SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
Filed by the Registrant [ ]
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 [ ] Soliciting Material Pursuant to
Section 240.14a-11(c) or Section
240.14a-12
[ ] Definitive Additional Materials
CALIFORNIA WATER SERVICE GROUP
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than 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):
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CALIFORNIA WATER SERVICE GROUP
NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
[PHOTO]
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the right PLACE the right TIME the right COMPANY
corporate PROFILE
CALIFORNIA WATER SERVICE GROUP (THE COMPANY) PROVIDES HIGH-QUALITY WATER UTILITY
SERVICES TO 1.5 MILLION PEOPLE THROUGH ITS THREE SUBSIDIARIES: CALIFORNIA WATER
SERVICE COMPANY (CAL WATER), WASHINGTON WATER SERVICE COMPANY (WASHINGTON WATER)
AND CWS UTILITY SERVICES.
REGULATED BY STATE UTILITY COMMISSIONS, CAL WATER AND WASHINGTON WATER PROVIDE
WATER UTILITY SERVICES TO CUSTOMERS IN 60 COMMUNITIES. FORMED IN 1926, CAL WATER
IS THE LARGEST INVESTOR-OWNED WATER UTILITY WEST OF THE MISSISSIPPI RIVER AND
THE FOURTH LARGEST IN THE NATION, WITH 21 DISTRICT OFFICES LOCATED THROUGHOUT
CALIFORNIA. THE COMPANY'S NEWEST SUBSIDIARY, WASHINGTON WATER, IS THE LARGEST
INVESTOR-OWNED WATER UTILITY IN THE STATE OF WASHINGTON, WITH OPERATIONS NEAR
OLYMPIA AND TACOMA.
CWS UTILITY SERVICES CONDUCTS THE COMPANY'S NON-REGULATED BUSINESS, WHICH
INCLUDES PROVIDING BILLING AND METER READING SERVICES, AS WELL AS FULL-SYSTEM
WATER OPERATIONS, FOR CITIES AND COMPANIES IN CALIFORNIA, WASHINGTON AND NEW
MEXICO.
KNOWN FOR ITS DEDICATED WORKFORCE, EXCELLENT CUSTOMER SERVICE AND EFFICIENT
OPERATIONS, CALIFORNIA WATER SERVICE GROUP IS COMMITTED TO BEING THE INDUSTRY
LEADER IN PROVIDING COMMUNITIES AND CUSTOMERS WITH TRADITIONAL AND INNOVATIVE
UTILITY SERVICES.
On the cover: The Tacoma Narrows Bridge leads to Gig Harbor, one of the
communities served by the Company's newest subsidiary, Washington Water.
[on border of each page "California Water Service Group Notice of 2000 Annual
Meeting and Proxy Statement."]
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
[LOGO]
CALIFORNIA WATER SERVICE GROUP
CALIFORNIA WATER SERVICE COMPANY, CWS UTILITY SERVICES AND WASHINGTON WATER
SERVICE COMPANY
1720 NORTH FIRST STREET - SAN JOSE, CA 95112-4598 - (408) 367-8200
March 17, 2000
DEAR FELLOW STOCKHOLDER:
You are cordially invited to attend our Annual Meeting of Stockholders at 10:00
a.m. on Wednesday, April 19, 2000, at the executive offices of California Water
Service Group, 1720 North First Street, San Jose, California. At the Annual
Meeting, we will review our 1999 performance and answer your questions.
With this letter, we are including the notice for the Annual Meeting, the proxy
statement, the proxy card, a prepaid addressed envelope and the 1999 Annual
Report. This year we've again made arrangements for you to vote over the
Internet or by telephone, as well as by the traditional proxy card. See the
proxy card for instructions on these new methods of voting.
When reviewing the proxy statement, you may want to keep two matters in mind.
First, you will be deciding who will serve as the Group's directors until the
next Annual Meeting. The directors also will serve on the boards of two of the
Group's subsidiaries, California Water Service Company and CWS Utility Services.
Second, you will be deciding on a Long Term Incentive Plan proposal. The
questions and answers on the following pages provide information on the proposal
and what it means to you as a stockholder. THE BOARD OF DIRECTORS AND MANAGEMENT
RECOMMEND APPROVAL OF THE PROPOSAL AND URGE EACH OF YOU TO VOTE FOR THE
PROPOSAL.
Whether or not you plan on attending the Annual Meeting on April 19, I hope you
will vote as soon as possible. Your vote is important.
Thank you for your ongoing support of and continued interest in California Water
Service Group.
Sincerely,
/s/ ROBERT W. FOY
- --------------------------
ROBERT W. FOY
Chairman of the Board
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CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
2000 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS
Notice of Annual Meeting and Proxy Statement 3
Questions and answers about the Proxy Materials and the Annual Meeting 4
What am I voting on? 4
Who may attend the Annual Meeting? 4
Who is entitled to vote? 4
How many votes do I get? 4
What is "cumulative voting" and how does it work? 4
How are the directors elected? 4
Who are the Board's nominees? 4
What is the significance of the Long Term Incentive Plan? 4
What is the required vote for the other proposals to pass? 4
How do I vote? 5
What if I change my mind after I return my proxy? 5
Will my shares be voted if I do not return my proxy? 5
What happens if my shares are held by my stockbroker? 5
What happens if I abstain from voting on a proposal? 6
Who will count the vote? 6
What does it mean if I get more than one proxy card? 6
What constitutes a quorum? 6
What percentage of stock do the directors and executive officers own? 6
Who are the largest stockholders? 6
What is the deadline for submitting stockholder proposals
for the Group's proxy materials for next year's Annual Meeting? 6
How can a stockholder propose a nominee for the Board? 6
How can a stockholder propose business at a stockholder's meeting? 7
Can I make comments and/or ask questions during the Annual Meeting? 7
Board Structure 8
Director Compensation Arrangements 9
Proposals of the Board to be Voted on 10
Proposal No. 1 -- Election of Directors 10
Proposal No. 2 -- Ratification of Independent Auditors 12
Proposal No. 3 -- Long Term Incentive Plan 12
Proposal of Stockholder to be Voted on 16
Proposal No. 4 -- Preemptive Rights 16
Stock Ownership of Management and Certain Beneficial Owners 18
Ownership of Directors and Executive Officers 18
Ownership of Largest Principal Stockholders 19
Section 16(a) Beneficial Ownership Reporting Compliance 19
Executive Compensation 20
Summary Compensation Table 20
Severance Agreements 21
Pension Plans 21
Report of the Compensation Committee of the Board of Directors on Executive Compensation 22
Performance Graph 24
Other Matters 25
Appendix A: California Water Service Group Long Term Incentive Plan 26
For directions to the Annual Meeting, please refer to the map on page 31.
2
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
CALIFORNIA WATER SERVICE GROUP
1720 NORTH FIRST STREET - SAN JOSE, CA 95112-4598 - (408) 367-8200
March 17, 2000
Notice of Annual Meeting of Stockholders
Time 10:00 a.m. on Wednesday, April 19, 2000
Place Executive Offices of California Water Service Group,
1720 North First Street, San Jose, California
Items of Business (1) To elect directors
(2) To ratify the appointment of independent auditors
(3) To approve the Long Term Incentive Plan
(4) To vote on a stockholder proposal, if presented,
concerning preemptive rights
(5) To consider such other business as may properly come
before the meeting
Record Date You are entitled to vote if you were a stockholder at the
close of business on Wednesday, February 23, 2000.
Voting By Proxy Please submit a proxy as soon as possible so that your
shares can be voted at the meeting in accordance with your
instructions. You may submit your proxy (1) over the
Internet, (2) by telephone, or (3) by mail. For specific
instructions, please refer to the Questions and Answers
beginning on page 5 of this proxy statement and the
instructions on the proxy card.
By Order of the Board of Directors
PAUL G. EKSTROM
Corporate Secretary
This notice of meeting and proxy statement and accompanying proxy card are being
distributed beginning on or about March 17, 2000.
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CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
questions and answers about THE PROXY MATERIALS AND THE ANNUAL MEETING
What am I voting on?
- - Election of nine directors to serve until the 2001 Annual Meeting,
- - Ratification of the Board's selection of KPMG LLP, as the Group's independent
auditors for 2000,
- - Approval of a Long Term Incentive Plan, and
- - A stockholder proposal, if presented, concerning preemptive rights.
Those elected to serve as the Group's directors also will serve as the
directors of California Water Service Company and CWS Utility Services, two of
the Group's operating subsidiaries.
Who may attend the Annual Meeting?
All Group stockholders may attend.
Who is entitled to vote?
Stockholders of record at the close of business on February 23, 2000 (the
"Record Date"), or those with a valid proxy from a brokerage firm or another
similar organization which held the shares on the Record Date.
How many votes do I get?
Each share of common stock is entitled to one vote. Each share of preferred
stock is entitled to 16 votes. You may also use "cumulative voting" in the
election of directors.
