<PAGE>

                                 EXHIBIT 10.1C

                            SIXTEENTH AMENDMENT TO

                    THE UTILITY EMPLOYEES' RETIREMENT PLAN

          The Utility Employees' Retirement Plan (the "Plan") was established on
December 30, 1957, effective as of December 31, 1957, by Suburban Water Systems,
a California corporation, as a mandatory contributory money purchase plan and
trust for the exclusive benefit of participating employees of Suburban Water
Systems.  It was amended on November 12, 1958, December 21, 1959, April 20,
1960, April 26, 1968 and October 10, 1968.  The Sixth Amendment to the Plan,
effective December 31, 1972, restated the Plan and converted it into a non-
contributory defined benefit pension plan.  The Plan has since been amended on
December 22, 1976, June 10, 1978, June 25, 1979, twice on March 26, 1986, by a
"model amendment" adopted on October 20, 1989, and on December 11, 1990,
December 12, 1996, October 30, 1997 and August 5, 1999.

          The Plan is maintained by Southwest Water Company, Suburban Water
Systems, New Mexico Utilities, Inc. and East Pasadena Water Company for the
benefit of their eligible employees.

          The Plan will be terminated effective as of December 30, 1999, and
benefit accruals under the Plan will cease as of December 30, 1999.  In order to
amend the Plan to comply with changes to the Internal Revenue Code made by the
Uniformed Services Employment and Reemployment Rights Act of 1992, the Small
Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, and the
Internal Revenue Service Restructuring and Reform Act of 1998, and make certain
other changes to the Plan, prior to the termination of the Plan, this Sixteenth
Amendment to the Plan has been adopted by the Board of Directors of Southwest
Water Company, effective as of December 30, 1999, except as otherwise provided
herein.

          1.   Section 1.3 of the Plan is hereby amended to read in its entirety
as follows:

     Section 1.3 - Actuarial Equivalent
     -----------   --------------------

               (a)  "Actuarial Equivalent" shall mean the equivalent of a given
      Benefit or a given amount payable in another manner or by other means,
      determined by or under the direction of the Administrator in accordance
      with the actuarial assumptions prescribed in this Section and actuarial
      principles and methods which are found to be appropriate by the Enrolled
      Actuary, acting independently of the Administrator or the Companies and in
      the exercise of his sole professional judgment (and which principles,
      methods and assumptions may differ from those used for the purposes of
      Section 3.1).  Such principles, methods and assumptions, however, shall be
      reasonable in the aggregate and shall constitute the Enrolled Actuary's
      best estimate of anticipated experience under the Plan.  On such basis,
      the "Actuarial Equivalent" of a Benefit payable as a monthly payment to an
      annuitant on the first day of each calendar
<PAGE>

      month and ending on the calendar month in which the death of such
      annuitant occurs, shall mean such Benefit, multiplied by the actuarial
      equivalency factor determined as follows:

                         (i)  in the case of a distribution, other than a lump
               sum distribution under Section 4.7, 4.8, 4.9 or 4.13, the
               actuarial equivalency factor determined by

                              a  an interest assumption of 7 1/2%, and
                              -

                              b  the UP-84 Mortality Table (with no setback for
                              -
                    Participants and a three year setback for Spouses and/or
                    Beneficiaries), and

                         (ii) in the case of a lump sum distribution under
               Section 4.7, 4.8, 4.9 or 4.13, the actuarial equivalency factor
               determined by

                              a  an interest assumption equal to the Applicable
                              -
                    Interest Rate (as defined in subsection (c)) with respect to
                    such distribution, and

                              b  the Applicable Mortality Table (as defined in
                              -
                    subsection (c)) with respect to such distribution.

                    (b)  Notwithstanding subsection (a), for the purposes of any
      determination under Section 4.12, the "Actuarial Equivalent" of a given
      amount, and the adjustments in the limitation under Section 4.12(a)(i),
      shall be determined as is prescribed in regulations promulgated by the
      Secretary under Code Section 415(b), as follows:

                         (i)  for purposes of determining, with respect to any
               Benefit, the "Actuarial Equivalent" of a straight life annuity in
               an annual amount determined under Section 4.12(a), in accordance
               with the provisions of Code Section 415(b)(2)(B), such "Actuarial
               Equivalent" shall be the amount determined using the lesser of
               the actuarial equivalency factor determined under subsection (a),
               and the actuarial equivalency factor determined by

