SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AMERICAN STATES WATER COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class 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
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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:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
AMERICAN STATES
WATER COMPANY
[LOGO]
American States
WATER COMPANY
NOTICE OF THE 2002 ANNUAL MEETING
OF SHAREHOLDERS
AND THE
2002 PROXY STATEMENT
TABLE OF CONTENTS
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Notice of Annual Meeting of Shareholders
Information About Attending
2002 Proxy Statement................................................................................................1
General Information.................................................................................................1
o Introduction.................................................................................................1
Solicitation of Proxy and Revocability; Voting Securities...........................................................1
o Date, Time and Place of Annual Meeting.......................................................................1
o Record Date and Voting Rights................................................................................1
o Voting by Proxy..............................................................................................2
o Voting by Mail...............................................................................................3
o Voting by Telephone..........................................................................................3
o Voting by Internet...........................................................................................3
o Adjournments.................................................................................................3
o Solicitation of Proxies......................................................................................3
Proposal One -- Election of Class II Directors......................................................................4
o Nominees for Class II Directors with Terms Expiring in 2004..................................................5
o Class I Directors Whose Terms Expire in 2003.................................................................6
Certain Relationships and Related Transactions......................................................................7
Board Committees and Meetings.......................................................................................7
o Audit and Finance Committee..................................................................................7
o Nominating and Governance Committee..........................................................................8
o Compensation Committee.......................................................................................8
o Remuneration for Directors...................................................................................8
Section 16(a) Beneficial Ownership Reporting Compliance.............................................................9
Executive Officers -- Experience, Security Ownership, Compensation and Options......................................9
o Executive Experience.........................................................................................9
o Executive Security Ownership................................................................................10
o Summary of Directors and Executive Beneficially Owned Common Shares.........................................10
o Executive Compensation......................................................................................11
o Annual Incentive Plan.......................................................................................12
o Key Executive Long-Term Incentive Plan......................................................................12
o 2000 Stock Incentive Plan...................................................................................13
o Option Grants in Last Fiscal Year...........................................................................13
o Option Exercises and Holdings...............................................................................14
o Employment Contracts, Termination and Change-in-Control Arrangements........................................14
Pension Plan.......................................................................................................15
Deferred Compensation Plan for Directors...........................................................................16
Compensation Committee Interlocks and Insider Participation........................................................16
Board Committee Reports............................................................................................17
Report of the Audit and Finance Committee..........................................................................17
o General.....................................................................................................17
o Communication with Audit Committee..........................................................................17
o Independence Discussions with Audit Committee...............................................................17
o Recommendation for Inclusion in Form 10-K...................................................................17
Report of the Compensation Committee...............................................................................18
o General Philosophy..........................................................................................18
o Executive Compensation Program..............................................................................18
o CEO Compensation............................................................................................19
o Section 162(M) Limitation...................................................................................19
Stock Performance Graph............................................................................................20
Security Ownership of Certain Beneficial Owners....................................................................21
Information on Independent Public Accountants......................................................................21
Other Matters......................................................................................................21
Proposals for Next Annual Meeting..................................................................................22
o Requirements for Shareholder Proposals to be Brought Before an Annual Meeting...............................22
o Requirements for Shareholder Proposals to be Considered for Inclusion in the Company's Proxy Materials......22
Additional Information.............................................................................................22
[LOGO]
American States
WATER COMPANY
------------------------------------------
Notice of the Annual Meeting
of Shareholders
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Meeting Date Tuesday, April 30, 2002
Meeting Time 10:00 a.m., Pacific Time
Meeting Location Hilton Pasadena
168 South Los Robles Avenue
Pasadena, California
Record Date February 28, 2002
Agenda
o To elect four Class II directors to the Board of Directors of the
Company to serve until their successors are elected and qualified;
o 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
Class II directors: Jean E. Auer, N.P. Dodge, Jr., Robert F. Kathol, and Lloyd
E. Ross.
By order of the Board of Directors,
McClellan Harris III
Secretary
San Dimas, California
March 22, 2002
INFORMATION ABOUT ATTENDING
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We will hold the Annual Meeting at the Pasadena Hilton in Pasadena, California.
Shareholders must present a ticket to be admitted to the Annual Meeting. For
shareholders of record, your admission ticket is the detachable portion of
your proxy form. Please have your ticket out and available when you reach the
registration area at the Annual Meeting.
For shareholders who hold shares through a brokerage firm, bank or other
holder of record, your ticket is the copy of your latest account statement
showing your American States Water Company stock balance. Please present your
account statement to the registration area at the Annual Meeting.
DIRECTIONS TO THE HILTON PASADENA
[GRAPHIC OMITTED]
March 22, 2002 American States Water Company
630 East Foothill Boulevard
San Dimas, California 91773
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2002 Proxy Statement
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GENERAL INFORMATION
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INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation by the Board of Directors of American States Water Company (the
"Company") of proxies to be voted at the Annual Meeting of Shareholders of the
Company (the "Annual Meeting") and any adjournments thereof. This statement
and the accompanying proxy are being sent to shareholders on or about March
22, 2002.
At the Annual Meeting, shareholders will be asked to elect four Class II
directors to serve until the Annual Meeting of Shareholders held in 2004 and
until their successors are elected and qualified.
SOLICITATION OF PROXY AND REVOCABILITY; VOTING SECURITIES
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DATE, TIME AND PLACE OF ANNUAL MEETING
The Annual Meeting will be held on April 30, 2002 at 10:00 a.m., Pacific Time
at the Hilton Pasadena, 168 South Los Robles Avenue, Pasadena, California.
RECORD DATE AND VOTING RIGHTS
Only holders of record of the Company's voting securities at the close of
business on February 28, 2002 (the "Record Date") are entitled to notice of
and to vote at the Annual Meeting. At the Record Date, the Company's
outstanding voting securities were 76,800 Preferred Shares and 10,079,629
Common Shares. Each Preferred Share is entitled to one vote and each Common
Share is entitled to one-tenth of a vote. Except as otherwise provided in the
Company's Articles of Incorporation, as amended, and under applicable law,
common and preferred shareholders vote together as a single class.
Votes cast by proxy or in person at the Annual Meeting will be counted by an
inspector of election appointed by the Board of Directors to act as an
election inspector for the Annual Meeting. Shares represented by proxies that
reflect abstentions will be treated as present and entitled to vote for
purposes of determining the presence of a quorum. Abstentions, however, will
not constitute a vote "for" or "against" any matter.
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
1
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 such 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 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 four candidates for the office of
director; provided, however, that if sufficient numbers of the Company's
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 a 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.
Assuming the presence of a quorum, the shareholders present at the meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
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 voting power required to constitute a quorum.
VOTING BY PROXY
Regardless of whether or not shareholders plan to attend the meeting in
person, all shareholders of the Company are urged to use the enclosed proxy
card to vote their shares. All proxies that are properly executed and
returned, unless revoked, will be voted at the Annual Meeting in accordance
with the instructions indicated thereon or, if no direction is indicated FOR
the election of the Board's nominees as directors. The execution of a proxy
will not affect the right to attend the Annual Meeting and vote in person. A
person who has given a proxy may revoke it at any time before it is exercised
at the Annual Meeting by filing with the Company a written notice of
revocation of a proxy bearing a later date or by attendance at the Annual
Meeting and voting in person (or presenting at the meeting such written notice
of the revocation of the proxy). Attendance at the Annual Meeting will not, by
itself, revoke a proxy. The proxies may also be voted for a substitute nominee
or nominees in the event any one or more of the director nominees named under
"Item 1--Election of Directors" will be unable to serve for any reason or be
withdrawn from nomination, a contingency not now anticipated. Shares for which
duly executed proxies are received will be voted according to the Board's best
judgment upon such matters
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as may properly come before the Annual Meeting or any adjournment thereof.
