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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period_______________ to______________
Commission File No. 1-8586
United Water Resources Inc.
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(Exact name of registrant as specified in its charter)
New Jersey 22-2441477
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(State of incorporation) (I.R.S. Employer
Identification No.)
200 Old Hook Road, Harrington Park, N.J. 07640
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 201-784-9434
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Securities registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock (No par value) New York Stock Exchange
Outstanding at January 31, 2000 - 38,965,639
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Securities registered pursuant to Section 12 (g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x . No .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
At January 31, 2000, the registrant's Common Stock, no par value, held by
non-affiliates had an aggregate market value of $ 915,946,004. See Item 13.
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PART I
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Item 1. BUSINESS
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(a) General Development of Business
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United Water Resources Inc. (United Water, or the Company) is a New Jersey
corporation that was incorporated on February 25, 1983 and has its principal
office at 200 Old Hook Road, Harrington Park, New Jersey 07640. On April 22,
1994, United Water completed a merger (the Merger) with GWC Corporation (GWC),
in which United Water was the surviving corporation. GWC's principal assets
included 100% of the stock of General Waterworks Corporation (now known as
United Waterworks Inc.), which currently owns regulated water and wastewater
utilities operating in 11 states. The Merger was accounted for under the
purchase method of accounting.
United Water's principal utility subsidiaries, United Water New Jersey
Inc., United Water New York Inc. and the utility subsidiaries of United
Waterworks, provide water and wastewater services to approximately two million
people in 11 states (after giving effect to the divestiture of several small
utility subsidiaries to be completed in the year 2000. See Item 8, Note 3 to
the consolidated financial statements for further details), with more than one
half of the Company's utility operations located in northeastern New Jersey and
southeastern New York. United Water New Jersey was incorporated by an act of
the New Jersey Legislature in 1869. United Water New York was incorporated
under the laws of New York in 1893 and is wholly-owned by United Water New
Jersey. United Waterworks was incorporated under the laws of Delaware in 1942.
Other significant wholly-owned subsidiaries of United Water include: United
Properties Group (United Properties), which is engaged in real estate
activities, including commercial rentals, land development and sales, golf
course operations and consulting services; United Water UK Limited, an equal
partner with Lyonnaise Europe (a wholly-owned subsidiary of Suez Lyonnaise des
Eaux) in the Northumbrian Partnership (the Partnership), which has acquired a
20% interest in Northumbrian Water Group plc (NWG), a major investor-owned water
and wastewater company in the United Kingdom; United Water Mid-Atlantic, whose
subsidiaries own and operate water and wastewater systems; United Water
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Note: In addition to the historical information contained herein, this report
contains a number of "forward-looking statements," within the meaning of the
Securities Exchange Act of 1934. Such statements address future events and
conditions concerning, among other things, the adequacy of water supply and
utility plant, capital expenditures, earnings on assets, resolution and impact
of litigation, liquidity and capital resources and accounting matters. Actual
results in each case could differ materially from those projected in such
statements, by reason of factors including, without limitation, general economic
conditions, competition, actions by regulators and other governmental
authorities, technological developments and Year 2000 issues affecting the
Company's operations, markets, services and prices, and other factors discussed
in the Company's filings with the Securities and Exchange Commission, including
this report.
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USA Inc. (United Water USA) which owns a 50% stake in United Water Services LLC
(United Water Services-described below); and United Water Canada Inc. (United
Water Canada) and United Water Mexico Inc. (United Water Mexico) which own a
33.3% and 20.5% interest in United Water Services Canada (UWS Canada) and United
Water Services Mexico (UWS Mexico), respectively. In addition, the Company has
entered into "public-private partnerships" with the cities of Hoboken, Jersey
City and Rahway, New Jersey, whereby the municipalities retain ownership of
their systems while the Company operates and maintains them.
United Water Services is a 50/50 joint venture between United Water and
Suez Lyonnaise des Eaux. On July 28, 1997, United Water Services acquired the
remaining 50% stake in JMM Operational Services that it did not already own.
United Water Services provides contract operations and maintenance services for
water and wastewater facilities and is pursuing additional contract operations.
As a result, United Water Services was awarded several contracts. The largest
awards include a ten-year contract to operate the wastewater systems in
Milwaukee, Wisconsin, and a 20-year contract to operate the water system in
Atlanta, Georgia, with a minority partner. United Water Services also operates
a meter installation subsidiary, United Metering, which it purchased from United
Water in December 1997 for book value of $6.2 million.
In July 1997, the Company's subsidiaries, United Water Canada and United
Water Mexico acquired a 30% and a 20% interest in UWS Canada and UWS Mexico,
respectively. In December 1998, United Water purchased additional interests and
now has a 33.3% and a 20.5% interest in UWS Canada and UWS Mexico, respectively.
At December 31, 1999 and 1998, United Water had equity investments,
relating to contract services, of approximately $22.1 million and $19.8 million,
respectively, including investments in Canada and Mexico. This amount is
included in equity investments in the accompanying consolidated balance sheet.
United Water's share of earnings in these investments is included in equity
earnings of affiliates in the accompanying statement of consolidated income.
See Item 8, Note 4 to the consolidated financial statements for further details.
On June 28, 1996, United Water UK Limited and Lyonnaise Europe, a wholly-
owned subsidiary of Suez Lyonnaise des Eaux, formed the Partnership, which has
acquired a 20% interest in NWG. United Water's initial $62 million investment
in the Partnership was made through its wholly-owned subsidiary in the United
Kingdom, United Water UK Limited. Investment in the Partnership was $112.2
million and $96.3 million at December 31, 1999 and 1998, respectively, and is
included in equity investments in the consolidated balance sheet. United
Water's share of the Partnership's earnings, which totaled $16.3 million and
$17.1 million in 1999 and 1998, respectively, is included in equity earnings of
affiliates in the accompanying statement of consolidated income.
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During 1997, the United Kingdom's new Labor Government imposed a one-time
"windfall profits" tax on privatized utilities. The levying of this one-time
tax negatively impacted the Company's earnings from its investment in NWG by
$13.1 million, which was partially offset by a reduction in deferred taxes of
$2.8 million, which resulted from a change in the UK corporate income tax rate
from 33% to 31%. The result was a net loss of $10.3 million. The imposition of
this tax had been factored into the Company's financial analysis at the time of
its investment in NWG and was considered in determining the purchase price. The
tax did not have an effect on United Water's cash flow or ability to pay
dividends, nor did it affect the long-term benefit the Company expected to
derive from its investment in NWG. See Item 8, Note 2 to the consolidated
financial statements for further details.
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(b) Financial Information About Segments
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See Item 1 (c) and Note 16 to the consolidated financial statements in Item
8 below for segment information.
(c) Narrative Description of Business
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As a holding company, United Water does not conduct any business
operations, except through its subsidiaries.
Utility Investments
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The Company's principal business is providing water and wastewater services
to the public at large in areas where its regulated utility subsidiaries possess
franchises or other rights to provide such services. Its utility subsidiaries
are subject to rate regulation, generally by the regulatory authorities in the
states in which they operate.
United Water New Jersey supplies water service to approximately 182,000
customers in 60 municipalities in the northeastern part of New Jersey, serving
most of Bergen County and the northern part of Hudson County. The total
population served is about 750,000 persons. United Water New Jersey is subject
to regulation by the New Jersey Board of Public Utilities (BPU). United Water
New Jersey's principal source of water supply is the Hackensack River, with a
watershed of 113 square miles, and is supplemented by water diversions from
additional streams and rivers, by ground water supplies drawn from wells and by
the purchase of water from contiguous water systems. United Water New Jersey
also obtains stream flow benefits from its wholly-owned subsidiary, United Water
New York, which owns and operates an impounding reservoir, Lake DeForest, on the
Hackensack River in Rockland County, New York, and has available additional
water supply from the Wanaque South Project. The Wanaque South Project, which
was completed in 1987, is a joint undertaking of United Water New Jersey and the
North Jersey District Water Supply Commission. United Water New Jersey has a
50% interest in the utility plant of the Wanaque South Project and is
responsible for its proportionate share of operating expenses.
United Water New York supplies water service to over 65,000 customers in
Rockland County, New York, and is subject to rate regulation by the New York
Public Service Commission (PSC). The total population served is approximately
270,000 persons. United Water New York's principal source of supply is derived
from wells and surface supplies (lakes, ponds, reservoirs and streams),
including the Lake DeForest reservoir.
United Waterworks is a holding company that provides water and wastewater
services to a total of approximately 360,000 customers in 11 states (after
giving effect to the divestiture of several small utility subsidiaries to be
completed in the year 2000. See Item 8, Note 3 to the consolidated financial
statements
5
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for further details) through its regulated water and wastewater utility
subsidiaries. United Waterworks' utility subsidiaries are subject to regulation
by state regulatory commissions in each of the jurisdictions in which it
operates. The utility subsidiaries of United Waterworks serve a total population
of about 1,000,000 persons. Its water utilities obtain water primarily from
wells and surface supplies (lakes, ponds, reservoirs and streams), and in a few
cases purchase water wholesale from adjoining water systems, generally owned by
municipalities. United Waterworks' major water utility subsidiaries are
generally not dependent upon water purchased from others, except that United
Water New Rochelle, a wholly-owned subsidiary, purchases all of its water from
an aqueduct system that is owned by and serves the City of New York. United
Waterworks believes that its water utilities have adequate supplies of water for
their present requirements, but anticipates making future capital expenditures
to expand their sources of water supply, primarily through development of
additional wells and expansion of other facilities, to provide for projected
increases in future demand because of customer growth.
Subsidiaries of United Water Mid-Atlantic own and operate several small
water and wastewater utility systems that provide water supply, wastewater
collection and wastewater transmission services to approximately 6,700 customers
primarily in Plainsboro, Vernon Township and Mt. Arlington, New Jersey. United
Water Mid-Atlantic's subsidiaries are subject to regulation by the BPU.
The Company's water business is seasonal, as sales tend to be higher during
warm, dry periods. The Company's water utilities operate in some jurisdictions
in which water conservation regulations have from time to time been imposed
during periods of drought. To date, such regulations are not having a material
impact on the Company's results of operations. The Company's water utilities
have not experienced any long-term material disruption of service because of
contamination of their water supplies; however, the Company cannot predict what
effect such events, should they occur, would have on its business.
In addition, the Company holds a 50% investment in the Northumbrian
Partnership, which acquired a 20% interest in Northumbrian Water Group, a major
investor-owned water and wastewater company in the United Kingdom. The Company
accounts for this investment under the equity method of accounting.
6
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The following table sets forth information concerning United Water's water
and wastewater utility operations, particularly the operations of the nine
larger utilities, as measured by revenues, which in 1999 accounted for 84.9% of
United Water's utility customers, 91.5% of United Water's utility operating
revenues and 91.7% of United Water's net investment in utility plant.
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# of Customers at 1999
Major Utility Operations Dec. 31, 1999 Revenues
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(in thousands)
United Water New Jersey 182,000 $124,308
United Water New York 65,000 44,000
United Waterworks Subsidiaries:
United Water Florida 54,997 29,809
United Water Idaho 66,121 26,424
United Water Pennsylvania 47,936 22,149
United Water New Rochelle 30,385 19,950
United Water Delaware 33,549 19,847
United Water Toms River 46,047 14,740
United Water Arkansas 18,995 7,628
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Subtotal 545,030 308,855
Other utility operations 96,852 28,765
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Total utility operations 641,882 $337,620
The Company's water utility subsidiaries chemically and physically treat,
filter or otherwise improve the quality of the water. Treated water is
distributed to customers through the utility subsidiaries' distribution mains,
assisted by pumping facilities where necessary. The Company's utility
operations provide water that meets or surpasses the minimum standards of the
Federal Safe Drinking Water Act (SDWA) of 1974, as amended.
Customers. In 1999, the Company's utility revenues were derived as
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follows: 63% from residential customers, 26% from commercial customers, 7% from
industrial customers and 4% from fire protection customers. Of the Company's
612,595 water utility customers at December 31, 1999, 543,480 (89%) were
residential customers, 57,716 (9%) were commercial customers and 11,399 (2%)
were industrial customers. The Company also had 29,287 wastewater customers at
December 31, 1999, many of whom were also water customers of the Company. The
Company does not depend on any single customer, because no single customer
accounted for more than 10% of the Company's consolidated utility revenues in
1999.
Capital Expenditures. The Company's additions to utility plant were $82
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million in 1999 as compared to $99.7 million in 1998. For a discussion of the
Company's capital expenditures, see Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operations, below.
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Competition and Franchises. Substantially all of the Company's utility
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subsidiaries serve an area or areas in which the subsidiaries own and operate
the sole public water or wastewater system. Accordingly, the Company's utility
businesses are, in most cases, free from direct competition. The Company
believes that its utility subsidiaries possess all material governmental
franchises, water rights, licenses and permits as are necessary for the
continuation of the water and wastewater operations as now conducted. Many such
franchises, rights, licenses and permits are perpetual and others are expected
to be renewed as they expire. The Company's utility subsidiaries derive their
rights to install and maintain distribution mains under streets and other public
places from statutes, municipal ordinances and permits from state and local
authorities. In most cases, these rights are non-exclusive.
Governmental Acquisition. In most of the states in which the Company has
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water or wastewater operations, there exists the right of governmental
acquisition. The price to be paid under condemnation is usually determined in
accordance with the eminent domain statutes of the state governing the taking of
land or other property by condemnation, which statutes generally provide for the
payment of a price which reflects the fair value of the condemned property.
Rate Matters. The Company's utility subsidiaries are subject to
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regulation by state regulatory commissions having jurisdiction over their
respective service areas with regard to rates, services, safety, accounting,
issuance of securities, changes in ownership, control or organization and other
matters. The rates charged by the Company's utility subsidiaries are fixed by
the regulatory authority having jurisdiction over the respective utility. The
Company's present rate structure consists of various rate and service
classifications. The profitability of the Company's utility subsidiaries is to
a large extent dependent upon the timeliness and adequacy of the rate relief
allowed by regulatory authorities. Accordingly, the Company maintains a
centralized rate management staff which monitors expense increases, capital
expenditures and other factors affecting the financial performance of its
utility subsidiaries and prepares, files and litigates rate cases. In certain
jurisdictions, procedures have been established by the utility regulatory
authorities to permit a more rapid, and less costly, recovery of certain expense
increases. The Company believes that all of its regulated utilities are in
compliance in all material respects with the appropriate state regulations. For
a discussion of rate increases granted to the Company's utility subsidiaries in
1999 as well as other rate matters, see Item 8, Note 12 to the consolidated
financial statements, below.
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Non-Regulated Operations
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Several of the Company's subsidiaries are engaged in activities which are
not subject to regulation of rates, service and similar matters by state public
utility commissions. The Company's principal non-regulated operations include
(a) United Properties, a subsidiary engaged in real estate activities, (b) a 50%
investment in United Water Services, which provides contract operations and
maintenance services for water and wastewater facilities and (c) public-private
partnerships with the cities of Jersey City, Hoboken and Rahway, New Jersey.
United Properties United Properties is a non-regulated business engaged in
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real estate investment and development activities, including commercial office
and retail properties, residential and commercial land development and sales,
golf course operations and consulting services. United Properties owns and
manages a portfolio of real estate located in New Jersey, New York, Delaware,
Idaho and Florida. United Properties also provides consulting and advisory
services in support of the real estate assets of the other United Water
companies.
In December 1999, United Properties contributed buildings to the Corporate
Office Properties United Partnership and in return received a $24.3 million
investment in preferred units of this partnership. This investment will result
in the recording of dividend income.
United Water Services As mentioned above, on July 28, 1997, United Water
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Services acquired the remaining 50% stake in JMM Operational Services.
United Water Services provides contract operations and maintenance services
for water and wastewater facilities and is pursuing additional contract
operations. As a result, United Water Services was awarded several contracts.
The largest awards include a ten-year contract to operate the wastewater systems
in Milwaukee, Wisconsin, and a 20-year contract to operate the water system in
Atlanta, Georgia, with a minority partner. United Water Services also provides
construction management, training and advisory services, as well as operates a
meter installation subsidiary, United Metering, which it purchased from United
Water in December 1997 for book value of $6.2 million.
In July 1997, the Company's subsidiaries, United Water Canada and United
Water Mexico, acquired a 30% and a 20% interest in UWS Canada and UWS Mexico,
respectively, which provide contract operations and maintenance services for
water and wastewater facilities. In December 1998, United Water purchased
additional interests and now has a 33.3% and a 20.5% interest in UWS Canada and
UWS Mexico, respectively. The Company's investments in United Water Services,
UWS Canada and UWS Mexico are accounted for under the equity method of
accounting.
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Public-Private Partnerships United Water is forming public-private
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partnerships and similar arrangements in which municipalities retain ownership
of their systems while the Company operates and maintains them. The Company
entered into public-private partnerships with the cities of Rahway, Jersey City
and Hoboken, New Jersey in November 1999, May 1996 and July 1994, respectively.
10
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Employee Relations
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The Company and its subsidiaries have approximately 1,300 employees.
Subsidiaries of the Company are parties to agreements with labor unions covering
approximately 560 employees at 10 locations. During the past five years, the
Company has experienced no work stoppages. The Company considers its employee
relations to be good.
Environmental Regulation
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The Company and its subsidiaries are subject to environmental regulation by
state and federal agencies. The state agencies typically consist of one
responsible for public health and another responsible for environmental
protection. The United States Environmental Protection Agency (EPA) administers
numerous federal statutes which encompass both public health and environmental
protection concerns.
At the Federal level, the SDWA provides minimum standards for potable water
quality and monitoring. State statutes and regulations, which are also
applicable, impose standards, which, in some cases, are more stringent than the
Federal standards. The Company believes that all its water utilities are
currently in compliance in all material respects with, and have all permits
required by, the SDWA and other applicable Federal and state health and
environmental statutes and regulations.
During 1996, the EPA issued revisions and a timetable for future revisions
of its regulations, which resulted in additional and more stringent standards
under the SDWA. Although the Company projects that additional expenditures for
utility plant will be required as a result of the 1996 amendments to the SDWA,
it anticipates that regulatory authorities will allow a recovery of and return
on any investment needed. Accordingly, the Company does not expect any
significant adverse financial impact from these regulations on the Company's
results of operations or financial condition.
The Federal Water Pollution Control Act, also known as the Clean Water Act,
and state laws in a number of jurisdictions regulate certain effluent discharges
into waterways. These laws are administered by the EPA at the federal level and
by state agencies. These laws require the Company's utility subsidiaries to
obtain permits for effluent discharges associated with water and wastewater
treatment operations, and these permits typically impose limitations with
respect to quality and quantity of effluent discharges. The Company believes
that its utility subsidiaries are currently in compliance in all material
respects with, and have all permits required by, these pollution control
statutes.
Of the projected $264 million (excluding the effects of inflation)
aggregate capital expenditures of United Water's utility subsidiaries over the
next five years, approximately 11% are estimated to be related to compliance
with environmental laws and regulations.
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(d) Financial Information About Geographic Areas
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Northumbrian Partnership In June 1996, a wholly-owned subsidiary of United
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Water, and Lyonnaise Europe, formed the Partnership, which has acquired a 20%
interest in NWG, a major investor-owned water and wastewater company in the
United Kingdom. The Company accounts for this investment under the equity
method of accounting. See Item 8, Note 4 to the consolidated financial
statements, below.
United Water Services In July 1997, the Company's subsidiaries, United
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Water Canada and United Water Mexico, acquired a 30% and a 20% interest in UWS
Canada and UWS Mexico, respectively, which provide contract operations and
maintenance services for water and wastewater facilities. In December 1998,
United Water purchased additional interests and now has a 33.3% and a 20.5%
interest in UWS Canada and UWS Mexico. The Company accounts for these
investments under the equity method of accounting.
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Item 2. PROPERTIES
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Regulated Utility Operations
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United Water's utility subsidiaries own, operate and maintain a total of
382 wells, 106 water treatment plants, with the largest plant having treatment
capacities of up to 200 million gallons per day (MGD), 16 wastewater treatment
plants, with the largest plant having treatment capacities of up to 3.25 MGD,
and 229 ground and elevated storage tanks. The Company's utility subsidiaries
also own numerous impounding basins, lift stations and purification stations,
generally located on land owned by the respective subsidiaries. In addition,
the Company's utility subsidiaries own a total of approximately 7,614 miles of
water transmission and distribution mains and 230 miles of wastewater collection
mains. The water mains and wastewater collection facilities are located in
easements and rights-of-way on or under public highways, streets, waterways and
other public places pursuant to statutes, municipal ordinances and permits from
state and local authorities, or on or under property owned by the respective
subsidiaries or occupied under property rights from the owners, which rights are
deemed adequate for the purposes for which they are used. In addition, the
Company's subsidiaries own pipelines, meters, services, fire hydrants,
transportation vehicles, construction equipment, office furniture and equipment,
and computer equipment. United Water's subsidiaries own or lease office space
at their respective locations.
In connection with the Wanaque South Project, United Water New Jersey owns
a 17-mile aqueduct from the Wanaque Reservoir to the Oradell Reservoir, along
with a booster pumping station. United Water New Jersey also owns 50% of the
other elements of the Wanaque South Project, including an 11-mile aqueduct and
related pump stations, a roller compacted concrete dam and reservoir, and has
contractual rights to yields derived from the Passaic and Ramapo rivers.
Non-Regulated Operations
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United Properties owns approximately 578 acres of land held for sale or
under development principally in New Jersey, New York and Florida, and 181,671
square feet of office and retail properties. In addition, United Properties
owns two golf properties in New Jersey.
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Item 3. LEGAL PROCEEDINGS
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United Water Toms River, a wholly-owned subsidiary of United Waterworks,
has been approached by counsel for several families in its franchise area to
notify them that counsel is considering filing a class action lawsuit naming
United Water Toms River as one of at least three defendants and alleging
personal injuries sustained as a result of contaminated water being delivered to
the potential plaintiffs. Counsel has reviewed testing data accumulated by the
New Jersey Department of Environmental Protection and United Water Toms River
which show that United Water Toms River has delivered water to its customers in
complete conformance with all applicable federal and state water quality
standards. Suit has not been filed. An initial agreement tolling the statute
of limitations for at least eighteen months was signed with the potential
plaintiffs and took effect February 1998. A second agreement, extending the
tolling period for an additional eighteen months, was executed in July 1999.
United Water Toms River has also entered into a joint defense agreement with
other potential defendants, Ciba-Geigy and Union Carbide. This agreement will
allow the potential defendants to work together until all disputes with the
potential plaintiffs have been resolved.
On September 22, 1998, Ramapo Land Co., Inc. commenced a lawsuit against
United Water New York (UWNY), a wholly-owned subsidiary of the Company, in the
Supreme Court of the State of New York, Rockland County, seeking specific
performance of certain provisions of a 1990 Water Release Agreement between UWNY
and Ramapo Land. The Water Release Agreement allows UWNY to release water from
Cranberry and Potake Lakes to augment flows in the Ramapo River. The lawsuit
alleges that UWNY has failed to meet certain maintenance and repair obligations
with respect to Cranberry and Potake dams and that water releases have exceeded
permitted levels. Management is vigorously defending the litigation and is
actively pursuing settlement. If the lawsuit is not resolved successfully,
UWNY's water releases from Cranberry and Potake Lakes could be affected, which
in turn could impact UWNY's operation of the Ramapo Valley Well Field during
periods when the Ramapo River is at low flow. Management believes that the
resolution of this matter will not have a material adverse effect upon the
financial position or results of operations of the Company.
On January 22, 1998, the Pierson Lakes Homeowners Association, Inc. and
various individuals (Plaintiffs) commenced a lawsuit against UWNY and Ramapo
Land Co., Inc. in the Supreme Court of the State of New York, Rockland County.
This litigation is related to the above-referenced lawsuit by Ramapo Land Co.,
Inc. against UWNY in connection with maintenance and repair obligations and
water releases from Cranberry and Potake Lakes. The Pierson Lakes lawsuit seeks
declaratory relief, injunctive relief and money damages against UWNY and Ramapo
Land Co. in amounts in excess of $25 million. In addition to claims relating to
alleged failure to maintain the dams and spillways, Plaintiffs claim that the
water releases
14
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have damaged the recreational and aesthetic value of the lakes, as well as their
docks, boats and other personal property. Management is vigorously defending
this action and is also pursuing settlement negotiations with the various
parties. Management believes that the resolution of this matter will not have a
material adverse effect upon the financial position or results of operations of
the Company.
Two lawsuits were recently filed contesting the pending merger by and among
Lyonnaise American Holding, Inc. ("LAH"), Suez Lyonnaise des Eaux ("SLDE") and
United Water. These suits are (1) Herbert Behrens vs. Donald L. Correll et al.,
filed on August 25, 1999 in the Superior Court of New Jersey Chancery Division,
Bergen County and (2) Lawrence Steinberg vs. United Water et al., filed on
August 24, 1999 in the Superior Court of New Jersey Chancery Division, Bergen
County.
These suits allege, among other things, breach of fiduciary duty by United
Water and its directors because the merger was purportedly agreed to without an
appropriate evaluation of UWR's worth to an acquisition candidate. Both suits
seek, in addition to other relief, an injunction preventing SLDE and LAH from
acquiring UWR for the consideration stated in the merger agreement.
UWR believes that these suits are entirely without merit and is vigorously
defending against them.
United Water is not a party to any other litigation other than that
described above and routine litigation incidental to the business of United
Water. None of such litigation, either individually or in the aggregate, is
material to the business of United Water.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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During the fourth quarter of 1999, there were no matters submitted to a
vote of security holders.
15
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PART II
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Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------- ------------------------------------------------------------------
MATTERS
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United Water's common stock is traded on the New York Stock Exchange under
the symbol UWR. The high and low sales prices for United Water's common stock
for 1999, 1998 and 1997 and the dividends paid on the common stock in each
quarter were as follows:
(dollars) Stock Price Dividend
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Quarter High Low
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1999 Fourth $34.500 $32.625 $.30
Third 33.750 20.750 .24
Second 23.688 20.000 .24
First 24.063 18.438 .24
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1998 Fourth $25.000 $16.500 $.24
Third 19.250 16.375 .23
Second 18.438 15.750 .23
First 19.875 17.500 .23
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1997 Fourth $19.750 $16.000 $.23
Third 19.813 17.000 .23
Second 19.375 16.375 .23
First 18.500 15.000 .23
The high and low stock prices from January 1 to February 29, 2000, were $34.875
and $33.750. There were 16,545 holders of record of United Water's common stock
as of February 29, 2000.
Dividend Policy The Company has continuously paid cash dividends on its
---------------
common stock since 1886. Under the Company's current common stock dividend
policy, quarterly dividends are paid by the Company, generally on March 1, June
1, September 1 and December 1. Each future declaration of dividends, however,
shall be made at the sole discretion of the Board of Directors, and only out of
cumulative earnings available therefor.
16
<PAGE>
Item 6. SELECTED FINANCIAL DATA
- ------- -------------------------
<TABLE>
<CAPTION>
Year ended December 31,
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
(thousands of dollars except per share data) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Income Statement Data
- ---------------------
Operating revenues $ 362,336 $ 356,210 $ 351,409 $ 332,045 $ 319,536
Operating income 77,395 97,600 95,644 95,699 82,183
Net income applicable to
common stock 31,117 43,929 29,331 34,010 17,343
Net income per common share .81 1.19 .83 1.01 .54
Net income per common share-
assuming dilution .80 1.17 .83 1.00 .54
====================================================================================================================================
Dividends paid per share 1.02 .93 .92 .92 .92
Balance Sheet Data (at end of period)
- ----------------------------------------------
Total assets $1,803,065 $1,768,156 $1,658,264 $1,582,097 $1,516,708
Long-term debt 639,017 652,969 622,737 558,093 558,658
Preferred stock
without mandatory redemption 9,000 9,000 9,000 9,000 9,000
Preferred and preference stock
with mandatory redemption 33,104 80,282 86,579 93,261 98,091
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Operating revenues and operating income represent results from continuing
operations. Prior year amounts have been restated to conform with current year
presentation.
17
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
---------------------------------------
SIGNIFICANT ITEMS
The following items had a significant impact on the financial results of United
Water Resources (United Water, or the Company):
Strategic Initiatives
During the third quarter of 1999, United Water announced strategic
initiatives designed to strengthen the long-term performance of the Company.
These initiatives were as follows:
. On August 23, 1999, the Company announced an agreement for Suez
Lyonnaise des Eaux to acquire the remaining shares of United Water it
did not already own for cash of $35 per share. As a result, United
Water's stock price increased. This increase resulted in an after-tax
charge of $2.2 million, representing an adjustment of the values of
stock options issued under the Company's variable stock option plan.
The acquisition agreement was approved by United Water's shareholders
on January 20, 2000, and remains subject to regulatory approvals. The
Company expects that this transaction will close during the second
quarter of 2000.
. On July 13, 1999, United Water announced that it was offering a
voluntary early retirement program to employees who qualified based on
age and length of service. This program, which ended September 14,
1999, resulted in a charge to net income of $5 million and is expected
to result in annual savings of approximately $3.5 million in payroll
costs, starting in 2000.
. On July 13, 1999, the Company announced that it entered into a
definitive agreement to sell several small utility subsidiaries to
American Water Works Company for approximately $49 million in cash,
which would result in an after-tax gain of approximately $6 million.
These utilities collectively contribute annual revenues of
approximately $13.8 million, provide water service to about 35,000
customers and represent less than 4% of the Company's regulated assets
and under 2% of the population it serves. The decision to sell these
subsidiaries was made in an effort to focus United Water's core
utility business in service areas experiencing significant growth and
development. Completion of the transaction is contingent upon
regulatory approvals. In the first quarter of 2000, the Company
concluded the sales of United Water Indiana and United Water Virginia
for $30.4 million. These transactions resulted in an after-tax gain of
$4.1 million.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As shown in the consolidated statement of cash flows, the Company's major
uses of cash in 1999 included: $88.6 million of capital expenditures and $42
million of common, preferred and preference dividends paid to shareholders. The
major sources of funds to meet these cash needs included: $31.8 million of
additional long-term debt; $61.8 million of cash provided by operations; $16.5
million of proceeds from the issuance of additional shares of common stock; and
an $40.6 million increase in short-term notes payable.
Capital expenditures are generally incurred by United Water's utility
subsidiaries in connection with the normal upgrading and expansion of existing
water and wastewater facilities and to comply with existing environmental
regulations. United Water considers its utility plant to be adequate and in
good condition. These capital expenditures are necessary to meet growth
requirements and to comply with environmental laws and regulations. Excluding
the effects of inflation, the capital expenditures of United Water's utility
subsidiaries are projected to aggregate $264 million over the next five years,
including $54 million and $53 million in 2000 and 2001, respectively. This
total includes $153 million for United Waterworks and $106 million for United
Water New Jersey and United Water New York. The expenditures related to
compliance with environmental laws and regulations are estimated to be
approximately 11% of the projected capital expenditures over the 2000-2004
period. To the best of management's knowledge, the Company is in compliance
with all material environmental laws and regulations.
United Water anticipates that its future capital expenditures will be
funded by internally generated funds and external financings. In addition,
United Water's regulated utilities participate in a number of tax-exempt
financings to fund capital expenditures. The companies draw down funds on these
financings as qualified capital expenditures are made. As of December 31, 1999,
$24.8 million of proceeds from these financings had not yet been disbursed to
the Company and are included in the consolidated balance sheet as restricted
cash. The amount and timing of the use of these proceeds and of future
financings will depend on actual capital expenditures, the timeliness and
adequacy of rate relief, the availability and cost of capital, and the ability
to meet interest and fixed charge coverage requirements.
In December 1994, United Waterworks entered into a medium-term note program
that enabled United Waterworks to issue up to $75 million of debt with terms
ranging from 9 months to 30 years. The interest rates are set as notes are
issued under the program. The first $10 million of notes under this program
were issued in 1995. Another $15 million of notes were issued in October 1997.
In February 1998, United Waterworks issued an additional $40 million of notes
($20 million at 6.97% due 2023, $15 million at 7.1%
19
<PAGE>
due 2028 and $5 million at 6.9% due 2017). In November 1998, United Waterworks
issued the final $10 million of notes under this program ($5 million at 6.44%
due 2008 and $5 million at 6.97% due 2023). The proceeds were used to redeem
outstanding notes payable.
In June 1996, United Water entered into a $30 million long-term note
agreement with Credit Lyonnais to partially fund its investment in the
Northumbrian Partnership. The loan bears interest at a London Interbank Offered
Rate based floating rate and is payable in annual installments through June
2006. In December 1998, the Company entered into an interest rate swap
agreement, which fixed the interest rate at 5.24% for 1999 and 5.34% for the
years 2000 through 2003.
In December 1998, United Water New Jersey issued $35 million of 5% Water
Facilities Revenue Bonds due 2028 through the New Jersey Economic Development
Authority. The proceeds are being used to finance the cost of acquiring,
constructing and reconstructing certain water transmission, transportation,
storage, treatment, and distribution facilities located in Passaic, Bergen,
Sussex, and Hudson counties in New Jersey.
In January 1999, United Water issued $30 million of Senior Notes ($5
million at 6.07% due 2005, $10 million at 6.43% due 2009, $10 million at 6.7%
due 2019, and $5 million at 7.04% due 2019). The proceeds were used to redeem
all remaining shares of 7 5/8% Series B cumulative preferred stock. See Note 7
to the consolidated financial statements for further details.
In October 1999, United Water redeemed $25 million of 9.38% senior notes
due 2019. This early redemption resulted in an extraordinary after-tax loss of
$1.1 million, representing the premium paid and the write-off of unamortized
debt costs.
On January 7, 2000, the Company called for redemption of all 150,000 shares
of its 7 3/8% preferred stock. The redemption resulted in the payment of
principal, accrued dividends and premium totaling $15.5 million, with $.5
million relating to the premium paid on the early redemption. The preferred
stock was redeemed with short-term financing.
At December 31, 1999, United Water had cash and cash equivalents of $.8
million (excluding restricted cash) and unused short-term bank lines of credit
of $185.8 million. Management expects that cash flows provided by operations
and unused credit lines currently available will be sufficient to meet
anticipated future operational needs.
20
<PAGE>
YEAR 2000 COMPLIANCE
Overview
- ----------
United Water successfully implemented a Year 2000 (Y2K) program designed to
mitigate, to the fullest extent possible, the impact of the century date change
on the Company's computer systems and automated processes, including those that
affect the delivery of water and wastewater services. The Company initiated
this program in 1994 with the Information Technology Strategic Plan (the ITSP),
which addressed all areas of technology and automation within United Water. A
key component of that plan was the identification of the Y2K issue and the need
to address the effect of the Y2K issue on all aspects of the Company's
operations. The Company addressed "Y2K readiness" as a critical component of
each project or initiative undertaken at United Water since 1994 that had Y2K
ramifications.
United Water defined Y2K readiness as the ability of the Company to advance
into 2000 with minimal effect on the Company's critical computer systems and
automated processes that control the delivery of water and wastewater services,
and the Company's operations, liquidity or financial condition. As a result of
these readiness activities, United Water encountered no significant problems
with the transition to the year 2000.
The Y2K program addressed internal systems and processes consisting of
application software, hardware, databases, networks, personal computers, data
processing equipment and operating systems (collectively, information technology
or IT systems) and embedded technology or microprocessors in non-computer
equipment (collectively, non-IT systems). The Y2K program also addressed the
assessment and monitoring of the Y2K compliance status of third parties upon
which the Company relies.
In addition, management believes that United Water complied with the
various Y2K requirements of the regulatory agencies that closely supervise its
activities. Such compliance included responding to surveys and questionnaires,
filing status reports, participating in task forces and sub-committees for the
purpose of meeting Y2K readiness targets, and contingency planning efforts.
The Company's State of Readiness
- --------------------------------
United Water successfully transitioned into the year 2000 with no problems
encountered by the Company's critical computer systems and automated processes.
This was a direct result of the attention and effort devoted to readiness
activities since 1994. United Water's strategy to replace the aging technical
infrastructure, including IT and non-IT systems, enabled United Water and its
operating affiliates to make a smooth transition into the 21st century.
21
<PAGE>
In addition to its own Y2K program, the Company was involved with Y2K
compliance efforts undertaken by one of its equity investments, United Water
Services (UWS).
UWS, which is engaged in providing contract operations to U.S. cities,
successfully implemented a Y2K program utilizing the guidelines established by
the Company. This program was applied to all UWS's project sites and resulted in
the production of inventories, risk assessments, testing methodologies and
contingency plans for Y2K compliance.
Where UWS assumed responsibility for part or all of the Y2K compliance
efforts of its operating affiliates in the various cities, it coordinated Y2K
corrective measures with the cities and their Y2K consultants or
representatives, where applicable, to mitigate business interruption exposures
associated with the Y2K problem.
United Water maintained close contact with UWS and other entities in which
it has equity interests to ascertain that appropriate and prudent action was
taken in order to achieve Y2K compliance.
Relationships with Third Parties
- ---------------------------------
United Water maintained close third party relationships during this effort
with regulatory agencies, critical vendors and service providers. This included
continuous communications with the appropriate regulatory agencies.
Costs
- ------
United Water's Y2K readiness evolved from the strategic initiatives of the
ITSP, which was budgeted as part of the Company's ongoing capital expenditures
since 1994. As a result, United Water has been able to minimize Y2K-related
compliance expenses outside of the ITSP budget. The Company's principal
technology costs to date have been associated with the planned replacement of IT
and non-IT systems, which has not been accelerated due to the Y2K issue.
United Water costs related to Y2K compliance efforts that fell outside the
ITSP budget were approximately $1 million. These costs included SCADA upgrade
as required internal employee time, as well as other miscellaneous costs.
Contingency Plans
- -----------------
In preparation for the Year 2000 and as a prudent measure of contingency
planning, United Water reviewed and refined all emergency operating plans for
each operating location. In addition, each location developed a full emergency
notification plan in the event of an emergency. The Company also developed
22
<PAGE>
a full "business continuity management plan and procedures" designed to
coordinate disaster and emergency management throughout the corporation. These
plans were tested on December 31, 1999. The focus of the contingency plans was
to address the possibility of automation failure so that the Company can sustain
its operational systems in the event of any such failure.
Risks
- -----
Management previously identified the most reasonably likely worst case
scenarios due to Y2K non-compliance issues to be fluctuations in water pressure,
aesthetic water quality and other temporary service interruptions. While United
Water transitioned successfully to the Year 2000, there are still several
significant dates to be encountered over the next year. United Water expects
the risk of automation failure at any of these to be significantly reduced based
on the smooth transition to the Year 2000. In addition, United Water has the
added benefit of well tested contingency management plans, which can be executed
as needed.
23
<PAGE>
RATE MATTERS
The profitability of United Water's regulated utilities is, to a large
extent, dependent upon adequate and timely rate relief. The Company anticipates
that the regulatory authorities that have jurisdiction over its utility
operations will allow the Company's regulated utilities to earn a reasonable
return on their utility investments.
The Company continues to follow Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," for
its regulated utilities. SFAS No. 71 provides for the recognition of regulatory
assets and liabilities as allowed by state regulators that are considered
probable of recovery. See Note 1 to the consolidated financial statements.
During 1999, the Company's regulated utilities received fourteen rate
decisions with an aggregate annual revenue increase of $4.4 million. An
estimated $2.6 million of this amount was reflected in 1999's revenues while the
remaining $1.8 million is expected to increase revenues in 2000. Current year
revenues also reflect the carryover impact of the rate awards granted in 1998 in
the amount of $4 million, as well as the reversal of a reserve for revenues in
effect, subject to refund, for which a positive resolution was reached in 1999.
See Note 12 to the consolidated financial statements for further details.
On October 26, 1996, United Water Delaware placed $2.3 million in increased
revenues in effect, subject to refund. On July 15, 1997, the Delaware Public
Utility Commission granted the Company a permanent rate increase of $1.6
million. On July 16, 1997, the Company filed an appeal and application for a
stay of the Commission's Order. On July 29, 1997, the Delaware Superior Court
granted a stay of the Commission decision pending the appeal. On March 31,
1998, the Superior Court decided in favor of the Commission. The Company
appealed this decision to the Supreme Court of Delaware and on February 11,1999,
the Supreme Court reversed the Commission's decision which had denied the $.7
million annual revenue increase, subject to refund and remanded the matter to
the Commission. As a result, the Company reversed a $1.7 million reserve which
was established for potential refunds pertaining to this case. In June 1999, the
Commission approved a stipulation permitting the Company to retain all revenues
collected without refund and permitting the rates currently in effect to become
permanent.
On March 11, 1998, United Water Delaware filed a request to increase
revenues by $4.1 million, or 24.8%. On May 11, 1998, interim rates of $2.4
million were placed in effect, subject to refund. A final decision was received
in June 1999 for $2 million. The difference of $.4 million has been refunded to
customers. The Company was fully reserved for these refunds.
At the end of January 2000, the Company had four rate cases pending
requesting an aggregate annual rate increase of $4.2 million. The most
significant rate case pending was filed by United Water New
24
<PAGE>
Rochelle. In July, 1999, United Water New Rochelle applied for a multi-year rate
increase. The filing requested an increase in revenues of $3.3 million, or 17.2%
for the 12 months ending May 31, 2001, an additional increase of $3.7 million,
or 16.4% for the 12 months ending May 31, 2002 and a final increase of $4.1
million, or 15.6% for the 12 months ending May 31, 2003. These increases were
requested primarily to recover capital investments.
Generally, the rate awards actually received by the Company's operating
utilities are less than the amounts requested, primarily due to differing
positions of the parties involved and/or updated information provided during the
proceedings.
25
<PAGE>
REAL ESTATE ACTIVITIES
United Properties Group (United Properties) owns and manages a portfolio of
real estate located in New Jersey, New York, Delaware, Idaho, and Florida,
consisting of commercial properties, golf courses and land under development.
In March 1999, United Properties sold two office buildings (Harrison
Plaza), which contributed annual revenues of approximately $4.6 million, for
$42.1 million. This transaction resulted in a pre-tax gain of $5.8 million and
net cash proceeds of $39.5 million. Cash proceeds of $15.6 million were used to
pay off long-term debt related to the office buildings.
In June 1999, United Properties purchased three office/retail buildings for
$40.6 million. Cash proceeds from the sale of Harrison Plaza of $23.9 million,
as well as $16.8 million of short-term debt were used to finance this purchase.
In December 1999, United Properties contributed these buildings to a partnership
and in return received preferred units in this partnership, as well as the
partnership's assumption of $16.7 million in short-term debt.
United Properties expects to spend $27.9 million over the next five years
for capital expenditures on its existing real estate portfolio, including $12.3
million and $3.4 million in 2000 and 2001, respectively. Funding for United
Properties' activities is anticipated to come from sales of properties,
operations of existing commercial properties and golf courses, and proceeds from
new financings. The timing of these expenditures will depend upon market
conditions and the attainment of necessary approvals.
RESULTS OF OPERATIONS
Overview
United Water's net income applicable to common stock for 1999 was $31.1
million, or $.81 per common share, as compared to $43.9 million, or $1.19 per
common share, earned in 1998. Earnings for 1999 included an after-tax charge of
$7.2 million relating to the strategic initiatives announced during the third
quarter of 1999. Excluding these initiatives, income before extraordinary item
was $39.4 million, or $1.02 per common share for 1999 compared with $43.9
million, or $1.19 per common share for 1998. This decrease was primarily
attributable to the regulatory lag in obtaining rate recovery on a new customer
information system that was placed in service at the end of 1998, as well as a
favorable prior year property tax settlement recorded in the fourth quarter of
1998. In addition, United Water's utilities in the Northeast experienced higher
operating expenses due to increased purchased water and pumping charges as a
result of drought conditions in the third quarter of 1999. Earnings for 1998
included a $2.9 million contribution from the effect on deferred taxes of a
decrease in the UK corporate tax rate. Excluding the impact of the
26
<PAGE>
deferred taxes in 1998, the Company experienced higher earnings from the
Northumbrian Partnerhsip.
United Water's net income applicable to common stock for 1998 was $43.9
million, or $1.19 per common share, as compared to $29.3 million, or $.83 per
common share, earned in 1997. During 1997, the United Kingdom's new Labor
Government imposed a one-time "windfall profits" tax on privatized utilities.
The levying of this one-time tax negatively impacted the Company's earnings from
its investment in NWG by $13.1 million, which was partially offset by the effect
of a change in the tax rate on deferred taxes of $2.8 million. Income before
non-recurring items was $43.9 million, or $1.19 per common share for 1998
compared with $39.7 million, or $1.12 per common share for 1997. This increase
was attributable to improved domestic utility performance as a result of rate
awards, higher water consumption and a property tax settlement relating to a
prior year. In addition, the Company experienced higher earnings from the
Northumbrian Partnership primarily due to the effect on deferred taxes of a
decrease in the UK corporate tax rate during 1998.
27
<PAGE>
Operating Revenues
Operating revenues increased $6.1 million, or 1.7%, in 1999 and $4.8
million, or 1.4%, in 1998 from the prior years, as follows:
- --------------------------------------------------------------------------------
1999 vs. 1998 1998 vs. 1997
(thousands of dollars) Increase (Decrease) Increase (Decrease)
- --------------------------------------------------------------------------------
Utilities
Rate awards $ 7,693 2.2% $ 9,790 2.8%
Consumption 1,433 0.4% 1,346 0.4%
Growth 3,019 0.8% 993 0.3%
Real estate (5,157) (1.5%) (3,879) (1.1%)
Other operations (862) (0.2%) (3,449) (1.0%)
- --------------------------------------------------------------------------------
$ 6,126 1.7% $ 4,801 1.4%
- --------------------------------------------------------------------------------
1999 versus 1998
The 2.2% increase in revenues from rate awards in 1999 includes the impact
of fourteen 1998 and fourteen 1999 increases for the Company's operating
utilities. Higher consumption due to favorable weather conditions in the
majority of service areas resulted in an increase in revenues of $1.4 million in
1999, despite the impact of mandatory water restrictions in the Northeast during
the third quarter of 1999. The increase in revenues due to growth is primarily
attributable to the acquisition of South County Water Company in Idaho in the
first quarter of 1999, as well as increased customers at the Florida operating
utility. Real estate revenues decreased $5.2 million primarily due to lower
land sale revenues, as well as lower rental revenue. The .2% decrease in
operating revenues from other operations was primarily attributable to lower
incentive revenues from the public-private partnership with Jersey City, New
Jersey, partially offset by higher revenues from the public-private partnership
with Hoboken, New Jersey, as well as revenues from a new public-private
partnership in New Jersey.
1998 versus 1997
The 2.8% increase in revenues from rate awards in 1998 includes the impact of
fifteen 1997 and fourteen 1998 increases for the Company's operating utilities.
Higher consumption due to favorable weather conditions in Northeast service
areas resulted in an increase in revenues of $1.3 million in 1998. The increase
in revenues due to growth is partially attributable to increased customers at
several operating utilities. Real estate revenues decreased $3.9 million
primarily due to lower land sale revenues as a result of a significant land sale
in the first quarter of 1997, partially offset by higher golf course revenues.
The $3.4 million decrease in operating revenues from other operations was
primarily attributable to the absence of revenues from the Company's meter
installation subsidiary, which was sold in the fourth quarter of 1997, partially
offset by an increase in revenues from the public-private partnership with
Jersey City, New Jersey.
28
<PAGE>
Operating Expenses
Operating expenses increased $26.3 million in 1999 and $2.8 million in 1998
from the prior years, as follows:
- --------------------------------------------------------------------------------
1999 vs. 1998 1998 vs. 1997
(thousands of dollars) Increase (Decrease) Increase
- --------------------------------------------------------------------------------
Operation and maintenance $17,785 10.6% $ (560) (0.3%)
Depreciation and amortization 4,406 11.0% 5,256 15.1%
General taxes 4,140 8.2% (1,851) (3.6%)
- --------------------------------------------------------------------------------
1999 versus 1998
The $17.8 million increase in operation and maintenance expenses includes
$7.7 million and $3.4 million, respectively, for the voluntary early retirement
program and the adjustment of the values of stock options as part of the
strategic initiatives announced during 1999. The increase was also attributable
to higher outside services and employee benefits costs at several of the
Company's subsidiaries. In addition, expenses increased due to higher purchased
water and pumping charges as a result of drought conditions, prior to the
mandatory water restrictions in the Northeast. Additionally, the Company
experienced operating expenses from a new public-private partnership in New
Jersey, as well as higher operating expenses from the partnership with Jersey
City. This was partially offset by a decrease in the cost of real estate
properties sold as a result of fewer property sales in 1999.
The $4.4 million increase in depreciation and amortization was primarily
attributable to an increase in depreciation rates as a result of regulatory
changes, as well as the placement in service of a new customer information
system at the end of 1998.
General taxes increased $4.1 million, or 8.2%, in 1999 primarily due to a
property tax settlement received in the fourth quarter of 1998, as well as
higher real estate taxes in utility operations.
1998 versus 1997
The decrease in operation and maintenance expenses was due primarily to the
absence of costs from the Company's meter installation subsidiary, which was
sold in the fourth quarter of 1997, as well as a $3.9 million decrease in the
cost of real estate properties sold, primarily due to a significant land sale in
the first quarter of 1997. This was partially offset by the write-off of
deferred start-up charges under Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities" as well as higher outside services and employee
benefits costs at several of the Company's subsidiaries.
The $5.3 million increase in depreciation and amortization was primarily
attributable to utility plant additions by the Company's utility subsidiaries,
as well as accelerated amortization associated with the service contract in
Jersey City. General taxes decreased $1.9 million, or 3.6%, in 1998 primarily
due to a
29
<PAGE>
property tax settlement received in the fourth quarter of 1998. This was
partially offset by higher real estate, franchise and gross receipts taxes in
utility operations.
Interest Expense
Interest expense increased $3.3 million in 1999 from 1998 primarily due to
the issuance of $30 million of Senior Notes in January 1999, the proceeds of
which were used to redeem all remaining shares of 7 5/8% Series B cumulative
preferred stock, as well as higher short-term debt. See the statement of
consolidated capitalization and Notes 5 and 6 to the consolidated financial
statements for further details on long-term debt and notes payable.
Equity Earnings of Affiliates
The $.4 million increase in equity earnings of affiliates in 1999 was due
mainly to a $.8 million increase in combined results from United Water Services,
UWS Canada and UWS Mexico. The Company also experienced higher equity earnings
from its other equity investment, Dundee Water Power and Land, as a result of a
one-time condemnation settlement recorded in the third quarter of 1998.
This was partially offset by a $.8 million decrease in earnings from the
Northumbrian Partnership, due to the $2.9 million effect on deferred taxes of a
decrease in the UK corporate tax rate, in the second quarter of 1998.
During 1999, the Office of Water Services (OFWAT) in the United Kingdom
announced its decision to substantially reduce water prices over the next five
years effective April 2000. As a result, the Company will experience lower
earnings from its investment in the Northumbrian Partnership.
Income Taxes
The effective income tax rates on income before preferred and preference
stock dividends were 28.6% in 1999, 27.9% in 1998 and 36.4% in 1997. An
analysis of income taxes is included in Note 13 to the consolidated financial
statements.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities" effective for all fiscal
years beginning after June 15, 2000. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in
the fair value of derivatives are recorded each period in current earnings or
other comprehensive income. Due to its limited use of derivative instruments,
management believes the adoption of SFAS No. 133 will not have a significant
effect on the Company's financial condition or results of operations.
30
<PAGE>
Effects of Inflation
Operating income from utility operations is normally not materially
affected by inflation because cost increases generally lead to proportionate
increases in revenues allowed through the regulatory process. However, there is
a lag in the recovery of higher expenses through the regulatory process, and
therefore, high inflation could have a detrimental effect on the Company until
rate increases are received. Conversely, lower inflation and lower interest
rates tend to result in reductions in the rates of return allowed by the utility
commissions, as has occurred over the last several years.
