1
EXHIBIT 10.14
AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENTS
BETWEEN AMERICAN STATES WATER COMPANY,
SOUTHERN CALIFORNIA WATER COMPANY AND CERTAIN EXECUTIVES,
DATED AS OF OCTOBER 25, 1999
2
AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT
This Amended and Restated Change-in-Control Agreement (the "Agreement") is
dated as of October 25, 1999, is entered into by and among McClellan Harris III
(the "Executive"), American States Water Company (the "Company") and its wholly
owned subsidiary, Southern California Water Company, a California corporation
("SCW"), and amends and restates in its entirety the Change-in-Control Agreement
dated as of October 27, 1998 among the Executive, the Company and SCW.
RECITALS
The Company considers it essential to the best interest of the Company and
its shareholders that the Executive be encouraged to remain with the Company and
SCW and continue to devote full attention to the Company's business
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined in Section 3). The Company believes that it is in the best interest of
the Company and its shareholders to reinforce and encourage the continued
attention and dedication of the Executive and to diminish inevitable
distractions arising from the possibility of a Change in Control. Accordingly,
to assure the Company that it will have the Executive's undivided attention and
services notwithstanding the possibility, threat or occurrence of a Change in
Control, and to induce the Executive to remain in the employ of the Company and
SCW, and for other good and valuable consideration, the Board of Directors of
the Company and SCW has, at the recommendation of the Company's Compensation
Committee, caused the Company and SCW to enter into this Agreement.
3
TERMS AND CONDITIONS
The Executive, the Company and SCW hereby agree to the following terms and
conditions:
1. TERM OF AGREEMENT
If a Change in Control (as defined in Section 3) occurs on or before
the expiration date of this Agreement and while the Executive is still an
employee of the Company or SCW, then this Agreement will continue in effect for
two years from the date of such Change in Control and, if the Executive's
employment with the Company or SCW is terminated within such two-year period,
this Agreement shall thereafter continue in effect until all of the obligations
of the Company and SCW under this Agreement shall have been fulfilled. If no
Change in Control occurs on or before December 31, 2000, this Agreement shall
expire; provided, however that this Agreement shall be automatically extended
for an additional two years to December 31, 2002 if (i) a plan or agreement for
a Change in Control has been approved by the Board of Directors of the Company
or SCW on or before the expiration date, or (ii) the Company and SCW have not
delivered to you or you shall have not delivered to the Company and SCW written
notice at least 60 days prior to the expiration date that such expiration date
shall not be so extended. This Agreement shall continue to be automatically
extended for an additional two-year period and each succeeding two-year period
if a plan or agreement for a Change in Control has been approved by the Board of
Directors of the Company or SCW or the Company, SCW or you have failed to give
notice by the time and in the manner described in this Section 1.
-2-
4
2. CHANGE IN CONTROL DATE
The "Change in Control Date" shall mean the first date during the
term of this Agreement on which a Change in Control (as defined in Section 3)
occurs; provided, however, that if a Change in Control occurs and if the
Executive's employment with the Company or SCW is terminated after approval by
the Board of Directors of the Company or SCW of a plan or agreement for a Change
in Control but prior to the date on which the Change in Control occurs, the
"Change in Control Date" shall mean the date immediately preceding the date of
such termination.
3. CHANGE IN CONTROL
A "Change in Control" shall mean any of the following events:
(a) the dissolution or liquidation of either the Company or SCW,
unless its business is continued by another entity in which holders of the
Company's voting securities immediately before the event own, either directly or
indirectly, more than 50% of the continuing entity's voting securities
immediately after the event;
(b) any sale, lease, exchange or other transfer (in one or a
series of transactions) of all or substantially all of the assets of either the
Company or SCW, unless its business is continued by another entity in which
holders of the Company's voting securities immediately before the event own,
either directly or indirectly, more than 50% of the continuing entity's voting
securities immediately after the event;
-3-
5
(c) any reorganization or merger of the Company or SCW, unless the
holders of the Company's voting securities immediately before the event own,
either directly or indirectly, more than 50% of the continuing or surviving
entity's voting securities immediately after the event;
(d) an acquisition by any person, entity or group acting in
concert of more than 50% of the voting securities of the Company or SCW, unless
the holders of the Company's voting securities immediately before the event own,
either directly or indirectly, more than 50% of the acquirer's voting securities
immediately after the acquisition; or
(e) a change of one-half or more of the members of the Board of
Directors of the Company or SCW within a twelve-month period, unless the
election or nomination for election by shareholders of new directors within such
period constituting a majority of the applicable Board was approved by the vote
of at least two-thirds of the directors then still in office who were in office
at the beginning of the twelve-month period.
4. EFFECTIVE PERIOD
For the purpose of this Agreement, the "Effective Period" is the
period commencing on the Change in Control Date and ending on the date this
Agreement terminates.
5. TERMINATION OF EMPLOYMENT
(a) Death or Disability: The Executive's employment shall
terminate automatically upon the Executive's death. If the Disability (as
defined below) of the Executive occurs during the Effective Period, the Company
or SCW may give the Executive written notice of their intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company or SCW shall terminate effective on the 30th day after receipt of
-4-
6
such notice by the Executive (the "Disability Effective Date"), provided that,
within the 30 days after such receipt, the Executive shall not have returned to
full-time performance of his or her duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from his or her duties with
the Company or SCW on a full-time basis for 180 consecutive business days as a
result of a physical or mental condition which prevents the Executive from
performing the Executive's normal duties of employment and which is (i)
determined to be total and permanent by a physician selected by the Company or
SCW or their insurers and acceptable to the Executive or the Executive's legal
representative and/or (ii) entitles the Executive to the payment of long-term
disability benefits from the Company's or SCW's long-term disability plan
commencing no later than the Disability Effective Date.
(b) Cause: The Company or SCW may terminate the Executive's
employment other than for Cause or Disability during the Effective Period as
provided in Section 6(a). The Company or SCW may also terminate the Executive's
employment during the Effective Period for Cause. For purposes of this
Agreement, "Cause" shall be limited to the following:
(i) the Executive's failure to render services to the
Company or SCW where such failure amounts to gross neglect or gross
misconduct of the Executive's responsibility and duties,
(ii) the Executive's commission of an act of fraud or
dishonesty against the Company or any affiliate of the Company, or
(iii) the Executive's conviction of a felony or other crime
involving moral turpitude.
-5-
7
(c) Good Reason: The Executive's employment may be terminated by
the Executive during the Effective Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as in effect on the Change in Control
Date, or any other action by the Company or SCW which results in a
diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by
the Company or SCW, as the case may be, promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company or SCW to reappoint the
Executive to a position held by the Executive on the Change in
Control Date, except as a result of the termination of the
Executive's employment by the Company or SCW for Cause or
Disability, the death of the Executive, or the termination of the
Executive's employment by the Executive other than for Good Reason;
(iii) reduction by the Company or SCW in the Executive's base
salary as in effect on the date hereof or as the same may be
increased from time-to-time;
(iv) the taking of any action by the Company or SCW
(including the elimination of benefit plans without providing
substitutes therefore or the reduction of the Executive's benefits
thereunder) that would substantially diminish the aggregate value of
the Executive's incentive awards and other fringe
-6-
8
benefits including the executive benefits and perquisites from the
levels in effect prior to the Change in Control Date;
(v) the Company's or SCW's requiring the Executive to be
based at any office or location which increases the distance from
the Executive's home to the office location by more than 35 miles
from the distance in effect as of the Change in Control Date;
(vi) any failure by the Company or SCW to comply with and
satisfy Section 11(c) of this Agreement.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION
(a) Good Reason, Other Than for Cause or Disability: If the
Company or SCW shall terminate the Executive's employment other than for Cause
or Disability during the Effective Period, or the Executive shall terminate
employment for Good Reason during the Effective Period, the Company and SCW
agrees, subject to Section 8, to make the payments and provide the benefits
described below:
(i) The Company and/or SCW shall pay to the Executive in a
cash lump sum within 10 days from the date of the Executive's
termination of employment an amount equal to the product of (A) and
(B), where (A) is 2.99 and (B) is the Executive's annual base salary
at the highest of the rate in effect at any time during the three
years preceding the date of termination.
(ii) The Company and/or SCW shall also pay to the Executive
in a cash lump sum within 10 days from the date of termination an
amount equal to the sum of (A) the Executive's base salary through
the date of termination, plus (B) any
-7-
9
compensation previously deferred by the Executive (together with any
accrued earnings or interest thereon), plus (C) any accrued vacation
pay, in each case to the extent not theretofore paid (the amounts
referred to in this paragraph (ii) are hereinafter referred to as
the "Accrued Obligations").