VOTING BY MAIL
Shareholders may sign, date and return their proxy forms in the pre-addressed,
postage-paid envelope provided.
VOTING BY TELEPHONE
You may vote by proxy using the toll-free telephone number listed on the proxy
form.
The telephone voting procedures are designed to verify your vote using the
Control Number that is provided on each proxy form. Please see your proxy form
for specific instructions.
Shareholders whose shares are held through a brokerage firm, bank or other
holder of record may vote by telephone only if the holder of record (broker,
bank or other holder of record) offers those options.
VOTING BY INTERNET
You may vote by proxy using the Internet. The Internet address is
www.proxyvote.com and is also listed on the proxy form.
The Internet voting procedures are designed to verify your vote using the
Control Number that is provided on each proxy form. Please see your proxy form
for specific instructions.
Shareholders whose shares are held through a brokerage firm, bank or other
holder of record may vote by Internet only if the holder of record (broker,
bank or other holder of record) offers those options.
ADJOURNMENTS
The Annual Meeting may be adjourned, even if a quorum is not present, by a
majority of the votes of shareholders represented at the Annual Meeting in
person or by proxy. In the absence of a quorum at the Meeting, no other
business may be transacted at the Meeting.
Notice of the adjournment of a meeting need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken,
provided that if the adjournment is for more than 45 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting must also be given. Any business may be transacted at an
adjourned meeting, which might have been transacted at the original meeting.
SOLICITATION OF PROXIES
The accompanying proxy relating to the meeting is being solicited by the Board
of Directors of the Company for use at the Annual Meeting.
The Company will bear the entire cost of preparing, assembling, printing and
mailing proxy statements, the proxies and any additional materials, which may
be furnished by the Board to shareholders. The solicitation of proxies will be
made by the use of the U.S. postal service and may also be made by telephone,
or personally, by directors, officers and regular employees of the Company who
will receive no extra compensation for such services.
3
PROPOSAL ONE
ELECTION OF CLASS II DIRECTORS
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The Company's Articles of Incorporation provide that classification of the
Board will apply to every election of directors for so long as at least six
directors are authorized under the Company's Bylaws and the Company's Common
Shares are listed on the New York Stock Exchange. The Company's Bylaws provide
that the Board of Directors shall consist of not less than five and not more
than nine directors, with the exact number of directors currently set at
seven. So long as the Board continues to consist of at least six, but less
than nine and the Company's Common Shares are listed on the New York Stock
Exchange, directors will serve for a term of two years, and one-half of the
directors (or as near to one-half as practicable) will be elected each year.
Under the Company's Bylaws, the Board of Directors could increase the
authorized number of directors to up to nine without obtaining shareholder
approval. In the event that the number of directors increases during any
period that the Company's Common Shares are listed on the New York Stock
Exchange, the increase will be apportioned by the Board between the classes of
directors to make each class as nearly equal as possible. If the number of
authorized directors is increased to at least nine during any period that the
Company's Common Shares are listed on the New York Stock Exchange, the
directors will be apportioned by the Board among three classes, each
consisting of one-third of the directors or as close an approximation as
possible, directors will serve for a term of three years, and one-third of the
directors (or as near to one-third as practicable) will be elected each year.
If the number of authorized directors is decreased to less than five, then the
Board will cease to be classified, provided the decrease in the number of
directors cannot shorten the term of any incumbent director. Vacancies in the
Board, except those existing as a result of a removal of a director, may be
filled by a majority of the remaining directors, though less than a quorum, or
by a sole remaining director, and each director so elected will hold office
until the next annual meeting and until such director's successor has been
elected and qualified. The Company's shareholders may elect a director or
directors at any time to fill any vacancy or vacancies not filled by the
directors.
Pursuant to California law, members of the Board of Directors may be removed
by the Board of Directors for cause (defined to be a felony conviction or
court declaration of unsound mind), by the shareholders without cause or by
court order for fraudulent or dishonest acts or gross abuse of authority or
discretion. Generally, no director may be removed by the shareholders if the
votes cast against such removal (or, if done by written consent, the votes
eligible to be cast by the non-consenting shareholders) would have been
sufficient to elect such director if voted cumulatively at an election at
which the same total number of votes were cast (or, if the action is taken by
written consent, all shares entitled to vote were voted) and the entire number
of directors authorized at the time of the director's most recent election
were then being elected (the "Relevant Number of Directors"). The Relevant
Number of Directors, in the case of classified boards, is the greater of (i)
the number of directors elected at the most recent annual meeting of
shareholders and (ii) the number sought to be removed.
Four directors have been nominated for election as Class II directors for a
two-year term expiring at the end of the Annual Meeting of Shareholders in
2004, or until their successors are elected and qualified. The terms of the
remaining directors will continue as indicated below. The ages of the
directors reported below are as of April 30, 2002.
4
NOMINEES FOR CLASS II DIRECTORS WITH TERMS EXPIRING IN 2004
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The Board of Directors recommends that Shareholders vote FOR each of the
nominees for Class II directors listed below.
No nominee for election as a Class II director 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.
[PHOTO]
Jean E. Auer, Consultant to the San Francisco Estuary Project since 1990 and
retired Mayor of the town of Hillsborough, California. Mrs. Auer has
previously served as a member of the National Drinking Water Advisory Board 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 Regional Water Quality Control Boards. Mrs. Auer is on the
board of the Water Education Foundation. Mrs. Auer, age 65, is a member of the
Company's Compensation Committee and Chairperson of the Nominating and
Governance Committee and has served as a director of the Company since 1995.
[PHOTO]
N.P. Dodge, Jr., President of the N.P. Dodge Company, a full service real
estate company in Omaha, Nebraska since September 1978. Mr. Dodge is a
director of the Omaha Public Power District and is a director of Bridges
Investment Fund. Mr. Dodge, age 65, is a member of the Company's Audit and
Finance and Compensation committees and has served as a director of the
Company since 1990.
[PHOTO]
Robert F. Kathol, Executive Vice President of Kirkpatrick, Pettis, Smith,
Polian, Inc., an investment banking firm in Omaha, Nebraska since 1985. Mr.
Kathol, age 61, is a member of the Company's Compensation Committee and is
Chairperson of the Audit and Finance Committee and has served as a director of
the Company since 1995.
[PHOTO]
Lloyd E. Ross, Managing Partner of Invermex, L.P., a company developing hotels
in the southwestern United States and Northern Mexico since 1997. 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 is also a director of PacifiCare Health Systems. Mr.
Ross, age 61, has been Chairman of the Board of Directors of the Company since
April 1999 and has served as a director of the Company since 1995.
5
CLASS I DIRECTORS WHOSE TERMS EXPIRE IN 2003
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[PHOTO]
James L. Anderson, President, since November 2000, of Americo Financial
Services, Inc., located in Austin, Texas and Senior Vice President of Americo
Life Inc. since September 1996. Prior to its acquisition by Americo Life Inc.,
Mr. Anderson had served for ten years as President and Chief Executive Officer
of Fremont Life Insurance Company. From 1975 to 1982, Mr. Anderson served as
President and Chief Operating Officer of National American Insurance Company
of California, a property and casualty company. Mr. Anderson, age 58, is a
member of the Company's Nominating and Governance Committee and Chairperson of
the Compensation Committee and has served as a director of the Company since
1997.
