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FORM 10-K
SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period ______________to_____________
Commission file number 1-8966
SJW CORP.
(Exact name of registrant as specified in its charter)
California 77-0066628
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
374 West Santa Clara Street, San Jose, California 95196
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 408-279-7810
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
OF THE ACT:
Name of each
exchange on
Title of each class which registered
Common Stock, Par Value $3.125 American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g)
OF THE ACT:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. []
The aggregate market value of the voting stock held by non-affiliates of the
registrant - $106,612,555 on March 3, 1997.
Shares of common stock outstanding on March 1, 1997 - 3,170,347
DOCUMENTS INCORPORATED BY REFERENCE
Definitive Proxy Statement relating to the Registrant's 1997 Annual
Meeting (filed on February 28, 1997), incorporated into Part III hereof.
EXHIBIT INDEX
The Exhibit Index to this Form 10-K is located in Part IV, Item 14
of this document.
TABLE OF CONTENTS
PART I Page
Item 1. Business
a. General Development of Business 3
Regulation and Rates
b. Financial Information about Industry Segments 5
c. Narrative Description of Business 5
General 5
Water Supply 5
Franchises 5
Seasonal Factors 6
Competition and Condemnation 6
Environmental Matters 6
Employees 6
Executive Officers of the Registrant 6
d. Financial Information about
Foreign and Domestic Operations
and Export Sales 8
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a
Vote of Security Holders 9
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 9
a. Market Information 9
b. Holders 9
c. Dividends 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 11
Item 8. Financial Statements and
Supplementary Data 15
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure 28
PART III
Item 10. Directors and Executive Officers
of the Registrant 28
Item 11. Executive Compensation 28
Item 12. Security Ownership of Certain
Beneficial Owners and Management 28
Management
Item 13. Certain Relationship on Related Transactions 28
PART IV.
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 28
Exhibit Index 29
Signatures 31
PART I
Item 1. Business.
(a) General Development of Business.
SJW Corp., incorporated in California on February 8, 1985, is a holding
company with two wholly owned subsidiaries, San Jose Water Company and SJW
Land Company.
San Jose Water Company, with headquarters at 374 West Santa Clara Street,
San Jose, California 95196, was incorporated under the laws of the State of
California in 1931, succeeding a business founded in 1866. San Jose Water
Company is a public utility in the business of providing water service to a
population of approximately 944,000 in an area comprising about 134 square
miles in the metropolitan San Jose area.
SJW Land Company was incorporated in October, 1985.
SJW Corp. also owns 549,976 shares of California Water Service Company,
acquired through the liquidation of Western Precision, Inc., formerly a
wholly owned subsidiary of SJW Corp.
Regulation and Rates.
San Jose Water Company's rates, service and other matters affecting its
business are subject to regulation by the Public Utilities Commission of the
State of California (the "Commission").
Ordinarily, there are two types of rate increases, general and offset. The
purpose of the latter is generally to compensate utilities for increases in
specific expenses, such as those for purchased water or power.
The most recent general rate case decision authorized an initial increase
followed by two annual step increases designed to maintain the authorized
return on equity over a three-year period. General rate applications are
normally filed and processed during the last year covered by the most recent
rate case in an attempt to avoid regulatory lag.
Pursuant to Section 792.5 of the Public Utilities Code, a balancing account
is to be kept for all expense items for which revenue offsets have been
authorized. A separate balancing account must be maintained for each offset
expense item. The purpose of a balancing account is to track the under
collection or overcollection associated with expense changes and the revenue
authorized by the Commission to offset those expense changes. At December
31,1996 the balancing account had a net under-collected balance to be offset of
$840,370.
This report contains forward looking statements relating to future events
and financial performance of the company. Such forward-looking statements
are identified by words including "expect," "estimate", "anticipate" and
similar expressions. The company's actual results could differ materially
from those discussed in such forward-looking statements. Important factors
that could cause or contribute to such differences include the following:
The Public Utilities Commission of California's policy and regulations
can adversely affect San Jose Water Company's operating results through the
availability, timeliness and amount of rate relief. The Commission's
willingness to allow San Jose Water Company to recover all of its capital
expenditure and to provide financial and operational flexibility to engage
in non-regulated operations can also affect San Jose Water Company's
operating results.
San Jose Water Company's sales and therefore its operating results
could be adversely affected by several events:
Difficulties in obtaining a secured water supply from the Santa Clara
Valley Water District which receives its allotment from the state and
federal water projects could prevent the company from satisfying its
customer demand within its service area;
Fluctuation of customer sales due to lifestyle or weather;
Availability of recycled water and its acceptance by customers as a
substitute to potable water; and
Economic development and growth in San Jose Water Company's service
area.
SJW Corp.'s expenses and therefore its operating results could be
adversely affected by the following:
Fluctuation of surface water availability from San Jose Water Company's
Santa Cruz mountain watershed, which produces a less costly water supply,
could result in the need to procure more costly water from other sources;
Stringent environmental and water quality regulations could increase
San Jose Water Company's water quality compliance costs;
Consequences from pollution and contamination of San Jose Water
Company's well and source of supply could result in the need to procure more
costly water from other sources;
The level of labor and non-labor operating and maintenance expenses as
affected by inflationary forces and collective bargaining power could
adversely affect the operating and maintenance expenses of the corporation;
Cost and other effects of lawsuits against SJW Corp. or its
subsidiaries, whether civil, environmental, product-related or liability-
related could increase the corporation's legal, liability and insurance
costs.
See also the heading "Factors That May Adversely Affect Future Operation
Results" under Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The Company undertakes no obligation to update the information including
the forward-looking statements, contained in this report.
(b) Financial Information about Industry Segments.
San Jose Water Company generated 99%, 98% and 94% of SJW Corp.'s
consolidated revenue, and 66%, 91% and 86% of SJW Corp.'s consolidated
income for the years
ended December 31, 1996, 1995 and 1994, respectively. There were no
significant changes in 1996 in the type of products produced or services
rendered by San Jose Water Company, or in its markets or methods of
distribution.
SJW Land Company sold non-utility property in 1996 and contributed 28% to
SJW Corp.'s consolidated income for the year.
Western Precision, Inc. a mechanical parts manufacturing operation, which
was acquired December 31, 1992 and sold on February 28, 1995, generated 1%
and 6% of SJW Corp.'s consolidated revenue for the years 1995 and 1994,
respectively. Dividend income from California Water Service generated 5%, 8%
and 9% of consolidated income for the years 1996, 1995 and 1994,
respectively.
(c) Narrative Description of Business.
(1) (i) General.
The principal business of San Jose Water Company consists of the production,
purchase, storage, purification, distribution and retail sale of water. San
Jose Water Company provides water service to customers in portions of the
cities of Cupertino and San Jose and in the cities of Campbell, Monte
Sereno, Saratoga and the Town of Los Gatos, and adjacent unincorporated
territory, all in the County of Santa Clara in the State of California. It
distributes water to customers in accordance with accepted water utility
methods, which include pumping from storage and gravity feed from high
elevation reservoirs.
(1) (iii) Water Supply.
San Jose Water Company's water supply is obtained from wells, surface run-
off or diversion and by purchases from the Santa Clara Valley Water District
("SCVWD"). Surface supplies, which during a year of normal rainfall satisfy
about 6% to 8% of San Jose Water Company's current annual needs, provide
approximately 1% of its water supply in a dry year and approximately 14% in
a wet year. In dry years the decrease in water from surface run-off and
diversion, and the corresponding increase in purchased and pumped water
increases production costs substantially.
San Jose Water Company implemented various mandatory water rationing
programs throughout the period of 1989-1993. Effective March 14, 1993 San
Jose Water Company terminated its mandatory water rationing plan and
instituted a voluntary conservation plan intended to reduce usage 15% from
1987 levels. Effective February 16, 1994, San Jose Water Company
discontinued its voluntary conservation plan.
Groundwater levels in 1996 maintained at a high level reflecting the impact
of the last rainfall season. SCVWD's reservoir storage of approximately
158,000 acre feet (93% of capacity) was reported on February 18, 1997.
Until 1989, San Jose Water Company had never found it necessary to impose
mandatory water rationing. Except in a few isolated cases when service had
been interrupted or curtailed because of power or equipment failures,
construction shutdowns or other operating difficulties, San Jose Water
Company had not at any prior time in its history interrupted or imposed
mandatory curtailment of service to any type or class of customer.
(1) (iv) Franchises.
San Jose Water Company holds such franchises or permits in the communities
it serves as it judges necessary to operate and maintain its facilities in
the public streets.
(1) (v) Seasonal Factors.
Water sales are seasonal in nature. The demand for water, especially by
residential customers, is generally influenced by weather conditions. The
timing of precipitation and climatic conditions can cause seasonal water
consumption by residential customers to vary significantly.
(1) (x) Competition and Condemnation.
San Jose Water Company is a public utility regulated by the Commission and
operates within a service area approved by the Commission. The laws of the
State of California provide that no other investor owned public utility may
operate in San Jose Water Company's service area without first obtaining
from the Commission a certificate of public convenience and necessity. Past
experience shows such a certificate will be issued only after demonstrating
San Jose Water Company's service in such area is inadequate.
California law also provides that whenever a public agency constructs
facilities to extend utility service to the service area of a privately
owned public utility (like San Jose Water Company), such an act constitutes
the taking of property and is conditioned upon payment of just compensation
to the private utility.
Under the constitution and statutes of the State of California,
municipalities, water districts and other public agencies have been
authorized to engage in the ownership and operation of water systems. Such
agencies are empowered to condemn properties operated by privately owned
public utilities upon payment of just compensation and are further
authorized to issue bonds (including revenue bonds) for the purpose of
acquiring or constructing water systems. To the Company's knowledge, no
municipality, water district or other public agency has pending any action
to condemn any part of San Jose Water Company's system.
(1) (xii) Environmental Matters.
San Jose Water Company maintains procedures to produce potable water in
accordance with all applicable county, state and federal environmental rules
and regulations. Additionally, San Jose Water Company is subject to
environmental regulation by various other governmental authorities.
(See Part II, Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations.")
(1) (xiii) Employees.
As of December 31, 1996, San Jose Water Company had 284 employees, of whom
57 were executive, administrative or supervisory personnel, and of whom 227
were members of unions. San Jose Water Company reached a two-year
collective bargaining agreement with the Utility Workers of America,
representing the majority of employees and the International Union of
Operating Engineers, representing certain employees in the engineering
department covering the years 1997 and 1998. Both groups are affiliated
with the AFL-CIO. Executive Officers of the Registrant.
Name Age Offices and Experience
J.W. Weinhardt 66 SJW Corp. - Chairman, Chief Executive Officer.
Prior to becoming Chairman in October 1996 he
was President; Director and Member of the
Executive Committee of the Board of Directors
since 1985.
San Jose Water Company - Chairman of the
Board. Prior to his election to Chairman
of the Board in October 1994, he was
President. He also served as Chief
Executive Officer until October 1996;
Director and Member of the Executive
Committee of the Board of
Directors since 1974.
Mr. Weinhardt has been with San Jose Water
Company since 1963.
W.R. Roth 44 SJW Corp. - President of the Corporation
since October 1996. Prior to that he was
Vice President from April 1992 until
October 1996 and Chief Financial Officer
and Treasurer from January 1990 until
October 1996.
San Jose Water Company - President since
October 1994. He has been Chief Executive
Officer since October 1996. Prior to that
he was Chief Operating Officer from
October 1994 until October 1996. He was
Vice President from April 1992 until July
1994 and Senior Vice President from July
1994 until October 1994. He served as
Chief Financial Officer and Treasurer from
January 1990 through October 1994.
R.J. Balocco 46 San Jose Water Company - Vice President -
Corporate Communications since October
1995. He was Vice President,
Administration from April 1992 until
October 1995 and Manager of Customer
Service until October 1995. Mr. Balocco
has been with San Jose Water Company since
1982.
G.J. Belhumeur 51 San Jose Water Company - Vice President -
Operations since April 1996. Prior to
April 1996 he was Operations & Maintenance
Manager.
Mr. Belhumeur has been with San Jose
Water Company since 1970.
F.R. Meyer 57 San Jose Water Company - Vice President -
Regulatory Affairs since January 1990.
Mr. Meyer has been with San Jose Water
Company since 1978.
R.J. Pardini 51 San Jose Water Company - Vice President -
Chief Engineer since April 1996. Prior to
April 1996 he was Chief Engineer. Mr. Pardini
has been with San Jose Water Company since
1987.
R.S. Yoo 46 San Jose Water Company - Vice President -
Water Quality since April 1996. Prior to
April 1996 he was Water Quality Manager. He
has been with San Jose Water Company since
1985.
A. Yip 43 SJW Corp., Chief Financial Officer and Treasurer
since October 1996.
San Jose Water Company - Chief Financial
Officer and Treasurer since October 1994. She
was Regulatory Affairs Manager from July 1993
until October 1994 and prior to that Regulatory
Affairs Supervisor. Ms. Yip has been with the
San Jose Water Company since 1986.
B.Y. Nilsen 55 SJW Corp., Secretary since 1985. San Jose Water
Company - Secretary since 1983. Ms. Nilsen has
been with San Jose Water Company since 1964.
No executive officer has any family relationship to any other executive
officer or director. No executive officer is appointed for any set term.
There are no agreements or understandings between any executive officer and
any other person pursuant to which he was selected as an officer, other than
those with directors or officers of SJW Corp. acting solely in their
capacities as such.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales. Substantially all of SJW Corp.'s revenue and expense are derived from
operations located in the County of Santa Clara in the State of California.
Item 2. Properties.
The properties of San Jose Water Company consist of a unified system of water
production, storage, purification and distribution located in the County of
Santa Clara in the State of California. In general, the property is
comprised of franchise rights, water rights, necessary rights-of-way,
approximately 7,000 acres of land held in fee (which is primarily
nondevelopable watershed), impounding reservoirs with a capacity of
approximately 2.256 billion gallons, diversion facilities, wells,
distribution storage of approximately 240 million gallons and all water
facilities, equipment and other property necessary to supply its customers.
San Jose Water Company maintains all of its properties in good operating
condition in accordance with customary proper practice for a water utility.
San Jose Water Company's well pumping stations have a production capacity of
approximately 259 million gallons per day and the present capacity for taking
purchased water is approximately 169 million gallons per day. The gravity
water collection system has a physical delivery capacity of approximately 25
million gallons per day. During 1996, a maximum and average of 207 million
gallons and 132 million gallons of water per day, respectively, were
delivered to the system.
San Jose Water Company holds all its principal properties in fee, subject to
current tax and assessment liens, rights-of-way, easements, and certain minor
clouds or defects in title which do not materially affect their use and to
the lien of the indenture securing its first mortgage bonds, of which there
were outstanding at December 31, 1996, $1,500,000 in principal amount.
SJW Land Company owns approximately nine acres of property adjacent to San Jose
Water Company's general office facilities and another approximately 6
undeveloped acres in the San Jose Metropolitan area. Eight of the nine acres
of land adjacent to San Jose Water Company are used as surface parking
facilities and generate substantially all SJW Land Company's revenue.
Item 3. Legal Proceedings.
In October 1993, Valley Title Company and its insurer filed a lawsuit in
Santa Clara County Superior Court naming San Jose Water Company as a
defendant. Plaintiffs claimed a fire service pipeline ruptured in October
1992, causing water to flood the title company's basement.
In April 1995, San Jose Water Company's insurance carrier settled with the
plaintiff's insurance company for $3.5 million. Whether or not San Jose
Water Company will be compelled to contribute to the settlement is uncertain.
However, management has consistently maintained that the pollution exclusion
asserted by the insurance carrier does not apply to this type of incident.
Therefore, the company will aggressively resist any demand for contribution.
The jury awarded the title company $3 million for its loss of records, and the
insurance carrier for San Jose Water Company has appealed that decision. San
Jose Water Company believes that any final award to the title company will be
within the stated limits of the company's insurance coverage.
On June 27, 1995, the City of San Jose passed an ordinance imposing a
franchise fee on the gross annual receipts arising from the use, operation,
or possession of a "Potable Water Franchise." This ordinance became
effective on July 28, 1995. San Jose Water Company maintains that it has a
"constitutional franchise" dating from at least 1891, and that the City of
San Jose cannot legally impose any new franchise or new franchise fees on
San Jose Water Company's operations. San Jose Water Company has filed suit
to challenge this new city ordinance.
Although the company could have filed an advice letter with the California
Public Utilities Commission requesting authorization to collect the new
franchise fee from its customers, San Jose Water Company, with the
concurrence of the Division of Ratepayer Advocates, decided to ask the
Commission for permission to establish a memorandum account for the imposed
franchise fee. A Commission decision issued on November 8, 1995, authorized
San Jose Water Company to establish such an account. San Jose Water Company
will be able to collect the franchise fee from its customers by surcharge in
the event that its efforts to invalidate the ordinance are unsuccessful.
In September 1996, a judgment in favor of San Jose Water Company was
rendered. It is unknown whether the City will appeal the decision. San Jose
Water Company does not believe, based upon all available information, that
the outcome of this event will have a material effect on its financial
position.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information.
(1) (i) Exchange
SJW Corp.'s common stock is traded on the American Stock Exchange under the
symbol SJW.
(1) (ii) High and Low Sales Prices
The information required by this item as to the high and low sales prices
for SJW Corp.'s common stock for each quarter in the 1996 and 1995 fiscal
years is contained in the section captioned "Market price range of stock" in
the tables set forth in Note 11 of "Notes to Consolidated Financial
Statements" in Part II, Item 8.
(b) Holders.
There were 1,250 record holders of SJW Corp.'s common stock on February 21,
1997 (record date for the 1997 annual meeting).
(c) Dividends.
Quarterly dividends have been paid on SJW Corp.'s and its predecessor's
common stock for 213 consecutive quarters and the quarterly rate has been
increased during each of the last 29 years. The information required by
this item as to the cash dividends paid on common stock in 1996 and 1995 is
contained in the section captioned "Dividends per share" in the tables set
forth in Note 11 of "Notes to consolidated Financial Statements" in Part II,
Item 8.
Item 6. Selected Financial Data.
FIVE YEAR STATISTICAL REVIEW
1996 1995 1994 1993 1992
CONSOLIDATED RESULTS ----- ----- ----- ------ ------
OF OPERATIONS (In thousands)
Operating revenue $102,593 97,385 99,422 95,045 89,109
Operating expense:
Operation 57,231 57,339 62,648 57,016 54,184
Maintenance 6,851 6,342 6,289 5,417 4,397
Taxes 12,234 10,764 9,426 10,829 10,252
Depreciation 8,671 7,626 7,292 6,823 6,153
------ ------ ------ ------ ------
Total operating expense 84,987 82,071 85,655 80,085 74,986
------ ------ ------ ------ -----
Operating income 17,606 15,314 13,767 14,960 14,123
Interest expense,
other income and
deductions (954) 3,779 3,865 3,193 3,896
------ ------ ------ ------ -----
Net income 18,560 11,535 9,902 11,767 10,227
Dividends paid 7,163 7,022 6,826 6,637 6,044
----- ------ ------ ------ -----
Invested in the
business $11,397 4,513 3,076 5,130 4,183
====== ===== ===== ===== =====
CONSOLIDATED PER SHARE DATA
Net income $ 5.75 3.55 3.05 3.64 3.60
Dividends paid $ 2.22 2.16 2.10 2.04 2.13
Shareholders' equity
at year-end $ 37.86 33.49 32.02 31.86 29.70
CONSOLIDATED BALANCE SHEET (In thousands)
Utility plant $342,368 324,098 308,515 293,683 272,999
Less accumulated
depreciation and
amortization 107,584 100,000 95,083 90,030 84,158
------- ------- ------- ------ -------
Net utility plant 234,784 224,098 213,432 203,653 188,841
------- ------- ------- ------- -------
Nonutility property 7,287 6,624 7,178 6,775 5,465
Total assets 296,536 280,497 262,530 256,851 230,198
Capitalization:
Common shareholders'
equity 120,028 108,854 104,098 103,130 96,155
Long-term
debt(includes current
maturities) 76,500 77,500 64,000 66,000 61,248
------- ------- ------ ------- ------
Total capitalization $196,528 186,354 168,098 169,130 157,403
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in
this Form 10-K. This discussion contains forward-looking statements that
involve risks and uncertainties. Such forward-looking statements are
identified by words including "expect," "anticipate," "estimate" and
similar expressions. The Company's actual results could differ materially
from those discussed in such forward-looking statements. Important factors
that could cause or contribute to such differences include those identified
in Item 1(a) of this report and factors discussed in this Item 7.
