-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q7XsfKNpC5hzp41V7nn83RdVmQRb4xRfNofdIOhhQmo+1t8GCMpCUL9wCoFr6unY 3QZAJ2uG2pcUsVFKHODtgw== 0001157523-06-005410.txt : 20060519 0001157523-06-005410.hdr.sgml : 20060519 20060519152515 ACCESSION NUMBER: 0001157523-06-005410 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060519 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060519 DATE AS OF CHANGE: 20060519 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHWEST WATER CO CENTRAL INDEX KEY: 0000092472 STANDARD INDUSTRIAL CLASSIFICATION: WATER SUPPLY [4941] IRS NUMBER: 951840947 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-08176 FILM NUMBER: 06855182 BUSINESS ADDRESS: STREET 1: ONE WILSHIRE BUILDING STREET 2: 624 SOUTH GRAND AVENUE, SUITE 2900 CITY: LOS ANGELES STATE: CA ZIP: 90017-3782 BUSINESS PHONE: 213 929 1800 MAIL ADDRESS: STREET 1: ONE WILSHIRE BUILDING STREET 2: 624 SOUTH GRAND AVENUE, SUITE 2900 CITY: LOS ANGELES STATE: CA ZIP: 90017-3782 FORMER COMPANY: FORMER CONFORMED NAME: SUBURBAN WATER SYSTEMS DATE OF NAME CHANGE: 19751202 8-K 1 a5152725.txt SOUTHWEST WATER COMPANY 8-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 19, 2006 SOUTHWEST WATER COMPANY (Exact Name of Registrant as Specified in its Charter) DELAWARE 0-8176 95-1840947 (State or Other Jurisdiction of (Commission (IRS Employer Incorporation or Organization) File Number) Identification Number) ONE WILSHIRE BUILDING 624 SOUTH GRAND AVENUE, SUITE 2900 LOS ANGELES, CALIFORNIA 90017-3782 (Address of Principal Executive Offices, including zip code) (213) 929-1800 (Registrant's telephone number, including area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT (i) Change of Control Severance Agreement. Effective May 15, 2006, Southwest Water Company, a Delaware Corporation (the "Company") entered into a Change of Control Severance Agreement (the "Severance Agreement") with Mark A. Swatek, Chairman of the Board and Chief Executive Officer. The Severance Agreement provides that the executive will, upon a change of control as defined in the Severance Agreement, be entitled for a period of two (2) years thereafter to a severance payment if executive's employment is terminated by the Company for other than good cause. The severance payment will consist of 2.99 times the sum of the executive's most recent base salary plus the average bonus for the prior three full years. The severance benefits also include acceleration of vesting of previously granted stock options held as of the date of the change of control. Total benefits may not exceed the limits imposed by Section 280G of the Internal Revenue Code. A copy of the Severance Agreement is attached to this Report as Exhibit 10.1. (ii) Adoption of Equity Incentive Plan. On May 16, 2006, the stockholders of the Company approved the "Southwest Water Company 2006 Equity Incentive Plan" (the "Plan"). The Plan is described in and attached as Appendix B to the Company's 2006 Proxy Statement on Form DEF 14A, filed with the Securities and Exchange Commission (the "Commission") on April 11, 2006. ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS (i) The Company's Board of Directors elected its Chief Executive Officer, Mark A. Swatek, a director and Chairman of the Board on May 16, 2006. There is no arrangement or understanding between Mr. Swatek and any other person pursuant to which Mr. Swatek was selected as a director. (ii) On May 16, 2006, the Company elected Mr. Anton G. Garnier Executive Vice Chair of the Board. Mr. Garnier was Chairman of the Board until May 16, 2006, and Chief Executive Officer of the Company until May 15, 2006. Mr. Mark A. Swatek became a director and Chairman of the Board on May 16, 2006, and Chief Executive Officer of the Company on May 15, 2006, as described above in this Item 5.02 and as described in the Company's current report on Form 8-K filed with the Commission on April 18, 2006. (iii) Mr. Peter J. Moerbeek resigned as a director of Southwest Water Company on May 16, 2006, and announced his intention to resign as President and Chief Operating Officer effective June 13, 2006, or such earlier date as the Company and Mr. Moerbeek may agree. ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR. On May 16, 2006, the Company adopted Amendment No. 3 to its Amended and Restated Bylaws, adding the position of Executive Vice Chair as an officer of the Company. A copy of Amendment No. 3 is attached to this report as Exhibit 3.2. ITEM 8.01 OTHER EVENTS On May 19, 2006, the Company announced the events described under Item 5.02 of this report. A copy of the Press Release is attached to this report as Exhibit 99.1. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits 2 3.2 Amendment No. 3 to the Company's Amended and Restated Bylaws. 10.1 Change of Control Agreement dated as of May 15, 2006, between Southwest Water Company, a Delaware corporation, (the "Company") and Mark A. Swatek, the Company's Chairman of the Board and Chief Executive Officer. 10.2 Southwest Water Company 2006 Equity Incentive Plan (Incorporated by reference to Appendix B to the Company's 2006 Proxy Statement filed on Form DEF 14A with the Securities and Exchange Commission on April 11, 2006). 99.1 Press Release dated May 19, 2006. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SOUTHWEST WATER COMPANY By: /s/ Shelley A. Farnham ----------------------------------- Shelley A. Farnham Vice President of Human Resources and Corporate Secretary Dated: May 19, 2006 3 EX-3.2 2 a5152725ex3-2.txt EXHIBIT 3.2 Exhibit 3.2 AMENDMENT NO. 3 TO AMENDED AND RESTATED BYLAWS OF SOUTHWEST WATER COMPANY The following sets forth the third amendment to the Amended and Restated Bylaws (the "Bylaws") of Southwest Water Company, a Delaware corporation, which amendment shall be effective as of May 16, 2006. 1. Article IV of the Bylaws are hereby amended and restated in their entirety to read as follows: SECTION 1. Generally. The officers of the Corporation shall consist of a Chair of the Board, an Executive Vice Chair, a Chief Executive Officer, a President, a Chief Financial Officer, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers as may from time to time be appointed by the Board of Directors. Officers shall be elected by the Board of Directors, which shall consider that subject at its first meeting after every annual meeting of stockholders. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any number of offices may be held by the same person. SECTION 2. Chair of the Board. The Chair of the Board, if such an officer be elected, shall, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned by the Board of Directors or prescribed by these bylaws. If there is no Chief Executive Officer or President, the Chair of the Board shall in addition be the Chief Executive Officer of the Corporation and shall have the powers and duties prescribed in SECTION 4 of this Article IV. SECTION 3. Executive Vice Chair. The Executive Vice Chair shall have such powers and duties as may be delegated to him or her by the Board of Directors or by the bylaws, or the Chair of the Board. The Executive Vice Chair shall perform the duties and exercise the powers of the Chair of the Board in the event of the Chair's absence or disability. SECTION 4. Chief Executive Officer. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there is such an officer, the Chief Executive Officer shall, subject to the control of the Board of Directors and these bylaws, have the responsibility for the general management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of chief executive or which are delegated to him or her by the Board of Directors or prescribed by these bylaws. He or she shall have the power to sign all stock certificates, contracts, and other instruments of the Corporation which are authorized and shall have general supervision and direction of all the other officers, employees and agents of the Corporation. SECTION 5. President. In the absence or disability of the Chief Executive Officer, if there be such an officer, the President shall perform all the duties of the Chief Executive Officer, and when so acting shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. The President shall have such other duties as from time to time may be prescribed for him or her by the Board of Directors or the Chief Executive Officer. SECTION 6. Vice Presidents. Each Vice President shall have such powers and duties as may be delegated to him or her by the Board of Directors or by the bylaws, the President, or the Chair of the Board if there is no President. One Vice President shall be designated by the Board to perform the duties and exercise the powers of the President in the event of the President's absence or disability. SECTION 7. Treasurer. The Treasurer shall have the responsibility for maintaining the financial records of the Corporation and shall have custody of all monies and securities of the Corporation. He or she shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an accounting of all such transactions and of the financial condition of the Corporation. The Treasurer shall also perform such other duties as the Board of Directors or these bylaws may from time to time prescribe. SECTION 8. Secretary. The Secretary shall issue all authorized notices for, and shall keep minutes of, all meetings of the stockholders and the Board of Directors. He or she shall have charge of the corporate books and shall perform such other duties as the Board of Directors or these bylaws may from time to time prescribe. SECTION 9. Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof. SECTION 10. Removal. Any officer of the Corporation may be removed at any time, with or without cause, by the Board of Directors. SECTION 11. Action With Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, the President or any officer of the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold securities, and otherwise to exercise any and all rights and powers which the Corporation may possess by reason of its ownership of securities in such other corporation. EX-10.1 3 a5152725ex10-1.txt EXHIBIT 10.1 Exhibit 10.1 CHANGE OF CONTROL SEVERANCE AGREEMENT ------------------------------------- THIS CHANGE OF CONTROL SEVERANCE AGREEMENT ("Agreement") is made effective as of May 15, 2006 (the "Effective Date") by and between SOUTHWEST WATER COMPANY, a Delaware corporation (the "Company") and MARK A. SWATEK ("Executive"). WHEREAS, Executive is employed as an executive officer or key employee of the Company; WHEREAS, the Company believes it to be in the best interests of its stockholders to attract, retain and motivate key executive officers and employees and to ensure continuity of management; WHEREAS, the Company recognizes that the possibility of a change of control of the Company may result in the departure of key executives or employees to the detriment of the Company and its stockholders; and WHEREAS, in order to induce Executive to remain in its employ, the Company hereby agrees that as of the Effective Date, Executive shall be entitled to receive the change of control benefits set forth below. NOW, THEREFORE, in consideration of Executive's continued employment as an executive officer or key employee of the Company and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agree as follows: 1. Term of Agreement. ----------------- (a) Original Term and Extension. Subject to earlier termination as set forth in Section 1(b), this Agreement shall commence on the Effective Date and shall continue in effect until the third anniversary of the Effective Date; provided, however, that the term of this Agreement shall automatically be extended for one or more additional terms of three years each (whether or not one or more Change of Control (as defined below) have occurred) unless, not later than 90 days prior to the last day of the then existing term, the Company shall have given notice to Executive that it does not wish to extend this Agreement. Notwithstanding the foregoing, if a Change of Control occurs during the original or any extended term of this Agreement, the term of this Agreement shall automatically continue in effect for the duration of the Protective Period (as defined below) and any attempt to have this Agreement terminate prior to such time shall be of no force or effect. (b) Earlier Termination. Notwithstanding the provisions of section 1(a), the term of this Agreement shall terminate upon the earlier of (i) the date as of which Executive ceases to be an executive officer or key employee of the Company and such cessation of position is not subject to Section 3 hereof or (ii) the expiration of the Protective Period (as defined below), as applicable. 