<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 9, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN STATES WATER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
CALIFORNIA 4941 APPLIED FOR
- ------------------------------------ ------------------------------------ ------------------------------------
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
630 EAST FOOTHILL BOULEVARD, SAN DIMAS, CALIFORNIA 91773 (909) 394-3600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
McCLELLAN HARRIS III
VICE PRESIDENT-FINANCE
AMERICAN STATES WATER COMPANY
630 EAST FOOTHILL BOULEVARD
SAN DIMAS, CALIFORNIA 91773
(909) 394-3600
AND
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF COMMUNICATIONS TO:
C. JAMES LEVIN ESQ.
O'MELVENY & MYERS LLP
400 SOUTH HOPE STREET
LOS ANGELES, CALIFORNIA 90071
(213) 669-6000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
AND AFTER CERTAIN OTHER CONDITIONS UNDER THE MERGER AGREEMENT ARE SATISFIED OR
WAIVED.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
==============================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(3)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, no par value............ 8,957,671 shares 24 7/16 218,903,000 0
- ------------------------------------------------------------------------------------------------------------------------------
Preferred Stock, par value $25.00..... 83,200 shares 25 2,080,000 0
- ------------------------------------------------------------------------------------------------------------------------------
Total................................. 219,983,000 0
==============================================================================================================================
</TABLE>
(1) Represents the estimated maximum number of Common Shares and Preferred
Shares of American States Water Company to be issued to shareholders of
Southern California Water Company in connection with the merger of SCW
Acquisition Corp. (a wholly-owned subsidiary of American States Water
Company) into Southern California Water Company (the "Merger").
(2) Estimated solely for the purpose of calculating the Registration Statement
fee in accordance with Rules 457(f)(1) and 457(f)(2) on the basis of the
average of the high and low sale price per share as reported by the New York
Stock Exchange of Common Shares of Southern California Water Company as of
March 5, 1998, and the book value per share of Preferred Shares of Southern
California Water Company as of March 5, 1998.
(3) A fee of $46,100.12 was previously paid with respect to the merger
transaction described herein pursuant to Section 14(g) of the Securities
Exchange Act of 1934 which is more than the fee due hereunder.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 9(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE> 2
SOUTHERN CALIFORNIA WATER COMPANY
630 EAST FOOTHILL BOULEVARD
SAN DIMAS, CALIFORNIA 91773
MARCH 13, 1998
Dear Southern California Water Company Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders (the
"Annual Meeting") of Southern California Water Company (the "Company") on
Tuesday, April 28, 1998, at 10:00 a.m., Pacific time. The Annual Meeting will be
held at the Industry Hills Sheraton, One Industry Hills Parkway, City of
Industry, California.
AT THE ANNUAL MEETING, COMPANY SHAREHOLDERS WILL BE ASKED TO CONSIDER AND
VOTE ON A PROPOSAL TO FORM A HOLDING COMPANY STRUCTURE FOR THE COMPANY. The
holding company's name will be American States Water Company ("HoldingCo"). The
Board of Directors and management of the Company believe that the formation of a
holding company will be in the best interests of the Company and its
shareholders. It will enhance the separation of the Company's regulated water
business from non-regulated businesses, and will provide greater financing
flexibility for the non-regulated businesses. This structure will help the
Company respond more effectively and efficiently to competitive changes
occurring in the water industry and to new business opportunities that may arise
from these changes.
THE QUESTIONS AND ANSWERS ON THE FOLLOWING PAGES PROVIDE INFORMATION ON THE
PROPOSED HOLDING COMPANY STRUCTURE AND WHAT IT MEANS TO YOU AS A SHAREHOLDER.
You should also read the enclosed Proxy Statement/Prospectus, which contains a
more extensive discussion of the proposal, including a description of the
formation of a holding company structure and the conversion of the Company's
Common Shares and Preferred Shares into Common Shares and Preferred Shares of
HoldingCo. In connection with the formation of the new corporate structure,
holders of the Company's Common Shares would receive one Common Share of
HoldingCo or fraction thereof for each Common Share of the Company or fraction
thereof, and holders of each series of Preferred Shares of the Company would be
issued one Preferred Share of the applicable series of HoldingCo for each such
Preferred Share of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS APPROVAL OF THE HOLDING
COMPANY STRUCTURE AND URGES EACH SHAREHOLDER TO VOTE FOR THE NEW CORPORATE
STRUCTURE.
At the Annual Meeting, Company shareholders also will be asked to ratify
certain provisions of HoldingCo's Articles of Incorporation providing for a
classified Board of Directors for HoldingCo, requiring a supermajority vote of
HoldingCo's shares to approve certain business combinations involving HoldingCo
and/or the sale of all or substantially all of HoldingCo's assets and to approve
certain restrictions on amendments to HoldingCo's bylaws. Company shareholders
will also be asked to vote on the election of the Company's directors. During
the Annual Meeting, management of the Company will report on operations and
other matters affecting the Company, and will respond to shareholders'
questions.
It is important that every shareholder, whether owning one or more shares
and whether or not expecting to attend the meeting in person, sign, date and
promptly return the enclosed proxy as the affirmative of the combined voting
power of the Company's outstanding shares is required for approval of the
holding company structure and ratification of the classified board and
supermajority vote provisions of HoldingCo's Amended and Restated Articles of
Incorporation. As a result, the failure to vote on these matters will have the
same effect as a no vote. A return envelope, requiring no postage if mailed in
the United States, is enclosed for convenience.
Sincerely,
/s/ W.V. CAVENEY
W.V. Caveney
Chairman of the Board
<PAGE> 3
QUESTIONS AND ANSWERS ABOUT THE PROPOSED HOLDING COMPANY
You may notice that this year's proxy materials look different. This is
because they include an extensive discussion of the proposal of the Board of
Directors to form a holding company for Southern California Water Company (the
"Company"). This proposal is briefly discussed below. For detailed information
on this proposal, shareholders are urged to read the accompanying Proxy
Statement/Prospectus in its entirety. For your convenience, however, the answers
below are cross-referenced in many cases to the page or pages of the Proxy
Statement/Prospectus in which the topic is discussed in more detail.
WHAT IS BEING PROPOSED?
The Board of Directors proposes to form a holding company, a structure
which is commonly used throughout the utility industry, including water
utilities. The Company would become a subsidiary of the holding company. The
Company's current shareholders would own the Common Shares and Preferred Shares
of the holding company rather than Common Shares and Preferred Shares of the
Company. (Please see pages 7, 8 and 18 of the Proxy Statement/Prospectus.)
WHAT WOULD THE NEW HOLDING COMPANY BE CALLED?
The holding company will be named American States Water Company
("HoldingCo").
WHY IS A HOLDING COMPANY BEING FORMED?
The Board of Directors believes that this structure will help the Company
to respond more effectively and efficiently to competitive changes occurring in
the water industry and to new non-regulated business opportunities that may
arise from these changes. It will enhance the separation of the Company's
regulated water business from its non-regulated businesses and will provide
greater financing flexibility for the non-regulated businesses. (Please see
pages 8 and 19.)
HOW SOON WOULD THE HOLDING COMPANY STRUCTURE BE FORMED
IF IT IS APPROVED BY SHAREHOLDERS?
Management intends to form the holding company structure as soon as
practicable and hopes this will occur during the second quarter of 1998.
However, since approval from the California Public Utilities Commission and
other third parties is required, the exact timing is not known and delays could
occur.
HOW WOULD MY OWNERSHIP OF STOCK OF SOUTHERN CALIFORNIA WATER COMPANY
BE AFFECTED BY THE NEW STRUCTURE?
When the new structure is formed, owners of Common Shares of the Company,
or fraction thereof, automatically would become owners of the Common Shares of
HoldingCo, or fraction thereof, on a one-for-one basis. In addition, owners of
each series of Preferred Shares of the Company automatically would become owners
of the Preferred Shares of the applicable series of HoldingCo on a one-for-one
basis. Following the restructuring, the holders of Common Shares and Preferred
Shares of the Company will have the same relative ownership interest and the
same relative voting power in HoldingCo as such shareholders now have as
shareholders of the Company. The Common Shares of HoldingCo will also be listed
on the New York Stock Exchange just like the Company's Common Shares are
currently listed. (Please see pages 7, 8 and 18.)
WOULD SHAREHOLDERS HAVE TO TURN IN THEIR CURRENT STOCK CERTIFICATES?
No. Existing Company stock certificates automatically would represent the
same number of shares, class and series of stock of HoldingCo. IT WOULD NOT BE
NECESSARY FOR HOLDERS OF SOUTHERN CALIFORNIA WATER COMPANY TO EXCHANGE THEIR
STOCK CERTIFICATES. If you wish,
<PAGE> 4
you may exchange your Company certificates for those of HoldingCo by requesting
that new certificates be issued. (Please see page 20.)
HOW WOULD A HOLDING COMPANY STRUCTURE AFFECT DIVIDENDS?
Instead of the dividends being paid by the Company, they would be paid by
HoldingCo. When the restructuring takes effect, it is expected that the
HoldingCo dividends will be no less than the dividends the Company is paying on
its stock at that time. Subsequently, the dividend would depend on the financial
performance of HoldingCo, the Company and its non-regulated subsidiaries, and on
other factors. It is expected that the HoldingCo dividends will be paid on
approximately the same dates in each year as the Company dividends are paid now.
In addition, there will be no change in the Company's Dividend Reinvestment and
Stock Purchase Plan, other than the substitution of the Common Shares of
HoldingCo for the Common Shares of the Company. (Please see pages 9 and 21.)
HOW WOULD FORMATION OF A HOLDING COMPANY AFFECT PERSONAL FEDERAL INCOME TAXES?
It wouldn't. There will be no federal income tax consequences to you when
your Company shares are converted to HoldingCo shares. For capital gain
purposes, the tax basis and holding period of the HoldingCo shares will be the
same as those for Company shares. (Please see pages 9, 10 and 22.)
THE ENCLOSED PROXY STATEMENT/PROSPECTUS PRESENTS A MORE DETAILED DISCUSSION
OF THE PROPOSAL TO FORM A HOLDING COMPANY STRUCTURE.
<PAGE> 5
SOUTHERN CALIFORNIA WATER COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS -- APRIL 28, 1998
Dear Southern California Water Company Shareholder:
The Annual Meeting of the shareholders of Southern California Water
Company, a California corporation (the "Company"), will be held at the Industry
Hills Sheraton, One Industry Hills Parkway, City of Industry, California on
Tuesday, April 28, 1998, at 10:00 a.m., Pacific time, for the following
purposes:
1. To approve the principal terms of an Agreement of Merger (the
"Merger Agreement"), by and among American States Water Company
("HoldingCo"), SCW Acquisition Corp. ("MergeCo") and the Company, pursuant
to which MergeCo would merge with and into the Company, with the Company
thereby becoming a wholly-owned subsidiary of HoldingCo (the "Merger");
2. To ratify certain provisions of HoldingCo's Articles of
Incorporation providing for the classification of HoldingCo's Board of
Directors for purposes of the election of HoldingCo's directors, the
implementation of such provisions being effective upon the listing of
HoldingCo's Common Shares on the New York Stock Exchange;
3. To ratify certain provisions of HoldingCo's Articles of
Incorporation providing that:
(a) certain business combinations involving HoldingCo, and/or the
sale of all or substantially all of HoldingCo's assets, would require,
in addition to any Board and/or shareholder approvals required under
applicable law, approval either by the affirmative vote of a majority of
HoldingCo's continuing directors (as defined in HoldingCo's Articles of
Incorporation) or by the affirmative vote of at least 66 2/3% of the
combined voting power of HoldingCo's outstanding shares, voting together
as a single class (other than any series of New Preferred Shares not
entitled to vote thereon),
(b) amendments to HoldingCo's bylaws relating to the calling of
shareholders' meetings and the bringing of business thereat be approved
by either a majority of HoldingCo's Board or by the affirmative vote of
at least 66 2/3% of the combined voting power of HoldingCo's outstanding
shares, voting together as a single class (other than any series of New
Preferred Shares not entitled to vote thereon), and
(c) amendments to the provisions of HoldingCo's Articles of
Incorporation described above be approved by the affirmative vote of 66
2/3% of the combined voting power of HoldingCo's outstanding shares,
voting together as a single class (other than any series of New
Preferred Shares not entitled to vote thereon);
4. To elect seven directors to the Board of Directors of the Company
to serve until their successors are elected and qualified; and
5. To transact any other business which may properly come before the
meeting or any adjournment thereof.
The Board of Directors has nominated the following individuals for election
as directors: James L. Anderson, Jean E. Auer, William V. Caveney, N.P. Dodge,
Jr., Robert Kathol, Lloyd E. Ross and Floyd E. Wicks.
The Board of Directors has fixed the close of business on February 27,
1998, as the record date for the determination of shareholders entitled to
notice of and to vote at this meeting or any adjournment thereof.
By order of the Board of Directors,
/s/ McClellan Harris III
McClellan Harris III
Secretary
San Dimas, California
March 13, 1998
<PAGE> 6
SOUTHERN CALIFORNIA WATER COMPANY
PROXY STATEMENT
AMERICAN STATES WATER COMPANY
PROSPECTUS
UP TO 8,957,671 COMMON SHARES
AND 83,200 PREFERRED SHARES
This Proxy Statement/Prospectus is being furnished to the shareholders of
Southern California Water Company, a California corporation (the "Company"), in
connection with the solicitation of proxies by the Board of Directors of the
Company to be used in voting at the Annual Meeting of Shareholders to be held on
April 28, 1998, and at any adjournment or postponement thereof (the "Annual
Meeting"), for the purposes listed in the preceding Notice of Annual Meeting of
Shareholders. This Proxy Statement/Prospectus is first being mailed to holders
of the Company's Common Shares and Preferred Shares on or about March 13, 1998.
In addition to customary annual meeting matters, such as the election of
directors of the Company, at the Annual Meeting, the shareholders will be asked
to approve the principal terms of an Agreement of Merger (the "Merger
Agreement") among the Company, American States Water Company ("HoldingCo"), and
SCW Acquisition Corp.("MergeCo") pursuant to which a holding company will be
formed. At the time of the Merger, HoldingCo will be a wholly-owned subsidiary
of the Company, and MergeCo will be a wholly-owned subsidiary of HoldingCo.
Pursuant to the Merger Agreement, MergeCo will merge with and into the Company
(the "Merger"), and each outstanding Common Share, $2.50 par value per share, or
fraction thereof, and each series of Preferred Shares, $25 par value per share,
of the Company will automatically be converted into one Common Share, no par
value per share, or fraction thereof, and one Preferred Share of the applicable
series, $25 par value per share, respectively, of HoldingCo. As a result, the
Company will become a subsidiary of HoldingCo and the holders of Company Common
Shares and each series of Company Preferred Shares will become holders of the
Common Shares and the applicable series of Preferred Shares of HoldingCo. Common
Shares of the Company issuable under the Company's Dividend Reinvestment and
Stock Purchase Plan, Key Executive Stock Incentive Plan and 401(k) Plan will be
issued as Common Shares of HoldingCo after the Merger. In connection with the
implementation of the holding company structure, the Company intends to transfer
certain of its non-utility assets to a separate wholly-owned subsidiary of
HoldingCo. See "Item 1 -- Proposal to Form a Holding Company -- Plan of
Implementation."
At the Annual Meeting, shareholders will also be asked to ratify certain
provisions of HoldingCo's Amended and Restated Articles of Incorporation
("HoldingCo's Articles of Incorporation") providing (i) for the classification
of HoldingCo's Board of Directors, (ii) that certain business combinations
involving HoldingCo, and/or the sale of all or substantially all of HoldingCo's
assets, would require, in addition to any Board and/or shareholder approvals
required under applicable law, approval either by the affirmative vote of a
majority of HoldingCo's continuing directors (as defined in HoldingCo's Articles
of Incorporation) or by the affirmative vote of at least 66 2/3% of the combined
voting power of HoldingCo's outstanding shares, voting together as a single
class (other than any series of New Preferred Shares not entitled to vote
thereon), (iii) that amendments to certain provisions of the Bylaws of HoldingCo
relating to the calling of shareholders' meetings and the bringing of business
thereat be approved either by a majority of HoldingCo's Board of Directors or by
the affirmative vote of at least 66 2/3% of the combined voting power of
HoldingCo's outstanding shares, voting together as a single class (other than
any series of New Preferred Shares not entitled to vote thereon); and (iv) that
amendments to the provisions described above be approved by the affirmative vote
of at least 66 2/3% of the combined voting power of HoldingCo's outstanding
shares, voting together as a single class (other than any series of New
Preferred Shares not entitled to vote thereon). See "Item 2 -- Proposal to
Ratify Provisions Regarding HoldingCo Board Classification" and "Item
3 -- Proposal to Ratify Provisions Regarding Supermajority Vote of HoldingCo
Shareholders."
1
<PAGE> 7
This Proxy Statement/Prospectus also constitutes the Prospectus of
HoldingCo under the Securities Act of 1933, as amended (the "1933 Act"), for the
issuance of up to 8,957,671 HoldingCo Common Shares, no par value, and 83,200
HoldingCo Preferred Shares, par value of $25.00 per share, 4% Series, 4-1/4%
Series and 5% Series, to be issued in exchange for the Common Shares and
Preferred Shares of the applicable series, respectively, of the Company in the
Merger. This Proxy Statement/Prospectus does not cover any resales of HoldingCo
Common Shares or Preferred Shares to be received by the shareholders of the
Company in the Merger, and no person is authorized to make any use of this Proxy
Statement/Prospectus in connection with any such resale. For further information
concerning the stock offered hereby, see "Item 1 -- Proposal to Form a Holding
Company -- Principal Terms of the Merger -- Post-Merger Rights of Holders" and
"-- Articles of Incorporation, Bylaws and Rights of Shareholders."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to shareholders of the Company on or about March 13, 1998. A
shareholder who has given a proxy may revoke it at any time before it is
exercised.
2
<PAGE> 8
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH
RESPECT TO SUCH MATTERS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY HOLDINGCO OR THE COMPANY. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OR THE SOLICITATION OF A PROXY OR AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HOLDINGCO OR THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION IN THIS PROXY
STATEMENT/PROSPECTUS OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATES HEREOF OR THEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "SEC"). Such reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
may be available at the following Regional Offices of the SEC: Chicago Regional
Office, Northwest Atrium, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and the New York Regional Office, Seven World Trade Center, 13th
Floor, New York, New York, 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549. The Company is also
required to file electronic versions of these documents with the SEC through the
SEC's Electronic Data Gathering Analysis and Retrieval (EDGAR) system. The SEC
maintains a world wide web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. In addition, reports, proxy and
information statements and other information concerning the Company can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005, on which the Company's Common Shares are listed.
HoldingCo was formed to effectuate the transactions described under "Item
1 -- Proposal to Form a Holding Company." HoldingCo previously has not been
subject to the requirements of the Exchange Act and there is currently no public
market for its stock. However, if the transactions described herein are approved
and consummated, HoldingCo will become subject to the same information,
reporting and proxy statement requirements under the Exchange Act as currently
apply to the Company, and such information will be available for inspection and
copying at the offices of the SEC set forth above. Following the date on which
HoldingCo's Common Shares will be listed on the New York Stock Exchange,
Exchange Act reports, proxy statements, and other information concerning
HoldingCo will be available for inspection and copying at such exchange.
Following completion of the Merger, the Company will also continue to be a
reporting company under the Exchange Act.
HoldingCo has filed with the SEC a Registration Statement on Form S-4 (No.
333- ) under the 1933 Act relating to the HoldingCo Common Shares and
HoldingCo Preferred Shares to be issued in connection with the Merger (the
"Registration Statement"). This Proxy Statement/Prospectus also constitutes the
Prospectus of HoldingCo filed as part of the Registration Statement and does not
contain all of the information set forth in the Registration Statement and
Exhibits thereto. The Registration Statement and the
3
<PAGE> 9
Exhibits thereto may be inspected and copied, at prescribed rates, at the public
reference facilities maintained by the SEC at the addresses set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, FROM SOUTHERN
CALIFORNIA WATER COMPANY, ATTN.: OFFICE OF THE SECRETARY, 630 EAST FOOTHILL
BOULEVARD, SAN DIMAS, CALIFORNIA 91773 (TELEPHONE 909-394-3600). IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY APRIL 17,
1998.
The Company's Annual Report on Form 10-K for the year ended December 31,
1997 filed by the Company with the SEC is incorporated in this Proxy
Statement/Prospectus by reference.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the Annual Meeting shall be deemed
incorporated by reference and to be part of this Proxy Statement/Prospectus from
the date of filing of such documents. Any statement contained herein or in a
document all or a portion of which is incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
4
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
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PAGE
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SUMMARY..................................................... 7
ITEM 1: PROPOSAL TO FORM A HOLDING COMPANY.................. 7
General................................................... 7
Plan of Implementation.................................... 7
Business of the Company and HoldingCo..................... 8
Reasons for the Formation of a Holding Company............ 8
Conditions and Regulatory Approvals....................... 8
Required Vote............................................. 8
No Dissenters' Rights..................................... 9
No Change in Dividend Policy.............................. 9
Articles of Incorporation, Bylaws and Rights of
Shareholders........................................... 9
Termination and Amendment of Merger Agreement............. 9
Certain Federal Income Tax Consequences................... 9
RATIO OF EARNINGS TO COMBINED FIXED CHARGES................. 10
MARKET PRICE DATA........................................... 10
SELECTED FINANCIAL INFORMATION.............................. 11
ITEM 2: PROPOSAL TO RATIFY PROVISIONS REGARDING HOLDINGCO
BOARD CLASSIFICATION...................................... 11
Implementation............................................ 12
Required Vote............................................. 12
ITEM 3: PROPOSAL TO RATIFY PROVISIONS REGARDING
SUPERMAJORITY VOTE OF HOLDINGCO SHAREHOLDERS.............. 13
Implementation............................................ 13
Required Vote............................................. 14
ITEM 4: ELECTION OF DIRECTORS............................... 14
Date, Time and Place of the Meeting....................... 14
Persons Entitled to Vote.................................. 14
GENERAL INFORMATION......................................... 15
INTRODUCTION................................................ 15
SOLICITATION OF PROXY AND REVOCABILITY; VOTING SECURITIES... 15
Date, Time and Place of Annual Meeting.................... 15
Record Date and Voting Rights............................. 15
Voting by Proxy........................................... 16
Adjournments.............................................. 17
Solicitation of Proxies................................... 17
ITEM 1: PROPOSAL TO FORM A HOLDING COMPANY.................. 17
General................................................... 17
Plan of Implementation.................................... 18
Reasons for the Formation of a Holding Company............ 19
Principal Terms of the Merger............................. 20
Conditions to the Merger.................................. 20
Regulatory Approvals...................................... 21
Required Vote............................................. 21
No Dissenters' Rights..................................... 21
No Change in Dividend Policy.............................. 21
</TABLE>
5
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Termination and Amendment of Merger Agreement............. 22
Directors and Officers of the Company and HoldingCo....... 22
Certain Federal Income Tax Consequences................... 22
Articles of Incorporation, Bylaws and Rights of
Shareholders........................................... 23
Exchange Act Filings...................................... 23
Legal Opinion............................................. 23
Experts................................................... 23
PRO FORMA FINANCIAL INFORMATION............................. 24
ITEM 2: PROPOSAL TO RATIFY PROVISIONS
REGARDING HOLDINGCO BOARD CLASSIFICATION.................. 25
General................................................... 25
Implementation............................................ 25
Effects of Board Classification; Comparison with Company
Bylaws................................................. 26
Required Vote............................................. 26
ITEM 3: PROPOSAL TO RATIFY PROVISIONS
REGARDING SUPERMAJORITY VOTE OF HOLDINGCO SHAREHOLDERS.... 27
General................................................... 27
Implementation............................................ 27
Effects of Supermajority Vote Provisions; Comparison with
Provisions of Company Articles of Incorporation and
Law.................................................... 27
Other Effects............................................. 28
Required Vote............................................. 28
ITEM 4: ELECTION OF DIRECTORS............................... 28
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 30
EXECUTIVE OFFICERS
EXPERIENCE, SECURITY OWNERSHIP AND COMPENSATION........... 32
PENSION PLAN................................................ 35
DEFERRED COMPENSATION PLAN FOR DIRECTORS AND EXECUTIVES..... 36
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION............................................. 36
REPORT ON EXECUTIVE COMPENSATION............................ 36
PERFORMANCE GRAPH........................................... 38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS............. 39
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS............ 39
OTHER MATTERS............................................... 39
PROPOSALS FOR NEXT ANNUAL MEETING........................... 39
EXHIBIT A
Form of Agreement of Merger............................... A-1
EXHIBIT B
Amended and Restated Articles of Incorporation of
HoldingCo.............................................. B-1
EXHIBIT C
Bylaws of HoldingCo....................................... C-1
EXHIBIT D
Text of HoldingCo Board Classification Provisions......... D-1
EXHIBIT E
Text of HoldingCo Supermajority Vote Provisions........... E-1
</TABLE>
6
<PAGE> 12
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. This summary does not contain a complete
statement of all material terms of the Merger and is qualified in its entirety
by reference to the full text of this Proxy Statement/Prospectus and the
Exhibits hereto. Southern California Water Company (the "Company") shareholders
are urged to read this Proxy Statement/Prospectus and the accompanying Exhibits
in their entirety.
This Proxy Statement/Prospectus is being furnished to the shareholders of
the Company in connection with the solicitation of proxies by the Board of
Directors of the Company to be used in voting at the Annual Meeting of
Shareholders to be held on April 28, 1998, and at any adjournment or
postponement thereof, for the purposes listed in the preceding Notice of Annual
Meeting of Shareholders. This Proxy Statement/ Prospectus is first being mailed
to holders of the Company's Common Shares and Preferred Shares on or about March
13, 1998.
ITEM 1: PROPOSAL TO FORM A HOLDING COMPANY
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER AGREEMENT.
GENERAL
The Board of Directors believes that it is in the best interest of the
Company and its shareholders to reorganize the corporate structure of the
Company by creating a new holding company. The result of the restructuring will
be to have the Company become a separate wholly-owned subsidiary of the new
parent company, HoldingCo, with the present holders of the Common Shares and
each series of Preferred Shares of the Company becoming holders of HoldingCo
Common Shares and Preferred Shares of the applicable series, respectively.
Following the Merger, the Company will continue to conduct its operations
substantially as it currently conducts such operations. While the immediate
control of the Company will change from the Company's present shareholders to
HoldingCo, the ultimate control will remain unchanged, as the Company's present
shareholders will, upon completion of the Merger, become shareholders of
HoldingCo, owning the same relative interests and having the same relative
voting rights in HoldingCo as they now own and have in the Company. HoldingCo's
Common Shares will be listed on the New York Stock Exchange, just as the
Company's Common Shares are currently listed, and HoldingCo's Common Shares will
be registered with the Securities and Exchange Commission ("SEC") pursuant to
the Exchange Act. The directors of HoldingCo will initially be the same as the
directors of the Company.
PLAN OF IMPLEMENTATION
To implement the restructuring, the Company has formed two new California
corporations: HoldingCo and MergeCo. Immediately prior to the Merger, the
Company will own all of the outstanding stock of HoldingCo, and HoldingCo will
own all of the outstanding stock of MergeCo. HoldingCo and MergeCo currently
have no business or properties of their own. MergeCo is a transitory
corporation, formed solely to effectuate the Merger, and will cease to exist
upon completion of the Merger. See "Item 1 -- Proposal to Form a Holding
Company -- Plan of Implementation" for a diagram comparing the current structure
of the Company with the proposed holding company structure to be effected
pursuant to the Merger.
