def14a
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a party other than the Registrant o
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California Water Service Group
(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):
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California
Water Service Group
California Water Service Company,
Hawaii Water Service Company,
New Mexico Water Service Company, Washington Water Service
Company, CWS Utility Services, and HWS Utility
Services
1720
North First Street
San Jose, CA
95112-4598
(408) 367-8200
April 7,
2010
Dear Fellow Stockholder:
You have now received your proxy materials for the California
Water Service Groups 2010 Annual Meeting of Stockholders.
If your shares are held in the name of your brokerage firm, due
to a recent change in New York Stock Exchange (NYSE) rules, your
broker can no longer vote your shares for the election of
directors without instructions from you. If you do not
provide voting instructions to your broker, no votes will be
cast on your behalf in the election of directors.
If your shares are held in the name of your brokerage firm, you
should have received with the proxy materials instructions from
your broker that you must follow in order for your shares to be
voted. We urge you to review the instructions from your broker
as soon as possible. If your shares are held in your own name,
please follow the voting instructions included on the enclosed
proxy card.
Your vote is important to us. Thank you for your investment in
the California Water Service Group.
Sincerely,
ROBERT W. FOY
CHAIRMAN OF THE BOARD
California
Water Service Group
California Water Service Company,
Hawaii Water Service Company,
New Mexico Water Service Company, Washington Water Service
Company, CWS Utility Services, and HWS Utility
Services
1720
North First Street
San Jose, CA
95112-4598
(408) 367-8200
April 7,
2010
Dear Fellow Stockholder:
You are cordially invited to attend our Annual Meeting of
Stockholders at 9:30 a.m. on Tuesday, May 25, 2010, at
the Doubletree Hotel San Jose, located at 2050 Gateway
Place in San Jose, California. Please note the
new location for the Annual Meeting of Stockholders.
Enclosed are a notice of matters to be voted on at the meeting,
our Proxy Statement, a proxy card and our 2009 Annual Report.
Whether or not you plan to attend, your vote is important.
Please vote your shares, as soon as possible, in one of three
ways: Internet, telephone or mail. Instructions regarding
Internet and telephone voting are included on the proxy card. If
you choose to vote by mail, please mark, sign and date the proxy
card and return it in the enclosed postage-paid envelope.
In a continuing effort to reduce costs and conserve natural
resources, we produced a summary annual report again this year,
opting not to duplicate the financial information that continues
to be provided in the SEC
Form 10-K.
We care about what you think of the report. Please send your
feedback to annualreport@calwater.com.
Thank you for your investment in the California Water Service
Group.
Sincerely,
ROBERT W. FOY
CHAIRMAN OF THE BOARD
2010
ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS
This Proxy Statement, dated April 7, 2010, relates to the
solicitation of proxies by the Board of Directors of California
Water Service Group for use at our 2010 Annual Meeting of
Stockholders, which is scheduled to be held on May 25,
2010. We expect to begin mailing this Proxy Statement to
stockholders on or about April 15, 2010.
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For directions to the Annual Meeting, please refer to page 35 of
the proxy.
CALIFORNIA
WATER SERVICE GROUP
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
The Annual Meeting of Stockholders of California Water Service
Group will be held on May 25, 2010, at 9:30 a.m., at
the Doubletree Hotel San Jose, 2050 Gateway Place,
San Jose, California 95110, for the following purposes:
1. Election of directors;
2. Ratify the selection of Deloitte & Touche LLP
as the Groups independent registered public accounting
firm; and
3. To consider such other business as may properly come
before the meeting.
The Board of Directors has fixed the close of business on
March 31, 2010, as the record date for the determination of
holders of common stock entitled to notice of and to vote at the
Annual Meeting.
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: (a) by Internet,
(b) by telephone, or (c) by USPS mail. For specific
instructions, please refer to Questions and Answers About
the Proxy Materials and the Annual Meeting of this Proxy
Statement and the instructions on the proxy card.
By Order of the Board of Directors
LYNNE P. MCGHEE, Esq.
Corporate Secretary
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IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDERS MEETING TO BE HELD ON MAY 25, 2010
Electronic copies of the Groups
10-K,
including exhibits, and this Proxy Statement will be available
on the Groups website at:
http://www.calwatergroup.com.
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL
MEETING
What am I
voting on?
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Election of nine directors to serve until the 2011 Annual
Meeting.
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Ratification of the Audit Committees selection of
Deloitte & Touche LLP as the Groups independent
registered public accounting firm for 2010.
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Those elected to serve as directors of California Water Service
Group, which we refer to in this Proxy Statement as the Group,
will also serve as the directors of California Water Service
Company and CWS Utility Services, two of the Groups
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
March 31, 2010 (the Record Date), or those with
a valid proxy from a brokerage firm or another similar
organization that held shares on the Record Date.
How many
votes do I get?
Each share of common stock is entitled to one vote. You may also
use cumulative voting in the election of directors
as described below.
What is
cumulative voting and how does it work?
You may elect to cumulate your vote in the election
of directors. Cumulative voting permits you to allocate among
the director nominees the total number of votes you may cumulate.
If you hold common stock, the total number of votes you may
cumulate is determined by multiplying the number of shares you
hold by the number of director positions to be filled. For
example, if you own 100 shares of common stock, you may
distribute 900 FOR votes (100 shares x
9 director positions to be filled) among as few or as many
of the nine director nominees as you choose.
If you wish to cumulate your vote for director nominees, you
must follow the special instructions on the proxy card or voting
instruction card and vote by mail. 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.
Who are
the Boards nominees?
The nominees are Douglas M. Brown, Robert W. Foy, Edwin A.
Guiles, Edward D. Harris, Jr., M.D., Bonnie G. Hill,
Richard P. Magnuson, Linda R. Meier, Peter C. Nelson, and George
A. Vera. All the nominees are current Board members. See
Proposal No. 1 Election of
Directors for biographical information and qualifications,
including the nominees current directorships in other
publicly held companies.
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What is
the required vote for the second proposal to pass?
In order for the Boards selection of Deloitte &
Touche LLP as independent registered public accounting firm to
be ratified, the 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.
How do I
vote?
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 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. You must have a Touch-Tone
phone to vote by telephone.
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 in person at the meeting.
We will hand 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:
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for the nine named director nominees, and
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for the ratification of the selection of the independent
registered public accounting firm.
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We have been advised by legal 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:
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signing another proxy with a later date;
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voting on the Internet or by telephone (your latest Internet or
telephone proxy is counted);
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voting again at the meeting; or
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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.
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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), and you do not return your proxy, your
shares will not be voted unless you attend the meeting and vote
in person. Different rules apply if your stockbroker holds your
shares for you.
What
happens if my shares are held by my stockbroker?
If you do not return your proxy, then your stockbroker, under
certain circumstances, may vote your shares.
Stockbrokers must write to you asking how you want your shares
voted. If you do not respond, stockbrokers have authority under
exchange regulations to vote your uninstructed shares on certain
routine matters, including ratification of the
selection of the independent registered public accounting firm.
Effective January 1, 2010,
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however, the election of directors is no longer considered a
routine matter. Thus, if you do not instruct your
stockbroker on how to vote in the election of directors, no
votes will be cast on your behalf. If you wish to change the
voting instructions you gave to your stockbroker, you must ask
your stockbroker how to do so.
If you do not give your stockbroker voting instructions, the
stockbroker may either:
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proceed to vote your shares on routine matters and refrain from
voting on nonroutine matters; or
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leave your shares entirely unvoted.
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Shares that your stockbroker does not vote (stockbroker
non-votes) will count towards the quorum only. We
encourage you to provide your voting instructions to your
stockbroker. 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 nonroutine matters, depending on the
terms of the agreement you have with your stockbroker.
What
happens if I abstain from voting on a proposal?
If you abstain from voting on a proposal (other than the
election of directors), either 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 the proposal. Abstentions have no
effect on the election of directors.
Who will
count the vote?
Representatives of Broadridge Financial Services, Proxy
Services, 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 2,596 stockholders
of record. There were 20,803,738 shares of our common stock
outstanding and entitled to vote at the Annual Meeting.
What
percentage of stock do the directors and executive officers
own?
Together, they own one percent of our common stock. See
Stock Ownership of Management and Certain Beneficial
Owners for more details.
Who are
the largest common stockholders?
As of April 7, 2010, the largest principal stockholder was
BlackRock, Inc, which held 1,195,191 shares of common
stock, representing 5.76% of our aggregate outstanding stock.
SJW Corp. held 1,099,952 shares of common stock,
representing 5.3% of our aggregate outstanding common stock. To
the best of our knowledge, no other stockholders held over 5% of
our common shares.
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What is
the deadline for submitting stockholder proposals for the
Groups proxy materials for next years Annual
Meeting?
Any proposals that stockholders intend to submit for inclusion
in the Groups 2011 proxy materials must be received by the
Corporate Secretary of the Group by December 9, 2010. A
proposal and any supporting statement together may not exceed
500 words. Please submit the proposal to the 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 or other business
for consideration at a stockholders meeting?
Any stockholder of record who is entitled to vote at a
stockholders meeting may propose a nominee for the Board
or propose other business for consideration at the meeting. The
bylaws contain the requirements for doing so. Contact the
Corporate Secretary to request a copy of the full bylaw
requirements. Briefly, a stockholder must give timely prior
notice of the matter to the Group. The notice must be received
by the Corporate Secretary at the Groups principal place
of business by the 150th day before the first anniversary
of the prior years Annual Meeting. For the 2011 Annual
Meeting, to be timely, notice must be received by the Corporate
Secretary by December 27, 2010. If we move the date of the
meeting by more than thirty days before or more than sixty 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
Groups Corporate Secretary receives notice of a matter
after the applicable deadline, the notice will be considered
untimely, and the persons named as proxies may exercise their
discretion in voting with respect to the matter when and if it
is raised at the meeting.
The bylaws specify what the notice must contain. Stockholders
must comply with all requirements of the securities laws with
respect to matters submitted in accordance with the bylaws. The
bylaws do not affect any stockholders right to request
inclusion of proposals in the Groups Proxy Statement under
the rules of the Securities and Exchange Commission.
How can a
stockholder or other interested party contact the independent
directors, the director who chairs the Boards executive
sessions or the full Board?
Stockholders or other interested parties may address inquiries
to any of the Groups directors, to the director who chairs
the Boards executive sessions, or to the full Board, by
writing to the Corporate Secretary, California Water Service
Group, 1720 North First Street, San Jose, California
95112-4598.
All such communications are sent directly to the intended
recipient.
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 two minutes in duration per
speaker. No cameras, video or recording equipment will be
permitted at the meeting.
BOARD
STRUCTURE
This section briefly describes the structure of the Board and
the functions of the principal committees of the Board. The
Board has adopted Corporate Governance Guidelines that, along
with the charters of the Board committees, provide a framework
for the governance of the Group. The Corporate Governance
Guidelines and the charters for the Audit, Organization and
Compensation, Finance and Risk Management, Nominating/Corporate
Governance and Executive committees are posted on the
Groups website at
http://www.calwatergroup.com.
These
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documents are also available in written form upon request to the
Corporate Secretary, California Water Service Group, 1720 North
First Street, San Jose, California
95112-4598.
The Groups policy is that all directors must be able to
devote the required time to carry out director responsibilities
and should attend all meetings of the Board and of committees on
which they sit.
Leadership
Structure
The role of chairman of the Board and the role of chief
executive officer (CEO) are separate pursuant to the Corporate
Governance Guidelines. The Corporate Governance Guidelines also
provide for an independent lead director to further strengthen
the governance structure. Mr. Douglas A. Brown currently
serves as lead director. The lead director presides over
executive sessions of the non-management and independent
directors and has the authority to call executive sessions. The
Board believes that this leadership structure fosters clear
accountability, effective decision making and helps to ensure
proper risk oversight for the Group.
Risk
Oversight
Under the Corporate Governance Guidelines, the full Board
oversees the Groups processes for assessing and managing
risk. The Board does not view risk in isolation but considers
risk as part of its regular consideration of business decisions
and business strategy. The Board exercises its risk oversight
function through the Board as a whole and through its
committees. Each of the Board committees considers the risks
within its areas of responsibility and identified in its
charter. The Finance and Risk Management Committee reviews the
Groups major risk exposures and the steps management has
taken and proposes to take to monitor and control such
exposures. The Audit Committee reviews with management risks
related to financial reporting and internal controls. At least
annually, the Finance and Risk Management Committee discusses
the Groups risk assessment and risk management with the
Audit Committee. The Organization and Compensation Committee
reviews enterprise risks to ensure that our compensation plans
and programs do not encourage management to take unreasonable
risks relating to our business. The Nominating/Corporate
Governance Committee oversees risks related to matters of
corporate governance, including director independence and board
performance.
The Group has an Enterprise Risk Management Committee (ERMC)
which reports directly to the Finance and Risk Management
Committee. The ERMC is not a committee of the Board. The ERMC is
chaired by the Groups chief financial officer, and four
other officers from various functions are members. The ERMC
identifies and prioritizes key risks and recommends the
implementation of appropriate mitigation measures, as needed.