2. Certain Definitions. ------------------- (a) Cause. "Cause" shall mean, and the Company shall be entitled to terminate the employment of Executive for: (i) fraud, misappropriation or embezzlement of money or property by Executive; (ii) willful and continued failure of Executive to substantially perform Executive's duties with the Company (other than any such failure resulting from incapacity of Executive due to physical or mental illness), which failure is not remedied within thirty (30) days after a written demand for substantial performance is delivered to Executive by the Chief Executive Officer of the Company or the Compensation and Organization Committee of the Board, which demand specifically identifies the manner in which Executive has not substantially performed Executive's duties; or (iii) willful engagement by Executive in misconduct which is materially injurious to the Company, monetarily or otherwise. For purposes of this subparagraph, no act, or failure to act, on Executive's part shall be considered "willful" unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that Executive's action or omission was in the best interest of the Company. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of the Compensation and Organization Committee finding that in the good faith opinion of the Compensation and Organization Committee, Executive was guilty of conduct set forth in this subparagraph and specifying the particulars thereof in detail. (b) Change of Control. "Change of Control" shall mean the occurrence of any of the following events: (i) the acquisition, directly or indirectly, by any "person" or "group" (as those terms are defined in Sections 3(a)(9), 13(d), and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules thereunder) of "beneficial ownership" (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the election of directors ("voting securities") of the Company that represent more than 50% of the combined voting power of the Company's then outstanding voting securities, other than: (A) an acquisition by a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company; (B) an acquisition of voting securities by the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company; or 2 (C) an acquisition of voting securities pursuant to a transaction described in clause (iii) below that would not be a Change of Control under clause (iii). Notwithstanding the foregoing, neither of the following events shall constitute an "acquisition" by any person or group for purposes of this clause (i): (x) a change in the voting power of the Company's voting securities based on the relative trading values of the Company's then outstanding securities as determined pursuant to the Company's Articles of Incorporation or (y) an acquisition of the Company's securities by the Company which, either alone or in combination only with the other event, causes the Company's voting securities beneficially owned by a person or group to represent more than 50% of the combined voting power of the Company's then outstanding voting securities; provided, however, that if a person or group shall become the beneficial owner of more than 50% of the combined voting power of the Company's then outstanding voting securities by reason of share acquisitions by the Company as described above and shall, after such share acquisitions by the Company, become the beneficial owner of any additional voting securities of the Company, then such acquisition shall constitute a Change of Control; or (ii) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (iii) the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination, (y) a sale or other disposition of all or substantially all of the Company's assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction which results in the Company's voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company's assets or otherwise succeeds to the business of the Company (the Company or such person, the "Successor Entity") directly or indirectly, of more than 50% of the combined voting power of the Successor Entity's outstanding voting securities immediately after the transaction; or (iv) a liquidation or dissolution of the Company. For purposes of clause (i) above, the calculation of voting power shall be made as if the date of the acquisition were a record date for a vote of the Company's stockholders, and for purposes of clause (iii) above, the calculation of voting power shall be made as if the date of the consummation of the transaction were a record date for a vote of the Company's stockholders. 3 (c) Code. "Code" shall mean the Internal Revenue Code of 1986, as amended, or any successor code. (d) Covenant Period. "Covenant Period" shall mean the twenty-four (24) months following the Date of Termination where such termination is an Involuntary Termination of Employment or a termination of employment by Executive for Good Reason. (e) Date of Termination. "Date of Termination" shall mean the date specified in the Notice of Termination (as defined below) as being the effective date of the termination of Executive's employment with the Company, provided that such date shall not be less than 30 days following the date the Notice of Termination is delivered. (f) Disability. "Disability" shall mean a physical or mental incapacity as a result of which Executive becomes unable to continue the proper performance of Executive's duties hereunder for six consecutive calendar months or for shorter periods aggregating 180 business days in any 12 month period, but only to the extent that such definition does not violate the Americans with Disabilities Act. (g) Good Reason. "Good Reason" shall mean, with respect to any termination by Executive of Executive's employment with the Company, any of the following which occurs during the Protective Period (as defined below), without the express written consent of Executive, unless such circumstances are cured prior to the Date of Termination: (i) The assignment to Executive by the Company of duties materially inconsistent with Executive's position, duties, responsibilities and status with the Company immediately prior to a Change of Control of the Company, or a material change in Executive's title or offices as in effect immediately prior to a Change of Control of the Company, except in connection with the termination of Executive's employment for Cause, death or Disability or by Executive other than for Good Reason; (ii) A material reduction in Executive's base salary as in effect at the time of a Change of Control of the Company, unless such reduction is on a basis not materially less favorable to Executive relative to other employees; (iii) Any