<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Southwest Water Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
(LOGO) Southwest Water Company "A Water Management Company"
PROXY STATEMENT
April 15, 1999
[PICTURE OF CHILD AT DRINKING FOUNTAIN]
We provide the water and the service.
<PAGE>
YOUR VOTE IS IMPORTANT
Stockholders of Southwest Water Company as of March 31, 1999 will
be eligible to vote on the proposals described in the attached Proxy
Statement. Please note that shares of stock are usually registered in
one of two ways as discussed below and that each way has a slightly
different voting procedure:
(1) Your securities may be registered in your name with our
transfer agent, ChaseMellon Shareholder Services. If so, you have two
ways that you can vote:
. By Telephone: Call the toll-free telephone number on your
proxy card to vote by phone.
. By Mail: Mark, sign, date and mail your proxy card to our
Transfer Agent, ChaseMellon Shareholder Services, in the
enclosed envelope.
(2) If your shares are not held in your name with our transfer
agent, and are held for you by a bank, broker or other agency, you
will receive instructions directly from the agency holding them. Some
of you will also be given the opportunity to vote by telephone. Your
voting instructions will be included with your proxy materials, and
you should follow these instructions in order for your shares to be
voted.
ELIMINATE DUPLICATE MAILINGS
If you are a stockholder with your stock recorded in your name
with our transfer agent and have more than one account in your name,
or live at the same address as other stockholders that have stock
recorded with our transfer agent, you may authorize us to discontinue
multiple mailings. To discontinue multiple mailings, mark the box on
the appropriate proxy card(s).
1
<PAGE>
SOUTHWEST WATER COMPANY
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------------------------
<TABLE>
<S> <C>
TIME: 10:00 a.m., local time,
on Thursday, May 27, 1999
PLACE: Hotel Inter-Continental
251 South Olive Street
Los Angeles, California
ITEMS OF BUSINESS: (1) To elect one member of the Board of
Directors for a three-year term.
(2) To ratify the appointment of KPMG LLP
as our independent auditors for the 1999 fiscal year.
(3) To transact other business as may properly come before
the Meeting and any adjournment or postponement.
RECORD DATE: You can vote if you owned Southwest Water Company stock on
March 31, 1999.
ANNUAL REPORT AND FORM 10-K: Our 1998 Annual Report and Form 10-K, which are not a part
of the proxy soliciting material, are enclosed.
PROXY VOTING: It is important that your shares be represented and voted so
that we can have a valid meeting. Please vote in one of two
ways:
(1) If available, USE THE TOLL-FREE TELEPHONE NUMBER shown
on the enclosed proxy card
OR
(2) MARK, SIGN, DATE AND PROMPTLY RETURN the enclosed proxy
card in the postage-paid envelope.
Your proxy may be revoked or changed at any time prior to
the Meeting by completing a new proxy card.
Peter J. Moerbeek
April 15, 1999 Secretary
============================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<S> <C>
Page
PROXY STATEMENT
Proxy Delivery.................................................. 1
Annual Meeting Admission........................................ 1
Stockholders Entitled to Vote................................... 1
Proxies......................................................... 1
Vote by Telephone............................................... 1
Vote by Mail.................................................... 1
Voting at the Annual Meeting.................................... 2
Voting on Other Matters......................................... 2
Consolidation of Your Vote...................................... 2
List of Stockholders............................................ 2
Quorum.......................................................... 2
Required Vote................................................... 2
Cost of Proxy Solicitation...................................... 2
Section 16(a) Beneficial Ownership Reporting Compliance......... 2
GOVERNANCE OF THE COMPANY
Our Corporate Governance Principles............................. 3
Board and Committee Membership.................................. 4
The Audit Committee............................................. 4
The Investment/Acquisition Committee............................ 4
The Nominating Committee........................................ 4
The Compensation Committee...................................... 5
Compensation of Directors....................................... 5-6
Fees and Benefit Plans for Non-Employee Directors............... 5-6
Beneficial Ownership of the Company's Securities................ 7-8
Comparison of the Cumulative Total Return on the
Company's Common Stock to Certain Industry Standards............ 8
Related Transactions............................................ 9
EXECUTIVE COMPENSATION
Summary Compensation Table...................................... 10
Executive Officers' Severance Compensation Agreements........... 11
Option Grants to Executive Officers in 1998..................... 12
Option Exercises in 1998 and Year-End Option Values............. 13
Retirement Benefits............................................. 13-14
Executive Compensation Committee Report......................... 15-16
ITEM 1 ELECTION OF DIRECTORS
Nominee for Director Whose Term Expires in 1999................. 17
Directors Whose Terms Expire in 2000............................ 18
Directors Whose Terms Expire in 2001............................ 18
Executive Officers Who Are Not Directors........................ 18
ITEM 2 RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS..... 19
REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS,
NOMINATION OF DIRECTORS AND OTHER BUSINESS OF STOCKHOLDERS........ 20
</TABLE>
<PAGE>
(LOGO) Southwest Water Company "A Water Management Company"
225 North Barranca Avenue, Suite 200
West Covina, California 91791-1605
Telephone: (626) 915-1551
Fax: (626) 915-1558
e-mail: [email protected]
PROXY STATEMENT
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Proxy Delivery Proxies
These proxy materials are delivered in Your vote is important so that we can have a valid
connection with the solicitation by the Board meeting. The proxy card that accompanies this proxy
of Directors of Southwest Water Company statement will give you voting instructions. Please
("Southwest Water," the "Company" "we," or review the enclosed proxy materials and vote as soon
"us"), a Delaware corporation, of proxies to be as possible.
voted at our 1999 Annual Meeting of
Stockholders and at any adjournment or Proxies may be changed or revoked at any time before
postponement of that meeting. the Meeting by (1) written notice to the Secretary of
the Company, or
You are invited to attend our Annual Meeting of (2) timely delivery of a valid, later-dated proxy or
Stockholders on May 27, 1999, beginning at (3) voting by ballot at the Annual Meeting.
10:00 a.m., local time. The Meeting will be
held at the Hotel Inter-Continental, 251 South You can save us the expense of a second mailing by
Olive Street, Los Angeles, California. voting promptly. Choose one of the following voting
methods to cast your vote, unless you are instructed
This Proxy Statement, form of proxy and voting differently:
instructions are being mailed on or about April
15, 1999.
1. Vote by Telephone
Annual Meeting Admission
If your shares are held in the name of a bank, You can vote your shares by telephone by calling the
broker or other holder of record and you plan toll-free telephone number (at no cost to you) on your
to attend the Meeting, please obtain proof of proxy card. Telephone voting is available 24 hours a
ownership, such as a current brokerage account day. Have your proxy card with you when you place
statement or certification from your broker. your call. Easy-to-follow voice prompts allow you to
vote your shares and confirm that your instructions
Stockholders Entitled to Vote have been properly recorded. If you vote by
Owners of Southwest Water Company common or telephone, you do not need to return your proxy card.
