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Exhibit 10.6

SOUTHWEST WATER COMPANY

DEFERRED COMPENSATION PLAN

Effective January 1, 2002

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Southwest Water Company
Deferred Compensation Plan
Master Plan Document

TABLE OF CONTENTS

 
 
 
  Page

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ARTICLE 1 Definitions   1
ARTICLE 2
Selection, Enrollment, Eligibility
 
7   2.1 Selection by Committee   7   2.2 Enrollment Requirements   7   2.3
Eligibility; Commencement of Participation   7   2.4 Termination of
Participation and/or Deferrals   7
ARTICLE 3
Deferral Commitments/Company Amounts/Crediting/Taxes
 
7   3.1 Minimum Deferral   7   3.2 Maximum Deferral   8   3.3 Election to Defer;
Effect of Election Form   8   3.4 Withholding of Annual Deferral Amounts   9  
3.5 Annual Company Amount   9   3.6 Intentionally Deleted   9   3.7 Stock Option
Deferral Amount   9   3.8 Intentionally Deleted   9   3.9 Crediting Prior to
Distribution   9   3.10 Interest Crediting for Installment Distributions   10  
3.11 FICA and Other Taxes   10   3.12 Vesting   11
ARTICLE 4
Short-Term Payout; Unforeseeable Financial Emergencies; Withdrawal Election
 
12   4.1 Short-Term Payout   12   4.2 Other Benefits Take Precedence Over
Short-Term Payout   12   4.3 Withdrawal Payout/Suspensions for Unforeseeable
Financial Emergencies   12   4.4 Withdrawal Election   12
ARTICLE 5
Retirement Benefit
 
13   5.1 Retirement Benefit   13   5.2 Payment of Retirement Benefit   13   5.3
Death Prior to Completion of Retirement Benefit   13
ARTICLE 6
Pre-Retirement Survivor Benefit
 
14   6.1 Pre-Retirement Survivor Benefit   14   6.2 Payment of Pre-Retirement
Survivor Benefit   14
ARTICLE 7
Termination Benefit
 
14   7.1 Termination Benefit   14   7.2 Payment of Termination Benefit   14
ARTICLE 8
Disability Waiver and Benefit
 
15   8.1 Disability Waiver   15   8.2 Continued Eligibility; Disability Benefit
  15
ARTICLE 9
Beneficiary Designation
 
15   9.1 Beneficiary   15          

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  9.2 Beneficiary Designation; Change; Spousal Consent   16   9.3 Acknowledgment
  16   9.4 No Beneficiary Designation   16   9.5 Doubt as to Beneficiary   16  
9.6 Discharge of Obligations   16
ARTICLE 10
Leave of Absence
 
16   10.1 Paid Leave of Absence   16   10.2 Unpaid Leave of Absence   16
ARTICLE 11
Termination, Amendment or Modification
 
16   11.1 Termination   16   11.2 Amendment   17   11.3 Plan Agreement   17  
11.4 Interest Rate in the Event of a Change in Control   17   11.5 Effect of
Payment   18
ARTICLE 12
Administration
 
18   12.1 Committee Duties   18   12.2 Administration Upon Change In Control  
18   12.3 Agents   18   12.4 Binding Effect of Decisions   19   12.5 Indemnity
of Committee   19   12.6 Employer Information   19
ARTICLE 13
Other Benefits and Agreements
 
19   13.1 Coordination with Other Benefits   19
ARTICLE 14
Claims Procedures
 
19   14.1 Presentation of Claim   19   14.2 Notification of Decision   19   14.3
Review of a Denied Claim   20   14.4 Decision on Review   20   14.5 Legal Action
  20
ARTICLE 15
Trust
 
20   15.1 Establishment of the Trust   20   15.2 Interrelationship of the Plan
and the Trust   20   15.3 Distributions From the Trust   20
ARTICLE 16
Miscellaneous
 
20   16.1 Status of Plan   20   16.2 Unsecured General Creditor   21   16.3
Employer's Liability   21   16.4 Nonassignability   21   16.5 Not a Contract of
Employment   21   16.6 Furnishing Information   21   16.7 Terms   21   16.8
Captions   21   16.9 Governing Law   21   16.10 Notice   22   16.11 Successors  
22   16.12 Spouse's Interest   22          

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  16.13 Validity   22   16.14 Incompetent   22   16.15 Court Order   22   16.16
Distribution in the Event of Taxation   22   16.17 Insurance   23   16.18 Legal
Fees To Enforce Rights After Change in Control   23

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SOUTHWEST WATER COMPANY
DEFERRED COMPENSATION PLAN

Effective January 1, 2002

Purpose

        The purpose of this Plan is to provide specified benefits to a select
group of management or highly compensated Employees and/or Directors who
contribute materially to the continued growth, development and future business
success of Southwest Water Company, a Delaware corporation, and its
subsidiaries, if any, that sponsor this Plan. This Plan shall be unfunded for
tax purposes and for purposes of Title I of ERISA.

ARTICLE 1
Definitions

        For purposes of this Plan, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:

1.1"Account Balance" shall mean, with respect to a Participant, the sum of
(i) the Deferral Account balance, (ii) the vested Company Account balance
(determined in accordance with Section 3.12), (iii) the Stock Option Deferral
Account balance and (iv) the Dividend Account balance. The Account Balance, and
all other "accounts" described in this Plan, shall be bookkeeping entries only
and shall be utilized solely as a device for the measurement and determination
of the amounts to be paid to a Participant, or his or her designated
Beneficiary, pursuant to this Plan.

1.2"Accounting Firm" shall have the meaning set forth in Section 3.12(d).

1.3"Administrator" shall have the meaning set forth in Section 12.2.

1.4"Annual Company Amount" shall mean, for any one Plan Year, the amount
determined in accordance with Section 3.5.

1.5"Annual Deferral Amount" shall mean that portion of a Participant's Base
Annual Salary, Bonus, Commissions and/or Directors Fees that a Participant
elects to have, and is deferred, in accordance with Article 3, for any one Plan
Year. In the event of a Participant's Retirement, Disability (if deferrals cease
in accordance with Section 8.1), death or a Termination of Employment prior to
the end of a Plan Year, such year's Annual Deferral Amount shall be the actual
amount withheld prior to such event.

1.6"Annual Stock Option Deferral Amount" shall mean, with respect to a
Participant for any one Plan Year, the amount of Qualifying Gains deferred on
Eligible Stock Options in accordance with Section 3.7 of this Plan, calculated
using the closing price of Stock as of the end of the business day prior to the
date of such Eligible Stock Option exercise.

