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EXHIBIT 10.15
AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENTS,
BETWEEN SOUTHERN CALIFORNIA WATER COMPANY AND CERTAIN EXECUTIVES,
DATED AS OF OCTOBER 25, 1999
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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 between
Susan L. Conway (the "Executive") and Southern California Water Company, a
California corporation (the "Company"), and amends and restates in its entirety
the Change-in-Control Agreement dated as of October 27, 1998 among the Executive
and the Company.
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 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
for other good and valuable consideration, the Board of Directors of the Company
has, at the recommendation of its Compensation Committee, caused the Company to
enter into this Agreement.
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TERMS AND CONDITIONS
The Executive and the Company 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, 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 is terminated within such two-year period, this Agreement shall
thereafter continue in effect until all of the obligations of the Company 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 American States Water
Company, a California corporation ("AWR"), on or before the expiration date, or
(ii) the Company has not delivered to you or you shall have not delivered to the
Company 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 AWR or the Company or the Executive
fails to give the notices by the time and in the manner described in this
Section 1.
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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 is terminated after approval by the
Board of Directors of the Company or AWR 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 AWR,
unless its business is continued by another entity in which holders of AWR'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 AWR, unless its business is continued by another entity in which
holders of AWR'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;
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(c) any reorganization or merger of the Company or AWR, unless
the holders of AWR'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 AWR, unless
the holders of AWR'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 AWR 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
may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt,
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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 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 its 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 AWR's long-term
disability plan commencing no later than the Disability Effective Date.
(b) Cause: The Company may terminate the Executive's employment
other than for Cause or Disability during the Effective Period as provided in
Section 6(a). The Company 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 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.
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(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 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 promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company 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 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 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 (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 benefits
including the
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executive benefits and perquisites from the levels in effect
prior to the Change in Control Date;
(v) the Company'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 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 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 agrees,
subject to Section 8, to make the payments and provide the benefits described
below:
(i) The Company 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 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)
Executive's base salary through the date of termination, plus (B)
any
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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 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 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 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 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 Pension Plan for determining the
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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 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 period of
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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, as amended
(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
referred to in this subsection is barred by the terms of such
plans, programs, practices or policies, the Company 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
and relating specifically to the Executive.
(v) The Company shall enable the Executive to purchase, at
the end of the Effective Period, the automobile, if any, provided
by the Company 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 upon
reimbursement to the Company of any membership costs paid by the
Company.
(vi) To the extent not theretofore paid or provided, the
Company shall timely pay or provide the Executive any other
amounts or benefits required to be
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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.
(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
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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 or another
entity or person, would not be deductible by the Company 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
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deductible under Section 162(m) of the Code. Either the Company 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, if so
requested, such determination shall be made by independent legal counsel
selected by the Company 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 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 shall pay to the Executive an
additional payment (a "Gross-Up Payment") in 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.
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(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 (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days after such determinations
are requested by Executive or the Company. All fees and expenses of the
Accounting Firm shall be born solely by the Company. The Company shall pay any
Gross-Up Payment, as determined pursuant to this Section 9(b), to Executive
within five days after the receipt by the Company of the Accounting Firm's
determination. 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 should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and the Company shall
pay such Underpayment promptly to or for the benefit of the Executive.
(c) Internal Revenue Service Claims. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after Executive is informed in writing of such
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claim and shall apprise the Company 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 (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:
(i) Give the Company any information reasonably requested
by it relating to such claim,
(ii) Take such action in connection with contesting such
claim as the Company 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,
(iii) Cooperate with the Company in good faith in order to
contest such claim effectively, and
(iv) Permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall 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 shall control all proceedings taken in connection
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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 its 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 shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company 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.
Furthermore, the control by the Company 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 pursuant to Section 9(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to
compliance by Company with the requirements of Section 9(c)) promptly pay to the
Company 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
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amount advanced by the Company 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 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 Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company 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 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 and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or
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assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company 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.