[PHOTO]
Anne M. Holloway, Having served as a Senior Consultant to Navigant Consulting,
Inc., a provider of consulting services to Fortune 500 companies, governments,
and governmental agencies from 1999 to 2000. Mrs. Holloway retired from 25
years of active service in the finance profession. Mrs. Holloway was employed
by Peterson Worldwide, LLC from 1998 to 1999 and by the Resolution Group, a
subsidiary of Xerox Financial Services, from 1992 to 1998 serving in various
executive capacities. Prior to joining the Resolution Group, Mrs. Holloway was
employed for nine years in various management positions with Shawmut National
Corporation, a financial service company. Mrs. Holloway, age 50, is a member
of the Company's Audit and Finance, Nominating and Governance and Compensation
Committees and has served as a director of the Company since 1998.
[PHOTO]
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 58, is a member of the Company's Nominating and
Governance Committee and has served as a director of the Company since 1990.
6
The following table sets forth, as of February 28, 2002, the beneficial
ownership of Common Shares of the Company by each of the Company's current
directors. No current director owns any of the Company's Preferred Shares.
DIRECTORS' BENEFICIAL OWNERSHIP OF COMMON SHARES TABLE
- -------------------------------- -------------------------------- -----------------------------
Amount and Nature of Percent of Class
Name Beneficial Ownership Beneficially Held
- -------------------------------- -------------------------------- -----------------------------
James L. Anderson 2,396 *
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Jean E. Auer 3,425 *
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N.P. Dodge, Jr. 4,000 *
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Anne M. Holloway 1,020 *
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Robert F. Kathol 2,300 *
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Lloyd E. Ross 1,705 *
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Floyd E. Wicks 19,136(1) *
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*Less than one percent
(1) Includes shares that maybe acquired upon exercise of Options
and share pursuant to the LTIP as of April 30, 2002
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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No director, nominee, executive officer or any member of their family, or any
holder of more than five percent of the Company's voting securities had any
indebtedness to the Company, any business relationship with the Company or any
transaction with the Company in 2001.
BOARD COMMITTEES AND MEETINGS
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During 2001, directors met as a Board four times. No director attended less
than 75% of the meetings of the Board. The Board of Directors has an Audit and
Finance Committee, a Nominating and Governance Committee, and a Compensation
Committee. Each Committee operates under a charter, which identifies the
purpose of the Committee and its primary functions and responsibilities. The
Board of Directors may establish, from time-to-time, other committees on an ad
hoc basis to address strategic or business related opportunities. Members of
such ad hoc committees are remunerated for their services in accordance with
policies of the Board. The Chairman of the Board is an ex-officio member of
all committees of the Board.
AUDIT AND FINANCE COMMITTEE
The Audit and Finance Committee provides advice and assistance to the Board of
Directors on accounting and financial reporting practices of the Company. The
Committee 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. The Committee 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.
The Audit and Finance Committee conducts its responsibilities pursuant to its
Charter, adopted by the Board of Directors on January 29, 2001. Members of the
Audit and Finance Committee are "independent" under New York Stock Exchange
Listing Standards.
During 2001, the Audit and Finance Committee, consisting of Robert F. Kathol -
Chairperson, N.P. Dodge, Jr. and Anne M. Holloway, met seven times to review
and discuss with management, the internal auditor and the Company's
independent auditors, the
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interim financial statements, annual audited financial statements and certain
other matters. The Committee has received disclosures from and discussed with
the Company's independent auditors, Arthur Andersen LLP, the auditors'
independence as required by Independence Standards Board Standard No. 1. No
director attended less than 75% of the meetings of the Audit and Finance
Committee.
NOMINATING AND GOVERNANCE COMMITTEE
The Nominating and Governance Committee assesses qualifications of and makes
recommendations as to candidates to fill vacancies on the Board of Directors.
The Nominating and Governance Committee will consider persons for election to
the Board of Directors who are recommended by shareholders. In order to submit
a recommendation to the Nominating and Governance Committee, such
recommendation must be submitted in writing and addressed to the Office of the
Secretary at the Company's corporate headquarters.
During 2001, the Nominating and Governance Committee, consisting of Jean E.
Auer - Chairperson, James L. Anderson and Anne M. Holloway, met five times. No
director attended less than 75% of the meetings of the Nominating and
Governance Committee.
COMPENSATION COMMITTEE
The Compensation Committee reviews and makes recommendations to the Board of
Directors as to appropriate compensation for the President and other executive
officers of the Company and determines the awards to be made under the
Company's Annual Incentive Plan and the 2000 Stock Incentive Plan.
During 2001, the Compensation Committee, consisting of James L. Anderson -
Chairperson, Jean E. Auer, N.P. Dodge, Jr., Anne M. Holloway and Robert F.
Kathol met five times. No director attended less than 75% of the meetings of
the Compensation Committee.
REMUNERATION FOR DIRECTORS
Outside directors (presently all directors except Mr. Wicks) are currently
paid an annual retainer of $15,000, payable in equal monthly installments. In
addition, each such director receives a $1,200 fee for each meeting attended.
The regular and organizational meetings of the board are counted as one
meeting for purposes of the per meeting fee. In addition, each outside
director who is a member of the Compensation Committee, Nominating and
Governance Committee or the Audit and Finance Committee receives a $1,000 fee
for each meeting attended. The chairperson of each such committee, if an
outside director, receives an additional fee of $1,000 for each committee
meeting attended. Each director is reimbursed for reasonable and necessary
travel, lodging and other expenses incurred in the performance of their
duties.
Chairman of the Board Ross earned $75,000 as chairperson for the year 2001.
The present annual compensation for the position of Chairman of the Board of
Directors is $75,000. Neither Mr. Ross nor Mr. Wicks received separate
compensation as directors.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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The Company has adopted procedures to assist its directors and executive
officers in complying with Section 16(a) of the Securities Exchange Act of
1934, as amended, which includes assisting in the preparation of forms for
filing.
For 2001, all but two of the reports were timely filed. The sale by Mr.
Saddoris, an executive officer of the Company, of 354 and 116 Common Shares on
7/26/01 and 8/8/01 respectively, were inadvertently not reported timely. The
purchases were reported on Mr. Saddoris' Form 5 for 2001.
EXECUTIVE OFFICERS
EXPERIENCE, SECURITY OWNERSHIP, COMPENSATION AND OPTIONS
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EXECUTIVE EXPERIENCE
The Company had eight executive officers as of March 22, 2002. Information
regarding the identities and business experience is shown in the following
table and footnotes thereto:
EXECUTIVE EXPERIENCE TABLE
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Principal Occupation and Experience During the Past Five Held Current
Name Years Age Position Since
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Floyd E. Wicks (1) President and Chief Executive Officer. 58 April 1992
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McClellan Harris III (1) Chief Financial Officer, Vice President Finance, 50 April 1997
Treasurer, Corporate Secretary. Vice President and
Treasurer from October 1996. Treasurer from April 1994.
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Joel A. Dickson (2) Vice President Administration. Vice President Business 49 April 2001
Development from April 1997. Vice President Customer
Service of Region III from April 1994.
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Donald K. Saddoris (3) Vice President and Chief of Operations. Vice President 58 October 2000
Customer Service of Region I since 1994.
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Denise L. Kruger (4) Vice President Customer Service of Region II. Vice 38 October 2001
President Water Quality from January 1998. Manager
Quality Assurance from January 1997. Water Quality
Manager from October 1992.