(iii) The Company and/or SCW shall also pay to the Executive
in a cash lump sum within 10 days from the date of termination an
amount equal to the excess of (A) over (B), where (A) is equal to
the single sum actuarial equivalent of what would be the Executive's
accrued benefits under the terms of the Southern California Water
Company Pension Plan (or any successor thereto), including any
supplemental retirement plan providing additional pension benefits,
(hereinafter together referred to as the "Pension Plan") at the time
of the Executive's termination of employment, without regard to
whether such benefits are "vested" thereunder, if the Executive were
credited with an additional two years of continuous service after
the termination of Executive's employment with the Company or SCW at
the Executive's highest annual rate of compensation covered by such
Pension Plan within the three years preceding the date of the
termination of the Executive's employment with the Company or SCW
and (B) is equal to the single sum actuarial equivalent of the
Executive's accrued benefits under the Pension Plan at the time of
the Executive's termination of employment. The payment under this
paragraph (iii) shall not extinguish any rights the Executive has to
benefits under the Pension Plan. For purposes of this paragraph,
"actuarial equivalent" shall be determined using the actuarial
assumptions used under the
-8-
10
Pension Plan for determining the actuarial equivalence of different
annuity forms of benefits. In no event shall the additional two
years of continuous service referred to above cause the Executive to
be deemed to be older than the Executive's actual age for any
purpose under this Agreement.
(iv) For two years after the Executive's date of termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company and SCW
shall continue to provide welfare benefits and fringe benefits and
other perquisites to the Executive and/or the Executive's family at
least equal to those which would have been provided to them if the
Executive's employment had not been terminated (in accordance with
the most favorable plans, practices, programs or policies of the
Company and its affiliates applicable generally to other peer
executives and their families immediately preceding the date of the
Executive's termination of employment); provided, however, that if
the Executive becomes employed by another employer and is eligible
to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such
other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for any retiree benefits
pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until two
years after the date of termination of employment and to have
retired on the last day of such period. Following the
-9-
11
period of continued benefits referred to in this subsection, the
Executive and the Executive's family shall be given the right
provided in Section 4980B of the Internal Revenue Code of 1986 (the
"Code") to elect to continue benefits in all group medical plans. In
the event that the Executive's participation in any of the plans,
programs, practices or policies of the Company or SCW referred to in
this subsection is barred by the terms of such plans, programs,
practices or policies, the Company and/or SCW shall provide the
Executive with benefits substantially similar to those which the
Executive would be entitled as a participant in such plans,
programs, practices or policies. At the end of the period of
coverage, the Executive shall have the option to have assigned to
the Executive, at no cost and with no apportionment of prepaid
premiums, any assignable insurance policy owned by the Company or
SCW and relating specifically to the Executive.
(v) The Company and/or SCW shall enable the Executive to
purchase, at the end of the Effective Period, the automobile, if
any, provided by the Company and/or SCW for the Executive's use at
the time of the Executive's termination of employment at the
wholesale value of such automobile at such time, as shown in the
current addition of the National Auto Research Publication Blue
Book. At the Executive's election, the Executive may retain any
existing club memberships of the Executive purchased by the Company
or SCW upon reimbursement to the Company or SCW, as the case may be,
of any membership costs paid by the Company or SCW.
-10-
12
(vi) To the extent not theretofore paid or provided, the
Company and/or SCW shall timely pay or provide the Executive any
other amounts or benefits required to be paid or provided or which
the Executive is eligible to receive under any plan, program,
policy, practice, contract or agreement of the Company and its
affiliates (such other amounts and benefits being hereinafter
referred to as "Other Benefits") in accordance with the terms of
such plan, program, policy, practice, contract or agreement.
(vii) The Executive shall be entitled to interest on any
payments not paid on a timely basis as provided in this Section 6(a)
at the applicable Federal Rate provided for in Section 7872(f)(2)(A)
of the Code.
(b) Death: If the Executive's employment is terminated by reason
of the Executive's death during the Effective Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a cash lump sum
within 10 days of the date of the Executive's death.
(c) Disability: If the Executive's employment is terminated by
reason of the Executive's Disability during the Effective Period, this Agreement
shall terminate without further obligations to the Executive, other than for
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum
within 30 days of the Executive's termination of employment.
-11-
13
(d) Cause, Other than for Good Reason: If the Executive's
employment shall be terminated for Cause during the Effective Period or, if the
Executive voluntarily terminates employment during the Effective Period,
excluding a termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for Accrued Obligations and any
benefits payable to Executive under a plan, policy, practice, etc., referred to
in Section 7 below. Accrued Obligations shall be paid to the Executive in a cash
lump sum within 60 days of the Executive's termination of employment.
7. NON-EXCLUSIVITY OF RIGHTS
Subject to Section 8, nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliates and for
which the Executive may qualify, nor, subject to Sections 8 and 20, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliates.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice, program, contract or agreement with
the Company or any of its affiliates at or subsequent to the date of termination
of the Executive's employment shall be payable in accordance with such plan,
policy, practice, program, contract or agreement except as explicitly modified
by this Agreement.
8. LIMITATION ON BENEFITS
Notwithstanding anything in this Agreement to the contrary, if any
payments or benefits to be made to or for the Executive's benefit, whether
pursuant to this Agreement or otherwise, whether by the Company, SCW or another
entity or person, would not be deductible
-12-
14
by the Company or SCW due to limitations imposed by Section 162(m) of the Code,
then such payments or benefits shall be deferred to the extent necessary until
such time as such payments would be deductible under Section 162(m) of the Code.
Either the Company, SCW or the Executive may request a determination as to
whether any payments would be subject to limitations on deductibility under
Section 162(m) of the Code and, of so requested, such determination shall be
made by independent legal counsel selected by the Company or SCW and approved by
the Executive. Payment may be delayed pending any such determination, provided
that the Executive shall be entitled to interest on any delayed payment at the
applicable Federal Rate provided for in Section 7872(f)(2)(A) of the Code. The
Executive shall also be entitled to interest on any payments deferred as a
result of the limitations on deductibility under Section 162(m) of the Code at
the applicable Federal Rate provided for in Section 7872(f)(2)(A) of the Code.
9. PARACHUTE PAYMENTS
(a) Gross-Up Payment. In the event that any payment or
distribution by the Company or SCW to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments under this Section 9(a)) (a "Payment") is determined to be subject to
the excise tax imposed by Section 4999 of the Code, or any interest or penalties
are incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Company and SCW shall pay to the
Executive an additional payment (a "Gross-Up Payment") in
-13-
15
an amount such that after payment by Executive of all taxes (including any
interest or penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon such Payments.
(b) Accounting Firm. Subject to the provisions of Section 9(c),
all determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Arthur Andersen LLP or such other certified public accounting firm as
may be designated by Executive and which is satisfactory to the Company and SCW
(the "Accounting Firm"), which shall provide detailed supporting calculations
both to the Company and SCW and to Executive within 15 business days after such
determinations are requested by Executive, the Company or SCW. All fees and
expenses of the Accounting Form shall be borne solely by the Company and SCW.
The Company and SCW shall be jointly and severally obligated to pay any Gross-Up
Payment, as determined pursuant to this Section 9(b), to Executive within five
days after the receipt by the Company and/or SCW of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be final and
binding on the Company, SCW and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company and/or SCW should have
been made (an "Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company and SCW exhausts its remedies
pursuant to Section 9(c) and Executive thereafter is required to make a payment
of
-14-
16
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and the Company and SCW shall be jointly and
severally obligated to pay any such Underpayment promptly to or for the benefit
of Executive.
(c) Internal Revenue Service Claims. Executive shall notify the
Company and SCW in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company and/or SCW of a Gross-Up
Payment. Executive shall give such notice as soon as practicable but no later
than ten business days after Executive is informed in writing of such claim and
shall apprise the Company and SCW of the nature of such claim, and the date on
which such claim is requested to be paid. Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Company and SCW (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company or SCW notifies Executive in writing prior to the expiration of such
period that it desires to contest such claim, Executive shall:
(i) Give the Company and SCW any information reasonably
requested by either of them relating to such claim,
(ii) Take such action in connection with contesting such
claim as the Company or SCW shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company or SCW,
(iii) Cooperate with the Company and SCW in good faith in
order to contest such claim effectively, and
-15-
17
(iv) Permit the Company and SCW to participate in any
proceedings relating to such claim;
provided, however, that the Company and SCW shall be jointly and severally
obligated to bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 9(c), the Company
and SCW shall control all proceedings taken in connection with such contests
and, at their sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at their sole option, either direct Executive to
pay the tax claimed and sue for a refund or contest the claim in any permissible
manner, and Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company and SCW shall determine; provided, however
that if the Company or SCW directs Executive to pay such claim and sue for a
refund, the Company or SCW, as the case may be, shall advance the amount of such
payment to Executive, on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount.
-16-
18
Furthermore, the control by the Company and/or SCW of the contest shall be
limited to issues with respect to which the Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) Refunds. If, after the receipt by Executive of an amount
advanced by the Company and/or SCW pursuant to Section 9(c), Executive becomes
entitled to receive any refund with respect to such claim, Executive shall
(subject to compliance by the Company and SCW with the requirements of Section
9(c)) promptly pay to the Company and SCW the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by Executive of an amount advanced by the Company and/or SCW
pursuant to Section 9(c), a determination is made that Executive shall not be
entitled to any refund with respect to such claim and the Company or SCW does
not notify Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
10. FULL SETTLEMENT
The obligation of the Company and SCW to make the payments provided
for in this Agreement and otherwise to perform their obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company or SCW may have against the Executive
or others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to
-17-
19
the Executive under any of the provisions of this Agreement and, except as
provided in Section 6(a)(iv), such amounts shall not be reduced whether or not
Executive obtains other employment.