Preferred Series "A" stock at the close of
business on March 31, 1999 are entitled to
receive this notice and to vote their shares at
the Annual Meeting. As of that date, there 2. Vote by Mail
were 4,253,272 common shares outstanding and
10,341 shares of Preferred Series "A" If you choose to vote by mail, simply mark your proxy,
outstanding. date and sign it, and return it in the postage-paid
envelope provided. If your shares are registered with
Common shares are entitled to one vote each, and our transfer agent, and if you wish to discontinue
Preferred Series "A" shares are entitled to future duplicate mailings, check the box provided on
five votes each on matters properly brought the card.
before the Meeting. The combined total number
of votes eligible to vote is 4,304,977.
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
Voting at the Annual Meeting Cost of Proxy Distribution and Solicitation
The method by which you vote a proxy now will in We will pay the expenses of distributing the proxy
no way limit your right to vote at the Annual materials and soliciting proxies. Proxies may be
Meeting if you later decide to attend in solicited on our behalf by Directors, officers or
person. If your shares are held in the name of employees, in person or by telephone, electronic
a bank, broker or other agency and you plan to transmission or by facsimile transmission.
attend the Meeting, please obtain proof of ChaseMellon Shareholder Services will distribute the
ownership, such as a current brokerage account proxy materials to our registered stockholders, and
statement or certification from your broker. ADP will distribute these materials to our beneficial
holders.
All shares that have been properly voted
whether by telephone or mail and not revoked Section 16(a) Beneficial Ownership Reporting Compliance
will be voted at the Annual Meeting in Section 16(a) of the Securities Exchange Act of 1934
accordance with your instructions. If you sign requires our Directors and executive officers to file
your proxy card but do not give voting reports of holdings and transactions in Southwest
instructions, the shares represented by that Water shares with the SEC and the Nasdaq Stock Market.
proxy will be voted as recommended by the Board Based on our records and other information, we believe
of Directors. that in 1998 our Directors and executive officers met
all applicable SEC filing requirements.
</TABLE>
Voting On Other Matters
If any other matters are properly presented at
the Annual Meeting for consideration, the
persons named in the enclosed form of proxy
will have the discretion to vote on those
matters for you. At the date of this proxy
statement, we did not know of any other matter
to be raised at the Annual Meeting.
List of Stockholders
A list of stockholders who have shares
registered in their own name and are entitled
to vote will be available at the Annual Meeting.
Quorum
In order to carry on the business of the
Meeting, there must be a quorum. This means at
least a majority of the outstanding shares
eligible to vote (with each share of Preferred
Stock counting as five votes for every share
owned for purposes of the quorum) must be
represented at the meeting, either by proxy or
in person.
Required Vote
A majority of the votes cast is required for the
election of Directors. Abstentions and broker
"non-votes" are not counted for purposes of the
election of Directors.
The affirmative vote of a majority of the votes
cast is required to ratify the appointment of
KPMG LLP. Abstentions and broker "non-votes"
are not counted for purposes of approving this
matter.
- -------------------------------------------------------------------------------
2
<PAGE>
GOVERNANCE OF THE COMPANY
- --------------------------------------------------------------------------------
Our Corporate Governance Principles
Role and Composition of the Board of Directors
1. The Board of Directors, which is elected by the stockholders, is the
ultimate decision-making body of the Company except with respect to those
matters reserved to the stockholders. It selects the senior management
team, which is charged with the conduct of the Company's business. Having
selected the senior management team, the Board acts as an advisor and
counselor to senior management and ultimately monitors its performance.
2. It is a policy of the Company that the Board consist of a majority of
outside directors and that the number of directors not exceed a number that
can function efficiently as a body. The Nominating Committee, in
consultation with the Chairman and CEO, considers and makes recommendations
to the Board concerning the appropriate size and needs of the Board. The
Nominating Committee considers candidates to fill new positions created by
expansion and vacancies that occur by resignation, retirement, or for any
other reason. Candidates are selected for their character, judgment,
business experience and acumen. Final approval of a candidate is determined
by the full Board. All Directors are expected to own the Company's stock.
The Company's current Directors are listed below.
Non-Employee Directors: H. Frederick Christie, Michael J. Fasman, Monroe
----------------------
Harris, Donovan D. Huennekens, Richard Kelton,
Maureen A. Kindel and Richard G. Newman.
Employee Director: Anton C. Garnier, Chairman and CEO
-----------------
3. The Chairman and CEO is responsible for establishing effective
communications with the Company's stockholders, board members and Company
associates.
- --------------------------------------------------------------------------------
3
<PAGE>
Board and Committee Membership
During 1998, the Board of Directors met eight times, either in person or by
telephone conference call. All of our Directors attended 85 percent or more of
the meetings of the Board and Board committees on which they served in 1998.
Committees of the Board are described as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
The Audit Committee
The members of the Audit Committee during 1998 were . Sets overall investment policy with respect to the
Mr. Kelton (Chairman), Mr. Fasman, Mr. Huennekens and Company's short-term funds; and
Ms. Kindel. During 1998, this Committee held two . Analyzes the effects of external economic conditions on
meetings. Among its responsibilities, the Audit the Company's investment policy.
Committee:
. Recommends to the Board the appointment of the Company's The Nominating Committee
independent auditors for the ensuing year; The members of the Nominating Committee during 1998 were Mr.
. Reviews with the independent auditors and management the Newman (Chairman), Mr. Fasman and Mr. Harris. During 1998,
scope and results of the audit engagement (as well as the Nominating Committee held one meeting. The functions of
management's internal audit program); the Nominating Committee include:
. Reviews the adequacy of the Company's internal control . Establishing criteria for the selection of nominees for
procedures and reviews the independence of the auditors; election as directors;
. Reviews with the outside auditors any questions or . Reviewing the qualifications of and maintaining
suggestions they may have relating to our internal information concerning potential nominees;
controls, accounting practices or procedures or those of . Making recommendations to the Board with respect to
our subsidiaries; and nominees for election as directors at the Annual Meeting of
. Reviews compliance with laws, regulations, and internal Stockholders;
procedures, contingent liabilities and risks that may be . Reviewing, on a long-term basis, the size and composition
material to us. of the Board as vacancies occur; and
. Establishing Non-Employee Director retirement policies.