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James B. Gallagher (4) Vice President Customer Service of Region III. Chief 47 April 1997
Financial Officer, Vice President Finance and Secretary
from April 1994.
- -------------------------------------------------------------------------------------------------------------------------
Joseph F. Young (4) Vice President Governmental Relations and Public 56 October 2001
Information. Vice President Customer Service of Region
II from January 1999. Vice President Government Affairs
from April 1997. Vice President Regulatory Affairs from
April 1994.
- -------------------------------------------------------------------------------------------------------------------------
Susan L. Conway (4) Vice President Regulatory Affairs. Manager of Regulatory 41 January 1998
Affairs from February 1990.
- -------------------------------------------------------------------------------------------------------------------------
(1) Holds same titles in Southern California Water Company, American States
Utility Services, Inc. and Chaparral City Water Company
(2) Holds titles of Vice President Customer & Operations Support in Southern
California Water Company and Vice President of Administration in Chaparral
City Water Company
(3) Holds title of Vice President-Customer Service of Region I in Southern
California Water Company and Vice President-Customer Service of Chaparral
City Water Company
(4) Officer of Southern California Water Company only
- --------------------------------------------------------------------------------
EXECUTIVE SECURITY OWNERSHIP
Information regarding the number of common shares beneficially owned by the
eight executive officers is shown in the following table. The holdings include
shares that the officers will have the right to acquire as of April 30, 2002
through the exercise of stock options under the Company's 2000 Stock Incentive
Plan.
EXECUTIVE SECURITY OWNERSHIP TABLE
- ---------------------------------------------------------------------------------------------------------------------------
Common Shares Option Shares Unvested LTIP Percent of
Name Owned (1) Shares (2) Total Class
- ---------------------------------------------------------------------------------------------------------------------------
Floyd E. Wicks 10,359 8,000 777 19,136 *
- ---------------------------------------------------------------------------------------------------------------------------
McClellan Harris III 5,568 4,000 315 9,883 *
- ---------------------------------------------------------------------------------------------------------------------------
Joel A. Dickson 4,293 4,000 404 8,697 *
- ---------------------------------------------------------------------------------------------------------------------------
Donald K. Saddoris 7,580 4,000 355 11,935 *
- ---------------------------------------------------------------------------------------------------------------------------
Denise L. Kruger 3,644 4,000 220 7,864 *
- ---------------------------------------------------------------------------------------------------------------------------
James B. Gallagher 3,592 4,000 167 7,759 *
- ---------------------------------------------------------------------------------------------------------------------------
Joseph F. Young 15,151 4,000 327 19,478 *
- ---------------------------------------------------------------------------------------------------------------------------
Susan L. Conway 2,354 4,000 220 6,574 *
- ---------------------------------------------------------------------------------------------------------------------------
* Less than one percent
(1) Includes all Option shares that may be acquired upon exercise of Options
under the Company's 2000 Stock Incentive Plan as of April 30, 2002.
(2) Executive officers have voting but not investment power with respect to these
Common Shares.
- --------------------------------------------------------------------------------------------------------------------------
SUMMARY OF DIRECTORS AND EXECUTIVES BENEFICIALLY OWNED COMMON SHARES
Directors and executive officers of the Company as a group beneficially owned
106,172 Common Shares of the Company, inclusive of Common Shares that may be
acquired upon exercise of Options awarded under the 2000 Stock Incentive Plan
and Common Shares issued under the Key Executive Long-Term Incentive Plan as
of April 30, 2002. The combined total 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.
EXECUTIVE COMPENSATION
The following table sets forth information on compensation of the Company's
Chief Executive Officer and the four most highly compensated executive
officers of the Company or Southern California Water Company for the three
most recent calendar years:
EXECUTIVE COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------
Number of
Shares
Underlying Short Term
Annual Long Term Options Comp. AIP
Name and Principal Comp. Comp. LTIP Granted (3) Payouts (4) All Other
Position Year Salary (1)($) Payouts (2) ($) (#) ($) Comp. (5) ($)
- ---------------------------------------------------------------------------------------------------------------------------
Floyd E. Wicks -- 2001 $376,566 - 8,000 $162,288 $6,610
President and Chief 2000 355,205 $135,943 8,000 158,949 9,513
Executive Officer 1999 346,479 - - - 9,067
- ---------------------------------------------------------------------------------------------------------------------------
McClellan Harris III -- 2001 205,122 - 4,000 67,738 7,926
Chief Financial Officer, 2000 200,125 51,461 4,000 64,929 8,190
Vice President Finance, 1999 187,912 - - - 6,943
Treasurer and Corporate
Secretary
- ---------------------------------------------------------------------------------------------------------------------------
Joel A. Dickson -- 2001 206,223 - 4,000 67,738 7,926
Vice President 2000 199,918 65,734 4,000 67,103 8,190
Administration 1999 195,590 - - - 7,805
- ---------------------------------------------------------------------------------------------------------------------------
Donald K. Saddoris -- 2001 201,710 - 4,000 51,056 7,926
Vice President and Chief 2000 182,285 57,777 4,000 39,716 8,203
of Operations 1999 171,463 - - - 7,818
- ---------------------------------------------------------------------------------------------------------------------------
James B. Gallagher -- 2001 166,820 - 4,000 37,162 1,125
Vice President Customer 2000 160,591 54,428 4,000 36,653 7,392
Service of Region III 1999 159,270 - - - 7,291
- ---------------------------------------------------------------------------------------------------------------------------
(1)The executive officers of the Company receive certain perquisites,
including the personal use of a Company-owned vehicle and personal
computer. The aggregate amount of such perquisites received by each named
officer, in the case of any such named officer, does not exceed 10% of the
total annual salary of such officer.
(2)The Company had a Key Executive Long-Term Incentive Plan (LTIP), the
provisions of which became effective January 1, 1995. Under the LTIP,
benefits were paid in the year following the end of a three-year
performance cycle. The LTIP was terminated in May 2000 with the approval of
the 2000 Stock Incentive Plan. With termination of the LTIP, benefits
accrued under the 1997-1999 performance cycle and benefits accrued under
the partially completed 1998-2000 and 1999-2001 performance cycles then
pending under the LTIP were paid out at that time. The accrued benefits
paid under the one completed three-year performance cycle and the two
partially completed performance cycles were paid in shares of the Company's
common stock. The shares vest equally over a three-year period. There will
be no future payments made under the LTIP.
(3)The 2000 Stock Incentive Plan (the "2000 Plan") was approved at the 2000
Annual Meeting. The purpose of the 2000 Plan is to provide stock-based
incentives as a means of promoting the success of the Company by
attracting, retaining and aligning the interests of employees (including
officers) with those of shareholders generally.
(4)The Company adopted an Annual Incentive Plan (AIP) for executive officers
and managers in 2000. Payouts under the AIP, which are made in cash or
restricted stock pursuant to the provisions of the AIP, are based on the
prior year's operating results. All amounts paid in 2001 were paid in cash.
(5)Includes payment by the Company of the premium on business travel and
accident policy of $99 per person per year for 1999 and 2000 and $86 for
2001, and payment by the Company of the premium for group life insurance of
$190 per person for 1999, $183 for 2000 and $190 for 2001. The balance
represents the Company's matching contribution to the 401(k) Plan for the
benefit of each named officer.
