote.
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The inspector of election will treat shares referred to as "broker
non-votes" (i.e., shares held by brokers or nominees as to which instructions
have not been received from the beneficial owners or persons entitled to vote
and as to which the broker has physically indicated on the proxy that the broker
or nominee does not have discretionary power to vote on a particular matter) as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. However, for purposes of determining the outcome of any
matter as to which the broker has physically indicated on the proxy that it does
not have discretionary authority to vote, those shares will be treated as not
present and not entitled to vote with respect to that matter (even though those
shares are considered present for quorum purposes and may be entitled to vote on
other matters). Any unmarked proxies, including those submitted by brokers or
nominees, will be voted as indicated in the accompanying proxy card.
In the election of directors, the candidates for election receiving the
highest number of affirmative votes of the shares entitled to be voted for them,
up to the number of directors to be elected, will be elected. Votes cast against
a candidate or votes withheld will have no legal effect. No shareholder will be
entitled to cumulate votes (i.e., cast for any candidate a number of votes
greater than the number of such shareholder's shares in the case of Preferred
Shares or one-tenth that number in the case of Common Shares) unless such
candidate's name has been placed in nomination prior to the voting and the
shareholder has given notice at the meeting, prior to the voting, of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
candidates who have been nominated. If voting for directors is conducted by
cumulative voting, each share will be entitled to the number of votes equal to
the number of directors authorized times the number of votes to which itsuch share
is otherwise entitled, which votes may be cast for a single candidate or may be
distributed among two or more candidates in whatever proportion the shareholder
may determine.desire. The accompanying proxy card will grant the named proxies
discretionary authority to vote cumulatively, if cumulative voting applies. In
such event, unless otherwise instructed, the named proxies intend to vote
equally FOR each of the seven candidates for the office of director; provided,
however, that if sufficient numbers of Company shareholders exercise cumulative
voting rights to elect one or more candidates, the named proxies will determine
the number of directors they are entitled to elect, select such number from
among the named candidates, cumulate their votes, and cast their votes for each
candidate among the number they are entitled to elect. If voting is not
conducted by cumulative voting, each Preferred Share will be entitled to one
vote and each Common Share will be entitled to one-tenth of one vote, and
shareholders having a majority of the voting power exercised at the meeting will
be able to elect all of the directors if they choose to do so. In that event,
the other shareholders will be unable to elect any director or directors.
OnExcept as otherwise provided in the Company's Articles of Incorporation or
under applicable law, on all matters other than the election of directors, the
affirmative vote of the majority of the voting power of shares represented and
voting at the meeting (if the shares voting affirmatively also
constitute2
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represent at least a majority of the voting power required for a quorum) is
required in addition to any other vote specified herein, for the shareholders to take action. As noted below under "Item
2 -- Proposal to Increase Authorized Number of Common Shares," the affirmative
vote of the majority of the Common Shares voting as a separate class, as well as
the affirmative vote of the majority of the voting power of the outstanding
Common Shares and Preferred Shares entitled to vote, is required for the
approval of such proposal. Assuming the presence of a quorum, the shareholders
present at the meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders holding sufficient voting power
to leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the sharesvoting power required to constitute a
quorum.
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ITEM 1.
ELECTION OF DIRECTORS
Action will be taken at the Annual Meeting to elect seven directors to the
Board of Directors to serve until the next Annual Meeting of Shareholders and
until their successors are elected and qualified. D.E. Brown,R. Bradbury Clark, who is
currently a Director of the Company, has determinedreached the mandatory retirement age
from the Board of Directors and is not to seek re-election.eligible for, nor is he seeking, re-
election in 1997. It is intended that the proxies solicited and received by and
on behalf of the Board of Directors will be voted for the re-election of the
other current Directors,directors, who are standing for re-election, and for the election of the New NomineesNominee
listed below (the "Nominees"), unless authority is withheld. If voting for
directors is conducted by cumulative voting, the proxies named on the enclosed
form of proxy will have discretionary authority to cumulate votes among the
Nominees named herein.
The proxies may also be voted for a substitute Nominee or Nominees in the
event any one or more of the persons named below shall be unable to serve for
any reason or be withdrawn from nomination, a contingency not now anticipated.
The following table, together with its footnotes, presents information
regardingA brief biography of each Nominee is set forth below, including the
occupation,Nominee's business experience outside directorships and
beneficial ownershipduring the last five years.
JAMES L. ANDERSON, Senior Vice President, since September, 1996, of shares of the Company for each Director and Nominee.
PRINCIPAL OCCUPATION AND EXPERIENCE PERIOD DURING COMMON SHARES PERCENT
DURING THE PAST FIVE YEARS; WHICH SERVED BENEFICIALLY OF
NAME OTHER DIRECTORSHIPS AGE AS DIRECTOR OWNED CLASS
- ------------------- ------------------------------------- --- ------------- ------------- -------
CURRENT DIRECTORS:
D.E. Brown Senior Vice President of Kirkpatrick, 68 1971 to date 26,000(2) *
Pettis, Smith, Polian, Inc.,
investment bankers, Omaha,
Nebraska(1)
W.V. Caveney Chairman of the Board of the 68 1980 to date 7,167 *
Company(3)
R.B. Clark Of Counsel to the law firm of 70 1970 to date 2,731 *
O'Melveny & Myers,
Los Angeles, California
N.P. Dodge, Jr. President of N.P. Dodge Company, a 58 1990 to date 3,100 *
full service real estate concern,
Omaha, Nebraska(4)
F.E. Wicks President and Chief Executive Officer 51 1990 to date 694 *
of the Company(5)
NEW NOMINEES:
J. E. Auer Consultant to California Leadership 58 -- 0 *
Water Class and Consultant to the
San Francisco Estuary Project(6)
R.F. Kathol Executive Vice President of 54 -- 0 *
Kirkpatrick, Pettis, Smith, Polian,
Inc., investment bankers, Omaha,
Nebraska
L.E. Ross President and Chief Executive 54 -- 0 *
Officer of SMI Construction Co.,
a commercial and industrial
construction firm, Irvine,
California(7)
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- ---------------
* Less than one percent.
(1) D.E. Brown has determinedAmerico
Life Inc. located in Orange, California. Prior to not seek reelection to the Board.
(2) Shares held in the name of D.E. Brown's wife.
(3) W.V. Caveney was Chairman of the Board and Chief Executive Officer from
4/90 to 3/92 andits acquisition by Americo
Life Inc., Mr. Anderson had served as President and Chief Executive Officer,
since 1986, of theFremont Life Insurance Company. Mr. Anderson, age 53, has, at
various times from 1982 to 1986, served as President and Chief Operating Officer
of Fremont Insurance Services, Chairman and Chief Operating Officer of
Physicians & Surgeons Underwriting Corporation and Founder, Chairman and Chief
Executive Officer of Hospital Insurance Services, a management company for
hospital medical malpractice and general liability programs throughout
California. From 1975 to 1982, Mr. Anderson served as President and Chief
Operating Officer of National American Insurance Company from
4/82 to 3/90.
(4) N.P. Dodge, Jr. is also Chairmanof California, a
property and casualty company.
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JEAN E. AUER, Consultant, member of the Board of Hillcrest/Westlawn
Cemeteries. Mr. Dodge is a director of Firststar Bank of Council Bluffs, a
directorDirectors of the Omaha Public DistrictWater
Education Foundation and a director of Bridges Investment
Fund, which is managed by Bridges Investment Counsel, Inc., the investment
management firm for the company's pension plan.
(5) F.E. Wicks was Presidentmember of the Company from 4/90 to 3/92 and Vice
Presidenttown council of Operations from 1/88 to 3/90.
(6) J.E.Hillsborough, California.
Mrs. Auer has served as Special Consultant to the Committee for Water Policy
Consensus (1984-1990) and as Assigned Member to the University of
California Agricultural Issues Center Advisory Board (1992-1995). Ms.San Francisco Estuary Project since
1990. Mrs. Auer has alsopreviously served as a member of the National Drinking Water
Advisory CouncilBoard to the United States Environmental Protection Agency, a member of
the California State Water Resources Control Board and a member of both the
Central Coast and the San Francisco Bay Regional Water Quality Control Boards. (7) L.E.Mrs.
Auer, age 60, is a member of the Company's Compensation, Nominating and Business
Opportunities Committees and has served as a director of the Company since 1995.
WILLIAM V. CAVENEY, Chairman of the Board of Directors of the Company since
April, 1992. Mr. Caveney was Chairman of the Board and Chief Executive Officer
of the Company from April, 1990 to March, 1992 and President and Chief Executive
Officer of the Company from April, 1982 to March, 1990. Mr. Caveney, age 70, is
Chairman of the Company's Compensation Committee and a member of the Business
Opportunities Committee and has served as a director of the Company since 1980.
N.P. DODGE, JR., President of the N.P. Dodge Company, a full service real
estate concern in Omaha, Nebraska. Mr. Dodge, age 59, is a director of the Omaha
Public Power District. Mr. Dodge is a member of the Company's Compensation
Committee and Chairman of the Audit Committee and has served as a director of
the Company since 1990.
ROBERT F. KATHOL, Executive Vice President of Kirkpatrick, Pettis, Smith,
Polian, Inc., an investment banking firm in Omaha, Nebraska. Mr. Kathol, age 56,
is a member of the Company's Compensation and Audit Committees and has served as
a director of the Company since 1995.
LLOYD E. ROSS, Managing Partner of Invermex, L.P., a company developing
hotels in the southwestern United States and northern Mexico. For more than 35
years prior to his current position, Mr. Ross was associated with SMI
Construction Co., a commercial and industrial general contracting firm in
Irvine, California, having served as its President and Chief Executive Officer
since 1976. Mr. Ross, age 56, also serves asis a director of PacifiCare Health Systems servingSystems.
Mr. Ross is a member of the Company's Compensation Committee and Chairman of the
Company's Nominating Committee and Business Opportunities Committee and has
served as a director of the Company since 1995.
FLOYD E. WICKS, President and Chief Executive Officer of the Company since
April, 1992. Mr. Wicks served as President of the Company from April, 1990 to
March, 1992 and as Vice President of Operations from January, 1988 to March,
1990. Mr. Wicks, age 53, is a member of the Company's Business Opportunities and
Nominating Committees and has served as a director of the Company since 1990.