1.7"Base Annual Salary" shall mean the annual cash compensation relating to
services performed during any Plan Year and includable on the Federal Income Tax
W-2 for such Plan Year, excluding bonuses, commissions, overtime, fringe
benefits, retainers, stock options, relocation expenses, incentive payments,
non-monetary awards, directors fees and other fees, severance allowances, pay in
lieu of vacations, insurance premiums paid by the Company, insurance benefits
paid to the Participant or his or her beneficiary, Company contributions to
qualified and non-qualified plans, automobile and other allowances, paid to a
Participant for employment services rendered (whether or not such allowances are
included in the Employee's gross income). Base Annual Salary shall be calculated
before reduction for compensation voluntarily deferred or contributed by the
Participant pursuant to all qualified or non-qualified plans of any Employer and
shall be calculated to include

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amounts not otherwise included in the Participant's gross income under Code
Sections 125, 402(e)(3), 402(h) or 403(b) pursuant to plans established by any
Employer; provided, however, that all such amounts will be included in
compensation only to the extent that, had there been no such plan, the amount
would have been payable in cash to the Employee.

1.8"Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 9, that are entitled to receive
benefits under this Plan upon the death of a Participant.

1.9"Beneficiary Designation Form" shall mean the form established from time to
time by the Committee that a Participant completes, signs and returns to the
Committee to designate one or more Beneficiaries.

1.10"Board" shall mean the board of directors of the Company.

1.11"Bonus" shall mean any compensation, in addition to Base Annual Salary,
payable in such Plan Year or includable on the Federal Income Tax Form W-2 for
such Plan Year, payable to a Participant as an Employee under any Employer's
bonus and cash incentive plans, excluding stock options and Commissions.

1.12"Bonus Rate" shall mean, for a Plan Year, an interest rate, if any,
determined by the Committee, in its sole discretion, which rate shall be
determined and announced before the commencement of the Plan Year for which the
rate applies. This rate may be zero for any Plan Year. For the first Plan Year,
the Bonus Rate shall equal 20% of the Crediting Rate.

1.13"Change in Control" shall mean ninety (90) days prior to the first to occur
of any of the following events:

(a)Any "person" (as that term is used in Section 13 and 14(d)(2) of the
Securities Exchange Act of 1934, as amended ("Exchange Act")) becomes the
beneficial owner (as that term is used in Section 13(d) of the Exchange Act),
directly or indirectly, of 50% or more of the Company's capital stock entitled
to vote in the election of directors;

(b)The shareholders of the Company approve any consolidation or merger of the
Company, other than a consolidation or merger of the Company in which the
holders of the common stock of the Company immediately prior to the
consolidation or merger hold more than 50% of the common stock of the surviving
corporation immediately after the consolidation or merger;

(c)The shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company;

(d)The shareholders of the Company approve the sale or transfer of all or
substantially all of the assets of the Company to parties that are not within a
"controlled group of corporations" (as defined in Code Section 1563) in which
the Company is a member.

(e)The Company offers any equity security pursuant to a registration statement
filed with and declared effective by the Securities Exchange Commission under
the Securities Act of 1933, as amended, other than in connection with an
employee benefit plan; or

(f)The shareholders of the Company approve any consolidation or merger of the
Company with, or the Company is acquired in a tax-free reorganization defined in
Code Section 368 by, a corporation that has previously offered an equity
security pursuant to a registration statement filed with and declared effective
by the Securities Exchange Commission under the Securities Act of 1933, as
amended, other than in connection with an employee benefit plan, and such equity
security remains outstanding after the merger or consolidation.

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1.14"Claimant" shall have the meaning set forth in Section 14.1.

1.15"Code" shall mean the Internal Revenue Code of 1986, as it may be amended
from time to time.

1.16"Committee" shall mean the committee described in Article 12.

1.17"Commissions" shall mean sales commissions and any other similar type of
remuneration to a Participant as an Employee of an Employer, as determined by
the Committee in its sole discretion, that is includable on the Federal Income
Tax Form W-2 for such Plan Year.

1.18"Company" shall mean Southwest Water Company, a Delaware corporation, and
any successor to all or substantially all of the Company's assets or business.

1.19"Company Account" shall mean (i) the sum of the Participant's Annual Company
Amounts, plus (ii) interest credited in accordance with all the applicable
interest crediting provisions of this Plan that relate to the Participant's
Company Account, less (iii) all distributions made to the Participant or his or
her Beneficiary pursuant to this Plan that relate to the Participant's Company
Account. This account shall be a bookkeeping entry only and shall be utilized
solely as a device for the measurement and determination of the amounts to be
paid to the Participant pursuant to this Plan.

1.20"Company Stock Crediting Rate" shall mean, with respect to a Participant's
Stock Option Deferral Account balance, a rate based on the performance of the
Stock, as determined by the Committee in its sole discretion.

1.21"Crediting Rate" shall mean, with respect to a Participant's Deferral
Account balance, Company Account balance and Dividend Account balance for each
Plan Year, an interest rate, stated as an annual rate, determined and announced
by the Committee before the Plan Year for which it is to be used, that is equal
to the applicable "Moody's Rate." The Moody's Rate for a Plan Year shall be an
interest rate, stated as an annual rate, that (i) is published in Mergent's Bond
Record under the heading of "Corporate Bond Yield Averages-Av. Corp." and
(ii) is equal to the average corporate bond yield calculated for the month of
September that immediately precedes the Plan Year for which the rate is to be
used.

1.22"Deduction Limitation" shall mean the following described limitation on a
benefit that may otherwise be distributable pursuant to the provisions of this
Plan. Except as otherwise provided, this limitation shall be applied to all
distributions that are "subject to the Deduction Limitation" under this Plan. If
an Employer determines in good faith that there is a reasonable likelihood that
any compensation to be paid prior to a Change in Control to a Participant for a
taxable year of the Employer would not be deductible by the Employer solely by
reason of the limitation under Code Section 162(m), then to the extent deemed
necessary by the Employer to ensure that the entire amount of any distribution
to the Participant pursuant to this Plan prior to the Change in Control is
deductible, the Employer may defer all or any portion of a distribution under
this Plan. Any amounts deferred pursuant to this limitation shall continue to be
credited with interest in accordance with Section 3.10 below, even if such
amount is being paid out in installments. The amounts so deferred and interest
thereon shall be distributed to the Participant or his or her Beneficiary (in
the event of the Participant's death) at the earliest possible date, as
determined by the Employer in good faith, on which the deductibility of
compensation paid or payable to the Participant for the taxable year of the
Employer during which the distribution is made will not be limited by
Section 162(m), or if earlier, the effective date of a Change in Control.
Notwithstanding anything to the contrary in this Plan, the Deduction Limitation
shall not apply to any distributions made after a Change in Control.