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 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 regarding the interpretation of this
Agreement and the claim is finally denied by the Company 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. 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
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Superior Court or Appellate Court judge. Within two weeks after receipt of the
list, the Company shall select one of the five arbitrators as the arbitrator for
the dispute in question. If the Company fails 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 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 has breached this Agreement,
he or she shall order the Company 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,
both the Company and the Executive agree that no appeal shall be taken by either
party from any decision rendered in such action.
(e) The Company will be considered the prevailing party in a
dispute if the arbitrator determines that the Company has not breached this
Agreement. Otherwise, the Executive will be considered the prevailing party. In
the event that the Company is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any attorneys'
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fees incurred by the Company) 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.
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:
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If to the Company: Southern California Water Company
630 East Foothill Boulevard
San Dimas, CA 91773
Attn: Secretary
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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 may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.
19. NO WAIVER
The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company 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 and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company 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 at any time, in which case the Executive shall have no
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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.
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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.
SOUTHERN CALIFORNIA WATER COMPANY
By /s/ Floyd E. Wicks
--------------------------------
Title President and C.E.O.
EXECUTIVE
/s/ Susan L. Conway
----------------------------------------
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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 between
Denise L. Kruger (the "Executive") and Southern California Water Company, a
California corporation (the "Company"), and amends and restates in its entirety
the Change-in-Control Agreement dated as of October 27, 1998 among the Executive
and the Company.
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 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
for other good and valuable consideration, the Board of Directors of the Company
has, at the recommendation of its Compensation Committee, caused the Company to
enter into this Agreement.
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TERMS AND CONDITIONS
The Executive and the Company 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, 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 is terminated within such two-year period, this Agreement shall
thereafter continue in effect until all of the obligations of the Company 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 American States Water
Company, a California corporation ("AWR"), on or before the expiration date, or
(ii) the Company has not delivered to you or you shall have not delivered to the
Company 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 AWR or the Company or the Executive
fails to give the notices by the time and in the manner described in this
Section 1.
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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 is terminated after approval by the
Board of Directors of the Company or AWR 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 AWR,
unless its business is continued by another entity in which holders of AWR'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 AWR, unless its business is continued by another entity in which
holders of AWR'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;
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(c) any reorganization or merger of the Company or AWR, unless
the holders of AWR'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 AWR, unless
the holders of AWR'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 AWR 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
may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt,
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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 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 its 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 AWR's long-term
disability plan commencing no later than the Disability Effective Date.
(b) Cause: The Company may terminate the Executive's employment
other than for Cause or Disability during the Effective Period as provided in
Section 6(a). The Company 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 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.
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(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 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 promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company 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 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 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 (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 benefits
including the
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executive benefits and perquisites from the levels in effect
prior to the Change in Control Date;
(v) the Company'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 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 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 agrees,
subject to Section 8, to make the payments and provide the benefits described
below:
(i) The Company 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 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) Executive's base salary through the date
of termination, plus (B) any
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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 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 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 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 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 Pension Plan for determining the
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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 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 period of
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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, as amended
(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
referred to in this subsection is barred by the terms of such
plans, programs, practices or policies, the Company 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
and relating specifically to the Executive.
(v) The Company shall enable the Executive to purchase, at
the end of the Effective Period, the automobile, if any, provided
by the Company 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 upon
reimbursement to the Company of any membership costs paid by the
Company.
(vi) To the extent not theretofore paid or provided, the
Company shall timely pay or provide the Executive any other
amounts or benefits required to be
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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.
(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
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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 or another
entity or person, would not be deductible by the Company 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
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deductible under Section 162(m) of the Code. Either the Company 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, if so
requested, such determination shall be made by independent legal counsel
selected by the Company 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 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 shall pay to the Executive an
additional payment (a "Gross-Up Payment") in 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.
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(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 (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days after such determinations
are requested by Executive or the Company. All fees and expenses of the
Accounting Firm shall be born solely by the Company. The Company shall pay any
Gross-Up Payment, as determined pursuant to this Section 9(b), to Executive
within five days after the receipt by the Company of the Accounting Firm's
determination. 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 should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and the Company shall
pay such Underpayment promptly to or for the benefit of the Executive.