Prospective Information
In addition to the historical information contained herein, this report
contains a number of "forward-looking statements," within the meaning of the
Securities Exchange Act of 1934. Such statements address future events and
conditions concerning the adequacy of water supply and utility plant, capital
expenditures, earnings on assets, resolution and impact of litigation, liquidity
and capital resources and accounting matters. Actual results in each case could
differ materially from those projected in such statements, by reason of factors
including, without limitation, general economic conditions, competition, actions
by regulators and other governmental authorities, and technological developments
affecting the Company's operations, markets, services and prices, and other
factors discussed in the Company's filings with the Securities and Exchange
Commission, including this report.
31
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -----------------------------------------------
Index to Consolidated Financial Statements
- ------------------------------------------
Page
----
Financial Statements:
Report of Independent Accountants 33
Consolidated Balance Sheet at
December 31, 1999 and 1998 34
Statement of Consolidated Income for each of the
years ended December 31, 1999, 1998 and 1997 35
Statement of Consolidated Common Equity for each of
the years ended December 31, 1999, 1998 and 1997 36
Statement of Consolidated Cash Flows for each of the
years ended December 31, 1999, 1998 and 1997 37
Statement of Consolidated Capitalization at
December 31, 1999 and 1998 38
Notes to Consolidated Financial Statements 39 - 66
Financial Statement Schedules:
For the three years ended December 31, 1999
VIII - Consolidated Valuation and Qualifying Accounts 81
All other schedules are omitted because they are not applicable, or the required
information is shown in the consolidated financial statements or notes thereto.
Financial statements of any 50%-owned investments have been omitted because the
registrant's proportionate share of net income and total assets of each is less
than 20% of the respective consolidated amounts, and the investment in and the
amount advanced to each is less than 20% of consolidated total assets.
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Shareholders of
United Water Resources
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of United Water Resources and its subsidiaries at December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of United Water Resources' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
February 24, 2000
33
<PAGE>
Consolidated Balance Sheet
UNITED WATER RESOURCES AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
(thousands of dollars) 1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Utility plant, including $24,533 and $47,348 under construction $1,620,716 $1,540,564
Less accumulated depreciation 358,528 328,224
---------- ----------
1,262,188 1,212,340
Utility plant acquisition adjustments,
Less accumulated amortization of $13,004 and $11,411 60,714 61,320
Real estate and other investments,
Less accumulated depreciation of $9,721 and $13,628 79,836 81,630
Equity investments 134,755 116,598
---------- ----------
214,591 198,228
Current assets:
Cash and cash equivalents 768 8,011
Restricted cash 24,803 48,495
Accounts receivable and unbilled revenues, less allowance of $1,234 and $1,204 62,221 59,693
Prepaid and other current assets 16,972 12,235
---------- ----------
104,764 128,434
Deferred charges and other assets:
Regulatory assets 65,424 75,582
Prepaid employee benefits 33,913 29,237
Unamortized debt expense 33,652 34,745
Other deferred charges and assets 27,819 28,270
---------- ----------
160,808 167,834
$1,803,065 $1,768,156
========== ==========
Capitalization and Liabilities
Capitalization:
Common stock and retained earnings $ 468,790 $ 456,029
Preferred stock without mandatory redemption 9,000 9,000
Preferred stock with mandatory redemption 6,935 49,748
Preference stock, convertible, with mandatory redemption 26,169 30,534
Long-term debt 639,017 652,969
---------- ----------
1,149,911 1,198,280
Current liabilities:
Notes payable 134,000 93,400
Preferred stock and long-term debt due within one year 21,119 5,795
Accounts payable and other current liabilities 37,259 36,525
Accrued taxes 24,466 24,257
Accrued interest and dividends 9,079 8,023
---------- ----------
225,923 168,000
Deferred credits and other liabilities:
Deferred income taxes and investment tax credits 197,072 195,368
Customer advances for construction 36,206 30,648
Contributions in aid of construction 154,413 143,327
Other deferred credits and liabilities 39,540 32,533
---------- ----------
427,231 401,876
Commitments and contingencies (Notes 7 and 12)
$1,803,065 $1,768,156
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
34
<PAGE>
Statement of Consolidated Income
UNITED WATER RESOURCES AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Years ended December 31,
(thousands except per share data) 1999 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $362,336 $356,210 $351,409
Operating expenses:
Operation and maintenance 186,172 168,387 168,947
Depreciation and amortization 44,356 39,950 34,694
General taxes 54,413 50,273 52,124
-------- -------- --------
Total operating expenses 284,941 258,610 255,765
-------- -------- --------
Operating income 77,395 97,600 95,644
Interest and other expenses:
Interest expense, net of amount capitalized 49,204 45,917 45,372
Allowance for funds used during construction (2,884) (4,567) (3,397)
Preferred stock dividends of subsidiaries 2,171 2,223 2,256
Windfall profits tax of affiliate -- -- 10,334
Gain on sale of Harrison Plaza (5,846) -- --
Equity earnings of affiliates (11,855) (11,451) (10,647)
Other income, net (3,369) (1,959) (2,529)
-------- -------- --------
Total interest and other expenses 27,421 30,163 41,389
-------- -------- --------
Income before income taxes &
extraordinary item 49,974 67,437 54,255
Provision for income taxes 15,019 19,450 20,579
-------- -------- --------
Income before extraordinary item 34,955 47,987 33,676
Preferred and preference stock dividends 2,697 4,058 4,345
-------- -------- --------
Net income applicable to common stock &
before extraordinary item 32,258 43,929 29,331
Extraordinary item:
Loss on early extinguishment of debt, net of income
tax benefit of $614 (1,141) -- --
-------- -------- --------
Net income applicable to common stock $ 31,117 $ 43,929 $ 29,331
======== ======== ========
Average common shares outstanding 38,528 37,028 35,492
Net income (loss) per common share
Before extraordinary item $ .84 $ 1.19 $ .83
Extraordinary item (.03) -- --
-------- -------- --------
Total $ .81 $ 1.19 $ .83
======== ======== ========
Average common shares outstanding-assuming dilution 40,583 39,192 37,838
Net income (loss) per common share
Before extraordinary item $ .83 $ 1.17 $ .83
Extraordinary item (.03) -- --
-------- -------- --------
Total $ .80 $ 1.17 $ .83
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
35
<PAGE>
Statement of Consolidated Common Equity
UNITED WATER RESOURCES AND SUBSIDIARIES
<TABLE>
<CAPTION>
Accumulated
Common Stock Other
Number Comprehensive Retained
(thousands) of shares Amount Income Earnings Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 34,549 $328,132 $6,703 $ 56,655 $391,490
Dividend reinvestment and stock purchase plans 1,446 25,083 -- -- 25,083
Net income applicable to common stock -- -- -- 29,331 29,331
Cumulative translation adjustment -- -- 591 -- 591
--------
Total comprehensive income -- -- -- -- 29,922
--------
Conversion of 5% preference stock 300 4,742 -- -- 4,742
Cash dividends paid on common stock, $.92 per share -- -- -- (32,636) (32,636)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 36,295 357,957 7,294 53,350 418,601
Dividend reinvestment and stock purchase plans 1,264 23,068 -- -- 23,068
Net income applicable to common stock -- -- -- 43,929 43,929
Cumulative translation adjustment -- -- 464 -- 464
--------
Total comprehensive income -- -- -- -- 44,393
--------
Conversion of 5% preference stock 277 4,394 -- -- 4,394
Cash dividends paid on common stock, $.93 per share -- -- -- (34,427) (34,427)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 37,836 385,419 7,758 62,852 456,029
Dividend reinvestment and stock purchase plans 790 16,520 -- -- 16,520
Net income applicable to common stock -- -- -- 31,117 31,117
Cumulative translation adjustment -- -- (70) -- (70)
--------
Total comprehensive income -- -- -- -- 31,047
--------
Conversion of 5% preference stock 284 4,534 -- -- 4,534
Cash dividends paid on common stock, $1.02 per share -- -- -- (39,340) (39,340)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 38,910 $406,473 $7,688 $ 54,629 $468,790
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
36
<PAGE>
Statement of Consolidated Cash Flows
UNITED WATER RESOURCES AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31,
(thousands of dollars) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 33,814 $ 47,987 $ 33,676
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 46,100 41,300 35,959
Deferred income taxes and investment tax credits, net 8,838 11,878 8,934
Equity earnings of affiliates (11,855) (11,451) (313)
Proceeds from sale of United Metering -- -- 6,223
Proceeds from sales of properties 394 3,761 11,068
Gain on sales of properties (89) (2,605) (5,220)
Gain on sales of operating assets (6,442) -- --
Improvements to property under development (1,627) (2,125) (1,376)
Allowance for funds used during construction (2,884) (4,567) (3,397)
Changes in assets and liabilities, net of effect of
acquisitions:
Accounts receivable and unbilled revenues (2,183) (1,970) 2,551
Prepayments (2,147) (530) (311)
Prepaid employee benefits (4,615) (7,811) (5,287)
Regulatory assets 6,666 4,088 (4,569)
Accounts payable and other current liabilities 555 3,692 1,131
Accrued taxes (6,238) (2,621) 8,863
Accrued interest and dividends 1,056 (94) (294)
Other, net 2,429 1,222 417
-------- --------- ---------
Net cash provided by operating activities 61,772 80,154 88,055
-------- --------- ---------
Investing activities:
Additions to utility plant (excludes allowance for funds
used during construction) (81,988) (99,722) (83,321)
Additions to real estate and other properties (46,046) (4,177) (2,080)
Additions to equity investments (6,555) (4,784) (15,859)
Acquisitions, net of cash received (3,772) -- --
Proceeds from sales of operating assets 41,390 -- --
Change in restricted cash 23,692 (13,914) (7,378)
-------- --------- ---------
Net cash used in investing activities (73,279) (122,597) (108,638)
-------- --------- ---------
Financing activities:
Change in notes payable 40,600 18,475 (18,300)
Additional long-term debt 31,826 85,233 75,565
Reduction in preferred stock and long-term debt (56,547) (59,318) (34,585)
Issuance of common stock 16,520 23,068 25,083
Dividends on common stock (39,340) (34,427) (32,636)
Dividends on preferred and preference stock (2,697) (4,058) (4,345)
Net contributions and advances for construction 13,902 12,935 9,386
-------- --------- ---------
Net cash provided by financing activities 4,264 41,908 20,168
-------- --------- ---------
Net decrease in cash and cash equivalents (7,243) (535) (415)
Cash and cash equivalents at beginning of year 8,011 8,546 8,961
-------- --------- ---------
Cash and cash equivalents at end of year $ 768 $ 8,011 $ 8,546
======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
37
<PAGE>
Statement of Consolidated Capitalization
UNITED WATER RESOURCES AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
December 31,
(thousands of dollars) 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock and retained earnings:
Common stock, no par value--authorized 100,000,000 shares $ 422,412 $ 401,370
Less treasury shares, at cost (15,939) (15,951)
Retained earnings 54,629 62,852
Accumulated other comprehensive income 7,688 7,758
---------- ----------
Total common stock and retained earnings 468,790 456,029
---------- ----------
Cumulative preferred stock without mandatory redemption:
United Water New Jersey, authorized 2,000,000 shares,
stated value--$100 per share, issuable in series:
4 1/2% Series, authorized and outstanding 30,000 shares 3,000 3,000
4.55% Series, authorized and outstanding 60,000 shares 6,000 6,000
---------- ----------
Total preferred stock without mandatory redemption 9,000 9,000
---------- ----------
Cumulative preferred and preference stock with mandatory redemption,
net of amount due within one year:
United Water New Jersey:
5% Series, authorized 15,000 shares; outstanding 5,400 and 6,000 shares 480 540
7 3/8% Series, authorized and outstanding 150,000 shares - 15,000
United Water New York:
Authorized 100,000 shares, stated value--$100 per share issuable in series:
$8.75 Series, issued and outstanding 20,000 and 22,000 shares 1,800 2,000
$9.84 Series, issued and outstanding 43,750 and 46,875 shares 4,062 4,375
United Water Idaho: 5%, authorized and outstanding 7,291and 7,399 shares 593 607
United Water Resources:
7 5/8% Series B, authorized 300,000 shares; outstanding 285,000 shares - 27,226
5% Series A, convertible preference, authorized 3,983,976 shares;
outstanding 1,955,984 and 2,296,278 shares 26,169 30,534
---------- ----------
Total preferred and preference stock with mandatory redemption 33,104 80,282
---------- ----------
Long-term debt, net of amount due within one year:
United Water New Jersey:
First mortgage bonds, 5.8%-5.9%, due 2024 (weighted average 5.85%) 40,000 40,000
Unsecured promissory notes, variable rates, due 2025-2026
(weighted average 2.94% and 3.11%) 130,000 130,000
Unsecured promissory notes, 5% 1998 EDA bonds, due 2028 35,000 35,000
United Water New York:
First mortgage bonds, 9 3/8%, due 2001 300 600
Unsecured promissory notes, 5.65%-8.98%, due 2023-2025 (weighted average 6.74%) 51,000 51,000
United Water Resources:
Promissory notes, 9.38%, due 2019 - 25,000
Promissory notes, floating LIBOR-based interest rate, due 2006 21,000 24,000
Promissory notes, 6.07%-7.9%, due 2005-2022 (weighted average 7.23% and 7.73%) 70,000 40,000
United Waterworks:
Unsecured debt, 5.30%-10.05%, due 2007-2028 (weighted average 7.06% and 7.07%) 281,278 282,815
United Properties Group:
Mortgage notes, 7.99%-10%, due 1999-2009 (weighted average 7.99% and 9.97%) 1,826 15,697
Floating rate LIBOR-based term loan, due 2000 7,078 7,211
New Jersey Wastewater Treatment Loans, 0%-4.2%, due 2013
(weighted average 2.52% and 2.48%) 1,535 1,646
---------- ----------
Total long-term debt 639,017 652,969
---------- ----------
Total capitalization $1,149,911 $1,198,280
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation: The consolidated financial statements include the
accounts of United Water Resources (United Water, or the Company) and the
subsidiaries in which it has more than 50% ownership. The Company accounts for
investments in which it has significant influence under the equity method of
accounting. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Certain
prior year amounts have been reclassified to conform with current year
presentation.
Description of business: United Water's principal utility subsidiaries include
United Water New Jersey, United Water New York and United Waterworks. These
subsidiaries provide water and wastewater services to approximately two million
people in 11 states (after giving effect to the divestiture of several small
utility subsidiaries to be completed in the year 2000. See Note 3 for further
details). Other significant wholly-owned subsidiaries of United Water include:
United Properties Group (United Properties), which is engaged in real estate
activities including commercial rentals, land development and sales, golf course
operations, and consulting services; United Water UK, an equal partner with
Lyonnaise Europe (a wholly-owned subsidiary of Suez Lyonnaise des Eaux) in the
Northumbrian Partnership, which has acquired a 20% interest in Northumbrian
Water Group plc (NWG), a major investor-owned water and wastewater company in
the United Kingdom; and United Water Mid-Atlantic, which owns and operates water
and wastewater systems. In addition, the Company has entered into public-
private partnerships with the cities of Hoboken, Jersey City and Rahway, New
Jersey, whereby the municipalities retain ownership of their systems while the
Company operates and maintains them. United Water also has several equity
investments in the contract services business.
United Water's domestic utility subsidiaries are subject to regulation by the
public utility commissions of the states in which they operate. Their
accounting must comply with the applicable uniform system of accounts prescribed
by these regulatory commissions and must also conform to generally accepted
accounting principles as applied to rate-regulated public utilities. The
Company continues to follow Statement of Financial Accounting Standards (SFAS)
No. 71 "Accounting for the Effects of Certain Types
39
<PAGE>
of Regulation" for its regulated utilities. SFAS No. 71 provides for the
recognition of regulatory assets and liabilities as allowed by state regulators
that are considered probable of recovery.
Equity investments: The Company holds an indirect investment in NWG and has
representation on its board of directors, and owns a 50% stake in United Water
Services and a 33.3% and 20.5% interest in United Water Services Canada (UWS
Canada) and United Water Services Mexico (UWS Mexico), respectively. The
Company accounts for these investments under the equity method of accounting by
recording its proportionate share of earnings included in equity investments in
the consolidated balance sheet and equity earnings of affiliates in the
statement of consolidated income.
Foreign currency translation: Financial statements for United Water UK are
translated into U.S. dollars at year-end exchange rates for assets and
liabilities and weighted average exchange rates for income and expenses. The
resulting cumulative translation adjustment is recorded as a separate component
of stockholders' equity in the Company's statement of consolidated common
equity.
Transactions for UWS Canada and UWS Mexico are recorded in U.S. dollars.
Therefore, a foreign currency translation adjustment is not required for these
entities.
Utility plant: Utility plant is recorded at original cost, which includes
direct and indirect labor and material costs associated with construction
activities, related operating overheads and an allowance for funds used during
construction (AFUDC). AFUDC is a non-cash credit to income and includes both
the cost of borrowed funds and a return on equity funds attributable to plant
under construction.
The original cost of utility property retired or otherwise disposed of in the
normal course of business is charged to accumulated depreciation, and salvage
(net of removal cost) is credited thereto; no gain or loss is recognized. The
costs of property repairs, replacements and renewals of minor property items are
included in maintenance expense when incurred.
Utility plant acquisition adjustments: Utility plant acquisition adjustments
represent the difference between the purchase price and the book value of net
assets acquired, and are amortized, generally, on a straight-line basis over a
40-year period. Utility plant acquisition adjustments include a premium paid to
acquire operating utilities. At each balance sheet date, the Company evaluates
the realizability of utility
40
<PAGE>
plant acquisition adjustments on the basis of expected future undiscounted cash
flows. Based on its most recent evaluation, the Company believes that no
impairment of utility plant acquisition adjustments exists at December 31, 1999.
Advances and contributions in aid of construction: When required by the public
utility commissions of the states in which the Company's utility subsidiaries
operate, outside parties, generally customers and developers, make payments to
the Company to fund certain utility capital expenditures to provide water or
wastewater service to new customers. Non-refundable amounts received by the
Company are recorded as contributions in aid of construction, except where the
Company is required to record such amounts directly as a reduction to utility
plant. Refundable amounts received are recorded as advances, and are
refundable, for limited periods of time, generally as new customers begin to
receive service. The remaining balance of any advances received, after the
Company has made all required refunds of such advances, is transferred to
contributions in aid of construction.
The balances of advances and contributions are used to reduce utility plant in
determining rate base, and plant funded by advances and contributions is
generally not depreciated. However, the public utility commissions in several
of the states in which the Company operates permit the depreciation of plant
funded by contributions in aid of construction, but also require that
contributions be amortized, so that there is no net effect on income from the
depreciation of the contributed plant. For income tax purposes, advances and
contributions received after 1986 and through June 1996 are included as taxable
income, and the related plant is depreciated for tax purposes. In accordance
with changes in the tax law, effective June 12, 1996, advances and contributions
are no longer included in taxable income, nor is the related plant depreciated
for tax purposes.
Jointly owned facilities: Utility plant includes United Water New Jersey's 50%
interest in the Wanaque South Water Supply Project, the net book value of which
was $41.2 million and $42 million at December 31, 1999 and 1998, respectively.
United Water New Jersey's share of the project's operating expenses is included
in operation and maintenance expenses.
Regulatory assets: Included in deferred charges and other assets are regulatory
items that are expected to be recognized when included in future rates and
recovered from customers as directed by the state public utility commissions.
These regulatory assets include items that the public utility commissions have
ordered
41
<PAGE>
the Company's regulated utilities to defer and prudently incurred costs where
the Company expects that recovery is probable because of the past practices of
the public utility commissions.
Regulatory assets consisted of the following at December 31:
- --------------------------------------------------------------------------------
(thousands of dollars) 1999 1998
- --------------------------------------------------------------------------------
Recoverable income taxes $36,069 $41,141
Deferred employee benefits 16,057 18,268
Rate case 2,412 3,308
Tank painting 2,856 3,117
Other 8,030 9,748
- --------------------------------------------------------------------------------
Total regulatory assets $65,424 $75,582
- --------------------------------------------------------------------------------
Real estate: Real estate properties are carried at the lower of cost, which
includes original purchase price and direct development costs, discounted cash
flow value or fair value. Real estate taxes and interest costs are capitalized
during the development period. The amount of interest capitalized was $200,000
in 1999, $650,890 in 1998 and $651,251 in 1997. Real estate operating revenues
include rental income from commercial properties, proceeds from the disposition
of real estate properties, revenues from golf course operations and fees from
consulting services.
In March 1999, United Properties sold two office buildings (Harrison Plaza),
which contributed annual revenues of approximately $4.6 million, for $42.1
million. This transaction resulted in a pre-tax gain of $5.8 million and net
cash proceeds of $39.5 million. Cash proceeds of $15.6 million were used to pay
off long-term debt related to the office buildings.
In June 1999, United Properties purchased three office/retail buildings for
$40.6 million. Cash proceeds of $23.9 million, as well as $16.8 million of
short-term debt were used to finance this purchase. In December 1999, United
Properties contributed these buildings to a partnership and in return received
preferred units of this partnership, as well as the partnership's assumption of
$16.7 million in short-term debt. This investment will generate dividend
income, which will be accounted for as other income in the statement of
consolidated income.
Unamortized debt expense: Debt premium, debt discount and deferred debt
expenses are amortized to income or expense over the lives of the applicable
issues.
42
<PAGE>
Revenues from utility operations: United Water New Jersey and United Waterworks
recognize as revenues billings to customers, plus estimated revenues for
consumption for the period from the date of the last billing to the balance
sheet date. United Water New York recognizes revenues as bills are rendered to
customers and does not accrue for unbilled revenues. United Water New York and
United Water New Rochelle have been directed by the New York Public Service
Commission to institute a Revenue Reconciliation Clause, which requires the
reconciliation of billed revenues with pro forma revenues that were used to set
rates. Any variances outside a threshold range are accrued or deferred for
subsequent recovery from or refund to customers. At December 31, 1999 and 1998,
United Water New York and United Water New Rochelle had $4.3 million and $4.4
million, respectively, of net unamortized revenue accruals, resulting from
revenues which were more than the amounts used to set rates. These amounts are
expected to be refunded over a three-year period.
Revenues from real estate activities: Revenues from real estate sales are
recognized when the transaction is consummated and title has passed. Revenues
from real estate transactions were $.4 million, $4.9 million and $11.2 million
in 1999, 1998 and 1997, respectively.
United Properties owns several office buildings, with an aggregate net book
value of $15.8 million (net of accumulated depreciation of $6.1 million) at
December 31, 1999, which are leased to tenants under various operating leases.
The following is a schedule, by year, of the minimum future rental income on
non-cancelable operating leases outstanding at December 31, 1999:
- ------------------------------------------------------------
(thousands of dollars)
- ------------------------------------------------------------
2000 $2,191
2001 2,134
2002 1,758
2003 993
2004 367
Thereafter 428
- ------------------------------------------------------------
Total minimum future rental income $7,871
- ------------------------------------------------------------
Revenues from public-private partnerships: In May 1996, United Water entered
into a five-year contract with Jersey City to operate its municipal water
system. This contract stipulated that the city could terminate the contract in
the fourth or fifth year. In 1999, the city exercised its option to terminate
the contract during the fourth year. United Water was then awarded a new eight-
year contract with Jersey City, commencing January 1, 2000. This contract also
provides for monthly service fees, which are recorded as revenues when
43
<PAGE>
billed, as well as certain incentives based on collection and marketing goals,
which are accrued, based on historical information. In addition, the contract
also provides for capital projects management fees due upon completion of any
capital project. Service fee revenues for the years ended December 31, 1999,
1998 and 1997 were $7.8 million, $10 million and $9.2 million, respectively.
In 1994, the Company entered into a ten-year contract with the city of Hoboken
to operate, maintain and manage its municipal water system. In 1996, this
contract was extended for an additional ten years. Under this contract, revenues
are recorded monthly based upon customer billings. Revenues for the years ended
December 31, 1999, 1998 and 1997 were $4.5 million, $4 million and $3.9 million,
respectively.
In November 1999, the Company entered into a 20-year contract with Rahway, New
Jersey to operate, maintain and manage its municipal water system. Under this
contract, revenues are recorded on the percentage of completion basis. Revenues
for the two months ended December 31, 1999 were $.5 million.
Depreciation: Depreciation of utility plant and real estate properties is
recognized using the straight-line method over the estimated service lives of
the properties. Utility plant depreciation rates are prescribed by the public
utility commissions. The provisions for depreciation in 1999, 1998 and 1997
were equivalent to 2.6%, 2.4% and 2.3%, respectively, of average depreciable
utility plant in service. Real estate properties are depreciated over estimated
lives ranging between 25 and 50 years. For federal income tax purposes,
depreciation is computed using accelerated methods and, in general, shorter
depreciable lives as permitted under the Internal Revenue Code.
Income taxes: The Company and its eligible subsidiaries file a consolidated
federal income tax return. Federal income taxes are deferred under the liability
method in accordance with SFAS No. 109, "Accounting for Income Taxes." Under
the liability method, deferred income taxes are provided for all differences
between financial statement and tax basis of assets and liabilities. Additional
deferred income taxes and offsetting regulatory assets or liabilities are
recorded to recognize that income taxes will be recoverable or refundable
through future revenues.
Investment tax credits arising from property additions are deferred and
amortized over the estimated service lives of the related properties.
44
<PAGE>
Statement of cash flows: United Water considers all highly liquid investments
with original maturities of three months or less to be cash equivalents. The
Company made cash payments for interest (net of amounts capitalized) and federal
and state income taxes as follows:
- --------------------------------------------------------------------------------
(thousands of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
Interest, net of amounts capitalized $47,978 $44,651 $44,400
Income taxes 9,141 11,520 7,413
- --------------------------------------------------------------------------------
The following is a supplemental schedule of non-cash transactions in 1999,
1998 and 1997:
- --------------------------------------------------------------------------------
(thousands of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
Conversion of 5% preference stock $ 4,694 $4,576 $4,967
Contribution of buildings to partnership:
Fair value of assets contributed 41,085 - -
Short-term debt assumed 16,720 - -
- --------------------------------------------------------------------------------
NOTE 2 -MERGER ACTIVITY
In August 1999, the Company announced an agreement for Suez Lyonnaise des Eaux
to acquire the remaining shares of United Water it did not already own for cash
of $35 per share. The acquisition agreement was approved by United Water's
shareholders on January 20, 2000, and remains subject to regulatory approvals.
The Company expects that this transaction will close during the second quarter
of 2000.
NOTE 3 -DIVESTITURES
In July 1999, the Company announced that it entered into a definitive agreement
to sell several small utility subsidiaries to American Water Works Company for
approximately $49 million in cash, which are anticipated to result in an after-
tax gain of approximately $6 million. These utilities collectively contribute
annual revenues of approximately $13.8 million, provide water service to about
35,000 customers and represent less than 4% of the Company's regulated assets
and under 2% of the population it serves. The decision to sell these
subsidiaries was made in an effort to focus United Water's core utility business
in service areas experiencing significant growth and development. Completion of
the transaction is contingent upon regulatory approvals. In the first quarter
of 2000, the Company concluded the sales of United Water Indiana and United
Water Virginia for $30.4 million. These transactions resulted in an after-tax
gain of $4.1 million.
45
<PAGE>
NOTE 4 -EQUITY INVESTMENTS
On June 28, 1996, United Water and Lyonnaise Europe formed the Northumbrian
Partnership (the Partnership), an equal partnership which has acquired a 20%
interest in NWG, a major investor-owned water and wastewater company in the
United Kingdom. United Water's initial $62 million investment in the
Partnership was made through its wholly-owned subsidiary in the United Kingdom,
United Water UK. Investment in the Partnership was $112.2 million and $96.3
million at December 31, 1999 and 1998, respectively, and is included in equity
investments in the consolidated balance sheet. United Water's share of the
Partnership's earnings, which totaled $16.3 million and $17.1 million in 1999
and 1998, respectively, is included in equity earnings of affiliates in the
accompanying statement of consolidated income.
During 1997, the United Kingdom's new Labor Government imposed a one-time
"windfall profits" tax on privatized utilities. The levying of this one-time
tax negatively impacted the Company's earnings from its investment in NWG by
$13.1 million, which was partially offset by the effect of a change in the tax
rate on deferred taxes of $2.8 million. The result was a net impact of $10.3
million. The imposition of this tax had been factored into the Company's
financial analysis at the time of its investment in NWG and was considered in
determining the purchase price. The tax did not have an effect on United
Water's cash flow or ability to pay dividends, nor did it affect the long-term
benefit the Company expected to derive from its investment in NWG.
United Water Services is a 50/50 joint venture between United Water and Suez
Lyonnaise des Eaux. On July 28, 1997, United Water Services acquired the
remaining 50% stake in JMM Operational Services that it did not already own.
United Water Services provides contract operations and maintenance services for
water and wastewater facilities and is pursuing additional contract operations.
As a result, United Water Services was awarded several contracts. The largest
awards include a ten-year contract to operate the wastewater systems in
Milwaukee, Wisconsin, and a 20-year contract to operate the water system in
Atlanta, Georgia, with a minority partner. United Water Services also provides
construction management, training and advisory services, as well as operates a
meter installation subsidiary, United Metering, which it purchased from United
Water in December 1997 for book value of $6.2 million.
In July 1997, the Company also acquired a 30% and a 20% interest in UWS Canada
and UWS Mexico, respectively. In December 1998, United Water purchased
additional interests and now has a 33.3% and a 20.5% interest in UWS Canada and
UWS Mexico, respectively.
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<PAGE>
At December 31, 1999 and 1998, United Water had equity investments relating to
contract services of approximately $22.1 million and $19.8 million,
respectively, including investments in Canada and Mexico. This amount is
included in equity investments in the accompanying consolidated balance sheet.
United Water's share of earnings in these investments is included in equity
earnings of affiliates in the accompanying statement of consolidated income.
NOTE 5 - NOTES PAYABLE
United Water and its subsidiaries have a number of credit lines with banks.
Borrowings under these credit lines generally bear interest at rates between the
London Interbank Offered Rate (LIBOR) and the prime lending rate. United Water
pays commitment fees under arrangements with certain of these banks to
compensate them for services and to support these lines of credit. There are no
legal restrictions placed on the withdrawal or other use of these bank balances.
The total credit lines available, the amounts utilized and the weighted average
interest rates at December 31 were as follows:
- --------------------------------------------------------------------------------
(thousands of dollars) 1999 1998
- --------------------------------------------------------------------------------
Total credit lines available $320,500 $280,500
Utilized:
Drawn 134,000 93,400
Pledged 655 655
Weighted average interest rates 6.2% 5.5%
- --------------------------------------------------------------------------------
NOTE 6 - LONG-TERM DEBT
The long-term debt repayments over each of the next five years are anticipated
to be as follows: 2000--$5.5 million; 2001--$13 million; 2002--$7.2 million;
2003--$7.3 million and 2004--$8.3 million. United Water New Jersey, United
Water New York, United Waterworks and other subsidiaries of United Water are
subject to certain restrictive covenants related to their issued debt.
In December 1994, United Waterworks entered into a medium-term note program that
enabled United Waterworks to issue up to $75 million of debt with terms ranging
from 9 months to 30 years. The interest rates are set as notes are issued under
the program. The first $10 million of notes under this program were issued in
1995. Another $15 million of notes were issued in October 1997. In February
1998, United Waterworks issued an additional $40 million of notes under this
program ($20 million at 6.97% due 2023,
47
<PAGE>
$15 million at 7.1% due 2028 and $5 million at 6.9% due 2017). In November 1998,
United Waterworks issued the final $10 million of notes under this program ($5
million at 6.44% due 2008 and $5 million at 6.97% due 2023). The proceeds were
used to redeem outstanding notes payable.
In June 1996, United Water entered into a $30 million long-term note agreement
with Credit Lyonnais to partially fund its investment in the Northumbrian
Partnership. The loan bears interest at a LIBOR-based floating rate and is
payable in annual installments through June 2006. In December 1998, the Company
entered into an interest rate swap agreement, which fixed the interest rate at
5.24% for 1999 and 5.34% for the years 2000 through 2003.
In December 1998, United Water New Jersey issued $35 million of 5% Water
Facilities Revenue Bonds through the New Jersey Economic Development Authority
due 2028. The proceeds are being used to finance the cost of acquiring,
constructing and reconstructing certain water transmission, transportation,
storage, treatment, and distribution facilities located in Passaic, Bergen,
Sussex, and Hudson counties in New Jersey.
In January 1999, United Water issued $30 million of Senior Notes ($5 million at
6.07% due 2005, $10 million at 6.43% due 2009, $10 million at 6.7% due 2019 and
$5 million at 7.04% due 2019). The proceeds were used to redeem all remaining
shares of 7 5/8% Series B cumulative preferred stock. See Note 8 to the
consolidated financial statements for further details.
In October 1999, United Water redeemed $25 million of 9.38% senior notes due
2019. This early redemption resulted in an extraordinary after-tax loss of $1.1
million, representing the premium paid and the write-off of unamortized debt
costs.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Capital Expenditures
The future capital expenditures of the Company's utility subsidiaries are
projected to aggregate $264 million over the next five years, including $54
million and $53 million in 2000 and 2001, respectively. United Properties
currently projects spending $27.9 million over the next five years for capital
expenditures on its existing real estate portfolio, including $12.3 million and
$3.4 million in 2000 and 2001, respectively.
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<PAGE>
Operating Leases
United Water's total consolidated rental expense was approximately $7.3 million
in 1999, $6.5 million in 1998 and $6.2 million in 1997. The minimum future
lease payments under all non-cancelable operating leases, which consist
primarily of buildings and automobiles, at December 31, 1999 are as follows:
- -----------------------------------------------------------------
(thousands of dollars)
- -----------------------------------------------------------------
2000 $ 5,749
2001 4,211
2002 2,579
2003 1,615
2004 1,029
Thereafter 1,616
- -----------------------------------------------------------------
Total minimum future lease payments $16,799
- -----------------------------------------------------------------
Legal Matters
United Water has been notified that it may be one of several defendants in a
lawsuit involving cancer incidences in Dover Township, New Jersey. A complaint
has not been filed; however, an agreement was signed on January 29, 1998 with
the potential plaintiffs that would toll the statute of limitations for a time
period of at least eighteen months. A second agreement, extending the tolling
period for an additional eighteen months, was executed in July 1999. The
Company has also entered into a joint defense agreement with other potential
defendants, which will allow the potential defendants to work together until all
disputes with the potential plaintiffs have been resolved. Management believes
if a lawsuit is commenced, the Company will have meritorious defenses, and there
will be a number of parties against whom it will have recourse. Therefore, the
Company believes that the ultimate disposition of this matter will not have a
material adverse effect on the financial position or results of operations.
The Company has various purchase commitments for materials, supplies and other
services incidental to the ordinary conduct of business. In addition, the
Company is routinely involved in legal actions arising in the ordinary course of
its utility operations. In the opinion of management, none of these matters
will have a material adverse impact on the Company.
NOTE 8 - PREFERRED AND PREFERENCE STOCK
The utility subsidiaries of the Company have issued and outstanding cumulative
preferred stock, generally with mandatory redemption provisions requiring annual
sinking fund payments. These sinking fund requirements will total $573,000 in
2000 and will total $2,716,000 per year in each of the years 2001 through
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<PAGE>
2004. The redemption of cumulative preferred stock was $29,073,000 in 1999
(including $28.5 million for the early redemption of the 7 5/8% Series B),
$2,073,000 in 1998 and $260,000 in 1997. In addition, except as described in the
next paragraph, optional sinking fund provisions can be exercised and
redemptions made at specific prices for all preferred stock issues. Redemptions
require payment of accrued and unpaid dividends up to the date fixed for
redemption.
As a result of the merger with GWC Corporation in 1994, United Water issued
3,341,078 shares ($46 million par value) of 5% Series A cumulative convertible
preference stock, valued at $43.3 million at the time of the merger and $30
million of 7 5/8% Series B cumulative preferred stock, valued at $31.1 million
at the time of the merger. Lyonnaise American Holding, Inc. (LAH) owned 97.7% of
the Series A preference stock outstanding. The Series B preferred stock has a
$1.5 million mandatory annual redemption which commenced in 1998. Shares of the
Series B preferred stock could not be redeemed by the Company prior to September
1, 1997. Each share of the Series A preference stock outstanding may be
converted into .83333 shares of United Water common stock at any time commencing
April 22, 1996. However, under the Governance Agreement between United Water and
LAH, LAH may convert no more than 10% of the Series A preference stock it owns
during the year commencing April 22, 1996, and an additional 10% cumulatively
per year thereafter until April 22, 2003, at which time these conversion
restrictions end. During 1999, 340,294 shares of the Series A preference stock
with a value of $4.7 million were converted into 283,562 shares of United Water
common stock with a value of $4.5 million. During 1998, 331,864 shares of the
Series A preference stock with a value of $4.6 million were converted into
276,543 shares of United Water common stock with a value of $4.4 million. At
December 31, 1999, LAH owned approximately 30.1% of the issued and outstanding
United Water common stock and approximately 98.1% of the issued and outstanding
United Water 5% cumulative convertible preference stock. United Water may not
redeem any of the outstanding, unconverted Series A preference stock prior to
maturity on April 22, 2004.
On December 8, 1998, the Company called for redemption of the outstanding
285,000 shares of its 7 5/8% Series B cumulative preferred stock. The
redemption, which occurred on January 8, 1999, resulted in the payment of
principal, accrued dividends and premium totaling $30 million, with $1.3 million
relating to the premium paid on the early redemption. The preferred stock was
redeemed with $30 million of 6.07%-7.04% Senior Notes due 2005-2019.
50
<PAGE>
On January 7, 2000, the Company called for redemption of all 150,000 shares of
its 7 3/8% preferred stock. The redemption resulted in the payment of
principal, accrued dividends and premium totaling $15.5 million, with $.5
million relating to the premium paid on the early redemption. The preferred
stock was redeemed with short-term financing.
NOTE 9 - INCENTIVE STOCK PLANS
Under the Company's management incentive plan, the following options have been
granted to key employees:
Weighted Average
Number of Exercise Price
Options Per Option
- --------------------------------------------------------------------------------
Outstanding at December 31, 1996 887,817 $14.196
Granted 370,840 15.580
Exercised (439,605) 15.032
Canceled or expired (20,062) 15.501
- --------------------------------------------------------------------------------
Outstanding at December 31, 1997 798,990 $14.345
Granted 408,480 18.625
Exercised (186,808) 15.182
Canceled or expired (23,380) 18.626
- --------------------------------------------------------------------------------
Outstanding at December 31, 1998 997,282 $15.841
Granted 425,870 22.737
Exercised (269,465) 16.159
Canceled or expired (4,110) 21.368
- --------------------------------------------------------------------------------
Outstanding at
December 31, 1999 1,149,577 $18.301
- --------------------------------------------------------------------------------
All options are currently exercisable and represent the only stock options
outstanding at December 31, 1999. A total of 2,499,124 common shares are
reserved for issuance under the management incentive plan.
In May 1993, the shareholders approved the creation of dividend units to be
issued in conjunction with stock options granted under the management incentive
plan. One dividend unit may be attached to each unexercised option to purchase
a share of United Water common stock, which entitles the option holder to
accrue, as a credit against the option exercise price, the aggregate dividends
actually paid on a share of United Water common stock while the dividend unit is
in effect. In May 1997, the shareholders amended the plan to provide that the
dividend units be granted separately and detached from the stock options and
accrue dividends for a predetermined period of time, after which, they are
distributed. United Water
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<PAGE>
recorded compensation expense of $3.1 million in 1999, $2.6 million in 1998 and
$2.3 million in 1997 with respect to the management incentive plan.
In October 1995, the Financial Accounting Standards Board (FASB) issued SFAS No.
123, "Accounting for Stock-Based Compensation," which establishes financial
accounting and reporting standards for stock-based employee compensation plans.
The statement defines a fair value based method of accounting for employee stock
options and similar equity instruments and encourages the use of that method of
accounting for all employee stock compensation plans. However, SFAS No. 123
also permits the measurement of compensation costs using the intrinsic value
based method of accounting prescribed by Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees." The Company has
elected to account for its employee stock compensation plans under the guidance
prescribed by APB Opinion No. 25 and has made the required pro forma disclosures
of net income and earnings per share as if the fair value based method of
accounting defined in SFAS No. 123 had been applied as indicated below:
- --------------------------------------------------------------------------------
(thousands of dollars except per share data) 1999 1998 1997
- --------------------------------------------------------------------------------
Net income:
As reported $31,117 $43,929 $29,331
Pro forma 31,291 44,140 29,273
Earnings per common share:
As reported $ .81 $ 1.19 $ .83
Pro forma .81 1.19 .83
Earnings per common share-assuming dilution:
As reported $ .80 $ 1.17 $ .83
Pro forma .81 1.17 .83
- --------------------------------------------------------------------------------
The fair value for these options was estimated at the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions for the years ended December 31, 1999, 1998 and 1997, respectively:
expected volatility of 21.0%, 21.1% and 20.3%; risk-free interest rates of 4.9%,
5.5% and 6.4%; expected life of 6 years and dividend yields of 4.5% in 1999,
5.0% in 1998 and 5.9% in 1997. The weighted average fair value of each option
granted during the years ended December 31, 1999, 1998 and 1997 was $3.69, $2.99
and $2.30, respectively. The Black-Scholes option-pricing model requires the
input of highly subjective assumptions including the expected stock price
volatility. Changes in the subjective input assumptions can materially affect
the fair value estimate. In management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
52
<PAGE>
In May 1988, the shareholders approved a restricted stock plan for certain key
employees. United Water issued 1,250 shares in 1996 in connection with the
restricted stock plan. Such shares are earned by the recipients over a five-
year period. United Water recorded compensation expense of $69,000 in 1996 with
respect to this restricted stock plan.
NOTE 10 - SHAREHOLDER RIGHTS PLAN
In July 1989, the board of directors of United Water approved a Shareholder
Rights Plan designed to protect shareholders against unfair and unequal
treatment in the event of a proposed takeover. It also guards against partial
tender offers and other hostile tactics to gain control of United Water without
paying all shareholders a fair price. Under the plan, each share of United
Water's common stock also represents one Series A Participating Preferred Stock
Purchase Right (Right) until the Rights become exercisable. The Rights attach
to all of United Water's common stock outstanding as of August 1, 1989, or
subsequently issued, and expire on August 1, 1999. On July 30, 1999, United
Water's Shareholders Rights Plan was amended to extend the expiration of the
Rights until April 22, 2006 and to eliminate the provision allowing the
redemption of Rights by shareholder action in the event that the board of
directors receives an offer to acquire all of the Company's voting stock.
The Rights would be exercisable only if a person or group acquired 20% or more
of United Water's common stock or announced a tender offer that would lead to
ownership by a person or group of 20% or more of the common stock.
In certain cases where an acquirer purchased more than 20% of United Water's
common stock, the Rights would allow shareholders (other than the acquirer) to
purchase shares of United Water's common stock at 50% of market price,
diminishing the value of the acquirer's shares and diluting the acquirer's
equity position in United Water. If United Water were acquired in a merger or
other business combination transaction, under certain circumstances the Rights
could be used to purchase shares of the acquirer at 50% of the market price.
Subject to certain conditions, if a person or group acquired 20% or more of
United Water's common stock, United Water's board of directors may exchange each
Right held by shareholders (other than the acquirer) for one share of common
stock or 1/100 of a share of Series A Participating Preferred Stock. If an
acquirer successfully purchased 80% of United Water's common stock after
tendering for all of the stock, the Rights would not operate. If holders of a
majority of the shares of United Water's common stock approved a proposed
acquisition under specified circumstances, the Rights would be redeemed at one
cent
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<PAGE>
each. They could also be redeemed by United Water's board of directors for one
cent each at any time prior to the acquisition of 20% of the common stock by an
acquirer.
On September 15, 1993, United Water's Shareholder Rights Plan was amended in
connection with United Water's execution of a merger agreement with GWC
Corporation. The amendment generally excepts the majority stockholder of United
Water (Suez Lyonnaise des Eaux, formerly known as Lyonnaise des Eaux-Dumez,) and
its affiliates and associates from triggering the Rights through the execution
of the merger agreement, the performance of the transactions contemplated
therein or otherwise.
In connection with the merger by and among Lyonnaise American Holding, Inc.,
Suez Lyonnaise des Eaux, LAH Acquisition Co. and United Water, United Water's
Shareholders Rights Plan was amended again on August 20, 1999 to except
Lyonnaise des Eaux-Dumez and its affiliates and associates, including Suez
Lyonnaise des Eaux, from triggering the Rights through the execution of the
merger agreement and the performance of the transactions contemplated therein.
The amendment also provides for the expiration of the Shareholders Rights Plan
and the Rights as of the effective date of the merger, which is anticipated to
occur within the first half of 2000.
NOTE 11 - EMPLOYEE BENEFITS
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This statement addresses
disclosure only. It does not address measurement or recognition. United Water
adopted SFAS No. 132 in 1998.
On July 13, 1999, United Water announced that it was offering a voluntary early
retirement program to employees who qualified based on age and length of
service. As a result, under SFAS No. 88, "Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits," the
Company recognized curtailment losses of $3.5 million and $.7 million,
respectively, for accelerated pension and other postretirement benefit
obligations. These losses resulted from the increase in the Company's benefit
obligation for employees who retired earlier than expected. The losses were
offset by actuarial gains and therefore, did not affect net income. In
addition, United Water recorded an additional $5.1 million and $2.3 million,
respectively, for special termination benefits under the pension and other
postretirement benefit plans.
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Defined benefit pension plans: Most of United Water's employees are covered by
trusteed, non-contributory, defined benefit pension plans. Benefits under these
plans are based upon years of service and the employee's compensation during the
last five years of employment. United Water's policy is to fund amounts accrued
for pension expense to the extent deductible for federal income tax purposes.
It is expected that no funding will be made for 1999.
Postretirement benefit plans other than pensions: The Company sponsors a defined
benefit postretirement plan that covers hospitalization, major medical benefits
and life insurance benefits for retired salaried and non-salaried employees.
The Company is funding a portion of its postretirement health care benefits
through contributions to Voluntary Employees' Beneficiary Association (VEBA)
Trusts.
The following sets forth the qualified plans' funded status and reconciles that
funded status to the amounts recognized in the Company's balance sheet as of
December 31:
Pension
- --------------------------------------------------------------------------------
(thousands of dollars) 1999 1998
- --------------------------------------------------------------------------------
Change in benefit obligation
Benefit obligation at beginning of year $150,579 $138,092
Service cost 4,693 4,367
Interest cost 10,721 9,971
Curtailment 3,460 -
Special termination benefits 5,092 -
Amendments 363 24
Actuarial (gain)/loss (21,239) 5,095
Benefits paid (7,468) (6,970)
- --------------------------------------------------------------------------------
Benefit obligation at end of year 146,201 150,579
- --------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year 227,001 200,853
Actual return on plan assets 28,961 33,118
Benefits paid (7,468) (6,970)
- --------------------------------------------------------------------------------
Fair value of plan assets at end of year* 248,494 227,001
- --------------------------------------------------------------------------------
Funded status 102,293 76,422
Unrecognized transition obligation (2,942) (3,569)
Unrecognized actuarial gain (67,500) (45,483)
Unrecognized prior service cost 2,062 1,867
- --------------------------------------------------------------------------------
Prepaid benefit cost $ 33,913 $ 29,237
- --------------------------------------------------------------------------------
*Primarily stocks and bonds, including $19.5 million and $13.7 million,
respectively, in common stock of United Water.
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Other benefits
- --------------------------------------------------------------------------------
(thousands of dollars) 1999 1998
- --------------------------------------------------------------------------------
Change in benefit obligation
Benefit obligation at beginning of year $ 60,383 $ 51,900
Service cost 3,504 2,953
Interest cost 4,413 3,954
Amendments and curtailments 3,043 -
Actuarial (gain)/loss (12,202) 2,620
Benefits paid (1,253) (1,044)
- --------------------------------------------------------------------------------
Benefit obligation at end of year 57,888 60,383
- --------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year 27,090 21,704
Actual return on plan assets 3,606 4,207
Employer contribution 2,343 2,223
Benefits paid (1,253) (1,044)
- --------------------------------------------------------------------------------
Fair value of plan assets at end of year 31,786 27,090
- --------------------------------------------------------------------------------
Funded status (26,102) (33,293)
Unrecognized transition obligation 18,359 20,470
Unrecognized actuarial gain (19,202) (7,419)
- --------------------------------------------------------------------------------
Accrued benefit cost $(26,945) $(20,242)
- --------------------------------------------------------------------------------
The components of net periodic pension income for the Company's qualified and
supplemental plans were as follows:
- --------------------------------------------------------------------------------
(thousands of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
Service cost $ 5,032 $ 4,600 $ 3,726
Interest cost 11,280 10,438 9,842
Expected return on plan assets (22,393) (19,748) (16,275)
Amortization of transition obligation (583) (583) (583)
Amortization of gain (2,269) (1,941) (1,549)
Amortization of prior service cost 328 226 268
- --------------------------------------------------------------------------------
Net periodic pension income $ (8,605) $ (7,008) $ (4,571)
- --------------------------------------------------------------------------------
Assumptions as of December 31:
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
Assumed discount rate 8.375% 7.125% 7.375%
Expected return on assets 10.0% 10.0% 9.5%
Range of compensation increase 3.75-4.5% 3.75-4.5% 3.75-4.5%
- --------------------------------------------------------------------------------
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Net periodic postretirement benefit cost components were as follows:
- --------------------------------------------------------------------------------
(thousands of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
Service cost $ 3,504 $ 2,953 $ 2,091
Interest cost 4,413 3,954 3,299
Expected return on plan assets (2,479) (1,896) (1,396)
Amortization of transition obligation 1,424 1,441 1,441
Amortization of gain (163) (90) (462)
- --------------------------------------------------------------------------------
Net periodic benefit cost $ 6,699 $ 6,362 $ 4,973
- --------------------------------------------------------------------------------
Assumptions as of December 31:
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
Assumed discount rate 8.625% 7.375% 7.625%
Expected return on assets 9.5% 9.5% 9.5%
- --------------------------------------------------------------------------------
The associated health care cost trend rate used in measuring the postretirement
benefit obligation at December 31, 1999 was 6.7%, gradually declining to 5.5% in
2009 and thereafter. Changing the assumed health care cost trend rate by one
percentage point in each year results in changes in service cost and interest,
and plan obligation as follows:
1-Percentage 1-Percentage
Point Increase Point Decrease
- --------------------------------------------------------------------------------
(in millions)
Effect on total service and interest cost components $ 1.9 $(1.7)
Effect on postretirement benefit obligation 8.6 (7.3)
Postretirement health care costs in excess of those currently included in rates
have been deferred in those jurisdictions where their recovery is deemed
probable. At December 31, 1999 and 1998, United Water had regulatory assets
relating to deferred employee benefits of $16.1 million and $18.3 million,
respectively, for recovery in future rates.
Supplemental benefit plans: Certain categories of employees are covered by non-
funded supplemental plans. The projected benefit obligations of these plans at
December 31, 1999 and 1998 totaled $7.6 million and $6.5 million, respectively.
At December 31, 1999 and 1998, the unfunded accumulated benefit
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obligations of $6.9 million and $6 million, respectively, have been recorded in
other deferred credits and liabilities and intangible pension assets of $298,000
and $372,000, respectively, are included in deferred charges and other assets.
United Water maintains defined contribution savings plans which permit employees
to make voluntary contributions with Company matching as defined by the plan
agreements. United Water made contributions of $2,083,000, $1,764,000 and
$1,155,000 in 1999, 1998 and 1997, respectively, to defined contribution savings
plans.
