<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Southern California Water Company
- ----------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
James B. Gallagher
- ----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE> 2
PRELIMINARY
SOUTHERN CALIFORNIA WATER COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS -- APRIL 26, 1994
Dear Shareholder:
The Annual Meeting of the Shareholders of Southern California Water
Company will be held at the Sheraton Suites Fairplex, 601 West McKinley Avenue,
Pomona, California, on Tuesday, April 26, 1994, at 11:00 A.M., Pacific time, for
the following purposes:
1. To elect a board of six directors to serve until the next Annual
Meeting of Shareholders and until their successors are elected and
qualified.
2. To approve an amendment to the Company's Bylaws to establish a
variable Board of Directors of between five and nine persons, with the
exact number of directors to be six until changed by the Board of
Directors or the shareholders by amendment of the Articles of
Incorporation or the Bylaws.
3. To transact any other business which may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on February 28,
1994, as the record date for the determination of shareholders entitled to
notice of and to vote at this meeting or any adjournment thereof.
It is important that every shareholder, whether owning one or more shares
and whether or not expecting to attend the meeting in person, sign, date and
promptly return the enclosed proxy. A return envelope, requiring no postage if
mailed in the United States, is enclosed for convenience. By returning your
signed proxy, you can help assure a quorum to transact the business of the
meeting.
By order of the Board of Directors
JAMES B. GALLAGHER
----------------------------------
James B. Gallagher
Secretary
San Dimas, California
March 18, 1994
<PAGE> 3
PRELIMINARY
PROXY STATEMENT
SOUTHERN CALIFORNIA WATER COMPANY
630 EAST FOOTHILL BOULEVARD
SAN DIMAS, CALIFORNIA 91773
------------------------
SOLICITATION OF PROXY AND RIGHT OF REVOCATION
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Southern California Water Company for use at the Annual Meeting of
Shareholders to be held on April 26, 1994, or any adjournment thereof. Any
shareholder giving a proxy has the power to revoke it at any time before it is
exercised by attending the meeting and voting in person or by a writing
delivered to the Company stating that the proxy is revoked or by a subsequent
proxy executed by the shareholder and presented to the meeting. All shares
represented by each properly executed, unrevoked proxy received in time for the
meeting will be voted as marked on the proxy. If the proxy is signed and
returned, but is not marked, it will be voted for all nominees listed and in
favor of the Bylaw amendment described herein. You are encouraged to mark your
proxy carefully in accordance with the instructions appearing thereon. The
expense of soliciting proxies will be paid by the Company. This proxy statement
and the accompanying proxy were mailed on or about March 18, 1994.
VOTING RIGHTS
The voting securities of the Company outstanding as of February 28, 1994
were 89,600 Preferred Shares and 7,845,092 Common Shares. Each Preferred Share
is entitled to one vote and each Common Share is entitled to one-tenth of one
vote. Common and Preferred shareholders vote as a single class.
Votes cast by proxy or in person at the meeting will be counted by an
inspector of election appointed by the Board of Directors to act as an election
inspector for the meeting. The election inspector will treat shares represented
by proxies that reflect abstentions as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. Abstentions, however,
do not constitute a vote "for" or "against" any matter and thus will be
disregarded in the calculation of a plurality or of votes cast on any matter
submitted to the shareholders for a vote.
The election inspector 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
1
<PAGE> 4
persons entitled to vote that the broker or nominee does not have discretionary
power to vote on a particular matter) as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. However, for purposes
of determining the outcome of any matter as to which the broker has physically
indicated on the proxy that it does not have discretionary authority to vote,
those shares will be treated as not present and not entitled to vote with
respect to that matter (even though those shares are considered present for
quorum purposes and may be entitled to vote on other matters). Any unmarked
proxies, including those submitted by brokers or nominees, will be voted as
indicated in the accompanying proxy card.
In the election of directors, the candidates for election receiving the
highest number of affirmative votes of the shares entitled to be voted for them
up to the number of directors to be elected by those shares will be elected.