Description of the Business
SJW Corp. is a holding company with two wholly owned subsidiaries: San
Jose Water Company and SJW Land Company. San Jose Water Company is a
public utility in the business of providing water service to a population
of approximately 944,000 in an area comprising about 134 square miles in
the metropolitan San Jose area. SJW Land Company owns and operates a 900-
space surface parking facility located adjacent to the San Jose Arena and
also owns several undeveloped real estate parcels in San Jose Water
Company's service area. SJW Corp. also owns 549,976 shares of California
Water Service Company, acquired through the liquidation of Western
Precision, Inc., formerly a wholly owned subsidiary of SJW Corp.
Results of Operations
Consolidated results of operations for the years ended December 31, 1995
and 1994 include the results of Western Precision, Inc. which was acquired
on December 31, 1992 and disposed of on February 28,1995.
CONSOLIDATED OPERATING REVENUE (in thousands)
1996 1995 1994
San Jose Water Company $101,780 95,634 92,963
Western Precision, Inc. - 1,051 5,968
SJW Land Company 813 700 491
-------- ------ ------
$102,593 97,385 99,422
======== ====== ======
Consolidated operating revenue for 1996 increased $5,208,000 or 5% from 1995
due to increased water consumption and the approval of a rate increase from
the California Public Utilities Commission (Commission). Consolidated
operating revenue for 1995 decreased $2,037,000 or 2% from 1994 due to the
sale of Western Precision, Inc. San Jose Water Company's revenue increased
3% over 1994 mainly due to a similar growth in customer usage.
CONSOLIDATED OPERATING EXPENSE (in thousands)
1996 1995 1994
San Jose Water Company $83,835 80,069 79,466
Western Precision, Inc. - 1,179 5,547
SJW Land Company 694 463 458
SJW Corp. 458 360 184
------- ------ ------
$84,987 82,071 85,655
======= ====== ======
In 1996, consolidated operating expense increased 4% due to increased
water production to satisfy water consumption growth. In 1995,
consolidated operating expense decreased 4% due to cost savings from
increased production of surface water and the sale of Western Precision,
Inc.
SOURCES OF SUPPLY (million gallons)
1996 1995 1994
Purchased water 23,328 20,380 19,161
Ground water 19,152 20,365 23,605
Surface water 5,908 5,275 1,663
------ ------ ------
48,388 46,020 44,429
====== ====== ======
The effective consolidated income tax rates for 1996, 1995 and 1994 were
38%, 40% and 39%, respectively. Refer to page 21 of the Notes To
Consolidated Financial Statements for the reconciliation of income tax
expense to the amount computed by applying the federal statutory rate to
income before income taxes.
OTHER INCOME AND EXPENSE
Dividend income increased $22,000, or 2%, over 1995 due to a $.04 per share
increase in the California Water Service Company annual dividend.
San Jose Water Company's interest expense on long-term debt in 1996,
including capitalized interest, increased $1,004,000 or 21%, from 1995 due
to the issuance of the Series D unsecured notes. San Jose Water Company's
weighted average cost of long-term debt, including amortization of debt
issuance costs, was 8.22%, 8.21% and 8.34% as of December 31, 1996, 1995 and
1994, respectively.
Liquidity and Capital Resources
CAPITAL REQUIREMENTS
San Jose Water Company's budgeted capital expenditures for 1997 compared to
1996, exclusive of capital expenditures financed by customer contributions
and advances, are as follows:
BUDGETED CAPITAL EXPENDITURES (in thousands)
1997 1996
Source of supply $ 827 5% $ 550 4%
Reservoirs and tanks 870 5% 813 5%
Pump stations and equipment 1,649 9% 1,721 11%
Distribution system 11,692 65% 10,171 67%
Equipment and other 2,964 16% 1,949 13%
$18,002 100% $15,204 100%
The 1997 capital budget is concentrated in two areas: $11,692,000 in main
replacements and related services to systematically renew the company's
aging infrastructure; and $1,800,000 to implement the third phase of a
geographical information and mapping system and a new accounting system.
San Jose Water Company expects to incur approximately $100,000,000,
exclusive of customer contributions and advances, in capital expenditures
over the next five years. San Jose Water Company's actual capital
expenditures may vary from its projection due to changes in the expected
demand for services, weather patterns, actions by governmental agencies and
general economic conditions. Total additions to utility plant normally
exceed company-financed additions by several million dollars because certain
new facilities are constructed using advances from developers and
contributions in aid of construction.
Most of San Jose Water Company's distribution system has been constructed
over the last forty years. Expenditure levels for renewal and modernization
of this part of the system will grow at an increasing rate as these
components reach the end of their useful lives. Additionally, in most cases
replacement cost will significantly exceed the cost of the retired asset due
to increases in the cost of goods and services.
SOURCES OF CAPITAL
San Jose Water Company's ability to finance future construction programs and
sustain dividend payments depends on its ability to attract external
financing and maintain or increase internally generated funds. The level of
future earnings and the related cash flow from operations is dependent, in
large part, upon the timing and outcome of regulatory proceedings.
Over the past five years SJW Corp. has paid its shareholders, in the form of
dividends, an average of 54% of its net income. The remaining earnings have
been reinvested. Capital requirements not funded by earnings are expected
to be funded through external financing in the form of unsecured senior
notes or a commercial bank line of credit. As of December 31, 1996, San
Jose Water Company had $20,000,000 of unused line of credit and over
$50,000,000 of borrowing capacity under the terms of the senior note
agreements.
San Jose Water Company's financing activity is designed to achieve a capital
structure consistent with regulatory guidelines - approximately 50% debt and
50% equity.
In 1996, San Jose Water Company redeemed its $1,000,000 Series O 6.5% first
mortgage bonds at maturity. In 1995, San Jose Water Company issued
$15,000,000 in Series D unsecured 30-year senior notes and redeemed its
$1,500,000 Series N 4.85% first mortgage bonds at maturity. In 1994, San
Jose Water Company redeemed its $2,000,000 Series M 4.65% first mortgage
bonds at maturity. San Jose Water Company intends to retire all remaining
first mortgage bonds by 1998 and satisfy all forseeable future long-term
financing needs with senior notes.
Factors That May Affect Future Results
The results of operations of San Jose Water Company generally depend on the
following factors: (1) regulation, (2) surface water supply, and (3)
operation and maintenance expense.
REGULATION
Principally all the operating revenue of San Jose Water Company results from
the sale of water at rates authorized by the Commission. The Commission
sets rates that are intended to provide revenue sufficient to recover
operating expenses and produce a reasonable return on common equity.
As a result of the Commission's General Rate Case decision, San Jose Water
Company was authorized new rates, which became effective on July 22, 1996.
In the decision the Commission authorized an average annual rate increase of
1.25% through 1999, for a total rate increase of $4.8 million during this
period. The new rates reflect an authorized return on equity of 10.2%,
which is within the range of recent rates of return authorized by the
Commission for water utilities. Additionally, San Jose Water Company was
authorized to recover the $1.4 million balance in its Voluntary Conservation
Memorandum Account via a oneyear surcharge effective concurrently with the
general rate increase.
The General Rate Case decision granted San Jose Water Company memorandum
account protection for the largely indeterminate costs associated with the
new or more stringent federal water quality regulations. With the
establishment of the water quality memorandum account, any potential
financial exposure resulting from these regulations has been substantially
reduced. The decision also authorized the $457,000 balance in the Tax
Memorandum Account to be transferred to the Balancing Account for future
collection in rates.
In November 1996, San Jose Water Company filed an advice letter requesting a
step rate increase in the amount of $1,212,000 to be effective January 1,
1997.
SURFACE WATER SUPPLY
The level of surface water available in each year depends on the amount of
rainfall and run-off collected in San Jose Water Company's Santa Cruz
Mountain reservoirs. In a normal year, surface supply provides 6-8% of the
total water supply of the system. Surface water is a less costly source of
water and its availability may significantly impact the results of
operations.
OPERATION AND MAINTENANCE EXPENSE
San Jose Water Company reached an agreement with its unionized personnel
covering 1997 and 1998. The agreement includes a 3.5% wage increase each
year and minor benefit modifications.
ENVIRONMENTAL MATTERS
San Jose Water Company's operations are subject to water quality and
pollution control regulations issued by the United States Environmental
Protection Agency (EPA), the California Department of Health Services and the
California Regional Water Quality Control Board. The company is also
subject to environmental laws and regulations administered by other state
and local regulatory agencies.
Under the federal Safe Drinking Water Act (SDWA), San Jose Water Company is
subject to regulation by the EPA of the quality of water it sells and
treatment techniques it uses to make the water potable. The EPA promulgates
nationally applicable maximum contaminant levels (MCLs) for "contaminants"
found in drinking water. San Jose Water Company is currently in compliance
with all of the 84 MCLs promulgated to date. The EPA has continuing
authority, however, to issue additional regulations under the SDWA. San
Jose Water Company has implemented monitoring activities and installed
specific water treatment improvements enabling it to comply with all
existing MCLs and plan for compliance with future drinking water
regulations.
To comply with the State Total Coliform Regulation, disinfection of San Jose
Water Company wells is being phased in over the next two to three years. To
date, ten of the company's nineteen key groundwater production stations have
been equipped with hypochlorinators, with six more installations to be
completed in 1997. The EPA is expected to mandate disinfection of all
groundwater supplies by 1999.
In 1995, State Assembly Bill No. 733 was signed into law requiring public
water systems in California serving at least 10,000 connections to
fluoridate water. The law provides that water systems would not be required
to comply unless funding for the needed capital and associated costs are
available from any source other than ratepayers, shareholders, local
taxpayers or bondholders of the public water system.
In addition to SDWA, other environmental regulations are becoming
increasingly important. The Santa Clara County Toxic Gas Ordinance became
effective in 1993 requiring the elimination of chlorine gas disinfection
systems or the installation of complete containment systems to control
accidental chlorine gas discharges. During 1994, San Jose Water Company
replaced the chlorine gas disinfection systems at its two water treatment
plants with hypochlorinators which accomplish disinfection with liquid
sodium hypochlorite. These facilities are currently operational and in
compliance with all state and local hazardous materials storage regulations.
Other state and local environmental regulations apply to San Jose Water
Company's operations and facilities. These regulations relate primarily to
the handling, storage and disposal of hazardous materials. San Jose Water
Company is currently in compliance with state and local regulations
governing underground storage tanks, disposal of hazardous wastes, non-point
source discharges, and the warning provisions of the California Safe
Drinking Water and Toxic Enforcement Act of 1986.
Future drinking water regulations will most likely require increased
monitoring, and may mandate disinfection or other treatment of underground
water supplies, more stringent performance standards for treatment plants
and procedures to reduce levels of disinfection by-products. San Jose Water
Company continues to seek to establish mechanisms for recovery of government
mandated environmental compliance costs. However, there are limited
regulatory mechanisms and procedures available to the company for the
recovery of such costs and there can be no assurance that such costs will be
fully recovered.
Of all of the regulations being considered under the current SDWA, the
proposed Disinfectants/Disinfection By-Products Rule is anticipated to have
the most significant impact on water utilities. Due to be promulgated in
the year 2000, this rule would impose more stringent monitoring requirements
and drinking water standards for by-products formed during the disinfection
of water. The Santa Clara Valley Water District, whose imported surface
water represents approximately 45% of San Jose Water Company's supply,
projects that compliance with this regulation could, by the year 2003, cost
over $100,000,000 in capital improvements and an additional $3,000,000 per
year in operating expenses. If incurred, part of these costs would be passed
along to San Jose Water Company and other water retailers in the form of
higher rates for purchased water and pump taxes. San Jose Water Company
would seek a rate increase, via an advice letter filing, to recover the
additional costs. The company's surface and groundwater sources are
generally of a higher quality than the imported water supplies, and are not
expected to require extensive modifications of existing treatment processes.
NONREGULATED SUBSIDIARIES
The investment in California Water Service Company is expected to produce
1997 pre-tax dividend income and cash flow of approximately $1,100,000. SJW
Land Company's parking revenue is largely dependent upon the level of events
and activities at the San Jose Arena which is located adjacent to its
parking facility.
Item 8. Financial Statements and Supplementary Data.
Financial Statements:
Independent Auditors' Report
----------------------------
The Shareholders and Board of Directors
SJW Corp.
We have audited the consolidated financial statements of SJW Corp. and
subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SJW
Corp. and subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-
year period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
San Jose, California
January 17, 1997
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(December 31, in thousands, except share data)
ASSETS
1996 1995
------ -------
Utility plant $ 342,368 324,098
Less accumulated depreciation 107,584 100,000
------- -------
234,784 224,098
------- -------
Nonutility property 7,287 6,624
Current assets:
Cash and equivalents 11,904 7,414
Temporary investments - 4,300
Accounts receivable:
Customers 4,808 5,315
Other 339 284
Accrued utility revenue 2,600 2,900
Materials and supplies, at
average cost 632 643
Prepaid expenses 587 595
------ ------
20,870 21,451
------ ------
Other assets:
Investment in California
Water Service Company 23,099 18,012
Unamortized debt issuance and
reacquisition costs 4,143 4,283
Goodwill 2,170 2,256
Regulatory assets 3,711 3,551
Other 472 222
------- ------
33,595 28,324
------- -------
$ 296,536 280,497
======= =======
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
(December 31, dollars in thousands, except share data)
CAPITALIZATION AND LIABILITIES
1996 1995
------ ------
Capitalization:
Shareholders' equity:
Common stock, $3.125 par value;
authorized 6,000,000 shares; issued
3,170,347 shares in 1996 and
3,250,746 shares in 1995 $ 9,907 10,159
Additional paid-in capital 19,235 22,208
Retained earnings 87,966 76,569
Cumulative change in market value of
investment 2,920 (82)
------- ------
120,028 108,854
Long-term debt, less current maturities 75,000 76,500
------- -------
195,028 185,354
------- -------
Current liabilities:
Current maturities of long-term debt 1,500 1,000
Accrued pump taxes and purchased water 1,992 3,742
Accounts payable 315 690
Accrued interest 2,665 2,179
Accrued taxes other than income taxes 344 311
Other current liabilities 2,138 2,838
------ ------
8,954 10,760
------- ------
Deferred income taxes 16,058 13,329
Unamortized investment tax credits 2,359 2,414
Advances for construction 39,217 35,805
Contributions in aid of construction 31,959 30,327
Deferred revenue 1,004 1,019
Other nonconcurrent liabilities 1,957 1,489
Commitments and contingency ------- -------
$296,536 280,497
======= =======
See accompanying notes to consolidated financial statements.
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Years ended December 31, in thousands, except share data)
1996 1995 1994
1994
------- ------ ------
Operating revenue $102,593 97,385 99,422
Operating expense:
Operation:
Purchased water 21,914 19,389 18,229
Power 4,099 4,781 5,470
Pump taxes 14,079 14,969 17,356
Other 17,139 18,200 21,593
Maintenance 6,851 6,342 6,289
Property taxes and other nonincome taxes 3,168 2,996 3,039
Depreciation 8,671 7,626 7,292
Income taxes 9,066 7,768 6,387
------ ------ ------
84,987 82,071 85,655
------ -------- ------
Operating income 17,606 15,314 13,767
Other (expense) income:
Interest on long-term debt (5,892) (4,888) (5,082)
Gain on sale of nonutility
property 5,269 - -
Dividends 1,144 1,122 1,089
Other 433 (13) 128
-------- ------- ------
Net income $ 18,560 11,535 9,902
======== ======= ======
Earnings per share $ 5.75 3.55 3.05
========= ========= =========
Weighted average shares outstanding 3,226,647 3,250,746 3,250,746
========= ========= =========
See accompanying notes to consolidated financial statements.
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY
(in thousands) Cumulative
Additional Change in Total
Common Paid-in Retained Market Value
Shareholders' Stock Capital Earnings of
investment Equity ------- ------- -------
-------- -------
Balances,
December 31, 1993 $10,116 21,763 68,980 2,271 103,130
Purchase price adjustment 43 445 - - 488
Net income - - 9,902 - 9,902
Dividends paid - - (6,826) - (6,826)
Change in market value
of investment, net of
tax effect of $1,804 - - - (2,596) (2,596)
------- ------- ------- ------- ------
Balances,
December 31, 1994 10,159 22,208 72,056 (325) 104,098
Net income - - 11,535 - 11,535
Dividends paid - - (7,022) - (7,022)
Change in market value
of investment, net of
tax effect of $170 - - - 243 243
------- ------- ------- ------- ------
Balances,
December 31, 1995 10,159 22,208 76,569 (82) 108,854
Net income - - 18,560 - 18,560
Dividends paid - - (7,163) - (7,163)
Purchase and retirement
of common stock (252) (2,973) - - (3,225)
Change in market
value of investment,
net of tax effect
of $2,085 - - - 3,002 3,002
------- ------- ------- ------- -------
Balances,
December 31, 1996 $ 9,907 19,235 87,966 2,920 120,028
======== ======= ======= ======= =======
See accompanying notes to consolidated financial statements.
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Years ended December 31
(in thousands) 1996 1995 1994
------ ------ ------
Operating activities:
Net income $ 18,560 11,535 9,902
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 8,671 7,626 7,292
Deferred income taxes and credits 287 274 144
Gain on sale of nonutility property (5,269) - -
Changes in operating assets and liabilities:
Accounts receivable and accrued utility
revenue 752 41 (515)
Accounts payable and other current
liabilities (1,075) (200) 828
Accrued pump taxes and purchased water (1,750) 539 (61)
Prepaid expenses (8) 1,383 95
Other changes, net (869) 979 769
------- ------ ------
Net cash provided by operating activities 19,299 22,177 18,454
------- ------- ------
Investing activities:
Additions to utility plant (20,065) (18,710) (17,350)
Cost to retire utility plant, net of salvage (273) (491) (572)
Additions to nonutility property (1,069) (328) (611)
(Purchase) sale of temporary investments 4,300 (4,300) -
Proceeds from sale of machine shop - 1,954 -
Proceeds from sale of nonutility property 7,767 - -
------- ------ ------
Net cash used in investing activities ( 9,340) (21,875) (18,533)
------- ------- ------
Financing activities:
Dividends paid (7,163) (7,022) (6,826)
Repayment of line of credit - (7,000) (2,400)
Borrowings from line of credit - 2,200 7,200
Advances and contributions in aid of
construction 7,325 5,585 4,393
Refunds of advances (1,406) (1,428) (1,569)
Proceeds from issuance of long-term debt - 15,000 -
Principal payments of long-term debt (1,000) (1,500) (2,000)
Purchase and retirement of common stock (3,225) - -
------ ------ ------
Net cash provided by (used in)
financing activities (5,469) 5,835 (1,202)
------ ------ ------
Net change in cash and equivalents 4,490 6,137 (1,281)
Cash and equivalents, beginning of year 7,414 1,277 2,558
------- ------- ------
Cash and equivalents, end of year $11,904 7,414 1,277
======= ======= =======
See accompanying notes to consolidated financial statements.
SJW CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1996, 1995 and 1994
(Dollars in thousands, except share data)
Note 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of
SJW Corp. and its wholly owned subsidiaries. Intercompany transactions and
balances have been eliminated.
SJW Corp.'s principal subsidiary, San Jose Water Company, is a regulated
California water utility providing water service to the greater metropolitan
San Jose area. San Jose Water Company's accounting policies comply with the
applicable uniform system of accounts prescribed by the California Public
Utilities Commission (Commission) and conform to generally accepted
accounting principles for rate-regulated public utilities. More than 90% of
San Jose Water Company's revenue is derived from the sale of water to
residential and business customers.
SJW Land Company owns and operates a 900-space surface parking facility
adjacent to the San Jose Arena, and also owns several undeveloped real
estate parcels in San Jose Water Company's service area.
The consolidated financial results of 1995 and 1994 included the operation
of Western Precision, Inc., which was sold in February 1995. Western
Precision, Inc. contributed $1,051 and $5,968 of SJW Corp.'s operating
revenues in 1995 and 1994, respectively.
