Exhibit 10.1(c)(1)

 

FORM OF

 

NONQUALIFIED STOCK OPTION AGREEMENT

 

FOR NON-EMPLOYEE DIRECTORS

 

THIS AGREEMENT, dated                 , is made by and between Southwest Water
Company, a Delaware corporation hereinafter referred to as the “Company,” and
                     , a non-employee director of the Company or Subsidiary of
the Company, hereinafter referred to as “Optionee”:

 

WHEREAS, the Company wishes to afford the Optionee the opportunity to purchase
shares of its $.01 par value Common Stock;

 

WHEREAS, the Company wishes to carry out its Amended and Restated Stock Option
Plan for Non-Employee Directors (the “Plan”) (the terms of which are hereby
incorporated by reference and made a part of this Agreement); and

 

WHEREAS, the Plan provides for the grant of the Non-Qualified Stock Option set
forth herein to the Optionee as an inducement to enter into or remain in the
service of the Company or its Subsidiaries and as an incentive for increased
efforts during such service, and has advised the Company thereof and instructed
the undersigned officers to issue said Option;

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto do hereby agree as follows:

 

ARTICLE I.
DEFINITIONS

 

Whenever the following terms are used in this Agreement, they shall have the
meaning specified below unless the context clearly indicates to the contrary. 
The masculine pronoun shall include the feminine and neuter, and the singular
the plural, where the context so indicates.

 

Section 1.1             Board

 

“Board” shall mean the Board of Directors of the Company as constituted from
time to time.

 

Section 1.2             Code

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

 

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Section 1.3             Common Stock

 

“Common Stock” shall mean the common stock of the Company, par value $.01 per
share, of the Company.

 

Section 1.4             Company

 

“Company” shall mean Southwest Water Company, a Delaware corporation, or any
successor entity.

 

Section 1.5             Director

 

“Director” shall mean a person who is a member of the Board as constituted at
that time.

 

Section 1.6             Employee

 

“Employee” shall mean any employee (as defined in accordance with the
Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company, or of any corporation which is then a Subsidiary or a
Parent Corporation, whether such employee is so employed at the time the Plan is
adopted or becomes so employed subsequent to the adoption of the Plan.

 

Section 1.7             Exchange Act

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

Section 1.8             Fair Market Value

 

“Fair Market Value” of a share of Common Stock as of a given date shall be (i)
the closing price of a share of Common Stock on the principal exchange on which
shares of Common Stock are then trading, if any (or as reported on any composite
index which includes such principal exchange), on the trading day preceding such
date, or if shares were not traded on the trading day preceding such date, then
on the next preceding trading day during which a sale occurred, or (ii) if the
Common Stock is not traded on an exchange (x) the last sales price of a share of
the Common Stock on The Nasdaq Stock Market (if the stock is then traded on The
Nasdaq Stock Market) on the trading day preceding such date, or, if shares were
not traded on the day preceding such date, then on the next preceding trading
day during which a sale occurred; or (y) the mean between the closing
representative bid and asked prices for the Common Stock on the trading day next
preceding such date as reported by the National Association of Securities
Dealers, Inc. through NASDAQ or a successor quotation system or, if shares were
not quoted on the day immediately preceding such date, then on the next
preceding trading day during which a quote occurred, or (iii) if the Common
Stock is not publicly traded on an exchange and prices are not provided through
The Nasdaq Stock Market, NASDAQ or a successor quotation system, the mean
between the closing bid and asked prices for the Common Stock on the trading day
next preceding such date as determined in good faith by the Board; or (iv) if
the Common Stock is not publicly traded, the fair market value of the Common
Stock established by the Board acting in good faith.

 

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Section 1.9             Non-Employee Director

 

“Non-Employee Director” shall mean any Director who is not at the same time an
Employee.

 

Section 1.10           Option

 

“Option” shall mean a non-qualified stock option to purchase Common Stock of the
Company granted under this Agreement and Article 3 of the Plan.

 

Section 1.11           Optionee

 

“Optionee” shall mean a Non-Employee Director to whom an Option is granted under
this Agreement and the Plan.

