FORM OF AMENDMENT TO INDIVIDUAL CHANGE-IN-CONTROL AGREEMENT] AMENDMENT TO CHANGE-IN-CONTROL AGREEMENT
Exhibit
10.6
[FORM OF
AMENDMENT TO INDIVIDUAL CHANGE-IN-CONTROL AGREEMENT]
AMENDMENT TO
CHANGE-IN-CONTROL AGREEMENT
WHEREAS, a
Change-in-Control Agreement (the “Agreement”) dated as of [ ],
was previously entered into by and between [ ] (the
“Executive”) and [Golden State Water Company, a California corporation][American
States Utility Services, Inc., a California corporation][NEEDS TO BE CHANGED TO
BE SIGNED BY ACTUAL EMPLOYER] (the “Company”); and
WHEREAS,
this Amendment to the Agreement between the Executive and the Company, as set
forth below, is effective January 1, 2009:
|
1.
|
Section
6 of the Agreement is amended to read as
follows:
|
“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 and AWR agree, subject to Sections 6(f), 8 and 9,
to make the payments and provide the benefits described below:
(i) The
Company or AWR shall pay to the Executive in a cash lump sum within 10 days from
the date of the Executive’s termination of employment, an amount equal to the
product of (A) and (B), where (A) is 2.99 and (B) is calculated as the sum of
(i) the Executive’s annual base salary at the highest rate in effect in any year
of the three calendar years immediately preceding the date of termination of
employment; plus (ii) the average of the payments made to the Executive pursuant
to any ‘cash-pay’ performance incentive plan of the Company or AWR (a ‘Cash
Incentive Payment’) during the five calendars years immediately preceding the
date of termination of employment (or, in the event that the Executive has less
than five calendar years of credited service, the sum of the Executive’s Cash
Incentive Payments during the number of calendar years of the Executive’s
employment with AWR or any of its subsidiaries divided by the number of calendar
years of the Executive’s employment with AWR or any of its subsidiaries); and
provided that if the Executive is employed pursuant to any written employment
agreement, the Cash Incentive Payment in any year for purposes of calculations
under this clause (ii) shall not be less than any minimum incentive or annual
cash bonus required thereunder; provided that Cash Incentive Payments do not
include (A) any extraordinary bonus, including any holiday, year end,
anniversary or signing bonus; (B) any amounts paid or to be paid to the
Executive under this Agreement, (C) reimbursement of moving or other expenses;
or (D) any other lump sum payment, unless specifically designated as a Cash
Incentive Payment pursuant to an incentive plan of the Company or AWR by the
Board of Directors of AWR or the Company, or any committee thereof; plus (iii)
the average of the amount of cash received by the Executive with respect to
dividend equivalents credited to the account of the Executive (‘Dividend
Equivalents’) during the five calendar years immediately preceding the date of
termination of employment (or, in the event that the Executive has less than
five calendar years of credited service or any such year did not include
Dividend Equivalent payments, the sum of the Dividend Equivalents during the
number of calendar years of the Executive’s employment with AWR or any of its
subsidiaries divided by the number of calendar years of the Executive’s
employment with AWR or any of its subsidiaries and in which Dividend Equivalents
were paid). Unless otherwise provided pursuant to the terms of the cash
incentive compensation plan of AWR or the Company or the terms of the award, the
amount paid to the Executive pursuant to this Section 6(a)(i) shall be in lieu
of any Cash Incentive Payment to which the Executive would otherwise be entitled
under any cash incentive plan of the Company or AWR for the year in which the
Executive’s employment is terminated as a result of a Change in
Control.
(ii) The
Company or AWR shall also 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 sum of (A) the Executive’s base salary through the date of termination, plus
(B) 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 or AWR shall also 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 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 Golden State Water Company Pension Plan, or any successor thereto, including
the Golden State Water Company Pension Restoration Plan and any other
supplemental retirement plan providing pension benefits (hereinafter together
referred to as the ‘Pension Plan’) at the time of the Executive’s termination of
employment, without regard to whether such benefits would be vested thereunder,
if the Executive were credited with an additional three years of credited
service (as defined in the Pension Plan), and (B) is equal to the single sum
actuarial equivalent of the Executive’s vested accrued benefits under the
Pension Plan at the time of the Executive’s termination of
employment. For purposes of this paragraph (iii), the term ‘single
sum actuarial equivalent’ shall be determined using an interest rate equal to
six percent (6%) and the mortality table named and described in detail in
Section A.1 of the Pension Plan after the reduction (if any) of the Executive’s
benefit using the ‘Regular Factors’ under Section A.4 of the Pension Plan and
using the Executive’s age upon termination of employment. Any payment
under this paragraph (iii) shall not extinguish any rights the Executive has to
benefits under the Pension Plan.
(iv) For
[three years for CEO and CFO] two years after the date of the Executive’s
termination of employment, 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 medical, dental, vision, accidental death and dismemberment, and life
insurance coverage, and reimbursement of club dues 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)
(the ‘Continued Benefits’); 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
[three years for CEO and CFO] 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 covered family members shall
be given the right provided in Section 4980B of the Internal Revenue Code of
1986 (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
or applicable law, 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 and AWR shall enable the Executive to purchase within 10 days following
the Executive’s termination of employment, 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 edition of the National Auto Research Publication Blue
Book.