NOTE 12 - RATE MATTERS
The following rate decisions were rendered to United Water's regulated utilities
during 1999:
- --------------------------------------------------------------------------------
Effective Allowed Annual %
(thousands of dollars) Date ROE Increase Increase
- --------------------------------------------------------------------------------
Virginia 01/14/99 10.10% $ 59 7.4
Pennsylvania-STAS* 01/21/99 N/A 52 0.2
Pennsylvania-DSIC** 04/10/99 N/A 54 0.3
Pennsylvania-STAS(Annual) 04/10/99 N/A 397 (a) 1.9
Bethel-STAS(Annual) 04/10/99 N/A (6) (0.7)
Florida-Water 05/21/99 9.57% 1,042 11.5
Florida-Wastewater 05/21/99 9.57% 322 2.0
Pennsylvania-DSIC 07/01/99 N/A 59 0.3
New York 07/13/99 10.30% 856 1.9
New York-Sloatsburg/Pothat 07/18/99 N/A 37 8.0
Pennsylvania-DSIC 10/01/99 N/A 80 0.4
Rhode Island 10/01/99 10.40% 420 20.4
New Rochelle-Purch. Water 11/01/99 N/A 290 1.5
Missouri 01/01/00 9.74% 751 23.7
- --------------------------------------------------------------------------------
Totals $4,413
- --------------------------------------------------------------------------------
* State Tax Adjustment Surcharge
** Distribution System Improvement Charge
(a) Includes balance of STAS of $154,944
At December 31, 1999, the most significant rate case pending was filed by United
Water New Rochelle. In July 1999, United Water New Rochelle applied for a
multi-year rate increase. The filing requested an increase in revenues of $3.3
million, or 17.2% for the 12 months ending May 31, 2001, an additional increase
of $3.7 million, or 16.4% for the 12 months ending May 31, 2002 and a final
increase of $4.1 million, or
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15.6% for the 12 months ending May 31, 2003. These increases were requested
primarily to fund capital investments.
In March 1998, United Water Delaware filed a request to increase revenues by
$4.1 million or 24.8%, in water revenues. On May 11, 1998, United Water
Delaware placed $2.4 million in increased revenues in effect, subject to refund.
A final decision was received in June 1999 for $2 million. The difference of
$.4 million has been refunded to customers. The Company was fully reserved for
these refunds.
On October 26, 1996, United Water Delaware placed $2.3 million in increased
revenues in effect, subject to refund. On July 15, 1997, the Delaware Public
Utility Commission granted the Company a permanent rate increase of $1.6
million. On July 16, 1997, the Company filed an appeal and application for a
stay of the Commission's Order. On July 29, 1997, the Delaware Superior Court
granted a stay of the Commission decision pending the appeal. On March 31,
1998, the Superior Court decided in favor of the Commission. The Company
appealed this decision to the Supreme Court of Delaware and on February 11,
1999, the Supreme Court reversed the Commission's decision which denied the $.7
million annual revenue increase, subject to refund and remanded the matter to
the Commission. As a result, the Company reversed a $1.7 million reserve which
was established for potential refunds pertaining to this case. In June 1999,
the Commission approved a stipulation permitting the Company to retain all
revenues collected without refund and permitting the rates currently in effect
to become permanent.
Generally, the rate awards the Company's operating utilities actually receive
are less than the amounts requested, primarily due to differing positions of the
parties involved and/or updated information provided during the proceedings.
59
<PAGE>
NOTE 13 - INCOME TAXES
Deferred income tax assets and liabilities: Deferred tax liabilities (assets)
and deferred investment tax credits consisted of the following at December 31:
- --------------------------------------------------------------------------------
(thousands of dollars) 1999 1998
- --------------------------------------------------------------------------------
Basis differences of property, plant
and equipment $143,932 $140,094
Real estate transactions and
capitalized costs 17,293 15,726
Prepaid employee benefits 8,919 10,941
Other liabilities 29,569 24,151
- --------------------------------------------------------------------------------
Gross deferred tax liabilities 199,713 190,912
- --------------------------------------------------------------------------------
Alternative minimum tax credit
carryforwards (15,808) (12,754)
Other assets (8,269) (4,763)
- --------------------------------------------------------------------------------
Gross deferred tax assets (24,077) (17,517)
- --------------------------------------------------------------------------------
Deferred investment tax credits 21,436 21,973
- --------------------------------------------------------------------------------
Total deferred income taxes
and investment tax credits $197,072 $195,368
- --------------------------------------------------------------------------------
Income tax provision: A reconciliation of income tax expense at the statutory
federal income tax rate to the actual income tax expense for 1999, 1998 and 1997
is as follows:
- --------------------------------------------------------------------------------
(thousands of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
Statutory tax rate 35% 35% 35%
Federal taxes at statutory rates on pretax
income before preferred stock
dividends of subsidiaries $18,251 $24,389 $19,779
Utility plant acquisition adjustment 720 733 641
State income taxes, net of federal benefit 1,233 985 835
Deferred investment tax credits (547) (523) (510)
Equity in foreign investments (5,639) (5,985) (1,135)
Other 1,001 (149) 969
- --------------------------------------------------------------------------------
Provision for income taxes $15,019 $19,450 $20,579
- --------------------------------------------------------------------------------
60
<PAGE>
Income tax expense for 1999, 1998 and 1997 consisted of the following:
- --------------------------------------------------------------------------------
(thousands of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
Current:
Federal $ 6,819 $ 7,146 $10,668
State 1,432 1,349 969
- --------------------------------------------------------------------------------
Total current $ 8,251 $ 8,495 $11,637
- --------------------------------------------------------------------------------
Deferred (prepaid):
Accelerated depreciation $ 8,953 $ 8,305 $ 7,437
Contributions and advances for
construction 727 401 200
Prepaid employee benefits (2,022) 2,391 1,400
Real estate transactions
and capitalized costs 1,952 117 (181)
Alternative minimum tax (3,053) (1,531) (1,507)
Investment tax credits (547) (523) (510)
State income taxes, net of federal benefit 303 192 316
Other 455 1,603 1,787
- --------------------------------------------------------------------------------
Total deferred $ 6,768 $10,955 $ 8,942
- --------------------------------------------------------------------------------
Total provision for income taxes $15,019 $19,450 $20,579
- --------------------------------------------------------------------------------
The Company considers the undistributed earnings of United Water UK to be
permanently reinvested and has not provided deferred taxes on these earnings.
At December 31, 1999 and 1998, cumulative undistributed earnings were $34.1
million and $18.8 million, respectively. These undistributed earnings could
become subject to additional tax if remitted, or deemed remitted, as a dividend.
Management believes it is not practicable to determine the amount of the
unrecognized deferred tax liability.
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts at December 31, 1999 and 1998, of those current assets and
liabilities that are considered financial instruments approximates their fair
values at those dates because of the short maturity of those instruments. Such
current assets and liabilities include cash and cash equivalents, restricted
cash, accounts receivable and unbilled revenues, notes payable, accounts payable
and other current liabilities, and accrued interest and dividends. Real estate
and other investments consist primarily of real estate and equity investments in
affiliates and are not financial instruments. The Company understands that
there are no quoted market prices for the Company's preferred stock, preference
stock or long-term debt. The fair values of the Company's long-term debt and
preferred and preference stock have been determined by discounting their future
cash flows using approximate current market interest rates for securities of a
similar nature and
61
<PAGE>
duration. Due to the impending acquisition by Suez Lyonnaise des Eaux,
preference stock for 1999 was valued using the quoted offered price.
The estimated fair values of United Water's financial instruments at December 31
were as follows:
- --------------------------------------------------------------------------------
Carrying Fair
(thousands of dollars) amount value
- --------------------------------------------------------------------------------
1999
Long-term debt $639,017 $626,206
Preferred and preference stock with
mandatory redemption 33,104 65,143
- --------------------------------------------------------------------------------
1998
Long-term debt $652,969 $715,993
Preferred and preference stock with
mandatory redemption 80,282 87,601
- --------------------------------------------------------------------------------
The Company's customer advances for construction have a carrying value of $36.2
million and $30.6 million at December 31, 1999 and 1998, respectively. Their
relative fair values cannot be accurately estimated since future refund payments
depend on several variables, including new customer connections, customer
consumption levels and future rate increases. The Company holds an interest
rate cap to limit its exposure to a maximum interest rate of 7% on the United
Water New Jersey Variable Rate Demand Water Facilities Refunding Bonds
aggregating $130 million. In addition, United Water entered into an interest
rate swap agreement on the $30 million long-term note agreement with Credit
Lyonnais which fixed the interest rate at 5.24% for 1999 and 5.34% for the years
2000 through 2003. The fair values and carrying amounts of these financial
instruments were not material at December 31, 1999.
62
<PAGE>
NOTE 15 - EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share" (EPS),
which specifies the computation, presentation and disclosure requirements for
earnings per share for entities with publicly held common stock or potential
common stock. The statement defines two earnings per share calculations, basic
and diluted. The following table is a reconciliation of the numerator and
denominator under each method:
For the year ended December 31, 1999
- --------------------------------------------------------------------------------
Per Share
(thousands except per share data) Income Shares Amount
- --------------------------------------------------------------------------------
Basic EPS:
Net income applicable to common stock
before extraordinary item $32,258 38,528 $ .84
Loss from extraordinary item (1,141) 38,528 (.03)
Net income applicable to common stock $31,117 38,528 $ .81
- --------------------------------------------------------------------------------
Assuming dilution:
Net income applicable to common stock
before extraordinary item $32,258 38,528
Stock options - 339
Convertible preference stock 1,577 1,716
------- -------
33,835 40,583 $.83
Loss from extraordinary item (1,141) 40,583 (.03)
Net income applicable to common stock $32,694 40,583 $ .80
- --------------------------------------------------------------------------------
For the year ended December 31, 1998
- --------------------------------------------------------------------------------
Per Share
(thousands except per share data) Income Shares Amount
- --------------------------------------------------------------------------------
Basic EPS:
Net income applicable to common stock
before extraordinary item $43,929 37,028 $1.19
Net income applicable to common stock $43,929 37,028 $1.19
Assuming dilution:
Net income applicable to common stock
before extraordinary item $43,929 37,028
Stock options - 165
Convertible preference stock 1,829 1,999
------- ------
Net income applicable to common stock $45,758 39,192 $1.17
- --------------------------------------------------------------------------------
63
<PAGE>
For the year ended December 31, 1997
- --------------------------------------------------------------------------------
Per Share
(thousands except per share data) Income Shares Amount
- --------------------------------------------------------------------------------
Basic EPS:
Net income applicable to common stock
before extraordinary item $29,331 35,492 $.83
Net income applicable to common stock $29,331 35,492 $.83
Assuming dilution:
Net income applicable to common stock
before extraordinary item $29,331 35,492
Stock options - 156
Convertible preference stock 2,076 2,190
------- ------
Net income applicable to common stock $31,407 37,838 $.83
- --------------------------------------------------------------------------------
64
<PAGE>
NOTE 16 - SEGMENT INFORMATION
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," which requires that business segment
financial information be reported in the financial statements utilizing the
management approach. Those segments include utility investments, real estate
and non-regulated business.
United Water's utility investments include its regulated, domestic subsidiaries,
United Water New Jersey, United Water New York, and the utility subsidiaries of
United Waterworks and United Water Mid-Atlantic. These regulated utilities
provide water and wastewater services to the public at large in areas where they
possess franchises or other rights to provide such services. The utility
subsidiaries are subject to regulation, generally by the regulatory authorities
in the states in which they operate. In addition, the Company holds a 50%
investment in the Northumbrian Partnership, which acquired a 20% interest in
Northumbrian Water Group, a major investor-owned water and wastewater company in
the United Kingdom.
United Properties Group is a non-regulated business engaged in real estate
investment and development activities, including commercial office and retail
properties, residential and commercial land development and sales, golf course
operations and consulting services. United Properties Group owns a portfolio of
real estate located in New Jersey, New York, Delaware, Idaho and Florida. In
addition, United Properties contributed buildings to a partnership and in return
received preferred units of this partnership.
The Company's non-regulated sector consists primarily of a 50% investment in
United Water Services, a 50/50 joint venture with Suez Lyonnaise des Eaux, which
provides contract operations and maintenance services for water and wastewater
facilities, as well as construction management, meter installation and training
and advisory services. In addition, United Water entered into public-private
partnerships with the cities of Jersey City, Hoboken and Rahway, New Jersey.
Under these arrangements, the municipalities retain ownership of their systems
while the Company operates and maintains them. Parent and elimination companies
are also included in this segment.
65
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Parent, Non-Regulated
Utility Real Water Services and
(thousands of dollars) Investments Estate Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Operating revenues $ 337,620 $11,039 $ 13,677 $ 362,336
Depreciation and amortization 40,612 1,729 2,015 44,356
Interest expense 40,653 1,692 6,859 49,204
Equity earnings/(loss) of affiliates 16,253 - (4,398) 11,855
Provision for income taxes 20,080 2,311 (7,372) 15,019
Extraordinary item - - (1,141) (1,141)
Net income/(loss) 45,741 3,444 (18,068) 31,117
Capital expenditures 82,348 5,524 722 88,594
Identifiable assets 1,675,850 80,781 43,908 1,800,539
- -----------------------------------------------------------------------------------------------------
1998
Operating revenues $ 325,475 $16,196 $ 14,539 $ 356,210
Depreciation and amortization 35,594 1,593 2,763 39,950
Interest expense 39,361 1,742 4,814 45,917
Equity earnings/(loss) of affiliates 17,103 - (5,652) 11,451
Provision for income taxes 23,288 1,985 (5,823) 19,450
Net income/(loss) 55,734 3,372 (15,177) 43,929
Capital expenditures 100,034 5,038 952 106,024
Identifiable assets 1,626,876 91,739 50,507 1,769,122
- -----------------------------------------------------------------------------------------------------
1997
Operating revenues $ 313,346 $20,075 $ 17,988 $ 351,409
Depreciation and amortization 31,519 1,419 1,756 34,694
Interest expense 38,936 1,750 4,686 45,372
Equity earnings/(loss) of affiliates 3,304 - (2,991) 313
Provision for income taxes 21,546 2,439 (3,406) 20,579
Net income/(loss) 37,620 3,440 (11,729) 29,331
Capital expenditures 83,342 2,431 1,004 86,777
Identifiable assets 1,512,966 88,388 56,988 1,658,342
- -----------------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE>
Quarterly Financial Information (unaudited)
UNITED WATER RESOURCES AND SUBSIDIARIES
Quarter
- --------------------------------------------------------------------------------
(thousands of dollars, except per
share data) First Second Third Fourth
- --------------------------------------------------------------------------------
1999
Operating revenues $79,227 $91,830 $107,374 $83,905
Operating income 12,397 24,661 24,438 15,899
Net income applicable to common stock 4,797 11,525 11,432 3,363
Net income per common share $ .13 $ .30 $ .29 $ .09
- --------------------------------------------------------------------------------
1998
Operating revenues $75,442 $86,219 $108,748 $85,801
Operating income 13,720 22,271 39,482 22,127
Net income applicable to common stock 3,134 11,042 19,500 10,253
Net income per common share $ .09 $ .30 $ .52 $ .27
Net income per common share-diluted $ .09 $ .30 $ .51 $ .27
- --------------------------------------------------------------------------------
1997
Operating revenues $80,006 $87,761 $ 99,690 $83,952
Operating income 14,644 24,991 34,169 21,840
Net income applicable to common stock 4,102 11,244 6,464 7,521
Net income per common share $ .12 $ .32 $ .18 $ .21
Net income per common share-diluted $ .12 $ .31 $ .18 $ .21
- --------------------------------------------------------------------------------
The Company announced strategic initiatives in the third quarter of 1999, which
resulted in a net charge of $7.2 million.
As disclosed in Note 6 to the consolidated financial statements, the Company
redeemed $25 million of 9.38% senior notes due 2019. This early extinguishment
resulted in an extraordinary after-tax loss of $1.1 million during the fourth
quarter of 1999.
As disclosed in Note 4 to the consolidated financial statements, the Company
recorded a net $10.3 million charge resulting from the "windfall profits" tax in
the United Kingdom during the third quarter of 1997.
67
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------- ------------------------------------------------------ -----------
AND FINANCIAL DISCLOSURE
--------------------------
There were no changes in or disagreements with accountants on accounting
and financial disclosure in 1999.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------------
Directors of United Water
The Board of Directors of United Water is comprised of thirteen directors,
divided into three classes. One class is elected yearly and serves for a period
of three years. Information with respect to the directors is set forth below.
Messrs. Barr, Bourbie, Chaumin and Keane were nominated by Lyonnaise American
Holding, Inc. and were elected by United Water's shareholders. All directors of
United Water also serve as directors of United Water New Jersey and United
Waterworks.
Period Served as Director
and Business Experience
Name and Age During Past Five Years
- ------------ ----------------------
Class I
Lawrence R. Codey, 55 Director of United Water since 1991. President and
Chief Operating Officer of Public Service Electric &
Gas Co. 1991 to February 2000. Director, Trust
Company of New Jersey, Public Service Enterprise
Group, Inc., and Sealed Air Corporation.
Donald L. Correll, 49 Chairman of United Water since 1994. Director, Chief
Executive Officer, and President of United Water
since 1992. Director, Interchange Financial Service
Corporation.
Robert L. Duncan, Jr., 57 Director of United Water since 1988. General Counsel
of American Management Association International
since July 1998. Member of the law firm of De Forest
& Duer through June 1998.
George F. Keane, 70 Director of United Water since 1997. Chairman of
Trigen Energy Corp. since 1994. President Emeritus
and Senior Investment Advisor for The Common Fund
1993 to 1996. Director, Security Capital U.S. Real
Estate Shares, Global Pharmaceutical Co., and
Universal Stainless & Alloy Products.
Class II
Thierry Bourbie, 47 Director of United Water since 1996. President of
the International Water Division of Lyonnaise since
September 1996 and Director of French Water
Operations 1994 to 1996. Chief Executive Officer and
Chairman of Lyd Informatique (Lyonnaise Subsidiary)
1994 to 1996. Director, AGBAR.
Peter Del Col, 65 Director of United Water since 1983. Chairman of
Colson Services
68
<PAGE>
Corporation since January 1998 and President 1986 to
1997. Chairman of FundQuest since 1994 and Partner,
Colson Investments since 1985.
Jon F. Hanson, 63 Director of United Water since 1986. Chairman of
Hampshire Management Company since 1976. Director,
Prudential Insurance Company of America, Neuman
Distributors, Inc. and Consolidated Delivery and
Logistics, Inc. and Orange and Rockland Utilities,
Inc. to August 1999.
Marcia L. Worthing, 57 Director of United Water since 1987. Executive Vice
President of Mullin & Associates since November
1998. Senior Vice President--Human Resources and
Corporate Affairs of Avon Products Inc. 1995 to
1998.
Class III
Edward E. Barr, 63 Director of United Water since 1994. Chairman of Sun
Chemical Corporation since January 1998, and
President and Chief Executive Officer since 1987.
President and Chief Executive Officer of DIC
American, Inc. 1988 to 1997. Director, Dainippon Ink
and Chemicals, Tokyo and First Union Corp.; Trustee,
Northwestern Mutual Insurance Company.
Charles Chaumin, 47 Director of United Water since July 1998. Vice
President of the Americas of Lyonnaise since
September 1998. Vice President of Aquas Argentina
1993 to 1998.
Frank J. Borelli, 64 Director of United Water since 1983. Director of
Marsh & McLennan Companies Inc. since 1988 and
Senior Vice President and Chief Financial Officer
since 1984. Director, Interpublic Group of Companies
Inc. and Express-Scripts, Inc.
Douglas W. Hawes, 67 Director of United Water since 1983. Secretary of
United Water since 1983. Of Counsel to law firm of
LeBoeuf, Lamb, Greene & MacRae, L.L.P. since January
1999 and Partner through 1999.
Dennis M. Newnham, 59 Director of United Water since 1986. President and
Chief Executive Officer of The B. Manischewitz
Company, LLC since January 1999. President and Chief
Executive Officer of Tsumura International 1996 to
1998 and Adirondack Beverages Inc. 1995 to 1996.
Venture capitalist consultant in 1994. Director,
Nutramax Products Inc.
Messrs. Correll, Chaumin, Del Col, Hanson and Keane also serve as directors of
United Properties Group. Mr. Keane and Ms. Worthing also serve as directors of
United Water Services LLC. Mr. Correll serves as a director and officer of
certain other subsidiaries of United Water.
United Water and two of its major subsidiaries, United Water New Jersey and
United Waterworks, have directors who are not salaried employees; each pays a
portion of the retainers and fees set forth below. No fees are paid to directors
who are salaried officers of United Water.
69
<PAGE>
Directors receive an annual retainer of $12,000 and a daily attendance fee of
$800. Daily attendance fees for the Executive Committee meeting are $800, and
all other committees are $525. Chairpersons of committees receive a double
committee fee in light of their responsibilities. United Properties Group, a
subsidiary of United Water, and United Water Services LLC, a partnership of
United Water and Suez Lyonnaise des Eaux, also have directors who are not
salaried employees. They receive a daily attendance fee of $750. During 1999
three directors received an aggregate of $75,000 for their additional service
relative to the merger agreement. Directors may defer all or a portion of their
compensation. Directors also received, pursuant to United Water's Directors'
Restricted Stock Plans, 10,870 shares of restricted stock. Each director, except
Messrs. Bourbie and Del Col, attended at least 75% of the aggregate of the
number of meetings of the board and committees on which they served.
Section 16(a) Beneficial Ownership Reporting Compliance
During the fiscal year ended December 31, 1999, the directors and officers of
United Water complied with all filing requirements of Section 16(a) of the
Securities Exchange Act of 1934, except Mr. Barr did not timely file one report
covering one transaction. His transactions in and holdings of United Water
Common Stock have been accurately and completely reflected in subsequent filings
with the Securities and Exchange Commission.
Executive Officers of United Water
The following table sets forth the age and principal occupation during the
past five years of each executive officer of United Water and its subsidiaries
who is not a director of United Water.
Business Experience During
Past Five Years
---------------
Name and Age
- ------------
Frank J. DeMicco, 55 President of United Water New Jersey since August
1996. Vice President--Operations from 1992 to 1996.
Senior Vice President of United Water M&S since
1994.
Michael C. J. Fallon ,53 President of United Properties Group since January
1993. Vice President of United Water M&S since March
1998.
Walton F. Hill, 51 Vice President-Regulatory Business of United Water
M&S since August 1998. Vice President-Regulatory Law
1994 to1998.
Robert J. Iacullo, 46 Vice President of United Waterworks since August
1998. Vice President--Regulatory Business of United
Water M&S 1996 to 1998 and Vice President---Rates
1994 to 1996.
John T. Marino, 48 Treasurer of United Water M&S since June 1994.
John Martinowich, 53 Vice President--External Affairs and Business
Development of United Water M&S since January 1998.
Assistant Vice President--External Affairs and
Marketing 1994 to 1998.
Richard B. McGlynn, 61 General Counsel of United Water since August 1996.
Vice President and General Counsel of United Water
M&S since 1995.
David Sherman, 47 President of United Water Services LLC since 1997.
Senior Vice President of United Water Services
previously known as JMM since
70
<PAGE>
1991.
Joseph Simunovich,60 President and Chief of Staff of United Water M&S
since November 1998. President since 1996 and Senior
Vice President--External Affairs and Marketing 1994
to 1996.
John J. Turner, 50 Treasurer of United Water since June 1994. Vice
President- Chief Financial Officer of United Water
M&S since November 1998 and Vice President-Finance
and Controller 1994 to 1998.
W. Marie Zanavich, 56 Vice President-Chief Information Officer of United
Water M&S since December 1998. Assistant Vice
President and Chief Information Officer 1994 to
1998.
Item 11. EXECUTIVE COMPENSATION
- -------- -----------------------
The following table sets forth the annual and long-term compensation of the
Chief Executive Officer and the four other most highly compensated executive
officers of United Water and its subsidiaries for services in all capacities for
the years ended December 31, 1997, 1998 and 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
Annual Compensation --------------------------------
-------------------------------------------
Securities
Underlying All Other
Options Compensation(b)
Name and principal position Year Salary($) Bonus($) (#) ($)
- ---------------------------------- ------- -------------- ---------- --------------------------------
<S> <C> <C> <C> <C> <C>
Donald L. 1999 380,000 150,000 41,500 4,800
Correll(a).......................
Chairman, Chief 1998 365,000 153,100 40,280 4,800
Executive Officer and President 1997 315,000 132,900 42,260 4,750
Joseph Simunovich................. 1999 240,000 90,000 17,670 4,800
President-Chief of Staff- United 1998 215,000 95,000 17,570 4,800
Water M&S 1997 187,500 95,000 18,500 4,750
Frank J. DeMicco.................. 1999 215,000 62,000 16,170 4,800
President--United Water New 1998 200,000 85,000 17,570 4,800
Jersey 1997 177,885 77,500 18,500 4,750
Richard B. McGlynn................ 1999 194,000 49,000 10,620 4,800
General Counsel 1998 187,500 52,000 10,890 4,800
1997 180,000 50,300 11,610 4,750
Michael C.J. Fallon............... 1999 173,000 130,000 6,070 4,800
President--United Properties 1998 163,000 100,800 6,500 5,900
Group 1997 150,000 97,500 7,010 9,000
</TABLE>
(a) The number and value of the aggregate restricted Common Stock holdings at
December 31, 1999, for D. Correll, 3,750 shares, $128,203. Dividends are
paid on such stock.
71
<PAGE>
(b) Contributions by United Water to its Thrift Plan.
Executive Employment Agreements
United Water has, by obtaining shareholder approval of the merger agreement,
incurred a change of control. United Water has employment agreements with
Messrs. Correll, Simunovich, DeMicco, McGlynn and Fallon. The exact terms of
the employment agreements vary. Generally, however, the agreements entitle the
executives to severance payments and benefits if, following a change of control,
United Water terminates the executive's employment for other than cause or if
the executive terminates employment for good reason. Cause is generally defined
in the agreements to include actions, such as the executive's failure to perform
his or her duties, the willful engaging of the executive in misconduct, or the
executive's conviction of a felony, if such actions would cause material injury
to United Water. Good reason is defined in the agreements to include, among
other things, a reduction in the executive's base salary, an adverse change in
the executive's duties or responsibilities, and, in all but one of the
agreements, a change of the executive's place of employment to one that is more
than 50 miles from where the executive is currently working. Additionally, Mr.
Correll's agreement provides that severance payments and benefits will be paid
following a termination or resignation for any reason during the six month
period following the consummation of a transaction that constitutes a change of
control and the agreements of Messrs. Simunovich, DeMicco and Fallon provide
that severance payments and benefits will be paid following a termination or
resignation for any reason during the thirteenth month following the
consummation of a transaction that constitutes a change of control. Severance
benefits provided under the agreements include the following:
. a payment equal to two or three hundred percent of the executive's
annual base salary and annual target bonus;
. continued participation for 18 or 24 months in employee benefit plans
in which the executive is entitled to participate, or the cash
equivalent if continued participation is not possible; and
. payment of the executive's nonqualified supplemental retirement plan
benefit, assuming for purposes of determining the benefit that it is
fully vested, and that the executive has attained at least age 55 with
at least 10 years of service under the plan.
The agreements also provide for an additional payment, if required, to make
the executives whole for any excise tax imposed by Section 4999 of the Internal
Revenue Code.
It is presently estimated that the value of the severance payments and
benefits, including the excise tax gross-up payments, to which the named
executive officers would become entitled under their employment agreements,
assuming for this purpose that each executive's employment was terminated for
one of the reasons set forth above: Mr. Correll, $3,975,600; Mr. Simunovich,
$2,201,500; Mr. DeMicco, $1,865,400; Mr. McGlynn, $685,800; and Mr. Fallon,
$1,395,600.
Retirement Plans
The table below contains information concerning estimated annual retirement
benefits in accordance with the Employee Retirement Income Security Act payable
under United Water's pension plans upon retirement at age 65 for certain key
executives with final average pay and years of credited service as set forth
below.
72
<PAGE>
Pension Plan Table(a)
<TABLE>
<CAPTION>
Years of Credited Service(b)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Final average pay 10 15 20 25 30 35
- ----------------- -------- -------- -------- -------- -------- --------
$200,000..................................... $ 60,000 $ 80,000 $100,000 $120,000 $140,000 $140,000
300,000...................................... 90,000 120,000 150,000 180,000 210,000 210,000
400,000...................................... 120,000 160,000 200,000 240,000 280,000 280,000
500,000...................................... 150,000 200,000 250,000 300,000 350,000 350,000
600,000...................................... 180,000 240,000 300,000 360,000 420,000 420,000
</TABLE>
(a) Pension benefits are calculated on a straight life annuity basis (other
benefit forms are available). Benefits are not subject to any deduction or
offset for Social Security or other amounts.
(b) The years of credited service as of December 31, 1999, for certain executive
officers included in the Summary Compensation Table are as follows: D.
Correll, 23 years; J. Simunovich, 7 years; F. DeMicco, 8 years; R. McGlynn, 5
years; and M. Fallon, 2 years.
The retirement benefits summarized in the preceding table are provided by
United Water's qualified defined benefit pension plan, which covers executive,
supervisory and other employees of United Water and certain subsidiaries who are
not included in collective bargaining units and by a supplemental executive
retirement plan ("SERP"). The qualified plan provides a normal retirement
benefit of one and one half percent of a participant's average base wage or
salary rate (up to the maximum permitted for tax-qualified retirement plans
under federal income tax laws and regulations, which was $160,000 in 1999 and is
adjusted for inflation) multiplied by years of credited service. Average base
wage or salary rate is defined in the qualified plan and is substantially
equivalent to the ''Salary'' reported in the Summary Compensation Table; the
average is computed over the five years having the highest base wage or salary
of the last ten years of service. The normal form of retirement benefit is a
straight life annuity for unmarried participants or an actuarially reduced 50%
joint and surviving spouse retirement benefit for married participants. Other
optional forms of benefit payment are available on an actuarially equivalent
basis. Federal income tax laws and regulations also limit the maximum annual
retirement benefit payable from the qualified defined benefit pension plan.
The SERP for the benefit of certain key executive employees, including some of
those named in the Summary Compensation Table, authorizes the payment of
benefits out of general funds in addition to those provided under the qualified
defined benefit pension plan according to a formula that takes into account
years of service, age, final average compensation (salary and bonus) of the
three years having the highest compensation of the last ten years of service and
qualified defined benefit pension plan benefits. The normal form of payment is a
single life annuity with a ten-year certain guaranty. Other optional forms of
benefit payment are available on an actuarially equivalent basis. In lieu of
participation in the SERP, Mr. McGlynn participates in a United Water "top-hat"
plan.
Option Grants
Shown below is additional information on grants of options to purchase United
Water Common Stock under the Management Incentive Plan during 1999 to the
executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Option Grants in 1999
- ---------------------------------------------------------------------------------------------------------------------------
Individual Grants Grant Date Value
-----------------------------------------
Number of Securities Percentage of
Total
Underlying Options Options Granted Exercise or Grant Date
Granted(a) to Base Price Expiration Present
Name (#) Employees in ($/sh) Date Value($)(b)
- ---- 1999
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Donald L. Correll................. 41,500 9.7 22.75 1/7/09 475,240
Joseph Simunovich................. 17,670 4.1 22.75 1/7/09 202,350
Frank J. DeMicco.................. 16,170 3.8 22.75 1/7/09 185,170
Richard B. McGlynn................ 10,620 2.5 22.75 1/7/09 121,616
Michael C.J. Fallon............... 6,070 1.4 22.75 1/7/09 65,510
</TABLE>
73
<PAGE>
(a) All options were granted and vested on January 7, 1999. The exercise price
per share equalled the fair market value on the date of grant.
(b) The grant date present value shown is estimated in part using the Black-
Scholes option pricing model, a method of approximating the present value of
options exercisable at a fixed price at the end of a fixed period. It relies
on certain assumptions as of the date of grant of the options, such as
interest rates, dividend yield, time to exercise, and stock price
sensitivity (volatility). Each of these factors could change over the life
of the options and affect the estimated value. The actual value of the
options when exercised may be a lesser or greater amount, depending on the
price of the stock at the date of exercise; it is also possible that the
options will expire unexercised and produce no cash value to the optionee.
In addition to the Black-Scholes value calculated above, the value of the
dividend equivalents is included in the option value, as the optionee is
entitled to receive dividend equivalents for five years. Note that similar
to options, factors could change over the term of the option that may
increase or decrease the dividend equivalent amount at the time of exercise.
The dividend equivalent was calculated by discounting the sum of quarterly
dividends for twenty quarters by the risk-free rate, stated below, for the
same period. The use of the Black-Scholes model is set forth as an
acceptable method of option valuation by the Securities and Exchange
Commission.
The present value of the options was based on the following assumptions:
. Risk-free rate of 6.50%
. Dividend yield of 3.33%
. 10 years to exercise the options
. Stock price volatility of 34.9%
. No adjustment has been made for non-transferability or risk of
forfeiture associated with the options
Option Exercises and Values of Unexercised Options
The table below summarizes information as of December 31, 1999, as to
exercised and unexercised options to purchase United Water Common Stock held by
the executive officers named in the Summary Compensation Table and granted under
the Management Incentive Plan.
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1999 and December 31, 1999 Option Values
- ----------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised,
-------------------- ----------------------
Value Underlying Unexercised In-the-Money
Shares Acquired ----- ------------------------ ------------
--------------- Realized($) options at December 31, options at December 31,
Name On Exercise(#) ----------- ------------------------ -----------------------
- ---- -------------- 1999(#)(a) 1999($)
---------- -------
<S> <C> <C> <C> <C>
Donald L. Correll......... 68,290 610,960 124,040 1,896,530
Joseph Simunovich......... -- 70,960 1,193,735
Frank J. DeMicco.......... 43,270 397,337 -- 274,835
Richard B. McGlynn........ -- -- 45,590 777,425
Michael C.J. Fallon....... -- -- 24,710 414,995
</TABLE>
(a) All such options are presently exercisable.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------- ----------
The following information pertains to the Common Stock of United Water
beneficially owned, directly or indirectly, by each director and the named
executive officers individually and by all directors and executive officers of
United
74
<PAGE>
Water and its subsidiaries as a group as of January 31, 2000.
<TABLE>
<CAPTION>
Number
------
of
--
Name of Beneficial Owner Shares(a)(d)
- ------------------------ ------------
<S> <C>
Edward E. Barr................................................. 31,435(b)(e)
Frank J. Borelli............................................... 9,072
Thierry Bourbie................................................ 4,590
Charles Chaumin................................................ 3,208
Lawrence R. Codey.............................................. 5,829
Donald L. Correll.............................................. 216,466(c)
Peter Del Col.................................................. 12,920
Frank J. DeMicco............................................... 1,807
Robert L. Duncan, Jr........................................... 5,407
Michael C. J.Fallon............................................ 28,950(c)
Jon F. Hanson.................................................. 39,228(b)(e)
Douglas W. Hawes............................................... 15,802
George F. Keane................................................ 5,464
Richard B. McGlynn............................................. 47,936(c)
Dennis M. Newnham.............................................. 6,595
Joseph Simunovich.............................................. 76,097(c)
Marcia L. Worthing............................................. 10,863(e)
Directors and Executive Officers as a Group (24 persons)....... 708,600(b)(c)
</TABLE>
- ----------------
(a) None of the directors or executive officers of United Water owns equity
securities of United Water or any of its subsidiaries other than Common
Stock. As of January 31, 2000, each director or executive officer
beneficially owned less than .5% of the outstanding Common Stock of United
Water and all of the directors and executive officers as a group
beneficially owned less than 1.9% of such stock. Fractional shares have been
rounded down to the nearest whole share.
(b) Includes, in compliance with applicable regulations and interpretations,
shares of Common Stock held by the spouse or other relatives who share the
home, in custody for children or grandchildren of the persons indicated or
indirectly through a trust or similar arrangement in the following amounts:
E. Barr (10,000); J. Hanson (16,845); and all directors and executive
officers as a group (27,098). Such persons disclaim any beneficial ownership
of such shares.
(c) Includes shares of Common Stock which may be acquired pursuant to options
awarded under United Water's Management Incentive Plan in the following
amounts: D. Correll (102,780); J. Simunovich (70,960); R. McGlynn (45,590);
M. Fallon (24,710); and all directors and executive officers as a group
(413,550).
(d) Includes shares of restricted Common Stock granted pursuant to the
Directors' Restricted Stock Plans totaling 64,840 shares.
(e) Includes non-voting Common Stock equivalent units acquired in accordance
with the Directors' Deferred Compensation Unit Plan in the following
amounts: E. Barr (4,977); J. Hanson (16,280); and M. Worthing (3,324).
The following corporation is known to United Water to be the beneficial owner
of more than 5% of a class of United Water's voting securities. To the knowledge
of United Water, no other person is the holder of more than 5% of any class of
United Water's voting securities as of January 31, 2000.
<TABLE>
<CAPTION>
Amount and Nature Percent
----------------- -------
of Beneficial of
------------- --
Title of Class Name and Address of Beneficial Owner Ownership Class
- ------------------- ------------------------------------ ------------------------------- ----------
<S> <C> <C> <C>
Common Stock Lyonnaise American Holding, Inc. 11,687,024 shares 30.0%
2000 First State Boulevard
Wilmington, Delaware 19804-0507
</TABLE>
75
<PAGE>
On August 20, 1999 United Water entered into a merger agreement to merge with
a subsidiary of Lyonnaise American Holding, Inc. and become its wholly owned
subsidiary. Lyonnaise American Holding, Inc. is a wholly owned subsidiary of
Suez Lyonnaise des Eaux.
On January 20, 2000 the shareholders of United Water approved the merger,
which is subject to additional approval by the regulatory authorities in which
United Water conducts its utility business.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- --------------------------------------------------
During 1999, LeBoeuf, Lamb, Greene & MacRae L.L.P., of which Mr. Hawes is of
counsel, performed legal services for United Water and its subsidiaries, and
S.T. Construction, of which Mr. Simunovich's son-in-law Stephen Martinez is the
owner, performed renovation work at various buildings totaling $84,201. Mr.
Simunovich does not participate in the bidding or the selection process of
contractors for this type of work.
In determining which persons may be affiliates of the registrant for the
purpose of disclosing on the cover page of this Form 10-K the market value of
voting shares held by non-affiliates, the registrant has excluded shares held by
the members of its Board of Directors, executive officers and beneficial owners
of more than 10% of the common stock outstanding to the extent that they have
not disclaimed beneficial ownership. No determination has been made that any
director or person connected with a director is an affiliate or that any other
person is not an affiliate. The registrant specifically disclaims any intent to
characterize any person as being or not being an affiliate.
76
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
- -------- --------------------------------------------------------
FORM 8-K
--------
The following documents are filed as part of this report:
(a) Financial Statements and Supplementary Data: See Item 8
(b) Reports on Form 8-K filed in the fourth quarter of 1999: None
(c) Exhibits:
3(a) Restated Certificate of Incorporation (Articles of Incorporation) of
United Water Resources Inc., dated July 14, 1987 (Filed as Exhibit 4(b)
to Registration Statement No. 33-20067)
3(b) Certificate of Correction to Restated Certificate of Incorporation of
United Water Resources Inc., dated August 13, 1987 (Filed as Exhibit
4(c) to Registration Statement No. 33-20067)
3(c) Certificate of Amendment to the Restated Articles of Incorporation of
United Water Resources Inc., dated April 22, 1994, amending Articles 5,
6, 7 and 9 (Filed as Exhibit 3(c) to Registration Statement No. 33-
61617)
3(d) Certificate of Amendment to the Restated Certificate of Incorporation
of United Water Resources Inc., dated June 3, 1997, amending Article
5(a) (Filed as Exhibit 3(d) to Registration Statement No. 333-30229)
3(e) Amended By-laws of United Water Resources, dated as of March 10, 1994
(Filed as Exhibit 4(l) to Form 10-K for year ended December 31, 1993)
4(a) Specimen of United Water Resources Common Stock (Filed as Exhibit 4(d)
to Registration Statement No. 2-90540)
4(b) Governance Agreement between United Water Resources and Lyonnaise
American Holding, Inc., dated April 22, 1994 (Filed in Appendix A to
Registration Statement No. 33-51703)
4(c) Amendment No. 1 to Governance Agreement between United Water Resources
and Lyonnaise American Holding, Inc., dated June 27, 1996 (Filed as
Exhibit 4(g) to Registration Statement No. 333-30229)
4(d) Amendment No. 2 to Governance Agreement between United Water Resources
and Lyonnaise American Holding, Inc., dated July 14, 1997 (Filed as
Exhibit 4(d) to Form 10-K for the fiscal year ended December 31, 1998)
4(e) Agreement and Plan of Merger between United Water Resources, Inc.,
Lyonnaise American Holding, Inc., LAH Acquisition Co., and Suez
Lyonnaise des Eaux, dated as of August 20, 1999 (Filed as Exhibit 2.1
to Form 8-K dated August 27, 1999)
77
<PAGE>
4(f) Additional instruments defining rights of holders of the Company's
long-term debt are not being filed because the securities authorized
under each such agreement do not exceed 10% of the total assets of the
Company and its subsidiaries on a consolidated basis. The Company
agrees to furnish to the Commission a copy of each such agreement upon
request.
4(g) Certificate of Amendment to the Restated Articles of Incorporation of
United Water Resources Inc., dated April 22, 1994 for Series A
Cumulative Convertible Preference Stock of United Water Resources Inc.
(Filed as Exhibit 4(a) to Registration Statement No. 33-61617)
4(h) Certificate of Amendment to the Restated Articles of Incorporation of
United Water Resources Inc., dated April 22, 1994 for Series B 7 5/8%
Cumulative Preferred Stock of United Water Resources Inc. (Filed as
Exhibit 4(b) to Registration Statement No. 33-61617)
4(i) Rights Agreement dated July 12, 1989, amended September 15, 1993
between United Water Resources Inc. and Chase Mellon Shareholders
Services, L.L.C. (as successor to First Interstate Bank of California)
(Filed originally as Exhibit 4(c) to Registration Statement No. 33-
32672)
4(j) Amendment No. 2 to Rights Agreement between United Water Resources Inc.
and Chase Mellon Shareholder Services, L.L.C., dated July 30, 1999
4(k) Amendment No. 3 to Rights Agreement between United Water Resources Inc.
and Chase Mellon Shareholder Services, L.L.C., dated August 20, 1999
10(a) Executive Employment Agreement, effective January 1, 1999, between and
among United Water Resources Inc. and Donald L. Correll
10(b) Executive Employment Agreement, effective January 1, 1999, between and
among United Water Resources Inc. and Frank J. DeMicco
10(c) Executive Employment Agreement, effective January 1, 1999, between and
among United Water Resources Inc. and Michael C.J. Fallon
10(d) Executive Employment Agreement, effective January 1, 1999, between and
among United Water Resources Inc. and John Martinowich
10(e) Executive Employment Agreement, effective January 1, 1999, between and
among United Water Resources Inc. and Walton F. Hill
10(f) Executive Employment Agreement, effective January 1, 1999, between and
among United Water Resources Inc. and Robert J. Iacullo
10(g) Executive Employment Agreement, effective January 1, 1999, between and
among United Water Resources Inc. and Joseph Simunovich
78
<PAGE>
10(h) Executive Employment Agreement, effective January 1, 1999, between and
among United Water Resources Inc. and John T. Marino
10(i) Executive Employment Agreement, effective January 1, 1999, between and
among United Water Resources Inc. and John J. Turner
10(j) Executive Employment Agreement, effective January 1, 1999, between and
among United Water Resources Inc. and Richard B. McGlynn
10(k) Executive Employment Agreement, effective January 1, 1999, between and
among United Water Resources Inc. and W. Marie Zanavich
21 Subsidiaries of registrant
23 Consent of Independent Accountants
27 Financial Data Schedule
79
<PAGE>
U N I T E D W A T E R R E S O U R C E S I N C.
SCHEDULE VIII - CONSOLIDATED VALUATION AND
QUALIFYING ACCOUNTS
(thousands of dollars)
December 31,
-------------------------
1999 1998 1997
---- ---- ----
Allowance for doubtful accounts:
Balance at beginning of period $ 1,204 $ 2,528 $ 2,549
Charges to costs and expenses 2,079 1,613 1,587
Accounts written off (2,351) (3,128) (1,770)
Recoveries of accounts written off 302 191 162
------- ------- -------
Balance at end of period $ 1,234 $ 1,204 $ 2,528
======= ======= =======
Real estate valuation reserve:
Balance at beginning of period $ 2,165 $ 3,201 $ 3,465
Sales of properties - (1,036) (264)
------- ------- -------
Balance at end of period $2,165 $ 2,165 $ 3,201
======= ======= =======
80
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNITED WATER RESOURCES INC.
-----------------------------
(Registrant)
March 16, 2000 By: DONALD L. CORRELL
--------------------- ------------------------
Donald L. Correll
Chairman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Chairman, President
DONALD L. CORRELL and Chief Executive Officer March 16, 2000
- --------------------------
(Donald L. Correll)
Secretary
DOUGLAS W. HAWES and Director March 16, 2000
- -------------------------
(Douglas W. Hawes)
JOHN J. TURNER Treasurer March 16, 2000
- -------------------------
(John J. Turner)
<TABLE>
<CAPTION>
Directors
-----------------------
<S> <C> <C> <C>
EDWARD E. BARR 3/16/00 ROBERT L. DUNCAN, JR. 3/16/00
- ---------------------------------- ------- ----------------------- -------
(Edward E. Barr) Date (Robert L. Duncan, Jr.) Date
FRANK J. BORELLI 3/16/00 JON F. HANSON 3/16/00
- ---------------------------------- ------- ----------------------- -------
(Frank J. Borelli) Date (Jon F. Hanson) Date
THIERRY BOURBIE 3/16/00 DOUGLAS W. HAWES 3/16/00
- ---------------------------------- ------- ----------------------- -------
(Thierry Bourbie) Date (Douglas W. Hawes) Date
CHARLES CHAUMIN 3/16/00 GEORGE F. KEANE 3/16/00
- ---------------------------------- ------- ----------------------- -------
(Charles Chaumin) Date (George F. Keane) Date
LAWRENCE R. CODEY 3/16/00 DENNIS M. NEWNHAM 3/16/00
- ---------------------------------- ------- ----------------------- -------
(Lawrence R. Codey) Date (Dennis M. Newnham) Date
DONALD L. CORRELL 3/16/00 MARCIA L. WORTHING 3/16/00
- ---------------------------------- ------- ----------------------- -------
(Donald L. Correll) Date (Marcia L. Worthing) Date
PETER DEL COL 3/16/00
- ---------------------------------- -------
(Peter Del Col) Date
</TABLE>
<PAGE>
Exhibit 4(j)
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
-----------------------------------
Amendment No. 2, dated as of July 30, 1999 (this "Amendment"), between
United Water Resources Inc., a New Jersey Corporation (the "Company"), and
ChaseMellon Shareholder Services, LLC (the "Rights Agent"), as successor to the
trust business of First Interstate Bank, Ltd., to the Rights Agreement, dated as
of July 12, 1989 (the "Rights Agreement"), between the Company and the Rights
Agent.
WHEREAS, the Company and the Rights Agent have entered into the Rights
Agreement;
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Board of
Directors deems it in the best interests of the Company and its shareholders,
necessary and desirable, and consistent with and for the purpose of fulfilling
the objectives of the Company's Board of Directors in authorizing the execution
of the Rights Agreement, to amend the Rights Agreement as set forth below.
NOW THEREFORE, in consideration of the premises and the mutual promises set
forth herein and in the Rights Agreement, the parties hereto agree as follows:
Section 1. Section 2 of the Rights Agreement is hereby amended to read in
its entirety as follows:
"Appointment of Rights Agent. The Company hereby appoints the Rights Agent
----------------------------
to act as agent for the Company in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-rights agents as it may deem necessary or
desirable."
Section 2. Section 7(a) of the Rights Agreement is hereby amended by
amending clause (i) thereof to read in its entirety as follows:
"(i) The Close of Business on April 22, 2006 (the "Final Expiration
Date"),."
Section 3. Section 20(c) of the Rights Agreement is hereby amended by
adding the following sentence as the second sentence:
"Anything to the contrary notwithstanding, in no event shall the Rights
Agent be liable for special, punitive, indirect, consequential or incidental
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Rights Agent has been advised of the likelihood of such
loss or damage."
<PAGE>
Section 4. Section 23 of the Rights Agreement is hereby amended by (i)
deleting subsection (c) thereof in its entirety, and (ii) amending subsection
(a) thereof to read in its entirety as follows:
"(a) The Rights may be redeemed by action of the Board of Directors
pursuant to subsection (b) of this Section 23 and shall not be redeemed in
any other manner."
Section 5. Section 26 of the Rights Agreement is hereby amended to delete
the reference to First Interstate Bank of California and its address on the
seventeenth through the twenty-second lines thereof and to insert in lieu
thereof the following:
ChaseMellon Shareholder Services, LLC
85 Challenger Road
Ridgefield, New Jersey 07660
Section 6. Except as expressly set forth herein, this Amendment shall not
by implication or otherwise alter, modify, amend or in any way affect any of the
terms, conditions, covenants or agreements contained in the Rights Agreement,
all of which are ratified and affirmed in all respects and shall continue in
full force and effect.
Section 7. This Amendment shall be deemed to be a contract made under the
laws of the State of New Jersey and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such state.
Section 8. This Amendment may be executed in counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterpart shall together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Rights Agreement to be duly executed and attested, all as of the date first
above written.
UNITED WATER RESOURCES, INC.
By:____________________________
Name:
Title:
Attest:
By:__________________________
Title:
CHASEMELLON SHAREHOLDER
SERVICES, LLC
By:___________________________
Name:
Title:
Attest:
By:__________________________
Title:
<PAGE>
Exhibit 4(k)
THIRD AMENDMENT
THIS THIRD AMENDMENT, dated as of August 20, 1999, to the Rights Agreement,
dated as of July 12, 1989, as amended (the "Rights Agreement"), between United
Water Resources Inc. (the "Company") and ChaseMellon Shareholder Services, LLC,
as Rights Agent as successor to First Interstate Bank, Ltd. (the "Rights
Agent").
WHEREAS, the parties hereto are parties to the Rights Agreement.
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Board of
Directors deems it necessary and desirable and in the best interests of the
Company and its shareholders to amend the Rights Agreement as set forth below;
and
WHEREAS, the parties hereto desire to amend the Rights Agreement, as
provided herein,
NOW, THEREFORE, in consideration of the premises and the mutual promises
set forth herein and in the Rights Agreement, the parties hereto agree as
follows:
1. The definition of "Acquiring Person" as set forth in Section 1(a) of
the Rights Agreement is hereby amended by adding the following provision at the
end of the first sentence thereto:
"; provided, however, that Lyonnaise shall not be deemed an "Acquiring
-------- -------
Person" as a result of the execution, delivery and performance of the
Agreement and Plan of Merger (the "Merger Agreement") dated as of August
20, 1999, by and among Lyonnaise American Holding, Inc., Suez Lyonnaise des
Eaux, LAH Acquisition Co. and the Company or the consummation of the
transactions contemplated in the Merger Agreement.
2. Section 13 of the Rights Agreement is hereby amended by adding the
words "other than pursuant to the Merger Agreement," at the end of the
introductory phrase "In the event that, directly or indirectly," of such clause.
3. Notwithstanding anything in the Rights Agreement to the contrary, the
Rights Agreement and all Rights shall expire at the "Effective Time" as defined
in the Merger Agreement, a copy of which is annexed hereto as Annex A. The
Company will use reasonable efforts to provide the Rights Agent with advance
notice of the anticipated Effective Time.
4. This Amendment shall be governed by and construed in accordance with
the laws of the State of New Jersey applicable to contracts to be made and
performed entirely within such State, except that the rights, duties and
obligation of the Rights Agent under this Amendment shall be governed by the
laws of the State of New Jersey.
5. Except as expressly amended hereby, the Rights Agreement shall continue
in full force and effect in accordance with the provisions thereof.
6. This Amendment may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the Company and the Rights Agent have executed this
First Amendment as of the date first above written.
UNITED WATER RESOURCES, INC.
By:____________________________
Name:
Title:
Attest:
By:__________________________
Name:
Title:
CHASEMELLON SHAREHOLDER
SERVICES LLC, as Rights Agent
By:___________________________
Name:
Title:
Attest:
By:__________________________
Name:
Title:
<PAGE>
Exhibit 10(a)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT effective as of January 1, 1999 (the "Commencement Date") by
and between United Water Resources Inc., a New Jersey corporation, and its
subsidiaries (collectively, the "Company"), and Donald L. Correll (the
"Executive") (this "Agreement").