(c) Internal Revenue Service Claims. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after Executive is informed in writing of such
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claim and shall apprise the Company 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 (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:
(i) Give the Company any information reasonably requested
by it relating to such claim,
(ii) Take such action in connection with contesting such
claim as the Company 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,
(iii) Cooperate with the Company in good faith in order to
contest such claim effectively, and
(iv) Permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall 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 shall control all proceedings taken in connection
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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 its 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 shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company 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.
Furthermore, the control by the Company 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 pursuant to Section 9(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to
compliance by Company with the requirements of Section 9(c)) promptly pay to the
Company 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
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amount advanced by the Company 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 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 Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company 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 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 and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or
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assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company 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.
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 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 regarding the interpretation of this
Agreement and the claim is finally denied by the Company 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. 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
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Superior Court or Appellate Court judge. Within two weeks after receipt of the
list, the Company shall select one of the five arbitrators as the arbitrator for
the dispute in question. If the Company fails 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 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 has breached this Agreement,
he or she shall order the Company 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,
both the Company and the Executive agree that no appeal shall be taken by either
party from any decision rendered in such action.
(e) The Company will be considered the prevailing party in a
dispute if the arbitrator determines that the Company has not breached this
Agreement. Otherwise, the Executive will be considered the prevailing party. In
the event that the Company is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any attorneys'
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fees incurred by the Company) 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.
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: Southern California Water Company
630 East Foothill Boulevard
San Dimas, CA 91773
Attn: Secretary
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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 may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.
19. NO WAIVER
The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company 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 and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company 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 at any time, in which case the Executive shall have no
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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.
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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.
SOUTHERN CALIFORNIA WATER COMPANY
By /s/ Floyd E. Wicks
--------------------------------
Title President and C.E.O.
EXECUTIVE
/s/ Denise L. Kruger
----------------------------------------
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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 between
James B. Gallagher (the "Executive") and Southern California Water Company, a
California corporation (the "Company"), and amends and restates in its entirety
the Change-in-Control Agreement dated as of October 27, 1998 among the Executive
and the Company.
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 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
for other good and valuable consideration, the Board of Directors of the Company
has, at the recommendation of its Compensation Committee, caused the Company to
enter into this Agreement.
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TERMS AND CONDITIONS
The Executive and the Company 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, 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 is terminated within such two-year period, this Agreement shall
thereafter continue in effect until all of the obligations of the Company 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 American States Water
Company, a California corporation ("AWR"), on or before the expiration date, or
(ii) the Company has not delivered to you or you shall have not delivered to the
Company 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 AWR or the Company or the Executive
fails to give the notices by the time and in the manner described in this
Section 1.
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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 is terminated after approval by the
Board of Directors of the Company or AWR 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 AWR,
unless its business is continued by another entity in which holders of AWR'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 AWR, unless its business is continued by another entity in which
holders of AWR'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;
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(c) any reorganization or merger of the Company or AWR, unless
the holders of AWR'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 AWR, unless
the holders of AWR'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 AWR 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
may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt,
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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 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 its 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 AWR's long-term
disability plan commencing no later than the Disability Effective Date.
(b) Cause: The Company may terminate the Executive's employment
other than for Cause or Disability during the Effective Period as provided in
Section 6(a). The Company 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 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.
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(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 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 promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company 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 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 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 (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 benefits including the
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executive benefits and perquisites from the levels in effect
prior to the Change in Control Date;
(v) the Company'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 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 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 agrees,
subject to Section 8, to make the payments and provide the benefits described
below:
(i) The Company 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 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)
Executive's base salary through the date of termination, plus (B)
any
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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 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 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 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 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 Pension Plan for determining the
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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 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 period of
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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, as amended
(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
referred to in this subsection is barred by the terms of such
plans, programs, practices or policies, the Company 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
and relating specifically to the Executive.
(v) The Company shall enable the Executive to purchase, at
the end of the Effective Period, the automobile, if any, provided
by the Company 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 upon
reimbursement to the Company of any membership costs paid by the
Company.
(vi) To the extent not theretofore paid or provided, the
Company shall timely pay or provide the Executive any other
amounts or benefits required to be
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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.