The Company, HoldingCo and MergeCo have approved the Merger Agreement,
which provides that, subject to the satisfaction of certain conditions
(including, without limitation, approval of the principal terms of the Merger
Agreement by the shareholders of the Company), the Company will become a
wholly-owned subsidiary of HoldingCo as a result of the merger of MergeCo with
and into the Company. In the Merger, each of the Common Shares, or fraction
thereof, and each series of the Preferred Shares of the Company will be
automatically converted into one Common Share, or fraction thereof, and one
Preferred Share of the applicable series, respectively, of HoldingCo Common
Shares of the Company issuable under the Company's
7
<PAGE> 13
Dividend Reinvestment and Stock Purchase Plan, Key Executive Incentive Plan and
401(k) Plan will be issued as Common Shares of HoldingCo after the Merger. None
of the Company's debt will be assumed by HoldingCo in the Merger. A copy of the
proposed form of Merger Agreement is attached hereto as Exhibit A.
BUSINESS OF THE COMPANY AND HOLDINGCO
The Company is a public utility company engaged principally in the
purchase, production, distribution and sale of water. The Company also
distributes electricity in one community. In the Company's 21 separate customer
service areas for water and one electric customer service area, rates and
operations are subject to the jurisdiction of the California Public Utilities
Commission ("CPUC"). At December 31, 1997, the Company served approximately
241,600 water customers and 20,700 electric customers.
HoldingCo was formed to effectuate the transactions described herein and
does not currently conduct any businesses or have any properties or assets of
its own, other than the stock of MergeCo.
The principal executive offices of the Company and HoldingCo are located at
630 East Foothill Boulevard, San Dimas, California 91773. The main telephone
number for each of the Company and HoldingCo is (909) 394-3600.
REASONS FOR THE FORMATION OF A HOLDING COMPANY
The water industry in California is experiencing competitive changes and
the Company believes there is potential for new growth. In particular, the
Company believes that there exist potentially significant opportunities to
engage in a variety of transactions involving the portion of the water utility
industry that is not regulated by the CPUC. The formation of the holding company
structure will provide a corporate structure with a clear separation between the
regulated water business and other utility businesses that are not subject to
regulation by the CPUC. It will also provide a framework that can better
accommodate future growth. Finally, the holding company structure, which is
utilized by many other water companies, will facilitate the financing of, and
accounting for, non-regulated business activities. See "Item 1 -- Proposal to
Form a Holding Company -- Reasons for the Formation of a Holding Company."
CONDITIONS AND REGULATORY APPROVALS
Consummation of the Merger is subject to the satisfaction of various
conditions, including approval of the Merger by the CPUC (subject only to
conditions deemed reasonable by the Company's Board of Directors) and listing of
HoldingCo Common Shares on the New York Stock Exchange, and various other
conditions. See "Item 1 -- Proposal to Form a Holding Company -- Conditions to
the Merger" and "-- Regulatory Approvals." The Company's application for an
exemption from all provisions of the Public Utility Holding Company Act of 1935
("PUHCA"), except for Section 9(a)(2), was granted by the SEC on April 18, 1997.
REQUIRED VOTE
Under the Merger Agreement, it is a condition to completion of the Merger
that the principal terms of the Merger Agreement are approved by shares
constituting a majority of the combined voting power of the Company's
outstanding Common Shares and Preferred Shares, voting together as a single
class; provided that if there are no differences between the Articles of
Incorporation of HoldingCo and the Company, the principal terms of the Merger
Agreement need only be approved by a majority of the combined voting power of
the Company's Common Shares and Preferred Shares represented at the Annual
Meeting and entitled to vote thereon, voting together as a class. Each Common
Share is entitled to one-tenth of a vote and each Preferred Share is entitled to
one vote. See "General Information -- Solicitation of Proxy and Revocability;
Voting Securities -- Record Date and Voting Rights."
Each of the Company's directors and executive officers owns less than one
percent (1%) of the combined voting power of the Company. There will be no
change in the voting power of the Company's directors and executive officers as
a result of the Merger.
8
<PAGE> 14
NO DISSENTERS' RIGHTS
Holders of Company stock will not, under California law, be entitled to any
dissenters' rights as a result of the Merger.
NO CHANGE IN DIVIDEND POLICY
When the restructuring takes effect, it is expected that the dividends on
HoldingCo shares will be no less than the dividends that the Company would
otherwise pay on its shares at that time. It is also expected that HoldingCo
will pay dividends on approximately the same schedule of dates as that now
followed by the Company. Future dividend payments will depend primarily on the
earnings of HoldingCo's subsidiaries, principally the Company; the dividend
restrictions on HoldingCo and its subsidiaries; other financial considerations;
and other factors affecting the Company. There will no change in the Company's
Dividend Reinvestment and Stock Purchase Plan after the consummation of the
Merger, other than the substitution of the Common Shares of HoldingCo for the
Common Shares of the Company. See "Item 1 -- Proposal to Form a Holding
Company -- No Change in Dividend Policy."
ARTICLES OF INCORPORATION, BYLAWS AND RIGHTS OF SHAREHOLDERS
The Articles of Incorporation and bylaws of HoldingCo are substantially
identical to the Articles of Incorporation and bylaws of the Company, except
that HoldingCo's Articles of Incorporation contain provisions (i) providing for
the classification of HoldingCo's Board of Directors, (ii) requiring certain
business combinations involving HoldingCo and/or the sale of all or
substantially all of HoldingCo's assets to be approved either by the affirmative
vote of a majority of the continuing directors of HoldingCo (as defined in
HoldingCo's Articles of Incorporation) or by the affirmative vote of at least
66 2/3% of the combined voting power of HoldingCo's outstanding shares, voting
together as a single class (other than any series of New Preferred Shares not
entitled to vote thereon), (iii) requiring that amendments to certain provisions
of the Bylaws of HoldingCo relating to the calling of shareholders' meetings and
the bringing of business thereat be approved either by a majority of HoldingCo's
directors or by the affirmative vote of at least 66 2/3% of the combined voting
power of HoldingCo's outstanding shares, voting together as a single class
(other than any series of New Preferred Shares not entitled to vote thereon),
and (iv) requiring that amendments to the provisions described above be approved
by the affirmative vote of at least 66 2/3% of the combined voting power of
HoldingCo's outstanding shares (other than any series of New Preferred Shares
not entitled to vote thereon). At the Annual Meeting, Company shareholders will
be asked to vote on proposals to ratify the classification and supermajority
vote provisions. See "Item 2 -- Proposal to Ratify Provisions Regarding
HoldingCo Board Classification" and "Item 3 -- Proposal to Ratify Provisions
Regarding Supermajority Vote of HoldingCo Shareholders." Except with respect to
the above-described provisions of HoldingCo's Articles of Incorporation,
HoldingCo's Articles of Incorporation have essentially the same provisions as
the Company's Articles of Incorporation immediately prior to the Merger. See
"Item 1 -- Proposal to Form a Holding Company -- Articles of Incorporation,
Bylaws and Rights of Shareholders."
TERMINATION AND AMENDMENT OF MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to consummation of
the Merger (whether before or after approval of the principal terms of the
Merger Agreement by the pre-Merger shareholders of the Company) by action of the
Board of Directors of the Company. Subject to applicable law, the Merger
Agreement may be amended, modified or supplemented at any time prior to the
effective time of the Merger by mutual consent of the Boards of Directors of the
Company, HoldingCo and MergeCo.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to be a tax-free reorganization for federal income
tax purposes. The Company will receive an opinion from O'Melveny & Myers LLP to
the effect that the Merger will constitute a tax-free reorganization for federal
income tax purposes. Consequently, Company shareholders who will receive only
HoldingCo stock pursuant to the Merger will not recognize gain or loss for
federal income tax purposes. The
9
<PAGE> 15
Company's shareholders are urged to consult their own tax advisors regarding the
federal (and any applicable foreign, state and local) income tax consequences of
the Merger. See "Item 1 -- Proposal to Form a Holding Company -- Certain Federal
Income Tax Consequences."
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
The following table sets forth, for the each of the last five completed
fiscal years, the ratio of the Company's earnings to combined fixed charges and
dividend obligations with respect to the Company's Preferred Shares.
<TABLE>
<CAPTION>
RATIO
-----
<S> <C>
Year ending December 31,
1997................................ 3.30
1996................................ 3.21
1995................................ 3.14
1994................................ 3.50
1993................................ 3.04
</TABLE>
MARKET PRICE DATA
The Common Shares of the Company are traded on the New York Stock Exchange
under the symbol "SCW". There currently is no public trading market for the
shares of HoldingCo. The table below sets forth, for the fiscal quarters
indicated, the high and low closing prices of the Common Shares of the Company
as reported by the New York Stock Exchange.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1996
First Quarter.......................................... 22 18 3/4
Second Quarter......................................... 22 5/8 19 3/4
Third Quarter.......................................... 23 3/8 19 3/8
Fourth Quarter......................................... 24 1/8 21
1997
First Quarter.......................................... 23 20 5/8
Second Quarter......................................... 24 1/2 20 1/4
Third Quarter.......................................... 24 5/8 20 1/2
Fourth Quarter......................................... 25 5/8 21 1/2
1998
First Quarter (through March , 1998).................
</TABLE>
On December 5, 1997, the last full trading day prior to the public
announcement of the proposed formation of a holding company, the last reported
sale price of the Company's Common Shares on the New York Stock Exchange was
$24.00 per share.
On March , 1998, the most recent practicable date prior to the printing
of this Proxy Statement/ Prospectus, the last reported sale price of the
Company's Common Shares on the New York Stock Exchange was $ per share.
10
<PAGE> 16
SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial information with respect
to the Company. Such information is derived from, and qualified by reference to,
the financial statements contained in certain documents incorporated by
reference herein. No information is included for HoldingCo, since HoldingCo was
formed to effectuate the transactions described herein and does not have any
operating history.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,(a)
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Operating Revenues................ $153,755 $151,529 $129,813 $122,675 $108,506
Operating Expenses................ 130,297 128,100 108,425 103,745 88,456
Operating Income.................. 23,458 23,429 21,388 18,930 20,050
Other Income...................... 758 531 366 236 354
Interest Charges.................. 10,157 10,500 9,559 7,828 8,378
Net Income........................ 14,059 13,460 12,165 11,338 12,026
Dividends on Preferred Shares..... 92 94 96 98 100
Earnings Available for Common
Shareholders................... 13,967 13,366 12,069 11,240 11,926
Basic Earnings per Common Share... 1.56 1.69 1.54 1.43 1.66
Dividends Declared per Common
Share.......................... 1.25 1.23 1.21 1.20 1.19
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,(a)
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total Assets...................... $457,074 $430,922 $406,255 $383,627 $358,533
Long-Term Debt.................... 115,286 107,190 107,455 92,891 84,286
Preferred Shares.................. 1,600 1,600 1,600 1,600 1,600
Preferred Shares Subject to
Mandatory Redemption........... 440 480 520 560 600
Common Equity..................... 151,053 146,766 121,576 118,962 116,463
Total Capitalization.............. $268,379 $256,036 $231,151 $214,013 $202,949
======== ======== ======== ======== ========
Book Value per Common Share....... $ 16.86 $ 16.52 $ 15.50 $ 15.16 $ 14.92
</TABLE>
- ---------------
(a) For pro forma information reflecting the restructuring, see "Item
1 -- Proposal to Form a Holding Company -- Pro Forma Financial Information."
ITEM 2: PROPOSAL TO RATIFY PROVISIONS
REGARDING HOLDINGCO BOARD CLASSIFICATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL TO RATIFY THE PROVISIONS FOR THE CLASSIFICATION
OF THE HOLDINGCO BOARD OF DIRECTORS.
The shareholders are being asked to ratify at the Annual Meeting certain
provisions of HoldingCo's Articles of Incorporation providing for classification
of the Board of Directors into two or three classes (depending upon the number
of directorships), each consisting of a number of directors equal as nearly as
practicable. After initial implementation (discussed below), each class of
directors would be subject to election every other year and would serve for a
two-year term for so long as the Board remained classified into two classes, or
would be subject to election every third year and would serve for a three-year
term in the event
11
<PAGE> 17
the Board were classified into three classes. A copy of the Board classification
provisions excerpted from HoldingCo's Articles of Incorporation is set forth as
Exhibit D hereto.
In contrast to the foregoing, the Company's Board of Directors is not
classified, and Company directors are elected at each annual meeting of
shareholders to hold office for a one-year term and until their successors are
elected and qualified. The classification of the Board of Directors will have
the effect of making it more difficult to replace incumbent directors and
management, even if the reason for the desired change is inadequate performance.
So long as the Board is classified into two classes, a minimum of two annual
meetings of shareholders would generally be required to replace the entire
Board, absent intervening vacancies. While the proposal is not intended as a
takeover-resistive measure in response to a specific threat, it may discourage
the acquisition of large blocks of HoldingCo's shares by causing it to take
longer for a person or group of persons who acquire such a block of shares to
effect a change in management. See "Item 2 -- Proposal to Ratify Provisions
Regarding HoldingCo Board Classification -- Effects of Classification of Board;
Comparison With Company Bylaws."
The Company's Board of Directors believes that the Board classification
provisions will be in the best interests of the Company and its shareholders
(which will, immediately after the Effective Time of the Merger, be the
shareholders of HoldingCo). Board classification will help lend continuity and
stability to the management of HoldingCo. Following adoption of the classified
board structure, at any given time one-half or more of the members of the Board
of Directors will generally have had prior experience as directors of HoldingCo.
The Company Board believes that this will facilitate long-range planning,
strategy and policy and will have a positive impact on employee loyalty. The
Company has not historically had problems with either the continuity or
stability of its Board of Directors.
IMPLEMENTATION
If this proposal is ratified by shareholders and HoldingCo's Common Shares
are listed on the New York Stock Exchange, the Board classification provisions
will be retained and HoldingCo's Board of Directors will, for purposes of
initial implementation, consist of two classes of directors. Prior to the
Effective Time of the Merger, the Company intends to elect as HoldingCo Class I
directors, James L. Anderson, William V. Caveney and Floyd E. Wicks, and as
HoldingCo Class II directors, Jean E. Auer, N.P. Dodge, Jr., Robert F. Kathol
and Lloyd E. Ross. The classification will become effective on the date
HoldingCo's Common Shares are listed on the New York Stock Exchange and will
expire at the Annual Meeting of Shareholders to be held in May, 1999, for Class
I directors, and at the Annual Meeting held in April, 2000, for Class II
directors; and, in each case, until their successors are duly elected and
qualified. Each of these people are also current nominees for election as
directors of the Company at the Annual Meeting. For further information, see,
"Item 4 -- Election of Directors." Commencing with the Annual Meeting of
Shareholders scheduled to occur in May 1999, directors elected to each class
would serve for a two-year term and until their successors are duly elected and
qualified, subject to any increase in the total number of authorized directors
to at least nine, as described above or to any decrease in the number of
directors to five.
If the proposal to ratify the Board classification provisions are not
ratified at the Annual Meeting or the Company and the Board of Directors of
HoldingCo otherwise determine that it is in the best interests of HoldingCo to
delete the Board classification provisions from HoldingCo's Articles of
Incorporation prior to consummation of the Merger, then HoldingCo's Articles of
Incorporation will be amended following the Annual Meeting to delete such
provisions.
See "Item 2 -- Proposal to Ratify Provisions Regarding HoldingCo Board
Classification -- Implementation."
REQUIRED VOTE
Approval of the proposal to ratify the HoldingCo Board classification
provisions requires the affirmative vote of at least a majority of the combined
voting power of the Company's Common Shares and Preferred Shares represented at
the Annual Meeting and entitled to vote thereon, voting together as a single
class. Each Common Share is entitled to one-tenth of a vote and each Preferred
Share is entitled to one vote.
12
<PAGE> 18
ITEM 3: PROPOSAL TO RATIFY PROVISIONS
REGARDING SUPERMAJORITY VOTE OF HOLDINGCO SHAREHOLDERS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS RATIFY
THE PROVISIONS REQUIRING CERTAIN HOLDINGCO BUSINESS COMBINATIONS
AND CERTAIN AMENDMENTS TO HOLDINGCO'S BYLAWS
TO BE APPROVED BY A MAJORITY OF HOLDINGCO'S DIRECTORS OR
A SUPERMAJORITY VOTE OF HOLDINGCO'S SHAREHOLDERS.
At the Annual Meeting, Company shareholders are being asked to ratify
certain provisions of HoldingCo's Articles of Incorporation providing that
certain business combinations involving HoldingCo and/or the sale of all or
substantially all of HoldingCo's assets would require, in addition to any Board
and/or shareholder approvals required under applicable law, approval either by
the affirmative vote of a majority of HoldingCo's continuing directors (as
defined in HoldingCo's Articles of Incorporation) or by the affirmative vote of
at least 66 2/3% of the combined voting power of HoldingCo's outstanding shares,
voting together as a single class (other than any series of New Preferred Shares
not entitled to vote thereon). In addition, Company shareholders are being asked
to ratify certain provisions of HoldingCo's Articles of Incorporation providing
that amendments to certain provisions of the Bylaws of HoldingCo relating to the
calling of shareholders' meetings and the bringing of business thereat be
approved by either a majority of HoldingCo's directors or by the affirmative
vote of at least 66 2/3% of the combined voting power of HoldingCo's outstanding
shares, voting together as a single class (other than any series of New
Preferred Shares not entitled to vote thereon), and that amendments to the
classification and supermajority vote provisions be approved by the affirmative
vote of at least 66 2/3% of the combined voting power of HoldingCo's outstanding
shares, voting together as a single class (other than any series of New
Preferred Shares not entitled to vote thereon). A copy of the text excerpted
from HoldingCo's Articles of Incorporation which provides for such supermajority
vote requirement is set forth as Exhibit E hereto. See also "Item 3 -- Proposal
to Ratify Provisions Regarding Supermajority Vote of HoldingCo
Shareholders -- Effects of Supermajority Vote Provisions; Comparison With
Provisions of Company Articles of Incorporation and Law."
The supermajority vote provisions could have the effect of giving the
holders of a minority of HoldingCo's shares a veto power over a
change-of-control transaction which a majority of the shareholders may believe
is desirable and beneficial. Based on their beneficial ownership of the
Company's Common Shares as of February 27, 1998, directors and executive
officers of the Company will, immediately following the Effective Time,
beneficially own less than 1% of the combined voting power of HoldingCo.
The Company's Board of Directors believes that such supermajority vote
provisions will be in the best interests of the Company's shareholders (which
will, immediately after the Effective Time of the Merger, be shareholders of
HoldingCo). The supermajority vote requirement would help to ensure the
continuity and stability of HoldingCo, as well as help to minimize disruptions
to HoldingCo's management, by tending to discourage attempts to gain control of
HoldingCo or its assets through a hostile takeover. A hostile takeover attempt
could prove to be highly disruptive to the business and operations of HoldingCo
and could result in a significant diversion of the time and resources of
HoldingCo's management. In addition, the provisions are intended to assure that
both the HoldingCo directors and HoldingCo shareholders have been given an
adequate opportunity to consider business combinations and other proposals that
may significantly affect their investment in HoldingCo.
The above-described supermajority vote provisions of HoldingCo's Articles
of Incorporation are not presently included in the Company's Articles of
Incorporation. See "Item 3 -- Proposal to Ratify Provisions Regarding
Supermajority Vote of HoldingCo Shareholders -- Effects of Supermajority Vote
Provisions -- Comparison With Provisions of Company Articles of Incorporation
and Law."
IMPLEMENTATION
If the proposal to ratify the supermajority vote provisions are not
ratified at the Annual Meeting or the Company and the Board of Directors of
HoldingCo otherwise determine that it is in the best interests of HoldingCo to
delete the supermajority vote provisions from HoldingCo's Articles of
Incorporation prior to
13
<PAGE> 19
consummation of the Merger, then HoldingCo's Articles of Incorporation will be
amended following the Annual Meeting to delete such provisions.
REQUIRED VOTE
Approval of the proposal to ratify the supermajority vote provisions of
HoldingCo's Articles of Incorporation requires the affirmative vote of the
combined voting power of the Company's Common Shares and Preferred Shares
represented at the Annual Meeting and entitled to vote thereon, voting together
as a single class. Each Common Share is entitled to one tenth of a vote and each
Preferred Share is entitled to one vote. See "Item 3 -- Proposal to Ratify
Provisions Regarding Supermajority Vote of HoldingCo Shareholders -- Required
Vote."
ITEM 4: ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE FOR ELECTION OF ALL BOARD NOMINEES FOR DIRECTOR.
Seven persons have been nominated for election as directors of the Company
to serve until the next Annual Meeting of Shareholders and until their
successors are elected and qualified. The Company intends to also elect these
persons as directors of HoldingCo prior to consummation of the Merger. Unless
the proposal to ratify the provisions of HoldingCo's Articles of Incorporation
providing for a classified HoldingCo Board are removed by appropriate amendment
to HoldingCo's Articles of Incorporation prior to consummation of the Merger,
the directors of HoldingCo will be classified as described under "Item No.
4 -- Proposal to Approve Classification of HoldingCo's Board of Directors."
DATE, TIME AND PLACE OF THE MEETING
The Meeting will be held on April 28, 1998, at 10:00 a.m. Pacific time at
the Industry Hills Sheraton, One Industry Hills Parkway, City of Industry,
California.
PERSONS ENTITLED TO VOTE
The Company has fixed the close of business on February 27, 1998 as the
record date for determining persons entitled to notice of and to vote at the
Annual Meeting or any adjournment thereof. At the close of business on February
27, 1998, there were outstanding and entitled to vote thereon 83,200 Preferred
Shares and 8,957,671 Common Shares. Each Preferred Share is entitled to one vote
and each Common Share is entitled to one-tenth of a vote. See "General
Information -- Solicitation of Proxy and Revocability; Voting
Securities -- Record Date and Voting Rights."
14
<PAGE> 20
GENERAL INFORMATION
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation by the Board of Directors of Southern California 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 Proxy
Statement/Prospectus also serves as the Prospectus of American States Water
Company ("HoldingCo") with respect to the offering of shares of HoldingCo to
shareholders of the Company.
At the Annual Meeting, shareholders will be asked to consider and vote upon
the Merger described in the Merger Agreement. A copy of the proposed form of
Merger Agreement is attached to this Proxy Statement/ Prospectus as Exhibit A
and is incorporated herein by reference. Under the terms of the Merger
Agreement, SCW Acquisition Corp., a wholly-owned subsidiary of HoldingCo
("MergeCo"), will be merged with and into the Company. The Company will be the
surviving corporation in the Merger and will become a wholly-owned subsidiary of
HoldingCo. Upon consummation of the Merger, each Common Share of the Company, or
fraction thereof, will be converted into one Common Share of HoldingCo, or
fraction thereof, and each series of Preferred Shares of the Company will be
converted into one HoldingCo Preferred Share of the applicable series,
respectively. The rights, preferences, privileges and restrictions of the
HoldingCo Common Shares and Preferred Shares will be substantially identical to
those of the Company Common Shares and Preferred Shares being converted.
Shareholders will also be asked to vote on proposals to ratify certain
provisions of HoldingCo's Articles of Incorporation providing for a classified
HoldingCo Board and requiring a supermajority vote of each class of HoldingCo
shares to approve certain business combinations involving HoldingCo and/or the
sale of all or substantially all of HoldingCo's assets and certain amendments to
HoldingCo's bylaws. In addition, shareholders will be asked to elect seven
directors to serve until the next Annual Meeting of Shareholders and until their
successors are elected and qualified.
SOLICITATION OF PROXY AND REVOCABILITY; VOTING SECURITIES
DATE, TIME AND PLACE OF ANNUAL MEETING
The Annual Meeting will be held on April 28, 1998 at 10:00 a.m. Pacific
time at the Industry Hills Sheraton, One Industry Hills Parkway, City of
Industry, California.
RECORD DATE AND VOTING RIGHTS
Only holders of record of Company stock at the close of business on
February 27, 1998 (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 83,200 Preferred Shares and 8,957,671 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
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<PAGE> 21
those shares are considered present for quorum purposes and may be entitled to
vote on other matters). Any unmarked proxies, including those submitted by
brokers or nominees, will be voted as indicated in the accompanying proxy card.
In the election of directors, the candidates for election receiving the
highest number of affirmative votes of the shares entitled to be voted for them,
up to the number of directors to be elected, will be elected. Votes cast against
a candidate or votes withheld will have no legal effect. No shareholder will be
entitled to cumulate votes (i.e., cast for any candidate a number of votes
greater than the number of such shareholder's shares in the case of Preferred
Shares or one-tenth that number in the case of Common Shares) unless such
candidate's name has been placed in nomination prior to the voting and the
shareholder has given notice at the meeting, prior to the voting, of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
candidates who have been nominated. If voting for directors is conducted by
cumulative voting, each share will be entitled to the number of votes equal to
the number of directors authorized times the number of votes to which 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 seven candidates for the office of director; provided,
however, that if sufficient numbers of Company shareholders exercise cumulative
voting rights to elect one or more candidates, the named proxies will determine
the number of directors they are entitled to elect, select such number from
among the named candidates, cumulate their votes, and cast their votes for each
candidate among the number they are entitled to elect. If voting is not
conducted by cumulative voting, each Preferred Share will be entitled to 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, (i) FOR the
principal terms of the Merger Agreement pursuant to which a holding company
structure will be formed, (ii) FOR the proposal to ratify the provisions of
HoldingCo's Articles of Incorporation providing for the classification of
HoldingCo's Board of Directors, (iii) FOR the proposal to ratify the
supermajority vote provisions of HoldingCo's Articles of Incorporation, and (iv)
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 4 -- 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 other matters as may properly come before the Annual Meeting or any
adjournment thereof.
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<PAGE> 22
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 will be given to each shareholder of record entitled to
vote at the meeting. At adjourned meetings, any business may be transacted 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. This statement
and the accompanying proxy are being sent to shareholders on or about March 13,
1998.
The Company will bear the entire cost of preparing, assembling, printing
and mailing these 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, telegraph, or personally, by directors, officers and regular
employees of the Company who will receive no extra compensation for such
services. In addition, the Company has retained Morrow & Co., a proxy
distribution and solicitation firm, to assist in the distribution and
solicitation of proxies for shares held in the names of brokers, banks and other
nominees, for a fee of $20,000 plus reimbursement of reasonable out-of-pocket
expenses.
ITEM 1: PROPOSAL TO FORM A HOLDING COMPANY
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER AGREEMENT.
GENERAL
The Board of Directors believes that it is in the best interest of the
Company and its shareholders to reorganize the corporate structure of the
Company by creating a new holding company. The result of the restructuring will
be to have the Company become a separate wholly-owned subsidiary of the new
parent company, HoldingCo, with the present holders of the Common Shares and
each series of Preferred Shares of the Company becoming holders of HoldingCo
Common Shares and Preferred Shares of the applicable series. As part of the
restructuring, the Company intends to transfer certain non-utility assets to
another subsidiary of HoldingCo so that, upon consummation of the Merger, the
unregulated business of the Company will be conducted by a separate wholly-owned
subsidiary of HoldingCo.
Following the Merger, the Company will continue to conduct its operations
substantially as it currently conducts such operations. While the immediate
control of the Company will change from the Company's present shareholders to
HoldingCo, the ultimate control will remain unchanged, as the Company's present
shareholders will, upon completion of the Merger, become shareholders of
HoldingCo, owning the same relative interest and having the same relative voting
rights in HoldingCo as they now own and have in the Company. HoldingCo's Common
Shares will be listed on the New York Stock Exchange, just as the Company's
Common Shares are currently listed, and HoldingCo's Common Shares will be
registered with the SEC pursuant to the Exchange Act. The directors of HoldingCo
will initially be the same as the directors of the Company.
Initially, HoldingCo is not expected to be an operating company and its
assets will consist principally of the capital stock of the Company and an
unregulated subsidiary. It will derive its income principally from dividends
from and fees for services rendered, if any, to its subsidiaries and from any
interest on any loans to subsidiaries. For the foreseeable future, all Company
personnel will remain principally Company employees and, to the extent such
personnel perform services for HoldingCo or any other subsidiary, the Company
will charge HoldingCo or such subsidiary for such services.