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Utility Plant - The cost of additions, replacements and betterments to
utility plant is capitalized. The amount of interest capitalized in 1996,
1995 and 1994 was $201, $245 and $103, respectively. Construction in
progress was $2,021 in 1996, $1,813 in 1995 and $2,658 in 1994.
Depreciation is computed using the straight-line method over the estimated
service lives of the assets, ranging from 5 to 75 years. The cost of
utility plant retired, including retirement costs (less salvage), is charged
to accumulated depreciation, and no gain or loss is recognized.
In 1996, SJW Corp. adopted Statement of Financial Accounting Standards
(SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. SFAS No. 121 prescribes that rate-
regulated enterprises should charge a regulatory asset to earnings if and
when that asset no longer meets the criteria for being recorded as a
regulatory asset. Rateregulated enterprises should also recognize an
impairment of an asset if the regulator excludes all or part of a cost from
rates. The adoption of SFAS No. 121 did not result in any material effect
on the corporation's results of operations, or on its financial condition
taken as a whole.
Nonutility Property - Nonutility property is recorded at cost and consists
primarily of land and parking facilities. Depreciation is computed using
accelerated depreciation method over the estimated useful lives of the
assets, ranging from 5 to 15 years.
Financial Instruments - Cash and equivalents include certain highly liquid
investments with remaining maturities of three months or less when
purchased. Cash equivalents are stated at cost plus accrued interest, which
approximates fair value. Temporary investments consist principally of tax-
exempt municipal obligations with maturities between three and twelve
months, and are stated at cost plus accrued interest, which approximates
fair value.
Investment in California Water Service Company - SJW Corp.'s investment in
California Water Service Company is reported at quoted market price, with
the unrealized gain or loss excluded from earnings and reported as a
separate component of shareholders' equity.
The fair value of SJW Corp.'s investment in California Water Service Company
approximated $23,099 and $18,012 as of December 31, 1996 and 1995,
respectively. The increase in fair value of $5,087, after offsetting the
deferred tax liabilities of $2,085, resulted in a net increase of $3,002 to
shareholders' equity as of December 31, 1996.
Other Assets - Debt reacquisition costs are amortized over the term of the
new debt. Debt issuance costs are amortized over the life of each issue.
The excess cost over fair market value of net assets acquired is recorded as
goodwill and amortized over the periods estimated to be benefited, not
exceeding 40 years. Management periodically evaluates goodwill to determine
if an impairment has occurred.
Income Taxes - Income taxes are accounted for using the asset and liability
method. Deferred tax assets and liabilities are recognized for the effect
of temporary differences between financial and tax reporting. Deferred tax
assets and liabilities are measured using enacted tax rates applicable to
future years.
To the extent that the tax benefits of the temporary differences
have previously been passed through to customers through lower water rates,
management anticipates that the payment of the future tax liabilities
resulting from the reversal of the temporary differences will be recoverable
through rates. Therefore, a regulatory asset has been recorded for the
portion of net deferred tax liabilities which are expected to be recovered
through future rates. Although realization is not assured, management
believes it is more likely than not that all of the regulatory asset will be
realized.
To the extent permitted by the Commission, investment tax credits resulting
from utility plant additions are deferred and amortized over the estimated
useful lives of the related property.
Advances for Construction and Contributions in Aid of Construction -
Advances for construction received after 1981 are being refunded ratably
over 40 years. Prior customer advances are refunded based on 22% of related
revenues. Estimated refunds for 1997 are $1,420.
Contributions in aid of construction represent funds received from
developers that are not refundable under Commission regulations.
Depreciation applicable to utility plant constructed with these
contributions is charged to contributions in aid of construction.
Customer advances and contributions in aid of construction received
subsequent to 1986 and prior to June 12, 1996 generally must be included in
federal taxable income. Taxes paid relating to advances and contributions
are recorded as deferred tax assets for financial reporting purposes and
amortized over 40 years for advances, and over the tax depreciable life of
the related asset for contributions.
Beginning in 1992, advances and contributions are also included in state
taxable income.
Advances and contributions in aid of construction received subsequent to
June 12, 1996 are generally exempt from federal taxable income.
Revenue - Revenue of San Jose Water Company includes amounts billed to
customers, and unbilled amounts based on estimated usage from the latest
meter reading to the end of the year. Included in 1996's operating revenue
is $631 relating to recovery of prior years' net revenue lost due to
voluntary conservation programs.
Earnings Per Share - Per share data are calculated using net income divided
by the weighted average number of shares outstanding during the year.
Note 2
CAPITALIZATION
At December 31, 1996, 1995, and 1994, 176,407 shares of preferred stock were
authorized and unissued.
In 1996, SJW Corp. repurchased and cancelled 80,399 shares of its
outstanding stock at the prevailing market price at an aggregate cost of
$3,225.
Note 3
LINE OF CREDIT
San Jose Water Company has available an unsecured bank line of credit,
allowing aggregate short-term borrowings of up to $20,000. This line of
credit bears
interest at variable rates and expires on May 31, 1997.
Note 4
GAIN ON SALE OF NONUTILITY PROPERTY
In September 1996, SJW Land Company sold nonutility property receiving as
consideration $6,750 in cash and a parcel of nonutility property with a
fair value of $1,050. The transaction resulted in a gain of $5,269, net
of income tax expense of $2,155, or $1.62 per share.
Note 5
LONG-TERM DEBT
Long-term debt as of December 31 was as follows:
Description Due Date 1996 1995
- ------------------------------------------------
First mortgage bonds:
O 6.5% 1996 $ - 1,000
P 6.5% 1997 1,500 1,500
- ------------------------------------------------
1,500 2,500
Senior notes:
A 8.58% 2022 20,000 20,000
B 7.37% 2024 30,000 30,000
C 9.45% 2020 10,000 10,000
D 7.15% 2026 15,000 15,000
- ------------------------------------------------
75,000 75,000
- ------------------------------------------------
Total long-term debt 76,500 77,500
Less current maturities 1,500 1,000
- ------------------------------------------------
$75,000 76,500
First mortgage bonds and senior notes are obligations of San Jose Water
Company. Maturities of long-term debt, including sinking fund requirements,
amount to $1,500 in 1997.
Substantially all utility plant is pledged as collateral for first mortgage
bonds. Senior notes are unsecured. To minimize issuance costs, all of San
Jose Water Company's debt has historically been privately placed. The fair
value of long-term debt, including current maturities, as of December 31,
1996 and 1995 was approximately $86,500 and $97,300, respectively based on
the amount of essentially risk-free assets that would have to be placed in
trust to extinguish these obligations.
Note 6
INCOME TAXES
The following table reconciles income tax expense to the amount computed by
applying the federal statutory rate to income before income taxes:
1996 1995 1994
------------------------------------------------------------
Computed "expected" federal
income tax at the
statutory rate of 35% $10,423 6,756 5,701
Increase (decrease) in taxes
attributable to:
Utility plant basis 462 400 448
State taxes, net of federal
income tax benefit 1,800 1,167 985
Dividend received deduction (280) (275) (267)
Nonutility property sale (922) - -
Other items, net (262) (280) (480)
------------------------------------------------------------
$11,221 7,768 6,387
============================================================
The components of income tax expense were:
1996 1995 1994
------------------------------------------------------------
Current:
Federal $7,830 5,564 4,276
State 2,961 2,041 1,683
Deferred:
Federal 907 549 782
State (477) (386) (354)
------------------------------------------------------------
$11,221 7,768 6,387
============================================================
The components of the net deferred tax liability as of December 31 were
as follows:
1996 1995
-----------------------------------------------------------
Deferred tax assets:
Advances and contributions $12,252 11,466
Unamortized investment tax credit 1,277 1,306
Pensions and postretirement
benefits 596 438
California franchise tax 668 538
Other 257 183
------------------------------------------------------------
Total deferred tax assets 15,050 13,931
------------------------------------------------------------
Deferred tax liabilities:
Utility plant 21,965 20,514
Investment 7,215 5,130
Debt reacquisition costs 1,355 1,406
Other 573 210
------------------------------------------------------------
Total deferred tax liabilities 31,108 27,260
------------------------------------------------------------
Net deferred tax liabilities $16,058 13,329
============================================================
Based upon the level of historical taxable income and projections for
future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the company will
realize the benefits of these deductible differences.
Note 7
EMPLOYEE BENEFIT PLANS
Pension Plans - San Jose Water Company sponsors noncontributory defined
benefit pension plans. Benefits under the plans are based on an employee's
years of service and highest consecutive three years of compensation. San
Jose Water Company's policy is to contribute the net periodic pension cost
to the extent it is tax deductible.
San Jose Water Company has a Supplemental Executive Retirement Plan, which
is a defined benefit plan under which the company will pay supplemental
pension
benefits to key executives in addition to the amounts received under the
retirement plan. The annual cost of this plan has been included in the
determination of the net periodic pension cost shown below. The plan,
which is unfunded, had a projected benefit obligation of $1,413 and $1,277
as of December 31, 1996 and 1995, respectively, and net periodic pension
cost of $193, $159 and $152 for 1996, 1995 and 1994, respectively.
Net periodic pension cost for the defined benefit plans was as follows:
1996 1995 1994
------------------------------------------------------------
Service cost-benefits earned
during the period $ 869 536 637
Interest cost on projected
benefit obligation 1,444 1,349 1,290
Actual return on plan assets (3,767) (3,896) 347
Net amortization and deferral 2,146 2,403 (1,802)
------------------------------------------------------------
$ 692 392 472
============================================================
The actuarial present value of benefit obligations and the funded status of
San Jose Water Company's defined benefit pension plans as of December 31
were as follows:
1996 1995
----------------------------------------------------------
Actuarial present value of
accumulated benefit obligation,
including vested benefits of
$16,981 and $16,254 $(18,686) (17,743)
------------------------------------------------------------
Projected benefit obligation (23,314) (22,300)
Plan assets at fair value 25,813 22,486
-----------------------------------------------------------
Plan assets in excess
of projected benefit obligation 2,499 186
Unrecognized net gain (4,532) (1,997)
Prior service cost not recognized
in net periodic pension cost 1,331 1,463
Unrecognized net obligation at
January 1, 1987 and 1992 being
recognized over 15 and 13.7 years 221 223
------------------------------------------------------------
Accrued pension cost included
in other current liabilities $ (481) (125)
===========================================================
The plans invest primarily in listed stocks, bonds, government securities
and cash and use the projected unit credit actuarial cost method. Average
remaining service lives were 14.5 years for 1996 and 1995.
In determining net periodic pension cost for 1996, 1995 and 1994 the
following assumptions were used: weighted average discount rate, 6.5%, 8.5%
and 7.0%, respectively; compensation growth rate, 4.0%, 5.0% and 5.0%,
respectively; and rate of return on plan assets, 8.0% for all years. In
determining projected benefit obligation as of December 31, 1996 and 1995,
the following assumptions were used: weighted average discount rate, 6.75%
and 6.5%, respectively; and compensation growth rate, 4.0% for both years.
Savings Plans - San Jose Water Company sponsors savings plans which allow
employees to defer and contribute a portion of their earnings to the plans.
Contributions, not to exceed set limits, are matched 50% by the company.
Company contributions were $366, $345 and $266 in 1996, 1995 and 1994,
respectively.
Other Postretirement Benefits - In addition to providing pension and savings
benefits, San Jose Water Company provides health care and life insurance
benefits for retired employees.
Net periodic postretirement benefit costs were as follows:
1996 1995 1994
------------------------------------------------------------
Service cost - benefits earned
during the period $48 28 40
Interest cost on benefit obligation 89 87 89
Actual return on plan assets (9) (5) -
Net amortization and deferral 51 28 50
------------------------------------------------------------
$179 138 179
------------------------------------------------------------
Benefits paid were $71, $72 and $72 in 1996, 1995 and 1994, respectively.
The Plan's combined funded status and the related accrual as of December 31
were as follows:
1996 1995
------------------------------------------------------------
Accumulated postretirement
benefit obligation:
Retirees $ (593) (630)
Active plan participants:
Fully eligible (180) (168)
Other (646) (643)
-----------------------------------------------------------
(1,419) (1,441)
Plan assets 291 218
Accumulated postretirement
obligation in excess of plan assets (1,128) (1,223)
Unrecognized net gain from
past experience and changes in
assumptions (231) (151)
------------------------------------------------------------
Unrecognized net transition
obligation 886 945
------------------------------------------------------------
Accrued postretirement benefit cost
included in other current liabilities $ (473) (429)
------------------------------------------------------------
For measurement purposes, an 8.0% annual increase in the per capita cost of
covered health care benefits was assumed for 1996; this increase was
assumed to decrease gradually to 5.0% by 2002 and remain at that level
thereafter. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 6.75% for 1996 and 6.5%
for 1995. In determining the net periodic postretirement benefit cost,
6.5% and 8.5% discount rates were used respectively for 1996 and 1995.
The health care cost trend rate assumption has a significant effect on the
amounts reported. Increasing the assumed health care cost trend rates by
1% each year would increase the accumulated postretirement benefit
obligation as of December 31, 1996 by $104 and the aggregate of the service
and interest cost components of net periodic postretirement benefit cost
for 1996 by $15.
Note 8
COMMITMENT
San Jose Water Company purchases water from the Santa Clara Valley Water
District (SCVWD). Delivery schedules for purchased water are based on a
contract year beginning July 1, and are negotiated every three years under
terms of a master contract with SCVWD expiring in 2051.
According to the contract terms, San Jose Water Company is obligated to
purchase a minimum of 90% of the delivery schedule. The delivery schedule is
established based on 95% of the water delivered to San Jose Water Company
within the prior three years.
Based on current prices and estimated deliveries, San Jose Water Company
expects to purchase $18,000 of water from SCVWD in the contract year ending
June 30, 1997.
Note 9
SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental information on cash flows and noncash transaction is as follows:
1996 1995 1994
--------------------------------------------------------------------
Cash paid during the year for:
Interest $ 5,607 5,284 4,482
Income taxes 11,443 5,810 5,760
Noncash investing and financing
activities - adjustments to
purchase price - - 488
Note 10
CONTINGENCY
In October 1993, Valley Title Company and its insurer filed a lawsuit in
Santa Clara County Superior Court naming San Jose Water Company as a
defendant. Plaintiffs claimed that a fire service pipeline ruptured in
October 1992, causing oil-contaminated water to flood the title company's
basement.
In April 1995, San Jose Water Company's insurance carrier settled with the
plaintiff insurance company for $3,500. Whether or not San Jose Water
Company will be compelled to contribute to the settlement is uncertain.
However, management has consistently maintained that the pollution exclusion
asserted by the insurance carrier does not apply to this type of incident,
and therefore San Jose Water Company will aggressively resist any demand for
contribution.
The jury awarded the title company $3,000 for its loss of files, and the
insurance carrier for San Jose Water Company has appealed that decision.
San Jose Water Company believes that any final award to the title
company will be within the stated limits of the company's insurance
coverage.
NOTE 11
UNAUDITED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data is as follows:
1996 Quarter ended
- ----------------------------------------------------------------
March June September December
- ----------------------------------------------------------------
Operating revenue $18,445 28,005 33,387 22,756
Operating income 2,588 5,014 6,426 3,578
Net income 1,480 3,929 10,579 2,572
Earnings per share .46 1.21 3.26 .82
Market price range of stock:
High 41 1/2 39 1/4 42 1/2 48 1/4
Low 36 32 33 1/2 39 1/8
Dividends per share .555 .555 .555 .555
- ---------------------------------------------------------------
1995 Quarter ended
- ---------------------------------------------------------------
March June September December
- ---------------------------------------------------------------
Operating revenue $ 18,239 23,780 32,004 23,362
Operating income 1,913 3,960 5,983 3,458
Net income 844 2,994 5,126 2,571
Earnings per share .26 .92 1.58 .79
Market price range of stock:
High 37 1/2 37 3/8 37 7/8 37 3/4
Low 31 1/4 32 3/8 35 1/8 34 1/4
Dividends per share .54 .54 .54 .54
- ---------------------------------------------------------------
FINANCIAL STATEMENT SCHEDULE
SJW CORP. - Schedule II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
Description 1996 1995 1994
- ----------- ---- ---- ----
Allowance for doubtful accounts
Balance, beginning of period 50,000 50,000 50,000
Charged to expense 174,275 222,163 188,171
Accounts written off (205,034) (255,449) (226,962)
Recoveries of accounts written off 30,759 33,286 38,791
------------------------------
Balance, end of period 50,000 50,000 50,000
==============================
Reserve for self insurance
Balance, beginning of period 500,044 309,467 456,191
Charged to expense 128,500 278,100 200,000
Payments (115,903) (87,523) (346,724)
-----------------------------
Balance, end of period 512,641 500,044 309,467
==============================
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
The Company's Proxy Statement for its 1997 Annual Meeting of Shareholders,
which was filed on February 27, 1997 pursuant to Regulation 14A under the
Securities Exchange Act of 1934 and is incorporated by reference in this
Form 10-K pursuant to General Instruction G(3) of Form 10-K, provides the
information required under Part III (Items 10, 11, 12 and 13), except for
the information with respect to the Company's executive officers which is
included in "Item 1. Business - Executive Officers of the Registrant."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements
Independent Auditors' Report, January 17, 1997 Page
Consolidated Balance Sheet as of December 31, 1996 and 1995 16
Consolidated Statement of Income for the years ended
December 31, 1996, 1995, and 1994. 18
Consolidated Statement of Changes in Shareholders' Equity
for the years ended December 31, 1996, 1995 and 1994 19
Consolidated Statement of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 20
Notes to Consolidated Financial Statements 21
(2) Financial Statement Schedule:
Schedule
Number
II Valuation and Qualifying Accounts and 28
Reserves, Years ended December 31,
1996, 1995 and 1994
All other schedules are omitted as the required information is inapplicable
or the information is presented in the financial statements or related
notes.
(3) Exhibits required to be filed by Item 601 of Regulation S-K.
See Exhibit Index located immediately following paragraph (b) of this Item
14.
The exhibits filed herewith are attached hereto (except as noted) and
those indicated on the Exhibit Index which are not filed herewith were
previously filed with the Securities and Exchange Commission as
indicated.
(b) Report on Form 8-K.
There have been no reports filed on Form 8-K during the last
quarter of the period covered by this report.
EXHIBIT INDEX
Location in
Sequentially
Exhibit Numbered
No. Description Copy
2 Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession:
2.1 Stock Exchange Agreement dated as of August 20, 1992
(as amended October 21, 1992). Filed as Appendix A to Proxy
Statement/Prospectus dated November 11, 1992.
File No. 1-8966. NA
2.2 Registration Rights Agreement entered into as of
December 31, 1992 among SJW Corp., Roscoe Moss, Jr. and
George E. Moss. Filed as Exhibit 4.1 to Form 8-K January 11,
1993. File No. 1-8966. NA
2.3 Affiliates Agreement entered into as of December 31, 1992
among SJW Corp., Roscoe Moss, Jr. and George E. Moss. Filed as
Exhibit 4.2 to Form 8-K January 11, 1993. File No. 1-8966. NA
2.4 Affiliates Agreement entered into as December 31,1992 among
SJW Corp., Roscoe Moss Company and Roscoe Moss, Jr. Filed as
Exhibit 4.3 to Form 8-K January 11, 1993. File No. 1-8966. NA
3 Articles of Incorporation and By-Laws:
3.1 Restated Articles of Incorporation and By-Laws of SJW Corp.,
defining the rights of holders of the equity securities of SJW
Corp. Filed as an Exhibit to Annual Report on Form 10-K for the
year ended December 31, 1991. SEC File No. 1-8966. NA
4 Instruments Defining the Rights of Security Holders,
including Indentures:
No current issue of the registrant's long-term debt exceeds 10
percent of the total assets of the Company. The Company hereby
agrees to furnish upon request to the Commission a copy of each
instrument defining the rights of holders of unregistered senior
and subordinated debt of the Company. NA
Location
in
Sequentially
Exhibit Numbered
No. Description Copy
10 Material Contracts:
10.1 Water Supply Contract dated January 27, 1981 between
San Jose Water Works and the Santa Clara Valley Water District,
as amended. Filed as an Exhibit to Annual Report on Form 10-K
for the year ended December 31, 1991. File No.1-8966. NA
Executive Compensation Plans and Arrangements:
10.2 Resolutions for Directors' Retirement Plan adopted by SJW
Corp. Board of Directors, as amended. Filed as an Exhibit to Annual
Report on Form 10-K for the year ended December 31, 1991.
S.E.C. File No. 1-8966. NA
10.3 Resolutions for Directors' Retirement Plan adopted by San Jose
Water Company Board of Directors, as amended. Filed as
an Exhibit to Annual Report on Form 10-K for the year ended December
31, 1991. S.E.C. File No. 1-8966. NA
10.4 San Jose Water Company Retirement Plan (As amended and
Restated effective January 1, 1995). S.E.C. File No. 1-8966. 33-98
10.5 San Jose Water Company Executive Supplemental Retirement Plan
adopted by San Jose Water Company Board of Directors. Filed as
an Exhibit to Annual Report on Form 10-K for the year ended December
31, 1992. S.E.C. File No. 1-8966. NA
10.6 First Amendment to San Jose Water Company Executive
Supplemental Retirement Plan adopted by San Jose Water Company
Board of Directors. Filed as an Exhibit to Annual Report on
Form 10-K for the year ended December 31, 1992. S.E.C. File
No. 1-8966. NA
21 Subsidiaries of the Registrant. Filed as an Exhibit
to Annual Report on Form 10-K for the year ended December
31, 1992. S.E.C. File No. 1-8966. NA
99 Additional Exhibits: None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SJW CORP.
Date: January 23, 1997 By /s/
J.W. WEINHARDT, Chairman, Chief Executive
Officer and Member, Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: January 23, 1997 By /s/
J.W. WEINHARDT, Chairman, Chief Executive
Officer and Member, Board of Directors
Date: January 23, 1997 By /s/
W.R. ROTH, President, and
Member, Board of Directors
Date: January 23, 1997 By /s/
ANGELA YIP, Chief Financial
Officer (Chief Accounting Officer)
Date: January 23, 1997 By /s/
MARK L. CALI
Member, Board of Directors
Date: January 23, 1997 By /s/
J. PHILIP DINAPOLI
Member, Board of Directors
Date: January 23, 1997 By /s/
DREW GIBSON
Member, Board of Directors
Date: January 23, 1997 By /s/
RONALD R. JAMES
Member, Board of Directors
Date: January 23, 1997 By /s/
GEORGE E. MOSS
Member, Board of Directors
Date: January 23, 1997 By /s/
ROSCOE MOSS, JR.
Member, Board of Directors
Date: January 23, 1997 By /s/
CHARLES J. TOENISKOETTER Member, Board of
Directors
In accordance with the Securities and Exchange Commission's requirements,
the Company will furnish copies of any exhibit upon payment of a 30 cents
per page fee.
SJW Corp.'s Form 10K report filed with the Securities and Exchange commission
and the American Stock Exchange includes all exhibits required to be filed
with that report. To order any exhibit(s), please advise the Secretary, SJW
Corp., 374 West Santa Clara Street, San Jose, CA 95196, as to the exhibit(s)
desired.
On receipt of your request, the Secretary will provide to you the cost of
the specific exhibit(s). The Secretary will forward the requested exhibits
upon receipt of the required fee.
RETIREMENT
PLAN OF SAN JOSE WATER COMPANY
Restated January 1, 1995
TABLE OF CONTENTS
Page
INTRODUCTION 1
ARTICLE I DEFINITIONS 2
1.01 Actuarial Equivalent 2
1.02 Affiliated Company 2
1.03 Annual Additions 2
1.04 Annuity Starting Date 2
1.05 Beneficiary 2
1.06 Code 3
1.07 Company 3
1.08 Committee 3
1.09 Compensation 3
1.10A Credited Service 5
1.10B Death Benefit 5
1.11 Directors 5
1.12 Early Retirement Date 5
1.13 Eligible Employee 6
1.14 Employee 6
1.15 ERISA 6
1.16 Fiduciaries 6
1.17 Five-Percent Owner 6
1.18 Former Participant 6
1.19 Highly Compensated 6
1.20 Hour of Service 8
1.21 Late Retirement Date 8
1.22 Leased Employee 8
1.23 Named Fiduciary 8
1.24 Non-Highly Compensated Employee 8
1.25 Normal Form of Benefit 8
1.26 Normal Retirement Date 8
1.27 Participant 8
1.28 Plan 8
1.29 Plan Year 8
1.30 Qualified Joint and Survivor Annuity 9
1.31 Qualified Preretirement Survivor Annuity 9
1.32 Regulations 9
1.33 Remuneration 9
1.34 Section 401(a)(17) Employee 9
1.35 Trustee and Trust 9
1.36 Year of Service 9
ARTICLE II SERVICE 10
2.01 Hour of Service 10
2.02 Year of Service 11
2.03 Authorized Leave of Absence 11
2.04 Military Service 11
ARTICLE III PARTICIPATION 12
3.01 Participation Date 12
3.02 Cessation and Resumption 12
ARTICLE IV ACCRUALS 13
4.01 Benefit Accrual 13
4.02 Minimum Benefit 13
4.03 Special Benefit 14
4.04 Statutory Benefit 14
4.05 Primary Insurance Amount 14
4.06 1985 Retiree Benefit Increase 15
4.07 1992 Retiree Benefit Increase 15
4.08Retirement Benefits as of Normal or Late Retirement15
4.09 Retirement Benefits as of Early Retirement Date 15
ARTICLE V CONTRIBUTIONS 17
5.01 Company Contributions 17
5.02 Deductibility 17
5.03 Mistake of Fact 17
ARTICLE VI VESTING 18
6.01 Vesting Schedule 18
6.02 Forfeitures 18
6.03 Change in Vesting Schedule 18
ARTICLE VII BENEFIT FORMS 19
7.01 Normal Forms of Benefit 19
7.02 Optional Forms of Benefit 19
7.03 Cessation 20
7.04 Waiver of Normal Form of Benefit 20
7.05 Amounts of $3,500 or Less 21
7.06 No Vested Benefit 21
ARTICLE VIII REEMPLOYMENT 22
8.01 Repayment 22
8.02 Suspension Upon Reemployment 22
8.03 Resumption 22
8.04 Death 22
ARTICLE IX DEATH BENEFITS 23
9.01 Qualified Preretirement Survivor Annuity 23
9.02 Alternative Calculation 23
9.03 Death Benefit 23
ARTICLE X CONTRIBUTIONS TO RETIREE HEALTH ACCOUNT 25
10.01 Definitions 25
10.02 Establishment of a Retiree Health Account 25
10.03 Purpose of Retiree Health Account 25
10.04 Eligibility 25
10.05 Contributions 25
10.06 Forfeitures 26
10.07 Deductions 26
10.08 Distributions from the Retiree Health Account 26
10.09 Investment of the Retiree Health Account 26
10.10Reversion of Contributions to the Retiree Health
Account 26
ARTICLE XI DISTRIBUTIONS 28
11.01 Distribution 28
11.02 Required Beginning Date 29
11.03Limit of Benefits for 25 Highest Paid Employees 29
11.04 Annuity Contracts 31
11.05 Timing 31
11.06 Satisfaction of Claims 31
11.07 Source 31
11.08 Determinations 31
11.09 Mistaken Payments 31
11.10 Direct Rollover 31
ARTICLE XII LIMITATIONS ON BENEFITS 33
12.01 Section 415 Limitation 33
12.02 Annual Benefit 33
12.03 Maximum Permissible Amount 34
12.04 Adjustment 36
12.05 Multiple Defined Benefit Plans 36
12.06 Defined Benefit and Defined Contribution Plans 36
12.07 Annual Addition 37
12.08 Adjustments 37
12.09 Top-Heavy Adjustment 38
ARTICLE XIII CLAIMS PROCEDURE 39
ARTICLE XIV ALIENATION AND QUALIFIED DOMESTIC RELATIONS
ORDER PROVISIONS 40
14.01 Prohibition 40
14.02 Domestic Relations Orders 40
14.03 Alternate Payee 40
ARTICLE XV ADMINISTRATION 41
15.01 Committee 41
15.02 Power 42
15.03 Expenses 43
ARTICLE XVI PLAN AMENDMENTS 44
16.01 Power 44
16.02 Limits 44
16.03 Limitation on Amendment or Termination of Plan 44
ARTICLE XVII DISCONTINUANCE AND TRANSFERS 45
17.01 Power 45
17.02 Effect of Discontinuance 45
17.03 Effect of Termination 45
17.04 Determination of Partial Termination 45
17.05 Mergers and Transfers 45
ARTICLE XVIII MERGER OF THE PLAN WITH CAMPBELL WATER COMPANY
RETIREMENT PLAN 47
18.01 Merger of Plans 47
18.02 Service with Campbell Water Company 47
18.03Benefits of Former Participants of Campbell Water
Plan 47
ARTICLE XIX TOP-HEAVY PROVISIONS 48
19.01 Definitions 48
19.02 Top-Heavy Status 52
19.03 Minimum Allocation 52
19.04 Vesting 54
19.05 Super Top-Heavy Adjustment 54
ARTICLE XX MISCELLANEOUS 55
20.01 Rights 55
20.02 Construction 55
20.03 Severability 55
20.04 No Guarantee Against Loss 55
ARTICLE XXI EXECUTION 56
SCHEDULE A 57
RETIREMENT
PLAN OF SAN JOSE WATER COMPANY
INTRODUCTION
Effective November 1, 1950, the San Jose Water Works established
the San Jose Water Company Retirement Plan (the "Plan") which was
later amended and restated effective January 1, 1981 and more
recently amended and restated effective January 1, 1993.
Effective January 1, 1995, this document constitutes a complete
amendment and restatement of the Plan. Except as provided
herein, the Retirement Plan of San Jose Water Company shall
continue in full force and effect.
The principal purpose of the January 1, 1993 amendment and
restatement was to bring the Plan document into compliance with
the requirements of the Tax Reform Act of 1986, the Omnibus
Budget Reconciliation Act of 1986, the Revenue Act of 1987, the
Technical and Miscellaneous Revenue Act of 1988, the Omnibus
Budget Reconciliation Act of 1990 and other applicable laws,
regulations, and administrative authority. The principal purpose
of this amendment and restatement is to include the changes
requested by the Internal Revenue Service as part of the
determination letter process.
ARTICLE I
DEFINITIONS
Unless otherwise required by the context, the terms used herein
shall have the meanings set forth in the remaining paragraphs of
Article I. As used herein, the masculine pronoun shall include
the feminine and the singular shall include the plural, unless a
different meaning is plainly required by the context.
1.01 Actuarial Equivalent.01 Actuarial Equivalent means a
pension of equivalent value computed in accordance with the
factors set forth in Schedule A.
1.02 Affiliated Company.02 Affiliated Company means, with
respect to the Company: (i) any corporation that, pursuant
to Section 414(b) of the Code, is a member of a controlled
group of corporations of which the Company is a member;
(ii) any employer that, pursuant to Section 414(c) of the
Code, is under common control with the Company; (iii) any
employer that, pursuant to Section 414(m) of the Code, is a
member of an affiliated service group of which the Company
is a member and (iv) any employer that, pursuant to Section
414(o) of the Code, is required to be aggregated with the
Company.
(a) For purposes of Article XII the determination of
an Affiliated Company will be made with the adjustment
required by Code Section 415(h).
(b) Unless expressly provided to the contrary by
resolution of the board of directors of the Company,
an Affiliated Company shall not be deemed to have
become an Affiliated Company until the date that it
satisfied the applicable requirements of this
definition of Affiliated Company.
1.03 Annual Additions.03 Annual Additions - See Section 12.02.
1.04 Annuity Starting Date.04 Annuity Starting Date means the
first day of the first calendar month for which an amount
is payable as an annuity or, in the case of a benefit not
payable as an annuity, the first day of the first calendar
month on which all events have occurred that entitle a
Participant, or Beneficiary, as the case may be, to a
benefit pursuant to the terms of this Plan.
1.05 Beneficiary.05 Beneficiary means the person, estate or
trust last designated by the Participant in a written
notice to the Committee or, if no person, estate or trust
is so named or if the person, estate or trust so designated
shall not be in existence when benefits become payable
hereunder, then the person or persons in the first of the
following classes of successive preference Beneficiaries
surviving the death of the Participant:
(a) Widow or widower;
(b) Children;
(c) Parents;
(d) Executors or administrators.
1.06 Code.06 Code means the Internal Revenue Code of 1986, as
amended.
1.07 Company.07 Company means San Jose Water Company, a
California corporation, and any successor organization
which shall assume the obligations of the Plan with respect
to Employees.
1.08 Committee.08 Committee - See Section 15.01.
1.09 Compensation.09 Compensation means the amount reported
on the Employee's W-2 Form for Federal Income Tax purposes
for the year and shall also include for purposes of
computing benefit accrual, any amounts that the Employee
elects to defer under any plan sponsored by the Company
which meets the requirements of Sections 401(k), 125, 129
or 403(b) of the Code. Compensation shall include shift
differential, overtime payments, notice pay, bonuses and
payment for sick leave, vacation, jury duty, bereavement
leave and other approved time off.
(a) Compensation shall not include benefits under any
employee benefit plan except as specified above, sick
leave payments after termination of employment,
matching contributions to any employee benefit plan,
reimbursement or other expense allowances, moving
expenses, deferred compensation welfare benefits, nor
any other special compensation of any kind.
(b) With respect to any Plan Year commencing after
December 31, 1988, the annual compensation of any
Participant taken into account pursuant to this
definition shall not exceed $200,000 (subject to any
cost of living adjustment pursuant to Section 415(d)
of the Code). For Plan Years beginning on or after
January 1, 1994, the Compensation of each Employee
taken into account under the Plan shall not exceed the
OBRA '93 annual compensation limit. The OBRA '93
annual compensation limit is $ 150,000, as adjusted by
the Internal Revenue Service for increases in the cost
of living in accordance with Section 401(a)(17)(B) of
the Code. The cost-of-living adjustment in effect for
a calendar year applies to any period, not exceeding
12 months, over which Compensation is determined
(determination period) beginning in such calendar
year.
For Plan Years beginning on or after January 1,
1994, any reference in this plan to the limitation
under Code Section 401(a)(17) shall mean the OBRA '93
annual compensation limit set forth in this Section.
If Compensation for any prior determination
period is taken into account in determining an
Employee's benefits accruing in the current Plan Year,
the compensation for that prior determination period
is subject to the OBRA '93 annual compensation limit
in effect for that prior determination period. For
this purpose, for determination periods beginning
before the first day of the first plan year beginning
on or after January 1, 1994, the OBRA '93 annual
compensation limit is $ 150,000.
Unless otherwise provided under the Plan, each
Section 401(a)(17) Employee's accrued benefit under
this Plan will be the greater of the accrued benefit
determined for the Employee under I or II below:
I. The employee's accrued benefit
determined with respect to the benefit formula
applicable for the plan year beginning on or
after January 1, 1994, as applied to the
employee's total years of service taken into
account under the plan for the purposes of
benefit accruals, or
II. The sum of:
(i) The Employee's accrued
benefit as of the last day of the last Plan
Year beginning before January 1, 1994,
frozen in accordance with Section
1.401(a)(4)-13 of the Regulations, and
(i) The Employee's accrued
benefit determined under the benefit formula
applicable for the Plan Year beginning on or
after January 1, 1994, as applied to the
Employee's years of Credited Service to the
Employee for Plan Years beginning on or
after January 1, 1994, for purposes of
benefit accruals.
In determining this limitation, the family
aggregation rules of Code Section 414(q)(6) shall
apply, except that the term "family" shall include
only the spouse of the Participant and any lineal
descendants of the Participant who have not attained
age 19 before the close of the Plan Year. To the
extent required by applicable Regulations, if the
limitation is reached for a family group, then the
limitation amount will be prorated among each member
of the family group in the proportion that each family
member's compensation bears to the total compensation
of the family group.
(c) Compensation shall only be recognized as of the
date that an Employee becomes a Participant.
(d) Compensation shall reflect the limits of Section
415(d) for the most current calendar year as permitted
by IRS notices, regulations and the special reliance
procedure for TRA 86 for periods through December 31,
1993.
(e) Average monthly compensation shall be total
annual Compensation or Compensation for the period in
question, divided by the number of months for which
the Employee was paid.
1.10A Credited Service.10A Credited Service means the total
of:
(a) Service prior to January 1, 1976 which was
credited under the Plan as in effect on December 31,
1975; and
(b) Years of Service after December 31, 1975.
Years of Service for this purpose shall be computed on the
basis of the number of days of service with the Company
that an individual is credited with as an Eligible
Employee. An Eligible Employee will be credited with a
Year of Service in the ratio that such Eligible Employee's
days of service with the Company bears to 365 or 366 days
in a calendar year, as applicable including the Employee's
date of hire, re-employment and final date paid.
1.10B Death Benefit.10B Death Benefit is defined in Section
9.03 of the Plan, effective March 1, 1995.
1.11 Directors.11 Directors means the Board of Directors of
the Company.
1.12 Early Retirement Date.12 Early Retirement Date means the
first day of the month coinciding with or next following
the date when a Participant or Former Participant has
attained the age of fifty-five (55) years and completed ten
(10) years of Credited Service with the Company.
1.13 Eligible Employee.13 Eligible Employee means every
Employee of the Company, except the following:
(a) A Leased Employee.
(b) Any Employee who is a nonresident alien who
receives no earned income from sources within the
United States.
1.14 Employee.14 Employee means a person who is employed by
the Company or a Leased Employee, unless: (i) such
individual is covered by a money purchase pension plan
described in Code Section 414(n)(5)(A)(i); and (ii) Leased
Employees do not constitute more than twenty percent (20%)
of the Affiliated Companies' non-highly compensated work
force (as defined in Code Section 414(n)(5)(C)(ii)).
1.15 ERISA.15 ERISA means the Employee Retirement Income
Security Act of 1974, as amended.
1.16 Fiduciaries.16 Fiduciaries shall include the Trustee named
in the Trust, the Committee and the Investment Manager
provided for in Section 15.01 hereof.
1.17 Five-Percent Owner.17 Five-Percent Owner means any
Participant who owns (or is considered as owning, within
the meaning of Code Section 318, applied by substituting
"one-twentieth" for "50%" in Code Section 318(a)(2)(c))
more than five percent (5%) of the outstanding stock or
stock possessing more than five percent (5%) of the total
combined voting power of all stock of an Affiliated
Company (or, if an Affiliated Company is not a corporation,
more than five percent (5%) of its capital or profits
interest).
1.18 Former Participant.18 Former Participant means an
Employee whose employment has terminated after he had
vested benefits but before he was eligible for early
retirement.
1.19 Highly Compensated.19 Highly Compensated means, with
respect to a Plan Year (the "current year"), an Employee
who, during the Plan Year or the preceding 12-month period:
(a) Was at any time a Five Percent Owner;
(b) Received aggregate Remuneration from all
Affiliated Companies in excess of $75,000 (or such
greater amount as may be permitted pursuant to Code
Section 414(q)(1));
(c) Received Remuneration from all Affiliated
Companies in excess of $50,000 (or such greater amount
as may be permitted pursuant to Code Section
414(q)(1)) and was in the group of Employees consist
ing of the top 20% of Employees when ranked on the
basis of Remuneration paid during such year; or
(d) Was at any time an officer and received
Remuneration greater than 50% of the dollar limitation
in effect under Code Section 415(b)(1)(A) for such
year, or, if no officer received so much Remuneration,
was the officer who received the greatest
Remuneration.
For purposes of identifying Highly Compensated Employees,
the following rules shall apply:
(I) With respect to the current year, no
Employee (other than a Five Percent Owner) who
was not a Highly Compensated Employee for the
preceding year shall be deemed a Highly
Compensated Employee unless such Employee is
among the 100 Employees paid the greatest
aggregate Remuneration by all Affiliated
Companies during the current year. For purposes
of the preceding sentence, an Employee's status
for the preceding year shall be determined
without regard to this item (I).
(II) For purposes of this definition,
members of a Five Percent Owner's family, or of
the family of a Highly Compensated Employee who
is one of the 10 most Highly Compensated
Employees, will be aggregated and treated as a
single Employee, with a single Remuneration, and
a single Plan benefit. Family, for purposes of
the preceding sentence, includes a Member's
spouse, and the Member's lineal ascendants and
descendants, and their spouses.