11
ANNUAL INCENTIVE PLAN
The Company has adopted an Annual Incentive Plan ("AIP") for executive
officers and managers of the Company ("Eligible Participants"). The purpose of
the AIP is to compensate Eligible Participants of the Company for increasing
shareholder value and supporting future growth of the Company. Under the terms
of the AIP, awards may be granted annually to an Eligible Participant in
accordance with the terms of the AIP. If an award is granted to an Eligible
Participant, a target award will be established for that Eligible Participant
by the Compensation Committee based upon a percentage of that Eligible
Participant's wages, exclusive of overtime and bonuses, for the preceding
calendar year. The target award to be paid to that Eligible Participant may be
adjusted by (i) a factor reflecting the Company's financial performance for
the preceding calendar year and (ii) a factor reflecting certain strategic
performance initiatives for the preceding calendar year, both of which would
be multiplied times the target award for that Eligible Participant. The
financial performance component is based on the Company's actual return on
rate base as a percentage of authorized return on rate base, less a
maintenance adjustment, if maintenance costs are significantly less than
estimated for rate base purposes. The strategic adjustment factor is based
upon achieving certain strategic goals established by the Compensation
Committee.
The Compensation Committee has established the financial performance component
for the year 2001 based on a schedule ranging from a financial performance
percentage of 125% if the actual return on rate base is more than 105% of
authorized return on rate base to 0% if the actual return on rate base is less
than 94%. The Compensation Committee has established the strategic adjustment
component for the year 2001 on the basis of a schedule ranging from 25% if
there is an increase in Company operating revenues as a result of acquisitions
of more than 33% to 0% if there is an increase in Company operating revenues
as a result of acquisitions of less than 10%.
Under the terms of the AIP, the Company's external auditors for the year in
which the awards were granted will pay awards after completion of a review of
the award calculations. If the awards are less than 20% of the Eligible
Participant's annual wages, the award will be paid in cash. If the awards are
20% or more of the Eligible Participant's annual wages, the awards may be paid
in restricted stock pursuant to the terms of the 2000 Stock Incentive Plan.
The restrictions applicable to the restricted stock will lapse in a series of
three successive annual installments commencing on the first anniversary date
after the end of the plan year for which the award was granted unless the
Compensation Committee provides otherwise. Payment of the award under the AIP
will be accelerated upon a change in control of the Company, as defined in the
Company's 2000 Stock Incentive Plan.
Based on the performance measurements in the AIP for the year ended December
31, 2001, the Compensation Committee approved awards to Messrs. Wicks, Harris,
Dickson, Saddoris and Gallagher of $111,581, $50,644, $50,644, $50,644 and
$41,677, respectively.
KEY EXECUTIVE LONG-TERM INCENTIVE PLAN
The Company implemented a Key Executive Long Term Incentive Plan effective as
of January 1, 1995 (see footnote (2) to the Executive Compensation Table).
With the approval of the 2000 Stock Incentive Plan in March 2000, the LTIP was
terminated. All accrued benefits for the completed 1997-1999 Performance Cycle
and the partially completed 1998-2000 Performance Cycle and 1999-2001
Performance Cycle were paid out in 2000 in Common Shares of the Company,
subject to vesting.
2000 STOCK INCENTIVE PLAN
The 2000 Stock Incentive Plan (the "2000 Plan") was approved at the 2000
Annual Meeting. The purpose of the 2000 Plan is to provide stock-based
incentives as a means of promoting the success of the Company by attracting,
retaining and aligning the interests of employees (including officers) with
those of shareholders generally. The 2000 Plan authorizes the grant of Options
and Restricted Stock, collectively "Awards".
The Board of Directors of the Compensation Committee administers the 2000
Plan. The Board retains the power to determine the particular eligible persons
to whom Awards will be granted. The Board or the Compensation Committee
authorizes all Awards to eligible employees.
Generally speaking, an Option will expire, and any other Award will vest or be
forfeited, not more than 10 years after the date of grant. The Compensation
Committee determines the applicable vesting schedule for each Award. Vesting
will be accelerated under the same circumstances in which a change in control
occurs pursuant to the Company's change-in-control agreements with its
executive officers. See the section entitled "Employment Contracts,
Termination and Change-in-Control Arrangements."
The maximum number of Common Shares that may be issued pursuant to Awards
granted to Eligible Employees under the 2000 Plan is limited to 250,000
shares. The maximum number of Common Shares that may be issued pursuant to
Incentive Stock Options is 125,000 shares. The maximum number of shares
subject to Awards issued during any calendar year to any individual is limited
to 15,000. Each of the four foregoing numerical limits is subject to
adjustment pursuant to anti-dilution provisions of the 2000 Plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to all options granted
to the named executive officers during 2001.
OPTION GRANTS IN LAST FISCAL YEAR TABLE
- ------------------------------------------------------------------------------------------------------------------------
Number of Percentage of
Shares Total Options
Underlying Granted to Grant Date
Options Employees in Exercise Present Value
Employee Name Granted (#) Fiscal Year Price ($/Sh) Expiration Date (1)(2)(3)
- ------------------------------------------------------------------------------------------------------------------------
Floyd E. Wicks 8,000 17.4% $34.81 January 1, 2011 $87,160
- ------------------------------------------------------------------------------------------------------------------------
McClellan Harris III 4,000 8.7% $34.81 January 1, 2011 $43,580
- ------------------------------------------------------------------------------------------------------------------------
Joel A. Dickson 4,000 8.7% $34.81 January 1, 2011 $43,580
- ------------------------------------------------------------------------------------------------------------------------
Donald K. Saddoris 4,000 8.7% $34.81 January 1, 2011 $43,580
- ------------------------------------------------------------------------------------------------------------------------
James B. Gallagher 4,000 8.7% $34.81 January 1, 2011 $43,580
- ------------------------------------------------------------------------------------------------------------------------
(1) The Black-Scholes option-pricing model was used to estimate the grant date
present value of the options. Assumptions for options granted are as
follows: 30.5% volatility; risk free rate of return of 5.7% based on
ten-year U.S. Treasury securities; dividend yield 4.2% and an estimated
period to exercise of 10 years.
(2) One-third of the stock options granted to the named executive become
exercisable on each of the first three anniversaries of the grant date, but
may be exercised earlier if there is a change in control of the Company as
defined under "Employment Contracts, Termination and Change-In-Control
Arrangements" below. The Company has not granted any stock appreciation
rights or other types of awards. No options were exercised by an executive
officer in 2001.
(3) These values are neither predictions nor indications of what the Company
believes the market value of its Common Shares will be. The ultimate values
of the options will depend on the future market prices of the Common Shares,
which cannot be forecasted with reasonable accuracy. The actual value, if
any, that an optionee will recognize on exercise of an option will depend on
the difference between the market value of the Common Shares on the date the
option is exercised and the applicable exercise price.
13
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning the aggregate value of
exercised and unexercised options held by the executive officers of the
Company. Value at December 31, 2001 is measured as the difference between the
exercise price and fair market value on December 31, 2001.