11. SUCCESSORS
(a) This Agreement is personal to the Executive and shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company, SCW and their successors and assigns.
(c) The Company and SCW will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of their business and/or assets to assume expressly and
agree to perform this Agreement in the same manner and to the same extent
that the Company or SCW would be required to perform it if no such
succession had taken place. As used in this Agreement, the "Company" shall
mean the Company as defined and any successor to its business and/or
assets which assumes and agrees to perform this Agreement by operation of
law, or otherwise, and "SCW" shall mean SCW as defined and any successor
to its business and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
12. ARBITRATION
-18-
20
(a) Because it is agreed that time will be of the essence in
determining whether any payments are due to the Executive under this Agreement,
the Executive may submit any claim for payment under this Agreement or dispute
regarding the interpretation of this Agreement to arbitration. This right to
select arbitration shall be solely that of the Executive, and the Executive may
decide whether or not to arbitrate in his or her discretion. The "right to
select arbitration" is not mandatory on the Executive, and the Executive may
choose in lieu thereof to bring an action in an appropriate civil court. Once an
arbitration is commenced, however, it may not be discontinued without the mutual
consent of both parties to the arbitration. During the lifetime of the Executive
only he or she can use the arbitration procedure set forth in this section.
(b) Any claim for arbitration may be submitted as follows: If the
Executive disagrees with the Company or SCW regarding the interpretation of this
Agreement and the claim is finally denied by the Company or SCW in whole or in
part, such claim may be filed in writing with an arbitrator of the Executive's
choice who is selected by the method described in the next three sentences. The
first step of the selection shall consist of the Executive submitting a list of
five potential arbitrators to the Company and SCW. Each of the five arbitrators
must be either (1) a member of the National Academy of Arbitrators located in
the State of California or (2) a retired California Superior Court or Appellate
Court judge. Within two weeks after receipt of the list, the Company and SCW
shall select one of the five arbitrators as the arbitrator for the dispute in
question. If the Company and SCW fail to select an arbitrator in a timely
manner, the Executive shall then designate one of the five arbitrators as the
arbitrator for the dispute in question.
-19-
21
(c) The arbitration hearing shall be held within thirty days (or
as soon thereafter as possible) after the picking of the arbitrator. No
continuance of the hearing shall be allowed without the mutual consent of the
Executive and the Company. Absence from or nonparticipation at the hearing by
either party shall not prevent the issuance of an award. Hearing procedures
which will expedite the hearing may be ordered at the arbitrator's discretion,
and the arbitrator may close the hearing at his or her discretion when
sufficient evidence to satisfy issuance of an award has been presented.
(d) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than thirty days after the close of the hearing.
In the event the arbitrator finds that the Company or SCW has breached this
Agreement, he or she shall order the Company or SCW, as the case may be, to
immediately take the necessary steps to remedy the breach. The award of the
arbitrator shall be final and binding upon the parties. The award may be
enforced in any appropriate court as soon as possible after it is rendered. If
an action is brought to confirm the award, the Company, SCW and the Executive
agree that no appeal shall be taken by either party from any decision rendered
in such action.
(e) The Company and SCW will be considered the prevailing party in
a dispute if the arbitrator determines that neither the Company nor SCW has
breached this Agreement. Otherwise, the Executive will be considered the
prevailing party. In the event that the Company and SCW are the prevailing
party, the fee of the arbitrator and all necessary expenses of the hearing
(excluding any attorneys' fees incurred by the Company or SCW) including
stenographic reporter, if employed, shall be paid by the Executive. In the event
that Executive is the prevailing party, the fee of the arbitrator and all
necessary expenses of the hearing (including all
-20-
22
attorneys' fees incurred by the Executive), including the fees of a stenographic
reporter if employed, shall be paid by the Company and SCW.
13. GOVERNING LAW
The laws of California shall govern the validity and interpretation
of this Agreement, with regard to conflicts of laws.
14. CAPTIONS
The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
15. AMENDMENT
This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
16. NOTICES
All notices and other communications regarding this Agreement shall
be in writing and shall be hand delivered to the other party or sent by prepaid
registered or certified mail, return receipt requested, addressed as follows:
If to the Executive:
-------------------------------------
-------------------------------------
-------------------------------------
If to the Company: American States Water Company
630 East Foothill Boulevard
San Dimas, CA 91773
Attn: Secretary
If to SCW: Southern California Water Company
630 East Foothill Boulevard
San Dimas, CA 91773
-21-
23
Attn: Secretary
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.
17. SEVERABILITY
The lack of validity or enforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
18. WITHHOLDING TAXES
The Company and SCW may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.
19. NO WAIVER
The Executive's, the Company's or SCW's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive, the Company or SCW may have under this Agreement,
including, without limitation, the right of the Executive to terminate
employment for Good Reason, shall not be deemed to be a waiver of such provision
or right or any other provision or right under this Agreement.
20. AT-WILL EMPLOYMENT
The Executive, the Company and SCW acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive,
the Company and SCW, the employment of the Executive by the Company and SCW
prior to the Change in Control Date is "at will" and, prior to the Change in
Control Date, the Executive's employment may be terminated by either the
Executive or the Company or SCW, as the case may be, at any
-22-
24
time, in which case the Executive shall have no further rights under this
Agreement. From and after the Change in Control Date, this Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof.
21. COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which shall together
constitute one and the same Agreement.
21. JOINT AND SEVERAL LIABILITY
The obligation of the Company and SCW to make payments hereunder shall be
joint and several.
22. ALLOCATION OF PAYMENTS
As between the Company and SCW, any payments to be made by the Company
and/SCW hereunder shall be allocated between the Company and SCW on the same
basis as the payment of salary and benefits of the Executive were allocated
between the Company and SCW immediately prior to the Change in Control Date.
-23-
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first written above in Los
Angeles, California.
AMERICAN STATES WATER COMPANY
By /s/ Floyd E. Wicks
-----------------------------------
Title President and C.E.O.
SOUTHERN CALIFORNIA WATER COMPANY
By /s/ Floyd E. Wicks
-----------------------------------
Title President and C.E.O.
EXECUTIVE
/s/ McClellan Harris III
-------------------------------------
-24-
26
AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT
This Amended and Restated Change-in-Control Agreement (the "Agreement") is
dated as of October 25, 1999, is entered into by and among Joel A. Dickson (the
"Executive"), American States Water Company (the "Company") and its wholly owned
subsidiary, Southern California Water Company, a California corporation ("SCW"),
and amends and restates in its entirety the Change-in-Control Agreement dated as
of October 27, 1998 among the Executive, the Company and SCW.
RECITALS
The Company considers it essential to the best interest of the Company and
its shareholders that the Executive be encouraged to remain with the Company and
SCW and continue to devote full attention to the Company's business
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined in Section 3). The Company believes that it is in the best interest of
the Company and its shareholders to reinforce and encourage the continued
attention and dedication of the Executive and to diminish inevitable
distractions arising from the possibility of a Change in Control. Accordingly,
to assure the Company that it will have the Executive's undivided attention and
services notwithstanding the possibility, threat or occurrence of a Change in
Control, and to induce the Executive to remain in the employ of the Company and
SCW, and for other good and valuable consideration, the Board of Directors of
the Company and SCW has, at the recommendation of the Company's Compensation
Committee, caused the Company and SCW to enter into this Agreement.
-25-
27
TERMS AND CONDITIONS
The Executive, the Company and SCW hereby agree to the following terms and
conditions:
1. TERM OF AGREEMENT
If a Change in Control (as defined in Section 3) occurs on or before
the expiration date of this Agreement and while the Executive is still an
employee of the Company or SCW, then this Agreement will continue in effect for
two years from the date of such Change in Control and, if the Executive's
employment with the Company or SCW is terminated within such two-year period,
this Agreement shall thereafter continue in effect until all of the obligations
of the Company and SCW under this Agreement shall have been fulfilled. If no
Change in Control occurs on or before December 31, 2000, this Agreement shall
expire; provided, however that this Agreement shall be automatically extended
for an additional two years to December 31, 2002 if (i) a plan or agreement for
a Change in Control has been approved by the Board of Directors of the Company
or SCW on or before the expiration date, or (ii) the Company and SCW have not
delivered to you or you shall have not delivered to the Company and SCW written
notice at least 60 days prior to the expiration date that such expiration date
shall not be so extended. This Agreement shall continue to be automatically
extended for an additional two-year period and each succeeding two-year period
if a plan or agreement for a Change in Control has been approved by the Board of
Directors of the Company or SCW or the Company, SCW or you have failed to give
notice by the time and in the manner described in this Section 1.
-26-
28
2. CHANGE IN CONTROL DATE
The "Change in Control Date" shall mean the first date during the
term of this Agreement on which a Change in Control (as defined in Section 3)
occurs; provided, however, that if a Change in Control occurs and if the
Executive's employment with the Company or SCW is terminated after approval by
the Board of Directors of the Company or SCW of a plan or agreement for a Change
in Control but prior to the date on which the Change in Control occurs, the
"Change in Control Date" shall mean the date immediately preceding the date of
such termination.