No Nominee is or has been employed in his or her principal occupation or
employment during the past five years by the Company or other organization that
is a parent, subsidiary or affiliate of the Company, other than Mr. Caveney and
Mr. Wicks whose relationships are as described above.
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RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that shareholders vote FOR the election
of each of the above nominees mentioned in this Item 1.
The following table sets forth, as of March 3,1997, the beneficial
ownership of Common Shares of the Company by each Nominee and R. Bradbury Clark,
who is a current member of the Board of Directors but not a Nominee. No Nominee
owns any of the Company's Preferred Shares.
AMOUNT AND NATURE OF PERCENT OF CLASS
NAME BENEFICIAL OWNERSHIP BENEFICIALLY HELD
-------------------------------------------- -------------------- -----------------
James L. Anderson........................... 0 *
Jean E. Auer................................ 600 *
William V. Caveney.......................... 7,695 *
R. Bradbury Clark........................... 3,019 *
N.P. Dodge, Jr. ............................ 3,600 *
Robert F. Kathol............................ 1,250 *
Lloyd E. Ross............................... 427 *
Floyd E. Wicks.............................. 2,209 *
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* Less than one percent
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During 1996, there was one report required by Section 16(a) of the
Securities Exchange Act of 1934 that was not timely filed. Specifically, a Form
3 -- Initial Statement of Beneficial Ownership -- for McClellan Harris III was
not timely filed in connection with his election as an officer of the Company.
The Form 3 was filed on January 9, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Kirkpatrick, Pettis, Smith, Polian Inc., of which Robert F. Kathol is an
Executive Vice President, has served, at various times in the past five years,
as co-manager of the Company's offerings of Common Shares and as co-agent on the
Audit, Real Estate and Compensation Committees of that firm.Company's debt issuances. A subsidiary, KPM Investment Management, Inc., had
also been, until December, 1995, the Company's 401(k) Plan investment manager.
Neither Kirkpatrick, Pettis, Smith, Polian Inc. nor its subsidiaries currently
provide any services to the Company.
O'Melveny & Myers LLP, for which R.B.R. Bradbury Clark is of counsel, and of
which he is a retired partner, provides legal services to the Company. Kirkpatrick, Pettis, Smith, Polian Inc., of which R.F. Kathol is an
Executive Vice President and D.E. Brown is a Senior Vice President,Mr. Clark
has served,
at various times, as co-manager ofreached the Company's Common Stock offerings and as
co-agent on the Company's debt issuances.
On July 25, 1994,mandatory retirement age from the Board of Directors accepted the resignation of W.M.
Kizer as a member of the
Board. Director BrownCompany and is not standingeligible for, nor is he seeking, re-election in 1995. His term1997.
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The Board of office will expire upon the election of his successor at
the Annual Meeting of Shareholders.
Directors met as a board four times in 1994. Anhas an Audit Committee, consisting
of R.B. Clark, W.M. Kizer and N.P. Dodge, Jr. met two times during 1994. An
Audita Nominating Committee, consisting of R.B. Clark, N.P. Dodge, Jr. and D.E. Brown met two
times during 1994. Aa
Compensation Committee (referenced below) met four times in
1994. The Board has not appointedand a NominatingBusiness Opportunities Committee. D.E. Brown attended
less than 75% of the board meetings and other committee meetings on which he
serves . The Audit
Committee provides advice and assistance to the CompanyBoard of Directors on accounting
and financial reporting practices of the Company. It reviews the scope of audit
work and findings of the firm of independent public accountants who serve as
auditors of the Company and also monitors the work of the Company's internal
auditors. It also reviews the qualifications of and recommends to the Board of
Directors a firm of independent auditors and reviews and approves fees charged
by the independent auditors. 4
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A CompensationThe Nominating Committee was appointed during 1994assesses qualifications of
and consistedmakes recommendations as to candidates to fill vacancies on the Board of
all
membersDirectors. The Nominating Committee will consider nominations of persons for
election to the Board of Directors except F.E. Wicks.recommended by shareholders. In order to
submit a nomination to the Nominating Committee, such nomination must be
submitted in writing and addressed to the Office of the Secretary at the
Company's corporate headquarters. The Compensation Committee reviews and makes
recommendations to the Board of Directors as to appropriate compensation for the
annual
compensationPresident and other executive officers of the executive officers, as well as considering related matters,
such as management performanceCompany and management planningdetermines the awards
to be made under the Company's Key Executive Long-Term Incentive Plan (see table
and succession.
During 1994, directors Dodgeaccompanying footnotes on pages 11 and Clark earned directors' fees including
amounts deferred -- see "Deferred Compensation Plan for Directors and
Executives," -- of $19,000. Director Brown earned director's fees of $17,000
while director Kizer earned $17,000 including $6,250 paid pursuant12). The Business Opportunities
Committee reviews potential changes to the Retirement Plan for Non-employeeregulated and non-regulated
operations of the Company including acquisitions, divestitures, joint ventures
and partnerships and makes recommendations to the Board of Directors -- see "Pension Plan."as to the
financial and operational integrity of such changes. There is no Executive
Committee.
Outside directors (presently all directors except Messrs. Caveney and
Wicks) are presently paid an annual retainer, payable monthly, of $15,000. In addition,
each such director receives a $1,000 fee for each meeting attended, (thealthough the
regular and organizationorganizational meetings of the board held in April are deemed one meeting
for purposes of the perper-meeting fee. In addition each outside director who is a
member of the Compensation Committee, Nominating Committee, Audit Committee or
Business Opportunities Committee will receive a $500 fee for each meeting
fee).attended and the chairperson of each committee, if an outside director, will
receive an additional fee of $250 for each committee meeting attended.
Chairman of the Board Caveney earned $94,500$70,000 as chairman during 1994, which
is the1996. The
current annual rate for such service.service is $50,000 effective June, 1996. President
Wicks was compensated as an officer of the Company andCompany. Neither Mr. Caveney nor Mr.
Wicks received no separate compensation as a director.
During 1996, directors met as a board 9 times. The Audit Committee,
consisting of N.P. Dodge, Jr., Robert F. Kathol and R. Bradbury Clark, met 4
times in 1996; the Compensation Committee, consisting of W.V. Caveney, R.
Bradbury Clark, Jean E. Auer, N.P. Dodge, Jr., Lloyd E. Ross and Robert F.
Kathol, met 4 times in 1996; the Nominating Committee, consisting of Jean E.
Auer, Lloyd E. Ross and Floyd E. Wicks, met twice during 1996; and the Business
Opportunities Committee, consisting of Lloyd E. Ross, R. Bradbury Clark, Jean E.
Auer, W.V. Caveney and Floyd
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E. Wicks, met twice in 1996. No director attended less than 75% of the board
meetings and other committee meetings on which such director serves.
ITEM 2.
APPROVALPROPOSAL TO INCREASE AUTHORIZED NUMBER OF THE
SOUTHERN CALIFORNIA WATER COMPANY
KEY EXECUTIVE LONG-TERM INCENTIVE PLANCOMMON SHARES
The Board of Directors of the Company has approved a resolution to amend the Southern California
Water Company Key Executive Long-Term Incentive Plan in the form attached as
Appendix ARestated
Articles of Incorporation (the "Articles") to this proxy statement (the "Plan"), subject to the approval of the
Plan by the shareholders of the Company. In general, the Plan authorizes the
Company to provide the opportunity to key executives of the Company to earn
awards of cash or shares of the Company's Common Shares based upon the Company's
performance over a three-year period. Shares earned under the Plan will be
subject to forfeiture if restrictions relating to continued employment with the
Company are not met.
The Board believes that the Plan will (a) promote additional focus by
participants on actions that contribute directly to the creation of value for
shareholders, (b) closely link the interests of shareholders and Company
executives, (c) enable the Company to attract and retain top quality executive
talent and (d) increase executive ownership of Common Shares.
A maximum of 150,000 Common Shares would be subject to the Plan. Shares may
be paid from either the authorized but unissued shares or shares previously
issued and outstanding, but reacquired by or on behalf of the Plan. The Plan
provides for appropriate adjustments in the number and kind of shares issuable
pursuant to the Plan and to any previously awarded Common Shares in the event of
a stock split, stock dividend, recapitalization or similar corporate
transactions. If
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approved by the Company's shareholders, the Plan will be effective as of January
1, 1995. The price of the Common Shares on January 1, 1995 was $17.50 per share.
Shareholders are being asked to ratify and approve the Plan at the 1995
Annual Meeting of Shareholders. Ratification and approval requires the
affirmative vote of a majority of the shares present or represented and entitled
to vote at the meeting. The following summary of the key features of the Plan is
qualified in its entirety by reference to the Plan.
ADMINISTRATION. The Plan will be administered by a Committee of the Board
of Directors, or a subcommittee thereof (the "Committee"), which shall be
composed of two or more directors each of whom is ineligible to participate in
the Plan and who shall have been ineligible to participate for at least one year
prior to such member's appointment to the Committee. Each member of the
Committee shall be a "disinterested person" as defined in Rule 16b-3(c)(2)(i)
under the Securities Exchange Act of 1934 (the "Act"), as in effect from time to
time. Subject to the provisions of the Plan, the Committee is authorized to
interpret the Plan and to make all determinations necessary or advisable for
administering the Plan, including but not limited to designating Plan
participants; establishing threshold, target and maximum awards for each
participant; establishing performance measures and objectives for earning awards
under the Plan; certifying the level of performance achieved; designating the
form of payment of earned awards between cash and Common Shares; and determining
restrictions to be placed on the Common Shares earned under the Plan.
The Plan may be amended by the Committee without shareholder approval,
except that any amendment to the Plan which would (a) materially increase the
benefits accruing to participants under the Plan, (b) increase the number of
Common Shares which may be awarded under the Plan (except for such adjustments
as are provided for in the Plan), or (c) materially modify the requirements as
to eligibility for participation in the Plan, requires shareholder approval.
Upon amendment, suspension or revocation of the Plan, the Committee may in its
discretion authorize the proration or early distribution, or both, of awards.