AGGREGATED OPTION EXERCISES AND HOLDINGS TABLE
- -------------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised In the
Options Held at Money Options Held at
Shares December 31, 2001 December 31, 2001
Acquired on Value --------------------------------- ---------------------------------
Employee Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------
- ------------------------- --------------- ----------- --------------- ----------------- --------------- -----------------
Floyd E. Wicks - - 2,640 13,360 $9,768 $20,952
- -------------------------------------------------------------------------------------------------------------------------
McClellan Harris III - - 1,320 6,680 $4,884 $10,476
- -------------------------------------------------------------------------------------------------------------------------
Joel A. Dickson - - 1,320 6,680 $4,884 $10,476
- -------------------------------------------------------------------------------------------------------------------------
Donald K. Saddoris - - 1,320 6,680 $4,884 $10,476
- -------------------------------------------------------------------------------------------------------------------------
James B. Gallagher - - 1,320 6,680 $4,884 $10,476
- -------------------------------------------------------------------------------------------------------------------------
EMPLOYMENT CONTRACTS, TERMINATION AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company is an at-will employer and none of the executive officers has an
employment contract with the Company. Each of the executive officers of the
Company is a party to a change in control agreement which provides for certain
benefits in the event of a change in control of the Company if the executive
officer's employment with the Company or Southern California Water Company is
terminated other than for cause or disability or the executive terminates
employment for good reason. A change in control under these agreements will
generally include (i) an acquisition by certain persons of more than 50% of
the voting securities of the Company or Southern California Water Company,
(ii) certain changes in a majority of the Board of Directors of the Company or
Southern California Water Company, (iii) certain dissolutions or liquidations
of the Company or Southern California Water Company, or (iv) certain mergers
or consolidations or sales of all or substantially all of the assets of the
Company or Southern California Water Company, in any case involving more than
a 50% change in ownership. An executive may terminate his or her employment
for good reason if the executive is assigned duties inconsistent in any
respect with the executive's position or the executive is not re-appointed to
the same position following the change in control, the executive's salary or
benefits are reduced or the executive is located at an office that increases
the distance from the executive's home by more than 35 miles. The executive
will be entitled to the following benefits: a cash payment equal to 2.99 times
the executive's highest annual base salary during the preceding three years
and an amount equal to the difference between the single sum actuarial
equivalent of the executive's accrued benefits under the Company's Pension
Plan and Pension Restoration Plan and the single sum actuarial equivalent of
the executive's accrued benefits under such plans if the executive was
credited with two additional years of service at the executive's highest
annual rate of compensation during the past three years. Coverage under the
Company's health and welfare benefit plans would also be extended to these
individuals for a period of 24 months after termination under the
circumstances previously described.
14
PENSION PLAN
- --------------------------------------------------------------------------------
Southern California Water Company maintains a noncontributory, defined benefit
pension plan. Benefits are determined under a formula applied uniformly to all
employees, regardless of position, and amounts depend on length of service at
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, excluding Social Security
deductions, for employees in the Southern California Water Company Pension
Plan and the Southern California Water Company Pension Restoration Plan.
PENSION PLAN TABLE
- ------------------------------------------------------------------------------------------------------------------------
Average Annual
Salary for Highest Benefits Based on Length of Service
- ------------------------------------------------------------------------------------------------------------------------
Consecutive Five Years 15 Years 20 Years 25 Years 30 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
- ------------------------------------------------------------------------------------------------------------------------
175,000 52,500 70,000 87,500 105,000 122,500 140,000
- ------------------------------------------------------------------------------------------------------------------------
200,000 60,000 80,000 100,000 120,000 140,000 160,000
- ------------------------------------------------------------------------------------------------------------------------
225,000 67,500 90,000 112,500 135,000 157,500 180,000
- ------------------------------------------------------------------------------------------------------------------------
250,000 75,000 100,000 125,000 150,000 175,000 200,000
- ------------------------------------------------------------------------------------------------------------------------
275,000 82,500 110,000 137,500 165,000 192,500 220,000
- ------------------------------------------------------------------------------------------------------------------------
300,000 90,000 120,000 150,000 180,000 210,000 240,000
- ------------------------------------------------------------------------------------------------------------------------
The executive officers of the Company in 2001 have the following credited
years of service under the pension plan:
---------------------------------------------------------
Name Years of Service
---------------------------------------------------------
Floyd E. Wicks 13
---------------------------------------------------------
McClellan Harris III 11
---------------------------------------------------------
Joel A. Dickson 11
---------------------------------------------------------
Donald K. Saddoris 34
---------------------------------------------------------
James B. Gallagher 14
---------------------------------------------------------
The Plan provides an early retirement option for those employees the sum of
whose age and number of years of service equals at least 90.
The Southern California Water Company Pension Restoration Plan supplements
retirement benefits payable to certain participants in the Southern California
Water Company Pension Plan by making up benefits, which are reduced by virtue
of Sections (a)(17) of 415 of the Internal Revenue Code of 1986, as amended.
The Company has a Retirement Plan for Non-Employee Directors (the
"Non-Employee Directors Plan") of the Company. This Non-Employee Directors
Plan provides annual benefits to an eligible director in an amount
15
equal to the annual retainer in effect at the director's date of retirement.
Benefits are payable in monthly installments for a period equal to the
shortest of (a) the period he or she was a director or (b) 10 years. In the
case of a director's death, benefits will continue to be received by that
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,
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, 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 Board at the annual shareholders' meeting occurring on or next following
such director's 72nd birthday, and to accept nomination as a director if
requested by the Board (and to serve if so nominated) for at least 10 years
after his or her first election to the Board. The Non-Employee Directors Plan
contains change-in-control provisions, which provide for payment of an amount
equal to ten years of retainer discounted at 6%. A change in control under the
Non-Employees Directors Plan will occur in the same circumstances in which a
change in control will occur under the Company's change-in-control
arrangements with its executive officers.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
- -------------------------------------------------------------------------------
Under the Company's Deferred Compensation Plan for Directors, directors are
entitled to defer a portion of their compensation until specified times after
the deferral. Interest accrues on amounts deferred under this plan. None of
the directors or nominees has currently deferred any income under the Deferred
Compensation Plan for Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
- -------------------------------------------------------------------------------
All of the Company's directors, except Mr. Wicks, are members of the
Compensation Committee. Mr. Ross, as Chairman of the Board, serves as an
ex-officio member of the Compensation Committee. Mr. Ross is, in his capacity
as Chairman, an officer of the Company although he 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 recommends Mr. Ross's compensation as
Chairman of the Board. The Board of Directors determines Mr. Ross's
compensation. No other member of this Committee is a current or former officer
or employee of the Company or any of its subsidiaries or affiliates. The
Compensation Committee's report on executive compensation is set forth below
under "Board Committee Reports-Report on Executive Compensation".
16
BOARD COMMITTEE REPORTS
REPORT OF THE AUDIT AND FINANCE COMMITTEE
- --------------------------------------------------------------------------------
The Audit and Finance Committee ("the Committee") operates under a written
charter adopted by the Board of Directors and is composed of three directors -
N.P. Dodge, Jr., Anne M. Holloway and Robert F. Kathol. The members of the
Committee have been determined to be independent and financially literate (as
independence and financial literacy is defined by the New York Stock Exchange
listing standards) by the Board of Directors. Lloyd E. Ross, Chairman of the
Company's Board of Directors is an ex-officio member of the Committee.
GENERAL
The Committee reviews the overall scope and plans for the respective audits of
the internal and independent auditors. The Committee meets with the internal
and independent auditors, with and without management present, to discuss the
results of their examinations, their evaluation of the internal controls and
the overall quality of the Company's financial reporting. The Committee
oversees the Company's financial reporting processes on behalf of the Board of
Directors. Management has primary responsibility for the Company's financial
statements, internal controls and the financial reporting process. The
independent accountants are responsible for performing an independent audit of
the Company's consolidated financial statements in accordance with generally
accepted auditing standards and to issue a report thereon. The Committee's
responsibility is to monitor and oversee these processes. The independent
auditors report directly to the Committee and the Board of Directors.