                              a  an interest assumption of 5%; provided,
                              -
                    however, that, in the case of a lump sum distribution under
                    Sections 4.7, 4.8, 4.9 or 4.13, the Applicable Interest Rate
                    (as defined in subsection (c)) with respect to such
                    distribution shall be substituted for 5%, and

                              b  the Applicable Mortality Table (as defined in
                              -
                    subsection (c)) with respect to such distribution,

                         (ii) for purposes of determining any limitation under
               Section 4.12(a)(i), in accordance with the provisions of Code
               Section 415(b)(2)(C), in
<PAGE>

               the case of Benefit payments beginning prior to the applicable
               Social Security Retirement Age, the limitation applicable to
               distributions commencing on or after age 62 shall be the
               limitation applicable to distributions commencing at Social
               Security Retirement Age, reduced to the age at which the
               distribution commences using factors that are consistent with the
               factors used to reduce old-age insurance benefits under the
               Social Security Act, which factors are presently

                              a  5/9 of 1% for each of the first 36 months by
                              -
                    which the distribution commences before the month in which
                    the Participant or Former Participant attains Social
                    Security Retirement Age, and

                              b  5/12 of 1% for each additional month (up to 24
                              -
                    months) by which such distribution commences before the
                    month in which the Participant or Former Participant attains
                    Social Security Retirement Age,

                        (iii) for purposes of determining any limitation under
               Section 4.12(a)(i), in accordance with the provisions of Code
               Section 415(b)(2)(C), in the case of Benefit payments beginning
               prior to age 62, the limitation applicable to distributions
               commencing prior to age 62 shall be the actuarial equivalent of
               the limitation applicable to distributions commencing at age 62,
               determined using the lesser of the actuarial equivalency factor
               determined by the early reduction factors under Section 4.5(b)(i)
               (to the extent applicable), and the actuarial equivalency factor
               determined by

                              a  an interest assumption of 5%, and
                              -

                              b  the Applicable Mortality Table (as defined in
                              -
                    subsection (c)) with respect to such distribution, and

                        (iv)  for purposes of determining any limitation under
               Section 4.12(a)(i), in accordance with the provisions of Code
               Section 415(b)(2)(D), in the case of Benefit payments beginning
               after the applicable Social Security Retirement Age, the
               limitation applicable to distributions commencing after the
               applicable Social Security Retirement Age shall be the actuarial
               equivalent of the limitation based on the applicable Social
               Security Retirement Age, determined using the actuarial
               equivalency factor determined by

                              a  an interest assumption of 5%, and
                              -

                              b  the Applicable Mortality Table (as defined in
                              -
                    subsection (c)) with respect to such distribution.

                    (c) For purposes of this Section,
<PAGE>

                         (i)   the "Applicable Interest Rate" with respect to
               any distribution shall mean the "applicable interest rate",
               within the meaning of Code Section 417(e)(3)(A)(ii)(II) and Temp.
               Reg. Section 1.417(e)-1T(d)(3), for the Lookback Month for such
               distribution,

                         (ii)  the "Applicable Mortality Table" with respect to
               any distribution shall mean the "applicable mortality table",
               within the meaning of Code Section 417(e)(3)(A)(ii)(I) and Temp.
               Reg. Section 1.417(e)-1T(d)(2), for the Lookback Month for such
               distribution, and

                         (iii) the "Lookback Month" with respect to any
               distribution shall mean the October next preceding the first day
               of the Plan Year in which the Annuity Starting Date of the
               distribution occurs.

               2.   Section 1.5 of the Plan is hereby amended to read in its
entirety as follows:

      Section 1.5 - Annuity Starting Date
      -----------   ---------------------

                    "Annuity Starting Date" shall mean the first day of the
      first period for which a Benefit is payable as an annuity to a Participant
      or Former Participant, or the date with respect to which a Benefit is
      payable as a lump sum distribution to a Participant or Former Participant,
      as the case may be, by reason of his Separation from the Service or the
      termination of the Plan.

               3.   Section 1.7 of the Plan is hereby amended to read in its
entirety as follows:

      Section 1.7 - Benefit
      -----------   -------

                    "Benefit" shall mean a monthly or lump sum payment payable
      at the times and over the applicable periods specified in Article IV.

