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EXHIBIT 10.17
AMERICAN STATES WATER COMPANY ANNUAL INCENTIVE PLAN
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AMERICAN STATES WATER COMPANY
ANNUAL INCENTIVE PLAN
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AMERICAN STATES WATER COMPANY
ANNUAL INCENTIVE PLAN
TABLE OF CONTENTS
ARTICLE I THE PLAN............................................................... I-1
1.1 Purpose................................................................ I-1
1.2 Definitions............................................................ I-1
1.3 Administration and Authorization; Power and Procedure.................. I-3
1.4 Payment/Grant of Awards................................................ I-4
1.5 Non-Transferability.................................................... I-4
1.6 Beneficiary Designation................................................ I-4
ARTICLE II AWARDS................................................................. II-1
2.1 Award Determination.................................................... II-1
2.2 Vesting................................................................ II-2
2.3 Award Payment.......................................................... II-2
2.4 Acceleration of Awards upon Change in Control.......................... II-2
ARTICLE III OTHER PROVISIONS....................................................... III-1
3.1 Rights of Eligible Employees, Participants and Beneficiaries........... III-1
3.2 Compliance with Laws................................................... III-1
3.3 Withholding; Payroll Taxes............................................. III-1
3.4 Plan Amendment, Termination and Suspension............................. III-1
3.5 Effective Date of the Plan............................................. III-1
3.6 Governing Law.......................................................... III-1
3.7 Captions............................................................... III-2
3.8 Terms.................................................................. III-2
3.9 Non-Exclusivity of Plan................................................ III-2
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AMERICAN STATES WATER COMPANY
ANNUAL INCENTIVE PLAN
I. THE PLAN
1.1 Purpose: The purpose of this Plan is to promote the success of the
Company by contributing to a team culture, focusing attention on
increasing shareholder value, and creating an incentive program
that will support future growth.
1.2 Definitions: For purposes of this Plan, the following terms shall
have the meanings indicated below:
(a) "Actual Return on Rate Base" shall mean the Company's actual
annual rate of return on net assets included in the Company's
rate filings.
(b) "Authorized Return on Rate Base" shall mean the composite
annual rate of return on equity authorized for the Company
during the Plan Year by the California Public Utilities
Commission. The Authorized Rate of Return shall be calculated
by the Company in accordance with the rules and/or examples
approved by the Committee, and will be reviewed by the
Company's external auditors.
(c) "Award" shall mean an award of a specified amount of cash or
restricted stock to a Participant under the Plan.
(d) "Base Compensation" shall mean the salary and hourly wages,
exclusive of overtime and bonuses, paid to an Eligible
Employee during the calendar year proceeding the Determination
Date.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Change in Control Event": Shall have the meaning given such
term in the Company's 2000 Stock Incentive Plan.
(g) "Class A Managers" shall mean the managers of the Company, or
a Subsidiary, designated as Class A Managers by the Chief
Executive Officer.
(h) "Class B Managers" shall mean the managers of the Company, or
a Subsidiary, designated as Class B Managers by the Chief
Executive Officer.
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(j) "Committee" shall mean the Compensation Committee of the Board
of Directors.
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(k) "Company" shall mean American States Water Company.
(l) "Consolidated Total Operating Revenues" shall be as set forth
in the Company's audited consolidated financial statements.
(m) "Determination Date" shall mean the last day of each Plan
Year.
(n) "Eligible Employee" shall mean an employee of the Company, or
a Subsidiary, designated by the Committee at the beginning of
a Plan Year as eligible to receive an Award under this Plan.
(o) "Employer" shall mean the Company, or a Subsidiary of the
Company which directly employs an Eligible Employee.
(p) "Financial Performance" shall mean the Company's Actual Return
on Rate Base as a percentage of its Authorized Return on Rate
Base.
(q) "Individual Adjustment" shall be the adjustment determined in
accordance with section 2.1(a)(iv) of this document.
(r) "Increase in Total Operating Revenues from Acquisition" shall
mean the projected increase in Consolidated Total Operating
Revenues from the Company's acquisition of another firm during
the Plan Year.
(s) "Maintenance Adjustment" shall be calculated in accordance
with section 2.1(a)(ii) of this document.
(t) "Participant" shall mean an Eligible Employee whose last
performance appraisal was satisfactory.
(u) "Personal Representative" shall mean the person or persons
who, upon the Total Disability or incompetence of a
Participant, shall have acquired on behalf of the Participant,
by legal proceeding or otherwise, the power to exercise the
rights or receive benefits under this Plan and who shall have
become the legal representative of the Participant.