What is "cumulative voting" and how does it work?
Stockholders or persons holding a valid proxy may "cumulate" their votes for the
election of directors. That is, they may give one candidate nine votes for each
common share owned (instead of casting one vote for each of the nine candidates
they may cast all nine votes for a single candidate) or they may distribute
their votes on the same principle among as many candidates as they desire.
Because each preferred share is entitled to 16 votes, preferred stockholders may
cumulate 144 votes (16 x 9) for each share owned. If you do not indicate
otherwise, the proxies may use their discretion to cumulate votes.
How are the directors elected?
The nine nominees receiving the highest number of votes are elected to the
Board. Common and preferred shares vote together on directors.
Who are the Board's nominees?
The nominees are Robert W. Foy, Edward D. Harris, Jr., M.D., Robert K. Jaedicke,
Richard P. Magnuson, Linda R. Meier, Peter C. Nelson, Langdon W. Owen, C. H.
Stump and George A. Vera. All the nominees except Mr. Owen are current Board
members. See page 10 for biographical information, including the nominees'
current directorships in other publicly held companies.
What is the significance of the Long Term Incentive Plan?
We have provided a separate set of Questions and Answers and additional
information about the Long Term Incentive Plan beginning on page 12.
What is the required vote for the other proposals to pass?
In order for the Long Term Incentive Plan to be approved, the Board's selection
of KPMG LLP as auditors to be ratified and for the stockholder proposal to be
adopted, each proposal must receive the affirmative vote of a majority of the
shares present in person or represented by proxy and entitled to vote at the
meeting.
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CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
How do I vote?
You may vote by mail.
You do this by signing the proxy card and mailing it in the enclosed,
prepaid and addressed envelope. If you mark your voting instructions on the
proxy card, your shares will be voted as you instruct.
You may vote by telephone.
You do this by following the "Vote by Telephone" instructions on the
proxy card. If you vote by telephone, you do not have to mail in your proxy
card. Stockholders who do not have touch tone phones will not be able to vote by
telephone.
You may vote on the Internet.
You do this by following the "Vote by Internet" instructions on the
proxy card. If you vote on the Internet, you do not have to mail in your proxy
card.
You may vote in person at the meeting.
We will pass out written ballots to anyone who wants to vote at the
meeting. If you hold your shares in street name, you must request a legal proxy
from your stockbroker in order to vote at the meeting.
If you return a signed card but do not provide voting instructions, your shares
will be voted:
- - for the nine named director nominees,
- - for the approval of the selection of auditors,
- - for the Long Term Incentive Plan proposal, and
- - against the stockholder proposal.
We have been advised by counsel that these telephone and internet voting
procedures comply with Delaware law.
What if I change my mind after I return my proxy?
You may revoke your proxy any time before the polls close at the meeting. You
may do this by:
- - signing another proxy with a later date,
- - voting by telephone or on the Internet (your latest telephone or Internet
proxy is counted),
- - voting again at the meeting, or
- - notifying the Corporate Secretary, in writing, that you wish to revoke your
previous proxy. We must receive your notice prior to the vote at the Annual
Meeting.
Will my shares be voted if I do not return my proxy?
If you are a stockholder of record (that is, you hold your shares in your own
name) your shares will not be voted unless you attend the meeting and vote in
person. Different rules apply if your broker holds your shares for you.
What happens if my shares are held by my stockbroker?
Your broker, under certain circumstances, may vote your shares.
Brokers will write to you asking how you want your shares voted.
However, if you do not respond, brokers have authority under exchange
regulations to vote your unvoted shares on certain "routine" matters, including
election of directors and approval of auditors. If you wish to change voting
instructions you give to your broker, you must ask your broker how to do so.
If you do not give your broker voting instructions, the broker may
either:
- - proceed to vote your shares on routine matters and refrain from voting
on non-routine matters, or
- - leave your shares entirely unvoted.
Shares which your broker does not vote ("broker non-votes") will count
towards the quorum only. We encourage you to provide your voting instructions to
your broker. This ensures that your shares will be voted at the meeting.
You may have granted to your stockbroker discretionary voting authority
over your account. If so, your stockbroker may be able to vote your shares even
on non-routine matters, depending on the terms of the agreement you have with
your stockbroker.
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CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
What happens if I abstain from voting on a proposal?
If you abstain from voting on a proposal (whether by proxy or in person at the
Annual Meeting), your shares will be counted in determining whether we have a
quorum but the abstention will have the same effect as a vote against a
proposal.
Who will count the vote?
Representatives of Boston EquiServe, our transfer agent, will serve as the
inspector of elections and count the votes.
What does it mean if I get more than one proxy card?
It means that you have multiple accounts at the transfer agent and/or with
stockbrokers. Please sign and return all proxy cards to ensure that all your
shares are voted.
What constitutes a quorum?
A majority of the outstanding shares--present at the Annual Meeting or
represented by persons holding valid proxies--constitutes a quorum. If you
submit a valid proxy card, your shares will be part of the quorum.
Without a quorum, no business may be transacted at the Annual Meeting.
However, whether or not a quorum exists, a majority of the voting power of those
present at the Annual Meeting may adjourn the Annual Meeting to another date,
time and place.
At the Record Date, there were approximately 11,000 stockholders of
record. There were 12,935,612 shares of our common stock outstanding and
entitled to vote at the Annual Meeting and 139,000 shares of our preferred stock
outstanding and entitled to vote at the Annual Meeting.
What percentage of stock do the directors and executive officers own?
Together, they own less than one percent of our common and preferred stock. See
page 18 for more details.
Who are the largest stockholders?
As of January 1, 2000, the largest principal stockholders were:
- - SJW Corp. (1,099,952 shares of common stock, representing 8.5% of our common
stock);
- - Employees Savings Plan of California Water Service Group, a Group-sponsored
401(k) plan (642,752 shares of common stock, representing 4.97%); (these
shares are voted by the participants in the plan), and
- - GE Financial Corporation (36,610 shares of Series C preferred stock,
representing 26.3%).
See page 19 for more details.
What is the deadline for submitting stockholder proposals for the Group's proxy
materials for next year's Annual Meeting?
Any proposals which stockholders intend to present at the 2001 Annual Meeting of
Stockholders must be received by the Corporate Secretary of the Group by
November 17, 2000 in order to be considered for inclusion in the Group's 2001
proxy materials. A proposal and any supporting statement together may not exceed
500 words. Please submit the proposal to Paul G. Ekstrom, Corporate Secretary,
California Water Service Group, 1720 North First Street, San Jose, California
95112-4598.
How can a stockholder propose a nominee for the Board?
Any stockholder of record who is entitled to vote at a stockholders meeting may
propose a nominee for the Board. The by-laws contain the requirements for doing
so. Contact the Corporate Secretary to request a copy of the full by-law
requirements. Briefly, a stockholder must give timely prior notice to the Group.
The notice must be received by the Secretary at the Group's principal place of
business by the 150th day before the first anniversary of the prior year's
Annual Meeting. If we move the date of the meeting by more than 30 days before
or more than 60 days after the date of the previous meeting, notice is due by
the 150th day before the Annual Meeting or the 10th day after we publicly
announce the holding of the meeting.
If the Board calls a special meeting to elect directors, stockholder
notice is due by the 150th day prior to that meeting or the 10th day after we
publicly announce the holding of the special meeting and identify the Board's
director nominees. The by-laws do not affect the rights of preferred holders to
nominate directors where they are otherwise entitled to do so.
6
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
The by-laws specify what the notice must contain. The notice deadline
for the 2001 Annual Meeting is November 20, 2000.
How can a stockholder propose business at a stockholder's meeting?
Any stockholder of record who is entitled to vote at a stockholder's meeting may
propose business for the meeting. Just as with nominations, the by-laws contain
the requirements. Contact the Secretary of the Group and request a copy of the
full by-law requirements. The stockholder must give timely prior notice to the
Group. The deadlines are the same as for stockholder nominations discussed
above.
The by-laws specify what the notice must contain. Stockholders must
comply with all requirements of the securities laws regarding proposals. The
by-laws do not affect any stockholder right to request inclusion of proposals in
the Group's proxy statement under the rules of the Securities and Exchange
Commission.
Because of the 150-day notice requirement discussed above, stockholders
who have not given prior notice may not raise a proposal (or a nomination) at
this year's meeting.
Can I make comments and/or ask questions during the Annual Meeting?
Yes, most certainly.
Stockholders wishing to address the meeting are welcome to do so by
adhering to the following guidelines:
1. Stockholders may address the meeting when recognized by the Chairman or
President and Chief Executive Officer.
2. Each stockholder, when recognized, should stand and identify himself or
herself.
3. Stockholder remarks must be limited to matters before the meeting and may not
exceed 2 minutes in duration per speaker.
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CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
board STRUCTURE
This section briefly describes the functions of the principal committees of the
Board.
