Exhibit 10.1
RETENTION AGREEMENT
This Agreement between Richard J. Shields ("Executive") and Southwest Water
Company ("Company") has been entered into effective as of November 9, 2004
("Effective Date").
This Agreement promises the Executive severance benefits if
he is terminated without Cause or resigns for Good Reason during the Term of
this Agreement, and in certain other circumstances as provided herein.
1.
PURPOSE
The Company considers a sound and vital management team to be essential. The
Company wishes to encourage the Executive to remain an employee of the Company
through the Term of this Agreement, and the Company is willing to provide a
retention bonus to Executive, to be paid from its general assets, under the
terms and conditions provided in this Agreement.
2.
EVENTS THAT TRIGGER SEVERANCE BENEFITS
2.1
EXECUTIVE WILL RECEIVE SEVERANCE BENEFITS UNDER THIS AGREEMENT IF:
(A) EXECUTIVE'S EMPLOYMENT IS TERMINATED BY THE COMPANY WITHOUT CAUSE DURING THE
TERM OF THIS AGREEMENT; (B) EXECUTIVE RESIGNS HIS EMPLOYMENT FOR GOOD REASON
DURING THE TERM OF THIS AGREEMENT; (C) EXECUTIVE DIES DURING THE TERM OF THIS
AGREEMENT; (D) EXECUTIVE RESIGNS HIS EMPLOYMENT FOR ANY REASON DURING THE PERIOD
BEGINNING ON THE FIFTH DAY AFTER THE COMPANY FILES ITS 2004 FORM 10-K WITH THE
SECURITIES AND EXCHANGE COMMISSION AND ENDING ON THE THIRTIETH DAY AFTER THE
COMPANY FILES SUCH FORM 10-K.
2.2
FOR PURPOSES OF THIS AGREEMENT, "CASH BENEFIT" MEANS A PAYMENT IN
THE GROSS AMOUNT OF $225,000, LESS APPLICABLE TAXES AND OTHER MANDATED PAYROLL
DEDUCTIONS.
IN ADDITION, EXECUTIVE MAY ELECT TO CONTINUE TO PARTICIPATE IN
COMPANY'S STANDARD MEDICAL BENEFITS THROUGH COBRA FOR UP TO 14 MONTHS FOLLOWING
THE DATE OF THE COMMENCEMENT OF SEVERANCE BENEFITS IF:
(1) EXECUTIVE PROVIDES
WRITTEN NOTICE OF SUCH ELECTION TO COMPANY WITHIN THE TIME PRESCRIBED IN THE
"COBRA NOTICE"; AND (2) EXECUTIVE PAYS COMPANY MONTHLY AN AMOUNT EQUAL TO
EXECUTIVE'S CURRENT CONTRIBUTION FOR SUCH BENEFITS (THE "MEDICAL BENEFIT").
AS
USED HEREIN THE TERM "SEVERANCE BENEFITS" MEANS THE CASH BENEFIT AND THE MEDICAL
BENEFIT (IF THE MEDICAL BENEFIT IS ELECTED).
2.3
FOR PURPOSES OF THIS AGREEMENT, "CAUSE" MEANS ANY OF THE
FOLLOWING: (A) EXECUTIVE WILLFULLY AND NEGLIGENTLY FAILS TO PERFORM HIS MATERIAL
DUTIES FOR THE COMPANY; (B) EXECUTIVE'S ACT OR OMISSION CONSTITUTING FRAUD,
EMBEZZLEMENT OR MISAPPROPRIATION OF FUNDS UNDER THE LAWS OF THE STATE OF
CALIFORNIA OR THE UNITED STATES OF AMERICA; AND (C) THE WILLFUL, NEGLIGENT OR
RECKLESS FAILURE BY EXECUTIVE TO ADHERE TO ANY SIGNIFICANT COMPANY POLICY.
2.4
"GOOD REASON" MEANS THE OCCURRENCE OF ANY OF THE FOLLOWING WITHOUT
HIS EXPRESS WRITTEN CONSENT: (A) EXECUTIVE'S BASE COMPENSATION OR BENEFITS ARE
SUBSTANTIALLY
REDUCED; OR (B) EXECUTIVE IS DIRECTED TO FULFILL THE RESPONSIBILITIES OF HIS
POSITION IN AN UNLAWFUL MANNER.
HOWEVER, AN EVENT THAT IS OR WOULD CONSTITUTE
GOOD REASON SHALL CEASE TO BE GOOD REASON IF: (A) EXECUTIVE DOES NOT TERMINATE
EMPLOYMENT WITHIN THE LATER OF 30 DAYS AFTER EXECUTIVE HAS KNOWLEDGE OF AN ACT
OR OMISSION WHICH CONSTITUTES GOOD REASON, OR 30 DAYS AFTER THE TERMINATION OF
EFFORTS TO RESOLVE EXECUTIVE'S DIFFERENCES WITH