ELIGIBILITY. Executives of the Company, who, in the opinionpar value of the
Committee, hold key executive, administrative or professional positions may be
selected$2.50 per share, from 10,000,000
shares to participate in the Plan. In selecting participants, the Committee
may take into account the nature of an employee's services, his or her present
and potential contributions30,000,000 shares. The amendment will not effect any other changes to
the successArticles. The 150,000 authorized $100 Preferred Shares with a par value of
the Company, and such other
factors as the Committee in its discretion deems relevant. The President and
Chief Executive Officer of the Company and each of the Vice Presidents of the
Company named in the table under -- "Executive Officers Experience and
Compensation" -- are expected to participate initially in the Plan. The
Committee may add new participants to the Plan during a performance cycle.
AWARDS. The Plan provides for the Committee to establish award
opportunities for each participant based on the participant's level of
responsibility, ability to influence long-term Company performance, competitive
pay considerations, and other relevant criteria in light of Plan objectives. The
participant's actual award will depend upon the Company's achievement of
performance
6
9
objectives over a three-year performance cycle. The Committee will establish
performance objectives for each participant for a performance cycle from among
the following performance measures: earnings$100 per share, of which none are outstanding, and the 86,400 authorized
Preferred Shares with a par value of $25, of which 84,800 are outstanding, will
remain unchanged.
The additional authorized Common Shares total
shareholder return, the pricecould be used for a variety of
Common Sharespurposes, including, among other things, financing transactions, acquisitions,
and the Company's rate of return
in relation to its authorized rate of return on equity. With the approval of the
Board of Directors, the Committee may establish additional performance measures.
The Company's performanceother corporate purposes, all as may be measured against a peer group of
publicly-traded waterdeemed to be feasible and electric utilities selected by the Committee, or
against internal goals established by the Committee, or both. The Committee may
delete or replace a member of the peer group, during a performance cycle if it
determines that the member no longer provides an appropriate basis for
comparison. It is anticipated that a new three-year performance cycle will be
established each year.
For the first performance cycle commencing January 1, 1995, the Committee
has determined that awards will be based upon earnings per share growth and
total shareholder return relative to a peer group selected by the Committee. The
receipt of awards will require the achievement of certain minimum performance
levels. Awards also may be decreased if the Company does not achieve a certain
rate of return on equity. The Company must achieve a specified minimum share
price, if participants are to receive any award under the Plan, although this
requirement may be waived by the Committee. The receipt of full target awards
will require performance exceeding the median of the peer group, and the receipt
of maximum awards will require that performance exceeds target award levels.
Awards earned under the Plan will be paid as soon as practicable after the
conclusion of the performance cycle to which the award relates and upon
certification by the Committee of the performance level achieved by the Company
and the associated award earned by the participant. Awards may be paid in the
form of cash or Common Shares, or both. Common Shares awarded under the Plan
will be subject to forfeiture until restrictions established by the Committee
are satisfied. Common Shares awarded under the Plan will be held by the Company
during the restriction period and may not be sold, hypothecated or otherwise
transferred by the participant until the applicable restrictions lapse. During
the restriction period, the participant will enjoy all other rights as a
shareholder of the shares, including the right to receive dividends declared and
paid in respect of such shares and to vote the shares.
Following the commencement of a performance cycle, the Committee may not
alter the performance objectives established for the performance cycle. However,
the Committee may, in its discretion, increase or decrease a participant's award
to reflect the participant's promotion, demotion, or change of duties, or
reduce, eliminate or defer awards for any performance cycle if the payment of
awards would not be in the
best interests of the Company or if awards were
materially increased by external events not anticipated at the time the
performance objectives were established.
A participant's rights under the Plan may not be transferred or assigned by
the participant other than by will or the laws of descent and distribution.
7
10
TERMINATION OF EMPLOYMENT. In the event that a participant's employment
with the Company is terminated during a performance cycle for any reason other
than death, permanent disability or early or normal retirement (as defined in
the Plan), the participant will forfeit the opportunity to earn an award under
the Plan for that performance cycle. In the event that a participant's
employment with the Company is terminated for any reason other than death,
permanent disability or early or normal retirement prior to the lapse of
restrictions on Common Shares previously received as an award payment, suchits shareholders. Additional Common Shares
will be forfeited.issued under the Company's Dividend Reinvestment and Common Share
Purchase Program and 401(k) Plan.
Except under certain limited circumstances, the Board of Directors will
have the authority to issue the additional Common Shares without further action
by the shareholders. For example, the issuance of additional Common Shares or of
securities convertible into additional Common Shares, for cash or property,
including the issuance of shares to directors, officers or employees, or as a
stock dividend would not ordinarily require shareholder approval. However,
shareholder approval of some kinds of transactions in which additional Common
Shares were to be issued, such as merger transactions, might be required. In
addition, issuances of additional Common Shares by the event of a participant's death, permanent disability or early or
normal retirement during a performance cycle, the participant willCompany would be eligible
to earn a pro-rata award for that performance cycle. In the event of a
participant's death, permanent disability or early or normal retirement priorsubject
to the lapseapproval of restrictions onthe California Public Utilities Commission. Shareholder
approval of the proposed increase in the number of authorized Common Shares previously received as an award
payment,is
being sought at this time to enable the restrictions on suchBoard of Directors to meet possible
future developments without the expense and delay of holding a special meeting
of shareholders to obtain their approval if a specific need arises in the
future.
The issuance of additional Common Shares shall lapse.
All pro-rated awards will be paidmay, among other things, dilute
the equity or book value per share, earnings per share and voting power of the
existing shareholders of the Company. Since the Common Shares have no preemptive
rights, the directors of the Company have the power to issue authorized but
unissued Common Shares at such times and for such purposes and for such
consideration as they may determine without first offering Common Shares to the
same time as normal awards underholders of Common Shares.
An increase in the Plan.
CERTAIN EVENTS. Innumber of authorized Common Shares could enable the
eventBoard of a change ofDirectors to render more difficult or discourage an attempt to obtain
control of the Company as
definedby means of a
7
10
merger, tender offer or other business combination transaction directed at the
Company. For example, the issuance of Common Shares in a public or private sale,
merger or similar transaction would increase the Plan,number of outstanding Common
Shares, thereby diluting the interest of a participant will be entitledparty attempting to receive the higherobtain control of
the target award for each performance cycle then in effect for the participant or an
award for each such performance cycle based upon the actual performance of the
Company, as determined by the Committee, through the effective date of the
change of control. In addition, any remaining restrictions on Common Shares
previously received in payment of an award under the Plan shall lapse.
FEDERAL TAX TREATMENT. Under the present federal tax laws, the federal
income tax treatment of awards under the Plan is as follows:
For awards paid in cash, an employee realizes taxable income and the
Company is entitled to a deduction when the award is actually paid. For awards
paid in Common Shares subject to forfeiture restrictions, unless an election is
made under Section 83(b) of the Internal Revenue Code, an employee realizes no
taxable income and theCompany. The Company is not entitledaware of any attempt, whether formal or
informal, to acquire a deduction whencontrolling interest in the shares
are awarded. OnCompany.
If approved, the dateproposal to increase the restrictions on the shares lapse, the employee will
realize ordinary income equal to the fair market valueauthorized number of the shares, andCommon
Shares of the Company will be implemented by filing with the Secretary of State
of California a Certificate of Amendment amending the first paragraph of Article
IV of the Articles. In all other respects, Article IV as presently included in
the Articles will remain unchanged. The text of the first paragraph of Article
IV as it is proposed to be amended is as follows:
This Corporation is authorized to issue three classes of stock to be
designated, respectively, "$100 Preferred Shares", "Preferred Shares", and
"Common Shares". The total number of shares which this Corporation is
authorized to issue is 30,234,800 and the aggregate par value of all such
shares is $92,120,000; all shares of each class are to have a par value;
150,000 shares are to be $100 Preferred Shares with a par value of $100 per
share and an aggregate par value of $15,000,000; 84,800 shares are to be
Preferred Shares with a par value of $25 per share and an aggregate par
value of $2,120,000; and 30,000,000 shares are to be Common Shares with a
par value of $2.50 per share and an aggregate par value of $75,000,000.
The affirmative vote of the majority of the Common Shares voting as a
separate class, as well as the affirmative vote of the majority of the voting
power of the outstanding Common Shares and Preferred Shares entitled to a corresponding deduction. Upon a salevote, is
required for the approval of shares,
the employee will realize a short-term or long-term capital gain or loss,
depending upon whether the shares sold have been held for more than one year
from the date the employee realized income. Such gain or loss will be equalproposed amendment to the difference between the sale price of the shares and the fair market value of
the shares on the date the employee realized income.Articles.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that shareholders vote "FOR"FOR the proposalapproval
of the amendment to ratify and approve the Southern California Water Company Key Executive
Long-Term Incentive Plan. Proxies solicited andArticles as described in this Item 2.
8
11
received by and on behalf of the Board of Directors will be voted "FOR"
ratification and approval of the Plan, unless otherwise directed.
EXECUTIVE OFFICERS
EXPERIENCE, SECURITY OWNERSHIP AND COMPENSATION
TheIn addition to Chairman Caveney (information about whose business
experience and beneficial share ownership is set forth on pages 3 and 4), the
Company had eight executive officers as of December 31, 1994.1996. Information
regarding the identities, business experience and beneficial ownership of shares
of thosesuch individuals is shown in the following table and footnotes thereto:
HELD SUCH COMMON SHARES PERCENT
PRINCIPAL OCCUPATION AND EXPERIENCE POSITION BENEFICIALLY OF
NAME DURING THE PAST FIVE YEARS AGE SINCE OWNED CLASS
- ----------------- ------------------------------------------------------------- --------------------------------------- --- --------- ------------- -------
W.V. Caveney Chairman of the Board(1) 68 4/92 7,167 *
F.E.Floyd E. Wicks President and Chief Executive Officer(2) 5153 4/92 6942,209 *
T.J.Officer(1)
Thomas J. Bunosky Vice President -- Customer Service of 40 4/94 219 *
Region II(3)
J.A. Dickson Vice President -- Customer Service of 42 4/94 1,159641 *
Region III(4)
J.B.II(2)
Joel A. Dickson Vice President -- Customer Service of 44 4/94 2,920 *
Region III(3)
James B. Gallagher Vice President -- Finance, Chief Financial 4042 4/94 3431,233 *
Financial
Officer and Secretary(5)
D.K.Secretary(4)
McClellan Harris Vice President and Treasurer(5) 45 10/96 538 *
III
Donald K. Saddoris Vice President -- Customer Service of 5153 4/94 1,6592,374 *
Region I(6)
R.J.Randell J. Vogel Vice President -- Customer and Operations 5961 4/94 387982 *
Operations
Support(7)
J.F.Joseph F. Young Vice President -- Regulatory Affairs(8) 5052 4/94 7,8479,537 *
- ---------------
* Less than one percent
(1) Chairman of the Board and Chief Executive Officer of the Company from 4/90
to 3/92 and President and Chief Executive Officer from 4/82 to 3/90.