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<PAGE> 23
PLAN OF IMPLEMENTATION
To implement the restructuring, the Company has caused to be formed two new
California corporations: HoldingCo and MergeCo. Immediately prior to the Merger,
the Company will own all of the outstanding stock of HoldingCo, and HoldingCo
will own all of the outstanding stock of MergeCo. HoldingCo and MergeCo
currently have no business or properties of their own. MergeCo is a transitory
corporation, formed solely to effectuate the Merger, and will cease to exist
upon completion of the Merger.
The Company, HoldingCo and MergeCo have approved the Merger Agreement,
which provides that, subject to the satisfaction of certain conditions
(including, without limitation, shareholder approval of the principal terms of
the Merger Agreement), the Company will become a wholly-owned subsidiary of
HoldingCo as a result of the merger of MergeCo with and into the Company. In the
Merger, each of the Common Shares, or fraction thereof, and each series of
Preferred Shares of the Company will be automatically converted into one Common
Share, or fraction thereof, and one Preferred Share of the applicable series,
respectively, of HoldingCo. Common Shares of the Company issuable under the
Company's Dividend Reinvestment and Stock Purchase Plan, Key Executive Incentive
Plan and 401(k) Plan will be issued as Common Shares of HoldingCo after the
Merger. None of the Company's debt will be assumed by HoldingCo in the Merger. A
copy of the proposed form of Merger Agreement is attached hereto as Exhibit A.
In connection with the restructuring, it is contemplated that the Company
will transfer certain non-utility assets to another subsidiary of HoldingCo. To
the extent that the Company acquires new businesses or assets not regulated by
the CPUC, such businesses and assets may also be transferred to HoldingCo or one
or more unregulated subsidiaries of HoldingCo. As a result of the foregoing,
after the restructuring, (i) the current holders of all of the outstanding stock
of the Company will own all of the stock of HoldingCo, and (ii) HoldingCo will
own all of the outstanding stock of the Company and another unregulated
subsidiary, which is expected to constitute all or substantially all of
HoldingCo's business and properties.
A diagram illustrating the current structure and the proposed structure of
the new holding company organization is set forth below.
CURRENT STRUCTURE
- ------------------------------------------------------------------------------
Common and Preferred Shareholders
- ------------------------------------------------------------------------------
Southern California Water Company
- ------------------------------------------------------------------------------
HoldingCo
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
- --------------------- ---------------------
Unregulated
MergeCo Subsidiary
- --------------------- ---------------------
</TABLE>
PROPOSED STRUCTURE
- ------------------------------------------------------------------------------
Common and Preferred Shareholders
- ------------------------------------------------------------------------------
HoldingCo
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
- --------------------- ---------------------
Southern California Unregulated
Water Company Subsidiary
- --------------------- ---------------------
</TABLE>
18
<PAGE> 24
REASONS FOR THE FORMATION OF A HOLDING COMPANY
The water industry in California is experiencing competitive changes and
the Company believes there is potential for new growth. In particular, the
Company believes that there exist potentially significant opportunities to
engage in a variety of transactions involving the portion of the water utility
industry that is not regulated by the CPUC. The formation of the holding company
structure will provide a corporate structure with a clear separation between the
regulated water utility business and other utility businesses that are not
subject to regulation by the CPUC. It will also provide a framework that can
better accommodate future growth. Finally, the holding company structure, which
is utilized by many other water companies, will facilitate the financing of, and
accounting for, new non-regulated business activities.
The Company continues to pursue strategic opportunities related to the
operation of municipally-owned water systems on both a stand-alone basis and as
part of a joint venture. For example, in December, 1996, the Company and U.S.
Water, L.L.C., a limited liability company owned by Bechtel Group, and by
Northwest Water Holdings, Inc., a subsidiary of United Utilities PLC, a water
and electric utility based in the United Kingdom, formed a joint venture for the
purpose of pursuing potential opportunities to lease, or operate and maintain,
municipally owned retail water supply and distribution systems and water
treatment, wastewater collection and wastewater treatment facilities in
California. The joint venture currently acts as the manager of the water
department of the City of Compton, California pursuant to a short-term contract.
Both the Company and the joint venture have responded to other requests for
proposals from other municipalities in California to operate all or a portion of
their water systems. There can be no assurance, however, that either the Company
or the joint venture will be awarded any new contracts with these or any other
municipalities or other entities, or that, if such contracts are obtained, such
contracts will prove to be beneficial to HoldingCo.
The corporate separation and financing flexibility afforded by a holding
company structure will improve the Company's ability to take advantage of these
and other potential opportunities related to the non-regulated portion of the
water utility industry. Under a holding company structure, new, non-regulated
businesses can be operated through subsidiaries of HoldingCo rather than through
subsidiaries of the Company, thereby enhancing the separation between the
Company and such businesses. This separation of operations will help facilitate
the development of new, non-regulated business activities while helping to
insulate the core utility operations of the Company from the risks associated
with such activities.
The Company's current corporate structure cannot provide the same degree of
financial separation because all business activities must be either part of the
utility operations or conducted through subsidiaries of the Company. As a
result, any volatility of earnings associated with any new businesses would
impact the financial results of the regulated utility operations. In a holding
company structure, such other businesses can be operated by companies other than
the Company, preventing any potentially adverse financial results from such
businesses from being reflected in the financial results of the regulated
utility operations or from impairing the equity capital of the Company.
Under current California law, the Company is not permitted to issue any
debt or equity securities for the purpose of financing its non-regulated
operations. With a holding company structure, the Company's unregulated
businesses will be able to obtain funds from financings by HoldingCo or from
affiliates other than the Company, or from its own financings.
Under the proposed restructuring, HoldingCo will not be a utility and is
therefore expected not to be subject to regulation by the CPUC as a utility.
However, following the restructuring, the Company, as a wholly-owned subsidiary
of HoldingCo, will continue to operate as a utility and will remain subject to
CPUC regulation. In addition, HoldingCo may not directly or indirectly acquire
5% or more of the voting securities of any gas utility or electric utility
without the approval of the SEC. The utility business of the Company is expected
to generate the principal part of HoldingCo's earnings for the foreseeable
future after the restructuring.
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<PAGE> 25
PRINCIPAL TERMS OF THE MERGER
General. The following description of the principal terms of the Merger is
subject to and qualified in its entirety by reference to the terms of the Merger
Agreement, a copy of which is attached to this Proxy Statement/Prospectus as
Exhibit A and is incorporated herein by this reference. The consummation of the
Merger is subject to the condition, among others, that the principal terms of
the Merger Agreement are approved by the shareholders of the Company.
Effective Time of Merger. The Merger Agreement provides that the Merger
will become effective at such date and time as the requisite officers'
certificates and a copy of the Merger Agreement are filed with the Secretary of
State of the State of California (the "Effective Time"). Such filing will not
occur until all the conditions to the Merger have been satisfied or waived. See
"Conditions to the Merger."
Conversion of Shares of Company Stock. Pursuant to the Merger Agreement
each of the Company's Common Shares, or fraction thereof, issued and outstanding
immediately prior to the Merger will be automatically changed and converted into
one Common Share of HoldingCo, or fraction thereof, and each series of the
Company's Preferred Shares issued and outstanding immediately prior to the
Merger will be automatically changed and converted into one share of HoldingCo
Preferred Shares of the applicable series, respectively. The rights,
preferences, privileges and restrictions of the HoldingCo Common Shares and the
HoldingCo Preferred Shares will be substantially identical to those of the
Company Common Shares and Company Preferred Shares being converted.
Optional Exchange of Company Stock Certificates. After the Effective Time,
each holder of a certificate or certificates representing Company Common Shares
or Company Preferred Shares, as applicable, immediately prior to the Merger may,
but will not be required to, surrender the same to the Transfer Agent, and
thereupon each holder or transferee will be entitled to receive a certificate or
certificates representing the number of HoldingCo Common Shares or series of
Company Preferred Shares, as applicable, equal to the number of Company Common
Shares or series of Company Preferred Shares surrendered.
Outstanding Certificates. Until surrendered or presented for transfer, each
outstanding stock certificate which, prior to the Effective Time represented
Company Common Shares or Company Preferred Shares, as the case may be, will be
deemed and treated for all corporate purposes to represent the ownership of the
same number of shares of HoldingCo Common Shares or series of HoldingCo
Preferred Shares, as the case may be, as though such surrender or transfer and
exchange had taken place. Accordingly, shareholders are not required to exchange
such stock certificates.
Company Stock Transfer Books. The stock transfer books for Company Common
Shares and Company Preferred Shares will be deemed to be closed at the Effective
Time such that no transfer of Company Common Shares or Company Preferred Shares
outstanding prior to the Effective Time will thereafter be made on such books.
Post-Merger Rights of Holders. Following the Effective Time, the holders of
certificates representing Company Common Shares or Company Preferred Shares
outstanding immediately prior to the Effective Time will cease to have any
rights with respect to stock of the Company and their sole rights will be with
respect to the HoldingCo Common Shares or series of HoldingCo Preferred Shares
into which their Company Common Shares or series of Company Preferred Shares,
respectively, will have been converted in connection with the Merger. The
rights, preferences, privileges and restrictions of the HoldingCo Common Shares
and each series of HoldingCo Preferred Shares will be substantially identical to
those of the Company Common Shares and applicable series of Company Preferred
Shares being converted. See "Item 2 -- Proposal to Ratify Provisions Regarding
HoldingCo Board Classification" and "Item 3 -- Proposal to Ratify Provisions
Regarding Supermajority Vote of HoldingCo Shareholders."
CONDITIONS TO THE MERGER
The Merger will occur only if the Merger is approved by the requisite vote
of the Company's shareholders. See "-- Required Vote" below. In addition,
consummation of the Merger is subject to satisfaction or waiver of certain other
conditions, including the receipt of CPUC approval, the listing of
20
<PAGE> 26
HoldingCo Common Shares on the New York Stock Exchange upon official notice of
issuance, and receipt of an opinion from O'Melveny & Myers LLP that the Merger
will constitute a tax-free reorganization for federal income tax purposes.
REGULATORY APPROVALS
The Merger is subject to approval by the CPUC and to the approval by the
Company's Board of Directors of any conditions to CPUC approval. The Board
anticipates that CPUC approval may include conditions relating to, among other
things, transactions between the Company and its non-regulated affiliates. The
Board anticipates that there may be reporting requirements with respect to
affiliate transactions and requirements that ensure that ratepayers do not
subsidize non-regulated operations and receive fair compensation for the use of
utility assets and for providing services by utility personnel in non-regulated
activities. If the CPUC conditions are deemed by the Board to be materially
burdensome for the Company, the Board may elect to terminate the Merger
Agreement and not proceed with the Merger.
The Company's application for an exemption from all provisions of PUHCA,
except 9(a)(2), was granted by the SEC on April 18, 1997.
REQUIRED VOTE
Approval of the principal terms of the Merger Agreement pursuant to which a
holding company will be formed requires the affirmative vote of at least a
majority of the combined voting power of the Company Common Shares and the
Company Preferred Shares, voting together as a single class; provided that if
there are no differences between the Articles of Incorporation of the Company
and HoldingCo's Articles of Incorporation, the principal terms of the Merger
Agreement need only be approved by a majority of the combined voting power of
the Company's Common Shares and Preferred Shares represented at the Annual
Meeting and entitled to vote thereon, voting together as a single class. Each
Common Share is entitled to one-tenth of a vote and each Preferred Share is
entitled to one vote.
NO DISSENTER'S RIGHTS
Holders of Company stock will not, under California law, be entitled to any
dissenters' rights as a result of the Merger.
NO CHANGE IN DIVIDEND POLICY
It is anticipated that the quarterly dividends on HoldingCo Common and
Preferred Shares will commence at a rate no less than that being paid on the
Company Common and Preferred Shares at the time of the Merger and will be paid
on approximately the same dates in each year as the dividends on the Company
Common and Preferred Shares have been paid. The amount and timing of the
dividends on the HoldingCo Common and Preferred Shares will depend primarily on
the earnings of HoldingCo's subsidiaries, principally the Company; any
restrictions on the payment of dividends applicable to HoldingCo and/or its
subsidiaries (including, without limitation, the Company); and other financial
and non-financial conditions and factors. The quarterly dividend most recently
declared by the Board of Directors of the Company was $0.315 per Company Common
Share payable on March 1, 1998 to holders of record on February 9, 1998. There
will be no changes in the Company's Dividend Reinvestment and Stock Purchase
Plan after the Merger, other than the substitution of HoldingCo's Common Shares
for Common Shares of the Company.
Initially, the funds required by HoldingCo to operate and to pay dividends
on the HoldingCo Common and Preferred Shares following the Merger are expected
to be derived primarily from dividends paid by the Company to HoldingCo as the
sole shareholder of the Company. It is anticipated that such cash dividends paid
by the Company to HoldingCo will be sufficient to enable HoldingCo to pay
dividends on its shares and to meet its operating expenses. However, the
dividend policy of the Company will continue to be set by the Company's Board of
Directors assuming the Company is a stand-alone utility, and the amount of
dividends declared and paid by the Company will continue to depend upon the
Company's earnings, the needs of its utility operations and requirements and
conditions imposed by the CPUC. In addition, the ability of the
21
<PAGE> 27
Company to pay dividends on the Company's Common Shares to the HoldingCo will be
subject to the requirements of California law.
TERMINATION AND AMENDMENT OF MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time by action of the Board of Directors of the Company. Subject to applicable
law, the Merger Agreement may be amended, modified or supplemented at any time
prior to the Effective Time by mutual consent of the Boards of Directors of the
Company, HoldingCo and MergeCo.
DIRECTORS AND OFFICERS OF THE COMPANY AND HOLDINGCO
Prior to the Effective Time, the persons who are the directors of the
Company will be appointed to be the directors of HoldingCo. This will occur
because those persons who are elected directors of the Company at the Annual
Meeting will also be appointed directors of HoldingCo. If the provisions in
HoldingCo's Articles of Incorporation providing for the classification of
HoldingCo's Board of Directors are ratified by Company shareholders at the
Annual Meeting and HoldingCo's Common Shares are listed on the New York Stock
Exchange, the persons initially appointed as HoldingCo directors will be divided
into classes as set forth under "Item 2 -- Proposal to Ratify Provisions
Regarding HoldingCo Board Classification -- Implementation." See "Item
4 -- Election of Directors."
Following the Annual Meeting, the directors of the Company and HoldingCo
will elect officers of the Company and HoldingCo, respectively, to serve until
their successors are elected and qualified. Such additional officers of
HoldingCo and the Company as the Board of Directors considers advisable may be
elected or appointed from time to time.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion generally summarizes certain of the federal income
tax consequences of the Merger under the Internal Revenue Code, as set forth in
the tax opinion obtained from O'Melveny & Myers LLP, counsel to the Company and
to HoldingCo. This discussion does not cover all possible tax consequences
relating to the Merger and does not address the tax consequences under state or
local law, or special tax consequences to particular shareholders having special
situations. Accordingly, shareholders are urged to consult with their own tax
advisors regarding the effect of the Merger on them personally.
Subject to the foregoing limitations and based on certain representations
made by the Company, the Company has been informed that, for federal income tax
purposes:
(a) The merger of MergeCo into the Company and the issuance of
HoldingCo stock in connection therewith as described herein will constitute
a tax-free reorganization under Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended;
(b) No gain or loss will be recognized by holders of Company stock who
receive HoldingCo stock in exchange for the shares of Company stock which
they hold;
(c) The holding period of HoldingCo stock received in exchange for
Company stock will include the holding period of the Company stock for
which it is exchanged, assuming that the shares of Company stock are
capital assets in the hands of the holder thereof at the time of the
Merger; and
(d) The tax basis of HoldingCo stock received by shareholders of the
Company pursuant to the Merger will be the same as the tax basis of the
shares of Company stock exchanged therefor.
SHAREHOLDERS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS WITH RESPECT
TO ALL TAX CONSEQUENCES OF THE MERGER. Expenses incurred by any shareholder
arising from disputes with the Internal Revenue Service or any state or any
foreign tax agency over the tax consequences of the Merger will not be borne by
the Company or HoldingCo.
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<PAGE> 28
ARTICLES OF INCORPORATION, BYLAWS AND RIGHTS OF SHAREHOLDERS
The Articles of Incorporation and Bylaws of HoldingCo are substantially
identical to the Articles of Incorporation and Bylaws, respectively, of the
Company, except that the Articles of Incorporation of HoldingCo contain
provisions providing for (i) a classified Board of Directors, (ii) requiring
certain business combinations involving a change of control of HoldingCo and/or
the sale of all or substantially all of HoldingCo's assets to be approved by the
affirmative vote of a majority of the continuing directors of HoldingCo (as
defined in HoldingCo's Articles of Incorporation) or by the affirmative vote of
at least 66 2/3% of the combined voting power of outstanding HoldingCo shares,
voting together as a single class (other than any series of New Preferred Shares
not entitled to vote thereon), (iii) requiring the affirmative vote of at least
66 2/3% of the combined voting power of outstanding HoldingCo shares, voting
together as a single class (other than any series of New Preferred Shares not
entitled to vote thereon), to amend or repeal certain provisions in HoldingCo's
Bylaws relating to the fixing of the range of the number of authorized
directors, calling of special shareholders' meetings and the notice required to
be given by shareholders seeking to introduce business at shareholders'
meetings, and (iv) requiring the affirmative vote of at least 66 2/3% of the
combined voting power of HoldingCo's outstanding shares, voting together as a
single class, in order to amend or repeal the provisions in the Articles of
Incorporation providing for Board classification or the supermajority vote
described above. At the Annual Meeting, Company shareholders will be asked to
vote on proposals to ratify the HoldingCo Board classification provisions and
HoldingCo supermajority vote provisions. If either or both of such proposals are
not ratified or the Company and the Board of Directors of HoldingCo otherwise
determine that it in the best interests of HoldingCo to delete either of these
proposals, HoldingCo's Articles of Incorporation will be amended, as applicable,
prior to the Effective Time of the Merger, to delete the provisions not
approved. For a more complete description of the proposals to approve the board
classification provisions of HoldingCo's Articles of Incorporation and the
provisions of HoldingCo's Articles of Incorporation requiring a supermajority
shareholder vote, as well as the effect of such provisions on the rights of
HoldingCo shareholders, see "Item 2 -- Proposal to Ratify Provisions Regarding
HoldingCo Board Classification" and "Item 3 -- Proposal to Ratify Provisions
Regarding Supermajority Vote of HoldingCo Shareholders." A complete copy of
HoldingCo's Articles of Incorporation and bylaws is set forth as "Exhibit B
- -- Articles of Incorporation" and "Exhibit C -- Bylaws," respectively.
EXCHANGE ACT FILINGS
Following the Effective Time, both HoldingCo and the Company will be
reporting companies under the Exchange Act.
LEGAL OPINION
O'Melveny & Myers LLP, as counsel for the Company and HoldingCo, has
rendered an opinion to the effect that the HoldingCo Common Shares and the
HoldingCo Preferred Shares offered in this Proxy Statement/Prospectus will be
validly issued, fully paid, and nonassessable.
EXPERTS
The financial statements included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997, and incorporated by reference
in this Proxy Statement/Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said report.
23
<PAGE> 29
PRO FORMA FINANCIAL INFORMATION
The following table summarizes certain pro forma financial effects of the
proposed formation of a holding company as of December 31, 1997, and for the
year ended December 31, 1997, as if the restructuring had occurred December 31,
1997 and January 1, 1997, respectively. This information should be read in
conjunction with the financial statements and notes to financial statements
incorporated by reference herein. The holding company restructuring is a
reorganization of commonly-controlled entities and will be accounted for as a
pooling of interests.
<TABLE>
<CAPTION>
PRO FORMA (UNAUDITED)
------------------------
COMPANY PRO FORMA HOLDINGCO
HISTORICAL ADJUSTMENTS COMPANY CONSOLIDATED
---------- ----------- -------- ------------
<S> <C> <C> <C> <C>
ASSETS
Net Plant in Service....................... $383,623 $383,623 $383,623
Other Property and Investments............. 1,355 -$593(1) 762 1,355
Current Assets............................. 44,494 44,494 44,494
Deferred Charges........................... 27,602 27,602 27,602
-------- ----- -------- --------
Total Assets....................... $457,074 -$593 $456,481 $457,074
CAPITALIZATION AND LIABILITIES
Common Stock Equity........................ $151,053 -$593 $150,460 $151,053
Preferred Stock............................ 2,040 2,040 2,040
Long-Term Debt............................. 115,286 115,286 115,286
Total Capitalization....................... 268,379 -593 267,786 268,419
Current Liabilities........................ 56,180 56,180 56,140
Other Credits.............................. 132,515 132,515 132,515
-------- ----- -------- --------
Total Capitalization and
Liabilities...................... $457,074 -$593 $456,481 $457,074
STATEMENTS OF INCOME -- YEAR ENDED DECEMBER
31, 1997
Operating Revenues........................... $153,755 $153,755 $153,755
Operating Expenses........................... 120,467 120,467 120,467
Operating Income............................. 33,288 33,288 33,288
Other Income/Deductions (Net)................ 758 313(2) 1,071 758
Interest Charges............................. 10,157 10,157 10,157
Pretax Income................................ 23,889 313 24,202 23,889
Income Taxes................................. 9,830 9,830 9,830
Net Income................................... 14,059 313 14,372 14,059
Preferred Dividend Requirements.............. 92 92 92
Earnings Available for Common Shares......... $ 13,967 313 $ 14,280 13,967
Earnings Per Common Share.................... $ 1.56 $ 1.59 $ 1.56
Ratio of Earnings to Fixed Charges........... 3.28 3.28 3.28
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends.............. 3.30 3.33 3.30
</TABLE>
- ---------------
(1) The Company has applied to the CPUC for approval to contribute certain
non-utility assets to a non-regulated subsidiary of HoldingCo. Such approval
may not be forthcoming without conditions that the Company believes are
materially burdensome. The Company intends to retain any non-utility assets
that cannot be contributed to HoldingCo without the imposition of such
conditions. Through December 31, 1997, the Company has invested
approximately $593,000 in Golden State Water Company, all of which was
provided from retained earnings.
(2) In 1997, the Company recorded a net loss of $312,658 related to its
participation in Golden State Water Company, a non-regulated company formed
for the purpose of developing opportunities to operate municipally-owned
water departments.
24
<PAGE> 30
ITEM 2: PROPOSAL TO RATIFY PROVISIONS
REGARDING HOLDINGCO BOARD CLASSIFICATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL TO RATIFY THE PROVISIONS
FOR THE CLASSIFICATION OF HOLDINGCO'S BOARD OF DIRECTORS.
GENERAL
The shareholders are being asked to approve at the Annual Meeting certain
provisions (the "Board Classification Provisions") of HoldingCo's Articles of
Incorporation providing for classification of the Board of Directors into two or
three classes (depending upon the number of directorships), each consisting of a
number of directors equal as nearly as practicable. After initial implementation
(discussed below), each class of directors would be subject to election every
other year and would serve for a two-year term for so long as the Board remained
classified into two classes, or would be subject to election every third year
and would serve for a three-year term in the event the Board were classified
into three classes. A copy of the Board Classification Provisions excerpted from
HoldingCo's Articles of Incorporation is set forth as Exhibit D hereto.
The Company's Board of Directors believes that the Board Classification
Provisions will be in the best interest of the Company and its shareholders (who
will, immediately after the Effective Time of the Merger, be the shareholders of
HoldingCo). Board classification will help lend continuity and stability to the
management of HoldingCo. Following adoption of the classified board structure,
at any given time at least one-half of the members of the Board of Directors
will generally have had prior experience as directors of HoldingCo. The Company
Board believes that this will facilitate long-range planning, strategy and
policy and will have a positive impact on employee loyalty. The Company has not
historically had problems with either the continuity or stability of its Board
of Directors.
IMPLEMENTATION
If this proposal is ratified by shareholders and HoldingCo's Common Shares
are listed on the New York Stock Exchange, the Board Classification Provisions
will be retained, unless the Company and the Board of Directors of HoldingCo
otherwise determine that it is in the best interests of HoldingCo to delete the
Board Classification Provisions before consummation of the Merger. If the Board
Classification Provisions are retained, HoldingCo's Board of Directors will, for
purposes of initial implementation, designate two classes of directors, Class I,
consisting of James L. Anderson, William V. Caveney and Floyd E. Wicks, who will
be elected initially for a term expiring at the next Annual Meeting of
HoldingCo's shareholders, and Class II, consisting of Jean E. Auer, N. P. Dodge,
Jr., Robert F. Kathol and Lloyd E. Ross who will be elected initially for a term
expiring at the Annual Meeting of HoldingCo's shareholders to be held in April,
2000; and, in each case, until their successors are duly elected and qualified.
Each of these persons is also a current nominee for election as director of the
Company at the Annual Meeting. Further information is set forth below under,
"Item 4 -- Election of Directors." Commencing with the Annual Meeting of
Shareholders scheduled to occur in May 1999, directors elected to each class
would serve for a two-year term and until their successors are duly elected and
qualified, subject to any increase in the total number of authorized directors
to at least nine, as described below in "-- Effects of Board Classification;
Comparison with Company Bylaws" and any decrease in the total number of
authorized directors to five.
If the proposal to ratify the Board Classification provisions are not
ratified at the Annual Meeting, then HoldingCo's Articles of Incorporation will
be amended following the Annual Meeting to delete such provisions.
Classification of the Board of Directors is permitted under California law
if a company's shares are listed on the New York Stock Exchange. Classified
boards of directors are also permitted under the corporate law of a majority of
states, and the Company believes that well over one-half of Fortune 500
companies provide for classified boards.
25
<PAGE> 31
EFFECTS OF BOARD CLASSIFICATION; COMPARISON WITH COMPANY BYLAWS
If the Board Classification Provisions are retained at the Annual Meeting,
the classification of the Board will apply to every election of directors for so
long as at least six directors are authorized under HoldingCo's Bylaws and
HoldingCo's Common Shares are listed on the New York Stock Exchange. HoldingCo'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 HoldingCo's Common Shares are listed on the New York Stock
Exchange, authorized directors, after initial implementation of the classified
Board, directors will serve for a term of two years rather than one year, and
one-half of the directors (or as near to one-half as practicable) will be
elected each year. This is in contrast to the current Bylaws of the Company,
which provide that Company directors are elected at each annual meeting of
shareholders to serve for one-year terms and until their successors are elected
and qualified.
Under HoldingCo's bylaws, HoldingCo's 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 HoldingCo's 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 HoldingCo's 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 that a 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. HoldingCo 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.
The classification of the Board of Directors will have the effect of making
it more difficult to replace incumbent directors and management, even if the
reason for the desired change is inadequate performance. So long as the Board is
classified into two classes, a minimum of two annual meetings of shareholders
would generally be required to replace the entire Board, absent intervening
vacancies. While the proposal is not intended as a takeover-resistive measure in
response to a specific threat, it may discourage the acquisition of large blocks
of HoldingCo's shares by causing it to take longer for a person or group of
persons who acquire such a block of shares to effect a change in management.
REQUIRED VOTE
Approval of the proposal to ratify the Board Classification Provisions
requires the affirmative vote of at least a majority of the combined voting
power of the Company's Common Shares and Preferred Shares
26
<PAGE> 32
represented at the Annual Meeting and entitled to vote thereon, voting together
as a single class. Each Common Share is entitled to one-tenth of a vote and each
Preferred Shares is entitled to one vote.
ITEM 3: PROPOSAL TO RATIFY PROVISIONS
REGARDING SUPERMAJORITY VOTE OF HOLDINGCO SHAREHOLDERS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE PROPOSAL TO RATIFY THE PROVISIONS REQUIRING
CERTAIN BUSINESS COMBINATIONS AND AMENDMENTS TO
BE APPROVED BY A MAJORITY OF HOLDINGCO'S DIRECTORS OR
A SUPERMAJORITY VOTE OF HOLDINGCO'S SHAREHOLDERS.