(v) "Plan" shall mean this Annual Incentive Plan.
(w) "Plan Year" shall mean the calendar year.
(x) "Restricted Stock" shall mean shares of the common stock of
the Company that are non-transferable and subject to
forfeiture upon termination of employment within a specified
period of time following the date of grant.
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(y) "Strategic Adjustment" shall be a factor based on Company
performance. At the beginning of each plan year the Committee
will establish performance criteria reflecting progress
towards the Company's strategic goals. The Committee will, at
that time, also establish the amount of the adjustment (no
more than 50% in total) to be made to Awards otherwise payable
under the Plan based on the achievement of these criteria.
(z) "Subsidiary" shall mean any corporation or other entity a
majority of whose outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Company.
(aa) "Target Award" shall mean the amount equal to a Participant's
Base Compensation multiplied by a percentage determined at the
beginning of each Plan Year by the Committee.
1.3 Administration and Authorization; Power and Procedure:
(a) Committee: This Plan shall be administered by, and all
granting of Awards to Eligible Employees shall be authorized
by, the Committee. Action with respect to the administration
of this Plan shall be the sole and absolute discretion and
responsibility of the Committee.
(b) Plan Awards; Interpretation; Powers of Committee: Subject to
the express provisions of this Plan, the Committee shall have
the sole and absolute authority:
(i) to determine which employees are eligible to participate
in the Plan for a Plan Year;
(ii) to determine the amount of the Award payable to each
Participant for a Plan Year;
(iii) to construe and interpret this Plan and any agreements
defining the rights and obligations of the Company and
Participants under this Plan, further define the terms
used in this Plan, and prescribe, amend and rescind
rules and regulations relating to the administration of
this Plan;
(iv) to make all other determinations and take such other
action as contemplated by this Plan or as may be
necessary or advisable for the administration of this
Plan and the effectuation of its purposes.
(c) Binding Determinations: The Committee shall have full
discretion to construe and interpret the terms and provisions
of the Plan, which interpretation or construction shall be
final and binding on all parties, including but not limited to
the Company, any Subsidiary and any Participants or
Beneficiaries. Any action taken by, or inaction of, the
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Company, or the Committee relating or pursuant to this Plan
shall be within the absolute discretion of that entity or body
and shall be conclusive and binding upon all persons. No
member of the Committee, or officer of the Company, shall be
liable for any such action or inaction of the entity or body,
of another person or, except in circumstances involving bad
faith, of himself or herself.
(d) Reliance on Experts: In making any determination or in taking
or not taking any action under this Plan, the Committee may
obtain and may rely upon the advice of experts, including
professional advisors to the Company.
(e) Delegation: The Committee may delegate ministerial,
non-discretionary functions to individuals who are officers or
employees of the Company or a Subsidiary.
(f) Absence of Liability; Indemnity: No member of the Committee,
director, officer or agent of the Company shall be liable for
any action or determination taken, made or omitted in good
faith. To the extent permitted under applicable state law, the
Company shall indemnify and hold harmless the members of the
Committee and any delegate against any and all claims, loss,
damage, expense or liability arising from any action or
failure to act with respect to this Plan, except in the case
of gross negligence or willful misconduct.
1.4 Payment/Grant of Awards: Subject to the express provisions of this
Plan, the Committee shall determine the amount of each Award.
1.5 Non-Transferability: Neither a Participant nor any other person
shall have the right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate
or convey in advance of actual receipt of the amounts, if any,
payable hereunder, or any part thereof, part thereof, which are,
and all rights to which are, expressly declared to be unassignable
and non-transferable. No part of the amounts payable shall, prior
to actual payment, be subject to seizure or sequestration for the
payment of any debts, judgments, alimony or separate maintenance
owed by a Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency.