The Company desires to employ the Executive and the Executive is
willing to be employed by the Company, on the terms and conditions hereinafter
provided.
In order to effect the foregoing, the parties hereto wish to enter
into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
----------
and the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The Executive's employment under this Agreement shall
----
commence on the Commencement Date and shall end at the close of business on
December 31, 2000; provided, however, that the term of this Agreement (the
-------- -------
"Term") shall thereafter be automatically extended for each succeeding 1-year
period unless either party hereto provides the other party with a written notice
at least 60 days prior to the end of the then current Term, advising that the
party providing the notice shall not agree to so extend the Term; and provided,
--------
further, that should a Change of Control occur during the Term, the Term shall
- -------
be extended to the date which is the end of the 24-month period immediately
following the consummation of the transaction which constitutes the Change of
Control. Notwithstanding the preceding, the Term shall not extend beyond the
date on which the Executive attains age 65 without the prior written consent of
the Company; provided, however, that the end of the Term solely on account of
-------- -------
the Executive attaining age 65 shall not entitle the Executive to any benefits
under Section 7.
3. Title, Duties and Authority. The Executive shall serve as Chief
---------------------------
Executive Officer, President and Chairman of the Board of Directors of United
Water Resources Inc. (the "Board") and shall have such responsibilities and
duties (consistent with the Executive's positions as Chief Executive Officer,
President and Chairman of the Board) as may from time to time be assigned to the
Executive by the Board, and shall have all of the powers and duties usually
incident to the offices of Chief Executive Officer, President and Chairman of
the Board. The Executive shall devote substantially all of his working time and
efforts to the business and affairs of the Company, except for vacations,
illness or incapacity.
4. Compensation and Benefits.
-------------------------
<PAGE>
(a) Base Salary. During the Term, the Company shall pay the Executive
-----------
a base salary ("Base Salary"), payable in equal installments in accordance with
the Company's normal practice for paying base salaries to its executive
employees. The Base Salary shall initially be payable at the rate of $380,000
per annum, and shall be subject to annual review by the Board for discretionary
annual increases.
(b) MIP. The Executive shall participate in the United Water
---
Resources Inc. Management Incentive Plan (the "MIP") or any successor plan
established by the Company.
(c) Employee Benefits. The Executive shall be entitled to participate
-----------------
in all of the Company's employee benefit plans made available by the Company (or
any affiliate thereof) to its executives during the Term as may be in effect
from time to time. In addition, during the Term, the Executive shall accrue
benefits under the United Water Resources Inc. Supplemental Retirement Plan for
Key Executives (the "SERP").
(d) Expenses. During the Term, the Executive shall be entitled to
--------
receive prompt reimbursement upon submission of expense claims to the Company
for all reasonable and customary expenses incurred by the Executive in
performing services hereunder, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company for its executive employees.
(e) Vacations. The Executive shall be entitled to paid vacation, paid
---------
holidays, sick days and personal days pursuant to the Company's regular policies
applicable to its executive employees.
(f) Taxes. The Company may withhold from any amounts payable under
-----
this Agreement such federal, state, local and/or other taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
5. Termination. The Executive's employment hereunder may be
-----------
terminated under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate
-----
upon the Executive's death.
(b) Disability. If, as a result of the Executive's incapacity due to
----------
physical or mental illness, the Executive shall become entitled to the receipt
of benefits under the Company's long-term disability plan, and within 30 days
after a written Notice of Termination (as defined in Section 6(a)) is given to
the Executive by the Company, the Executive shall not have returned to the
performance of his duties hereunder on a full-time basis, the Company may
terminate the Executive's employment hereunder for "Disability."
<PAGE>
(c) Cause. The Company may terminate the Executive's employment
-----
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon the occurrence of
any of the following which is materially injurious to the business or reputation
of the Company or any of its affiliates:
(i) the failure by the Executive to substantially perform the
Executive's duties hereunder (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness);
(ii) the willful violation by the Executive of any of the
Executive's material obligations hereunder;
(iii) the willful engaging by the Executive in misconduct; or
(iv) the Executive's conviction of a felony.
Notwithstanding the foregoing, the Executive shall not be
terminated for Cause without:
(A) at least 15 days' advance notice to the Executive setting
forth the reasons for the Company's intention to terminate the Executive's
employment hereunder for Cause;
(B) the failure of the Executive to cure the nonperformance,
violation or misconduct described in the notice referred to in clause (A)
of this paragraph, if cure thereof is possible, to the reasonable
satisfaction of the Board, within 15 days of such notice; and
(C) delivery to the Executive of a Notice of Termination (as
defined in Section 6(a)) from the Company notifying him that in the good
faith opinion of a majority of the Board, the Company is entitled to
terminate the Executive for Cause as set forth above, and specifying the
particulars thereof in detail.
(d) Good Reason. The Executive may terminate his employment hereunder
-----------
for "Good Reason" by providing a Notice of Termination to the Company within 30
days after the occurrence, without the Executive's consent, of one of the
following events that has not been cured within 15 days after written notice
thereof has been given to the Company by the Executive:
(i) a reduction of the Executive's Base Salary;
<PAGE>
(ii) a material and adverse change in the Executive's title,
status, authority, duties or function (in each case, other than as may be
contemplated by this Agreement);
(iii) any failure to pay the Executive's Base Salary or MIP
payment(s) when due;
(iv) a change of the Executive's place of employment by the
Company to a location which is greater than 50 miles from the location of
the Executive's place of employment by the Company as of the Commencement
Date; or
(v) the willful violation by the Company of any of the Company's
material obligations hereunder.
(e) Without Cause. The Company may terminate the Executive's
-------------
employment hereunder without Cause by providing the Executive with a Notice of
Termination.
(f) Without Good Reason. The Executive may terminate the Executive's
-------------------
employment hereunder without Good Reason by providing the Company with a Notice
of Termination.
6. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than a termination on
account of the Executive's death pursuant to Section 5(a)) shall be communicated
by a written Notice of Termination to the other party hereto in accordance with
Section 11. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and the Date of Termination, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment hereunder pursuant to the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall mean:
-------------------
(i) if the Executive's employment is terminated on account of
the Executive's death pursuant to Section 5(a), the date of the Executive's
death;
(ii) if the Executive's employment is terminated on account of
the Executive's Disability pursuant to Section 5(b), 30 days after a Notice
of Termination has been provided pursuant thereto (provided that the
Executive shall not have returned to the performance of the Executive's
duties on a full-time basis during such thirty 30-day period);
<PAGE>
(iii) if the Executive's employment is terminated for Cause
pursuant to Section 5(c), the date specified in the Notice of Termination
provided pursuant thereto; and
(iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is provided or any later
date (within 30 days) set forth in such Notice of Termination.
7. Compensation Upon Termination.
-----------------------------
(a) Death. If the Executive's employment with the Company is
-----
terminated on account of the Executive's death pursuant to Section 5(a), the
Company shall as soon as practicable pay to the Executive's estate or as may be
directed by the legal representatives of the Executive's estate any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such pro rated MIP payment, the amount, if any, of which
shall be determined in the sole discretion of the Compensation Committee of the
Board (the "Compensation Committee"). The Company shall provide the Executive
through the Date of Termination with continued participation in the employee
benefit plans provided to the Executive pursuant to Section 4(c) as of the
Executive's Date of Termination. Other than the foregoing, the Company shall
have no further obligations to the Executive hereunder.
(b) Disability. If the Executive's employment with the Company is
----------
terminated on account of the Executive's Disability pursuant to Section 5(b),
the Company shall as soon as practicable pay the Executive any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such pro rated MIP payment, the amount, if any, of which
shall be determined in the sole discretion of the Compensation Committee. The
Company shall provide the Executive through the Executive's Date of Termination
with continued participation in the employee benefit plans provided to the
Executive pursuant to Section 4(c) as of the Executive's Date of Termination.
Other than the foregoing, the Company shall have no further obligations to the
Executive hereunder.
(c) By the Company for Cause or By the Executive Without Good
-------------------------------------------------------------
Reason. If the Executive's employment with the Company is terminated by the
- ------
Company for Cause pursuant to Section 5(c) or by the Executive without Good
Reason pursuant to Section 5(f), the Company shall as soon as practicable pay
the Executive any Base Salary accrued and due to the Executive under Section
4(a) through the Executive's Date of Termination and the Executive shall forfeit
his entire then unpaid MIP payment(s), if any. The Company shall provide the
Executive through his Date of Termination with continued participation in the
employee benefit plans provided to the Executive pursuant to Section
<PAGE>
4(c) as of his Date of Termination. Other than the foregoing, the Company shall
have no further obligations to the Executive hereunder.
(d) Termination By the Company Without Cause or By the Executive for
----------------------------------------------------------------
Good Reason or Within 6 Months Following a Change of Control. If the
- ------------------------------------------------------------
Executive's employment with the Company is terminated by the Company (other than
for Disability or Cause), or by the Executive (1) for Good Reason pursuant to
Section 5(d), or (2) with or without Good Reason (other than to avoid his
termination by the Company for Cause) at any time within the 6-month period
commencing upon the consummation of any transaction which constitutes a Change
of Control, as defined below, then the Company shall:
(i) within 30 days of the Executive's Date of Termination, pay
the Executive any Base Salary accrued and due to the Executive under
Section 4(a) through his Date of Termination and any unpaid MIP payment(s)
for any previously completed calendar year(s);
(ii) (A) if the Executive's Date of Termination occurs within the
period beginning on the date of a Change of Control, as defined below, and
ending 24 months following the Change of Control, as defined below (or, if
the Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), within 30 days of the
Executive's Date of Termination, pay the Executive an amount equal to 300%
of his Base Salary in effect as of his Date of Termination, or (B) if the
Executive's Date of Termination does not occur within the period beginning
on the date of a Change of Control, as defined below, and ending 24 months
following the Change of Control, as defined below (or, if the Change of
Control, as defined below, is in connection with shareholder approval
pursuant to paragraph (iii) of the definition of Change of Control, ending
24 months following the consummation of the transaction which was the
subject of shareholder approval), continue to pay the Executive his Base
Salary in effect as of his Date of Termination for the 36-month period
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8) at the times such
payments would otherwise have been made under Section 4(a);
(iii) (A) if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending
<PAGE>
24 months following the consummation of the transaction which was the
subject of shareholder approval), within 30 days of the Executive's Date of
Termination, pay the Executive an amount equal to 300% of the greater of
(I) his then current "Cash Target Amount" under the MIP, or (II) his most
recently paid or declared cash award under the MIP, or (B) if the
Executive's Date of Termination does not occur within 24 months following
the consummation of any transaction which constitutes a Change of Control,
as defined below, pay the Executive an annual MIP payment for each of the 3
MIP years immediately following his Date of Termination (or until such
earlier time that the Executive violates the provisions of Section 8), each
such payment in an amount equal to his "Cash Target Amount" under the MIP
(as of his Date of Termination), and to be made at the times such payments
would otherwise have been made under the MIP;
(iv) provide the Executive for the 36-month period immediately
following his Date of Termination (or until such earlier time that the
Executive violates the provisions of Section 8), with continued
participation (or equivalent benefits if such participation is not legally
permissible (cash payments in the case of tax-qualified retirement plan
benefits)) in the employee benefit plans provided to the Executive pursuant
to Section 4(c) as of his Date of Termination;
(v) solely if the Executive's Date of Termination occurs within
24 months following the consummation of the transaction which was the
subject of shareholder approval), (A) his SERP benefit shall become fully
vested and nonforfeitable, (B) if he had not attained age 55 as of his Date
of Termination, he shall be (I) deemed to have attained age 55 for purposes
of the early retirement provisions of the SERP, and (II) credited with an
additional number of years of service for SERP benefit accrual purposes
equal to the difference between his age as of his Date of Termination and
age 55, (C) if he had not accumulated 10 years of service under the SERP as
of his Date of Termination, he shall be deemed to have 10 years of service
for SERP benefit accrual purposes and (D) within 30 days of his Date of
Termination, the Company shall pay the Executive an amount equal to the
present value of his accrued SERP benefit (utilizing a discount rate for
calculating such present value equal to the "discount rate," as defined in
Statement of Financial Accounting Standards No. 87 published by the
Financial Accounting Standards Board, utilized for purposes of the most
recent audit disclosure relating to the Company's tax-qualified defined
benefit pension plan preceding the Change of Control by the "enrolled
actuary" (as defined in Section 7701 (a)(35) of the Internal Revenue Code
of 1986, as amended (the "Code")), who signed the Schedule B to the most
recent Internal Revenue Service Form 5500 relating to the Company's tax-
qualified defined benefit pension plan, filed prior to the Change of
Control); and
<PAGE>
(vi) solely if the Executive's Date of Termination occurs within
24 months following the consummation of any transaction which constitutes a
Change of Control, as defined below, he shall receive retiree medical
coverage under the United Water Resources Inc. Corporate Medical Benefits
Program.
Other than the foregoing, the Company shall have no further obligations to the
Executive hereunder.
For purposes of this Agreement, a "Change of Control" of the Company
shall mean the first to occur of any of the following events:
(i) any "Person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding (A)
the Company or any of its subsidiaries, (B) a trustee or any fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, or an underwriter temporarily holding securities pursuant
to an offering of such securities, in each case with respect to the
securities so held, or (C) a corporation or other entity owned, directly or
indirectly, by holders of voting securities of the Company in substantially
the same proportions as their ownership of the Company, is or becomes the
"Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its subsidiaries or other affiliates
controlled by the Company or any such subsidiary) representing 20% or more
of the combined ordinary (in the absence of contingencies) voting power of
the Company's then outstanding securities; provided, however, that if such
-------- -------
"Person" shall be Suez Lyonnaise des Eaux or an affiliate thereof, solely
for purposes thereof the above reference to "20%" shall instead be deemed
to refer to the sum of the amount of the "Maximum Stockholder Investment
Percentage" (as defined in Section 1.1 of the Governance Agreement between
United Water Resources Inc. and Lyonnaise American Holding, Inc., dated as
of April 22, 1994) plus two percentage points; or
(ii) during any period of not more than two consecutive calendar
years (commencing January 1, 1999), individuals who at the beginning of
such period constitute the Board, together with any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction triggering the operation of clause
(i) or (iii) of this paragraph) whose election by the Board or nomination
for election by the Company's shareholders was approved by a vote of at
least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or
<PAGE>
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, or a plan of
liquidation of the Company or an agreement for the sale or disposition by
the Company of its assets as an entirety or substantially as an entirety,
other than (A) a transaction which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding, by being converted into voting securities
of the surviving entity, or otherwise), in combination with the ownership
by any trustee or other fiduciary of securities under an employee benefit
plan of the Company, at least 80% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such transaction, or (B) a transaction effected to
implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than 20% of the combined voting power of the
Company's then outstanding securities (or if such person so acquiring more
than 20% of such combined voting power is Suez Lyonnaise des Eaux or an
affiliate thereof, solely for the purposes thereof the above reference to
"20%" shall instead be deemed to refer to the sum of the amount of the
Maximum Stockholder Investment Percentage plus two percentage points).
8. Restrictions.
------------
(a) Reasonable Covenants. It is expressly understood by and between
--------------------
the Company and the Executive that the covenants contained in this Section 8 are
an essential element of this Agreement and that but for the agreement by the
Executive to comply with these covenants and thereby not to diminish the value
of the organization and goodwill of the Company or any affiliate of the Company,
if any, including without limitation relations with their employees, suppliers,
customers and accounts, the Company would not enter into this Agreement. The
Executive has independently consulted with his legal counsel and after such
consultation agrees that such covenants are reasonable and proper.
(b) Noncompetition; No Diversion of Customers; Etc. During the Term
----------------------------------------------
and for 36 months after the Executive's Date of Termination, the Executive shall
not:
(i) engage directly, alone or in association with or as a
shareholder, principal, agent, partner, officer, director, employee or
consultant of any other organization or entity, in competition with the
businesses of the Company and/or any of its affiliates as of the
Executive's Date of Termination;
(ii) divert to any competitor of the Company or any of its
affiliates, any customer of the Company or any of its affiliates or any
"prospective customer" (as defined in the last
<PAGE>
paragraph of this Section 8(b)) of the Company or any of its affiliates; or
(iii) solicit or encourage any officer, employee or consultant of
the Company or any of its affiliates to leave the employ of the Company or
any of its affiliates for employment by or with any competitor of the
Company or any of its affiliates;
provided, however, that the Executive may invest in stocks, bonds or other
- -------- -------
securities of any competitor of the Company or any of its affiliates if:
(A) such stocks, bonds or other securities are listed on any
national or regional securities exchange or have been registered under
Section 11(g) of the Securities Exchange Act of 1934;
(B) the Executive's investment does not exceed, in the case of
any class of the capital stock of any one issuer, 1% of the issued and
outstanding shares, or, in the case of other securities, 1% of the
aggregate principal amount thereof issued and outstanding; and
(C) such investment would not prevent, directly or indirectly,
the transaction of business by the Company and/or any of its affiliates
with any state, district, territory or possession of the United States or
any governmental subdivision, agency or instrumentality thereof by virtue
of any statute, law, regulation or administrative practice.
If, at any time, the provisions of this Section 8(b) shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 8(b) shall
be considered severable and shall become and shall be immediately amended solely
with respect to such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter and the Executive agrees that this Section 8(b) as so amended
shall be valid and binding as though any invalid or unenforceable provision had
not been included herein. Except as provided in this Section 8 and in Section
3, nothing in this Agreement shall prevent or restrict the Executive from
engaging in any business or industry in any capacity.
For purposes of clause (ii) of this Section 8(b), the term
"prospective customer" shall mean any entity, business or individual included on
a list of prospective customers provided to the Executive by the Company within
15 days following his Date of Termination, which list contains the names of
those entities, businesses and individuals with whom the Company had been in
contact prior to the Executive's Date of Termination for purposes of
establishing a customer relationship therewith. Any entity, business or
individual not appearing on the
<PAGE>
aforementioned list of prospective customers due to the failure of the Executive
to advise the Company of such contact shall be considered a "prospective
customer" for purposes of clause (ii) of this Section 8(b).
(c) Public Support and Assistance. The Executive agrees that
-----------------------------
following any termination of his employment hereunder by the Company, the
Executive shall not disclose or cause to be disclosed any negative, adverse or
derogatory comments or information of a substantial nature about the Company or
its management, or about any product or service provided by the Company, or
about the Company's prospects for the future (including any such comments or
information with respect to affiliates of the Company). The Company and/or any
of its affiliates may seek the assistance, cooperation or testimony of the
Executive following any such termination in connection with any investigation,
litigation or proceeding arising out of matters within the knowledge of the
Executive and related to the Executive's position as an officer or employee of
the Company, and in any such instance, the Executive shall provide such
assistance, cooperation or testimony and the Company shall pay the Executive's
reasonable costs and expenses in connection therewith; in addition, if such
assistance, cooperation or testimony requires more than a nominal commitment of
the Executive's time, the Company shall compensate the Executive for such time
at a per diem rate derived from the Executive's Base Salary at the time of the
Executive's Date of Termination.
(d) Nondisclosure of Confidential Information. During the Term, the
-----------------------------------------
Executive shall hold in a fiduciary capacity for the benefit of the Company and
its affiliates all Confidential Information (as defined below). After
termination of the Executive's employment with the Company, the Executive shall
keep secret and confidential all Confidential Information and shall not use or
disclose to any third party in any fashion or for any purpose whatsoever, any
Confidential Information. As used herein, "Confidential Information" shall mean
any information regarding this Agreement, or any other information regarding the
Company or its affiliates which is not available to the general public, and/or
not generally known outside the Company or any such affiliate, to which the
Executive has or shall have had access at any time during the course of the
Executive's employment with the Company, including, without limitation, any
information relating to the Company's (and its affiliates'):
(i) business, operations, plans, strategies, prospects or
objectives;
(ii) products, technologies, processes, specifications, research
and development operations or plans;
(iii) customers and customer lists;
(iv) sales, service, support and marketing practices and
operations;
<PAGE>
(v) financial condition and results of operations;
(vi) operational strengths and weaknesses; and
(vii) personnel and compensation policies and procedures.
Notwithstanding the foregoing provisions of this Section 8, the Executive may
discuss this Agreement with the members of the Executive's immediate family and
with the Executive's personal legal and tax advisors.
(e) Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Executive agrees that damages at law would be an
insufficient remedy to the Company in the event that the Executive violates any
of the provisions of this Section 8, and that the Company may apply for and,
upon the requisite showing, have injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach of or otherwise to
specifically enforce any of the covenants contained in this Section 8.
9. Excise Tax Gross-Up Payment. If any payments made and/or benefits
---------------------------
provided to the Executive by the Company, whether or not under this Agreement
("Payments"), are subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Payments and all income taxes and Excise Tax
upon such Company payment, shall be equal to the Payments. The determination of
whether any Payments are subject to the Excise Tax shall be based on the opinion
of tax counsel selected by the Company and reasonably acceptable to the
Executive, whose fees and expenses shall be paid by the Company. For purposes
of determining the amount of the Gross-Up Payment, the Executive shall be deemed
to pay federal, state and local income taxes at the highest marginal rate of
income taxation applicable to any individual residing in the jurisdiction in
which the Executive resides in the calendar year in which the Gross-Up Payment
is to be made. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the Gross-Up
Payment being repaid by the Executive to the extent that such repayment results
in a reduction in Excise Tax and/or a federal, state or local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event
<PAGE>
that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross- Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such excess) at
the time that the amount of such excess is finally determined. The Executive and
the Company shall each reasonably cooperate with the other in connection with
any administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Payments.
10. Legal Fees. To provide the Executive with reasonable assurances
----------
that the purposes of this Agreement will not be frustrated by the cost of its
enforcement should the Company fail to perform any of its obligations under this
Agreement, the Company shall pay all of the reasonable attorneys' fees and
expenses and court and arbitration costs incurred by the Executive and any of
his beneficiaries, heirs and legal representatives, should a court of competent
jurisdiction or an arbitrator determine that the Company shall have failed to
perform any of its obligations under this Agreement.
11. Notice. For the purposes of this Agreement, notices, demands and
------
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Donald L. Correll
375 Spring Avenue
Ridgewood, NJ 07450
If to the Company:
Office of the General Counsel
United Water Resources Inc.
200 Old Hook Road
Harrington Park, NJ 07640-1799
or to such other address as either of the parties may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
12. Successors. Without the prior written consent of the Executive,
----------
this Agreement cannot be assigned by the Company except that it shall be binding
automatically on any successors and assigns of all or substantially all of the
business and/or assets of the Company
<PAGE>
(whether direct or indirect, by purchase, merger, consolidation or otherwise).
In addition, without the prior written consent of the Company, this Agreement
cannot be assigned by the Executive, except that the right to receive payments
or benefits hereunder may be transferred by will or the laws of descent and
distribution. This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives.
13. Arbitration. Except as provided in Section 8(e), all
-----------
controversies, claims or disputes arising out of or relating to this Agreement
shall be settled by binding arbitration under the rules of the American
Arbitration Association then in effect in the State of New Jersey, as the sole
and exclusive remedy of either party, and judgment upon any such award rendered
by the arbitrator(s) may be entered in any court of competent jurisdiction. The
costs of arbitration shall be borne by the unsuccessful party or otherwise as
determined by the arbitrators in their discretion.
14. Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of New
Jersey without regard to conflicts of law principles.
15. Amendments. No provision of this Agreement may be modified,
----------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated for such purpose 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.
16. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
17. Entire Agreement. 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. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
18 Indemnification. The Company shall indemnify the Executive to
---------------
the full extent permitted by the New Jersey Business Corporation Act and any
provision of the By-Laws of the Company, as
<PAGE>
amended from time to time, generally applicable to officers and directors of the
Company, for all amounts (including without limitation, judgments, fines,
settlement payments, expenses and attorneys' fees) incurred or paid by the
Executive in connection with any action, suit, investigation or proceeding
arising out of or relating to the performance by the Executive of services for,
or the actions by the Executive as an officer or employee of, the Company or any
affiliate of the Company or any other person or enterprise at the Company's
request. Nothing in this Section 18 or elsewhere in this Agreement is intended
to prevent the Company from indemnifying the Executive to any greater extent
than is required by this Section 18.
<PAGE>
19 Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
UNITED WATER RESOURCES INC.
By:_______________________________
Name: Marcia L. Worthing
Title: Chair, Compensation Committee
DONALD L. CORRELL
_________________________________
<PAGE>
Exhibit 10(b)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT effective as of January 1, 1999 (the "Commencement Date") by
and between United Water Resources Inc., a New Jersey corporation, and its
subsidiaries (collectively, the "Company"), and Frank J. DeMicco (the
"Executive") (this "Agreement").
The Company desires to employ the Executive and the Executive is
willing to be employed by the Company, on the terms and conditions hereinafter
provided.
In order to effect the foregoing, the parties hereto wish to enter
into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
----------
and the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The Executive's employment under this Agreement shall
----
commence on the Commencement Date and shall end at the close of business on
December 31, 2000; provided, however, that the term of this Agreement (the
-------- -------
"Term") shall thereafter be automatically extended for each succeeding 1-year
period unless either party hereto provides the other party with a written notice
at least 60 days prior to the end of the then current Term, advising that the
party providing the notice shall not agree to so extend the Term; and provided,
--------
further, that should a Change of Control occur during the Term, the Term shall
- -------
be extended to the date which is the end of the 24-month period immediately
following the consummation of the transaction which constitutes the Change of
Control . Notwithstanding the preceding, the Term shall not extend beyond the
date on which the Executive attains age 65 without the prior written consent of
the Company; provided, however, that the end of the Term solely on account of
-------- -------
the Executive attaining age 65 shall not entitle the Executive to any benefits
under Section 7.
3. Title, Duties and Authority. The Executive shall serve as
---------------------------
President of United Water Resources New Jersey Inc. and shall have such
responsibilities and duties (consistent with the Executive's position as
President) as may from time to time be assigned to the Executive by the Board of
Directors of United Water Resources Inc. (the "Board"), and shall have all of
the powers and duties usually incident to the office of President. The
Executive shall devote substantially all of his working time and efforts to the
business and affairs of the Company, except for vacations, illness or
incapacity.
<PAGE>
4. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Term, the Company shall pay the Executive
-----------
a base salary ("Base Salary"), payable in equal installments in accordance with
the Company's normal practice for paying base salaries to its executive
employees. The Base Salary shall initially be payable at the rate of $215,000
per annum, and shall be subject to annual review by the Board for discretionary
annual increases.
(b) MIP. The Executive shall participate in the United Water
---
Resources Inc. Management Incentive Plan (the "MIP") or any successor plan
established by the Company.
(c) Employee Benefits. The Executive shall be entitled to participate
-----------------
in all of the Company's employee benefit plans made available by the Company (or
any affiliate thereof) to its executives during the Term as may be in effect
from time to time. In addition, during the Term, the Executive shall accrue
benefits under the United Water Resources Inc. Supplemental Retirement Plan for
Key Executives (the "SERP").
(d) Expenses. During the Term, the Executive shall be entitled to
--------
receive prompt reimbursement upon submission of expense claims to the Company
for all reasonable and customary expenses incurred by the Executive in
performing services hereunder, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company for its executive employees.
(e) Vacations. The Executive shall be entitled to paid vacation, paid
---------
holidays, sick days and personal days pursuant to the Company's regular policies
applicable to its executive employees.
(f) Taxes. The Company may withhold from any amounts payable under
-----
this Agreement such federal, state, local and/or other taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
5. Termination. The Executive's employment hereunder may be
-----------
terminated under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate upon
-----
the Executive's death.
(b) Disability. If, as a result of the Executive's incapacity due to
----------
physical or mental illness, the Executive shall become entitled to the receipt
of benefits under the Company's long-term disability plan, and within 30 days
after a written Notice of Termination (as defined in Section 6(a)) is given to
the Executive by the Company, the Executive shall not have returned to the
performance
<PAGE>
of his duties hereunder on a full-time basis, the Company may terminate the
Executive's employment hereunder for "Disability."
(c) Cause. The Company may terminate the Executive's employment
-----
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon the occurrence of
any of the following which is materially injurious to the business or reputation
of the Company or any of its affiliates:
(i) the failure by the Executive to substantially perform the
Executive's duties hereunder (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness);
(ii) the willful violation by the Executive of any of the Executive's
material obligations hereunder;
(iii) the willful engaging by the Executive in misconduct; or
(iv) the Executive's conviction of a felony.
Notwithstanding the foregoing, the Executive shall not be terminated
for Cause without:
(A) at least 15 days' advance notice to the Executive setting forth
the reasons for the Company's intention to terminate the Executive's employment
hereunder for Cause;
(B) the failure of the Executive to cure the nonperformance, violation
or misconduct described in the notice referred to in clause (A) of this
paragraph, if cure thereof is possible, to the reasonable satisfaction of the
Board, within 15 days of such notice; and
(C) delivery to the Executive of a Notice of Termination (as defined
in Section 6(a)) from the Company notifying him that in the good faith opinion
of a majority of the Board, the Company is entitled to terminate the Executive
for Cause as set forth above, and specifying the particulars thereof in detail.
(d) Good Reason. The Executive may terminate his employment hereunder
-----------
for "Good Reason" by providing a Notice of Termination to the Company within 30
days after the occurrence, without the Executive's consent, of one of the
following events that has not been cured within 15 days after written notice
thereof has been given to the Company by the Executive:
<PAGE>
(i) a reduction of the Executive's Base Salary;
(ii) a material and adverse change in the Executive's title,
status, authority, duties or function (in each case, other than as may be
contemplated by this Agreement);
(iii) any failure to pay the Executive's Base Salary or MIP
payment(s) when due;
(iv) a change of the Executive's place of employment by the
Company to a location which is greater than 50 miles from the location of
the Executive's place of employment by the Company as of the Commencement
Date; or
(v) the willful violation by the Company of any of the Company's
material obligations hereunder.
(e) Without Cause. The Company may terminate the Executive's
-------------
employment hereunder without Cause by providing the Executive with a Notice
of Termination.
(f) Without Good Reason. The Executive may terminate the
-------------------
Executive's employment hereunder without Good Reason by providing the
Company with a Notice of Termination.
6. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than a termination on
account of the Executive's death pursuant to Section 5(a)) shall be communicated
by a written Notice of Termination to the other party hereto in accordance with
Section 11. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice which shall indicate the specific termination provision in this
Agreement relied upon and the Date of Termination, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment hereunder pursuant to the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall mean:
-------------------
(i) if the Executive's employment is terminated on account of the
Executive's death pursuant to Section 5(a), the date of the Executive's
death;
(ii) if the Executive's employment is terminated on account of
the Executive's Disability pursuant to Section 5(b), 30 days after a Notice
of Termination has been provided pursuant thereto (provided that the
Executive shall not have returned to
<PAGE>
the performance of the Executive's duties on a full-time basis during such
thirty 30-day period);
(iii) if the Executive's employment is terminated for Cause
pursuant to Section 5(c), the date specified in the Notice of Termination
provided pursuant thereto; and
(iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is provided or any later date
(within 30 days) set forth in such Notice of Termination.
7. Compensation Upon Termination.
-----------------------------
(a) Death. If the Executive's employment with the Company is
-----
terminated on account of the Executive's death pursuant to Section 5(a), the
Company shall as soon as practicable pay to the Executive's estate or as may be
directed by the legal representatives of the Executive's estate any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee of the Board
(the "Compensation Committee"). The Company shall provide the Executive through
the Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of the Executive's
Date of Termination. Other than the foregoing, the Company shall have no further
obligations to the Executive hereunder.
(b) Disability. If the Executive's employment with the Company is
----------
terminated on account of the Executive's Disability pursuant to Section 5(b),
the Company shall as soon as practicable pay the Executive any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee. The Company
shall provide the Executive through the Executive's Date of Termination with
continued participation in the employee benefit plans provided to the Executive
pursuant to Section 4(c) as of the Executive's Date of Termination. Other than
the foregoing, the Company shall have no further obligations to the Executive
hereunder.
(c) By the Company for Cause or By the Executive Without Good
---------------------------------------------------------
Reason. If the Executive's employment with the Company is terminated by the
- ------
Company for Cause pursuant to Section 5(c) or by the Executive without Good
Reason pursuant to Section 5(f), the Company shall as soon as practicable pay
the Executive any Base Salary accrued and due to the Executive under Section
4(a) through the Executive's Date of Termination and the Executive shall forfeit
his entire then unpaid MIP payment(s), if any. The Company shall provide the
Executive through his Date of Termination with continued participation in the
<PAGE>
employee benefit plans provided to the Executive pursuant to Section 4(c) as of
his Date of Termination. Other than the foregoing, the Company shall have no
further obligations to the Executive hereunder.
(d) Termination By the Company Without Cause or By the Executive
------------------------------------------------------------
for Good Reason or During the Thirteenth Month Following a Change of Control. If
- ----------------------------------------------------------------------------
the Executive's employment with the Company is terminated by the Company (other
than for Disability or Cause), or by the Executive (1) for Good Reason pursuant
to Section 5(d), or (2) with or without Good Reason (other than to avoid his
termination by the Company for Cause) during the thirteenth calendar month
beginning after the consummation of any transaction which constitutes a Change
of Control, as defined below, then the Company shall:
(i) within 30 days of the Executive's Date of Termination, pay
the Executive any Base Salary accrued and due to the Executive under
Section 4(a) through his Date of Termination and any unpaid MIP payment(s)
for any previously completed calendar year(s);
(ii) (A) if the Executive's Date of Termination occurs within the
period beginning on the date of a Change of Control, as defined below, and
ending 24 months following the Change of Control, as defined below (or, if
the Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), within 30 days of the
Executive's Date of Termination, pay the Executive an amount equal to 300%
of his Base Salary in effect as of his Date of Termination, or (B) if the
Executive's Date of Termination does not occur within the period beginning
on the date of a Change of Control, as defined below, and ending 24 months
following the Change of Control, as defined below (or, if the Change of
Control, as defined below, is in connection with shareholder approval
pursuant to paragraph (iii) of the definition of Change of Control, ending
24 months following the consummation of the transaction which was the
subject of shareholder approval), continue to pay the Executive his Base
Salary in effect as of his Date of Termination for the 24-month period
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8) at the times such
payments would otherwise have been made under Section 4(a);
(iii) (A) if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending
<PAGE>
24 months following the consummation of the transaction which was the
subject of shareholder approval), within 30 days of the Executive's Date of
Termination, pay the Executive an amount equal to 300% of the greater of
(I) his then current "Cash Target Amount" under the MIP, or (II) his most
recently paid or declared cash award under the MIP, or (B) if the
Executive's Date of Termination does not occur within the period beginning
on the date of a Change of Control, as defined below, and ending 24 months
following the Change of Control, as defined below (or, if the Change of
Control, as defined below, is in connection with shareholder approval
pursuant to paragraph (iii) of the definition of Change of Control, ending
24 months following the consummation of the transaction which was the
subject of shareholder approval), pay the Executive an annual MIP payment
for each of the 2 MIP years immediately following his Date of Termination
(or until such earlier time that the Executive violates the provisions of
Section 8), each such payment in an amount equal to his "Cash Target
Amount" under the MIP (as of his Date of Termination), and to be made at
the times such payments would otherwise have been made under the MIP;
(iv) provide the Executive for the 24-month period immediately
following his Date of Termination (or until such earlier time that the
Executive violates the provisions of Section 8), with continued
participation (or equivalent benefits if such participation is not legally
permissible (cash payments in the case of tax-qualified retirement plan
benefits)) in the employee benefit plans provided to the Executive pursuant
to Section 4(c) as of his Date of Termination; and
(v) solely if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), (A) his SERP
benefit shall become fully vested and nonforfeitable, (B) if he had not
attained age 55 as of his Date of Termination, he shall be deemed to have
attained age 55 for purposes of the early retirement provisions of the
SERP, (C) if he had not accumulated 10 years of service under the SERP as
of his Date of Termination, he shall be deemed to have 10 years of service
for SERP benefit accrual purposes and (D) within 30 days of his Date of
Termination, the Company shall pay the Executive an amount equal to the
present value of his accrued SERP benefit (utilizing a discount rate for
calculating such present value equal to the "discount rate," as defined in
Statement of Financial Accounting Standards No. 87 published by the
Financial Accounting Standards Board, utilized for purposes of the most
recent audit disclosure
<PAGE>
relating to the Company's tax-qualified defined benefit pension plan
preceding the Change of Control by the "enrolled actuary" (as defined in
Section 7701(a)(35) of the Internal Revenue Code of 1986, as amended (the
"Code")), who signed the Schedule B to the most recent Internal Revenue
Service Form 5500 relating to the Company's tax- qualified defined benefit
pension plan, filed prior to the Change of Control).
Other than the foregoing, the Company shall have no further obligations to the
Executive hereunder.
For purposes of this Agreement, a "Change of Control" of the Company
shall mean the first to occur of any of the following events:
(i) any "Person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding (A)
the Company or any of its subsidiaries, (B) a trustee or any fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, or an underwriter temporarily holding securities pursuant
to an offering of such securities, in each case with respect to the
securities so held, or (C) a corporation or other entity owned, directly or
indirectly, by holders of voting securities of the Company in substantially
the same proportions as their ownership of the Company, is or becomes the
"Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its subsidiaries or other affiliates
controlled by the Company or any such subsidiary) representing 20% or more
of the combined ordinary (in the absence of contingencies) voting power of
the Company's then outstanding securities; provided, however, that if such
-------- -------
"Person" shall be Suez Lyonnaise des Eaux or an affiliate thereof, solely
for purposes thereof the above reference to "20%" shall instead be deemed
to refer to the sum of the amount of the "Maximum Stockholder Investment
Percentage" (as defined in Section 1.1 of the Governance Agreement between
United Water Resources Inc. and Lyonnaise American Holding, Inc., dated as
of April 22, 1994) plus two percentage points; or
(ii) during any period of not more than two consecutive calendar
years (commencing January 1, 1999), individuals who at the beginning of
such period constitute the Board, together with any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction triggering the operation of clause
(i) or (iii) of this paragraph) whose election by the Board or nomination
for election by the Company's shareholders was approved by a vote of at
least two-thirds of the directors then still in office who
<PAGE>
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, or a plan of
liquidation of the Company or an agreement for the sale or disposition by
the Company of its assets as an entirety or substantially as an entirety,
other than (A) a transaction which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding, by being converted into voting securities
of the surviving entity, or otherwise), in combination with the ownership
by any trustee or other fiduciary of securities under an employee benefit
plan of the Company, at least 80% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such transaction, or (B) a transaction effected to
implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than 20% of the combined voting power of the
Company's then outstanding securities (or if such person so acquiring more
than 20% of such combined voting power is Suez Lyonnaise des Eaux or an
affiliate thereof, solely for the purposes thereof the above reference to
"20%" shall instead be deemed to refer to the sum of the Maximum
Stockholder Investment Percentage plus two percentage points).
8. Restrictions.
------------
(a) Reasonable Covenants. It is expressly understood by and
--------------------
between the Company and the Executive that the covenants contained in this
Section 8 are an essential element of this Agreement and that but for the
agreement by the Executive to comply with these covenants and thereby not to
diminish the value of the organization and goodwill of the Company or any
affiliate of the Company, if any, including without limitation relations with
their employees, suppliers, customers and accounts, the Company would not enter
into this Agreement. The Executive has independently consulted with his legal
counsel and after such consultation agrees that such covenants are reasonable
and proper.
(b) Noncompetition; No Diversion of Customers; Etc. During the
----------------------------------------------
Term and for 24 months after the Executive's Date of Termination, the Executive
shall not:
(i) engage directly, alone or in association with or as a
shareholder, principal, agent, partner, officer, director, employee or
consultant of any other organization or entity, in competition with the
businesses of the Company and/or any of its affiliates as of the
Executive's Date of Termination;
<PAGE>
(ii) divert to any competitor of the Company or any of its
affiliates, any customer of the Company or any of its affiliates or any
"prospective customer" (as defined in the last paragraph of this Section
8(b)) of the Company or any of its affiliates; or
(iii) solicit or encourage any officer, employee or consultant of
the Company or any of its affiliates to leave the employ of the Company or
any of its affiliates for employment by or with any competitor of the
Company or any of its affiliates;
provided, however, that the Executive may invest in stocks, bonds or other
- -------- -------
securities of any competitor of the Company or any of its affiliates if:
(A) such stocks, bonds or other securities are listed on any
national or regional securities exchange or have been registered under
Section 11(g) of the Securities Exchange Act of 1934;
(B) the Executive's investment does not exceed, in the case of
any class of the capital stock of any one issuer, 1% of the issued and
outstanding shares, or, in the case of other securities, 1% of the
aggregate principal amount thereof issued and outstanding; and
(C) such investment would not prevent, directly or indirectly,
the transaction of business by the Company and/or any of its affiliates
with any state, district, territory or possession of the United States or
any governmental subdivision, agency or instrumentality thereof by virtue
of any statute, law, regulation or administrative practice.
If, at any time, the provisions of this Section 8(b) shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 8(b) shall
be considered severable and shall become and shall be immediately amended solely
with respect to such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter and the Executive agrees that this Section 8(b) as so amended
shall be valid and binding as though any invalid or unenforceable provision had
not been included herein. Except as provided in this Section 8 and in Section
3, nothing in this Agreement shall prevent or restrict the Executive from
engaging in any business or industry in any capacity.
For purposes of clause (ii) of this Section 8(b), the term
"prospective customer" shall mean any entity, business or individual included on
a list of prospective customers provided to the Executive by the Company within
15 days following his Date of Termination, which
<PAGE>
list contains the names of those entities, businesses and individuals with whom
the Company had been in contact prior to the Executive's Date of Termination for
purposes of establishing a customer relationship therewith. Any entity, business
or individual not appearing on the aforementioned list of prospective customers
due to the failure of the Executive to advise the Company of such contact shall
be considered a "prospective customer" for purposes of clause (ii) of this
Section 8(b).
(c) Public Support and Assistance. The Executive agrees that
-----------------------------
following any termination of his employment hereunder by the Company, the
Executive shall not disclose or cause to be disclosed any negative, adverse or
derogatory comments or information of a substantial nature about the Company or
its management, or about any product or service provided by the Company, or
about the Company's prospects for the future (including any such comments or
information with respect to affiliates of the Company). The Company and/or any
of its affiliates may seek the assistance, cooperation or testimony of the
Executive following any such termination in connection with any investigation,
litigation or proceeding arising out of matters within the knowledge of the
Executive and related to the Executive's position as an officer or employee of
the Company, and in any such instance, the Executive shall provide such
assistance, cooperation or testimony and the Company shall pay the Executive's
reasonable costs and expenses in connection therewith; in addition, if such
assistance, cooperation or testimony requires more than a nominal commitment of
the Executive's time, the Company shall compensate the Executive for such time
at a per diem rate derived from the Executive's Base Salary at the time of the
Executive's Date of Termination.
(d) Nondisclosure of Confidential Information. During the Term, the
-----------------------------------------
Executive shall hold in a fiduciary capacity for the benefit of the Company and
its affiliates all Confidential Information (as defined below). After
termination of the Executive's employment with the Company, the Executive shall
keep secret and confidential all Confidential Information and shall not use or
disclose to any third party in any fashion or for any purpose whatsoever, any
Confidential Information. As used herein, "Confidential Information" shall mean
any information regarding this Agreement, or any other information regarding the
Company or its affiliates which is not available to the general public, and/or
not generally known outside the Company or any such affiliate, to which the
Executive has or shall have had access at any time during the course of the
Executive's employment with the Company, including, without limitation, any
information relating to the Company's (and its affiliates'):
(i) business, operations, plans, strategies, prospects or
objectives;
(ii) products, technologies, processes, specifications, research
and development operations or plans;
<PAGE>
(iii) customers and customer lists;
(iv) sales, service, support and marketing practices and
operations;
(v) financial condition and results of operations;
(vi) operational strengths and weaknesses; and
(vii) personnel and compensation policies and procedures.
Notwithstanding the foregoing provisions of this Section 8, the Executive may
discuss this Agreement with the members of the Executive's immediate family and
with the Executive's personal legal and tax advisors.
(e) Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Executive agrees that damages at law would be an
insufficient remedy to the Company in the event that the Executive violates any
of the provisions of this Section 8, and that the Company may apply for and,
upon the requisite showing, have injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach of or otherwise to
specifically enforce any of the covenants contained in this Section 8.
9. Excise Tax Gross-Up Payment. If any payments made and/or
---------------------------
benefits provided to the Executive by the Company, whether or not under this
Agreement ("Payments"), are subject to the tax (the "Excise Tax") imposed by
Section 4999 of the Code, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Payments and all income
taxes and Excise Tax upon such Company payment, shall be equal to the Payments.
The determination of whether any Payments are subject to the Excise Tax shall be
based on the opinion of tax counsel selected by the Company and reasonably
acceptable to the Executive, whose fees and expenses shall be paid by the
Company. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal, state and local income taxes at the
highest marginal rate of income taxation applicable to any individual residing
in the jurisdiction in which the Executive resides in the calendar year in which
the Gross-Up Payment is to be made. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time of termination of the Executive's employment, the Executive shall
repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to
such reduction (plus that portion of the Gross-Up Payment attributable to
<PAGE>
the Excise Tax and federal, state and local income tax imposed on the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by the Executive to the extent that
such repayment results in a reduction in Excise Tax and/or a federal, state or
local income tax deduction) plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at the time
of the termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross- Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions payable by the
Executive with respect to such excess) at the time that the amount of such
excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Payments.
10. Legal Fees. To provide the Executive with reasonable assurances
----------
that the purposes of this Agreement will not be frustrated by the cost of its
enforcement should the Company fail to perform any of its obligations under this
Agreement, the Company shall pay all of the reasonable attorneys' fees and
expenses and court and arbitration costs incurred by the Executive and any of
his beneficiaries, heirs and legal representatives, should a court of competent
jurisdiction or an arbitrator determine that the Company shall have failed to
perform any of its obligations under this Agreement.
11. Notice. For the purposes of this Agreement, notices, demands and
------
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Frank J. DeMicco
210 Wayfair Circle
Franklin Lakes, NJ 07417
If to the Company:
Office of the General Counsel
United Water Resources Inc.
200 Old Hook Road
Harrington Park, NJ 07640-1799
or to such other address as either of the parties may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
<PAGE>
12. Successors. Without the prior written consent of the Executive,
----------
this Agreement cannot be assigned by the Company except that it shall be binding
automatically on any successors and assigns of all or substantially all of the
business and/or assets of the Company (whether direct or indirect, by purchase,
merger, consolidation or otherwise). In addition, without the prior written
consent of the Company, this Agreement cannot be assigned by the Executive,
except that the right to receive payments or benefits hereunder may be
transferred by will or the laws of descent and distribution. This Agreement and
all rights of the Executive hereunder shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives.
13. Arbitration. Except as provided in Section 8(e), all
-----------
controversies, claims or disputes arising out of or relating to this Agreement
shall be settled by binding arbitration under the rules of the American
Arbitration Association then in effect in the State of New Jersey, as the sole
and exclusive remedy of either party, and judgment upon any such award rendered
by the arbitrator(s) may be entered in any court of competent jurisdiction. The
costs of arbitration shall be borne by the unsuccessful party or otherwise as
determined by the arbitrators in their discretion.
14. Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of New
Jersey without regard to conflicts of law principles.
15. Amendments. No provision of this Agreement may be modified,
----------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated for such purpose 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.
16. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
17. Entire Agreement. 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. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
<PAGE>
18. Indemnification. The Company shall indemnify the Executive to
---------------
the full extent permitted by the New Jersey Business Corporation Act and any
provision of the By-Laws of the Company, as amended from time to time, generally
applicable to officers and directors of the Company, for all amounts (including
without limitation, judgments, fines, settlement payments, expenses and
attorneys' fees) incurred or paid by the Executive in connection with any
action, suit, investigation or proceeding arising out of or relating to the
performance by the Executive of services for, or the actions by the Executive as
an officer or employee of, the Company or any affiliate of the Company or any
other person or enterprise at the Company's request. Nothing in this Section 18
or elsewhere in this Agreement is intended to prevent the Company from
indemnifying the Executive to any greater extent than is required by this
Section 18.
<PAGE>
19. Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
UNITED WATER RESOURCES INC.
By:_____________________________
Name: Donald L. Correll
Title: Chairman and Chief Executive Officer
FRANK J. DEMICCO
________________________________
MARCIA L. WORTHING
________________________________
<PAGE>
Exhibit 10(c)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT effective as of January 1, 1999 (the "Commencement Date") by
and between United Water Resources Inc., a New Jersey corporation, and its
subsidiaries (collectively, the "Company"), and Michael C. J. Fallon (the
"Executive") (this "Agreement").
The Company desires to employ the Executive and the Executive is
willing to be employed by the Company, on the terms and conditions hereinafter
provided.
In order to effect the foregoing, the parties hereto wish to enter
into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
----------
and the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
I. Term. The Executive's employment under this Agreement shall
----
commence on the Commencement Date and shall end at the close of business on
December 31, 2000; provided, however, that the term of this Agreement (the
-------- -------
"Term") shall thereafter be automatically extended for each succeeding 1-year
period unless either party hereto provides the other party with a written notice
at least 60 days prior to the end of the then current Term, advising that the
party providing the notice shall not agree to so extend the Term; and provided,
--------
further, that should a Change of Control occur during the Term, the Term shall
- -------
be extended to the date which is the end of the 24-month period immediately
following the consummation of the transaction which constitutes the Change of
Control. Notwithstanding the preceding, the Term shall not extend beyond the
date on which the Executive attains age 65 without the prior written consent of
the Company; provided, however, that the end of the Term solely on account of
-------- -------
the Executive attaining age 65 shall not entitle the Executive to any benefits
under Section 7.
2. Title, Duties and Authority. The Executive shall serve as
---------------------------
President of United Properties Group, Incorporated and Vice President of United
Water Management and Services Inc. and shall have such responsibilities and
duties (consistent with the Executive's positions as President of United
Properties Group, Incorporated and Vice President of United Water Management and
Services Inc.) as may from time to time be assigned to the Executive by the
Board of Directors of United Water Resources Inc. (the "Board"), and shall have
all of the powers and duties usually
<PAGE>
incident to the offices of President of United Properties Group, Incorporated
and Vice President of United Water Management and Services Inc. The Executive
shall devote substantially all of his working time and efforts to the business
and affairs of the Company, except for vacations, illness or incapacity.
3. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Term, the Company shall pay the Executive
-----------
a base salary ("Base Salary"), payable in equal installments in accordance with
the Company's normal practice for paying base salaries to its executive
employees. The Base Salary shall initially be payable at the rate of $173,000
per annum, and shall be subject to annual review by the Board for discretionary
annual increases.
(b) MIP. The Executive shall participate in the United Water
---
Resources Inc. Management Incentive Plan (the "MIP") or any successor plan
established by the Company.
(c) Employee Benefits. The Executive shall be entitled to participate
-----------------
in all of the Company's employee benefit plans made available by the Company (or
any affiliate thereof) to its executives during the Term as may be in effect
from time to time. In addition, during the Term, the Executive shall accrue
benefits under the United Water Resources Inc. Supplemental Retirement Plan for
Key Executives (the "SERP").
(d) Expenses. During the Term, the Executive shall be entitled to
--------
receive prompt reimbursement upon submission of expense claims to the Company
for all reasonable and customary expenses incurred by the Executive in
performing services hereunder, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company for its executive employees.
(e) Vacations. The Executive shall be entitled to paid vacation, paid
---------
holidays, sick days and personal days pursuant to the Company's regular policies
applicable to its executive employees.
(f) Taxes. The Company may withhold from any amounts payable under
-----
this Agreement such federal, state, local and/or other taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
4. Termination. The Executive's employment hereunder may be terminated
-----------
under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate upon
-----
the Executive's death.
<PAGE>
(b) Disability. If, as a result of the Executive's incapacity due to
----------
physical or mental illness, the Executive shall become entitled to the receipt
of benefits under the Company's long-term disability plan, and within 30 days
after a written Notice of Termination (as defined in Section 6(a)) is given to
the Executive by the Company, the Executive shall not have returned to the
performance of his duties hereunder on a full-time basis, the Company may
terminate the Executive's employment hereunder for "Disability."