(III) For purposes of determining the
number of Employees in the top 20% of Employees
by Remuneration, the Committee shall exclude
Employees who: (i) have not completed 6 months of
service; (ii) normally work less than 17-1/2
hours per week; (iii) normally work during not
more than 6 months during any year; (iv) have not
attained age 21; (v) are nonresident aliens and
receive no earned income from the Company that
constitutes income from sources within the United
States; or (vi) rendered no services to any
Affiliated Company during such year.
(IV) No more than 50 Employees (or, if less,
the greater of three Employees or 10% of the
Employees) shall be treated as officers.
(V) A former Employee shall be treated as a
Highly Compensated Employee if the former
Employee was a Highly Compensated Employee (i) on
separation from service, or (ii) at any time
after attaining age 55.
(VI) At the discretion of the Committee, the
determination of Highly Compensated Employees for
any Plan Year shall be made utilizing the
calendar year calculation election as defined in
Regulation 1.414(q)-1T Q&A 14.
1.20 Hour of Service.20 Hour of Service is defined in Section
2.01 of the Plan.
1.21 Late Retirement Date.21 Late Retirement Date means the
first day of the month coinciding with or following an
Employee's separation from service following his Normal
Retirement Date.
1.22 Leased Employee.22 Leased Employee means any person, other
than an employee of an Affiliated Company, who pursuant to
an agreement between an Affiliated Company and any other
person has performed services for the Affiliated Company
(or for the Affiliated Company and related persons
determined in accordance with Code Section 414(n)(6)) on a
substantially full-time basis for a period of at least one
year, which services are of a type historically performed
by employees in the business field of the Affiliated
Company.
1.23 Named Fiduciary.23 Named Fiduciary shall be the Committee.
1.24 Non-Highly Compensated Employee.24 Non-Highly Compensated
Employee an Employee who is not a Highly Compensated
Employee.
1.25 Normal Form of Benefit.25 Normal Form of Benefit is
defined in Section 7.01 of the Plan.
1.26 Normal Retirement Date.26 Normal Retirement Date means
the first day of the calendar month coincident with or next
following the date when a Participant attains the age of
sixty-five (65).
1.27 Participant.27 Participant means any Eligible Employee who
has become a Participant pursuant to Article III of the
Plan, and who has an accrued benefit under the Plan.
1.28 Plan.28 Plan means the San Jose Water Company Retirement
Plan, as set forth in this document, and as amended from
time to time.
1.29 Plan Year.29 Plan Year means the year ended December 31st
of each calendar year.
1.30 Qualified Joint and Survivor Annuity.30 Qualified Joint and
Survivor Annuity is defined in Section 7.01 of the Plan.
1.31 Qualified Preretirement Survivor Annuity.31 Qualified
Preretirement Survivor Annuity is defined in Section 9.01
of the Plan
1.32 Regulations.32 Regulations means the federal Income Tax Reg
ulations, as amended.
1.33 Remuneration.33 Remuneration means compensation as
defined in Code Section 415(c)(3) and accompanying
Regulations. This alternate definition of compensation is
required by law to be used in certain Articles. For
purposes of the definition of Highly Compensated Employee
and Article XIX, Remuneration includes an Employee's
elective deferrals under a qualified cash or deferred
arrangement described in Code Sections 401(k) and
402(e)(3), under a simplified employee pension plan
described in Code Section 408(k)(6), and under a cafeteria
plan described in Code Section 125.
1.34 Section 401(a)(17) Employee.34 Section 401(a)(17)
Employee means an Employee whose current accrued benefit as
of a date on or after the first day of the first Plan Year
beginning on or after January 1, 1994, is based on
Compensation for a year beginning prior to the first day of
the first plan year beginning on or after January 1, 1994,
that exceeded $ 150,000.
1.35 Trustee and Trust.35 Trustee and Trust mean the Trustee
provided--for in the Trust entered into pursuant to this
Plan and the Trust provided for therein.
1.36 Year of Service.36 Year of Service is defined in
Article II of the Plan.
ARTICLE II
SERVICE
This Plan uses the hours of service method of crediting service.
Unless otherwise indicated in this Plan, the following provisions
apply for purposes of computing vesting and Credited Service.
2.01 Hour of Service.01 Hour of Service. An Hour of Service
is:
(a) Each hour for which an Employee is directly or
indirectly paid or entitled to payment for the
performance of duties. Such hours shall be credited
for the computation period or periods in which the
duties were performed.
(b) Each hour for which back pay, irrespective of
mitigation of damages, has been awarded or agreed to.
Such hours shall be credited for the computation
period or periods to which the award or agreement
pertains. Such hours shall not include any hours which
duplicate hours credited under subsection (a) above.
(c) Each hour for which an Employee is directly or
indirectly paid or entitled to payment for reasons
(such as periods of paid vacation, regular holidays,
sickness or disability, Authorized Leave of Absence,
Military Service, temporary leave of absence, jury
duty or non-work due to a labor-management dispute)
other than for the performance of duties. Such hours
shall be credited for the computation period or
periods in which either payment is actually made or
the amounts payable come due. Such hours shall be
determined by dividing the payments received or due by
the lesser of (i) the employee's most recent hourly
rate of compensation or ii) the employee's average
hourly rate of compensation for the most recent period
in which he completed more than 500 Hours of Service.
(d) Effective for absences in Plan Years beginning
with or in calendar year 1985 and solely for purposes
of determining whether a Break-in-Service for vesting
purposes has occurred in a Computation Period, each
hour an individual who is absent from work for
maternity or paternity reasons. Such individual shall
receive credit for the Hours of Service which would
otherwise have been credited to such individual but
for such absence, or in any case in which such hours
cannot be determined, eight (8) Hours of Service per
day of such absence. For purposes of this paragraph,
an absence from work for maternity or paternity
reasons means an absence (1) by reason of the
pregnancy of the individual, (2) by reason of a birth
of a child of the individual, (3) by reason of the
placement of a child with the individual in connection
with the adoption of such child by such individual, or
(4) for purposes of caring for such child for a period
beginning immediately following such birth or
placement. The Hours of Service credited under this
paragraph shall be credited (1) only in the
Computation Period in which the absence begins if the
crediting is necessary to prevent a Break-in-Service
in that period, or (2) in all other cases, in the
following Computation Period. The Administrator may
require the Participant to furnish such timely
information as the Administrator may reasonably
require to establish that the absence from work was
for maternity or paternity reasons (as described in
this paragraph) and the number of days for which there
was such an absence.
(e) Such hours shall be determined pursuant to the
rules established in Labor Department regulation 29
CFR 2530.200b-2(b), and any succeeding regulations,
and such hours shall be credited to Years of Service
in accordance with the rules for crediting Hours of
Service to computation periods established in Labor
Department regulation 29 CFR 2530.200b-2(c) and any
succeeding regulations.
2.02 Year of Service.02 Year of Service. Is a twelve-month
period commencing on the first day on which an Employee
performs an Hour of Service, or on a reemployment date,
during which the Employee has performed at least 1,000
Hours of Service.
2.03 Authorized Leave of Absence.03 Authorized Leave of
Absence. Authorized Leave of Absence means an unpaid,
temporary cessation from active employment with an
Affiliated Company pursuant to an established policy,
whether occasioned by illness, vacation, disability,
layoff, or any other reason.
2.04 Military Service.04 Military Service. To the extent
required by law, Hours of Service will be credited for
periods of military service.
ARTICLE III
PARTICIPATION
3.01 Participation Date.01 Participation Date. All Employees
who were Participants on December 31, 1992, shall continue
to be such. All other Eligible Employees of the Company
shall be eligible for participation in the Plan on the date
of their employment.
3.02 Cessation and Resumption.02 Cessation and Resumption. An
individual will cease to be a Participant when he ceases to
have an accrued benefit under the Plan. An individual who
ceases to be a Participant will again become a Participant
on the date the individual performs an Hour of Service as
an Eligible Employee.
ARTICLE IV
ACCRUALS
4.01 Benefit Accrual.01 Benefit Accrual. Subject to the
provisions of Articles VI, VII and XII a Participant shall
accrue monthly pension benefits for each year of Credited
Service as follows: (i) for each year of Credited Service
completed after January 1, 1978, 1.6% of average monthly
compensation for such year; (ii) for each year of Credited
Service completed after January 1, 1969 and prior to
January 1, 1978, the greater of: (A) $7, or (B) 1.2% of the
first $650 of average monthly compensation for such year
plus 1.6% of the excess, if any, of average monthly
compensation for such year of $650; (iii) $7 for each year
of Credited Service completed before January 1, 1969, and
before reaching the age of 35 years; (iv) for each year of
Credited Service completed before January 1, 1969, but
after reaching the age of 35 years, the greater of $7 or
1.2% of the first $650 of average past service monthly
compensation plus 1.6% of the excess, if any, of average
past service monthly compensation over $650. For this
purpose average past service monthly compensation shall be
the average monthly compensation received by such employee
during such part or all of the period from January l, 1964,
through December 31, 1968, in which he was employed by the
Company.
4.02 Minimum Benefit.02 Minimum Benefit. Notwithstanding the
provisions of Section 4.01, but subject to the provisions
of Section 4.04, Article VI and Article XII, the pension
benefits accrued by each Participant who is an employee on
or after January 1, 1981 shall not be less than a monthly
benefit equal to an amount computed as follows:
(a) 50% of the employee's average monthly
compensation for the employee's thirty-six (36)
consecutive months of highest compensation prior to
his normal retirement date (or his earlier retirement
or termination of employment), adjusted to a monthly
basis for consecutive months of Credited Service less
than thirty-six (36) and for partial months of
Credited Service, less
(b) 50% of the employee's Primary Insurance Amount,
as defined in Section 4.05.
The monthly benefit determined under this Section shall be
reduced 1/30 for each year by which the employee's Credited
Service is less than thirty (30) years, adjusted to give
credit for partial years of Credited Service.
4.03 Special Benefit.03 Special Benefit. Notwithstanding the
provisions of Sections 4.01 or 4.02, but subject to the
provisions of Article VI and Article XII, the pension
benefits accrued by each Participant who is an employee on
or after January 1, 1993 and whose combined age at
retirement and Years of Service equals or exceeds eighty-
five (85) (the combined age and and Years of Service
requirement shall be reduced to eighty (80) for
Participant's employed on or after January 1, 1997) shall
not be less than a monthly benefit equal to the amount
computed as follows:
(a) 55% of the employee's average monthly
compensation for the employee's thirty-six (36)
consecutive months of highest compensation prior to
his normal retirement date (or his earlier retirement
or termination of employment), adjusted to a monthly
basis for consecutive months of Credited Service less
than thirty-six (36) and for partial months of
Credited Service, less
(b) 50% of the employee's Primary Insurance Amount,
as defined in Section 4.05.
The monthly benefit determined under this Section shall be
reduced 1/30 for each year by which the employee's Credited
Service is less than thirty (30) years.
4.04 Statutory Benefit.04 Statutory Benefit. In no event
shall a Participant's pension benefit accrue at a rate less
than the rate required by Section 411(b)(1)(A) of the Code.
4.05 Primary Insurance Amount.05 Primary Insurance Amount.
(a) An employee's Primary Insurance Amount shall mean
the old-age insurance benefit under Section 202 of the
Social Security Act (42 U.S.C. 402) payable to each
employee at age 65. The Primary Insurance Amount
shall be determined under the Social Security Act as
in effect at the time the employee's offset is
determined. Thus, it is determined without assuming
any future increases in the taxable wage base, any
changes in the formulas used under the Social security
Act to determine the Primary Insurance Amount or any
future increases in the consumer price index. If an
employee retires or otherwise terminates his
employment prior to age 65, the employee's Primary
Insurance Amount shall be computed on the assumption
that the employee receives no wages for Social
Security purposes after the time of his retirement or
termination of employment.
(b) The Committee may adopt rules governing the
computation of the amounts of Primary Insurance
Amounts of employees, and the fact that an employee
does not actually receive the amount computed, because
of failure to apply or any other reason, shall be
disregarded. If discontinuance or reduction of
benefits under the Social Security System occurs, the
Committee may thereafter calculate the Primary
Insurance Amount using the benefit tables and formulas
in effect immediately prior to such discontinuance or
reduction of benefits. The Primary Insurance Amount
shall be determined in a consistent manner for all
Participants.
4.06 1985 Retiree Benefit Increase.06 1985 Retiree Benefit
Increase. The monthly pension of each Participant who has
retired (or Beneficiary in the case of a deceased
Participant) shall be increased .001667 for each month or
partial month which has elapsed from the earlier of the
date retirement or death benefits commenced until February
28, 1985.
4.07 1992 Retiree Benefit Increase.07 1992 Retiree Benefit
Increase. Subject to a 21% maximum benefit increase, the
monthly pension of each Participant (or Beneficiary in the
case of a deceased Participant) shall be increased .25% for
each month or partial month which has elapsed from the date
of the initial payment of Participant retirement benefits
until February 28, 1992.
4.08 Retirement Benefits as of Normal or Late Retirement.08
Retirement Benefits as of Normal or Late Retirement. A
Participant who retires at or after his Normal Retirement
Date and a Former Participant who has not elected early
retirement benefits, shall be entitled to a retirement
benefit based on his accrued benefits under this Article.
The amount may be reduced actuarially depending upon the
form of benefit as provided in Article VII. If
distribution of a Participant's accrued benefit begins
after his Normal Retirement Date, the retirement benefit
shall be greater of the accrued benefit at termination and
the Actuarial Equivalent of his accrued benefit at Normal
Retirement Age.
4.09 Retirement Benefits as of Early Retirement Date.09
Retirement Benefits as of Early Retirement Date. A
Participant who retires on or after January 1, 1981 and
before January 1, 1987, and a Former Participant who elects
on or after January 1, 1981 an early retirement date, shall
be entitled to a retirement benefit based on his accrued
benefits under this Article, but reduced in accordance with
column (2) of Table A below based on his age at retirement
as specified in column (1), thereof. A Participant who
retires on or after January 1, 1987 shall be entitled to a
retirement benefit based on his accrued benefits under this
Article, but reduced in accordance with column (3) of Table
A below based on his age at retirement as specified in
column (1). A Participant who retires on or after January
1, 1993 whose combined age at retirement and Years of
Service equals or exceeds eighty-five (85) shall be
entitled to a retirement benefit based on his accrued
benefits under this Article, but reduced in accordance with
column (4) of Table A below based on his age at retirement
as specified in column (1). A Participant who is employed
on or after January 1, 1997 whose combined age at
retirement and Years of Service equals or exceeds ninety
(90) shall be entitled to an unreduced retirement benefit
based on his accrued benefits under this Article. The
reduction percentages in Table A shall be prorated based on
whole months and fractions thereof where the Participant
retires on a date other than his birthday.
TABLE A
(1) (2) (3) (4)
65 NONE NONE NONE
64 3% NONE NONE
63 6% NONE NONE
62 9% NONE NONE
61 12% 10% 5%
60 15% 14% 7%
59 22% 18% 9%
58 29% 22% 11%
57 36% 28% 14%
56 43% 34% 17%
55 50% 40% 20%
ARTICLE V
CONTRIBUTIONS
This Plan provides for Company contributions, and does not permit
Employee contributions.
5.01 Company Contributions.01 Company Contributions.
(a) The Company will make contributions to the Plan
as determined from time to time by the Company and the
Plan actuary as are required to fund the benefits
provided for in this Plan. Actuarial gains and/or
forfeitures, if any, arising from termination of
participation, or from any other source, shall not be
applied to increase the benefits any Participant would
otherwise receive under the Plan but shall be used to
reduce the Employer's future contributions becoming
due thereafter.
(b) All of the contributions to the Plan shall be
transmitted to the Trustee and shall become a part of
the Trust Fund to be administered by the Trustee in
accordance with the terms of the Plan and the Trust.
All of the benefits under the Plan will be payable by
the Trustee from the Trust Fund pursuant to written
instructions from the Committee.
(c) Except as otherwise provided by law, no liability
for payment of benefits hereunder shall be imposed
upon the Company, its officers, directors or
shareholders or the Committee and its members.
5.02 Deductibility.02 Deductibility. To the extent that the
Company is not allowed a deduction under the Code for any
contribution to the Plan for the year for which it is
contributed, the Company will, within one year following a
final determination of the disallowance, whether by
agreement with the Internal Revenue Service or by final
decision of a court of competent jurisdiction, demand
repayment of such disallowed contribution, and the Trustee
will return such contribution within one year following the
disallowance. Earnings of the Plan attributable to such a
contribution may not be returned to the Company, but any
losses attributable to such a contribution will reduce the
amount returned.
5.03 Mistake of Fact.03 Mistake of Fact. If, within one year
of making a contribution to the Plan, the Committee
certifies to the Trustee that the contribution was made by
the Company under a mistake of fact, the Trustee will,
before the expiration of that year, return the contribution
to the Company.
ARTICLE VI
VESTING
6.01 Vesting Schedule.01 Vesting Schedule. Subject to rules in
Article XIX, the accrued benefit of a Participant will
become fully vested, and nonforfeitable on the earlier of
the date on which the Participant is credited with five (5)
Years of Service, or the date the Participant attains age
65.
6.02 Forfeitures.02 Forfeitures. If a Participant separates
from service before the Participant is vested in his
accrued benefit, the Participant's accrued benefit will be
forfeited as of the date that the Participant separates
from service. Such a Participant's accrued benefit will be
restored at such time as the Participant again becomes an
Employee. Forfeitures will not be applied to increase the
benefit any Participant would receive under the Plan but
shall be used to reduce the Company's future contributions
becoming due thereafter.
6.03 Change in Vesting Schedule.03 Change in Vesting Schedule.
If the Plan's vesting schedule is changed for any reason,
including a change by reason of the Plan becoming Top-Heavy
or ceasing to be Top-Heavy, the vested percentage of every
Employee who is a Participant on the amendment adoption
date or the amendment effective date, whichever is later,
will not be less than the Participant's vested percentage
determined under the Plan without regard to the amendment.
In addition, if the Plan's vesting schedule is changed,
each Participant who has completed three Years of Service
and whose vested percentage is determined under the new
vesting schedule may elect to have his vested percentage
determined under the old vesting schedule if the old
vesting schedule would be more favorable.
ARTICLE VII
BENEFIT FORMS
This Article outlines the Normal Forms of Benefit provided under
the Plan, and the requirements for electing optional forms of
benefit.
7.01 Normal Forms of Benefit.01 Normal Forms of Benefit.
(a) If a Participant is not married on his Annuity
Starting Date, the Participant's Normal Form of
Benefit will be a straight life annuity.
(b) If a Participant is married on his Annuity
Starting Date, the Participant's Normal Form of
Benefit will be a Qualified Joint and Survivor Annuity
that provides an annuity for the life of the
Participant and a survivor annuity for the life of the
Participant's spouse that is equal to 50% of the
amount of the annuity payable during the Participant's
lifetime. The Qualified Joint and Survivor Annuity
will be the Actuarial Equivalent of the Participant's
Normal, Early or, Late Retirement Benefit, as the case
may be, calculated as though the Participant were not
married on his Annuity Starting Date.
7.02 Optional Forms of Benefit.02 Optional Forms of Benefit.
Subject to the waiver procedures outlined below, a
Participant may designate, in a manner prescribed by the
Committee, that retirement benefits be paid in one of the
following optional forms, instead of in the Normal Form of
Benefit. A benefit paid in an optional form of benefit
will be the Actuarial Equivalent of the Participant's
Normal, Early, or Late Retirement Benefit, as the case may
be, calculated as though the Participant were not married
on his Annuity Starting Date.
(a) A straight life annuity payable to the
Participant during the Participant's lifetime.
(b) A reduced monthly benefit payable for a 10-year
period to the Participant and, should the Participant
die within the 10-year period, to the Participant's
designated Beneficiary for the balance of the 10-year
period. If, however, the Participant should live
longer than 10 years, this benefit will continue to be
paid to the Participant for the Participant's
lifetime.