The ERMC meets at least semi-annually and reports regularly to
the Finance and Risk Management Committee and the CEO. The ERMC
reports to the Audit Committee no less frequently than annually.
Further review or reporting on risks is conducted as needed or
as requested by the Board or committee.
Committees:
AUDIT: Reviews the Groups auditing,
accounting, financial reporting and internal audit functions.
Also, the Committee is directly responsible for the appointment,
compensation and oversight of the independent registered public
accounting firm, although stockholders are asked to ratify the
Committees selection that was adopted by the Board. All
members are independent as defined in the listing standards of
the New York Stock Exchange and meet the additional independence
requirements for audit committee members imposed by the
Sarbanes-Oxley Act and the rules of the SEC thereunder.
The Board has determined that George A. Vera, chair of the Audit
Committee, is an audit committee financial expert and is
independent as defined in the rules of the SEC and in the
listing standards of the New York Stock Exchange. This means
that the Board believes Mr. Vera has:
(i) an understanding of generally accepted accounting
principles and financial statements;
(ii) the ability to assess the general application of such
principles in connection with the accounting for estimates,
accruals and reserves;
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(iii) experience preparing, auditing, analyzing or
evaluating financial statements that present a breadth and level
of complexity of accounting issues that are generally comparable
to the breadth and complexity of issues that can reasonably be
expected to be raised by the Groups financial statements,
or experience actively supervising one or more persons engaged
in such activities;
(iv) an understanding of internal control over financial
reporting; and
(v) an understanding of Audit Committee functions.
Designation of a person as an audit committee financial expert
does not result in the person being deemed an expert for any
purpose, including under Section 11 of the Securities Act
of 1933. The designation does not impose on the person any
duties, obligations or liability greater than those imposed on
any other audit committee member or any other Director and does
not affect the duties, obligations or liability of any other
member of the Audit Committee or Board of Directors.
ORGANIZATION AND COMPENSATION: Reviews the
Groups executive and director compensation, employee
benefit plans and programs, including their establishment,
modification and administration. All members are independent as
defined in the listing standards of the New York Stock Exchange.
In 2009, the Organization and Compensation Committee took steps
to analyze the current risk profile of the Groups
executive and broad-based compensation programs. In its
evaluation, the Organization and Compensation Committee review
took into account the fact that the Group does not provide for
cash-based annual incentive compensation and that Group operates
in a highly regulated environment and thus maintains strong
internal controls, which factors tend to mitigate against undue
risk.
For a description of the processes and procedures used by the
Organization and Compensation Committee for the consideration
and determination of executive and director compensation, see
Compensation Discussion & Analysis
elsewhere in this Proxy Statement.
FINANCE AND RISK MANAGEMENT: Assists the Board
in reviewing the Groups financial policies, risk
management strategies and capital structure. All members are
independent as defined in the listing standards of the New York
Stock Exchange.
NOMINATING/CORPORATE GOVERNANCE: Assists the
Board by (i) identifying candidates and nominating
individuals qualified to become Board members and
(ii) developing and recommending a set of corporate
governance principles applicable to the Group. All members are
independent as defined in the listing standards of the New York
Stock Exchange.
EXECUTIVE: Has limited powers to act on behalf
of the Board whenever it is not in session. This committee meets
only as needed. The committee consists of a majority of
independent directors.
During 2009, there were eight regular meetings of the Board,
five meetings of the Audit Committee, two meetings of the
Organization and Compensation Committee, two meetings of the
Finance and Risk Management Committee, and two meetings of the
Nominating/Corporate Governance Committee. Each of the
director-nominees who served on the Board of California Water
Service Group in 2009 attended at least 95% of all Board and
applicable committee meetings. Collectively, they attended an
average of 99% of all of the Board and applicable committee
meetings.
Independence
of Directors
As discussed in the Groups Corporate Governance
Guidelines, a substantial majority of the Board is made up of
independent directors. Under the listing standards of the New
York Stock Exchange, a director is independent if he or she has
no material relationship, whether commercial, industrial,
banking, consulting, accounting, legal, charitable or familial,
with the Group, either directly or indirectly as a partner,
stockholder or officer of an entity that has a material
relationship with the Group. The Board makes an affirmative
determination regarding the independence of each director
annually, based on the recommendation of the
Nominating/Corporate Governance Committee. The Board has adopted
standards to assist it in assessing the independence of
directors, which are set
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forth in the Corporate Governance Guidelines. Under these
standards, the Board has determined that a director is not
independent if:
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the director has a material relationship (including, among
others, commercial, industrial, banking, consulting, legal,
accounting, charitable and familial relationships) with
companies that comprise the Group;
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the director is, or has been within the last three years, an
employee of any company that comprises the Group or an immediate
family member is, or has been within the last three years, an
executive officer of any company that comprises the Group;
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the director or any immediate family member has received
personally during any twelve-month period within the past three
years more than $120,000 in direct compensation from companies
that comprise the Group, other than director or committee fees
and pension or other forms of deferred compensation for prior
service (compensation received by an immediate family member for
service as an employee, other than an executive officer, of the
Group is not considered for purposes of this standard);
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the director or an immediate family member is a current partner
of the Groups external auditor; the director is a current
employee of such a firm; the directors immediate family
member is a current employee of such a firm who works personally
on the Groups audit or the director or an immediate family
member was in the last three years a partner or employee of such
a firm and personally worked on the Groups audit within
that time;
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employment of the director or of an immediate family member
within the last three years as an executive officer of a company
whose Organization and Compensation Committee includes or
included at the same time an executive officer of the Group;
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being an employee or having an immediate family member who is an
executive officer of a customer or vendor or other party that
has made payments to or received payments from companies that
comprise the Group for property or services in an amount that
exceeded the greater of 2% or $1 million of the
partys consolidated gross revenues, in any of the past
three years; and
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the director, or the directors spouse, is an executive
officer of a non-profit organization to which the Group makes,
or in the past three years has made, payments that, in any
single fiscal year, exceeded the greater of 2% or
$1 million of the non-profit organizations
consolidated gross revenues.
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The Board has determined that none of the following
relationships, in itself, is a material relationship that would
impair a directors independence:
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being a residential customer of any companies that comprise
Group;
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being an executive officer or employee, or being otherwise
affiliated with, a commercial customer from which the
Groups consolidated gross revenues in any of the last
three years are or were not more than the greater of (i) 1%
of the Groups consolidated gross revenues for the year or
(ii) $500,000;
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being an executive officer or employee of a supplier or vendor
that has or had consolidated gross revenues from the Group in
any of the last three years of not more than the lesser of
(i) 1% of the Groups consolidated gross revenues for
the year or (ii) $500,000;
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having a 5% or greater ownership interest or similar financial
interest in a supplier or vendor that has or had consolidated
gross revenues from the Group in any of the last three years of
not more than the lesser of (i) 1% of the Groups
consolidated gross revenues for such year or
(ii) $500,000; and
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being a director of any of the Groups subsidiaries.
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Director
Qualifications and Diversity
The Group seeks directors having the following specific
qualifications:
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evidence of leadership in his or her particular field;
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broad experience and sound business judgment;
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8
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expertise in an area of importance to the Group and its
subsidiaries;
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the ability to work in a collegial Board environment;
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high personal and professional ethics and integrity;
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the ability to devote the required time to carry out director
responsibilities;
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the ability and willingness to contribute special competencies
to Board activities, including appointment to Board committees;
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freedom from conflicts of interest that would interfere with
serving and acting in the best interests of the Group and its
stockholders;
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evidence of being a high caliber individual who has achieved a
level of prominence in his or her career; for example, a CEO or
highest level financial officer of a sizeable organization, a
director of a major corporation, a prominent civic or academic
leader, etc.
|
Additionally, Section 2.8 of the Groups bylaws
contains requirements that a person must meet to avoid conflicts
of interest that would disqualify that person from serving as a
director.
Board membership should reflect diversity in its broadest sense.
The Group seeks directors who represent a diversity of
backgrounds and experiences that will enhance the quality of the
Boards deliberations and decisions. The Board, as a whole,
should possess a combination of skills, professional experience
and backgrounds necessary to oversee the Groups business.
Identification
of Director Nominees
The Group identifies new director candidates by director
recommendations and by the use of search firms selected by the
Nominating/Corporate Governance Committee.
The Group considers nominees of stockholders in the same manner
as all other nominees. The Group will consider director nominees
recommended by stockholders who adhere to the procedure
described under Questions and Answers About the Proxy
Materials and the Annual Meeting How can a
stockholder propose a nominee for the Board or other business
for consideration at a stockholders meeting?
elsewhere in this Proxy Statement.
Executive
Sessions of the Board
Under the Groups Corporate Governance Guidelines, the
nonmanagement directors meet at least four times each year in
executive session without management present, and the
independent directors meet in executive session at least once a
year. The lead director, Mr. Douglas M. Brown, chairs these
sessions. The lead director performs other responsibilities that
are described in the Groups Corporate Governance
Guidelines.
Retirement
Age of Directors
The Group has established a mandatory retirement age for
directors. A director must retire no later than the Annual
Meeting that follows the date of the directors
75th birthday. An employee director must retire as an
employee no later than the Annual Meeting that follows the date
of his or her 70th birthday, but may remain on the Board at
the discretion of the Board.
Annual
Meeting Attendance
All directors are expected to attend each Annual Meeting of the
Groups stockholders, unless attendance is prevented by an
emergency. All of the Groups directors who were in office
at that time attended the Groups 2009 Annual Meeting of
Stockholders, except Bonnie G. Hill.
9
Our directors as of April 7, 2010, are as follows:
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Current
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Term
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Director
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Name
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Age
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Position
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Expires
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Since
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Douglas M.
Brown(1)(2)(5)(8)(11)(12)
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72
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Lead Director
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2010
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2001
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Robert W.
Foy(10)
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73
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Chairman of the Board and Director
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2010
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1977
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Edwin A.
Guiles(2)(3)(4)(12)
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60
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Director
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2010
|
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2008
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Edward D. Harris,
Jr., M.D.(1)(5)(7)(12)
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72
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Director
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2010
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1993
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Bonnie G.
Hill(3)(5)(12)
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68
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Director
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2010
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2003
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Richard P.
Magnuson(1)(2)(3)(4)(9)(12)
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54
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Director
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2010
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1996
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Linda R.
Meier(1)(2)(3)(5)(12)
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69
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Director
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2010
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1994
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Peter C.
Nelson(1)
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62
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President, Chief Executive Officer and Director
|
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2010
|
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1996
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George A.
Vera(4)(5)(6)(12)
|
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66
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Director
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2010
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1998
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(1) |
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Member of the Executive Committee |
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(2) |
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Member of the Audit Committee |
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(3) |
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Member of the Organization and Compensation Committee |
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(4) |
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Member of the Finance and Risk Management Committee |
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(5) |
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Member of the Nominating/Corporate Governance Committee |
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(6) |
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Chair of the Audit Committee |
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(7) |
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Chair of the Organization and Compensation Committee |
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(8) |
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Chair of the Finance and Risk Management Committee |
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(9) |
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Chair of the Nominating/Corporate Governance Committee |
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(10) |
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Chair of the Executive Committee |
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(11) |
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Chair of the Boards Executive Sessions |
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(12) |
|
Independent director |
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Upon the recommendation of the Nominating/Corporate Governance
Committee, the Board has nominated for election at the 2010
Annual Meeting of Stockholders a slate of nine nominees. All of
the nominees have served as directors since the last Annual
Meeting. All directors are elected annually to serve until the
next Annual Meeting and until their respective successors are
elected.
Nominee
Qualifications
When an incumbent director is up for re-election, the
Nominating/Corporate Governance Committee reviews the
performance, skills and characteristics of such incumbent
director before making a determination to recommend that the
Board nominate him or her for re-election. The Boards
membership criteria, which are set forth in the Corporate
Governance Guidelines, include leadership in a particular field,
broad experience and sound business judgment, expertise in areas
of importance to the Group, ability to work in a collegial board
environment, the highest personal and professional ethics and
integrity, ability to devote required time to carrying out
director responsibilities, ability and willingness to contribute
special competencies to Board and committee activities, freedom
from conflicts of interest that would interfere with serving and
acting in the best interests of the Group and its stockholders,
and achievement of prominence in a career.
The Nominating/Corporate Governance Committee believes that all
of the nine director nominees listed below are highly qualified
and have the skills and experience required for membership on
our Board. A description of the
10
specific experience, qualifications, attributes and skills that
led our Board to conclude that each of the nominees should serve
as a director follows the biographical information of each
nominee below.
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.