The Investment/Acquisition Committee
The members of the Investment/ Acquisition ("I/A") The Nominating Committee will consider recommendations for
Committee during 1998 were Mr. Huennekens (Chairman), director nominees proposed by stockholders. Any
Mr. Christie, Mr. Kelton and Ms. Kindel. During 1998, recommendations for nominees should be submitted in writing
this Committee held three meetings. Among its to Mr. Newman at the Company's principal executive offices:
responsibilities, the I/A Committee: Southwest Water Company, 225 North Barranca Avenue, Suite
. Provides direction in the areas of long-term planning, 200, West Covina, California 91791-1605.
consideration of diversification alternatives, new
business developments, and acquisitions and mergers;
</TABLE>
4
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
The Compensation Committee Non-Employee Director Stock Option Plan. On May 28, 1998,
The members of the Compensation Committee during 1998 the day of our 1998 Annual Meeting of Stockholders, all of
were Mr. Harris (Chairman), Mr. Christie and Mr. our Non-Employee Directors were awarded a stock option grant
Newman. During 1998, the Compensation Committee held of 1,260 shares of the Company's common stock under the 1996
four meetings. The Committee is responsible for: Stock Option Plan for Non-Employee Directors (the "Director
. Establishing annual and long-term performance goals for Option Plan"). The total options granted under this plan in
our appointed executive officers; 1998 were 8,820. Each of the seven Non-Employee Director
. Approving and reporting to the Board the annual awards of 1,260 shares at $16.125 was subsequently adjusted
compensation for all executive officers, including salary, to 1,575 shares at an exercise price of $12.90 to reflect
stock options, incentive compensation and other benefits; last October's 5-for-4 stock split.
. Granting stock awards and stock option grants; and Under the Director Option Plan, Non-Employee Directors are
. Reviewing the Company`s non-qualified benefit plans. granted an initial award of 1,575 shares of the Company's
The Compensation Committee consists of independent, common stock when they become Directors. Afterwards, each
Non-Employee Directors. Non-Employee Director is granted an annual award of 1,575
shares of the Company's Common stock on the day of each
Compensation Committee Interlocks and Insider Participation Annual Meeting, provided the Director continues to serve as
There were no Compensation Committee interlocks or a Director following the Meeting.
insider participation during 1998. Initially, 50,000 shares of the Company's common stock were
reserved for issuance under the Director Option Plan. Stock
Compensation of Directors Fees and Benefit Plans for dividends and a 5-for-4 stock split increased the number of
Non-Employee Directors shares reserved for issuance by an additional 28,750 shares.
The total number of shares reserved for issuance under the
Annual Cash Retainer Fees. Non-Employee Directors Director Option Plan is 78,750.
receive an annual cash retainer fee of $12,000 per year.
In addition, the Chair of a Board committee receives an Service Policy for Directors. In August 1998, the Board
additional $1,200 per year. established a Service Policy for Directors. This policy
stipulates that Directors will not serve on the Southwest
Meeting Fees. Non-Employee Directors also receive a fee Water Company Board past his or her 72nd birthday. The
of $1,000 for attending each Board meeting, committee Board authorized the Nominating Committee to develop a
meeting and long-range planning meeting. When a transition plan for current Directors who are older than 72
committee meeting is held on the same day as a Board years of age.
meeting, the committee attendance fee is $500.
Directors who are officers of the Company are not paid
any fees or additional remuneration for services as
members of the Board or any Board committee.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
NON-EMPLOYEE DIRECTOR STOCK OPTIONS GRANTED IN 1998
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
Options Exercise Expiration
(#) (1)(2) Base Price Date
($/sh.) (2)
- -------------------------------
Eligible Directors
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
H. Frederick Christie 1,575 $12.90 2008
- --------------------------------------------------------------------------------
Michael J. Fasman 1,575 $12.90 2008
- --------------------------------------------------------------------------------
Monroe Harris 1,575 $12.90 2008
- --------------------------------------------------------------------------------
Donovan D. Huennekens 1,575 $12.90 2008
- --------------------------------------------------------------------------------
Richard Kelton 1,575 $12.90 2008
- --------------------------------------------------------------------------------
Maureen A. Kindel 1,575 $12.90 2008
- --------------------------------------------------------------------------------
Richard G. Newman 1,575 $12.90 2008
- --------------------------------------------------------------------------------
</TABLE>
(1) Options vest 50% per year until fully vested.
(2) All options have been adjusted to reflect a 5% stock dividend on January
2, 1998 and a 5-for-4 stock split on October 1, 1998.
NON-EMPLOYEE DIRECTOR
OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Value of Unexercised
Acquired Unexercised Options In-the-Money Options at
On Value At December 31, 1998 December 31, 1998 (1)
Non-Employee Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
Director Name (#) ($) (#) ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H. Frederick Christie 0 0 1,479 / 3,403 10,621 / 17,844
- ------------------------------------------------------------------------------------------------------------------------
Michael J. Fasman 318 3,086 5,611 / 4,196 36,425 / 26,158
- ------------------------------------------------------------------------------------------------------------------------
Monroe Harris 2,066 11,353 4,734 / 4,197 48,892 / 26,169
- ------------------------------------------------------------------------------------------------------------------------
Donovan D. Huennekens 0 0 5,711 / 2,562 38,311 / 11,038
- ------------------------------------------------------------------------------------------------------------------------
Richard Kelton 0 0 5,711 / 2,562 38,311 / 11,038
- ------------------------------------------------------------------------------------------------------------------------
Maureen A. Kindel 0 0 787 / 2,363 4,277 / 8,575
- ------------------------------------------------------------------------------------------------------------------------
Richard G. Newman 0 0 4,931 / 3,999 37,453 / 23,942
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Difference between fair market value at fiscal year end of $15.625 and
option exercise price.
At December 31, 1998, the Non-Employee Director Group had a total of
52,246 stock options outstanding with a weighted average exercise price of $9.39
per share. The stock options shown in the above table include stock options
granted under the Director Option Plan and the Company's Stock Option Plan.
6
<PAGE>
BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES
By Directors and Executive Officers
The following table sets forth, as of March 31, 1999, the number of shares of
each class of equity securities of the Company beneficially owned by each
Director and Executive Officer of the Company and its subsidiaries, and by all
directors and executive officers as a group. All securities are common stock,
and except as otherwise indicated, each individual named has sole investment and
voting power with respect to the securities shown.