Votes cast against a candidate or votes withheld will have no legal effect. No
shareholder shall 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 votes equal to the number of
directors authorized times the number of votes to which it is otherwise
entitled, which votes may be cast for a single candidate or may be distributed
among two or more candidates in whatever proportion the shareholder may
determine. If voting is not conducted by cumulative voting, each share will be
entitled to one vote for each Preferred Share and one-tenth of one vote for each
Common Share 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.
Approval of the proposed amendment requires the favorable vote of the
majority of the Company's outstanding Common and Preferred Shareholders entitled
to vote at the Annual Meeting, voting together as a single class. On all matters
other than the election of directors, the affirmative vote of the majority of
the shares represented and voting at the meeting (which shares voting
affirmatively also constitute at least a majority of the quorum) is required for
the shareholders to take action. Assuming the presence of a quorum, the
shareholders present at the meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders 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.
2
<PAGE> 5
ITEM 1.
ELECTION OF DIRECTORS
Action will be taken at the Annual Meeting to elect six 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 election as
directors of the Nominees listed below unless authority is withheld. If voting
for directors is conducted by cumulative voting, the proxies named on the
enclosed form of proxy will have discretionary authority to cumulate votes among
the Nominees named herein.
The proxies may also be voted for a substitute Nominee or Nominees in the
event any one or more of the persons named below shall be unable to serve for
any reason or be withdrawn from nomination, a contingency not now anticipated.
The following table, together with its footnotes, presents information
regarding the occupation, business experience, outside directorships and
beneficial ownership of shares of the Company for each nominee. All nominees are
presently directors of the Company.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
EXPERIENCE PERIOD DURING COMMON SHARES PERCENT
DURING THE PAST FIVE YEARS; WHICH SERVED BENEFICIALLY OF
NAME OTHER DIRECTORSHIPS AGE AS DIRECTOR OWNED CLASS
---- ---------------------------- --- ------------- ------------- -------
<S> <C> <C> <C> <C> <C>
D.E. Brown Senior Vice President of 67 1971 to date 26,000(1) *
Kirkpatrick, Pettis, Smith,
Polian Inc., investment
bankers, Omaha, Nebraska
W.V. Caveney Chairman of the Board of the 67 1980 to date 6,905 *
Company(2)
R.B. Clark Retired Partner in the law 69 1970 to date 2,641 *
firm of O'Melveny & Myers,
Los Angeles, California
N.P. Dodge, Jr. President of N.P. Dodge 57 1990 to date 2,600 *
Company, full service real
estate concern,
Omaha, Nebraska(3)
W.M. Kizer Chairman of the Board of 69 1969 to date 7,600 *
Central States Health & Life
Co. of Omaha
F.E. Wicks President and Chief Executive 50 1990 to date 555 *
Officer of the Company(4)
</TABLE>
- ---------------
* Less than one percent.
(1) Shares held in the name of D. E. Brown's wife.
(2) W.V Caveney was Chairman of the Board and Chief Executive Officer from 4/90
to 3/92 and President and Chief Executive Officer of the Company from 4/82
to 3/90.
(3) N.P. Dodge is also Chairman of the Board of Hillcrest/Westlawn Cemetaries.
Mr. Dodge is a director of Firststar Bank of Council Bluffs and a director
of Bridges Investment Fund, which is managed by Bridges Investment Counsel,
Inc., the investment management firm for the Company's pension plan.
3
<PAGE> 6
(4) F.E. Wicks was President of the Company from 4/90 to 3/92 and Vice President
of Operations from 1/88 to 3/90.
O'Melveny & Myers, of which R.B. Clark is a retired partner, provides
legal services to the Company.
Kirkpatrick, Pettis, Smith, Polian Inc., of which D.E. Brown is a Senior
Vice President, served as co-manager of the Company's Common Stock offering in
June of 1993 and as co-agent on the Company's Medium Term Note program in 1993.