(c) Cause. The Company may terminate the Executive's employment
-----
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon the occurrence of
any of the following which is materially injurious to the business or reputation
of the Company or any of its affiliates:
(i) the failure by the Executive to substantially perform the
Executive's duties hereunder (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness);
(ii) the willful violation by the Executive of any of the
Executive's material obligations hereunder;
(iii) the willful engaging by the Executive in misconduct; or
(iv) the Executive's conviction of a felony.
Notwithstanding the foregoing, the Executive shall not be
terminated for Cause without:
(A) at least 15 days' advance notice to the Executive setting
forth the reasons for the Company's intention to terminate the Executive's
employment hereunder for Cause;
(B) the failure of the Executive to cure the nonperformance,
violation or misconduct described in the notice referred to in clause (A)
of this paragraph, if cure thereof is possible, to the reasonable
satisfaction of the Board, within 15 days of such notice; and
(C) delivery to the Executive of a Notice of Termination (as
defined in Section 6(a)) from the Company notifying him that in the good
faith opinion of a majority of the Board, the Company is entitled to
terminate the Executive for Cause as set forth above, and specifying the
particulars thereof in detail.
<PAGE>
(d) Good Reason. The Executive may terminate his employment hereunder
-----------
for "Good Reason" by providing a Notice of Termination to the Company within 30
days after the occurrence, without the Executive's consent, of one of the
following events that has not been cured within 15 days after written notice
thereof has been given to the Company by the Executive:
(i) a reduction of the Executive's Base Salary;
(ii) a material and adverse change in the Executive's title,
status, authority, duties or function (in each case, other than as may be
contemplated by this Agreement);
(iii) any failure to pay the Executive's Base Salary or MIP
payment(s) when due;
(iv) a change of the Executive's place of employment by the
Company to a location which is greater than 50 miles from the location of
the Executive's place of employment by the Company as of the Commencement
Date; or
(v) the willful violation by the Company of any of the Company's
material obligations hereunder.
(e) Without Cause. The Company may terminate the Executive's
-------------
employment hereunder without Cause by providing the Executive with a Notice of
Termination.
(f) Without Good Reason. The Executive may terminate the Executive's
-------------------
employment hereunder without Good Reason by providing the Company with a Notice
of Termination.
5. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than a termination on
account of the Executive's death pursuant to Section 5(a)) shall be communicated
by a written Notice of Termination to the other party hereto in accordance with
Section 11. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and the Date of Termination, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment hereunder pursuant to the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall mean:
-------------------
<PAGE>
(i) if the Executive's employment is terminated on account of the
Executive's death pursuant to Section 5(a), the date of the Executive's
death;
(ii) if the Executive's employment is terminated on account of
the Executive's Disability pursuant to Section 5(b), 30 days after a Notice
of Termination has been provided pursuant thereto (provided that the
Executive shall not have returned to the performance of the Executive's
duties on a full-time basis during such thirty 30-day period);
(iii) if the Executive's employment is terminated for Cause
pursuant to Section 5(c), the date specified in the Notice of Termination
provided pursuant thereto; and
(iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is provided or any later
date (within 30 days) set forth in such Notice of Termination.
6. Compensation Upon Termination.
-----------------------------
(a) Death. If the Executive's employment with the Company is
-----
terminated on account of the Executive's death pursuant to Section 5(a), the
Company shall as soon as practicable pay to the Executive's estate or as may be
directed by the legal representatives of the Executive's estate any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee of the Board
(the "Compensation Committee"). The Company shall provide the Executive through
the Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of the Executive's
Date of Termination. Other than the foregoing, the Company shall have no
further obligations to the Executive hereunder.
(b) Disability. If the Executive's employment with the Company is
----------
terminated on account of the Executive's Disability pursuant to Section 5(b),
the Company shall as soon as practicable pay the Executive any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee. The Company
shall provide the Executive through the Executive's Date of Termination with
continued participation in the employee benefit plans provided to the Executive
pursuant to Section 4(c) as of the Executive's Date of Termination. Other than
the foregoing, the Company shall have no further obligations to the Executive
hereunder.
<PAGE>
(c) By the Company for Cause or By the Executive Without Good Reason.
----------------------------------------------------------------
If the Executive's employment with the Company is terminated by the Company for
Cause pursuant to Section 5(c) or by the Executive without Good Reason pursuant
to Section 5(f), the Company shall as soon as practicable pay the Executive any
Base Salary accrued and due to the Executive under Section 4(a) through the
Executive's Date of Termination and the Executive shall forfeit his entire then
unpaid MIP payment(s), if any. The Company shall provide the Executive through
his Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of his Date of
Termination. Other than the foregoing, the Company shall have no further
obligations to the Executive hereunder.
(d) Termination By the Company Without Cause or By the Executive for
----------------------------------------------------------------
Good Reason or During the Thirteenth Month Following a Change of Control. If
- ------------------------------------------------------------------------
the Executive's employment with the Company is terminated by the Company (other
than for Disability or Cause), or by the Executive (1) for Good Reason pursuant
to Section 5(d), or (2) with or without Good Reason (other than to avoid his
termination by the Company for Cause) during the thirteenth calendar month
beginning after the consummation of any transaction which constitutes a Change
of Control, as defined below, then the Company shall:
(i) within 30 days of the Executive's Date of Termination, pay
the Executive any Base Salary accrued and due to the Executive under
Section 4(a) through his Date of Termination and any unpaid MIP payment(s)
for any previously completed calendar year(s);
(ii) (A) if the Executive's Date of Termination occurs within the
period beginning on the date of a Change of Control, as defined below, and
ending 24 months following the Change of Control, as defined below (or, if
the Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of any transaction
which was the subject of shareholder approval), within 30 days of the
Executive's Date of Termination, pay the Executive an amount equal to 300%
of his Base Salary in effect as of his Date of Termination, or (B) if the
Executive's Date of Termination does not occur within the period beginning
on the date of a Change of Control, as defined below, and ending 24 months
following the Change of Control, as defined below (or, if the Change of
Control, as defined below, is in connection with shareholder approval
pursuant to paragraph (iii) of the definition of Change of Control, ending
24 months following the consummation of the transaction which was the
subject of shareholder approval), continue to pay the Executive his Base
Salary in effect as of his Date of Termination for the 24-month period
immediately
<PAGE>
following his Date of Termination (or until such earlier time that the
Executive violates the provisions of Section 8) at the times such payments
would otherwise have been made under Section 4(a);
(iii) (A) if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), within 30 days
of the Executive's Date of Termination, pay the Executive an amount equal
to 300% of the greater of (I) his then current "Cash Target Amount" under
the MIP, or (II) his most recently paid or declared cash award under the
MIP, or (B) if the Executive's Date of Termination does not occur within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), pay the
Executive an annual MIP payment for each of the 2 MIP years immediately
following his Date of Termination (or until such earlier time that the
Executive violates the provisions of Section 8), each such payment in an
amount equal to his "Cash Target Amount" under the MIP (as of his Date of
Termination), and to be made at the times such payments would otherwise
have been made under the MIP;
(iv) provide the Executive for the 24-month period immediately
following his Date of Termination (or until such earlier time that the
Executive violates the provisions of Section 8), with continued
participation (or equivalent benefits if such participation is not legally
permissible (cash payments in the case of tax-qualified retirement plan
benefits)) in the employee benefit plans provided to the Executive pursuant
to Section 4(c) as of his Date of Termination; and
(v) solely if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), (A) his SERP
benefit shall become fully vested and
<PAGE>
nonforfeitable, (B) if he had not attained age 55 as of his Date of
Termination, he shall be deemed to have attained age 55 for purposes of the
early retirement provisions of the SERP, (C) if he had not accumulated 10
years of service under the SERP as of his Date of Termination, he shall be
deemed to have 10 years of service for SERP benefit accrual purposes and
(D) within 30 days of his Date of Termination, the Company shall pay the
Executive an amount equal to the present value of his accrued SERP benefit
(utilizing a discount rate for calculating such present value equal to the
"discount rate," as defined in Statement of Financial Accounting Standards
No. 87 published by the Financial Accounting Standards Board, utilized for
purposes of the most recent audit disclosure relating to the Company's
tax-qualified defined benefit pension plan preceding the Change of Control
by the "enrolled actuary" (as defined in Section 7701(a)(35) of the
Internal Revenue Code of 1986, as amended (the "Code")), who signed the
Schedule B to the most recent Internal Revenue Service Form 5500 relating
to the Company's tax- qualified defined benefit pension plan, filed prior
to the Change of Control).
Other than the foregoing, the Company shall have no further obligations to the
Executive hereunder.
For purposes of this Agreement, a "Change of Control" of the Company
shall mean the first to occur of any of the following events:
(i) any "Person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding (A)
the Company or any of its subsidiaries, (B) a trustee or any fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, or an underwriter temporarily holding securities pursuant
to an offering of such securities, in each case with respect to the
securities so held, or (C) a corporation or other entity owned, directly or
indirectly, by holders of voting securities of the Company in substantially
the same proportions as their ownership of the Company, is or becomes the
"Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its subsidiaries or other affiliates
controlled by the Company or any such subsidiary) representing 20% or more
of the combined ordinary (in the absence of contingencies) voting power of
the Company's then outstanding securities; provided, however, that if such
-------- -------
"Person" shall be Suez Lyonnaise des Eaux or an affiliate thereof, solely
for purposes thereof the above reference to "20%" shall instead be deemed
to refer to the sum of the amount of the "Maximum Stockholder Investment
Percentage" (as defined in Section 1.1
<PAGE>
of the Governance Agreement between United Water Resources Inc. and
Lyonnaise American Holding, Inc., dated as of April 22, 1994) plus two
percentage points; or
(ii) during any period of not more than two consecutive calendar
years (commencing January 1, 1999), individuals who at the beginning of
such period constitute the Board, together with any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction triggering the operation of clause
(i) or (iii) of this paragraph) whose election by the Board or nomination
for election by the Company's shareholders was approved by a vote of at
least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, or a plan of
liquidation of the Company or an agreement for the sale or disposition by
the Company of its assets as an entirety or substantially as an entirety,
other than (A) a transaction which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding, by being converted into voting securities
of the surviving entity, or otherwise), in combination with the ownership
by any trustee or other fiduciary of securities under an employee benefit
plan of the Company, at least 80% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such transaction, or (B) a transaction effected to
implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than 20% of the combined voting power of the
Company's then outstanding securities (or if such person so acquiring more
than 20% of such combined voting power is Suez Lyonnaise des Eaux or an
affiliate thereof, solely for the purposes thereof the above reference to
"20%" shall instead be deemed to refer to the sum of the Maximum
Stockholder Investment Percentage plus two percentage points).
<PAGE>
7. Restrictions.
------------
(a) Reasonable Covenants. It is expressly understood by and between
--------------------
the Company and the Executive that the covenants contained in this Section 8 are
an essential element of this Agreement and that but for the agreement by the
Executive to comply with these covenants and thereby not to diminish the value
of the organization and goodwill of the Company or any affiliate of the Company,
if any, including without limitation relations with their employees, suppliers,
customers and accounts, the Company would not enter into this Agreement. The
Executive has independently consulted with his legal counsel and after such
consultation agrees that such covenants are reasonable and proper.
(b) Noncompetition; No Diversion of Customers; Etc. During the Term
----------------------------------------------
and for 24 months after the Executive's Date of Termination, the Executive shall
not:
(i) engage directly, alone or in association with or as a
shareholder, principal, agent, partner, officer, director, employee or
consultant of any other organization or entity, in competition with the
businesses of the Company and/or any of its affiliates as of the
Executive's Date of Termination;
(ii) divert to any competitor of the Company or any of its
affiliates, any customer of the Company or any of its affiliates or any
"prospective customer" (as defined in the last paragraph of this Section
8(b)) of the Company or any of its affiliates; or
(iii) solicit or encourage any officer, employee or consultant of
the Company or any of its affiliates to leave the employ of the Company or
any of its affiliates for employment by or with any competitor of the
Company or any of its affiliates;
provided, however, that the Executive may invest in stocks, bonds or other
- -------- -------
securities of any competitor of the Company or any of its affiliates if:
(A) such stocks, bonds or other securities are listed on any
national or regional securities exchange or have been registered under
Section 11(g) of the Securities Exchange Act of 1934;
(B) the Executive's investment does not exceed, in the case of
any class of the capital stock of any one issuer, 1% of the issued and
outstanding shares, or, in the case of other securities, 1% of the
aggregate principal amount thereof issued and outstanding; and
<PAGE>
(C) such investment would not prevent, directly or indirectly,
the transaction of business by the Company and/or any of its affiliates
with any state, district, territory or possession of the United States or
any governmental subdivision, agency or instrumentality thereof by virtue
of any statute, law, regulation or administrative practice.
If, at any time, the provisions of this Section 8(b) shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 8(b) shall
be considered severable and shall become and shall be immediately amended solely
with respect to such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter and the Executive agrees that this Section 8(b) as so amended
shall be valid and binding as though any invalid or unenforceable provision had
not been included herein. Except as provided in this Section 8 and in Section
3, nothing in this Agreement shall prevent or restrict the Executive from
engaging in any business or industry in any capacity. For purposes of this
Agreement and specifically, Sections 8(a) and (b), however, it is specifically
understood and agreed that the Executive, upon termination, may engage in any
aspect of the real estate industry, either as a principal, employee, consultant
or otherwise.
For purposes of clause (ii) of this Section 8(b), the term
"prospective customer" shall mean any entity, business or individual included on
a list of prospective customers provided to the Executive by the Company within
15 days following his Date of Termination, which list contains the names of
those entities, businesses and individuals with whom the Company had been in
contact prior to the Executive's Date of Termination for purposes of
establishing a customer relationship therewith. Any entity, business or
individual not appearing on the aforementioned list of prospective customers due
to the failure of the Executive to advise the Company of such contact shall be
considered a "prospective customer" for purposes of clause (ii) of this Section
8(b).
(c) Public Support and Assistance. The Executive agrees that
-----------------------------
following any termination of his employment hereunder by the Company, the
Executive shall not disclose or cause to be disclosed any negative, adverse or
derogatory comments or information of a substantial nature about the Company or
its management, or about any product or service provided by the Company, or
about the Company's prospects for the future (including any such comments or
information with respect to affiliates of the Company). The Company and/or any
of its affiliates may seek the assistance, cooperation or testimony of the
Executive following any such termination in connection with any investigation,
litigation or proceeding arising out of matters within the knowledge of the
Executive and related to the Executive's position as an officer or employee of
the Company, and in any such instance, the Executive
<PAGE>
shall provide such assistance, cooperation or testimony and the Company shall
pay the Executive's reasonable costs and expenses in connection therewith; in
addition, if such assistance, cooperation or testimony requires more than a
nominal commitment of the Executive's time, the Company shall compensate the
Executive for such time at a per diem rate derived from the Executive's Base
Salary at the time of the Executive's Date of Termination.
(d) Nondisclosure of Confidential Information. During the Term, the
-----------------------------------------
Executive shall hold in a fiduciary capacity for the benefit of the Company and
its affiliates all Confidential Information (as defined below). After
termination of the Executive's employment with the Company, the Executive shall
keep secret and confidential all Confidential Information and shall not use or
disclose to any third party in any fashion or for any purpose whatsoever, any
Confidential Information. As used herein, "Confidential Information" shall mean
any information regarding this Agreement, or any other information regarding the
Company or its affiliates which is not available to the general public, and/or
not generally known outside the Company or any such affiliate, to which the
Executive has or shall have had access at any time during the course of the
Executive's employment with the Company, including, without limitation, any
information relating to the Company's (and its affiliates'):
(i) business, operations, plans, strategies, prospects or
objectives;
(ii) products, technologies, processes, specifications, research
and development operations or plans;
(iii) customers and customer lists;
(iv) sales, service, support and marketing practices and
operations;
(v) financial condition and results of operations;
(vi) operational strengths and weaknesses; and
(vii) personnel and compensation policies and procedures.
Notwithstanding the foregoing provisions of this Section 8, the Executive may
discuss this Agreement with the members of the Executive's immediate family and
with the Executive's personal legal and tax advisors.
(e) Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Executive agrees that damages at law would be an
insufficient remedy to the Company in the event that the Executive violates any
of the provisions of
<PAGE>
this Section 8, and that the Company may apply for and, upon the requisite
showing, have injunctive relief in any court of competent jurisdiction to
restrain the breach or threatened breach of or otherwise to specifically enforce
any of the covenants contained in this Section 8.
8. Excise Tax Gross-Up Payment. If any payments made and/or benefits
---------------------------
provided to the Executive by the Company, whether or not under this Agreement
("Payments"), are subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Payments and all income taxes and Excise Tax
upon such Company payment, shall be equal to the Payments. The determination of
whether any Payments are subject to the Excise Tax shall be based on the opinion
of tax counsel selected by the Company and reasonably acceptable to the
Executive, whose fees and expenses shall be paid by the Company. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal, state and local income taxes at the highest marginal rate of income
taxation applicable to any individual residing in the jurisdiction in which the
Executive resides in the calendar year in which the Gross-Up Payment is to be
made. In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company, at the time
that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the Gross-Up
Payment being repaid by the Executive to the extent that such repayment results
in a reduction in Excise Tax and/or a federal, state or local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the Gross-
Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax with
respect to the Payments.
II. Legal Fees. To provide the Executive with reasonable assurances
----------
that the purposes of this Agreement will not be
<PAGE>
frustrated by the cost of its enforcement should the Company fail to perform any
of its obligations under this Agreement, the Company shall pay all of the
reasonable attorneys' fees and expenses and court and arbitration costs incurred
by the Executive and any of his beneficiaries, heirs and legal representatives,
should a court of competent jurisdiction or an arbitrator determine that the
Company shall have failed to perform any of its obligations under this
Agreement.
9. Notice. For the purposes of this Agreement, notices, demands
------
and all other communications provided for herein shall be in writing and shall
be deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Michael C. J. Fallon
250 Titus Road
North Salem, NY 10560
If to the Company:
Office of the General Counsel
United Water Resources Inc.
200 Old Hook Road
Harrington Park, NJ 07640-1799
or to such other address as either of the parties may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
III. Successors. Without the prior written consent of the Executive,
----------
this Agreement cannot be assigned by the Company except that it shall be binding
automatically on any successors and assigns of all or substantially all of the
business and/or assets of the Company (whether direct or indirect, by purchase,
merger, consolidation or otherwise). In addition, without the prior written
consent of the Company, this Agreement cannot be assigned by the Executive,
except that the right to receive payments or benefits hereunder may be
transferred by will or the laws of descent and distribution. This Agreement and
all rights of the Executive hereunder shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives.
10. Arbitration. Except as provided in Section 8(e), all
-----------
controversies, claims or disputes arising out of or relating to this Agreement
shall be settled by binding arbitration under the rules of the American
Arbitration Association then in
<PAGE>
effect in the State of New Jersey, as the sole and exclusive remedy of either
party, and judgment upon any such award rendered by the arbitrator(s) may be
entered in any court of competent jurisdiction. The costs of arbitration shall
be borne by the unsuccessful party or otherwise as determined by the arbitrators
in their discretion.
11. Governing Law. The validity, interpretation, construction
-------------
and performance of this Agreement shall be governed by the laws of the State of
New Jersey without regard to conflicts of law principles.
IV. Amendments. No provision of this Agreement may be modified,
----------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated for such purpose 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.
V. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
VI. Entire Agreement. 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. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
<PAGE>
VII. Indemnification. The Company shall indemnify the Executive to
---------------
the full extent permitted by the New Jersey Business Corporation Act and any
provision of the By-Laws of the Company, as amended from time to time, generally
applicable to officers and directors of the Company, for all amounts (including
without limitation, judgments, fines, settlement payments, expenses and
attorneys' fees) incurred or paid by the Executive in connection with any
action, suit, investigation or proceeding arising out of or relating to the
performance by the Executive of services for, or the actions by the Executive as
an officer or employee of, the Company or any affiliate of the Company or any
other person or enterprise at the Company's request. Nothing in this Section 18
or elsewhere in this Agreement is intended to prevent the Company from
indemnifying the Executive to any greater extent than is required by this
Section 18.
VIII. Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
UNITED WATER RESOURCES INC.
By:_____________________________
Name: Donald L. Correll
Title: Chairman and Chief Executive Officer
MICHAEL C. J. FALLON
________________________________
MARCIA L. WORTHING
________________________________
<PAGE>
Exhibit 10(d)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT effective as of January 1, 1999 (the "Commencement Date") by
and between United Water Resources Inc., a New Jersey corporation, and its
subsidiaries (collectively, the "Company"), and John Martinowich (the
"Executive") (this "Agreement").
The Company desires to employ the Executive and the Executive is
willing to be employed by the Company, on the terms and conditions hereinafter
provided.
In order to effect the foregoing, the parties hereto wish to enter
into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
----------
and the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The Executive's employment under this Agreement shall
----
commence on the Commencement Date and shall end at the close of business on
December 31, 2000; provided, however, that the term of this Agreement (the
-------- -------
"Term") shall thereafter be automatically extended for each succeeding 1-year
period unless either party hereto provides the other party with a written notice
at least 60 days prior to the end of the then current Term, advising that the
party providing the notice shall not agree to so extend the Term; and provided,
--------
further, that should a Change of Control occur during the Term, the Term shall
- -------
be extended to the date which is the end of the 24-month period immediately
following the consummation of the transaction which constitutes the Change of
Control. Notwithstanding the preceding, the Term shall not extend beyond the
date on which the Executive attains age 65 without the prior written consent of
the Company; provided, however, that the end of the Term solely on account of
-------- -------
the Executive attaining age 65 shall not entitle the Executive to any benefits
under Section 7.
3. Title, Duties and Authority. The Executive shall serve as Vice
---------------------------
President-External Affairs/Business Development of United Water Management and
Services Inc. and shall have such responsibilities and duties (consistent with
the Executive's position as Vice President-External Affairs/Business
Development) as may from time to time be assigned to the Executive by the
Company, and shall have all of the powers and duties usually incident to the
office of Vice President-External Affairs/Business Development. The Executive
shall devote substantially all of his working time and efforts to the
<PAGE>
business and affairs of the Company, except for vacations, illness or
incapacity.
<PAGE>
4. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Term, the Company shall pay the Executive
-----------
a base salary ("Base Salary"), payable in equal installments in accordance with
the Company's normal practice for paying base salaries to its executive
employees. The Base Salary shall initially be payable at the rate of $143,900
per annum, and shall be subject to annual review by the Company for
discretionary annual increases.
(b) MIP. The Executive shall participate in the United Water
---
Resources Inc. Management Incentive Plan (the "MIP") or any successor plan
established by the Company.
(c) Employee Benefits. The Executive shall be entitled to participate
-----------------
in all of the Company's employee benefit plans made available by the Company (or
any affiliate thereof) to its executives during the Term as may be in effect
from time to time. In addition, during the Term, the Executive shall accrue
benefits under the United Water Resources Inc. Supplemental Retirement Plan for
Executives (the "SERP").
(d) Expenses. During the Term, the Executive shall be entitled to
--------
receive prompt reimbursement upon submission of expense claims to the Company
for all reasonable and customary expenses incurred by the Executive in
performing services hereunder, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company for its executive employees.
(e) Vacations. The Executive shall be entitled to paid vacation, paid
---------
holidays, sick days and personal days pursuant to the Company's regular policies
applicable to its executive employees.
(f) Taxes. The Company may withhold from any amounts payable under
-----
this Agreement such federal, state, local and/or other taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
5. Termination. The Executive's employment hereunder may be terminated
-----------
under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate
-----
upon the Executive's death.
(b) Disability. If, as a result of the Executive's incapacity due to
----------
physical or mental illness, the Executive shall become entitled to the receipt
of benefits under the Company's long-term disability plan, and within 30 days
after a written Notice of
<PAGE>
Termination (as defined in Section 6(a)) is given to the Executive by the
Company, the Executive shall not have returned to the performance of his duties
hereunder on a full-time basis, the Company may terminate the Executive's
employment hereunder for "Disability."
(c) Cause. The Company may terminate the Executive's employment
-----
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon the occurrence of
any of the following which is materially injurious to the business or reputation
of the Company or any of its affiliates:
(i) the failure by the Executive to substantially perform the
Executive's duties hereunder (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness);
(ii) the willful violation by the Executive of any of the
Executive's material obligations hereunder;
(iii) the willful engaging by the Executive in misconduct; or
(iv) the Executive's conviction of a felony.
Notwithstanding the foregoing, the Executive shall not be
terminated for Cause without:
(A) at least 15 days' advance notice to the Executive setting
forth the reasons for the Company's intention to terminate the Executive's
employment hereunder for Cause;
(B) the failure of the Executive to cure the nonperformance,
violation or misconduct described in the notice referred to in clause (A)
of this paragraph, if cure thereof is possible, to the reasonable
satisfaction of the Board of Directors of United Water Resources Inc. (the
"Board"), within 15 days of such notice; and
(C) delivery to the Executive of a Notice of Termination (as
defined in Section 6(a)) from the Company notifying him that in the good
faith opinion of a majority of the Board, the Company is entitled to
terminate the Executive for Cause as set forth above, and specifying the
particulars thereof in detail.
(d) Good Reason. The Executive may terminate his employment hereunder
-----------
for "Good Reason" by providing a Notice of Termination to the Company within 30
days after the occurrence,
<PAGE>
without the Executive's consent, of one of the following events that has not
been cured within 15 days after written notice thereof has been given to the
Company by the Executive:
(i) a reduction of the Executive's Base Salary;
(ii) a material and adverse change in the Executive's title,
status, authority, duties or function (in each case, other than as may be
contemplated by this Agreement);
(iii) any failure to pay the Executive's Base Salary or MIP
payment(s) when due;
(iv) a change of the Executive's place of employment by the
Company to a location which is greater than 50 miles from the location of
the Executive's place of employment by the Company as of the Commencement
Date; or
(v) the willful violation by the Company of any of the Company's
material obligations hereunder.
(e) Without Cause. The Company may terminate the Executive's
-------------
employment hereunder without Cause by providing the Executive with a Notice of
Termination.
(f) Without Good Reason. The Executive may terminate the Executive's
-------------------
employment hereunder without Good Reason by providing the Company with a Notice
of Termination.
6. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than a termination on
account of the Executive's death pursuant to Section 5(a)) shall be communicated
by a written Notice of Termination to the other party hereto in accordance with
Section 11. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and the Date of Termination, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment hereunder pursuant to the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall mean:
-------------------
(i) if the Executive's employment is terminated on account of the
Executive's death pursuant to Section 5(a), the date of the Executive's
death;
<PAGE>
(ii) if the Executive's employment is terminated on account of
the Executive's Disability pursuant to Section 5(b), 30 days after a Notice
of Termination has been provided pursuant thereto (provided that the
Executive shall not have returned to the performance of the Executive's
duties on a full-time basis during such thirty 30-day period);
(iii) if the Executive's employment is terminated for Cause
pursuant to Section 5(c), the date specified in the Notice of Termination
provided pursuant thereto; and
(iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is provided or any later
date (within 30 days) set forth in such Notice of Termination.
7. Compensation Upon Termination.
-----------------------------
(a) Death. If the Executive's employment with the Company is
-----
terminated on account of the Executive's death pursuant to Section 5(a), the
Company shall as soon as practicable pay to the Executive's estate or as may be
directed by the legal representatives of the Executive's estate any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee of the Board
(the "Compensation Committee"). The Company shall provide the Executive through
the Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of the Executive's
Date of Termination. Other than the foregoing, the Company shall have no
further obligations to the Executive hereunder.
(b) Disability. If the Executive's employment with the Company is
----------
terminated on account of the Executive's Disability pursuant to Section 5(b),
the Company shall as soon as practicable pay the Executive any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee. The Company
shall provide the Executive through the Executive's Date of Termination with
continued participation in the employee benefit plans provided to the Executive
pursuant to Section 4(c) as of the Executive's Date of Termination. Other than
the foregoing, the Company shall have no further obligations to the Executive
hereunder.
(c) By the Company for Cause or By the Executive Without Good Reason.
----------------------------------------------------------------
If the Executive's employment with the Company
<PAGE>
is terminated by the Company for Cause pursuant to Section 5(c) or by the
Executive without Good Reason pursuant to Section 5(f), the Company shall as
soon as practicable pay the Executive any Base Salary accrued and due to the
Executive under Section 4(a) through the Executive's Date of Termination and the
Executive shall forfeit his entire then unpaid MIP payment(s), if any. The
Company shall provide the Executive through his Date of Termination with
continued participation in the employee benefit plans provided to the Executive
pursuant to Section 4(c) as of his Date of Termination. Other than the
foregoing, the Company shall have no further obligations to the Executive
hereunder.
(d) Termination By the Company Without Cause or By the Executive for
----------------------------------------------------------------
Good Reason. If the Executive's employment with the Company is terminated by
- -----------
the Company (other than for Disability or Cause), or by the Executive for Good
Reason pursuant to Section 5(d), then the Company shall:
(i) within 30 days of the Executive's Date of Termination, pay
the Executive any Base Salary accrued and due to the Executive under
Section 4(a) through his Date of Termination and any unpaid MIP payment(s)
for any previously completed calendar year(s);
(ii) (A) if the Executive's Date of Termination occurs within the
period beginning on the date of a Change of Control, as defined below, and
ending 24 months following the Change of Control, as defined below (or, if
the Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), within 30 days of the
Executive's Date of Termination, pay the Executive an amount equal to 200%
of his Base Salary in effect as of his Date of Termination, or (B) if the
Executive's Date of Termination does not occur within the period beginning
on the date of a Change of Control, as defined below, and ending 24 months
following the Change of Control, as defined below (or, if the Change of
Control, as defined below, is in connection with shareholder approval
pursuant to paragraph (iii) of the definition of Change of Control, ending
24 months following the consummation of the transaction which was the
subject of shareholder approval), continue to pay the Executive his Base
Salary in effect as of his Date of Termination for the 18-month period
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8) at the times such
payments would otherwise have been made under Section 4(a);
<PAGE>
(iii) (A) if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), within 30 days
of the Executive's Date of Termination, pay the Executive an amount equal
to 200% of his then current "Cash Target Amount" under the MIP, or (B) if
the Executive's Date of Termination does not occur within the period
beginning on the date of a Change of Control, as defined below, and ending
24 months following the Change of Control, as defined below (or, if the
Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), pay the Executive (I) 100%
of his "Cash Target Amount" under the MIP payment (as of his Date of
Termination) for the MIP year immediately following his Date of
Termination, and (II) 50% of his "Cash Target Amount" under the MIP (as of
his Date of Termination) for the second year immediately following his Date
of Termination (unless the Executive earlier violates the provisions of
Section 8), each such payment to be made at the times such payments would
otherwise have been made under the MIP;
(iv) provide the Executive for the 18-month period commencing
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8), with continued
participation (or equivalent benefits if such participation is not legally
permissible (cash payments in the case of tax-qualified retirement plan
benefits)) in the employee benefit plans provided to the Executive pursuant
to Section 4(c) as of his Date of Termination; and
(v) solely if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), (A) his SERP
benefit shall become fully vested and nonforfeitable, (B) if he had not
attained age 55 as of his Date of Termination, he shall be deemed to have
attained age 55 for purposes of the
<PAGE>
early retirement provisions of the SERP, (C) if he had not accumulated 10
years of service under the SERP as of his Date of Termination, he shall be
deemed to have 10 years of service for SERP benefit accrual purposes and
(D) within 30 days of his Date of Termination, the Company shall pay the
Executive an amount equal to the present value of his accrued SERP benefit
(utilizing a discount rate for calculating such present value equal to the
"discount rate," as defined in Statement of Financial Accounting Standards
No. 87 published by the Financial Accounting Standards Board, utilized for
purposes of the most recent audit disclosure relating to the Company's
tax-qualified defined benefit pension plan preceding the Change of Control
by the "enrolled actuary" (as defined in Section 7701(a)(35) of the
Internal Revenue Code of 1986, as amended (the "Code")), who signed the
Schedule B to the most recent Internal Revenue Service Form 5500 relating
to the Company's tax- qualified defined benefit pension plan, filed prior
to the Change of Control).
Other than the foregoing, the Company shall have no further obligations to the
Executive hereunder.
For purposes of this Agreement, a "Change of Control" of the Company
shall mean the first to occur of any of the following events:
(i) any "Person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding (A)
the Company or any of its subsidiaries, (B) a trustee or any fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, or an underwriter temporarily holding securities pursuant
to an offering of such securities, in each case with respect to the
securities so held, or (C) a corporation or other entity owned, directly or
indirectly, by holders of voting securities of the Company in substantially
the same proportions as their ownership of the Company, is or becomes the
"Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its subsidiaries or other affiliates
controlled by the Company or any such subsidiary) representing 20% or more
of the combined ordinary (in the absence of contingencies) voting power of
the Company's then outstanding securities; provided, however, that if such
-------- -------
"Person" shall be Suez Lyonnaise des Eaux or an affiliate thereof, solely
for purposes thereof the above reference to "20%" shall instead be deemed
to refer to the sum of the amount of the "Maximum Stockholder Investment
Percentage" (as defined in Section 1.1 of the Governance Agreement between
United Water Resources Inc. and
<PAGE>
Lyonnaise American Holding, Inc., dated as of April 22, 1994) plus two
percentage points; or
(ii) during any period of not more than two consecutive calendar
years (commencing January 1, 1999), individuals who at the beginning of
such period constitute the Board, together with any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction triggering the operation of clause
(i) or (iii) of this paragraph) whose election by the Board or nomination
for election by the Company's shareholders was approved by a vote of at
least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, or a plan of
liquidation of the Company or an agreement for the sale or disposition by
the Company of its assets as an entirety or substantially as an entirety,
other than (A) a transaction which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding, by being converted into voting securities
of the surviving entity, or otherwise), in combination with the ownership
by any trustee or other fiduciary of securities under an employee benefit
plan of the Company, at least 80% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such transaction, or (B) a transaction effected to
implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than 20% of the combined voting power of the
Company's then outstanding securities (or if such person so acquiring more
than 20% of such combined voting power is Suez Lyonnaise des Eaux or an
affiliate thereof, solely for the purposes thereof the above reference to
"20%" shall instead be deemed to refer to the sum of the Maximum
Stockholder Investment Percentage plus two percentage points).
8. Restrictions.
------------
(a) Reasonable Covenants. It is expressly understood by and between
--------------------
the Company and the Executive that the covenants contained in this Section 8 are
an essential element of this Agreement and that but for the agreement by the
Executive to comply with these covenants and thereby not to diminish the value
of the organization and goodwill of the Company or any affiliate of the Company,
if any, including without limitation relations with their employees, suppliers,
customers and accounts, the Company would not enter into
<PAGE>
this Agreement. The Executive has independently consulted with his legal counsel
and after such consultation agrees that such covenants are reasonable and
proper.
(b) Noncompetition; No Diversion of Customers; Etc. During the Term
----------------------------------------------
and for 18 months after the Executive's Date of Termination, the Executive shall
not:
(i) engage directly, alone or in association with or as a
shareholder, principal, agent, partner, officer, director, employee or
consultant of any other organization or entity, in competition with the
businesses of the Company and/or any of its affiliates as of the
Executive's Date of Termination;
(ii) divert to any competitor of the Company or any of its
affiliates, any customer of the Company or any of its affiliates or any
"prospective customer" (as defined in the last paragraph of this Section
8(b)) of the Company or any of its affiliates; or
(iii) solicit or encourage any officer, employee or consultant of
the Company or any of its affiliates to leave the employ of the Company or
any of its affiliates for employment by or with any competitor of the
Company or any of its affiliates;
provided, however, that the Executive may invest in stocks, bonds or other
- -------- -------
securities of any competitor of the Company or any of its affiliates if:
(A) such stocks, bonds or other securities are listed on any
national or regional securities exchange or have been registered under
Section 11(g) of the Securities Exchange Act of 1934;
(B) the Executive's investment does not exceed, in the case of
any class of the capital stock of any one issuer, 1% of the issued and
outstanding shares, or, in the case of other securities, 1% of the
aggregate principal amount thereof issued and outstanding; and
(C) such investment would not prevent, directly or indirectly,
the transaction of business by the Company and/or any of its affiliates
with any state, district, territory or possession of the United States or
any governmental subdivision, agency or instrumentality thereof by virtue
of any statute, law, regulation or administrative practice.
If, at any time, the provisions of this Section 8(b) shall be
determined to be invalid or unenforceable by reason of being vague
<PAGE>
or unreasonable as to area, duration or scope of activity, this Section 8(b)
shall be considered severable and shall become and shall be immediately amended
solely with respect to such area, duration and scope of activity as shall be
determined to be reasonable and enforceable by the court or other body having
jurisdiction over the matter and the Executive agrees that this Section 8(b) as
so amended shall be valid and binding as though any invalid or unenforceable
provision had not been included herein. Except as provided in this Section 8 and
in Section 3, nothing in this Agreement shall prevent or restrict the Executive
from engaging in any business or industry in any capacity.
For purposes of clause (ii) of this Section 8(b), the term
"prospective customer" shall mean any entity, business or individual included on
a list of prospective customers provided to the Executive by the Company within
15 days following his Date of Termination, which list contains the names of
those entities, businesses and individuals with whom the Company had been in
contact prior to the Executive's Date of Termination for purposes of
establishing a customer relationship therewith. Any entity, business or
individual not appearing on the aforementioned list of prospective customers due
to the failure of the Executive to advise the Company of such contact shall be
considered a "prospective customer" for purposes of clause (ii) of this Section
8(b).
(c) Public Support and Assistance. The Executive agrees that
-----------------------------
following any termination of his employment hereunder by the Company, the
Executive shall not disclose or cause to be disclosed any negative, adverse or
derogatory comments or information of a substantial nature about the Company or
its management, or about any product or service provided by the Company, or
about the Company's prospects for the future (including any such comments or
information with respect to affiliates of the Company). The Company and/or any
of its affiliates may seek the assistance, cooperation or testimony of the
Executive following any such termination in connection with any investigation,
litigation or proceeding arising out of matters within the knowledge of the
Executive and related to the Executive's position as an officer or employee of
the Company, and in any such instance, the Executive shall provide such
assistance, cooperation or testimony and the Company shall pay the Executive's
reasonable costs and expenses in connection therewith; in addition, if such
assistance, cooperation or testimony requires more than a nominal commitment of
the Executive's time, the Company shall compensate the Executive for such time
at a per diem rate derived from the Executive's Base Salary at the time of the
Executive's Date of Termination.
(d) Nondisclosure of Confidential Information. During the Term, the
-----------------------------------------
Executive shall hold in a fiduciary capacity for the benefit of the Company and
its affiliates all Confidential Information
<PAGE>
(as defined below). After termination of the Executive's employment with the
Company, the Executive shall keep secret and confidential all Confidential
Information and shall not use or disclose to any third party in any fashion or
for any purpose whatsoever, any Confidential Information. As used herein,
"Confidential Information" shall mean any information regarding this Agreement,
or any other information regarding the Company or its affiliates which is not
available to the general public, and/or not generally known outside the Company
or any such affiliate, to which the Executive has or shall have had access at
any time during the course of the Executive's employment with the Company,
including, without limitation, any information relating to the Company's (and
its affiliates'):
(i) business, operations, plans, strategies, prospects or
objectives;
(ii) products, technologies, processes, specifications, research
and development operations or plans;
(iii) customers and customer lists;
(iv) sales, service, support and marketing practices and
operations;
(v) financial condition and results of operations;
(vi) operational strengths and weaknesses; and
(vii) personnel and compensation policies and procedures.
Notwithstanding the foregoing provisions of this Section 8, the Executive may
discuss this Agreement with the members of the Executive's immediate family and
with the Executive's personal legal and tax advisors.
(e) Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Executive agrees that damages at law would be an
insufficient remedy to the Company in the event that the Executive violates any
of the provisions of this Section 8, and that the Company may apply for and,
upon the requisite showing, have injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach of or otherwise to
specifically enforce any of the covenants contained in this Section 8.
9. Excise Tax Gross-Up Payment. If any payments made and/or benefits
---------------------------
provided to the Executive by the Company, whether or not under this Agreement
("Payments"), are subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment")
<PAGE>
such that the net amount retained by the Executive, after deduction of any
Excise Tax on the Payments and all income taxes and Excise Tax upon such Company
payment, shall be equal to the Payments. The determination of whether any
Payments are subject to the Excise Tax shall be based on the opinion of tax
counsel selected by the Company and reasonably acceptable to the Executive,
whose fees and expenses shall be paid by the Company. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal, state and local income taxes at the highest marginal rate of income
taxation applicable to any individual residing in the jurisdiction in which the
Executive resides in the calendar year in which the Gross-Up Payment is to be
made. In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company, at the time
that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the Gross-Up
Payment being repaid by the Executive to the extent that such repayment results
in a reduction in Excise Tax and/or a federal, state or local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the Gross-
Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax with
respect to the Payments.
10. Legal Fees. To provide the Executive with reasonable assurances
----------
that the purposes of this Agreement will not be frustrated by the cost of its
enforcement should the Company fail to perform any of its obligations under this
Agreement, the Company shall pay all of the reasonable attorneys' fees and
expenses and court and arbitration costs incurred by the Executive and any of
his beneficiaries, heirs and legal representatives, should a court of competent
jurisdiction or an arbitrator determine that the Company shall have failed to
perform any of its obligations under this Agreement.
11 Notice. For the purposes of this Agreement, notices, demands and
------
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
<PAGE>
If to the Executive:
John Martinowich
534 Alosio Drive
River Vale, NJ 07675
If to the Company:
Office of the General Counsel
United Water Resources Inc.
200 Old Hook Road
Harrington Park, NJ 07640-1799
or to such other address as either of the parties may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
12 Successors. Without the prior written consent of the Executive,
----------
this Agreement cannot be assigned by the Company except that it shall be binding
automatically on any successors and assigns of all or substantially all of the
business and/or assets of the Company (whether direct or indirect, by purchase,
merger, consolidation or otherwise). In addition, without the prior written
consent of the Company, this Agreement cannot be assigned by the Executive,
except that the right to receive payments or benefits hereunder may be
transferred by will or the laws of descent and distribution. This Agreement and
all rights of the Executive hereunder shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives.
13 Arbitration. Except as provided in Section 8(e), all
-----------
controversies, claims or disputes arising out of or relating to this Agreement
shall be settled by binding arbitration under the rules of the American
Arbitration Association then in effect in the State of New Jersey, as the sole
and exclusive remedy of either party, and judgment upon any such award rendered
by the arbitrator(s) may be entered in any court of competent jurisdiction. The
costs of arbitration shall be borne by the unsuccessful party or otherwise as
determined by the arbitrators in their discretion.
14 Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of New
Jersey without regard to conflicts of law principles.
15 Amendments. No provision of this Agreement may be modified,
----------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated for such purpose 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
<PAGE>
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
16 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
17 Entire Agreement. 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. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
18 Indemnification. The Company shall indemnify the Executive to
---------------
the full extent permitted by the New Jersey Business Corporation Act and any
provision of the By-Laws of the Company, as amended from time to time, generally
applicable to officers and directors of the Company, for all amounts (including
without limitation, judgments, fines, settlement payments, expenses and
attorneys' fees) incurred or paid by the Executive in connection with any
action, suit, investigation or proceeding arising out of or relating to the
performance by the Executive of services for, or the actions by the Executive as
an officer or employee of, the Company or any affiliate of the Company or any
other person or enterprise at the Company's request. Nothing in this Section 18
or elsewhere in this Agreement is intended to prevent the Company from
indemnifying the Executive to any greater extent than is required by this
Section 18.
19 Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
UNITED WATER RESOURCES INC.
By:_______________________________
Name: Donald L. Correll
Title: Chairman and Chief Executive Officer
JOHN MARTINOWICH
_________________________________
MARCIA L. WORTHING
_________________________________
<PAGE>
Exhibit 10(e)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT effective as of January 1, 1999 (the "Commencement Date") by
and between United Water Resources Inc., a New Jersey corporation, and its
subsidiaries (collectively, the "Company"), and Walton F. Hill (the "Executive")
(this "Agreement").
The Company desires to employ the Executive and the Executive is
willing to be employed by the Company, on the terms and conditions hereinafter
provided.
In order to effect the foregoing, the parties hereto wish to enter
into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
----------
and the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The Executive's employment under this Agreement shall
----
commence on the Commencement Date and shall end at the close of business on
December 31, 2001; provided, however, that the term of this Agreement (the
-------- -------
"Term") shall thereafter be automatically extended for each succeeding 1-year
period unless either party hereto provides the other party with a written notice
at least 60 days prior to the end of the then current Term, advising that the
party providing the notice shall not agree to so extend the Term; and provided,
--------
further, that should a Change of Control occur during the Term, the Term shall
- -------
be extended to the date which is the end of the 24-month period immediately
following the consummation of the transaction which constitutes the Change of
Control. Notwithstanding the preceding, the Term shall not extend beyond the
date on which the Executive attains age 65 without the prior written consent of
the Company; provided, however, that the end of the Term solely on account of
-------- -------
the Executive attaining age 65 shall not entitle the Executive to any benefits
under Section 7.
3. Title, Duties and Authority. The Executive shall serve as Vice
---------------------------
President-Regulatory Business of United Water Management and Services Inc. and
shall have such responsibilities and duties (consistent with the Executive's
position as Vice President-Regulatory Business) as may from time to time be
assigned to the Executive by the Company, and shall have all of the powers and
duties usually incident to the office of Vice President-Regulatory Business.
The Executive shall devote substantially all of his working time and efforts to
the
<PAGE>
business and affairs of the Company, except for vacations, illness or
incapacity.
4. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Term, the Company shall pay the Executive
-----------
a base salary ("Base Salary"), payable in equal installments in accordance with
the Company's normal practice for paying base salaries to its executive
employees. The Base Salary shall initially be payable at the rate of $134,000
per annum, and shall be subject to annual review by the Company for
discretionary annual increases.
(b) MIP. The Executive shall participate in the United Water
---
Resources Inc. Management Incentive Plan (the "MIP") or any successor plan
established by the Company.
(c) Employee Benefits. The Executive shall be entitled to participate
-----------------
in all of the Company's employee benefit plans made available by the Company (or
any affiliate thereof) to its executives during the Term as may be in effect
from time to time.
(d) Expenses. During the Term, the Executive shall be entitled to
--------
receive prompt reimbursement upon submission of expense claims to the Company
for all reasonable and customary expenses incurred by the Executive in
performing services hereunder, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company for its executive employees.
(e) Vacations. The Executive shall be entitled to paid vacation, paid
---------
holidays, sick days and personal days pursuant to the Company's regular policies
applicable to its executive employees.
(f) Taxes. The Company may withhold from any amounts payable under
-----
this Agreement such federal, state, local and/or other taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
5. Termination. The Executive's employment hereunder may be
-----------
terminated under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate
-----
upon the Executive's death.
(b) Disability. If, as a result of the Executive's incapacity due to
----------
physical or mental illness, the Executive shall become entitled to the receipt
of benefits under the Company's long-term disability plan, and within 30 days
after a written Notice of Termination (as defined in Section 6(a)) is given to
the Executive by the Company, the Executive shall not have returned to the
performance
<PAGE>
of his duties hereunder on a full-time basis, the Company may terminate the
Executive's employment hereunder for "Disability."
(c) Cause. The Company may terminate the Executive's employment
-----
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon the occurrence of
any of the following which is materially injurious to the business or reputation
of the Company or any of its affiliates:
(i) the failure by the Executive to substantially perform the
Executive's duties hereunder (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness);
(ii) the willful violation by the Executive of any of the
Executive's material obligations hereunder;
(iii) the willful engaging by the Executive in misconduct; or
(iv) the Executive's conviction of a felony.
Notwithstanding the foregoing, the Executive shall not be
terminated for Cause without:
(A) at least 15 days' advance notice to the Executive setting
forth the reasons for the Company's intention to terminate the Executive's
employment hereunder for Cause;
(B) the failure of the Executive to cure the nonperformance,
violation or misconduct described in the notice referred to in clause (A)
of this paragraph, if cure thereof is possible, to the reasonable
satisfaction of the Board of Directors of United Water Resources Inc. (the
"Board"), within 15 days of such notice; and
(C) delivery to the Executive of a Notice of Termination (as
defined in Section 6(a)) from the Company notifying him that in the good
faith opinion of a majority of the Board, the Company is entitled to
terminate the Executive for Cause as set forth above, and specifying the
particulars thereof in detail.
(d) Good Reason. The Executive may terminate his employment hereunder
-----------
for "Good Reason" by providing a Notice of Termination to the Company within 30
days after the occurrence, without the Executive's consent, of one of the
following events that has not been cured within 15 days after written notice
thereof has been given to the Company by the Executive:
<PAGE>
(i) a reduction of the Executive's Base Salary;
(ii) a material and adverse change in the Executive's title,
status, authority, duties or function (in each case, other than as may be
contemplated by this Agreement);
(iii) any failure to pay the Executive's Base Salary or MIP
payment(s) when due;
(iv) a change of the Executive's place of employment by the
Company to a location which is greater than 50 miles from the location of
the Executive's place of employment by the Company as of the Commencement
Date; or
(v) the willful violation by the Company of any of the Company's
material obligations hereunder.
(e) Without Cause. The Company may terminate the Executive's
-------------
employment hereunder without Cause by providing the Executive with a Notice of
Termination.
(f) Without Good Reason. The Executive may terminate the
-------------------
Executive's employment hereunder without Good Reason by providing the Company
with a Notice of Termination.
6. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than a termination on
account of the Executive's death pursuant to Section 5(a)) shall be communicated
by a written Notice of Termination to the other party hereto in accordance with
Section 11. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and the Date of Termination, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment hereunder pursuant to the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall mean:
-------------------
(i) if the Executive's employment is terminated on account of the
Executive's death pursuant to Section 5(a), the date of the Executive's
death;
(ii) if the Executive's employment is terminated on account of
the Executive's Disability pursuant to Section 5(b), 30 days after a Notice
of Termination has been provided pursuant
<PAGE>
thereto (provided that the Executive shall not have returned to the performance
of the Executive's duties on a full-time basis during such 30-day period);
(iii) if the Executive's employment is terminated for Cause
pursuant to Section 5(c), the date specified in the Notice of Termination
provided pursuant thereto; and
(iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is provided or any later
date (within 30 days) set forth in such Notice of Termination.
7. Compensation Upon Termination.
-----------------------------
(a) Death. If the Executive's employment with the Company is
-----
terminated on account of the Executive's death pursuant to Section 5(a), the
Company shall as soon as practicable pay to the Executive's estate or as may be
directed by the legal representatives of the Executive's estate any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee of the Board
(the "Compensation Committee"). The Company shall provide the Executive through
the Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of the Executive's
Date of Termination. Other than the foregoing, the Company shall have no
further obligations to the Executive hereunder.
(b) Disability. If the Executive's employment with the Company
----------
is terminated on account of the Executive's Disability pursuant to Section 5(b),
the Company shall as soon as practicable pay the Executive any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee. The Company
shall provide the Executive through the Executive's Date of Termination with
continued participation in the employee benefit plans provided to the Executive
pursuant to Section 4(c) as of the Executive's Date of Termination. Other than
the foregoing, the Company shall have no further obligations to the Executive
hereunder.
(c) By the Company for Cause or By the Executive Without Good
---------------------------------------------------------
Reason. If the Executive's employment with the Company is terminated by the
- ------
Company for Cause pursuant to Section 5(c) or by the Executive without Good
Reason pursuant to Section 5(f), the Company shall as soon as practicable pay
the Executive any Base Salary accrued and due to the Executive under Section
4(a) through the Executive's Date of Termination and the Executive shall forfeit
his
<PAGE>
entire then unpaid MIP payment(s), if any. The Company shall provide the
Executive through his Date of Termination with continued participation in the
employee benefit plans provided to the Executive pursuant to Section 4(c) as of
his Date of Termination. Other than the foregoing, the Company shall have no
further obligations to the Executive hereunder.