<TABLE>
<CAPTION>
Number of Exercisable Total Number of
Name of Shares Options Shares and
Beneficial Owner and Beneficially Beneficially Exercisable Options Percentage
Capacity with Company Owned Owned (a) Beneficially Owned Of Class
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H. Frederick Christie, Director 6,615 3,401 10,016 *
- ----------------------------------------------------------------------------------------------------------
Michael J. Fasman, Director 6,634 (b) 7,533 14,167 *
- ----------------------------------------------------------------------------------------------------------
Monroe Harris, Director 14,934 (c) 7,053 21,987 *
- ----------------------------------------------------------------------------------------------------------
Donovan D. Huennekens, Director 17,413 (d) 7,485 24,898 *
- ----------------------------------------------------------------------------------------------------------
Richard Kelton, Director 40,818 (e) 7,485 48,303 1.1%
- ----------------------------------------------------------------------------------------------------------
Maureen A. Kindel, Director 1,250 2,362 3,612 *
- ----------------------------------------------------------------------------------------------------------
Richard G. Newman, Director 12,919 (f) 7,250 20,169 *
- ----------------------------------------------------------------------------------------------------------
Anton C. Garnier, Director, Chairman,
President and Chief Executive Officer 147,244 (g) 91,435 238,679 5.4%
- ----------------------------------------------------------------------------------------------------------
Peter J. Moerbeek, Chief Financial
Officer and Secretary of Company;
President, ECO Resources, Inc. 6,824 26,682 33,506 *
- ----------------------------------------------------------------------------------------------------------
Michael O. Quinn, President,
Suburban Water Systems 8,681 10,544 19,225 *
- ----------------------------------------------------------------------------------------------------------
Robert L. Swartwout, President,
New Mexico Utilities, Inc. 4,938 6,486 11,424 *
- ----------------------------------------------------------------------------------------------------------
All Directors and Executive Officers
As a Group (11 persons) 268,270 177,716 445,986 10.1%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Indicates less than one percent of class of stock.
(a) Includes options that become exercisable within 60 days after March 31,
1999..
(b) Excludes 22,926 shares of common stock held of record by Mr. Fasman's wife,
as trustee. Also excludes 45,670 shares of common stock and 147 shares of
Series "A" preferred stock held of record by Mr. Fasman as a co-trustee of
two trusts in which Mr. Fasman has no voting or investment control. Mr.
Fasman disclaims beneficial ownership of all such shares.
(c) Includes 11,358 shares of common stock held by Mr. Harris and his wife as
co-trustees of a family trust. Mr. Harris has shared voting and investment
power with respect to such shares.
(d) Mr. & Mrs. Huennekens hold all of the 17,413 shares of common stock as
trustees of a revocable trust for their benefit. Mr. Huennekens is a
trustee of such trust, and has shared voting and investment power with
respect to such shares.
(e) Included in the table are 11,550 shares of common stock held by The Kelton
Foundation (the "Foundation"), a charitable corporation. Mr. Kelton is
President of the Foundation and has sole voting and investment power with
respect to such shares. Mr. Kelton disclaims pecuniary interest in the
shares held by the Foundation.
(f) Mr. and Mrs. Newman hold all of the 12,919 shares of common stock as
trustees of a revocable trust for their benefit. Mr. Newman is a trustee
of such trust, and has shared voting and investment power with respect to
such shares.
(g) Included in the table are 40,801 common shares owned by Mr. and Mrs.
Garnier as trustees of a revocable trust for their benefit. Mr. Garnier is
trustee of such trust and has shared voting and investment power with
respect to the shares. Also included in the table are 59,204 common shares
representing Mr. Garnier's proportionate interests in two corporations of
which Mr. Garnier is president, a director and a stockholder. Mr. Garnier
has shared voting and investment power with respect to these two
corporations, which own a total of 255,358 shares (6.0%) of Southwest Water
Company common stock. Other than his proportionate interests above, Mr.
Garnier disclaims beneficial ownership of these shares.
7
<PAGE>
By Others
The following table identifies others who own more than five percent of any
class or series of the Company's outstanding voting securities as of the Record
Date:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Name and Address Number of Shares Percentage
Class of Stock Of Beneficial Owner Beneficially Owned Of Class
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series "A" Preferred Lincoln National Life Insurance Co. 3,607 35%
C/O Banker's Trust
P.O. Box 704, Church Street Station
New York, NY 10008
- -----------------------------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF THE CUMULATIVE TOTAL RETURN
ON THE COMPANY'S COMMON STOCK TO CERTAIN INDUSTRY STANDARDS
The following graph compares the cumulative total return to holders of the
Common stock of the Company during the most recent five fiscal years versus the
average return to investors during the same period achieved by 13 publicly held
water utilities listed in the Edward Jones Water Utility Index and The Standard
and Poor's Index of 500 Companies. The comparison assumes that $100 was
invested on December 31, 1993, and the cumulative total return assumes the
reinvestment of dividends. The historical stock performance shown on the graph
is not necessarily indicative of future stock performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG SOUTHWEST WATER AVGE. AND S&P 500
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period SOUTHWEST WATER S&P
(Fiscal Year Covered) WATER AVGE. 500
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-12/31/93 $100.00 $100.00 $100.00
FYE 12/31/94 $ 91.03 $ 92.66 $101.32
FYE 12/31/95 $113.20 $117.58 $139.37
FYE 12/31/96 $201.94 $141.16 $171.35
FYE 12/31/97 $274.34 $192.79 $228.50
FYE 12/31/98 $313.09 $243.88 $293.80
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Related Transactions In 1998, Suburban made a lease payment of $52,958 for the
use of water rights owned by a Garnier family trust. Based
Mr. Garnier is a director and a beneficial owner of upon payments made by other non-related parties, the lease
approximately 10 percent of the outstanding stock of payments were at market rate.
California Michigan Land and Water Company (California
Michigan). East Pasadena Water Company (East Pasadena), The foregoing transactions were reviewed and approved by the
a water purveyor, is a wholly owned subsidiary of outside members of the Board of Directors of the Company.
California Michigan. In 1998, East Pasadena Mr. Garnier did not participate in the Board's consideration
participated in employee insurance coverage with the of these transactions.
Company and its wholly-owned subsidiary, Suburban Water
Systems, and reimbursed them an aggregate of $21,423,
representing its proportionate share of the cost of
employee insurance coverage and other services.
East Pasadena is also a party to the Noncontributory
Defined Benefit Pension Plan, and makes contributions
and pays administrative fees on the same actuarial basis
as payments by the Company. The Pension Plan owns 363
shares of California Michigan stock, or 17 percent of
the common shares outstanding of California Michigan
stock.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
- -----------------------------------------------------------------------------------------------------------------
Stock
Name and Salary Bonus Options
Principal Position Year ($)(1) ($) (#) (2) (3)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Anton C. Garnier 1998 230,000 120,000 31,250
Chairman, Chief Executive 1997 220,000 154,000 15,750
Officer and President 1996 210,000 85,000 15,750
- -----------------------------------------------------------------------------------------------------------------
Peter J. Moerbeek 1998 172,000 78,000 25,000
Chief Financial Officer and 1997 161,000 89,900 10,500
Secretary of the Company; 1996 154,500 60,500 9,292
President,
ECO Resources, Inc.