3. CHANGE IN CONTROL
A "Change in Control" shall mean any of the following events:
(a) the dissolution or liquidation of either the Company or SCW,
unless its business is continued by another entity in which holders of the
Company's voting securities immediately before the event own, either directly or
indirectly, more than 50% of the continuing entity's voting securities
immediately after the event;
(b) any sale, lease, exchange or other transfer (in one or a
series of transactions) of all or substantially all of the assets of either the
Company or SCW, unless its business is continued by another entity in which
holders of the Company's voting securities immediately before the event own,
either directly or indirectly, more than 50% of the continuing entity's voting
securities immediately after the event;
-27-
29
(c) any reorganization or merger of the Company or SCW, unless the
holders of the Company's voting securities immediately before the event own,
either directly or indirectly, more than 50% of the continuing or surviving
entity's voting securities immediately after the event;
(d) an acquisition by any person, entity or group acting in
concert of more than 50% of the voting securities of the Company or SCW, unless
the holders of the Company's voting securities immediately before the event own,
either directly or indirectly, more than 50% of the acquirer's voting securities
immediately after the acquisition; or
(e) a change of one-half or more of the members of the Board of
Directors of the Company or SCW within a twelve-month period, unless the
election or nomination for election by shareholders of new directors within such
period constituting a majority of the applicable Board was approved by the vote
of at least two-thirds of the directors then still in office who were in office
at the beginning of the twelve-month period.
4. EFFECTIVE PERIOD
For the purpose of this Agreement, the "Effective Period" is the
period commencing on the Change in Control Date and ending on the date this
Agreement terminates.
5. TERMINATION OF EMPLOYMENT
(a) Death or Disability: The Executive's employment shall terminate
automatically upon the Executive's death. If the Disability (as defined below)
of the Executive occurs during the Effective Period, the Company or SCW may give
the Executive written notice of their intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company or SCW
shall terminate effective on the 30th day after receipt of
-28-
30
such notice by the Executive (the "Disability Effective Date"), provided that,
within the 30 days after such receipt, the Executive shall not have returned to
full-time performance of his or her duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from his or her duties with
the Company or SCW on a full-time basis for 180 consecutive business days as a
result of a physical or mental condition which prevents the Executive from
performing the Executive's normal duties of employment and which is (i)
determined to be total and permanent by a physician selected by the Company or
SCW or their insurers and acceptable to the Executive or the Executive's legal
representative and/or (ii) entitles the Executive to the payment of long-term
disability benefits from the Company's or SCW's long-term disability plan
commencing no later than the Disability Effective Date.
(b) Cause: The Company or SCW may terminate the Executive's
employment other than for Cause or Disability during the Effective Period as
provided in Section 6(a). The Company or SCW may also terminate the Executive's
employment during the Effective Period for Cause. For purposes of this
Agreement, "Cause" shall be limited to the following:
(i) the Executive's failure to render services to the
Company or SCW where such failure amounts to gross neglect or gross
misconduct of the Executive's responsibility and duties,
(ii) the Executive's commission of an act of fraud or
dishonesty against the Company or any affiliate of the Company, or
(iii) the Executive's conviction of a felony or other crime
involving moral turpitude.
-29-
31
(c) Good Reason: The Executive's employment may be terminated by
the Executive during the Effective Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as in effect on the Change in Control
Date, or any other action by the Company or SCW which results in a
diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by
the Company or SCW, as the case may be, promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company or SCW to reappoint the
Executive to a position held by the Executive on the Change in
Control Date, except as a result of the termination of the
Executive's employment by the Company or SCW for Cause or
Disability, the death of the Executive, or the termination of the
Executive's employment by the Executive other than for Good Reason;
(iii) reduction by the Company or SCW in the Executive's base
salary as in effect on the date hereof or as the same may be
increased from time-to-time;
(iv) the taking of any action by the Company or SCW
(including the elimination of benefit plans without providing
substitutes therefore or the reduction of the Executive's benefits
thereunder) that would substantially diminish the aggregate value of
the Executive's incentive awards and other fringe
-30-
32
benefits including the executive benefits and perquisites from the
levels in effect prior to the Change in Control Date;
(v) the Company's or SCW's requiring the Executive to be
based at any office or location which increases the distance from
the Executive's home to the office location by more than 35 miles
from the distance in effect as of the Change in Control Date;
(vi) any failure by the Company or SCW to comply with and
satisfy Section 11(c) of this Agreement.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION
(a) Good Reason, Other Than for Cause or Disability: If the
Company or SCW shall terminate the Executive's employment other than for Cause
or Disability during the Effective Period, or the Executive shall terminate
employment for Good Reason during the Effective Period, the Company and SCW
agrees, subject to Section 8, to make the payments and provide the benefits
described below:
(i) The Company and/or SCW shall pay to the Executive in a
cash lump sum within 10 days from the date of the Executive's
termination of employment an amount equal to the product of (A) and
(B), where (A) is 2.99 and (B) is the Executive's annual base salary
at the highest of the rate in effect at any time during the three
years preceding the date of termination.
(ii) The Company and/or SCW shall also pay to the Executive
in a cash lump sum within 10 days from the date of termination an
amount equal to the sum of (A) the Executive's base salary through
the date of termination, plus (B) any
-31-
33
compensation previously deferred by the Executive (together with any
accrued earnings or interest thereon), plus (C) any accrued vacation
pay, in each case to the extent not theretofore paid (the amounts
referred to in this paragraph (ii) are hereinafter referred to as
the "Accrued Obligations").
(iii) The Company and/or SCW shall also pay to the Executive
in a cash lump sum within 10 days from the date of termination an
amount equal to the excess of (A) over (B), where (A) is equal to
the single sum actuarial equivalent of what would be the Executive's
accrued benefits under the terms of the Southern California Water
Company Pension Plan (or any successor thereto), including any
supplemental retirement plan providing additional pension benefits,
(hereinafter together referred to as the "Pension Plan") at the time
of the Executive's termination of employment, without regard to
whether such benefits are "vested" thereunder, if the Executive were
credited with an additional two years of continuous service after
the termination of Executive's employment with the Company or SCW at
the Executive's highest annual rate of compensation covered by such
Pension Plan within the three years preceding the date of the
termination of the Executive's employment with the Company or SCW
and (B) is equal to the single sum actuarial equivalent of the
Executive's accrued benefits under the Pension Plan at the time of
the Executive's termination of employment. The payment under this
paragraph (iii) shall not extinguish any rights the Executive has to
benefits under the Pension Plan. For purposes of this paragraph,
"actuarial equivalent" shall be determined using the actuarial
assumptions used under the
-32-
34
Pension Plan for determining the actuarial equivalence of different
annuity forms of benefits. In no event shall the additional two
years of continuous service referred to above cause the Executive to
be deemed to be older than the Executive's actual age for any
purpose under this Agreement.
(iv) For two years after the Executive's date of termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company and SCW
shall continue to provide welfare benefits and fringe benefits and
other perquisites to the Executive and/or the Executive's family at
least equal to those which would have been provided to them if the
Executive's employment had not been terminated (in accordance with
the most favorable plans, practices, programs or policies of the
Company and its affiliates applicable generally to other peer
executives and their families immediately preceding the date of the
Executive's termination of employment); provided, however, that if
the Executive becomes employed by another employer and is eligible
to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such
other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for any retiree benefits
pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until two
years after the date of termination of employment and to have
retired on the last day of such period. Following the
-33-
35
period of continued benefits referred to in this subsection, the
Executive and the Executive's family shall be given the right
provided in Section 4980B of the Internal Revenue Code of 1986 (the
"Code") to elect to continue benefits in all group medical plans. In
the event that the Executive's participation in any of the plans,
programs, practices or policies of the Company or SCW referred to in
this subsection is barred by the terms of such plans, programs,
practices or policies, the Company and/or SCW shall provide the
Executive with benefits substantially similar to those which the
Executive would be entitled as a participant in such plans,
programs, practices or policies. At the end of the period of
coverage, the Executive shall have the option to have assigned to
the Executive, at no cost and with no apportionment of prepaid
premiums, any assignable insurance policy owned by the Company or
SCW and relating specifically to the Executive.
(v) The Company and/or SCW shall enable the Executive to
purchase, at the end of the Effective Period, the automobile, if
any, provided by the Company and/or SCW for the Executive's use at
the time of the Executive's termination of employment at the
wholesale value of such automobile at such time, as shown in the
current addition of the National Auto Research Publication Blue
Book. At the Executive's election, the Executive may retain any
existing club memberships of the Executive purchased by the Company
or SCW upon reimbursement to the Company or SCW, as the case may be,
of any membership costs paid by the Company or SCW.
-34-
36
(vi) To the extent not theretofore paid or provided, the
Company and/or SCW shall timely pay or provide the Executive any
other amounts or benefits required to be paid or provided or which
the Executive is eligible to receive under any plan, program,
policy, practice, contract or agreement of the Company and its
affiliates (such other amounts and benefits being hereinafter
referred to as "Other Benefits") in accordance with the terms of
such plan, program, policy, practice, contract or agreement.