Directors met as a board seven times in 1993. An Audit Committee
consisting of R.B. Clark, W.M. Kizer and N.P. Dodge, Jr. met four times during
1993. A Compensation Committee (referenced below) met once in 1993. The Board
has not appointed a Nominating Committee. No director attended less than 75% of
the board and committee meetings as appropriate.
The Audit Committee provides advice and assistance to the Company 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.
A Compensation Committee was appointed during 1993 and consists of all
members of the Board of Directors except F.E. Wicks. The Compensation Committee
is responsible for the review of and recommendations as to annual salaries of
the executive officers, as well as an evaluation of management performance.
During 1993, directors Dodge, Brown and Clark earned directors' fees
(including amounts deferred -- see "Deferred Compensation Plan for Directors and
Executives") of $22,000 while director Kizer earned $21,000. Outside directors
are presently paid an annual retainer, payable monthly, of $15,000. In addition,
each such director receives a $1,000 fee for each meeting attended (the regular
and organization meetings of the board held in April are deemed one meeting for
purposes of the per meeting fee).
Chairman of the Board Caveney earned $93,375 as chairman during 1993. The
current annual rate for such service is $94,500. President Wicks was compensated
as an officer of the Company and received no separate compensation as a
director.
4
<PAGE> 7
ITEM 2.
AMENDMENT TO BYLAWS
The Bylaws of the Company currently provide for a Board of Directors of
six persons unless changed by an amendment duly adopted by the shareholders
amending the Bylaws. The proposed amendment to the Bylaws will establish a
variable Board of Directors of between five and nine persons. The amendment will
also provide that the exact number of directors within these limits will be
fixed by the Board of Directors or the shareholders, and that until changed, the
exact number will be six.
The Board of Directors has approved the proposed amendment to the Bylaws
in order to provide greater flexibility in the number of directors that may
serve on the Board. This flexibility will enable the Board to increase its size
to add directors under appropriate circumstances, for example, in connection
with acquisitions of other water companies or water properties, and to reduce
the size of the Board in the event of resignation or retirement of directors. In
addition, in part in response to recommendations of the Management Audit
referred to in the Company's Annual Report to Shareholders, the Board has
determined that it would be in the best interests of the Company to increase the
number of California directors on the Board and the added flexibility
contemplated by the amended Bylaws will permit the Board to do so when it
identifies qualified candidates.
The text of the proposed amendment is set forth in Annex A to this Proxy
Statement. Approval of the proposed amendment requires the favorable vote of the
holders of a majority of the Company's outstanding Common and Preferred Shares
entitled to vote at the Annual Meeting, voting as a single class. If approved,
the proposed amendment will be effective immediately upon the close of the 1994
Annual Meeting of Shareholders.
THE BOARD OF DIRECTORS HAS APPROVED THE PROPOSED AMENDMENT AND RECOMMENDS
THAT THE SHAREHOLDERS APPROVE THE AMENDMENT.
5
<PAGE> 8
EXECUTIVE OFFICERS
EXPERIENCE AND COMPENSATION
The Company had six executive officers as of December 31, 1993.
Information regarding the identification, business experience and beneficial
ownership of shares of the Company's executive officers is shown in the
following table and footnotes thereto:
<TABLE>
<CAPTION>
HELD SUCH COMMON SHARES PERCENT
PRINCIPAL OCCUPATION AND EXPERIENCE POSITION BENEFICIALLY OF
NAME DURING THE PAST FIVE YEARS AGE SINCE OWNED CLASS
---- ------------------------------------ --- --------- ------------- -------
<S> <C> <C> <C> <C> <C>
W.V. Caveney Chairman of the Board(1) 67 4/92 6,905 *
F.E. Wicks President and Chief Executive Officer(2) 50 4/92 555 *
J.A. Dickson Vice President -- Regulatory Affairs and 41 6/90 1,144 *
Utility Business Development(3)
T.J. Bunosky Vice President -- Operations(4) 39 3/93 87 *
R.J. Vogel Vice President -- Administration(5) 57 2/93 -- --
J.B. Gallagher Secretary, Treasurer and Chief Financial 39 10/90 129 *
Officer(6)
</TABLE>
- ---------------
* Less than one percent
(1) Chairman of the Board and Chief Executive Officer of the Company from 4/90
to 3/92 and President and Chief Executive Officer from 4/82 to 3/90.