Audit: Reviews the Group's auditing, accounting, financial reporting and
internal audit functions. Also recommends the selection of independent auditors
to the Board. All members are non-employee directors.
Compensation: Reviews the Group's executive compensation and employee benefit
plans and programs, including their establishment, modification and
administration. All members are non-employee directors.
Executive: Has limited powers to act on behalf of the Board whenever it is not
in session. This Committee meets only as needed.
During 1999, there were 12 regular meetings and two special meetings of the
Board, two meetings of the Compensation Committee, two meetings of the Audit
Committee and no meetings of the Executive Committee. Each of the
director-nominees who served on the Board of California Water Service Group in
1999 attended at least 93% of all Board and applicable committee meetings.
Collectively, they attended an average of 97% of all of the Board and applicable
committee meetings.
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CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
director COMPENSATION ARRANGEMENTS
The following table provides information on the Group's compensation and
reimbursement practices during 1999 for non-employee directors, as well as the
range of compensation paid to non-employee directors who served the entire year.
Directors who are employed by the Group receive no compensation for their Board
activities except a fee for attending each Board meeting. Directors receive no
additional compensation for serving on the Boards of the Group's subsidiaries.
Director Compensation Table For 1999
Annual Director Retainer $16,000
Board and Committee Meeting Attendance Fee $850
Range of Committee Meeting Attendance Fees Paid to Directors $1,700 -- $5,100
Additional Compensation Fee for Committee Chairs $850
Compensation. In 1999, Directors Harris, Jaedicke, Magnuson, Meier, Stump and
Vera received an annual retainer of $16,000. Director Stump is paid an annual
fee of $30,000 in addition to his annual retainer, for his consulting services
and expertise relating to the Group's business. Effective January 1, 2000,
non-employee directors are paid $1,040 for each Board meeting attended and $950
for each committee meeting attended (which are increases from the previous
amounts of $850 for each Board or committee meeting attended). The committee
chairs are paid $1,900 for each committee meeting attended.
Deferred Compensation Plan. Effective January 1, 1998, the Group established a
Directors Deferred Compensation Plan, an unfunded deferred compensation program
for non-employee directors. After we formed Group as a holding company, this
plan succeeded the California Water Service Company Directors Deferred
Compensation Plan, which originally became effective in 1988. As under the
predecessor plan, participants may defer up to 100% of their annual retainer
fees, with a minimum annual contribution of $5,000. Amounts deferred are fully
vested and recorded by Group as general liabilities and the value of deferrals
fluctuate according to an index selected by the participant. We distribute funds
from this plan when the participant ceases to be a director (unless the
participant then becomes an employee, in which case we make a distribution when
employment terminates). Distributions also are available upon a showing of
hardship. Amounts remaining undistributed at death are distributed to the
participant's designated beneficiary or beneficiaries. We are under no
obligation to make any investment or otherwise fund the plan. Participants are
general, unsecured creditors of the Group.
Retirement Plan. Effective January 1, 1998, we established a directors'
retirement plan to succeed the retirement plan of California Water Service
Company. This plan operates in the same manner as the prior plan. Any director
who retires after serving on the Board for a total of five or more years
(including service on the California Water Service Company Board before January
1, 1998) will receive a benefit equal to the annual retainer paid to our
non-employee directors at the time of the director's retirement. We will pay
this benefit annually for the number of years the director served on the Board,
up to a maximum of 10 years. Effective January 26, 2000, the plan was amended to
clarify the mandatory retirement age for directors. We amended the plan so that
a director who has not attained age 75 at the time of his or her most recent
election or appointment as a director and who attains age 75 during his or her
term may defer retirement until the next Annual Meeting of Stockholders.
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CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
proposals of the board TO BE VOTED ON
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
There are nine nominees for election to our Board this year. All of the nominees
have served as directors since the last Annual Meeting, except for Langdon W.
Owen, who is a new nominee and will stand for election as a director by our
stockholders for the first time at this year's Annual Meeting. Information
regarding the business experience of each nominee is provided below. All
directors are elected annually to serve until the next Annual Meeting and until
their respective successors are elected.(1)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
FOLLOWING NOMINEES.
VOTE REQUIRED
The nine persons receiving the highest number of votes represented by
outstanding shares present or represented by proxy and entitled to vote will be
elected. Except as otherwise indicated, each director has served for at least
five years in the positions stated below.
Robert W. Foy(2)
Director since 1977
age 63
Mr. Foy is chairman of the board of California Water Service Group and
its two subsidiaries. He was formerly president and chief executive officer of
Pacific Storage Company, a diversified transportation and warehousing group
serving Stockton, Modesto, Sacramento, San Jose, Vallejo, Marysville and Merced,
California. He has served as chairman of California Water Service Group since
January 1, 1996.
Edward D. Harris, Jr., M.D.(2),(3)
Director since 1993
age 62
Dr. Harris is the George DeForest Barnett professor of medicine at
Stanford University Medical Center, where he is the director of the Center for
Musculoskeletal Diseases and the medical director of the International Medicine
Service. He is a director of the Genentech Research and Educational Foundation.
He is also the executive secretary of Alpha Omega Alpha, the National Medical
Honor Society and the governor-elect of the American College of
Physicians/American Society of Internal Medicine -- Northern California Chapter.
Robert K. Jaedicke(3),(4)
Director since 1974
age 71
Professor Jaedicke is professor emeritus of accounting and was dean at
the Stanford University Graduate School of Business. Professor Jaedicke also is
a director of Boise Cascade Corporation, Enron Corp. and GenCorp.
[PHOTO] [PHOTO] [PHOTO] [PHOTO] [PHOTO]
Robert W. Foy Edward D. Harris, Robert K. Richard P. Linda R. Meier
Jr., M.D. Jaedicke Magnuson
10
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
Richard P. Magnuson(4)
Director since 1996
age 44
Mr. Magnuson is a private venture capitalist. From 1984 to 1996, he was
a general partner of Menlo Ventures, a venture capital firm. He also is a
director of Rogue Wave Software, Inc.
Linda R. Meier(3),(4)
Director since 1994
age 59
Ms. Meier is a director of Comerica Bank -- California, the Peninsula
Community Foundation and the National Advisory Board of the Haas Public Service
Center. She is also a member of the Board of Trustees of the California Academy
of Sciences, the former chair of the Stanford University Hospital Board of
Directors (1992-1997) and a former trustee of Stanford University (1984-1994).
Peter C. Nelson(2)
Director since 1996
age 52
Mr. Nelson is president and chief executive officer of California Water
Service Group and its two subsidiaries. Before joining California Water Service
Group in 1996, he was vice president, division operations (1994-1995) and region
vice president (1989-1994) of Pacific Gas & Electric Company.
Langdon W. Owen
New Nominee for 2000
age 69
Mr. Owen is president of Don Owen & Associates, an assessment
engineering and special tax consulting firm. He is a director of the
Metropolitan Water District of Southern California and the Orange County Water
District. He also is a director of Dominguez Services Corporation.
C. H. Stump(2),(4)
Director since 1976
age 74
Mr. Stump was California Water Service Company's chairman of the board
(1991-1996), president (1981-1991) and chief executive officer (1986-1992).
George A. Vera(3)
Director since 1998
age 56
Mr. Vera is chief financial officer (previously, the director of finance
and administration) of the David and Lucile Packard Foundation. Formerly, he was
an audit partner for Arthur Andersen, LLP.
(1) No nominee has any family relationship with any other nominee or with any
executive officer of the Group. "Director since" date refers to the year the
nominee first was elected or appointed to the Board of California Water
Service Group or California Water Service Company, as appropriate.
(2) Member of Executive Committee
(3) Member of Audit Committee
(4) Member of Compensation Committee
[PHOTO] [PHOTO] [PHOTO] [PHOTO]
Peter C. Nelson Langdon W. Owen C. H. Stump George A. Vera
11
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
PROPOSAL NO. 2 -- RATIFICATION OF SELECTION OF KPMG LLP AS INDEPENDENT AUDITORS
FOR 2000
VOTE REQUIRED
In order for the ratification of selection of independent auditors to be
approved, it must receive the affirmative vote of a majority of the shares
present in person or represented by proxy and entitled to vote at the meeting.
Stockholders will vote on the ratification of KPMG LLP, certified public
accountants, to audit our books, records and accounts for the year ending
December 31, 2000. KPMG has acted as independent auditors for California Water
Service Company and Group since 1939. Following the recommendation of the Audit
Committee, the Board recommends a vote FOR the adoption of this proposal.
Representatives of KPMG LLP will be present at the meeting to answer appropriate
questions and will have an opportunity to make a statement if they desire to do
so. If the stockholders do not ratify this appointment, the Board will
reconsider the selection of the auditors.
THE BOARD URGES YOU TO VOTE FOR THIS PROPOSAL.