The Board recommends a vote FOR the election of each of the
following nominees:
Douglas M. Brown
Director since 2001
Age 72
Mr. Brown is lead director and a resident of the
State of New Mexico. He is the dean of the University of
New Mexicos Anderson School of Management. He is the
former Treasurer for the State of New Mexico. From 1999 to 2005,
he was president and CEO of Tuition Plan Consortium and from
1990 to 1999, he was president and CEO of Talbot Financial
Services. He is also a former trustee of Stanford University and
former regent of the University of New Mexico. Previously, he
spent 28 years in commercial banking, most of it with Wells
Fargo Bank.
With his diverse professional background, Mr. Brown brings
to the Board economic and public policy expertise as well as
financial acumen. He is a former CEO of a publicly traded
company and has demonstrated leadership capabilities that
position him well to serve as lead director. In addition,
Mr. Brown brings valuable insight to the Board from the
perspective of the Groups subsidiary operations in New
Mexico.
Robert W. Foy
Director since 1977
Age 73
Mr. Foy is Chairman of the Board of California Water
Service Group and its subsidiaries. Mr. Foy retired as an
executive officer and employee director at the 2007 Annual
Meeting in accordance with the Groups retirement policy.
See Board Structure Retirement Age of
Directors. He was formerly president and CEO of Pacific
Storage Company, a diversified transportation, warehousing and
business records management company with offices throughout
Northern California; he remains an owner and director of that
company. He has served as Chairman of the California Water
Service Group since January 1, 1996. He serves as a member
of the San Jose State University College of Business Global
Leadership Council.
With his many years of leadership experience, both at the Group
and at Pacific Storage Company, Mr. Foy brings to the Board
demonstrated management ability at a senior level.
Mr. Foys full understanding of the Groups
business and its history, combined with his drive for
excellence, position him well to serve as chairman. Mr. Foy
is also active in numerous civic activities in Stockton, a city
served by the Groups subsidiary, California Water Service
Company.
Edwin A. Guiles
Director since March, 2008
Age 60
Mr. Guiles is a director of Cubic
Corporation. He was formerly executive vice-president
of corporate development at Sempra Energy. He was previously
chairman and CEO of San Diego Gas & Electric
(SDG&E) and Southern California Gas Company (SoCal Gas),
Sempra Energys California regulated utilities.
Mr. Guiles is also a director and past chairman of the
California Chamber of Commerce.
Mr. Guiles is a former CEO with a strong public utility
background. He has corporate governance experience through his
service on the boards of SDG&E, SoCal Gas and Cubic
Corporation, a public company. He brings to the Board valuable
senior management and operational expertise from his years at
Sempra Energy, SDG&E and SoCal Gas. Additionally,
Mr. Guiless in-depth knowledge of public utility
regulation provides the Board with crucial insight.
11
Edward D. Harris, Jr., M.D.
Director since 1993
Age 72
Dr. Harris is the George DeForest Barnett professor
of medicine, emeritus, at Stanford University Medical Center. He
is the Academic Secretary emeritus to Stanford University. He is
also the executive secretary of Alpha Omega Alpha, the National
Medical Honor Society, and editor of The Pharos. He
is a Master of the American College of Rheumatology, a Master of
the American College of Physicians and a Fellow of the Royal
College of Physicians (London).
Dr. Harris is a prominent medical clinician and
academician. His experience as a physician gives him extensive
knowledge in dealing with science and health issues that come
before the Board. He has a unique perspective to offer the Board
on a variety of public health issues, including water quality,
healthcare legislation and employee health.
Bonnie G. Hill
Director since 2003
Age 68
Ms. Hill is the president of B. Hill Enterprises,
LLC, a consulting firm specializing in corporate governance and
board organization. She is also co-founder of Icon Blue, a brand
marketing company. From 1997 to 2001, she was president and CEO
of Times Mirror Foundation and senior vice president,
communications and public affairs, of The Los Angeles Times. She
is a director of AK Steel Holdings Corp., Home Depot, Inc. and
Yum Brands, Inc. She was formerly a director of Hershey Foods
Corporation. She is a director of the Financial Industry
Regulatory Authority Investor Education Foundation and a member
of the Investors Advisory Group of the Public Company Accounting
Oversight Board.
Through her experience as a former chair of the Securities and
Exchange Commissions Consumer Affairs Advisory Committee,
and as a former director of the National Association of
Securities Dealers Regulation Board, Ms. Hill brings
to the Board significant public policy, regulatory, and
governance expertise. Her business experience as well as her
service on the boards of a variety of public companies over the
past 19 years demonstrates her extensive knowledge of the
complex financial and operational issues that public companies
face.
Richard P. Magnuson
Director since 1996
Age 54
Mr. Magnuson is a private venture capitalist.
Mr. Magnuson holds a law degree and a masters degree
in business administration from Stanford University. From 1984
to 1996, he was a general partner of Menlo Ventures, a venture
capital firm. He has served on the boards of the following
public companies: Rogue Wave Software (acquired by Quovadx.),
IKOS Systems, Inc. (acquired by Mentor Graphics) and OrCAD, Inc.
(acquired by Cadence Design Systems). He is currently a director
of two privately held companies and has also served on the
boards of several other privately held companies in the past.
With his legal and venture capital backgrounds,
Mr. Magnuson brings valuable financial and business
strategy expertise to the Board. His past experience on the
boards of other public companies, and his insight on financial
and operational matters, adds value to the Board. His past and
current board service also provides insight on corporate
governance practices.
Linda R. Meier
Director since 1994
Age 69
Ms. Meier is a member of the National Board of the
Institute of International Education and the Board of Trustees
of the World Affairs Council of Northern California. She is
co-chair of the The Stanford Challenge and chair of
outreach programs. She is a former director of Greater Bay
Bancorp. Previously, she was a founding board member of The
University National Bank and Trust Company. From
1992-1997,
Ms. Meier was chair of the
12
Stanford University Hospital Board of Directors. From
1984-1994,
she was a trustee of Stanford University and vice-president from
1991-1994.
Ms. Meier has demonstrated management capabilities and
knowledge of operational issues facing large organizations and
public companies. Her years of philanthropic and non-profit
experience provide an important perspective to the Board and a
valuable link to our community. Her past experience on the
boards of other public companies, including her membership on
marketing and compensation committees adds value to the Board as
well.
Peter C. Nelson
Director since 1996
Age 62
Mr. Nelson is president and CEO of the Group and its
subsidiaries. Before joining the Group in 1996, he was vice
president, division operations
(1994-1995)
and region vice president
(1989-1994)
of Pacific Gas & Electric Company (PG&E). He is a
director of the California Chamber of Commerce, chair of the
Chambers Water Resources Committee and a past president of
the National Association of Water Companies (NAWC).
Mr. Nelson is well positioned to lead our management team
and provide guidance and insight to the Board. Mr. Nelson
has a strong record of operational and strategy leadership in
the public utility business. An engineer by training with a
graduate degree in business administration, he gained extensive
senior executive experience at PG&E. He has a vast
understanding of the water industry from his fourteen-plus years
of experience as president and CEO of the Group and from his
leadership nationally at NAWC as well as in California at the
state chamber.
George A. Vera
Director since 1998
Age 66
Mr. Vera is vice president and chief financial
officer of the David and Lucile Packard Foundation. Until 1997,
he was an audit partner at Arthur Andersen, LLP.
Mr. Vera is an experienced financial leader with the skills
necessary to chair our Audit Committee. He brings many years of
accounting experience as a former audit partner that is critical
to the Board. His current position with the David and Lucile
Packard Foundation provides him with extensive knowledge in
dealing with financial and accounting matters.
13
STOCK
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Ownership
of Directors and Executive Officers
Our Board strongly encourages stock ownership by directors and
believes it is desirable for all directors to own an amount of
shares having a value of four times the amount of such
directors annual director retainer. Pursuant to the
Groups Corporate Governance Guidelines, available on the
Groups website at
http://www.calwatergroup.com,
directors elected before April 27, 2005, who own less than
the desirable amounts were strongly encouraged to increase their
holdings to that amount by April 26, 2009. Directors
elected on or after April 27, 2005, who own less than the
desired amount are strongly encouraged to increase their
holdings to four times the annual director retainer level before
the end of four years from the date of their election to the
Board.
The following table shows the common stock ownership of our
directors and officers as of April 7, 2010. All directors
and executive officers have sole voting and investment power
over their shares (or share such powers with their spouses).
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Common Stock
|
|
|
|
Beneficially Owned
|
|
Name
|
|
(*)
|
|
|
Douglas M. Brown
|
|
|
7,159
|
(1)
|
Director
|
|
|
|
|
Paul G. Ekstrom
|
|
|
15,356
|
(2)
|
Executive Officer
|
|
|
|
|
Francis S. Ferraro
|
|
|
12,728
|
(3)
|
Executive Officer
|
|
|
|
|
Robert W. Foy
|
|
|
52,905
|
(4)
|
Director
|
|
|
|
|
Edwin A. Guiles
|
|
|
3,721
|
(5)
|
Director
|
|
|
|
|
Robert R. Guzzetta
|
|
|
14,348
|
(6)
|
Executive Officer
|
|
|
|
|
Edward D. Harris, Jr., M.D.
|
|
|
5,703
|
(7)
|
Director
|
|
|
|
|
Bonnie G. Hill
|
|
|
6,631
|
(8)
|
Director
|
|
|
|
|
Martin A. Kropelnicki
|
|
|
11,879
|
(9)
|
Executive Officer
|
|
|
|
|
Richard P. Magnuson
|
|
|
24,719
|
(10)
|
Director
|
|
|
|
|
Linda R. Meier
|
|
|
7,922
|
(11)
|
Director
|
|
|
|
|
Peter C. Nelson
|
|
|
85,057
|
(12)
|
Director and Executive Officer
|
|
|
|
|
George A. Vera
|
|
|
7,907
|
(13)
|
Director
|
|
|
|
|
All directors and executive officers as a group
|
|
|
256,035
|
(14)
|
|
|
|
* |
|
To the knowledge of the Group, as of March 31, 2010, all
directors and executive officers together beneficially owned an
aggregate of 1% of the Groups outstanding common shares.
No one director or officer beneficially owns more than 1% of the
Groups outstanding common shares. |
|
(1) |
|
Includes 4,922 shares of restricted stock
(3,545 shares vested and 1,377 shares awarded on
March 2, 2010, which have a 12 month vesting). |
14
|
|
|
(2) |
|
Includes 8 shares held in the Employees Savings Plan,
7,483 shares of vested stock-settled stock appreciation
rights, and 4,311 shares restricted stock
(1,202 shares vested and 3,109 shares not vested which
includes 2,066 shares awarded on March 2, 2010). |
|
(3) |
|
Includes 32 shares held in the Employees Savings Plan,
7,483 shares of vested stock-settled stock appreciation
rights, and 4,311 shares restricted stock
(1,202 shares vested and 3,109 shares not vested which
includes 2,066 shares awarded on March 2, 2010). |
|
(4) |
|
Includes 7,500 shares restricted stock (5,286 shares
vested and 3,909 shares not vested which includes
1,377 shares awarded on March 2, 2010). |
|
(5) |
|
Includes 3,647 shares restricted stock (2,270 shares
vested and 1,377 shares not vested awarded on March 2,
2010). |
|
(6) |
|
Includes 104 shares held in the Employees Savings Plan,
7,483 shares of vested stock-settled stock appreciation
rights, and 4,311 shares restricted stock
(1,202 shares vested and 3,109 shares not vested which
includes 2,066 shares awarded on March 2, 2010). |
|
(7) |
|
Includes 4,922 shares restricted stock (3,545 shares
vested and 1,377 shares awarded on March 2, 2010). |
|
(8) |
|
Includes 4,922 shares restricted stock (3,545 shares
vested and 1,377 shares awarded on March 2, 2010). |
|
(9) |
|
Includes 7,430 shares of vested stock-settled stock
appreciation rights, and 4,311 shares restricted stock
(1,195 shares vested and 3,116 shares not vested which
includes 2,066 shares awarded on March 2, 2010). |
|
(10) |
|
Includes 4,922 shares restricted stock (3,545 shares
vested and 1,377 shares awarded on March 2, 2010). |
|
(11) |
|
Includes 4,922 shares restricted stock (3,545 shares
vested and 1,377 shares awarded on March 2, 2010). |
|
(12) |
|
Includes 61 shares held in the Employees Savings Plan,
31,669 shares of vested stock-settled stock appreciation
rights, and 17,739 shares restricted stock
(5,021 shares vested and 12,718 shares not vested
which includes 8,676 shares awarded on March 2, 2010). |
|
(13) |
|
Includes 4,922 shares restricted stock (3,545 shares
vested and 1,377 shares awarded on March 2, 2010). |
|
(14) |
|
Includes an aggregate of 205 shares held in the Employees
Savings Plan for the benefit of the directors and executive
officers, 53,000 shares outstanding stock options which are
currently exercisable by the directors and executive officers
within 60 days, 69,048 shares of vested stock-settled
stock appreciation rights for the benefit of the executive
officers and 73,448 shares of restricted stock
(37,271 shares vested and 36,177 shares not vested
which includes 38,286 shares awarded on March 2, 2010). |
15
Ownership
of Largest Principal Stockholders
As of March 31, 2010, the Groups records and other
information available from outside sources indicated that the
following stockholder was the beneficial owner of more than five
percent of the outstanding shares of our common stock.