- -----------------------------------------------------------------------------------------------------------------
Michael O. Quinn 1998 151,000 42,575 3,125
President, 1997 146,500 44,450 3,281
Suburban Water Systems 1996 143,700 35,600 3,780
- -----------------------------------------------------------------------------------------------------------------
Robert L. Swartwout 1998 108,000 38,000 2,500
President, 1997 104,800 16,000 2,625
New Mexico Utilities, Inc. 1996 101,800 31,100 2,677
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) There were no other compensation items totaling $50,000 or greater.
(2) Options have been adjusted to reflect a 5-for-4 stock split on October 1,
1998, and stock dividends of 5% on January 2, 1998, 20% on January 2,
1997, and 5% on January 2, 1996, and were granted at fair market value on
the date of grant.
(3) Restricted stock options can no longer be granted. Restricted stock
previously awarded vests 10 years after grant. Dividends on the
restricted stock are paid without restrictions. The following is the
restricted stock issued and outstanding as of December 31, 1998 (valued
at the year-end closing price of $15.625):
Anton C. Garnier received 9,973 shares (granted in 1989) valued at
$155,828.
Michael O. Quinn received 3,318 shares (granted in 1989) valued at
$51,844.
10
<PAGE>
<TABLE>
<S> <C>
Executive Severance Compensation Agreements Cash severance amounts as of December 31, 1998, assuming
termination meets the requirements for a severance payment,
In 1998, Messrs. Garnier and Moerbeek entered into new are as follows: Mr. Garnier - $900,127; Mr. Moerbeek -
severance compensation agreements with the Company. The $685,442; Mr. Quinn - $256,856; and
Company has agreed to provide severance benefits and Mr. Swartwout - $194,650. In addition to the cash payment,
payments to Messrs. Garnier and Moerbeek based on 2.99 each executive is entitled to certain health insurance
times their respective average 5-year compensation if benefits with a value of approximately $25,000 and
certain conditions are met. outplacement services with a maximum benefit of $15,000 each
for Messrs. Garnier and Moerbeek and $4,000 each for Messrs.
In 1995, Messrs. Quinn and Swartwout entered into Quinn and Swartwout. For purposes of the severance
severance compensation agreements with the Company. The compensation agreements, a "change in control" is generally
Company has agreed to provide severance benefits and defined as a change in the person or persons owning,
payments to Messrs. Quinn and Swartwout based on 1.5 directly or indirectly, sufficient voting stock to elect the
times their respective average 5-year compensation if Board of Directors for the entity that employs an executive.
certain conditions are met. These severance compensation agreements are in addition to
the plans described under the heading "Retirement Benefits."
The severance compensation agreements for Messrs.
Garnier, Moerbeek, Quinn and Swartwout will be triggered In 1992, Mr. Swartwout and New Mexico Utilities, Inc. (NMUI)
if one of the following conditions is met: (1) entered into an agreement whereby upon a disposition of
termination of the executive's employment by his substantially all assets of NMUI, Mr. Swartwout is entitled
employer prior to the second anniversary of a change in to a severance payment of one percent of the gross
control other than by retirement or for death, disposition price if in excess of $6,000,000, or three
disability or cause; or (2) termination of executive's percent of the gross disposition price if in excess of
employment by the executive within two years after a $11,000,000. For Mr. Swartwout to be given this severance
change in control for "good reason" (including payment, he would need to continue his employment with NMUI
assignment of executive to duties inconsistent with through the completion of the transaction, at which time he
executive's position, duties, responsibilities and would receive a cash payment equal to the greater of (1) the
status prior to the change in control, or alternatively, cash severance payment determined by his severance
a reduction in salary, a significant reduction in compensation agreement or (2) the amount determined under
benefits, an elimination of stock plans or a relocation the NMUI agreement based upon the gross disposition price of
of employment greater than 50 miles), without written the NMUI assets.
consent by the executive. Under these agreements, cash
severance payments are based upon base salary, auto
benefits, bonuses and certain life insurance premium
amounts paid by the employer. Cash severance payments
are payable within five days after termination of
employment.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
OPTION GRANTS TO EXECUTIVE OFFICERS IN 1998
Stock options were granted during the Company's most recent fiscal year to
the chief executive officer and the other executive officers listed below. The
following table sets forth a summary of information relating to the potential
realizable value of stock options granted in 1998. Exercise prices and number of
options have been adjusted to reflect a 5-for-4 stock split (in the form of a
dividend) on October 1, 1998 and a 5% stock dividend on January 2, 1998.
<TABLE>
<CAPTION>
Potential Realizable Value
At Assumed Annual Rates
Individual Grants Of Stock Price Appreciation
For 10-Year Option Term
- --------------------------------------------------------------------------------------------------------------------------
% of Total
Options Granted Exercise
to Or At 0% At 5% At 10%
Options Employees Base Annual Annual Annual
Granted In Price Expiration Date Growth Growth Growth
Executive (#) (1) Fiscal Year ($/sh.) (2) Rate ($) Rate ($) Rate ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Anton C. Garnier 31,250 33% 12.80 2008 0 251,558 637,497
- --------------------------------------------------------------------------------------------------------------------------
Peter J. Moerbeek 25,000 27% 12.80 2008 0 201,246 509,998
- --------------------------------------------------------------------------------------------------------------------------
Michael O. Quinn 3,125 3% 12.80 2008 0 25,156 63,750
- --------------------------------------------------------------------------------------------------------------------------
Robert L. Swartwout 2,500 3% 12.80 2008 0 20,125 51,000
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
All Stockholders (3) N/A N/A N/A N/A N/A 41,794,686 105,915,940
- --------------------------------------------------------------------------------------------------------------------------
All Optionees 94,150 100% 12.80 2008 0 758,587 1,922,408
- --------------------------------------------------------------------------------------------------------------------------
Optionee Gain
As % of Total
Stockholders' Gain N/A N/A N/A N/A N/A 1.8% 1.8%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options vest 20% per year until fully vested. All options have been
adjusted to reflect a 5-for-4 stock split (in the form of a dividend) on
October 1, 1998 and a 5% stock dividend on January 2, 1998. Under the
terms of the Company's Amended and Restated Stock Option and Restricted
Stock Plan, the Compensation Committee retains discretion, subject to plan
limits, to modify the terms of outstanding options and to re-price the
options. The options were granted for a term of 10 years, subject to
earlier cancellation upon certain events related to termination of
employment. The exercise price and tax withholding obligations related to
exercise may be paid by delivery of already owned shares, or by offset of
the underlying shares, subject to certain conditions.
