Exhibit 10.19
AGREEMENT
Agreement made as of the 1st day of January, 1997, by and among
Philadelphia Suburban Water Company, a Pennsylvania corporation (the "Company"),
Philadelphia Suburban Corporation, a Pennsylvania corporation ("PSC"), and Xxx
X. Xxxxx (the "Executive").
WHEREAS, the Executive is presently employed by the Company, as its
Senior Vice President - Law & Administration; and
WHEREAS, the Company considers it essential to xxxxxx the employment of
well-qualified, key management personnel, and, in this regard, the boards of
directors of the Company and PSC recognize that, as is the case with many
publicly-held corporations such as PSC, the possibility of a change of control
of PSC may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of key management personnel to the detriment of the Company;
WHEREAS, the boards of directors of the Company and PSC have determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company's management to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change of control of PSC,
although no such change is now contemplated;
WHEREAS, in order to induce the Executive to remain in the employ of
the Company, the Company and PSC, for which certain of the employees of the
Company, such as the Executive, provide key executive services, agree that the
Executive shall receive the compensation set forth in this Agreement in the
event his employment with the Company is terminated subsequent to a "Change of
Control" (as defined in Section 1 hereof) of PSC as a
cushion against the financial and career impact on the Executive of any such
Change of Control; and
WHEREAS, PSC is willing to guarantee that such compensation is paid to
the Executive in light of his role in the management of the affairs of PSC or
its subsidiaries;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings specified in this Section unless the
context clearly otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(b) "Base Compensation" shall mean the average of the
total cash base salary, annual bonus and dividend equivalents (paid under the
Company's Equity Compensation Plan) received by the Executive in all capacities
with the Company, and its Subsidiaries or Affiliates, as reported for Federal
income tax purposes on Form W-2, together with any amounts the payment of which
has been deferred by the Executive under any deferred compensation plan of the
Company, and its Subsidiaries or Affiliates, or otherwise, and any and all
salary reduction authorized amounts under any of the benefit plans or programs
of the Company, and its Subsidiaries or Affiliates, but excluding any amounts
attributable to the exercise of stock options or the receipt of Restricted Stock
granted to the Executive under the Company's Equity Compensation Plan and its
predecessors or successors, for the three calendar years (or such number of
actual full calendar years of employment, if less than three)
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immediately preceding the calendar year in which occurs a Change of Control or
the Executive's Termination Date, whichever period produces the higher amount.
(c) A Person shall be deemed the "Beneficial Owner" of
any securities: (i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for payment, purchase or exchange; (ii) that such Person
or any of such Person's Affiliates or Associates, directly or indirectly, has
the right to vote or dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act), including without limitation pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of any security under this clause (ii) as a
result of an oral or written agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or (iii) that are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or
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Associates) has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to clause (ii) above) or disposing
of any voting securities of PSC; provided, however, that nothing in this Section
1(c) shall cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(d) "Board" shall mean the board of directors of PSC.
(e) "Change of Control" shall mean:
(i) any Person (including any individual, firm,
corporation, partnership or other entity except PSC or the Company or any
employee benefit plan of the PSC or the Company or of any Affiliate or
Associate, any Person or entity organized, appointed or established by PSC or
the Company for or pursuant to the terms of any such employee benefit plan),
together with all Affiliates and Associates of such Person, shall become the
Beneficial Owner in the aggregate of 20% or more of the Common Stock of PSC then
outstanding;
(ii) during any twenty-four month period, individuals who
at the beginning of such period constitute the Board cease for any reason to
constitute a majority thereof, unless the election, or the nomination for
election by PSC's shareholders, of at least seventy-five percent of the
directors who were not directors at the beginning of such period was approved by
a vote of at least seventy-five percent of the directors in office at the time
of such election or nomination who were directors at the beginning of such
period; or
(iii) there occurs a sale of substantially all of the
assets of PSC or its liquidation is approved by a majority of its shareholders
or PSC is merged into or is merged with an
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unrelated entity such that following the merger the shareholders of PSC no
longer own more than 51% of the resultant entity.
Notwithstanding anything in this Section 1(e) to the contrary,
a Change of Control shall not be deemed to have taken place under clause (e)(i)
above if (a) such Person becomes the beneficial owner in the aggregate of 20% or
more of the Common Stock of the Company then outstanding as a result of an
inadvertent acquisition by such Person if such Person, as soon as practicable,
divests itself of a sufficient amount of its Common Stock so that it no longer
owns 20% or more of the Common Stock then outstanding, as determined by the
Board of Directors of the Company, or (ii) the shares of Common Stock required
to be counted in order to meet the 20% minimum threshold described under such
clause (i) include any of the shares described in subsections (i) through (iv)
of section 2543(b) of the Pennsylvania Business Corporation Law of 1988 (15
Pa.C.S.A. ss.2543(b)) as in effect on the date of adoption of the Plan.