The information below is as reported in filings made by third
parties with the Securities and Exchange Commission. Based
solely on the review of our stockholder records and public
filings made by the third parties with the Securities and
Exchange Commission, the Group is not aware of any other
beneficial owners of more than five percent of the common stock.
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|
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|
|
|
|
|
|
|
|
|
|
Number of Shares of
|
|
|
Class
|
|
Beneficial Owner(1)
|
|
Common Stock
|
|
Percent of Class
|
|
Common
|
|
BlackRock, Inc.
|
|
|
1,195,191
|
|
|
|
5.75
|
%
|
|
|
40 East 52nd Street New York, NY 10022
|
|
|
|
|
|
|
|
|
Common
|
|
SJW Corp.
|
|
|
1,099,952
|
|
|
|
5.29
|
%
|
|
|
110 West Taylor Street San Jose, CA 95110
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
BlackRock, Inc. and SJW Corp. each has sole voting and
investment power over their respective 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 forms furnished to
the Group, or written representations that no annual forms (SEC
Form 5) were required, the Group believes that during
the fiscal year ended December 31, 2009, our directors,
executive officers and holders of more than ten percent of our
common stock complied with all applicable SEC Section 16(a)
filing requirements.
COMPENSATION
DISCUSSION AND ANALYSIS
The Organization and Compensation Committee (Committee)
administers the Groups compensation plans and programs for
board members and executive officers. After a review of
compensation levels, the Committee recommends to the full Board
of Directors compensation levels, including the equity incentive
plan awards for board members and executive officers for the
12-month
period beginning January 1st of each year. The
Committee starts its planning and review process in September of
each year and typically concludes its process in November. The
Groups principal executive officer, principal financial
officer, and three other most highly compensated executive
officers in a particular year are referred to herein as
executive officers or executives. More
information on the committee and related charter can be found at
the Groups website at
http://www.calwatergroup.com
in the corporate governance section.
Compensation
Philosophy for Executive Officers
The Groups overall philosophy is to provide compensation
that attracts, retains, and motivates talented executives,
rewards excellent job performance and overall leadership, and
provides for fair, reasonable, and competitive total
compensation. The Committee believes that compensating
executives using these criteria is a benefit to both
stockholders and customers.
16
Elements
of Compensation
The material elements of the Groups executive compensation
program include:
|
|
|
|
|
Salary
|
|
|
|
Equity Compensation
|
|
|
|
Basic and Supplemental Pension Plan Benefits
|
|
|
|
Deferred Compensation Plan Benefits
|
|
|
|
Limited Perquisites
|
Historically, the Group has not used annual bonuses as a
compensation mechanism and did not use annual bonuses for the
2009 fiscal year. The Committee is mindful that as a holding
company for a California regulated utility, the Groups
financial performance is to a large extent dependent upon
California Public Utilities Commission (CPUC) ratemaking
decisions and other factors beyond the control of the
executives. Therefore, the Committees decisions regarding
overall compensation are determined largely by its comparisons
with peer groups and evaluation of factors that are within the
executives control.
Salary
The Group provides a significant portion of executive
officers total compensation in the form of base salaries.
Base salaries provide a measure of security that enables
executive officers to meet daily living expenses and financial
commitments. The Committee reviews base salaries for executive
officers annually and determines whether or not to recommend
adjustments to base salaries. To assist the Committee in this
review, the Groups chief executive officer (CEO) provides
an assessment of performance and recommendations regarding base
salary adjustments to the Committee for each of the executive
officers other than himself based on the competitive data and
the other factors described below under Determining
Executive Compensation.
As noted below, under Determining Executive
Compensation, the Committee targets base salaries for each
executive that are within the competitive range (defined as plus
or minus 20% from the median compensation level) for the
executives position as established by reference to the
competitive data described below. As noted above, the Group does
not pay annual cash incentive compensation. However, because
annual incentives are a common component of executive
compensation in the surveys included in the competitive data,
the Group compares base salary levels for the executives to the
actual total cash compensation (base salary plus actual bonus)
for similar positions within the competitive data (rather than
comparing the executives base salaries to the base
salaries within the competitive data). Each of the
executives base salaries for 2009 were within the
competitive range of actual total cash compensation, except
Mr. Ferraro whose base salary was slightly above the
competitive range for his position because of his long tenure
with the Group, his unique expertise and continued contributions
in regulatory matters, and his corporate development
responsibilities, each of which are greater than those usually
afforded to executives in his position with other public
utilities.
In addition to the review of competitive data, the CEO provides
a full self-assessment of his own performance and degree of
success in meeting the goals set for him by the Committee at the
beginning of the year, and this is followed by the
Committees assessment of the Groups performance and
the CEOs role in achieving that performance. The
CEOs goals for 2009 were to implement improvements in
California regulation, to achieve budgeted earnings per share of
$1.96 (the Groups actual performance resulted in earnings
per share of $1.95), and to achieve planned results in other
corporate initiatives. The Committee then reviews and discusses
the performance of each executive and the competitive data
provided by Presidio Pay Advisors (PPA). Once reviewed and
agreed
17
upon, the Committee recommends to the full Board of Directors
the base salaries for the executive officers (including the
CEO). The following tables shows the base salaries for each
executive for 2008, 2009 and 2010:
|
|
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|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
2008 Base Salary
|
|
|
2009 Base Salary
|
|
|
2010 Base Salary
|
|
|
Mr. Nelson
|
|
$
|
794,000
|
|
|
$
|
875,000
|
|
|
$
|
910,000
|
|
Mr. Kropelnicki
|
|
$
|
370,000
|
|
|
$
|
400,000
|
|
|
$
|
425,000
|
|
Mr. Ferraro
|
|
$
|
340,000
|
|
|
$
|
375,000
|
|
|
$
|
381,000
|
|
Mr. Guzzetta
|
|
$
|
280,000
|
|
|
$
|
295,000
|
|
|
$
|
300,000
|
|
Mr. Ekstrom
|
|
$
|
235,000
|
|
|
$
|
260,000
|
|
|
$
|
270,000
|
|
Shown in the chart above for both 2009 and 2010, are the base
salary increases for senior management approved by the
Committee. These increases are intended to maintain base
salaries within the competitive range of actual total cash
compensation for similar positions within the competitive data.
Equity
Compensation
The purpose of the Groups long-term equity incentive
compensation program has been to align executive compensation
with stockholder interests, to create incentives for executive
recruiting and retention, to encourage long-term performance by
the Groups executive officers, and to promote stock
ownership. As with base salaries, the Committee reviews the
competitive range of long-term equity compensation and total
direct compensation (long-term equity compensation plus base
salary) for similar positions within the competitive data in
making decisions regarding long-term equity compensation awards
for 2009. However, the Committee also believes that, in the
interest of fostering the Groups one-team
approach, the annual equity incentive awards granted to each of
the Groups executive officers (other than the CEO) would
be the same for each. The Committee recommended awarding the CEO
a greater value of equity awards than the other executive
officers because of his substantially greater level of
responsibility and ability to influence the Groups
operational results. In addition, for both the CEO and the other
executives, the grant values for 2009 were increased over the
grant values for 2008 as a result of the Committees review
of the competitive data and its desire to bring long-term equity
incentive compensation values within the competitive range for
similar positions within the competitive data, while maintaining
the Groups one-team approach for executives
other than the CEO.
Each year the Committee first establishes the total value of the
equity compensation awards to be granted to the CEO and the
other executive officers. For 2009 these values were $300,000
and $75,000, respectively, vesting over four years. In 2009, we
granted annual equity compensation awards to the executive
officers in the form of stock-settled stock appreciation rights
(SARs) and restricted stock awards (RSAs), with 50% of the total
value of the annual equity compensation award allocated to each.
The Committee believed this mix of SARs and RSAs creates an
effective combination of incentives and retention for those
executives who are most responsible for influencing stockholder
value.
The Committee has granted equity awards to the executive
officers in March of each year following the release of annual
financial results. On March 3, 2009, the Committee granted
to: (i) the CEO, RSAs covering 3,550 shares and SARs
covering 22,000 shares; and (ii) each of the executive
officers other than the CEO, RSAs covering 890 shares and
SARs covering 5,500 shares. These share numbers were
determined based upon the grant date fair value of the awards
and the dollar value allocated to each executive officer.
Both the SARs and RSAs granted to the executive officers on
March 3, 2009, pursuant to the California Water Service
Group Equity Incentive Plan (the Incentive Plan)
vest in monthly installments over 48 months following the
date of grant. In addition, the SARs have a ten-year term. The
exercise price of the SARs is the closing price for the
Groups common stock on the New York Stock Exchange on the
grant date. Neither the SARs nor the RSAs provide for automatic
vesting acceleration if there is a change in control or in the
ownership of the Group.
In November of 2009, the Committee, after reviewing competitive
data for each executive, approved the total value of the equity
compensation awards to be granted to the CEO and the other
executive officers for 2010. These values were $315,000 (CEO)
and $75,000 (other executive officers), and were granted on
March 2, 2010, in the form of RSAs. The Committee decided
to change the form of the 2010 long-term equity incentive
compensation from 50% RSAs and 50% SARs to 100% RSAs after
observing that companies similar to the Group tend to
18
experience steady growth in revenue and profit, but do not
always see this value growth reflected in its stock price. As
such, the Committee determined that SARs, whose value is
primarily driven by market volatility, were not ideal for
compensating executives who may be increasing the Groups
value but whose performance is not reflected in the Groups
stock price appreciation. In addition, the Committee observed
that the Group records a significant accounting expense each
year related to the grants of SARs to the executives, however,
few executives have actually gained any economic benefits from
those awards.
Basic
and Supplemental Pension Plan Benefits
In addition to the tax-qualified defined benefit plan that
covers virtually all union and non-union employees, the Group
provides supplemental retirement benefits to executive officers
under the Supplemental Executive Retirement Plan (SERP). The
plan is an unfunded, unsecured obligation of the Group and is
designed to assist in attracting and retaining key executives
while providing a competitive, total compensation program. In
addition, since we do not provide a significant amount of total
compensation in the form of equity incentives, SERP benefits
provide executive officers with retirement security.
Furthermore, the plan is designed, in part, to make up for
limitations imposed by the Internal Revenue Code on allocations
and benefits that may be paid to our executive officers under
the Groups tax-qualified plan. Since the tax code
restricts benefits under our tax-qualified plan, our executives
otherwise would not be eligible to receive the retirement
benefits that are proportional to the benefits received by our
employees that generally are based on compensation.
Deferred
Compensation Plan
The Group maintains a deferred compensation plan for its
directors, officers, and qualified managers. The plan is
intended to promote retention by providing eligible employees,
including the executive officers, with a long-term savings
opportunity on an income tax-deferred basis.
401(k)
Plan
All employees satisfying the eligibility requirements are
entitled to participate in our 401(k) plan and receive matching
contributions from the Group. Pursuant to the plan, executive
officers are entitled to contribute up to the statutory limit
set by the Internal Revenue Service and effective
January 1, 2010, the Group matches 75 percent for each
dollar contributed up to a maximum company match of 6%.
Limited
Perquisites
As part of the Groups automobile policy, the Groups
executive officers have the use of a company-owned automobile.
The Committee believes that the provision of a company-owned
automobile allows our executive officers to work more
efficiently because many of the geographic areas served by the
Group are most effectively reached by automobile as opposed to
other forms of mass transportation, such as airlines. Any
personal mileage incurred by the executive is taxed as
additional compensation in accordance with IRS regulations.
Other than this automobile benefit, the Committees general
philosophy is not to provide perquisites and other personal
benefits of substantial value to the Groups executive
officers.
Severance
Arrangements
None of the executive officers is a party to an individual
employment agreement with the Group that provides for severance
benefits. In addition, we do not provide executive officers with
single-triggered change in control benefits.
Consistent with the Groups compensation philosophy, the
Committee believes that the interests of stockholders are best
served if the interests of senior management are aligned with
those of the Groups stockholders. To this end, the Group
provides change in control severance benefits to executive
officers under the Groups Executive Severance Plan to
reduce any reluctance of the executive officers to pursue or
support potential change in control transactions that would be
beneficial to the Groups stockholders. We adopted the plan
in 1998, and its purpose is to promote the continued employment
and dedication of our executives without distraction in the face
of a potential change in control transaction. The Executive
Severance Plan provides severance pay equal to three times base
salary
19
to each of the executive officers if their employment is
terminated without good cause or they resign for good reason
during the two-year period following a change in control.
In addition to the Executive Severance Plan, each executive
officer is covered by the Groups general severance policy
stating that each non-union employee of Group whose employment
is terminated without cause is entitled to severance pay of
either one weeks pay after completing two years of service
or two weeks pay after completing five or more years of
service, provided at least two weeks notice is given.
