CHANGE IN CONTROL AND SEVERANCE AGREEMENT (As amended and restated effective as of December 31, 2008)
Exhibit 10.42
CHANGE IN CONTROL AND SEVERANCE AGREEMENT
(As amended and restated effective as of December 31, 2008)
THIS Amended and Restated Agreement made as of the 31st day of December, 2008, by and between
Aqua America, Inc., a Pennsylvania corporation (“Aqua America”), formerly known as Philadelphia
Suburban Corporation, and Xxxxxxxx XxXxxxxxxxxx (the “Executive”).
WHEREAS, the Executive is presently employed by Aqua America, as its Chairman, Chief Executive
Officer;
WHEREAS, Aqua America considers it essential to xxxxxx the employment of well-qualified, key
management personnel, and, in this regard, the board of directors of Aqua America recognizes that,
as is the case with many publicly-held corporations such as Aqua America, the possibility of a
change in control of Aqua America 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 Aqua America and its subsidiaries;
WHEREAS, the board of directors of Aqua America has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and dedication of key members of
management of Aqua America and its subsidiaries to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the possibility of a change in control of
Aqua America, although no such change is now contemplated;
WHEREAS, in order to induce the Executive to remain in the employ of Aqua America or its
subsidiaries, for which the Executive provides key executive services, Aqua America previously
entered into an Agreement, to provide the Executive with certain compensation in the event that the
Executive’s employment is terminated subsequent to a “Change in Control” (as defined in Section 1
hereof) of Aqua America as a cushion against the financial and career impact on the Executive of
any such Change in Control;
WHEREAS, the Agreement has been amended from time to time with the mutual consent of Aqua
America and the Executive;
WHEREAS, Aqua America and the Executive wish to amend and restate the Agreement at this time
to comply with section 409A of the Code (as defined below) and the final regulations issued
thereunder, to make such other changes as set forth herein and to incorporate a severance benefit
provided under a letter agreement with the Executive dated May 20, 1992.
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 that the
Agreement shall be amended and restated to read as follows effective January 1, 2009:
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 Executive’s current base annual salary, plus the
greater of the Executive’s target bonus for the year in which the Executive incurs a Termination of
Employment, or the last actual bonus paid to the Executive under the Annual Cash Incentive
Compensation Plan (or any successor plan maintained by Aqua America), in all capacities with Aqua
America and its Subsidiaries or Affiliates. The Executive’s Base Compensation shall be determined
prior to reduction for salary deferred by the Executive under any deferred compensation plan of
Aqua America and its Subsidiaries or Affiliates, or otherwise.
(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
-2-
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 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 Aqua America; 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 Aqua America.
(e) “Cause” shall mean the Executive’s willful failure to perform or observe any of his
employment duties or to comply with the lawful directives of the Board after notice and reasonable
opportunity to cure said failure; dishonesty; or conviction of a crime involving moral turpitude.
(f) “Change in Control” shall mean:
(i) any Person (including any individual, firm, corporation, partnership or other entity
except Aqua America, any subsidiary of Aqua America, any employee benefit plan of Aqua America or
of any subsidiary, or any Person or entity organized, appointed or established by Aqua America 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 Aqua America 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 Aqua America’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 50% or more of the aggregate assets or earning power of Aqua
America and its subsidiaries, or its liquidation is approved by a majority of its shareholders or
Aqua America is merged into or is merged with an unrelated entity such that following the merger
the shareholders of Aqua America no longer own more than 50% of the resultant entity.
-3-
Notwithstanding anything in this subsection 1(f) to the contrary, a Change in Control shall
not be deemed to have taken place under clause (f)(i) above if (i) such Person becomes the
beneficial owner in the aggregate of 20% or more of the Common Stock of Aqua America then
outstanding as a result, in the determination of a majority of those members of the Board of
Directors of Aqua America in office prior to the acquisition, 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, or (ii) such
Person becomes the beneficial owner in the aggregate of 20% or more of the Common Stock of Aqua
America outstanding as a result of an acquisition of common stock by Aqua America which, by
reducing the number of common stock outstanding, increases the proportionate number of shares of
common stock beneficially owned by such Person to 20% or more of the shares of common stock then
outstanding; provided, however that if a Person shall become the beneficial owner of 20% or more of
the shares of common stock then outstanding by reason of common stock purchased by Aqua America and
shall, after such share purchases by Aqua America become the beneficial owner of any additional
shares of common stock, then the exemption set forth in this clause shall be inapplicable.