PROPOSAL NO. 3 -- LONG TERM INCENTIVE PLAN
VOTE REQUIRED
In order for the Long Term Incentive Plan to be approved, it must receive the
affirmative vote of a majority of the shares present in person or represented by
proxy and entitled to vote at the meeting. The plan is attached at the end of
this proxy statement.
Questions and Answers About Proposal
What is the Purpose of the Long Term Incentive Plan?
The Long Term Incentive Plan allows the Group to offer competitive compensation,
thus assisting in recruiting and retaining top-performing individuals. The plan
also aligns the interests of stockholders and participants. Finally, the plan
provides the potential to link benefits to the Group's achievement of
stockholder, customer or other performance goals, which gives participants an
incentive to achieve these goals.
Who is Making the Proposal to Approve the Long Term Incentive Plan?
Our Board of Directors has approved this Long Term Incentive Plan and has made
this proposal to seek approval of the stockholders.
Who is Eligible for Awards Under the Long Term Incentive Plan?
Officers and certain other employees who are recommended annually by the Chief
Executive Officer are eligible for awards under the plan. No director who is not
also an employee of the Group may receive awards. Awards are made once a year,
and eligibility may vary from year to year. All yearly awards must be approved
by the Compensation Committee of the Group's Board of Directors.
What Awards May Be Granted Under the Long Term Incentive Plan?
The plan provides for three different types of awards: nonqualified stock
options, dividend units, and performance shares.
- - Nonqualified stock options are options to purchase a certain number of shares
of the Group's common stock. The options will have an exercise price not lower
than the closing price of the Group's common stock on the New York Stock
Exchange on the date of grant. Options are granted for a term of not more than
10 years and become exercisable in yearly increments as determined by the
Compensation Committee.
- - Dividend units are the right to receive a payment equal to the dividends, if
any, that are paid on a share of the Group's common stock for a stated period of
time. The grant of a dividend unit will specify the number of shares subject to
the grant and term of the grant. No payment is made to the participant until the
end of the term. For example, if a dividend unit is granted for 100 shares with
a term of two years, at the end of the two-year term, the
12
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
participant will receive cash equal to the amount of dividends paid on 100
shares during the two year term. Dividend units may be attached to the shares
covered by stock options or performance shares, or they may be granted
separately.
- - Performance shares are shares of the Group's common stock which are granted
subject to the participant satisfying various performance goals over a given
term. At the end of the term, the Compensation Committee measures the level of
performance against the goals and determines the portion of the performance
shares, if any, which the participant will receive. In the sole discretion of
the Committee, performance shares may be paid in cash or shares.
Do Other Water Utilities Have Similar Plans?
Yes. Eight out of 9 of the largest investor-owned water utilities have similar
plans.
Who Determines the Amount and Type of Award Granted?
Each year the Chief Executive Officer will recommend the award level for each
participant and how the award should be allocated among the three types of
awards. The Compensation Committee will determine awards for the Chairman of the
Board and for the Chief Executive Officer. All awards, including the terms and
conditions, must be approved by the Compensation Committee.
Are There any Limits on Awards Under the Long Term Incentive Plan?
Yes. The number of shares of the Group's common stock that may be issued or
transferred under the plan cannot exceed 1,500,000 shares, although this amount
may be adjusted for stock splits, stock dividends, and certain other events.
Also, no participant in the plan may receive more than 500,000 nonqualified
stock options in a single year.
Have any Awards Been Made Under the Long Term Incentive Plan?
On the date of the Annual Meeting, the Group expects to make the following
option grants, if the stockholders approve the plan. All options are for a term
of ten years and will vest 25% per year during the first four years. As
previously discussed, the exercise price will not be lower than the closing
price of the Group's common stock on the New York Stock Exchange as of the date
of grant.
Number of Shares
Position Subject to Options(1)
- -------- ---------------------
President and Chief Executive Officer 12,500
Chairman of the Board of Directors 8,000
Vice President, Chief Financial Officer and Treasurer 3,000
Vice President, Regulatory Matters 3,000
Vice President, Operations 3,000
All executive officers as a group (13 in number) 53,500
(1) As the option price will not be set until the date of grant, the dollar
value of options granted cannot as yet be determined.
Can the Long Term Incentive Plan Be Amended Without Stockholder Approval?
Yes. Amendments can be made by the Board of Directors. However, no amendment can
be made which increases the number of shares of common stock authorized or
available under the plan.
Further Discussion of the Long Term Incentive Plan
Securities Covered by the Long Term Incentive Plan
The Group's common stock, $0.01 par value.
Market Value of Securities Covered by the Long Term Incentive Plan
As of March 1, 2000, the last practicable date before printing this proxy
statement, the closing price of the Group's common stock on the New York Stock
Exchange was $26.8125 per share.
13
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
Other Material Terms of the Long Term Incentive Plan
Other Terms Applicable to All Awards
The following additional terms apply to all three types of awards under the
plan:
Communication to Participants. Awards will be communicated to participants on
the date of grant. The actual number of performance shares (or cash in lieu of
shares) will be communicated as soon as possible after the end of a performance
period.
The Number of Shares of Common Stock Under the Long Term Incentive Plan is
Subject to Adjustment
In the event of a stock split, stock dividend, or other subdivision or
combination of the Group's common stock, the number of shares of common stock
authorized under the Plan will be adjusted proportionately, along with a
proportionate adjustment in the number and exercise price of shares of common
stock subject to unexercised nonqualified stock options, performance shares and
dividend units.
If the outstanding shares of the Group's common stock are changed or
converted into or exchanged or exchangeable for a different number or class of
shares or other security of the Group or of another corporation by reason of a
reorganization, merger, consolidation, reclassification, or combination, an
appropriate adjustment shall be made by the Board in the number and kind of
shares for which nonqualified stock options, dividend units or performance
shares were granted pursuant to the plan.
Awards Are Not Transferable. No nonqualified stock option, dividend unit, or
performance share is transferable or assignable by a participant other than by
will or laws which apply when an employee dies without a will. During the
lifetime of a participant, awards can only be exercised by or paid to the
participant subject to the requirements of domestic relations orders and
excluding a participant's legal representative in the case of the participant's
disability.
Awards Are Subject to Withholding for Taxes. The Group has the right to deduct
from any payment resulting from a dividend unit or performance share any
federal, state, or local tax required to be withheld. The Group also has the
right to require payment of any of these taxes with respect to options.
The Plan May Be Terminated by the Board of Directors. The Board of Directors may
terminate the plan at any time. However, termination of the plan will not affect
rights under outstanding awards.
The Plan Does Not Create a Trust. Any funds which the Group invests to meet its
obligations under the plan shall be part of the general funds of the Group and
no trust is created for the benefit of any participant. The rights of a
participant to receive payments from the Group under the plan are the rights of
a general creditor. No participant, or his or her beneficiaries, has a right to
encumber, borrow against, transfer or assign the right to receive any payment or
other benefit under the plan.
Effective Date. The plan is effective as of May 1, 2000, subject to stockholder
approval at the Annual Meeting.
Other Terms and Matters Applicable to Nonqualified Stock Options
- - Payment of the Exercise Price. The entire exercise price is payable in cash or
by certified check, official bank check, or the equivalent acceptable to the
Group at the time when options are exercised. The payment must also include the
amount of any withholding tax obligation which may arise in connection with the
exercise, as determined by the Group. In addition, in the sole discretion of the
Compensation Committee, payment may be made in any of the following forms:
- - Surrender of Stock. Payment of all or part of the exercise price and any
withholding taxes may be made all or in part with shares of the Group's common
stock which have already been owned by the option holder or the option holder's
representative for more than 6 months and which are surrendered to the Group in
good form for transfer. The shares surrendered are valued at their fair market
value on the date the option is exercised.
14
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
- - Exercise/Sale. Payment may be made by the delivery of an irrevocable direction
to a securities broker approved by the Group to sell shares of the Group's
common stock and to deliver all or part of the sales proceeds to the Group in
payment of all or part of the exercise price and any withholding taxes. This is
commonly referred to as a "cashless exercise."
- - Exercise/Pledge. Payment may be made by the delivery of an irrevocable
direction to pledge shares of the Group's common stock to a securities broker or
lender approved by the Group, as security for a loan, and the delivery of all or
part of the loan proceeds to the Group in payment of all or part of the exercise
price and any withholding taxes.
- - Tax Consequences. There is no taxable event when an option is granted.
However, when an option is exercised, the option holder will generally recognize
income for tax purposes in an amount equal to the excess of the then fair market
value of the shares received over the exercise price. The Group will be required
to withhold tax from the option holder's current compensation with respect to
any income recognized. If the option holder's current compensation is
insufficient to satisfy the withholding tax liability, the Group may require the
option holder to make a cash payment to cover any unsatisfied liability as a
condition of exercise of the option. If the option holder is subject to Section
16 of the Securities Exchange Act of 1934, as amended, the option holder's
payment election must be made in compliance with rules and procedures
established by the Compensation Committee.