Under the Groups policies, all executive officers are
entitled to a pay-out of six weeks of vacation time upon any
termination of employment.
Determining
Executive Compensation
Each year the Committee reviews, assesses, and recommends to the
Board of Directors all compensation for executive officers after
determining that the compensation for these individuals is
competitive relative to companies of comparable size,
complexity, location and business nature (see below for
additional discussion of this comparison). In addition, the
Committee approves the retention, fees, and termination of any
compensation consultant or compensation consulting firm used to
assist in the evaluation of director and executive compensation.
With respect to 2009 compensation decisions, the Committee
retained the services of an independent compensation consultant,
PPA, for investigation into and advice on total compensation for
executive officers. The Committee believes that having an
independent evaluation of executive officer compensation is a
valuable tool for the Committee, the Group and stockholders. PPA
is not engaged to perform any additional work for the Group.
The Committee retained PPA for a number of purposes, including:
|
|
|
|
|
Constructing and reviewing compensation comparisons from readily
available published survey data; and
|
|
|
|
Performing a competitive assessment of the Groups
compensation programs, practices, and levels for its directors,
executive officers and other senior officers.
|
The Committee made a number of compensation recommendations,
including those pertaining to the executive officers, that were
based on the competitive assessments provided by and through
consultation with PPA. The Committees recommendations were
made, however, entirely by the Committee, using its sole
discretion.
Total compensation level for executives is based on one or more
of the following factors:
|
|
|
|
|
The individuals duties and responsibilities within the
Group;
|
|
|
|
The individuals experience and expertise;
|
|
|
|
The compensation levels for the individuals peers within
the Group;
|
|
|
|
Compensation levels for similar positions based on a review of
published compensation surveys; and
|
|
|
|
The levels of compensation necessary to recruit, retain, and
motivate executives.
|
In order to determine competitive compensation practices for
2009, the Committee relied, in part, on published compensation
data from the following sources:
|
|
|
|
|
Saje Consulting Group Investor-Owned Water Utility
Compensation and Benefits Survey
|
|
|
|
Watson Wyatt Data Services Top Management
Compensation Survey and Top Management Compensation Calculator
|
|
|
|
Mercer Human Resources Consulting Executive
Compensation Survey
|
PPA utilized the data from these sources (the competitive
data) to compile the competitive pay information comparing
each officers compensation to the 25th, 50th, and the
75th percentiles for the executive officers position.
The Committee is not provided the names of the companies in any
of the surveys. With respect to compensation decisions for 2009,
the Committee did not review proxy data for individual companies
in making compensation decisions and instead focused on
competitive data from established published surveys.
After consideration of the competitive data, the Committee makes
decisions regarding each individual executives target
total compensation opportunities based on Group and individual
performance and the need
20
to attract, motivate, and retain an experienced and effective
management team. The Committee examined the relationship of each
executives base salary, long-term equity incentives and
total compensation (base salary plus long-term equity
incentives) to the competitive data at the 25th, 50th, and
75th percentiles for the executives position within
the competitive data.
In making compensation recommendations for the 2009 fiscal year
for the executive officers, the Committees general
objective was to set total compensation within a
competitive range for each executives position
based on the competitive data. The Committee considers the
competitive range to mean that compensation levels
are within plus or minus 20% of the median compensation levels
as determined by reference to the competitive data. Actual
compensation decisions for the executive officers were, however,
influenced by a variety of additional factors, including
considerations of each individuals experience, expertise
and performance, the Groups performance, and internal
equity among the executive officers.
Tax and
Other Compensation Policies
When designing compensation policies and setting compensation
levels, the Group considers the potential tax treatment of the
compensation, but the primary factor influencing program design
is the support of business objectives. The Committee has
reviewed the Groups compensation structure in light of
Section 162(m) of the Internal Revenue Code
(Section 162(m)), which limits the amount of
compensation that the Group may deduct for federal income tax
purposes for any year to $1,000,000 for our CEO and each of our
three highest compensated officers other than the CEO and CFO.
There are certain exceptions to this limit, one of which is for
performance-based compensation, as defined under
Section 162(m). SARs granted by the Group are intended to
satisfy the requirements for the performance-based
compensation, exception, and therefore do not count
against the $1,000,000 deductibility limit. RSAs granted by the
Group do not qualify as performance-based
compensation, and thus do count against the $1,000,000
deductibility limit. In 2009, no executive officers
compensation exceeded the limitation set by Section 162(m),
meaning all compensation paid to the executive officers was
tax-deductible.
Historically, the Committee has not used equity awards as a
significant portion of executive compensation. Thus, the Group
currently does not have any formal stock ownership guidelines
for its executive officers, nor does it require that executive
officers own a specific number of shares.
21
Summary
Compensation Table
The table below summarizes the total compensation paid or earned
by our Chief Executive Officer, Chief Financial Officer and the
three most highly compensated executive officers of the Group
for the fiscal year ended December 31, 2009, 2008 and 2007.
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(e)
|
|
|
(f)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Awards
|
|
|
Grants
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Name and Principal Position
|
|
Year
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)(4)
|
|
|
($)
|
|
|
Peter C. Nelson
|
|
|
2009
|
|
|
$
|
904,619
|
|
|
$
|
136,249
|
|
|
$
|
230,905
|
|
|
$
|
860,929
|
|
|
$
|
26,437
|
|
|
$
|
2,159,139
|
|
President and Chief
|
|
|
2008
|
|
|
$
|
791,523
|
|
|
$
|
84,224
|
|
|
$
|
91,479
|
|
|
$
|
2,401,823
|
|
|
$
|
27,932
|
|
|
$
|
3,396,981
|
|
Executive Officer
|
|
|
2007
|
|
|
$
|
732,760
|
|
|
$
|
62,882
|
|
|
$
|
84,359
|
|
|
$
|
511,773
|
|
|
$
|
28,365
|
|
|
$
|
1,420,139
|
|
Martin A. Kropelnicki
|
|
|
2009
|
|
|
$
|
412,549
|
|
|
$
|
34,158
|
|
|
$
|
57,726
|
|
|
$
|
164,651
|
|
|
$
|
21,737
|
|
|
$
|
690,821
|
|
Vice President, Chief Financial
|
|
|
2008
|
|
|
$
|
345,074
|
|
|
$
|
23,688
|
|
|
$
|
25,754
|
|
|
$
|
120,481
|
|
|
$
|
19,983
|
|
|
$
|
534,980
|
|
Officer and Treasurer
|
|
|
2007
|
|
|
$
|
313,862
|
|
|
$
|
15,244
|
|
|
$
|
20,727
|
|
|
$
|
48,543
|
|
|
$
|
20,224
|
|
|
$
|
418,600
|
|
Francis S. Ferraro
|
|
|
2009
|
|
|
$
|
387,677
|
|
|
$
|
34,158
|
|
|
$
|
57,726
|
|
|
$
|
349,202
|
|
|
$
|
15,623
|
|
|
$
|
844,386
|
|
Vice President, Corporate
|
|
|
2008
|
|
|
$
|
338,960
|
|
|
$
|
23,688
|
|
|
$
|
25,754
|
|
|
$
|
1,155,204
|
|
|
$
|
18,266
|
|
|
$
|
1,561,872
|
|
Development
|
|
|
2007
|
|
|
$
|
314,246
|
|
|
$
|
15,244
|
|
|
$
|
20,727
|
|
|
$
|
149,341
|
|
|
$
|
18,658
|
|
|
$
|
518,216
|
|
Robert R. Guzzetta
|
|
|
2009
|
|
|
$
|
305,603
|
|
|
$
|
34,158
|
|
|
$
|
57,726
|
|
|
$
|
383,951
|
|
|
$
|
16,868
|
|
|
$
|
798,306
|
|
Vice President, Operations
|
|
|
2008
|
|
|
$
|
279,248
|
|
|
$
|
23,688
|
|
|
$
|
25,754
|
|
|
$
|
662,362
|
|
|
$
|
15,679
|
|
|
$
|
1,006,731
|
|
|
|
|
2007
|
|
|
$
|
261,363
|
|
|
$
|
15,244
|
|
|
$
|
20,727
|
|
|
$
|
71,388
|
|
|
$
|
14,091
|
|
|
$
|
382,813
|
|
Paul G. Ekstrom
|
|
|
2009
|
|
|
$
|
268,751
|
|
|
$
|
34,158
|
|
|
$
|
57,726
|
|
|
$
|
380,435
|
|
|
$
|
20,839
|
|
|
$
|
761,909
|
|
Vice President, Customer Service,
|
|
|
2008
|
|
|
$
|
234,469
|
|
|
$
|
23,688
|
|
|
$
|
25,754
|
|
|
$
|
640,513
|
|
|
$
|
20,959
|
|
|
$
|
945,383
|
|
Human Resources and Information Technology
|
|
|
2007
|
|
|
$
|
221,480
|
|
|
$
|
15,244
|
|
|
$
|
20,727
|
|
|
$
|
92,346
|
|
|
$
|
19,635
|
|
|
$
|
369,432
|
|
|
|
|
(1) |
|
The executive officers were not entitled to receive payments
which would be characterized as bonus or
non-equity incentive plan compensation payments for
the fiscal year ended December 31, 2009, 2008 and 2007. |
|
(2) |
|
Amounts reflect the full grant date fair value of RSAs
(Stock Awards column) and SARs (Option
Grants column) granted in the years shown, calculated in
accordance with FASB Accounting Standards Codification
(ASC) Topic 718, disregarding estimates for
forfeitures. Assumptions used in the calculation of these
amounts are included in footnote 13 of Groups annual
report on
Form 10-K
filed with the Securities and Exchange Commission on
March 1, 2010. |
|
(3) |
|
Amounts in this column reflect the actuarial increase in the
present value of the executive officers benefits under the
Groups pension plan and Supplemental Executive Retirement
Plan (SERP) determined using interest rate and mortality rate
assumptions consistent with those used in the Groups
financial statements and includes amounts which the executive
officers may not currently be entitled to receive because such
amounts are not vested. Earnings on the nonqualified deferred
compensation plan are noted on the Nonqualified Deferred
Compensation table for those officers participating in the plan.
Earnings have been excluded from this table since earnings were
not at above market or at preferential rates. |
|
(4) |
|
All other compensation is comprised of 401(k) matching
contributions made by Group on behalf of the executive officer,
the personal use of company-provided cars, and any miscellaneous
reimbursed expenses that may be taxable. The value attributable
to personal use of company-provided cars is included as
compensation on the
W-2 of each
executive officer who receives such benefits. Each such officer
is responsible for paying income tax on such amount. |
22
Grants
for Plan-Based Awards
For
Fiscal Year Ended 2009
The table below sets forth certain information with respect to
awards granted during the fiscal year-ended December 31,
2009, to each of our executive officers.
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All Other
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All Other
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Grant
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Stock
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Option
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Date
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Awards:
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Awards:
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Exercise or
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Fair
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Number of
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Number of
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Base
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Value of
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Shares of
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Securities
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Price of
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Stock and
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Stock or
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Underlying
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Option
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Options
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Approval
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Grant
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Units
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Options
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Awards
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Awards
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Name
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Date
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Date
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(#)
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(#)
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($/Sh)
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($)(1)
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(a)
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(b)
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(c)
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(j)
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(k)
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(l)
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(m)
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Peter C.
Nelson(1)
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11/19/2008
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3/3/2009
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3,550
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$
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136,249
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11/19/2008
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3/3/2009
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22,000
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$
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38.38
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$
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150,040
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Martin A.
Kropelnicki(1)
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11/19/2008
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3/3/2009
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890
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$
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34,158
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11/19/2008
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3/3/2009
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5,500
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$
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38.38
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$
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37,510
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Francis S.
Ferraro(1)
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11/19/2008
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3/3/2009
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890
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|
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|
|
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|
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$
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34,158
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11/19/2008
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3/3/2009
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5,500
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$
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38.38
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$
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37,510
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Robert R.
Guzzetta(1)
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11/19/2008
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3/3/2009
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890
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|
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|
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|
|
|
|
|
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$
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34,158
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|
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|
|
11/19/2008
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3/3/2009
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5,500
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$
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38.38
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$
|
37,510
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Paul G.
Ekstrom(1)
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11/19/2008
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|
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3/3/2009
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890
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|
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$
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34,158
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11/19/2008
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3/3/2009
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|
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|
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5,500
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$
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38.38
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$
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37,510
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(1) |
|
Both the SARs and RSAs granted to the executive officers on
March 3, 2009 pursuant to the Incentive Plan vest in
monthly installments over 48 months following the date of
grant. In addition, the SARs have a ten-year term. The exercise
price of the SARs is the closing price for the Groups
common stock on the New York Stock Exchange on the grant date.