(g) “Equity Compensation Plan” shall mean Aqua America’s 1994 Equity Compensation Plan, and
its predecessors and successors.
(h) “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 Aqua America or their successor(s) to comply with and satisfy any of the
terms of this Agreement;
(ii) any significant involuntary reduction of the authority, duties, responsibilities or
reporting relationships held by the Executive immediately prior to the Change in Control;
(iii) any involuntary removal of the Executive from the employment grade, compensation level
or officer positions which the Executive holds with Aqua America or, if the Executive is employed
by a Subsidiary, with a Subsidiary, held by him immediately prior to the Change in 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 in Control;
-4-
(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);
(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 in
Control; or
(vii) the Executive determines, in his sole discretion, at any time within 12 months after the
Change in Control, that circumstances have changed with respect to Aqua America, and that he is no
longer able to effectively perform his duties and responsibilities.
(i) “Normal Retirement Date” shall mean the first day of the calendar month coincident with or
next following the Executive’s 65th birthday.
(j) “Subsidiary” shall mean any corporation in which Aqua America, directly or indirectly,
owns at least a 50% interest or an unincorporated entity of which Aqua America, directly or
indirectly, owns at least 50% of the profits or capital interests.
(k) “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.
(l) “Termination of Employment” shall mean the involuntary termination of the Executive’s
actual employment relationship with Aqua America and any of its Subsidiaries that actually employ
the Executive.
2. Notice of Termination. Any Termination of Employment following a Change in Control
shall be communicated by a Notice of Termination to the other party hereto given in accordance with
Section 16 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 Prior to a Change in Control. The severance benefits
provided to the Executive pursuant to the terms of a letter agreement dated May 20, 1992 are hereby
replaced by the severance benefits provided under this Agreement. Subject to Section 25 hereof, in
the event of the Executive’s Termination of Employment for any reason other than disability, death,
or for Cause, Aqua America shall pay to the Executive a single lump sum cash payment equal to the
Executive’s annual base salary at the Termination Date, excluding any bonus, subject to required
employment taxes and deductions. Such payment shall be made to the Executive within 60 days
following the Executive’s Termination of Employment.
-5-
4. Severance Compensation Upon a Change in Control.
(a) Subject to the provisions of Section 13 and Section 25 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 in Control, Aqua
America shall pay to the Executive, upon the execution of a release in the form required by Aqua
America of its terminating executives prior to the Change in Control, a single lump sum cash
payment equal to three times the Executive’s Base Compensation, plus a pro-rata share of the
Executive’s target bonus under Aqua America’s Annual Cash Incentive Compensation Plan (or any
successor plan maintained by Aqua America) based on the portion of the calendar year elapsed at the
time of the Executive’s Termination of Employment, subject to required employment taxes and
deductions. Such payment shall be made to the Executive within 60 days following the Executive’s
Termination of Employment.
(b) Notwithstanding the foregoing, the amount of any payment to which the Executive becomes
entitled to receive under this Section 4, prior to any adjustment made pursuant to Section 5, shall
be reduced by any severance benefit owed to the Executive pursuant to Section 3.
5. Other Payments and Benefits. The payment due under Section 4 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 Aqua America and its Subsidiaries or Affiliates; provided, however, that an
Executive shall not be eligible for benefits under any severance or stay-on bonus plan maintained
by Aqua America, or any of its Subsidiaries or Affiliates, if the Executive is entitled to receive
benefits under this Agreement as a result of a Termination of Employment. In addition, if the
Executive is entitled to a payment under Section 4 hereof, the Executive shall be entitled to
(a) an amount equal to (i) thirty-six (36) months of the COBRA rate in effect at the
Executive’s Termination of Employment, plus (ii) an additional amount which, after reduction for
applicable income and employment taxes owed with respect to such additional amount, equals the
income and employment taxes payable with respect to the amount described in clause (i), which shall
be paid in a single lump sum at the time the benefit under Section 4 is paid,
-6-
(b) fully-paid executive level reasonable outplacement services from the provider of the
Executive’s choice for 12 months following the Termination Date. All reimbursements paid to the
Executive for purposes of outplacement services shall be made or provided in accordance with the
requirements of Treas. Reg. §1.409A-1(b)(9)(v)(A), and
(c) a transfer, without requiring a cash payment from him, of any life insurance policy
maintained by Aqua America on his life or any rights the Company may have pursuant to a split
dollar life insurance agreement.