The Group incurs no federal tax consequences as a result of the grant of
an option. Upon exercising an option the Group will be entitled to a business
expense deduction for the same amount as any taxable compensation realized by
the optionee. This tax treatment applies whether the tax is paid to the Group in
cash or stock. The tax treatment of a disposition of option shares acquired
under the Plan depends on how long the shares have been held. The Group will not
be entitled to a deduction in connection with a disposition of option shares.
- - Status of Options Upon Termination of Employment of Participant. In the case
of normal retirement, death or disability, the participant, or his or her
beneficiary, shall have a period equal to the remaining term of the option, or
five years, whichever is shorter, to exercise any outstanding options. If
employment is terminated for any other reason, the option will expire thirty
days after the participant's termination date.
Other Terms Applicable to Dividend Units
- - Payment Upon Termination of Employment of Participant. If the participant is
terminated by the Group, unless otherwise decided by the Compensation Committee,
he or she will receive the current value of his or her dividend units.
Generally, no dividend units will be paid to a participant who voluntarily
leaves the Group.
Other Terms Applicable to Participation Shares
- - Determination of Performance Goals and Period. At the time a performance share
is granted, the Compensation Committee will determine the performance period and
the performance goals to be achieved in order for awards to be payable.
THE BOARD URGES YOU TO VOTE FOR THIS PROPOSAL.
15
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
PROPOSAL OF STOCKHOLDER TO BE VOTED ON
PROPOSAL NO. 4 -- PREEMPTIVE RIGHTS
Mr. James J. Palma, 6590 Little Falls Drive, San Jose, California, 95120-4049,
record owner of 5,000 shares of Group stock, has informed the Group that he
intends to present the following proposal at the Annual Meeting.
VOTE REQUIRED
In order for the stockholder proposal to be adopted, it must receive the
affirmative vote of a majority of the shares present in person or represented by
proxy and entitled to vote at the meeting.
Stockholder Proposal
(The proposal is printed exactly as the stockholder submitted it.)
Re: Proposal for Spring 2000 Annual Shareholders' Meeting
Ladies and Gentlemen
Proposal is for the establishment for common stock and other class of
common stock that may be issued in the future PREMEPTIVE RIGHT.
Premptive Right is nothing more or less than Board of Directors may not
issue shares, option rights, or securities having conversion on option
rights without first offering the same to shareholders of any class or
classes. (underscored for emphasis)
Necessity for premptive right is for the sole benefit of existing common
shareholders at the time of issuance of additional common shares. If
premptive right were a part of Articles of Incorporation as of May 1,
1998 as proposed by the writer there would not have been the outrageous
offered, 50 times earnings (stock for stock), for the property of
Dominguez Services*. If Delaware corporate law impede the adoption of
premptive right then there would be reincorporation back to California.
Senior manages and directors in 1872, premptive right part of California
law beginning in 1872, are no better than what they are today. Existing
or future employee stock acquisition plan(s) are excluded from premptive
right proposal. Stock ownership requirements for shareholders proposal
are met today and will be met at date of the Spring 2000 annual meeting.
Sincerely
James J. Palma
*statutory merger, if consumated will take place in year 2000.
The Group's Statement in Opposition
The Board of Directors recommends that stockholders vote AGAINST this proposal.
The Group opposes the stockholder proposal for the following reasons:
1. The proposal is vague and incomplete. Under the stockholder proposal, the
Group would be required to offer any common stock or other equity securities it
proposes to sell, first to existing stockholders and only then to the public or
other third parties. Preemptive rights generally give an existing stockholder
the opportunity to maintain his or her percentage ownership of the Group. The
stockholder proposal includes no detail on how the Group would implement the
proposal if it were to be adopted.
16
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
The proposal does not state how much time must be provided to existing
stockholders to exercise their preemptive rights; whether stockholders are
limited to their prorata shares of new offerings; whether unsubscribed shares
must be reoffered one or more times to subscribing stockholders; whether a
change in price or terms of a securities offering would require a reoffer to
stockholders of the opportunity to exercise preemptive rights; or how preemptive
rights would apply in a stock merger or other offering for consideration other
than cash.
Mr. Palma has twice submitted similar proposals. The SEC has twice
supported the Group's decision to omit the proposal from the proxy statement, in
1998 because its submission to the Group was not timely and in 1999 because the
proposal was vague and indefinite. This year, the Group has elected to place the
stockholder proposal on the agenda to be judged on its merits. The Group
believes that the proposal's vagueness is reason enough for stockholders to
reject it.
2. The Board believes that preemptive rights serve no useful purpose in a public
company. Preemptive rights may be valuable in a small, closely-held corporation
in which percentage ownership is an important element. With a public company,
the Board believes that most stockholders focus on the value of their investment
rather than on their percentage ownership of the Group. The Board believes that
its duty is to enhance the value of each stockholder's investment, not to
preserve each stockholder's percentage interest of ownership. Stockholders who
wish to preserve their percentage ownership may buy shares in the open market
without the Group's involvement.
3. The Board believes that the proposal would impair the Group's ability to
raise capital. The Board believes that preemptive rights would effectively
preclude an underwritten offering of securities. The price for an underwritten
offering is generally determined immediately after the Group's registration
statement is declared effective. At that time, an underwriter typically commits
to purchase the shares and distributes them among investors who have indicated
an interest in the offer. If the Group were required to first offer the shares
to existing stockholders, the Group could not deliver the shares to the
underwriter in accordance with the typical terms of an underwriting agreement.
Thus, a potential important source of capital could be unavailable to the Group.
4. The proposal might impede the Group from issuing stock in connection with a
merger or acquisition. Typically, preemptive rights arrangements exclude the
issuance of stock in connection with a merger or similar acquisition, for the
simple reason that a company's own stockholders cannot offer to deliver the
assets or shares of the target corporation in exchange for the new issuance of
the Group's shares. The stockholder proposal does not make provision for this
exclusion.
The law of Delaware, where the Group is incorporated, requires that a
company obtain the approval of its stockholders for a merger in which the
company will issue shares equal to or greater than 20 percent of the number of
shares currently outstanding. If the stockholder proposal were adopted, the
Group could effect such a merger only if the merger proposal included a repeal
of preemptive rights. A stock merger in which a smaller number of shares would
be issued which, at present, would not require stockholder approval, could be
completed only if the Group nevertheless obtained stockholder approval of the
merger and repeal of preemptive rights. Accordingly, the stockholder proposal
would place serious obstacles in the way of management if it wished to make any
acquisitions using stock as consideration.
5. The proposal would impose needless expense on the Group. Offering preemptive
rights to stockholders entails additional mailings to all stockholders, of which
the Group has approximately 11,000. Stockholder mailings are expensive. The
Board believes that the delay that would result in completing any proposed
transaction would also increase expense without any adequate offsetting benefit.
6. The Board believes that the proposal could negatively impact the stock price.
The Board believes that the proposal could have a significant negative effect
upon the market price of the Group's stock because the market may perceive
preemptive rights as a negative factor in evaluating the stock's investment
potential.
The Board urges you to vote AGAINST this proposal.
17
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
(Common and Preferred Stock Ownership as of January 1, 2000.)(1)
Name Shares Owned
- ---- ------------
Gerald F. Feeney 9,162(2)
Executive Officer
Francis S. Ferraro 800(3)
Executive Officer
Robert W. Foy 6,331(4)
Director and Executive Officer
Edward D. Harris, Jr., M.D 1,151
Director
Robert K. Jaedicke 2,127
Director
Richard P. Magnuson 8,051
Director
Linda R. Meier 3,000
Director
Peter C. Nelson 3,758(5)
Director and Executive Officer
C. H. Stump 15,329(6)
Director
Raymond H. Taylor 3,453(3)
Executive Officer
George A. Vera 241
Director
Langdon W. Owen 0
Nominee
All directors and executive officers as a group(7) 69,540
- ----------
(1) Except for Mr. Stump (see note 6), no director, nominee or executive officer
owns any shares of Series C preferred stock. All directors and executive
officers have sole voting and investment power over their shares (or share such
powers with their spouses). To the knowledge of the Group, as of January 1,
2000, all directors and executive officers together beneficially owned an
aggregate of less than 1% of the Group's outstanding common shares and Series C
preferred stock.
(2) Includes 4,195 shares held in the Employees Savings Plan.
(3) Held in the Employees Savings Plan.
(4) Includes 948 shares held in the Employees Savings Plan.
(5) Includes 958 shares held in the Employees Savings Plan.
(6) In addition, Mr. Stump holds 400 shares of Series C preferred stock
which is less than 1% of the outstanding preferred shares.
(7) Includes 24,576 shares held in the Employees Savings Plan for the
benefit of executive officers.