(vii) The Executive shall be entitled to interest on any
payments not paid on a timely basis as provided in this Section 6(a)
at the applicable Federal Rate provided for in Section 7872(f)(2)(A)
of the Code.
(b) Death: If the Executive's employment is terminated by reason
of the Executive's death during the Effective Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a cash lump sum
within 10 days of the date of the Executive's death.
(c) Disability: If the Executive's employment is terminated by
reason of the Executive's Disability during the Effective Period, this Agreement
shall terminate without further obligations to the Executive, other than for
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum
within 30 days of the Executive's termination of employment.
-35-
37
(d) Cause, Other than for Good Reason: If the Executive's
employment shall be terminated for Cause during the Effective Period or, if the
Executive voluntarily terminates employment during the Effective Period,
excluding a termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for Accrued Obligations and any
benefits payable to Executive under a plan, policy, practice, etc., referred to
in Section 7 below. Accrued Obligations shall be paid to the Executive in a cash
lump sum within 60 days of the Executive's termination of employment.
7. NON-EXCLUSIVITY OF RIGHTS
Subject to Section 8, nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliates and for
which the Executive may qualify, nor, subject to Sections 8 and 20, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliates.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice, program, contract or agreement with
the Company or any of its affiliates at or subsequent to the date of termination
of the Executive's employment shall be payable in accordance with such plan,
policy, practice, program, contract or agreement except as explicitly modified
by this Agreement.
8. LIMITATION ON BENEFITS
Notwithstanding anything in this Agreement to the contrary, if any
payments or benefits to be made to or for the Executive's benefit, whether
pursuant to this Agreement or otherwise, whether by the Company, SCW or another
entity or person, would not be deductible
-36-
38
by the Company or SCW due to limitations imposed by Section 162(m) of the Code,
then such payments or benefits shall be deferred to the extent necessary until
such time as such payments would be deductible under Section 162(m) of the Code.
Either the Company, SCW or the Executive may request a determination as to
whether any payments would be subject to limitations on deductibility under
Section 162(m) of the Code and, of so requested, such determination shall be
made by independent legal counsel selected by the Company or SCW and approved by
the Executive. Payment may be delayed pending any such determination, provided
that the Executive shall be entitled to interest on any delayed payment at the
applicable Federal Rate provided for in Section 7872(f)(2)(A) of the Code. The
Executive shall also be entitled to interest on any payments deferred as a
result of the limitations on deductibility under Section 162(m) of the Code at
the applicable Federal Rate provided for in Section 7872(f)(2)(A) of the Code.
9. PARACHUTE PAYMENTS
(a) Gross-Up Payment. In the event that any payment or
distribution by the Company or SCW to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments under this Section 9(a)) (a "Payment") is determined to be subject to
the excise tax imposed by Section 4999 of the Code, or any interest or penalties
are incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Company and SCW shall pay to the
Executive an additional payment (a "Gross-Up Payment") in
-37-
39
an amount such that after payment by Executive of all taxes (including any
interest or penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon such Payments.
(b) Accounting Firm. Subject to the provisions of Section 9(c),
all determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Arthur Andersen LLP or such other certified public accounting firm as
may be designated by Executive and which is satisfactory to the Company and SCW
(the "Accounting Firm"), which shall provide detailed supporting calculations
both to the Company and SCW and to Executive within 15 business days after such
determinations are requested by Executive, the Company or SCW. All fees and
expenses of the Accounting Form shall be borne solely by the Company and SCW.
The Company and SCW shall be jointly and severally obligated to pay any Gross-Up
Payment, as determined pursuant to this Section 9(b), to Executive within five
days after the receipt by the Company and/or SCW of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be final and
binding on the Company, SCW and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company and/or SCW should have
been made (an "Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company and SCW exhausts its remedies
pursuant to Section 9(c) and Executive thereafter is required to make a payment
of
-38-
40
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and the Company and SCW shall be jointly and
severally obligated to pay any such Underpayment promptly to or for the benefit
of Executive.
(c) Internal Revenue Service Claims. Executive shall notify the
Company and SCW in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company and/or SCW of a Gross-Up
Payment. Executive shall give such notice as soon as practicable but no later
than ten business days after Executive is informed in writing of such claim and
shall apprise the Company and SCW of the nature of such claim, and the date on
which such claim is requested to be paid. Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Company and SCW (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company or SCW notifies Executive in writing prior to the expiration of such
period that it desires to contest such claim, Executive shall:
(i) Give the Company and SCW any information reasonably
requested by either of them relating to such claim,
(ii) Take such action in connection with contesting such
claim as the Company or SCW shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company or SCW,
(iii) Cooperate with the Company and SCW in good faith in
order to contest such claim effectively, and
-39-
41
(iv) Permit the Company and SCW to participate in any
proceedings relating to such claim;
provided, however, that the Company and SCW shall be jointly and severally
obligated to bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 9(c), the Company
and SCW shall control all proceedings taken in connection with such contests
and, at their sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at their sole option, either direct Executive to
pay the tax claimed and sue for a refund or contest the claim in any permissible
manner, and Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company and SCW shall determine; provided, however
that if the Company or SCW directs Executive to pay such claim and sue for a
refund, the Company or SCW, as the case may be, shall advance the amount of such
payment to Executive, on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount.
-40-
42
Furthermore, the control by the Company and/or SCW of the contest shall be
limited to issues with respect to which the Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) Refunds. If, after the receipt by Executive of an amount
advanced by the Company and/or SCW pursuant to Section 9(c), Executive becomes
entitled to receive any refund with respect to such claim, Executive shall
(subject to compliance by the Company and SCW with the requirements of Section
9(c)) promptly pay to the Company and SCW the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by Executive of an amount advanced by the Company and/or SCW
pursuant to Section 9(c), a determination is made that Executive shall not be
entitled to any refund with respect to such claim and the Company or SCW does
not notify Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
10. FULL SETTLEMENT
The obligation of the Company and SCW to make the payments provided
for in this Agreement and otherwise to perform their obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company or SCW may have against the Executive
or others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to
-41-
43
the Executive under any of the provisions of this Agreement and, except as
provided in Section 6(a)(iv), such amounts shall not be reduced whether or not
Executive obtains other employment.
11. SUCCESSORS
(a) This Agreement is personal to the Executive and shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company, SCW and their successors and assigns.
(c) The Company and SCW will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of their business and/or assets to assume expressly and agree
to perform this Agreement in the same manner and to the same extent that the
Company or SCW would be required to perform it if no such succession had taken
place. As used in this Agreement, the "Company" shall mean the Company as
defined and any successor to its business and/or assets which assumes and agrees
to perform this Agreement by operation of law, or otherwise, and "SCW" shall
mean SCW as defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. ARBITRATION
(a) Because it is agreed that time will be of the essence in
determining whether any payments are due to the Executive under this Agreement,
the Executive may submit any claim for payment under this Agreement or dispute
regarding the interpretation of this Agreement to arbitration. This right to
select arbitration shall be solely that of the Executive, and
-42-
44
the Executive may decide whether or not to arbitrate in his or her discretion.
The "right to select arbitration" is not mandatory on the Executive, and the
Executive may choose in lieu thereof to bring an action in an appropriate civil
court. Once an arbitration is commenced, however, it may not be discontinued
without the mutual consent of both parties to the arbitration. During the
lifetime of the Executive only he or she can use the arbitration procedure set
forth in this section.
(b) Any claim for arbitration may be submitted as follows: If the
Executive disagrees with the Company or SCW regarding the interpretation of this
Agreement and the claim is finally denied by the Company or SCW in whole or in
part, such claim may be filed in writing with an arbitrator of the Executive's
choice who is selected by the method described in the next three sentences. The
first step of the selection shall consist of the Executive submitting a list of
five potential arbitrators to the Company and SCW. Each of the five arbitrators
must be either (1) a member of the National Academy of Arbitrators located in
the State of California or (2) a retired California Superior Court or Appellate
Court judge. Within two weeks after receipt of the list, the Company and SCW
shall select one of the five arbitrators as the arbitrator for the dispute in
question. If the Company and SCW fail to select an arbitrator in a timely
manner, the Executive shall then designate one of the five arbitrators as the
arbitrator for the dispute in question.
(c) The arbitration hearing shall be held within thirty days (or
as soon thereafter as possible) after the picking of the arbitrator. No
continuance of the hearing shall be allowed without the mutual consent of the
Executive and the Company. Absence from or nonparticipation at the hearing by
either party shall not prevent the issuance of an award. Hearing procedures
which will expedite the hearing may be ordered at the arbitrator's discretion,
and the arbitrator
-43-
45
may close the hearing at his or her discretion when sufficient evidence to
satisfy issuance of an award has been presented.
(d) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than thirty days after the close of the hearing.
In the event the arbitrator finds that the Company or SCW has breached this
Agreement, he or she shall order the Company or SCW, as the case may be, to
immediately take the necessary steps to remedy the breach. The award of the
arbitrator shall be final and binding upon the parties. The award may be
enforced in any appropriate court as soon as possible after it is rendered. If
an action is brought to confirm the award, the Company, SCW and the Executive
agree that no appeal shall be taken by either party from any decision rendered
in such action.