(d) Termination By the Company Without Cause or By the Executive
------------------------------------------------------------
for Good Reason. If the Executive's employment with the Company is terminated by
- ---------------
the Company (other than for Disability or Cause), or by the Executive for Good
Reason pursuant to Section 5(d), then the Company shall:
(i) within 30 days of the Executive's Date of Termination, pay
the Executive any Base Salary accrued and due to the Executive under
Section 4(a) through his Date of Termination and any unpaid MIP payment(s)
for any previously completed calendar year(s);
(ii) (A) if the Executive's Date of Termination occurs within the
period beginning on the date of a Change of Control, as defined below, and
ending 24 months following the Change of Control, as defined below (or, if
the Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), within 30 days of the
Executive's Date of Termination, pay the Executive an amount equal to 200%
of his Base Salary in effect as of his Date of Termination, or (B) if the
Executive's Date of Termination does not occur within the period beginning
on the date of a Change of Control, as defined below, and ending 24 months
following the Change of Control, as defined below (or, if the Change of
Control, as defined below, is in connection with shareholder approval
pursuant to paragraph (iii) of the definition of Change of Control, ending
24 months following the consummation of the transaction which was the
subject of shareholder approval), continue to pay the Executive his Base
Salary in effect as of his Date of Termination for the 18-month period
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8) at the times such
payments would otherwise have been made under Section 4(a);
(iii) (A) if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of
<PAGE>
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), within 30 days of the
Executive's Date of Termination, pay the Executive an amount equal to 200%
of his then current "Cash Target Amount" under the MIP, or (B) if the
Executive's Date of Termination does not occur within the period beginning
on the date of a Change of Control, as defined below, and ending 24 months
following the Change of Control, as defined below (or, if the Change of
Control, as defined below, is in connection with shareholder approval
pursuant to paragraph (iii) of the definition of Change of Control, ending
24 months following the consummation of the transaction which was the
subject of shareholder approval), pay the Executive (I) 100% of his "Cash
Target Amount" under the MIP (as of his Date of Termination) for the MIP
year immediately following his Date of Termination, and (II) 50% of his
"Cash Target Amount" under the MIP (as of his Date of Termination) for the
second year immediately following his Date of Termination (unless the
Executive earlier violates the provisions of Section 8), each such payment
to be made at the times such payments would otherwise have been made under
the MIP; and
(iv) provide the Executive for the 18-month period commencing
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8), with continued
participation (or equivalent benefits if such participation is not legally
permissible (cash payments in the case of tax-qualified retirement plan
benefits)) in the employee benefit plans provided to the Executive pursuant
to Section 4(c) as of his Date of Termination.
Other than the foregoing, the Company shall have no further obligations to the
Executive hereunder.
For purposes of this Agreement, a "Change of Control" of the Company
shall mean the first to occur of any of the following events:
(i) any "Person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding (A)
the Company or any of its subsidiaries, (B) a trustee or any fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, or an underwriter temporarily holding securities pursuant
to an offering of such securities, in each case with respect to the
securities so held, or (C) a corporation or other entity owned, directly or
indirectly, by holders of voting securities of the Company in substantially
the same proportions as their ownership of the Company, is or becomes the
"Beneficial
<PAGE>
Owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its subsidiaries or other affiliates controlled by the Company
or any such subsidiary) representing 20% or more of the combined ordinary
(in the absence of contingencies) voting power of the Company's then
outstanding securities; provided, however, that if such "Person" shall be
-------- -------
Suez Lyonnaise des Eaux or an affiliate thereof, solely for purposes
thereof the above reference to "20%" shall instead be deemed to refer to
the sum of the amount of the "Maximum Stockholder Investment Percentage"
(as defined in Section 1.1 of the Governance Agreement between United Water
Resources Inc. and Lyonnaise American Holding, Inc., dated as of April 22,
1994) plus two percentage points; or
(ii) during any period of not more than two consecutive calendar
years (commencing January 1, 1999), individuals who at the beginning of
such period constitute the Board, together with any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction triggering the operation of clause
(i) or (iii) of this paragraph) whose election by the Board or nomination
for election by the Company's shareholders was approved by a vote of at
least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, or a plan of
liquidation of the Company or an agreement for the sale or disposition by
the Company of its assets as an entirety or substantially as an entirety,
other than (A) a transaction which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding, by being converted into voting securities
of the surviving entity, or otherwise), in combination with the ownership
by any trustee or other fiduciary of securities under an employee benefit
plan of the Company, at least 80% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such transaction, or (B) a transaction effected to
implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than 20% of the combined voting power of the
Company's then outstanding securities (or if such person so acquiring more
than 20% of such combined voting power is Suez Lyonnaise des Eaux or an
affiliate thereof, solely for the purposes thereof the above reference to
"20%" shall instead be
<PAGE>
deemed to refer to the sum of the Maximum Stockholder Investment Percentage
plus two percentage points).
8. Restrictions.
------------
(a) Reasonable Covenants. It is expressly understood by and between
--------------------
the Company and the Executive that the covenants contained in this Section 8 are
an essential element of this Agreement and that but for the agreement by the
Executive to comply with these covenants and thereby not to diminish the value
of the organization and goodwill of the Company or any affiliate of the Company,
if any, including without limitation relations with their employees, suppliers,
customers and accounts, the Company would not enter into this Agreement. The
Executive has independently consulted with his legal counsel and after such
consultation agrees that such covenants are reasonable and proper.
(b) Noncompetition; No Diversion of Customers; Etc. During the Term
----------------------------------------------
and for 18 months after the Executive's Date of Termination, the Executive shall
not:
(i) engage directly, alone or in association with or as a
shareholder, principal, agent, partner, officer, director, employee or
consultant of any other organization or entity, in competition with the
businesses of the Company and/or any of its affiliates as of the
Executive's Date of Termination;
(ii) divert to any competitor of the Company or any of its
affiliates, any customer of the Company or any of its affiliates or any
"prospective customer" (as defined in the last paragraph of this Section
8(b)) of the Company or any of its affiliates; or
(iii) solicit or encourage any officer, employee or consultant of
the Company or any of its affiliates to leave the employ of the Company or
any of its affiliates for employment by or with any competitor of the
Company or any of its affiliates;
provided, however, that the Executive may invest in stocks, bonds or other
- -------- -------
securities of any competitor of the Company or any of its affiliates if:
(A) such stocks, bonds or other securities are listed on any
national or regional securities exchange or have been registered under
Section 11(g) of the Securities Exchange Act of 1934;
(B) the Executive's investment does not exceed, in the case of
any class of the capital stock of any one issuer, 1% of the issued and
outstanding shares, or, in the case of other
<PAGE>
securities, 1% of the aggregate principal amount thereof issued and
outstanding; and
(C) such investment would not prevent, directly or indirectly,
the transaction of business by the Company and/or any of its affiliates
with any state, district, territory or possession of the United States or
any governmental subdivision, agency or instrumentality thereof by virtue
of any statute, law, regulation or administrative practice.
If, at any time, the provisions of this Section 8(b) shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 8(b) shall
be considered severable and shall become and shall be immediately amended solely
with respect to such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter and the Executive agrees that this Section 8(b) as so amended
shall be valid and binding as though any invalid or unenforceable provision had
not been included herein. Except as provided in this Section 8 and in Section 3,
nothing in this Agreement shall prevent or restrict the Executive from engaging
in any business or industry in any capacity.
For purposes of clause (ii) of this Section 8(b), the term
"prospective customer" shall mean any entity, business or individual included on
a list of prospective customers provided to the Executive by the Company within
15 days following his Date of Termination, which list contains the names of
those entities, businesses and individuals with whom the Company had been in
contact prior to the Executive's Date of Termination for purposes of
establishing a customer relationship therewith. Any entity, business or
individual not appearing on the aforementioned list of prospective customers due
to the failure of the Executive to advise the Company of such contact shall be
considered a "prospective customer" for purposes of clause (ii) of this Section
8(b).
(c) Public Support and Assistance. The Executive agrees that
-----------------------------
following any termination of his employment hereunder by the Company, the
Executive shall not disclose or cause to be disclosed any negative, adverse or
derogatory comments or information of a substantial nature about the Company or
its management, or about any product or service provided by the Company, or
about the Company's prospects for the future (including any such comments or
information with respect to affiliates of the Company). The Company and/or any
of its affiliates may seek the assistance, cooperation or testimony of the
Executive following any such termination in connection with any investigation,
litigation or proceeding arising out of matters within the knowledge of the
Executive and related to the Executive's position as an officer or employee of
the Company, and in any such instance,
<PAGE>
the Executive shall provide such assistance, cooperation or testimony and the
Company shall pay the Executive's reasonable costs and expenses in connection
therewith; in addition, if such assistance, cooperation or testimony requires
more than a nominal commitment of the Executive's time, the Company shall
compensate the Executive for such time at a per diem rate derived from the
Executive's Base Salary at the time of the Executive's Date of Termination.
(d) Nondisclosure of Confidential Information. During the Term,
-----------------------------------------
the Executive shall hold in a fiduciary capacity for the benefit of the Company
and its affiliates all Confidential Information (as defined below). After
termination of the Executive's employment with the Company, the Executive shall
keep secret and confidential all Confidential Information and shall not use or
disclose to any third party in any fashion or for any purpose whatsoever, any
Confidential Information. As used herein, "Confidential Information" shall mean
any information regarding this Agreement, or any other information regarding the
Company or its affiliates which is not available to the general public, and/or
not generally known outside the Company or any such affiliate, to which the
Executive has or shall have had access at any time during the course of the
Executive's employment with the Company, including, without limitation, any
information relating to the Company's (and its affiliates'):
(i) business, operations, plans, strategies, prospects or
objectives;
(ii) products, technologies, processes, specifications, research
and development operations or plans;
(iii) customers and customer lists;
(iv) sales, service, support and marketing practices and
operations;
(v) financial condition and results of operations;
(vi) operational strengths and weaknesses; and
(vii) personnel and compensation policies and procedures.
Notwithstanding the foregoing provisions of this Section 8, the Executive may
discuss this Agreement with the members of the Executive's immediate family and
with the Executive's personal legal and tax advisors.
(e) Specific Performance. Without intending to limit the
remedies available to the Company, the Executive agrees that damages at law
would be an insufficient remedy to the Company in the event that the Executives
violates any of the provisions of this
<PAGE>
Section 8, and that the Company may apply for and, upon the requisite showing,
have injunctive relief in any court of competent jurisdiction to restrain the
breach or threatened breach of or otherwise to specifically enforce any of the
covenants contained in this Section 8.
9. Excise Tax Gross-Up Payment. If any payments made and/or benefits
---------------------------
provided to the Executive by the Company, whether or not under this Agreement
("Payments"), are subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Payments and all income taxes and Excise Tax
upon such Company payment, shall be equal to the Payments. The determination of
whether any Payments are subject to the Excise Tax shall be based on the opinion
of tax counsel selected by the Company and reasonably acceptable to the
Executive, whose fees and expenses shall be paid by the Company. For purposes
of determining the amount of the Gross-Up Payment, the Executive shall be deemed
to pay federal, state and local income taxes at the highest marginal rate of
income taxation applicable to any individual residing in the jurisdiction in
which the Executive resides in the calendar year in which the Gross-Up Payment
is to be made. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the Gross-Up
Payment being repaid by the Executive to the extent that such repayment results
in a reduction in Excise Tax and/or a federal, state or local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the Gross-
Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax with
respect to the Payments.
10. Legal Fees. To provide the Executive with reasonable assurances
----------
that the purposes of this Agreement will not be frustrated by the cost of its
enforcement should the Company fail to perform any
<PAGE>
of its obligations under this Agreement, the Company shall pay all of the
reasonable attorneys' fees and expenses and court and arbitration costs incurred
by the Executive and any of his beneficiaries, heirs and legal representatives,
should a court of competent jurisdiction or an arbitrator determine that the
Company shall have failed to perform any of its obligations under this
Agreement.
11. Notice. For the purposes of this Agreement, notices, demands and
------
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Walton F. Hill
15 Wethersfield Lane
Highland Mills, NY 10930
If to the Company:
Office of the General Counsel
United Water Resources Inc.
200 Old Hook Road
Harrington Park, NJ 07640-1799
or to such other address as either of the parties may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
12. Successors. Without the prior written consent of the Executive,
----------
this Agreement cannot be assigned by the Company except that it shall be binding
automatically on any successors and assigns of all or substantially all of the
business and/or assets of the Company (whether direct or indirect, by purchase,
merger, consolidation or otherwise). In addition, without the prior written
consent of the Company, this Agreement cannot be assigned by the Executive,
except that the right to receive payments or benefits hereunder may be
transferred by will or the laws of descent and distribution. This Agreement and
all rights of the Executive hereunder shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives.
13 Arbitration. Except as provided in Section 8(e), all
-----------
controversies, claims or disputes arising out of or relating to this Agreement
shall be settled by binding arbitration under the rules of the American
Arbitration Association then in effect in the State of New Jersey, as the sole
and exclusive remedy of either party, and
<PAGE>
judgment upon any such award rendered by the arbitrator(s) may be entered in any
court of competent jurisdiction. The costs of arbitration shall be borne by the
unsuccessful party or otherwise as determined by the arbitrators in their
discretion.
14 Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of New
Jersey without regard to conflicts of law principles.
15 Amendments. No provision of this Agreement may be modified,
----------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated for such purpose 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.
16 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
17 Entire Agreement. 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. No agreements or
representations, oral or otherwise, express or implied, with
<PAGE>
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.
18 Indemnification. The Company shall indemnify the Executive to
---------------
the full extent permitted by the New Jersey Business Corporation Act and any
provision of the By-Laws of the Company, as amended from time to time, generally
applicable to officers and directors of the Company, for all amounts (including
without limitation, judgments, fines, settlement payments, expenses and
attorneys' fees) incurred or paid by the Executive in connection with any
action, suit, investigation or proceeding arising out of or relating to the
performance by the Executive of services for, or the actions by the Executive as
an officer or employee of, the Company or any affiliate of the Company or any
other person or enterprise at the Company's request. Nothing in this Section 18
or elsewhere in this Agreement is intended to prevent the Company from
indemnifying the Executive to any greater extent than is required by this
Section 18.
19 Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
UNITED WATER RESOURCES INC.
By:_____________________________
Name: Donald L. Correll
Title: Chief Executive Officer
WALTON F. HILL
________________________________
MARCIA L. WORTHING
________________________________
<PAGE>
Exhibit 10(f)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT effective as of January 1, 1999 (the "Commencement Date") by
and between United Water Resources Inc., a New Jersey corporation, and its
subsidiaries (collectively, the "Company"), and Robert J. Iacullo (the
"Executive") (this "Agreement").
The Company desires to employ the Executive and the Executive is
willing to be employed by the Company, on the terms and conditions hereinafter
provided.
In order to effect the foregoing, the parties hereto wish to enter
into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
----------
and the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The Executive's employment under this Agreement shall
----
commence on the Commencement Date and shall end at the close of business on
December 31, 2000; provided, however, that the term of this Agreement (the
-------- -------
"Term") shall thereafter be automatically extended for each succeeding 1-year
period unless either party hereto provides the other party with a written notice
at least 60 days prior to the end of the then current Term, advising that the
party providing the notice shall not agree to so extend the Term; and provided,
--------
further, that should a Change of Control occur during the Term, the Term shall
- -------
be extended to the date which is the end of the 24-month period immediately
following the consummation of the transaction which constitutes the Change of
Control. Notwithstanding the preceding, the Term shall not extend beyond the
date on which the Executive attains age 65 without the prior written consent of
the Company; provided, however, that the end of the Term solely on account of
-------- -------
the Executive attaining age 65 shall not entitle the Executive to any benefits
under Section 7.
3. Title, Duties and Authority. The Executive shall serve as Vice
---------------------------
President of United Waterworks, Inc. and Vice President of United Water
Management and Services Inc. and shall have such responsibilities and duties
(consistent with the Executive's positions as Vice President) as may from time
to time be assigned to the Executive by the Company, and shall have all of the
powers and duties usually incident to the office of Vice President. The
Executive shall devote substantially all of his working time and efforts to the
business and affairs of the Company, except for vacations, illness or
incapacity.
<PAGE>
4. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Term, the Company shall pay the Executive
-----------
a base salary ("Base Salary"), payable in equal installments in accordance with
the Company's normal practice for paying base salaries to its executive
employees. The Base Salary shall initially be payable at the rate of $165,000
per annum, and shall be subject to annual review by the Company for
discretionary annual increases.
(b) MIP. The Executive shall participate in the United Water
---
Resources Inc. Management Incentive Plan (the "MIP") or any successor plan
established by the Company.
(c) Employee Benefits. The Executive shall be entitled to participate
-----------------
in all of the Company's employee benefit plans made available by the Company (or
any affiliate thereof) to its executives during the Term as may be in effect
from time to time. In addition, during the Term, the Executive shall accrue
benefits under the United Water Resources Inc. Supplemental Retirement Plan for
Key Executives (the "SERP").
(d) Expenses. During the Term, the Executive shall be entitled to
--------
receive prompt reimbursement upon submission of expense claims to the Company
for all reasonable and customary expenses incurred by the Executive in
performing services hereunder, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company for its executive employees.
(e) Vacations. The Executive shall be entitled to paid vacation, paid
---------
holidays, sick days and personal days pursuant to the Company's regular policies
applicable to its executive employees.
(f) Taxes. The Company may withhold from any amounts payable under
-----
this Agreement such federal, state, local and/or other taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
5. Termination. The Executive's employment hereunder may be
-----------
terminated under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate upon
-----
the Executive's death.
(b) Disability. If, as a result of the Executive's incapacity due to
----------
physical or mental illness, the Executive shall become entitled to the receipt
of benefits under the Company's long-term disability plan, and within 30 days
after a written Notice of Termination (as defined in Section 6(a)) is given to
the Executive by the Company, the Executive shall not have
<PAGE>
returned to the performance of his duties hereunder on a full-time basis, the
Company may terminate the Executive's employment hereunder for "Disability."
(c) Cause. The Company may terminate the Executive's employment
-----
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon the occurrence of
any of the following which is materially injurious to the business or reputation
of the Company or any of its affiliates:
(i) the failure by the Executive to substantially perform the
Executive's duties hereunder (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness);
(ii) the willful violation by the Executive of any of the
Executive's material obligations hereunder;
(iii) the willful engaging by the Executive in misconduct; or
(iv) the Executive's conviction of a felony.
Notwithstanding the foregoing, the Executive shall not be
terminated for Cause without:
(A) at least 15 days' advance notice to the Executive setting
forth the reasons for the Company's intention to terminate the Executive's
employment hereunder for Cause;
(B) the failure of the Executive to cure the nonperformance,
violation or misconduct described in the notice referred to in clause (A)
of this paragraph, if cure thereof is possible, to the reasonable
satisfaction of the Board of Directors of United Water Resources Inc. (the
"Board"), within 15 days of such notice; and
(C) delivery to the Executive of a Notice of Termination (as
defined in Section 6(a)) from the Company notifying him that in the good
faith opinion of a majority of the Board, the Company is entitled to
terminate the Executive for Cause as set forth above, and specifying the
particulars thereof in detail.
(d) Good Reason. The Executive may terminate his employment hereunder
-----------
for "Good Reason" by providing a Notice of Termination to the Company within 30
days after the occurrence, without the Executive's consent, of one of the
following events that has not been cured within 15 days after written notice
thereof has been given to the Company by the Executive:
(i) a reduction of the Executive's Base Salary;
<PAGE>
(ii) a material and adverse change in the Executive's title,
status, authority, duties or function (in each case, other than as may be
contemplated by this Agreement);
(iii) any failure to pay the Executive's Base Salary or MIP
payment(s) when due;
(iv) a change of the Executive's place of employment by the
Company to a location which is greater than 50 miles from the location of
the Executive's place of employment by the Company as of the Commencement
Date; or
(v) the willful violation by the Company of any of the Company's
material obligations hereunder.
(e) Without Cause. The Company may terminate the Executive's
-------------
employment hereunder without Cause by providing the Executive with a Notice of
Termination.
(f) Without Good Reason. The Executive may terminate the Executive's
-------------------
employment hereunder without Good Reason by providing the Company with a Notice
of Termination.
6. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than a termination on
account of the Executive's death pursuant to Section 5(a)) shall be communicated
by a written Notice of Termination to the other party hereto in accordance with
Section 11. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and the Date of Termination, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment hereunder pursuant to the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall mean:
-------------------
(i) if the Executive's employment is terminated on account of the
Executive's death pursuant to Section 5(a), the date of the Executive's
death;
(ii) if the Executive's employment is terminated on account of
the Executive's Disability pursuant to Section 5(b), 30 days after a Notice
of Termination has been provided pursuant thereto (provided that the
Executive shall not have returned to the performance of the Executive's
duties on a full-time basis during such thirty 30-day period);
<PAGE>
(iii) if the Executive's employment is terminated for Cause
pursuant to Section 5(c), the date specified in the Notice of Termination
provided pursuant thereto; and
(iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is provided or any later
date (within 30 days) set forth in such Notice of Termination.
7. Compensation Upon Termination.
-----------------------------
(a) Death. If the Executive's employment with the Company is
-----
terminated on account of the Executive's death pursuant to Section 5(a), the
Company shall as soon as practicable pay to the Executive's estate or as may be
directed by the legal representatives of the Executive's estate any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee of the Board
(the "Compensation Committee"). The Company shall provide the Executive through
the Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of the Executive's
Date of Termination. Other than the foregoing, the Company shall have no
further obligations to the Executive hereunder.
(b) Disability. If the Executive's employment with the Company is
----------
terminated on account of the Executive's Disability pursuant to Section 5(b),
the Company shall as soon as practicable pay the Executive any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee. The Company
shall provide the Executive through the Executive's Date of Termination with
continued participation in the employee benefit plans provided to the Executive
pursuant to Section 4(c) as of the Executive's Date of Termination. Other than
the foregoing, the Company shall have no further obligations to the Executive
hereunder.
(c) By the Company for Cause or By the Executive Without Good Reason.
----------------------------------------------------------------
If the Executive's employment with the Company is terminated by the Company for
Cause pursuant to Section 5(c) or by the Executive without Good Reason pursuant
to Section 5(f), the Company shall as soon as practicable pay the Executive any
Base Salary accrued and due to the Executive under Section 4(a) through the
Executive's Date of Termination and the Executive shall forfeit his entire then
unpaid MIP payment(s), if any. The Company shall provide the Executive through
his Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of his Date of
<PAGE>
Termination. Other than the foregoing, the Company shall have no further
obligations to the Executive hereunder.
(d) Termination By the Company Without Cause or By the Executive for
----------------------------------------------------------------
Good Reason. If the Executive's employment with the Company is terminated by
- -----------
the Company (other than for Disability or Cause), or by the Executive for Good
Reason pursuant to Section 5(d), then the Company shall:
(i) within 30 days of the Executive's Date of Termination, pay
the Executive any Base Salary accrued and due to the Executive under
Section 4(a) through his Date of Termination and any unpaid MIP payment(s)
for any previously completed calendar year(s);
(ii) (A) if the Executive's Date of Termination occurs within the
period beginning on the date of a Change of Control, as defined below, and
ending 24 months following the Change of Control, as defined below (or, if
the Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), within 30 days of the
Executive's Date of Termination, pay the Executive an amount equal to 200%
of his Base Salary in effect as of his Date of Termination, or (B) if the
Executive's Date of Termination does not occur within the period beginning
on the date of a Change of Control, as defined below, and ending 24 months
following the Change of Control, as defined below (or, if the Change of
Control, as defined below, is in connection with shareholder approval
pursuant to paragraph (iii) of the definition of Change of Control, ending
24 months following the consummation of the transaction which was the
subject of shareholder approval), continue to pay the Executive his Base
Salary in effect as of his Date of Termination for the 18-month period
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8) at the times such
payments would otherwise have been made under Section 4(a);
(iii) (A) if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), within 30 days
of the Executive's Date of Termination, pay the Executive an amount equal
to 200% of his then current "Cash Target Amount" under the MIP, or (B) if
the Executive's Date of Termination does not occur within the
<PAGE>
period beginning on the date of a Change of Control, as defined below, and
ending 24 months following the Change of Control, as defined below (or, if
the Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), pay the Executive (I) 100%
of his "Cash Target Amount" under the MIP (as of his Date of Termination)
for the MIP year immediately following his Date of Termination, and (II)
50% of his "Cash Target Amount" under the MIP (as of his Date of
Termination) for the second year immediately following his Date of
Termination (in each case unless the Executive earlier violates the
provisions of Section 8), each such payment to be made at the times such
payments would otherwise have been made under the MIP;
(iv) provide the Executive for the 18-month period commencing
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8), with continued
participation (or equivalent benefits if such participation is not legally
permissible (cash payments in the case of tax-qualified retirement plan
benefits)) in the employee benefit plans provided to the Executive pursuant
to Section 4(c) as of his Date of Termination; and
(v) solely if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval),(A) his SERP
benefit shall become fully vested and nonforfeitable, (B) if he had not
attained age 55 as of his Date of Termination, he shall be (I) deemed to
have attained age 55 for purposes of the early retirement provisions of the
SERP, and (II) credited with an additional number of years of service for
SERP benefit accrual purposes equal to the difference between his age as of
his Date of Termination and age 55, (C) if he had not accumulated 10 years
of service under the SERP as of his Date of Termination, he shall be deemed
to have 10 years of service for SERP benefit accrual purposes and (D)
within 30 days of his Date of Termination, the Company shall pay the
Executive an amount equal to the present value of his accrued SERP benefit
(utilizing a discount rate for calculating such present value equal to the
"discount rate," as defined in Statement of Financial Accounting Standards
No. 87 published by the Financial Accounting Standards Board, utilized for
purposes of the most recent audit disclosure relating to the Company's tax-
qualified defined benefit pension plan preceding the Change of Control by
the "enrolled actuary" (as defined in Section 7701 (a)(35) of the Internal
Revenue Code of 1986, as amended (the "Code")), who signed the Schedule B
to the most recent Internal Revenue Service Form 5500 relating to the
Company's
<PAGE>
tax-qualified defined benefit pension plan, filed prior to the Change of
Control).
Other than the foregoing, the Company shall have no further obligations to the
Executive hereunder.
For purposes of this Agreement, a "Change of Control" of the Company
shall mean the first to occur of any of the following events:
(i) any "Person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding (A)
the Company or any of its subsidiaries, (B) a trustee or any fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, or an underwriter temporarily holding securities pursuant
to an offering of such securities, in each case with respect to the
securities so held, or (C) a corporation or other entity owned, directly or
indirectly, by holders of voting securities of the Company in substantially
the same proportions as their ownership of the Company, is or becomes the
"Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its subsidiaries or other affiliates
controlled by the Company or any such subsidiary) representing 20% or more
of the combined ordinary (in the absence of contingencies) voting power of
the Company's then outstanding securities; provided, however, that if such
-------- -------
"Person" shall be Suez Lyonnaise des Eaux or an affiliate thereof, solely
for purposes thereof the above reference to "20%" shall instead be deemed
to refer to the sum of the amount of the "Maximum Stockholder Investment
Percentage" (as defined in Section 1.1 of the Governance Agreement between
United Water Resources Inc. and Lyonnaise American Holding, Inc., dated as
of April 22, 1994) plus two percentage points; or
(ii) during any period of not more than two consecutive calendar
years (commencing January 1, 1999), individuals who at the beginning of
such period constitute the Board, together with any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction triggering the operation of clause
(i) or (iii) of this paragraph) whose election by the Board or nomination
for election by the Company's shareholders was approved by a vote of at
least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, or a plan of
liquidation of the Company or an agreement for the sale or disposition by
the Company of its assets as an entirety or substantially as an entirety,
other than (A) a
<PAGE>
transaction which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding, by being converted into voting securities of the
surviving entity, or otherwise), in combination with the ownership by any
trustee or other fiduciary of securities under an employee benefit plan of
the Company, at least 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such transaction, or (B) a transaction effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 20% of the combined voting power of the Company's then
outstanding securities (or if such person so acquiring more than 20% of
such combined voting power is Suez Lyonnaise des Eaux or an affiliate
thereof, solely for the purposes thereof the above reference to "20%" shall
instead be deemed to refer to the sum of the Maximum Stockholder Investment
Percentage plus two percentage points).
8. Restrictions.
------------
(a) Reasonable Covenants. It is expressly understood by and between
--------------------
the Company and the Executive that the covenants contained in this Section 8 are
an essential element of this Agreement and that but for the agreement by the
Executive to comply with these covenants and thereby not to diminish the value
of the organization and goodwill of the Company or any affiliate of the Company,
if any, including without limitation relations with their employees, suppliers,
customers and accounts, the Company would not enter into this Agreement. The
Executive has independently consulted with his legal counsel and after such
consultation agrees that such covenants are reasonable and proper.
(b) Noncompetition; No Diversion of Customers; Etc. During the Term
----------------------------------------------
and for 18 months after the Executive's Date of Termination, the Executive shall
not:
(i) engage directly, alone or in association with or as a
shareholder, principal, agent, partner, officer, director, employee or
consultant of any other organization or entity, in competition with the
businesses of the Company and/or any of its affiliates as of the
Executive's Date of Termination;
(ii) divert to any competitor of the Company or any of its
affiliates, any customer of the Company or any of its affiliates or any
"prospective customer" (as defined in the last paragraph of this Section
8(b)) of the Company or any of its affiliates; or
(iii) solicit or encourage any officer, employee or consultant
of the Company or any of its affiliates to leave the employ of the Company
or any of its affiliates for
<PAGE>
employment by or with any competitor of the Company or any of its
affiliates;
provided, however, that the Executive may invest in stocks, bonds or other
- -------- -------
securities of any competitor of the Company or any of its affiliates if:
(A) such stocks, bonds or other securities are listed on any
national or regional securities exchange or have been registered under
Section 11(g) of the Securities Exchange Act of 1934;
(B) the Executive's investment does not exceed, in the case of
any class of the capital stock of any one issuer, 1% of the issued and
outstanding shares, or, in the case of other securities, 1% of the
aggregate principal amount thereof issued and outstanding; and
(C) such investment would not prevent, directly or indirectly,
the transaction of business by the Company and/or any of its affiliates
with any state, district, territory or possession of the United States or
any governmental subdivision, agency or instrumentality thereof by virtue
of any statute, law, regulation or administrative practice.
If, at any time, the provisions of this Section 8(b) shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 8(b) shall
be considered severable and shall become and shall be immediately amended solely
with respect to such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter and the Executive agrees that this Section 8(b) as so amended
shall be valid and binding as though any invalid or unenforceable provision had
not been included herein. Except as provided in this Section 8 and in Section
3, nothing in this Agreement shall prevent or restrict the Executive from
engaging in any business or industry in any capacity.
For purposes of clause (ii) of this Section 8(b), the term
"prospective customer" shall mean any entity, business or individual included on
a list of prospective customers provided to the Executive by the Company within
15 days following his Date of Termination, which list contains the names of
those entities, businesses and individuals with whom the Company had been in
contact prior to the Executive's Date of Termination for purposes of
establishing a customer relationship therewith. Any entity, business or
individual not appearing on the aforementioned list of prospective customers due
to the failure of the Executive to advise the Company of such contact shall be
considered a "prospective customer" for purposes of clause (ii) of this Section
8(b).
(c) Public Support and Assistance. The Executive agrees that
-----------------------------
following any termination of his employment hereunder
<PAGE>
by the Company, the Executive shall not disclose or cause to be disclosed any
negative, adverse or derogatory comments or information of a substantial nature
about the Company or its management, or about any product or service provided by
the Company, or about the Company's prospects for the future (including any such
comments or information with respect to affiliates of the Company). The Company
and/or any of its affiliates may seek the assistance, cooperation or testimony
of the Executive following any such termination in connection with any
investigation, litigation or proceeding arising out of matters within the
knowledge of the Executive and related to the Executive's position as an officer
or employee of the Company, and in any such instance, the Executive shall
provide such assistance, cooperation or testimony and the Company shall pay the
Executive's reasonable costs and expenses in connection therewith; in addition,
if such assistance, cooperation or testimony requires more than a nominal
commitment of the Executive's time, the Company shall compensate the Executive
for such time at a per diem rate derived from the Executive's Base Salary at the
time of the Executive's Date of Termination.
(d) Nondisclosure of Confidential Information. During the Term, the
-----------------------------------------
Executive shall hold in a fiduciary capacity for the benefit of the Company and
its affiliates all Confidential Information (as defined below). After
termination of the Executive's employment with the Company, the Executive shall
keep secret and confidential all Confidential Information and shall not use or
disclose to any third party in any fashion or for any purpose whatsoever, any
Confidential Information. As used herein, "Confidential Information" shall mean
any information regarding this Agreement, or any other information regarding the
Company or its affiliates which is not available to the general public, and/or
not generally known outside the Company or any such affiliate, to which the
Executive has or shall have had access at any time during the course of the
Executive's employment with the Company, including, without limitation, any
information relating to the Company's (and its affiliates'):
(i) business, operations, plans, strategies, prospects or
objectives;
(ii) products, technologies, processes, specifications, research
and development operations or plans;
(iii) customers and customer lists;
(iv) sales, service, support and marketing practices and
operations;
(v) financial condition and results of operations;
(vi) operational strengths and weaknesses; and
<PAGE>
(vii) personnel and compensation policies and procedures.
Notwithstanding the foregoing provisions of this Section 8, the Executive may
discuss this Agreement with the members of the Executive's immediate family and
with the Executive's personal legal and tax advisors.
(e) Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Executive agrees that damages at law would be an
insufficient remedy to the Company in the event that the Executive violates any
of the provisions of this Section 8, and that the Company may apply for and,
upon the requisite showing, have injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach of or otherwise to
specifically enforce any of the covenants contained in this Section 8.
9. Excise Tax Gross-Up Payment. If any payments made and/or benefits
---------------------------
provided to the Executive by the Company, whether or not under this Agreement
("Payments"), are subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Payments and all income taxes and Excise Tax
upon such Company payment, shall be equal to the Payments. The determination of
whether any Payments are subject to the Excise Tax shall be based on the opinion
of tax counsel selected by the Company and reasonably acceptable to the
Executive, whose fees and expenses shall be paid by the Company. For purposes
of determining the amount of the Gross-Up Payment, the Executive shall be deemed
to pay federal, state and local income taxes at the highest marginal rate of
income taxation applicable to any individual residing in the jurisdiction in
which the Executive resides in the calendar year in which the Gross-Up Payment
is to be made. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the Gross-Up
Payment being repaid by the Executive to the extent that such repayment results
in a reduction in Excise Tax and/or a federal, state or local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the Gross-
Up Payment),
<PAGE>
the Company shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by the Executive with respect
to such excess) at the time that the amount of such excess is finally
determined. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Payments.
10. Legal Fees. To provide the Executive with reasonable assurances
----------
that the purposes of this Agreement will not be frustrated by the cost of its
enforcement should the Company fail to perform any of its obligations under this
Agreement, the Company shall pay all of the reasonable attorneys' fees and
expenses and court and arbitration costs incurred by the Executive and any of
his beneficiaries, heirs and legal representatives, should a court of competent
jurisdiction or an arbitrator determine that the Company shall have failed to
perform any of its obligations under this Agreement.
11. Notice. For the purposes of this Agreement, notices, demands and
------
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Robert J. Iacullo
23 Holiday Drive
West Caldwell, NJ 07006
If to the Company:
Office of the General Counsel
United Water Resources Inc.
200 Old Hook Road
Harrington Park, NJ 07640-1799
or to such other address as either of the parties may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
12. Successors. Without the prior written consent of the Executive,
----------
this Agreement cannot be assigned by the Company except that it shall be binding
automatically on any successors and assigns of all or substantially all of the
business and/or assets of the Company (whether direct or indirect, by purchase,
merger, consolidation or otherwise). In addition, without the prior written
consent of the Company, this Agreement cannot be assigned
<PAGE>
by the Executive, except that the right to receive payments or benefits
hereunder may be transferred by will or the laws of descent and distribution.
This Agreement and all rights of the Executive hereunder shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives.
13. Arbitration. Except as provided in Section 8(e), all
-----------
controversies, claims or disputes arising out of or relating to this Agreement
shall be settled by binding arbitration under the rules of the American
Arbitration Association then in effect in the State of New Jersey, as the sole
and exclusive remedy of either party, and judgment upon any such award rendered
by the arbitrator(s) may be entered in any court of competent jurisdiction. The
costs of arbitration shall be borne by the unsuccessful party or otherwise as
determined by the arbitrators in their discretion.
14. Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of New
Jersey without regard to conflicts of law principles.
15. Amendments. No provision of this Agreement may be modified,
----------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated for such purpose 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.
16. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
17. Entire Agreement. 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. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
18. Indemnification. The Company shall indemnify the Executive to
---------------
the full extent permitted by the New Jersey Business Corporation Act and any
provision of the By-Laws of the Company, as amended from time to time, generally
applicable to officers and directors of the Company, for all amounts (including
without
<PAGE>
limitation, judgments, fines, settlement payments, expenses and attorneys' fees)
incurred or paid by the Executive in connection with any action, suit,
investigation or proceeding arising out of or relating to the performance by the
Executive of services for, or the actions by the Executive as an officer or
employee of, the Company or any affiliate of the Company or any other person or
enterprise at the Company's request. Nothing in this Section 18 or elsewhere in
this Agreement is intended to prevent the Company from indemnifying the
Executive to any greater extent than is required by this Section 18.
<PAGE>
19. Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
UNITED WATER RESOURCES INC.
By:_____________________________
Name: Donald L. Correll
Title: Chairman and Chief Executive Officer
ROBERT J. IACULLO
________________________________
MARCIA L. WORTHING
________________________________
<PAGE>
Exhibit 10(g)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT effective as of January 1, 1999 (the "Commencement Date") by
and between United Water Resources Inc., a New Jersey corporation, and its
subsidiaries (collectively, the "Company"), and Joseph Simunovich (the
"Executive") (this "Agreement").
The Company desires to employ the Executive and the Executive is
willing to be employed by the Company, on the terms and conditions hereinafter
provided.
In order to effect the foregoing, the parties hereto wish to enter
into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
----------
and the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The Executive's employment under this Agreement shall
----
commence on the Commencement Date and shall end at the close of business on
December 31, 2000; provided, however, that the term of this Agreement (the
-------- -------
"Term") shall thereafter be automatically extended for each succeeding 1-year
period unless either party hereto provides the other party with a written notice
at least 60 days prior to the end of the then current Term, advising that the
party providing the notice shall not agree to so extend the Term; and provided,
--------
further, that should a Change of Control occur during the Term, the Term shall
- -------
be extended to the date which is the end of the 24-month period immediately
following the consummation of the transaction which constitutes the Change of
Control. Notwithstanding the preceding, the Term shall not extend beyond the
date on which the Executive attains age 65 without the prior written consent of
the Company; provided, however, that the end of the Term solely on account of
-------- -------
the Executive attaining age 65 shall not entitle the Executive to any benefits
under Section 7.
3. Title, Duties and Authority. The Executive shall serve as
---------------------------
President and Chief of Staff of United Water Management and Services Inc. and
shall have such responsibilities and duties (consistent with the Executive's
positions as President and Chief of Staff) as may from time to time be assigned
to the Executive by the Board of Directors of United Water Resources Inc. (the
"Board"), and shall have all of the powers and duties usually incident to the
offices of President and Chief of Staff. The Executive shall devote
substantially all of his working time and efforts to the business and affairs of
the Company, except for vacations, illness or incapacity.
<PAGE>
4. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Term, the Company shall pay the Executive
-----------
a base salary ("Base Salary"), payable in equal installments in accordance with
the Company's normal practice for paying base salaries to its executive
employees. The Base Salary shall initially be payable at the rate of $240,000
per annum, and shall be subject to annual review by the Board for discretionary
annual increases.
(b) MIP. The Executive shall participate in the United Water
---
Resources Inc. Management Incentive Plan (the "MIP") or any successor plan
established by the Company.
(c) Employee Benefits. The Executive shall be entitled to participate
-----------------
in all of the Company's employee benefit plans made available by the Company (or
any affiliate thereof) to its executives during the Term as may be in effect
from time to time. In addition, during the Term, the Executive shall accrue
benefits under the United Water Resources Inc. Supplemental Retirement Plan for
Key Executives (the "SERP").
(d) Expenses. During the Term, the Executive shall be entitled to
--------
receive prompt reimbursement upon submission of expense claims to the Company
for all reasonable and customary expenses incurred by the Executive in
performing services hereunder, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company for its executive employees.
(e) Vacations. The Executive shall be entitled to paid vacation, paid
---------
holidays, sick days and personal days pursuant to the Company's regular policies
applicable to its executive employees.
(f) Taxes. The Company may withhold from any amounts payable under
-----
this Agreement such federal, state, local and/or other taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
5. Termination. The Executive's employment hereunder may be
-----------
terminated under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate
-----
upon the Executive's death.
(b) Disability. If, as a result of the Executive's incapacity due
----------
to physical or mental illness, the Executive shall become entitled to the
receipt of benefits under the Company's long-term disability plan, and within 30
days after a written Notice of Termination (as defined in Section 6(a)) is
<PAGE>
given to the Executive by the Company, the Executive shall not have returned to
the performance of his duties hereunder on a full-time basis, the Company may
terminate the Executive's employment hereunder for "Disability."
(c) Cause. The Company may terminate the Executive's employment
-----
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon the occurrence of
any of the following which is materially injurious to the business or reputation
of the Company or any of its affiliates:
(i) the failure by the Executive to substantially perform the
Executive's duties hereunder (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness);
(ii) the willful violation by the Executive of any of the
Executive's material obligations hereunder;
(iii) the willful engaging by the Executive in misconduct; or
(iv) the Executive's conviction of a felony.
Notwithstanding the foregoing, the Executive shall not be
terminated for Cause without:
(A) at least 15 days' advance notice to the Executive setting
forth the reasons for the Company's intention to terminate the Executive's
employment hereunder for Cause;
(B) the failure of the Executive to cure the nonperformance,
violation or misconduct described in the notice referred to in clause (A)
of this paragraph, if cure thereof is possible, to the reasonable
satisfaction of the Board, within 15 days of such notice; and
(C) delivery to the Executive of a Notice of Termination (as
defined in Section 6(a)) from the Company notifying him that in the good
faith opinion of a majority of the Board, the Company is entitled to
terminate the Executive for Cause as set forth above, and specifying the
particulars thereof in detail.
(d) Good Reason. The Executive may terminate his employment
-----------
hereunder for "Good Reason" by providing a Notice of Termination to the Company
within 30 days after the occurrence, without the Executive's consent, of one of
the following events that has not been cured within 15 days after written notice
thereof has been given to the Company by the Executive:
<PAGE>
(i) a reduction of the Executive's Base Salary;
(ii) a material and adverse change in the Executive's title,
status, authority, duties or function (in each case, other than as may be
contemplated by this Agreement);
(iii) any failure to pay the Executive's Base Salary or MIP
payment(s) when due;
(iv) a change of the Executive's place of employment by the
Company to a location which is greater than 50 miles from the location of
the Executive's place of employment by the Company as of the Commencement
Date; or
(v) the willful violation by the Company of any of the Company's
material obligations hereunder.
(e) Without Cause. The Company may terminate the Executive's
-------------
employment hereunder without Cause by providing the Executive with a Notice of
Termination.
(f) Without Good Reason. The Executive may terminate the
-------------------
Executive's employment hereunder without Good Reason by providing the Company
with a Notice of Termination.
6. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than a termination on
account of the Executive's death pursuant to Section 5(a)) shall be communicated
by a written Notice of Termination to the other party hereto in accordance with
Section 11. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and the Date of Termination, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment hereunder pursuant to the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall mean:
-------------------
(i) if the Executive's employment is terminated on account of the
Executive's death pursuant to Section 5(a), the date of the Executive's
death;
(ii) if the Executive's employment is terminated on account of
the Executive's Disability pursuant to Section
<PAGE>
5(b), 30 days after a Notice of Termination has been provided pursuant
thereto (provided that the Executive shall not have returned to the
performance of the Executive's duties on a full-time basis during such
thirty 30-day period);
(iii) if the Executive's employment is terminated for Cause
pursuant to Section 5(c), the date specified in the Notice of Termination
provided pursuant thereto; and
(iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is provided or any later
date (within 30 days) set forth in such Notice of Termination.
7. Compensation Upon Termination.
-----------------------------
(a) Death. If the Executive's employment with the Company is
-----
terminated on account of the Executive's death pursuant to Section 5(a), the
Company shall as soon as practicable pay to the Executive's estate or as may be
directed by the legal representatives of the Executive's estate any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee of the Board
(the "Compensation Committee"). The Company shall provide the Executive through
the Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of the Executive's
Date of Termination. Other than the foregoing, the Company shall have no
further obligations to the Executive hereunder.
(b) Disability. If the Executive's employment with the Company is
----------
terminated on account of the Executive's Disability pursuant to Section 5(b),
the Company shall as soon as practicable pay the Executive any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee. The Company
shall provide the Executive through the Executive's Date of Termination with
continued participation in the employee benefit plans provided to the Executive
pursuant to Section 4(c) as of the Executive's Date of Termination. Other than
the foregoing, the Company shall have no further obligations to the Executive
hereunder.
(c) By the Company for Cause or By the Executive Without Good Reason.
----------------------------------------------------------------
If the Executive's employment with the Company is terminated by the Company for
Cause pursuant to Section 5(c) or by the Executive without Good Reason pursuant
to Section 5(f), the Company shall as soon as practicable pay the Executive any
Base Salary accrued and due to the Executive under Section 4(a)
<PAGE>
through the Executive's Date of Termination and the Executive shall forfeit his
entire then unpaid MIP payment(s), if any. The Company shall provide the
Executive through his Date of Termination with continued participation in the
employee benefit plans provided to the Executive pursuant to Section 4(c) as of
his Date of Termination. Other than the foregoing, the Company shall have no
further obligations to the Executive hereunder.
(d) Termination By the Company Without Cause or By the Executive for
Good Reason or During the Thirteenth Month Following a Change of Control. If
the Executive's employment with the Company is terminated by the Company (other
than for Disability or Cause), or by the Executive (1) for Good Reason pursuant
to Section 5(d), or (2) with or without Good Reason (other than to avoid his
termination by the Company for Cause) during the thirteenth calendar month
beginning after the consummation of any transaction which constitutes a Change
of Control, as defined below, then the Company shall:
(i) within 30 days of the Executive's Date of Termination, pay
the Executive any Base Salary accrued and due to the Executive under
Section 4(a) through his Date of Termination and any unpaid MIP payment(s)
for any previously completed calendar year(s);
(ii) (A) if the Executive's Date of Termination occurs within the
period beginning on the date of a Change of Control, as defined below, and
ending 24 months following the Change of Control, as defined below (or, if
the Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), within 30 days of the
Executive's Date of Termination, pay the Executive an amount equal to 300%
of his Base Salary in effect as of his Date of Termination, or (B) if the
Executive's Date of Termination does not occur within the period beginning
on the date of a Change of Control, as defined below, and ending 24 months
following the Change of Control, as defined below (or, if the Change of
Control, as defined below, is in connection with shareholder approval
pursuant to paragraph (iii) of the definition of Change of Control, ending
24 months following the consummation of the transaction which was the
subject of shareholder approval), continue to pay the Executive his Base
Salary in effect as of his Date of Termination for the 24-month period
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8) at the times such
payments would otherwise have been made under Section 4(a);
<PAGE>
(iii) (A) if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), within 30 days
of the Executive's Date of Termination, pay the Executive an amount equal
to 300% of the greater of (I) his then current "Cash Target Amount" under
the MIP, or (II) his most recently paid or declared cash award under the
MIP, or (B) if the Executive's Date of Termination does not occur within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), pay the
Executive an annual MIP payment for each of the 2 MIP years immediately
following his Date of Termination (or until such earlier time that the
Executive violates the provisions of Section 8), each such payment in an
amount equal to his "Cash Target Amount" under the MIP (as of his Date of
Termination), and to be made at the times such payments would otherwise
have been made under the MIP;
(iv) provide the Executive for the 24-month period immediately
following his Date of Termination (or until such earlier time that the
Executive violates the provisions of Section 8), with continued
participation (or equivalent benefits if such participation is not legally
permissible (cash payments in the case of tax-qualified retirement plan
benefits)) in the employee benefit plans provided to the Executive pursuant
to Section 4(c) as of his Date of Termination; and
(v) solely if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), (A) his SERP
benefit shall become fully vested and nonforfeitable, (B) if he had not
attained age 55 as of his Date of Termination, he shall be deemed to have
attained age 55 for purposes of the early retirement provisions of the
SERP, (C) if he had not accumulated 10 years of service under the SERP as
of his Date of Termination, he shall be deemed to
<PAGE>
have 10 years of service for SERP benefit accrual purposes and (D) within
30 days of his Date of Termination, the Company shall pay the Executive an
amount equal to the present value of his accrued SERP benefit (utilizing a
discount rate for calculating such present value equal to the "discount
rate," as defined in Statement of Financial Accounting Standards No. 87
published by the Financial Accounting Standards Board, utilized for
purposes of the most recent audit disclosure relating to the Company's tax-
qualified defined benefit pension plan preceding the Change of Control by
the "enrolled actuary" (as defined in Section 7701(a)(35) of the Internal
Revenue Code of 1986, as amended (the "Code")), who signed the Schedule B
to the most recent Internal Revenue Service Form 5500 relating to the
Company's tax-qualified defined benefit pension plan, filed prior to the
Change of Control).
Other than the foregoing, the Company shall have no further obligations to the
Executive hereunder.
For purposes of this Agreement, a "Change of Control" of the Company
shall mean the first to occur of any of the following events:
(i) any "Person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding (A)
the Company or any of its subsidiaries, (B) a trustee or any fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, or an underwriter temporarily holding securities pursuant
to an offering of such securities, in each case with respect to the
securities so held, or (C) a corporation or other entity owned, directly or
indirectly, by holders of voting securities of the Company in substantially
the same proportions as their ownership of the Company, is or becomes the
"Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its subsidiaries or other affiliates
controlled by the Company or any such subsidiary) representing 20% or more
of the combined ordinary (in the absence of contingencies) voting power of
the Company's then outstanding securities; provided, however, that if such
-------- -------
"Person" shall be Suez Lyonnaise des Eaux or an affiliate thereof, solely
for purposes thereof the above reference to "20%" shall instead be deemed
to refer to the sum of the amount of the "Maximum Stockholder Investment
Percentage" (as defined in Section 1.1 of the Governance Agreement between
United Water Resources Inc. and Lyonnaise American Holding, Inc., dated as
of April 22, 1994) plus two percentage points; or
<PAGE>
(ii) during any period of not more than two consecutive calendar
years (commencing January 1, 1999), individuals who at the beginning of
such period constitute the Board, together with any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction triggering the operation of clause
(i) or (iii) of this paragraph) whose election by the Board or nomination
for election by the Company's shareholders was approved by a vote of at
least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, or a plan of
liquidation of the Company or an agreement for the sale or disposition by
the Company of its assets as an entirety or substantially as an entirety,
other than (A) a transaction which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding, by being converted into voting securities
of the surviving entity, or otherwise), in combination with the ownership
by any trustee or other fiduciary of securities under an employee benefit
plan of the Company, at least 80% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such transaction, or (B) a transaction effected to
implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than 20% of the combined voting power of the
Company's then outstanding securities (or if such person so acquiring more
than 20% of such combined voting power is Suez Lyonnaise des Eaux or an
affiliate thereof, solely for the purposes thereof the above reference to
"20%" shall instead be deemed to refer to the sum of the Maximum
Stockholder Investment Percentage plus two percentage points).
8. Restrictions.
------------
(a) Reasonable Covenants. It is expressly understood by and between
--------------------
the Company and the Executive that the covenants contained in this Section 8 are
an essential element of this Agreement and that but for the agreement by the
Executive to comply with these covenants and thereby not to diminish the value
of the organization and goodwill of the Company or any affiliate of the Company,
if any, including without limitation relations with their employees, suppliers,
customers and accounts, the Company would not enter into this Agreement. The
Executive has independently consulted with his legal counsel and after such
consultation agrees that such covenants are reasonable and proper.