(2) President from 4/90 to 3/92 and Vice President of Operations from 1/88 to
3/90.
(3)92.
(2) Vice President of Operations from 3/93 to 3/94,94; Manager of Operations from
5/91 to 2/93, Director of Engineering, Production and Water Resources from
12/90 to 4/91, Director of Water Resources from 10/90 to 11/90; Assistant
Manager of Operations for Ohio Water Service Company from 4/83 to 9/90.
(4)93.
(3) Vice President -- Regulatory Affairs and Utility Business Development from
9/90 to 3/94; Employed by Suburban Water Systems as Vice President of Finance
and Administration from 8/88 to 5/90.
(5)94.
(4) Secretary, Treasurer and Chief Financial Officer from 10/90 to 3/94 and
Secretary and94.
(5) Treasurer from 10/874/94 to 9/90.96; Director of Financial Management from 6/90 to
3/94.
(6) Director of Operations -- Northern/Coastal Division from 5/90 to 3/94 and
Northern Division Manager from 7/78 to 4/90.94.
(7) Vice President of Administration from 2/93 to 3/94, Director of
Administration from 1/93 to 2/93, Director of Information Systems from 6/92
to 12/92; Executive Vice President and Chief Operating Officer of Suburban
Water Systems from 10/85 to 4/92.
(8) Assistant Vice President for Conservation Management and Governmental
Affairs from 4/92 to 3/94, Assistant Vice President of Operations from 5/91
to 3/92 and Director of Operations from 4/89 to 4/91.
9
12
Directors and executive officers of the Company as a group beneficially own
51,30637,025 Common Shares of the Company, which is less than one percent of the total
shares outstanding. No director or executive officer of the Company owns any of
the Company's outstanding preferred shares.Preferred Shares.
9
12
The following table sets forth information on compensation of the Company's
Chief Executive Officer and its four most highly compensated executive officers
for the three most recent calendar years:
LONG TERM
COMPENSATION
------------
ANNUAL PAYOUTS
COMPENSATION --------------------------- ALL OTHER------------
NAME AND PRINCIPAL ------------ LTIP ALL OTHER
POSITION YEAR SALARY(1) COMPENSATION(2)PAYOUTS(2) COMPENSATION(3)
- ------------------------------------------------------------------------------- ----- ------------------------------- ------------ ---------------
F.E.
Floyd E. Wicks - 1996 $279,054 $28,910
President and Chief 1995 263,584 4,767
Executive Officer 1994 $ 251,796 $ 267
1993 237,918 3,700
1992 216,895(3) 3,332
J.A. DicksonRandell J. Vogel - Vice 1996 157,349 19,250
President - Customer Service of 1994 139,625 2,313
Region III 1993 132,687 2,288
1992 126,606 2,110
T.J. Bunosky - Vice President - Customer Service of 1994 138,307 2,282
Region II
1993 130,807(4) 2,231
1992 109,930 13,619(5)
R.J. Vogel - Vice President - Customer1995 143,699 4,322
and Operations 1994 124,023 2,061
Support
1993 114,818(6) 267
1992 55,044 --
J.B.Joel A. Dickson - Vice 1996 154,626 19,682
President - Customer 1995 147,039 4,548
Service of Region III 1994 139,625 2,313
Thomas J. Bunosky - 1996 150,821 16,808
Vice President - 1995 142,739 4,452
Customer Service 1994 138,307 2,282
of Region II
James B. Gallagher - Vice 1996 136,609 18,795
President - Finance, 1995 128,167 3,990
Chief Financial Officer 1994 121,488 2,016
Financial Officer and Secretary 1993 111,678 1,944
1992 105,903 1,046
- ---------------
(1) The executive officers of the Company receive both cash compensation and
certain perquisites, including
the personal use of a Company vehicles.vehicle and personal computer. However, the
aggregate amount of such perquisites received by each named officer does
not, in the case of any such named officer, exceed 10% of the total annual
salary of each namedsuch officer.
(2) The Company has a Key Executive Long-Term Incentive Plan, the provisions of
which became effective on January 1, 1995. Any payouts, which are made in
cash and/or Common Shares of the Company, would not occur prior to 1998 for
the three-year performance cycle beginning January 1, 1995, except in
certain circumstances provided in the Plan.
(3) Includes Company payment of premium on business travel and accident policy
of $39 per person per year and Company payment of the premium on group life
insurance of $228$212 per person per year. Except with regard to footnote (5)
below,year and, in 1996 only, a special award
authorized by the Board of Directors. The balance represents the Company's
matching contribution to the 401(k) Plan for the benefit of the named
officer.
(3) Elected Chief Executive Officer in 1992.
(4) Elected executive officer in April, 1993.
(5) Includes $13,619 in 1992 as remuneration for relocation expenses.
(6) Elected executive officer in April, 1993. Employed by the Company beginning
in June, 1992.10
13
The Company currently has no other bonus, profit sharing, stock option,
stock appreciation right or other remunerative program (other than pension and
welfare benefits) in effect. Shareholders are being asked to ratify and approveThe Company implemented a Key Executive Long-Term
Incentive Plan ateffective as of January 1, 1995 (see footnote 2 above). The
following table sets forth information about this Plan for the 1995 Annual Meeting. If approved,three-year
performance cycle that began January 1, 1996.
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
OR OTHER PRICE-BASED PLANS(2)
PERIOD UNTIL -----------------------------------------------
MATURATION THRESHOLD TARGET MAXIMUM
NAME AND PRINCIPAL POSITION OR PAYOUT(1) (# OR $)(3) (# OR $)(4) (# OR $)(3)
- ------------------------------- ------------ ----------- ----------- -----------
Floyd E. Wicks - 3 years $15,720 N/A $ 104,800
President and Chief
Executive Officer
Joel A. Dickson - Vice 3 years $ 7,300 N/A $ 43,800
President - Customer
Service of Region III
Thomas J. Bunosky - 3 years $ 7,050 N/A $ 42,300
Vice President -
Customer Service
of Region II
Randell J. Vogel - Vice 3 years $ 7,350 N/A $ 44,100
President - Customer
and Operations
Support
James B. Gallagher - Vice 3 years $ 6,350 N/A $ 38,100
President - Finance,
Chief Financial Officer
and Secretary
- ---------------
(1) It is intended, but not required, under the provisions of theCompany's Key Executive
Long-Term Incentive Plan that a three-year performance cycle (as such cycle
is defined in the Plan, the "Performance Cycle") until payout of the awards
under the Plan will become effective
asbegin to run at the start of each calendar year. The
information presented in the table above is for the three-year performance
cycle that began January 1, 1995.
101996. Payment of awards is to be made as soon as
practicable after the end of the Performance Cycle to which they relate. If
a Termination of Service (as defined in the Plan) of a participant occurs
during a Performance Cycle for any reason other than death, disability,
normal retirement or early retirement, the participant will forfeit the
opportunity to receive an award for that Performance Cycle. If a participant
dies, becomes disabled or retires during a Performance Cycle, the
participant will be eligible to receive a pro rata award (based on the
number of days the participant was employed substantially full-time during
that Performance Cycle) for that Performance Cycle. The Plan also contains
provisions for the payment of awards if there is a change of control of the
Company (as defined in the Plan) before the end of a Performance Cycle.
11
1314
(2) Awards under the Plan are established as a percentage of each Plan
participant's annual base salary and are payable in cash and/or Company
Common Shares. Awards for the Performance Cycle that began in 1996 will be
based on the Company's ranking, expressed as a percentile, for growth in
earnings per share and total shareholder return relative to the
corresponding measures for the companies that comprise the Peer Group
referred to on page 17. A ranking below the 40th percentile among the
companies in the Peer Group with respect to either performance measure will
result in no award with respect to that measure, while the maximum award for
either performance measure will be paid for a ranking at or above the 75th
percentile with respect to that measure. Awards will be reduced if the
Company's return on equity falls more than 50 basis points below the
Company's Authorized Rate of Return (as defined in the Plan), and awards
will not be paid at all if the Company's share price at the end of a
Performance Cycle is less than 80% of its price at the beginning of that
cycle.
(3) Figures listed represent the amount of awards that would be payable to the
executives if the Company were to achieve a ranking among the Peer Group at
the 40th percentile (Threshold) and for any percentile at or above the 75th
percentile (Maximum) for each of the performance measures. The Plan also
specifies awards for performance at the 50th and 60th percentiles with
respect to each of the performance measures. Awards for performance at
percentiles between such stated percentiles will be calculated by linear
interpolation.
(4) Participants in the Plan are not assigned a "target" award. Rather, awards
are variable depending upon the Company's performance with respect to each
of the performance measures for the Performance Cycle (see footnote (3)
above).
12
15
PENSION PLAN
The Company hasmaintains a noncontributory, defined benefit pension plan that is noncontributory.plan.
Benefits are determined under a formula applied uniformly to all employees,
regardless of position, and amounts depend on length of service and the average
of the five highest consecutive years of compensation earned. For purposes of
pension calculations, compensation includes salary and all other compensation
but excludes the value of personal use of Company vehicles and other
perquisites. An employee who terminates employment after having at least five
years of service with the Company has a vested interest in the plan.
Annual benefits payable at retirement (at age 65 or beyond) are reduced by
a percentage of primary social security benefits based upon years of credited
service and are payable monthly. The following table illustrates the estimated
annual benefits payable upon retirement for persons in the earnings
classifications with years of service as shown, but excluding the Social
Security deduction.
