AQUA AMERICA,
INC
2004 EQUITY COMPENSATION PLAN
(amended and restated as of
January 1, 2009)
The purpose of this plan (the
“Plan”) is to provide an incentive, in the form of a
proprietary interest in Aqua America, Inc. (the
“Corporation”), to officers, other key employees and
Non-employee Directors, as defined below, of the Corporation and
its subsidiaries and key consultants who are in a position to
contribute materially to the successful operation of the business
of the Corporation, to increase their interest in the
Corporation’s welfare, and to provide a means through which
the Corporation can attract and retain officers, other key
employees and Non-employee Directors and key consultants of
significant abilities. The Plan is a successor plan to the
Corporation’s existing Amended and Restated 1994 Equity
Compensation Plan (the “1994 Plan”).
This Plan shall be administered by a Committee
(the “Committee”) of the Board of Directors of the
Corporation. Each of the members of the Committee may be an
“outside director” as defined under section 162(m) of
the Internal Revenue Code of 1986, as amended (the
“Code”), and related Treasury regulations and each of
whom shall also be a “non-employee director” as defined
under Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). However, the Board of
Directors may ratify or approve any grants made by the Committee if
the Committee deems it appropriate in a particular
circumstance.
From time to time the Committee may make grants,
subject to the terms of the Plan, with respect to such number of
shares of Common Stock of the Corporation as the Committee, acting
in its sole discretion, may determine. All references to the
Committee hereunder shall also mean the Board of Directors to the
extent that the Board of Directors is acting pursuant to its
authority to ratify or approve grants under the Plan. Non-employee
Directors, as defined below, may only receive stock grants pursuant
to the provisions of Section 7(f).
Subject to the provisions of the Plan, the
Committee shall be authorized to interpret the Plan and the grants
made under the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan, to determine the terms and
provisions of the agreement related to grants described in
Section 9 hereof, and to make all other determinations,
including factual determinations, necessary or advisable for the
administration of the Plan. The Committee may correct any defect,
supply any omission and reconcile any inconsistency in the Plan or
in any option or grant in the manner and to the extent it shall be
deemed desirable to carry it into effect. The determinations of the
Committee in the administration of the Plan, as described herein,
shall be final and conclusive. The Committee may adopt such rules
and regulations as it deems necessary for governing its affairs.
All powers of the Committee shall be executed in its sole
discretion, in the best interest of the Corporation, not as a
fiduciary, and in keeping with the objectives of the Plan and need
not be uniform as to similarly situated individuals. An Agreement,
as defined below, shall be executed by each grantee and shall
constitute that grantee’s acknowledgement and acceptance of
the terms of the Plan and the Committee’s authority and
discretion.
Pursuant to the terms of the Plan, the Committee
shall have the authority to grant stock options to officers and
other key employees and key consultants and restricted stock and
dividend equivalents to officers and other key employees; provided,
however, that Non-employee Directors, as defined below, may receive
stock grants in accordance with Section 7(f) (hereinafter
collectively referred to as the “Grants”). All Grants
shall be subject to the terms and conditions set forth herein and
to those other terms and conditions consistent with this Plan as
the Committee deems appropriate and as are specified in writing by
the Corporation in the agreement described in Section 9 of the
Plan (the “Agreement”). Grants under a particular
Section of the Plan need not be uniform as among the grantees and
Grants under two or more Sections of the Plan may be combined in
one instrument.
4. Shares
Subject to the Plan
Subject to adjustment as provided in
Section 15, the maximum aggregate number of shares of the
Common Stock of the Corporation that may be issued or transferred
under the Plan shall be 3,675,000 shares; provided, however, that
no more than 50% of these shares shall be available for issuance as
restricted stock. The maximum number of shares of Common Stock that
may be subject to Grants made under the Plan to any individual
during any calendar year shall be 150,000 shares, subject to
adjustment as provided in Section 15. Shares deliverable under
the Plan may be authorized and unissued shares or treasury shares,
as the Committee may from time to time determine. Shares of Common
Stock related to the unexercised or undistributed portion of any
terminated, expired or forfeited Grant also may be made available
for distribution in connection with future Grants under the Plan.
Additionally, if and to the extent options granted under the 1994
Plan terminate or expire without being exercised, or if any shares
of restricted stock are forfeited, or shares of Common Stock
otherwise issuable under the 1994 Plan are withheld by the
Corporation in satisfaction of withholding taxes incurred in
connection with the exercise of a stock option or vesting of a
restricted stock award, the shares subject to such awards may be
made available for distribution in connection with future Grants
under the Plan.