(2) President from 4/90 to 3/92 and Vice President of Operations from 1/88 to
3/90.
(3) Employed by Suburban Water Systems as Vice President of Finance and
Administration from 8/88 to 5/90 and as Vice President of Budgeting and
Regulations from 4/88 to 7/88.
(4) Manager of Operations from 5/91 to 2/93, Director of Engineering,
Production and Water Resources from 12/90 to 4/91, Director of Water
Resources from 10/90 to 11/90; Assistant Manager of Operations for Ohio
Water Service Company from 4/83 to 9/90.
(5) Director of Administration from 1/93 to 2/93, Director of Information
Systems 6/92 to 12/92; Executive Vice President and Chief Operating Officer
of Suburban Water Systems from 10/85 to 4/92.
(6) Secretary and Treasurer from 10/87 to 9/90.
Directors and executive officers of the Company as a group beneficially
own 47,661 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.
6
<PAGE> 9
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>
ANNUAL COMPENSATION ALL
--------------------------- OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) COMPENSATION(2)
- ------------------------------------------------------ ----- ------------------- ---------------
<S> <C> <C> <C>
F.E. Wicks - President and Chief Executive Officer 1993 $ 237,918 $ 3,700
1992 216,895(3) 3,332
1991 180,563 2,423
J.A. Dickson - Vice President - Regulatory Affairs and 1993 132,687 2,288
Utility Business Development 1992 126,606 2,110
1991 118,268 267
T.J. Bunosky - Vice President - Operations 1993 130,807(4) 2,231
1992 109,930 13,619(5)
1991 91,873 32,294(5)
R.J. Vogel - Vice President - Administration 1993 114,818(6) 267
1992 55,044 --
1991 -- --
J.B. Gallagher - Chief Financial Officer, Secretary 1993 111,678 1,944
and Treasurer 1992 105,903 1,046
1991 99,667 267
</TABLE>
- ---------------
(1) The executive officers of the Company receive both cash compensation and
certain perquisites, including the personal use of Company vehicles.
However, the aggregate amount of such perquisites received by each named
officer does not exceed 10% of the total annual salary of each named
officer.
(2) Includes Company payment of premium on business travel and accident policy
of $39 per person per year. Except with regard to footnote (5) below, the
balance represents the Company's matching contribution to the 401(k) Plan
for the benefit of the named officer.
(3) Elected Chief Executive Officer in 1992.
(4) Elected executive officer in April, 1993.
(5) Includes $32,294 in 1991 and $13,619 in 1992 as remuneration for relocation
expenses.
(6) Elected executive officer in April, 1993. Employed by the Company beginning
in June, 1992.
The Company has no bonus, profit sharing, stock option, stock appreciation
right or other remunerative program (other than pension and welfare benefits)
currently in effect.
PENSION PLAN
The Company has a defined benefit pension plan that is noncontributory.
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.
7
<PAGE> 10
Annual benefits payable at retirement (at age 65 or beyond) are reduced by
a percentage of primary social security benefits based upon years of credited
service and are payable monthly. The following table illustrates the estimated
annual benefits payable upon retirement for persons in the earnings
classifications with years of service as shown, but excluding the Social
Security deduction.