(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
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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 or another
entity or person, would not be deductible by the Company 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
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deductible under Section 162(m) of the Code. Either the Company 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, if so
requested, such determination shall be made by independent legal counsel
selected by the Company 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 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 shall pay to the Executive an
additional payment (a "Gross-Up Payment") in 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.
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(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 (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days after such determinations
are requested by Executive or the Company. All fees and expenses of the
Accounting Firm shall be born solely by the Company. The Company shall pay any
Gross-Up Payment, as determined pursuant to this Section 9(b), to Executive
within five days after the receipt by the Company of the Accounting Firm's
determination. 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 should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and the Company shall
pay such Underpayment promptly to or for the benefit of the Executive.
(c) Internal Revenue Service Claims. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after Executive is informed in writing of such
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claim and shall apprise the Company 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 (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:
(i) Give the Company any information reasonably requested
by it relating to such claim,
(ii) Take such action in connection with contesting such
claim as the Company 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,
(iii) Cooperate with the Company in good faith in order to
contest such claim effectively, and
(iv) Permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall 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 shall control all proceedings taken in connection
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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 its 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 shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company 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.
Furthermore, the control by the Company 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 pursuant to Section 9(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to
compliance by Company with the requirements of Section 9(c)) promptly pay to the
Company 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
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amount advanced by the Company 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 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 Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company 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 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 and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or
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assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company 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.
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 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 regarding the interpretation of this
Agreement and the claim is finally denied by the Company 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. 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
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Superior Court or Appellate Court judge. Within two weeks after receipt of the
list, the Company shall select one of the five arbitrators as the arbitrator for
the dispute in question. If the Company fails 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 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 has breached this Agreement,
he or she shall order the Company 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,
both the Company and the Executive agree that no appeal shall be taken by either
party from any decision rendered in such action.
(e) The Company will be considered the prevailing party in a
dispute if the arbitrator determines that the Company has not breached this
Agreement. Otherwise, the Executive will be considered the prevailing party. In
the event that the Company is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any attorneys'
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fees incurred by the Company) 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.
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: Southern California Water Company
630 East Foothill Boulevard
San Dimas, CA 91773
Attn: Secretary
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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 may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.
19. NO WAIVER
The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company 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 and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company 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 at any time, in which case the Executive shall have no
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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.
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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.
SOUTHERN CALIFORNIA WATER COMPANY
By /s/ Floyd E. Wicks
--------------------------------
Title President and C.E.O.
EXECUTIVE
/s/ James B. Gallagher
----------------------------------------
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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 between
Donald K. Saddoris (the "Executive") and Southern California Water Company, a
California corporation (the "Company"), and amends and restates in its entirety
the Change-in-Control Agreement dated as of October 27, 1998 among the Executive
and the Company.
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 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
for other good and valuable consideration, the Board of Directors of the Company
has, at the recommendation of its Compensation Committee, caused the Company to
enter into this Agreement.
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TERMS AND CONDITIONS
The Executive and the Company 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, 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 is terminated within such two-year period, this Agreement shall
thereafter continue in effect until all of the obligations of the Company 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 American States Water
Company, a California corporation ("AWR"), on or before the expiration date, or
(ii) the Company has not delivered to you or you shall have not delivered to the
Company 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 AWR or the Company or the Executive
fails to give the notices by the time and in the manner described in this
Section 1.
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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 is terminated after approval by the
Board of Directors of the Company or AWR 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 AWR,
unless its business is continued by another entity in which holders of AWR'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 AWR, unless its business is continued by another entity in which
holders of AWR'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;
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(c) any reorganization or merger of the Company or AWR, unless
the holders of AWR'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 AWR, unless
the holders of AWR'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 AWR 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
may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt,
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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 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 its 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 AWR's long-term
disability plan commencing no later than the Disability Effective Date.
(b) Cause: The Company may terminate the Executive's employment
other than for Cause or Disability during the Effective Period as provided in
Section 6(a). The Company 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 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.