 

Section 1.12           Parent Corporation

 

“Parent Corporation” shall have the meaning given in Section 424(e) of the Code.

 

Section 1.13           Plan

 

“Plan” shall mean the Amended and Restated Stock Option Plan for Non-Employee
Directors of Southwest Water Company, as the same may be amended or restated
from time to time.

 

Section 1.14           Rule 16b-3

 

“Rule 16b-3” shall mean that certain Rule 16b-3 under the Exchange Act, as such
Rule may be amended from time to time.

 

Section 1.15           Secretary

 

“Secretary” shall mean the Secretary of the Company.

 

Section 1.16           Securities Act

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

Section 1.17           Subsidiary

 

“Subsidiary” shall mean any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

 

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Section 1.18           Termination as a Non-Employee Director

 

“Termination as a Non-Employee Director” shall mean the time when the Optionee
who is a Non-Employee Director ceases to be a member of the Board by reason of
such Optionee’s death or disability (within the meaning of Section 22(e)(3) of
the Code), retirement, resignation or for any other reason.

 

ARTICLE II.
GRANT OF OPTION

 

Section 2.1             Grant of Option

 

In consideration of the Optionee’s agreement to serve as a Non-Employee Director
of the Company or its Subsidiaries until the next annual meeting of stockholders
of the Company and for other good and valuable consideration, effective as of
«Award_Date», the Company irrevocably grants to the Optionee the option to
purchase any part or all of an aggregate of «Shares» shares of its $.01 par
value Common Stock upon the terms and conditions set forth in this Agreement.

 

Section 2.2             Purchase Price

 

The price per share of the Common Stock subject to each Option shall be
«Exercise_Price_» per share (which is the Fair Market Value of a share of Common
Stock on the date of the granting of this Option) without commission or other
charge.

 

Section 2.3             Consideration to Company

 

In consideration of the granting of this Option by the Company, the Optionee
agrees to render faithful and efficient services to the Company or a Subsidiary,
with such duties and responsibilities as the Company shall from time to time
prescribe, until the next annual meeting of stockholders of the Company. 
Nothing in the Plan or this Agreement shall confer upon any Optionee any right
to continue as a director of the Company, or shall interfere with or restrict in
any way the rights of the Company and any Subsidiary, which are hereby expressly
reserved, to discharge the Optionee at any time for any reason whatsoever, with
or without good cause.

 

Section 2.4             Adjustments in Option

 

In the event that the outstanding shares of the Common Stock subject to the
Option are changed into or exchanged for a different number or kind of shares of
the Company or other securities of the Company by reason of merger (including
reincorporation by means of merger), consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares (a
“Recapitalization”), the Board shall make an appropriate and equitable
adjustment in the number and kind of shares as to which the Option, or portions
thereof then unexercised, shall be exercisable, to the end that after such event
the Optionee’s proportionate interest shall be maintained as before the
occurrence of such event.  Such adjustment in the Option may include any
necessary corresponding

 

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adjustment in the Option price per share, but shall be made without change in
the total price applicable to the Option or the unexercised portion of the
Option (except for any change in the aggregate price resulting from rounding-off
of share quantities or prices).  Any such adjustment made by the Board shall be
final and binding upon the Optionee, the Company and all other interested
persons.

 

Section 2.5             Merger, Consolidation, Exchange, Acquisition,
Liquidation or Dissolution

 

The Board may provide by the terms of the Option that the Option cannot be
exercised after the merger or consolidation of the Company into another
corporation, the exchange of all or substantially all of the assets of the
Company for the securities of another corporation, the acquisition by another
corporation of 80% or more of the Company’s then outstanding voting stock or the
liquidation or dissolution of the Company; or the Board may, in its absolute
discretion and on such terms and conditions as it deems appropriate, also
provide that the Option shall be assumed or an equivalent option substituted by
any successor corporation of the Company, or the Board may, in its absolute
discretion and upon such terms and conditions as it deems appropriate, provided
by resolution adopted prior to the occurrence of such merger, consolidation,
exchange, acquisition, liquidation or dissolution, that, for some period of time
prior to such event, that such Option shall be exercisable as to all shares
covered thereby, notwithstanding anything to the contrary in Sections 3.1(a) or
3.1(b) below.  Any determinations made by the Board pursuant to this Section
shall be applied uniformly to all Options outstanding on the date of such
determination.