(e) The Company and SCW will be considered the prevailing party in
a dispute if the arbitrator determines that neither the Company nor SCW has
breached this Agreement. Otherwise, the Executive will be considered the
prevailing party. In the event that the Company and SCW are the prevailing
party, the fee of the arbitrator and all necessary expenses of the hearing
(excluding any attorneys' fees incurred by the Company or SCW) including
stenographic reporter, if employed, shall be paid by the Executive. In the event
that Executive is the prevailing party, the fee of the arbitrator and all
necessary expenses of the hearing (including all attorneys' fees incurred by the
Executive), including the fees of a stenographic reporter if employed, shall be
paid by the Company and SCW.
13. GOVERNING LAW
The laws of California shall govern the validity and interpretation
of this Agreement, with regard to conflicts of laws.
-44-
46
14. CAPTIONS
The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
15. AMENDMENT
This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
16. NOTICES
All notices and other communications regarding this Agreement shall
be in writing and shall be hand delivered to the other party or sent by prepaid
registered or certified mail, return receipt requested, addressed as follows:
If to the Executive:
-----------------------------------
-----------------------------------
-----------------------------------
If to the Company: American States Water Company
630 East Foothill Boulevard
San Dimas, CA 91773
Attn: Secretary
If to SCW: Southern California Water Company
630 East Foothill Boulevard
San Dimas, CA 91773
Attn: Secretary
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.
-45-
47
17. SEVERABILITY
The lack of validity or enforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
18. WITHHOLDING TAXES
The Company and SCW may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.
19. NO WAIVER
The Executive's, the Company's or SCW's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive, the Company or SCW may have under this Agreement,
including, without limitation, the right of the Executive to terminate
employment for Good Reason, shall not be deemed to be a waiver of such provision
or right or any other provision or right under this Agreement.
20. AT-WILL EMPLOYMENT
The Executive, the Company and SCW acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive,
the Company and SCW, the employment of the Executive by the Company and SCW
prior to the Change in Control Date is "at will" and, prior to the Change in
Control Date, the Executive's employment may be terminated by either the
Executive or the Company or SCW, as the case may be, at any time, in which case
the Executive shall have no further rights under this Agreement. From and after
the Change in Control Date, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.
-46-
48
21. COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
21. JOINT AND SEVERAL LIABILITY
The obligation of the Company and SCW to make payments hereunder
shall be joint and several.
22. ALLOCATION OF PAYMENTS
As between the Company and SCW, any payments to be made by the
Company and/ SCW hereunder shall be allocated between the Company and SCW on the
same basis as the payment of salary and benefits of the Executive were allocated
between the Company and SCW immediately prior to the Change in Control Date.
-47-
49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first written above in Los
Angeles, California.
AMERICAN STATES WATER COMPANY
By /s/ Floyd E. Wicks
----------------------------------
Title President and C.E.O.
SOUTHERN CALIFORNIA WATER COMPANY
By /s/ Floyd E. Wicks
----------------------------------
Title President and C.E.O.
EXECUTIVE
/s/ Joel A. Dickson
-------------------------------------
-48-
50
AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT
This Amended and Restated Change-in-Control Agreement (the "Agreement") is
dated as of October 25, 1999, is entered into by and among Floyd E. Wicks (the
"Executive"), American States Water Company (the "Company") and its wholly owned
subsidiary, Southern California Water Company, a California corporation ("SCW"),
and amends and restates in its entirety the Change-in-Control Agreement dated as
of October 27, 1998 among the Executive, the Company and SCW.
RECITALS
The Company considers it essential to the best interest of the Company and
its shareholders that the Executive be encouraged to remain with the Company and
SCW and continue to devote full attention to the Company's business
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined in Section 3). The Company believes that it is in the best interest of
the Company and its shareholders to reinforce and encourage the continued
attention and dedication of the Executive and to diminish inevitable
distractions arising from the possibility of a Change in Control. Accordingly,
to assure the Company that it will have the Executive's undivided attention and
services notwithstanding the possibility, threat or occurrence of a Change in
Control, and to induce the Executive to remain in the employ of the Company and
SCW, and for other good and valuable consideration, the Board of Directors of
the Company and SCW has, at the recommendation of the Company's Compensation
Committee, caused the Company and SCW to enter into this Agreement.
-49-
51
TERMS AND CONDITIONS
The Executive, the Company and SCW hereby agree to the following terms and
conditions:
1. TERM OF AGREEMENT
If a Change in Control (as defined in Section 3) occurs on or before
the expiration date of this Agreement and while the Executive is still an
employee of the Company or SCW, then this Agreement will continue in effect for
two years from the date of such Change in Control and, if the Executive's
employment with the Company or SCW is terminated within such two-year period,
this Agreement shall thereafter continue in effect until all of the obligations
of the Company and SCW under this Agreement shall have been fulfilled. If no
Change in Control occurs on or before December 31, 2000, this Agreement shall
expire; provided, however that this Agreement shall be automatically extended
for an additional two years to December 31, 2002 if (i) a plan or agreement for
a Change in Control has been approved by the Board of Directors of the Company
or SCW on or before the expiration date, or (ii) the Company and SCW have not
delivered to you or you shall have not delivered to the Company and SCW written
notice at least 60 days prior to the expiration date that such expiration date
shall not be so extended. This Agreement shall continue to be automatically
extended for an additional two-year period and each succeeding two-year period
if a plan or agreement for a Change in Control has been approved by the Board of
Directors of the Company or SCW or the Company, SCW or you have failed to give
notice by the time and in the manner described in this Section 1.
-50-
52
2. CHANGE IN CONTROL DATE
The "Change in Control Date" shall mean the first date during the
term of this Agreement on which a Change in Control (as defined in Section 3)
occurs; provided, however, that if a Change in Control occurs and if the
Executive's employment with the Company or SCW is terminated after approval by
the Board of Directors of the Company or SCW of a plan or agreement for a Change
in Control but prior to the date on which the Change in Control occurs, the
"Change in Control Date" shall mean the date immediately preceding the date of
such termination.
3. CHANGE IN CONTROL
A "Change in Control" shall mean any of the following events:
(a) the dissolution or liquidation of either the Company or SCW,
unless its business is continued by another entity in which holders of the
Company's voting securities immediately before the event own, either directly or
indirectly, more than 50% of the continuing entity's voting securities
immediately after the event;
(b) any sale, lease, exchange or other transfer (in one or a
series of transactions) of all or substantially all of the assets of either the
Company or SCW, unless its business is continued by another entity in which
holders of the Company's voting securities immediately before the event own,
either directly or indirectly, more than 50% of the continuing entity's voting
securities immediately after the event;
-51-
53
(c) any reorganization or merger of the Company or SCW, unless the
holders of the Company's voting securities immediately before the event own,
either directly or indirectly, more than 50% of the continuing or surviving
entity's voting securities immediately after the event;
(d) an acquisition by any person, entity or group acting in
concert of more than 50% of the voting securities of the Company or SCW, unless
the holders of the Company's voting securities immediately before the event own,
either directly or indirectly, more than 50% of the acquirer's voting securities
immediately after the acquisition; or
(e) a change of one-half or more of the members of the Board of
Directors of the Company or SCW within a twelve-month period, unless the
election or nomination for election by shareholders of new directors within such
period constituting a majority of the applicable Board was approved by the vote
of at least two-thirds of the directors then still in office who were in office
at the beginning of the twelve-month period.
4. EFFECTIVE PERIOD
For the purpose of this Agreement, the "Effective Period" is the
period commencing on the Change in Control Date and ending on the date this
Agreement terminates.
5. TERMINATION OF EMPLOYMENT
(a) Death or Disability: The Executive's employment shall
terminate automatically upon the Executive's death. If the Disability (as
defined below) of the Executive occurs during the Effective Period, the Company
or SCW may give the Executive written notice of their intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company or SCW shall terminate effective on the 30th day after receipt of
-52-
54
such notice by the Executive (the "Disability Effective Date"), provided that,
within the 30 days after such receipt, the Executive shall not have returned to
full-time performance of his or her duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from his or her duties with
the Company or SCW on a full-time basis for 180 consecutive business days as a
result of a physical or mental condition which prevents the Executive from
performing the Executive's normal duties of employment and which is (i)
determined to be total and permanent by a physician selected by the Company or
SCW or their insurers and acceptable to the Executive or the Executive's legal
representative and/or (ii) entitles the Executive to the payment of long-term
disability benefits from the Company's or SCW's long-term disability plan
commencing no later than the Disability Effective Date.
(b) Cause: The Company or SCW may terminate the Executive's
employment other than for Cause or Disability during the Effective Period as
provided in Section 6(a). The Company or SCW may also terminate the Executive's
employment during the Effective Period for Cause. For purposes of this
Agreement, "Cause" shall be limited to the following:
(i) the Executive's failure to render services to the
Company or SCW where such failure amounts to gross neglect or gross
misconduct of the Executive's responsibility and duties,
(ii) the Executive's commission of an act of fraud or
dishonesty against the Company or any affiliate of the Company, or
(iii) the Executive's conviction of a felony or other crime
involving moral turpitude.
