Exhibit 10.21
(SJW Corp. Letterhead)
X. Xxxxxxx Xxxx
c/o SJW Corp.
000 Xxxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Dear Rich:
It gives me great pleasure to present you with this
agreement concerning your continued employment with SJW Corp.
("SJW") and its two wholly owned subsidiaries, San Xxxx Water
Company and SJW Land Company (the three entities collectively
referred to as the "Company"). This new agreement will have an
effective date retroactive to January 1, 2003.
Positions and Duties. You will continue in the positions of
President and Chief Executive Officer of SJW and San Xxxx Water
Company and President of SJW Land Company and will report
directly to Board of Directors of SJW (the "Board"). Your duties
and responsibilities will be those assigned from time to time by
the Board and will be commensurate with your positions. You will
be expected to perform all such assigned duties and
responsibilities, to devote substantially all of your time,
attention and effort to the business and affairs of the Company,
and to use your reasonable best efforts to promote the best
interests of the Company. You will be expected principally to
work out of the Company's San Xxxx office, subject to travel
associated with your duties. During your employment with the
Company, you must not render any services for any other person,
firm or entity that represents a conflict of interest with the
business of the Company. The Company agrees to continue to
nominate you as a member of Board at each stockholders meeting at
which Board members are to be elected for so long as you continue
as Chief Executive Officer. You shall serve in such capacity at
no additional compensation, including any future or prior right
to participate in the Company's Director's Pension Plan.
Term. The initial term of this agreement shall be three
years beginning January 1, 2003 and ending on the second business
day of January, 2006. At the end of the second year of such
term, and at the end of each successive year thereafter, the term
shall automatically be extended for an additional year unless the
Company gives prior written notice of non-renewal no later than
November 30, 2004 and November 30th of each successive year
thereafter; provided, however, that the term of this agreement
shall in no event extend beyond November 16, 2017.
At-Will Employment. Although this agreement has a term as
set forth above, your employment with the Company may be
terminated by you or by the Company at any time during or after
the term of the agreement, for any reason, with or without
notice, subject to the payment of any benefits which may be owed
you hereunder based on the circumstances of such termination. The
at-will nature of your employment relationship with the Company,
as described immediately above, may only be changed in an express
written approval by a disinterested majority of the Board.
Salary and Bonus. Your base salary will be at an initial
annual rate of $400,000 per year, to be paid according to the
Company's standard payroll practices. Your base salary will be
reviewed periodically as set forth below, and your base salary as
in effect from time to time during the term of this agreement
will be referred to as "Base Salary."
You will also be entitled to an annual bonus ("Annual
Bonus") for each fiscal year of the Company based on achievement
of reasonable Company and individual performance goals
established for each such fiscal year by the Executive
Compensation Committee of the Board after consultation with you.
Your targeted Annual Bonus is twenty-five percent (25%) of your
Base Salary, but your actual Annual Bonus for any fiscal year
within the term of this agreement may range from 0 to 150% of
your target, based on the Executive Compensation Committee's
determination of the level of achievement of the applicable
performance goals for the year. Your target Annual Bonus will be
reviewed periodically as set forth below. Your actual Annual
Bonus for each fiscal year will be paid as soon as practicable
after the end of that fiscal year, recognizing a reasonable time
to calculate performance for the measurement period.
Payment of your Base Salary and Annual Bonus will be subject
to all applicable withholdings and deductions, and you will only
receive the amount remaining after such withholdings and
deductions have been made.
Annual Review. The Executive Compensation Committee of the
Board will review annually your performance. Your performance
will be evaluated based upon mutually approved written criteria
to be developed jointly by the Executive Compensation Committee
and you. In connection with that review, the Executive
Compensation Committee shall also review and consider appropriate
adjustments to your Base Salary, target Annual Bonus, long-term
incentives and other compensation in order to further the
objective of maintaining your total compensation at a competitive
level and may, as part of that process, retain the services of a
professional compensation consultant. However, neither your Base
Salary nor the sum of your Base Salary and target Annual Bonus
will decrease from any previous level in effect under this
agreement, except for a reduction of not more than fifteen
percent (15%), as part of, and consistent with, any
across-the-board reduction in the salaries or target annual
bonuses of senior officers of the Company to which you and the
Executive Compensation Committee have mutually agreed, and which
occurs prior to a change in control of the Company.