(2) All exercise prices represent fair market value on the date of grant, after
adjusting to reflect a 5-for-4 stock split on October 1, 1998 and a 5%
stock dividend on January 2, 1998.
(3) Based on total number of shares outstanding at December 31, 1998.
12
<PAGE>
Exercise of Options by Executive Officers
The following table shows information as to exercised and unexercised stock
options, value realized and the value of unexercised options during the
Company's most recent fiscal year by the chief executive officer of the Company
and the Company's other executive officers.
OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Value of Unexercised In-The-Money
Acquired Value Number of Unexercised Options Options at
On Exercise Realized At December 31, 1998 December 31, 1998
Executive (#) ($) (#) ($)(1)
- -----------------------------------------------------------------------------------------------------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Anton C. Garnier 0 0 73,818 / 60,901 501,522 / 313,574
- -----------------------------------------------------------------------------------------------------------------------
Peter J. Moerbeek 0 0 17,323 / 46,914 165,894 / 245,941
- -----------------------------------------------------------------------------------------------------------------------
Michael O. Quinn 0 0 21,649 / 10,132 146,595 / 63,601
- -----------------------------------------------------------------------------------------------------------------------
Robert L. Swartwout 1,651 12,845 4,658 / 7,692 32,514 / 47,071
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
1) Difference between fair market value at December 31, 1998 of $15.625 and
option exercise price.
Retirement Benefits
The Company is a party to a Noncontributory Defined Benefit Pension Plan (the
"Pension Plan"), established on December 31, 1957, which provides retirement
benefits and certain death benefits. All regular full-time and part-time
employees of the Company, Suburban Water Systems and New Mexico Utilities, Inc.
who meet all eligibility requirements, including the completion of one year of
service, are eligible to participate in the Pension Plan.
Four executive officers of the Company and its participating subsidiaries are
covered under the terms of the Pension Plan. The Company and its participating
subsidiaries pay the entire cost of administering the Pension Plan. Non-Employee
Directors are not eligible to participate in the Pension Plan. All of the
trustees and administrators of the Pension Plan are currently officers or
employees of the participating companies. Payments to the Pension Plan by the
Company are computed on an actuarial basis to provide fixed benefits to
employees in the event of retirement at specified ages.
13
<PAGE>
The following table indicates the approximate annual benefits that would be
received by participants in the Pension Plan, based upon the assumptions
indicated.
<TABLE>
<CAPTION>
5-Year Average
Annual Compensation Estimated Annual Benefit for Years of Service Indicated
15 Years 20 Years 25 Years 30 Years 35 Years
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 80,000 $23,300 $31,000 $ 38,800 $ 46,500 $ 54,300
120,000 35,300 47,000 58,800 70,500 82,300
160,000 47,300 63,000 78,800 94,500 110,300
200,000 59,300 79,000 98,800 118,500 138,300
240,000 71,300 95,000 118,800 142,500 166,300
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The actual maximum amount of compensation that may be recognized for Pension
Plan purposes according to the Internal Revenue Code (the "Code") was $160,000
in 1998. The maximum annual defined benefit in 1998 allowable under the Code
was $130,000. These limits are subject to annual cost of living adjustments.
The compensation on which benefits under the Pension Plan is based is limited
to salary paid by the Company and certain subsidiaries and excludes bonuses and
other forms of compensation. The amounts used in making the calculations under
the Pension Plan for 1998 are based on July 1, 1998 base compensation as
follows: Anton C. Garnier - $230,000, Peter J. Moerbeek - $170,000; Michael
O. Quinn - $151,000; and Robert L. Swartwout $108,000. At December 31, 1998,
years of credited service of each of such individuals are 28, 3, 19, and 5
years, respectively. Benefits under the Pension Plan are not subject to offset
for amounts received from Social Security or other sources.
14
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Report of the Compensation Committee of the Board of Directors
Executive Officer Compensation Philosophy
The compensation philosophy for executive officers is to ensure that
compensation be directly linked to continuous improvements in the Company`s
financial performance and increases in stockholder value. To implement the
philosophy, the Committee is guided by the following objectives: (1) enable the
Company to attract and retain highly qualified executives, (2) focus executives'
efforts on the fulfillment of Company annual and long-term business objectives
and strategies, and (3) ensure that a portion of executive compensation is tied
to specific performance measures. The Committee has used various outside
consultants in designing the current executive compensation plan.
Executive Compensation
In determining the base salary of executives, the Committee considers
individual performance, the performance of the operations directed by the
executives, and the competitive salary levels of executives in companies of
similar size and complexity. Competitive salary information, obtained primarily
through published compensation surveys, is used to determine the reasonableness
of total compensation, which includes base salary and incentive compensation.
For executives other than the Chief Executive Officer, the Committee also
considers the recommendations of the Chief Executive Officer.
Annual Incentive Compensation
The Committee believes that the Company's short-term objectives are
enhanced with annual performance-based incentive compensation for its
executives. Annual incentive awards are based on meeting certain financial
objectives for the Company and on an executive's achievement of goals in his or
her area of responsibility. Executive performance objectives include both
quantitative and qualitative criteria. As an executive's level of
responsibility increases, a greater portion of potential total cash compensation
is at risk in the form of annual performance-based incentives.
Financial goals and performance-based measures are established by the
Committee at the beginning of each year. Awards are made at the end of the year
based on actual performance. Each year, the Committee establishes a performance
threshold. No awards are made if the performance threshold is not met. In 1998,
the results for the year exceeded the threshold set by the Committee, and
incentive compensation awards were approved for the Company's executives.
Long-term Incentive Compensation
The purpose of long-term incentives is to encourage and facilitate personal
stock ownership by the executive officers and thus strengthen both their
personal commitments to the Company and a longer-term perspective in their
managerial responsibilities. This component of an executive officer's
compensation links the officer's interests with those of the Company`s
stockholders. Currently, the primary form of long-term incentive compensation is
non-qualified stock options. The Committee approves stock options for all
executives and managers.
15
<PAGE>
In determining the number of stock options awarded, the Committee considers
a number of factors including the executive's pay level, responsibilities in the
organization, and ability to significantly improve future financial results. In
addition, the Committee compares the Company's option grant levels with similar
industry practices.
Chief Executive Officer Compensation
Anton C. Garnier has been President and Chief Executive Officer of the
Company since November 1968 and has been Chairman of the Board since August
1996. The Committee reviewed Mr. Garnier's 1998 performance based on the
performance of the Company as a whole and his performance with respect to
quantitative and qualitative objectives approved at the start of the year by the
Committee. The Committee carefully considered the Company's continuing
improvements in financial results, including earnings improvement, new business
development, return on equity and the creation of stockholder value. The
Committee also evaluated Mr. Garnier's progress in attaining qualitative
objectives in such areas as investor relations, planning for the Company's long-
term future, setting strategic objectives, and communications. The Committee
did not use specific weighting factors with respect to quantitative and
qualitative performance measures. The Committee Chairman prepared a CEO
performance evaluation, which was discussed with Mr. Garnier.