failure by the Company to continue in effect any material benefit plan or arrangement in which Executive is participating at the time of a Change of Control of the Company, unless (a) an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan or arrangement, or (b) such failure is on a basis not materially less favorable to Executive, both in terms of the amount of benefits provided and the level of Executive's participation, relative to other participants; (iv) Any failure by the Company to continue in effect any bonus or incentive plan or arrangement in which Executive is participating at the time of a Change of Control of the Company, unless (a) an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan or arrangement, or (b) such failure is on a basis not materially less favorable to Executive, both in terms of the amount of benefits provided and the level of Executive's participation, relative to other participants; 4 (v) Any requirement by the Company that Executive be based anywhere other than within fifty (50) miles of Executive's office location as of the date of a Change of Control, except for required travel by Executive on the Company's business to an extent substantially consistent with Executive's business travel obligations at the time of a Change of Control of the Company; (vi) Any failure by the Company to provide Executive with the number of paid vacation days to which Executive is entitled at the time of a Change of Control of the Company; (vii) Any material breach by the Company of any provision of this Agreement; (viii) Any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; or (ix) Any purported termination by the Company of Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements set forth herein, and for purposes of this Agreement, no such purported termination shall be effective. (h) Involuntary Termination of Employment. "Involuntary Termination of Employment" shall mean any termination of Executive's employment by the Company and its subsidiaries, other than a termination for Cause or due to death or Disability. (i) Notice of Termination. "Notice of Termination" shall mean a written notice delivered by the party effecting the termination of Executive's employment to the other party. The notice shall state the specific termination provision in this Agreement relied upon for the termination of Executive's employment, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and shall state the date upon which such termination shall be effective. (j) Protective Period. "Protective Period" shall mean the six (6) months preceding the effective date of a Change of Control and the twenty-four (24) months following the effective date of a Change of Control. (k) Termination Base Salary. "Termination Base Salary" shall mean Executive's base salary at the rate in effect at the time the Notice of Termination is given or, if a greater amount, Executive's base salary at the rate in effect immediately prior to the Change of Control. 3. Change of Control Severance Plan. -------------------------------- Upon the occurrence, during a Protective Period, of (a) Executive's voluntary termination of employment for Good Reason or (b) an Involuntary Termination of Employment of Executive, Executive shall be entitled to receive the following compensation and benefits, subject to Executive's compliance with Sections 6 and 7: 5 (a) Salary Due Prior to Termination. The Company shall pay to Executive when otherwise due Executive's then base salary through the Date of Termination, along with credit for any vacation earned but not taken and any earned and awarded, but unpaid bonus amount. Such payment shall be within five days after the Date of Termination. (b) Severance Pay. The Company shall pay to Executive, as severance pay, an amount equal to 2.99 times the sum of (i) Executive's Termination Base Salary and (ii) the average aggregate annual bonus paid by the Company to Executive for the three (3) full calendar years preceding the date of Change of Control (the "Change of Control Payment"). If Executive has not been employed by the Company for three (3) full calendar years preceding the date of Change of Control, the Change of Control Payment, with respect to part (ii) of this clause above, shall be computed based on the average aggregate annual bonus paid by the Company to Executive for the full term of Executive's employment with the Company. The Change of Control Payment shall be paid in cash in a single lump sum within fifteen days after the Date of Termination, except as provided for in Section 5 below. 4. Acceleration of Option Vesting Upon a Change of Control. ------------------------------------------------------- Notwithstanding the provisions of the Company's equity compensation plans or of any particular option grant, all unvested options granted under any equity compensation plan of the Company (or assumed by the Company) and held by Executive as of the effective date of a Change of Control of the Company shall vest and become immediately exercisable upon the effective date of the Change of Control of the Company. 5. Limitation on Payments. ---------------------- If the severance and other benefits provided for in this Agreement or otherwise payable to Executive constitute "excess parachute payments" within the meaning of Section 280G of the Code, but for this Section, then Executive's Change of Control Payments and other severance benefits under this Agreement shall be reduced to such lesser amount as would result in no portion of such severance benefits being classified as excess parachute payments under Section 2806 of the Code. 6. Non-Compete and Confidentiality Covenants. ----------------------------------------- (a) Non-Compete. As an inducement for the Company to enter into this Agreement, Executive agrees that during the Covenant Period, Executive shall not, directly or indirectly in any geographic area where the Company currently operates (i) engage without the prior express written consent of the Company, in any business or activity, whether as an employee, consultant, partner, principal, agent, representative, stockholder (except as a holder of less than 2% of the combined voting power of the outstanding stock of a publicly held company) or in any other individual, corporate or representative capacity, or render any services or provide any advice to any business, activity, person or entity, if Executive knows or reasonably should know