COMMUNICATION WITH AUDIT COMMITTEE
In this context, the Committee has met and held discussions with management
and the independent accountants. Management represented to the Committee that
the Company's internal controls have no material weakness and that the
consolidated financial statements were prepared in accordance with generally
accepted accounting principles, and the Committee has reviewed and discussed
the consolidated financial statements with management and the independent
accountants. The Committee discussed with the independent accountants matters
required to be discussed by Statement on Auditing Standards No. 61.
INDEPENDENCE DISCUSSIONS WITH AUDIT COMMITTEE
The Company's independent accountants also provided to the Committee the
written disclosures required by Independence Standards Board Standard No. 1,
and the Committee discussed with the independent accountants that firm's
independence.
RECOMMENDATION FOR INCLUSION IN FORM 10-K
Based upon the Committee's discussion with management, the independent
accountants, and the Committee's review of the representations of management,
and the report of the independent accountants to the Committee, the Committee
recommended that the Board of Directors include the audited consolidated
financial statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2001 filed with the Securities and Exchange Commission.
Audit Committee
---------------
Robert F. Kathol - Chairperson
N.P. Dodge, Jr. Anne M. Holloway
17
REPORT OF THE COMPENSATION COMMITTEE
- -------------------------------------------------------------------------------
The Compensation Committee operates under a written charter adopted by the
Board of Directors and is composed of five independent directors - James L.
Anderson, Jean E. Auer, N.P. Dodge, Jr., Anne M. Holloway, and Robert F.
Kathol. Lloyd E. Ross, Chairman of the Corporation's Board of Directors, is an
ex-officio member of the Committee.
The primary responsibility of the Compensation Committee is to review and make
recommendations to the Board of Directors as to the appropriate level of
compensation for the executive officers of the Company, including the Chairman
of the Board.
GENERAL PHILOSOPHY
In general, the executive compensation program is designed to reward, motivate
and retain the skilled management necessary to achieve the Company's goals of
increasing shareholder value and maintaining leadership position within the
industry. The Committee has established as its objective the design and
implementation of a compensation program for executives that will (i) provide
fair, equitable and reasonable compensation, (ii) reward excellent team and
individual job performance and abilities, and (iii) attract, retain and
motivate talented and experienced executives. In making its recommendations to
the Board, the Compensation Committee takes into account the fact that both
the California Public Utilities Commission and the Arizona Corporation
Commission review executive salaries for reasonableness. Moreover, the
Committee recognizes that, as a holding company of regulated public utilities,
financial performance of the Company is constrained by and dependent upon not
only the regulatory process but also a number of other factors beyond the
Company's immediate control, such as weather, water quality and water supply.
As a result, executive compensation is based on a number of subjective and
objective factors beyond the recent financial performance of the Company.
EXECUTIVE COMPENSATION PROGRAM
In determining individual compensation, the Committee considered the executive
officer's duties, the quality of his or her performance of those duties, the
importance of the position, the contribution that each individual has made to
the Company's overall performance and its strategic positioning for the
future. The Committee also considered whether an executive officer's duties
have expanded or otherwise materially changed from the previous year, the
officer's experience and value to the Company and the extent and frequency of
prior adjustments to that officer's salary. The Committee retains outside
consultants and executive compensation specialists in evaluating the current
compensation program and in implementing any changes. For executives other
than the Chief Executive Officer, the Committee may also consider
recommendations made by the Chief Executive Officer.
Total compensation consists of three components - base salary, short-term
incentives in the form of cash bonuses and long-term incentives in the form of
stock options. Adjustment to base salaries, after consideration of all
relevant factors, allow for annual adjustments and avoid wide fluctuations in
compensation from year to year. Salary ranges are set by periodic comparison
to rates of pay for comparable positions within the utility industry and
individual salaries are adjusted based on external salary levels, individual
performance and changes in responsibilities.
The Committee bases executive compensation not only on base salary, but
believes that executives should have the opportunity to earn a significant
amount of variable pay based on the short and long-term performance of the
18
Company. Including all forms of compensation, the executive total annual
compensation opportunity is such that at maximum performance levels, base
salary plus awards under the Company's existing Annual Incentive Plan and the
Stock Incentive Plan will be between the 60th and 75th percentiles of certain
identified companies within the utility industry (the "Competitive Target
Level"). The Committee believes that stock-based incentives promote the
success of the Company by attracting, motivating, rewarding, retaining and
aligning the interests of executive officers with those of shareholders
generally.
On a total company basis, reported net income in 2001 was $20.4 million or
$2.02 per share ($2.00 per diluted share) compared with net income of $18.0
million or $1.92 per share ($1.91 per diluted share) reported last year. The
financial results reported for 2001 reflect significant management time
addressing cost issues associated with recovery of electric power costs and
the Committee believes that through the cash preservation plan and other
measures implemented by management that the Company was able to continue its
operations to provide reliable and safe water and electric services to its
customers. In addition to its operating performance under extraordinary
conditions, the Company's stock price demonstrated good market performance
during the year, reaching a record high of $39.60 per share. Based on this
level of performance, the Committee believes that total compensation for
executives consisting of base salaries; annual incentives and long-term
incentives will remain within the Competitive Target Level.
CEO COMPENSATION
Floyd E. Wicks has been President and Chief Executive Officer of the Company
since 1992. As with the compensation of the Company's other executive
officers, the Committee has chosen not to adopt a direct formula approach to
determining Mr. Wicks' base salary. Rather, the Committee reviewed a number of
objective and subjective measures including the performance of the Company as
a whole, his effectiveness in addressing local, industry-wide issues and
specific issues facing the Company, business development, the Company's
immediate and long-term financial health and the performance of the Company's
stock price. After the Committee's deliberations and review of the Company's
performance in 2001, the Committee recommended and the Board of Directors
authorized that Mr. Wicks' annual salary be set at $365,000, effective for the
first pay period in January 2002. The Committee determined that, including
base salary, maximum payouts under the Annual Incentive Plan and options
granted under the Stock Incentive Plan would place Mr. Wicks' total
compensation within the Competitive Target Level.
SECTION 162(M) LIMITATION
The Committee has reviewed the Company's compensation structure in light of
Section 162(m) of the Internal Revenue Code (the "Code") which limits, subject
to limited exceptions, the amount of compensation that the Company may deduct
from its taxable income for any year to $1,000,000 for any of its five most
highly compensated executives. In 2001, no executive officer's compensation
exceeded the limitation set by Section 162(m), and therefore such limitation
is presently inapplicable to the Company. The Committee will address this
limitation when and if it becomes meaningful.
Compensation Committee
----------------------
James L. Anderson - Chairperson
Jean E. Auer N.P. Dodge, Jr.
Anne M. Holloway Robert F. Kathol
19
STOCK PERFORMANCE GRAPH
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The following graph compares the Company's cumulative total shareholder return
on its Common Shares with the cumulative total return of (i) the Standard &
Poor's 500 Stock Index, and (ii) the Dow Jones Water Utility Index.
The cumulative total shareholder return computations set forth in the Stock
Performance Graph assume an initial investment of $100 made on December 31,
1996 in each of the Company's Common Shares, the Standard & Poor's 500 Stock
Index and the Dow Jones Water Utility Index. The computations also assume
reinvestment of all dividends. As with any investment, the historical
performance reflected in the Stock Performance Graph is not necessarily
indicative of future performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG AMERICAN STATES WATER COMPANY, THE STANDARD & POOR's 500 STOCK
INDEX AND THE DOW JONES WATER UTILITIES INDEX
[GRAPHIC OMITTED]
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Cumulative Total Return
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12/96 12/97 12/98 12/99 12/00 12/01
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- -------------------------------------- ------------ ------------- ------------- ------------- ------------ -------------
American States Water Company 100.00 122.14 139.41 192.02 205.36 202.34
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S&P 500 Index 100.00 133.36 171.47 207.56 188.66 166.24
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Dow Jones Water Utilities Index 100.00 136.82 175.11 165.38 192.41 271.33
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*$100 Invested on 12/31/96 in stock or index -- including reinvestment of dividends. Fiscal year-ending December 31.