               4.   Effective as of December 30, 1997, Section 1.12 of the Plan
is hereby amended to read in its entirety as follows:

      Section 1.12 - Compensation
      ------------   ------------

                    "Compensation" of a Participant for any Plan Year, expressed
      as a monthly rate, shall mean his fixed, basic monthly rate of pay from
      the Companies as of July 1 of such Plan Year if he was then an Employee,
      or (if not) as of the date during such Plan Year nearest to July 1 on
      which nearest date he was an Employee, but shall exclude all payments from
      overtime hours, bonuses, incentive pay, special allowances, workers'
      compensation, retainers, insurance or pension benefits and any other
      special payments, but in no event shall such monthly rate exceed one
      twelfth of $160,000 (adjusted for increases in the cost of living
      described in Code Section 401(a)(17)).
<PAGE>

            5.  Section 1.18 of the Plan is hereby amended to read in its
entirety as follows:

      Section 1.18 - Election Period
      ------------   ---------------

                "Election Period" means, in the case of an election under
      Section 4.7(f) to waive the Joint and Survivor Annuity, the period
      beginning ninety days before the Participant's or Former Participant's
      Annuity Starting Date and ending on the later of

                (a) the Participant's or Former Participant's Annuity Starting
      Date,

                (b) the ninetieth day after the latest mailing or personal
      delivery to him of the explanation described in Section 4.7(d)(i), or

                (c) the sixtieth day after the mailing or personal delivery to
      him of the information he has requested under Section 4.7(d)(ii).

            6.  Effective as of December 30, 1997, Section 1.24 of the Plan is
hereby amended to read in its entirety as follows:

      Section 1.24 - Highly Compensated Employee
      ------------   ---------------------------

                For any Plan Year, a "Highly Compensated Employee" shall mean
      any Employee who

                    (a)  in the previous Plan Year, or the current Plan Year,
            was a 5% owner of the Company (within the meaning of Code Section
            414(q)(2)), or

                    (b)  in the previous Plan Year, had Statutory Compensation
            in excess of $80,000 (adjusted as described in Code Section
            414(q)(1)(B)) and was in the group consisting of the top 20% of
            Employees (excluding for such purpose such Employees described in
            Code Section 414(q)(5) as are excluded under the Rules of the Plan)
            when ranked by Statutory Compensation for the previous Plan Year.

      For each Plan Year, the "top-paid group election" shall be applied for
      purposes of the determination under this section.

            7.  Section 4.3(a) of the Plan is hereby amended as follows:

                a.  Except as otherwise provided below, for each Participant who
      is an Employee as of December 30, 1999, Section 4.3(a)(i)a 1 of the Plan
                                                               - -
      is hereby amended to read as follows:  "1  the factor 0.0215."
                                              -

                b.  Notwithstanding the foregoing, and except as otherwise
      provided in paragraph c. below, for all Participants who are Employees as
      of December
<PAGE>

      30, 1999 and who are Highly Compensated Employees for the Plan Year ended
      as of December 30, 1999, the factor set forth in Section 4.3(a)(i)a 1 of
                                                                        - -
      the Plan for such Participants is hereby amended to be the greatest factor
      (rounded down to the nearest 0.0001), that is not less than 0.0150 and not
      greater than 0.0215, for which the Plan satisfies the requirements of the
      Code and ERISA (including, without limitation, the requirements of
      Sections 401(a)(4) and 410(b) of the Code and the Treasury Regulations
      thereunder). Such factor shall be applied uniformly to all such
      Participants.

                c.  In the case of a Participant is an Employee as of December
      30, 1999 and whose Compensation for any Plan Year ended on or before
      December 30, 1994 exceeded $150,000, the amount determined under Section
      4.3(a)(i) of the Plan for such Participant shall not exceed the greater of
      the following amounts:

                    i.  the sum of:

                        A.  the amount determined under Section 4.3(a)(i) of the
                Plan (determined without regard to the amendment under paragraph
                a. or b. above (as applicable) to the factor set forth in
                Section 4.3(a)(i)a 1 of the Plan), based on such Participant's
                                 - -
                Credited Service as of December 30, 1994, and such Participant's
                Final Average Compensation as of December 30, 1994, and