1.23"Deferral Account" shall mean (i) the sum of all of a Participant's Annual
Deferral Amounts, plus (ii) interest credited in accordance with all the
applicable interest crediting provisions of this Plan

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that relate to the Participant's Deferral Account, less (iii) all distributions
made to the Participant or his or her Beneficiary pursuant to this Plan that
relate to the Participant's Deferral Account. This account shall be a
bookkeeping entry only and shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to the Participant
pursuant to this Plan.

1.24"Director" shall mean any member of the board of directors of the Company.

1.25"Directors Fees" shall mean the annual fees payable by the Company,
including retainer fees and meetings fees, as compensation for serving on the
board of directors of the Company.

1.26"Disability" shall mean a period of disability during which a Participant
qualifies for disability benefits under the Participant's Employer's long-term
disability plan. If a Participant does not participate in such a plan,
"Disability" shall mean a period of disability during which the Participant
would have qualified for disability benefits under such a plan had the
Participant been a participant in such a plan, as determined in the sole
discretion of the Committee. If the Participant's Employer does not sponsor such
a plan, or discontinues to sponsor such a plan, Disability shall be determined
by the Committee in its sole discretion.

1.27"Disability Benefit" shall mean the benefit set forth in Article 8.

1.28"Dividend Account" shall mean (i) the sum of all of a Participant's Dividend
Amounts, plus (ii) interest credited in accordance with all the applicable
interest crediting provisions of this Plan that relate to the Participant's
Dividend Account, less (iii) all distributions made to the Participant or his or
her Beneficiary pursuant to this Plan that relate to the Participant's Dividend
Account. This account shall be a bookkeeping entry only and shall be utilized
solely as a device for the measurement and determination of the amounts to be
paid to the Participant pursuant to this Plan.

1.29"Dividend Amount" shall mean the cash dividend amount that would have been
paid on the dividend payment date if the Stock Option Deferral Account was
actually invested in Stock on the date a cash dividend of the Company is
declared (fractional shares shall be rounded up to the nearest whole share).

1.30"Election Form" shall mean the form established from time to time by the
Committee that a Participant completes, signs and returns to the Committee to
make an election under the Plan.

1.31"Eligible Stock Option" shall mean one or more non-qualified stock option(s)
selected by the Committee in its sole discretion and exercisable under a plan or
arrangement of any Employer permitting a Participant under this Plan to defer
gain with respect to such option.

1.32"Employee" shall mean a person who is an employee of any Employer.

1.33"Employer(s)" shall mean the Company and/or any of its subsidiaries (now in
existence or hereafter formed or acquired) that have been selected by the Board
to participate in the Plan and have adopted the Plan as a sponsor.

1.34"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.

1.35"Ex-CEO" shall have the meaning set forth in Section 12.2.

1.36"FICA" shall mean the Federal Insurance Contributions Act, as amended, which
generally deals with what is commonly known as social security taxes.

1.37"Participant" shall mean any Employee or Director (i) who is selected to
participate in the Plan, (ii) who elects to participate in the Plan, (iii) who
signs a Plan Agreement, an Election Form and a Beneficiary Designation Form,
(iv) whose signed Plan Agreement, Election Form and Beneficiary

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Designation Form are accepted by the Committee, (v) who commences participation
in the Plan, and (vi) whose Plan Agreement has not terminated. A spouse or
former spouse of a Participant shall not be treated as a Participant in the Plan
(other than as a Beneficiary, if so designated) or have an account balance under
the Plan, even if he or she has an interest in the Participant's benefits under
the Plan as a result of applicable law or property settlements resulting from
legal separation or divorce.

1.38"Plan" shall mean the Company's Deferred Compensation Plan, which shall be
evidenced by this instrument (and may be modified by each Plan Agreement), as it
may be amended from time to time.

1.39"Plan Agreement" shall mean a written agreement, as may be amended from time
to time, which is entered into by and between an Employer and a Participant.
Each Plan Agreement executed by a Participant and the Participant's Employer
shall provide for the entire benefit to which such Participant is entitled under
the Plan; should there be more than one Plan Agreement, the Plan Agreement
bearing the latest date of acceptance by the Committee shall supersede all
previous Plan Agreements in their entirety and shall govern such entitlement.
The terms of any Plan Agreement may be different for any Participant, and any
Plan Agreement may provide additional benefits not set forth in the Plan or
limit the benefits otherwise provided under the Plan.

1.40"Plan Year" shall mean a period beginning on January 1 of each calendar year
and continuing through December 31 of such calendar year.

1.41"Preferred Rate" shall mean, for each Plan Year, an interest rate that is
the sum of the Crediting Rate and the Bonus Rate for that Plan Year.

1.42"Qualifying Gain" shall mean the value accrued upon exercise of an Eligible
Stock Option (i) using a Stock-for-Stock payment method illustrated in the
example below and (ii) having an aggregate fair market value in excess of the
total Stock purchase price necessary to exercise the option. In other words, the
Qualifying Gain upon exercise of an Eligible Stock Option equals the total
market value of the shares (or share equivalent units) acquired minus the total
stock purchase price. For example, assume a Participant elects to defer the
Qualifying Gain accrued upon exercise of an Eligible Stock Option to purchase
1000 shares of Stock at an exercise price of $20 per share, when Stock has a
current fair market value of $25 per share. Using the Stock-for-Stock payment
method, the Participant would deliver 800 shares of Stock (worth $20,000) to
exercise the Eligible Stock Option and receive, in return, 800 shares of Stock
plus a Qualifying Gain (in this case, in the form of an unfunded and unsecured
promise to pay money or property in the future) equal to $5,000 (i.e., the
current value of the remaining 200 shares of Stock).

1.43"Pre-Retirement Survivor Benefit" shall mean the benefit set forth in
Article 6.

1.44"Retirement", "Retires" or "Retired" shall mean, with respect to an
Employee, severance from employment from all Employers for any reason other than
a leave of absence, death or Disability on or after the earlier of the
attainment of (a) age sixty-five (65) or (b) age fifty-five (55) with five
(5) Years of Service; and shall mean, with respect to a Director who is not an
Employee, severance of his or her directorships with all Employers on or after
the later of (y) the attainment of age seventy-two (72), or (z) in the sole
discretion of the Committee, an age later than age seventy-two (72). If a
Participant is both an Employee and a Director, Retirement shall not occur until
he or she Retires as both an Employee and a Director, which Retirement shall be
deemed to be a Retirement as a Director; provided, however, that such a
Participant may elect, at least one year prior to Retirement, and in accordance
with the policies and procedures established by the Committee, to Retire for
purposes of this Plan at the time he or she Retires as an Employee, which
Retirement shall be deemed to be a Retirement as an Employee.

1.45"Retirement Benefit" shall mean the benefit set forth in Article 5.