that such business, activity, service, person or entity, directly or indirectly, competes in any material manner with the Business, or (ii) meaningfully assist, help or otherwise support, without the prior express written consent of the Company, any person, business, corporation, partnership or other entity or activity, whether as an employee, consultant, partner, principal, agent, representative, 6 stockholder (other than in the capacity as a stockholder of less than 2% of the combined voting power of the outstanding shares of stock of a publicly held company) or in any other individual, corporate or representative capacity, to create, commence or otherwise initiate, or to develop, enhance or otherwise further, any business or activity if Executive knows or reasonably should know that such business or activity, directly or indirectly competes in any material manner with the Business. For purposes of this Section 6, the term "Business" shall refer to the business of the Company as presently conducted or as conducted on the Date of Termination. As of the date of this Agreement, the business of the Company, generally, involves the ownership, operation, billing, collection, maintenance, construction management, servicing and management of entities in the water or wastewater industry and water and wastewater utilities. (b) Non-Solicitation. As an additional inducement for the Company to enter into this Agreement, Executive agrees that during the Covenant Period, Executive shall not, directly or indirectly (i) with respect to the Business, take any action to solicit or divert any business (or potential business) or clients or customers (or potential clients or potential customers) away from the Company who it comes in contact with or are involved in the Business, (ii) induce customers, potential customers, clients, potential clients, suppliers, agents or other persons under contract or otherwise associated or doing business with respect to the Business with the Company to terminate, reduce or alter any such association or business with respect to the Business with or from the Company, and/or (iii) knowingly induce any person in the employment of the Company to (A) terminate such employment, (B) accept employment, or enter into any consulting arrangement, with anyone other than the Company, and/or (C) interfere with the customers, suppliers, or clients of the Company in any manner or the business of the Company. (c) Confidentiality. Throughout the Covenant Period, Executive shall not, directly or indirectly, disclose or make available to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, any Confidential Information (as defined below). Executive agrees that, upon termination of Executive's employment with the Company, all Confidential Information in Executive's possession that is in writing or other tangible form (together with all copies or duplicates thereof, including computer files) shall be returned to the Company and shall not be retained by Executive or furnished to any third party, in any form except as provided herein; provided, however, that Executive shall not be obligated to treat as confidential, or return to the Company copies of any Confidential Information that (i) was publicly known at the time of disclosure to Executive, (ii) becomes publicly known or available thereafter other than by any means in violation of this Agreement or any other duty owed to Company by any person or entity, or (iii) is lawfully disclosed to Executive by a third party. As used in this Agreement, the term "Confidential Information" means: information disclosed to Executive or known by Executive as a consequence of or through Executive's relationship with the Company, about the customers, employees, business methods, operations, public relations, contracts, organization, procedures, finances, customer lists, rates and prospects of the Company and its affiliates. (d) Remedies. Executive agrees and acknowledges that Executive's right to receive any of the benefits set forth in Sections 3 and 4 (to the extent Executive is otherwise entitled to such payments) is conditioned upon Executive's compliance with the covenants in this Section 6, and all benefits granted to Executive under this Agreement shall terminate immediately upon Executive's breach of any covenant in this Section 6 and Executive shall be responsible for refunding to the Company the benefits previously received under this Agreement. 7 (e) Understanding of Covenants. Executive represents that he (i) is familiar with the foregoing covenants not to compete and not to solicit, and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of these covenants. 7. Additional Condition to Payment. ------------------------------- The Company's obligations to make the Change of Control Payments and to provide any other benefits under Sections 3 and 4 shall be contingent upon Executive's execution (and, if applicable, non-revocation) of a general release of claims against the Company and any related parties, in the form attached as Exhibit A; provided, however, that in the event of a change in law affecting the breadth or efficacy of the release, the Company may modify Exhibit A as necessary to have the same effect as Exhibit A would have had, but for the change in law. Executive understands that he will not be entitled to any payments under this agreement should he fail to execute or should he revoke such release. 8. Indemnity. --------- In any situation where under applicable law the Company has the power to indemnify, advance expenses to and defend Executive in respect of any judgments, fines, settlements, loss, cost or expense (including attorneys' fees) of any nature related to or arising out of Executive's activities as an agent, employee, officer or director of the Company or in any other capacity on behalf of or at the request of the Company, the Company shall promptly on written request, indemnify Executive, advance expenses to Executive and defend Executive to the fullest extent permitted by applicable law, including but not limited to making such findings and determinations and taking any and all such actions as the Company may, under applicable law, be permitted to have the discretion to take so as to effectuate such indemnification, advancement or defense. Such agreement by the Company shall not be deemed to impair any other obligation of the Company respecting Executive's indemnification or defense otherwise arising out of this or any other agreement or promise of the Company or under any statute. 