<TABLE>
<CAPTION>
BENEFITS BASED ON LENGTH OF SERVICE
AVERAGE ANNUAL --------------------------------------------------------------------------
SALARY FOR HIGHEST
CONSECUTIVE FIVE YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
---------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 75,000 $22,500 $30,000 $ 37,500 $ 45,000 $ 52,500
100,000 30,000 40,000 50,000 60,000 70,000
125,000 37,500 50,000 62,500 75,000 87,500
150,000 45,000 60,000 75,000 90,000 105,000
175,000 52,500 70,000 87,500 105,000 122,500
200,000 60,000 80,000 100,000 120,000 140,000
</TABLE>
The executive officers listed in the summary compensation table have the
following credited years of service under the pension plan: F.E. Wicks -- 6;
J.A. Dickson -- 3; T.J. Bunosky -- 3; R.J. Vogel -- 1 and J.B. Gallagher -- 6.
The plan provides an early retirement option for those employees whose age
plus number of years of service equal at least 90.
The Board of Directors has a Retirement Plan for Non-Employee Directors
(the "Plan") of the Company. The Plan provides annual benefits to eligible
directors in an amount equal to the annual retainer in effect at such director's
date of retirement. Benefits are payable in monthly installments for a period
equal to the shortest of (a) the life of the director following retirement, (b)
the period such individual was a director or (c) ten years. In the case of death
of the director, benefits will continue to be received by such director's
surviving spouse for the remaining period for which the director would have been
entitled to receive benefits except for death. The minimum age for a director to
qualify for retirement benefits under the Plan is 62 unless retirement before
age 62 is required for health reasons. Directors who are "removed for cause"
(including failure to be re-elected by shareholders) are not eligible for
benefits under the Plan. As a condition of participation in the 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.
DEFERRED COMPENSATION PLAN FOR DIRECTORS AND EXECUTIVES
Under the Company's Deferred Compensation Plan for Directors and
Executives, directors and eligible officers and employees are entitled to defer
all, in the case of directors, or a portion, in the case of officers and
employees, of their compensation until specified times after the deferral.
Interest accrues on amounts deferred under the Plan, but such accrued interest
is not included in the compensation table on page 5 because the interest rate
does not exceed prevailing rates of interest at the time the interest is
accrued.
8
<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee's report on executive compensation is set forth
below. Mr. William V. Caveney, a member of this Committee and Chairman of the
Board of Directors, is, in his capacity as Chairman of the Board, an officer of
the Company. Mr. Caveney does not actively participate in the daily operation of
the Company, duties as to which are the responsibility of Mr. Wicks, President
and Chief Executive Officer of the Company. No other member of this Committee is
a current or former officer or employee of the Company or any of its
subsidiaries or affiliates.
R. B. Clark and D. E. Brown are also members of this Committee and are
directors of the Company. Mr. Clark is a retired partner of O'Melveny & Myers,
which provides legal services to the Company. Mr. Brown is Senior Vice President
of Kirkpatrick, Pettis, Smith, Polian Inc., which served as co-manager of the
Company's Common Stock offering in June of 1993 and as co-agent on the Company's
Medium Term Note Program in 1993.
The following Report and the Performance Graph included in this proxy
statement shall not be deemed to be incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent the Company specifically incorporates this
Report or the Performance Graph by reference therein, and shall not be deemed
soliciting material or otherwise deemed filed under either of such Acts.
BOARD REPORT ON EXECUTIVE COMPENSATION
To: The Board of Directors
As members of the Compensation Committee of the Board of Directors (the
"Committee"), it is our responsibility to review and make recommendations as to
the annual salaries of the executive officers of the Company. In addition to our
review of cash compensation, our responsibility in this regard extends to
consideration of other related matters including evaluation of management
performance and management planning and succession. This Committee makes
recommendations to and reviews in detail all aspects of these matters with the
Board of Directors concerning the six executive officers as well as reviewing
compensation recommendations of certain senior executives reporting directly to
those executive officers.
The Company has retained the services of Sibson & Company Inc. ("Sibson"),
a nationally-recognized compensation consulting firm, to assist this Committee
in connection with the discharge of its responsibilities. Sibson has been
retained by the Company since 1991.