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1.46"Short-Term Payout" shall mean the payout set forth in Section 4.1.

1.47"Stock" shall mean the Company's common stock, $.01 par value, or any other
equity securities of the Company designated by the Committee.

1.48"Stock Option Deferral Account" shall mean the sum of (i) the Participant's
Annual Stock Option Deferral Amounts, plus (ii) amounts credited in accordance
with all the applicable crediting provisions of this Plan that relate to the
Participant's Stock Option Deferral Account, less (iii) all distributions made
to the Participant or his or her Beneficiary pursuant to this Plan that relate
to the Participant's Stock Option Deferral Account. This account shall be a
bookkeeping entry only and shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to the Participant
pursuant to this Plan.

1.49"Stock Option Deferral Amount" shall mean, for any Eligible Stock Option,
the amount of Qualifying Gains deferred in accordance with Section 3.7 of this
Plan, calculated using the closing price of Stock as of the end of the business
day prior to the date of exercise of such Eligible Stock Option.

1.50"Termination Benefit" shall mean the benefit set forth in Article 7.

1.51"Termination of Employment" shall mean the severing of employment with all
Employers, or service as a Director of all Employers, voluntarily or
involuntarily, for any reason other than Retirement, Disability, death or an
authorized leave of absence. If a Participant is both an Employee and a
Director, a Termination of Employment shall occur only upon the termination of
the last position held; provided, however, that such a Participant may elect, at
least one year before Termination of Employment and in accordance with the
policies and procedures established by the Committee, to be treated for purposes
of this Plan as having experienced a Termination of Employment at the time he or
she ceases employment with all Employers as an Employee.

1.52"Trust" shall mean the trust established pursuant to that certain Master
Trust Agreement, dated as of January 1, 2002, between the Company and the
trustee named therein, as amended from time to time.

1.53"Trustee" shall mean the trustee of the Trust.

1.54"Unforeseeable Financial Emergency" shall mean an unanticipated emergency
that is caused by an event beyond the control of the Participant that would
result in severe financial hardship to the Participant resulting from (i) a
sudden and unexpected illness or accident of the Participant or a dependent of
the Participant, (ii) a loss of the Participant's property due to casualty, or
(iii) such other extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant, all as determined in the
sole discretion of the Committee.

1.55"Years of Plan Participation" shall mean the total number of full Plan Years
a Participant has been a Participant in the Plan prior to his or her Termination
of Employment (determined without regard to whether deferral elections have been
made by the Participant for any Plan Year). Any partial year shall not be
counted. Notwithstanding the previous sentence, a Participant's first Plan Year
of participation shall be treated as a full Plan Year for purposes of this
definition if such Participant is a Participant for at least six (6) months
during such first Plan Year.

1.56"Years of Service" shall mean the total number of full years in which a
Participant has been employed by one or more Employers. For purposes of this
definition, a year of employment shall be a 365 day period (or 366 day period in
the case of a leap year) that, for the first year of employment, commences on
the Employee's date of hiring and that, for any subsequent year, commences on an
anniversary of that hiring date. Any partial year of employment shall not be
counted.

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ARTICLE 2
Selection, Enrollment, Eligibility

2.1Selection by Committee.    Participation in the Plan shall be limited to a
select group of management or highly compensated Employees of the Employers and
to Directors, as determined by the Committee, in its sole discretion. From that
group, the Committee shall select, in its sole discretion, Employees and
Directors to participate in the Plan.

2.2Enrollment Requirements.    As a condition to participation, each selected
Employee or Director shall complete, execute and return to the Committee a Plan
Agreement, an Election Form and a Beneficiary Designation Form, all within
30 days after he or she is selected to participate in the Plan. In addition, the
Committee shall establish from time to time such other enrollment requirements
as it determines, in its sole discretion, are necessary.

2.3Eligibility; Commencement of Participation.    Provided an Employee or
Director selected to participate in the Plan has met all enrollment requirements
set forth in this Plan and required by the Committee, including returning all
required documents to the Committee within the specified time period, that
Employee or Director shall commence participation in the Plan on the first day
of the month following the month in which the Employee or Director completes all
enrollment requirements. If an Employee or a Director fails to meet all such
requirements within the period required, in accordance with Section 2.2, that
Employee or Director shall not be eligible to participate in the Plan until the
first day of the Plan Year following the delivery to and acceptance by the
Committee of the required documents and the completion of all other enrollment
requirements.

2.4Termination of Participation and/or Deferrals.    If the Committee determines
in good faith that a Participant no longer qualifies as a member of a select
group of management or highly compensated employees, as membership in such group
is determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA, the Committee shall have the right, in its sole discretion, to
(i) terminate any deferral election the Participant has made for the remainder
of the Plan Year in which the Participant's membership status changes,
(ii) prevent the Participant from making future deferral elections and/or
(iii) immediately distribute the Participant's then Account Balance as a
Termination Benefit and terminate the Participant's participation in the Plan.

ARTICLE 3
Deferral Commitments/Company Amounts/Crediting/Taxes

3.1Minimum Deferral. (a)Annual Deferral Amount.    For each Plan Year, a
Participant may elect to defer, as his or her Annual Deferral Amount, Base
Annual Salary, Bonus, Commissions and/or Director's Fees in the combined minimum
amount of $2,500. If an election is made for less than this minimum amount, or
if no election is made, the amount deferred shall be zero.

(b)Short Plan Year.    Notwithstanding the foregoing, if a Participant first
becomes a Participant after the first day of a Plan Year, the minimum combined
deferral shall be an amount equal to the combined minimum set forth in
Section 3.1(a) above, multiplied by a fraction, the numerator of which is the
number of complete months remaining in the Plan Year and the denominator of
which is 12.

(c)Stock Option Deferral Amount.    At the sole discretion of the Committee, a
Participant may be selected to defer gain upon one or more Eligible Stock
Options. For each Eligible Stock Option, a selected Participant may elect to
defer, as his or her Stock Option Deferral

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Amount, the following minimum percentage of Qualifying Gain with respect to the
exercise of the Eligible Stock Option:

Deferral

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  Minimum Percentage

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  Qualifying Gain   10 %

provided, however, that the Annual Stock Option Deferral Amount shall be no less
than the lesser of $20,000 or 100% of the Qualifying Gain.

3.2Maximum Deferral.

(a)For each Plan Year, a Participant may elect to defer, as his or her Annual
Deferral Amount, Base Annual Salary, Bonus, Commissions and/or Directors Fees up
to the following maximum percentages for each deferral elected:

Deferral

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  Maximum Percentage

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  Base Annual Salary   50 % Bonus   100 % Commissions   100 % Directors Fees  
100 %

Notwithstanding the foregoing, if a Participant first becomes a Participant
after the first day of a Plan Year, the maximum Annual Deferral Amount with
respect to Base Annual Salary, Commissions and Directors Fees shall be limited
to the amount of compensation not yet earned, and in the case of the Bonus not
yet paid, to the Participant as of the date the Participant commences
participation pursuant to Section 2.3.