18
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
OWNERSHIP OF LARGEST PRINCIPAL STOCKHOLDERS
The following table shows the largest principal holders of the Group's voting
securities as of January 1, 2000:
Class Beneficial Owner Number of Shares Percent of Class
- ----- ---------------- ---------------- ----------------
Common SJW Corp.(1) 1,099,952 8.5%
374 W. Santa Clara Street
San Jose, CA 95196
Common California Water Service Group 642,752 4.97%
Employees Savings Plan
(a 401(k) plan)
1720 N. First Street
San Jose, CA 95112
Series C Preferred GE Investments 36,610 26.3%
3003 Summer Street
Stanford, CT 06905
- ----------
(1) SJW Corp. has sole voting and investment power over these shares.
(2) GE Financial Corp. has sole voting and investment power over these shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors,
certain officers, and holders of more than 10% of our common stock to file with
the Securities and Exchange Commission reports regarding their ownership of our
securities. Based solely on its review of the copies of reports furnished to the
Group, or written representations that no annual reports (SEC Form 5) were
required, the Group believes that during 1999, all SEC Section 16(a) filings of
the officers, directors and 10-percent stockholders of the Group complied with
requirements for reporting stock ownership.
19
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table discloses the compensation of
the president and chief executive officer and our four other most highly paid
executive officers for the three years ended December 31, 1999.
Other Annual All Other
Name and Principal Position Year Salary(1) Compensation Compensation
- --------------------------- ---- --------- ------------ ------------
Peter C. Nelson 1999 $383,469 $ 11,900(2) $ 5,336(3)
President and Chief Executive Officer 1998 348,334 11,050(2) 5,336(3)
1997 316,214 9,000(2) 5,086(4)
Robert W. Foy 1999 $246,309 11,900(2) 5,336(3)
Chairman of the Board 1998 205,264 36,050(5) 5,336(3)
1997 189,489 33,250(6) 5,086(4)
Gerald F. Feeney 1999 191,338 -- 5,336(3)
Vice President, 1998 172,183 -- 5,336(3)
Chief Financial Officer and Treasurer 1997 162,733 -- 5,086(4)
Francis S. Ferraro 1999 176,604 -- 5,336(3)
Vice President, 1998 160,242 -- 5,336(3)
Regulatory Matters 1997 157,601 -- 5,086(4)
Raymond H. Taylor 1999 163,265 -- 5,336(3)
Vice President, 1998 157,101 -- 5,336(3)
Operations 1997 150,618 -- 5,086(4)
- ----------
(1) Includes salary, amounts deferred under the Employees Savings Plan and
compensation associated with the non-business use of a Company automobile except
for Mr. Nelson, who does not have a Company automobile. The value of automobile
use amounted to $12,411, $5,624, $3,940 and $2,648 for Messrs. Foy, Feeney,
Ferraro and Taylor, respectively.
(2) Director fees.
(3) Includes Employees Savings Plan contributions of $5,000 and annual life
insurance premiums of $336.
(4) Includes Employees Savings Plan contributions of $4,750 and annual life
insurance premiums of $336.
(5) Figure includes an annual consulting fee of $25,000 and director fees of
$11,050.
(6) Figure includes an annual consulting fee of $25,000 and director fees of
$8,250.
20
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
Severance Agreements. In 1998, we entered into executive severance plan
agreements with all officers. These agreements provide officers with severance
payments of approximately three times their annual salary if we merge with
another company or effect another transaction by which another company acquires
control of us and as a result, within 24 months, these officers lose their
executive positions. This severance amount would be paid in three equal annual
payments, beginning with the month following termination. The agreements provide
uniform payment levels for all officers.
Pension Plans. The table(+) that follows shows the estimated annual benefits we
must pay upon retirement to our executive officers under the Group's Pension and
Supplemental Executive Retirement plans.
Three Highest
Consecutive Years
Average Compensation* 15 Years 20 Years 25 Years 30 Years
- --------------------- -------- -------- -------- --------
$150,000 $ 45,000 $ 60,000 $ 67,500 $ 75,000
200,000 60,000 80,000 90,000 100,000
250,000 75,000 100,000 112,500 125,000
300,000 90,000 120,000 135,000 150,000
350,000 105,000 140,000 157,500 175,000
400,000 120,000 160,000 180,000 200,000
450,000 135,000 180,000 202,500 225,000
500,000 150,000 200,000 225,000 250,000
- ----------
+ The pension table above shows estimated annual retirement benefits, payable as
a straight life annuity, assuming retirement at age 60, using the normal form of
benefit under the above plans. The benefits listed are not subject to any
deduction for Social Security or other offset amounts.
* Compensation includes salary plus all other compensation. The number of years
of credited service at January 1, 2000 for officers named in the Compensation
table is as follows: Mr. Nelson, 14, Mr. Foy, 14, Mr. Feeney, 23, Mr. Ferraro,
10, and Mr. Taylor, 17.
21
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
What is this report?
The Securities and Exchange Commission requires that public companies disclose
the policies that the Group uses to establish executive officer compensation.
This report explains the criteria that the Group used to determine the
compensation of all of its officers in 1999.
What are the Compensation Committee's responsibilities?
The Committee is responsible for establishing and implementing policies and
programs to compensate Group executives. Each November, the Committee reviews
and recommends compensation levels for all executive officers for the 12-month
period beginning January 1. The Committee submits its recommendations to the
entire Board for approval. In 1999, the Board adopted the Committee's
recommendations without modification.
What is our compensation philosophy?
The primary objectives of our executive compensation program are:
(1) To attract, retain and motivate talented and experienced executives,
(2) To reward excellent job performance and contributions to future success, and
(3) To provide fair and reasonable compensation.
The Compensation Committee believes that compensating executives on this basis
leads to excellent executive performance, which benefits stockholders and
ratepayers alike. When making its recommendations, the Committee takes into
account that the California Public Utilities Commission (CPUC) reviews the
compensation decisions of the Group's officers for reasonableness. Furthermore,
as a regulated utility, the Group's financial performance is to a large extent
dependent upon CPUC ratemaking decisions and other factors beyond management's
control, such as weather. Therefore, the Committee's decisions largely are
determined by factors other than the Group's most recent financial performance.
Who serves on the Compensation Committee?
The Compensation Committee is composed of Ms. Meier, Mr. Jaedicke, Mr. Magnuson
and Mr. Stump.
How is executive compensation determined?
When examining the annual compensation of individual executives, the Committee
considers the officer's duties, performance and contribution to the Group's
current and future success. The Committee also considers the officer's
experience, tenure, value to the Group, prior salary adjustments and the
inflation rate.
In order to set salaries for the Group's officers at competitive and
reasonable levels, the Committee annually reviews the compensation of officers
of other major water companies. The Committee factors into its analysis the
Group's comparatively low number of officers and its limited methods of
compensation.
Mr. Nelson's Compensation. In November 1998, the Committee reviewed the
compensation for Peter C. Nelson, president and chief executive officer. The
Committee determined Mr. Nelson's 1999 compensation using the same factors that
it used to set the compensation of the other Group executives.
22
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
Do executive officers of California Water Service Group receive additional
compensation for serving as executive officers of California Water Service
Company and CWS Utility Services?
No. Group officers do not receive additional compensation for serving as
officers of the Company and CWS Utility Services.
Does the Group have an Executive Severance Plan?
Yes. Effective December 16, 1998, the Board of Directors adopted an Executive
Severance plan for the benefit of the officers of Group and its subsidiaries.
The Board adopted the plan to provide security for the officers in the event of
a change in control of Group. See page 21 for more detailed information on the
plan.
How have we responded to IRS limits on deductibility of compensation?
The Committee has reviewed the Group's compensation structure in light of
Section 162(m) of the Internal Revenue Code, which limits the amount of
compensation that the Group may deduct in determining its taxable income for any
year to $1,000,000 for any of its five most highly compensated executive
officers. In 1999, no executive officer's compensation exceeded the limitation
set by Section 162(m).
Compensation Committee
Linda R. Meier, Committee Chair
Robert K. Jaedicke
Richard P. Magnuson
C. H. Stump
23
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
PERFORMANCE GRAPH
The graph below shows a five-year comparison of cumulative total returns from an
initial $100 investment in California Water Service Group, the S&P 500 Index and
the Edward Jones Water Utility Average.
[PERFORMANCE GRAPH]
Performance Graph Data
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
California Water Service Group 100 109 148 218 241 242
S&P 500 Index 100 137 169 225 290 351
Edward Jones Water Utility Average 100 128 154 212 265 263
Past stock performance is not necessarily indicative of future performance.
24
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
OTHER MATTERS
Adjournment. Notice of the adjournment need not be given if the date, time and
place thereof are announced at the Annual Meeting at which the adjournment is
taken. However, if the adjournment is for more than 45 days, or if a new record
date is fixed for the adjourned Annual Meeting, a notice of the adjourned Annual
Meeting will be given to each stockholder entitled to vote at the Annual
Meeting. At adjourned Annual Meetings, any business may be transacted which
might have been transacted at the original Annual Meeting.