                        B.  the amount determined under Section 4.3(a)(i) of the
                Plan (determined after taking into account the amendment under
                paragraph a. or b. (as applicable) to the factor set forth in
                Section 4.3(a)(i)a 1 of the Plan), based on such Participant's
                                 - -
                Credited Service accrued after December 30, 1994 and such
                Participant's Final Average Compensation as of December 30, 1999
                (determined assuming that such Participant's Compensation for
                any Plan Year ended on or before December 30, 1994 was not in
                excess of $150,000), and

                    ii. the amount determined under Section 4.3(a)(i) of the
          Plan (determined taking into account the amendment under paragraph a.
          or b. above (as applicable) to the factor set forth in Section
          4.3(a)(i)a 1 of the Plan), based on such Participant's Credited
                   - -
          Service as of December 30, 1999, and such Participant's Final Average
          Compensation as of December 30, 1999 (determined assuming that such
          Participant's Compensation for any Plan Year ended on or before
          December 30, 1994 was not in excess of $150,000).

                d.  In no event shall a Participant's or Former Participant's
      "accrued benefit," within the meaning of Section 411(a)(7) of the Code and
      the Treasury Regulations thereunder, be reduced or eliminated, to the
      extent accrued as of December 30, 1999.
<PAGE>

The Plan was previously amended to cease all benefit accruals under the Plan as
of December 30, 1999.

          8.   Subsection 4.4(b) of the Plan is hereby amended to read in its
entirety as follows:

               (b)  A Former Participant with a Vested Retirement Benefit may on
     or after attainment of his fifty-fifth birthday and upon not less than two
     months prior written notice to the Administrator elect Early Retirement in
     accordance with this Section.

          9.   Subsection 4.6(e) of the Plan is hereby amended to read in its
entirety as follows:

               (e)  The Vested Retirement Benefit of a Participant who dies
     prior to his Early or Normal Retirement (and prior to receiving a lump sum
     distribution under Section 4.8(a)(v) or an immediate annuity distribution
     under Section 4.8(e)), or of a Former Participant who dies prior to his
     Annuity Starting Date (whichever is applicable) shall be forfeited as
     provided in Section 2.5, but a Survivor Annuity shall be payable under
     Section 4.9 or 4.10 with regard to such a Participant or Former
     Participant.

          10.  Section 4.7(a) of the Plan is hereby amended to read in its
entirety as follows:

               (a)  Notwithstanding anything in the Plan to the contrary, the
     Benefit, if any, of a married Participant or of a married Former
     Participant not referred to in subsection (l), commencing on his Early or
     Normal Retirement Date (or, in the case of a Participant or Former
     Participant eligible to elect a lump sum distribution under Section
     4.8(a)(v), commencing on the Annuity Starting Date of such distribution)
     shall be a Joint and Survivor Annuity, as described in subsection (b), if

                    (i)   he was legally married to his Spouse on his Annuity
          Starting Date,

                    (ii)  he notified the Administrator, in writing, prior to
          his Annuity Starting Date that he was married,

                    (iii) the then Actuarial Equivalent of such Benefit as
          determined under Section 1.2(a)(ii) is more than $5,000, and

                    (iv)  he has not otherwise elected under subsection (f).

          11.  Subsection 4.7(d) of the Plan is hereby amended to read in its
entirety as follows:
<PAGE>

               (d)  At least nine months prior to his qualifying for Early
      Retirement (or, if later, upon his becoming a Participant), and again not
      more than 90 days before (and not less than 30 days before) the Annuity
      Starting Date, each Participant or Former Participant (including a Former
      Participant referred to in subsection (m)) who may be affected by this
      Section shall be furnished, by mail or personal delivery (and consistent
      with such regulations as the Secretary may prescribe), with

                    (i)  a written explanation of the terms and conditions of
          the Joint and Survivor Annuity, including

                         a  the right of the Participant or Former Participant
                         -
               to make, and the effect of, an election under subsection (f) to
               waive the Joint and Survivor Annuity,

                         b  the relative financial effect on his Benefit of
                         -
               an election under subsection (f),

                         c  the right of the Participant's or Former
                         -
               Participant's Spouse under subsection (g),

                         d  the right of the Participant or Former Participant
                         -
               under subsection (h) to revoke an election made under subsection
               (f) and the effect thereof, and

                    (ii) a statement that the Administrator will furnish the
          Participant or Former Participant, upon his first written request
          within 60 days after the mailing or personal delivery to him of the
          notice required under this subsection, a detailed statement as to the
          financial effect upon his Benefit of making an election under
          subsection (f).

          12.  Subsection 4.7(f) of the Plan is hereby amended to read in its
entirety as follows:

               (f)  A Participant or Former Participant referred to in
     subsection (a) may elect in writing, at any time during his Election
     Period, not to receive a Joint and Survivor Annuity (in which case, he
     shall receive his Normal Retirement Benefit, Optional Retirement Benefit or
     other Benefit as provided in the Plan). Notwithstanding the requirement
     under subsection (d) that the written explanation described in paragraph
     (d)(i) be provided not less than 30 days before the Annuity Starting Date,
     a Participant or a Former Participant, after having received the written
     explanation of the Joint and Survivor Annuity described in paragraph
     (d)(i), may make an election under this subsection, with Spousal Consent
     thereto, less than 30 days after the written explanation was provided to
     the Participant or Former Participant, provided, that

                    (i)  the Administrator shall provide information to the
          Participant or Former Participant clearly indicating that the
          Participant or Former Participant has the right during the Election
          Period to consider whether
<PAGE>

          to waive the Joint and Survivor Annuity and consent to a distribution
          other than the Joint and Survivor Annuity and that such period shall
          be at least 30 days in duration,

                    (ii)  the Participant or the Former Participant shall be
          permitted to revoke the distribution election under this subsection at
          least until the Annuity Starting Date or, if later, at any time prior
          to the expiration of the seven-day period that begins the day after
          the written explanation of the Joint and Survivor Annuity is provided
          to the Participant or Former Participant,

                    (iii) the Annuity Starting Date is after the date that the
          written explanation of the Joint and Survivor Annuity is provided to
          the Participant or Former Participant, and

                    (iv)  the distribution in accordance with the election under
          this subsection does not commence before the expiration of the seven-
          day period that begins the day after the explanation of the Joint and
          Survivor Annuity is provided to the Participant or Former Participant.

          13.  Section 4.8 of the Plan is hereby amended to read as follows:

     Section 4.8 - Optional Retirement Benefit
     -----------   ---------------------------

               (a)  In lieu of his Vested, Early or Normal Retirement Benefit, a
     Participant or Former Participant may elect, with Spousal Consent, to
     receive an Optional Retirement Benefit. A Participant or Former Participant
     must make such an election in writing in accordance with the Rules of the
     Plan and deliver it to the Administrator prior to his Early or Normal
     Retirement Date (or, in the case of a lump sum distribution under paragraph
     (v), the Annuity Starting Date of such distribution), as the case may be.
     Subject to Section 4.15, the Optional Retirement Benefit of a Participant
     or Former Participant shall be one of

                    (i)   a monthly Benefit, reduced as provided in subsection
          (b), payable during each month of the period of his Early or Normal
          Retirement with the provision that if he dies after his Annuity
          Starting Date, and if his properly designated Contingent Annuitant
          survives him, such Contingent Annuitant shall receive a monthly
          payment beginning on the first day of the calendar month next
          following the Participant's death and ending with the calendar month
          in which the Contingent Annuitant's death occurs, in the same amount
          (or in one-half, two-thirds or three-quarters of that amount as the
          Participant may elect); provided, however, that this election shall
          not take effect if the Contingent Annuitant does not survive until the
          Participant's Annuity Starting Date,

                    (ii)  a monthly Benefit, reduced as provided in subsection
          (b), payable during each month of the period of his Early or Normal
          Retirement
<PAGE>

          with the provision that if he dies after his Annuity Starting Date and
          before receiving thirty-six, sixty or one hundred-twenty monthly
          payments, as the Participant may elect, his Beneficiaries as
          designated for this purpose under Section 4.14 will receive the
          remainder of such monthly payments,

                    (iii) solely with respect to a Participant or Former
          Participant who elects to retire on his Early Retirement Date, monthly
          payments increased before the then anticipated commencement date of
          his old age benefits under the federal Social Security Act and
          decreased or, if necessary, eliminated after such date in order to
          provide monthly payments to the Participant which, when added to his
          then anticipated old age benefits under said Act would provide monthly
          payments for his life which are as nearly uniform as possible,

                    (iv)  solely with respect to a Participant or Former
          Participant who has an Account, the amount of his Account in cash in a
          lump sum Benefit and the remainder of his Benefit, as actuarially
          determined under Section 1.3, in accordance with Sections 4.3, 4.5,
          4.6, 4.7 or this Section as applicable, or

                    (v)   a lump sum Benefit pursuant to the termination of the
          Plan, determined as provided in subsection (b), payable as of an
          Annuity Starting Date after the termination of the Plan as follows:

                          a   in the case of a Participant who is an Employee
                          -
               on his Annuity Starting Date (other than a Participant who is
               employed by East Pasadena Water Company), such lump sum
               distribution shall be made in the form of an elective transfer of
               such Participant's lump sum Benefit from the Plan to The 401(k)
               Retirement and Savings Plan for Southwest Water Company (the
               "Southwest Savings Plan") in accordance with subsection (f), or

                          b   in the case of any other Participant or Former
                          -
               Participant, in the form of a lump sum distribution to such
               Participant or Former Participant;

          provided, however, that any lump sum distribution under paragraph (v)
          shall be made in accordance with the Code and ERISA.

               (b)  A Participant's or Former Participant's Optional Retirement
      Benefit (other than a lump sum distribution under paragraph (a)(v)) shall
      be the Actuarial Equivalent of his Vested, Early or Normal Retirement
      Benefit, said Equivalent being computed as of his Early or Normal
      Retirement Date, whichever is applicable.  A Participant's or a Former
      Partnership's Optional Retirement Benefit distributed in the form of a
      lump sum distribution under paragraph (a)(v) shall be the Actuarial
      Equivalent of his Normal Retirement Benefit, such Actuarial Equivalent
      being computed as of the Annuity Starting Date of such distribution.

<PAGE>

               (c)  Notwithstanding any other provision of this Section, no
      Optional Retirement Benefit shall be provided under which any Beneficiary
      or Contingent Annuitant (other than the Participant's or Former
      Participant's spouse or incompetent child) can receive a Benefit having an
      Actuarial Equivalent on the date such Benefits commence greater than the
      then present Actuarial Equivalent of the Participant's Benefit under said
      election.

               (d)  Notwithstanding subsection (a) and Section 4.7(g), if a
      Participant or Former Participant elects to receive any one of the
      Optional Retirement Benefits specified in paragraph (a)(i) and his
      Contingent Annuitant is his Spouse, Spousal Consent shall not be required.

               (e)  Notwithstanding anything in this Section to the contrary, a
      Participant or Former Participant who is eligible to elect a lump sum
      distribution under paragraph (a)(v) may elect to receive, in lieu thereof,
      the Actuarial Equivalent of his Vested, Early or Normal Retirement Benefit
      (whichever is greatest) in the form of a monthly payment on the first day
      of each calendar month commencing on or after the Annuity Starting Date on
      which such lump sum distribution is otherwise payable and ending on the
      calendar month in which his death occurs, or, if required under Section
      4.7, in the form of a Joint and Survivor Annuity.

               (f)  If a Participant elects to receive lump sum distribution
      under subparagraph 4.8(a)(v)a, such lump sum distribution shall be made in
                                  -
      the form of an elective transfer of such Participant's lump sum Benefit
      from the Plan to the Southwest Savings Plan in accordance with Treasury
      Regulation Section 1.411(d)-4 Q/A-3(b).  Such Participant's lump sum
      Benefit as of his Annuity Starting Date shall be transferred in a transfer
      of assets and liabilities from the Plan to the Southwest Savings Plan
      satisfying the requirements of Code Sections 401(a)(12) and 414(l),
      Treasury Regulation Section 1.414(l)-1 and ERISA Section 208.  Upon such
      transfer, the Trustees shall transfer from the Trust an amount, in cash,
      equal to the amount of such Participant's lump sum Benefit as of the
      Annuity Starting Date to the trust established pursuant to the Southwest
      Savings Plan.  Such lump sum distribution shall be conditioned upon the
      voluntary, fully informed election by the Participant of the transfer of
      such Participant's lump sum Benefit to the Southwest Savings Plan.  Such
      lump sum distribution shall only be made if such Participant has elected
      not to receive a life annuity or a Joint and Survivor Annuity in
      accordance with subsection 4.7(e) and has elected such lump sum
      distribution with Spousal Consent.  Such lump sum distribution shall be
      credited to an account under the Southwest Savings Plan and such
      Participant shall be fully vested in the amount credited to such account.
      The amount credited to such account shall be distributable under the terms
      of the Southwest Savings Plan.

          14.  Section 4.13(a) of the Plan is hereby amended to read in its
entirety as follows:

<PAGE>

               (a)  Notwithstanding any other provision of the Plan to the
      contrary, upon a Participant's Separation from the Service, or following
      the termination of the Plan, the Administrator shall cause payment to him
      or on his account the Actuarial Equivalent in cash of his Vested, Normal
      or Early Retirement Benefit if it is not more than $5,000 (and at no time
      exceeded such amount at the time of a prior distribution under Section
      4.15(a)).