Sibson provided reports and advice to the Company and this Committee with
respect to the appropriate compensation and benefit levels of executive officers
and senior executives of the
9
<PAGE> 12
Company. As part of its studies, Sibson compared compensation paid by water
utilities and industrial companies having gross revenues and numbers of
employees and customers relatively similar to that of the Company, taking into
account four areas of compensation: base salary, annual incentives, long-term
incentives and benefits and perquisites. The water utilities which are part of
the Dow Jones Water Utility Index reported in the performance graph were
included in the Sibson study, as well as seven other water utilities. This
Committee relies on the reports prepared by Sibson and a subjective evaluation
of management performance in the discharge of their assigned duties and
responsibilities, as well as the performance of the Company generally, in
determining the appropriate compensation levels for the Company's executive
officers and senior executives.
In April, 1993, the Company commissioned Sibson and Chase Consulting Group
to prepare a Water Utility Executive Compensation Survey Update Report (the
"Update Report") covering the four areas of compensation generally reviewed by
this Committee. The Update Report indicated that, while past increases to base
salaries have brought the Company's salaries closer to the average paid by the
water utilities referenced above, in the areas of incentive compensation and
benefits and perquisites, the Company lags behind other water utilities. The
Update Report demonstrated that base salaries for 1993 would remain within the
median range of this peer group of water utilities, with a nominal 5% average
merit increase over 1992 amounts for the executive group.
This Committee has not adopted a formula relationship between the
Company's financial performance and the level of compensation paid to its
executive officers in part because of the pervasive effects that varying
regulatory practices and weather conditions have on financial performance, which
effects are outside the immediate control of the executive officers. The Update
Report compared the salary and all other compensation received by the Chief
Executive Officer and concluded Mr. Wicks' base salary and all other
compensation was 12% and 28%, respectively, below the other water utilities
included in the Update Report. In determining the compensation of Mr. Wicks and
other executives, the Committee also relied upon a subjective evaluation of the
Company's earnings performance and the performance of the executive staff in
maintaining and enhancing the Company's ability to meet its challenges,
including water quality and water supply issues, earnings levels and the
successful resolution of issues before regulatory agencies and the California
Public Utilities Commission. Upon review of all of the objective and subjective
factors described above, the Committee recommended that Mr. Wicks' base
compensation be increased by 9.1% for 1993-94.
10
<PAGE> 13
This Committee recognizes that changes to the Internal Revenue Code in
1993 affect, subject to limited exceptions, the deductibility of compensation in
excess of $1,000,000 for certain executive officers unless such compensation
qualifies as "performance-based". However, since the Company's current
compensation program does not provide for annual compensation to any executive
in excess of $1,000,000, the deduction limitations are presently inapplicable to
the Company.
Compensation Committee
D.E. Brown W.M. Kizer
R.B. Clark W.V. Caveney
N.P. Dodge, Jr.
March, 1993
11
<PAGE> 14
PERFORMANCE GRAPH
The graph below compares the performance of Southern California Water
Company to the S&P 500, the NASDAQ Stock Market Index (U.S. companies only) and
the Dow Jones Water Utility index, a published industry index. The graph shows
the total return to shareholders for the last five years of an investment of
$100 made on December 31, 1988 and assuming reinvestment of all dividends. As
with any investment, the historical performance reflected in this performance
graph is not necessarily indicative of future performance.