(vi) To
the extent not theretofore paid or provided, the Company or AWR 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.
(viii) Upon
the occurrence of a Change in Control, each stock option granted to an Executive
under any stock incentive plan of AWR or the Company shall become immediately
exercisable, and each restricted stock award under any stock incentive plan of
AWR or the Company shall immediately vest free of restrictions. If
the vesting of any stock option or restricted stock award has been accelerated
expressly in anticipation of a Change in Control and the Board
of Directors later determines that a Change in Control will not
occur, the effect of the acceleration as to any then outstanding and unexercised
stock option or restricted stock award shall be rescinded. In no event shall any
such stock option or restricted stock award be reinstated or extended beyond its
final expiration date.
(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 10 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 the 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 10 days of the Executive’s termination of
employment.
(e) Payment of Club
Dues. This Section 6(e) shall apply to any club dues that may
be reimbursed pursuant to Section 6(a)(iv) that exceed the de minimus amounts
set forth in Treasury Regulations Section 1.409A-1(b)(9)(iv)(D) (the “Club
Dues”). The amount of Club Dues that the Executive receives in one
taxable year shall not affect the amount of Club Dues that the Executive
receives in any other taxable year. To the extent the Executive is
reimbursed for any Club Dues, such reimbursement shall be paid to the Executive
on or before the last day of the Executive’s taxable year following the taxable
year in which the expense was incurred. The Club Dues are not subject
to liquidation or exchange for another benefit.
(f) Six-Month
Delay. Notwithstanding any other provisions of the Agreement,
any payment or benefit otherwise required to be made after the Executive’s
termination of employment that the Company reasonably determines is subject to
Section 409A(a)(2)(B)(i) of the Code, shall not be paid or payment
commenced until the later of (i) six months after the date of the Executive’s
‘separation from service’ (within the meaning of Section 409A of the Code and
Treasury Regulations Section 1.409A-1(h) without regard to optional alternative
definitions available thereunder) and (ii) the payment date or commencement date
specified in the Agreement for such payment(s). With respect to any
benefit that the Company cannot provide during the six-month period following
the Executive’s separation from service pursuant to the preceding sentence, the
Executive shall pay the cost or premium for such benefit during such period and
be reimbursed by the Company therefor. On the earliest date on which
such payments can be made or commenced without violating the requirements of
Section 409A(a)(2)(B)(i) of the Code, the Executive shall be paid, in a
single cash lump sum, an amount equal to the aggregate amount of all payments
delayed pursuant to this Section 6(f), including reimbursement for any premiums
paid by the Executive as a result of the delay.”
|
2.
|
The
first sentence of Section 7 of the Agreement is amended to read as
follows:
|
“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 6(f), 8 and 20, shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliates.”
|
3.
|
Section
8 of the Agreement is amended to read as
follows:
|
“8. Limitation on
Benefits
Notwithstanding
anything in this Agreement to the contrary, if any payments or benefits to be
made to or for the Executive’s benefit, whether pursuant to this Agreement or
otherwise, whether by the Company or another entity or person, would not be
deductible by the Company due to limitations imposed by Section 162(m) of the
Code, then to the extent permitted by Treasury Regulation
Section 1.409A-2(b)(7)(i) without subjecting the Executive to adverse tax
consequences, such payments or benefits shall be delayed. The delayed
amounts shall be paid to the Executive at the earliest date the Company
reasonably anticipates that the deduction of the payment of the amount will not
be limited or eliminated by application of Section 162(m) of the Code;
provided, however, that if the Executive is a Specified Employee, to the extent
deemed necessary to comply with Treasury Regulations Section 1.409A-3(i)(2), the
delayed payment shall not be made before the end of the six-month period
following the Executive’s separation from service. 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. 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.”
|
4.
|
A
new paragraph (e) is added at the end of Section 9 of the Agreement, to
read as follows:
|
“(e) Payment. Notwithstanding
anything herein to the contrary, any payment under this Section 9 shall be
paid to the Executive by the end of the Executive’s taxable year following the
taxable year in which the Executive pays the related taxes.”
|
5.
|
Section
22 of the Agreement is amended to read as
follows:
|
“22. Section 409A
It is
intended that any amounts payable under this Agreement shall either be exempt
from Section 409A of the Code or shall comply with Section 409A (including
Treasury regulations and other published guidance related thereto) so as not to
subject the Executive to payment of any additional tax, penalty or interest
imposed under Section 409A of the Code. The provisions of this
Agreement shall be construed and interpreted to avoid the imputation of any such
additional tax, penalty or interest under Section 409A of the Code yet preserve
(to the nearest extent reasonably possible) the intended benefit payable to the
Executive.”
IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to the Agreement to be duly executed and delivered
effective the day and year first written above in San Dimas,
California.
[GOLDEN
STATE WATER COMPANY]
[AMERICAN
STATES UTILITY SERVICES, INC.]
By __________________________________
Title
Date __________________________________
EXECUTIVE
________________________________________
[_____________]
Date __________________________________