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20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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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, 2002 based upon public information known to and
believed to be correct by the Company.
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Amount and Nature of
Name and Address of Beneficial Owners Title of Class Beneficial Ownership Percent of Class
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Massachusetts Mutual Life Insurance Co. Preferred Shares 12,000 15%
1295 State Street; Springfield, MA 01111
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INFORMATION ON INDEPENDENT PUBLIC ACCOUNTANTS
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The Audit Committee has reviewed the advisability and acceptability of
utilizing the Company's external auditor Arthur Andersen LLP, for non-audit
services. In reviewing this area, the Committee focused on the ability of the
external auditor to maintain independence. Based on input from management and
a review of procedures established within the external audit firm, the
Committee finds that it is both advisable and acceptable to employ the
external auditor for certain limited non-audit services, from time-to-time.
Representatives of Arthur Andersen LLP will be in attendance at the Annual
Meeting of Shareholders and will have an opportunity to make a statement, if
they desire to do so, and to respond to appropriate questions from those
attending the meeting.
Audit Fees: Fees for the fiscal year 2001 audit and quarterly reviews are
$135,100, of which an aggregate amount of $69,100 has been billed through
December 31, 2001.
Financial Information Systems and Implementation Fees: Arthur Andersen LLP
rendered no such services to the Company during fiscal year 2001.
All Other Fees: Aggregate fees billed for all other services for fiscal year
2001 were $133,690 including audit-related fees of $70,290 and non-audit fees
of $63,400. Audit-related fees include statutory audits of subsidiaries,
benefit plan audits, accounting consultation, attest services under
professional standards, assistance with registration statements, comfort
letters and consents. Non-audit fees include only billings for tax-related
services.
OTHER MATTERS
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Management of the Company knows of no business, other than that mentioned
above, to be transacted at the Annual Meeting, but if other matters 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.
21
PROPOSALS FOR NEXT ANNUAL MEETING
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REQUIREMENTS FOR SHAREHOLDER PROPOSALS TO BE BROUGHT BEFORE AN ANNUAL MEETING
For shareholder proposals to be considered before an annual meeting by a
shareholder, the shareholder must have given timely notice in writing to the
Secretary of the Company. To be timely for the 2003 Annual Meeting, a
shareholder's notice must be delivered to or mailed and received by the
Secretary of the Company at the principal executive offices of the Company not
less than 75 days nor more than 90 days prior to the first anniversary of the
2002 Annual Meeting; provided however that in the event that the annual
meeting date is changed by more than 30 days from such anniversary date,
notice by the shareholder to be timely must be received not later than the
close of business on the tenth day following the day on which notice of the
meeting was mailed or public disclosure of the date of the meeting was made. A
shareholder's notice to the Secretary must set forth as to each matter the
shareholder proposes to bring before the annual meeting (i) a brief
description of the matter to be brought before the annual meeting and the
reasons for conducting such matter at the annual meeting, (ii) the name and
record address of the shareholder proposing such business (and the name and
address of the beneficial owner, if any), (iii) the class and number of shares
of the Company which are owned by the shareholder, and (iv) any material
interest of the shareholder in such matter.
REQUIREMENTS FOR SHAREHOLDER PROPOSALS TO BE CONSIDERED FOR INCLUSION IN THE
COMPANY'S PROXY MATERIALS
Shareholder proposals submitted pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and intended to be
presented at the Company's 2003 Annual Meeting of Shareholders must be
received by the Company not later than December 20, 2002 in order to be
considered for inclusion in the Company's proxy materials for that meeting and
must satisfy the requirement for such proposals set forth in the Rule.
ADDITIONAL INFORMATION
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The Company undertakes, on written request, to provide, without charge, to
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, 2001 as
filed with the Securities and Exchange Commission, including the financial
statements and schedules. Requests should be addressed to American States
Water Company, 630 East Foothill Boulevard, San Dimas, California 91773,
Attention: Office of the Secretary.
22
INFORMATION ABOUT ATTENDING
We will hold the Annual Meeting at the Pasadena Hilton in Pasadena, California.
Shareholders must present a ticket to be admitted to the Annual Meeting. For
shareholders of record, your admission ticket is the detachable portion of your
proxy form. Please have your ticket out and available when you reach the
registration area at the Annual Meeting.
For shareholders who hold shares through a brokerage firm, bank or other holder
of record, your ticket is the copy of your latest account statement showing your
American States Water Company stock balance. Please present your account
statement to the registration area at the Annual Meeting.
[MAP OMITTED]
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AMERICAN STATES WATER COMPANY
2002 ANNUAL MEETING OF SHAREHOLDERS
APRIL 30, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of American States Water Company (the Company) of proxies
to be voted at the Annual Meeting of Shareholders of the Company (the Annual
Meeting) and any adjournments thereof. The Annual Meeting will be held on
Tuesday, April 30, 2002 at 10:00 a.m., Pacific Time at the Hilton Pasadena, 168
South Los Robles Avenue, Pasadena, California.
At the Annual Meeting, shareholders will be asked to elect four Class II
directors to serve until the Annual Meeting of Shareholders held in 2004 and
until their successors are elected and qualified.
[AMERICAN STATES WATER COMPANY LOGO]
AMERICAN STATES WATER COMPANY
630 E. FOOTHILL BLVD.
SAN DIMAS, CA 91773
VOTE BY INTERNET - WWW.PROXYVOTE.COM
Use the Internet to transmit your voting instructions up until 11:59 P.M.
Eastern Time the day before the meeting date. Have your proxy card in hand when
you access the web site. You will be prompted to enter your 12-digit Control
Number which is located below to obtain your records and to create an electronic
voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the meeting date. Have your proxy card in hand
when you call. You will be prompted to enter your 12-digit Control Number which
is located below and then follow the simple instructions the Vote Voice provides
you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to American States Water Company, c/o ADP, 51
Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: ASWC01 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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AMERICAN STATES WATER COMPANY
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR EACH OF THE
NOMINEES FOR CLASS II DIRECTORS LISTED BELOW.
ELECTION OF DIRECTORS ------
FOR WITHHOLD FOR ALL |
1. To elect four Class II directors to the Board of Directors of the Company ALL ALL EXCEPT |
to serve until their successors are elected and qualified. The Board of |
Directors has nominated the following individuals for election as Class II [ ] [ ] [ ]
directors: 01) Jean E. Auer, 02) N.P. Dodge, Jr. 03) Robert F. Kathol, and
04) Lloyd E. Ross.
To withhold authority to vote, mark "For All Except" and write the
nominee's number on the line below.
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This proxy, when properly executed, will be voted in the manner described
herein by the undersigned shareholder(s) and the named proxies will, in their
sole discretion, vote such shares on any other matters that may properly come
before the meeting or any adjournments thereof. If no direction is made, this
proxy will be voted FOR the listed Nominees. Further, if cumulative voting
rights for the election of directors (Item 1) are exercised at the meeting, the
proxies will cumulatively vote their shares as provided in the proxy statement.
If you plan to attend the Annual Meeting, please check this box. [ ]
Please sign exactly as name(s) appear hereon. When shares are held by joint
tenants, both should sign. When signing as attorney or executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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