 

ARTICLE III.
PERIOD OF EXERCISABILITY

 

Section 3.1             Commencement of Exercisability

 

(A)           THE OPTION MAY NOT BE EXERCISED IN WHOLE OR IN PART DURING THE
FIRST YEAR AFTER THE DATE OF GRANT OF THE OPTION.

 

(B)           SUBJECT TO THE PROVISIONS OF SECTIONS 3.1(A) AND 3.1(C), THE
OPTION SHALL BECOME EXERCISABLE IN TWO (2) CUMULATIVE INSTALLMENTS AS FOLLOWS:

 

(I)            THE FIRST INSTALLMENT SHALL CONSIST OF FIFTY PERCENT (50%) OF THE
SHARES COVERED BY THE OPTION AND SHALL BECOME EXERCISABLE ON THE FIRST
ANNIVERSARY OF THE DATE THE OPTION IS GRANTED.

 

(II)           THE SECOND INSTALLMENT SHALL CONSIST OF FIFTY PERCENT (50%) OF
THE SHARES COVERED BY THE OPTION AND SHALL BECOME EXERCISABLE ON THE SECOND
ANNIVERSARY OF THE DATE THE OPTION IS GRANTED.

 

(C)           SUBJECT TO SECTION 3.1(A), THE PORTION, IF ANY, OF AN OPTION WHICH
IS UNEXERCISABLE ON THE DATE OF TERMINATION AS A NON-EMPLOYEE DIRECTOR SHALL
BECOME IMMEDIATELY EXERCISABLE.

 

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Section 3.2             Duration of Exercisability

 

The installments provided for in Section 3.1 are cumulative.  Each such
installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.

 

Section 3.3             Expiration of Option

 

The Option may not be exercised to any extent by anyone after the first to occur
of the following events:

 

(A)           THE EXPIRATION OF A PERIOD OF SEVEN YEARS AND ONE DAY FROM THE
DATE THE OPTION WAS GRANTED; OR

 

(B)           THE EXPIRATION OF ONE YEAR FROM THE DATE OF THE OPTIONEE’S
TERMINATION AS A NON-EMPLOYEE DIRECTOR FOR ANY REASON, UNLESS THE OPTIONEE DIES
WITHIN SAID ONE YEAR PERIOD; OR

 

(C)           THE EXPIRATION OF ONE YEAR FROM THE DATE OF THE OPTIONEE’S DEATH.

 

ARTICLE IV.
EXERCISE OF OPTION

 

Section 4.1             Person Eligible to Exercise

 

During the lifetime of the Optionee, only the Optionee may exercise the Option
or any portion thereof; provided, however, that nothing in this Section 4.1
shall prevent the exercise of the Option by a person to whom the Option was
lawfully transferred, in whole or in part, pursuant to a qualified domestic
relations order (as defined in the Code).  After the death of the Optionee, any
exercisable portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 3.3, be exercised by his personal representative or
by any person empowered to do so under the Optionee’s will or under the then
applicable laws of descent and distribution or if the Optionee has made a
permitted transfer pursuant to Section 5.2(ii) to a family member the Option may
be exercised by such family member.

 

Section 4.2             Partial Exercise

 

Any exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time and from time to
time prior to the time when the Option or portion thereof becomes unexercisable
under Section 3.3; provided, however, that each partial exercise shall be for
not less than one hundred (100) shares and shall be for whole shares only.