GENERAL
At the Annual Meeting, Company shareholders are being asked to ratify
certain provisions (the "Supermajority Vote Provisions") of HoldingCo's Articles
of Incorporation pursuant to which certain business combinations involving
HoldingCo, and/or the sale of all or substantially all of HoldingCo's assets,
would require, in addition to any Board and/or shareholder approvals required
under applicable law, approval by the affirmative vote of a majority of
HoldingCo's continuing directors (as defined in HoldingCo's Articles of
Incorporation) or by the affirmative vote of at least 66 2/3% of the combined
voting power of HoldingCo's outstanding shares, voting together as a single
class (other than any series of New Preferred Shares not entitled to vote
thereon). In addition, Company shareholders are being asked to ratify certain
provisions of HoldingCo's Articles of Incorporation providing that amendments to
HoldingCo's bylaws relating to the calling of shareholders' meetings and the
bringing of business thereat be approved by either a majority of HoldingCo's
directors or by the affirmative vote of at least 66 2/3% of the combined voting
power of HoldingCo's outstanding shares, voting together as a single class
(other than any series of New Preferred Shares not entitled to vote thereon),
and that amendments to the Board Classification Provisions and Supermajority
Vote Provisions be approved by the affirmative vote of at least 66 2/3% of the
combined voting power of HoldingCo's shares, voting together as a single class
(other than any series of New Preferred Shares not entitled to vote thereon). A
copy of the text excerpted from HoldingCo's Articles of Incorporation which
contains such Supermajority Vote Provisions is set forth as Exhibit E hereto.
The Company's Board of Directors believes that the Supermajority Vote
Provisions will be in the best interests of the Company's shareholders (who
will, immediately after the Effective Time of the Merger, be HoldingCo's
shareholders). The Supermajority Vote Provisions will help to ensure the
continuity and stability of HoldingCo, as well as help to minimize disruptions
to HoldingCo's management, by tending to discourage attempts to gain control of
HoldingCo or its assets through a hostile takeover. A hostile takeover attempt
could prove to be highly disruptive to the business and operations of HoldingCo
and could result in a significant diversion of the time and resources of
HoldingCo's management. In addition, the provisions are intended to assure that
HoldingCo's Board and its shareholders have been given adequate opportunity to
consider business combinations and other matters that may significantly affect
their investment in HoldingCo.
IMPLEMENTATION
If the proposal to ratify the Supermajority Vote Provisions is not approved
at the Annual Meeting, then HoldingCo's Articles of Incorporation will be
amended following the Annual Meeting to delete such provisions.
EFFECTS OF SUPERMAJORITY VOTE PROVISIONS; COMPARISON WITH PROVISIONS OF COMPANY
ARTICLES OF INCORPORATION AND LAW
Under the Supermajority Vote Provisions, in addition to any Board and/or
shareholder approvals required under applicable law, and unless approved by the
affirmative vote of at least a majority of the continuing directors (as defined
in HoldingCo's Articles of Incorporation), a supermajority vote would be
required (i) to sell, convey, lease or otherwise dispose of all or substantially
all of HoldingCo's assets (or to approve, as a
27
<PAGE> 33
shareholder, the sale, conveyance, lease or other disposition by any HoldingCo
subsidiary of all or substantially all of such subsidiary's assets); (ii) to
sell, transfer, convey or otherwise dispose (other than to entities the majority
of the voting power of which is owned and controlled by HoldingCo) of more than
a majority of the voting power of the outstanding capital stock or other equity
interest of any of HoldingCo's subsidiaries which accounts for 50% or more of
HoldingCo's consolidated assets; (iii) to consolidate or merge with or into any
corporation or other business entity, except if, immediately after such
consolidation or merger, the shareholders of HoldingCo immediately prior to such
consolidation or merger will own more than 60% of the voting power of the
capital stock or other equity interest of or in the surviving entity; or (iv)
approve, as a shareholder, the consolidation or merger of any of HoldingCo's
subsidiaries which accounts for 50% or more of HoldingCo's consolidated assets
(as reflected on HoldingCo's most recent audited consolidated balance sheet),
with or into with or into any corporation or other business entity.
The Supermajority Vote Provisions are not included in the Company's
Articles of Incorporation and would, as permitted by California law, replace
various provisions of law that would otherwise prescribe the shareholder
approval required for certain business combinations involving the Company and/or
sales of all or substantially all of the Company's assets. Under California law
as applied to the Company, the principal terms of a merger reorganization or a
sale-of-assets reorganization (defined generally as a statutory merger and the
acquisition of all or substantially all of the assets of a corporation in
exchange in whole or in part for the equity securities of the acquiring
corporation) must be approved by a majority of the combined voting power of the
Company's outstanding shares. Direct sales of all or substantially all of the
Company's assets must also be approved by at least a majority of the combined
voting power of its outstanding shares. In contrast to such requirements of
California law and the Company's Articles of Incorporation, HoldingCo's Articles
of Incorporation would require all of the above-described transactions (except,
as described above, for certain transactions with affiliates and transactions in
which HoldingCo's shareholders would retain control of the surviving entity) to
be approved by at least 66 2/3% of the combined voting power of HoldingCo's
outstanding shares, voting together as a single class (other than any series of
New Preferred Shares not entitled to vote thereon).
OTHER EFFECTS
The Supermajority Vote Provisions will have the effect of giving
HoldingCo's continuing directors (as defined in HoldingCo's Articles of
Incorporation) a veto power over transactions that would result in a change of
control of HoldingCo or of all or substantially all of its assets, even if such
transactions are desired by a majority (but not more than 66 2/3%) of the
combined voting power of HoldingCo's outstanding shares. Another effect of the
Supermajority Vote Provisions will be to give the holders of shares representing
a minority of HoldingCo's voting power a veto power over a change-of-control
transaction which a majority (but less than 66 2/3%) of the shareholders may
believe is desirable. Based on their beneficial ownership of the shares of the
Company as of February 27, 1998, directors and officers of the Company will,
immediately following the Effective Time, beneficially own shares representing
less than 1% of the combined voting power of HoldingCo's outstanding shares.
REQUIRED VOTE
Approval of the proposal to ratify the Supermajority Vote Provisions
requires the affirmative vote of at least a majority of the combined voting
power of the Company's Common Shares and Preferred Shares represented at the
Annual Meeting and entitled to vote thereon, voting together as a single class.
ITEM 4: ELECTION OF DIRECTORS
Action will be taken at the Annual Meeting to elect seven directors to the
Board of Directors to serve until the next Annual Meeting of Shareholders and
until their successors are elected and qualified. It is intended that the
proxies solicited and received by and on behalf of the Board of Directors will
be voted for the re-election of the current directors, who are standing for
re-election (the "Nominees"), unless authority is
28
<PAGE> 34
withheld. If voting for directors is conducted by cumulative voting, the proxies
named on the enclosed form of proxy will have discretionary authority to
cumulate votes among the Nominees named herein.
Prior to the Effective Time of the Merger, the Nominees will also be
appointed to be the directors of HoldingCo. Those Nominees who are elected
directors of the Company at the Annual Meeting will also be appointed directors
of HoldingCo.
The proxies may also be voted for a substitute Nominee or Nominees in the
event any one or more of the persons named below shall be unable to serve for
any reason or be withdrawn from nomination, a contingency not now anticipated.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF
EACH OF THE ABOVE NOMINEES MENTIONED IN THIS ITEM 4.
A brief biography of each Nominee is set forth below, including the
Nominee's business experience during the last five years.
JAMES L. ANDERSON, Senior Vice President, since September 1996, of Americo
Life Inc. located in Orange, California. Prior to its acquisition by Americo
Life Inc., Mr. Anderson had served as President and Chief Executive Officer,
since 1986, of Fremont Life Insurance Company. Mr. Anderson has, at various
times from 1982 to 1986, served as President and Chief Operating Officer of
Fremont Insurance Services, Chairman and Chief Operating Officer of Physicians &
Surgeons Underwriting Corporation and Founder, Chairman and Chief Executive
Officer of Hospital Insurance Services, a management company for hospital
medical malpractice and general liability programs throughout California. From
1975 to 1982, Mr. Anderson served as President and Chief Operating Officer of
National American Insurance Company of California, a property and casualty
company. Mr. Anderson, age 54, is a member of the Company's Compensation and
Business Opportunities Committees and has served as a director of the Company
since 1997.
JEAN E. AUER, Consultant to the San Francisco Estuary Project since 1990,
member of the Board of Directors of the Water Education Foundation and member of
the town council 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, age 61, is a member
of the Company's Audit, Compensation, Nominating and Business Opportunities
Committees and has served as a director of the Company since 1995.
WILLIAM V. CAVENEY, Chairman of the Board of Directors of the Company since
April, 1992. Mr. Caveney was Chairman of the Board and Chief Executive Officer
of the Company from April, 1990 to March, 1992 and President and Chief Executive
Officer of the Company from April, 1982 to March, 1990. Mr. Caveney, age 71, is
Chairman of the Company's Compensation Committee and a member of the Business
Opportunities Committee and has served as a director of the Company since 1980.
N.P. DODGE, JR., President of the N.P. Dodge Company, a full service real
estate concern in Omaha, Nebraska. Mr. Dodge, age 60, is a director of the Omaha
Public Power District and is a director of Bridges Investment Fund. Mr. Dodge is
a member of the Company's Compensation Committee and Chairman of the Audit
Committee and has served as a director of the Company since 1990.
ROBERT F. KATHOL, Executive Vice President of Kirkpatrick, Pettis, Smith,
Polian, Inc., an investment banking firm in Omaha, Nebraska. Mr. Kathol, age 57,
is a member of the Company's Compensation and Audit Committees and has served as
a director of the Company since 1995.
LLOYD E. ROSS, Managing Partner of Invermex, L.P., a company developing
hotels in the southwestern United States and northern Mexico. For more than 35
years prior to his current position, Mr. Ross was associated with SMI
Construction Co., a commercial and industrial general contracting firm in
Irvine, California, having served as its President and Chief Executive Officer
since 1976. Mr. Ross, age 57, also is a director of PacifiCare Health Systems.
Mr. Ross is a member of the Company's Compensation Committee
29
<PAGE> 35
and Chairman of the Company's Nominating Committee and Business Opportunities
Committee and has served as a director of the Company since 1995.
FLOYD E. WICKS, President and Chief Executive Officer of the Company since
April, 1992. Mr. Wicks served as President of the Company from April, 1990 to
March, 1992 and as Vice President of Operations from January, 1988 to March,
1990. Mr. Wicks, age 54, is a member of the Company's Business Opportunities and
Nominating Committees and has served as a director of the Company since 1990.
No Nominee is or has been employed in his or her principal occupation or
employment during the past five years by the Company or other organization that
is a parent, subsidiary or affiliate of the Company, other than Mr. Caveney and
Mr. Wicks whose relationships are as described above.
The following table sets forth, as of February 27, 1998, the beneficial
ownership of Common Shares of the Company by each Nominee. No Nominee owns any
of the Company's Preferred Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF CLASS
NAME BENEFICIAL OWNERSHIP BENEFICIALLY HELD
---- -------------------- ------------------
<S> <C> <C>
James L. Anderson.................. 1,924 *
Jean E. Auer....................... 800 *
William V. Caveney................. 7,950 *
N.P. Dodge, Jr..................... 3,600 *
Robert F. Kathol................... 1,250 *
Lloyd E. Ross...................... 457 *
Floyd E. Wicks..................... 2,656 *
</TABLE>
- ---------------
* Less than one percent
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During 1997, to the knowledge of the Company, all reports required by
Section 16(a) of the Exchange Act were timely filed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Kirkpatrick, Pettis, Smith, Polian Inc., of which Robert F. Kathol is an
Executive Vice President, has served, at various times in the past five years,
as co-manager of the Company's offerings of Common Shares and as co-agent on the
Company's debt issuances. A subsidiary, KPM Investment Management, Inc., had
also been, until December, 1995, the Company's 401(k) Plan investment manager.
Neither Kirkpatrick, Pettis, Smith, Polian Inc. nor its subsidiaries currently
provide any services to the Company.
The Board of Directors has an Audit Committee, a Nominating Committee, a
Compensation Committee and a Business Opportunities Committee. The Audit
Committee provides advice and assistance to the Board of Directors on accounting
and financial reporting practices of the Company. It reviews the scope of audit
work and findings of the firm of independent public accountants who serve as
auditors of the Company and also monitors the work of the Company's internal
auditors. It also reviews the qualifications of and recommends to the Board of
Directors a firm of independent auditors and reviews and approves fees charged
by the independent auditors. The Nominating Committee assesses qualifications of
and makes recommendations as to candidates to fill vacancies on the Board of
Directors. The Nominating Committee will consider nominations of persons for
election to the Board of Directors recommended by shareholders. In order to
submit a nomination to the Nominating Committee, such nomination must be
submitted in writing and addressed to the Office of the Secretary at the
Company's corporate headquarters. The Compensation Committee reviews and makes
recommendations to the Board of Directors as to appropriate compensation for the
President and other executive officers of the Company and determines the awards
to be made under the Company's Key Executive Long-Term Incentive Plan (see table
and accompanying footnotes on page 33). The Business Opportunities Committee
reviews potential changes to the regulated and non-regulated
30
<PAGE> 36
operations of the Company including acquisitions, divestitures, joint ventures
and partnerships and makes recommendations to the Board of Directors as to the
financial and operational integrity of such changes. There is no Executive
Committee.
Outside directors (presently all directors except Messrs. Caveney and
Wicks) are currently paid an annual retainer, payable monthly, of $15,000. In
addition, each such director receives a $1,000 fee for each meeting attended,
although the regular and organizational meetings of the board in April are
deemed one meeting for purposes of the per-meeting fee. In addition each outside
director who is a member of the Compensation Committee, Nominating Committee,
Audit Committee or Business Opportunities Committee receives a $500 fee for each
meeting attended and the chairperson of each committee, if an outside director,
receives an additional fee of $250 for each committee meeting attended.
Chairman of the Board Caveney earned $50,000 as chairman during 1997.
President Wicks was compensated as an officer of the Company. Neither Mr.
Caveney nor Mr. Wicks received separate compensation as directors.
During 1997, directors met as a board 4 times. The Audit Committee,
consisting of Jean E. Auer, N.P. Dodge, Jr. and Robert F. Kathol met 4 times in
1997; the Compensation Committee, consisting of W.V. Caveney, James L. Anderson,
Jean E. Auer, N.P. Dodge, Jr., Lloyd E. Ross and Robert F. Kathol met 3 times in
1997; the Nominating Committee, consisting of Jean E. Auer, Lloyd E. Ross and
Floyd E. Wicks, met twice during 1997; and the Business Opportunities Committee,
consisting of Lloyd E. Ross, James L. Anderson, Jean E. Auer, W.V. Caveney and
Floyd E. Wicks, met once in 1997. No director attended less than 75% of the
board meetings and other committee meetings on which such director serves.
31
<PAGE> 37
EXECUTIVE OFFICERS
EXPERIENCE, SECURITY OWNERSHIP AND COMPENSATION
In addition to Chairman Caveney (information about whose business
experience and beneficial share ownership is set forth on page 29), the Company
had seven executive officers as of December 31, 1997. Two additional executive
officers were elected in January 1998. Information regarding the identities,
business experience and beneficial ownership of shares of such individuals is
shown in the following table and footnotes thereto:
<TABLE>
<CAPTION>
HELD COMMON SHARES PERCENT
PRINCIPAL OCCUPATION AND EXPERIENCE SUCH POSITION BENEFICIALLY OF
NAME DURING THE PAST FIVE YEARS AGE SINCE OWNED CLASS
---- ----------------------------------- --- ------------- ------------- -------
<S> <C> <C> <C> <C> <C>
Floyd E. Wicks President and Chief Executive 54 4/92 2,656 *
Officer
McClellan Harris III Vice President -- Finance, Chief 45 4/97 877 *
Financial Officer, Treasurer and
Corporate Secretary(1)
Joel A. Dickson Vice President -- Business 45 4/97 3,952 *
Development(2)
Joseph F. Young Vice President -- Regulatory 52 4/94 10,525 *
Affairs(3)
Donald K. Saddoris Vice President -- Customer Service 54 4/94 3,036 *
of Region I(4)
Randell J. Vogel Vice President -- Customer and 62 4/94 1,348 *
Operations Support and Vice
President -- Customer Service of
Region II(5)
James B. Gallagher Vice President -- Customer Service 43 4/97 1,690 *
of Region III(6)
Denise L. Kruger Vice President -- Quality 33 1/98 761 *
Assurance(7)
Susan L. Conway Vice President -- Regulatory 36 1/98 1,076 *
Affairs(8)
</TABLE>
- ---------------
* Denotes less than one percent
(1) Vice President and Treasurer from 10/96, Treasurer from 4/94 to 9/96 and
Director of Financial Management from 6/90 to 3/94.
(2) Vice President -- Regulatory Affairs and Utility Business Development from
6/90 to 3/94 and Vice President -- Customer Service of Region III from 4/94
to 3/97.
(3) Assistant Vice President for Conservation Management and Governmental
Affairs from 4/92 to 3/94.
(4) Director of Operations -- Northern/Coastal Division from 5/90 to 3/94.
(5) Vice President of Administration from 2/93 to 3/94. Also serving in the
capacity of Vice President -- Customer Service in Region II since May 1997.
(6) Secretary, Treasurer and Chief Financial Officer from 10/90 to 3/94, and
Vice President -- Finance, Chief Financial Officer and Secretary from
4/94-3/97.
(7) Manager -- Quality Assurance from 1/97 and Water Quality Manager from 10/92.
(8) Manager -- Regulatory Affairs from 2/90.
Directors and executive officers of the Company as a group beneficially own
41,902 Common Shares of the Company, which is less than one percent of the total
shares outstanding. No director or executive officer of the Company owns any of
the Company's outstanding Preferred Shares.
32
<PAGE> 38
The following table sets forth information on compensation of the Company's
Chief Executive Officer and its four most highly compensated executive officers
for the three most recent calendar years:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL PAYOUTS
COMPENSATION ------------ ALL OTHER
------------ LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY (1) PAYOUTS(2) (3)
--------------------------- ---- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Floyd E. Wicks -- 1997 $297,992 $ 8,521
President and Chief Executive Officer 1996 279,054 28,910
1995 263,584 4,767
Randell J. Vogel -- 1997 171,735 6,308
Vice President of Customer and 1996 157,349 19,250
Operations Support 1995 143,699 4,322
Joel A. Dickson -- 1997 170,909 7,361
Vice President -- Business Development 1996 154,626 19,682
1995 147,039 4,548
Donald K. Saddoris -- 1997 151,705 6,840
Vice President -- Customer Service of 1996 145,744 6,246
Region I 1995 111,876 2,487
James B. Gallagher -- 1997 143,101 6,462
Vice President -- Customer Service of 1996 136,609 18,795
Region III 1995 128,167 2,016
</TABLE>
- ---------------
(1) The executive officers of the Company receive certain perquisites, including
the personal use of a Company vehicle and personal computer. However, the
aggregate amount of such perquisites received by each named officer does
not, in the case of any such named officer, exceed 10% of the total annual
salary of such officer.
(2) The Company has a Key Executive Long-Term Incentive Plan, the provisions of
which became effective on January 1, 1995. Any payouts, which are made in
cash and/or Common Shares of the Company, would not occur prior to 1998 for
the three-year performance cycle beginning January 1, 1995, except in
certain circumstances provided in the Plan.
(3) Includes Company payment of premium on business travel and accident policy
of $39 per person per year and Company payment of the premium on group life
insurance of $150 per person per year and, in 1996 only, a special award
authorized by the Board of Directors. The balance represents the Company's
matching contribution to the 401(k) Plan for the benefit of the named
officer.
33
<PAGE> 39
The Company currently has no other bonus, profit sharing, stock option,
stock appreciation right or other remunerative program (other than pension and
welfare benefits) in effect. The Company implemented a Key Executive Long Term
Incentive Plan (the "Plan") effective as of January 1, 1995 (see footnote 2
above). The following table sets forth information about this Plan for the
three-year performance cycle that began January 1, 1997.
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
OR OTHER NON-STOCK PRICE-BASED PLANS
PERIOD UNTIL (2)
MATURATION --------------------------------
OR PAYOUT THRESHOLD TARGET MAXIMUM
NAME AND PRINCIPAL POSITION (1) ($) ($)(4) ($)(3)
--------------------------- ------------ ---------- ------- ---------
<S> <C> <C> <C> <C>
Floyd E. Wicks -- 3 years $16,500 N/A $110,000
President and Chief Executive Officer
Joel A. Dickson -- 3 years 7,750 N/A 46,500
Vice President -- Business Development
Donald K. Saddoris -- 3 years 6,900 N/A 41,400
Vice President -- Customer Service of Region I
Randell J. Vogel -- 3 years 7,800 N/A 46,800
Vice Presiden -- Customer and Operations Support
James B. Gallagher -- 3 years 6,725 N/A 40,350
Vice President -- Customer Service of Region III
</TABLE>
- ---------------
(1) It is intended, but not required, under the Company's Key Executive
Long-Term Incentive Plan that a three-year performance cycle (as such cycle
is defined in the Plan, the "Performance Cycle") until payout of the awards
under the Plan will begin to run at the start of each calendar year. The
information presented in the table above is for the three-year performance
cycle that began January 1, 1997. Payment of awards is to be made as soon as
practicable after the end of the Performance Cycle to which they relate. If
Termination of Service (as defined in the Plan) of a participant occurs
during a Performance Cycle for any reason other than death, disability,
normal retirement or early retirement, the participant will forfeit the
opportunity to receive an award for that Performance Cycle. If a participant
dies, becomes disabled or retires during a Performance Cycle, the
participant will be eligible to receive a pro rata award (based on the
number of days the participant was employed substantially full-time during
that Performance Cycle) for that Performance Cycle. The Plan also contains
provisions for the payment of awards if there is a change of control of the
Company (as defined in the Plan) before the end of a Performance Cycle.
(2) Awards under the Plan are established as a percentage of each Plan
participant's annual base salary and are payable in cash and/or Company
Common Shares. Awards for the Performance Cycle that began in 1997 will be
based on the Company's ranking, expressed as a percentile, for growth in
earnings per share and total shareholder return relative to the
corresponding measures for the companies that comprise the Peer Group
referred to on page 38. A ranking below the 40th percentile among the
companies in the Peer Group with respect to either performance measure will
result in no award with respect to that measure, while the maximum award for
either performance measure will be paid for a ranking at or above the 75th
percentile with respect to that measure. Awards will be reduced if the
Company's return on equity falls more than 50 basis points below the
Company's Authorized Rate of Return (as defined in the Plan), and awards
will not be paid at all if the Company's share price at the end of a
Performance Cycle is less than 80% of its price at the beginning of that
cycle.
(3) Figures listed represent the amount of awards that would be payable to the
executives if the Company were to achieve a ranking among the Peer Group at
the 40th percentile (Threshold) and for any percentile at or above the 75th
percentile (Maximum) for each of the performance measures. The Plan also
specifies awards for performance at the 50th and 60th percentiles with
respect to each of the performance measures. Awards for performance at
percentiles between such stated percentiles will be calculated by linear
interpolation.
34
<PAGE> 40
(4) Participants in the Plan are not assigned a "target" award. Rather, awards
are variable depending upon the Company's performance with respect to each
of the performance measures for the Performance Cycle (see footnote (3)
above).
PENSION PLAN
The 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 and the average
of the five highest consecutive years of compensation earned. For purposes of
pension calculations, compensation includes salary and all other compensation
but excludes the value of personal use of Company vehicles and other
perquisites. An employee who terminates employment after having at least five
years of service with the Company has a vested interest in the plan.
Annual benefits payable at retirement (at age 65 or beyond) are reduced by
a percentage of primary social security benefits based upon years of credited
service and are payable monthly. The following table illustrates the estimated
annual benefits payable upon retirement for persons in the earnings
classifications with years of service as shown, excluding the Social Security
deduction, for employees in the Southern California Water Company Pension Plan
and the Southern California Water Company Pension Restoration Plan.
<TABLE>
<CAPTION>
AVERAGE ANNUAL BENEFITS BASED ON LENGTH OF SERVICE
SALARY FOR HIGHEST ---------------------------------------------------------------
CONSECUTIVE FIVE YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ---------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 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
</TABLE>
The executive officers of the Company in 1997 not presently receiving
pension benefits have the following credited years of service under the pension
plan: Floyd E. Wicks -- 10; McClellan Harris III -- 7; Joel A. Dickson -- 7;
Randell J. Vogel -- 5, James B. Gallagher -- 10, Joseph F. Young -- 20 and
Donald K. Saddoris -- 30.
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.
During 1997, the Company adopted the Southern California Water Company
Pension Restoration Plan, the purpose of which is to supplement 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 401(a)(17) or 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 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
35
<PAGE> 41
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.
DEFERRED COMPENSATION PLAN FOR DIRECTORS AND EXECUTIVES
Under the Company's Deferred Compensation Plan for Directors and
Executives, directors and eligible officers and employees are entitled to defer
all, in the case of directors, or a portion, in the case of officers and
employees, of their compensation until specified times after the deferral.
Interest accrues on amounts deferred under this plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee's report on executive compensation is set forth
below. Mr. William V. Caveney, a member of this Committee and Chairman of the
Board of Directors, is, in his capacity as Chairman, an officer of the Company.
Mr. Caveney does not actively participate in the daily operation of the Company,
duties as to which are the responsibility of Mr. Wicks, President and Chief
Executive Officer of the Company. The Compensation Committee does not recommend
or determine Mr. Caveney's compensation as Chairman of the Board. No other
member of this Committee is a current or former officer or employee of the
Company or any of its subsidiaries or affiliates.
All of the Company's directors except Mr. Wicks are members of the
Compensation Committee. Mr. Kathol is Executive Vice President of Kirkpatrick,
Pettis, Smith, Polian Inc., which has served as co-manager of the Company's
Common Share offerings and as co-agent on the Company's debt sales in the past.
The firm of Kirkpatrick, Pettis, Smith, Polian Inc. and its subsidiaries do not
currently provide any services to the Company.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee consists of all directors who are not employees
of the Company. As of January 1, 1997, the Committee was composed of Directors
Auer, Caveney, Clark, Dodge, Kathol and Ross. Mr. Clark retired from the
Committee in April 1997, when he retired from the Board of Directors. The
Committee is currently composed of Directors Anderson, Auer, Caveney, Dodge,
Kathol and Ross. The primary responsibility of the Committee is to review and
make recommendations as to the appropriate level of compensation for the
executive officers of the Company, excluding the Chairman of the Board. In April
1997, the Committee submitted its recommendations for the executive officers and
those recommendations were adopted by the Board of Directors without
modification.
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 job
performance and abilities, and (iii) attract, retain and motivate talented and
experienced executives. In making its recommendations to the Board, the
Committee takes into account the fact that executive salaries are routinely
reviewed for reasonableness by the CPUC. Moreover, the Committee recognizes
that, as a regulated public utility, financial performance of the Company is
constrained by and dependent upon not only the regulatory process but 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.
The principal vehicle for compensation of executives has been and remains
salary. Annual increases, after consideration of all relevant factors, allows
for annual adjustments and avoids wide fluctuations in compensation from year to
year. However, the Committee also believes the additional compensation which can
be
36
<PAGE> 42
earned under the provisions of the Key Executive Long-Term Incentive Plan are
also important in assisting the Committee to meet its objectives.
In determining individual compensation, the Committee considers the
executive officer's duties, the quality of his or her performance of those
duties, the importance of the position and the contribution that each individual
has made to the Company's overall performance as well as its strategic
positioning for the future. The Committee also considers whether an executive
officer's duties have expended 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.
In order to set salaries of the executive officers at competitive and
reasonable levels, the Committee relies upon information provided to it by
internal and independent sources regarding the salaries of other major water
companies located locally and throughout the United States, the rate of
inflation, and the assessment of Mr. Wicks as to the performance of each
executive officer in meeting personal and job-related goals.
As with the compensation of the Company's other executive officers, the
Committee has chosen not to adopt a direct formula approach to determining the
compensation of Mr. Wicks. Based on the same factors as reviewed for other of
the Company's executive officers as well as Mr. Wicks' progress in addressing
local and industry-wide issues facing the water utility industry, the Committee
recommended and the Board authorized that Mr. Wicks' annual salary be set at
$300,000.