In determining Mr. Garnier's performance for 1998, the Committee gave
particular emphasis to the continuing improved operating results of the
Company's contract operations subsidiary. After the Committee's deliberations,
the Committee increased Mr. Garnier's annual salary to $240,000, effective
January 1, 1999, and awarded him an incentive compensation amount of $120,000
for 1998. In addition, on February 4, 1999, the Committee awarded Mr. Garnier a
stock option grant of 30,000 shares of the Company`s Common stock.
Compensation Committee
Monroe Harris (Chairman)
H. Frederick Christie
Richard G. Newman
March 31, 1999
16
<PAGE>
ITEM 1 ELECTION OF DIRECTORS
<TABLE>
<S> <C>
The Board of Directors Angeles Board of Public Works and is a founding and current
The Board of Directors is divided into three classes, member of the Pacific Council on International Policy. She
currently consisting of two classes of three and one is a board member of the International Women's Forum, the
class of two Directors each, whose terms expire at Board of the Los Angeles Urban League and the Board of
successive annual meetings. For 1999, the Class I Governors of Town Hall of Los Angeles. Ms. Kindel is a
Directors, consisting of two Directors, were scheduled trustee for the International Foundation of Electoral
to be elected at our 1999 Annual Meeting for a Systems and serves on the board of the Los Angeles Amateur
three-year term expiring at our Annual Meeting in the Athletic Foundation. Ms. Kindel was elected a Director in
year 2002. 1997.
In March 1999, Michael J. Fasman, a Class I Director, The persons named in the enclosed proxy intend to vote the
notified the Company that he would not seek reelection proxy for the election of the nominee, unless you indicate
as a Director at the 1999 Annual Meeting. Mr. Fasman is on the proxy card that your vote should be withheld from the
an attorney and a partner of the law firm, Allen and nominee. If you are voting by telephone, you will be
Fasman. In recognition of Mr. Fasman's 24 years of instructed how to withhold your vote from the nominee. If
invaluable services performed as a Director, the Company elected, the nominee will continue in office until her
conferred upon him the title of Director Emeritus. successor has been elected, or until her resignation or
retirement.
The remaining Class I Director nominee is Maureen A.
Kindel. Ms. Kindel was elected to her current term of There are no family relationships between any director and
office at the last Annual Meeting of Stockholders. We any executive officer of the Company. None of the entities
expect Ms. Kindel will be able to serve if elected. If by which the Directors are employed is related to the
she is not able to serve, proxies may be voted for the Company. No Director is a director of any other corporation
election of a substitute nominee recommended by the subject to Sections 12 or 15(d) of the Securities Exchange
Board. Act of 1934 or registered as an investment Company under the
Investment Company Act of 1940. No Director or executive
Information About the Nominee for officer of the Company has been, during the last five years,
Director Whose Term Expires in 1999 involved in a legal proceeding of the type that would
Class I require disclosure herein by the Securities Exchange Act of
1934. There are no arrangements or understandings between
The following biographical summary as of March 31, 1999 any Director and any other persons pursuant to which any
was furnished to the Company by the nominee: director was or is to be selected as a Director or nominee
of the Company or of any other Company.
Maureen A. Kindel, 60, is president of Rose & Kindel, a
public affairs firm. Ms. Kindel is past president of The Board of Directors recommends a
the City of Los vote FOR the election of these nominees
as Directors.
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
Directors Whose Terms Expire in 2000 Anton C. Garnier, 58, has been president and chief executive
Class II officer of the Company since 1968. Mr. Garnier was first
elected a director in 1968 and was elected Chairman of the
Monroe Harris, 77, is a consultant and retired executive Board in 1996.
vice president and director of Johns-Manville
Corporation. Mr. Harris was first elected a director in Richard Kelton, 69, is an attorney and president of
1963. He resigned from the Board in 1965 when he moved Bollenbacher & Kelton, Inc., a commercial and residential
to New York. Mr. Harris was reelected a director in developer. Mr. Kelton was first elected a director in 1969.
1987.
Executive Officers
Donovan D. Huennekens, 62, is a partner of HQT Homes, a Who Are Not Directors
real estate development company and a director of Bixby
Ranch Company. Mr. Huennekens was first elected a Peter J. Moerbeek, CPA, 51, is our Chief Financial Officer,
director in 1969. Secretary, and is President of ECO Resources, Inc. (ECO), a
subsidiary of the Company. Mr. Moerbeek joined the Company
Richard G. Newman, 64, is chairman, president, chief in 1995 as Vice President Finance, Chief Financial Officer
executive officer, and a director of AECOM Technology and Secretary.
Corporation, the parent of several subsidiaries that
provide architectural, engineering, construction, Thomas C. Tekulve, CPA, 47, joined us in February 1999 as
operations and maintenance services on an international Vice President of Finance. He oversees finance, accounting
basis. He also serves on the board of 13 mutual funds and information systems and provides guidance in strategic
managed by the Capital Research and Management Company. planning for the Company and its subsidiaries. Mr. Tekulve
Mr. Newman was first elected a director in 1991. has 24 years' experience in finance.
Directors Whose Terms Expire in 2001 Michael O. Quinn, 52, is President of Suburban Water
Class III Systems, a subsidiary of the Company. Mr. Quinn has been
with the Company over 28 years, serving as treasurer of
H. Frederick Christie, 65, is an independent consultant. Suburban prior to his move to ECO as President and CEO
He retired in 1990 as president and chief executive between 1985 and 1992. He rejoined Suburban as Chief
officer of the Mission Group, a subsidiary of SCEcorp Operating Officer, and was promoted to President of Suburban
(now Edison International), which oversaw SCEcorp's in 1996.
non-utility businesses. From 1984 to 1987, he served as
president of Southern California Edison Company, a Robert L. Swartwout, 57, joined the Company 7 years ago as
subsidiary of SCEcorp. Mr. Christie is a director of President of New Mexico Utilities, Inc., a subsidiary of the
Ultramar Diamond Shamrock, IHOP Corp. and Ducommun Company. Mr. Swartwout is a registered professional
Incorporated. He also serves on the boards of 19 mutual engineer in New Mexico and New York and has over 30 years of
funds managed by the Capital Research and Management experience with public utilities and state/federal
Company. Mr. Christie was first elected a director in regulatory agencies.