7.03 Cessation.03 Cessation. A Participant's retirement
annuity will terminate with the last monthly payment
preceding the Participant's death. If a Participant
receives Qualified Joint and Survivor Annuity, the
Beneficiary's annuity will terminate with the last monthly
payment preceding the Beneficiary's death. If a
Participant elects a 10-year certain and life annuity, the
Beneficiary's retirement annuity will terminate on the date
of the last payment under the term certain period. Should
the Beneficiary of such a term certain annuity die before
the end of the term certain period, the balance of the term
certain benefit will be paid to the Beneficiary's estate.
7.04 Waiver of Normal Form of Benefit.04 Waiver of Normal
Form of Benefit. A Participant's waiver of the Normal Form
of Benefit must satisfy the following conditions:
(a) Conditions Applicable to All Participants.
(1) No less than 30 days and no more than
90 days before the Annuity Starting Date, the
Committee will provide the Participant with a
written explanation of the terms and conditions
of the Qualified Joint and Survivor Annuity, the
Participant's right to make, and the effect of,
an election to waive the Qualified Joint and
Survivor Annuity, the rights of the Participant's
spouse to approve such a waiver, the
Participant's right to revoke such a waiver and
the effect of the Participant's right to revoke
such a waiver.
(2) A Participant's waiver must be made on
a form prepared by, and delivered to, the
Committee no earlier than 90 days before the
Participant's Annuity Starting Date.
(3) Participants may revoke or change their
waivers at any time prior to their Annuity
Starting Date by delivering a subsequent form to
the Committee.
(b) Additional Conditions Applicable to Married
Participants.
(1) A Participant's surviving spouse must
consent to the Participant's waiver of the Normal
Form of Benefit in a written document, delivered
to the Committee, that acknowledges the effect of
the waiver, and that is witnessed by a notary
public. In the waiver, the Participant's
surviving spouse must either consent to the
specific non-spouse Beneficiary or Beneficiaries
named by the Participant, and the optional form
of benefit selected by the Participant, or
acknowledge that the surviving spouse had the
right to limit consent only to a specific non-
spouse Beneficiary or Beneficiaries, and to a
specific optional form of benefit, and that the
surviving spouse voluntarily elected to
relinquish that right.
(2) If the Participant is legally separated
or abandoned (within the meaning of local law)
and the Participant has a court order to that
effect (and there is no Qualified Domestic
Relations Order as defined in Code Section 414(p)
that provides otherwise), or the surviving spouse
cannot be located, then the waiver described in
the preceding paragraph need not be filed with
the Committee when a married Participant elects
an optional form of benefit.
(3) Any waiver by a spouse obtained
pursuant to these procedures (or establishment
that the consent of a spouse could not be
obtained) shall be effective only with respect to
that spouse.
7.05 Amounts of $3,500 or Less.05 Amounts of $3,500 or Less.
Notwithstanding anything to the contrary in this Plan, if a
vested Participant separates from service with the Company
and with all Affiliated Companies, and the present value of
that Participant's Normal Retirement Benefit has never
exceeded $3,500, the Committee may, without the consent of
the Participant or the Participant's spouse, distribute the
present value of the benefit to the Participant or the
Participant's Beneficiary, as the case may be, as soon as
administratively feasible. Similarly, if a Qualified
Preretirement Survivor Annuity has become payable under the
Plan, and the present value of that benefit has never
exceeded $3,500, the Committee may, without the consent of
the Beneficiary, distribute the present value of the
benefit to the Beneficiary.
7.06 No Vested Benefit.06 No Vested Benefit. If the present
value of an individual's vested accrued benefit is zero,
the individual will be deemed to have received a
distribution of that vested accrued benefit as of the date
of termination.
ARTICLE VIII
REEMPLOYMENT
8.01 Repayment.01 Repayment. As permitted under Section
411(a)(7)(C) of the Code, if a Participant who has received
less than 100% of his accrued benefit again becomes an
Eligible Employee, the Participant may repay in cash the
total amount that he received under the Plan with interest
from the date of receipt at the rate permitted under
Section 411(c)(2)(C) of the Code. Such repayment must be
made by delivering the required amount to the Trustee
within 5 years after the date on which the Participant
again becomes an Eligible Employee. By making this
repayment, the Participant will be entitled to have
reinstated the Credited Service with which the Participant
was credited as of the date of the separation from service
to which the benefit relates and to have no reduction made
to any subsequent benefit under the Plan for any prior
benefit payments.
8.02 Suspension Upon Reemployment.02 Suspension Upon
Reemployment. If a Participant who has separated from
service again becomes an Employee, any Plan benefit payable
to the Participant will be continued for each month during
which the Participant would not be credited with forty
Hours of Service or such other amount of time that does not
constitute Section 203(a)(3)(B) service under ERISA. Any
benefits to which the Participant may become entitled
because of this subsequent separation from service will be
actuarially determined on the basis of increased service,
age and other relevant factors and will be actuarially
reduced for payments received before reemployment unless
the Participant repaid all such amounts in accordance with
the preceding Section.
8.03 Resumption.03 Resumption. Benefits suspended because they
constitute Section 203(a)(3)(B) service under ERISA will
resume on the first day of the calendar month coincident
with or next following the calendar month in which the
Participant ceases such service and has notified the
appropriate Company of such cessation of service.
8.04 Death.04 Death. If a Participant dies while benefits are
suspended, with respect to the Participant's retirement
benefits earned before the suspension, a death benefit will
be paid as provided under the form of benefit payment
previously elected by the Participant, and will be based on
the benefit that would have been paid if the Participant
had again retired on the date of death. With respect to
the benefit earned during the suspension, any death
benefits will be provided in accordance with Article IX.
ARTICLE IX
DEATH BENEFITS
9.01 Qualified Preretirement Survivor Annuity.01 Qualified
Preretirement Survivor Annuity. If a married Participant
dies after his accrued benefit has vested, but before his
Annuity Starting Date, that Participant's surviving spouse
will be entitled to a Qualified Preretirement Survivor
Annuity if the surviving spouse had been married to the
Participant as of the applicable retirement date or as of
the earlier date of death of the Participant.
(a) The Qualified Preretirement Survivor Annuity will
become payable on the later of (1) the first day of
the month coinciding with or next following the
Participant's death, or (2) the first date on which
the Participant would have been eligible to receive a
Qualified Joint and Survivor Annuity.
(b) The Qualified Preretirement Survivor Annuity will
be 50% of the amount the Participant would have
received had the Participant terminated employment on
the day before the Participant's death without having
waived a Qualified Joint and Survivor Annuity. In the
case of a vested Participant who dies on or before the
date that he or she would have been eligible to
receive a Qualified Joint and Survivor Annuity, the
value of the Qualified Preretirement Survivor Annuity
will be computed as though the Participant had
survived until he was eligible to receive a Qualified
Joint and Survivor Annuity, retired at that time with
an immediate Qualified Joint and Survivor Annuity, and
died the next day.
9.02 Alternative Calculation.02 Alternative Calculation. If,
within 90 days before the Participant's Annuity Starting
Date, the Participant properly elects an optional form of
benefit under Article VII that will provide the
Participant's spouse with a death benefit of equal or
greater value than the calculation under the immediately
preceding Qualified Preretirement Survivor Annuity
calculation, the death benefit under the properly elected
optional form of benefit will be the Qualified
Preretirement Survivor Annuity.
9.03 Death Benefit.03 Death Benefit. Effective March 1,
1995, if an unmarried Participant dies after his accrued
benefit has vested, but before his Annuity Starting Date,
his Beneficiaries are entitled to a Death Benefit.
(a) The Death Benefit will become payable on the
later of (1) the first day of the month coinciding
with or next following the Participant's death, or (2)
the first date on which the Participant would have
been eligible to receive a retirement benefit.
(b) A death Benefit will be equal to the monthly
retirement benefit the Participant would have received
had the Participant terminated employment on the day
before the Participant's death and elected to receive
the optional form of benefit described in Section
7.02(b) of the Plan. In the case of a vested
Participant who dies on or before the date that he
would have been eligible to receive a retirement
benefit, the amount of the Death Benefit will be
computed as though the Participant had survived until
he was eligible to receive a retirement benefit,
retired at that time and elected to receive the
optional form of benefit described in Section 7.02(b)
of the Plan, and died the next day.
ARTICLE XX
CONTRIBUTIONS TO RETIREE HEALTH ACCOUNT
10.01 Definitions.01 Definitions.
(a) Retiree Health Account means a separate account
established and maintained for the funding of retiree
health benefits.
(b) Retiree Health Plan means the retiree health
benefits which are part of the San Jose Water Company
Social Welfare Plan.
10.02 Establishment of a Retiree Health Account.02 Establishment
of a Retiree Health Account. The Trustee, directed by the
Retirement Plan Committee, shall establish a Retiree Health
Account.
10.03 Purpose of Retiree Health Account.03 Purpose of Retiree
Health Account. The purpose of the Retiree Health Account
is to fund the payment of medical expenses, as defined in
section 213(e) of the Code, for employees participating in
the Retiree Health Plan, their spouses, and their
dependents, as defined in section 152 of the Code.
10.04 Eligibility.04 Eligibility.
(a) No person who is, or ever has been, a Key
Employee within the meaning of Section 19.01 of the
Plan and Section 416 of the Code will receive
benefits from the Retiree Health Account.
(b) All other participants are eligible to receive
benefits from the Retiree Health Account if they have
satisfied the eligibility criteria set out in the
Retiree Health Plan and are eligible to receive
retirement benefits under the Plan.
10.05 Contributions.05 Contributions. For any Plan Year,
Company contributions to the Retiree Health Account shall
not exceed the greater of: (i) the aggregate of the amounts
determined by amortizing the remaining unfunded costs of
past and current service credits to each current and former
employee covered by the Retiree Health Account as a level
amount, or as a level percentage of compensation, over the
expected remaining future service of each employee covered
by the Retiree Health Account, or (ii) ten percent (10%) of
the cost which would be required to completely fund or
purchase such retiree medical benefits.
Notwithstanding the foregoing, Company contributions to the
Retiree Health Account must be subordinate to the
retirement benefits provided by the Plan. Company
contributions to the Retiree Health Account are considered
subordinate to the Plan's retirement benefits if at all
times the aggregate Company contributions to the Retiree
Health Account do not exceed twenty-five percent (25%) of
the aggregate Company contributions made after the
effective date of this Amendment (other than contributions
to fund past service credits).
10.06 Forfeitures.06 Forfeitures. Forfeitures of interests in
the Retiree Health Account which occur prior to termination
of the Plan shall be applied to reduce future Company
contributions to such Retiree Health Account.
10.07 Deductions.07 Deductions. The amount to be contributed
under Section 10.05 will be further reduced by any proposed
contribution that is not currently deductible by the
Company.
10.08 Distributions from the Retiree Health Account.08
Distributions from the Retiree Health Account. The
Administrator of the Retiree Health Plan shall instruct the
Trustee as to the timing of distributions from the Retiree
Health Account. At no time shall the amounts distributed
from the Retiree Health Account in any year exceed the
costs of providing retiree health benefits to those
individuals meeting the requirements of Section 10.04.
10.09 Investment of the Retiree Health Account.09 Investment of
the Retiree Health Account. The assets of the Retiree
Health Account shall be deemed assets of the Plan and shall
be invested by the Trustee in accordance with the Trust.
10.10 Reversion of Contributions to the Retiree Health Account.10
Reversion of Contributions to the Retiree Health Account.
(a) Any assets remaining in the Retiree Health
Account after satisfaction of all liabilities under
the Retiree Health Plan (as in effect at such time)
shall be treated as excess assets and may revert to
the Company provided that such reversion is not
precluded by the Plan or the governing law.
(b) The Retiree Health Account is established on the
express condition that it will be considered by the
Internal Revenue Service as qualifying under Section
401(h) and Section 401(a) of the Code. If the Retiree
Health Account receives an adverse determination with
respect to its timely filed request for determination
as to initial qualification, the Retiree Health
Account will be of no effect, and contributions to the
Retiree Health Account, together with any earnings,
will be returned to the appropriate Participating
Company within one year from the date of the adverse
Internal Revenue Service determination. However, the
Committee shall have the power to make any retroactive
amendments to the Retiree Health Account that the
Internal Revenue Service may require as a condition
for its determination that the Retiree Health Account
qualifies under Section 401(h) and Section 401(a) of
the Code.
(c) Notwithstanding the foregoing, it shall be
impossible, at any time prior to satisfaction of all
liabilities under the Retiree Health Plan (as in
effect at such time) to provide such benefits, for any
part of the corpus or income of the Retiree Health
Account to be used for, or diverted to, any purpose
other than the providing of such benefits.
ARTICLE XI
DISTRIBUTIONS
11.01 Distribution.01 Distribution. Once Plan benefits have
become payable, they will be distributed at such time as is
administratively feasible after the Participant or the
Beneficiary, as the case may be, has elected a distribu
tion, in writing, subject to the following provisions:
(a) There shall be no distribution of benefits to a
Participant or his Beneficiary prior to termination of
the Participant's employment, unless such Participant
has attained his Normal Retirement Date and his
combined age at the time of his election to begin
receiving distribution of Plan benefits and Years of
Service equals or exceeds one hundred (100).
(b) If a Participant does not elect a distribution,
in writing, benefits will be distributed within the
60 days following the end of the Plan Year in which
the Participant attains age 65 or separates from
service, whichever occurs later.
(c) If the amount of a distribution cannot be
determined by the date payment is required, or it is
not possible to make such payment because the
Committee has been unable to locate the recipient
after making reasonable efforts to do so, a payment
retroactive to the date payment is required may be
made no later than 60 days after the earliest date on
which the amount of the payment can be determined, or
the date on which the recipient is located (whichever
is applicable).
(d) If a distribution is to be made to a minor, or to
an incompetent person, the Committee may direct that
the distribution be paid to the legal guardian, or if
none, to a parent of such person, or to a responsible
adult with whom the person maintains residence, or to
the custodian for the person under the Uniform Gift to
Minors Act or Gift to Minors Act, if permitted by the
laws of the state in which the person resides.
(e) If a benefit under the Plan remains unpaid for 2
years from the date it becomes payable, solely because
the Committee, exercising due diligence, cannot locate
the recipient, the benefit will be treated as a
forfeiture.
(1) Any such forfeited amount will be
restored, without earnings, upon presentation of
an authenticated written claim by the recipient
or the recipient's personal representative.
(2) For purposes of this section, due
diligence includes written notice to the
recipient at the last known address shown in the
relevant Company's records, and contacts with the
federal Social Security Administration designed
to determine the whereabouts of the recipient.
11.02 Required Beginning Date.02 Required Beginning Date.
(a) Effective January 1, 1985, distributions will be
made in accordance with the Regulations under Code
Section 401(a)(9), and the incidental death benefit
requirements in Code Section 401(a)(9)(G).
Notwithstanding anything to the contrary in this Plan,
a Participant may not defer commencement of his
benefits past his required beginning date. A
Participant's required beginning date is April 1 of
the calendar year following the calendar year in which
the Participant attains age 70-1/2, or such earlier
date on which payments have irrevocably begun as an
annuity.
(b) If the Participant dies after the Participant's
required beginning date, the remaining portion of that
Participant's accrued benefit shall continue to be
distributed at least as rapidly as under the method of
distribution being used prior to the Participant's
death.
(c) If the Participant dies before his required
beginning date, the date distributions are required to
begin to the Participant's surviving spouse shall not
be earlier than the later of December 31 of the
calendar year immediately following the calendar year
in which the Participant died and December 31 of the
calendar year in which the Participant would have
attained age 70-1/2. The date that distributions are
required to begin to a designated Beneficiary who is
not the Participant's surviving spouse shall be
December 31 of the calendar year immediately following
the calendar year of the Participant's death.
11.03 Limit of Benefits for 25 Highest Paid Employees.03
Limit of Benefits for 25 Highest Paid Employees. This
Section sets forth limitations required by the Internal
Revenue Service on the Normal Retirement Benefit payable to
certain Participants in the event of an early termination
of the Plan. It shall apply to a Participant only if he is
a Highly-Compensated Employee or former Highly-Compensated
Employee, who is one of the 25 nonexcludable employees and
former employees of the employer with the largest amount of
compensation in the current or any prior year on the
original effective date of the Plan ("Restricted
Employee").
(a) In the event of Plan termination, the benefit of
any Highly-compensated Employee and any former Highly-
Compensated Employee is limited to a benefit that is
nondiscriminatory under Code Section 401(a)(4).
(b) In any year, the payment of benefits to or on
behalf of a Restricted Employee shall not exceed an
amount equal to the payments that would be made to or
on behalf of the Restricted Employee in that year
under:
(1) A straight life annuity that is the
Actuarial Equivalent of the Accrued Benefit and
other benefits to which the Restricted Employee
is entitled under the Plan (other than a social
security supplement); and
(2) A social security supplement, if any,
that the Restricted Employee is entitled to
receive.
(c) For purposes of this Section, the term benefit
includes, among other benefits, loans in excess of the
amounts set forth in Code Section 72(p)(2)(A), any
periodic income, any withdrawal values payable to a
living Employee or former Employee, and any death
benefits not provided for by insurance on the
Employee's or former Employee's life.
(d) If one of the following requirements is
satisfied, the restrictions of this section 11.03(a)
and (b) shall not apply:
(1) After taking into account payment to or
on behalf of the Restricted Employee of all
benefits payable to or on behalf of that
Restricted Empoyee of all benefits payable to or
on behalf of that Restricted Employee under the
Plan, the value of Plan assets must equal or
exceed 110 percent of the value of current
liabilities, as defined in Code Section
412(l)(7).
(2) The value of the benefits payable to or
on behalf of the Restricted Employee must be less
than one percent of the value of current
liabilities before distribution.
(3) The value of the benefits payable to or
on behalf of the Restricted Employee must not
exceed the amount described in Code Section
411(a)(11)(A) (restrictions on certain mandatory
distributions).
11.04 Annuity Contracts.04 Annuity Contracts. Annuity
contracts purchased and distributed under the Plan will
satisfy all requirements of the Retirement Equity Act.
11.05 Timing.05 Timing. Subject to Regulation 1.411(a)-11(c)(7)
and the provisions of this Plan, benefits to a Former
Participant will become distributable no later than 60 days
after the last to occur of (a) the last day of the Plan
Year in which the Participant attains age 65, (b) the last
day of the Plan Year in which the Participant separates
from employment with all Affiliated Companies, or (c) the
10th anniversary of the last day of the Plan Year in which
the Participant commenced participation in the Plan.
11.06 Satisfaction of Claims.06 Satisfaction of Claims. Any
payment to a Participant, the Participant's legal
representative or Beneficiary, in accordance with the terms
of this Plan and the Trust, shall, to the extent thereof,
be in full satisfaction of all claims such person may have
against the Trustee, the Committee and the Company, any of
whom may condition the payment upon execution of a receipt
and release therefor as determined by the Trustee, the
Committee or the Company.
11.07 Source.07 Source. All Plan benefits will be paid solely
from the Trust, and the Company assume no liability or
responsibility therefor.
11.08 Determinations.08 Determinations. The amount of any Plan
benefit will be determined under Plan provisions in effect
when the Participant separated from service.
11.09 Mistaken Payments.09 Mistaken Payments. Benefits
improperly paid to a person will be owed by that person to
the Plan and, notwithstanding any other provisions of this
Plan, may be deducted from future benefits payable to the
person entitled to receive such benefits.
11.10 Direct Rollover.10 Direct Rollover. Effective January 1,
1993, notwithstanding any provision of this Plan to the
contrary that would otherwise limit a Distributee's
election under this Plan, a Distributee may elect, at the
time and in the manner prescribed by the Committee, to have
any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover. For these purposes, the
following definitions apply:
(a) An Eligible Rollover Distribution is any
distribution of all or any portion of the balance to
the credit of the Distributee, except that an Eligible
Rollover Distribution does not include: any
distribution that is one of a series of substantially
equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of
the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee's
designated Beneficiary, or for a specified period of
10 years or more; any distribution to the extent that
distribution is required under Section 401(a)(9) of
the Code; and the portion of any distribution that is
not includable in gross income.
(b) An Eligible Retirement Plan is an individual
retirement account described in Code Section 408(a),
an individual retirement annuity described in Code
Section 408(b), an annuity plan described in Code
Section 403(a), or a qualified trust described in Code
Section 401(a), that accepts the Distributee's
Eligible Rollover Distribution. However, in the case
of an Eligible Rollover Distribution to the surviving
spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
(c) A Distributee includes an Employee or former
Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the
alternate payee under a Qualified Domestic Relations
Order, as defined in Code Section 414(p), are
Distributees with regard to the interest of the spouse
or former spouse.