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Only officers, key employees, members of the
Board of Directors who are not employed in any capacity by the
Corporation (hereinafter referred to as “Non-employee
Directors”) and key consultants of the Corporation and its
subsidiaries shall be eligible for Grants under the Plan; provided,
however, that Grants to Non-employee Directors shall be made only
in accordance with Section 7(f). The term
“subsidiaries” shall mean any corporation in an
unbroken chain of corporations beginning with the Corporation, if
at the time of the Grant, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
The Committee may, from time to time, grant
stock options to eligible officers and other key employees and
shall designate options at the time of grant as either
“incentive stock options” intended to qualify as such
under section 422 of the Internal Revenue Code of 1986, as from
time to time amended or any successor statute of similar purpose
(the “Code”), or “nonqualified stock
options”, which options are not intended to so qualify. The
Committee may, from time to time, grant nonqualified stock options
to key consultants. Except as hereinafter provided, options granted
pursuant to the Plan shall be subject to the following terms and
conditions:
(a)
Price. The purchase price per share of stock deliverable
upon the issuance of shares pursuant to the exercise of each option
shall be not less than 100% of the fair market value of the
Corporation’s Common Stock on the date the option is granted.
The fair market value shall be the mean of the closing price of the
Corporation’s Common Stock on the New York Stock Exchange -
Composite Transactions or other recognized market source, as
determined by the Committee, on the date the option is granted, or
if there is no sale on such date, then the closing price on the
last previous day on which a sale is reported. In any event, in
case of the Grant of an incentive stock option, the fair market
value shall be determined in a manner consistent with section 422
of the Code.
Shares may be purchased only by delivering a
notice of exercise to the Corporation with payment of the purchase
price therefore to be paid in full prior to the issuance of the
shares. Such notice may instruct the Corporation to deliver shares
of Common Stock due upon the exercise of the option to any
registered broker or dealer in lieu of delivery to the grantee.
Such instructions must designate the account into which the shares
are to be deposited. The grantee may tender this notice of
exercise, which has been properly executed by the grantee, and the
aforementioned delivery instructions to any broker or dealer. With
the consent of the Committee, payment of the purchase price may be
made, in whole or in part, through the surrender of shares of the
Common Stock of the Corporation (including without limitation
shares of Common Stock acquired pursuant to the option then being
exercised) at the fair market value of such shares determined as of
the last trading day prior to the date on which the option is
exercised, in the same manner set forth in the above
paragraph.
(b)
Terms of Options. The term during which each incentive stock
option may be exercised shall be determined by the Committee, but
in no event shall an incentive stock option be exercisable in whole
or in part more than 10 years from the date it is granted and
in no event shall a nonqualified stock option be exercisable in
whole or in part more than 10 years and one day from the date
it is granted. All rights to purchase pursuant to an option shall,
unless sooner terminated, expire at the date designated by the
Committee.
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The Committee shall determine the date on which
each option shall become exercisable and may provide that an option
shall become exercisable in installments. The shares comprising
each installment may be purchased in whole or in part at any time
after such installment becomes exercisable. The Committee may, in
its sole discretion, accelerate the time at which any option may be
exercised in whole or in part. Notwithstanding any determinations
by the Committee regarding the exercise period of any option, all
outstanding options shall become immediately exercisable upon a
Change in Control of the Corporation, as defined in
Section 16.
(c)
Termination of Employment. Upon the termination of a
grantee’s regular full-time employment for any reason (except
as a result of retirement, disability or death), the options held
by such grantee, whether exercisable or unexercisable, shall
terminate. Notwithstanding the fact that, in all cases, a
grantee’s employment shall be deemed to have terminated upon
the sale of a “subsidiary” of the Corporation (an
entity in which the Corporation has at least a 50% ownership of the
entity’s total voting power) that employs such grantee, the
Committee, in its sole discretion, may extend the period during
which any option held by such a grantee may be exercised after such
sale to the earliest of (i) a date which is not more than
three years from the date of the sale of the subsidiary,
(ii) the date of the grantee’s termination of employment
as a regular full-time employee with the subsidiary (or successor
employer) following such sale for reasons other than retirement,
disability or death, (iii) the date which is one year from the
date of the grantee’s termination of employment with the
subsidiary on account of the grantee’s total disability (as
defined in section 22(e)(3) of the Code), or three months from the
date of such termination if on account of death, retirement or a
disability other than a total disability, or (iv) the
expiration of the original term of the option as established at the
time of grant. The Committee, in its sole discretion, may similarly
extend the period of exercise of any option held by a grantee
employed by the Corporation, or a subsidiary, whose employment with
the Corporation or subsidiary is terminated in connection with the
sale of a subsidiary of the Corporation. To the extent that any
option is not otherwise exercisable as of the date on which the
grantee ceases to be employed as a regular full-time employee by
the subsidiary or the Corporation, as applicable, as a result of
the grantee’s retirement, disability or death, such
unexercisable portion of the option shall terminate as of such
date.
Transfer from the Corporation to a subsidiary,
from a subsidiary to the Corporation, or from one subsidiary to
another, shall not be deemed to be a termination of employment. All
references in this Section 6 to the termination of a
grantee’s employment shall include the termination of a
consultant’s relationship with the Corporation or any
subsidiary.