(b)For each Eligible Stock Option, a selected Participant may elect to defer, as
his or her Stock Option Deferral Amount, Qualifying Gain up to the following
maximum percentage with respect to exercise of the Eligible Stock Option:

Deferral

--------------------------------------------------------------------------------

  Maximum Percentage

--------------------------------------------------------------------------------

  Qualifying Gain   100 %

(c)Stock Option Deferral Amounts may also be limited by other terms or
conditions set forth in the stock option plan or agreement under which such
options are granted.

3.3Election to Defer; Effect of Election Form.

(a)First Plan Year.    In connection with a Participant's commencement of
participation in the Plan, the Participant shall make an irrevocable deferral
election for the Plan Year in which the Participant commences participation in
the Plan, along with such other elections as the Committee deems necessary or
desirable under the Plan. For these elections to be valid, the Election Form
must be completed and signed by the Participant, timely delivered to the
Committee (in accordance with Section 2.2 above) and accepted by the Committee.

(b)Subsequent Plan Years.    For each succeeding Plan Year, an irrevocable
deferral election for that Plan Year, and such other elections as the Committee
deems necessary or desirable under the Plan, shall be made by timely delivering
to the Committee, in accordance with its rules and procedures before the end of
the Plan Year preceding the Plan Year for which the election is made, a new
Election Form. If no such Election Form is timely delivered for a Plan Year, the
Annual Deferral Amount shall be zero for that Plan Year. For purposes of the
Plan, a Bonus shall be deemed attributable to the Plan Year in which such Bonus
is paid.

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(c)Stock Option Deferral.    If the Committee has permitted a Participant to
defer gain upon an Eligible Stock Option, for an election to defer gain upon an
Eligible Stock Option exercise to be valid: (i) a separate Election Form must be
completed and signed by the Participant with respect to the Eligible Stock
Option; (ii) the Election Form must be timely delivered to the Committee and
accepted by the Committee at least six (6) months prior to the date the
Participant elects to exercise the Eligible Stock Option; (iii) the Eligible
Stock Option must be exercised using an actual Stock-for-Stock payment method;
and (iv) the Stock actually or constructively delivered by the Participant to
exercise the Eligible Stock Option must have been owned by the Participant
during the entire six (6) month period prior to its delivery.

3.4Withholding of Annual Deferral Amounts.    For each Plan Year, the Base
Annual Salary portion of the Annual Deferral Amount shall be withheld from each
regularly scheduled Base Annual Salary payroll in equal amounts, as adjusted
from time to time for increases and decreases in Base Annual Salary. The Bonus,
Commissions and/or Directors Fees portion of the Annual Deferral Amount shall be
withheld at the time the Bonus, Commissions or Directors Fees are or otherwise
would be paid to the Participant, whether or not this occurs during the Plan
Year itself.

3.5Annual Company Amount.    For each Plan Year, an Employer, in its sole
discretion, may, but is not required to, credit any amount it desires to any
Participant's Company Account under this Plan, which amount shall be for that
Participant the Annual Company Amount for that Plan Year. The amount so credited
to a Participant may be smaller or larger than the amount credited to any other
Participant, and the amount credited to any Participant for a Plan Year may be
zero, even though one or more other Participants receive an Annual Company
Amount for that Plan Year. The Annual Company Amount, if any, shall be credited
as of the last day of the Plan Year. If a Participant is not employed by an
Employer as of the last business day of a Plan Year other than by reason of his
or her Retirement or death, the Annual Company Amount for that Plan Year shall
be zero. In the event of Retirement or death, a Participant shall be credited
with the Annual Company Amount for the Plan Year in which he or she Retires or
dies.

3.6Intentionally Deleted.

3.7Stock Option Deferral Amount.    Subject to any terms and conditions imposed
by the Committee, selected Participants may elect to defer, under the Plan,
Qualifying Gains attributable to an Eligible Stock Option exercise. Stock Option
Deferral Amounts shall be credited to the Stock Option Deferral Account at the
time Stock would otherwise have been delivered to the Participant pursuant to
the Eligible Stock Option exercise, but for the election to defer.

3.8Intentionally Deleted.

3.9Crediting Prior to Distribution.

(a)Interest Crediting.    Except as provided below, prior to any distribution of
benefits under Articles 4, 5, 6, 7 or 8, interest shall be credited and
compounded annually on (i) a Participant's Deferral Account as though the Base
Annual Salary, Bonus and Director Fee portion of the Annual Deferral Amount for
that Plan Year was withheld on the first day of the Plan Year (in the case of
the first year of Plan participation, as though such amounts were withheld on
the date that the Participant commenced participation in the Plan), (ii) on a
Participant's Company Account as though the Annual Company Amount, if any, was
credited on the last day of the Plan Year to which it relates, and (iii) on a
Participant's Dividend Account as though the Dividend Amount was credited on the
day dividends on Company Stock were actually paid. If the Participant Retires,
dies, or experiences a Termination of Employment prior to the end of the Plan
Year, the Annual Company Amount, if any, for the Plan Year in which such event
occurs shall be treated as having been credited as of the date of such event.
The rate of interest for crediting shall be the Preferred Rate, except as

9

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otherwise provided in Section 7.1, which rate shall be treated as the nominal
rate for crediting interest. In the event of Retirement, Disability, death or
Termination of Employment prior to the end of a Plan Year, the basis for that
year's interest crediting will be a fraction of the full year's interest, based
on the number of full months that the Participant was employed with the Employer
during the Plan Year prior to the occurrence of such event. If a distribution is
made under this Plan, for purposes of crediting interest up to the time of the
distribution, the Participant's Account Balance shall be reduced as of the first
day of the month in which the distribution is made.

(b)Company Stock Crediting Rate.    A selected Participant's Stock Option
Deferral Account shall to be credited at the Company Stock Crediting Rate as
though (i) Qualifying Gain was invested in Stock at the closing price of Stock
as of the end of the business day prior to the date of exercise of an Eligible
Stock Option; (ii) stock dividends and splits shall be debited or credited to
the Stock Option Deferral Account balance as if such balance were invested in
Stock as of the date the stock dividend or split occurs; and (ii) any
distribution made to a Participant out of the Stock Option Deferral Account
shall cease to be invested in Stock no earlier than three business days prior to
the distribution. Notwithstanding any other provision of this Plan that may be
interpreted to the contrary, the Company Stock Crediting Rate is to be used for
measurement purposes only, and the crediting or debiting of amounts to a
Participant's Stock Option Deferral Account shall not be considered or construed
in any manner as an actual investment of his or her Stock Option Deferral
Account in Stock. In the event that the Company or the Trustee, in its own
discretion, decides to invest funds in Stock, no Participant shall have any
rights in or to such investments themselves.