Cost of Proxy Solicitation. The Group will bear the entire cost of preparing,
assembling, printing and mailing this proxy statement, the proxies and any
additional materials which may be furnished by the Board to stockholders. The
solicitation of proxies will be made by the use of the U.S. postal service and
also may be made by telephone, telegraph, or personally, by directors, officers
and regular employees of the Group, who will receive no extra compensation for
such services. Morrow & Co. was hired to assist in the distribution of proxy
materials and solicitation of votes for $6,000, plus out-of-pocket expenses. The
Group will reimburse brokerage houses and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy
solicitation materials to stockholders.
Other Matters. The Board is not aware of any matters to come before the Annual
Meeting other than as set forth above. If any other matters should be brought
before the Meeting, or any adjournment thereof, upon which a vote properly may
be taken, the proxy holders will vote in their discretion unless otherwise
provided in the proxies. The Report of the Compensation Committee and the
Performance Graph are not to be considered as incorporated by reference into any
other filings which the Group makes with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended. These portions of this proxy statement are not a part of any
of those filings unless otherwise stated in those filings.
25
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
Appendix A
California Water Service Group
Long-Term Incentive Plan
1. Purpose
The objectives of the Long Term Incentive Plan (the "Plan") are to promote the
success of the California Water Service Group (the "Company") and its Affiliates
by:
1.1 Linking incentive opportunities to the performance of the Company in meeting
shareholder and customer goals;
1.2 Supporting the planning and goal setting process; and,
1.3 Offering compensation opportunities that will assist the Company in
recruiting and retaining top performing executives from both within and outside
of the water utility industries.
2. Definitions
2.1 "Affiliate" means:
2.1.1 A member of a controlled group of corporations of which the
Company is a member or;
2.1.2 Any corporation, or unincorporated trade or business in which the
Company has an ownership interest of at least 25% of the equity value of
the entity.
For purposes hereof, a "controlled group of corporations" shall mean a
controlled group of corporations as defined in Section 1563(a) of the
Code determined without regard to Section 1563(a)(4) and (e)(3)(C) of
the Code.
2.2 "Award" means the grant of a Nonqualified Stock Option, Dividend Unit, or
Performance Share pursuant to the Plan.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Code" means the Internal Revenue Code of 1986, as from time to time
amended.
2.5 "Committee" means the Compensation Committee of the Board of Directors of
the Company.
2.6 "Common Stock" means the common stock of the Company.
2.7 "Company" means the California Water Service Group a Delaware corporation,
its successors and assigns, and its Affiliates.
2.8 "Dividend Unit" means a right to receive, in accordance with the provisions
of the Plan, a payment equal to the dividends that are paid on a share of Common
Stock of the Company for a stated period of time.
2.9 "Fair Market Value" means the value of the Company's Common Stock on the New
York Stock Exchange as of the close of the trading day.
2.10 "Fiscal Year" means the calendar year.
26
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
2.11 "Nonqualified Stock Option" means the right to purchase a share of the
Common Stock of the Company at a fixed price for a specified period of time, as
determined by the Committee. These Nonqualified Stock Options are not meant to
qualify under Section 422 of the Code.
2.12 "Normal Retirement" means termination of employment with the Company with
an immediate pension benefit being paid by the Company.
2.13 "Participant" means an employee of the Company, selected by the Committee
to participate in the Plan.
2.14 "Performance Share" means a share of Common Stock granted to a Participant,
the vesting of which is subject to performance conditions established by the
Committee.
2.15 "Plan" means this Long Term Incentive Plan as originally adopted or
amended.
2.16 "Plan Year" means the calendar year.
3. ADMINISTRATION
3.1 The Plan shall be administered by the Committee, subject to such
requirements for review and approval by the Board, as the Board may establish.
In all areas not specifically reserved by the Board for its review and approval,
decisions of the Committee concerning the Plan shall be binding on the Company
and on all eligible Participants.
3.2 No member of the Committee shall be eligible to participate in the Plan.
3.3 The Committee shall have the power and authority to adopt, amend, and
rescind administrative guidelines, rules and regulations pertaining to the Plan,
to accept, modify or reject recommendations of the Chief Executive Officer, to
set final Awards and to interpret and rule on any questions pertaining to any
provision of the Plan.
4. ELIGIBILITY
4.1 Company officers and other key employees of the Company who are recommended
annually by the Chief Executive Officer and who are approved by the Committee,
will be eligible for Awards granted under the terms of the Plan. Eligibility may
vary, and participation in one Award does not guarantee continued employment by
the Company or participation in the Plan.
4.2 No Director of the Company who is not also an employee of the Company shall
be eligible for any Award pursuant to the Plan.
5. INCENTIVE AWARDS
5.1 Prior to the beginning of the Plan Year, the Chief Executive Officer shall
recommend to the Committee for its approval the award level for each Plan
Participant.
5.2 The Chief Executive Officer shall recommend the manner in which each
Participant's Award shall be allocated among Nonqualified Stock Options,
Dividend Units, and Performance Shares and the specific terms of the
Participant's Award not specified under the Plan.
6. TYPES OF AWARDS
The following types of Awards may be granted under the terms of the Plan:
Nonqualified Stock Options, Performance Shares and Dividend Units. The
Committee, in its sole discretion shall determine the types of Awards that will
be granted to Participants under the Plan.
27
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
6.1 Nonqualified Stock Options: The Committee may grant Nonqualified Stock
Options to a Participant of the Plan.
6.1.1 The Nonqualified Stock Option price per share shall not be less
than the Fair Market Value of the Common Stock on the date of the grant.
6.1.2 Nonqualified Stock Options may be exercised with cash, stock, or a
combination of the two, provided that if shares acquired pursuant to the
exercise of a Nonqualified Stock Option are used, such shares shall be held by
the Participant for a period of at least six months before their tender to
exercise additional Nonqualified Stock Option shares. In accordance with the
rules and procedures established by the Committee for this purpose, the
Nonqualified Stock Option may also be exercised through a "cashless exercise"
procedure approved by the Committee involving a broker or dealer approved by the
Committee, that affords Participants the opportunity to sell immediately some or
all of the shares underlying the exercised portion of the Nonqualified Stock
Option in order to generate sufficient cash to pay the Nonqualified Stock Option
exercise price and/or to satisfy withholding tax obligations related to the
Nonqualifed Stock Option exercise.
6.1.3 No Nonqualified Stock Option shall be for a term of more than ten
years from the date of the grant.
6.1.4 In the case of Normal Retirement, death or disability, a
Participant or his or her beneficiary shall have a period equal to the remaining
term of the Nonqualified Stock Option or five years, whichever is shorter to
exercise any outstanding Nonqualified Stock Options.
6.1.5 If employment is terminated for any other reason, any outstanding
Nonqualified Stock Options shall expire 30 days after the Participant's
termination date.
6.1.6 No Participant may receive more than 500,000 Nonqualified Stock
Options in a single Plan Year.
6.1.7 Subject to the provisions of the Plan, the Committee shall
determine the key employees of the Company to whom, and the time or times at
which, Awards will be granted or awarded; the number of Nonqualified Stock
Options, the applicable vesting schedule for each Award, Dividend Units or
Performance Shares to be subject to each Award; duration of each award; the time
or times within which Nonqualified Stock Options may be exercised; the
performance targets required to earn Performance Shares, the duration of the
Dividend Units; and the other terms and conditions of the grant or award of the
Award, at grant or award, or while outstanding, pursuant to the terms of the
Plan. The provisions and conditions of the Award need not be the same with
respect to each employee or with respect to each Award.
6.2 Dividend Units: The Committee may grant Dividend Units to a Participant in
the Plan. Dividend Units may be granted alone or in tandem with Nonqualified
Stock Options or Performance Shares.
6.2.1 The amount payable to a Participant in respect to a Dividend Unit
shall be equal to the aggregate dividends payable on a share of Common Stock
during the term of the Dividend Unit. A Participant shall be deemed to have held
a Dividend Unit from the date of the Award.
6.2.2 The term of a Dividend Unit shall be established by the Committee
at the time of the Award and specified in the related grant letter to the
Participant.
6.2.3 The amount payable to a Participant in respect of a Dividend Unit
shall be paid by the Company to a Participant at the end of the term of the
Dividend Unit.
6.2.4 If a Participant is terminated by the Company unless otherwise
decided by the Committee, he or she shall receive the current value of his or
her Dividend Units.
6.2.5 No Dividend Units are generally paid to a Participant who
voluntarily leaves the Company.
28
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
6.3 Performance Shares: The Committee may grant Performance Shares to
Participants in the Plan.
6.3.1 Prior to the beginning of a Plan Year, the Chief Executive Officer
shall recommend the performance period and one or more performance goals to the
Committee.