9. Arbitration; Dispute Resolution, etc. ------------------------------------ (a) Executive and the Company each agrees that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof (any such occurrence, a "Dispute") shall be settled by arbitration to be held in Los Angeles County, California, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction. 8 (b) The arbitrator shall apply California law to the merits of any Dispute, without reference to rules of conflict of law. The arbitration proceedings shall be governed by federal arbitration law and by the Rules, without reference to state arbitration law. The Company and Executive each hereby expressly consents to the personal jurisdiction of the state and federal courts located in California for any action or proceeding arising from or relating to this Agreement and/or relating to any arbitration in which the parties are participants. (c) The Company and Executive shall each pay one-half of the costs and expenses of such arbitration, and shall separately pay its counsel fees and expenses. (d) EXECUTIVE HAS READ AND UNDERSTANDS SECTION 9, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH, OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE COMPANY/EXECUTIVE RELATIONSHIP. (e) THE COMPANY AGREES THAT BY SIGNING THIS AGREEMENT, THE COMPANY AGREES TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF COMPANY'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE COMPANY/EXECUTIVE RELATIONSHIP. 10. Code Section 409A. ----------------- (a) Short-Term Deferral Exemption. This Agreement is not intended to provide for any deferral of compensation subject to Code Section 409A and, accordingly, the Change of Control Payment is to be paid not later than the later of: (i) the 15th day of the third month following Executive's first taxable year in which such severance benefit is no longer subject to a substantial risk of forfeiture, and (ii) the 15th day of the third month following first taxable year of the Company in which such severance benefit is no longer subject to substantial risk of forfeiture, as determined in accordance with Code Section 409A and any Treasury Regulations and other guidance issued thereunder. The date determined under this subsection is referred to as the "Short-Term Deferral Date." (b) Compliance with Code Section 409A. Notwithstanding anything to the contrary in the Agreement, in the event that the Change of Control Payment is not actually or constructively received by Executive on or before the Short-Term Deferral Date, to the extent such Change of Control Payment constitutes a deferral of compensation subject to Code Section 409A, then: (i) subject to clause (ii), such Change of Control Payment shall be paid upon Executive's "separation from service," as defined in Code Section 409A(a)(2)(A)(i), with respect to the Company, and (ii) if Executive is a 9 "specified employee," as defined in Code Section 409A(a)(2)(B)(i), with respect to the Company, such Change of Control Payment shall be paid upon the date which is six months after the date of Executive's "separation from service" (or, if earlier, the date of Executive's death) in accordance with Code Section 409A(a)(2)(B)(i) and any Treasury Regulations or other guidance issued thereunder. In the event that the Change of Control Payment is subject to this subsection, such Change of Control Payment shall be paid not later than 60 days following the payment date determined under this subsection, and shall be made subject to Section 6(d) and Section 7. 11. Miscellaneous. ------------- (a) Mitigation. Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise nor, except as provided in Section 4(a), shall the amount of any payment or benefit provided for in this Agreement be reduced by any compensation earned or benefit received by Executive as the result of employment by another the Company or self-employment, by retirement benefits, by offset against any amount claimed to be owed by Executive to the Company, or otherwise. (b) Modification. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and such officer as may be designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California without regard to its conflicts of law principles. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Except as expressly provided in this Agreement, any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The section headings contained in this Agreement are for convenience only, and shall not affect the interpretation of this Agreement. (c) Successors; Binding Agreement. (i) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets as stock of the Company to expressly assume 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. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to terminate Executive's employment and receive compensation from the Company in the same amount and on the same terms to which Executive would be entitled hereunder if Executive terminates Executive's employment for Good Reason within the Protective Period, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 10 (ii) This Agreement shall inure to the benefit of and be enforceable by Executive and Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee or other designee or, if there is no such designee, to Executive's estate. (d) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (e) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. (f) Entire Agreement. Except as set forth in clause (g) below, this Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of the subject matter contained herein. Any of Executive's rights hereunder shall be in addition to any rights Executive may otherwise have under benefit plans or agreements of the Company to which Executive is a party or in which Executive is a participant, including, but not limited to, any Company sponsored employee benefit plans and stock options plans. In the event any provision of this Agreement shall conflict with the provisions of any other agreement to which Executive and the Company are parties, the provisions of this Agreement shall control. (g) Termination of Prior Agreements. This Agreement is effective as of the Effective Date. The Prior Agreement and any other prior severance or change of control agreement between Executive and any of the Company, or predecessors to any of the Company, or any subsidiary of the Company are hereby expressly terminated as of the Effective Date. Executive hereby terminates and waives any and all rights, title and interest Executive may have under the Prior Agreement. (h) Governing Law. This Agreement is made and is to be governed by and construed under the laws of the State of California. (i) Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and delivered by United States certified or registered mail (return receipt requested, postage prepaid) or by courier guaranteeing overnight delivery or by hand delivery (with signed receipt required), addressed to the respective addresses set forth below, and such notice or communication shall be deemed to have been duly given two days after deposit in the mail, one day after deposit with such overnight carrier or upon delivery with hand delivery. The addresses set forth below may be changed in writing in accordance herewith. 