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(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 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 promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company 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 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 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 (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 benefits
including the
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executive benefits and perquisites from the levels in effect
prior to the Change in Control Date;
(v) the Company'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 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 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 agrees,
subject to Section 8, to make the payments and provide the benefits described
below:
(i) The Company 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 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) Executive's base salary through the date
of termination, plus (B) any
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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 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 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 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 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 Pension Plan for determining the
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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 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 period of
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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, as amended
(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
referred to in this subsection is barred by the terms of such
plans, programs, practices or policies, the Company 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
and relating specifically to the Executive.
(v) The Company shall enable the Executive to purchase, at
the end of the Effective Period, the automobile, if any, provided
by the Company 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 upon
reimbursement to the Company of any membership costs paid by the
Company.
(vi) To the extent not theretofore paid or provided, the
Company shall timely pay or provide the Executive any other
amounts or benefits required to be
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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.
(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
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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 or another
entity or person, would not be deductible by the Company 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
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deductible under Section 162(m) of the Code. Either the Company 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, if so
requested, such determination shall be made by independent legal counsel
selected by the Company 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 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 shall pay to the Executive an
additional payment (a "Gross-Up Payment") in 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.
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(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 (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days after such determinations
are requested by Executive or the Company. All fees and expenses of the
Accounting Firm shall be born solely by the Company. The Company shall pay any
Gross-Up Payment, as determined pursuant to this Section 9(b), to Executive
within five days after the receipt by the Company of the Accounting Firm's
determination. 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 should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and the Company shall
pay such Underpayment promptly to or for the benefit of the Executive.
(c) Internal Revenue Service Claims. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after Executive is informed in writing of such
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claim and shall apprise the Company 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 (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:
(i) Give the Company any information reasonably requested
by it relating to such claim,
(ii) Take such action in connection with contesting such
claim as the Company 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,
(iii) Cooperate with the Company in good faith in order to
contest such claim effectively, and
(iv) Permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall 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 shall control all proceedings taken in connection
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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 its 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 shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company 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.
Furthermore, the control by the Company 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 pursuant to Section 9(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to
compliance by Company with the requirements of Section 9(c)) promptly pay to the
Company 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
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amount advanced by the Company 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 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 Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company 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 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 and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or
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assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company 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.
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 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 regarding the interpretation of this
Agreement and the claim is finally denied by the Company 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. 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
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Superior Court or Appellate Court judge. Within two weeks after receipt of the
list, the Company shall select one of the five arbitrators as the arbitrator for
the dispute in question. If the Company fails 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 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 has breached this Agreement,
he or she shall order the Company 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,
both the Company and the Executive agree that no appeal shall be taken by either
party from any decision rendered in such action.
(e) The Company will be considered the prevailing party in a
dispute if the arbitrator determines that the Company has not breached this
Agreement. Otherwise, the Executive will be considered the prevailing party. In
the event that the Company is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any attorneys'
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fees incurred by the Company) 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.
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: Southern California Water Company
630 East Foothill Boulevard
San Dimas, CA 91773
Attn: Secretary
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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 may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.
19. NO WAIVER
The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company 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 and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company 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 at any time, in which case the Executive shall have no
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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.
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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.
SOUTHERN CALIFORNIA WATER COMPANY
By /s/ Floyd E. Wicks
--------------------------------
Title President and C.E.O.
EXECUTIVE
/s/ Donald K. Saddoris
----------------------------------------
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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 between
Joseph F. Young (the "Executive") and Southern California Water Company, a
California corporation (the "Company"), and amends and restates in its entirety
the Change-in-Control Agreement dated as of October 27, 1998 among the Executive
and the Company.
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 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
for other good and valuable consideration, the Board of Directors of the Company
has, at the recommendation of its Compensation Committee, caused the Company to
enter into this Agreement.
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TERMS AND CONDITIONS
The Executive and the Company 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, 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 is terminated within such two-year period, this Agreement shall
thereafter continue in effect until all of the obligations of the Company 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 American States Water
Company, a California corporation ("AWR"), on or before the expiration date, or
(ii) the Company has not delivered to you or you shall have not delivered to the
Company 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 AWR or the Company or the Executive
fails to give the notices by the time and in the manner described in this
Section 1.