Unless you expressly agree otherwise, you will be eligible
to participate in the Company's current long-term incentive
programs (including the Company's stock option plan) and any
other cash or equity incentive programs hereafter established for
senior officers of the Company (subject to such modifications to
such programs as the Executive Compensation Committee shall
determine to be necessary and appropriate to preserve the income
tax deductibility of the compensation paid under those programs)
at participation levels determined each fiscal year in connection
with your annual performance review.
Initial Stock Options and DERs. On April 29, 2003 the
Company granted you an option to purchase Seven Thousand Six
Hundred and Four (7,604) shares of the Company's common stock
(the "Initial Option") under and subject to the terms of the
Company's Long-Term Incentive Plan (the "Long-Term Incentive
Plan"). The Initial Option is a non-statutory stock option,
which shall has a term of ten (10) years, subject to earlier
termination as set forth below, and includes the standard terms
and provisions of the Company's standard form of option agreement
under the Long-Term Incentive Plan. The exercise price of the
Initial Option is $84.00 per share, equal to the fair market
value per share of the Company's common stock (the "Common
Stock") on the grant date, as determined under the Long-Term
Incentive Plan.
The Initial Option shall vest and become exercisable with
respect to twenty-five percent (25%) of the shares subject
thereto on the first anniversary of the grant date and with
respect to an additional twenty-five percent (25%) of such shares
on each of the next three (3) anniversaries of such date, so long
as you remain in the Company's employ. The Initial Option shall
become immediately exercisable in full: (i) in the event of your
termination by reason of death or disability or (ii) immediately
prior to the effective date of a Change in Control (as such term
is defined in the Company's Executive Severance Plan) provided
you remain in the Company's employ through such date. If you
terminate by reason of retirement (i.e., after age fifty-five
(55) and ten (10) years of service) you shall continue to vest in
your Initial Option during the four (4) year period commencing on
the date of termination as if you remain employed through such
period. In the case of termination by reason of death,
disability or retirement your Initial Option shall, to the extent
vested, remain exercisable until the earlier of (i) the
expiration of the four (4) year period measured from your
termination date or (ii) the remainder of the initial ten (10)
year term. Otherwise, the Initial Option shall cease to further
vest and become exercisable for any additional shares on or after
your termination of employment and shall expire ninety (90) days
after your termination date (or immediately upon your termination
if for Good Cause).
You shall also be credited with dividend equivalent rights
or "DERs," awarded under the Dividend Unit feature of the
Company's Long-Term Incentive Plan, with respect to the number of
shares subject to the Initial Option until the earlier of the
quarterly dividend record date sixteen (16) quarters after the
grant date, or the date that the Initial Option is exercised for
such shares. DERs will entitle you to an additional number of
units representing shares of Common Stock determined as follows:
An Option Deferred Stock Account has been established for you.
Each time a dividend is paid on the Company's outstanding Common
Stock, you will be credited with a dollar amount equal to the
dividend paid per share multiplied by the number of shares still
subject to the Initial Option (plus the number of units credited,
as of the record date for the dividend, to your Option Deferred
Stock Account pursuant to the annual crediting mechanism set
forth in the next sentence). As of the first business day in
January each year, your Option Deferred Stock Account will be
credited with that number of shares determined by dividing (i)
the cash dividend equivalent amounts so credited to you in the
immediately preceding year by (ii) the average of the fair market
value per share of the Common Stock on each of the dates in the
immediately preceding year on which dividends were paid. The
units credited your Option Deferred Stock Account will vest in
the same manner as the option shares to which they are
attributable and shall be paid to you in shares of Common Stock
on the earlier of the quarterly dividend record date sixteen (16)
quarters after the grant date or your termination of employment.
Any cash amounts not yet converted to stock units shall be
distributed in cash.
You shall be eligible for such annual stock option and DER
awards, or other forms of equity or equity-like compensation,
after fiscal 2003 as the Executive Compensation Committee may
determine each year. The Committee shall consider your personal
performance, competitive practice for comparable positions
outside the Company, grants to other senior officers of the
Company, availability of shares in the Long-Term Incentive Plan,
and other relevant factors.
