EXHIBIT 10.09
CHANGE-IN-CONTROL AGREEMENT
This Change-in-Control Agreement (the "Agreement")
is dated as of October 27, 1998, and is entered into by and
between Xxxxx X. Xxxxxx (the "Executive") and Southern
California Water Company, a California corporation (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.
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.
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;
(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, 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.
(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 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 10(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 two 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 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 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 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 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 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 19, 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
(a) 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 constitute "parachute payments" within the
meaning of Section 280G of the Code, then such payments
or benefits shall be modified to the extent necessary so
that no portion of such benefits or payments shall
subject the Executive to any excise tax under Section
4999 of the Code.
(b) In the event the amount of any "parachute payments"
which would be payable to or for the benefit of the Executive
without regard to this Section must be modified to comply
with this Section, the Executive shall direct which
"parachute payments" are to be waived or modified;
provided, however, that no change in timing of the
payments shall be made without the consent of the
Company.
(c) Payment of amounts pursuant to this Agreement
shall not, unless directed by the Executive, be delayed
pending determination of the status of a payment as a
"parachute payment" by the Internal Revenue Service, court
or similar body of competent jurisdiction. Either the
Company or the Executive may, however, request a
determination as to whether the payment or benefit would
constitute a parachute payment and, if so requested, such
determination shall be made by an independent accounting
firm 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.
(d) 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
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. 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.]
10. 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 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.
11. 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 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' 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.
12. Governing Law
The laws of California shall govern the validity
and interpretation of this Agreement, with regard to
conflicts of laws.
13. Captions
The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
14. 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.
15. 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
000 Xxxx Xxxxxxxx Xxxxxxxxx
Xxx Xxxxx, XX 00000
Attn: Secretary
or to such other address as either party shall have
furnished to the other in writing. Notice and communications
shall be effective when actually received by the addressee.
16. 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.
17. Withholding Taxes
The Company may withhold required federal, state,
local or foreign taxes from any amounts payable under this
Agreement.
18. 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.
19. 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 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.
20. 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.
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/ Xxxxx X. Xxxxx
----------------------------
Title President and Chief Executive Officer
EXECUTIVE
/s/ Xxxxx X. Xxxxxx
----------------------------