(f) "Cause" shall mean 1) misappropriation of funds,
2) habitual insobriety or substance abuse, 3) conviction of a crime involving
moral turpitude, or 4) gross negligence in the performance of duties, which
gross negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company.
(g) "Good Reason Termination" shall mean a Termination of
Employment initiated by the Executive upon one or more of the following
occurrences:
(i) any failure of the Company to comply with
and satisfy any of the terms of this the Agreement;
(ii) any significant involuntary reduction of
the authority, duties or responsibilities held by the Executive
immediately prior to the Change of Control;
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(iii) any involuntary removal of the Executive
from the employment grade, compensation level or officer
positions which the Executive holds with the Company or, if the
Executive is employed by a Subsidiary, with a Subsidiary, held
by him immediately prior to the Change of Control, except in
connection with promotions to higher office;
(iv) any involuntary reduction in the
Executive's target level of annual and long-term compensation
as in effect immediately prior to the Change of Control;
(v) any transfer of the Executive, without his
express written consent, to a location which is outside the
Bryn Mawr, Pennsylvania area by more than 50 miles, other than
on a temporary basis (less than 6 months); or
(vi) the Executive being required to undertake
business travel to an extent substantially greater than the
Executive's business travel obligations immediately prior to
the Change of Control.
(h) "Normal Retirement Date" shall mean the first day of
the calendar month coincident with or next following the Executive's 65th
birthday.
(i) "Subsidiary" shall mean any corporation in which the
Company, directly or indirectly, owns at least a 50% interest or an
unincorporated entity of which the Company, directly or indirectly, owns at
least 50% of the profits or capital interests.
(j) "Termination Date" shall mean the date of receipt of
the Notice of Termination described in Section 2 hereof or any later date
specified therein, as the case may be.
(k) "Termination of Employment" shall mean the
termination of the Executive's actual employment relationship with the Company
and any of it Subsidiaries that actually employs the Executive.
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2. Notice of Termination. Any Termination of Employment
following a Change of Control shall be communicated by a Notice of Termination
to the other party hereto given in accordance with Section 14 hereof. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific provision in this Agreement relied upon, (ii)
briefly summarizes the facts and circumstances deemed to provide a basis for the
Executive's Termination of Employment under the provision so indicated, and
(iii) if the Termination Date is other than the date of receipt of such notice,
specifies the Termination Date (which date shall not be more than 15 days after
the giving of such notice).
3. Severance Compensation upon Termination.
(a) Subject to the provisions of Section 11 hereof, in
the event of the Executive's involuntary Termination of Employment for any
reason other than Cause or in the event of a Good Reason Termination, in either
event within two years after a Change of Control, the Company shall pay to the
Executive, upon the execution of a release in the form required by the Company
of its terminating executives prior to the Change of Control, within 15 days
after the Termination Date (or as soon as possible thereafter in the event that
the procedures set forth in Section 11(b) hereof cannot be completed within 15
days), an amount in cash equal to two (2) times the Executive's Base
Compensation, subject to required employment taxes and deductions. PSC hereby
guarantees the obligations of the Company and, in the event that the Company
does not satisfy its obligation hereunder within the required time period, PSC
shall pay or cause to be paid all compensation, benefits and other amounts
remaining due to the Executive upon prompt written notice to PSC that the
Company has not satisfied its obligation (or a portion thereof) to the
Executive.
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(b) In the event the Executive's Normal Retirement Date
would occur prior to 12 months after the Termination Date, the aggregate cash
amount determined as set forth in (a) above shall be reduced by multiplying it
by a fraction, the numerator of which shall be the number of days from the
Termination Date to the Executive's Normal Retirement Date and the denominator
of which shall be 365 days. In the event the Termination Date occurs after the
Executive's Normal Retirement Date, no payments shall be made under this Section
3.
4. Other Payments. The payment due under Section 3
hereof shall be in addition to and not in lieu of any payments or benefits due
to the Executive under any other plan, policy or program of the Company, and its
Subsidiaries or Affiliates. In addition, the Executive shall be entitled to a
continuation of health, dental, life and welfare benefits, excluding disability
benefits, otherwise provided to senior level executives or employees generally,
as the same may be amended for all such individuals from time to time, for the
period of two (2) years.
5. Trust Fund. PSC sponsors an irrevocable trust fund
pursuant to a trust agreement to hold assets to satisfy its obligations to the
Executive under this Agreement. Funding of such trust fund shall be subject to
the discretion of PSC's President, as set forth in the agreement pursuant to
which the fund has been established.