1.6 Beneficiary Designation:
(a) "Beneficiary" or "Beneficiaries" shall mean the person or
persons, including a trustee, Personal Representative or other
fiduciary, last designated in writing by a Participant in
accordance with procedures established by the Committee to
receive the benefits, if any, specified hereunder in the event
of the Participant's death. No beneficiary designation shall
become effective
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until it is filed with the Committee, and no Beneficiary
designation of someone other than the Participant's spouse
shall be effective unless such designation is consented to by
the Participant's spouse on a form provided by and in
accordance with procedures established by the Committee. If
there is no valid Beneficiary designation in effect, or if
there is no surviving designated Beneficiary, then the
Participant's surviving spouse shall be the Beneficiary. If
there is no surviving spouse to receive any benefits payable
in accordance with the preceding sentence, the duly appointed
and currently acting personal representative of the
Participant's estate (which shall include either the
Participant's probate estate or living trust) shall be the
Beneficiary. In any case where there is no such personal
representative of the Participant's estate duly appointed and
acting in that capacity within 90 days after the Participant's
death (or such extended period as the Committee determines is
reasonably necessary to allow such personal representative to
be appointed but not to exceed 180 days after the
Participant's death), then Beneficiary shall mean the person
or persons who can verify by affidavit or court order to the
satisfaction of the Committee that they are legally entitled
to receive the benefits specified hereunder. In the event any
amount is payable under the Plan to a minor, payment shall not
be made to the minor, but instead be paid (a) to that person's
living parent(s) to act as custodian, (b) if that person's
parents are then divorced, and one parent is the sole
custodial parent, to such custodial parent, or (c) if no
parent of that person is then living, to a custodian selected
by the Committee to hold the funds for the minor under the
Uniform Transfers of Gifts to Minors Act in effect in the
jurisdiction in which the minor resides. If no parent is
living and the Committee decides not to select another
custodian to hold the funds for the minor, then payment shall
be made to the duly appointed and currently acting guardian of
the estate for the minor or, if no guardian of the estate for
the minor is duly appointed and currently acting within 60
days after the date the amount becomes payable, payment shall
be deposited with the court having jurisdiction over the
estate of the minor.
(b) Effect of Payment: The payment to the Beneficiary or deemed
Beneficiary, in accordance with the provisions of this Plan,
shall completely discharge all obligations under this Plan of
the Committee, the Company and any Subsidiary.
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II. AWARDS
2.1 Award Determination:
(a) Performance Evaluation:
(i) Financial Performance: Performance shall first be
evaluated based on the Company's Actual Return on Rate
Base as a percentage of its Authorized Return on Rate
Base. In 2000, the following schedule shall apply:
Actual/Authorized Return Financial Performance Percentage
------------------------ --------------------------------
Greater than 100% 120%
98% 100%
96% 85%
94% 60%
92% 25%
Less than 92% 0%
Note: Percentages will be interpolated for performance
between levels.
(ii) Maintenance Adjustment: If the Company's maintenance
costs are significantly less than estimated for rate base
purposes (more than .5% of the Authorized Return on Rate
Base), the Actual Return on Rate Base will be adjusted
downwards by the amount of the shortfall.
(iii)Strategic Adjustment: For Executives (Vice Presidents and
above) and Class A Managers, the Company's Financial
Performance shall be adjusted (up or down) based on
factors including the achievement of strategic goals such
as acquisitions of other firms. The maximum adjustment
for strategic performance in one year shall be capped at
50%. In 2000, the following schedule shall apply:
Increase in Total Operating Revenues
from Acquisition Strategic Adjustment
--------------------------------------- --------------------
Less than 10% 0%
10% 10%
13% 12%
16% 14%
19% 16%
22% 18%
25% 20%
28% 22%
31% 24%
Greater than 33% 25%
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(iv) Individual Adjustment: For Class B Managers, the
Company's Financial Performance shall be adjusted based
on team/individual performance. The adjustment can
increase or decrease payout by 0% - 50%. The size of the
adjustment shall be based on the accomplishment of goals
that are established by the Employer at the beginning of
each Plan Year.
(b) Determination of Individual Awards: The Award to be paid to
any Participant will be equal to (i) the Financial Performance
times (ii) one hundred percent (100%) plus the Strategic
Adjustment or Individual Adjustment, whichever is applicable,
times the Target Award.
(c) Participant's Award: A Participant's Award shall be pro-rated
in the event he/she participates in the Plan for less than the
full year, moves into a position covered under a different
schedule of awards, and/or moves into or from a position not
currently included under this Plan. The pro-rated amount will
be calculated by multiplying the Award otherwise payable to
the Participant for the entire year by a fraction, the
numerator of which is the number months completed by the
Participant during the Plan Year, and the denominator of
which is 12.
2.2 Vesting: There is no vested right to receive an Award and no Award
is earned until paid. A Participant who terminates employment for
any reason before the payment of the Awards shall forfeit any
unpaid Awards, except in the cases of death or disability.