The Committee has reviewed the Company's compensation structure in light of
Section 162(m) of the Internal Revenue 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 1997, 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 if and
when it becomes meaningful.
The Compensation Committee
<TABLE>
<S> <C>
James L. Anderson Jean E. Auer
William V. Caveney N.P. Dodge, Jr.
Robert F. Kathol Lloyd E. Ross
</TABLE>
37
<PAGE> 43
PERFORMANCE GRAPH
The graph below compares the performance of the Company to that of (1) the
Standard & Poor's 500 Stock Index and (2) a Peer Group Index developed by the
Company for the Key Executive Long-Term Incentive Plan.
The seven water companies which comprise the peer group index described
above are: Aquarion Corp., Consumers Water Company, California Water Service
Group, E'Town Corp., Philadelphia Suburban Corp., SJW Corp. and United Water
Resources, Inc.
The graph below shows the total return to shareholders for the last five
years of an initial investment of $100 made on December 31, 1992 and assuming
reinvestment of all dividends. As with any investment, the historical
performance reflected in the performance graph is not necessarily indicative of
future performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG SOUTHERN CALIFORNIA WATER COMPANY, THE S & P 500 STOCK INDEX
AND A PEER GROUP.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SOUTHERN CALIF. PEER GROUP S&P 500
(FISCAL YEAR COVERED) WATER CO.
<S> <C> <C> <C>
12/92 100 100 100
12/93 115 114 110
12/94 99 108 112
12/95 122 122 153
12/96 139 159 189
12/97 170 219 252
</TABLE>
- ---------------
* $100 Invested on 12/31/92 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31.
38
<PAGE> 44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the beneficial
owners of more than five percent of any class of the Company's voting securities
on February 27, 1998 based upon public information known to the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT
BENEFICIAL OWNER TITLE OF CLASS OF BENEFICIAL OWNERSHIP OF CLASS
------------------- ------------------ ----------------------- --------
<S> <C> <C> <C>
Massachusetts Mutual Life Insurance Co. Preferred Shares 12,000 -- Direct 14.1%
1295 State Street
Springfield, MA
J.P. Morgan & Co., Incorporated Common Shares 472,000 -- Direct 5.2%
60 Wall Street
New York, NY
</TABLE>
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, 1997 as
filed with the Securities and Exchange Commission, including the financial
statements and schedules. Requests should be addressed to Southern California
Water Company, 630 East Foothill Boulevard, San Dimas, California 91773,
Attention: Office of the Secretary.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the Company's independent public accountants
for the year ended December 31, 1997. No accounting firm has been selected for
the current year. The Board of Directors normally selects the public accountants
for each year in July of that year. Representatives of Arthur Andersen LLP will
be at the Annual Meeting of Shareholders and will have an opportunity to make a
statement, if they so desire, and will be available to respond to appropriate
questions.
OTHER MATTERS
Management of the Company knows of no business, other than that mentioned
above, to be transacted at the Annual Meeting, but if other matters do properly
come before the meeting, it is the intention of the persons named in the
enclosed proxy to vote in regard thereto in accordance with their judgment, and
discretionary authority to do so is included in the proxy. Whether or not you
intend to be present at the meeting, you are urged to complete, sign and return
your proxy promptly.
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal which a shareholder intends to present at the next Annual
Meeting of Shareholders, which, if the proposal for a holding company is
approved, will be an Annual Meeting of HoldingCo held on the last Tuesday in
April 1999, must be received at the principal executive office of HoldingCo,
which is the same as the principal office of the Company, by November 13, 1998
if such proposal is to be considered for inclusion in the proxy statement and
form of proxy relating to that meeting. In addition, HoldingCo's bylaws contain
separate notice requirements applicable to the bringing of business before the
Annual Meeting of Shareholders by a shareholder of HoldingCo. The Company and,
if the proposal to form a holding company is approved, the HoldingCo will
maintain at their principal executive offices in San Dimas, California, a copy
of their bylaws, as amended, which bylaws will be open to inspection by
shareholders at all reasonable times during office hours.
39
<PAGE> 45
EXHIBIT A
FORM OF AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") is made as of , 1998,
by and among SOUTHERN CALIFORNIA WATER COMPANY, a California corporation
("SCW"), SCW ACQUISITION CORP., a California corporation ("MergeCo"), and
AMERICAN STATES WATER COMPANY, ("HoldingCo"), a California corporation, with
reference to the following facts:
A. SCW has authorized capital consisting of (i) 30,000,000 shares of
Common Stock, with par value of $2.50 per share ("SCW Common Stock"), of
which shares have been issued and are outstanding; (ii) 83,200
shares of Preferred Stock (the "SCW Preferred Stock"), with par value of
$25.00 per share, of which 32,000 shares of the 4% Series have been issued
and are outstanding, 32,000 shares of the 4 1/4% Series have been issued
and are outstanding, and 19,200 of the 5% Series have been issued and are
outstanding; and (iii) 150,000 shares of Preferred Stock, with a Par Value
of $100 per share, none of which have been issued.
B. MergeCo has authorized capital consisting of 1,000 shares of
Common Stock, with no par value per share ("MergeCo Common Stock"), 100
shares of which have been issued and are outstanding and are beneficially
owned of record by HoldingCo.
C. HoldingCo has authorized capital consisting of (i) 30,000,000
shares of Common Stock, no par value and a stated value of $2.50 per share
("HoldingCo Common Stock"), of which 100 shares are issued and outstanding
and beneficially owned of record by SCW, (ii) 83,200 shares of Preferred
Stock (the "HoldingCo Preferred Stock"), with par value of $25.00 per
share, of which 32,000 shares are of the 4% Series, 32,000 shares are of
the 4 1/4% Series, and 19,200 shares are of the 5% Series, and none of
which shares have been issued or are outstanding; and (iii) 150,000 shares
of New Preferred Stock, with no par value and a stated value of $100 per
share, none of which have been issued or are outstanding.
D. The Boards of Directors of the respective parties hereto deem it
advisable to merge MergeCo with and into SCW in accordance with the
California General Corporation Law (the "CGCL") and this Agreement for the
purpose of establishing HoldingCo as the parent corporation of SCW in a
transaction intended to qualify as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties agree that (i) MergeCo shall be merged with and
into SCW, (ii) SCW shall be the corporation surviving such merger, and (iii) the
terms and conditions of such merger, the mode of carrying it into effect, and
the manner of converting and exchanging shares of capital stock shall be as
follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the CGCL, MergeCo shall be merged (the
"Merger") with and into SCW at the Effective Time (as defined below). Following
the Merger, the separate corporate existence of MergeCo shall cease and SCW
shall continue as the surviving corporation (SCW, as the surviving corporation,
being sometimes referred to herein as the "Surviving Corporation"), and shall
succeed to and assume all the rights and obligations of SCW and of MergeCo in
accordance with the CGCL.
1.2 Closing. The closing of the Merger shall take place at 10:00 a.m. on a
date specified by the parties (the "Closing Date"), at the offices of O'Melveny
& Myers LLP, 400 South Hope Street, Los Angeles, California 90071.
1.3 Effective Time. Subject to the provisions of this Agreement, on the
Closing Date the parties shall file with the California Secretary of State (i) a
copy of this Agreement of Merger, (ii) an officer's certificate
A-1
<PAGE> 46
for each of MergeCo and SCW, and (iii) a certificate of satisfaction of the
California Franchise Tax Board for MergeCo, all as required by Section 1103 of
the CGCL (such documents, the "Merger Documents"), and shall make all other
filings or recordings required under the CGCL. The Merger shall become effective
at such time as the Merger Documents are duly filed with the California
Secretary of State (the date and time of such filing, being the "Effective
Time").
1.4 Effects of the Merger. The Merger shall have the effects set forth in
Section 1107 of the CGCL and all other effects specified in the applicable
provisions of the CGCL.
ARTICLE 2
TERMS OF CONVERSION AND EXCHANGE OF SHARES
At the Effective Time:
2.1 SCW Common Stock. Each share of SCW Common Stock or fraction thereof
issued and outstanding immediately prior to the Merger shall be automatically
changed and converted into one share of HoldingCo Common Stock or fraction
thereof, which shall thereupon be issued and fully-paid and non-assessable.
2.2 SCW Preferred Stock. Each share of each series of SCW Preferred Stock
issued and outstanding immediately prior to the Merger shall be automatically
changed and converted into the same number of shares of the same series of
HoldingCo Preferred Stock, which shall thereupon be issued and fully-paid and
non-assessable.
2.3 MergeCo Shares. The shares of MergeCo Common Stock issued and
outstanding immediately prior to the Merger shall be automatically changed and
converted into all of the issued and outstanding shares of Common Stock of the
Surviving Corporation, which shall thereupon be issued and fully-paid and non-
assessable, with the effect that the number of issued and outstanding shares of
Common Stock of the Surviving Corporation shall be the same as the number of
issued and outstanding shares of MergeCo Common Stock immediately prior to the
Effective Time.
2.4 HoldingCo Shares. Each share of HoldingCo Common Stock owned or held
by SCW immediately prior to the Merger shall be canceled.
ARTICLE 3
ARTICLES OF INCORPORATION AND BYLAWS
3.1 Articles of Incorporation. Upon the Effective Time and until amended
or modified in accordance therewith or pursuant to applicable law, the articles
of incorporation set forth as Appendix A hereto shall be the articles of
incorporation of Surviving Corporation.
3.2 Bylaws. Upon the Effective Time and until amended or modified in
accordance therewith pursuant to applicable law, the bylaws of SCW in effect on
the effective time shall be the bylaws of Surviving Corporation.
ARTICLE 4
DIRECTORS AND OFFICERS
4.1 Directors and Officers. The persons who are directors and officers of
SCW immediately prior to the Merger shall continue as directors and officers,
respectively, of the Surviving Corporation and shall continue to hold office as
provided in the Bylaws of the Surviving Corporation. If, at or following the
Effective Time, a vacancy shall exist in the Board of Directors or in the
position of any officer of the Surviving Corporation, such vacancy may be filled
in the manner provided in the Bylaws of the Surviving Corporation.
A-2
<PAGE> 47
ARTICLE 5
STOCK CERTIFICATES
5.1 Pre-Merger SCW Common Share Certificates and SCW Preferred Shares
Certificates. Following the Effective Time, each holder of an outstanding
certificate or certificates theretofore representing SCW Common Shares or SCW
Preferred Shares, as the case may be, may, but shall not be required to,
surrender the same to HoldingCo for cancellation or transfer, and thereupon each
such holder or transferee will be entitled to receive a certificate or
certificates representing the same number of shares of Holding Common Shares or
series of HoldingCo Preferred Shares, as the case may be, as the SCW Common
Shares or series of SCW Preferred Shares previously represented by the stock
certificate(s) so surrendered.
5.2 Outstanding Certificates. Until surrendered or presented for transfer
in accordance with Section 5.1 above, each outstanding stock certificate which,
prior to the Effective Time, represented SCW Common Shares or a series of SCW
Preferred Shares, as the case may be, shall be deemed and treated for all
corporate purposes to represent the ownership of the same number of shares of
HoldingCo Common Shares or series of HoldingCo Preferred Shares, as the case my
be, as though such surrender or transfer and exchange and taken place.
5.3 SCW Stock Transfer Books. The stock transfer books for SCW Common
Shares and each series of SCW Preferred Shares shall be deemed to be closed at
the Effective Time such that no transfer of SCW Common Shares or any series of
SCW Preferred Shares shall thereafter be made on such books.
5.4 Post-Merger Rights of Holders. Following the Effective Time, the
holders of certificates representing SCW Common Shares and each series of SCW
Preferred Shares outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to stock of the Surviving Corporation and their
sole rights shall be with respect to the HoldingCo Common Shares or series of
HoldingCo Preferred Shares, respectively, into which their SCW Common shares or
series of SCW Preferred Shares shall have been converted in connection with the
Merger.
ARTICLE 6
CONDITIONS OF THE MERGER
Completion of the Merger is subject to the satisfaction of the following
conditions:
6.1 SCW Shareholder Approval. The principal terms of this Agreement shall
have been approved by shares constituting a majority of the combined voting
power of the outstanding Common Shares and Preferred Shares. Each outstanding
Common Share shall be entitled to one-tenth of a vote and each outstanding
Preferred Share shall be entitled to one vote.
6.2 HoldingCo Common Stock Listed. The HoldingCo Common Stock to be issued
and to be reserved for issuance pursuant to the Merger shall have been approved
for listing, upon official notice of issuance, by the New York Stock Exchange.
6.3 CPUC Approval. The California Public Utilities Commission shall have
approved the formation of a holding company structure for SCW pursuant to this
agreement of merger in a form substantially similar to the Agreement, subject
only to conditions deemed reasonable by the Board of Directors of SCW.
6.4 Tax Opinion. The Company shall have received from O'Melveny & Myers
LLP an opinion to the effect that the Merger will constitute a tax-free
reorganization for federal income tax purposes.
ARTICLE 7
AMENDMENT AND TERMINATION
7.1 Amendment. Subject to applicable law, the parties to this Agreement,
by mutual consent of their respective boards of directors, may amend, modify or
supplement this Agreement in such manner as may be
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agreed upon by them in writing at any time before or after approval of this
Agreement by the pre-Merger shareholders of SCW (as provided in Section 6.1
above).
7.2 Termination. his Agreement may be terminated and the Merger and other
transactions provided for by this Agreement may be abandoned at any time,
whether before or after approval of this Agreement by the pre-Merger
shareholders of SCW, by action of the board of directors of SCW if such board of
directors determines for any reason that the completion of the transactions
provided for herein would for any reason be inadvisable or not in the best
interests of SCW or its shareholders.
ARTICLE 8
MISCELLANEOUS
8.1 Approval of HoldingCo Shares. By its execution and delivery of this
Agreement, SCW, as the sole pre-Merger shareholder of HoldingCo, consents to,
approves and adopts this Agreement and approves the Merger, subject to approval
of this Agreement by the pre-Merger shareholders of SCW and the satisfaction of
all other conditions specified in Article 6 above.
8.2 Approval of MergeCo Shares. By its execution and delivery of this
Agreement, HoldingCo, as the sole pre-Merger shareholder of MergeCo, consents
to, approves and adopts this Agreement and approves the Merger, subject to
approval of this Agreement by the pre-Merger shareholders of SCW and the
satisfaction of all other conditions specified in Article 6 above.
IN WITNESS WHEREOF, SCW, HoldingCo and MergeCo, pursuant to approval and
authorization duly given by resolutions adopted by their respective boards of
directors, have each caused this Agreement to be executed by its chairman of the
board or its president or one of its vice presidents and by its secretary or one
of its assistant secretaries.
SOUTHERN CALIFORNIA WATER COMPANY,
a California corporation
By:
--------------------------------------
Its:
--------------------------------------
By:
--------------------------------------
Its:
--------------------------------------
AMERICAN STATES WATER COMPANY
a California corporation
By:
--------------------------------------
Its:
--------------------------------------
By:
--------------------------------------
Its:
--------------------------------------
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SCW ACQUISITION CORP.,
a California corporation
By:
--------------------------------------
Its:
--------------------------------------
By:
--------------------------------------
Its:
--------------------------------------
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APPENDIX A TO AGREEMENT OF MERGER
RESTATED ARTICLES OF INCORPORATION
OF
SOUTHERN CALIFORNIA WATER COMPANY
(AS AMENDED , 1998)
NAME
One: The name of the corporation is SOUTHERN CALIFORNIA WATER COMPANY.
PURPOSE
Two: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
AUTHORIZED SHARES
Three: The total number of shares which the corporation is authorized to
issue is 1,000 shares of Common Stock.
DIRECTOR LIABILITY
Four: The liability of the directors of the corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
Law.
INDEMNIFICATION OF AGENTS
Five: The corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits set forth in Section 204 of the California Corporations Code with respect
to actions for breach of duty to the corporation and its shareholders.
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EXHIBIT B
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
AMERICAN STATES WATER COMPANY
ARTICLE I
The name of this Corporation is American States Water Company.
ARTICLE II
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
The name and address of this Corporation's initial agent for service of
process is McClellan Harris III, 630 East Foothill Boulevard, San Dimas,
California 91773.
ARTICLE IV
This Corporation is authorized to issue three classes of stock to be
designated, respectively, "New Preferred Shares", "Preferred Shares", and
"Common Shares". The total number of shares which this Corporation is authorized
to issue is 30,233,200; 150,000 shares are to be New Preferred Shares with no
par value and a stated value of $100 per share and an aggregate stated value of
$15,000,000; 83,200 shares are to be Preferred Shares with a par value of $25
per share and an aggregate par value of $2,080,000; and 30,000,000 shares are to
be Common Shares, no par value with a stated value of $2.50 per share and an
aggregate stated value of $75,000,000.
A statement of the preferences, privileges and restrictions granted to or
imposed upon the respective classes or series of shares and/or upon the holders
thereof is as follows:
(1) Subject to the provisions of this Article IV, New Preferred Shares
of any particular series shall be entitled to such voting rights, if any,
as may be specified for shares of such series in the certificate of
determination of preferences of such series filed as provided below; all
Preferred Shares shall be entitled to voting rights on the basis of one
vote per share; and all Common Shares shall be entitled to voting rights on
the basis of one-tenth of one vote per share.
(2) New Preferred Shares may be issued from time to time in one or
more series. Each such series shall be so designated as to distinguish it
from other series of New Preferred Shares and from series of Preferred
Shares. Such designation may include an appropriate reference to the
dividend rate and/or any other characteristics of such series. The Board of
Directors is hereby authorized, within the limits of, but to the extent
authorized by applicable law and within the limitations and restrictions,
if any, stated in this Article IV, to fix or alter, from time to time, the
dividend rights, dividend rate, conversion rights, voting rights, right and
terms of redemption (including sinking fund provisions), redemption price
or prices, and liquidation preferences, or any of them, of any wholly
unissued series of New Preferred Shares, and to fix the number of shares
constituting any such unissued series, by a resolution or resolutions
adopted by the Board of Directors in exercise of the authority hereby
granted.
(3) The Preferred Shares may be issued from time to time in any number
of series. One such series shall (i) be and hereby is designated the
"4 1/4% Series", (ii) consist of 32,000 shares, (iii) be entitled to
dividends as provided in Paragraph (4) hereof at the rate of 4 1/4% per
annum of the par value thereof, and
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(iv) be redeemable in the manner and otherwise upon the conditions provided
in Paragraph (6) hereof by payment of a redemption price equal to the par
value thereof and unpaid dividends accrued thereon to and including the
date fixed for such redemption and a premium of $1.50 per share. Another
such series of Preferred Shares shall (i) be and hereby is designated as
the "4% Series", (ii) consist of 32,000 shares, (iii) be entitled to
dividends as provided in Paragraph (4) hereof at the rate of 4% per annum
of the par value thereof, and (iv) be redeemable in the manner and
otherwise upon the conditions provided in Paragraph (6) hereof by payment
of a redemption price equal to the par value thereof and unpaid dividends
accrued thereon to and including the date fixed for such redemption and a
premium of $2 per share. Except as to the foregoing particulars no
distinction shall exist between any of the Preferred Shares or any series
thereof, and all Preferred Shares, regardless of series, shall be of equal
rank and priority.
(4) The holders of the outstanding shares of the several and
respective series of Preferred Shares shall be entitled to receive, out of
any funds legally available therefor, dividends at the respective rates for
the shares of said series, payable in cash quarterly on the first days of
March, June, September and December in each year when and as declared by
the Board of Directors of this Corporation. Such dividends shall accrue on
each such share from the date of its original issuance and shall accrue
from day to day whether or not earned or declared. Such dividends shall be
cumulative so that if such dividends in respect of any quarterly dividend
period at the respective rates fixed therefor shall not have been paid on,
or declared and set apart for, all Preferred Shares of each series at the
time outstanding, the deficiency shall be fully paid on or declared or set
apart for such shares before any dividend or other distribution shall be
paid upon or declared or set apart for the Common Shares. No such dividend
shall be declared or paid upon or set apart for any outstanding shares of
any one of said series unless at the same time such dividends on all
outstanding Preferred Shares of all of said series shall be declared and
paid in full or set apart for such payment.
(5) In the event of the liquidation, dissolution or winding up of this
Corporation, whether voluntary or involuntary, the holders of the shares of
the several and respective series of Preferred Shares shall be entitled to
receive out of the assets of this Corporation, whether such assets are
capital or surplus of any nature, an amount equal to the par value thereof
plus all unpaid dividends accrued thereon to the date that such amount is
made available for distribution to the holders thereof, and no more, or
ratably from available assets if such assets are insufficient to permit
payment to said holders of their full preferential amount aforesaid. Such
amount shall be paid upon said shares, or shall be set apart for such
payment, before any distribution is made or set apart for any Common Shares
in any such liquidation, dissolution or winding up. A consolidation or
merger of this Corporation with or into any other corporation or
corporations shall not be deemed to be a liquidation, dissolution or
winding up within the meaning of this Paragraph (5).
(6) This Corporation, at the option of its Board of Directors, may at
any time or from time to time redeem the whole or any part of the
outstanding shares of any one or more series of the Preferred Shares by
paying in cash therefor the amount payable upon the redemption thereof
(such amount being hereinafter referred to as the "redemption price"). In
case of the redemption of a part only of the outstanding shares of any
series of Preferred Shares, this Corporation shall designate by lot, in
such manner as the Board of Directors may determine, the shares to be
redeemed. At least thirty (30) days' previous notice by mail, postage
prepaid, shall be given to the holders of record of the shares to be
redeemed, such notice to be addressed to each such shareholder at his post
office address as shown by the records of this Corporation at the opening
of business on the day of mailing such notice. If on or before the date
fixed for redemption and specified in such notice funds necessary for such
redemption shall have been set aside at the place designated in said notice
so as to be and continue available therefor, then notwithstanding that the
certificates evidencing any shares called for such redemption shall not
have been surrendered, the dividends with respect to the shares so called
for redemption shall cease to accrue after the said date fixed for
redemption and all rights with respect to such shares shall forthwith after
said date cease and determine except only the right of the holders thereof
to receive payment of the redemption price, without interest, upon
surrender of their certificates representing the redeemed shares. In case
less than all the shares represented by any such surrendered certificate
shall have been redeemed, a new
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certificate shall be issued for the unredeemed shares. Subject to the
provisions hereof, the Board of Directors shall have authority to prescribe
from time to time the manner in which the Preferred Shares shall be
redeemed.
(7) If at any time four (4) quarterly dividends (whether or not
consecutive) which have accrued on the outstanding Preferred Shares
pursuant to Paragraph (4) hereof shall be in arrears, then at the annual
meeting of shareholders next following the fourth such quarterly dividend
default, or, if such next annual meeting is not to be held within sixty
(60) days following such default, at a special meeting of shareholders
called for the purpose on the written request of the holders of not less
than ten percent (10%) of the then outstanding Preferred Shares, the
holders of said outstanding Preferred Shares shall be entitled, voting
separately as a class (regardless of series), to elect the smallest number
of directors of this Corporation which shall constitute a majority of the
authorized number of such directors and the holders of the New Preferred
Shares and the holders of the Common Shares, in accordance with their
respective voting rights, shall be entitled to elect the remaining number
of such authorized directors; which voting rights by said respective
classes of shares shall continue until, but only until, all dividends which
shall have accrued for any period under said Paragraph (4) upon the
outstanding Preferred Shares shall have been paid or set apart for payment.
At all meetings of shareholders held for the purpose of electing directors
during such time as the holders of the Preferred Shares have the right,
voting separately as a class, to elect directors pursuant to this Paragraph
(7), the presence in person or by proxy of the holders of a majority of the
outstanding Preferred Shares (regardless of series), shall be required to
constitute a quorum of such class for the election of directors, and the
presence in person or by proxy of the holders of a majority of the other
outstanding shares entitled to vote at such meeting, as a separate class or
classes in accordance with their respective voting rights, shall be
required to constitute a quorum of such class for the election of
directors; provided, however, that the absence of a quorum of the holders
of outstanding shares of either such class or classes shall not prevent the
election at any such meeting, or adjournment thereof, of directors by the
other such class or classes if the necessary quorum of such other class or
classes is present in person or by proxy at such meeting or adjournment;
and provided further that in the event that at such meeting or adjournment
such a quorum of the holders of classes other than the Preferred Shares is
present and such quorum of the holders of the Preferred Shares is not
present, then an election of the directors elected at such meeting or
adjournment by the holders of classes other than the Preferred Shares shall
not be effective and any directors so elected by such holders of classes
other than the Preferred Shares shall not assume office until the holders
of the Preferred Shares, with such a quorum present, shall elect the
directors they are entitled to elect. In the event of an election of
directors by holders of Preferred Shares pursuant to this Paragraph (7),
the term of office as directors of all persons who are directors of this
Corporation at the time of the accrual under this Paragraph (7) of the
right of the holders of the Preferred Shares to elect directors shall
terminate when the holders of the outstanding Preferred Shares shall have
so elected directors. In case any vacancy shall occur among the directors
elected as aforesaid by the holders of the Preferred Shares, or among the
directors elected as aforesaid by the holders of classes other than the
Preferred Shares, during any period for which a majority of the directors
shall have been so elected by the holders of the Preferred Shares, such
vacancy shall be filled by the vote of a majority of the remaining
directors who were so elected by the holders of the Preferred Shares or by
the holders of classes other than the Preferred Shares, as the case may be.
(8) Without the approval of the holders of at least two-thirds of the
outstanding Preferred Shares, given in person or by proxy, either by
written consent or by vote as provided by law, this Corporation shall not
(i) alter or amend the preferences, voting powers or other special
rights or the qualifications, limitations and restrictions imposed in
favor of any of the Preferred Shares so as adversely to affect any of
the Preferred Shares then outstanding, or
(ii) authorize or issue any shares of any class, or any securities
convertible into shares of any class, ranking prior to the Preferred
Shares as to dividends or assets; or
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(iii) reclassify any shares of any class ranking junior to or on a
parity with the Preferred Shares into shares of any other class ranking
prior to the Preferred Shares; or
(iv) issue any shares of any class ranking on a parity with the
Preferred Shares, unless in either case (a) the aggregate of the par or
stated value of the Common Shares to be outstanding immediately after
such issue, plus the surplus of this Corporation, all determined in
accordance with accepted accounting practice, shall be at least equal to
the par or stated value of all shares which rank prior to the Common
Shares and which are to be outstanding immediately after such issue; (b)
the net earnings of this Corporation, computed in accordance with
accepted accounting practice (but after provision for all taxes based
upon or measured by income, and after annual interest charges adjusted
by provision for amortization of bond discount and expense or of premium
on indebtedness, and also after deduction of depreciation as reported in
the accounts of this Corporation as filed with the Public Utilities
Commission of the State of California or other public authority of said
State having jurisdiction to establish or approve the system of accounts
of this Corporation), for a period of 12 consecutive calendar months out
of the 15 calendar months immediately preceding the date of such issue
shall have been at least equal to twice the aggregate of the annual
dividend requirements on all shares of this Corporation which rank prior
to the Common Shares and which are to be outstanding immediately after
such issue, and (c) the net earnings of this Corporation, computed as
above (but before interest charges as aforesaid and after deduction for
depreciation and provision for all taxes as above), for said 12 months
period, shall have been at least equal to one and one-half times the
aggregate of all such interest charges and the annual dividend
requirements on all shares of this Corporation which rank prior to the
Common Shares and which are to be outstanding immediately after such
issue.