SERP. You shall continue to participate in the Company's
Executive Supplemental Retirement Plan ("SERP"). In
consideration, in part, of your agreement to the amendment of the
SERP on April 29, 2003 to eliminate the minimum benefit equal to
55% of your Final Average Compensation, you were granted on April
29, 2003 the right to receive a number of shares of Common Stock,
awarded under the Restricted Stock feature of the Company's Long-
Term Incentive Plan, determined as follows: a SERP Deferred Stock
Account was established for you and credited on April, 29, 2003
with thirteen thousand eight hundred ninety (13,890) units. Each
time a dividend is paid on the Company's outstanding Common
Stock, you will be credited with a dollar amount equal to the
dividend paid per share multiplied by the number of units
credited, as of the record date for the dividend, to your SERP
Deferred Stock Account (including any additional units resulting
from the annual crediting mechanism set forth in the next
sentence). As of the first business day in January each year,
your SERP Deferred Stock Account will be credited with that
number of additional units determined by dividing (i) the cash
dividend equivalent amounts so credited to you in the previous
year by (ii) the average of the fair market value per share of
the Common Stock on each of the dates in the immediately
preceding year on which dividends were paid.
The units credited to your SERP Deferred Stock Account shall
vest in thirty-six (36) monthly installments on the first day of
each month measured from January 1, 2003, provided you continue
in the Company's employ on each such date. Units credited to
your SERP Deferred Stock Account as a result of the dividend
rights described above shall vest at the same time and in the
same manner as the units with respect to which the dividend
rights were credited. The units credited to your SERP Deferred
Stock Account shall become fully vested on an accelerated basis
if your employment is terminated by reason of death or
Disability, involuntarily terminated for any reason other than
Good Cause or if your employment is voluntarily terminated for
Good Reason.
The units credited to your SERP Deferred Stock Account, to
the extent vested, shall be payable in shares of Company Common
Stock upon the later of your termination of employment or
attainment of age 55, either in a single lump sum or in up to ten
(10) annual installments, as you may elect no later than one (1)
year prior to the triggering event (termination or attainment of
age 55). However, if your employment is terminated under
circumstances entitling you to severance benefits under the
Executive Severance Plan then the units credited to your SERP
Deferred Stock Account will be immediately paid to you in full.
Any cash amounts credited to your SERP Deferred Stock Account not
yet converted to stock units shall be distributed in cash.
The issuance of shares of Company Common Stock under the SERP
Deferred Stock Account is subject to satisfaction of all tax
withholding obligations with respect to such shares. In order to
satisfy all such tax withholding obligations, the number of
shares of Common Stock which you would otherwise be entitled to
receive will be reduced by that number of shares which, as of the
date of distribution, has an aggregate Fair Market Value (as
defined in the Long-Term Incentive Plan) equal to the total
amount of tax withholding obligations applicable to the shares
issuable on that date.
Expense Reimbursement. The Company will reimburse you for
the reasonable expenses incurred in connection with the
performance of your duties, consistent with Company policy and
practice.
Perquisites and Other Benefits. Except as otherwise
precluded by applicable law or regulations, you will continue to
be entitled to the level of perquisites in effect for you as of
the effective date of this agreement, including a Company-
provided luxury motor vehicle (with replacement at every three or
four-year interval), vehicle maintenance, first class business
travel, Company-paid club memberships, financial support for your
participation in community activities (and authority to bind the
Company at a level to be agreed upon from time to time), training
and continuing education, single assignment of an Executive
Assistant and reimbursement of home office expenses attributable
to the services required of you pursuant to this agreement.
Severance Benefits. You shall continue to be eligible for
benefits under the Company's Executive Severance Plan (which
provides benefits in the event of a qualifying termination in
connection with a Change in Control, as defined therein). In
addition, if your employment is involuntarily terminated for any
reason other than death, disability or Good Cause or your
employment is voluntarily terminated for Good Reason and you are
not entitled to benefits under the Executive Severance Plan, you
will be entitled to the following contractual severance benefits
pursuant to this agreement:
- Cash severance equal to three (3) times the sum of (i)
your annual rate of Base Salary in effect at the time of your
termination (or such higher rate as was in effect at any time
during the previous twelve months after the effective date of
this Agreement) and (ii) your target Annual Bonus for the year of
your termination (or if, higher, the average of your actual
annual bonuses for the previous three years after fiscal 2002),
payable in a single lump sum on the first of the month following
the month in which your employment terminates.