2.3 Award Payment: Awards will be paid by the Employer following the
completion of the audit of the financials, normally within 75 days
of the end of the fiscal year. Payment shall be provided in cash
and/or Restricted Stock. All payments less than 20% of Base
Compensation shall be paid cash. Payments above 20% of Base
Compensation may be paid, at the discretion of the Committee, in
Restricted Stock issued in accordance with the provisions of the
American States Water Company Long-Term Incentive Plan (the
"Long-Term Incentive Plan"). The number of shares of Restricted
Stock (if any) to be issued shall equal the difference between the
amount of the Award and the amount paid in cash divided by the Fair
Market Value (as defined in the Long-Term Incentive Plan) of a
share of the Company common stock determined as of the
Determination Date. Unless the Committee otherwise provides, the
rights of a Participant with respect to Restricted Stock issued
hereunder shall vest, and the applicable restrictions shall lapse,
in a series of three successive equal annual installments
commencing on the first anniversary of the Determination Date.
2.4 Acceleration of Awards upon Change in Control: Notwithstanding the
foregoing, unless prior to a Change in Control Event the Committee
determines that, upon its
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occurrence, benefits under any or all Awards shall not be
accelerated or determines that only certain or limited benefits
under any or all Awards shall be accelerated and the extent to
which they shall be accelerated, then upon the occurrence of a
Change in Control Event, the Awards shall be vested and the
Participant shall be entitled to the payment thereof within 75 days
after the Change in Control Event. The Award to be paid to any
Participant will be equal to (i) the Financial Performance for the
12 month period preceding the Change in Control Event times (ii)
one hundred percent (100%) plus the Strategic Adjustment or
Individual Adjustment, whichever is applicable, for the 12 month
period preceding the Change in Control Event, times the Target
Award times (iii) a fraction, the numerator of which is the number
of months completed by the Participant during the Plan Year, and
the denominator of which is 12. Any discretion with respect to
these events shall be limited to the extent required by applicable
accounting requirements in the case of a transaction intended to be
accounted for as a pooling of interests transaction. The Committee
may override the limitations on acceleration and may accord any
Participant the right to refuse any acceleration in such
circumstances as the Committee may approve.
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III. OTHER PROVISIONS
3.1 Rights of Eligible Employees, Participants and Beneficiaries:
(a) Employment Status: Status as an Eligible Employee shall not be
construed as a commitment that any Award will be made under
this Plan to an Eligible Employee or to Eligible Employees
generally.
(b) No Employment Contract: Nothing contained in this Plan (or in
any other documents related to this Plan or to any Award)
shall confer upon any Eligible Employee or Participant any
right to continue in the employ or other service of the
Company, or any Subsidiary, or constitute any contract or
agreement of employment or other service, nor shall interfere
in any way with the right of the Company, or any Subsidiary,
to change such person's compensation or other benefits or to
terminate the employment of such person, with or without
cause, but nothing contained in this Plan or any document
related hereto shall adversely affect any independent
contractual right of such person without his or her consent
thereto.
3.2 Compliance with Laws: This Plan, the granting and vesting of Awards
under this Plan and the payment of money under this Plan or under
Awards granted hereunder are subject to compliance with all,
applicable federal and state laws, rules and regulations and to
such approvals by any listing, regulatory or governmental authority
as may, in the opinion of counsel for the Company, be necessary or
advisable in connection therewith.
3.3 Withholding; Payroll Taxes: The Employer shall withhold from
payments made hereunder any taxes required to be withheld from such
payments under federal, state or local law.
3.4 Plan Amendment, Termination and Suspension:
(a) Board Authorization: The Board may, at any time, terminate or,
from time to time, amend, modify or suspend this Plan, in
whole or in part. Any Restricted Stock outstanding at that
time will be governed by the terms of the American States
Water Company Long-Term Incentive Plan.
3.5 Effective Date of the Plan: This Plan shall be effective as of
January 1, 1999.
3.6 Governing Law: Severability
(a) Choice of Law: This Plan shall be governed by, and construed
in accordance with the laws of the State of California
applicable to contracts made and performed within such State,
except as such laws may be preempted by the
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laws of the United States of America, which laws shall then
govern its effect and its construction to the extent they
preempt California law.
(b) Severability: If any provision shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the
remaining provisions of this Plan shall continue in effect.
3.7 Captions: Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate
reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any
provision thereof.
3.8 Terms: Whenever any words are used herein in the masculine, they
shall be construed as though they were used in the feminine in all
cases where they would so apply; and wherever any words are used
herein in the singular or plural, they shall be construed as though
they were used in the plural or the singular, as the case may be,
in all cases where they would so apply.
3.9 Non-Exclusivity of Plan: Nothing in this Plan shall limit or be
deemed to limit the authority of the Board or the Committee to
grant awards or authorize any other compensation.
EXECUTED this ______ day of ____________________, 1999.
AMERICAN STATES WATER COMPANY
By:
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Title:
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