BENEFITS BASED ON LENGTH OF SERVICE
AVERAGE ANNUAL --------------------------------------------------------------------------
SALARY FOR HIGHEST 15 20 25 30
CONSECUTIVE FIVE YEARS YEARS YEARS YEARS YEARS 35 YEARS 40 YEARS
- ------------------------- ------- ------- ------- ------- -------- --------
$ 75,000 $22,500 $30,000 $37,500 $45,000 $ 52,500 $ 60,000
100,000 30,000 40,000 50,000 60,000 70,000 80,000
125,000 37,500 50,000 62,500 75,000 87,500 100,000
150,000 45,000 60,000 75,000 90,000 105,000 120,000
The executive officers listed inof the summary compensation tableCompany not presently receiving pension
benefits have the following credited years of service under the pension plan:
F.E.Floyd E. Wicks -- 7;
J.A.9; McClellan Harris III -- 6; Joel A. Dickson -- 4; T.J.6; Thomas J.
Bunosky -- 4; R.J.6; Randell J. Vogel -- 2, J.B.4, James B. Gallagher -- 7, J.F.9, Joseph F.
Young -- 1719 and D.K.Donald K. Saddoris -- 27.29.
The plan provides an early retirement option for those employees the sum of
whose age plusand number of years of service equalequals at least 90.
The Board of DirectorsCompany has a Retirement Plan for Non-Employee Directors (the
"Plan""Non-Employee Directors Plan") of the Company. TheThis Plan provides annual
benefits to an eligible directorsdirector in an amount equal to the annual retainer in
effect at suchthe director's date of retirement. Benefits are payable in monthly
installments for a period equal to the shortest of (a) the life of the director following retirement, (b)
the period such individualhe or she was
a director or (c) ten(b) 10 years. In the case of a director's death,
of the director, benefits will
continue to be received by suchthat director's surviving spouse for the remaining
period for which the director would have been entitled to receive benefits
except for death. Benefits are payable to directors after the age of 62 and
after retirement from the board,Board, except that a director who ceases to be a
director before attaining age 62 because of ill health or death may receive
benefits immediately after retirement from the board,Board, or at such later date as
he or she may request. Directors who are "removed for cause" are not eligible
for benefits under the Non-Employee Directors Plan. As a condition of
participation in the Non-Employee Directors Plan, an eligible director must
agree to retire from the boardBoard at the annual shareholders'
13
16
meeting occurring on or next following such director's 72nd birthday, and to
accept nomination as a director 11
14
if requested by the Board (and to serve if so
nominated) for at least ten10 years after his or her first election to the board.Board.
DEFERRED COMPENSATION PLAN FOR DIRECTORS AND EXECUTIVES
Under the Company's Deferred Compensation Plan for Directors and
Executives, directors and eligible officers and employees are entitled to defer
all, in the case of directors, or a portion, in the case of officers and
employees, of their compensation until specified times after the deferral.
Interest accrues on amounts deferred under the Plan, but such accrued interest
is not included in the compensation table on page 10 because the interest rate
does not exceed prevailing rates of interest at the time the interest is
accrued.this Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee's report on executive compensation is set forth
below. Mr. William V. Caveney, a member of this Committee and Chairman of the
Board of Directors, is, in his capacity as Chairman, of the Board, an officer of the Company.
Mr. Caveney does not actively participate in the daily operation of the Company,
duties as to which are the responsibility of Mr. Wicks, President and Chief
Executive Officer of the Company. The Compensation Committee does not recommend
or determine Mr. Caveney's compensation as Chairman of the Board. No other
member of this Committee is a current or former officer or employee of the
Company or any of its subsidiaries or affiliates.
R. B. Clark and D. E. BrownAll of the Company's directors except Mr. Wicks are also members of thisthe
Compensation Committee. R. B. ClarkMr. Kathol is a director of the Company. Mr. Clark is of counsel to and is a retired
partner of O'Melveny & Myers, which provides legal services to the Company. Mr.
Brown, who is not seeking re-election as a director, is SeniorExecutive Vice President of Kirkpatrick,
Pettis, Smith, Polian Inc., which has served as co-manager of the Company's
Common StockShare offerings and as co-agent on the Company's debt sales in the past.
A subsidiary, KPM Investment Management, Inc., had also been, until December,
1995, the Company's 401(K) Plan investment manager. The firm of Kirkpatrick,
Pettis, Smith, Polian Inc. and its subsidiaries do not currently provide any
services to the Company.
O'Melveny & Myers LLP, for which R. Bradbury Clark is of counsel, and of
which he is a retired partner, provides legal services to the Company. Mr. Clark
has reached the mandatory retirement age from the Board of Directors of the
Company and is not eligible for, nor is he seeking, re-election in 1997.
The following Report and the Performance Graph included in this proxy
statement shall not be deemed to be incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent the Company specifically incorporates this
Report or the Performance Graph by reference therein, and shall not be deemed
soliciting material or otherwise deemed filed under either of such Acts.
1214
1517
REPORT ON EXECUTIVE COMPENSATION
To: The Board of Directors
The principal responsibility of the Compensation Committee of the Board of
Directors is to review and
make recommendations as to the annual compensation of the executive officers of the
Company.Company (other than the Chairman of the Board). In addition to recommending cash
and other typeskinds of compensation, our responsibility includes the consideration
of related matters such as evaluation ofevaluating management performance and planning for
management planning and succession. The Compensation Committee reviews these
matters in detail with the Board of
Directorsyou and reports to ityou the Compensation Committee's recommendations as
to compensation of thethese executive officers named in the Company's proxy statement.officers.
The Compensation Committee alsoparticularly reviews, management's recommendations as toin detail, the performance
and other aspects of compensation of certain senior executives who report directly to those executive
officers.
Sibsonfor the President and Company, Inc. ("Sibson") has provided reportsChief Executive Officer,
Floyd E. Wicks.
In its deliberations concerning compensation for Mr. Wicks and advice to the
Company with respect to the appropriate compensation and benefit levels ofCompany's other executive officers in April, 1996, the Committee relied on both
objective and senior executivessubjective criteria. We reviewed comparative salary and total
compensation data for Mr. Wicks and other executive officers, the results of
which were included as part of a report entitled "An Assessment of Executive
Compensation", prepared by Strategic Compensation Associates ("SCA"). This
report was initially prepared in January, 1995 and was updated by SCA at the
request of this committee. In addition, we relied on other compensation data
developed by the Company's Human Resources department, which included comparable
cash salary data of other water utilities, as well as comments and evaluative
recommendations of Mr. Wicks based on his formal appraisal of each executive's
performance. In conducting the formal appraisals, Mr. Wicks reviewed the
contribution of each executive in the areas of regulatory matters,
implementation of the Company since 1991.Company's organizational goals and general progress made
toward the achievement of individually determined, job-related goals.
As part of its studies, Sibson comparesour review, we recognize that our responsibilities also extend
to offering compensation paid by water utilitiesopportunities designed to retain and industrial
companies having gross revenues and numbersattract managerial
talent. We believe that the Key Executive Long-Term Incentive Plan will result
in closer alignment of employees and customers
relatively similar to thatmanagement's goals with those of the Company, taking into account four areas of
compensation: base salary, annual incentives, long-term incentives and benefits
and perquisites. These water utilities are those included in the Dow Jones Water
Utility Index reported in the performance graph set forth in this proxy
statement, as well as seven other water utilities. The Compensation Committee
has relied on the reports preparedshareholders by
Sibson and others, and the committee's
subjective evaluation of performance by the executive officers in the discharge
of their assigned duties and responsibilities, and has considered the
performance of the Company generally, in determining appropriateproviding compensation levels forto management based upon the Company's executive officersachievement, over
rolling three-year performance cycles, of specified targets for total
shareholder return and senior executives.
In April 1994,growth in earnings per share. Awards earned under the
Compensation Committee requested that certain sections
ofPlan supplement base compensation and should enhance the Sibson report prepared for the Company in 1993 by SibsonCompany's ability to
attract and the Chase
Consulting Group be updated by the Company for use, as appropriate, in
determining compensation levels (the "1994 Study"). The April 1994 Study
included a survey of salaries from similarly situated water utility companies.
Based on the April 1994 Study, base salaries for the executive group, including
the Chief Executive Officer, would remain competitive within the median range of
those companies included in the 1994 Study for the ensuing twelve months.retain qualified personnel.
As in the past, the Compensation Committee haswe have not adopted a direct formula relationship between
the Company's financial performance and the level of compensation paid to itsMr.
Wicks and other executive officers in part because of the pervasive effects that
varying regulatory practices and weather conditions have on financial
performance, whichperformance. We believe that these effects are largely outside the immediate
control of the executive officers. InAccordingly, in determining theexecutives'
compensation, of Mr. Wicks and
other executives, the committee also relied
15
18
upon aits subjective evaluation of the Company's earnings performance, in light
of those considerations, and 13
16
of the performance of the executive staffexecutives in maintaining
and enhancing the Company's ability to meet its challenges. These challenges
includinginclude (i) water quality and water supply, issues,(ii) appropriately enhancing
earnings levels and the successful resolution of(iii) successfully resolving issues before the California Public
Utilities Commission and other regulatory agencies.agencies (including the Company's
continuing response to the CPUC-ordered management audit). Upon review of all of
the objective and subjective factors described above, the
Compensation Committee in April 1994,1996, we
recommended and the Board authorized that Mr. Wicks' annual base compensation be
increased by 5% for the ensuing twelve months.
The Compensation Committee recognizesset at $275,000.
We recognize that changes to the Internal Revenue Code in 1993 affect,
subject to limited exceptions, the deductibility of compensation in excess of
$1,000,000 for certain executive officers unless such compensation qualifies as
"performance-based." However, since the Company's current compensation program
does not provide for annual compensation to any executive in excess of
$1,000,000, the deduction limitations are presently inapplicable to the Company.
We will address this limitation if and when it becomes meaningful.
Compensation Committee
D.Jean E. Brown
R. B. Clark
N. P.Auer N.P. Dodge, Jr.
W. M. Kizer
W.William V. Caveney 14Robert F. Kathol
R. Bradbury Clark Lloyd E. Ross
16
1719
PERFORMANCE GRAPH
The graph below compares the performance of Southernthe Company to that of (1) the
Standard & Poor's 500 Stock Index, (2) a peer group index developed by the
Company for the Key Executive Long-Term Incentive Plan (the "Former Peer Group")
and (3) a peer group index developed by the Company currently in effect for the
Key Executive Long-Term Incentive Plan (the "Current Peer Group").