(9) Without the approval of the holders of a majority of the
outstanding Preferred Shares, given in person or by proxy, by written
consent or by vote as provided by law, this Corporation shall not (i)
issue, assume, or guarantee any unsecured notes or obligations unless
immediately thereafter the total principal amount of the unsecured
indebtedness of this Corporation shall be less than 10% of the aggregate of
the total principal amount of outstanding bonds or other securities
representing secured indebtedness issued, assumed or guaranteed by this
Corporation, plus its stated capital and surplus; provided, however, that
the foregoing provisions of this Paragraph (9) shall not apply to any such
notes or obligations which (a) represent liabilities incurred in the
ordinary course of business or for construction or acquisition of capital
assets or represent tax liability or liability incurred or accrued on
account of customers' deposits, or (b) are issued to extend, renew, redeem
or refund outstanding indebtedness of this Corporation in principal amount
not less than the principal amount of such notes or obligations, or are
issued to redeem or refund then outstanding Preferred Shares which have an
aggregate par or stated value at least equal to the aggregate principal
amount of such notes or obligations, or (ii) sell, convey, lease or
otherwise dispose of all or substantially all of its assets, property or
business, or consolidate or merge with or into any other corporation.
(10) The approval of the holders of outstanding Preferred Shares which
in any case may be required by the foregoing Paragraphs (8) and (9) for the
taking of any action referred to in any of said paragraphs shall be in
addition to any such approval of shareholders of this Corporation as may at
the time be required by the laws of the State of California with respect to
such action and no such action shall be taken without compliance with such
laws of said State as are in effect at the time of taking of any such
action.
(11) For the purposes of Paragraphs (8)(iv) and (9)(i) hereof, the
certificate or opinion of any independent certified or public accountant of
recognized standing (who may be the accountant regularly retained by this
Corporation), selected in good faith by the Board of Directors, shall be
conclusive with respect to all questions of fact therein required to be
determined.
(12) Subject to the dividend preferences provided for herein for all
shares of each other class at the time outstanding and to the restrictions
set forth above and in this Paragraph (12), the Common Shares shall be
entitled to receive dividends when and as declared by the Board of
Directors out of any funds of
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this Corporation legally available therefor. After payment of the full
preferential amounts hereinabove provided for all shares of each other
class outstanding at the time of any liquidation, dissolution or winding up
of this Corporation, whether voluntary or involuntary, all then remaining
assets of this Corporation available for distribution to its shareholders
shall be distributed ratably upon the Common Shares. No dividend shall be
declared on the Common Shares which, after giving effect to such
declaration, would reduce the Common Stock Equity of this Corporation as of
the end of the calendar month last preceding that in which such dividend
was declared to an amount less than 25% of the Total Capitalization of this
Corporation as of the end of said last preceding month, except that any
such dividend may be declared (a) which would reduce such Common Stock
Equity to less than 25% but not less than 20% of such Total Capitalization
if the amount of such dividend plus all dividends on the Common Shares
declared during the 12 months period terminating at the end of such last
preceding calendar month shall not exceed 75% of the net income of this
Corporation applicable to its Common Shares for such period, or (b) which
would reduce such Common Stock Equity to less than 20% of such Total
Capitalization if the amount of such dividend plus all dividends on the
Common Shares declared during said 12 months period shall not exceed 50% of
the net income of this Corporation applicable to its Common Shares for such
period; provided, however, that the foregoing restrictions of this sentence
shall not apply to, nor in any way restrict, (a) the payment of any
dividend on the Common Shares which is payable in shares of stock of this
Corporation, or (b) any reclassification, subdivision, split-up or
combination of the Common Shares, or (c) any transfer between the capital
and surplus accounts of this Corporation in connection with any such
reclassification, subdivisions, split-up or combination or payment of
dividend in shares of stock of this Corporation. Common Stock Equity as
herein used shall mean the aggregate of (i) par value or stated capital of
all outstanding Common Shares, and (ii) the surplus (including capital
surplus, paid-in surplus and earned surplus) as shown by the books of this
Corporation after giving effect to the declaration of the proposed
dividend, and (iii) premium on Common Shares; less the remaining balance of
the amount of organization expenses, as shown on said books. Total
Capitalization as herein used shall mean the aggregate of (i) Common Stock
Equity, (ii) premium on and the par value or stated capital of all
outstanding shares of this Corporation of any and all classes having
preferences over the Common Shares as to dividends or assets, and (iii) the
principal amount of all outstanding debt maturing more than 12 months after
the close of said 12 months period, all as shown by the books of this
Corporation; less the remaining balance of organization expenses, as shown
on said books. Net Income as herein used shall be determined in accordance
with accepted accounting practice (but after provision for all taxes based
upon or measured by income, and after annual interest charges adjusted by
provision for amortization of bond discount and expense or of premium on
indebtedness, and also after deduction of depreciation for said 12 months
period as reported in the accounts of this Corporation as filed with the
Public Utilities Commission of the State of California or other public
authority of said state having jurisdiction to establish or approve the
system of accounts of this Corporation). Net Income applicable to Common
Shares as herein used shall mean net income after deduction therefrom of
all dividends payable for the period involved on all outstanding shares of
any and all classes of this Corporation having preference over the Common
Shares as to dividends or assets.
(13) No Preferred Shares of this Corporation which have been
reacquired in any manner by this Corporation after the original issue
thereof shall ever again be reissued and all such shares so reacquired
shall upon such reacquisition cease to be a part of the authorized shares
of this Corporation.
(14) Unless such action has been approved by the affirmative vote of
at least a majority of the Continuing Directors (as defined below), without
the approval of Common Shares, Preferred Shares and, unless otherwise
provided in the certificate of determination for any series of New
Preferred Shares, the New Preferred Shares representing in the aggregate at
least 66 2/3% of the combined voting power of this Corporation's
outstanding Common Shares, Preferred Shares and the New Preferred Shares,
voting together as a single class, this Corporation shall not
(i) subject to subparagraph (iii) below, sell, convey, lease or
otherwise dispose of all or substantially all of its assets, property or
business;
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(ii) approve the sale, conveyance, lease or other disposition by
any subsidiary of this Corporation of all or substantially all of such
subsidiary's assets, property or business;
(iii) sell, transfer, convey or otherwise dispose of more than a
majority of the outstanding capital stock of any subsidiary of the
Corporation, if such subsidiary holds assets accounting for 50% or more
of the Corporation's consolidated assets, other than to an entity the
majority of the voting power of the capital stock or other equity
interest of which is owned and controlled by this Corporation;
(iv) consolidate or merge with or into any other corporation or
other business entity, except if, immediately after such consolidation
or merger, the shareholders of this Corporation immediately prior to
such consolidation or merger will own more than 60% of the voting power
of the outstanding capital stock or other equity interest of or in the
surviving entity; or
(v) approve the consolidation or merger of any subsidiary of this
Corporation, if such subsidiary holds assets accounting for 50% or more
of the Corporation's consolidated assets, with or into any other
corporation or other business entity.
For purposes of this paragraph (14) of Article IV, the term "Continuing
Directors" shall mean any member of the Board of Directors of the Corporation
(while such person is a member of the Board) who (i) is not an Acquiring Person,
or an Affiliate or Associate of an Acquiring Person, or a representative of an
Acquiring Person or of any such Affiliate or Associate, and (ii) either (A) was
a member of the Board of Directors prior to the time any person became an
Acquiring Person, or (B) became a member of the Board of Directors subsequent to
the time any person became an Acquiring Person, if such person's nomination for
election, or re-election, to the Board was recommended, or approved, by a
majority of the Continuing Directors then in office. For purposes of the
foregoing definition, (i) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect as of the date hereof; (ii)
"Acquiring Person" shall mean any person or entity which, alone or together with
all Affiliates and Associates of such person or entity, shall be the beneficial
owner of 20% or more of the Corporation's voting stock, but shall not include
(1) an Exempt Person or (2) any person or entity who or which acquires 20% or
more of the Corporation's voting stock in connection with a transaction or
series of transactions approved prior to such transaction or transactions by the
Board of Directors of the Corporation; provided that no person or entity shall
become an Acquiring Person solely as a result of a reduction in the number of
shares of the Corporation's voting stock outstanding, unless and until such
person or entity shall thereafter become the beneficial owner of additional
shares constituting 1% or more of the general voting power of the Corporation.
"Exempt Person" shall mean the Corporation, any majority-owned subsidiary of the
Corporation, and any employee benefit plan or employee stock plan of the
Corporation, or any trust or other entity organized, established or holding
Common Shares by, for or pursuant to, the terms of any such plan.
(15) Another series of Preferred Shares shall have the following terms and
provisions:
(i) Designation. The designation of said series shall be "Preferred
Shares, 5% Series".
(ii) Number of Shares. The authorized number of shares constituting
said Preferred Shares, 5% Series, shall be 19,200 shares.
(iii) Dividend Rate. The dividend rate of said Preferred Shares, 5%
Series, shall be, per share, 5% per annum of the share par value.
(iv) Optional Redemption. The redemption prices of the shares of said
series, when redeemed by this Corporation at the option of its Board of
Directors, shall be an amount per share equal to the par value thereof and
unpaid dividends accrued thereon to and including the date fixed for
redemption, plus a premium of $.25 per share.
(v) Sinking Fund for Mandatory Purchases or Redemptions. (a) So long
as any of the Preferred Shares, 5% Series, shall be outstanding, this
Corporation, as a sinking fund for the purchase or redemption thereof
(hereinafter called the "Sinking Fund"), shall set aside in cash out of any
moneys legally available therefor, after full payment or provision for
payment of dividends on all outstanding
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Preferred Shares of all series and all other shares of this Corporation
ranking prior to or on a parity with the Preferred Shares for all prior
periods through the end of the last preceding quarterly dividend period for
such Preferred Shares and such other shares, on September 5 of each year
(hereinafter called the "Sinking Fund payment date"), a sum equal to two
percent (2%) of the aggregate par value of the total number of Preferred
Shares, 5% Series, theretofore issued. If on any Sinking Fund payment date
the funds of this Corporation legally available therefor shall be
insufficient to discharge in full the Sinking Fund requirement then
accrued, funds to the extent legally available for such purpose shall be
set aside for the Sinking Fund. Such Sinking Fund requirements shall be
cumulative so that if for any year or years such requirements shall not be
fully discharged as they accrue, funds legally available therefor, after
such payment or provision for dividends, for each fiscal year thereafter
shall be applied thereto until such requirements are fully discharged.
(b) This Corporation at its option shall be entitled to use as a
credit against its Sinking Fund requirement for any year, in an amount
equal to the par value thereof, Preferred Shares, 5% Series, which this
Corporation shall have theretofore acquired by purchase or redemption,
otherwise than through the operation of the Sinking Fund, and for which
credit shall not therefore have been taken against any Sinking Fund
requirement.
(c) On or before the 60th day next following each Sinking Fund payment
date, the cash in the Sinking Fund shall be used to acquire Preferred
Shares, 5% Series, by purchase, at a price or prices not exceeding the par
value thereof, or by redemption at the par value thereof in the manner
provided in Paragraph 6 of Article IV of the Articles of Incorporation of
this Corporation, in each case plus an additional amount equal to accrued
dividends thereon to the date of such purchase or redemption, which
additional amount shall be paid from general funds of this Corporation
legally available therefor and not from the Sinking Fund, or by both such
purchase and such redemption. Upon retirement of all Preferred Shares, 5%
Series, any cash remaining in the Sinking Fund in excess of that required
to complete payment for any shares purchased or agreed to be purchased, or
to redeem shares called for redemption through the operation of the Sinking
Fund, shall become a part of the general funds of this Corporation.
ARTICLE V
The liability of the directors of this Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
This Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors, or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits set forth in Section 204 of the California Corporations Code.
ARTICLE VI
Notwithstanding any contrary provision of these Articles of Incorporation,
any amendment or repeal of paragraph (14) of Article IV, this Article VI or any
amendment to these Articles of Incorporation providing for a classified board
shall require the affirmative vote of shares representing not less than 66 2/3%
of the combined voting power of the outstanding Common Shares, Preferred Shares
and, unless otherwise provided in the certificate of determination, the New
Preferred Shares, voting together as a single class.
Notwithstanding any contrary provision of these Articles of Incorporation,
and except as otherwise expressly provided in the California Corporations Code,
none of the following provisions of the Bylaws of the Company may be amended or
repealed, except by a majority of the Board or by the shareholders upon the
affirmative vote of shares representing at least 66 2/3% of the combined voting
power of the outstanding Common Shares, Preferred Shares and, unless otherwise
provided in the certificate of determination for any series of New Preferred
Shares, the New Preferred Shares, voting together as a single class: (a) Section
2 of Article II, (b) Section 15 of Article II, and (c) Section 2 of Article III.
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ARTICLE VII
In the event that the authorized number of directors shall be fixed with at
least six (6) but less than nine (9) during any period of time that the Common
Shares are listed on the New York Stock Exchange, the Board of Directors shall
be divided into two classes, designated Class I and Class II. Each class shall
consist of one-half of the directors or as close an approximation as possible.
The initial term of office of the directors of Class I shall commence on the
date that the Common Shares are listed on the New York Stock Exchange and shall
expire at the annual meeting to be held during fiscal year 1999 and the initial
term of office of the directors of Class II shall commence on the date that the
Common Shares are listed on the New York Stock Exchange and shall expire at the
annual meeting to be held during fiscal year 2000. At each subsequent annual
meeting, each of the successors to the directors of the class whose term shall
have expired at such annual meeting shall be elected for a term running until
the second annual meeting next succeeding his or her election and until his or
her successor shall have been duly elected and qualified, unless the Common
Shares are no longer listed on the New York Stock Exchange.
In the event that the authorized number of directors shall be fixed at nine
(9) or more during any period of time that the Common Shares are listed on the
New York Stock Exchange, the Board of Directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall consist of
one-third of the directors or as close an approximation as possible. At each
subsequent annual meeting, each of the successors to the directors of the class
whose term shall have expired at such annual meeting shall be elected for a term
running until the third annual meeting next succeeding his or her election until
his or her successor shall have been duly elected and qualified, unless the
Common Shares are no longer listed on the New York Stock Exchange.
Notwithstanding the rule that the classes shall be as nearly equal in
number of directors as possible, in the event of any change in the authorized
number of directors, each director then continuing to serve as such shall
nevertheless continue as a director of the class of which he or she is a member
until the expiration of his or her current term, or his or her prior death,
resignation or removal.
At each annual election, the directors chosen to succeed those whose terms
then expire shall be of the same class as the directors they succeed, unless, by
reason of any intervening changes in the authorized number of directors, the
Board of Directors shall designate one or more directorships whose term then
expires as directorships of another class in order more nearly to achieve
equality of number of directors among the classes.
The effective date of the amendment adding this Article VII shall be the
date on which the Common Shares are first listed on the New York Stock Exchange.
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EXHIBIT C
BYLAWS
FOR THE REGULATION, EXCEPT
AS OTHERWISE PROVIDED BY STATUTE OR
ITS ARTICLES OF INCORPORATION,
OF
AMERICAN STATES WATER COMPANY
(A CALIFORNIA CORPORATION)
ARTICLE I
OFFICES
Section 1. Principal Executive Office. The corporation's principal
executive office shall be fixed and located at such place as the Board of
Directors (herein called the "Board") shall determine. The Board is granted full
power and authority to change said principal executive office from one location
to another.
Section 2. Other Offices. Branch or subordinate offices may be established
at any time by the Board at any place or places.
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meetings. Meetings of shareholders shall be held either
at the principal executive office of the corporation or at any other place
within or without the State of California which may be designated either by the
Board or by the written consent of all persons entitled to vote thereat given
either before or after the meeting and filed with the Secretary.
Section 2. Special Meetings. Special meetings of the shareholders may be
called at any time by the Board, the Chairman of the Board, the President or by
the holders of shares entitled to cast not less than ten percent of the votes at
such meeting. Upon request in writing to the Chairman of the Board, the
President, any Vice President or the Secretary by any person (other than the
Board) entitled to call a special meeting of shareholders, the officer forthwith
shall cause notice to be given to the shareholders entitled to vote that a
meeting will be held at a time requested by the person or persons calling the
meeting, not less than thirty-five nor more than sixty days after the receipt of
the request. Such request shall be made in accordance with applicable law and
these Bylaws. If the notice is not given within twenty days after receipt of the
request, the persons entitled to call the meeting may give the notice.
Section 3. Annual Meetings. The annual meetings of shareholders shall be
held on such date and at such time as may be fixed by the Board. At such
meetings, directors shall be elected and any other proper business may be
transacted in accordance with applicable law and these Bylaws.
Section 4. Notice of Annual or Special Meetings. Written notice of each
annual or special meeting of shareholders shall be given not less than ten nor
more than sixty days before the date of the meeting to each shareholder entitled
to vote thereat. Such notice shall state the place, date and hour of the meeting
and (i) in the case of a special meeting, the general nature of the business to
be transacted, and no other business may be transacted, or (ii) in the case of
the annual meeting, those matters which the Board, at the time of the mailing of
the notice, intends to present for action by the shareholders, but, subject to
the provisions of applicable law and these Bylaws, any proper matter may be
presented at the meeting for such action. The notice of any meeting at which
directors are to be elected shall include the names of nominees intended at the
time of the notice to be presented by management for election.
Notice of a shareholders' meeting shall be given either personally or by
mail or by other means of written communication, addressed to the shareholder at
the address of such shareholder appearing on the books of the
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corporation or given by the shareholder to the corporation for the purpose of
notice, or, if no such address appears or is given, at the place where the
principal executive office of the corporation is located or by publication at
least once in a newspaper of general circulation in the county in which the
principal executive office is located. Notice by mail shall be deemed to have
been given at the time a written notice is deposited in the United States mails,
postage prepaid. Any other written notice shall be deemed to have been given at
the time it is personally delivered to the recipient or is delivered to a common
carrier for transmission, or actually transmitted by the person giving the
notice by electronic means, to the recipient.
Section 5. Quorum. A majority of the shares entitled to vote, represented
in person or by proxy, shall constitute a quorum at any meeting of shareholders.
If a quorum is present, the affirmative vote of a majority of the shares
represented and voting at the meeting (which shares voting affirmatively also
constitute at least a majority of the required quorum) shall be the act of the
shareholders, unless the vote of a greater number or voting by classes is
required by law or by the Articles, except as provided in the following
sentence. The shareholders present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment, notwithstanding
the withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 6. Adjourned Meetings and Notice Thereof. Any shareholders'
meeting, whether or not a quorum is present, may be adjourned from time to time
by the vote of shareholders entitled to exercise a majority of the voting power
represented either in person or by proxy, but in the absence of a quorum (except
as provided in Section 5 of this Article) no other business may be transacted at
such meeting.
It shall not be necessary to give any notice of the time and place of the
adjourned meeting or of the business to be transacted thereat, other than by
announcement at the meeting at which such adjournment is taken; provided,
however, when any shareholders' meeting is adjourned for more than forty-five
days or, if after adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given as in the case of an
original meeting.
Section 7. Voting. The shareholders entitled to notice of any meeting or to
vote at such meeting shall be only persons in whose name shares stand on the
stock records of the corporation on the record date determined in accordance
with Section 8 of this Article.
Subject to the following sentence and to the provisions of Section 708 of
the California General Corporation Law, every shareholder entitled to vote at
any election of directors may cumulate such shareholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the shareholder's shares are
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder thinks fit. No shareholder shall be entitled
to cumulate votes for any candidate or candidates pursuant to the preceding
sentence unless such candidate or candidates' names have 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 in nomination.
Elections need not be by ballot; provided, however, that all elections for
directors must be by ballot upon demand made by a shareholder at the meeting and
before the voting begins.
In any election of directors, the candidates receiving the highest number
of votes of the shares entitled to be voted for them up to the number of
directors to be elected by such shares are elected.
Voting shall in all cases be subject to the provisions of Chapter 7 of the
California General Corporation Law, and to the following provisions:
(a) Subject to clause (g), shares held by an administrator, executor,
guardian, conservator or custodian may be voted by such holder either in
person or by proxy, without a transfer of such shares into the holder's
name; and shares standing in the name of a trustee may be voted by the
trustee, either in
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person or by proxy, but no trustee shall be entitled to vote shares held by
such trustee without a transfer of such shares into the trustee's name.
(b) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be
voted by such receiver without the transfer thereof into the receiver's
name if authority to do so is contained in the order of the court by which
such receiver was appointed.
(c) Subject to the provisions of Section 705 of the California General
Corporation Law and except where otherwise agreed in writing between the
parties, a shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
(d) Shares standing in the name of a minor may be voted and the
corporation may treat all rights incident thereto as exercisable by the
minor, in person or by proxy, whether or not the corporation has notice,
actual or constructive, of the nonage, unless a guardian of the minor's
property has been appointed and written notice of such appointment given to
the corporation.
(e) Shares outstanding in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxyholder as the bylaws
of such other corporation may prescribe or, in the absence of such
provision, as the board of directors of such other corporation may
determine or, in the absence of such determination, by the chairman of the
board, president or any vice president of such other corporation, or by any
other person authorized to do so by the chairman of the board, president or
any vice president of such other corporation. Shares which are purported to
be voted or any proxy purported to be executed in the name of a corporation
(whether or not any title of the person signing is indicated) shall be
presumed to be voted or the proxy executed in accordance with the
provisions of this clause, unless the contrary is shown.
(f) Shares of the corporation owned by any subsidiary shall not be
entitled to vote on any matter.
(g) Shares held by the corporation in a fiduciary capacity, and shares
of the issuing corporation held in a fiduciary capacity by any subsidiary,
shall not be entitled to vote on any matter, except to the extent that the
settlor or beneficial owner possesses and exercises a right to vote or to
give the corporation binding instructions as to how to vote such shares.
(h) If shares stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in
common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a shareholder voting
agreement or otherwise, or if two or more persons (including proxyholders)
have the same fiduciary relationship respecting the same shares, unless the
Secretary of the corporation is given written notice to the contrary and is
furnished with a copy of the instrument or order appointing them or
creating the relationship wherein it is so provided, their acts with
respect to voting shall have the following effect:
(i) If only one votes, such act binds all;
(ii) If more than one vote, the act of the majority so voting binds
all;
(iii) If more than one vote, but the vote is evenly split on any
particular matter each faction may vote the securities in question
proportionately.
If the instrument is so filed or the registration of the shares shows that any
such tenancy is held in unequal interests, a majority or even split for the
purpose of this Section shall be a majority or even split in interest.
Section 8. Record Date. The Board may fix, in advance, a record date for
the determination of the shareholders entitled to notice of any meeting or to
vote or entitled to receive payment of any dividend or other distribution, or
any allotment of rights, or to exercise rights in respect of any other lawful
action. The record date so fixed shall be not more than sixty days nor less than
ten days prior to the date of the meeting nor more than sixty days prior to any
other action. When a record date is so fixed, only shareholders of record on
that date are entitled to notice of and to vote at the meeting or to receive the
dividend, distribution, or allotment of
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rights, or to exercise of the rights, as the case may be, notwithstanding any
transfer of shares on the books of the corporation after the record date. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless the
Board fixes a new record date for the adjourned meeting. The Board shall fix a
new record date if the meeting is adjourned for more than forty-five days.
If no record date is fixed by the Board, the record date for determining
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the business day next preceding the day on which
notice is given or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held. The record
date for determining shareholders for any purpose other than set forth in this
Section 8 or Section 10 of this Article shall be at the close of business on the
day on which the Board adopts the resolution relating thereto, or the sixtieth
day prior to the date of such other action, whichever is later.
Section 9. Consent of Absentees. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Attendance of a person at a meeting shall constitute a
waiver of notice of and presence at such meeting, except when the person
objects, at the beginning of the meeting, to the transactions of any business
because the meeting is not lawfully called or convened and except that
attendance at a meeting is not waiver of any right to object to the
consideration of matters required by the California General Corporation Law to
be included in the notice but not so included, if such objection is expressly
made at the meeting. Neither the business to be transacted at nor the purpose of
any regular or special meeting of shareholders need to be specified in any
written waiver of notice, consent to the holding of the meeting or approval of
the minutes thereof, except as provided in Section 601(f) of the California
General Corporation Law.
Section 10. Action Without Meeting. Subject to Section 603 of the
California General Corporation Law, any action which, under any provision of the
California General Corporation Law, may be taken at any annual or special
meeting of shareholders, may be taken without a meeting and without prior notice
if a consent in writing, setting forth the action so taken, shall be signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Unless a
record date for voting purposes be fixed as provided in Section 8 of this
Article, the record date for determining shareholders entitled to give consent
pursuant to this Section 10, when no prior action by the Board has been taken,
shall be the day on which the first written consent is given.
Section 11. Proxies. Every person entitled to vote shares has the right to
do so either in person or by one or more persons authorized by a written proxy
executed by such shareholder and filed with the Secretary. Any proxy duly
executed is not revoked and continues in full force and effect until revoked by
the person executing it prior to the vote pursuant thereto by a writing
delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by the person executing the prior proxy and presented
to the meeting, or by attendance at the meeting and voting in person by the
person executing the proxy; provided, however, that no proxy shall be valid
after the expiration of eleven months from the date of its execution unless
otherwise provided in the proxy.
Section 12. Inspectors of Election. In advance of any meeting of
shareholders, the Board may appoint inspectors of election to act at such
meeting and any adjournment thereof. If inspectors of election be not so
appointed, or if any persons so appointed fail to appear or refuse to act, the
chairman of any such meeting may, and on the request of any shareholder or
shareholder's proxy shall, make such appointment at the meeting. The number of
inspectors shall be either one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares present
shall determine whether one or three inspectors are to appointed.
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The duties of such inspectors shall be as prescribed by Section 707(b) of
the California General Corporation Law and shall include: determining the number
of shares outstanding and the voting power of each; determining the shares
represented at the meeting; determining the existence of a quorum; determining
the authenticity, validity and effect of proxies; receiving votes, ballots or
consents; hearing and determining all challenges and questions in any way
arising in connection with the right to vote; counting and tabulating all votes
or consents; determining when the polls shall close; determining the result; and
doing such acts as may be proper to conduct the election or vote with fairness
to all shareholders. If there are three inspectors of election, the decision,
act or certificate of a majority is effective in all respects as the decision,
act or certificate of all.
Section 13. Conduct of Meeting. The Chairman of the Board shall preside as
chairman at all meetings of the shareholders. The chairman shall conduct each
such meeting in a businesslike and fair manner, but shall not be obligated to
follow any technical, formal or parliamentary rules or principles of procedure.
The chairman's rulings on procedural matters shall be conclusive and binding on
all shareholders, unless at the time of a ruling a request for a vote is made to
the shareholders holding shares entitled to vote and which are represented in
person or by proxy at the meeting, in which case the decision of a majority of
such shares shall be conclusive and binding on all shareholders. Without
limiting the generality of the foregoing, the chairman shall have all of the
powers usually vested in the chairman of a meeting of shareholders.
Section 14. Qualifications of Directors. Only persons who are nominated in
accordance with the procedures set forth in these Bylaws shall be qualified to
serve as directors. Nominations of persons for election to the Board may be made
at a meeting of shareholders (a) by or at the direction of the Board or (b) by
any shareholder of the corporation who is a shareholder of record at the time of
giving of notice provided for in this Bylaw, who shall be entitled to vote for
the election of directors at the meeting and who complies with the notice
procedures set forth in this Bylaw.
Nominations by shareholders shall be made pursuant to timely notice in
writing to the Secretary. To be timely as to an annual meeting, a shareholder's
notice must be received at the principal executive officers of the corporation
not less than 75 days nor more than 90 days prior to the first anniversary of
the preceding year's annual meeting; provided, however, that if the date of the
annual meeting is changed by more than 30 days from such anniversary date,
notice by the shareholder to be timely must be so received not later than the
close of business on the 10th day following the earlier of the day on which
notice of the date of the meeting was mailed to shareholders or public
disclosure of such date was made. To be timely as to a special meeting at which
directors are to be elected, a shareholder's notice must be received not later
than the close of business on the 10th day following the earlier of the day on
which notice of the date of the meeting was mailed to shareholders or public
disclosure of such date was made. Such shareholder's notice shall set forth (a)
as to each person whom the shareholder proposes to nominate for election or
reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to the shareholder giving the notice (i) the name
and address, as they appear on the corporation's books, of such shareholder and
(ii) the class and number of shares of the corporation which are beneficially
owned by such shareholder and also which are owned of record by such
shareholder; and (c) as to the beneficial owner, if any, on whose behalf the
nomination is made, (i) the name and address of such person and (ii) the class
and number of shares of the corporation which are beneficially owned by such
person. At the request of the Board, any person nominated by the Board for
election as a director shall furnish to the Secretary that information required
to be set forth in the shareholder's notice of nomination which pertains to the
nominee.