6. Restrictive Covenant.
(a) In exchange for the payments and benefits provided under Section 4 and 5 of this Agreement
upon a Change in Control, for a period of 12 months after the Termination Date, the Executive
agrees that he will not, unless acting pursuant with the prior written consent of the Board,
directly or indirectly, own, manage, operate, join, control, finance or participate in the
ownership, management, operation, control or financing of, or be connected as an officer, director,
employee, partner, principal, agent, representative, consultant or otherwise with or use or permit
his name to be used in connection with, any business or enterprise engaged in a geographic area
within 25 miles of any location from which Aqua America or any of its Subsidiaries is operating on
the Termination Date (the “Geographic Area”), in any business that is competitive to a business
from which Aqua America and any of its Subsidiaries, taken as a whole, derived at least ten percent
of its respective annual gross revenues for the twelve (12) months preceding the Termination Date.
It is recognized by the Executive that the business of Aqua America and its Subsidiaries and the
Executive’s connection therewith is or will be involved in activity throughout the Geographic Area,
and that more limited geographical limitations on this non-competition covenant are therefore not
appropriate. The foregoing restriction shall not be construed to prohibit the ownership by the
Executive of less than one percent of any class of securities of any corporation which is
engaged in any of the foregoing businesses having a class of securities registered pursuant to the
Securities Exchange Act of 1934, provided that such ownership represents a passive investment and
that neither the Executive nor any group of persons including the Executive in any way, either
directly or indirectly, manages or exercises control of any such corporation, guarantees any of its
financial obligations, otherwise takes any part in its business, other than exercising his rights
as a shareholder, or seeks to do any of the foregoing.
-7-
(b) The Executive acknowledges that the restrictions contained in paragraph (a) are reasonable
and necessary to protect the legitimate interests of Aqua America and its Subsidiaries and
Affiliates, and that any violation of those provisions will result in irreparable injury to Aqua
America. The Executive represents that his experience and capabilities are such that the
restrictions contained in paragraph (a) will not prevent the Executive from obtaining employment or
otherwise earning a living at the same general level of economic benefit as is the case as of the
date hereof. The Executive agrees that Aqua America shall be entitled to preliminary and permanent
injunctive relief, without the necessity of proving actual damages, which right shall be cumulative
and in addition to any other rights or remedies to which Aqua America may be entitled. In the
event that any of the provisions of paragraph (a) should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any jurisdiction, then
such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic,
service, or other limitations permitted by applicable law.
7. Trust Fund. Aqua America 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 Aqua America’s President, as set forth in
the agreement pursuant to which the fund has been established.
8. Enforcement.
(a) In the event that Aqua America shall fail or refuse to make payment of any amounts due the
Executive under Sections 3, 4 and 5 hereof within the respective time periods provided therein,
Aqua America 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, 4 or 5, as 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, Aqua America shall pay
the Executive 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 Aqua America under this Agreement within five business days following the
Executive’s request for the reimbursement.
-8-
9. 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.
10. 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 Aqua America, or any of its Subsidiaries or Affiliates, and for
which the Executive may qualify.
11. No Set-Off. Aqua America’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 Aqua America may have against the Executive or others.
12. 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 Aqua America shall use its best efforts to satisfy promptly all such requirements.
13. Certain Conditional Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be
determined that any payment or distribution by Aqua America 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 (the “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 Executive shall, subject to subsection (b) below, be paid an additional amount
(the “Gross-Up Payment”) such that the net amount retained by the Executive after deduction of any
excise tax imposed under Section 4999 of the Code, and any federal, state and local income and
employment tax and excise tax imposed upon the Gross-Up Payment shall be equal to the Payment. For
purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay
federal income tax and employment taxes at the highest marginal rate of federal income and
employment taxation in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and locality of the
Executive’s residence (or, if greater, the state and locality in which the Executive is required to
file a nonresident income tax return with respect to the Payment) on the Termination Date, net of
the maximum reduction in federal income taxes that may be obtained from the deduction of such state
and local taxes.