11 Corporation: Southwest Water Company One Wilshire Building 624 South Grand Avenue Suite 2900 Los Angeles, California 90017 Attention: Human Resources Executive: Mark A. Swatek At last address on file with the Company IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the date first above written. COMPANY SOUTHWEST WATER COMPANY, a Delaware corporation By: /s/ Maureen Kindel --------------------------------------- Its: Director --------------------------------------- EXECUTIVE /s/ Mark Swatek --------------------------------------------- MARK A. SWATEK 12 EXHIBIT A FORM OF GENERAL RELEASE ----------------------- GENERAL RELEASE --------------- THIS GENERAL RELEASE ("Agreement") is entered into by and between ______________ ("Executive") and Southwest Water Company, a Delaware corporation (the "Company") as of _______, 200__ (the "Effective Date"). Recitals -------- WHEREAS, Executive is currently employed by the Company as _______________; WHEREAS, the Company and Executive desire to terminate their employment relationship in accordance with the terms of that certain Change of Control Severance Agreement dated __________________, 200__, by and between Executive and Company (the "Severance Agreement"); and WHEREAS, Executive's receipt of the benefits set forth in the Severance Agreement are conditioned upon Executive's execution and delivery of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and promises set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties expressly, knowingly and voluntarily agree as follows: 1. Release of the Company and Related Persons. (a) General Release. In consideration for the Company's payments and other benefits specified in the Severance Agreement, Executive hereby releases and forever discharges the Company and its respective parents, subsidiaries, predecessors, successors, heirs, estates and each of their associates, owners, stockholders, members, assigns, employees, agents, directors, officers, partners, lawyers, and all persons acting by, through, under, or in concert with them, or any of them (collectively the "Releasees") of and from any and all manner of action or actions, causes or causes of action, in law or in equity, suits, debts, liens, contracts, agreements, promises, liabilities, claims, demands, damages, losses, costs or expenses, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called "Claims"), which Executive now has or may hereafter have against the Releasees by reason of any and all acts, omissions, events or facts occurring or existing prior to the date hereof. This release includes, but is not limited to, any and all alleged claims based on Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Age Discrimination in Employment Act (including the Older Workers Benefit Protection Act), the Equal Pay Act, the Americans with Disabilities Act, the California Fair Employment and Housing Act, the California Labor Code, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act of 1993 or any common law, public policy, contract (whether oral or written, express or implied) or tort law, or any other local, state or federal law, regulation or ordinance having any bearing whatsoever on the terms and conditions of Executive's employment and the cessation thereof. The foregoing release, together with subparagraph (c) of this Section 1, shall hereinafter be referred to as the "General Release". 1 (b) Release of Unknown Claims. Executive acknowledges that he is familiar with the provisions of California Civil Code section 1542, which provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH, IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Executive, being aware of said code section, hereby expressly waives any rights he may have thereunder, as well as under any other statutes or common law principles of similar effect. (c) Older Worker's Benefit Protection Act. Executive agrees and expressly acknowledges that this General Release includes a waiver and release of all claims which Executive has or may have under the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. ss. 621, et seq. ("ADEA"). The following terms and conditions apply to and are part of the waiver and release of the ADEA claims under this Agreement: (i) That this General Release is written in a manner calculated to be understood by Executive. (ii) The waiver and release of claims under the ADEA contained in this General Release do not cover rights or claims that may arise after the date on which Executive signs this General Release. (iii) This General Release provides for consideration in addition to anything of value to which Executive is already entitled. (iv) Executive is advised to consult an attorney before signing this General Release. (v) Executive is granted twenty-one (21) days after Executive is presented with this General Release to decide whether or not to sign this General Release. If Executive executes this General Release prior to the expiration of such period, Executive does so voluntarily and after having had the opportunity to consult with an attorney. (vi) Executive will have the right to revoke the General Release within seven (7) days of signing this Agreement. In the event the General Release is revoked, this General Release will be null and void in its entirety, and Executive will not receive any of the payments provided for in the Severance Agreement. 