On June 17, 1993, the Common Shares of the Company were listed on the New
York Stock Exchange. The Company, therefore, changed its broad market index to
the S&P 500 to more accurately reflect the market in which its Common Shares are
traded. Information on the NASDAQ Stock Market Index is presented here pursuant
to applicable SEC regulations.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG SOUTHERN CALIFORNIA WATER COMPANY, THE S & P 500 INDEX
THE DOW JONES WATER UTILITIES INDEX AND THE NASDAQ STOCK MARKET-US INDEX
[PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31 1988 1989 1990 1991 1992 1993
- --------------------------------------------------------------------------------------
Southern California Water Co. 100 119 121 155 197 227
- --------------------------------------------------------------------------------------
DJ Water Utilities 100 105 93 142 153 172
- --------------------------------------------------------------------------------------
S&P 500 100 132 128 166 179 197
- --------------------------------------------------------------------------------------
NASDAQ Stock Market 100 121 103 165 192 219
</TABLE>
- --------------------------------------------------------------------------------
* $100 INVESTED ON 12/31/88 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
12
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the beneficial
owners of more than five percent of any class of the Company's voting securities
on February 28, 1994 based upon public information known to the Company.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP OF CLASS
- ------------------------------------------- ------------------ --------------- --------
<S> <C> <C> <C>
First Colony Life Insurance Company Preferred Shares 46,125--Direct 51.5*
700 Main Street
Lynchburg, Virginia
Massachusetts Mutual Life Insurance Co. Preferred Shares 12,000--Direct 13.4
1295 State Street
Springfield, Massachusetts
Equitable Life Insurance Company of Iowa Preferred Shares 2,645--Direct 3.0
699 Walnut Street
Des Moines, Iowa
</TABLE>
- ---------------
* Represents 5.3% of total eligible vote.
ANNUAL REPORT (FORM 10-K)
The Company undertakes, on written request, to provide, without charge,
each person from whom the accompanying proxy is solicited, with a copy of the
Company's Annual Report on Form 10-K for the year ended December 31, 1993 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 & Co. served as the Company's independent public
accountants for the year ended December 31, 1993. 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 & Co. 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.
13
<PAGE> 16
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.
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal which a shareholder intends to present at the next Annual
Meeting of Shareholders to be held in April 1995 must be received at the
principal executive office of the Company by November 18, 1994 if such proposal
is to be considered for inclusion in the Company's proxy statement and form of
proxy relating to that meeting.
14
<PAGE> 17
ANNEX A
TEXT OF PROPOSED
AMENDMENT TO BYLAWS
Resolved, that, effective immediately after the adjournment of the 1994
Annual Meeting of Shareholders, Section 2 of Article III of the Bylaws of this
Corporation shall be amended in its entirety to read as follows:
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 amendment of the
next sentence duly adopted either by the Board or the shareholders. The
exact number of directors shall be six until changed as provided in this
Section 2.
<PAGE> 18
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF SOUTHERN CALIFORNIA WATER COMPANY
D. E. Brown and W. V. Caveney, each with full power to act without the
other, are hereby appointed the attorneys and proxies, with full power of
substitution, for and in the name of the undersigned to represent and vote in
their discretion all stock which the undersigned could represent and vote at the
annual meeting of the shareholders of the Southern California Water Company to
be held at the Sheraton Suites Fairplex, 601 West McKinley Avenue, Pomona,
California, on Tuesday, April 26, 1994 at 11:00 o'clock A.M., Pacific time, or
any adjournment thereof, for the election of Directors, and upon other matters
properly coming before the meeting.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) / / listed below / /
</TABLE>
D. E. Brown, W. V. Caveney, R. B. Clark, N. P. Dodge, Jr.,
W. M. Kizer and F. E. Wicks
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE INDIVIDUAL
NOMINEE(S) WRITE THAT NOMINEE(S) NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
Continued and to be signed on the other side
2. Approval of an amendment proposed by the Board of Directors to the Company's
Bylaws to establish a variable Board of Directors of between five and nine
persons, with the exact number of directors to be six until changed by the
Board of Directors or the shareholders by amendment of the Articles of
Incorporation or the Bylaws.
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES AND FOR APPROVAL OF THE AMENDMENT OF THE BYLAWS.
(NOTE: Signature should
agree with name hereon.
When signing as attorney,
executor, administrator,
trustee, guardian, or
corporate officer, please
give full title as such.
All joint owners should
sign.)
-------------------------
Signature
-------------------------
Signature
-------------------------
Date
IMPORTANT: Please mark, date, sign and return this Proxy promptly in the
enclosed envelope.