No person shall be qualified to serve as a director of the corporation
unless nominated in accordance with the procedures set forth in this Bylaw. The
Chairman of the meeting shall, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the procedures
prescribed by these Bylaws, and if the Chairman should so determine, that the
defective nomination shall be disregarded. Notwithstanding the foregoing
provisions of this Bylaw, a shareholder shall also comply with all applicable
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requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder with respect to the matters set forth in this Bylaw.
Section 15. Proper Business for Shareholder Meetings. At a meeting of the
shareholders, only such business shall be proper as shall be brought before the
meeting (a) pursuant to the corporation's notice of meeting, (b) by or at the
direction of the Board or (c) by any shareholder of the corporation who is a
shareholder of record at the time of giving of the notice provided for in this
Bylaw, who shall be entitled to vote at such meeting and who complies with the
notice procedures set forth in this Bylaw.
For business to be properly brought before a meeting by a shareholder
pursuant to clause (c) of the first paragraph of this Bylaw, the shareholder
must have given timely notice thereof in writing to the Secretary. To be timely
as to an annual meeting of shareholders, a shareholder's notice must be received
at the principal executive offices of the corporation not less than 75 days nor
more than 90 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that if the date of the meeting is changed by more
than 30 days from such anniversary date, notice by the shareholder to be timely
must be received no later than the close of business on the 10th day following
the earlier of the day on which notice of the date of the meeting was mailed to
shareholders or public disclosure of such date was made. To be timely as to a
special meeting of shareholders, a shareholder's notice must be received not
later than the call of the meeting by the Board, the Chairman of the Board or
the President, or the date of receipt of a valid request by a person (other than
the Board) that the special meeting be called. Such shareholder's notice shall
set forth as to each matter the shareholder proposes to bring before the meeting
(a) a brief description of such matter and the reasons for proposing such
matters(s) at the meeting, (b) the name and address, as they appear on the
corporation's books, of the shareholder proposing such business, and the name
and address of the beneficial owner, if any, on whose behalf the proposal is
made, (c) the class and number of shares of the corporation which are owned
beneficially and of record by such shareholder of record and by the beneficial
owner, if any, on whose behalf the proposal is made and (d) any material
interest of such shareholder of record and the beneficial owner, if any, on
whose behalf the proposal is made in such proposal.
Notwithstanding anything in these Bylaws to the contrary, no business shall
be proper at a meeting unless brought before it in accordance with the
procedures set forth in this Bylaw. The Chairman of the meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the procedures
prescribed by these Bylaws, and if the Chairman should so determine, that any
such business not properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing provisions of this Bylaw, a shareholder shall also
comply with all applicable requirements of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder with respect to the matters
set forth in this Bylaw.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations of the Articles, of these Bylaws
and of the California General Corporation Law relating to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the Board. Without prejudice to such
general powers, but subject to the same limitations, it is hereby expressly
declared that the Board shall have the following powers in addition to the other
powers enumerated in these Bylaws:
(a) To select and remove all the other officers, agents and employees
of the corporation, prescribe the powers and duties for them as may not be
inconsistent with law, the Articles or these Bylaws, fix their compensation
and require from them security for faithful service.
(b) To conduct, manage and control the affairs and business of the
corporation and to make such rules and regulations therefor not
inconsistent with law, the Articles or these Bylaws, as they may deem best.
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(c) To adopt, make and use a corporate seal, and to prescribe the
forms of certificates of stock, and to alter the form of such seal and of
such certificates from time to time, as they may deem best.
(d) To authorize the issuance of shares of stock of the corporation
from time to time, upon such terms and for such consideration as may be
lawful.
(e) To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and
securities therefor.
Section 2. Number of Directors. The authorized number of directors shall be
not less than five nor more than nine until changed by amendment of the Articles
or by a Bylaw duly adopted by the shareholders amending this Section 2. The
exact number of directors shall be fixed, within the limits specified, by the
Board from time to time in a resolution adopted by a majority of the directors.
The exact number of directors shall be seven until changed as provided in this
Section 2.
Section 3. Election and Term of Office. Except as otherwise provided in the
Articles, the directors shall be elected at each annual meeting of the
shareholders, but if any such annual meeting is not held or the directors are
not elected thereat, the directors may be elected at any special meeting of
shareholders held for that purpose. Each director shall hold office until the
next annual meeting and until a successor has been elected and qualified.
Section 4. Vacancies. Any director may resign effective upon giving written
notice to the Chairman of the Board, the President, the Secretary or the Board,
unless the notice specifies a later time for the effectiveness of such
resignation. If the resignation is effective at a future time, a successor may
be elected to take office when the resignation becomes effective.
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
shall hold office until the next annual meeting and until such director's
successor has been elected and qualified.
A vacancy or vacancies in the Board shall be deemed to exist in case of the
death, resignation or removal of any director, or if the authorized number of
directors be increased, or if the shareholders fail, at any annual or special
meeting of shareholders at which any director or directors are elected, to elect
the full authorized number of directors to be voted for at that meeting.
The Board may declare vacant the office of a director who has been declared
of unsound mind by an order of court or convicted of a felony.
The shareholders, subject to applicable law and these Bylaws, may elect a
director or directors at any time to fill any vacancy or vacancies not filled by
the directors. Any such election by written consent, other than to fill a
vacancy created by removal, requires the consent of a majority of the
outstanding shares entitled to vote. Any such election by written consent to
fill a vacancy created by removal requires unanimous consent.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of the director's term of office.
Section 5. Place of Meeting. Regular or special meetings of the Board shall
be held at any place within or without the State of California which has been
designated from time to time by the Board. In the absence of such designation,
regular meetings shall be held at the principal executive office of the
corporation.
Section 6. Regular Meetings. Immediately following each annual meeting of
shareholders, the Board shall hold a regular meeting for the purpose of
organization, election of officers and the transaction of other business.
Other regular meetings of the Board shall be held without call on such
dates and at such times as may be fixed by the Board. Call and notice of all
regular meetings of the Board are hereby dispensed with.
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Section 7. Special Meetings. Special meetings of the Board for any purpose
or purposes may be called at any time by the Chairman of the Board, the
President, any Vice President, the Secretary or by any two directors.
Special meetings of the Board shall be held upon four days' written notice
or forty-eight hours' notice given personally or by telephone, telegraph, telex,
or other similar means of communication. Any such notice shall be addressed or
delivered to each director at such director's address as it is shown upon the
records of the corporation or as may have been given to the corporation by the
director for purposes of notice or, if such address is not shown on such records
or is not readily ascertainable, at the place in which the meetings of the
directors are regularly held.
Notice by mail shall be deemed to have been given at the time a written
notice is deposited in the United States mails, postage prepaid. Any other
written notice shall be deemed to have been given at the time it is personally
delivered to the recipient or is delivered to a common carrier for transmission,
or actually transmitted by the person giving the notice by electronic means, to
the recipient. Oral notice shall be deemed to have been given at the time it is
communicated, in person or by telephone or wireless, to the recipient or to a
person at the office of the recipient who the person giving the notice has
reason to believe will promptly communicate it to the recipient.
Section 8. Quorum. A majority of the authorized number of directors
constitutes a quorum of the Board for the transaction of business, except to
adjourn as provided in Section 11 of this Article. Every act or decision done or
made by a majority of the directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board, unless a greater
number be required by law or by the Articles. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
Section 9. Participation in Meetings by Conference Telephone. Members of
the Board may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all members participating in such
meeting can hear one another.
Section 10. Waiver of Notice. Notice of a meeting need not be given to any
director who signs a waiver of notice or consent to holding the meeting or an
approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such director. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the minutes of the
meetings.
Section 11. Adjournment. A majority of the directors present, whether or
not a quorum is present, may adjourn any directors' meeting to another time and
place. Notice of the time and place of holding an adjourned meeting need not be
given to absent directors if the time and place be fixed at the meeting
adjourned, except as provided in the next sentence. If the meeting is adjourned
for more than twenty-four hours, notice of any adjournment to another time or
place shall be given prior to the time of the adjourned meeting to the directors
who were not present at the time of the adjournment.
Section 12. Fees and Compensation. Directors and members of committees may
receive such compensation, if any, for their services, and such reimbursement
for expenses, as may be fixed or determined by the Board.
Section 13. Action Without Meeting. Any action required or permitted to be
taken by the Board may be taken without a meeting if all members of the Board
shall individually or collectively consent in writing to such action. Such
consent or consents shall have the same effect as a unanimous vote of the Board
and shall be filed with the minutes of the proceedings of the Board.
Section 14. Rights of Inspection. Every director shall have the absolute
right at any reasonable time to inspect and copy all books, records and
documents of every kind and to inspect the physical properties of the
corporation and also of its subsidiary corporations, domestic or foreign. Such
inspection by a director may be made in person or by agent or attorney and
includes the right to copy and obtain extracts.
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Section 15. Committees. The Board may appoint one or more committees, each
consisting of two or more directors, and delegate to such committees any of the
authority of the Board except with respect to:
(a) The approval of any action for which the California General
Corporation Law also requires shareholders' approval or approval of the
outstanding shares;
(b) The filling of vacancies on the Board or on any committee;
(c) The fixing of compensation of the directors for service on the
Board or on any committee;
(d) The amendment or repeal of bylaws or the adoption of new bylaws;
(e) The amendment or repeal of any resolution of the Board which by
its express terms is not so amendable or repealable;
(f) A distribution to the shareholders of the corporation except at a
rate or in a periodic amount or within a price range determined by the
Board; or
(g) The appointment of other committees of the Board or the members
thereof.
Any such committee must be designated, and the members or alternate members
thereof appointed, by resolution adopted by a majority of the authorized number
of directors and any such committee may be designated an Executive Committee or
by such other name as the Board shall specify. Alternative members of a
committee may replace any absent member at any meeting of the committee. The
Board shall have the power to prescribe the manner in which proceedings of any
such committee shall be conducted. In the absence of any such prescription, such
committee shall have the power to prescribe the manner in which its proceedings
shall be conducted. Unless the Board or such committee shall otherwise provide,
the regular and special meetings and other actions of any such committee shall
be governed by the provisions of this Article applicable to meetings and actions
of the Board. Minutes shall be kept of each meeting of each committee.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the corporation shall be a President,
a Secretary and a Chief Financial Officer. The corporation may also have, at the
discretion of the Board, a Chairman of the Board, an Executive Vice President, a
Senior Vice President, one or more Vice Presidents, a Treasurer, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
as may be elected or appointed in accordance with the provisions of Section 3 of
this Article.
Section 2. Election. The officers of the corporation, except such officers
as may be elected or appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be chosen annually by, and shall serve at the
pleasure of, the Board, and shall hold their respective offices until their
resignation, removal, or other disqualification from service, or until their
respective successors shall be elected.
Section 3. Subordinate Officers. The Board may elect, and may empower the
Chairman of the Board, if there be such an officer, or the President, to appoint
such other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in these Bylaws or as the Board may from time to time determine.
Section 4. Removal and Resignation. Any officer may be removed, either with
or without cause, by the Board at any time or, except in the case of an officer
chosen by the Board, by an officer upon whom such power of removal may be
conferred by the Board. Any such removal shall be without prejudice to the
rights, if any, of the officer under any contract of employment of the officer.
Any officer may resign at any time by giving written notice to the
corporation, but without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
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Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular election or appointment to such
office.
Section 6. Chairman of the Board. The Chairman of the Board, if there shall
be such an officer, shall be the Chief Executive Officer of the corporation
unless, in its sole discretion, the Board should elect the President to be such.
The Chief Executive Officer is the general manager and chief executive officer
of the corporation and has, subject to the control of the Board, general
supervision, direction and control of the business and officers of the
corporation. The Chairman of the Board, if there shall be such an officer,
shall, if present, preside at all meetings of the shareholders and the Board and
exercise and perform such other powers and duties as may be from time to time
assigned by the Board.
Section 7. President. Subject to such powers, if any, as may be given to
the Chairman of the Board, if there be such an officer, the President shall have
the general powers and duties of management usually vested in the office of the
president of a corporation and such other powers and duties as may be prescribed
by the Board or the Chief Executive Officer, if other than the President. In the
absence of the Chairman of the Board, or if there be none, the President shall
preside at all meetings of the shareholders and the Board. In the absence or
disability of the Chief Executive Officer, if other than the President, the
President shall perform all the duties of the Chief Executive Officer and, when
so acting, shall have all of the powers of, and be subject to all the
restrictions upon, the Chief Executive Officer.
Section 8. Vice Presidents. The Executive Vice President and Senior Vice
President, if any, and other Vice Presidents shall have (subject to the
authority of the Board) such powers and perform such duties as from time to time
determined by the Chief Executive Officer. In the absence or disability of the
President, the Vice Presidents, in the following order, shall perform all the
duties of the President and, when so acing, shall have all the powers of, and be
subject to all the restrictions upon, the President: the Executive Vice
President, if any, the Senior Vice President, if any, and the Vice Presidents in
the order of their rank as fixed by the Board, or if not ranked, the Vice
President designated by the Board. The Vice President shall have such other
powers and perform such other duties as from time to time may be prescribed for
them, respectively, by the Board.
Section 9. Secretary. The Secretary shall keep or cause to be kept, at the
principal executive office and such other place as the Board may order, a book
of minutes of all meetings of shareholders, the Board and its committees, with
the time and place of holding, whether regular or special, how authorized, the
notice thereof given, the names of those present at Board and committee
meetings, the number of shares present or represented at shareholders' meetings,
and the proceedings thereof. The Secretary shall keep, or cause to be kept, a
copy of the Bylaws of the corporation at the principal executive office or
business office in accordance with Section 213 of the California General
Corporation Law.
The Secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the corporation's transfer agent or registrar, if one
be appointed, a share register, or a duplicate share register, showing the names
of the shareholders and their addresses, the number of classes of shares held by
each, the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board and any committees thereof required by these
Bylaws or by law to be given, shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board.
Section 10. Chief Financial Officer. The Chief Financial Officer shall keep
and maintain, or cause to be kept and maintained, adequate and correct accounts
of the properties and business transactions of the corporation, and shall send
or cause to be sent to the shareholders of the corporation such financial
statements and reports as are by law or these Bylaws required to be sent to
them. The books of account shall at all times be open to inspection by any
director.
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The Chief Financial Officer shall deposit all monies and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the Board. The Chief Financial Officer shall disburse the funds of
the corporation as may be ordered by the Board, shall render to the President
and the directors, whenever they request it, an account of all transactions as
Chief Financial Officer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the Board.
ARTICLE V
OTHER PROVISIONS
Section 1. Inspection of Corporate Records.
(a) A shareholder or shareholders holding at least five percent in the
aggregate of the outstanding voting shares of the corporation or who hold at
least one percent of such voting shares and have filed a Schedule 14B with the
United States Securities and Exchange Commission relating to the election of
directors of the corporation shall have the absolute right to do either or both
of the following:
(i) Inspect and copy the record of shareholders' names and addresses
and shareholders during usual business hours upon five business days' prior
written demand upon the corporation; or
(ii) Obtain from the transfer agent, if any, for the corporation, upon
five business days' prior written demand and upon the tender of its usual
charges for such a list (the amount of which charges shall be stated to the
shareholder by the transfer agent upon request), a list of the
shareholders' names and addresses who are entitled to vote for the election
of directors and their shareholdings, as of the most recent complied or as
of the date specified by the shareholder subsequent to the date of demand.
(b) The record of shareholders shall also be open to inspection and copying
by any shareholder or holder of a voting trust certificate at any time during
usual business hours upon written demand on the corporation, for a purpose
reasonably related to such holder's interest as a shareholder or holder of a
voting trust certificate.
(c) The accounting books and records and minutes of proceedings of the
shareholders and the Board and committees of the Board shall be open to
inspection upon written demand on the corporation of any shareholder or holder
of a voting trust certificate at any reasonable time during usual business
hours, for a purpose reasonably related to such holder's interests as a
shareholder or as a holder of such voting trust certificate.
(d) Any inspection and copying under this Article may be made in person or
by agent or attorney.
Section 2. Inspection of Bylaws. The corporation shall keep in its
principal executive office in the State of California, or if its principal
executive office is not in such State at its principal business office in such
state, the original or copy of these Bylaws as amended to date, which shall be
open to inspection by shareholders at all reasonable times during office hours.
If the principal executive office of the corporation is located outside the
State of California and the corporation has no principal business office in such
state, it shall upon the written request of any shareholder furnish to such
shareholder a copy of these Bylaws as amended to date.
Section 3. Endorsement of Documents, Contracts. Subject to the provisions
of applicable law, any note, mortgage, evidence of indebtedness, contract, share
certificate, conveyance or other instrument in writing and any assignment or
endorsements thereof executed or entered into between the corporation and any
other person, when signed by the Chairman of the Board, the President or any
Vice President and the Secretary, any Assistant Secretary, the Chief Financial
Officer, the Treasurer or any Assistant Treasurer of the corporation, shall be
valid and binding on the corporation in the absence of actual knowledge on the
part of the other person that the signing officers had no authority to execute
the same. Any such instruments may be signed by any other person or persons and
in such manner as from time to time shall be determined by the Board, and,
unless so authorized by the Board, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or amount.
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Section 4. Certificates of Stock. Every holder of shares of the corporation
shall be entitled to have a certificate signed in the name of the corporation by
the Chairman of the Board, the President or a Vice President and by the Chief
Financial Officer, the Treasurer or an Assistant Treasurer or the Secretary or
an Assistant Secretary, certifying the number of shares and the class or series
of shares owned by the shareholder. Any or all of the signatures on the
certificate may be facsimile. If any officer, transfer agent or registrar who
has signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such person were an officer, transfer agent or registrar at the date of
issue.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the Board may provide; provided, however,
that on any certificate issued to represent any partly paid shares, the total
amount of the consideration to be paid therefor and the amount paid thereon
shall be stated.
Except as provided in this Section, no new certificate for shares shall be
issued in lieu of an old one unless the latter is surrendered and cancelled at
the same time. The Board may, however, if any certificate for shares is alleged
to have been lost, stolen or destroyed, authorize the issuance of a new
certificate in lieu thereof, and the corporation may require that the
corporation be given a bond or other adequate security sufficient to indemnify
it against any claim that may be made against it (including expense or
liability) on account of the alleged loss, theft or destruction of such
certificate or the issuance of such new certificate.
Section 5. Representation of Shares of Other Corporations. The Chief
Executive Officer, the President or any other officer or officers authorized by
the Board or the Chief Executive Officer are each authorized to vote, represent
and exercise on behalf of the corporation all rights incident to any and all
shares of any other corporation or corporations standing in the name of the
corporation. The authority herein granted may be exercised either by any such
officer in person or by any other person authorized so to do by proxy or power
of attorney duly executed by said officer.
Section 6. Stock Purchase Plans. The corporation may adopt and carry out a
stock purchase plan or agreement or stock option plan or agreement providing for
the issue and sale for such consideration as may be fixed of its unissued
shares, or of issued shares acquired or to be acquired, to one or more of the
employees or directors of the corporation or of a subsidiary or to a trustee on
their behalf and for the payment for such shares in installments or at one time,
and may provide for aiding any such persons in paying for such shares by
compensation for services rendered, promissory notes or otherwise.
Any such stock purchase plan or agreement or stock option plan or agreement
may include, among other features, the fixing of eligibility for participation
therein, the class and price of shares to be issued or sold under the plan or
agreement, the number of shares which may be subscribed for, the method of
payment therefor, the reservation of title until full payment therefor, the
effect of the termination of employment, an option or obligation on the part of
the corporation, to repurchase the shares upon termination of employment,
restrictions upon transfer of the shares, the time limits of and termination of
the plan, and any other matters, not in violation of applicable law, as may be
included in the plan as approved or authorized by the Board or any committee of
the Board.
Section 7. Construction and Definitions. Unless the context otherwise
requires, the general provisions, rules of construction and definitions
contained in the General Provisions of the California Corporations Code and in
the California General Corporation Law shall govern the construction of these
Bylaws.
ARTICLE VI
INDEMNIFICATION
Section 1. Indemnification of Directors and Officers.
(a) Each person who was or is a party or is threatened to be made a party
or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director or officer of the
corporation, or of any predecessor corporation, or is or was a director or
officer who is or was serving at the request of the corporation as a
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director, officer, employee or other agent of another corporation, a
partnership, joint venture, trust or other enterprise (including service with
respect to corporation-sponsored employee benefit plans), whether the basis of
such proceeding is alleged action or inaction in an official capacity as a
director or officer or in any other capacity while serving as a director or
officer, shall, subject to the terms of any agreement between the corporation
and such person, be indemnified and held harmless by the corporation to the
fullest extent permissible under California law and the corporation's Articles,
against all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement) actually
and reasonably incurred or suffered by such person in connection therewith;
provided, however, that amounts paid in settlement of a proceeding shall be
payable only if the settlement is approved in writing by the corporation. Such
indemnification shall continue as to a person who has ceased to be a director or
officer for acts performed while a director or officer and shall inure to the
benefit of his or her heirs, executors and administrators. Notwithstanding the
foregoing, the corporation shall indemnify any such person in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of the corporation. The right to
indemnification conferred in this Article shall include the right to be paid by
the corporation the expenses incurred in defending any proceeding in advance of
final disposition to the fullest extent permitted by law; provided, however,
that the payment under this Article of such expenses in advance of the final
disposition of a proceedings shall be conditioned upon the delivery to the
corporation of a written request for such advance and of an undertaking by or on
behalf of the director or officer to repay all amounts so advanced if it shall
be ultimately determined that such director or officer is not entitled to be
indemnified.
(b) Notwithstanding the foregoing or any other provisions under this
Article, the corporation shall not be liable under this Article to indemnify a
director or officer against expenses, liabilities or losses incurred or suffered
in connection with, or make any advances with respect to, any proceeding against
a director or officer: (i) as to which the corporation is prohibited by
applicable law from paying as an indemnity; (ii) with respect to expenses of
defense or investigation, if such expenses were or are incurred without the
corporation's consent (which consent may not be unreasonably withheld); (iii)
for which payment is actually made to the director or officer under a valid and
collectible insurance policy maintained by the corporation, except in respect of
any excess beyond the amount of payment under such insurance; (iv) for which
payment is actually made to the director or officer under an indemnity by the
corporation otherwise than pursuant to this Bylaw Article, except in respect of
any excess beyond the amount of payment under such indemnity; (v) based upon or
attributable to the director or officer gaining in fact any personal profit or
advantage to which he or she was not legally entitled; (vi) for an accounting of
profits made from the purchase or sale by the director or officer of securities
of the corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law; or (vii) based upon acts or omissions
involving intentional misconduct or a knowing and culpable violation of law.
Section 2. Indemnification of Employees and Agents. A person who was or is
a party or is threatened to be made a party to or is involved in any proceeding
by reason of the fact that he or she is or was an employee or agent of the
corporation or is or was an employee or agent of the corporation who is or was
serving at the request of the corporation as an employee or agent of another
enterprise, including service with respect to corporation-sponsored employee
benefits plans, whether the basis of such action is alleged action or inaction
in an official capacity or in any other capacity while serving as an employee or
agent, may, upon appropriate action by the corporation and subject to the terms
of any agreement between the corporation and such person, be indemnified and
held harmless by the corporation up to the fullest extent permitted by
California law and the corporation's Articles, against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) actually and reasonably
incurred or suffered by such person in connection therewith.
Section 3. Right of Directors and Officers to Bring Suit. If a claim under
Section 1 of this Article is not paid by the corporation or on its behalf within
90 days after a written claim has been received by the corporation, the claimant
may at any time thereafter bring suit against the corporation to recover the
unpaid amount of the claim, and, if successful in whole or in part, the claimant
also shall be entitled to be paid the expense of prosecuting such claim.
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Section 4. Successful Defense. Notwithstanding any other provision of this
Article, to the extent that a director or officer has been successful on the
merits or otherwise (including the dismissal of a proceeding without prejudice
or the settlement with the written consent of the corporation of a proceeding
without admission of liability) in defense of any proceeding referred to in
Section 1 or in defense of any claim, issue or matter therein, such director or
officer shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred in connection therewith.
Section 5. Indemnity Agreements. The corporation may enter into agreements
with any director, officer, employee or agent of the corporation providing for
indemnification to the fullest extent permissible under applicable law and the
corporation's Articles.
Section 6. Subrogation. In the event of payment by the corporation of a
claim under Section 1 of this Article, the corporation shall be subrogated to
the extent of such payment to all of the rights of recovery of the indemnified
person, who shall execute all papers required and shall do everything that may
be necessary or appropriate to secure such rights, including the execution of
such documents necessary or appropriate to enable the corporation effectively to
bring suit to enforce such rights.
Section 7. Non-Exclusivity Rights. The right to indemnification provided by
this Article shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, bylaw, agreement, vote of shareholders
or disinterested directors or otherwise.
Section 8. Insurance. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
corporation or another corporation, a partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under California law.
Section 9. Expenses as a Witness. To the extent that any director, officer
or employee of the corporation is by reason of such position a witness in any
action, suit or proceeding, he or she will be indemnified against all costs and
expenses actually and reasonably incurred by him or her or on his or her behalf
in connection therewith.
Section 10. Nonapplicability to Fiduciaries of Employee Benefit Plans. This
Article does not apply to any proceeding against any trustee, investment manager
or other fiduciary of an employee benefit plan in such person's capacity as
such, even though such person may also be an agent of the corporation. The
corporation shall have power to indemnify such trustee, investment manager or
other fiduciary to the extent permitted by subdivision (f) of Section 207 of the
California General Corporation Law.
Section 11. Separability. Each and every paragraph, sentence, term and
provision of this Article is separate and distinct so that if any paragraph,
sentence, term or provision shall be held to be invalid or unenforceable for any
reason, such invalidity or unenforceability shall not affect the validity or
enforceability of any other paragraph, sentence, term or provision hereof. To
the extent required, any paragraph, sentence, term or provision of this Article
may be modified by a court of competent jurisdiction to preserve its validity
and to provide the claimant with, subject to the limitations set forth in this
Article and any agreement between the corporation and the claimant, the broadest
possible indemnification permitted under applicable law.
Section 12. Effect of Repeal or Modification. Any repeal or modification of
this Article shall not adversely affect any right of indemnification of a
director, officer, employee or agent of the corporation existing at the time of
such repeal or modification with respect to any action or omission occurring
prior to such repeal or modification.
ARTICLE VII
EMERGENCY PROVISIONS
Section 1. General. The provisions of this Article shall be operative only
during a national emergency declared by the President of the United States or
the person performing the President's functions, or in the event of a nuclear,
atomic or other attack on the United States or a disaster making it impossible
or impracticable for the corporation to conduct its business without recourse to
the provisions of this Article. Said
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provisions in such event shall override all other Bylaws of the corporation in
conflict with any provisions of this Article, and shall remain operative so long
as it remains impossible or impracticable to continue the business of the
corporation otherwise, but thereafter shall be inoperative; provided that all
actions taken in good faith pursuant to such provisions shall thereafter remain
in full force and effect unless and until revoked by action taken pursuant to
the provisions of the Bylaws other than those contained in this Article.
Section 2. Unavailable Directors. All directors of the corporation who are
not available to perform their duties as directors by reason of physical or
mental incapacity or for any other reason or who are unwilling to perform their
duties or whose whereabouts are unknown shall automatically cease to be
directors, with like effect as if such persons had resigned as directors, so
long as such unavailability continues.
Section 3. Authorized Number of Directors. The authorized number of
directors shall be the number of directors remaining after eliminating those who
have ceased to be directors pursuant to Section 2, or the minimum number
required by law, whichever number is greater.