2 (vii) If Executive wishes to revoke the General Release, he shall deliver written notice stating his intent to revoke the General Release to ________________ on or before 5:00 p.m. on the Seventh (7th) Day after the Effective Date. (d) No Assignment of Claims. Executive represents and warrants to the Releasees that there has been no assignment or other transfer of any interest in any Claim which Executive may have against the Releasees, or any of them, and Executive agrees to indemnify and hold the Releasees harmless from any liability, claims, demands, damages, costs, expenses and attorneys' fees incurred as a result of any person asserting any such assignment or transfer of any rights or Claims under any such assignment or transfer from such party. (e) No Suits or Actions. If Executive hereafter commences, joins in, or in any manner seeks relief through any suit arising out of, based upon, or relating to any of the Claims, or in any manner asserts any of the Claims against the Releasees, then he will pay to the Releasees against whom any such Claim is asserted, in addition to any other damages caused thereby, all attorneys' fees incurred by such Releasees in defending or otherwise responding to such Claim. This provision, however, shall not apply to claims relating to the interpretation of this Agreement, or to the alleged breach of this Agreement. Such claims will be governed by Section 9 of the Severance Agreement. 2. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. 3. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective legal representatives, heirs, successors, assigns, related entities, directors, officers, employees, stockholders and agents to the full extent permitted by law. 4. Severability. If any clause or provision in this Agreement is found to be void, invalid, or unenforceable, it shall be severed from the remaining provisions and clauses which shall remain in full force and effect. 5. Waiver. A waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by that same party. 6. Governing Law. This Agreement shall be governed by the laws of the state of California applicable to agreements made and to be wholly performed in such state. 7. Headings. The section headings contained in this Agreement are for convenience and reference purposes only and shall not affect in any way the meaning and interpretation of this Agreement. 8. Notices. All notices, requests, demands and other communications required or permitted under this Agreement and the transactions contemplated herein shall be in writing and shall be deemed to have been duly given, made and received on the date when delivered by hand delivery with receipt acknowledged or upon the third day after deposit in the United States mail, registered or certified with postage prepaid, return receipt requested, addressed as set forth below or to such other address as either party may have furnished to the other party: 3 (a) If to Company: Southwest Water Company One Wilshire Building 624 South Grand Avenue Suite 2900 Los Angeles, California 90017 Attention: _____________ (b) If to Executive: _________________________ _________________________ _________________________ IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. SOUTHWEST WATER COMPANY, a Delaware corporation By: ---------------------------------- Its: ---------------------------------- Executive --------------------------------------- 4 EX-99.1 4 a5152725ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Southwest Water Appoints Chairman, Vice Chairman; Announces Resignation of President/COO LOS ANGELES--(BUSINESS WIRE)--May 19, 2006--Southwest Water Company (NASDAQ:SWWC) today announced that its board of directors elected chief executive officer, Mark A. Swatek, as a director and chairman of the board, succeeding Anton C. Garnier, who remains a director and was appointed executive vice chairman. Swatek was appointed chief executive officer of Southwest Water in April and took office on May 15th. The company also announced that Peter J. Moerbeek has resigned as a director and as president and chief operating officer. "Pete has decided to pursue other opportunities after helping Southwest Water through a transition period," said Swatek. "He has done a great job over the last 10 years, and Southwest Water has benefited from his leadership and guidance. We want to thank Pete for his service and wish him the very best in his future endeavors." Commenting on his new role, Swatek stated: "As I assume the added role of chairman, I look forward to Tony's continued advice and counsel. Southwest Water is a great company with a proven strategy, and I am committed to continuing to enhance shareholder value. We will continue to build on our geographic diversification strategy through selected profitable utility acquisitions and new operations and maintenance and design/build/operate contracts. We will also continue to actively manage our utility rate proceedings and offer additional value-added services to our current clients." Southwest Water Company provides a broad range of services including water production, treatment and distribution; wastewater collection and treatment; utility billing and collection; utility infrastructure construction management; and public works services. The company owns regulated public utilities and also serves cities, utility districts and private companies under contract. More than two million people from coast to coast depend on Southwest Water for high-quality, reliable service. Additional information may be found on the company's Web site: www.swwc.com. This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, including expectations relating to future revenues and income, the company's ability to gain new business and control costs, involve risks and uncertainties, as well as assumptions that, if they prove incorrect or never materialize, could cause the results of the company to differ materially from those expressed or implied by such forward-looking statements. Actual results may differ materially from these expectations due to changes in regulatory, political, weather, economic, business, competitive, market, environmental and other factors. More detailed information about these factors is contained in the company's filings with the Securities and Exchange Commission, including the company's 2005 Annual Report on Form 10-K and Quarterly Report for the quarter ended March 31, 2006 on Form 10-Q. The company assumes no obligation to update these forward-looking statements to reflect any change in future events. CONTACT: Southwest Water Company DeLise Keim, 213-929-1846 www.swwc.com -----END PRIVACY-ENHANCED MESSAGE-----