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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 is terminated after approval by the
Board of Directors of the Company or AWR 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 AWR,
unless its business is continued by another entity in which holders of AWR'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 AWR, unless its business is continued by another entity in which
holders of AWR'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;
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(c) any reorganization or merger of the Company or AWR, unless
the holders of AWR'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 AWR, unless
the holders of AWR'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 AWR 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
may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt,
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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 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 its 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 AWR's long-term
disability plan commencing no later than the Disability Effective Date.
(b) Cause: The Company may terminate the Executive's employment
other than for Cause or Disability during the Effective Period as provided in
Section 6(a). The Company 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 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.
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(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 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 promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company 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 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 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 (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 benefits including the
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executive benefits and perquisites from the levels in effect
prior to the Change in Control Date;
(v) the Company'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 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 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 agrees,
subject to Section 8, to make the payments and provide the benefits described
below:
(i) The Company 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 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) Executive's base salary through the date
of termination, plus (B) any
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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 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 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 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 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 Pension Plan for determining the
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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 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 period of
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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, as amended
(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
referred to in this subsection is barred by the terms of such
plans, programs, practices or policies, the Company 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
and relating specifically to the Executive.
(v) The Company shall enable the Executive to purchase, at
the end of the Effective Period, the automobile, if any, provided
by the Company 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 upon
reimbursement to the Company of any membership costs paid by the
Company.
(vi) To the extent not theretofore paid or provided, the
Company shall timely pay or provide the Executive any other
amounts or benefits required to be
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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.
(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
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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 or another
entity or person, would not be deductible by the Company 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
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deductible under Section 162(m) of the Code. Either the Company 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, if so
requested, such determination shall be made by independent legal counsel
selected by the Company 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 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 shall pay to the Executive an
additional payment (a "Gross-Up Payment") in 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.
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(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 (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days after such determinations
are requested by Executive or the Company. All fees and expenses of the
Accounting Firm shall be born solely by the Company. The Company shall pay any
Gross-Up Payment, as determined pursuant to this Section 9(b), to Executive
within five days after the receipt by the Company of the Accounting Firm's
determination. 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 should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and the Company shall
pay such Underpayment promptly to or for the benefit of the Executive.
(c) Internal Revenue Service Claims. Executive shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after Executive is informed in writing of such
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claim and shall apprise the Company 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 (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:
(i) Give the Company any information reasonably requested
by it relating to such claim,
(ii) Take such action in connection with contesting such
claim as the Company 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,
(iii) Cooperate with the Company in good faith in order to
contest such claim effectively, and
(iv) Permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall 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 shall control all proceedings taken in connection
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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 its 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 shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company 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.
Furthermore, the control by the Company 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 pursuant to Section 9(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to
compliance by Company with the requirements of Section 9(c)) promptly pay to the
Company 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
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amount advanced by the Company 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 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 Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company 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 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 and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or
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assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company 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.
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 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 regarding the interpretation of this
Agreement and the claim is finally denied by the Company 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. 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
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Superior Court or Appellate Court judge. Within two weeks after receipt of the
list, the Company shall select one of the five arbitrators as the arbitrator for
the dispute in question. If the Company fails 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 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 has breached this Agreement,
he or she shall order the Company 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,
both the Company and the Executive agree that no appeal shall be taken by either
party from any decision rendered in such action.
(e) The Company will be considered the prevailing party in a
dispute if the arbitrator determines that the Company has not breached this
Agreement. Otherwise, the Executive will be considered the prevailing party. In
the event that the Company is the prevailing party, the fee of the arbitrator
and all necessary expenses of the hearing (excluding any attorneys'
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fees incurred by the Company) 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.
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:
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If to the Company: Southern California Water Company
630 East Foothill Boulevard
San Dimas, CA 91773
Attn: Secretary
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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 may withhold required federal, state, local or
foreign taxes from any amounts payable under this Agreement.
19. NO WAIVER
The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company 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 and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company 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 at any time, in which case the Executive shall have no
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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.
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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.
SOUTHERN CALIFORNIA WATER COMPANY
By /s/ Floyd E. Wicks
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Title President and C.E.O.
EXECUTIVE
/s/ Joseph F. Young
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