The 17 water and electric companies initially selected by the Compensation
Committee of the Board of Directors and included in the Former Peer Group were
intended to provide an appropriate basis for comparison with the Company in
determining awards payable under the Key Executive Long-Term Incentive Plan. The
Former Peer Group consisted of 17 companies: American Water Works Inc., Aquarion
Company, Consumers Water Company, Connecticut Water Service, Inc., California
Water Service Company, Citizens Utilities Company (Class A and Class B), Empire
District Electric Company, E'Town Corporation, Green Mountain Power Corporation,
IWC Resources Corporation, Middlesex Water Company, Northwestern Public Service
Company, Philadelphia Suburban Corporation, St. Joseph Light & Power Company,
SJW Corp., Southwest Water Company and United Water Resources, Inc. However,
based on current trends affecting the electric utility industry as well as
reconsideration of the degree of comparability of certain water utilities to the
S&P 500Company, the Compensation Committee has modified the Former Peer Group index to
include 8 water utilities only. The 8 water companies which comprise the Current
Peer Group are: Aquarion Corp., Consumers Water Company, California Water
Service Company, E'Town Corp., IWC Resources Corp., Philadelphia Suburban Corp.,
SJW Corp. and the Dow JonesUnited Water Utility Index, a published
industry index.Resources, Inc.
17
20
The graph below shows the total return to shareholders for the last five
years of an initial investment of $100 made on December 31, 19891991 and assuming
reinvestment of all dividends. As with any investment, the historical
performance reflected in thisthe performance graph is not necessarily indicative of
future performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG SOUTHERN CALIFORNIA WATER COMPANY, THE S & P 500 STOCK INDEX,
A FORMER PEER GROUP AND THE DOW JONES WATER UTILITIES INDEXA CURRENT PEER GROUP.
SOUTHERN CALI-
MEASUREMENT PERIOD FORNIA WATER D J WATER UTILI-SOUTHERN CALIFOR- CURRENT PEER
(FISCAL YEAR COVERED) COMPANYNIA WATER CO. GROUP FORMER PEER GROUP S & P 500
TIES
--------------------- -------------- --------- ----------------
1989
12/91 100 100 100 1990 101 97 89
1991 130 126 136
1992100
12/92 127 110 112 108
12/93 147 125 129 118
12/94 125 119 108 120
12/95 155 134 127 165
136 146
1993 191 150 164
1994 163 152 15412/96 177 178 135 203
- ---------------
* $100 invested on December 31, 19891991 in stock or index -- including reinvestment of
dividends. Fiscal year endingended December 31.
1518
1821
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the beneficial
owners of more than five percent of any class of the Company's voting securities
on February 28, 19951997 based upon public information known to the Company.
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP OF CLASS
-------------------- ---------------------------------------- ------------------ --------------------------------- --------
First Colony Life Insurance Company Preferred Shares 45,842--Direct 52.1*
700 Main Street
Lynchburg, Virginia
Massachusetts Mutual Life Insurance Co. Preferred Shares 12,000--Direct 13.612,000 -- Direct 14.1
1295 State Street
Springfield, Massachusetts
Equitable Life Insurance Company of Iowa PreferredMA
J.P. Morgan & Co., Incorporated Common Shares 2,645--Direct 3.0
699 Walnut413,500 -- Direct 5.2
60 Wall Street
Des Moines, IowaNew York, NY
- ---------------
* Represents 5.3% of total eligible vote.
ANNUAL REPORT (FORM 10-K)
The Company undertakes, on written request, to provide, without charge,
each person from whom the accompanying proxy is solicited, with a copy of the
Company's Annual Report on Form 10-K for the year ended December 31, 19941996 as
filed with the Securities and Exchange Commission, including the financial
statements and schedules. Requests should be addressed to Southern California
Water Company, 630 East Foothill Boulevard, San Dimas, California 91773,
Attention: Office of the Treasurer.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the Company's independent public accountants
for the year ended December 31, 1994.1996. No accounting firm has been selected for
the current year. The Board of Directors normally selects the public accountants
for each year in July of that year. Representatives of Arthur Andersen LLP will
be at the Annual Meeting of Shareholders and will have an opportunity to make a statement if
they so desire, and will be available to respond to appropriate questions.
1619
1922
OTHER MATTERS
Management of the Company knows of no business, other than that mentioned
above, to be transacted at the Annual Meeting, but if other matters do properly
come before the meeting, it is the intention of the persons named in the
enclosed proxy to vote in regard thereto in accordance with their judgment, and
discretionary authority to do so is included in the proxy. Whether or not you
intend to be present at the meeting, you are urged to complete, sign and return
your proxy promptly.
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal which a shareholder intends to present at the next Annual
Meeting of Shareholders to be held in April, 19961998 must be received at the
principal executive office of the Company by November 17, 199515, 1997 if such proposal
is to be considered for inclusion in the Company's proxy statement and form of
proxy relating to that meeting. 17In addition, the Company's bylaws contain
separate notice requirements applicable to the bringing of business before the
Annual Meeting of Shareholders by a shareholder of the Company. The Company
maintains at its principal executive offices in San Dimas, California, a copy of
its bylaws, as amended, which bylaws will be open to inspection by shareholders
at all reasonable times during office hours.
20
20
APPENDIX A23
PROXY
SOUTHERN CALIFORNIA WATER COMPANY
KEY EXECUTIVE LONG-TERM INCENTIVE PLAN
1. PURPOSE. The Southern California Water Company (together with any
successors and assigns, the "Company") Key Executive Long-Term Incentive Plan
(the "Plan") is intended to promote sustained success of the Company and closely
link executives' interests to those of the Company's shareholders by (a)
focusing key executives of the Company on actions that contribute directly to
the creation of value for shareholders, (b) enabling the Company to continue to
attract, retain and motivate executives of the highest caliber, and (c)
providing a performance-based vehicle through which key executives may acquire
and retain Company stock.
2. COMPLIANCE WITH APPLICABLE LAWS. The provisions of this Plan are
intended to comply with all provisions of applicable laws and government
regulations. As to Participants subject to Section 16 of the Securities Exchange
Act of 1934, all transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 ("Rule 16b-3") of the Securities and
Exchange Commission under that Act. To the extent that any provision of this
Plan or action by the Committee or Board fails to so comply, such provision or
action shall be considered ineffective or, in the discretion of the Committee,
modified so as to conform to applicable laws, regulations and conditions. The
Committee shall have the authority to take such actions as may be required to
comply with such applicable laws, regulations and conditions.
3. DEFINITIONS. The following definitions shall apply to the Plan:
3.1 Authorized Rate of Return means the weighted average of the annual
rate or rates of return on equity authorized for the Company during a
Performance Cycle by the California Public Utilities Commission. Authorized Rate
of Return during a Performance Cycle shall be calculated by the Company, subject
to review by the Company's external auditors.
3.2 Award means a payment, either in cash or Common Shares, earned in
accordance with the provisions of the Plan.
3.3 Board means the Board of Directors of the Company.
3.4 Change of Control shall mean any or all of the following:
(1) The dissolution or liquidation of the Company, unless its business
is continued by another entity in which holders of the Company's voting
securities immediately before the event own more than 50% of the continuing
entity's voting securities immediately after the event;
(2) Approval by the shareholders of the Company of any sale, lease,
exchange or other transfer (in one or a series of transactions) of all or
substantially all of the assets of the
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21
Company, unless its business is continued by another entity in which
holders of the Company's voting securities immediately before the event own
more than 50% of the continuing entity's voting securities immediately
after the event;
(3) Approval by the shareholders of the Company of any reorganization
or merger of the Company, unless the holders of the Company's voting
securities immediately before the event own more than fifty percent (50%)
of the continuing or surviving entity's voting securities immediately after
the event;
(4) A change of one-half or more of the members of the Board within a
twelve-month period, unless the election or nomination for election by
shareholders of new directors within such period constituting a majority of
the Board was approved by the vote of at least two-thirds of the directors
then still in office who were in office at the beginning of the
twelve-month period.
3.5 Committee means a Committee of the Board consisting of two (2) or
more directors appointed by the Board to administer the Plan pursuant to Section
5. All members of the Committee shall be "disinterested persons" (as defined in
Rule 16b-3) in respect of the Plan.
3.6 Common Shares means the common shares of the Company (par value
of $2.50) or any security of the Company issued in substitution, exchange, or in
lieu thereof as contemplated by Section 12.
3.7 Disability means a physical or mental condition that permanently
prevents a Participant from performing his or her normal duties of employment.
If a Participant is covered by a Company-sponsored long-term disability program
and the Participant is determined to qualify for disability benefits under that
program, then the Participant shall be presumed to qualify as permanently
disabled for purposes of the Plan unless the Committee reasonably determines
that the Participant is not permanently disabled for purposes of the Plan. If a
Participant is not covered by a Company-sponsored long-term disability program,
then the Participant shall be presumed to be permanently disabled for purposes
of the Plan if the Committee so determines upon review of one of more medical
opinions acceptable to the Committee.
3.8 Early Retirement means a voluntary Termination of Service at or
after reaching age sixty-two (62) with the approval of the Committee.
3.9 Earnings Per Share Growth means the percentage change in
fully-diluted earnings per Common Share between the latest fiscal year ending
before the beginning of a Performance Cycle and the latest fiscal year ending
before or upon the completion of the same Performance Cycle, calculated from the
audited annual reports prepared for shareholders for those fiscal years,
excluding any items classified in the reports as extraordinary, and excluding
any gain or loss from the sale of operating properties.
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22
3.10 Executive means an employee of the Company determined by the
Committee to hold a key executive position.
3.11 Market Price: Market Price at the beginning of a Performance
Cycle means the average of the closing prices of one Common Share on the New
York Stock Exchange during the thirty (30) consecutive trading days ending with
the last day immediately before commencement of the Performance Cycle. Market
Price at the end of a Performance Cycle means the average of the closing prices
of one Common Share on the New York Stock Exchange during the thirty (30)
consecutive trading days ending with the last day of the Performance Cycle.