3.10Interest Crediting for Installment Distributions.

(a)If a Participant's benefits under this Plan are to be paid in substantially
equal annual installments, such payments shall be determined by amortizing the
Participant's specified benefit over the number of years elected, using the
interest rate specified below and treating the first installment payment as all
principal and each subsequent installment payment, first as interest accrued for
the applicable installment period on the unpaid Account Balance and second as a
reduction in the Account Balance. Except as provided in Section 3.10(b) below,
the interest rate to be used to calculate installment payment amounts shall be a
fixed interest rate that is determined by averaging the Preferred Rates for the
Plan Year in which installment payments commence and the four (4) preceding Plan
Years. This rate shall be treated as the nominal rate for making such
calculations. If a Participant has completed fewer than five (5) Years of Plan
Participation, this average shall be determined using the Preferred Rates for
the Plan Years during which the Participant participated in the Plan. If a
Participant has a Stock Option Deferral Account, the balance as of the date the
first installment is paid shall no longer be credited at the Company Stock
Crediting Rate, but shall be credited with interest in accordance with this
Section.

(b)Despite Section 3.10(a) above, if the Participant elects installment
distributions under Section 7.2, the applicable interest rate(s) to be used for
calculating interest under 3.10(a) shall be determined in accordance with the
table set forth in Section 7.1, but using the Crediting Rate(s) or Preferred
Rates, as the case may be, for the Plan Year in which the installment
distributions commence and the preceding four Plan Years (or such shorter number
of Plan Years for which the Participant was a participant in the Plan).

3.11FICA and Other Taxes.

(a)Annual Deferral Amounts.    For each Plan Year in which an Annual Deferral
Amount is being first withheld from a Participant, the Participant's Employer(s)
shall withhold from that portion of the Participant's Base Annual Salary, Bonus
or Commissions that is not being

10

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deferred, in a manner determined by the Employer(s), the Participant's share of
FICA and other employment taxes on such Annual Deferral Amount. If necessary,
the Committee may reduce the Annual Deferral Amount in order to comply with this
Section 3.11. No FICA or other employment taxes shall be withheld with respect
to Directors Fees withheld unless otherwise required by law.

(b)Company Account.    When a Participant becomes vested in a portion of his or
her Company Account, the Participant's Employer(s) shall withhold from the
Participant's Base Annual Salary, Bonus and/or Commissions that is not deferred,
in a manner determined by the Employer(s), the Participant's share of FICA and
other employment taxes. If necessary, the Committee may reduce the vested
portion of the Participant's Company Account, and include the amount reduced in
the income of the Participant, in order to comply with this Section 3.11.

(c)Annual Stock Option Deferral Amounts.    For each Plan Year in which an
Annual Stock Option Deferral Amount is being first withheld from a Participant,
the Participant's Employer(s) shall withhold from that portion of the
Participant's Base Annual Salary, Bonus, Commissions and Qualifying Gains that
are not being deferred, in a manner determined by the Employer(s), the
Participant's share of FICA and other employment taxes on such Annual Stock
Option Deferral Amount. If necessary, the Committee may reduce the Annual Stock
Option Deferral Amount, and include the amount reduced in the income of the
Participant, in order to comply with this Section 3.11.

(d)Other Amounts.    The Participant's Employer(s) shall have the right to
withhold from a Participant's Base Annual Salary, Bonus, Commissions and/or any
other remuneration that is not being deferred, in a manner determined by the
Employer(s), a Participant's share of FICA and other employment taxes on such
other amounts as it determines are due with respect to amounts credited or
deferred in accordance with this Plan. If necessary, the Committee may reduce
any amounts otherwise being deferred and include the amount reduced in the
income of the Participant, in order to comply with this Section 3.11.

(e)Distributions.    The Participant's Employer(s), or the Trustee, shall
withhold from any payments made to a Participant under this Plan all federal,
state and local income, employment and other taxes required to be withheld by
the Employer(s), or the Trustee, in connection with such payments, in amounts
and in a manner to be determined in the sole discretion of the Employer(s) and
the Trustee.

3.12Vesting.

(a)Except as provided in Section 7.1 below, a Participant shall at all times be
100% vested in his or her Deferral Account, Dividend Account and Stock Option
Deferral Account.

(b)A Participant shall be vested in his or her Company Account as follows:
(i) with respect to all benefits under this Plan other than the Termination
Benefit, a Participant's vested Company Account shall equal 100% of such
Participant's Company Account; and (ii) with respect to the Termination Benefit,
each Annual Company Amount credited to a Participant (along with interest
credited thereon) shall vest in accordance with such vesting schedule as the
Committee shall determine, in its sole and absolute discretion, at the time such
Annual Company Amount is credited to such Participant. The vesting schedule
determined by the Committee under clause (ii) above may be determined on a
Participant-by-Participant basis, and may be different for each Participant.

(c)Notwithstanding anything to the contrary contained in this Section 3.12, in
the event of a Change in Control, a Participant's Company Account shall
immediately become 100% vested.

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(d)Notwithstanding subsection (c), the vesting of a Participant's Company
Account shall not be accelerated to the extent that the Committee determines
that such acceleration would cause the deduction limitations of Section 280G of
the Code to become effective. In the event that all of a Participant's Company
Account is not vested pursuant to such a determination, the Participant may
request independent verification of the Committee's calculations with respect to
the application of Section 280G. In such case, the Committee must provide to the
Participant within 15 business days of such a request an opinion from a
nationally recognized accounting firm selected by the Participant (the
"Accounting Firm"). The opinion shall state the Accounting Firm's opinion that
any limitation in the vested percentage hereunder is necessary to avoid the
limits of Section 280G and contain supporting calculations. The cost of such
opinion shall be paid for by the Company.