1996.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
ITEM 2 RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
<TABLE>
<S> <C>
The Board of Directors has selected KPMG LLP as the If the stockholders fail to ratify the selection, the Board
Company's independent auditors for the year ending will reconsider whether or not to retain that firm. Even if
December 31, 1999, and has further directed that the selection is ratified, the Board in its discretion may
management submit the selection of independent auditors direct the appointment of a different independent accounting
for ratification by the stockholders at the Annual firm at any time during the year if the Board determines
Meeting. KPMG LLP has audited the Company's financial that such a change would be in the best interests of the
statements since 1978. Company and its stockholders.
Representatives of KPMG LLP are expected to be present at The affirmative vote of the holders of a majority of the
the Annual Meeting and will have the opportunity to make shares present in person or represented by proxy and
a statement if they so desire and will be available to entitled to vote at the Meeting will be required to ratify
respond to appropriate questions. the selection of KPMG LLP.
Stockholder ratification of the selection of KPMG LLP as Your Board of Directors unanimously
the Company's independent auditors is not required by recommends a vote in favor of Item 2.
the Company's Bylaws or otherwise. However, the Board
is submitting the selection of KPMG LLP to the
stockholders for ratification as a matter of corporate
practice.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS, NOMINATION
OF DIRECTORS AND OTHER BUSINESS OF STOCKHOLDERS
<TABLE>
<S> <C>
Under the Company's Bylaws, certain 2) Proposals received after December 17,
procedures are provided for a stockholder to 1999 but prior to February 25, 2000 (90 days
nominate persons for election as Directors or prior to the 2000 Meeting, which is tentatively
to introduce an item of business at an annual scheduled for May 25, 2000) will not be
meeting of stockholders. These procedures included in the proxy statement and proxy
provide that any proposals for consideration card but may be introduced at the 2000
at the Company's 2000 Annual Meeting of Meeting. The Company would exercise
Stockholders (the "2000 Meeting") must be discretionary authority to vote proxies held by
submitted in writing to the Company's it at the 2000 Meeting.
Secretary on or before the following dates:
1) For inclusion in the proxy statement 3) Proposals received after February 25,
and proxy card, proposals must be received 2000 cannot be submitted for action at the
by the Company on or before December 17, 1999. 2000 Meeting.
All proposals should be submitted in writing to the
Company's Secretary at 225 North Barranca Avenue,
Suite 200, West Covina, California 91791-1605.
</TABLE>
Whether or not you plan to attend the Meeting, please vote by telephone as
instructed or mark, sign, date and promptly return the enclosed proxy in the
envelope provided.
By order of the Board of Directors,
Peter J. Moerbeek
April 15, 1999 Secretary
20
<PAGE>
DIRECTIONS TO
SOUTHWEST WATER COMPANY
ANNUAL MEETING OF STOCKHOLDERS
MAY 27, 1999 AT 10:00 A.M.
[MAP APPEARS HERE]
Suggested Route:
- ---------------
Exit the Harbor Frwy. (110) at 4th Street
Take 4th Street east to Olive Street, turn left. Hotel is about 100 yards on the
left side of the street. Circular drive in front - complimentary valet parking.
Hotel Inter-Continental
-----------------------
Located on Bunker Hill At California Plaza
251 South Olive Street
Los Angeles, CA
(213) 617-3300
<PAGE>
PROXY
SOUTHWEST WATER COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 27, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Anton C. Garnier and Peter J. Moerbeek, each with the power of
substitution, are hereby appointed by the stockholder named on the reverse side
of this Proxy to vote all eligible shares of common or preferred stock of
Southwest Water Company at the Annual Meeting of Stockholders to be held on May
27, 1999, or any adjournments thereof, on the matters set forth on the reverse
side in accordance with any directions given by the stockholder and, in the
discretion of the Proxy holders, on all other matters that may properly come
before the Annual Meeting or any adjournment.
IMPORTANT - PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN PROMPTLY.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON THE
REVERSE SIDE. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ITEMS 1
AND 2.
- -------------------------------------------------------------------------------
x FOLD AND DETACH PROXY CARD HERE x
Southwest Water Company
YOUR VOTE IS IMPORTANT
You can vote in one of two ways:
1. Mark, date, sign and return your proxy by detaching the top portion of this
sheet and returning it in the enclosed envelope.
OR
2. Call toll-free 1-800-840-1208 on a touch-tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
<PAGE>
SOUTHWEST WATER COMPANY ANNUAL MEETING OF STOCKHOLDERS
The Board of Directors unanimously recommends a vote FOR the Director
nominee and FOR the ratification of the appointment of independent auditors for
1999 fiscal year.
1. Election as directors of the nominees listed in the accompanying Proxy
Statement.
[ ]FOR the nominee listed below [ ]WITHHOLD AUTHORITY to vote for
(except as marked to the contrary below) the nominee listed below
MAUREEN A. KINDEL
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
<S> <C>
2. Ratification of the appointment of KPMG LLP as the Company's FOR SHAREHOLDERS WITH
independent auditors for 1999: MULTIPLE ACCOUNTS ONLY:
Mark this box to discontinue receipt of an Annual
[ ] FOR [ ] AGAINST [ ] ABSTAIN Report for this account [ ]
_________________________________________________________________________________________________________________________________
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2.
</TABLE>
Prepared label includes:
#shares registered, Class of stock
Registered Name
Registered Street Address
Registered City,State,Zip Voting by telephone on our toll-free
number will expedite the tally of the
votes. Please see the instructions below.
Signature __________________________________________ Date: ___________
Note: Please sign your name as it appears on the label. Joint owners should
both sign. When signing as attorney, administrator, trustee or guardian, please
give full title as such.
________________________________________________________________________________
x FOLD AND DETACH PROXY CARD HERE x
VOTE BY TELEPHONE
QUICK * * * EASY * * * IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
Call our toll-free number 1-800-840-1208 on a touch-tone telephone at any time
of the day or night. There is NO CHARGE to you for this call.
You will be asked to enter the 11-digit Control Number located in the box in the
lower right hand corner of this form.
________________________________________________________________________________
OPTION 1:TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL PROPOSALS, PRESS 1.
________________________________________________________________________________
When asked, please confirm by pressing 1.
<TABLE>
<S> <C>
__________________________________________________________________________________________________
OPTION 2:IF YOU CHOOSE TO VOTE ON EACH ITEM SEPARATELY, PRESS 0. YOU WILL HEAR THESE INSTRUCTIONS:
__________________________________________________________________________________________________
</TABLE>
Item 1: To vote FOR ALL nominees, press 1;
To WITHHOLD AUTHORITY for ALL nominees, press 9;
To WITHHOLD AUTHORITY for an individual nominee, press 0 and listen to
the instructions.
When asked, please confirm by pressing 1.
PLEASE DO NOT RETURN THIS PROXY
CARD IF YOU ARE VOTING BY TELEPHONE