-53-
55
(c) Good Reason: The Executive's employment may be terminated by
the Executive during the Effective Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as in effect on the Change in Control
Date, or any other action by the Company or SCW which results in a
diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by
the Company or SCW, as the case may be, promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company or SCW to reappoint the
Executive to a position held by the Executive on the Change in
Control Date, except as a result of the termination of the
Executive's employment by the Company or SCW for Cause or
Disability, the death of the Executive, or the termination of the
Executive's employment by the Executive other than for Good Reason;
(iii) reduction by the Company or SCW in the Executive's base
salary as in effect on the date hereof or as the same may be
increased from time-to-time;
(iv) the taking of any action by the Company or SCW
(including the elimination of benefit plans without providing
substitutes therefore or the reduction of the Executive's benefits
thereunder) that would substantially diminish the aggregate value of
the Executive's incentive awards and other fringe
-54-
56
benefits including the executive benefits and perquisites from the
levels in effect prior to the Change in Control Date;
(v) the Company's or SCW's requiring the Executive to be
based at any office or location which increases the distance from
the Executive's home to the office location by more than 35 miles
from the distance in effect as of the Change in Control Date;
(vi) any failure by the Company or SCW to comply with and
satisfy Section 11(c) of this Agreement.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION
(a) Good Reason, Other Than for Cause or Disability: If the
Company or SCW shall terminate the Executive's employment other than for Cause
or Disability during the Effective Period, or the Executive shall terminate
employment for Good Reason during the Effective Period, the Company and SCW
agrees, subject to Section 8, to make the payments and provide the benefits
described below:
(i) The Company and/or SCW shall pay to the Executive in a
cash lump sum within 10 days from the date of the Executive's
termination of employment an amount equal to the product of (A) and
(B), where (A) is 2.99 and (B) is the Executive's annual base salary
at the highest of the rate in effect at any time during the three
years preceding the date of termination.
(ii) The Company and/or SCW shall also pay to the Executive
in a cash lump sum within 10 days from the date of termination an
amount equal to the sum of (A) the Executive's base salary through
the date of termination, plus (B) any
-55-
57
compensation previously deferred by the Executive (together with any
accrued earnings or interest thereon), plus (C) any accrued vacation
pay, in each case to the extent not theretofore paid (the amounts
referred to in this paragraph (ii) are hereinafter referred to as
the "Accrued Obligations").
(iii) The Company and/or SCW shall also pay to the Executive
in a cash lump sum within 10 days from the date of termination an
amount equal to the excess of (A) over (B), where (A) is equal to
the single sum actuarial equivalent of what would be the Executive's
accrued benefits under the terms of the Southern California Water
Company Pension Plan (or any successor thereto), including any
supplemental retirement plan providing additional pension benefits,
(hereinafter together referred to as the "Pension Plan") at the time
of the Executive's termination of employment, without regard to
whether such benefits are "vested" thereunder, if the Executive were
credited with an additional two years of continuous service after
the termination of Executive's employment with the Company or SCW at
the Executive's highest annual rate of compensation covered by such
Pension Plan within the three years preceding the date of the
termination of the Executive's employment with the Company or SCW
and (B) is equal to the single sum actuarial equivalent of the
Executive's accrued benefits under the Pension Plan at the time of
the Executive's termination of employment. The payment under this
paragraph (iii) shall not extinguish any rights the Executive has to
benefits under the Pension Plan. For purposes of this paragraph,
"actuarial equivalent" shall be determined using the actuarial
assumptions used under the
-56-
58
Pension Plan for determining the actuarial equivalence of different
annuity forms of benefits. In no event shall the additional two
years of continuous service referred to above cause the Executive to
be deemed to be older than the Executive's actual age for any
purpose under this Agreement.
(iv) For two years after the Executive's date of termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company and SCW
shall continue to provide welfare benefits and fringe benefits and
other perquisites to the Executive and/or the Executive's family at
least equal to those which would have been provided to them if the
Executive's employment had not been terminated (in accordance with
the most favorable plans, practices, programs or policies of the
Company and its affiliates applicable generally to other peer
executives and their families immediately preceding the date of the
Executive's termination of employment); provided, however, that if
the Executive becomes employed by another employer and is eligible
to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such
other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for any retiree benefits
pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until two
years after the date of termination of employment and to have
retired on the last day of such period. Following the
-57-
59
period of continued benefits referred to in this subsection, the
Executive and the Executive's family shall be given the right
provided in Section 4980B of the Internal Revenue Code of 1986 (the
"Code") to elect to continue benefits in all group medical plans. In
the event that the Executive's participation in any of the plans,
programs, practices or policies of the Company or SCW referred to in
this subsection is barred by the terms of such plans, programs,
practices or policies, the Company and/or SCW shall provide the
Executive with benefits substantially similar to those which the
Executive would be entitled as a participant in such plans,
programs, practices or policies. At the end of the period of
coverage, the Executive shall have the option to have assigned to
the Executive, at no cost and with no apportionment of prepaid
premiums, any assignable insurance policy owned by the Company or
SCW and relating specifically to the Executive.
(v) The Company and/or SCW shall enable the Executive to
purchase, at the end of the Effective Period, the automobile, if
any, provided by the Company and/or SCW for the Executive's use at
the time of the Executive's termination of employment at the
wholesale value of such automobile at such time, as shown in the
current addition of the National Auto Research Publication Blue
Book. At the Executive's election, the Executive may retain any
existing club memberships of the Executive purchased by the Company
or SCW upon reimbursement to the Company or SCW, as the case may be,
of any membership costs paid by the Company or SCW.
-58-
60
(vi) To the extent not theretofore paid or provided, the
Company and/or SCW shall timely pay or provide the Executive any
other amounts or benefits required to be paid or provided or which
the Executive is eligible to receive under any plan, program,
policy, practice, contract or agreement of the Company and its
affiliates (such other amounts and benefits being hereinafter
referred to as "Other Benefits") in accordance with the terms of
such plan, program, policy, practice, contract or agreement.
(vii) The Executive shall be entitled to interest on any
payments not paid on a timely basis as provided in this Section 6(a)
at the applicable Federal Rate provided for in Section 7872(f)(2)(A)
of the Code.
(b) Death: If the Executive's employment is terminated by reason
of the Executive's death during the Effective Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a cash lump sum
within 10 days of the date of the Executive's death.
(c) Disability: If the Executive's employment is terminated by
reason of the Executive's Disability during the Effective Period, this Agreement
shall terminate without further obligations to the Executive, other than for
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum
within 30 days of the Executive's termination of employment.
-59-
61
(d) Cause, Other than for Good Reason: If the Executive's
employment shall be terminated for Cause during the Effective Period or, if the
Executive voluntarily terminates employment during the Effective Period,
excluding a termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for Accrued Obligations and any
benefits payable to Executive under a plan, policy, practice, etc., referred to
in Section 7 below. Accrued Obligations shall be paid to the Executive in a cash
lump sum within 60 days of the Executive's termination of employment.
7. NON-EXCLUSIVITY OF RIGHTS
Subject to Section 8, nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliates and for
which the Executive may qualify, nor, subject to Sections 8 and 20, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliates.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice, program, contract or agreement with
the Company or any of its affiliates at or subsequent to the date of termination
of the Executive's employment shall be payable in accordance with such plan,
policy, practice, program, contract or agreement except as explicitly modified
by this Agreement.
8. LIMITATION ON BENEFITS
Notwithstanding anything in this Agreement to the contrary, if any
payments or benefits to be made to or for the Executive's benefit, whether
pursuant to this Agreement or otherwise, whether by the Company, SCW or another
entity or person, would not be deductible
-60-
62
by the Company or SCW due to limitations imposed by Section 162(m) of the Code,
then such payments or benefits shall be deferred to the extent necessary until
such time as such payments would be deductible under Section 162(m) of the Code.
Either the Company, SCW or the Executive may request a determination as to
whether any payments would be subject to limitations on deductibility under
Section 162(m) of the Code and, of so requested, such determination shall be
made by independent legal counsel selected by the Company or SCW and approved by
the Executive. Payment may be delayed pending any such determination, provided
that the Executive shall be entitled to interest on any delayed payment at the
applicable Federal Rate provided for in Section 7872(f)(2)(A) of the Code. The
Executive shall also be entitled to interest on any payments deferred as a
result of the limitations on deductibility under Section 162(m) of the Code at
the applicable Federal Rate provided for in Section 7872(f)(2)(A) of the Code.
9. PARACHUTE PAYMENTS
(a) Gross-Up Payment. In the event that any payment or
distribution by the Company or SCW to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments under this Section 9(a)) (a "Payment") is determined to be subject to
the excise tax imposed by Section 4999 of the Code, or any interest or penalties
are incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Company and SCW shall pay to the
Executive an additional payment (a "Gross-Up Payment") in
-61-
63
an amount such that after payment by Executive of all taxes (including any
interest or penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon such Payments.