ARTICLE 4
Short-Term Payout; Unforeseeable Financial Emergencies; Withdrawal Election

4.1Short-Term Payout.    In connection with each election to defer an Annual
Deferral Amount, a Participant may irrevocably elect to receive a future
"Short-Term Payout" from the Plan with respect to all or a portion of such
Annual Deferral Amount. In order for a Short-Term Payout election to be
effective, the Participant must elect to receive at least $2500 of such
Participant's Annual Deferral Amount as a Short-Term Payout; if an election is
made for less than this minimum amount, or if no election is made, the
Short-Term Payout shall be zero. Subject to the Deduction Limitation, the
Short-Term Payout shall be a lump sum payment in an amount that is equal to the
sum of (i) the portion of the Annual Deferral Amount for which the Short-Term
Payout election has been made plus interest credited in the manner provided in
Section 3.9 above on that amount but using the applicable interest rate set
forth in Section 7.1 below, determined at the time that the Short-Term Payout
becomes payable (rather than the date of a Termination of Employment). Subject
to the Deduction Limitation and the other terms and conditions of this Plan,
each Short-Term Payout elected shall be paid during a period beginning one day
and ending 60 days after the last day of any Plan Year designated by the
Participant that is at least five Plan Years after the Plan Year in which the
Annual Deferral Amount is actually deferred (counting the deferral Plan Year as
one of the five Plan Years). By way of example, if a five year Short-Term Payout
is elected for an Annual Deferral Amount that is deferred in the Plan Year
commencing January 1, 2002 (deferral through the 2006 Plan Year), the five year
Short-Term Payout would become payable during a 60 day period commencing
January 1, 2007.

4.2Other Benefits Take Precedence Over Short-Term Payout.    Should an event
occur that triggers a benefit under Article 5, 6, 7 or 8, any Annual Deferral
Amount, plus interest thereon, that is subject to a Short-Term Payout election
under Section 4.1 shall not be paid in accordance with Section 4.1, but shall be
paid in accordance with the other applicable Article.

4.3Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies.    If
the Participant experiences an Unforeseeable Financial Emergency, the
Participant may petition the Committee to (i) suspend any deferrals required to
be made by a Participant and/or (ii) receive a partial or full payout from the
Plan. The payout shall not exceed the lesser of the Participant's Account
Balance, calculated as if such Participant were receiving a Termination Benefit,
or the amount reasonably needed to satisfy the Unforeseeable Financial
Emergency. If, subject to the sole discretion of the Committee, the petition for
a suspension and/or payout is approved, suspension shall take effect upon the
date of approval and any payout shall be made within 60 days of the date of
approval. The payment of any amount under this Section 4.3 shall not be subject
to the Deduction Limitation.

4.4Withdrawal Election.    A Participant (or, after the Participant's death, his
or her Beneficiary) may elect, at any time, to withdraw all of his or her
Account Balance, adjusted as provided below, less

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a withdrawal penalty equal to 10% of such amount (the net amount shall be
referred to as the "Withdrawal Amount"). This election can be made at any time
before or after Retirement, Disability, death or Termination of Employment, and
whether or not the Participant (or Beneficiary) is in the process of being paid
pursuant to an installment payment schedule. Except as provided below, a
Participant's Account Balance shall be 100% of his or her Account Balance as of
the day of the election. If the election is made before the Participant is
eligible to Retire, or before death, a Participant's Withdrawal Amount shall be
his or her Account Balance calculated as if there had occurred a Termination of
Employment as of the day of the election. If the election is made on or after
the Participant is eligible to Retire, the Account Balance shall be calculated
as if the Participant had Retired as of the day of the election. In the case of
Disability, the Account Balance shall be calculated in accordance with
Section 8.2, as if the Committee had deemed the Participant to have terminated
his or her employment. No partial withdrawals of the Withdrawal Amount shall be
allowed. The Participant (or his or her Beneficiary) shall make this election by
giving the Committee advance written notice of the election in a form determined
from time to time by the Committee. The Participant (or his or her Beneficiary)
shall be paid the Withdrawal Amount within 60 days of his or her election. Once
the Withdrawal Amount is paid, the Participant's participation in the Plan shall
terminate and the Participant shall not be eligible to participate in the Plan
for a period of two (2) full Plan Years. The payment of this Withdrawal Amount
shall not be subject to the Deduction Limitation.

ARTICLE 5
Retirement Benefit

5.1Retirement Benefit.    Subject to the Deduction Limitation, a Participant who
Retires shall receive, as a Retirement Benefit, his or her Account Balance.

5.2Payment of Retirement Benefit.    A Participant, in connection with his or
her commencement of participation in the Plan, shall elect on an Election Form
to receive the Retirement Benefit in a lump sum or in substantially equal annual
installments (the latter determined in accordance with Section 3.10 above) over
a period of 5, 10 or 15 years. The Participant may annually change his or her
election to an allowable alternative payout period by submitting a new Election
Form to the Committee, provided that any such Election Form is submitted at
least 1 year prior to the Participant's Retirement and is accepted by the
Committee in its sole discretion. The Election Form most recently accepted by
the Committee shall govern the payout of the Retirement Benefit. If a
Participant does not make any election with respect to the payment of the
Retirement Benefit, then such benefit shall be payable in a lump sum. The lump
sum payment shall be made, or installment payments shall commence, no later than
60 days after the date the Participant Retires. In the event the Participant
elects to receive installments, remaining annual installments shall be paid
within 60 days of the beginning of each calendar year, commencing on the
calendar year following the calendar year in which the first installment payment
is made. Any payment made shall be subject to the Deduction Limitation.

5.3Death Prior to Completion of Retirement Benefit.    If a Participant dies
after Retirement but before the Retirement Benefit is paid in full, the
Participant's unpaid Retirement Benefit payments shall continue and shall be
paid to the Participant's Beneficiary (a) over the remaining number of years and
in the same amounts as that benefit would have been paid to the Participant had
the Participant survived, or (b) in a lump sum, if requested by the Beneficiary
and allowed in the sole discretion of the Committee, that is equal to the
Participant's unpaid remaining Account Balance.

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ARTICLE 6
Pre-Retirement Survivor Benefit

6.1Pre-Retirement Survivor Benefit.    Subject to the Deduction Limitation, the
Participant's Beneficiary shall receive a Pre-Retirement Survivor Benefit equal
to the Participant's Account Balance, if the Participant dies before he or she
Retires, experiences a Termination of Employment or suffers a Disability.

6.2Payment of Pre-Retirement Survivor Benefit.    A Participant, in connection
with his or her commencement of participation in the Plan, shall elect on an
Election Form whether the Pre-Retirement Survivor Benefit shall be received by
his or her Beneficiary in a lump sum or in substantially equal annual
installments (the latter determined in accordance with Section 3.10 above) over
a period of 5, 10 or 15 years. The Participant may annually change this election
to an allowable alternative payout period by submitting a new Election Form to
the Committee, which form must be accepted by the Committee in its sole
discretion. The Election Form most recently accepted by the Committee prior to
the Participant's death shall govern the payout of the Participant's
Pre-Retirement Survivor Benefit. If a Participant does not make any election
with respect to the payment of the Pre-Retirement Survivor Benefit, then such
benefit shall be paid in a lump sum. Despite the foregoing, if the Participant's
Account Balance at the time of his or her death is less than $25,000, payment of
the Pre-Retirement Survivor Benefit may be made, in the sole discretion of the
Committee, in a lump sum or annual installment payments that do not exceed five
years in duration. The lump sum payment shall be made, or installment payments
shall commence, no later than 60 days after the date the Committee is provided
with proof that is satisfactory to the Committee of the Participant's death. In
the event the Participant elected to receive installments, remaining annual
installments shall be paid within 60 days of the beginning of each calendar
year, commencing on the calendar year following the calendar year in which the
first installment payment is made. Any payment made shall be subject to the
Deduction Limitation.