          15.  Effective as of December 30, 1995, Article IV of the Plan is
hereby amended by adding Section 4.18 as follows at the end thereof:

      Section 4.18 - Limitation on Distributions other than Life Annuities
      ------------   -----------------------------------------------------

               (a)  Notwithstanding any other provision of the Plan, no payment
      described in subsection (b) shall be made to any Participant, Former
      Participant, Beneficiary or Contingent Annuitant during a period in which
      the Plan has a "liquidity shortfall" (as defined in Code Section
      401(a)(32)(C)).

               (b)  The payments described in this subsection shall include

                    (i)   any payment, in excess of the monthly amount paid
          under a single life annuity (plus any Social Security supplements
          described in the last sentence of Code Section 411(a)(9)), to a
          Participant, Former Participant, Beneficiary or Contingent Annuitant
          whose "annuity starting date" (as defined in Code Section 417(f)(2))
          occurs during the period referred to in subparagraph (a),

                    (ii)  any payment for the purchase of an irrevocable
          commitment from an insurer to pay Benefits, and

                    (iii) any other payment specified by the Secretary by
          regulations under Code Section 401(a)(32).

          16.  Section 7.1 of the Plan is hereby amended by adding the following
new subsection (e) to the end thereof to read as follows:

               (e)  In the event of the termination of the Plan, the Benefit of
      a Participant, Former Participant, Beneficiary and Contingent Annuitant
      who is a "missing participant" (as defined in ERISA Section 4050(b)(1))
      shall be distributed by transferring the "designated benefit" (as defined
      in ERISA Section 4050(b)(2)) of such Participant, Former Participant,
      Beneficiary or Contingent Annuitant to the Pension Benefit Guaranty
      Corporation, or by purchasing irrevocable commitments from an insurer with
      respect to such "designated benefit" in accordance with ERISA Section
      4041(b)(3)(A)(i).  Any such transfer and purchase of an irrevocable
      commitment shall be in accordance with regulations promulgated by the
      Pension Benefit Guaranty Corporation.  The Administrator shall provide to
      the Pension Benefit Guaranty Corporation such information and
      certifications regarding the "designated benefits" or
<PAGE>

     irrevocable commitments with respect to such Participants, Former
     Participants, Beneficiaries and Contingent Annuitants as are required under
     ERISA Section 4050 and the regulations thereunder. This subsection shall be
     effective with respect to distributions that occur in Plan Years commencing
     after final regulations implementing ERISA Section 4050 are promulgated by
     the Pension Benefit Guaranty Corporation.

          17.  Section 7.12 of the Plan is hereby amended to read in its
entirety as follows:


     Section 7.12 - Use of Funds
     ------------   ------------

               Except as provided in Section 7.03 of the Trust Agreement, under
     no circumstances shall any contribution by a Company under the Plan or any
     part of any fund created thereby, be recoverable by such Company from the
     Trust or from any Participant or Former Participant, Beneficiary,
     Contingent Annuitant, or other person, or be used for or diverted to for
     purposes other than for the exclusive benefit of Participants, Former
     Participants and their Beneficiaries and Contingent Annuitants, except that
     the portion of the funds not required for the satisfaction of all
     liabilities to Participants, Former Participants and their Beneficiaries
     and Contingent Annuitants shall, upon termination of the Plan, be
     transferred to the Southwest Savings Plan in accordance with the Code and
     ERISA (prior to any reversion to any Company, and in such amount as is
     determined by the Board) and revert to the applicable Company (to the
     extent not so transferred).
<PAGE>

          18.  Effective as of October 13, 1996, Article VII of the Plan is
hereby amended by adding the following new Section 7.20 to the end thereof to
read as follows:

     Section 7.20 - Qualified Military Service
     ------------   --------------------------

               Notwithstanding any provision of the Plan to the contrary,
     benefits and service credits with respect to qualified military service
     shall be provided in accordance with Code Section 414(u).

          Executed at West Covina, California as of December 30, 1999.

                                   SOUTHWEST WATER COMPANY

                                   By /s/ PETER J. MOERBEEK
                                   ------------------------


                                   Title Chief Financial Officer and Secretary
                                   -------------------------------------------