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(d)
Retirement, Disability, or Death . Options may be exercised
upon termination of a grantee’s employment as a result of
retirement, disability or death in accordance with the following
provisions:
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(i)
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Options granted prior to
January 1, 2009 may be exercised over a period that does not
exceed: (1) one year from the date of such termination of
employment in the case of death; (2) two years from the date
of such termination of employment in the case of retirement or
permanent and total disability (within the meaning of section
22(e)(3) of the Code); and (3) three months from the date of
such termination of employment in the case of other disability;
provided, however, that in no event shall the period extend beyond
the expiration of the option term. To the extent that any option is
not otherwise exercisable as of the date on which the grantee
ceases to be employed by the Corporation or any subsidiary, as
applicable, such unexercisable portion of the option shall
terminate as of such date. Subject to the foregoing, in the event
of a grantee’s death, such options may be exercised by a
grantee’s legal representative or beneficiary, but only to
the extent that an option has become exercisable as of the date of
death.
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(ii)
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Options granted on or after
January 1, 2009 may be exercised over a period that does not
exceed: (1) 12 months from the date of such termination
of employment in the case of death; and (2) 38 months
from the date of such termination of employment in the case of
“Early Retirement” as defined in paragraph
(iii) below, “Normal Retirement” as defined in
paragraph (iv) below, or disability; provided, however, that in no
event shall the exercise period extend beyond the expiration of the
option term and the exercise period for any option shall not be
accelerated as a result of Early Retirement or Normal Retirement.
Notwithstanding any determinations by the Committee regarding the
exercise period of any option, all outstanding options of a grantee
which are granted on or after January 1, 2009 shall become
immediately exercisable if the grantee terminates employment due to
death or disability. Subject to the foregoing, in the event of a
grantee’s death, such options may be exercised by a
grantee’s legal representative or beneficiary.
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(iii)
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“Early Retirement”
shall mean a termination of employment that occurs on or after the
date that the grantee become eligible for early retirement pursuant
to the terms of the Retirement Income Plan for Aqua America, Inc.
and Subsidiaries (the “Pension Plan”); provided,
however, that if a grantee is not an active participant in the
Pension Plan immediately prior to terminating employment,
“Early Retirement” shall mean a termination of
employment that occurs on or after the date that a grantee is first
eligible for Social Security retirement benefits and has completed
at least 10 years of service for vesting purposes under the
Pension Plan.
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(iv)
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“Normal Retirement”
shall mean a termination of employment on or after the date a
grantee first satisfies the conditions for normal retirement
benefits under the terms of the Pension Plan, whether or not the
grantee is covered by the Pension Plan.
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(e) Notwithstanding any contrary provision
in subsection (c) or (d) above, the Committee, in its
sole discretion, may determine that any portion of an option that
has not become exercisable as of the date of the grantee’s
death, termination of employment on account of permanent and total
disability (within the meaning of section 22(e)(3) of the Code) or
other termination of employment may also be exercised by a grantee,
or in the case of death, a grantee’s legal representative or
beneficiary. Subject to the foregoing, in the event of a
grantee’s death, such options may be exercised by a
grantee’s legal representative or beneficiary, but only to
the extent that an option has become exercisable as of the date of
death.
(f)
Limits on Incentive Stock Options. Each Grant of an
incentive stock option shall provide that (i) it is not
transferable by the grantee other than by will or the laws of
descent and distribution and otherwise is exercisable, during the
grantee’s lifetime, only by the grantee, and (ii) the
aggregate fair market value of the Common Stock on the date of the
Grant with respect to which incentive stock options are exercisable
for the first time by a grantee during any calendar year under the
Plan and under any other stock option plan of the Corporation shall
not exceed the limitation set forth in section 422(d) of the
Code.
An incentive
stock option shall not be granted to any grantee who, at the time
of grant, owns stock possessing more than 10 percent of the
total combined voting power of all classes of stock of the
Corporation or subsidiary of the Corporation, unless the exercise
price of the incentive stock option is no less than 110% of the
fair market value per share on the date of grant and the term of
the incentive stock option is not more than five years. Unless a
grantee could otherwise transfer Common Stock issued pursuant to an
incentive stock option granted hereunder without incurring
liability under section 16(b) of the Exchange Act, at least six
months must elapse from the date of acquisition of an incentive
stock option to the date of disposition of the Common Stock issued
upon exercise of such option.
(g)
Forfeiture of Options . Notwithstanding any other provisions
set forth above, if the grantee shall (i) commit any act of
malfeasance or wrongdoing affecting the Corporation, any parent or
subsidiary, (ii) breach any covenant not to compete, or
employment contract, with the Corporation, any parent or
subsidiary, or (iii) engage in conduct that would warrant the
grantee’s discharge for cause (excluding general
dissatisfaction with the performance of the Grantee’s duties,
but including any act of disloyalty or any conduct clearly tending
to bring discredit upon the Corporation, any parent or subsidiary),
all options, or the unexercised portion thereof, shall immediately
terminate and be void.
(h)
Non-Compete Agreement . All unexercised stock options
following a grantee’s termination of full-time employment by
reason of Early Retirement or Normal Retirement with respect to
grants made on or after January 1, 2009, shall be forfeited
if, during the period of 38 months following the
grante
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