-9-
(b) If the total Payment to the Executive does not exceed the largest amount payable to the
Executive without causing an “excess parachute payment” within the meaning of Section 280G of the
Code (the “Capped Amount”) by more than 10%, the total Payment shall be reduced or limited to the
Capped Amount and no Gross-Up Payment shall be made to the Executive pursuant to subsection (a)
above; provided, however, that the reduction described in this subsection (b) shall be made only if
the Accounting Firm (described below) determines that the reduction will provide the Executive with
a greater net after-tax benefit than would no reduction. The Company shall reduce the Payments
under this Agreement by first reducing Payments that are not payable in cash and then by reducing
cash Payments. Any Payment reductions made pursuant to this subsection (b) shall be
nondiscretionary and made in the manner that (i) least reduces economic value to the Executive and
(ii) amounts payable at different times with the same value shall be reduced pro-rata. Only
amounts payable under this Agreement shall be reduced pursuant to this subsection (b).
(c) All determinations to be made under this Section 13 shall be made by Aqua America’s
independent public accountant immediately prior to the Change in Control (the “Accounting Firm”),
which firm shall provide its determinations and any supporting calculations both to Aqua America
and the Executive within 10 days of the event triggering the “excess parachute payment” within the
meaning of Section 280G of the Code. Any such determination by the Accounting Firm shall be
binding upon Aqua America and the Executive. Within five days after the Accounting Firm’s
determination, Aqua America 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.
(d) The Executive shall notify Aqua America in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by Aqua America of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten business days after
the Executive knows of such claim and shall apprise Aqua America of the nature of such claim and
the date on which such claim is requested to be paid. The Executive shall not pay such claim prior
to the expiration of the thirty-day period following the date on which it gives such notice to Aqua
America (or such shorter period ending on the date that any payment of taxes with respect to such
claim is due). If Aqua America notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give Aqua America any information
reasonably requested by Aqua America relating to such claim,
(ii) take such action in connection
with contesting such claim as Aqua America shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to such
claim by an attorney mutually agreed to by the Executive and
Aqua America,
-10-
(iii) cooperate with Aqua America in
good faith in order to effectively contest such claim, and
(iv) permit Aqua America to
participate in any proceedings relating to such claim;
provided, however, that Aqua America 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, income tax or employment
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 Xxxxxxx 00, Xxxx Xxxxxxx shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and all administrative appeals,
proceedings, hearing and conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax claimed and xxx for a refund or contest
the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a termination before any
administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as
Aqua America shall determine; provided, however, that if Aqua America directs the Executive to pay
such claim and xxx for a refund Aqua America shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax, income tax or employment 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 provided, further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited solely to such contested amount.
Furthermore, Aqua America’s control of the contest shall be limited to issues with respect to which
a Gross-Up Payment would be payable hereunder and the 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.
-11-
(e) If, after the receipt by the Executive of an amount advanced by Aqua America pursuant to
this Section, the Executive receives any refund with respect to such claim, the Executive shall
(subject to Aqua America’s complying with the requirements of subsection (a)) promptly pay to Aqua
America the amount of such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount advanced by Aqua America
pursuant to this Section, a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and Aqua America does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty 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 as a result of the final determination.
(f) All of the fees and expenses of the Accounting Firm in performing the determinations
referred to above shall be borne solely by Aqua America. Aqua America 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 above, except for claims, damages or expenses resulting from the
gross negligence or willful misconduct of the Accounting Firm.
(g) Any Gross-Up Payment shall be paid on the date described above, but no later than the date
on which the Company remits the related taxes to the taxing authorities, in accordance with Treas.
Reg. §1.409A-3(i)(1)(v).
14. Term of Agreement. The term of this Agreement shall be indefinite until Aqua
America 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 in 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 in Control, the employment of the Executive with Aqua America and
its Subsidiaries, as the case may be, shall terminate for any reason; provided, however, that if a
Change in Control occurs within 18 months after (a) the Executive’s termination incurred for any
reason other than a voluntary resignation or retirement (a Good Reason Termination shall not be
deemed voluntary) or termination for Cause or (b) the termination of this Agreement, the Executive
shall be entitled to all of the terms and conditions of this Agreement as if the Executive’s
termination had occurred on the date of the Change in Control. Notwithstanding the foregoing, the
severance benefits provided under Section 3 of this Agreement shall survive the termination of the
remainder of this Agreement, to the extent applicable.