(d) A Direct Rollover is a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
ARTICLE XII
LIMITATIONS ON BENEFITS
This Article outlines the requirements of Code Section 415 and is
effective January 1, 1987.
12.01 Section 415 Limitation.01 Section 415 Limitation. The
annual benefit (as defined below) payable to a Participant
at any time will not exceed the maximum permissible amount
(as defined below). This limit will be deemed satisfied if
the annual benefit is not more than $1,000 multiplied by
the Participant's Years of Service or parts thereof (not to
exceed 10) with an Affiliated Company, and the Affiliated
Company has not at any time maintained a defined
contribution plan, a welfare benefit plan as defined in
Code Section 419(e), or an individual medical account as
defined in Code Section 415(1)(2) in which the Participant
participated.
12.02 Annual Benefit.02 Annual Benefit. An annual benefit is a
retirement benefit that is payable annually in the form of
a straight life annuity. Except as provided below, a
benefit payable in a form other than a straight life
annuity must be adjusted to an actuarially equivalent
straight life annuity before applying the limitations of
this Article.
(a) The interest rate assumption used to determine
actuarial equivalence will be the greater of the
interest rate specified in the Plan's definition of
Actuarial Equivalent, or 5%.
(b) The annual benefit does not include any benefits
attributable to Employee contributions, to rollover
contributions, or to assets transferred from a
qualified plan that was not maintained by an
Affiliated Company.
(c) No actuarial adjustment is required for: (i) the
value of a Qualified Joint and Survivor Annuity; (ii)
the value of benefits that are not directly related to
retirement benefits (such as a qualified disability
benefit, pre-retirement death benefits, and post-
retirement medical benefits); and (iii) the value of
post-retirement cost-of-living increases made in
accordance with Code Section 415(d) and Regulation
1.415-3(c)(2)(iii).
12.03 Maximum Permissible Amount.03 Maximum Permissible Amount.
(a) The lesser of the defined benefit dollar
limitation of Code Section 415 (b)(1)(A) which was
$90,000 in 1987, or the compensation limitation which
is 100% of the Participant's highest average
Remuneration, as defined in Code Section 415(b)(3), as
adjusted automatically pursuant to Regulations to
reflect cost of living increases.
(b) If a Participant has fewer than 10 years of
participation (as defined below) in this Plan, the
defined benefit dollar limitation is reduced by 1/10
for each year of participation (or part thereof) less
than 10, and the compensation limitation is reduced by
1/10 for each Year of Service (or part thereof) less
than 10. These adjustments shall be applied in the
denominator of the defined benefit fraction based upon
Years of Service. Years of Service shall include
future years occurring before the Participant's Normal
Retirement Age, only if it can be reasonably
anticipated that the Participant will receive a Year
of Service for such a year.
(1) A Participant will be credited with a
year of participation (computed to fractional
parts of a year) for each accrual computation
period for which the following conditions are
met: (i) The Participant is credited with at
least the number of Hours of Service (or period
of service if the elapsed time method is used)
required under the terms of the Plan in order to
accrue a benefit, and (ii) The Participant is
included as a Participant under the eligibility
provisions of the Plan for at least one day of
the accrual computation period.
If above two conditions are met, the portion of a
year of participation credited to the Participant
shall equal the amount of benefit accrual service
credited to the Participant for such accrual
computation period. A Participant who is permanently
and totally disabled within the meaning of Code
Section 415(c)(3)(C)(i) for an accrual computation
period shall receive a year of participation with
respect to that period. In addition, for a
Participant to receive a year of participation (or
part thereof) for an accrual computation period, the
Plan must be established no later than the last day of
such accrual computation period. In no event will
more than one year of participation be credited for
any 12-month period.
(2) To the extent provided in Regulations,
or in other guidance issued by the Internal
Revenue Service, the participation limit
applicable to the defined benefit dollar
limitation shall also be applied separately with
respect to each change in the benefit structure
of the Plan.
(c) If the annual benefit of the Participant
commences before the Participant's social security
retirement age (as defined below), but on or after age
62, the defined benefit dollar limitation, as reduced
above if necessary, shall be determined as follows:
(1) If a Participant's social security
retirement age is 65, the dollar limitation for
benefits commencing on or after age 62 is
determined by reducing the defined benefit dollar
limitation by 5/9 of 1% for each month by which
benefits commence before the month in which the
Participant attains age 65.
(2) If a Participant's social security
retirement age is greater than age 65, the dollar
limitation for benefits commencing on or after
age 62 is determined by reducing the defined
benefit dollar limitation by 5/9 of 1% for each
of the first 36 months and 5/12 of 1% for each of
the additional months (up to 24 months) by which
benefits commence before the month of the
Participant's social security retirement age.
(d) If the annual benefit of a Participant begins
before age 62, the defined benefit dollar limitation
will be the actuarial equivalent of an annual benefit
beginning at age 62, as determined above, reduced for
each month by which benefits commence before the month
in which the Participant attains age 62. To determine
actuarial equivalence, the interest rate assumption is
the greater of the rate specified in the Plan's
definition of Actuarial Equivalent, or 5%. Any
decrease in the defined benefit dollar limitation
determined in accordance with this provision shall not
reflect the mortality decrement to the extent that
benefits will not be forfeited upon the death of the
Participant.
(e) If the annual benefit of a Participant commences
after the Participant's social security retirement
age, the defined benefit dollar limitation shall be
increased so that it is the actuarial equivalent of an
annual benefit beginning at the Participant's social
security retirement age. To determine actuarial
equivalence, the interest rate assumption used will be
the lesser of the rate specified in the Plan's
definition of Actuarial Equivalent or 5%.
(f) Age 65 for a Participant born before January 1,
1938; age 66 for a Participant born after December 31,
1937, but before January 1, 1955; and age 67 for a
Participant born after December 31, 1954.
12.04 Adjustment.04 Adjustment. If the benefit the Participant
would otherwise accrue in a limitation year would produce
an annual benefit in excess of the maximum permissible
amount, the rate of the Participant's benefit accrual will
be reduced so that the annual benefit will equal the
maximum permissible amount.
12.05 Multiple Defined Benefit Plans.05 Multiple Defined Benefit
Plans. If a Participant has ever been covered under more
than one defined benefit plan maintained by an Affiliated
Company, and the sum of the Participant's annual benefits
from all such plans would exceed the maximum permissible
amount, the rate of the Participant's benefit accrual in
each of the plans will be reduced, pro rata, so that the
annual benefit will equal the maximum permissible amount.
12.06 Defined Benefit and Defined Contribution Plans.06 Defined
Benefit and Defined Contribution Plans. If the Affiliated
Company maintains, or at any time maintained, one or more
qualified defined contribution plans covering any
Participant in this plan, a welfare benefit fund, as
defined in Code Section 419(e), or an individual medical
account as defined in Code Section 415(1)(2), the sum of
the Participant's defined contribution fraction (as defined
below) and defined benefit fraction (as defined below) will
not exceed 1.0 in any limitation year. The Plan Year shall
be the limitation year.
(a) Defined Benefit Fraction means that fraction, the
numerator of which is the Participant's projected
annual benefit (defined below), determined as of the
close of the Plan Year, under all defined benefit
plans of all Affiliated Companies and the denominator
of which is the lesser of: (i) the product of 1.25 and
the dollar limitation in effect under Code Section
415(b)(1)(A) for such Plan Year; or (ii) the product
of 1.4 and the compensation limitation, which is the
Participant's average annual Remuneration for the
three consecutive Plan Years for which such average is
the highest. A Participant's "projected annual
benefit" shall be equal to the total annual benefit to
which the Participant would be entitled under all
defined benefit plans of all Affiliated Companies if
the Participant were to remain an Employee until
normal retirement age under each such plan and all
other relevant factors used to determine benefits
under such plans were to remain constant for all
future Plan Years.
(b) Defined Contribution Fraction means that
fraction, the numerator of which is the sum of the
Annual Additions (as defined below) to the
Participant's accounts under each defined contribution
plan maintained by an Affiliated Company for the Plan
Year and all prior Plan Years (less the amount, if
any, permitted to be subtracted under: (i) the transi
tional rule of Section 235(g)(3) of the Tax Equity and
Fiscal Responsibility Act of 1982; or (ii) the
transitional rule of Section 1106(h)(4) of the Tax
Reform Act of 1986) and the denominator of which is
the lesser of the following amounts with respect to
the Plan Year and each prior Plan Year during which
the Participant was an employee of an Affiliated
Company: (A) the product of 1.25 and the dollar limit
in effect under Code Section 415(c)(1)(A) (without
regard to Code Section 415(c)(6)) for such Plan Year;
or (B) the product of 1.4 and 25% of the Participant's
Remuneration for the Plan Year; provided that the
Committee may, in its discretion, calculate the denomi
nator of the Defined Contribution Fraction for all
defined contribution plans of Affiliated Companies
using the alternative method set forth in Code
Section 415(e)(6).
12.07 Annual Addition.07 Annual Addition. For purposes of this
Article, "Annual Addition" means, for any Plan Year, the
aggregate amount (excluding Rollover Contributions and
trustee-to-trustee transfers) credited to a Participant's
accounts under each defined contribution plan of an
Affiliated Company with respect to such Plan Year from:
(a) Company contributions and forfeitures allocated
to a Participant's account (excluding any amount
reinstated to an account pursuant to Code Sections
411(a)(7)(C) (cash-outs) or 411(a)(3)(D) (mandatory
contributions)).
(b) A Participant's own contributions made on behalf
of the Participant; provided, however, that the Annual
Addition for any Plan Year beginning before January 1,
1987, shall not be recomputed to treat all Participant
contributions as Annual Additions.
(c) With respect to a Participant who is a key
employee, as defined in Code Section 416(i), with
respect to such Plan Year or any preceding Plan Year,
any amount paid or accrued to such Participant's
account under a welfare benefit fund pursuant to
Section 419A(d) of the Code and contributions to an
individual medical account (as defined in Section
415(1) of the Code) for a Participant as part of a
defined benefit plan.
12.08 Adjustments.08 Adjustments. If the sum of the defined
benefit fraction and the defined contribution fraction
would exceed 1.0 in any limitation year for a Participant,
and if an adjustment would, therefore, be required by law,
the Committee shall adjust the numerator of the defined
benefit fraction so that the sum of both fractions shall
not exceed 1.0 in any limitation year for the Participant.
(a) If, due to required top heavy adjustments
pursuant to Code Section 416(h), or due to excess
benefit accruals or Annual Additions pursuant to
Internal Revenue Service Notice 82-19, the 1.0 limit
is exceeded for a Participant in any limitation year,
the Participant will be subject to the following
restrictions for each future limitation year until the
1.0 limitation is satisfied: (i) the Participant's
accrued benefit shall not increase, and (ii) no
Annual Additions may be credited to a Participant's
account under a defined contribution plan of an
Affiliated Company and (iii) No Employee
contributions (voluntary or mandatory) may be made
under any defined benefit plan or any defined
contribution plan of an Affiliated Company.
(b) In the case of an individual who was a
Participant in one or more defined benefit plans of
the Employer as of the first day of the first
limitation year beginning after December 31, 1986, the
application of the limits of this Article will not
cause the maximum permissible amount for such
individual under all such defined benefit plans to be
less than the individual's current accrued benefit (as
defined below).
(1) The preceding sentence applies only if
such defined benefit plans met the requirements
of Code Section 415, for all limitation years
beginning before May 6, 1986.
(2) A Participant's current accrued benefit
is the Participant's accrued benefit, determined
as if the Participant had separated from service
as of the close of the last limitation year
beginning before January 1, 1987, when expressed
as an annual benefit. In determining a
Participant's current accrued benefit, the
following shall be disregarded: (i) any change
in the terms and conditions of the plan after
May 5, 1986 and (ii) any cost of living
adjustments occurring after May 5, 1986.
12.09 Top-Heavy Adjustment.09 Top-Heavy Adjustment. With
respect to any Plan Year for which the Plan is Top-heavy as
described in Article XIX, the definitions of Defined
Contribution Fraction and Defined Benefit Fraction shall be
modified by substituting 1.0 for 1.25; provided, however,
in no event, shall the accrued benefit or account balance
of any Participant be reduced below the amount of such
accrued benefit or account balance immediately before the
Plan became top-heavy.
ARTICLE XIV
CLAIMS PROCEDURE
If a Participant or Beneficiary ("Claimant") believes that he is
entitled to a greater benefit under the Plan, the Claimant may
submit a signed, written application to the Committee within 90
days of having been denied such a greater benefit. The Claimant
will generally be notified of the approval or denial of this
application within 90 days of the date that the Committee
receives the application. If the claim is denied, the
notification will state specific reasons for the denial and the
Claimant will have 60 days to file a signed, written request for
a review of the denial with the Committee. This request will
include the reasons for requesting a review, facts supporting the
request and any other relevant comments. The Committee,
operating pursuant to its discretionary authority to administer
and interpret the Plan and to determine eligibility for benefits
under the terms of the Plan, will generally make a final, written
determination of the Claimant's eligibility for benefits within
60 days of receipt of the request for review.
ARTICLE XIV
ALIENATION AND QUALIFIED DOMESTIC RELATIONS ORDER PROVISIONS
14.01 Prohibition.01 Prohibition. Plan benefits may not be
assigned or alienated and will not be subject to the claims
of creditors. The Plan will, however, honor properly
executed federal tax levies, executions on federal tax
judgments, Qualified Domestic Relations Orders within the
meaning of Code Section 414(p), a direction to pay third
parties pursuant to Regulation 1.401(a)-13(e), and the
provisions of this Plan regarding distributions to minors
and incompetent persons.
14.02 Domestic Relations Orders.02 Domestic Relations Orders.
The Committee has full discretionary authority to determine
whether a domestic relations order is "Qualified" within
the meaning of Code Section 414(p).
14.03 Alternate Payee.03 Alternate Payee. Rights and benefits
provided to a Participant or Beneficiary are subject to the
rights and benefits of an alternate payee under a Qualified
Domestic Relations Order.
ARTICLE XVXV
ADMINISTRATION
15.01 Committee.01 Committee.
(a) The Plan shall be administered by a Retirement
Plan Committee (hereinafter referred to as the
Committee) which shall be composed of six members,
three of whom shall be designated by the Company, two
of whom shall be designated by Local 259 organized
under the Utility Workers Union of America affiliated
with the AFL-CIO, and one of whom shall be designated
by the Operating Engineers Local Union No. 3 of the
International Union of Operating Engineers, AFL-CIO
(hereinafter referred to as the Unions). Both the
Company and the Unions may designate substitutes,
alternates or successors as occasion may require. The
Committee shall be the Plan Administrator. No member
of the Committee shall have the right to vote on any
question affecting his individual capacity as a
participating employee hereunder as distinguished from
his status as a member of the group of participating
employees. The Committee shall keep minutes of its
meetings and shall prescribe the duties of a secretary
who shall be furnished by the Company at its expense.
Such Committee shall have a chairman selected from its
own membership to preside over its meetings and call
meetings as required. Such chairman shall serve for a
year and shall be designated alternately by the
Company representatives and the Union representatives.
(b) The Company and the Union representatives on the
Committee shall select an impartial umpire to break
any deadlocks which occur in the Committee.
(c) The Committee shall establish rules for its
procedure including the procedure for calling special
meetings and shall agree upon the time for future
regular meetings of the Committee.
(d) The expenses of the Company members of the
Committee for attending Committee meetings shall be
borne by the Company, and the expenses of the Union
members shall be borne by the Union. The Committee
members shall receive no compensation for attending
meetings or other work performed as Committee members,
provided, however that time spent by Committee members
during regular working hours in attending such
meetings and in traveling to and from such meetings
shall not result in loss of pay.
15.02 Power.02 Power.
(a) The Committee has full discretionary authority to
administer and interpret the Plan, including
discretionary authority to determine eligibility for
participation and benefits under the Plan, to appoint
one or more investment managers, and to correct
errors. The Committee may delegate its discretionary
authority and such duties and responsibilities as it
deems appropriate to facilitate the day-to-day
administration of the Plan. Determinations by the
Committee or the Committee's delegate will be final
and conclusive upon all persons.
(b) In amplification of its powers and duties, but
not by way of limitation, it shall:
(1) Be responsible for the compilation and
maintenance of all records necessary for the
Plan;
(2) Authorize the payment of all benefits
as they become payable under the Plan, which
payments shall be made by the Trustee from the
Trust Fund on written instructions of the
Committee;
(3) Authorize the payment of administrative
costs of the Plan such as Trustee's fees,
actuarial fees, legal fees, and other
administrative costs, which payments shall be
made by the Trustee from the Trust Fund on
written instructions of the Committee, provided,
however, that the Company will pay the
secretarial, clerical (other than those incurred
by the Trustee) and normal routine printing costs
relating to the Plan;
(4) Make rules and regulations for the
administration of the Plan not inconsistent with
the Plan or the Agreement of Trust;
(5) Engage such legal, actuarial,
accounting and other professional services as it
may deem proper;
(6) Approve mortality tables, interest
rates and other factors to be used in the
actuarial computations arising under the Plan;
(7) Do and perform such other matters as
may be provided for in other parts of this Plan
or in the Trust (e.g., participate in the
appointment or revocation of one or more
investment managers).
(c) All discretion conferred upon the Committee shall
be absolute, but no discretionary power conferred on
the Committee or in the Trustee or retained by the
Company shall be exercised in such a manner as to
cause or create discrimination in favor of employees
who are officers or shareholders of the Company or
highly compensated employees or persons whose
principal duties consist of supervising the work of
other employees.
(d) The members of the Committee, the Company, and
its officers and directors shall be entitled to rely
conclusively upon all tables, valuations, certificates
and reports furnished by any actuary or accountant
employed by the Committee and upon all opinions of
counsel or other experts and they and each of them
shall be fully protected as to any action taken or
suffered by them in good faith in reliance upon any
such tables, valuations, certificates, reports or
opinions, and all action so taken and suffered by any
of them shall be conclusive upon any persons having or
claiming any interests under the Plan.
(e) Any action taken in good faith by the Committee
in exercise of authority conferred upon it by this
Plan shall be conclusive and binding upon Participants
and their Beneficiaries.
(f) All written instruments and notices required
hereunder to be filed with the Committee shall be
sufficiently filed upon delivery thereof to its
secretary. Two members of the Committee, one a Union
representative and one a Company representative, may
sign any document on behalf of the Committee. Third
persons, including the Trustee, dealing with the
Committee may conclusively rely on any such document
signed by such two Committee members.
15.03 Expenses.03 Expenses. Expenses incurred in
administering the Plan will be paid by the Company if not
paid from the Trust. If expenses are initially paid by the
Company, the Company may be reimbursed from the Trust.
Committee members will receive no compensation for
administering the Plan.
ARTICLE XVIXVI
PLAN AMENDMENTS
16.01 Power.01 Power. Subject to the limitation set forth in
Section 16.03 hereof, this Plan may be amended at any time
and from time to time in whole or in part by the Board of
Directors of the Company. Additionally, the Board of
Directors may delegate authority to amend the Plan to the
President of the Company together with any other officer of
the Company, for the sole purpose of amending the Plan to
ensure that it qualifies under applicable revenue laws. Any
amendment to this Plan adopted by these corporate officers
shall be adopted in writing, executed by all officers to
whom the authority to amend has been delegated. No
amendment shall permit any part of the Trust Fund to revert
to or be recoverable by the Company or to be used for or
diverted to any purpose other than to provide benefits for
Participants, joint annuitants and beneficiaries under the
Plan and to defray the expense of administration of the
Plan.
16.02 Limits.02 Limits. No amendment to the Plan (including a
change in the Actuarial Equivalence for determining
optional retirement benefits) shall be adopted to the
extent that it has the effect of decreasing a Participant's
accrued benefit. Notwithstanding the preceding sentence, a
Participant's accrued benefit may be reduced to the extent
permitted under Section 412(i)(8) of the Code. For purposes
of this paragraph, a plan amendment which has the effect
of: (i) eliminating or reducing an early retirement benefit
or a retirement-type subsidy; or (ii) eliminating an
optional form of benefit, with respect to benefits
attributable to service before the amendment shall be
treated as reducing accrued benefits. In the case of a
retirement-type subsidy, the preceding sentence shall apply
only with respect to a Participant who satisfies (either
before or after the amendment) the preamendment conditions
for the subsidy. In general, a retirement-type subsidy is
a subsidy that continues after retirement, but does not
include a disability benefit, a medical benefit, a social
security supplement, a death benefit (including life
insurance) or a facility shutdown benefit (that does not
continue after retirement age).