Section 4. Quorum. The number of directors necessary to constitute a quorum
shall be one-third of the authorized number of directors as specified in the
foregoing Section, or other minimum number as, pursuant to the law or lawful
decree then in force, it is possible for the Bylaws of a corporation to specify.
Section 5. Creation of Emergency Committee. In the event the number of
directors remaining after eliminating those who have ceased to be directors
pursuant to Section 2 is less than the minimum number of authorized directors
required by law, then until the appointment of additional directors to make up
such required minimum, all the powers and authorities which the Board could by
law delegate, including all powers and authorities which the Board could
delegate to a committee, shall be automatically vested in an emergency
committee, and the emergency committee shall thereafter manage the affairs of
the corporation pursuant to such powers and authorities and shall have all other
powers and authorities as may by law or lawful decree be conferred on any person
or body of persons during a period of emergency.
Section 6. Constitution of Emergency Committee. The emergency committee
shall consist of all the directors remaining after eliminating those who have
ceased to be directors pursuant to Section 2, provided that such remaining
directors are not less than three in number. In the event such remaining
directors are less than three in number the emergency committee shall consist of
three persons, who shall be the remaining director or directors and either one
or two officers or employees of the corporation as the remaining director or
directors may in writing designate. If there is no remaining director, the
emergency committee shall consist of the three most senior officers of the
corporation who are available to serve, and if and to the extent that officers
are not available, the most senior employees of the corporation. Seniority shall
be determined in accordance with any designation of seniority in the minutes of
the proceedings of the Board, and in the absence of such designation, shall be
determined by rate of remuneration. In the event that there are no remaining
directors and no officers or employees of the corporation available, the
emergency committee shall consist of three persons designated in writing by the
shareholder owning the largest number of shares of record as of the date of the
last record date.
Section 7. Powers of Emergency Committee. The emergency committee, once
appointed, shall govern its own procedures and shall have power to increase the
number of members thereof beyond the original number, and in the event of a
vacancy or vacancies therein, arising at any time, the remaining member or
members of the emergency committee shall have the power to fill such vacancy or
vacancies. In the event at any time after its appointment all members of the
emergency committee shall die or resign or become unavailable to act for any
reason whatsoever, a new emergency committee shall be appointed in accordance
with the foregoing provisions of this Article.
Section 8. Directors Becoming Available. Any person who has ceased to be a
director pursuant to the provisions of Section 2 and who thereafter becomes
available to serve as a director shall automatically become a member of the
emergency committee.
Section 9. Election of Board of Directors. The emergency committee, shall,
as soon after its appointment as is practicable, take all requisite action to
secure the election of a board of directors, and upon such election, all the
powers and authorities of the emergency committee shall cease.
C-15
<PAGE> 74
Section 10. Termination of Emergency Committee. In the event, after the
appointment of an emergency committee, a sufficient number of persons who ceased
to be directors pursuant to Section 2 become available to serve as directors, so
that if they had not ceased to be directors as aforesaid, there would be enough
directors to constitute the minimum number of directors required by law, then
all such persons shall automatically be deemed to be reappointed as directors
and the powers and authorities of the emergency committee shall be at an end.
ARTICLE VIII
AMENDMENTS
Subject to the Articles of Incorporation, these Bylaws may be amended or
repealed either by approval of the outstanding shares (as defined in Section 152
of the California General Corporation Law) or by the approval of the Board;
provided, however, that after the issuance of shares, a bylaw specifying or
changing a fixed number of directors or the maximum or minimum number or
changing from a fixed to a variable number of directors or vice versa may only
be adopted by approval of the outstanding shares and a bylaw reducing the fixed
number or the minimum number of directors to a number less than five shall be
subject to the provisions of Section 212(a) of the California General
Corporation Law.
C-16
<PAGE> 75
EXHIBIT D
TEXT OF BOARD CLASSIFICATION PROVISIONS
EXCERPTED FROM HOLDINGCO ARTICLES OF INCORPORATION:
"ARTICLE VII
In the event that the authorized number of directors shall, in accordance
with the bylaws, be fixed with at least six (6) but less than nine (9) during
any period of time that the Common Shares are listed on the New York Stock
Exchange, the Board of Directors shall be divided into two classes, designated
Class I and Class II. Each class shall consist of one-half of the directors or
as close an approximation as possible. The initial term of office of the
directors of Class I shall commence on the date that the Common Shares are
listed on the New York Stock Exchange and shall expire at the annual meeting to
be held during fiscal year 1999 and the initial term of office of the directors
of Class II shall commence on the date that the Common Shares are listed on the
New York Stock Exchange and shall expire at the annual meeting to be held during
fiscal year 2000. At each subsequent annual meeting, each of the successors to
the directors of the class whose term shall have expired at such annual meeting
shall be elected for a term running until the second annual meeting next
succeeding his or her election and until his or her successor shall have been
duly elected and qualified, unless the Common Shares are no longer listed on the
New York Stock Exchange.
In the event that the authorized number of directors shall, in accordance
with the bylaws, be fixed at nine (9) or more during any period of time that the
Common Shares are listed on the New York Stock Exchange, the Board of Directors
shall be divided into three classes, designated Class I, Class II and Class III.
Each class shall consist of one-third of the directors or as close an
approximation as possible. At each subsequent annual meeting, each of the
successors to the directors of the class whose term shall have expired at such
annual meeting shall be elected for a term running until the third annual
meeting next succeeding his or her election until his or her successor shall
have been duly elected and qualified, unless the Common Shares are no longer
listed on the New York Stock Exchange.
Notwithstanding the rule that the classes shall be as nearly equal in
number of directors as possible, in the event of any change in the authorized
number of directors, each director then continuing to serve as such shall
nevertheless continue as a director of the class of which he or she is a member
until the expiration of his or her current term, or his or her prior death,
resignation or removal.
At each annual election, the directors chosen to succeed those whose terms
then expire shall be of the same class as the directors they succeed, unless, by
reason of any intervening changes in the authorized number of directors, the
Board of Directors shall designate one or more directorships whose term then
expires as directorships of another class in order more nearly to achieve
equality of number of directors among the classes.
The effective date of the amendment adding this Article VII shall be the
date on which the Common Shares are first listed on the New York Stock Exchange.
EXCERPTED FROM HOLDINGCO BYLAWS:
"Section 3. Election and Term of Office. Except as otherwise provided in
the Articles, the directors shall be elected at each annual meeting of the
shareholders, but if any such annual meeting is not held or the directors are
not elected thereat, the directors may be elected at any special meeting of
shareholders held for that purpose. Each director shall hold office until the
next annual meeting and until a successor has been elected and qualified."
D-1
<PAGE> 76
EXHIBIT E
TEXT OF SUPERMAJORITY VOTE PROVISIONS
EXCERPTED FROM ARTICLE IV OF HOLDINGCO'S ARTICLES OF INCORPORATION:
"(14) Unless such action has been approved by the affirmative vote of at
least a majority of the Continuing Directors (as defined below), without the
approval of Common Shares, Preferred Shares and, unless otherwise provided in
the certificate of determination for any series of New Preferred Shares, the New
Preferred Shares representing in the aggregate at least 66 2/3% of the combined
voting power of this Corporation's outstanding Common Shares, Preferred Shares
and the New Preferred Shares, voting together as a single class, this
Corporation shall not
(i) subject to subparagraph (iii) below, sell, convey, lease or
otherwise dispose of all or substantially all of its assets, property or
business;
(ii) approve the sale, conveyance, lease or other disposition by any
subsidiary of this Corporation of all or substantially all of such
subsidiary's assets, property or business;
(iii) sell, transfer, convey or otherwise dispose of more than a
majority of the outstanding capital stock of any subsidiary of the
Corporation, if such subsidiary holds assets accounting for 50% or more of
the Corporation's consolidated assets, other than to an entity the majority
of the voting power of the capital stock or other equity interest of which
is owned and controlled by this Corporation;
(iv) consolidate or merge with or into any other corporation or other
business entity, except if, immediately after such consolidation or merger,
the shareholders of this Corporation immediately prior to such
consolidation or merger will own more than 60% of the voting power of the
outstanding capital stock or other equity interest of or in the surviving
entity; or
(v) approve the consolidation or merger of any subsidiary of this
Corporation, if such subsidiary holds assets accounting for 50% or more of
the Corporation's consolidated assets, with or into any other corporation
or other business entity.
For purposes of this paragraph (14) of Article IV, the term "Continuing
Directors" shall mean any member of the Board of Directors of the Corporation
(while such person is a member of the Board) who (i) is not an Acquiring Person,
or an Affiliate or Associate of an Acquiring Person, or a representative of an
Acquiring Person or of any such Affiliate or Associate, and (ii) either (A) was
a member of the Board of Directors prior to the time any person became an
Acquiring Person, or (B) became a member of the Board of Directors subsequent to
the time any person became an Acquiring Person, if such person's nomination for
election, or re-election, to the Board was recommended, or approved, by a
majority of the Continuing Directors then in office. For purposes of the
foregoing definition, (i) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect as of the date hereof; (ii)
"Acquiring Person" shall mean any person or entity which, alone or together with
all Affiliates and Associates of such person or entity, shall be the beneficial
owner of 20% or more of the Corporation's voting stock, but shall not include
(1) an Exempt Person or (2) any person or entity who or which acquires 20% or
more of the Corporation's voting stock in connection with a transaction or
series of transactions approved prior to such transaction or transactions by the
Board of Directors of the Corporation; provided that no person or entity shall
become an Acquiring Person solely as a result of a reduction in the number of
shares of the Corporation's voting stock outstanding, unless and until such
person or entity shall thereafter become the beneficial owner of additional
shares constituting 1% or more of the general voting power of the Corporation.
"Exempt Person" shall mean the Corporation, any majority-owned subsidiary of the
Corporation, and any employee benefit plan or employee stock plan of the
Corporation, or any trust or other entity organized, established or holding
Common Shares by, for or pursuant to, the terms of any such plan.
E-1
<PAGE> 77
EXCERPTED FROM ARTICLE VI OF HOLDINGCO'S ARTICLES OF INCORPORATION:
Notwithstanding any contrary provision of these Articles of Incorporation,
any amendment or repeal of paragraph (14) of Article IV, this Article VI or any
amendment to these Articles of Incorporation providing for a classified board
shall require the affirmative vote of shares representing not less than 66 2/3%
of the combined voting power of the outstanding Common Shares, Preferred Shares
and, unless otherwise provided in the certificate of determination, the New
Preferred Shares, voting together as a single class.
Notwithstanding any contrary provision of these Articles of Incorporation,
and except as otherwise provided in the California Corporations Code, none of
the following provisions of the Bylaws of the Company may be amended or
repealed, except by a majority of the Board or by the shareholders upon the
affirmative vote of shares representing at least 66 2/3% of the combined voting
power of the outstanding Common Shares, Preferred Shares and, unless otherwise
provided in the certificate of determination for any series of New Preferred
Shares, the New Preferred Shares, voting together as a single class : (a)
Section 2 of Article II, (b) Section 15 of Article II, and (c) Section 2 of
Article III.
E-2
<PAGE> 78
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317 of the CGCL provides that a corporation has the power, and in
some cases is required, to indemnify an agent, including a director or officer,
who was or is a party or is threatened to be made a party to any proceeding,
against certain expenses, judgments, fines, settlements and other amounts under
certain circumstances. Article VI of the HoldingCo bylaws (see Exhibit C hereto)
provides for the indemnification of directors, officers and agents as allowed by
statute. In addition, upon the effectiveness of the Merger (as contemplated in
Part I of this Registration Statement), HoldingCo will have directors' and
officers' insurance policies in force which provide insurance against certain
liabilities for directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession.
2.1 Agreement of Merger, dated , 1998, by and among
Southern California Water Company, a California corporation,
American States Water Company, a California corporation, and SCW
Acquisition Corp., a California corporation (See Exhibit A to the
Proxy Statement/Prospectus included in Part I of this Registration
Statement and incorporated herein by reference)
3. Articles of Incorporation and By-laws:
3.1 Articles of Incorporation of Registrant (See Exhibit B to the
Proxy Statement/Prospectus included in Part I of this Registration
Statement and incorporated herein by reference)
3.2 Bylaws of Registrant (Exhibit C to the Proxy Statement/Prospectus
included in Part I of this Registration Statement and incorporated
herein by reference)
5. Opinion Re Legality
5.1 Opinion of O'Melveny & Myers LLP as to legality of the securities
being registered hereby.*
8. Opinion Re Tax Matters
8.1 Opinion of O'Melveny & Myers LLP regarding tax consequences of the
merger.*
12. Ratio of Earnings to Fixed Charges*
23. Consents of Experts and Counsel
23.1 Consents of O'Melveny & Myers LLP (included in Exhibits 5.1 and
8.1)
23.2 Consent of Arthur Andersen LLP.*
27. Financial Data Schedules
None
(b) Financial Statement Schedules
None
99. Additional Exhibits
99.1 Form of Proxy
- ---------------
* Filed concurrently herewith.
II-1
<PAGE> 79
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The registrant hereby undertakes as follows: that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such posteffective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event
II-2
<PAGE> 80
that a claim for expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(f) The registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Item 4, 10(b),
11, or 13 of this form, within one business day of receipt of such request, and
to send the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding to
the request.
(g) The registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-3
<PAGE> 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Dimas, State of
California on March 9, 1998.
AMERICAN STATES WATER COMPANY
a California corporation
By: /s/ MCCLELLAN HARRIS III
------------------------------------
McClellan Harris III, Vice
President -- Finance,
Chief Financial Officer, Treasurer
and Corporate Secretary
POWER OF ATTORNEY
We, the undersigned directors and officers of American States Water
Company, and each of us, do hereby constitute and appoint McClellan Harris III
and Floyd E. Wicks, or any one of them, our true and lawful attorneys and
agents, each with power of substitution, to do any and all acts and things in
our name and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated above, which said attorneys and agents, or any one of them, may deem
necessary or advisable to enable said corporation to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this registration
statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that the said attorneys and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WILLIAM V. CAVENEY Chairman of the Board March 9, 1998
- --------------------------------------------------------
William V. Caveney
/s/ FLOYD E. WICKS Director, President, and March 9, 1998
- -------------------------------------------------------- Chief Executive Officer
Floyd E. Wicks
/s/ MCCLELLAN HARRIS III Vice-President -- Finance, March 9, 1998
- -------------------------------------------------------- Chief Financial Officer,
McClellan Harris III Treasurer and Corporate
Secretary
/s/ JAMES L. ANDERSON Director March 9, 1998
- --------------------------------------------------------
James L. Anderson
/s/ JEAN E. AUER Director March 9, 1998
- --------------------------------------------------------
Jean E. Auer
</TABLE>
II-4
<PAGE> 82
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ N.P. DODGE, JR. Director March 4, 1998
- --------------------------------------------------------
N.P. Dodge, Jr.
/s/ ROBERT F. KATHOL Director March 9, 1998
- --------------------------------------------------------
Robert F. Kathol
/s/ LLOYD E. ROSS Director March 9, 1998
- --------------------------------------------------------
Lloyd E. Ross
</TABLE>
II-5
<PAGE> 83
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C> <C>
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession........................................................
2.1 Agreement of Merger, dated , 1998, by and among
Southern California Water Company, a California corporation,
American States Water Company, a California corporation, and
SCW Acquisition Corp., a California corporation (Exhibit A
to the Proxy Statement/Prospectus included in Part I of this
Registration Statement and incorporated herein by
reference)..................................................
3. Articles of Incorporation and by-laws:
3.1 Articles of Incorporation of Registrant (Exhibit B to the
Proxy Statement/Prospectus included in Part I of this
Registration Statement and incorporated herein by
reference)..................................................
3.2 Bylaws of Registrant (Exhibit C to the Proxy
Statement/Prospectus included in Part I of this Registration
Statement and incorporated herein by reference).............
5. Opinion Re Legality...............................................
5.1 Opinion of O'Melveny & Myers LLP as to legality of the
Securities.*................................................
8. Opinion Re Tax Matters............................................
8.1 Opinion of O'Melveny & Myers LLP regarding tax consequences
of the merger.*.............................................
12. Ratio of Earnings to Fixed Charges*...............................
23. Consents of Experts and Counsel...................................
23.1 Consents of O'Melveny & Myers LLP (included in Exhibits 5.1
and 8.1)....................................................
23.2 Consent of Arthur Andersen LLP..............................
27. Financial Data Schedules..........................................
None..............................................................
(b) Financial Statement Schedules.................................
None..............................................................
99. Additional Exhibits...............................................
99.1 Form of Proxy...............................................
</TABLE>
- ---------------
* Filed concurrently herewith.
<PAGE> 1
EXHIBIT 5.1
March
6th
1 9 9 8
(213) 669-6000 814,675-407
American States Water Company
630 East Foothill Boulevard
San Dimas, California 91773
Re: Issuance of Common Shares and Preferred Shares
of American States Water Company
Ladies and Gentlemen:
At your request, we have examined the registration statement on Form S-4
(the "Registration Statement") proposed to be filed by American States Water
Company (the "Company") with the Securities and Exchange Commission in
connection with the issuance of up to 8,957,671 Common Shares (the "Common
Shares") and 83,200 Preferred Shares of the Company (collectively, the "ASWC
Shares") to the holders of common shares and preferred shares of Southern
California Water Company ("SCWC") upon consummation of the merger (the "Merger")
of SCWC with and into SCW Acquisition Corp., a wholly owned subsidiary of the
Company ("Interim"). We have also examined the proposed form of Agreement of
Merger among the Company, SCWC and Interim included in the Registration
Statement (the "Merger Agreement") pursuant to which the ASWC Shares will be
issued. We are familiar with the proceedings taken and proposed to be taken by
the Company in connection with the authorization, execution, and delivery of the
Merger Agreement and the authorization, registration and issuance of the ASWC
Shares.
Subject to such proposed additional proceedings with respect to the
Merger, the Merger Agreement and the issuance of the ASWC Shares as now are
contemplated by us as your counsel being taken and completed prior to the
execution and delivery of the
<PAGE> 2
Merger Agreement and the issuance of the ASWC Shares upon consummation of the
Merger, and assuming (i) each certificate evidencing an ASWC Share, when issued
in exchange for a corresponding common or preferred share of SCWC, has been duly
executed by the proper officers of the Company and duly countersigned and
registered by a transfer agent and registrar agent therefor, and (ii) the
issuance of an order by the California Public Utilities Commission approving the
change in control of SCWC and the issuance of all of the outstanding stock of
SCWC to the Company upon consummation of the Merger, it is our opinion that the
ASWC Shares will be duly and validly issued, fully paid, and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and we further consent to the use of our name under the caption
"Legal Matters" in the Registration Statement and the prospectus which forms a
part thereof.
Respectfully submitted,
/s/ O'Melveny & Myers LLP
<PAGE> 1
EXHIBIT 8.1
March
6th
1 9 9 8
(213) 669-6000
814,675-407
Southern California Water Company
630 East Foothill Boulevard
San Dimas, California 91773
Re: Proposed Merger of SCW Acquisition Corp. with
and into Southern California Water Company
Dear Sir or Madam:
You have requested our opinion concerning certain of the federal
income tax consequences of the proposed statutory merger ("the Merger") of SCW
Acquisition Corp., a California corporation, with and into Southern California
Water Company, a California corporation ("SCW").
In connection with this opinion, we have examined such documents
and matters of law and fact as we have considered appropriate, including the
proposed form of Agreement of Merger ("the Agreement") and the Registration
Statement of American States Water Company on Form S-4, to be filed on or about
March 6, 1998 with the Securities and Exchange Commission, and with your consent
have relied (without any independent investigation on our part) on the
representations contained in the certificate of SCW, delivered in connection
with this opinion.
SCW has formed American States Water Company, a California
corporation ("HoldingCo") and SCW Acquisition Corp., a California corporation
("MergeCo") in order to implement and facilitate the Merger and the corporate
restructuring of which it is a part. Immediately prior to the effective time of
the Merger, HoldingCo will be a wholly-owned subsidiary of SCW, and
<PAGE> 2
MergeCo will be a wholly-owned subsidiary of HoldingCo. The rights, preferences,
privileges and restrictions of the currently outstanding SCW Common Shares and
each series of SCW Preferred Shares are substantially identical to those of the
HoldingCo Common Shares and the applicable series of HoldingCo Preferred Shares
into which they will be converted in the Merger; such rights for each class of
stock include the right to vote in the election of directors.
Pursuant to the Agreement and for good and persuasive business
reasons, MergeCo, at the effective time of the Merger, will be merged in
accordance with applicable state law with and into SCW, which will continue as
the surviving corporation. As a result of the Merger, (i) MergeCo's separate
corporate existence will cease, and SCW will hold substantially all of SCW's
assets and business, and substantially all of the assets of MergeCo; (ii) each
of SCW's Common Shares, or fraction thereof, issued and outstanding immediately
prior to the Merger will be automatically changed and converted into one Common
Share of HoldingCo, or fraction thereof; (iii) each share of each series of
SCW's Preferred Shares issued and outstanding immediately prior to the Merger
will be automatically changed and converted into one Preferred Share of
HoldingCo of the applicable series; (iv) the shares of HoldingCo owned by SCW
will be cancelled; and (v) SCW will become a wholly-owned subsidiary of
HoldingCo.
In connection with the Merger, SCW may transfer certain of its
assets (the "Non-utility Assets") to HoldingCo or another subsidiary of
HoldingCo. The fair market value of the Non- utility Assets, as of the effective
time of the Merger, will not exceed 1% of SCW's total net assets.
Based upon the aforementioned facts and representations, and our
review and analysis of the current state of the law, it is our opinion that if
the Agreement is carried out in accordance with its terms:
(1) The Merger will constitute a reorganization within the
meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code"), and SCW, HoldingCo and MergeCo will each be a party to the
reorganization within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by holders of SCW stock
who receive HoldingCo stock in exchange for the shares of SCW stock which they
hold;
(3) The holding period of HoldingCo stock received in exchange
for SCW stock will include the holding period of the SCW stock for which it is
exchanged, assuming that the shares of SCW stock are capital assets in the hands
of the holders thereof at the time of the Merger; and
<PAGE> 3
(4) The tax basis of HoldingCo stock received by shareholders of
the Company pursuant to the Merger will be the same as the tax basis of the
shares of SCW stock exchanged therefor.
This opinion is based on current authorities and upon facts and
assumptions as of this date. It addresses only the classification of the Merger
as a reorganization under Section 368(a)(1) of the Code and the other federal
income tax consequences described in Paragraphs (1), (2), (3) and (4) above, and
does not address any other federal, state, local or foreign tax consequences
that may result from the Merger or any other transaction, related or otherwise.
It is subject to change in the event of a change in the applicable law or a
change in the interpretation of such law by the courts or by the Internal
Revenue Service. There can be no assurance that legislative or administrative
changes or court decisions will not be forthcoming that would significantly
modify this opinion. Any such changes may or may not be retroactive with respect
to transactions prior to the date of such changes. This opinion has no binding
effect or official status, and accordingly no assurance can be given that the
positions set forth herein will be sustained by a court, if contested. No ruling
will be obtained from the Internal Revenue Service with respect to the Merger.
We consent to the filing with the Securities Exchange Commission
of this letter as an exhibit to the Registration Statement of HoldingCo, and to
the references to us under the headings "Summary -- Certain Federal Income Tax
Consequences", "Item 1: Proposal to Form a Holding Company -- Conditions to the
Merger", and "Item 1: Proposal to Form a Holding Company -- Certain Federal
Income Tax Consequences" in the proxy statement/prospectus. In giving such
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Respectfully submitted,
/s/ O'Melveny & Myers LLP
<PAGE> 1
EXHIBIT 12
SOUTHERN CALIFORNIA WATER COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31,
---------------------------------------------------
DESCRIPTION 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income from Continuing Operations $14,059 $13,460 $12,165 $11,338 $12,026
Taxes on Income $ 9,830 $10,283 $ 8,784 $ 8,865 $ 5,491
Interest Charges $10,157 $10,500 $ 9,559 $ 7,828 $ 8,378
Earnings Available for Fixed Charges $34,046 $34,243 $30,508 $28,031 $25,895
Total Fixed Interest Charges $10,157 $10,500 $ 9,559 $ 7,828 $ 8,378
Ratio of Earnings to Fixed Charges 3.35 3.26 3.19 3.58 3.09
Preferred Dividends $ 92 $ 94 $ 96 $ 98 $ 100
Effective Tax Rate 42.3% 43.7% 41.8% 45.0% 23.5%
Tax-effected Preferred Dividends $ 159 $ 167 $ 165 $ 178 $ 131
Ratio of Earnings to Total Fixed Charges 3.30 3.21 3.14 3.50 3.04
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
February 12, 1998 included in Southern California Water Company's Form 10-K for
the year ended December 31, 1997 and to all references to our Firm included in
this registration statement.
/s/ ARTHUR ANDERSEN LLP
---------------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
March 9, 1998
<PAGE> 1
EXHIBIT 99.1
PROXY
SOUTHERN CALIFORNIA WATER COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints N.P. Dodge, Jr. and W.V. Caveney proxies,
with power to act without the other and with power of substitution, and hereby
authorizes them to represent and vote, as designated on the other side, all the
shares of stock of Southern California Water Company standing in the name of
the undersigned with all powers which the undersigned would possess if present
at the Annual Meeting of Shareholders of the Company to be held April 28, 1998
or any adjournment of that meeting.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- -------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
IMPORTANT NOTICE TO SHAREHOLDERS
OF SOUTHERN CALIFORNIA WATER COMPANY
THE ANNUAL MEETING OF SHAREHOLDERS WILL BE HELD ON
APRIL 28, 1998 AT 10:00 A.M.
AT THE INDUSTRY HILLS SHERATON
MAP TO INDUSTRY HILLS SHERATON
ONE INDUSTRY HILLS PARKWAY,
CITY OF INDUSTRY, CA
===============================================================================
[MAP OF SHERATON HOTEL]
===============================================================================
<PAGE> 2
Please mark
your votes as [X]
indicated in
this example
The Board of Directors recommends a vote FOR the proposals described in
Items 1, 2 and 3 and FOR each of the Director Nominees listed in Item 4.
FOR AGAINST ABSTAIN
Item 1. Proposal to approve the principal terms of [ ] [ ] [ ]
the Agreement of Merger pursuant to which a
holding company will be formed.
Item 2. Proposal to ratify provisions re: supermajority FOR AGAINST ABSTAIN
vote of HoldingCo shareholders. [ ] [ ] [ ]
Item 3. Proposal to ratify provisions re: classification FOR AGAINST ABSTAIN
of HoldingCo Board of Directors. [ ] [ ] [ ]
WITHHELD
Item 4. Election of Directors FOR FOR ALL
[ ] [ ]
Nominees: James L. Anderson Jean E. Auer
Robert F. Kathol William V. Caveney
Lloyd E. Ross N.P. Dodge, Jr.
Floyd E. Wicks
WITHHELD FOR: (write name of such Nominee(s) in this
space provided below.)
- ------------------------------------------------------
Item 5. In their discretion, the Proxies are authorized
to vote upon such other business as may properly
come before the meeting.
If this Proxy Card is signed and returned but is not
marked, it will be voted FOR the proposals described
in Items 1, 2 and 3 FOR each of the Director Nominees
listed under Item 4.
Signature(s)_____________________________________________________ Date _________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
[] FOLD AND DETACH HERE []
Dear Shareholder:
The Annual Meeting of Shareholders of Southern California Water Company
will be held on Tuesday, April 28, 1998, at 10:00 A.M., Pacific time, at the
Industry Hills Sheraton, One Industry Parkway, City of Industry, California.
The enclosed notice of the meeting and accompanying proxy statement cover
the formal business of the meeting.
Your continued interest in Southern California Water Company is
appreciated and we hope that you will find it convenient to attend the meeting.
However, whether or not you plan to attend in person, please assure
representation of your shares by marking, signing and mailing in the
accompanying proxy card.
Sincerely,
/s/ W.V. CAVENEY
- -----------------
W.V. Caveney
Chairman of the Board