Neither the SARs nor the RSAs provide for automatic vesting
acceleration if there is a change in control or in the ownership
of the Group. |
23
Outstanding
Equity Awards at Fiscal 2009 Year-End
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Option Awards
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Stock Awards
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Market
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Number of
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Number of
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Number of
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Value of
|
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|
Securities
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|
Securities
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Shares or
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Shares or
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Underlying
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Underlying
|
|
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|
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Units of
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Units of
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Unexercised
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Unexercised
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Option
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Stock That
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Stock That
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Options
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Options
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Exercise
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Option
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Have Not
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Have Not
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(#)
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(#)
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Price
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Expiration
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Vested
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Vested
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Name
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Exercisable
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Unexercisable
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($)
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Date
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(#)
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($)(1)
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(a)
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(b)
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(c)
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(e)
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(f)
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(g)
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(h)
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Peter C.
Nelson(1)
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15,000
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|
|
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|
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$
|
25.94
|
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|
1/1/2011
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|
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15,000
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$
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25.15
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1/1/2012
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|
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12,239
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|
261
|
(2)
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$
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38.51
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|
1/4/2016
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|
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34
|
(2)
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$
|
1,252
|
|
|
|
|
5,596
|
|
|
|
2,544
|
(4)
|
|
$
|
38.11
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|
|
3/4/2017
|
|
|
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516
|
(4)
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|
$
|
18,999
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|
|
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|
5,827
|
|
|
|
7,493
|
(5)
|
|
$
|
37.60
|
|
|
|
3/6/2018
|
|
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|
1,260
|
(5)
|
|
$
|
46,393
|
|
|
|
|
4,125
|
|
|
|
17,875
|
(6)
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|
$
|
38.38
|
|
|
|
3/3/2019
|
|
|
|
2,885
|
(6)
|
|
$
|
106,226
|
|
Martin A.
Kropelnicki(1)
|
|
|
2,239
|
|
|
|
261
|
(3)
|
|
$
|
42.51
|
|
|
|
5/1/2016
|
|
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|
34
|
(3)
|
|
$
|
1,252
|
|
|
|
|
1,375
|
|
|
|
625
|
(4)
|
|
$
|
38.11
|
|
|
|
3/4/2017
|
|
|
|
125
|
(4)
|
|
$
|
4,603
|
|
|
|
|
1,640
|
|
|
|
2,110
|
(5)
|
|
$
|
37.60
|
|
|
|
3/6/2018
|
|
|
|
355
|
(5)
|
|
$
|
13,071
|
|
|
|
|
1,031
|
|
|
|
4,469
|
(6)
|
|
$
|
38.38
|
|
|
|
3/3/2019
|
|
|
|
724
|
(6)
|
|
$
|
26,658
|
|
Francis S.
Ferraro(1)
|
|
|
2,447
|
|
|
|
53
|
(2)
|
|
$
|
38.51
|
|
|
|
1/4/2016
|
|
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|
7
|
(2)
|
|
$
|
258
|
|
|
|
|
1,375
|
|
|
|
625
|
(4)
|
|
$
|
38.11
|
|
|
|
3/4/2017
|
|
|
|
125
|
(4)
|
|
$
|
4,603
|
|
|
|
|
1,640
|
|
|
|
2,110
|
(5)
|
|
$
|
37.60
|
|
|
|
3/6/2018
|
|
|
|
355
|
(5)
|
|
$
|
13,071
|
|
|
|
|
1,031
|
|
|
|
4,469
|
(6)
|
|
$
|
38.38
|
|
|
|
3/3/2019
|
|
|
|
724
|
(6)
|
|
$
|
26,658
|
|
Robert R.
Guzzetta(1)
|
|
|
3,000
|
|
|
|
|
|
|
$
|
25.94
|
|
|
|
1/1/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
2,447
|
|
|
|
53
|
(2)
|
|
$
|
38.51
|
|
|
|
1/4/2016
|
|
|
|
7
|
(2)
|
|
$
|
258
|
|
|
|
|
1,375
|
|
|
|
625
|
(4)
|
|
$
|
38.11
|
|
|
|
3/4/2017
|
|
|
|
125
|
(4)
|
|
$
|
4,603
|
|
|
|
|
1,640
|
|
|
|
2,110
|
(5)
|
|
$
|
37.60
|
|
|
|
3/6/2018
|
|
|
|
355
|
(5)
|
|
$
|
13,071
|
|
|
|
|
1,031
|
|
|
|
4,469
|
(6)
|
|
$
|
38.38
|
|
|
|
3/3/2019
|
|
|
|
724
|
(6)
|
|
$
|
26,658
|
|
Paul G.
Ekstrom(1)
|
|
|
2,447
|
|
|
|
53
|
(2)
|
|
$
|
38.51
|
|
|
|
1/4/2016
|
|
|
|
7
|
(2)
|
|
$
|
258
|
|
|
|
|
1,375
|
|
|
|
625
|
(4)
|
|
$
|
38.11
|
|
|
|
3/4/2017
|
|
|
|
125
|
(4)
|
|
$
|
4,603
|
|
|
|
|
1,640
|
|
|
|
2,110
|
(5)
|
|
$
|
37.60
|
|
|
|
3/6/2018
|
|
|
|
355
|
(5)
|
|
$
|
13,071
|
|
|
|
|
1,031
|
|
|
|
4,469
|
(6)
|
|
$
|
38.38
|
|
|
|
3/3/2019
|
|
|
|
724
|
(6)
|
|
$
|
26,658
|
|
|
|
|
(1) |
|
The market value of the stock awards represents the product of
the closing price for the Groups common stock on the New
York Stock Exchange as of December 31, 2009, which was
$36.82, and the number of shares underlying each such award. |
|
(2) |
|
Awards were granted on January 4, 2006, and vest ratably
over 48 months. |
|
(3) |
|
Awards were granted on May 1, 2006, and vest ratably over
48 months. |
|
(4) |
|
Awards were granted on March 4, 2007, and vest ratably over
48 months. |
|
(5) |
|
Awards were granted on March 6, 2008, and vest ratably over
48 months. |
|
(6) |
|
Awards were granted on March 3, 2009, and vest ratably over
48 months. |
24
Option
Exercises and Stock Vested
For
Fiscal Year Ended 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Value
|
|
|
|
Number of Shares
|
|
|
Value
|
|
|
Acquired on
|
|
|
Realized on
|
|
|
|
Acquired on
|
|
|
Realized on
|
|
|
Vesting
|
|
|
Vesting
|
|
Name of Executive Officer
|
|
Exercise
|
|
|
Exercise
|
|
|
(#)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
Peter C. Nelson
|
|
|
12,500
|
|
|
$
|
162,750
|
|
|
|
2,044
|
|
|
$
|
77,973
|
|
Martin A. Kropelnicki
|
|
|
|
|
|
|
|
|
|
|
505
|
|
|
$
|
19,301
|
|
Francis S. Ferraro
|
|
|
|
|
|
|
|
|
|
|
505
|
|
|
$
|
19,301
|
|
Robert R. Guzzetta
|
|
|
|
|
|
|
|
|
|
|
505
|
|
|
$
|
19,301
|
|
Paul G. Ekstrom
|
|
|
|
|
|
|
|
|
|
|
505
|
|
|
$
|
19,301
|
|
Pension
Benefits
For
Fiscal Year Ended 2009
The table below shows the present value of accumulated benefits
payable to each of the executive officers, including the number
of years of service credited to each executive officer under the
California Water Service Pension Plan and the Supplemental
Executive Retirement Plan, each of which is described elsewhere
in this Proxy Statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
|
Present Value of
|
|
|
|
|
|
Credited Service
|
|
|
Accumulated Benefit
|
|
Name
|
|
Plan Name
|
|
(#)(1)
|
|
|
($)(2)(3)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
(d)
|
|
|
Peter C. Nelson
|
|
California Water Service Pension Plan
|
|
|
13.92
|
|
|
$
|
758,950
|
|
President and Chief
Executive Officer
|
|
Supplemental Executive Retirement Plan
|
|
|
15.00
|
(3)
|
|
$
|
7,532,367
|
|
Martin A. Kropelnicki
|
|
California Water Service Pension Plan
|
|
|
3.80
|
|
|
$
|
106,120
|
|
Vice President, Chief
Financial Officer and
Treasurer
|
|
Supplemental Executive Retirement Plan
|
|
|
3.80
|
|
|
$
|
265,089
|
|
Francis S. Ferraro
|
|
California Water Service Pension Plan
|
|
|
20.42
|
|
|
$
|
1,104,173
|
|
Vice President,
Corporate Development
|
|
Supplemental Executive Retirement Plan
|
|
|
15.00
|
|
|
$
|
2,451,908
|
|
Robert R. Guzzetta
|
|
California Water Service Pension Plan
|
|
|
32.58
|
|
|
$
|
1,428,382
|
|
Vice President, Operations
|
|
Supplemental Executive Retirement Plan
|
|
|
15.00
|
|
|
$
|
808,880
|
|
Paul G. Ekstrom
|
|
California Water Service Pension Plan
|
|
|
36.00
|
|
|
$
|
1,727,396
|
|
Vice President,
|
|
Supplemental Executive Retirement Plan
|
|
|
15.00
|
|
|
$
|
426,090
|
|
Customer Service,
Human Resources and
Information Technology
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Assumptions used in the calculation of the present value are
included in footnote 14 of Groups annual report on
Form 10-K
filed with the Securities and Exchange Commission on
March 1, 2010. |
|
(2) |
|
Includes amounts which the named executive officer may not
currently be entitled to receive because such amounts are not
vested. |
|
(3) |
|
In February 1996, Mr. Nelson was awarded, for purposes of
calculating his accrued benefit under the SERP, credit for an
additional ten years of service. Without taking into account the
additional ten years of service, the present value of
Mr. Nelsons accumulated benefits would be $6,930,960,
a difference of $601,407 from the value reported in the table. |
25
The benefits under the Supplemental Executive Retirement Plan
(the SERP) are obtained by applying the benefit
provisions of the California Water Service Pension Plan (the
Pension Plan), a tax-qualified plan, to all
compensation included under the Pension Plan, without regard to
these limits, reduced by benefits actually accrued under the
Pension Plan. Under the SERP, all eligible officers are fully
vested after 15 years of service and at age 60. SERP
participants are eligible for early retirement starting at
age 55 and would receive a reduced benefit ranging from 74%
to 95% of their monthly SERP benefit upon early retirement
between the ages of 55 and 60. Under the Pension Plan, all
eligible employees, including officers, are fully vested after
35 years of service.
The combined maximum benefit payout under the SERP and Pension
Plan achievable by an officer is 60% of the average, eligible
compensation (including salary, bonus and car allowance) paid
over the previous 36 months prior to retirement.
Nonqualified
Deferred Compensation
For
Fiscal Year Ended 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions in
|
|
|
Earnings
|
|
|
Balance
|
|
|
|
Last FY
|
|
|
in Last FY
|
|
|
at Last FY
|
|
Name
|
|
($)(1)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
(a)
|
|
(b)
|
|
|
(d)
|
|
|
(f)
|
|
|
Peter C. Nelson
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Martin A. Kropelnicki
|
|
$
|
9,000
|
|
|
$
|
5,038
|
|
|
$
|
22,051
|
|
Francis S. Ferraro
|
|
$
|
157,000
|
|
|
$
|
204,277
|
|
|
$
|
867,156
|
|
Robert R. Guzzetta
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Paul G. Ekstrom
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
(1) |
|
All of the amounts reported under Executive Contributions
in Last FY were included in the Summary Compensation Table
for 2009. None of the amounts reported under Aggregate
Earnings in Last FY were included in the Summary
Compensation Table for 2009. |
|
(2) |
|
The amounts reported under Aggregate Balance at Last
FY that were included in the Summary Compensation Table in
years prior to 2009 are as follows: Mr. Kropelnicki
($12,000) and Mr. Ferraro ($365,000). |
The Deferred Compensation Plan provides specified benefits to
select group of management and highly compensated employees who
contribute materially to the continued growth, development and
future business success of California Water Service Group. The
Deferred Compensation Plan permits the Groups executives
and eligible managers to defer up to 50% of their base salary.
The Group does not make any contributions to the deferred
compensation plan. The Deferred Compensation Plans
investment options are similar, but not identical, to the
Groups tax-qualified 401(k) plan and are funded by a Rabbi
trust created for the funding of such benefits. Benefits under
the Deferred Compensation Plan are payable by the Group upon
separation from service with the Group either in lump sum at
separation, in monthly installments over five years
following separation or in lump sum or installments commencing
five years following separation.
Potential
Payments Upon Termination or Change in Control
The information below describes certain compensation that would
have become payable under existing plans and contractual
arrangements assuming a termination of employment, or a change
in control and termination of employment had occurred on
December 31, 2009, given the executive officers
compensation and service levels as of such date. In addition to
the benefits described below, upon any termination of
employment, each of the executive officers would also be
entitled to the benefits described in the table of Pension
Benefits for Fiscal Year 2009 above and the amount shown in the
column labeled Aggregate Balance at Last FY of the
table of Nonqualified Deferred Compensation for Fiscal Year 2009
above.