-12-
15. Successor Company. Aqua America 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 Aqua America or of any of its 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 with Aqua
America to perform this Agreement in the same manner and to the same extent that Aqua America would
be required to perform if no such succession or successions had taken place. Failure of Aqua
America 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, Aqua America shall mean Aqua America respectively, and its Subsidiaries
as hereinbefore defined and any such successor or successors to their business and/or assets,
jointly and severally.
16. 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 Aqua America, to:
Aqua America, Inc.
000 X. Xxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Chairman, Executive Compensation Committee
000 X. Xxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Chairman, Executive Compensation Committee
If to the Executive, to:
Xx. Xxxxxxxx XxXxxxxxxxxx
-13-
or to such other names or addresses as Aqua America 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 Aqua America following a Change in Control, notice at
the last address of Aqua America or to any successor pursuant to Section 16 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.
17 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.
18. 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 approved by Aqua America’s Executive Compensation and Employee Benefits
Committee, or its successor, and signed by the parties hereto. 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 Aqua America or the Board.
19. 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 Aqua America or any of its
Subsidiaries.
20. 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 Aqua America hereunder shall not be assignable in whole or in part.
21. 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.
-14-
22. 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.
23. 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.
24. 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 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. Aqua America 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’ fee`s and expenses).
25. Section 409A of the Code.
(a) Compliance. This Agreement shall be interpreted to avoid any penalty sanctions under
section 409A of the Code. If any payment or benefit cannot be provided or made at the time
specified herein without incurring sanctions under section 409A, then such benefit or payment shall
be provided in full at the earliest time thereafter when such sanctions will not be imposed. For
purposes of section 409A of the Code, all payments to be made upon a Termination of Employment
under this Agreement may only be made upon a “separation from service” under section 409A of the
Code, each payment made under this Agreement shall be treated as a separate payment and the right
to a series of installment payments under this Agreement is to be treated as a right to a series of
separate payments. In no event shall the Executive, directly or indirectly, designate the calendar
-15-
year of any payments to be made to him under this Agreement. All reimbursements and in-kind
benefits provided under this Agreement shall be made or provided in accordance with the
requirements of Treas. Reg. §1.409A-3(i)(1)(iv), including, where applicable, the requirement that
(i) any reimbursement is for expenses incurred during the Executive’s lifetime (or during a shorter
period of time specified in this Agreement), (ii) the amount of expenses eligible for
reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii)
the reimbursement of an eligible expense will be made on or before the last day of the calendar
year following the year in which the expense is incurred, and (iv) the right to reimbursement or
in-kind benefits is not subject to liquidation or exchange for another benefit.
(b) Payment Delay. If at the time of the Executive’s Termination of Employment, the Executive
is a “specified employee” (as defined in section 409A of the Code and determined in the sole
discretion of Aqua America in accordance with Aqua America’s “specified employee” determination
policy), then all cash payments to the Executive pursuant to this Agreement shall be postponed for
a period of six (6) months following the Executive’s Termination of
Employment. The postponed amounts shall be paid in a lump sum to the Executive within fifteen
(15) days following the date that is six (6) months following the Executive’s Termination of
Employment, and any amount payable to the Executive after the expiration of such six (6) month
period under this Agreement shall continue to be paid to the Executive in accordance with the terms
of this Agreement. If the Executive dies during such six-month period and prior to the payment of
the postponed cash amounts hereunder, the amounts delayed on account of section 409A of the Code
shall be paid to the personal representative of the Executive’s estate within fifteen (15) days
after the Executive’s death, and any amounts not delayed shall be paid to the personal
representative of the Executive’s estate in accordance with the terms of this Agreement. If any
cash payments payable pursuant to this Agreement are delayed due to the requirements of Section
409A of the Code, interest, compounded daily, shall be added to such payments during the deferral
period 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.
-16-
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this
Agreement as of the date first above written.
| ATTEST: | AQUA AMERICA, INC | |||||||||
/s/
Xxxxx Xxxxxxxx
|
By: | /s/ Xxx X. Xxxxx | ||||||||
Title:
|
Assistant Secretary | Title: Chief Administrative Officer | ||||||||
| EXECUTIVE | ||||||||||
| /s/ Xxxx Xxxxx Xxxxxxxxx | /s/ Xxxxxxxx XxXxxxxxxxxx | |||||||||
| Witness | Xxxxxxxx XxXxxxxxxxxx | |||||||||
-17-