<PAGE>
(b) Noncompetition; No Diversion of Customers; Etc. During the Term
----------------------------------------------
and for 24 months after the Executive's Date of Termination, the Executive shall
not:
(i) engage directly, alone or in association with or as a
shareholder, principal, agent, partner, officer, director, employee or
consultant of any other organization or entity, in competition with the
businesses of the Company and/or any of its affiliates as of the
Executive's Date of Termination;
(ii) divert to any competitor of the Company or any of its
affiliates, any customer of the Company or any of its affiliates or any
"prospective customer" (as defined in the last paragraph of this Section
8(b)) of the Company or any of its affiliates; or
(iii) solicit or encourage any officer, employee or consultant of
the Company or any of its affiliates to leave the employ of the Company or
any of its affiliates for employment by or with any competitor of the
Company or any of its affiliates;
provided, however, that the Executive may invest in stocks, bonds or other
- -------- -------
securities of any competitor of the Company or any of its affiliates if:
(A) such stocks, bonds or other securities are listed on any
national or regional securities exchange or have been registered under
Section 11(g) of the Securities Exchange Act of 1934;
(B) the Executive's investment does not exceed, in the case of
any class of the capital stock of any one issuer, 1% of the issued and
outstanding shares, or, in the case of other securities, 1% of the
aggregate principal amount thereof issued and outstanding; and
(C) such investment would not prevent, directly or indirectly,
the transaction of business by the Company and/or any of its affiliates
with any state, district, territory or possession of the United States or
any governmental subdivision, agency or instrumentality thereof by virtue
of any statute, law, regulation or administrative practice.
If, at any time, the provisions of this Section 8(b) shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 8(b) shall
be considered severable and shall become and shall be immediately amended solely
with respect to such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter and the Executive agrees that this
<PAGE>
Section 8(b) as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein. Except as provided in this
Section 8 and in Section 3, nothing in this Agreement shall prevent or restrict
the Executive from engaging in any business or industry in any capacity.
For purposes of clause (ii) of this Section 8(b), the term
"prospective customer" shall mean any entity, business or individual included on
a list of prospective customers provided to the Executive by the Company within
15 days following his Date of Termination, which list contains the names of
those entities, businesses and individuals with whom the Company had been in
contact prior to the Executive's Date of Termination for purposes of
establishing a customer relationship therewith. Any entity, business or
individual not appearing on the aforementioned list of prospective customers due
to the failure of the Executive to advise the Company of such contact shall be
considered a "prospective customer" for purposes of clause (ii) of this Section
8(b).
(c) Public Support and Assistance. The Executive agrees that
-----------------------------
following any termination of his employment hereunder by the Company, the
Executive shall not disclose or cause to be disclosed any negative, adverse or
derogatory comments or information of a substantial nature about the Company or
its management, or about any product or service provided by the Company, or
about the Company's prospects for the future (including any such comments or
information with respect to affiliates of the Company). The Company and/or any
of its affiliates may seek the assistance, cooperation or testimony of the
Executive following any such termination in connection with any investigation,
litigation or proceeding arising out of matters within the knowledge of the
Executive and related to the Executive's position as an officer or employee of
the Company, and in any such instance, the Executive shall provide such
assistance, cooperation or testimony and the Company shall pay the Executive's
reasonable costs and expenses in connection therewith; in addition, if such
assistance, cooperation or testimony requires more than a nominal commitment of
the Executive's time, the Company shall compensate the Executive for such time
at a per diem rate derived from the Executive's Base Salary at the time of the
Executive's Date of Termination.
(d) Nondisclosure of Confidential Information. During the Term, the
-----------------------------------------
Executive shall hold in a fiduciary capacity for the benefit of the Company and
its affiliates all Confidential Information (as defined below). After
termination of the Executive's employment with the Company, the Executive shall
keep secret and confidential all Confidential Information and shall not use or
disclose to any third party in any fashion or for any purpose whatsoever, any
Confidential Information. As used herein, "Confidential Information" shall mean
any information regarding this Agreement, or any other information regarding the
Company or its affiliates which is not available to the general public, and/or
<PAGE>
not generally known outside the Company or any such affiliate, to which the
Executive has or shall have had access at any time during the course of the
Executive's employment with the Company, including, without limitation, any
information relating to the Company's (and its affiliates'):
(i) business, operations, plans, strategies, prospects or
objectives;
(ii) products, technologies, processes, specifications, research
and development operations or plans;
(iii) customers and customer lists;
(iv) sales, service, support and marketing practices and
operations;
(v) financial condition and results of operations;
(vi) operational strengths and weaknesses; and
(vii) personnel and compensation policies and procedures.
Notwithstanding the foregoing provisions of this Section 8, the Executive may
discuss this Agreement with the members of the Executive's immediate family and
with the Executive's personal legal and tax advisors.
(e) Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Executive agrees that damages at law would be an
insufficient remedy to the Company in the event that the Executive violates any
of the provisions of this Section 8, and that the Company may apply for and,
upon the requisite showing, have injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach of or otherwise to
specifically enforce any of the covenants contained in this Section 8.
9. Excise Tax Gross-Up Payment. If any payments made and/or benefits
---------------------------
provided to the Executive by the Company, whether or not under this Agreement
("Payments"), are subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Payments and all income taxes and Excise Tax
upon such Company payment, shall be equal to the Payments. The determination of
whether any Payments are subject to the Excise Tax shall be based on the opinion
of tax counsel selected by the Company and reasonably acceptable to the
Executive, whose fees and expenses shall be paid by the Company. For purposes
of determining the amount of the Gross-Up Payment, the Executive
<PAGE>
shall be deemed to pay federal, state and local income taxes at the highest
marginal rate of income taxation applicable to any individual residing in the
jurisdiction in which the Executive resides in the calendar year in which the
Gross-Up Payment is to be made. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of the Executive's employment, the Executive shall repay to the
Company, at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to such reduction
(plus that portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state and local income tax imposed on the Gross-Up Payment attributable
to the Excise Tax and federal, state and local income tax imposed on the Gross-
Up Payment being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the Gross-
Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax with
respect to the Payments.
10. Legal Fees. To provide the Executive with reasonable assurances
----------
that the purposes of this Agreement will not be frustrated by the cost of its
enforcement should the Company fail to perform any of its obligations under this
Agreement, the Company shall pay all of the reasonable attorneys' fees and
expenses and court and arbitration costs incurred by the Executive and any of
his beneficiaries, heirs and legal representatives, should a court of competent
jurisdiction or an arbitrator determine that the Company shall have failed to
perform any of its obligations under this Agreement.
11. Notice. For the purposes of this Agreement, notices, demands and
------
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
<PAGE>
If to the Executive:
Joseph Simunovich
725 Holly Court
Norwood, NJ 07648
If to the Company:
Office of the General Counsel
United Water Resources Inc.
200 Old Hook Road
Harrington Park, NJ 07640-1799
or to such other address as either of the parties may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
12. Successors. Without the prior written consent of the Executive,
----------
this Agreement cannot be assigned by the Company except that it shall be binding
automatically on any successors and assigns of all or substantially all of the
business and/or assets of the Company (whether direct or indirect, by purchase,
merger, consolidation or otherwise). In addition, without the prior written
consent of the Company, this Agreement cannot be assigned by the Executive,
except that the right to receive payments or benefits hereunder may be
transferred by will or the laws of descent and distribution. This Agreement and
all rights of the Executive hereunder shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives.
13. Arbitration. Except as provided in Section 8(e), all
-----------
controversies, claims or disputes arising out of or relating to this Agreement
shall be settled by binding arbitration under the rules of the American
Arbitration Association then in effect in the State of New Jersey, as the sole
and exclusive remedy of either party, and judgment upon any such award rendered
by the arbitrator(s) may be entered in any court of competent jurisdiction. The
costs of arbitration shall be borne by the unsuccessful party or otherwise as
determined by the arbitrators in their discretion.
14. Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of New
Jersey without regard to conflicts of law principles.
15. Amendments. No provision of this Agreement may be modified,
----------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated for such
<PAGE>
purpose 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.
16. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
17. Entire Agreement. 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. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
18. Indemnification. The Company shall indemnify the Executive to
---------------
the full extent permitted by the New Jersey Business Corporation Act and any
provision of the By-Laws of the Company, as amended from time to time, generally
applicable to officers and directors of the Company, for all amounts (including
without limitation, judgments, fines, settlement payments, expenses and
attorneys' fees) incurred or paid by the Executive in connection with any
action, suit, investigation or proceeding arising out of or relating to the
performance by the Executive of services for, or the actions by the Executive as
an officer or employee of, the Company or any affiliate of the Company or any
other person or enterprise at the Company's request. Nothing in this Section 18
or elsewhere in this Agreement is intended to prevent the Company from
indemnifying the Executive to any greater extent than is required by this
Section 18.
<PAGE>
19. Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
UNITED WATER RESOURCES INC.
By:_____________________________
Name: Donald L. Correll
Title: Chairman and Chief Executive Officer
JOSEPH SIMUNOVICH
________________________________
MARCIA L. WORTHING
________________________________
<PAGE>
Exhibit 10(h)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT effective as of January 1, 1999 (the "Commencement Date") by
and between United Water Resources Inc., a New Jersey corporation, and its
subsidiaries (collectively, the "Company"), and John T. Marino (the "Executive")
(this "Agreement").
The Company desires to employ the Executive and the Executive is
willing to be employed by the Company, on the terms and conditions hereinafter
provided.
In order to effect the foregoing, the parties hereto wish to enter
into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
----------
and the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The Executive's employment under this Agreement shall
----
commence on the Commencement Date and shall end at the close of business on
December 31, 2000 ; provided, however, that the term of this Agreement (the
-------- -------
"Term") shall thereafter be automatically extended for each succeeding 1-year
period unless either party hereto provides the other party with a written notice
at least 60 days prior to the end of the then current Term, advising that the
party providing the notice shall not agree to so extend the Term; and provided,
--------
further, that should a Change of Control occur during the Term, the Term shall
- -------
be extended to the date which is the end of the 24-month period immediately
following the consummation of the transaction which constitutes the Change of
Control. Notwithstanding the preceding, the Term shall not extend beyond the
date on which the Executive attains age 65 without the prior written consent of
the Company; provided, however, that the end of the Term solely on account of
-------- -------
the Executive attaining age 65 shall not entitle the Executive to any benefits
under Section 7.
3. Title, Duties and Authority. The Executive shall serve as
---------------------------
Treasurer of United Water Management and Services Inc. and shall have such
responsibilities and duties (consistent with the Executive's position as
Treasurer) as may from time to time be assigned to the Executive by the Company,
and shall have all of the powers and duties usually incident to the office of
Treasurer. The Executive shall devote substantially all of his working time and
efforts to the business and affairs of the Company, except for vacations,
illness or incapacity.
<PAGE>
4. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Term, the Company shall pay the Executive
-----------
a base salary ("Base Salary"), payable in equal installments in accordance with
the Company's normal practice for paying base salaries to its executive
employees. The Base Salary shall initially be payable at the rate of $150,000
per annum, and shall be subject to annual review by the Company for
discretionary annual increases.
(b) MIP. The Executive shall participate in the United Water
---
Resources Inc. Management Incentive Plan (the "MIP") or any successor plan
established by the Company.
(c) Employee Benefits. The Executive shall be entitled to participate
-----------------
in all of the Company's employee benefit plans made available by the Company (or
any affiliate thereof) to its executives during the Term as may be in effect
from time to time. In addition, during the Term, the Executive shall accrue
benefits under the United Water Resources Inc. Supplemental Retirement Plan for
Key Executives (the "SERP").
(d) Expenses. During the Term, the Executive shall be entitled to
--------
receive prompt reimbursement upon submission of expense claims to the Company
for all reasonable and customary expenses incurred by the Executive in
performing services hereunder, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company for its executive employees.
(e) Vacations. The Executive shall be entitled to paid vacation, paid
---------
holidays, sick days and personal days pursuant to the Company's regular policies
applicable to its executive employees.
(f) Taxes. The Company may withhold from any amounts payable under
-----
this Agreement such federal, state, local and/or other taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
5. Termination. The Executive's employment hereunder may be
-----------
terminated under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate
-----
upon the Executive's death.
(b) Disability. If, as a result of the Executive's incapacity due to
----------
physical or mental illness, the Executive shall become entitled to the receipt
of benefits under the Company's long-term disability plan, and within 30 days
after a written Notice of Termination (as defined in Section 6(a)) is given to
the Executive by the Company, the Executive shall not have returned to the
performance
<PAGE>
of his duties hereunder on a full-time basis, the Company may terminate the
Executive's employment hereunder for "Disability."
(c) Cause. The Company may terminate the Executive's employment
-----
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon the occurrence of
any of the following which is materially injurious to the business or reputation
of the Company or any of its affiliates:
(i) the failure by the Executive to substantially perform the
Executive's duties hereunder (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness);
(ii) the willful violation by the Executive of any of the
Executive's material obligations hereunder;
(iii) the willful engaging by the Executive in misconduct; or
(iv) the Executive's conviction of a felony.
Notwithstanding the foregoing, the Executive shall not be
terminated for Cause without:
(A) at least 15 days' advance notice to the Executive setting
forth the reasons for the Company's intention to terminate the Executive's
employment hereunder for Cause;
(B) the failure of the Executive to cure the nonperformance,
violation or misconduct described in the notice referred to in clause (A)
of this paragraph, if cure thereof is possible, to the reasonable
satisfaction of the Board of Directors of United Water Resources Inc. (the
"Board"), within 15 days of such notice; and
(C) delivery to the Executive of a Notice of Termination (as
defined in Section 6(a)) from the Company notifying him that in the good
faith opinion of a majority of the Board, the Company is entitled to
terminate the Executive for Cause as set forth above, and specifying the
particulars thereof in detail.
(d) Good Reason. The Executive may terminate his employment hereunder
-----------
for "Good Reason" by providing a Notice of Termination to the Company within 30
days after the occurrence, without the Executive's consent, of one of the
following events that has not been cured within 15 days after written notice
thereof has been given to the Company by the Executive:
<PAGE>
(i) a reduction of the Executive's Base Salary;
(ii) a material and adverse change in the Executive's title,
status, authority, duties or function (in each case, other than as may
be contemplated by this Agreement);
(iii) any failure to pay the Executive's Base Salary or MIP
payment(s) when due;
(iv) a change of the Executive's place of employment by the
Company to a location which is greater than 50 miles from the location
of the Executive's place of employment by the Company as of the
Commencement Date; or
(v) the willful violation by the Company of any of the
Company's material obligations hereunder.
(e) Without Cause. The Company may terminate the Executive's
-------------
employment hereunder without Cause by providing the Executive with a Notice of
Termination.
(f) Without Good Reason. The Executive may terminate the Executive's
-------------------
employment hereunder without Good Reason by providing the Company with a Notice
of Termination.
6. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than a termination on
account of the Executive's death pursuant to Section 5(a)) shall be communicated
by a written Notice of Termination to the other party hereto in accordance with
Section 11. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and the Date of Termination, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment hereunder pursuant to the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall mean:
-------------------
(i) if the Executive's employment is terminated on account of the
Executive's death pursuant to Section 5(a),
the date of the Executive's death;
(ii) if the Executive's employment is terminated on account of
the Executive's Disability pursuant to Section 5(b), 30 days after a Notice
of Termination has been provided pursuant thereto (provided that the
Executive shall not have returned to
<PAGE>
the performance of the Executive's duties on a full-time basis during such
thirty 30-day period);
(iii) if the Executive's employment is terminated for Cause
pursuant to Section 5(c), the date specified in the Notice of Termination
provided pursuant thereto; and
(iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is provided or any later
date (within 30 days) set forth in such Notice of Termination.
7. Compensation Upon Termination.
-----------------------------
(a) Death. If the Executive's employment with the Company is
-----
terminated on account of the Executive's death pursuant to Section 5(a), the
Company shall as soon as practicable pay to the Executive's estate or as may be
directed by the legal representatives of the Executive's estate any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee of the Board
(the "Compensation Committee"). The Company shall provide the Executive through
the Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of the Executive's
Date of Termination. Other than the foregoing, the Company shall have no
further obligations to the Executive hereunder.
(b) Disability. If the Executive's employment with the Company is
----------
terminated on account of the Executive's Disability pursuant to Section 5(b),
the Company shall as soon as practicable pay the Executive any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee. The Company
shall provide the Executive through the Executive's Date of Termination with
continued participation in the employee benefit plans provided to the Executive
pursuant to Section 4(c) as of the Executive's Date of Termination. Other than
the foregoing, the Company shall have no further obligations to the Executive
hereunder.
(c) By the Company for Cause or By the Executive Without Good Reason.
----------------------------------------------------------------
If the Executive's employment with the Company is terminated by the Company for
Cause pursuant to Section 5(c) or by the Executive without Good Reason pursuant
to Section 5(f), the Company shall as soon as practicable pay the Executive any
Base Salary accrued and due to the Executive under Section 4(a) through the
Executive's Date of Termination and the Executive shall forfeit his entire then
unpaid MIP payment(s), if any. The Company shall
<PAGE>
provide the Executive through his Date of Termination with continued
participation in the employee benefit plans provided to the Executive pursuant
to Section 4(c) as of his Date of Termination. Other than the foregoing, the
Company shall have no further obligations to the Executive hereunder.
(d) Termination By the Company Without Cause or By the Executive for
----------------------------------------------------------------
Good Reason. If the Executive's employment with the Company is terminated by
- -----------
the Company (other than for Disability or Cause), or by the Executive for Good
Reason pursuant to Section 5(d), then the Company shall:
(i) within 30 days of the Executive's Date of Termination, pay
the Executive any Base Salary accrued and due to the Executive under
Section 4(a) through his Date of Termination and any unpaid MIP payment(s)
for any previously completed calendar year(s);
(ii) (A) if the Executive's Date of Termination occurs within the
period beginning on the date of a Change of Control, as defined below, and
ending 24 months following the Change of Control, as defined below (or, if
the Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), within 30 days of the
Executive's Date of Termination, pay the Executive an amount equal to 200%
of his Base Salary in effect as of his Date of Termination, or (B) if the
Executive's Date of Termination does not occur within the period beginning
on the date of a Change of Control, as defined below, and ending 24 months
following the Change of Control, as defined below (or, if the Change of
Control, as defined below, is in connection with shareholder approval
pursuant to paragraph (iii) of the definition of Change of Control, ending
24 months following the consummation of the transaction which was the
subject of shareholder approval), continue to pay the Executive his Base
Salary in effect as of his Date of Termination for the 18-month period
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8) at the times such
payments would otherwise have been made under Section 4(a);
(iii) (A) if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval),
<PAGE>
within 30 days of the Executive's Date of Termination, pay the Executive an
amount equal to 200% of his then current "Cash Target Amount" under the
MIP, or (B) if the Executive's Date of Termination does not occur within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), pay the
Executive (I) 100% of his "Cash Target Amount" under the MIP (as of his
Date of Termination) for the MIP year immediately following his Date of
Termination, and (II) 50% of his "Cash Target Amount" under the MIP (as of
his Date of Termination) for the second MIP year immediately following his
Date of Termination (in each case unless the Executive earlier violates the
provisions of Section 8), each such payment to be made at the times such
payments would otherwise have been made under the MIP;
(iv) provide the Executive for the 18-month period commencing
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8), with continued
participation (or equivalent benefits if such participation is not legally
permissible (cash payments in the case of tax-qualified retirement plan
benefits)) in the employee benefit plans provided to the Executive pursuant
to Section 4(c) as of his Date of Termination; and
(v) solely if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), (A) his SERP
benefit shall become fully vested and nonforfeitable, (B) if he had not
attained age 55 as of his Date of Termination, he shall be (I) deemed to
have attained age 55 for purposes of the early retirement provisions of
the SERP, and (II) credited with an additional number of years of service
for SERP benefit accrual purposes equal to the difference between his age
as of his Date of Termination and age 55, (C) if he had not accumulated 10
years of service under the SERP as of his Date of Termination, he shall be
deemed to have 10 years of service for SERP benefit accrual purposes and
(D) within 30 days of his Date of Termination, the Company shall pay the
Executive an amount equal to the present value of his accrued SERP benefit
(utilizing a discount rate for calculating such present value equal to the
"discount rate," as defined in Statement of
<PAGE>
Financial Accounting Standards No. 87 published by the Financial Accounting
Standards Board, utilized for purposes of the most recent audit disclosure
relating to the Company's tax-qualified defined benefit pension plan
preceding the Change of Control by the "enrolled actuary" (as defined in
Section 7701 (a) (35) of the Internal Revenue Code of 1986, as amended (the
"Code")), who signed the Schedule B to the most recent Internal Revenue
Service Form 5500 relating to the Company's tax-qualified defined benefit
pension plan, filed prior to the Change of Control).
Other than the foregoing, the Company shall have no further obligations to the
Executive hereunder.
For purposes of this Agreement, a "Change of Control" of the Company
shall mean the first to occur of any of the following events:
(i) any "Person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding (A)
the Company or any of its subsidiaries, (B) a trustee or any fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, or an underwriter temporarily holding securities pursuant
to an offering of such securities, in each case with respect to the
securities so held, or (C) a corporation or other entity owned, directly or
indirectly, by holders of voting securities of the Company in substantially
the same proportions as their ownership of the Company, is or becomes the
"Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its subsidiaries or other affiliates
controlled by the Company or any such subsidiary) representing 20% or more
of the combined ordinary (in the absence of contingencies) voting power of
the Company's then outstanding securities; provided, however, that if such
-------- -------
"Person" shall be Suez Lyonnaise des Eaux or an affiliate thereof, solely
for purposes thereof the above reference to "20%" shall instead be deemed
to refer to the sum of the amount of the "Maximum Stockholder Investment
Percentage" (as defined in Section 1.1 of the Governance Agreement between
United Water Resources Inc. and Lyonnaise American Holding, Inc., dated as
of April 22, 1994) plus two percentage points; or
(ii) during any period of not more than two consecutive calendar
years (commencing January 1, 1998), individuals who at the beginning of
such period constitute the Board, together with any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction triggering the operation of clause
(i) or (iii) of this paragraph) whose election by the
<PAGE>
Board or nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, or a plan of
liquidation of the Company or an agreement for the sale or disposition by
the Company of its assets as an entirety or substantially as an entirety,
other than (A) a transaction which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding, by being converted into voting securities
of the surviving entity, or otherwise), in combination with the ownership
by any trustee or other fiduciary of securities under an employee benefit
plan of the Company, at least 80% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such transaction, or (B) a transaction effected to
implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than 20% of the combined voting power of the
Company's then outstanding securities (or if such person so acquiring more
than 20% of such combined voting power is Suez Lyonnaise des Eaux or an
affiliate thereof, solely for the purposes thereof the above reference to
"20%" shall instead be deemed to refer to the sum of the Maximum
Stockholder Investment Percentage plus two percentage points).
8. Restrictions.
------------
(a) Reasonable Covenants. It is expressly understood by and between
--------------------
the Company and the Executive that the covenants contained in this Section 8 are
an essential element of this Agreement and that but for the agreement by the
Executive to comply with these covenants and thereby not to diminish the value
of the organization and goodwill of the Company or any affiliate of the Company,
if any, including without limitation relations with their employees, suppliers,
customers and accounts, the Company would not enter into this Agreement. The
Executive has independently consulted with his legal counsel and after such
consultation agrees that such covenants are reasonable and proper.
(b) Noncompetition; No Diversion of Customers; Etc. During the Term
----------------------------------------------
and for 18 months after the Executive's Date of Termination, the Executive shall
not:
(i) engage directly, alone or in association with or as a
shareholder, principal, agent, partner, officer, director, employee or
consultant of any other organization or entity, in
<PAGE>
competition with the businesses of the Company and/or any of its affiliates
as of the Executive's Date of Termination;
(ii) divert to any competitor of the Company or any of its
affiliates, any customer of the Company or any of its affiliates or any
"prospective customer" (as defined in the last paragraph of this Section
8(b)) of the Company or any of its affiliates; or
(iii) solicit or encourage any officer, employee or consultant of
the Company or any of its affiliates to leave the employ of the Company or
any of its affiliates for employment by or with any competitor of the
Company or any of its affiliates;
provided, however, that the Executive may invest in stocks, bonds or other
- -------- -------
securities of any competitor of the Company or any of its affiliates if:
(A) such stocks, bonds or other securities are listed on any
national or regional securities exchange or have been registered under
Section 11(g) of the Securities Exchange Act of 1934;
(B) the Executive's investment does not exceed, in the case of
any class of the capital stock of any one issuer, 1% of the issued and
outstanding shares, or, in the case of other securities, 1% of the
aggregate principal amount thereof issued and outstanding; and
(C) such investment would not prevent, directly or indirectly,
the transaction of business by the Company and/or any of its affiliates
with any state, district, territory or possession of the United States or
any governmental subdivision, agency or instrumentality thereof by virtue
of any statute, law, regulation or administrative practice.
If, at any time, the provisions of this Section 8(b) shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 8(b) shall
be considered severable and shall become and shall be immediately amended solely
with respect to such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter and the Executive agrees that this Section 8(b) as so amended
shall be valid and binding as though any invalid or unenforceable provision had
not been included herein. Except as provided in this Section 8 and in Section
3, nothing in this Agreement shall prevent or restrict the Executive from
engaging in any business or industry in any capacity.
For purposes of clause (ii) of this Section 8(b), the term
"prospective customer" shall mean any entity, business or individual included on
a list of prospective customers provided to the Executive
<PAGE>
by the Company within 15 days following his Date of Termination, which list
contains the names of those entities, businesses and individuals with whom the
Company had been in contact prior to the Executive's Date of Termination for
purposes of establishing a customer relationship therewith. Any entity, business
or individual not appearing on the aforementioned list of prospective customers
due to the failure of the Executive to advise the Company of such contact shall
be considered a "prospective customer" for purposes of clause (ii) of this
Section 8(b).
(c) Public Support and Assistance. The Executive agrees that
-----------------------------
following any termination of his employment hereunder by the Company, the
Executive shall not disclose or cause to be disclosed any negative, adverse or
derogatory comments or information of a substantial nature about the Company or
its management, or about any product or service provided by the Company, or
about the Company's prospects for the future (including any such comments or
information with respect to affiliates of the Company). The Company and/or any
of its affiliates may seek the assistance, cooperation or testimony of the
Executive following any such termination in connection with any investigation,
litigation or proceeding arising out of matters within the knowledge of the
Executive and related to the Executive's position as an officer or employee of
the Company, and in any such instance, the Executive shall provide such
assistance, cooperation or testimony and the Company shall pay the Executive's
reasonable costs and expenses in connection therewith; in addition, if such
assistance, cooperation or testimony requires more than a nominal commitment of
the Executive's time, the Company shall compensate the Executive for such time
at a per diem rate derived from the Executive's Base Salary at the time of the
Executive's Date of Termination.
(d) Nondisclosure of Confidential Information. During the Term, the
-----------------------------------------
Executive shall hold in a fiduciary capacity for the benefit of the Company and
its affiliates all Confidential Information (as defined below). After
termination of the Executive's employment with the Company, the Executive shall
keep secret and confidential all Confidential Information and shall not use or
disclose to any third party in any fashion or for any purpose whatsoever, any
Confidential Information. As used herein, "Confidential Information" shall mean
any information regarding this Agreement, or any other information regarding the
Company or its affiliates which is not available to the general public, and/or
not generally known outside the Company or any such affiliate, to which the
Executive has or shall have had access at any time during the course of the
Executive's employment with the Company, including, without limitation, any
information relating to the Company's (and its affiliates'):
(i) business, operations, plans, strategies, prospects or
objectives;
<PAGE>
(ii) products, technologies, processes, specifications, research
and development operations or plans;
(iii) customers and customer lists;
(iv) sales, service, support and marketing practices and
operations;
(v) financial condition and results of operations;
(vi) operational strengths and weaknesses; and
(vii) personnel and compensation policies and procedures.
Notwithstanding the foregoing provisions of this Section 8, the Executive may
discuss this Agreement with the members of the Executive's immediate family and
with the Executive's personal legal and tax advisors.
(e) Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Executive agrees that damages at law would be an
insufficient remedy to the Company in the event that the Executive violates any
of the provisions of this Section 8, and that the Company may apply for and,
upon the requisite showing, have injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach of or otherwise to
specifically enforce any of the covenants contained in this Section 8.
9. Excise Tax Gross-Up Payment. If any payments made and/or benefits
---------------------------
provided to the Executive by the Company, whether or not under this Agreement
("Payments"), are subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Payments and all income taxes and Excise Tax
upon such Company payment, shall be equal to the Payments. The determination of
whether any Payments are subject to the Excise Tax shall be based on the opinion
of tax counsel selected by the Company and reasonably acceptable to the
Executive, whose fees and expenses shall be paid by the Company. For purposes
of determining the amount of the Gross-Up Payment, the Executive shall be deemed
to pay federal, state and local income taxes at the highest marginal rate of
income taxation applicable to any individual residing in the jurisdiction in
which the Executive resides in the calendar year in which the Gross-Up Payment
is to be made. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such
<PAGE>
reduction (plus that portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income tax imposed on the Gross-Up Payment
attributable to the Excise Tax and federal, state and local income tax imposed
on the Gross-Up Payment being repaid by the Executive to the extent that such
repayment results in a reduction in Excise Tax and/or a federal, state or local
income tax deduction) plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at the time of
the termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions payable by the
Executive with respect to such excess) at the time that the amount of such
excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Payments.
10. Legal Fees. To provide the Executive with reasonable assurances
----------
that the purposes of this Agreement will not be frustrated by the cost of its
enforcement should the Company fail to perform any of its obligations under this
Agreement, the Company shall pay all of the reasonable attorneys' fees and
expenses and court and arbitration costs incurred by the Executive and any of
his beneficiaries, heirs and legal representatives, should a court of competent
jurisdiction or an arbitrator determine that the Company shall have failed to
perform any of its obligations under this Agreement.
11. Notice. For the purposes of this Agreement, notices, demands and
------
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
John T. Marino
602 Stonewall Court
Wyckoff, NJ 07481
If to the Company:
Office of the General Counsel
United Water Resources Inc.
200 Old Hook Road
Harrington Park, NJ 07640-1799
<PAGE>
or to such other address as either of the parties may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
12. Successors. Without the prior written consent of the Executive,
----------
this Agreement cannot be assigned by the Company except that it shall be binding
automatically on any successors and assigns of all or substantially all of the
business and/or assets of the Company (whether direct or indirect, by purchase,
merger, consolidation or otherwise). In addition, without the prior written
consent of the Company, this Agreement cannot be assigned by the Executive,
except that the right to receive payments or benefits hereunder may be
transferred by will or the laws of descent and distribution. This Agreement and
all rights of the Executive hereunder shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives.
13. Arbitration. Except as provided in Section 8(e), all
-----------
controversies, claims or disputes arising out of or relating to this Agreement
shall be settled by binding arbitration under the rules of the American
Arbitration Association then in effect in the State of New Jersey, as the sole
and exclusive remedy of either party, and judgment upon any such award rendered
by the arbitrator(s) may be entered in any court of competent jurisdiction. The
costs of arbitration shall be borne by the unsuccessful party or otherwise as
determined by the arbitrators in their discretion.
14. Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of New
Jersey without regard to conflicts of law principles.
15. Amendments. No provision of this Agreement may be modified,
----------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated for such purpose 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.
16 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
17 Entire Agreement. This Agreement sets forth the entire agreement
----------------
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements,
<PAGE>
promises, covenants, arrangements,communications, representations or warranties,
whether oral or written, by any officer, employee or representative of any party
hereto. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement.
18 Indemnification. The Company shall indemnify the Executive to
---------------
the full extent permitted by the New Jersey Business Corporation Act and any
provision of the By-Laws of the Company, as amended from time to time, generally
applicable to officers and directors of the Company, for all amounts (including
without limitation, judgments, fines, settlement payments, expenses and
attorneys' fees) incurred or paid by the Executive in connection with any
action, suit, investigation or proceeding arising out of or relating to the
performance by the Executive of services for, or the actions by the Executive as
an officer or employee of, the Company or any affiliate of the Company or any
other person or enterprise at the Company's request. Nothing in this Section 18
or elsewhere in this Agreement is intended to prevent the Company from
indemnifying the Executive to any greater extent than is required by this
Section 18.
<PAGE>
19 Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
UNITED WATER RESOURCES INC.
By:_______________________________
Name: Donald L. Correll
Title: Chairman and Chief Executive Officer
JOHN T. MARINO
_________________________________
MARCIA L. WORTHING
_________________________________
<PAGE>
Exhibit 10(i)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT effective as of January 1, 1999 (the "Commencement Date") by
and between United Water Resources Inc., a New Jersey corporation, and its
subsidiaries (collectively, the "Company"), and John J. Turner (the "Executive")
(this "Agreement").
The Company desires to employ the Executive and the Executive is
willing to be employed by the Company, on the terms and conditions hereinafter
provided.
In order to effect the foregoing, the parties hereto wish to enter
into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
----------
and the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The Executive's employment under this Agreement shall
----
commence on the Commencement Date and shall end at the close of business on
December 31, 2000 ; provided, however, that the term of this Agreement (the
-------- -------
"Term") shall thereafter be automatically extended for each succeeding 1-year
period unless either party hereto provides the other party with a written notice
at least 60 days prior to the end of the then current Term, advising that the
party providing the notice shall not agree to so extend the Term; and provided,
--------
further, that should a Change of Control occur during the Term, the Term shall
- -------
be extended to the date which is the end of the 24-month period immediately
following the consummation of the transaction which constitutes the Change of
Control. Notwithstanding the preceding, the Term shall not extend beyond the
date on which the Executive attains age 65 without the prior written consent of
the Company; provided, however, that the end of the Term solely on account of
-------- -------
the Executive attaining age 65 shall not entitle the Executive to any benefits
under Section 7.
3. Title, Duties and Authority. The Executive shall serve as Vice
---------------------------
President and Chief Financial Officer of United Water Management and Services
Inc. and Treasurer of United Water Resources Inc. and shall have such
responsibilities and duties (consistent with the Executive's positions as Vice
President and Chief Financial Officer of United Water Management and Services
Inc. and Treasurer of United Water Resources Inc.) as may from time to time be
assigned to the Executive by the Company, and shall have all of the powers and
duties usually incident to the offices of Vice President and Chief Financial
Officer of United Water Management and Services Inc. and Treasurer of
<PAGE>
United Water Resources Inc. The Executive shall devote substantially all of his
working time and efforts to the business and affairs of the Company, except for
vacations, illness or incapacity.
4. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Term, the Company shall pay the Executive
-----------
a base salary ("Base Salary"), payable in equal installments in accordance with
the Company's normal practice for paying base salaries to its executive
employees. The Base Salary shall initially be payable at the rate of $175,000
per annum, and shall be subject to annual review by the Company for
discretionary annual increases.
(b) MIP. The Executive shall participate in the United Water
---
Resources Inc. Management Incentive Plan (the "MIP") or any successor plan
established by the Company.
(c) Employee Benefits. The Executive shall be entitled to participate
-----------------
in all of the Company's employee benefit plans made available by the Company (or
any affiliate thereof) to its executives during the Term as may be in effect
from time to time. In addition, during the Term, the Executive shall accrue
benefits under the United Water Resources Inc. Supplemental Retirement Plan for
Key Executives (the "SERP").
(d) Expenses. During the Term, the Executive shall be entitled to
--------
receive prompt reimbursement upon submission of expense claims to the Company
for all reasonable and customary expenses incurred by the Executive in
performing services hereunder, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company for its executive employees.
(e) Vacations. The Executive shall be entitled to paid vacation, paid
---------
holidays, sick days and personal days pursuant to the Company's regular policies
applicable to its executive employees.
(f) Taxes. The Company may withhold from any amounts payable under
-----
this Agreement such federal, state, local and/or other taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
5. Termination. The Executive's employment hereunder may be
-----------
terminated under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate
-----
upon the Executive's death.
(b) Disability. If, as a result of the Executive's incapacity due to
----------
physical or mental illness, the
<PAGE>
Executive shall become entitled to the receipt of benefits under the Company's
long-term disability plan, and within 30 days after a written Notice of
Termination (as defined in Section 6(a)) is given to the Executive by the
Company, the Executive shall not have returned to the performance of his duties
hereunder on a full-time basis, the Company may terminate the Executive's
employment hereunder for "Disability."
(c) Cause. The Company may terminate the Executive's employment
-----
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon the occurrence of
any of the following which is materially injurious to the business or reputation
of the Company or any of its affiliates:
(i) the failure by the Executive to substantially perform the
Executive's duties hereunder (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness);
(ii) the willful violation by the Executive of any of the
Executive's material obligations hereunder;
(iii) the willful engaging by the Executive in misconduct; or
(iv) the Executive's conviction of a felony.
Notwithstanding the foregoing, the Executive shall not be
terminated for Cause without:
(A) at least 15 days' advance notice to the Executive setting
forth the reasons for the Company's intention to terminate the Executive's
employment hereunder for Cause;
(B) the failure of the Executive to cure the nonperformance,
violation or misconduct described in the notice referred to in clause (A)
of this paragraph, if cure thereof is possible, to the reasonable
satisfaction of the Board of Directors of United Water Resources Inc. (the
"Board"), within 15 days of such notice; and
(C) delivery to the Executive of a Notice of Termination (as
defined in Section 6(a)) from the Company notifying him that in the good
faith opinion of a majority of the Board, the Company is entitled to
terminate the Executive for Cause as set forth above, and specifying the
particulars thereof in detail.
<PAGE>
(d) Good Reason. The Executive may terminate his employment hereunder
-----------
for "Good Reason" by providing a Notice of Termination to the Company within 30
days after the occurrence, without the Executive's consent, of one of the
following events that has not been cured within 15 days after written notice
thereof has been given to the Company by the Executive:
(i) a reduction of the Executive's Base Salary;
(ii) a material and adverse change in the Executive's title,
status, authority, duties or function (in each case, other than as may be
contemplated by this Agreement); provided, however, that the requirements
-------- -------
of this clause (ii) shall be deemed to have been satisfied as of any time
during the 12-month period immediately following a Change of Control
(solely for purposes of a Change of Control triggered by shareholder
approval referred to in clause (iii) of the definition of "Change of
Control" contained in Section 7, at any time during the 12-month period
immediately following the date of the consummation of the transaction
requiring such shareholder approval), that (a) the Executive shall no
longer be Vice President and Chief Financial Officer of United Water
Management and Services Inc. and Treasurer of United Water Resources Inc.
(or shall no longer occupy a similar position with either the Company or
the top-tier parent company thereof), or (b) the securities of the company
of which the Executive is Treasurer (or holds a similar position) are not
common stock which is (or American Depositary Receipts which are) traded on
a nationally recognized stock exchange or quoted on NASDAQ; provided,
--------
further, that the Executive's entitlement to utilize the immediately
-------
preceding proviso shall terminate at the end of such 12-month period;
(iii) any failure to pay the Executive's Base Salary or MIP
payment(s) when due;
(iv) a change of the Executive's place of employment by the
Company to a location which is greater than 50 miles from the location of
the Executive's place of employment by the Company as of the Commencement
Date; or
(v) the willful violation by the Company of any of the Company's
material obligations hereunder.
(e) Without Cause. The Company may terminate the Executive's
-------------
employment hereunder without Cause by providing the Executive with a Notice of
Termination.
(f) Without Good Reason. The Executive may terminate the Executive's
-------------------
employment hereunder without Good Reason by providing the Company with a Notice
of Termination.
<PAGE>
6. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than a termination on
account of the Executive's death pursuant to Section 5(a)) shall be communicated
by a written Notice of Termination to the other party hereto in accordance with
Section 11. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and the Date of Termination, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment hereunder pursuant to the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall mean:
-------------------
(i) if the Executive's employment is terminated on account of the
Executive's death pursuant to Section 5(a), the date of the Executive's
death;
(ii) if the Executive's employment is terminated on account of
the Executive's Disability pursuant to Section 5(b), 30 days after a Notice
of Termination has been provided pursuant thereto (provided that the
Executive shall not have returned to the performance of the Executive's
duties on a full-time basis during such thirty 30-day period);
(iii) if the Executive's employment is terminated for Cause
pursuant to Section 5(c), the date specified in the Notice of Termination
provided pursuant thereto; and
(iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is provided or any later
date (within 30 days) set forth in such Notice of Termination.
<PAGE>
7. Compensation Upon Termination.
-----------------------------
(a) Death. If the Executive's employment with the Company is
-----
terminated on account of the Executive's death pursuant to Section 5(a), the
Company shall as soon as practicable pay to the Executive's estate or as may be
directed by the legal representatives of the Executive's estate any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee of the Board
(the "Compensation Committee"). The Company shall provide the Executive through
the Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of the Executive's
Date of Termination. Other than the foregoing, the Company shall have no
further obligations to the Executive hereunder.
(b) Disability. If the Executive's employment with the Company is
----------
terminated on account of the Executive's Disability pursuant to Section 5(b),
the Company shall as soon as practicable pay the Executive any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee. The Company
shall provide the Executive through the Executive's Date of Termination with
continued participation in the employee benefit plans provided to the Executive
pursuant to Section 4(c) as of the Executive's Date of Termination. Other than
the foregoing, the Company shall have no further obligations to the Executive
hereunder.
(c) By the Company for Cause or By the Executive Without Good Reason.
----------------------------------------------------------------
If the Executive's employment with the Company is terminated by the Company for
Cause pursuant to Section 5(c) or by the Executive without Good Reason pursuant
to Section 5(f), the Company shall as soon as practicable pay the Executive any
Base Salary accrued and due to the Executive under Section 4(a) through the
Executive's Date of Termination and the Executive shall forfeit his entire then
unpaid MIP payment(s), if any. The Company shall provide the Executive through
his Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of his Date of
Termination. Other than the foregoing, the Company shall have no further
obligations to the Executive hereunder.
(d) Termination By the Company Without Cause or By the Executive for
----------------------------------------------------------------
Good Reason. If the Executive's employment with the Company is terminated by
- -----------
the Company (other than for Disability or Cause), or by the Executive for Good
Reason pursuant to Section 5(d), then the Company shall:
<PAGE>
(i) within 30 days of the Executive's Date of Termination, pay
the Executive any Base Salary accrued and due to the Executive under
Section 4(a) through his Date of Termination and any unpaid MIP payment(s)
for any previously completed calendar year(s);
(ii) (A) if the Executive's Date of Termination occurs within the
period beginning on the date of a Change of Control, as defined below, and
ending 24 months following the Change of Control, as defined below (or, if
the Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), within 30 days of the
Executive's Date of Termination, pay the Executive an amount equal to 200%
of his Base Salary in effect as of his Date of Termination, or (B) if the
Executive's Date of Termination does not occur within the period beginning
on the date of a Change of Control, as defined below, and ending 24 months
following the Change of Control, as defined below (or, if the Change of
Control, as defined below, is in connection with shareholder approval
pursuant to paragraph (iii) of the definition of Change of Control, ending
24 months following the consummation of the transaction which was the
subject of shareholder approval), continue to pay the Executive his Base
Salary in effect as of his Date of Termination for the 18-month period
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8) at the times such
payments would otherwise have been made under Section 4(a);
(iii) (A) if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), within 30 days
of the Executive's Date of Termination, pay the Executive an amount equal
to 200% of his then current "Cash Target Amount" under the MIP, or (B) if
the Executive's Date of Termination does not occur within the period
beginning on the date of a Change of Control, as defined below, and ending
24 months following the Change of Control, as defined below (or, if the
Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), pay the Executive (I) 100%
of his "Cash Target Amount" under
<PAGE>
the MIP (as of his Date of Termination) for the MIP year immediately
following his Date of Termination, and (II) 50% of his "Cash Target Amount"
under the MIP (as of his Date of Termination) for the second MIP year
immediately following his Date of Termination (in each case unless the
Executive earlier violates the provisions of Section 8), each such payment
to be made at the times such payments would otherwise have been made under
the MIP;
(iv) provide the Executive for the 18-month period commencing
immediately following his Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8), with continued
participation (or equivalent benefits if such participation is not legally
permissible (cash payments in the case of tax-qualified retirement plan
benefits)) in the employee benefit plans provided to the Executive pursuant
to Section 4(c) as of his Date of Termination; and
(v) solely if the Executive's Date of Termination occurs
within the period beginning on the date of a Change of Control, as
defined below, and ending 24 months following the Change of Control, as
defined below (or, if the Change of Control, as defined below, is in
connection with shareholder approval pursuant to paragraph (iii) of the
definition of Change of Control, ending 24 months following the
consummation of the transaction which was the subject of shareholder
approval), if the Executive is a participant in the SERP, (A) his SERP
benefit shall become fully vested and nonforfeitable, (B) if he had not
attained age 55 as of his Date of Termination, he shall be (I) deemed to
have attained age 55 for purposes of the early retirement provisions of
the SERP, and (II) credited with an additional number of years of service
for SERP benefit accrual purposes equal to the difference between his age
as of his Date of Termination and age 55, (C) if he had not accumulated 10
years of service under the SERP as of his Date of Termination, he shall be
deemed to have 10 years of service for SERP benefit accrual purposes
and (D) within 30 days of his Date of Termination, the Company shall pay
the Executive an amount equal to the present value of his accrued SERP
benefit (utilizing a discount rate for calculating such present value
equal to the "discount rate" as defined in Statement of Financial
Accounting Standards No.87 published by the Financial Accounting
Standards Board, utilized for purposes of the most recent audit disclosure
relating to the Company's tax-qualified defined benefit pension plan
preceding the Change of Control by the "enrolled actuary" (as defined in
Section 7701(a)(35) of the Internal Revenue Code of 1986, as amended (the
"Code")), who signed the Schedule B to the most recent Internal Revenue
Service Form 5500 relating to the Company's tax-qualified defined benefit
pension plan, filed prior to the Change of Control).
Other than the foregoing, the Company shall have no further
<PAGE>
obligations to the Executive hereunder.
For purposes of this Agreement, a "Change of Control" of the Company
shall mean the first to occur of any of the following events:
(i) any "Person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding (A)
the Company or any of its subsidiaries, (B) a trustee or any fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, or an underwriter temporarily holding securities pursuant
to an offering of such securities, in each case with respect to the
securities so held, or (C) a corporation or other entity owned, directly or
indirectly, by holders of voting securities of the Company in substantially
the same proportions as their ownership of the Company, is or becomes the
"Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its subsidiaries or other affiliates
controlled by the Company or any such subsidiary) representing 20% or more
of the combined ordinary (in the absence of contingencies) voting power of
the Company's then outstanding securities; provided, however, that if such
-------- -------
"Person" shall be Suez Lyonnaise des Eaux or an affiliate thereof, solely
for purposes thereof the above reference to "20%" shall instead be deemed
to refer to the sum of the amount of the "Maximum Stockholder Investment
Percentage" (as defined in Section 1.1 of the Governance Agreement between
United Water Resources Inc. and Lyonnaise American Holding, Inc., dated as
of April 22, 1994) plus two percentage points; or
(ii) during any period of not more than two consecutive calendar
years (commencing January 1, 1999), individuals who at the beginning of
such period constitute the Board, together with any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction triggering the operation of clause
(i) or (iii) of this paragraph) whose election by the Board or nomination
for election by the Company's shareholders was approved by a vote of at
least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, or a plan of
liquidation of the Company or an agreement for
<PAGE>
the sale or disposition by the Company of its assets as an entirety or
substantially as an entirety, other than (A) a transaction which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding, by
being converted into voting securities of the surviving entity, or
otherwise), in combination with the ownership by any trustee or other
fiduciary of securities under an employee benefit plan of the Company, at
least 80% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
transaction, or (B) a transaction effected to implement a recapitalization
of the Company (or similar transaction) in which no person acquires more
than 20% of the combined voting power of the Company's then outstanding
securities (or if such person so acquiring more than 20% of such combined
voting power is Suez Lyonnaise des Eaux or an affiliate thereof, solely for
the purposes thereof the above reference to "20%" shall instead be deemed
to refer to the sum of the Maximum Stockholder Investment Percentage plus
two percentage points).
8. Restrictions.
------------
(a) Reasonable Covenants. It is expressly understood by and between
--------------------
the Company and the Executive that the covenants contained in this Section 8 are
an essential element of this Agreement and that but for the agreement by the
Executive to comply with these covenants and thereby not to diminish the value
of the organization and goodwill of the Company or any affiliate of the Company,
if any, including without limitation relations with their employees, suppliers,
customers and accounts, the Company would not enter into this Agreement. The
Executive has independently consulted with his legal counsel and after such
consultation agrees that such covenants are reasonable and proper.
(b) Noncompetition; No Diversion of Customers; Etc. During the Term
----------------------------------------------
and for 18 months after the Executive's Date of Termination, the Executive shall
not:
(i) engage directly, alone or in association with or as a
shareholder, principal, agent, partner, officer, director, employee or
consultant of any other organization or entity, in competition with the
businesses of the Company and/or any of its affiliates as of the
Executive's Date of Termination;
(ii) divert to any competitor of the Company or any of its
affiliates, any customer of the Company or any of its affiliates or any
"prospective customer" (as defined in the last paragraph of this Section
8(b)) of the Company or any of its affiliates; or
<PAGE>
(iii) solicit or encourage any officer, employee or consultant of
the Company or any of its affiliates to leave the employ of the Company or
any of its affiliates for employment by or with any competitor of the
Company or any of its affiliates;
provided, however, that the Executive may invest in stocks, bonds or other
- -------- -------
securities of any competitor of the Company or any of its affiliates if:
(A) such stocks, bonds or other securities are listed on any
national or regional securities exchange or have been registered under
Section 11(g) of the Securities Exchange Act of 1934;
(B) the Executive's investment does not exceed, in the case of
any class of the capital stock of any one issuer, 1% of the issued and
outstanding shares, or, in the case of other securities, 1% of the
aggregate principal amount thereof issued and outstanding; and
(C) such investment would not prevent, directly or indirectly,
the transaction of business by the Company and/or any of its affiliates
with any state, district, territory or possession of the United States or
any governmental subdivision, agency or instrumentality thereof by virtue
of any statute, law, regulation or administrative practice.
If, at any time, the provisions of this Section 8(b) shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 8(b) shall
be considered severable and shall become and shall be immediately amended solely
with respect to such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter and the Executive agrees that this Section 8(b) as so amended
shall be valid and binding as though any invalid or unenforceable provision had
not been included herein. Except as provided in this Section 8 and in Section
3, nothing in this Agreement shall prevent or restrict the Executive from
engaging in any business or industry in any capacity.
For purposes of clause (ii) of this Section 8(b), the term
"prospective customer" shall mean any entity, business or individual included on
a list of prospective customers provided to the Executive by the Company within
15 days following his Date of Termination, which list contains the names of
those entities, businesses and individuals with whom the Company had been in
contact prior to the Executive's Date of Termination for purposes of
establishing a customer relationship therewith. Any entity, business or
individual not appearing on the aforementioned list of prospective customers due
to the failure of the Executive to advise
<PAGE>
the Company of such contact shall be considered a "prospective customer" for
purposes of clause (ii) of this Section 8(b).
(c) Public Support and Assistance. The Executive agrees that
-----------------------------
following any termination of his employment hereunder by the Company, the
Executive shall not disclose or cause to be disclosed any negative, adverse or
derogatory comments or information of a substantial nature about the Company or
its management, or about any product or service provided by the Company, or
about the Company's prospects for the future (including any such comments or
information with respect to affiliates of the Company). The Company and/or any
of its affiliates may seek the assistance, cooperation or testimony of the
Executive following any such termination in connection with any investigation,
litigation or proceeding arising out of matters within the knowledge of the
Executive and related to the Executive's position as an officer or employee of
the Company, and in any such instance, the Executive shall provide such
assistance, cooperation or testimony and the Company shall pay the Executive's
reasonable costs and expenses in connection therewith; in addition, if such
assistance, cooperation or testimony requires more than a nominal commitment of
the Executive's time, the Company shall compensate the Executive for such time
at a per diem rate derived from the Executive's Base Salary at the time of the
Executive's Date of Termination.