On December 16, 1998, the Group adopted the Executive
Severance Plan. The Executive Severance Plan provides that if
within 24 months following a change in control of the
Group, the executive officers employment is
26
terminated for any reason other than good cause or by the
executive for good reason, the Group will make a cash payment to
the executive officer an amount equal to three times such
executive officers base salary on the date of the change
in control or on the date that the officers employment
terminates, whichever is greater. The payments would be paid in
three equal annual installments commencing on the first of the
month following the month in which the officers employment
terminated and payable thereafter on the anniversary of the
initial payment date.
Each officers entitlement to the severance payment is
conditioned upon execution of a release agreement. Additionally,
the executive officer forfeits the right to receive the
severance payment if he or she violates the non-solicitation and
confidentiality provisions of the Executive Severance Plan.
For purposes of the Executive Severance Plan, the term
change in control means the occurrence of
(i) any merger or consolidation of the Group in which the
Group is not the surviving organization, a majority of the
capital stock of which is not owned by the shareholders of the
Group immediately prior to such merger or consolidation;
(ii) a transfer of all or substantially all of the assets
of the Group; (iii) any other corporate reorganization in
which there is a change in ownership of the outstanding shares
of the Group wherein thirty percent (30%) or more of the
outstanding shares of the Group are transferred to any person;
(iv) the acquisition by or transfer to a person (including
all affiliates or associates of such person) of beneficial
ownership of capital stock of the Group if after such
acquisition or transfer such person (and their affiliates or
associates ) is entitled to exercise thirty percent (30%) or
more of the outstanding voting power of all capital stock of the
Group entitled to vote in elections of directors; or
(v) the election to the Board of Directors of the Group of
candidates who were not recommended for election by the Board of
Directors of the Group in office immediately prior to the
election, if such candidates constitute a majority of those
elected in that particular election.
For purposes of the Executive Severance Plan, good
cause will be deemed to exist if (i) the applicable
officer engages in acts or omissions that result in substantial
harm to the business or property of the Group and that
constitute dishonesty, intentional breach of fiduciary
obligation or intentional wrongdoing; or (ii) the
applicable officer is convicted of a criminal violation
involving fraud or dishonesty.
For purposes of the Executive Severance Plan, good
reason will be deemed to exist if, without the applicable
officers consent, (i) there is a significant change
in the nature or the scope of the applicable officers
authority or in his or her overall working environment;
(ii) the applicable officer is assigned duties materially
inconsistent with his or her present duties, responsibilities
and status; (iii) there is a reduction in the applicable
officers rate of base salary or bonus; or (iv) the
Group changes by 100 miles or more the principal location
in which the applicable officer is required to perform services.
Had a change in control occurred during fiscal 2009 and had
their employment been terminated on December 31, 2009,
either without good cause or by the executive for good reason,
the executive officers would have been eligible to receive the
payments set forth below.
In addition to the Executive Severance Plan, each executive
officer is covered by the Groups general severance policy.
Under the severance policy, each non-union employee of Group
whose employment is terminated without cause is entitled to
severance pay of either one weeks pay after completing two
years of service or two weeks pay after completing five or
more years of service, provided at least two weeks notice
is given. In addition, all executive officers are entitled to a
payout of six weeks of vacation time upon any termination of
employment, which may be paid either in lump sum at termination
or in installments over six weeks. In the absence of a change in
control, had their employment been terminated on
December 31, 2009, without cause, the executive officers
would have been eligible to receive the payments set forth below.
27
Potential
payments Upon Termination or Change in Control
|
|
|
|
|
|
|
|
|
|
|
Change in Control and
|
|
|
Termination of Employment
|
|
|
|
Termination of Employment
|
|
|
without a Change in Control
|
|
|
|
Severance Amount
|
|
|
Severance Amount
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
Peter C. Nelson,
|
|
$
|
2,625,000
|
|
|
$
|
134,616
|
|
Martin A. Kropelnicki,
|
|
$
|
1,200,000
|
|
|
$
|
53,847
|
|
Francis S. Ferraro,
|
|
$
|
1,125,000
|
|
|
$
|
57,693
|
|
Robert R. Guzzetta,
|
|
$
|
885,000
|
|
|
$
|
45,385
|
|
Paul G. Ekstrom,
|
|
$
|
780,000
|
|
|
$
|
40,000
|
|
In addition to the benefits described above, if an executive
officers employment terminates within one year of a change
of control, his or her options continue to vest on the original
vesting schedule. Please refer to the table of Outstanding
Equity Awards at Fiscal Year-Ended 2009 above for more
information regarding these awards.
Director
Compensation
For
Fiscal Year Ended 2009
The Groups nonemployee directors receive cash retainers
and meeting fees and equity awards for their service.
Nonemployee directors receive a $26,500 annual Board retainer,
except for the Audit Committee chair who receives $35,500 and
the Chairman of the Board who receives $80,000. In addition,
each Board member receives $2,200 for each Board meeting
attended, and $1,800 for each committee meeting attended.
Further, each committee chair receives an additional fee of
$1,800 for each committee meeting chaired.
Each nonemployee director also receives annual restricted stock
grants under the Groups equity compensation plan. The
amount of these awards is determined each year by the Board.
These awards are generally granted at the same time as awards
are made to the Groups executive officers and fully vest
one year from the grant date. For 2009, each nonemployee
director received shares of restricted stock valued at $45,288.
In November of 2009, after performing its annual compensation
review, the Committee approved increases to the foregoing
amounts, effective January 1, 2010, as follows: nonemployee
directors will receive a $27,500 annual Board retainer, except
for the Chairman of the Board who receives $80,000. The Audit
Committee chair receives an additional $9,000 retainer, and the
Finance and Risk Management Committee chair receives an
additional $2,500 retainer. The chairs of the
Nominating/Corporate Governance Committee and Organization and
Compensation Committee receive an additional $4,000 retainer,
respectively. In addition, each Board member receives $2,300 for
each Board meeting attended, and $1,800 for each committee
meeting attended. Further, each committee chair will receive an
additional fee of $1,800 for each committee meeting chaired.
In November of 2009, after performing its annual compensation
review the Committee approved grants of restricted stock to each
Board member for the 2010 fiscal year valued at $48,670. The
grants were made in March of 2010.
The Board of Directors strongly encourages stock ownership by
directors. Pursuant to the Groups Corporate Governance
Guidelines, available on the Groups website at
http://www.calwatergroup.com,
beneficial ownership of an aggregate amount of shares having a
value of four times the amount of the annual director retainer
is desirable. Directors elected before April 27, 2005, who
owned less than the desirable amount were strongly encouraged to
increase their holdings to that amount by April 26, 2009.
Directors elected on or after April 27, 2005, who own less
than the desired amount are strongly encouraged to increase
their holdings to four times the annual director retainer level
before the end of four years from the date of their election to
the Board.
Directors may elect to defer cash compensation payable to them
under the Groups deferred compensation plan in the same
manner as applicable to the Groups executive officers as
described above.
28
In addition, the Group maintains a Director Retirement Plan for
the benefit of its nonemployee directors. In December 2005, this
plan was closed to new participants, however, each of the
nonemployee directors listed in the table below (except for
Mr. Guiles) were, at that time, participants in the plan
and thus continue to accrue benefits thereunder. Under the
Director Retirement Plan, a director who participates in the
plan and retires after serving on the Board for a total of five
or more years will receive a retirement benefit equivalent to
$22,000 per year. This benefit will be paid for the number of
years the director served on the Board, up to 10 years. No
amounts were paid to directors under this program in fiscal 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
Non-Qualified
|
|
|
|
|
|
|
Earned
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
or Paid
|
|
|
Stock
|
|
|
Compensation
|
|
|
|
|
|
|
in Cash
|
|
|
Awards
|
|
|
Earnings
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)(1)(2)
|
|
|
($)(3)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(f)
|
|
|
(h)
|
|
|
Robert W. Foy
|
|
$
|
99,800
|
|
|
$
|
54,037
|
|
|
$
|
16,003
|
|
|
$
|
169,840
|
|
Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas M. Brown
|
|
$
|
66,100
|
|
|
$
|
45,288
|
|
|
$
|
23,697
|
|
|
$
|
135,085
|
|
Lead Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edwin A. Guiles
|
|
$
|
64,300
|
|
|
$
|
45,288
|
|
|
$
|
|
|
|
$
|
109,588
|
|
Edward D. Harris, Jr., M.D.
|
|
$
|
60,700
|
|
|
$
|
45,288
|
|
|
$
|
16,126
|
|
|
$
|
122,114
|
|
Bonnie G. Hill
|
|
$
|
55,300
|
|
|
$
|
45,288
|
|
|
$
|
19,339
|
|
|
$
|
119,927
|
|
Richard P. Magnuson
|
|
$
|
67,900
|
|
|
$
|
45,288
|
|
|
$
|
12,156
|
|
|
$
|
125,344
|
|
Linda R. Meier
|
|
$
|
64,300
|
|
|
$
|
45,288
|
|
|
$
|
16,133
|
|
|
$
|
125,721
|
|
George A. Vera
|
|
$
|
78,700
|
|
|
$
|
45,288
|
|
|
$
|
21,442
|
|
|
$
|
145,430
|
|
|
|
|
(1) |
|
Amounts reflect the full grant date fair value of each
restricted stock award granted in 2009 to the nonemployee
directors, calculated in accordance with FASB ASC Topic 718,
disregarding estimates for forfeitures. Assumptions used in the
calculation of these amounts are included in footnote 13 of
Groups annual report on
Form 10-K
filed with the Securities and Exchange Commission on
March 1, 2010. |
|
(2) |
|
At the end of 2009, the aggregate number of restricted stock
awards held by each current non-employee Director was as
follows: Mr. Robert W. Foy, 3,909; Mr. Douglas Brown,
3,545; Mr. Edwin A. Guiles, 2,270; Dr. Edward D.
Harris, Jr., 3,545; Ms. Bonnie G. Hill, 3,545;
Mr. Richard P. Magnuson, 3,545; Ms. Linda R. Meier,
3,545; and Mr. George A. Vera, 3,545. |
|
(3) |
|
Amounts in this column represents the actuarial increase in the
present value of the director benefits under the Groups
Director Retirement Plan. In December 2005, this plan was closed
to new participants, however, any director active in 2005, will
continue to accrue benefits. |
REPORT OF
THE ORGANIZATION AND COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION
The Organization and Compensation Committee of the Groups
Board of Directors has submitted the following report for
inclusion in this Proxy Statement:
Our Organization and Compensation Committee has reviewed and
discussed the Compensation Discussion and Analysis contained in
this Proxy Statement with management. Based on our review of and
the discussions with management with respect to the Compensation
Discussion and Analysis, our Organization and Compensation
Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this Proxy
Statement and in the Groups Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, for filing
with the SEC.
29
The foregoing report is provided by the following directors, who
constitute the Organization and Compensation Committee:
ORGANIZATION
AND COMPENSATION COMMITTEE
Edward D. Harris, Jr., M.D., Committee Chair
Edwin A. Guiles
Bonnie G. Hill
Richard P. Magnuson
Linda R. Meier
ORGANIZATION
AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
No member of the Organization and Compensation Committee was an
officer or employee of the Group or any of its subsidiaries
during 2009, nor was any such member previously an officer of
the Group or any of its subsidiaries. No member of the
Organization and Compensation Committee had any material
interest in a transaction of the Group or a business
relationship with, or any indebtedness to the Group, in each
case that would require disclosure under Certain Related
Persons Transactions included elsewhere in this Proxy
Statement.
None of the executive officers or nonexecutive officers of the
Group have served on the Board of Directors or on the
Organization and Compensation Committee of any other entity, any
of whose officers served either on the Board of Directors or on
the Organization and Compensation Committee of the Group.
CERTAIN
RELATED PERSONS TRANSACTIONS
Our wholly-owned subsidiary, CWS Utility Services (CWSUS),
provided laboratory services to a subsidiary of San Jose
Water Corporation (SJWC), which has ownership of over 5.29% of
our common stock outstanding. The contract was cancelled in 2010
by the SJWC subsidiary. The rates charged were comparable to
rates charged to other third parties. We received approximately
$107,000 from SJW for water sampling. The revenue and income
from this activity is not significant to our business. Certain
of our properties are in SJWCs service territory. As a
result, we paid SJWC approximately $85,000 for utility water
service.
Procedures
for Approval of Related Persons Transactions
The Group does not have a stated policy for considering
related-party transactions. Instead, the Board of Directors
reviews all related-persons transactions, for officers and
directors on a case by case basis and approves all such
transactions in accordance with the Delaware general corporation
law.
30
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee oversees the Groups financial
reporting process on behalf of the Board of Directors. The
Committees purpose and responsibilities are set forth in
the Audit Committee Charter. The current charter is available on
the Groups website at
http://www.calwatergroup.com.