(b) Accounting Firm. Subject to the provisions of Section 9(c),
all determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Arthur Andersen LLP or such other certified public accounting firm as
may be designated by Executive and which is satisfactory to the Company and SCW
(the "Accounting Firm"), which shall provide detailed supporting calculations
both to the Company and SCW and to Executive within 15 business days after such
determinations are requested by Executive, the Company or SCW. All fees and
expenses of the Accounting Form shall be borne solely by the Company and SCW.
The Company and SCW shall be jointly and severally obligated to pay any Gross-Up
Payment, as determined pursuant to this Section 9(b), to Executive within five
days after the receipt by the Company and/or SCW of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be final and
binding on the Company, SCW and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company and/or SCW should have
been made (an "Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company and SCW exhausts its remedies
pursuant to Section 9(c) and Executive thereafter is required to make a payment
of
-62-
64
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and the Company and SCW shall be jointly and
severally obligated to pay any such Underpayment promptly to or for the benefit
of Executive.
(c) Internal Revenue Service Claims. Executive shall notify the
Company and SCW in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company and/or SCW of a Gross-Up
Payment. Executive shall give such notice as soon as practicable but no later
than ten business days after Executive is informed in writing of such claim and
shall apprise the Company and SCW of the nature of such claim, and the date on
which such claim is requested to be paid. Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Company and SCW (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company or SCW notifies Executive in writing prior to the expiration of such
period that it desires to contest such claim, Executive shall:
(i) Give the Company and SCW any information reasonably
requested by either of them relating to such claim,
(ii) Take such action in connection with contesting such
claim as the Company or SCW shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company or SCW,
(iii) Cooperate with the Company and SCW in good faith in
order to contest such claim effectively, and
-63-
65
(iv) Permit the Company and SCW to participate in any
proceedings relating to such claim;
provided, however, that the Company and SCW shall be jointly and severally
obligated to bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 9(c), the Company
and SCW shall control all proceedings taken in connection with such contests
and, at their sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at their sole option, either direct Executive to
pay the tax claimed and sue for a refund or contest the claim in any permissible
manner, and Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company and SCW shall determine; provided, however
that if the Company or SCW directs Executive to pay such claim and sue for a
refund, the Company or SCW, as the case may be, shall advance the amount of such
payment to Executive, on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount.
-64-
66
Furthermore, the control by the Company and/or SCW of the contest shall be
limited to issues with respect to which the Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) Refunds. If, after the receipt by Executive of an amount
advanced by the Company and/or SCW pursuant to Section 9(c), Executive becomes
entitled to receive any refund with respect to such claim, Executive shall
(subject to compliance by the Company and SCW with the requirements of Section
9(c)) promptly pay to the Company and SCW the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by Executive of an amount advanced by the Company and/or SCW
pursuant to Section 9(c), a determination is made that Executive shall not be
entitled to any refund with respect to such claim and the Company or SCW does
not notify Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
10. FULL SETTLEMENT
The obligation of the Company and SCW to make the payments provided
for in this Agreement and otherwise to perform their obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company or SCW may have against the Executive
or others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to
-65-
67
the Executive under any of the provisions of this Agreement and, except as
provided in Section 6(a)(iv), such amounts shall not be reduced whether or not
Executive obtains other employment.
11. SUCCESSORS
(a) This Agreement is personal to the Executive and shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company, SCW and their successors and assigns.
(c) The Company and SCW will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of their business and/or assets to assume expressly and agree
to perform this Agreement in the same manner and to the same extent that the
Company or SCW would be required to perform it if no such succession had taken
place. As used in this Agreement, the "Company" shall mean the Company as
defined and any successor to its business and/or assets which assumes and agrees
to perform this Agreement by operation of law, or otherwise, and "SCW" shall
mean SCW as defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. ARBITRATION
-66-
68
(a) Because it is agreed that time will be of the essence in
determining whether any payments are due to the Executive under this Agreement,
the Executive may submit any claim for payment under this Agreement or dispute
regarding the interpretation of this Agreement to arbitration. This right to
select arbitration shall be solely that of the Executive, and the Executive may
decide whether or not to arbitrate in his or her discretion. The "right to
select arbitration" is not mandatory on the Executive, and the Executive may
choose in lieu thereof to bring an action in an appropriate civil court. Once an
arbitration is commenced, however, it may not be discontinued without the mutual
consent of both parties to the arbitration. During the lifetime of the Executive
only he or she can use the arbitration procedure set forth in this section.
(b) Any claim for arbitration may be submitted as follows: If the
Executive disagrees with the Company or SCW regarding the interpretation of this
Agreement and the claim is finally denied by the Company or SCW in whole or in
part, such claim may be filed in writing with an arbitrator of the Executive's
choice who is selected by the method described in the next three sentences. The
first step of the selection shall consist of the Executive submitting a list of
five potential arbitrators to the Company and SCW. Each of the five arbitrators
must be either (1) a member of the National Academy of Arbitrators located in
the State of California or (2) a retired California Superior Court or Appellate
Court judge. Within two weeks after receipt of the list, the Company and SCW
shall select one of the five arbitrators as the arbitrator for the dispute in
question. If the Company and SCW fail to select an arbitrator in a timely
manner, the Executive shall then designate one of the five arbitrators as the
arbitrator for the dispute in question.
-67-
69
(c) The arbitration hearing shall be held within thirty days (or
as soon thereafter as possible) after the picking of the arbitrator. No
continuance of the hearing shall be allowed without the mutual consent of the
Executive and the Company. Absence from or nonparticipation at the hearing by
either party shall not prevent the issuance of an award. Hearing procedures
which will expedite the hearing may be ordered at the arbitrator's discretion,
and the arbitrator may close the hearing at his or her discretion when
sufficient evidence to satisfy issuance of an award has been presented.
(d) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than thirty days after the close of the hearing.
In the event the arbitrator finds that the Company or SCW has breached this
Agreement, he or she shall order the Company or SCW, as the case may be, to
immediately take the necessary steps to remedy the breach. The award of the
arbitrator shall be final and binding upon the parties. The award may be
enforced in any appropriate court as soon as possible after it is rendered. If
an action is brought to confirm the award, the Company, SCW and the Executive
agree that no appeal shall be taken by either party from any decision rendered
in such action.
(e) The Company and SCW will be considered the prevailing party in
a dispute if the arbitrator determines that neither the Company nor SCW has
breached this Agreement. Otherwise, the Executive will be considered the
prevailing party. In the event that the Company and SCW are the prevailing
party, the fee of the arbitrator and all necessary expenses of the hearing
(excluding any attorneys' fees incurred by the Company or SCW) including
stenographic reporter, if employed, shall be paid by the Executive. In the event
that Executive is the prevailing party, the fee of the arbitrator and all
necessary expenses of the hearing (including all
-68-
70
attorneys' fees incurred by the Executive), including the fees of a stenographic
reporter if employed, shall be paid by the Company and SCW.
13. GOVERNING LAW
The laws of California shall govern the validity and interpretation
of this Agreement, with regard to conflicts of laws.
14. CAPTIONS
The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
15. AMENDMENT
This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
16. NOTICES
All notices and other communications regarding this Agreement shall
be in writing and shall be hand delivered to the other party or sent by prepaid
registered or certified mail, return receipt requested, addressed as follows:
If to the Executive:
-----------------------------------
-----------------------------------
-----------------------------------
If to the Company: American States Water Company
630 East Foothill Boulevard
San Dimas, CA 91773
Attn: Secretary
If to SCW: Southern California Water Company
-69-
71
630 East Foothill Boulevard
San Dimas, CA 91773
Attn: Secretary
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.
17. SEVERABILITY
The lack of validity or enforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
18. WITHHOLDING TAXES
The Company and SCW may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.
19. NO WAIVER
The Executive's, the Company's or SCW's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive, the Company or SCW may have under this Agreement,
including, without limitation, the right of the Executive to terminate
employment for Good Reason, shall not be deemed to be a waiver of such provision
or right or any other provision or right under this Agreement.
20. AT-WILL EMPLOYMENT
The Executive, the Company and SCW acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive,
the Company and SCW, the employment of the Executive by the Company and SCW
prior to the Change in Control Date is "at will" and, prior to the Change in
Control Date, the Executive's employment
-70-
72
may be terminated by either the Executive or the Company or SCW, as the case may
be, at any time, in which case the Executive shall have no further rights under
this Agreement. From and after the Change in Control Date, this Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof.
21. COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
21. JOINT AND SEVERAL LIABILITY
The obligation of the Company and SCW to make payments hereunder
shall be joint and several.
22. ALLOCATION OF PAYMENTS
As between the Company and SCW, any payments to be made by the
Company and/ SCW hereunder shall be allocated between the Company and SCW on the
same basis as the payment of salary and benefits of the Executive were allocated
between the Company and SCW immediately prior to the Change in Control Date.
-71-
73
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first written above in Los
Angeles, California.
AMERICAN STATES WATER COMPANY
By /s/ Lloyd E. Ross
-----------------------------------
Title Chairman of the Board
SOUTHERN CALIFORNIA WATER COMPANY
By /s/ Lloyd E. Ross
-----------------------------------
Title Chairman of the Board
EXECUTIVE
/s/ Floyd E. Wicks
-------------------------------------
-72-