Market Price upon a Change in Control means the average of the closing prices of
one Common Share on the New York Stock Exchange during the seven (7) consecutive
trading days ending on the date on which the Change in Control occurs. If the
Common Shares cease to be listed on the New York Stock Exchange, references to
that Exchange thereafter shall refer instead to the principal market on which
the Common Shares are traded.
3.12 Maximum Award means the maximum value in dollars of an Award,
expressed as a percentage of a Participant's Salary at the beginning of a
Performance Cycle, that the Participant is eligible to receive in cash or Common
Shares for that Performance Cycle if the Performance Objectives for the Maximum
Award as set forth in the Participant Agreement established for that Performance
Cycle are fully achieved.
3.13 Normal Retirement means voluntary Termination of Service at or
after reaching age sixty-five (65).
3.14 Participant means an Executive designated by the Committee to
participate in the Plan.
3.15 Participation Agreement means an agreement between the Company
and a Participant with respect to an Award, in form designated by the Committee.
3.16 Peer Group means a group of publicly-traded water and electric
utilities selected by the Committee for a Performance Cycle. The Peer Group
shall be selected based upon criteria satisfactory to the Committee and intended
to provide an appropriate basis for comparison with the Company in determining
Awards. One or more members of a Peer Group established for a Performance Cycle
may be deleted or replaced if the Committee determines that the member or
members no longer provide an appropriate basis for comparison.
3.17 Performance Cycle means three consecutive fiscal years of the
Company over which its (and the Peer Group's) performance is measured for
determining whether and to what extent an Award is earned under the Plan. It is
the intent of the Plan, but not a requirement, that a new three-year Performance
Cycle will begin each fiscal year.
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23
3.18 Performance Measures means the specific performance measures
selected by the Committee as described in Section 7 below as bases for
determining Awards for a particular Performance Cycle. With the approval of the
Board, the Committee may establish additional measures from which to select.
3.19 Performance Objectives means the specific performance goals for
the Performance Measures established by the Committee for a Performance Cycle
against which performance is assessed under the Plan.
3.20 Rate Of Return means the Company's average annual return on
equity during a Performance Cycle calculated from the audited annual reports
prepared for shareholders for the fiscal years comprising that Performance
Cycle, excluding any items classified in the reports as extraordinary. Rate of
Return during a Performance Cycle shall be calculated by the Company, subject to
review by the Company's external auditors.
3.21 Salary means a Participant's regular annual base salary, before
any deductions and exclusive of any bonuses, payments under employee benefit or
incentive plans and other non-regular forms of compensation, whether deferred or
received currently, as of the first day of a Performance Cycle.
3.22 Service means substantially full-time employment (whether active
or on an authorized leave of absence) with the Company.
3.23 Target Award means the value in dollars of an Award, expressed
as a percentage of a Participant's Salary at the beginning of a Performance
Cycle, that the Participant is eligible to receive in cash or Common Shares for
that Performance Cycle if the Performance Objectives for the Target Award as set
forth in the Participation Agreement established for that Performance Cycle are
fully achieved.
3.24 Termination of Service means termination of Service with the
Company for any reason, whether voluntary or involuntary, including death,
Disability, Early Retirement or Normal Retirement.
3.25 Total Shareholder Return means the total return on one Common
Share during a Performance Cycle measured by dividing (i) the sum of (a) all
dividends paid on one Common Share during that Performance Cycle and (b) the
difference between the Market Price of one Common Share at the beginning of the
Performance Cycle and the end of that Performance Cycle by (ii) the Market Price
of one Common Share at the beginning of that Performance Cycle.
4. ELIGIBILITY. Eligibility for the Plan shall be at the discretion of
the Committee and shall be limited to Executives of the Company selected by the
Committee. Participation in the Plan for any one Performance Cycle shall not
create any right to participate in any other Performance Cycle.
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24
5. PLAN ADMINISTRATION. The Plan shall be administered by the Committee.
The Committee is authorized to interpret the Plan, to prescribe, amend and
rescind rules and regulations pertaining to the Plan, provide for conditions and
assurances deemed necessary or advisable to protect the interests of the
Company, and to make all other determinations necessary or advisable for the
administration of the Plan, but only to the extent not contrary to the express
provisions of the Plan. In selecting a Participant, the Committee may take into
account the nature of services rendered by the Executive, his or her present and
potential contributions to the success of the Company, and such other factors as
the Committee in its discretion shall deem relevant. The Committee's authority
shall include but shall not be limited to:
(1) All determinations and actions which this Plan specifies the
Committee shall or may make or take;
(2) All actions necessary or incidental to clause (1) above;
(3) The final determination and written certification of the
performance level achieved by the Company during a Performance Cycle and
the associated Awards earned by Participants; and
(4) The treatment of unanticipated events materially affecting Plan
administration or objectives.
Determinations, interpretations or other actions made or taken by the Committee
pursuant to the provisions of the Plan shall be final and shall be binding and
conclusive for all purposes and for all persons.
Expenses of administering the Plan shall be borne by the Company.
6. AWARD DETERMINATION PROCESS. For each Performance Cycle, the Committee
shall assign each Participant in that Cycle a Target Award and a Maximum Award
based on the Participant's level of responsibility, ability to influence
longterm Company performance, competitive compensation considerations and other
relevant criteria in light of the objectives of the Plan. The Committee may also
establish other Award levels above or below the Target Award and Maximum Award
levels, with values based on (i.e. either above or below, respectively) the
latter levels, as determined by the Committee. In addition, the Committee shall
establish Performance Measures and Performance Objectives for the Performance
Cycle as well as the relationship between Awards and different levels of
achievement relative to the Performance Objectives. A Participant's levels,
applicable Performance Measures, Performance Objectives, and the relationship
between the Participant's stated Award levels and different levels of
achievement shall be described in a Participation Agreement entered into between
the Company and the Participant for each Performance Cycle.
The Committee reserves the right to adjust a Participant's Target Award and
Maximum Award during a Performance Cycle, in its sole discretion, to reflect the
promotion, demotion or change of
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25
duties of a Participant. If a Participant's Award is adjusted during a
Performance Cycle, calculation of the Award for that Performance Cycle will be
determined by prorating each Award according to the number of days each was in
effect during the Performance Cycle. Awards shall be determined by the Committee
in accordance with the terms of the Participation Agreement. The Plan does not
provide for discretionary payments outside of Awards determined in accordance
with the Plan. However, the Committee reserves the right to reduce, eliminate or
defer Awards if the Committee deems, in its sole discretion, that payment of
Awards earned under the Plan would not be in best interests of the Company or if
Awards were materially increased by external events not anticipated at the time
that the Performance Objectives were established.
7. PERFORMANCE MEASUREMENT. The Committee, in its sole discretion, shall
establish the Performance Objectives for each Executive who is a Participant in
a Performance Cycle for that Performance Cycle from among the following
Performance Measures: Earnings Per Share; Total Shareholder Return; price of
Common Shares; and the Company's Rate of Return in relation to its Authorized
Rate of Return. Performance may be measured against the performance of the Peer
Group or against internal goals established by the Committee. The Performance
Measures and weighting assigned to each Performance Measure may be different for
different Performance Cycles and for different Participants at the discretion of
the Committee.
8. PAYMENT OF AWARDS. At the discretion of the Committee, Awards may be
paid in cash or in Common Shares, or both. Payment shall be made as soon as
practicable after conclusion of the Performance Cycle to which the Award relates
and after certification by the Committee of the performance level achieved by
the Company and the associated Awards earned by Participants. In the absence of
unusual circumstances, payment shall be made no later than one-hundred twenty
days after the end of the Performance Cycle. If Awards are paid in Common
Shares, the number of Common Shares awarded to a Participant shall be determined
by dividing the dollar amount of the Participant's Award to be paid in Common
Shares by the Market Price of one Common Share at the end of the Performance
Cycle. Common Shares awarded under the Plan will be subject to forfeiture until
vesting restrictions established by the Committee and contained in the
Participation Agreement have been satisfied. Common Shares awarded to a
Participant shall be registered in the Participant's name but the certificates
evidencing restricted Shares shall be held by the Company during the restriction
periods. No such share may be sold, hypothecated or otherwise transferred by a
Participant until the applicable restrictions on that share lapse. During the
restriction period, the Participant will enjoy all other rights as a shareholder
of the Company, including the right to receive dividends declared and paid in
respect of such shares and to vote the shares, except that any dividends paid in
Common Shares will be held by the Company subject to the same restrictions as
the underlying shares.
9. TERMINATION OF SERVICE. If Termination of Service of a Participant
occurs during a Performance Cycle for any reason except death, Disability,
Normal Retirement or Early Retirement,
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26
the Participant's opportunity to receive an Award for that Performance Cycle
shall be forfeited. If Termination of Service of a Participant occurs for any
reason except death, Disability, Normal Retirement or Early Retirement, any
Common Shares previously received as payment under the Plan and still subject to
restrictions shall be forfeited. If death, Disability or Normal Retirement of a
Participant occurs during a Performance Cycle, the Participant shall be eligible
to receive a pro-rata Award for that Performance Cycle based on a ratio equal to
the number of full days of the Participant's Service during the Performance
Cycle divided by the number of days in the Performance Cycle. If Early
Retirement of a Participant occurs during a Performance Cycle, the Participant
shall be eligible to receive a pro-rata Award for that Performance Cycle based
on a ratio equal to fifty percent (50%) of the number of full days of the
Participant's Service during the Performance Cycle divided by the number of days
in the Performance Cycle. If death, Disability, Normal Retirement or Early
Retirement of a Participant occurs, any remaining restrictions applicable to any
Common Shares previously received as payment under the Plan shall lapse.
Pro-rata Awards resulting from Termination of Service during a Performance
Cycle shall be paid at the same time as normal Awards are paid for the
Performance Cycle. Any Common Shares delivered as a part of such Awards shall
not be subject to vesting restrictions.