 

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Section 4.3             Manner of Exercise

 

The Option, or any exercisable portion thereof, shall be exercised solely by
delivery to the Secretary or his office of all of the following prior to the
time when the Option or such portion becomes unexercisable under Section 3.3:

 

(A)           NOTICE IN WRITING SIGNED BY THE OPTIONEE OR THE OTHER PERSON THEN
ENTITLED TO EXERCISE THE OPTION OR PORTION, STATING THAT THE OPTION OR PORTION
IS THEREBY EXERCISED, SUCH NOTICE COMPLYING WITH ALL APPLICABLE RULES
ESTABLISHED BY THE BOARD;

 

(B)           THE PAYMENT TO THE COMPANY OF THE AGGREGATE OPTION EXERCISE PRICE
FOR THE SHARES WITH RESPECT TO WHICH SUCH OPTION OR PORTION IS EXERCISED IN:

 

(I)            CASH;

 

(II)           WITH THE CONSENT OF THE BOARD, (A) SHARES OF THE COMPANY’S COMMON
STOCK OWNED BY THE OPTIONEE DULY ENDORSED FOR TRANSFER TO THE COMPANY OR (B)
SHARES OF THE COMPANY’S COMMON STOCK ISSUABLE TO THE OPTIONEE UPON EXERCISE OF
THE OPTION, WITH A FAIR MARKET VALUE ON THE DATE OF OPTION EXERCISE EQUAL TO THE
AGGREGATE PURCHASE PRICE OF THE SHARES WITH RESPECT TO WHICH SUCH OPTION OR
PORTION IS EXERCISED;

 

(III)          WITH THE CONSENT OF THE BOARD, A FULL RECOURSE PROMISSORY NOTE
BEARING INTEREST (AT NO LESS THAN SUCH RATE AS SHALL THEN PRECLUDE THE
IMPUTATION OF INTEREST UNDER THE CODE OR SUCCESSOR PROVISION) AND PAYABLE UPON
SUCH TERMS AS MAY BE PRESCRIBED BY THE BOARD.  THE BOARD MAY ALSO PRESCRIBE THE
FORM OF SUCH NOTE AND THE SECURITY TO BE GIVEN FOR SUCH NOTE.  THE OPTION MAY
NOT BE EXERCISED, HOWEVER, BY DELIVERY OF A PROMISSORY NOTE OR BY A LOAN FROM
THE COMPANY WHEN OR WHERE SUCH LOAN OR OTHER EXTENSION OF CREDIT IS PROHIBITED
BY LAW; OR

 

(IV)          WITH THE CONSENT OF THE BOARD, ANY COMBINATION OF THE
CONSIDERATION PROVIDED IN THE FOREGOING SUBPARAGRAPHS (I), (II) AND (III);

 

(C)           FULL PAYMENT TO THE COMPANY (OR OTHER EMPLOYER CORPORATION) OF ALL
AMOUNTS WHICH, UNDER FEDERAL, STATE OR LOCAL LAW, IT IS REQUIRED TO WITHHOLD IN
CONNECTION WITH THE EXERCISE OF THE OPTION OR A PORTION THEREOF; ALL OR ANY PART
OF SUCH PAYMENT MAY BE MADE, WITH THE CONSENT OF THE BOARD, (I) WITH SHARES OF
THE COMPANY’S COMMON STOCK OWNED BY THE OPTIONEE DULY ENDORSED FOR TRANSFER, OR
(II) WITH SHARES OF THE COMPANY’S COMMON STOCK ISSUABLE TO THE OPTIONEE UPON
EXERCISE OF THE OPTION, IN EACH CASE, HAVING A FAIR MARKET VALUE AT THE DATE OF
OPTION EXERCISE EQUAL TO THE SUMS REQUIRED TO BE WITHHELD;

 

(D)           SUCH REPRESENTATIONS AND DOCUMENTS AS THE BOARD, IN ITS ABSOLUTE
DISCRETION, DEEMS NECESSARY OR ADVISABLE TO EFFECT COMPLIANCE WITH ALL
APPLICABLE PROVISIONS OF THE SECURITIES ACT AND ANY OTHER FEDERAL OR STATE
SECURITIES LAWS OR REGULATIONS.  THE BOARD MAY, IN ITS ABSOLUTE DISCRETION, ALSO
TAKE WHATEVER ADDITIONAL ACTIONS IT DEEMS APPROPRIATE TO EFFECT SUCH COMPLIANCE
INCLUDING, WITHOUT LIMITATION, PLACING LEGENDS ON SHARE CERTIFICATES AND ISSUING
STOP-TRANSFER ORDERS TO TRANSFER AGENTS AND REGISTRARS; AND

 

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(E)           IN THE EVENT THE OPTION OR PORTION THEREOF SHALL BE EXERCISED
PURSUANT TO SECTION 4.1 BY ANY PERSON OR PERSONS OTHER THAN THE OPTIONEE,
APPROPRIATE PROOF OF THE RIGHT OF SUCH PERSON OR PERSONS TO EXERCISE THE OPTION.