The Committee consists of five members, each of whom meets the
New York Stock Exchange standards for independence and the
Sarbanes-Oxley Act independence standards for audit committee
membership, and has at least one member meeting the requirements
of an audit committee financial expert. During 2009, the
Committee met five times.
The Groups management has primary responsibility for
preparing the Groups financial statements and the overall
reporting process, including the Groups system of internal
controls. Deloitte & Touche LLP, the Groups
independent registered public accounting firm, audited the
financial statements prepared by the Group and expressed their
opinion that the financial statements fairly present the
Groups financial position, results of operations and cash
flows in conformity with generally accepted accounting
principles. Deloitte & Touche LLP also audited that
the Group maintained, in all material respects, effective
internal control over financial reporting as of
December 31, 2009.
In connection with the December 31, 2009, financial
statements, the Audit Committee:
|
|
|
(1) |
|
reviewed and discussed the audited financial statements with
management and the independent registered public accounting firm; |
|
(2) |
|
discussed with the independent registered public accounting firm
the matters required by Statement on Auditing Standards
No. 114, The auditors communication with
those charged with governance, as amended; |
|
(3) |
|
received from Deloitte & Touche LLP and discussed with
the auditor written disclosures required by the Public
Company Accounting Oversight Board, also discussed
with Deloitte & Touche LLP the firms
independence, and considered whether the firms provision
of non-audit services and the fees and costs billed for those
services are compatible with Deloitte & Touche
LLPs independence; and |
|
(4) |
|
met privately with the Groups independent registered
public accounting firm and internal auditors, each of whom has
unrestricted access to the Audit Committee, without management
present, and discussed their evaluations of the Groups
internal controls and overall quality of the Groups
financial reporting and accounting principles used in
preparation of financial statements. The Committee also met
privately with the Groups Chairman and the President and
CEO, the Chief Financial Officer and the Controller to discuss
the same issues. |
Based upon these reviews and discussions, the Audit Committee
recommended to the Board that the audited financial statements
be included in the Annual Report on
Form 10-K
to be filed with the Securities and Exchange Commission.
AUDIT COMMITTEE
George A. Vera, Committee Chair
Douglas M. Brown
Edwin A. Guiles
Richard P. Magnuson
Linda R. Meier
31
RELATIONSHIP
WITH THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Deloitte & Touche LLP
to serve as the Groups independent registered public
accounting firm for the year ending December 31, 2010 and
the Board adopted its recommendation. The Committees
selection of Deloitte & Touche LLP as independent
registered public accounting firm is submitted for ratification
by vote of the stockholders at the Annual Meeting.
The following fees relate to services provided by
Deloitte & Touche LLP, the Groups independent
registered public accounting firm for fiscal years 2008 and
2009. No fees were paid to Deloitte & Touche LLP in
either 2006 or 2007.
|
|
|
|
|
|
|
|
|
Category of Services
|
|
2008
|
|
|
2009
|
|
|
Audit
Fees(1)
|
|
$
|
842,350
|
|
|
$
|
984,000
|
|
Audit-Related
Fees(2)
|
|
$
|
|
|
|
$
|
151,000
|
|
Tax
Fees(3)
|
|
$
|
|
|
|
$
|
|
|
Subtotal
|
|
$
|
842,350
|
|
|
$
|
1,135,000
|
|
All Other
Fees(4)
|
|
$
|
65,000
|
|
|
$
|
94,000
|
|
|
|
|
(1) |
|
The audit services included audits of California Water Service
Group annual financial statements for the years ended
December 31, 2008 and 2009, and quarterly reviews of the
Groups interim financial statements. Included also are
fees related to the audit of the effectiveness of internal
control over financial reporting. |
|
(2) |
|
Services include assurance and related services by the
independent registered public accounting firm that are
reasonably related to the performance of the audit or review of
the Groups financial statements and are not reported under
Audit Fees. |
|
(3) |
|
Services include tax compliance, tax advice, and tax planning. |
|
(4) |
|
Services include other services provided by the independent
registered public accounting firm, other than the services
reported above in this table. |
Fees reported in the above table relate to that fiscal year and
were incurred either during the fiscal year or in the quarter
following the fiscal year end.
All audit and non-audit services provided by the independent
registered public accounting firm are subject to preapproval by
the Audit Committee, as described in the Audit Committee
Charter, which is available on the Groups website at
http://www.calwatergroup.com.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF DELOITTE & TOUCHE LLP
AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
2010
Stockholders will vote on the ratification of the selection of
Deloitte & Touche LLP, independent registered public
accounting firm, to audit the Groups books, records and
accounts for the year ending December 31, 2010. Following
the recommendation of the Audit Committee, the Board recommends
a vote FOR the adoption of this proposal. Representatives of
Deloitte & Touche LLP will be present at the meeting
to answer 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 Audit Committee will reconsider the
selection of the independent registered public accounting firm.
Vote
Required
In order for the ratification of the selection of the
independent registered public accounting firm 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 Board urges you to vote FOR this proposal.
32
OTHER
MATTERS
Adjournment
Notice of 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 30 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, or personally, by directors, officers and regular
employees of the Group, who will receive no extra compensation
for such services. Morrow & Company, LLC,
470 West Avenue, Stamford, CT 06902 was hired to assist in
the distribution of proxy materials and solicitation of votes
for $8,500, 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 and solicitation materials to stockholders.
Other
Matters
The Board is not aware of any matters to come before the Annual
Meeting other than the proposals for the election of directors
and the ratification of the selection of the independent
registered public accounting firm. 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 Organization and Compensation Committee, the
report of the Audit Committee, and the statement of independence
of Audit Committee members referred to under Board
Structure Committees: Audit 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.
Code of
Ethics
The Group has adopted a written code of ethics that applies to
its principal executive officer, principal financial officer and
all other officers. The Group has also adopted codes of ethics
for its employees and directors. The codes are posted on the
Groups website at
http://www.calwatergroup.com.
The codes are also available in written form upon request to
Corporate Secretary, California Water Service Group, 1720 North
First Street, San Jose, California
95112-4598.
Stockholders
Sharing an Address
The SEC allows us to deliver a single proxy statement and annual
report to an address shared by two or more of our stockholders.
This delivery method, referred to as householding,
can result in significant cost savings for us. In order to take
advantage of this opportunity, banks and brokerage firms that
hold shares for stockholders who are the beneficial owners, but
not the record holders, of the Groups shares, have
delivered only one proxy statement and annual report to multiple
stockholders who share an address unless one or more of the
stockholders has provided contrary instructions. For
stockholders who are the record holders of the Companys
shares, the Company may follow a similar process absent contrary
instructions. The Group will deliver promptly, upon written or
oral request, a separate copy of the proxy statement and annual
report to a stockholder at a shared address to which a single
copy of the documents was delivered. A stockholder who wishes to
receive a separate copy of the proxy statement and annual
report, now or in the future, may obtain one, without charge, by
addressing a request to the Corporate Secretary, California
Water Service Group, 1720 North First Street, San Jose,
California
95112-4598
or calling
(408) 367-8200.
Stockholders of record sharing an address who are receiving
multiple copies of proxy materials and
33
annual reports and wish to receive a single copy of such
materials in the future should submit their request by
contacting us in the same manner. If you are the beneficial
owner, but not the record holder, of the Groups shares and
wish to receive only one copy of the proxy statement and annual
report in the future, you will need to contact your broker, bank
or other nominee to request that only a single copy of each
document be mailed to all stockholders at the shared address in
the future.
Copies of
Annual Report on
Form 10-K
The Group, upon request, will furnish to record and beneficial
holders of its common stock, free of charge, a copy of its
Annual Report on
Form 10-K
(including financial statements and schedules but without
exhibits) for fiscal year 2009. Copies of exhibits to
Form 10-K
also will be furnished upon request for a payment of a fee of
$0.50 per page. All requests should be directed to Corporate
Secretary, California Water Service Group, 1720 North First
Street, San Jose, California
95112-4598.
Electronic copies of the Groups
10-K,
including exhibits, and this Proxy Statement will be available
on the Groups website at:
http://www.calwatergroup.com.
Disclaimer
Regarding Website
The information contained on the Groups website is not to
be deemed included or incorporated by reference into this Proxy
Statement.
34
Directions
to Annual Meeting
The Annual Meeting of Stockholders will be held at a new
location, the Doubletree Hotel San Jose, located at 2050
Gateway Place in San Jose, California. The
Monterey-Carmel Room at the Doubletree is reserved for the
Annual Meeting. Valet parking at the Doubletree Hotel will be
validated (no charge) for stockholders. Below are directions:
From
the San Francisco Airport/Peninsula:
1. US-101 South toward San Jose
2. Exit Brokaw Rd. toward First St.
3. Keep Right at the fork, follow signs for Airport
Pkwy.
4. Merge onto Airport Pkwy.
5. Turn Right at Gateway Pl.
6. Doubletree Hotel on the Right
From
Oakland Airport/East Bay:
1. I-880 South toward San Jose
2. Exit Brokaw Rd.
3. Turn Right on E. Brokaw Rd.
4. Continue on Airport Pkwy.
5. Turn Right on Gateway Pl.
6. Doubletree Hotel on the Right
From
San Jose/South Bay:
1. US-101 North toward San Jose
2. Slight Right at CA-85 North
3. Exit 87 North toward Downtown San Jose
4. Merge onto CA-87 North
5. Exit Skyport Dr.
6. Turn first Left at Technology Dr.
7. Continue onto Gateway Pl.
8. Doubletree Hotel on the Right
From
Santa Cruz Area:
1. CA-17 North toward San Jose
2. Merge onto 1-880 North
3. Merge onto 101-North toward San Francisco
4. Exit Brokaw Rd. toward First St.
5. Turn Left onto E. Brokaw Rd.
6. E. Brokaw Rd. becomes Airport Pkwy.
7. Turn Right onto Gateway Pl.
8. Doubletree Hotel on the Right
35
You cannot cumulate your votes when voting via the Internet or telephone. In order to cumulate
your votes, you must return this proxy card by mail in the enclosed envelope.
VOTE BY INTERNET www.proxyvote.com
CALIFORNIA WATER SERVICE GROUP Use the Internet to transmit your voting instructions and for
electronic delivery of ATTN: KAREN LICHTENBERG information up until 11:59 P.M. Eastern Time the day
before the cut-off date or meeting date. Have your proxy card in hand when you access the web site
and follow the instructions 1720 NORTH FIRST STREET to obtain your records and to create an
electronic voting instruction form.
SAN JOSE, CA 95112
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can
consent to receiving all future proxy statements, proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to
vote using the Internet and, when prompted, indicate that you agree to receive or access proxy
materials electronically in future years.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in hand when you call and
then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or
return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M23683-P90714 KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
CALIFORNIA WATER SERVICE GROUP For Withhold For All To withhold authority to vote for any
individual
All All Except nominee(s), mark For All Except and write the
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR number(s) of the nominee(s) on the line below. THE
ELECTION OF DIRECTORS AND FOR PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE 0 0 0 ENCLOSED ENVELOPE.
To cumulate your votes, see the instruction below. Vote on Directors
1. Election of Directors
Nominees:
01) Douglas M. Brown ___06) Richard P. Magnuson ___02) Robert W. Foy ___07) Linda R. Meier ___
03) Edwin A. Guiles ___08) Peter C. Nelson ___04) Edward D. Harris, Jr., M.D. ___09) George A.
Vera ___05) Bonnie G. Hill ___
Vote on Proposal For Against Abstain
2. Proposal to ratify the appointment of Deloitte & Touche LLP as the independent registered public
accounting firm of the Group for 2010. 0 0 0
IF NOT OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR 2010 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 COMPANYS PROXY STATEMENT.
PLEASE DATE, SIGN AND RETURN PROMPTLY.
To cumulate your vote for one or more of the above nominee(s), write 0 the manner in which such
votes shall be cumulated in the space to the right of the nominee(s) name(s). If you are cumulating
your vote, please mark the box.
NOTE: Please sign exactly as your name or names appear(s) on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date |
PROXY CARD
ANNUAL MEETING OF STOCKHOLDERS OF
CALIFORNIA WATER SERVICE GROUP
May 25, 2010
Please date, sign and mail your proxy card in the envelope provided, or vote via Telephone or
Internet, as soon as possible.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Combined Document is available at www.proxyvote.com.
Please detach along perforated line and mail in the envelope provided.
M23684-P90714
CALIFORNIA WATER SERVICE GROUP
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PETER C. NELSON and LYNNE P. MCGHEE, 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 of the undersigned at the Annual Meeting of Stockholders of California Water
Service Group to be held at the Doubletree Hotel, 2050 Gateway Place, San Jose, California on May
25, 2010 at 9:30 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 and of the Groups Annual Report to Stockholders for 2009. Unless
otherwise specified on the reverse side, 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 on the reverse side and mark the
box next to the instructions at the bottom.
Please date, sign and mail as soon as possible in the enclosed envelope.
(Continued and to be signed on the reverse side) |