10. CHANGE OF CONTROL. Upon a Change of Control of the Company before the
end of a Performance Cycle, each Participant in that Performance Cycle shall be
entitled to receive an Award under the Plan determined by the Committee as
follows: (i) the Committee shall assess the Company's performance against the
Performance Objectives for the Performance Cycle through the effective date of
the Change of Control as if that period were a full Performance Cycle and
determine the Award that would have been earned based upon that performance;
(ii) that Award amount shall be prorated in the ratio of the number of days in
the Performance Cycle through the effective date of the Change of Control to the
full number of days in the Performance Cycle; (iii) the prorated amount shall be
the amount of the Award to which the Participant is entitled and the Participant
shall be entitled to receive it as soon as practicable after the Committee has
determined it. The provisions of the last sentence of Section 6 shall not apply
to any determinations made, or actions taken, by the Committee pursuant to this
Section 10. Upon a Change of Control, any remaining restrictions applicable to
any Common Shares previously received as payment under the Plan shall lapse and
any Common Shares received upon a Change of Control shall not be subject to
vesting restrictions.
11. NEW PARTICIPANTS. Participants may be added to the Plan by the
Committee at any time. A Participant added to the Plan during a Performance
Cycle shall be eligible to receive a pro-rata Award for that Performance Cycle
in an amount determined by the Committee provided that the individual is a
Participant in the Plan for at least six months during the Performance Cycle.
The pro-rata Award for an individual added to the Plan during a Performance
Cycle shall be determined by multiplying the Participant's Award for the
Performance Cycle by a ratio equal to the number of
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27
days that the individual participates in the Plan during the Performance Cycle
divided by the number of days in the Performance Cycle.
12. SHARES SUBJECT TO THE PLAN. An aggregate of 150,000 Common Shares
shall be subject to the Plan. These shares shall be either authorized unissued
shares or outstanding shares acquired by or on behalf of the Plan, including
shares purchased in the open market. Shares subject to Awards but not earned and
Shares awarded but forfeited under the Plan shall again become subject to the
Plan if permissible pursuant to Rule 16b-3.
In the event of a stock dividend, stock split, or other subdivision or
combination of the Common Shares, the number of Common Shares subject to the
Plan shall be adjusted proportionately. If the outstanding Common Shares are
changed or converted into, or exchanged or exchangeable for other securities of
the Company or another corporation by reason of a reorganization, merger,
reclassification, exchange or combination, an appropriate adjustment shall be
made by the Committee, whose determination shall be conclusive, in the number
and/or type of securities for which Awards may be made under the Plan, with the
objective that the proportionate interests of Participants be maintained at the
same level as before the occurrence of such event.
13. AMENDMENT OR TERMINATION OF THE PLAN. The Plan may be amended,
suspended or terminated at any time, with or without notice, by the Committee.
However, a majority of the voting power of the securities of the Company
entitled to vote and voting must first be obtained in order to (a) materially
increase the benefits accruing to Participants under the Plan, (b) increase the
number of Common Shares subject to Plan (except for such adjustments as are
provided for in Section 12), or (c) materially modify the requirements as to
eligibility for participation in the Plan. However, unless required by law or
applicable government regulation, no change may be made to the Plan that
adversely affects an Award due for a completed Performance Cycle. Upon
amendment, suspension or revocation of the Plan, the Committee may, in its sole
discretion, authorize the proration or early distribution, or a combination
thereof, of Awards under then outstanding Participation Agreements under the
Plan.
14. OTHER PROVISIONS.
14.1 Transfer Restrictions. No rights under a Participation
Agreement, no Award and no Common Share received by a Participant and still
subject to restrictions shall be transferred, assigned, pledged or hypothecated
in any way, whether by operation of law (including bankruptcy) or otherwise,
except by will or laws of descent and distribution. Upon any attempt to
transfer, assign, pledge or hypothecate or otherwise dispose of rights under a
Participation Agreement, Awards or Common Shares received by a Participant and
still subject to restrictions contrary to the provisions of the Plan, the
Participation Agreement shall terminate and the Participant shall have no rights
under it, any Award and its associated rights and privileges shall become null
and void and any such Common Shares shall be forfeited as provided in Section 8.
In the event of a Participant's death,
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Awards will be distributed as provided in Section 9 to the Participant's
designated beneficiary, or in the absence of such designation, the Participant's
estate.
14.2 Withholding Tax. The Company shall deduct from all Awards paid
under the plan any federal, state or local taxes required to be withheld. The
Company may, at its election, withhold from Common Share Awards such number of
shares as are sufficient to meet the Company's withholding requirements. A
Participant may elect, subject to the Committee's approval, to satisfy
withholding, in whole or in part, by having the Company withhold Common Shares
having a market value (as of the date of withholding) equal to the amount
required to be withheld.
14.3 Effective Date. Subject to shareholder approval of the Plan, the
Plan shall become effective January 1, 1995 and shall remain in effect until
terminated by the Board.
14.4 Unfunded Nature of the Plan. Subject to compliance with
applicable laws, government regulations and accounting principles, the Company
may periodically accrue estimated payouts pursuant to the Plan and charge them
as an expense. Accruals for estimated payouts shall not obligate the Company to
make payments under the Plan. Each Participant shall be an unsecured creditor
regarding the Company's obligations under the Plan. No Participant or any other
person shall have as a result of the Plan any interest in any fund or in any
specific asset of the Company. No reserve or other asset that the Company may
establish or acquire to ensure itself of the funds to provide benefits under the
Plan shall serve in any way as security for any Participant or any other person
for the Company's performance under the Plan.
14.5 Right of Employment Denied. Nothing contained in the Plan shall
confer upon a Participant any right to be or remain an employee of the Company
or shall interfere in any way with the right of the Company at any time to
terminate a Participant's Service or employment or to increase or decrease the
compensation of a Participant or change a Participant's duties or
responsibilities.
14.6 Headings. The headings contained herein are for purposes of
convenience only, and in the event of any conflict with the text of the Plan,
the text rather than the headings shall control.
14.7 Requirements of Law. Awards of Common Shares pursuant to the
Plan shall be subject to all applicable laws, rules and regulations, and shall
not be made until all required approvals of the proper government agencies have
been obtained.
14.8 Governing Laws. The Plan shall be administered, interpreted and
governed under the laws of the State of California.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF SOUTHERN CALIFORNIA WATER COMPANY
R. B. ClarkThe undersigned hereby appoints N.P. Dodge, Jr. and W. V.W.V. Caveney eachproxies, with full
power to act without the other are hereby appointed the attorneys and proxies, with full power of substitution, for and hereby
authorizes them to represent and vote, as designated on the other side, all the
shares of stock of Southern California Water Company standing in the name of the
undersigned to represent and vote in
their discretionwith all stockpowers which the undersigned could represent and votewould possess if present at
the annual meetingAnnual Meeting of the shareholdersStockholders of the Southern California Water Company to be held at the Industry Hills Sheraton, One Industry Hills Parkway, City of
Industry, California, on Tuesday, April 25, 1995 at 11:00 o'clock A.M., Pacific
time,29, 1997 or
any adjournment thereof, for the election of Directors, the approval of
a Key Executive Long-Term Incentive Plan and upon other matters properly coming
before thethat meeting.
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) / / listed below(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
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FOLD AND DETACH HERE
IMPORTANT NOTICE TO SHAREHOLDERS
OF SOUTHERN CALIFORNIA WATER COMPANY
THE ANNUAL MEETING OF SHAREHOLDERS WILL BE HELD ON
APRIL 29, 1997 AT 10:00 A.M.
AT THE SHERATON SUITES FAIRPLEX
MAP TO SHERATON SUITES FAIRPLEX
601 WEST MCKINLEY AVE. POMONA, CA. 91768
PHONE: (909) 622-2220 -- (800) 722-6055
[MAP]
24
Please mark
your votes as /X/
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR EACH OF THE DIRECTOR
NOMINEES LISTED IN ITEM 1 AND FOR
THE PROPOSAL DESCRIBED IN ITEM 2.
Item 1. ELECTION OF DIRECTORS
Nominees: James L. Anderson Jean E. Auer
Robert F. Kathol William V. Caveney
Lloyd E. Ross N.P. Dodge, Jr.
Floyd E. Wicks
FOR WITHHELD
FOR ALL
/ /
J. E. Auer, W. V. Caveney, R. B. Clark, N. P. Dodge, Jr., R. F. Kathol, L. E.
Ross and F. E. Wicks
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE INDIVIDUAL
NOMINEE(S) WRITE THAT NOMINEE(S) NAME ON THE SPACE PROVIDED BELOW.)
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Continued and to be signed on the other side
2. Approval of a Key Executive Long-Term Incentive Plan.
/ /
WITHHELD FOR: (write name of such Nominee(s)
in the space provided below.)
____________________________________________
Item 2. Proposal to increase the number of authorized
common shares from 10,000,000 to 30,000,000.
FOR AGAINST ABSTAIN
/ / AGAINST / / ABSTAIN/ /
Item 3. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
IF THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTIONCARD IS MADE, THIS PROXYSIGNED AND RETURNED BUT IS
NOT MARKED, IT WILL BE VOTED FOR ALLEACH OF THE DIRECTOR NOMINEES
OR CUMULATIVELY AMONG NOMINEES IF CUMULATIVE VOTING
APPLIES,LISTED UNDER ITEM 1 AND FOR APPROVAL OF THE KEY EXECUTIVE LONG-TERM INCENTIVE PLAN.
(NOTE: SignaturePROPOSAL DESCRIBED IN ITEM 2.
Signature(s)___________________________________________Date____________________
NOTE: Please sign as name appears hereon. Joint owners should agree with name hereon.each sign. When
signing as attorney, executor, administrator, trustee guardian, or corporate officer,guardian, please give
full title as such.
All joint owners should
sign.)
-------------------------
Signature
-------------------------
Signature
1995
--------------------
Date
IMPORTANT: Please mark, date, sign- -------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
Dear Shareholder:
The Annual Meeting of Shareholders of Southern California Water Company
will be held on Tuesday, April 29, 1997, at 10:00 A.M., Pacific time, at the
Sheraton Suites Fairplex, 601 West McKinley Avenue, Pomona, California. You
are cordially invited to attend.
The enclosed notice of the meeting and return this Proxy promptlyaccompanying proxy statement
cover the formal business of the meeting.
Your continued interest in Southern California Water Company is
appreciated and we hope that you will find it convenient to attend the
meeting. However, whether or not you plan to attend in person, please assure
representation of your shares by marking, signing and mailing in the
enclosed envelope.accompanying proxy card.
Sincerely,
/s/ W.V. Caveney
W.V. Caveney
Chairman of the Board