 

(F)            NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE OPTIONEE MAY
SATISFY THE REQUIREMENTS OF SUBSECTIONS (B) AND (C) OF THIS SECTION 4.3
CONCERNING PAYMENT FOR THE SHARES AND ALL APPLICABLE WITHHOLDING TAXES, WITH THE
CONSENT OF THE BOARD, THROUGH THE DELIVERY TO THE SECRETARY OR HIS OFFICE OF (I)
AN IRREVOCABLE WRITTEN EXERCISE NOTICE CONTAINING INSTRUCTIONS TO THE COMPANY TO
DELIVER TO OPTIONEE’S BROKER THE CERTIFICATE(S) REPRESENTING THE SHARES WITH
RESPECT TO WHICH THE OPTION OR PORTION IS THEREBY EXERCISED AND (II) A COPY OF
OPTIONEE’S IRREVOCABLE WRITTEN INSTRUCTIONS TO SUCH BROKER TO DELIVER TO THE
COMPANY, WITHIN FIVE BUSINESS DAYS FROM THE DATE OF THE COMPANY’S RECEIPT OF
SUCH EXERCISE NOTICE, FULL PAYMENT (IN CASH OR BY CHECK) FOR THE SHARES WITH
RESPECT TO WHICH SUCH OPTION OR PORTION IS THEREBY EXERCISED AND ALL AMOUNTS
WHICH THE COMPANY IS REQUIRED TO WITHHOLD UNDER FEDERAL, STATE OR LOCAL LAW IN
CONNECTION WITH THE EXERCISE OF THE OPTION OR PORTION THEREOF.  PROVIDED THE
OPTIONEE COMPLIES WITH CLAUSES (I) AND (II) ABOVE AND THE COMPANY RECEIVES SUCH
FULL PAYMENT THE OPTIONEE SHALL BE DEEMED TO HAVE SUCH EXERCISED SUCH OPTION ON
THE DATE OF THE COMPANY’S RECEIPT OF THE DELIVERIES SPECIFIED IN CLAUSES (I) AND
(II) ABOVE.  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 4.3, THE
BOARD SHALL NOT TAKE ANY DISCRETIONARY ACTION WHICH WILL RESULT IN THE FAILURE
OF THE PLAN TO SATISFY ANY EXEMPTIVE CONDITION IMPOSED BY RULE 16B-3 OF THE CODE
WITH RESPECT TO THE EFFECTED OPTION.

 

Section 4.4             Conditions to Issuance of Stock Certificates

 

The shares of stock issuable and deliverable upon the exercise of the Option, or
any portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company.  Such shares shall
be fully paid and nonassessable.  The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions:

 

(A)           THE ADMISSION OF SUCH SHARES TO LISTING ON ALL STOCK EXCHANGES ON
WHICH SUCH CLASS OF STOCK IS THEN LISTED;

 

(B)           THE COMPLETION OF ANY REGISTRATION OR OTHER QUALIFICATION OF SUCH
SHARES UNDER ANY STATE OR FEDERAL LAW OR UNDER RULINGS OR REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION OR OF ANY OTHER GOVERNMENTAL REGULATORY BODY,
WHICH THE BOARD SHALL, IN ITS ABSOLUTE DISCRETION, DEEM NECESSARY OR ADVISABLE;

 

(C)           THE OBTAINING OF ANY APPROVAL OR OTHER CLEARANCE FROM ANY STATE OR
FEDERAL GOVERNMENTAL AGENCY WHICH THE BOARD SHALL, IN ITS ABSOLUTE DISCRETION,
DETERMINE TO BE NECESSARY OR ADVISABLE;

 

(D)           THE RECEIPT BY THE COMPANY OF FULL PAYMENT FOR SUCH SHARES,
INCLUDING PAYMENT OF ALL AMOUNTS WHICH, UNDER FEDERAL, STATE OR LOCAL TAX LAW,
IT IS REQUIRED TO WITHHOLD UPON EXERCISE OF THE OPTION; AND

 

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(E)           THE LAPSE OF SUCH REASONABLE PERIOD OF TIME FOLLOWING THE EXERCISE
OF THE OPTION AS THE BOARD MAY ESTABLISH FROM TIME TO TIME FOR REASONS OF
ADMINISTRATIVE CONVENIENCE.