6.3.2 At the time of the grant, the Committee shall determine:
6.3.2.1 The performance period;
6.3.2.2 The performance goal or goals to be achieved for Awards to
be payable.
6.3.3 At the end of the performance period, the Committee shall
determine the level of performance versus the goal, and the portion of the
Performance Shares, if any, which shall be payable to the Participants.
6.3.4 Shares earned shall be paid as soon as practicable following the
end of the performance period.
6.3.5 Awards may be paid in cash or Common Stock of the Company, or any
combination of the two in the sole discretion of the Committee.
7. Shares Reserved
7.1 The total number of shares of California Water Service Group Common Stock
that may be issued or transferred under the Plan pursuant to Awards may not
exceed 1,500,000 shares (subject to adjustment as described below).
7.2 Common Stock may be issued from authorized but unissued shares or out of
shares held in the Company's treasury, or both.
8. Amendments
All amendments to the Plan shall be in writing and shall be effective when
approved by the Board, provided that no amendment shall be made to increase the
number of shares of Common Stock authorized or available under the Plan.
9. Other Provisions
9.1 Nonqualified Stock Options, Dividend Units and Performance Shares granted
shall be communicated to the Participant at the time of grant. The actual number
of Performance Shares earned shall be communicated to the Participant as soon as
practicable after the end of a performance period.
9.2 The following provisions shall apply to all Common Stock, Nonqualified Stock
Options, Performance Shares and Dividend Units authorized for issuance under the
Plan.
9.2.1 In the event of a stock split, stock dividend, or other
subdivision or combination of the Common Stock of the Company, the number of
shares of Common Stock authorized under the Plan shall be adjusted
proportionately. Similarly, in any event aforementioned, there will be a
proportionate adjustment in the number and exercise price of shares of Common
Stock subject to unexercised Nonqualified Stock Options, Performance Shares and
Dividend Units.
9.2.2 If the outstanding shares of Common Stock are changed or converted
into or exchanged or exchangeable for a different number or class of shares or
other security of the Company or of another corporation by reason of a
reorganization, merger, consolidation, reclassification, or combination, an
appropriate adjustment shall be made by the Board in the number and kind of
shares for which Nonqualified Stock Options, Dividend Units or Performance
Shares were granted pursuant to the Plan.
29
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
9.3 No Nonqualified Stock Option, Dividend Unit or Performance Share awarded
shall be construed as imposing an obligation on the Company to continue the
Participant's employment with the Company.
9.4 No Nonqualified Stock Option, Dividend Unit, or Performance Share awarded
pursuant to the Plan shall be transferable or assignable by a Participant other
than by will or laws of descent and distribution, and during the lifetime of the
Participant shall be exercisable by, and payable only to the Participant.
9.5 The Company shall have the right to deduct from any payment resulting from
the Performance Share, or Dividend Unit awarded hereunder any Federal, state or
local income or employment taxes required by law to be withheld, and with
respect to Nonqualified Stock Options to require the payment of any such taxes.
9.6 If approved by the shareholders, the Plan will become effective immediately.
Performance Shares, Nonqualified Stock Options and Dividend Unit grants may be
made prior to, but contingent on, shareholder approval of the Plan.
9.7 The Board may terminate the Plan at any time, but no such termination by the
Board shall adversely affect the rights of the Participants under the Plan with
respect to outstanding Nonqualified Stock Options, Dividend Units, or
Performance Shares.
9.8 This Plan shall be construed in accordance with, and governed by, the laws
of the state of Delaware.
9.9 Nothing contained in this Plan and no action taken pursuant to the
provisions of this Plan shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Company or any of its officers or
directors and Participant, his or her designated beneficiary or any other
person. Any funds which the Company may invest to meet its obligations under
this Plan shall continue for all purposes to be a part of the general funds of
the Company and no person other than the Company shall by virtue of the
provisions of this Plan have any interest in such funds. To the extent that any
person acquires a right to receive payments from the Company under this Plan,
such right shall be no greater than the right of any unsecured general creditor
of the Company. Neither a Participant nor his or her beneficiaries shall have
the right to encumber, commute, borrow against, dispose of, transfer or assign
part or all of the right to receive payments hereunder. This Plan is intended to
be a "Top Hat" plan exempt from the requirements of the Employee Retirement
Income Security Act of 1974 ("ERISA") pursuant to ERISA sections 201(2),
301(a)(3), and 401(a)(1).
11. Effective Date
This Plan shall be effective May 1, 2000, subject to shareholder approval at the
Company's 2000 annual shareholder meeting.
30
CALIFORNIA WATER SERVICE GROUP NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT
[MAP]
California Water Service Group
California Water Service Company, CWS Utility Services, and Washington Water
Service Company
1720 North First Street o San Jose, CA 95112-4598 o (408) 367-8200
31
(This page intentionally left blank)
[LOGOS]
California Water Service Group
1720 North First Street
San Jose, California 95112-4598
408.367.8200
www.calwater.com
VOTE BY TELEPHONE
IT'S FAST, CONVENIENT, AND IMMEDIATE!
CALL TOLL-FREE ON A TOUCH-TONE PHONE
1-877-PRX-VOTE (1-877-779-8683)
FOLLOW THESE FOUR EASY STEPS:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Call the toll-free number 1-877 PRX-VOTE (1-877-779-8683).
3. Enter your 14-digit Control Number located on your Proxy Card above your
name.
4. Follow the recorded instructions.
Your vote is important!
Call 1-877-PRX-VOTE
VOTE BY INTERNET
IT'S FAST, CONVENIENT, AND YOUR VOTE IS IMMEDIATELY CONFIRMED AND POSTED.
FOLLOW THESE FOUR EASY STEPS:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Go to the Website http://www.eproxyvote.com/cwt
3. Enter your 14-digit Control Number located on your Proxy Card above your
name.
4. Follow the instructions provided.
Your vote is important!
Go to http://www.eproxyvote.com/cwt
We have been advised by counsel that these telephone and internet voting
procedures comply with Delaware law.
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
PROXY
CALIFORNIA WATER SERVICE GROUP
PROXY SOLICITED BY THE BOARD OF DIRECTORS
PETER C. NELSON and PAUL G. EKSTROM, and each of them, with full power of
substitution, are hereby authorized to vote, as designated on the reverse side,
all the shares of California Water Service Group common stock and preferred
stock of the undersigned at the Annual Meeting of Stockholders of California
Water Service Group to be held at 1720 N. First Street, San Jose, California on
Wednesday, April 19, 2000 at 10:00 A.M., or at any adjournment thereof. By my
signature on the reverse side of this proxy, I acknowledge that I have received
a copy of the notice of meeting and proxy statement relating to this meeting.
PLEASE DATE, SIGN AND MAIL AS SOON AS POSSIBLE IN THE ENCLOSED ENVELOPE.
Unless otherwise specified below this proxy authorizes the proxies to cumulate
all votes that the undersigned is entitled to cast at the Annual Meeting for,
and to allocate such votes among, one or more of the nominees listed on the
reverse side as the proxies determine in their discretion. To specify a
different method of cumulative voting, write "Cumulate For" and the number of
shares and the name(s) of the nominee(s) in the space provided below.
- --------------------------------------------------------------------------------
(Continued and to be signed on reverse side)
SEE REVERSE SIDE SEE REVERSE SIDE
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
If not otherwise directed, this proxy will be voted FOR the election of
directors, FOR ratification of the appointment of KPMG LLP as independent
auditors, FOR the approval of the Long Term Incentive Plan, AGAINST the
stockholder proposal and in the discretion of the proxy holders on any other
matters properly raised at the meeting. The Company knows of no other matter to
be raised at the meeting other than as set forth in the Company's proxy
statement.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR PROPOSALS 1, 2 AND 3.
1. ELECTION OF DIRECTORS
NOMINEES: Robert W. Foy, Edward D. Harris, Jr., M.D., Robert K.
Jaedicke, Richard P. Magnuson, Linda R. Meier, Peter C. Nelson, Langdon
W. Owen, C.H. Stump, and George A. Vera
[ ] FOR ALL NOMINEES [ ] WITHHELD FROM ALL NOMINEES
[ ] FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP, AS THE INDEPENDENT
AUDITORS OF THE GROUP.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE A LONG TERM INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS VOTING AGAINST PROPOSAL 4
4. STOCKHOLDER PROPOSAL REGARDING PREEMPTIVE RIGHTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
NOTE:Please sign exactly as name appears hereon. If signing as attorney,
executor, administrator, trustee, guardian or the like, please give your
full title as such. If signing for a corporation, please give your title.
In the case of shares standing in the name of two or more persons, Delaware
law permits the voting of such shares under a proxy signed by any one of
such persons if none of the others is present in person or represented by
proxy.
PLEASE DATE, SIGN AND RETURN PROMPTLY.
Signature -------------------------------------- Date ---------------------------------------
Signature -------------------------------------- Date ---------------------------------------