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 Nicholas DeBenedictis
(the “Executive”).
WHEREAS, the Executive is presently employed by Aqua America, as its Chairman,
Chief Executive Officer;
WHEREAS, Aqua America considers it essential to foster 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.

 

 

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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

 

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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.

 

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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;

 

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(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.

 

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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,

 

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(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.

 

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(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.

 

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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.

 

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(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,

 

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(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 Section 13, Aqua America 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 sue 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 sue 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.

 

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(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.

 

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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.
762 W. Lancaster Avenue
Bryn Mawr, PA 19010-3489
Attention: Chairman, Executive Compensation Committee
If to the Executive, to:
Mr. Nicholas DeBenedictis

 

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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.

 

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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

 

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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.

 

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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/ Maria Gordiany
      By:   /s/ Roy H. Stahl                      
Title:
  Assistant Secretary           Title: Chief Administrative Officer    
 
                                EXECUTIVE    
 
                    /s/ Mary Ellen Callaghan           /s/ Nicholas DeBenedictis
                  Witness       Nicholas DeBenedictis    

 

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