(d) Nondisclosure of Confidential Information. During the Term, the
-----------------------------------------
Executive shall hold in a fiduciary capacity for the benefit of the Company and
its affiliates all Confidential Information (as defined below). After
termination of the Executive's employment with the Company, the Executive shall
keep secret and confidential all Confidential Information and shall not use or
disclose to any third party in any fashion or for any purpose whatsoever, any
Confidential Information. As used herein, "Confidential Information" shall mean
any information regarding this Agreement, or any other information regarding the
Company or its affiliates which is not available to the general public, and/or
not generally known outside the Company or any such affiliate, to which the
Executive has or shall have had access at any time during the course of the
Executive's employment with the Company, including, without limitation, any
information relating to the Company's (and its affiliates'):
(i) business, operations, plans, strategies, prospects or
objectives;
(ii) products, technologies, processes, specifications, research
and development operations or plans;
(iii) customers and customer lists;
(iv) sales, service, support and marketing practices and
operations;
<PAGE>
(v) financial condition and results of operations;
(vi) operational strengths and weaknesses; and
(vii) personnel and compensation policies and procedures.
Notwithstanding the foregoing provisions of this Section 8, the Executive may
discuss this Agreement with the members of the Executive's immediate family and
with the Executive's personal legal and tax advisors.
(e) Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Executive agrees that damages at law would be an
insufficient remedy to the Company in the event that the Executive violates any
of the provisions of this Section 8, and that the Company may apply for and,
upon the requisite showing, have injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach of or otherwise to
specifically enforce any of the covenants contained in this Section 8.
9. Excise Tax Gross-Up Payment. If any payments made and/or benefits
---------------------------
provided to the Executive by the Company, whether or not under this Agreement
("Payments"), are subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Payments and all income taxes and Excise Tax
upon such Company payment, shall be equal to the Payments. The determination of
whether any Payments are subject to the Excise Tax shall be based on the opinion
of tax counsel selected by the Company and reasonably acceptable to the
Executive, whose fees and expenses shall be paid by the Company. For purposes
of determining the amount of the Gross-Up Payment, the Executive shall be deemed
to pay federal, state and local income taxes at the highest marginal rate of
income taxation applicable to any individual residing in the jurisdiction in
which the Executive resides in the calendar year in which the Gross-Up Payment
is to be made. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the Gross-Up
Payment being repaid by the Executive to the extent that such repayment results
in a reduction in Excise Tax and/or a federal, state or local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
<PAGE>
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the Gross-
Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax with
respect to the Payments.
10. Legal Fees. To provide the Executive with reasonable assurances
----------
that the purposes of this Agreement will not be frustrated by the cost of its
enforcement should the Company fail to perform any of its obligations under this
Agreement, the Company shall pay all of the reasonable attorneys' fees and
expenses and court and arbitration costs incurred by the Executive and any of
his beneficiaries, heirs and legal representatives, should a court of competent
jurisdiction or an arbitrator determine that the Company shall have failed to
perform any of its obligations under this Agreement.
11. Notice. For the purposes of this Agreement, notices, demands and
------
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
John J. Turner
14 Eastbrook Road
Harrington Park, NJ 07640
If to the Company:
Office of the General Counsel
United Water Resources Inc.
200 Old Hook Road
Harrington Park, NJ 07640-1799
or to such other address as either of the parties may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
<PAGE>
12. Successors. Without the prior written consent of the Executive,
----------
this Agreement cannot be assigned by the Company except that it shall be binding
automatically on any successors and assigns of all or substantially all of the
business and/or assets of the Company (whether direct or indirect, by purchase,
merger, consolidation or otherwise). In addition, without the prior written
consent of the Company, this Agreement cannot be assigned by the Executive,
except that the right to receive payments or benefits hereunder may be
transferred by will or the laws of descent and distribution. This Agreement and
all rights of the Executive hereunder shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives.
13. Arbitration. Except as provided in Section 8(e), all
-----------
controversies, claims or disputes arising out of or relating to this Agreement
shall be settled by binding arbitration under the rules of the American
Arbitration Association then in effect in the State of New Jersey, as the sole
and exclusive remedy of either party, and judgment upon any such award rendered
by the arbitrator(s) may be entered in any court of competent jurisdiction. The
costs of arbitration shall be borne by the unsuccessful party or otherwise as
determined by the arbitrators in their discretion.
14. Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of New
Jersey without regard to conflicts of law principles.
15. Amendments. No provision of this Agreement may be modified,
----------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated for such purpose 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.
16. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
17. Entire Agreement. 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. No agreements or
representations, oral or otherwise, express or implied, with
<PAGE>
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.
18. Indemnification. The Company shall indemnify the Executive to
---------------
the full extent permitted by the New Jersey Business Corporation Act and any
provision of the By-Laws of the Company, as amended from time to time, generally
applicable to officers and directors of the Company, for all amounts (including
without
<PAGE>
limitation, judgments, fines, settlement payments, expenses and attorneys' fees)
incurred or paid by the Executive in connection with any action, suit,
investigation or proceeding arising out of or relating to the performance by the
Executive of services for, or the actions by the Executive as an officer or
employee of, the Company or any affiliate of the Company or any other person or
enterprise at the Company's request. Nothing in this Section 18 or elsewhere in
this Agreement is intended to prevent the Company from indemnifying the
Executive to any greater extent than is required by this Section 18.
19. Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
UNITED WATER RESOURCES INC.
By:_______________________________
Name: Donald L. Correll
Title: Chairman and Chief Executive Officer
JOHN J. TURNER
__________________________________
MARCIA L. WORTHING
__________________________________
<PAGE>
Exhibit 10(j)
EXECUTIVE EMPLOYMENT AGREEMENT
between and among
UNITED WATER RESOURCES INC.
and
RICHARD B. MCGLYNN
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1: EMPLOYMENT, TERM, DUTIES AND RESPONSIBILITIES............................... 2
1.1 Employment.................................................................. 2
1.2 Period of Employment........................................................ 2
1.3 Non-Disclosure.............................................................. 3
1.4 Term of Employment.......................................................... 3
1.5 Duties and Responsibilities................................................. 4
SECTION 2: COMPENSATION AND BENEFITS................................................... 4
2.1 Base Salary................................................................. 4
2.2 Employee Benefits........................................................... 5
2.3 Executive Compensation Plans................................................ 6
SECTION 3: TERMINATION................................................................. 6
3.1 Termination by Employer Other Than for Cause or by Employee with Good
Reason...................................................................... 6
3.2 Termination by Employee or by Employer for Cause............................ 13
3.3 Expiration of Period of Employment.......................................... 13
SECTION 4: SOURCE OF PAYMENTS.......................................................... 14
SECTION 5: NON-COMPETITION............................................................. 14
SECTION 6: EXCISE TAX GROSS-UP PAYMENT................................................. 15
SECTION 7: GOVERNING LAW............................................................... 16
SECTION 8: NO ATTACHMENT............................................................... 16
SECTION 9: ARBITRATION................................................................. 17
SECTION 10: NOTICES..................................................................... 17
SECTION 11: MISCELLANEOUS............................................................... 19
</TABLE>
<PAGE>
AGREEMENT, dated as of January 1, 1999, by and between United Water Resources
Inc. (the "Employer"), and Richard B. McGIynn (the "Employee").
IN CONSIDERATION OF the mutual covenants herein contained, and other good and
valuable consideration, the parties hereto agree as follows:
SECTION 1: EMPLOYMENT, TERM, DUTIES AND RESPONSIBILITIES
- ---------------------------------------------------------
1.1 Employment.
----------
Employer hereby agrees to employ Employee, and Employee agrees to serve as
employee of Employer during the Period of Employment, as Vice President-
General Counsel of the Employer. It is understood and agreed that the
position of Vice President-General Counsel is an Executive Officer level
position and shall be considered as such for all purposes.
1.2 Period of Employment.
--------------------
If at any time during the Period of Employment, the Employer fails, without
Employee's consent, to cause Employee to be elected or re-elected as Vice
President-General Counsel of the Employer, or removes Employee from such
offices, or if at any time during the Period of Employment, Employee shall
fail to be vested by the Board of Directors of the Employer with the power
and authority of an Executive Officer of Employer at a level equivalent to
Employee's current position, Employee shall have the right by written
notice to Employer to terminate his services hereunder, effective as of the
last day of the month after the month of
<PAGE>
receipt by Employer of the written notice, in which event the Period of
Employment, as hereinafter defined, shall so terminate on the last day of
such month; termination under these circumstances shall be deemed pursuant
to Section 3.1 hereof as a termination by Employee with "Good Reason" (as
defined therein) with all the consequences which flow from such
termination.
1.3 Non-Disclosure.
--------------
Employee shall not, at any time during or following the Period of
Employment, disclose, use, transfer or sell, except in the course of
employment with Employer, any confidential information or proprietary data
of Employer and the parent company and subsidiaries of Employer so long as
such information or proprietary data remains confidential and has not been
disclosed or is not otherwise in the public domain, except as required by
law or pursuant to legal process.
1.4 Term of Employment.
------------------
The "Period of Employment" shall be the 2 year period commencing January 1,
1999 and ending on December 31, 2000; provided, however, if a Change of
Control occurs prior to December 31, 2000, such ending date shall be the
24-month anniversary of the Change of Control, as defined below (or if the
Change of Control is shareholder approval of a transaction pursuant to
paragraph (iii) of the definition of Change of Control, below, the 24-month
anniversary of the consummation of such transaction).
<PAGE>
1.5 Duties and Responsibilities.
---------------------------
Employee shall devote Employee's full business time, attention and best
efforts to the affairs of Employer and the parent company and subsidiaries
of Employer during the Period of Employment as an Executive Officer of
Employer at a level equivalent to Employee's current position, provided,
--------
however, that Employee may engage in other activities, such as activities
-------
involving professional, charitable, educational, religious and similar
types of organizations, speaking engagements, membership on the Board of
Directors of other organizations (as Employer may from time to time agree
to), and similar type activities to the extent that such other activities
do not inhibit or prohibit the performance of Employee's duties under this
Agreement, or conflict in any material way with the business of Employer
and the parent company and subsidiaries of Employer. Employer acknowledges
that Employee is currently serving as a Director of Conectiv, Inc. and
agrees to Employee's continuing to serve in that capacity during the term
of this Agreement.
SECTION 2: COMPENSATION AND BENEFITS
- -------------------------------------
2.1 Base Salary.
-----------
Employer will pay to Employee during the Period of Employment a base annual
salary of $194,000, payable in accordance with Employer's normal payroll
policies for senior executives, subject to applicable withholding of taxes
and other applicable payroll deductions. It is agreed between the parties
that Employer shall review the base annual salary annually and in light of
such review may, in the discretion of the Board of Directors of Employer
(but shall not be obligated to), increase such base
<PAGE>
annual salary taking into account any change in Employee's then
responsibilities, increases in the cost of living, increases in
compensation of other executives of Employer and the parent company and
subsidiaries of Employer, performance by Employee, and other pertinent
factors.
2.2 Employee Benefits.
-----------------
(a) Vacation and Sick Leave.
-----------------------
Employee shall be entitled to 25 days paid vacation per year and to
reasonable sick leave as determined by the Board of Directors of
Employer (the "Board") but no less than Employer's policy at the date
of this Agreement.
(b) Regular Reimbursed Business Expenses.
------------------------------------
Employer shall reimburse Employee for all travel and other expenses
and disbursements reasonably incurred by Employee in the performance
of Employee's duties during the Period of Employment, in accordance
with Employer's established policies.
(c) Employer's Benefit Plans or Arrangements.
----------------------------------------
Employee, subject to the provisions of this Agreement, shall be
entitled to participate in all employee benefit plans of Employer in
which other executives of Employer participate, as presently in effect
or as they may be modified or added to by Employer from time to time,
including, without limitation, plans providing retirement benefits,
medical insurance, disability insurance, and accidental death or
dismemberment insurance and shall be entitled to full credit
thereunder for all service with Employer and any
<PAGE>
successor. Employee shall be provided with the use of a company car
with all lease, operating costs, insurance, etc. paid by Employer.
Benefits shall be at least comparable to those provided by the current
plans of Employer. In addition, Employee shall participate in a
nonqualified retirement plan established by Employer for Employee,
substantially in the form attached hereto as Exhibit A (the
"Nonqualified Retirement Plan").
2.3 Executive Compensation Plans.
----------------------------
Employee, subject to the provisions of this Agreement, shall be entitled to
participate in all executive compensation plans of Employer, as presently
in effect or as they may be modified or added to by Employer from time to
time, including without limitation, management incentive plans, deferred
compensation plans, supplemental "top hat" retirement plans and stock and
stock option plans. Employee shall be entitled to benefit opportunities
and incentives at least comparable to those to which Employee is entitled
at the date of this Agreement.
SECTION 3: TERMINATION
- -----------------------
3.1 Termination by Employer Other Than for Cause or by Employee with Good
---------------------------------------------------------------------
Reason. If Employer should terminate the Period of Employment other than
------
for Cause, as defined herein, or if Employee should terminate the Period of
Employment with Good Reason, Employer shall:
(i) within 30 days of termination of the Period of Employment, pay
Employee any base annual salary accrued and due to Employee under
Section 2.1
<PAGE>
through his Date of Termination and any unpaid MIP payment(s) for any
previously completed calendar year(s);
(ii) (A) if the termination of the Period of Employment occurs within the
period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below
(or, if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), within 30
days of the termination of the Period of Employment, pay Employee an
amount equal to 200% of his base annual salary in effect as of the
termination of the Period of Employment, or (B) if the termination of
the Period of Employment does not occur within the period beginning on
the date of a Change of Control, as defined below, and ending 24
months following the Change of Control, as defined below (or, if the
Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), continue
to pay Employee his base annual salary in effect as of the termination
of the Period of Employment for the 18-month period immediately
following the termination of the Period of Employment (or until such
earlier time that Employee violates the provisions of Section 5) at
the times such payments would otherwise have been made under Section
2.1;
<PAGE>
(iii) (A) if the termination of the Period of Employment occurs within the
period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below
(or, if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), within
30 days of the termination of the Period of Employment, pay Employee
an amount equal to 200% of his then current "Cash Target Amount" under
the MIP, or (B) if the termination of the Period of Employment does
not occur within the period beginning on the date of a Change of
Control, as defined below, and ending 24 months following the Change
of Control, as defined below (or, if the Change of Control, as defined
below, is in connection with shareholder approval pursuant to
paragraph (iii) of the definition of Change of Control, ending 24
months following the consummation of the transaction which was the
subject of shareholder approval), pay Employee (I) 100% of his "Cash
Target Amount" under the MIP (as of the termination of the Period of
Employment) for the MIP year immediately following the termination of
the Period of Employment, and (II) 50% of his "Cash Target Amount"
under the MIP (as of the termination of the Period of Employment) for
the second MIP year immediately following the termination of the
Period of Employment (in each case unless Employee earlier violates
the provisions of Section 5), each such payment to be made at the
times such payments would otherwise have been paid under the MIP;
<PAGE>
(iv) provide Employee for the 18-month period commencing immediately
following the termination of the Period of Employment (or until such
earlier time that Employee violates the provisions of Section 5), with
continued participation (or equivalent benefits if such participation
is not legally permissible (cash payments in the case of tax-qualified
retirement plan benefits)) in the employee benefit plans provided to
Employee pursuant to Section 2.2 as of the termination of the Period
of Employment; and
(v) solely if the termination of the Period of Employment occurs within
the period beginning on the date of a Change of Control, as defined
below, and ending 24 months following the Change of Control, as
defined below (or, if the Change of Control, as defined below, is in
connection with shareholder approval pursuant to paragraph (iii) of
the definition of Change of Control, ending 24 months following the
consummation of the transaction which was the subject of shareholder
approval), (A) Employee's Nonqualified Retirement Plan benefit shall
become fully vested and nonforfeitable, (B) if he had not attained age
55 as of the termination of the Period of Employment, he shall be
deemed to have attained age 55 for purposes of the early retirement
provisions of the Nonqualified Retirement Plan, (C) if he had not
accumulated 10 years of service under the Nonqualified Retirement Plan
as of the termination of the Period of Employment, he shall be deemed
to have 10 years of service for Nonqualified Retirement Plan benefit
accrual purposes and (D) within 30 days of the termination of the
Period of Employment, Employer shall pay to Employee an amount equal
to the present value of his accrued Nonqualified Retirement Plan
benefit (utilizing
<PAGE>
a discount rate for calculating such present value equal to the
"discount rate," as defined in Statement of Financial Accounting
Standards No. 87 published by the Financial Accounting Standards
Board, utilized for purposes of the most recent audit disclosure
relating to Employer's tax-qualified defined benefit pension plan
preceding the Change of Control by the "enrolled actuary" (as defined
in Section 7701 (a)(35) of the Internal Revenue Code of 1986, as
amended (the "Code")), who signed the Schedule B to the most recent
Internal Revenue Service Form 5500 relating to Employer's tax-
qualified defined benefit pension plan, filed prior to the Change of
Control).
Other than the foregoing, Employer shall have no further obligations to
Employee hereunder.
For purposes of this Agreement, a "Change of Control" of Employer shall
mean the first to occur of any of the following events:
(i) any "Person" (as defined in Section 3(a)(9) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding
(A) Employer or any of its subsidiaries, (B) a trustee or any
fiduciary holding securities under an employee benefit plan of
Employer or any of its subsidiaries, or an underwriter temporarily
holding securities pursuant to an offering of such securities, in each
case with respect to the securities so held, or (C) a corporation or
other entity owned, directly or indirectly, by holders of voting
securities of Employer in substantially the same proportions as their
ownership of Employer, is or becomes the "Beneficial Owner" (as
defined in
<PAGE>
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Employer (not including in the securities beneficially
owned by such Person any securities acquired directly from Employer or
its subsidiaries or other affiliates controlled by Employer or any
such subsidiary) representing 20% or more of the combined ordinary (in
the absence of contingencies) voting power of Employer's then
outstanding securities; provided, however, that if such "Person" shall
-------- -------
be Suez Lyonnaise des Eaux or an affiliate thereof, solely for
purposes thereof the above reference to "20%" shall instead be deemed
to refer to the sum of the amount of the "Maximum Stockholder
Investment Percentage" (as defined in Section 1.1 of the Governance
Agreement between United Water Resources Inc. and Lyonnaise American
Holding, Inc., dated as of April 22, 1994) plus two percentage points;
or
(ii) during any period of not more than two consecutive calendar years
(commencing January 1, 1999), individuals who at the beginning of such
period constitute Employer's Board, together with any new director
(other than a director designated by a person who has entered into an
agreement with Employer to effect a transaction triggering the
operation of clause (i) or (iii) of this paragraph) whose election by
the Board or nomination for election by Employer's shareholders was
approved by a vote of at least two-thirds of the directors then still
in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(iii) the shareholders of Employer approve a merger or consolidation of
Employer with any other entity, or a plan of liquidation of Employer
or an agreement for
<PAGE>
the sale or disposition by Employer of its assets as an entirety or
substantially as an entirety, other than (A) a transaction which would
result in the voting securities of Employer outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding, by being converted into voting securities of the
surviving entity, or otherwise), in combination with the ownership by
any trustee or other fiduciary of securities under an employee benefit
plan of Employer, at least 80% of the combined voting power of the
voting securities of Employer or such surviving entity outstanding
immediately after such transaction, or (B) a transaction effected to
implement a recapitalization of Employer (or similar transaction) in
which no person acquires more than 20% of the combined voting power of
Employer's then outstanding securities (or if such person so acquiring
more than 20% of such combined voting power is Suez Lyonnaise des Eaux
or an affiliate thereof, solely for the purposes thereof the above
reference to "20%" shall instead be deemed to refer to the sum of the
Maximum Stockholder Investment Percentage plus two percentage points).
"Cause" shall mean the continued and willful failure by Employee to perform
substantially his duties with Employer (other than any such failure
resulting from incapacity due to physical or mental illness) after a notice
demanding substantial performance is delivered to Employee by Employer;
conviction of a felony; excessive absenteeism not related to illness, sick
leave or vacations, but only after written notice from Employer followed by
a repetition of such excessive
<PAGE>
absenteeism; misconduct or dishonesty that is harmful to the interest of
Employer; or material breach by Employee of this Agreement.
Employee's termination with "Good Reason" shall mean Employee's termination
of his employment pursuant to Section 1.2 above; a reduction by Employer in
Employee's base annual salary as in effect immediately prior to such
reduction; or a material breach by Employer of its obligations under this
Agreement.
3.2 Termination by Employee or by Employer for Cause.
------------------------------------------------
(a) Employee shall have the right, upon 30 days' notice given to Employer
in accordance with Section 10 hereof, or as otherwise agreed to by
Employer, to terminate the Period of Employment.
(b) If Employee should terminate the Period of Employment pursuant to
Section 3.2(a) above or Employer should terminate the Period of
Employment for Cause, as herein defined, Employee will be entitled to
be paid the base annual salary otherwise payable to Employee under
Section 2.1 through the end of the month in which the Period of
Employment is terminated. Employee shall be entitled to all other
earned and accrued benefits to which Employee would otherwise be
entitled through the termination date.
3.3 Expiration of Period of Employment.
----------------------------------
On December 31, 2000, provided that this Agreement shall then still be in
effect, Employer shall make a lump sum cash payment to Employee in an
amount equal
<PAGE>
to 6 months of Employee's base annual salary at such level as shall be in
effect immediately prior to such date.
SECTION 4: SOURCE OF PAYMENTS
- ------------------------------
All payments provided herein shall be paid from the general funds of Employer
unless otherwise properly payable under any contract, trust or other arrangement
maintained by Employer for purposes of such payment. Employer shall not be
required to segregate any funds, create any trust or make any special deposits
to fund any obligations under this Agreement, provided, however, that Employer,
-------- --------
at its sole and absolute discretion, may take any steps it deems appropriate to
meet its obligation hereunder.
SECTION 5: NON-COMPETITION
- ---------------------------
Without the consent in writing of the Board of Directors of Employer, during the
Period of Employment and for a period of two years after termination of
Employee's employment for any reason whatsoever, Employee will not permit his
name to be used by, or engage in, or carry on, directly or indirectly, either
for himself or as a member of a partnership or as more than a five percent (5%)
stockholder, investor, officer or director of a corporation or as an employee,
agent, associate or consultant of any person, partnership or corporation, any
business in competition with the business carried on in the United States by
Employer and the parent company and subsidiaries of Employer.
<PAGE>
SECTION 6: EXCISE TAX GROSS-UP PAYMENT
- ---------------------------------------
If any payments made and/or benefits provided to Employee by Employer, whether
or not under this Agreement ("Payments"), are subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Code, Employer shall pay to Employee an
additional amount (the "Gross-Up Payment") such that the net amount retained by
Employee, after deduction of any Excise Tax on the Payments and all income taxes
and Excise Tax upon such Employer payment, shall be equal to the Payments. The
determination of whether any Payments are subject to the Excise Tax shall be
based on the opinion of tax counsel selected by Employer and reasonably
acceptable to Employee, whose fees and expenses shall be paid by Employer. For
purposes of determining the amount of the Gross-Up Payment, Employee shall be
deemed to pay federal, state and local income taxes at the highest marginal rate
of income taxation applicable to any individual residing in the jurisdiction in
which Employee resides in the calendar year in which the Gross-Up Payment is to
be made. In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of
Employee's employment, Employee shall repay to Employer, at the time that the
amount of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of the Gross-
Up Payment attributable to the Excise Tax and federal, state and local income
tax imposed on the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment being repaid by
Employee to the extent that such repayment results in a reduction in Excise Tax
and/or a federal, state or local income tax deduction) plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the termination of Employee's employment
(including by
<PAGE>
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), Employer shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or additions
payable by Employee with respect to such excess) at the time that the amount of
such excess is finally determined. Employee and Employer shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax with
respect to the Payments.
SECTION 7: GOVERNING LAW
- -------------------------
This Agreement is governed by and is to be construed and enforced in accordance
with the laws of the State of New Jersey, without reference to rules relating to
conflicts of law. If under such law, any portion of this Agreement is at any
time deemed to be in conflict with any applicable statute, rule, regulation or
ordinance, such portion shall be deemed to be modified or altered to conform
thereto or, if that is not possible, to be omitted from this Agreement; the
invalidity of any such portion shall not affect the force, effect and validity
of the remaining portion hereof.
SECTION 8: NO ATTACHMENT
- -------------------------
Except as required by law, no right to receive any payment or benefit under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or
<PAGE>
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect.
SECTION 9: ARBITRATION
- -----------------------
Any claim, controversy or dispute arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration by an independent
impartial arbitrator in accordance with the rules of the American Arbitration
Association then obtaining. The decision of the arbitrator shall be final and
binding and judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
In any such claim, controversy or dispute involving a request for relief by way
of injunction to prevent the disclosure or further disclosure of confidential
information belonging to Employer, the arbitrator shall be appointed by the
American Arbitration Association without submission of any such list of
prospective arbitrators to the parties, and the proceedings shall be carried out
as expeditiously as possible by the parties without undue delay.
SECTION 10: NOTICES
- --------------------
All notices under this Agreement shall be in writing and shall be deemed
effective when delivered in person, or forty-eight (48) hours after deposit
thereof in the U.S. mails, postage prepaid, for delivery as registered or
certified mail B addressed, in the case of Employee, to him at his residential
address, and in the case of Employer, to its corporate
<PAGE>
headquarters, attention of the Secretary, or to such other address as Employee
or Employer may designate in writing at any time or from time to time to the
other party.
If to the Employee:
Richard B. McGlynn
30 Hurlingham Club Road
Far Hills, NJ 07931
If to the Employer:
Donald L. Correll
United Water Resources
200 Old Hook Road
Harrington, Park, NJ 07640
In lieu of personal notice by deposit in the U.S. mail, a party may give
notice by telegram, telex or telecopier.
<PAGE>
SECTION 11: MISCELLANEOUS
- --------------------------
This Agreement constitutes the entire understanding between Employer and
Employee relating to employment of Employee by Employer and supersedes and
cancels all prior written and oral agreements and understandings with respect to
the subject matter of this Agreement. This Agreement may be amended but only by
a subsequent written agreement of the parties. This Agreement shall be binding
upon and shall inure to the benefit of Employee, Employee's heirs, executors,
administrators and beneficiaries, and Employer and its successors, whether by
merger, combination sale of assets or otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
year and day first above written.
United Water Resources Inc.
By:_______________________________
Chairman
_______________________________
Richard B. McGlynn
<PAGE>
Exhibit 10(k)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT effective as of January 1, 1999 (the "Commencement Date") by
and between United Water Resources Inc., a New Jersey corporation, and its
subsidiaries (collectively, the "Company"), and W. Marie Zanavich (the
"Executive) this "Agreement").
The Company desires to employ the Executive and the Executive is
willing to be employed by the Company, on the terms and conditions hereinafter
provided.
In order to effect the foregoing, the parties hereto wish to enter
into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
----------
and the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The Executive's employment under this Agreement shall
----
commence on the Commencement Date and shall end at the close of business on
December 31, 2001; provided, however, that the term of this Agreement (the
-------- -------
"Term") shall thereafter be automatically extended for each succeeding one-year
period unless either party hereto provides the other party with a written notice
at least 60 days prior to the end of the then current Term, advising that the
party providing the notice shall not agree to so extend the Term; and provided,
--------
further, that should a Change of Control occur during the Term, the Term shall
- -------
be extended to the date which is the end of the 24-month period immediately
following the consummation of the transaction which constitutes the Change of
Control. Notwithstanding the preceding, the Term shall not extend beyond the
date on which the Executive attains age 65 without the prior written consent of
the Company; provided, however, that the end of the Term solely on account of
-------- -------
the Executive attaining age 65 shall not entitle the Executive to any benefits
under Section 7.
3. Title, Duties and Authority. The Executive shall serve as Vice
---------------------------
President Information Technology/CIO of United Water Management and Services
Inc. and shall have such responsibilities and duties (consistent with the
Executive's position as Vice President Information Technology/CIO) as may from
time to time be assigned to the Executive by the Company, and shall have all of
the powers and duties usually incident to the office of Vice President
Information Technology/CIO. The Executive shall devote substantially all of her
working time and efforts to the business
<PAGE>
and affairs of the Company, except for vacations, illness or incapacity.
4. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Term, the Company shall pay the Executive
-----------
a base salary ("Base Salary"), payable in equal installments in accordance with
the Company's normal practice for paying base salaries to its executive
employees. The Base Salary shall initially be payable at the rate of $140,710
per annum, and shall be subject to annual review by the Company for
discretionary annual increases.
(b) MIP. The Executive shall participate in the United Water
---
Resources Inc. Management Incentive Plan (the "MIP") or any successor plan
established by the Company.
(c) Employee Benefits. The Executive shall be entitled to participate
-----------------
in all of the Company's employee benefit plans made available by the Company (or
any affiliate thereof) to its executives during the Term as may be in effect
from time to time.
(d) Expenses. During the Term, the Executive shall be entitled to
--------
receive prompt reimbursement upon submission of expense claims to the Company
for all reasonable and customary expenses incurred by the Executive in
performing services hereunder, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company for its executive employees.
(e) Vacations. The Executive shall be entitled to paid vacation, paid
---------
holidays, sick days and personal days pursuant to the Company's regular policies
applicable to its executive employees.
(f) Taxes. The Company may withhold from any amounts payable under
-----
this Agreement such federal, state, local and/or other taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
5. Termination. The Executive's employment hereunder may be
-----------
terminated under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate
-----
upon the Executive's death.
(b) Disability. If, as a result of the Executive's incapacity due to
----------
physical or mental illness, the
<PAGE>
Executive shall become entitled to the receipt of benefits under the Company's
long-term disability plan, and within 30 days after a written Notice of
Termination (as defined in Section 6(a)) is given to the Executive by the
Company, the Executive shall not have returned to the performance of her duties
hereunder on a full-time basis, the Company may terminate the Executive's
employment hereunder for "Disability."
(c) Cause. The Company may terminate the Executive's employment
-----
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon the occurrence of
any of the following which is materially injurious to the business or reputation
of the Company or any of its affiliates:
(i) the failure by the Executive to substantially perform the
Executive's duties hereunder (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness);
(ii) the willful violation by the Executive of any of the
Executive's material obligations hereunder;
(iii) the willful engaging by the Executive in misconduct; or
(iv) the Executive's conviction of a felony.
Notwithstanding the foregoing, the Executive shall not be
terminated for Cause without:
(A) at least 15 days' advance notice to the Executive setting
forth the reasons for the Company's intention to terminate the Executive's
employment hereunder for Cause;
(B) the failure of the Executive to cure the nonperformance,
violation or misconduct described in the notice referred to in clause (A)
of this paragraph, if cure thereof is possible, to the reasonable
satisfaction of the Board of Directors of United Water Resources Inc. (the
"Board"), within 15 days of such notice; and
(C) delivery to the Executive of a Notice of Termination (as
defined in Section 6(a)) from the Company notifying her that in the good
faith opinion of a majority of the Board, the Company is entitled to
terminate the Executive for Cause as set forth above, and specifying the
particulars thereof in detail.
<PAGE>
(d) Good Reason. The Executive may terminate her employment hereunder
-----------
for "Good Reason" by providing a Notice of Termination to the Company within 30
days after the occurrence, without the Executive's consent, of one of the
following events that has not been cured within 15 days after written notice
thereof has been given to the Company by the Executive:
(i) a reduction of the Executive's Base Salary;
(ii) a material and adverse change in the Executive's title,
status, authority, duties or function (in each case, other than as may be
contemplated by this Agreement);
(iii) any failure to pay the Executive's Base Salary or MIP
payment(s) when due;
(iv) a change of the Executive's place of employment by the
Company to a location which is greater than 50 miles from the location of
the Executive's place of employment by the Company as of the Commencement
Date; or
(v) the willful violation by the Company of any of the Company's
material obligations hereunder.
(e) Without Cause. The Company may terminate the Executive's
-------------
employment hereunder without Cause by providing the Executive with a Notice of
Termination.
(f) Without Good Reason. The Executive may terminate the
-------------------
Executive's employment hereunder without Good Reason by providing the Company
with a Notice of Termination.
6. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than a termination on
account of the Executive's death pursuant to Section 5(a)) shall be communicated
by a written Notice of Termination to the other party hereto in accordance with
Section 11. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and the Date of Termination, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment hereunder pursuant to the provision so
indicated.
<PAGE>
(b) Date of Termination. "Date of Termination" shall mean:
-------------------
(i) if the Executive's employment is terminated on account of the
Executive's death pursuant to Section 5(a), the date of the Executive's
death;
(ii) if the Executive's employment is terminated on account of
the Executive's Disability pursuant to Section 5(b), 30 days after a
Notice of Termination has been provided pursuant thereto (provided that the
Executive shall not have returned to the performance of the Executive's
duties on a full-time basis during such 30-day period);
(iii) if the Executive's employment is terminated for Cause
pursuant to Section 5(c), the date specified in the Notice of Termination
provided pursuant thereto; and
(iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is provided or any later
date (within 30 days) set forth in such Notice of Termination.
7. Compensation Upon Termination.
-----------------------------
(a) Death. If the Executive's employment with the Company is
-----
terminated on account of the Executive's death pursuant to Section 5(a), the
Company shall as soon as practicable pay to the Executive's estate or as may be
directed by the legal representatives of the Executive's estate any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee of the Board
(the "Compensation Committee"). The Company shall provide the Executive through
the Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of the Executive's
Date of Termination. Other than the foregoing, the Company shall have no
further obligations to the Executive hereunder.
(b) Disability. If the Executive's employment with the Company is
----------
terminated on account of the Executive's Disability pursuant to Section 5(b),
the Company shall as soon as practicable pay the Executive any Base Salary
accrued and due to the Executive under Section 4(a) through the Executive's Date
of Termination and such prorated MIP payment, the amount, if any, of which shall
be determined in the sole discretion of the Compensation Committee. The Company
shall provide the Executive through the Executive's Date of Termination with
continued
<PAGE>
participation in the employee benefit plans provided to the Executive pursuant
to Section 4(c) as of the Executive's Date of Termination. Other than the
foregoing, the Company shall have no further obligations to the Executive
hereunder.
(c) By the Company for Cause or By the Executive Without Good Reason.
----------------------------------------------------------------
If the Executive's employment with the Company is terminated by the Company for
Cause pursuant to Section 5(c) or by the Executive without Good Reason pursuant
to Section 5(f), the Company shall as soon as practicable pay the Executive any
Base Salary accrued and due to the Executive under Section 4(a) through the
Executive's Date of Termination and the Executive shall forfeit her entire then
unpaid MIP payment(s), if any. The Company shall provide the Executive through
her Date of Termination with continued participation in the employee benefit
plans provided to the Executive pursuant to Section 4(c) as of her Date of
Termination. Other than the foregoing, the Company shall have no further
obligations to the Executive hereunder.
(d) Termination By the Company Without Cause or By the Executive for
----------------------------------------------------------------
Good Reason. If the Executive's employment with the Company is terminated by
- -----------
the Company (other than for Disability or Cause), or by the Executive for Good
Reason pursuant to Section 5(d), then the Company shall:
(i) within 30 days of the Executive's Date of Termination, pay
the Executive any Base Salary accrued and due to the Executive under
Section 4(a) through her Date of Termination and any unpaid MIP payment(s)
for any previously completed calendar year(s);
(ii) (A) if the Executive's Date of Termination occurs within the
period beginning on the date of a Change of Control, as defined below, and
ending 24 months following the Change of Control, as defined below (or, if
the Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), within 30 days of the
Executive's Date of Termination, pay the Executive an amount equal to 200%
of her Base Salary in effect as of her Date of Termination, or (B) if the
Executive's Date of Termination does not occur within the period beginning
on the date of a Change of Control, as defined below, and ending 24 months
following the Change of Control, as defined below (or, if the Change of
Control, as defined below, is in connection with shareholder approval
pursuant to paragraph (iii) of the definition of Change of Control, ending
24 months following the consummation of the
<PAGE>
transaction which was the subject of shareholder approval), continue to pay
the Executive her Base Salary in effect as of her Date of Termination for
the 18-month period immediately following her Date of Termination (or until
such earlier time that the Executive violates the provisions of Section 8)
at the times such payments would otherwise have been made under Section
4(a);
(iii) (A) if the Executive's Date of Termination occurs within
the period beginning on the date of a Change of Control, as defined below,
and ending 24 months following the Change of Control, as defined below (or,
if the Change of Control, as defined below, is in connection with
shareholder approval pursuant to paragraph (iii) of the definition of
Change of Control, ending 24 months following the consummation of the
transaction which was the subject of shareholder approval), within 30 days
of the Executive's Date of Termination, pay the Executive an amount equal
to 200% of her then current "Cash Target Amount" under the MIP, or (B) if
the Executive's Date of Termination does not occur within the period
beginning on the date of a Change of Control, as defined below, and ending
24 months following the Change of Control, as defined below (or, if the
Change of Control, as defined below, is in connection with shareholder
approval pursuant to paragraph (iii) of the definition of Change of
Control, ending 24 months following the consummation of the transaction
which was the subject of shareholder approval), pay the Executive (I) 100%
of her "Cash Target Amount" under the MIP (as of her Date of Termination)
for the MIP year immediately following her Date of Termination, and (II)
50% of her "Cash Target Amount" under the MIP (as of her Date of
Termination) for the second MIP year immediately following her Date of
Termination (in each case unless the Executive earlier violates the
provisions of Section 8), each such payment to be made at the times such
payments would otherwise have been made under the MIP; and
(iv) provide the Executive for the 18-month period commencing
immediately following her Date of Termination (or until such earlier time
that the Executive violates the provisions of Section 8), with continued
participation (or equivalent benefits if such participation is not legally
permissible (cash payments in the case of tax-qualified retirement plan
benefits)) in the employee benefit plans provided to the Executive pursuant
to Section 4(c) as of her Date of Termination.
Other than the foregoing, the Company shall have no further obligations to the
Executive hereunder.
<PAGE>
For purposes of this Agreement, a "Change of Control" of the Company
shall mean the first to occur of any of the following events:
(i) any "Person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding (A)
the Company or any of its subsidiaries, (B) a trustee or any fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, or an underwriter temporarily holding securities pursuant
to an offering of such securities, in each case with respect to the
securities so held, or (C) a corporation or other entity owned, directly or
indirectly, by holders of voting securities of the Company in substantially
the same proportions as their ownership of the Company, is or becomes the
"Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its subsidiaries or other affiliates
controlled by the Company or any such subsidiary) representing 20% or more
of the combined ordinary (in the absence of contingencies) voting power of
the Company's then outstanding securities; provided, however, that if such
-------- -------
"Person" shall be Suez Lyonnaise des Eaux or an affiliate thereof, solely
for purposes thereof the above reference to "20%" shall instead be deemed
to refer to the sum of the amount of the "Maximum Stockholder Investment
Percentage" (as defined in Section 1.1 of the Governance Agreement between
United Water Resources Inc. and Lyonnaise American Holding, Inc., dated as
of April 22, 1994) plus two percentage points; or
(ii) during any period of not more than two consecutive calendar
years (commencing January 1, 1999), individuals who at the beginning of
such period constitute the Board, together with any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction triggering the operation of clause
(i) or (iii) of this paragraph) whose election by the Board or nomination
for election by the Company's shareholders was approved by a vote of at
least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or
<PAGE>
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, or a plan of
liquidation of the Company or an agreement for the sale or disposition by
the Company of its assets as an entirety or substantially as an entirety,
other than (A) a transaction which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding, by being converted into voting securities
of the surviving entity, or otherwise), in combination with the ownership
by any trustee or other fiduciary of securities under an employee benefit
plan of the Company, at least 80% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such transaction, or (B) a transaction effected to
implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than 20% of the combined voting power of the
Company's then outstanding securities (or if such person so acquiring more
than 20% of such combined voting power is Suez Lyonnaise des Eaux or an
affiliate thereof, solely for the purposes thereof the above reference to
"20%" shall instead be deemed to refer to the sum of the Maximum
Stockholder Investment Percentage plus two percentage points).
8. Restrictions.
------------
(a) Reasonable Covenants. It is expressly understood by and between
--------------------
the Company and the Executive that the covenants contained in this Section 8 are
an essential element of this Agreement and that but for the agreement by the
Executive to comply with these covenants and thereby not to diminish the value
of the organization and goodwill of the Company or any affiliate of the Company,
if any, including without limitation relations with their employees, suppliers,
customers and accounts, the Company would not enter into this Agreement. The
Executive has independently consulted with her legal counsel and after such
consultation agrees that such covenants are reasonable and proper.
(b) Noncompetition; No Diversion of Customers; Etc. During the Term
----------------------------------------------
and for 18 months after the Executive's Date of Termination, the Executive shall
not:
(i) engage directly, alone or in association with or as a
shareholder, principal, agent, partner, officer, director, employee or
consultant of any other organization or entity, in competition with the
businesses of the Company and/or any of its affiliates as of the
Executive's Date of Termination;
<PAGE>
(ii) divert to any competitor of the Company or any of its
affiliates, any customer of the Company or any of its affiliates or any
"prospective customer" (as defined in the last paragraph of this Section 8
(b)) of the Company or any of its affiliates; or
(iii) solicit or encourage any officer, employee or consultant of
the Company or any of its affiliates to leave the employ of the Company or
any of its affiliates for employment by or with any competitor of the
Company or any of its affiliates;
provided, however, that the Executive may invest in stocks, bonds or other
- -------- -------
securities of any competitor of the Company or any of its affiliates if:
(A) such stocks, bonds or other securities are listed on any
national or regional securities exchange or have been registered under
Section 11(g) of the Securities Exchange Act of 1934;
(B) the Executive's investment does not exceed, in the case of
any class of the capital stock of any one issuer, 1% of the issued and
outstanding shares, or, in the case of other securities, 1% of the
aggregate principal amount thereof issued and outstanding; and
(C) such investment would not prevent, directly or indirectly,
the transaction of business by the Company and/or any of its affiliates
with any state, district, territory or possession of the United States or
any governmental subdivision, agency or instrumentality thereof by virtue
of any statute, law, regulation or administrative practice.
If, at any time, the provisions of this Section 8(b) shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 8(b) shall
be considered severable and shall become and shall be immediately amended solely
with respect to such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter and the Executive agrees that this Section 8(b) as so amended
shall be valid and binding as though any invalid or unenforceable provision had
not been included herein. Except as provided in this Section 8 and in Section
3, nothing in this Agreement shall prevent or restrict the Executive from
engaging in any business or industry in any capacity.
<PAGE>
For purposes of clause (ii) of this Section 8(b), the term
"prospective customer" shall mean any entity, business or individual included on
a list of prospective customers provided to the Executive by the Company within
15 days following her Date of Termination, which list contains the names of
those entities, businesses and individuals with whom the Company had been in
contact prior to the Executive's Date of Termination for purposes of
establishing a customer relationship therewith. Any entity, business or
individual not appearing on the aforementioned list of prospective customers due
to the failure of the Executive to advise the Company of such contact shall be
considered a "prospective customer" for purposes of clause (ii) of this Section
8(b)
(c) Public Support and Assistance. The Executive agrees that
-----------------------------
following any termination of her employment hereunder by the Company, the
Executive shall not disclose or cause to be disclosed any negative, adverse or
derogatory comments or information of a substantial nature about the Company or
its management, or about any product or service provided by the Company, or
about the Company's prospects for the future (including any such comments or
information with respect to affiliates of the Company). The Company and/or any
of its affiliates may seek the assistance, cooperation or testimony of the
Executive following any such termination in connection with any investigation,
litigation or proceeding arising out of matters within the knowledge of the
Executive and related to the Executive's position as an officer or employee of
the Company, and in any such instance, the Executive shall provide such
assistance, cooperation or testimony and the Company shall pay the Executive's
reasonable costs and expenses in connection therewith; in addition, if such
assistance, cooperation or testimony requires more than a nominal commitment of
the Executive's time, the Company shall compensate the Executive for such time
at a per diem rate derived from the Executive's Base Salary at the time of the
Executive's Date of Termination.
(d) Nondisclosure of Confidential Information. During the Term, the
------------------------------------------
Executive shall hold in a fiduciary capacity for the benefit of the Company and
its affiliates all Confidential Information (as defined below). After
termination of the Executive's employment with the Company, the Executive shall
keep secret and confidential all Confidential Information and shall not use or
disclose to any third party in any fashion or for any purpose whatsoever, any
Confidential Information. As used herein, "Confidential Information" shall mean
any information regarding this Agreement, or any other information regarding the
Company or its affiliates which is not available to the general public, and/or
not generally known outside the Company or any such affiliate, to which the
Executive has or shall have had access at any time during the course of the
Executive's employment with the Company,
<PAGE>
including, without limitation, any information relating to the Company's (and
its affiliates'):
(i) business, operations, plans, strategies, prospects or
objectives;
(ii) products, technologies, processes, specifications, research
and development operations or plans;
(iii) customers and customer lists;
(iv) sales, service, support and marketing practices and
operations;
(v) financial condition and results of operations;
(vi) operational strengths and weaknesses; and
(vii) personnel and compensation policies and procedures.
Notwithstanding the foregoing provisions of this Section 8, the Executive may
discuss this Agreement with the members of the Executive's immediate family and
with the Executive's personal legal and tax advisors.
(e) Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Executive agrees that damages at law would be an
insufficient remedy to the Company in the event that the Executives violates any
of the provisions of this Section 8, and that the Company may apply for and,
upon the requisite showing, have injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach of or otherwise to
specifically enforce any of the covenants contained in this Section 8.
9. Excise Tax Gross-Up Payment. If any payments made and/or benefits
---------------------------
provided to the Executive by the Company, whether or not under this Agreement
("Payments"), are subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Payments and all income taxes and Excise Tax
upon such Company payment, shall be equal to the Payments. The determination of
whether any Payments are subject to the Excise Tax shall be based on the opinion
of tax counsel selected by the Company and reasonably acceptable to the
Executive, whose fees and expenses shall be paid by the Company. For purposes
of determining the amount of the Gross-Up Payment, the Executive
<PAGE>
shall be deemed to pay federal, state and local income taxes at the highest
marginal rate of income taxation applicable to any individual residing in the
jurisdiction in which the Executive resides in the calendar year in which the
Gross-Up Payment is to be made. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of the Executive's employment, the Executive shall repay to the
Company, at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to such reduction
(plus that portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state and local income tax imposed on the Gross-Up Payment attributable
to the Excise Tax and federal, state and local income tax imposed on the Gross-
Up Payment being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the Gross-
Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax with
respect to the Payments.
10 Legal Fees. To provide the Executive with reasonable assurances
----------
that the purposes of this Agreement will not be frustrated by the cost of its
enforcement should the Company fail to perform any of its obligations under this
Agreement, the Company shall pay all of the reasonable attorneys' fees and
expenses and court and arbitration costs incurred by the Executive and any of
his beneficiaries, heirs and legal representatives, should a court of competent
jurisdiction or an arbitrator determine that the Company shall have failed to
perform any of its obligations under this Agreement.
11 Notice. For the purposes of this Agreement, notices, demands and
------
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
<PAGE>
W. Marie Zanavich
1 Broadway
Park Ridge, NJ 07656
If to the Company:
Office of the General Counsel
United Water Resources Inc.
200 Old Hook Road
Harrington Park, NJ 07640-1799
or to such other address as either of the parties may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
12 Successors. Without the prior written consent of the Executive,
----------
this Agreement cannot be assigned by the Company except that it shall be binding
automatically on any successors and assigns of all or substantially all of the
business and/or assets of the Company (whether direct or indirect, by purchase,
merger, consolidation or otherwise). In addition, without the prior written
consent of the Company, this Agreement cannot be assigned by the Executive,
except that the right to receive payments or benefits hereunder may be
transferred by will or the laws of descent and distribution. This Agreement and
all rights of the Executive hereunder shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives.
13 Arbitration. Except as provided in Section 8(e), all
-----------
controversies, claims or disputes arising out of or relating to this Agreement
shall be settled by binding arbitration under the rules of the American
Arbitration Association then in effect in the State of New Jersey, as the sole
and exclusive remedy of either party, and judgment upon any such award rendered
by the arbitrator(s) may be entered in any court of competent jurisdiction. The
costs of arbitration shall be borne by the unsuccessful party or otherwise as
determined by the arbitrators in their discretion.
14 Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of New
Jersey without regard to conflicts of law principles.
15 Amendments. No provision of this Agreement may be modified,
----------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such
<PAGE>
officer of the Company as may be specifically designated for such purpose 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.
16 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
17 Entire Agreement. 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. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
18 Indemnification. The Company shall indemnify the Executive to
---------------
the full extent permitted by the New Jersey Business Corporation Act and any
provision of the By-Laws of the Company, as amended from time to time, generally
applicable to officers and directors of the Company, for all amounts (including
without limitation, judgments, fines, settlement payments, expenses and
attorneys' fees) incurred or paid by the Executive in connection with any
action, suit, investigation or proceeding arising out of or relating to the
performance by the Executive of services for, or the actions by the Executive as
an officer or employee of, the Company or any affiliate of the Company or any
other person or enterprise at the Company's request. Nothing in this Section 18
or elsewhere in this Agreement is intended to prevent the Company from
indemnifying the Executive to any greater extent than is required by this
Section 18.
19 Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
UNITED WATER RESOURCES INC.
<PAGE>
By:_____________________________
Name: Donald L. Correll
Title: Chairman and Chief Executive
Officer
W. MARIE ZANAVICH
_______________________________
MARCIA L. WORTHING
_______________________________
<PAGE>
Exhibit 21
UNITED WATER RESOURCES INC.
LIST OF SUBSIDIARIES OF THE REGISTRANT
Names of Companies and their Subsidiaries States of Incorporation
- ----------------------------------------- -----------------------
United Water New Jersey Inc. New Jersey
United Water New York Inc. New York
United Waterworks Inc. Delaware
United Water Idaho Inc. Idaho
United Water Florida Inc. Florida
United Water Pennsylvania Inc. Pennsylvania
United Water New Rochelle Inc. New York
United Water Delaware Inc. Delaware
United Water Toms River Inc. New Jersey
14 other subsidiaries in the water services business 7 states
United Water Mid-Atlantic Inc. New Jersey
Owns 9 subsidiaries in the water services business New Jersey
United Properties Group Incorporated New York
Owns 9 subsidiaries in the real estate business 3 states
United Water UK Limited N/A
Laboratory Resources, Inc. New Jersey
Fifteen (15) other subsidiaries in businesses related 4 states
to the water industry or providing services to
affiliates
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
-------------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-77581) and
the Registration Statement on Form S-8 (No. 333-30229) of United Water Resources
of our report dated February 24, 2000, appearing on page 33 of this Annual
Report on Form 10-K. We also consent to the reference to us under the heading
"Experts" in the Prospectus constituting part of the Registration Statement on
Form S-3 (No. 333-77581).
PRICEWATERHOUSECOOPERS LLP
New York, New York
March 23, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary information from the Consolidated Balance Sheet,
Statement of Consolidated Income and Statement of Consolidated Cash Flows and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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<TOTAL-DEFERRED-CHARGES> 160,808
<OTHER-ASSETS> 60,714
<TOTAL-ASSETS> 1,803,065
<COMMON> 414,161
<CAPITAL-SURPLUS-PAID-IN> 0
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<TOTAL-COMMON-STOCKHOLDERS-EQ> 468,790
33,104
9,000
<LONG-TERM-DEBT-NET> 639,017
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 134,000
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 5,546
15,573
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<TOT-CAPITALIZATION-AND-LIAB> 1,803,065
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<TOTAL-OPERATING-EXPENSES> 299,346
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<OTHER-INCOME-NET> 20,028
<INCOME-BEFORE-INTEREST-EXPEN> 83,018
<TOTAL-INTEREST-EXPENSE> 49,204
<NET-INCOME> 33,814
2,697
<EARNINGS-AVAILABLE-FOR-COMM> 31,117
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