6. Enforcement.
(a) In the event that the Company (or PSC, as
appropriate) shall fail or refuse to make payment of any amounts due the
Executive under Sections 3 and 4 hereof within the respective time periods
provided therein, the Company shall pay to the Executive, in addition to the
payment of any other sums provided in this Agreement, interest, compounded
daily, on any amount remaining unpaid from the date payment is required under
Section 3 or 4, as
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appropriate, until paid to the Executive, at the rate from time to time
announced by PNC Bank as its "prime rate" plus 1%, each change in such rate to
take effect on the effective date of the change in such prime rate.
(b) It is the intent of the parties that the Executive
not be required to incur any expenses associated with the enforcement of his
rights under this Agreement by arbitration, litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder. Accordingly, the
Company shall pay the Executive on demand the amount necessary to reimburse the
Executive in full for all reasonable expenses (including all attorneys' fees and
legal expenses) incurred by the Executive in enforcing any of the obligations of
the Company under this Agreement.
7. No Mitigation. The Executive shall not be required
to mitigate the amount of any payment or benefit provided for in this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for herein be reduced by any compensation earned by other
employment or otherwise.
8. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in or
rights under any benefit, bonus, incentive or other plan or program provided by
the Company, or any of its Subsidiaries or Affiliates, and for which the
Executive may qualify.
9. No Set-Off. 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 circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others.
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10. Taxes. Any payment required under this Agreement
shall be subject to all requirements of the law with regard to the withholding
of taxes, filing, making of reports and the like, and the Company shall use its
best efforts to satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined 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 (a "Payment"), would constitute an "excess parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), the aggregate present value of amounts payable or
distributable to or for the benefit of the Executive pursuant to this Agreement
(such payments or distributions pursuant to this Agreement are hereinafter
referred to as "Agreement Payments") shall be reduced (but not below zero) to
the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present
value which maximizes the aggregate present value of Agreement Payments without
causing any Payment to be subject to the loss of deduction under Section 280G of
the Code. For purposes of this Section 11, present value shall be determined in
accordance with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 11
shall be made by the Company's independent public accountant immediately prior
to the Change of Control (the "Accounting Firm"), which firm shall provide its
determinations and any supporting calculations both to the Company and the
Executive within 10 days of the Termination Date. Any such determination by the
Accounting Firm shall be binding upon the Company and the Executive. The
Executive shall then have the right to determine which of the Agreement
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Payments shall be eliminated or reduced in order to produce the Reduced Amount
in accordance with the requirements of this Section. Within five days after this
determination, the Company shall pay (or cause to be paid) or distribute (or
cause to be distributed) to or for the benefit of the Executive such amounts as
are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Agreement Payments, as the case
may be, will have been made by the Company which should not have been made
("Overpayment") or that additional Agreement Payments which have not been made
by the Company could have been made ("Underpayment"), in each case, consistent
with the calculations required to be made hereunder. Within two years after the
Termination of Employment, the Accounting Firm shall review the determination
made by it pursuant to the preceding paragraph and the Company shall cooperate
and provide all information necessary for such review. In the event that the
Accounting Firm determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to the Executive which
the Executive shall repay to the Company together with interest from the date of
payment under this Agreement at the applicable Federal rate provided for in
Section 7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no
amount shall be payable by the Executive to the Company if and to the extent
such payment would not reduce the limit on the amount that is deductible under
Section 280G of the Code. In the event that the Accounting Firm determines that
an Underpayment has occurred, any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive together with interest from
the date of payment under this Agreement at the Federal Rate.
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(d) All of the fees and expenses of the Accounting Firm
in performing the determinations referred to in subsections (b) and (c) above
shall be borne solely by the Company. The Company agrees to indemnify and hold
harmless the Accounting Firm of and from any and all claims, damages and
expenses resulting from or relating to its determinations pursuant to
subsections (b) and (c) above, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the Accounting Firm.
12. Term of Agreement. The term of this Agreement shall
be indefinite until the Company notifies the Executive in writing that this
Agreement will not be renewed at least sixty days prior to the proposed
termination; provided, however, that (i) after a Change of Control during the
term of this Agreement, this Agreement shall remain in effect until all of the
obligations of the parties hereunder are satisfied or have expired, and (ii)
this Agreement shall terminate if, prior to a Change of Control, the employment
of the Executive with the Company or any of its Subsidiaries, as the case may
be, shall terminate for any reason; provided, however, that if a Change of
Control occurs within 6 months after the Executive's Termination of Employment
other than for Cause, the Executive shall be entitled to all of the terms and
conditions of this Agreement as if the Termination Date had occurred on the date
of the Change of Control.