 

Section 4.5             Rights as Stockholder

 

The holder of the Option shall not be, nor have any of the rights or privileges
of, a stockholder of the Company in respect of any shares purchasable upon the
exercise of any part of the Option unless and until certificates representing
such shares shall have been issued by the Company to such holder.

 

ARTICLE V.
OTHER PROVISIONS

 

Section 5.1             Administration

 

With respect to this Option, the full Board, acting by a majority of its members
in office, shall have the power to interpret the Plan and this Agreement and to
adopt such rules for the administration, interpretation and application of the
Plan as are consistent therewith and to interpret or revoke any such rules.  All
actions taken and all interpretations and determinations made by the Board in
good faith shall be final and binding upon the Optionee, the Company and all
other interested persons.  No member of the Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan or the Option.

 

Section 5.2             Option Not Transferable

 

Neither the Option nor any interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the Optionee or his successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section 5.2 shall
prevent (i) transfers by will or by the applicable laws of descent and
distribution, or, to the extent not prohibited by the Code, pursuant to a
qualified domestic relations order (as defined in the Code) or (ii) with the
prior written consent of the Board, by gift or as a contribution, to a family
member of the Optionee, (as defined under the instructions to use of Form S-8),
provided, that an Option that has been so transferred shall continue to be
subject to all of the terms and conditions as applicable to the original
Optionee, and the transferee shall execute any and all such documents requested
by the Board in connection with the transfer, including without limitation to
evidence the transfer and to satisfy any requirements for an exemption for the
transfer under applicable federal and state securities laws.

 

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Section 5.3             Shares to Be Reserved

 

The Company shall at all times during the term of the Option reserve and keep
available such number of shares of stock as will be sufficient to satisfy the
requirements of this Agreement.

 

Section 5.4             Notices

 

Any notice to be given under the terms of this Agreement to the Company shall be
addressed to the Company in care of its Secretary, and any notice to be given to
the Optionee shall be addressed to him at the address given beneath his
signature hereto.  By a notice given pursuant to this Section 5.4, either party
may hereafter designate a different address for notices to be given to him.  Any
notice which is required to be given to the Optionee shall, if the Optionee is
then deceased, be given to the Optionee’s personal representative if such
representative has previously informed the Company of his status and address by
written notice under this Section 5.4.  Any notice shall be deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.

 

Section 5.5             Titles

 

Titles are provided herein for convenience only and are not to serve as a basis
for interpretation or construction of this Agreement.

 

Section 5.6             Construction

 

This Agreement shall be administered, interpreted and enforced under the laws of
the State of California.

 

Section 5.7             Conformity to Securities Laws

 

The Optionee acknowledges that the Plan and this Option grant are intended to
conform to the extent necessary with all provisions of the Securities Act and
the Exchange Act and any and all regulations and rules promulgated by the
Securities and Exchange Commission thereunder, including without limitation Rule
16b-3.  Notwithstanding anything herein to the contrary, the Plan shall be
administered, and the Option is granted and may be exercised, only in such a
manner as to conform to such laws, rules and regulations.  To the extent
permitted by applicable law, the Plan and this Agreement shall be deemed amended
to the extent necessary to conform to such laws, rules and regulations.

 

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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.

 

 

SOUTHWEST WATER COMPANY,

 

a Delaware corporation

 

 

 

 

 

By:

 

 

 

Anton C. Garnier, President & CEO

 

 

 

By:

 

 

 

Peter J. Moerbeek, EVP & Secretary

 

 

 

«Name_», Director Optionee

 

 

Optionee’s Taxpayer

Identification Number:

Shares Awarded:

Award Date:

Exercise Price:

 

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