- A prorated annual bonus for the year of termination,
based on your target bonus.
- If you elect to continue health benefit coverage under
the Company's health benefit coverage plans pursuant to COBRA,
the Company will provide such COBRA coverage, without charge, to
you and your eligible dependents until the earlier of (x) thirty-
six (36) months from the date your employment terminates, or (y)
the first date on which you are covered under another employer's
health benefit program without exclusion for any pre-existing
medical condition.
- Accelerated vesting of the units credited to your SERP
Deferred Stock Account as described under the heading "SERP."
Your receipt of such contractual severance benefits shall be
conditioned upon your execution and delivery to the Company of a
general release in substantially the form of general release
required under the Executive Severance Plan (and the lapse of any
statutory right to revoke such release).
For purposes of this agreement:
- "Good Cause" shall be deemed to exist if, and only if (i)
you engage in acts or omissions that result in substantial harm
to the business or property of the Company or its affiliates and
that constitute dishonesty, intentional breach of fiduciary
obligation or intentional wrongdoing, or (ii) you are convicted
of a criminal violation involving fraud or dishonesty.
- "Good Reason" shall exist if and only if, without your
express written consent (i) there is a Significant Change in the
nature or the scope of your authority or overall working
environment; (ii) you are assigned duties materially inconsistent
with your present duties, responsibilities and status; (iii)
there is a reduction in your rate of Base Salary or target Annual
Bonus other than a reduction in an amount not in excess of
fifteen percent (15%) of either your Base Salary or the sum of
your Base Salary and target Annual Bonus pursuant to a uniform
reduction in the base salary or target bonus payable to all
senior executives of the Company to which you and the Executive
Compensation Committee have mutually agreed and occurs prior to
change in control of the Company; (iv) the Company changes by
fifty-five (55) miles or more the principal location at which you
are required to perform your services hereunder or (v) there is a
material breach by the Company of any of its obligations
hereunder which remains uncured for more than thirty (30) days
following your written notice to the Board in which you
specifically identify the material breach which has occurred.
- "Significant Change" for purposes of this agreement shall
include removing you from any of your current positions set forth
above.
In the event of your death during the term of this
agreement, your employment will terminate under this agreement.
The Company shall make payments of any salary and/or bonus that
is earned but unpaid as of the date of death to your legal
representative.
Non-Solicitation. During the term of your employment and
for one (1) year thereafter, you agreed that you will not (i)
encourage any employee, consultant, or person who was employed by
the Company on the date of termination of your employment (or at
any time during the six (6) month period prior to termination of
your employment) to leave the company for any reason, nor will
you solicit their services; or (ii) assist any other person or
entity in such encouragement or solicitation. This provision is
not intended to restrict you from performing the duties of your
employment in the best interest of the Company.
Confidential and Proprietary Information. You agree to
comply with the Company's standard policies regarding disclosure
of confidential and proprietary information, both during and
subsequent to the term of this agreement.
The terms and conditions set forth in this offer letter
(together with all documents reference herein) as accepted by you
will be the entire agreement between you and the Company with
regard to your employment. This offer letter supercedes any
other agreements, understandings or representations, whether
written or oral, with regard to the subject matter set forth in
this letter, including but not limited to the letter agreement
between you and the Company dated April 29, 2003. This agreement
shall be governed by the laws of the State of California, without
regard to choice of law rules.
Please contact me if you wish to discuss any of the details
of this offer. I am enclosing an extra copy of this letter for
your records and would appreciate your returning the original to
me with your signature.
Sincerely,
SJW Corp.
By: __________________________________
Title: _______________________________
I HAVE READ THIS OFFER LETTER CAREFULLY, AND I UNDERSTAND
AND ACCEPT ITS TERMS. I SIGN THIS AGREEMENT VOLUNTARILY AND
FREELY:
/s/ X. XXXXXXX XXXX Date: June ________, 2003
______________________
Signature