13. Successor Company. PSC shall require any successor or
successors (whether direct or indirect, by purchase, merger or otherwise) to all
or substantially all of the business and/or assets of PSC or the Company, or of
any of their Subsidiaries that actually employ the Executive, by agreement in
form and substance satisfactory to the Executive, to acknowledge expressly that
this Agreement is binding upon and enforceable against the successor or
successors, in accordance with the terms hereof, and to become jointly and
severally obligated
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with PSC and the Company to perform this Agreement in the same manner and to the
same extent that PSC and the Company would be required to perform if no such
succession or successions had taken place. Failure of PSC or the Company to
notify the Executive in writing as to such successorship, to provide the
Executive the opportunity to review and agree to the successor's assumption of
this Agreement or to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement. As used in this Agreement,
PSC and the Company shall mean PSC and the Company, respectively, and their
Subsidiaries as hereinbefore defined and any such successor or successors to
their business and/or assets, jointly and severally.
14. Notice. All notices and other communications
required or permitted hereunder or necessary or convenient in connection
herewith shall be in writing and shall be delivered personally or mailed by
registered or certified mail, return receipt requested, or by overnight express
courier service, as follows:
If to PSC or to the Company, to:
Philadelphia Suburban Corporation
000 X. Xxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: President
If to the Executive, to:
Xxx X. Xxxxx, Esq.
0000 Xxxxx Xxxx Xxxx
Xxxxx, XX 00000
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of
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Control, notice at the last address of the Company or to any successor pursuant
to Section 13 hereof shall be deemed sufficient for the purposes hereof. Any
such notice shall be deemed delivered and effective when received in the case of
personal delivery, five days after deposit, postage prepaid, with the U.S.
Postal Service in the case of registered or certified mail, or on the next
business day in the case of overnight express courier service.
15 Governing Law. This Agreement shall be governed by
and interpreted under the laws of the Commonwealth of Pennsylvania without
giving effect to any conflict of laws provisions.
16. Contents of Agreement, Amendment and Assignment. This
Agreement supersedes all prior agreements, sets forth the entire understanding
between the parties hereto with respect to the subject matter hereof and cannot
be changed, modified, extended or terminated except upon written amendment
executed by the Executive and the Company's Chairman of the Company's Executive
Compensation and Employee Benefits Committee, or its successor. The provisions
of this Agreement may require a variance from the terms and conditions of
certain compensation or bonus plans under circumstances where such plans would
not provide for payment thereof in order to obtain the maximum benefits for the
Executive. It is the specific intention of the parties that the provisions of
this Agreement shall supersede any provisions to the contrary in such plans, and
such plans shall be deemed to have been amended to correspond with this
Agreement without further action by the Company or the Board.
17. No Right to Continued Employment. Nothing in this
Agreement shall be construed as giving the Executive any right to be retained in
the employ of the Company.
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18. Successors and Assigns. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective heirs, representatives, successors and
assigns of the parties hereto, except that the duties and responsibilities of
PSC and the Company hereunder shall not be assignable in whole or in part.
19. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
20. Remedies Cumulative; No Waiver. No right conferred
upon the Executive by this Agreement is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to any other right or remedy given hereunder or now or
hereafter existing at law or in equity. No delay or omission by the Executive in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof.
21. Miscellaneous. All section headings are for
convenience only. This Agreement may be executed in several counterparts, each
of which is an original. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
22. Arbitration. In the event of any dispute under the
provisions of this Agreement other than a dispute in which the sole relief
sought is an equitable remedy such as an injunction, the parties shall be
required to have the dispute, controversy or claim settled by arbitration in
Bryn Mawr, Pennsylvania, in accordance with the National Rules for the
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Settlement of Employment Disputes of the American Arbitration Association,
before one arbitrator who shall be an executive officer or former executive
officer of a publicly traded corporation, selected by the parties. Any award
entered by the arbitrator shall be final, binding and nonappealable and judgment
may be entered thereon by either party in accordance with applicable law in any
court of competent jurisdiction. This arbitration provision shall be
specifically enforceable. The arbitrator shall have no authority to modify any
provision of this Agreement or to award a remedy for a dispute involving this
Agreement other than a benefit specifically provided under or by virtue of the
Agreement. The Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrator and any expenses relating to the
conduct of the arbitration (including reasonable attorneys' fees and expenses).
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.
ATTEST: PHILADELPHIA SUBURBAN CORPORATION
[Seal]
/s/ Xxxxxxxx X. Xxxxx By: Xxxxxxxx XxXxxxxxxxxx
------------------------ -----------------------------------
Secretary
ATTEST: PHILADELPHIA SUBURBAN WATER COMPANY
[Seal]
/s/ Xxxxxxxx X. Xxxxx By: /s/ Xxxxxxxx XxXxxxxxxxxx
------------------------ -------------------------------
Secretary
/s/ Xxxx X. Xxxxxxxxx /s/ Xxx X. Xxxxx
------------------------ -----------------------------------
Witness Executive
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