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.


 

















 


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.


 

















 


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.


 

















 


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


 

















 


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.


 

















 


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.


 

















 


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


 

















 


(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


 

















 


(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.


 

















 


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.


 

















 


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: