AQUA AMERICA, INC.
2004 EQUITY COMPENSATION PLAN
STOCK OPTION AND DIVIDEND
EQUIVALENT GRANT
Grant Date:
This Incentive Stock Option and Dividend
Equivalent Grant Agreement evidences the grant made by Aqua
America, Inc., a Pennsylvania corporation (the
“Corporation”), to «F1»
«Name», an officer of the Corporation or one of its
subsidiaries (the “Grantee”), under the terms and
provisions of the Aqua America, Inc. 2004 Equity Compensation Plan
(the “Plan”).
WHEREAS, on March 18, 2004 the Executive
Committee of the Board of Directors of the Corporation (the
“Board”) adopted the Plan, subject to the approval of
the shareholders of the Corporation;
WHEREAS, the Plan was approved and ratified at
the Corporation’s 2004 Annual Meeting of the Shareholders by
the vote of the holders of a majority of the Corporation’s
common stock (the “Common Stock”) entitled to vote
thereon;
WHEREAS, the Plan has been amended or amended
and restated from time to time with the approval of the
Corporation’s Board of Directors and, when required, the
Corporation’s shareholders;
WHEREAS, pursuant to the Plan, the Board has
empowered its compensation committee (the “Committee”)
to grant options to purchase Common Stock and to grant dividend
equivalents based upon the dividends earned on Common Stock
(collectively, the “Grants”) to eligible persons in
accordance with the terms and provisions of the Plan;
and
WHEREAS, the Committee, as required by the Plan,
considers the Grantee to be an eligible person as contemplated by
the Plan and has determined that it would be in the best interests
of the Corporation to make the Grants referred to
herein;
NOW, THEREFORE, the parties hereto, intending to
be legally bound hereby, agree as follows:
a. Number of Shares, Option Price and
Exercise Schedule . Subject to the terms and conditions
hereinafter set forth, the Corporation, with the approval and at
the direction of the Committee, hereby grants to the Grantee an
option to purchase an aggregate of «Proposed
_____ of_Optionis_and_Div_Equiv» shares of
Common Stock at a price of $ _____ per share.
This option shall become exercisable in three (3) annual
installments, the Grantee having the right hereunder to purchase
from the Corporation, on and after the following dates, the
following numbers of shares of Common Stock:
February 26, 2009: «F6»
shares,
February 26, 2010: an additional «F7»
shares,
February 26, 2011: an additional «F8»
shares;
The right of
the Grantee to purchase shares of Common Stock subject to any
accrued installment may be exercised in whole or in part from time
to time, subject to the restrictions set forth herein. The
Committee may, in its sole discretion, accelerate the time at which
the option may be exercised in whole or in part. Notwithstanding
any determinations by the Committee regarding the exercise period
of the option or the exercise schedule set forth above, all
outstanding options shall become immediately exercisable upon a
Change in Control of the Corporation (as defined in the
Plan).
b. Options as an Incentive Stock
Option . It is intended that this option shall meet the
applicable requirements of, and qualify as, an incentive stock
option under the terms of Section 422 of the Internal Revenue
Code as now or hereafter constituted (the “Code”) and
as interpreted by relevant rulings, regulations and other
applicable authority, and shall in all respects be so interpreted
and construed. In conformance with the foregoing, the Grantee
understands and hereby acknowledges that: (i) in the event
that the aggregate fair market value (determined at the time the
option is granted) of the stock with respect to which incentive
stock options are exercisable for the first time by the Grantee
during any calendar year (under all stock option plans of the
Corporation and its parents and subsidiaries, if any) exceeds
$100,000, then to the extent of such excess, all or a portion of
this option shall (if, and to the extent, required by
Section 422 of the Code) not be treated as an incentive stock
option; and (ii) any exercise of this option following the
termination of employment of the Grantee which occurs more than
three months from the date of such termination (including
termination of employment on account of retirement, but excluding
termination on account of death), or more than one year from the
date of such termination in the case of total disability, will not
satisfy the conditions of Section 422 of the Code for
treatment as an incentive stock option; and (iii) therefore,
any such excess referred to in (i), or exercise referred to in
(ii), will be taxed in accordance with the rules of taxation
governing the exercise of nonqualified stock options. Unless the
Grantee could otherwise transfer Common Stock issued pursuant to an
incentive stock option granted hereunder without incurring
liability under Section 16(b) of the Securities Exchange Act of
1934 (the “Exchange Act”), at least six months must
elapse from the date of grant of an incentive stock option to the
date of disposition of the Common Stock issued upon exercise of
such option.
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c. Termination of Option . This
option and all rights hereunder, to the extent such rights shall
not have been exercised, shall terminate and become null and void
after the expiration of ten (10) years from the Date of Grant
(the “option term”). The Date of Grant for the options
granted hereunder is
.
Upon the termination of the Grantee’s
regular full-time employment for any reason (except as a result of
retirement, disability or death), this option, whether exercisable
or unexercisable, shall terminate. Notwithstanding the fact that,
in all cases, the Grantee’s employment shall be deemed to
have terminated upon the sale of a subsidiary of the Corporation
that employs the Grantee, the Committee, in its sole discretion,
may extend the period during which the option 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 retirement or a
disability other than a total disability, or (iv) the
expiration of the original term of the option as established in the
first paragraph of this Section. The Committee, in its sole
discretion, may similarly extend the period of exercise of the
option if the Grantee’s employment with the Corporation or
subsidiary is terminated in connection with the sale of a
subsidiary of the Corporation.
Upon termination of the Grantee’s
employment as a result of retirement, disability or death, this
option may be exercised over a period that does not exceed:
(i) 12 months from the date of such termination of
employment in the case of death, and (ii) 38 months from
the date of such termination in the case of “Early
Retirement,” as defined below, “Normal
Retirement,” as defined below, or disability; but 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 or normal retirement. Stock
options become immediately exercisable as of the termination of the
Grantee’s employment as a result of disability or
death.
Early Retirement means a Grantee’s
termination of employment that occurs on or after (i) the date
that the Grantee becomes eligible for early retirement pursuant to
the terms of the Retirement Income Plan for Aqua America, Inc. and
Subsidiaries (the “Pension Plan”), or (ii) if the
Grantee is not an active participant in the Pension Plan, the date
that the 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. Normal Retirement means a
Grantee’s termination of employment on or after the date the
Grantee first satisfies the conditions for normal retirement
benefits under the Pension Plan, whether or not the Grantee is
covered by the Pension Plan.
Subject to the foregoing, in the event of the
Grantee’s death, such option may be exercised by the
Grantee’s legal representative but only to the extent
exercisable by Grantee as of the date of death. Notwithstanding the
foregoing, the Committee, in its sole discretion, may determine
that installments that are not 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 the Grantee or in the case of
death, the Grantee’s legal representative or beneficiary.
Grantee’s transfer of employment among the Corporation, its
parent or any subsidiary shall not be deemed to be a termination of
employment.
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d. Forfeiture of Option .
Notwithstanding any other provisions set forth herein or in the
Plan, if the Grantee shall (i) commit any act of malfeasance
or wrongdoing affecting the Corporation, any parent or subsidiary,
(ii) breach the terms of any covenant not to compete, or any
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)
this option, or the unexercised portion thereof, shall immediately
terminate and be void.
e. Non-Compete Agreement . The
Grantee hereby agrees that all unexercised stock options following
a Grantee’s termination of full-time employment by reason of
Early Retirement or Normal Retirement shall be forfeited
if
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