16.03 Limitation on Amendment or Termination of Plan.03
Limitation on Amendment or Termination of Plan. For the
term of the Agreement between the Company and the Union, of
which this Plan becomes a part by incorporation, but
without commitment or liability thereafter, the Company
agrees not to exercise its rights to amend or terminate the
Plan for any reason other than those particularly specified
in this Plan or in said Agreement.
ARTICLE XVII
DISCONTINUANCE AND TRANSFERS
17.01 Power.01 Power. Subject to the limitations set forth in
Section 16.03, the Company is under no obligation or
liability to continue its contributions to, or to maintain
the Plan for, any given length of time. The Company may,
in its sole discretion, with respect to its Eligible
Employees, discontinue contributions or terminate the Plan,
in whole or in part, at any time without any liability
whatsoever for such discontinuance or termination.
17.02 Effect of Discontinuance.02 Effect of Discontinuance. If
the Company decides to discontinue contributions to the
Plan, the duties of the Committee and the Trustee under the
Plan will continue as before, and the provisions of the
Plan (other than provisions for contributions and benefit
accruals) will remain in force.
17.03 Effect of Termination.03 Effect of Termination. In the
event of a termination or a partial termination of the
Plan, the accrued benefits of all directly affected
Participants will become vested, and the assets of the Plan
will be allocated in accordance with Section 4044 of ERISA.
In the event of a Plan termination, any residual assets of
the Plan will be distributed to the Company, provided that
all liabilities of the Plan to Participants and their
Beneficiaries have been satisfied, and the distribution
does not contravene applicable law.
17.04 Determination of Partial Termination.04 Determination of
Partial Termination. For purposes of determining whether a
partial termination has occurred, all Employees will be
deemed employed by the same employer. A partial
termination of the Plan will not be deemed to occur solely
by reason of the sale or transfer of all or substantially
all of the assets of the Company, but will be deemed to
occur only if there is a determination, either made or
agreed to by the Committee, or made by the Internal Revenue
Service and upheld by a decision of a court of last resort,
that a particular event or transaction (including the sale
or transfer of all or substantially all of the assets of
the Company) constitutes a partial termination within the
meaning of Code Section 411(d)(3)(A).
17.05 Mergers and Transfers.05 Mergers and Transfers.
(a) This Plan may be merged or consolidated with
another tax-qualified retirement Plan, and assets and
liabilities may be transferred from this Plan to any
other retirement plan qualified under Section 401 of
the Code if each Participant is entitled to receive
from the recipient plan, a benefit immediately after
the merger, consolidation or transfer (if such plan
were then terminated) that is equal to or greater than
the benefit the Participant would have been entitled
to receive under the transferring plan if the
transferring plan had been terminated immediately
before the merger, consolidation or transfer. If
assets are transferred from this Plan, the Committee
will satisfy the distribution requirements of Proposed
Regulation 1.401(a)(9)-G-3.
(b) In the event of termination or partial
termination of the Plan, a Participant or Former
Participant shall have no recourse towards
satisfaction of his nonforfeitable benefits against
the Company and instead may recover only from Plan
Assets and the Pension Benefit Guaranty Corporation.
ARTICLE XVIII
MERGER OF THE PLAN WITH CAMPBELL WATER COMPANY
RETIREMENT PLAN
18.01 Merger of Plans.01 Merger of Plans. The Retirement Plan
for the employees of the Campbell Water Company
(hereinafter referred to as the "Campbell Water Plan") has
been merged with the Plan as of July 1, 1981, and the terms
of the Plan shall govern on and after that date for all
purposes except as otherwise indicated in this Article
XVIII.
18.02 Service with Campbell Water Company.02 Service with
Campbell Water Company. For all purposes under the Plan,
previous service with the Campbell Water Company shall be
treated as service with the Company.
18.03 Benefits of Former Participants of Campbell Water Plan.03
Benefits of Former Participants of Campbell Water Plan. A
person who was a Participant of the Campbell Water Plan
with vested benefits under the Campbell Water Plan on May
9, 1980 shall become a Participant of the Plan as of that
date, PROVIDED, HOWEVER, that such Participant's pension
benefits for his employment prior to, on and after that
date shall be determined in accordance with the accrual,
vesting and other provisions contained in Sections 5, 6 and
7 of the Campbell Water Plan (with service including both
service with the Campbell Water Company and service with
the Company) and not in accordance with Articles IV, VI,
VII and IX of the Plan, PROVIDED FURTHER, HOWEVER, that
such Participant's pension benefits on a late or postponed
retirement date shall not exceed the Participant's pension
benefits on his normal retirement date. A person who was a
Participant of the Campbell Water Plan with no vested
benefits-under the Campbell Water Plan on May 9, 1980 shall
become a Participant of the Plan as of that date and his
pension benefits shall be determined in accordance with the
provisions of the Plan and not in accordance with the
provisions of the Campbell Water Plan.
ARTICLE XIX
TOP-HEAVY PROVISIONS
This Article outlines certain Code Section 416 top-heavy
provisions. In the unlikely event that the Plan were to become
Top-Heavy, certain Employees would receive vesting credit and
special minimum allocations as described in the last sections of
this Article.
19.01 Definitions.01 Definitions. In this Article, the following
terms have the meaning indicated:
(a) Determination Date shall mean, for any Plan Year,
the last day of the preceding Plan Year.
(b) Key Employee with respect to a particular
Affiliated Company for a particular Plan Year, a
Participant or former Participant (or the Beneficiary
of a deceased Participant) who, at any time during the
Plan Year containing the Determination Date for the
Plan Year in question or any of the four immediately
preceding Plan Years, was:
(1) An officer of such Affiliated Company
having aggregate annual Remuneration from all
such entities for a Plan Year greater than fifty
percent (50%) of the maximum dollar limitation in
effect under Code Section 415(b)(1)(A) for the
calendar year in which such Plan Year ended;
(2) One of the ten employees of such
Affiliated Company owning the largest interests
in value of any such entity, provided that:
(i) such employee owns more than a one-half
percent (r%) interest in such entity; and
(ii) such employee's aggregate annual
Remuneration from all such entities exceeds the
maximum dollar limitation under Section
415(c)(1)(A) of the Code;
(3) A Five-Percent Owner of such Affiliated
Company; or
(4) A One-Percent Owner of such Affiliated
Company whose aggregate annual Remuneration from
all such entities exceeds $150,000.
The determination of Key Employee status shall be made
pursuant to the following:
(I) For purposes of determining ownership
in any entity under this subsection, the
attribution principles of Section 318 of the Code
shall apply by substituting "5%" for "50%" in
Section 318(a)(2)(C).
(II) For purposes of item (I) above, the
individuals actually considered as Key Employees
with respect to a Affiliated Company by virtue of
being officers: (i) shall not in number exceed
the lesser of fifty (50) or that number not in
excess of the greater of three (3) officers or
ten percent (10%) of the total number of
employees of the Affiliated Company; and
(ii) shall be those individuals belonging to the
group of all Participants determined to be
officers for the Plan Year containing the
Determination Date or any of the preceding four
(4) Plan Years, who received the highest annual
Remuneration from such entities for any Plan Year
during such five (5) year period.
Notwithstanding the preceding sentence, no entity
other than a corporation shall be deemed to have
officers for purposes of clause (1) for any Plan
Year beginning before March 1, 1985.
(III) For purposes of item (II) above,
should two employees own the same percentage
interest in an entity, then the employee having
the greater annual Remuneration shall be deemed
to own the larger percentage interest.
(c) Top-Heavy Ratio of a plan or group of plans with
respect to a particular Affiliated Company shall be a
fraction, the numerator of which is the sum of: (i)
the present value of all cumulative accrued benefits
for all Key Employees under this Plan and under each
other defined benefit plan included in the
determination; and (ii) the account balances for all
Key Employees under each defined contribution plan
(including any simplified employee pension plan)
included in the determination, and the denominator of
which is the sum of: (A) the present value of the
cumulative accrued benefits for all Participants under
this Plan and each other defined benefit plan included
in the determination; and (B) the account balances for
all Participants under each defined contribution plan
(including any simplified employee pension plan)
included in the determination, disregarding any
accrued benefits or account balances not provided with
respect to an Employee of such Affiliated Company.
In determining the Top-Heavy Ratio with respect
to a particular Affiliated Company, the following
rules apply:
(1) In determining the accrued benefits and
account balances of a Participant employed by a
particular Affiliated Company, benefits
attributable to service with an entity other than
such Affiliated Company (including service with a
predecessor employer) shall be excluded.
(2) Present value of accrued benefits shall
be calculated in accordance with the provisions
of the Plan (or such other defined benefit plan
to which such benefits pertain). If an
aggregation group includes two or more defined
benefit plans, the same actuarial assumptions
must be used with respect to all such plans. The
value of account balances shall be determined as
of the most recent valuation date that falls
within or ends with the 12-month period ending on
the Determination Date. Amounts attributable to
Company contributions and employee contributions
(other than deductible contributions) shall be
taken into account. In the event that two or
more plans with different plan years are included
in the determination, accrued benefits under such
plans shall be aggregated as of the Determination
Dates for such plans that fall within the same
calendar year. Account balances and accrued
benefits so determined shall be adjusted for the
amount of any contributions: (i) made after the
date of such valuation but on or before the
Determination Date; or (ii) due but unpaid as of
the Determination Date, and, except as otherwise
provided in paragraphs (3) or (4) below, shall
include any amount distributed during the 5-year
period ending on the Determination Date. The
present value of accrued benefits will be
determined by using the mortality table based on
the table described in Section 807(d)(5) of the
Code that is used to determine reserves for group
annuity contracts issued on the date as of which
present value is being determined (without regard
to any other subparagraph of Section 807(d)(5) of
the Code), and a 5% interest rate.
(3) The accrued benefit of any Participant
in a defined benefit plan with respect to the
Plan Year in question, will be treated as
accruing at the slowest rate of accrual permitted
under the fractional rule of section 411(b)(1)(C)
of the Code.
(4) With respect to a transfer from one
qualified plan to another (by rollover or plan-to-
plan transfer) which is: (i) incident to a merger
or consolidation of two or more plans or a
division of a single plan into two or more plans;
(ii) made between two plans maintained by the
same employer or by employers required to be
aggregated under Section 414(b), (c), or (m) of
the Code; or (iii) otherwise not initiated by the
employee, a Participant's accrued benefit or
account balance under a plan shall include any
amount attributable to any such transfer received
or accepted by such plan on or before the
Determination Date but shall not include any
amount transferred by such plan to any other plan
in such a transfer on or before the Determination
Date. With respect to any rollover or plan-to-
plan transfer not described in the preceding
sentence, a Participant's accrued benefit or
account balance under a plan shall include: (A)
any amount distributed or transferred by such
plan, unless the distributed or transferred
amount is excludable under paragraph (2); and (B)
any amount attributable to assets received in any
such transfer accepted prior to January 1, 1984,
but such accrued benefit or account balance shall
not include any amount attributable to assets
received by such plan in any such transfer
accepted after December 31, 1983.
(5) No accrued benefit or account balance
for any Participant shall be taken into account
with respect to: (i) a Participant who is not a
Key Employee with respect to the Plan Year in
question, but who was a Key Employee with respect
to a prior Plan Year; or (ii) for Plan Years
commencing after December 31, 1984, an Employee
who has not performed services for the Affiliated
Company within the five (5)-year period ending
with the Determination Date.
(6) Account shall be taken of any accrued
benefit or account balance payable to a
beneficiary (or group of beneficiaries) after the
death of a Participant by disregarding the death
of such Participant.
(d) Required Aggregation Group means a group of two
or more plans consisting of: (i) a qualified plan of
an Affiliated Company (including a simplified employee
pension plan) in which at least one Key Employee
participates (or has participated in the five (5)-year
period ending with the Determination Date); and (ii)
any other qualified plan or plans which enable the
plan described in (i) to meet the requirements of
Sections 401(a)(4) and 410 of the Code.
(e) Permissive Aggregation Group means a group of
plans consisting of: (i) one or more qualified plans
of a Affiliated Company in which at least one Key
Employee participates (or has participated in the five
(5)-year period ending with the Determination Date) or
one or more Required Aggregation Groups of plans; and
(ii) any other qualified plan or plans of the
Affiliated Company which, when considered as a group
with the plan or plans specified in (i), would
continue to satisfy the requirements of Sections
401(a)(4) and 410 of the Code.
19.02 Top-Heavy Status.02 Top-Heavy Status.
(a) Subject to subsection (b), with respect to a
particular Affiliated Company, this Plan shall be
considered "Top-Heavy" with respect to any Plan Year
if, as of the Determination Date for such Plan Year,
either:
(1) The Top-Heavy Ratio for the Affiliated
Company's portion of this Plan exceeds sixty
percent (60%) and the Affiliated Company's
portion of this Plan is not part of any Required
Aggregation Group; or
(2) The Affiliated Company's portion of
this Plan is part of a Required Aggregation Group
of plans and the Top-Heavy Ratio for the Required
Aggregation Group exceeds sixty percent (60%).
(b) Notwithstanding subsection (a), if the Affiliated
Company's portion of this Plan is part of one or more
Permissive Aggregation Groups of plans for which the
Top-Heavy Ratio does not exceed sixty percent (60%),
this Plan shall not be Top-Heavy with respect to such
Affiliated Company.
19.03 Minimum Allocation.03 Minimum Allocation.
(a) For any Plan Year in which this Plan is Top-
Heavy, a minimum, non-integrated, vested benefit must
be provided (i) under a defined benefit plan
maintained by an Affiliated Company, to each Non-Key
Employee who has completed 1,000 Hours of Service in
the Plan Year or (ii) under a defined contribution
plan maintained by an Affiliated Company, to the
account of each Non-Key Employee (except those who are
separated from service with all Affiliated Companies
at the end of the Plan Year).
(b) Minimum benefits for a Non-Key Employee's Year of
Service in a defined benefit plan will be no less than
2% of the Employee's average high 5 consecutive years
of Remuneration.
(c) Minimum benefits for a Non-Key Employee in a
defined contribution plan will be no less than the
lesser of 3% of Remuneration or the highest rate of
contribution applicable to any Key Employee.
(d) If both a defined contribution and a defined
benefit plan have been or are being maintained by
Affiliated Companies, and both plans are Top-Heavy, a
minimum benefit of 5% of Remuneration will be provided
for each Non-Key Employee participating in both plans.
(e) Solely for the purposes of this section, years of
service shall not include a particular year of service
if: (i) the Plan was not Top-Heavy with respect to
such Affiliated Company for any Plan Year ending
during such year of service; or (ii) such year of
service was completed in a Plan Year beginning before
January 1, 1984.
(f) Solely for the purposes of this section, the
Participant's average Remuneration from an Affiliated
Company shall be computed for the testing period
consisting of the period of consecutive years (not
exceeding five (5)) during which the Participant had
the greatest aggregate such Remuneration, except that
the following years shall not be taken into account:
(1) Any year ending in a Plan Year
beginning before January 1, 1984;
(2) Any year beginning after the close of
the last year in which the Plan was Top-Heavy
with respect to such Affiliated Company; and
(3) Any year for which the Participant did
not earn a year of service (determined without
regard to subsection (a) of this section) with
such Affiliated Company.
19.04 Vesting.04 Vesting. Subject to the Plan's general
rules regarding changes in vesting schedules, the following
Top-Heavy vesting rules apply. If the Plan is Top-Heavy
for any Plan Year, then the otherwise applicable Plan
vesting schedule will be replaced, for that Plan Year, by
the following:
If Years of Service Percentage of
Equal or Exceed Account Vested
2 20%
3 40%
4 60%
5 80%
6 100%
This revised vesting schedule will not apply to any
Employee who does not render an Hour of Service after the
Plan becomes Top-Heavy or to any amounts forfeited before
the Plan becomes Top-Heavy. If, following a Plan Year in
which this revised vesting schedule is applicable, the Plan
ceases to be Top-Heavy, the Plan's normal vesting schedule
will again be applicable, and the provisions in Section
6.03 regarding amendments to the vesting schedule will
apply.
19.05 Super Top-Heavy Adjustment.05 Super Top-Heavy Adjustment.
Notwithstanding Section 12.09, if this Plan would not be
deemed to be top-heavy if "ninety percent (90%)" were
substituted for "sixty percent (60%)" each place it appears
in Section 19.02, and if an Affiliated Company provides
benefits and or contributions to the accounts of non-key
employees who participate in defined benefit and or defined
contribution plans maintained by an Affiliated Company, in
amounts at least as equal to that which would be required
under Section 19.03 after substituting 4% for 3% in Section
19.03(b) and substituting 3% for 2% in Section 19.03(c),
then the reduction in the defined benefit fraction and the
defined contribution fraction as set forth in Section
12.09, shall not be made.
ARTICLE XX
MISCELLANEOUS
20.01 Rights.01 Rights. Participation in this Plan does not give
to any Employee the right to be retained in the employ of
an Affiliated Company, nor any right or interest in this
Plan other than as provided in this Plan document.
The rights and benefits of a Participant who ceased to be
an Employee on or prior to December 31, 1992 shall be
determined in accordance with the provisions of the Plan in
effect on the date on which the Participant ceased to be an
Employee, and any of the provisions of this Plan that are
specifically made effective to such date.
20.02 Construction.02 Construction. The Plan is to be con
strued, administered and governed in accordance with ERISA
and other pertinent federal laws and in accordance with the
laws of the State of California to the extent not preempted
by ERISA. If any provision is susceptible to more than one
interpretation, such interpretation shall be given that is
consistent with the intent that this Plan and the Trust be
exempt from federal income tax under Code Sections 401(a)
and 501(a), respectively. The headings and subheadings of
this Plan are inserted for convenience and are not to be
considered in the construction of this Plan.
20.03 Severability.03 Severability. If any provision of this
Plan is held by a court of competent jurisdiction to be
invalid or unenforceable, the remaining provisions of the
Plan will continue to be fully effective.
20.04 No Guarantee Against Loss.04 No Guarantee Against Loss.
Except as provided by law, neither the Company, the
Committee nor the Trustee guaranteed the Trust against loss
or depreciation or guarantees that benefits as herein
provided will be paid.
ARTICLE XXI
EXECUTION
IN WITNESS WHEREOF, the Company has caused this amended and
restated Plan to be duly executed on the ____ day of
__________________, 1993
SAN JOSE WATER COMPANY
By____________________
President
SCHEDULE A
ACTUARIAL EQUIVALENCE
Optional Benefit Amount
as a Percentage of the
Benefit Form Normal Form of Pension
(i) Straight Life Annuity 100%
(ii) Qualified Joint & 90%
Survivor
(iii) Ten Year Certain & Life 95%
(iv) Single Sum Cash This value will be determined on the basis of
Payment the 1984 Unisex Mortality Table and the
($3,500 or Less) interest rates prescribed by the PBGC for plan
terminations as of the date of distribution.
If under (ii) above the spouse is more than 10 years younger than
the Participant, the factors will be reduced as follows:
For Each Full Year in Excess of 10,
Subtract .8%
But the Minimum Factor is 70%
If the spouse is more than 10 years older than the Participant,
the factors shall be increased as follows:
For Each Full Year in Excess of 10, ADD .8%
But the Minimum Factor is 98%
Other Benefit Forms
Effective January 1, 1995, in all other circumstances
Actuarial Equivalence means a form of benefit differing in
time or manner of payment from a specific benefit provided
under the Plan, but having the same present value, when
computed using the mortality table based on the table
described in Section 807(d)(5) of the Code that is used to
determine reserves for group annuity contracts issued on
the date as of which present value is being determined
(without regard to any other subparagraph of Section
807(d)(5) of the Code) and the "applicable interest rate"
(as defined in Section 417(e)(3) of the Code), rounded to
the nearest one-half percent, in effect two months prior to
payment.