ARTICLE 7
Termination Benefit

7.1Termination Benefit.    Subject to the Deduction Limitation, the Participant
shall receive a Termination Benefit, which shall be equal to the Participant's
Account Balance, with interest credited in the manner provided in Section 3.9
above, but using the applicable interest rate set forth in the following
schedule, if a Participant experiences a Termination of Employment prior to his
or her Retirement, death or Disability:

Completion of Years of Plan Participation

--------------------------------------------------------------------------------

  Applicable Rate

--------------------------------------------------------------------------------

Less than 5 years   Crediting Rate 5 years or more   Preferred Rate

7.2Payment of Termination Benefit.    If the Participant's Account Balance at
the time of his or her Termination of Employment is less than $25,000, payment
of his or her Termination Benefit shall be paid in a lump sum. If his or her
Account Balance at such time is equal to or greater than that amount, the
Committee, in its sole discretion, may cause the Termination Benefit to be paid
in a lump sum or in substantially equal annual installment payments over a
period of time that does not exceed five years in duration (the latter
determined in accordance with Section 3.10 above). The lump sum payment shall be
made, or installment payments shall commence, no later than 60 days after the
date of the Participant's Termination of Employment. In the event the Committee
elects to pay installments, remaining annual installments shall be paid within
60 days of the beginning of each calendar year, commencing on the calendar year
following the calendar year in

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which the first installment payment is made. Any payment made shall be subject
to the Deduction Limitation.

ARTICLE 8
Disability Waiver and Benefit

8.1Disability Waiver.

(aWaiver of Deferral.    A Participant who is determined by the Committee to be
suffering from a Disability shall be (i) excused from fulfilling that portion of
the Annual Deferral Amount commitment that would otherwise have been withheld
from a Participant's Base Annual Salary, Bonus, Commissions and/or Directors
Fees for the Plan Year during which the Participant first suffers a Disability
and (ii) excused from fulfilling any unexercised Stock Option Deferral Amount
commitments. During the period of Disability, the Participant shall not be
allowed to make any additional deferral elections, but will continue to be
considered a Participant for all other purposes of this Plan.

(bReturn to Work.    If a Participant returns to employment with an Employer, or
service as a Director, after a Disability ceases, the Participant may elect to
defer an Annual Deferral Amount and Stock Option Deferral Amount for the Plan
Year following his or her return to employment or service and for every Plan
Year thereafter while a Participant in the Plan; provided such deferral
elections are otherwise allowed and an Election Form is delivered to and
accepted by the Committee for each such election in accordance with Section 3.3
above.

8.2Continued Eligibility; Disability Benefit.    A Participant suffering a
Disability shall, for benefit purposes under this Plan, continue to be
considered to be employed, or in the service of the Company as a Director, and
shall be eligible for the benefits provided for in Articles 4, 5, 6 or 7 in
accordance with the provisions of those Articles. Notwithstanding the above, the
Committee shall have the right, in its sole and absolute discretion and for
purposes of this Plan only, and must in the case of a Participant who is
otherwise eligible to Retire, deem the Participant to have experienced a
Termination of Employment, or in the case of a Participant who is eligible to
Retire, to have Retired at any time (or in the case of a Participant who is
eligible to Retire, as soon as practicable) after such Participant is determined
to be suffering a Disability, in which case the Participant shall receive a
Disability Benefit equal to his or her Account Balance at the time of the
Committee's determination. The Disability Benefit shall be paid in a lump sum or
in substantially equal annual installment payments over a period of time that
does not exceed five years in duration (the latter determined in accordance with
Section 3.10 above); provided, however, that should the Participant otherwise
have been eligible to Retire, he or she shall be paid in accordance with
Article 5. The lump sum payment shall be made, or installment payments shall
commence, no later than 60 days after the date the Committee exercises of such
right. In the event the Committee elects to pay installments, remaining annual
installments shall be paid within 60 days of the beginning of each calendar
year, commencing on the calendar year following the calendar year in which the
first installment payment is made. Any payment made shall be subject to the
Deduction Limitation.

ARTICLE 9
Beneficiary Designation

9.1Beneficiary.    Each Participant shall have the right, at any time, to
designate his or her Beneficiary(ies) (both primary as well as contingent) to
receive any benefits payable under the Plan to a beneficiary upon the death of a
Participant. The Beneficiary designated under this Plan may be the same as or
different from the Beneficiary designation under any other plan of an Employer
in which the Participant participates.

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9.2Beneficiary Designation; Change; Spousal Consent.    A Participant shall
designate his or her Beneficiary by completing and signing the Beneficiary
Designation Form, and returning it to the Committee or its designated agent. A
Participant shall have the right to change a Beneficiary by completing, signing
and otherwise complying with the terms of the Beneficiary Designation Form and
the Committee's rules and procedures, as in effect from time to time. If the
Participant names someone other than his or her spouse as a Beneficiary, a
spousal consent, in the form designated by the Committee, must be signed by that
Participant's spouse and returned to the Committee. Upon the acceptance by the
Committee of a new Beneficiary Designation Form, all Beneficiary designations
previously filed shall be canceled. The Committee shall be entitled to rely on
the last Beneficiary Designation Form filed by the Participant and accepted by
the Committee prior to his or her death.

9.3Acknowledgment.    No designation or change in designation of a Beneficiary
shall be effective until received, accepted and acknowledged in writing by the
Committee or its designated agent.

9.4No Beneficiary Designation.    If a Participant fails to designate a
Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all designated
Beneficiaries predecease the Participant or die prior to complete distribution
of the Participant's benefits, then the Participant's designated Beneficiary
shall be deemed to be his or her surviving spouse. If the Participant has no
surviving spouse, the benefits remaining under the Plan to be paid to a
Beneficiary shall be payable to the executor or personal representative of the
Participant's estate.

9.5Doubt as to Beneficiary.    If the Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this Plan, the Committee shall have
the right, exercisable in its discretion, to cause the Participant's Employer to
withhold such payments until this matter is resolved to the Committee's
satisfaction.

9.6Discharge of Obligations.    The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the Committee
from all further obligations under this Plan with respect to the Participant,
and that Participant's Plan Agreement shall terminate upon such full payment of
benefits.

ARTICLE 10
Leave of Absence

10.1Paid Leave of Absence.    If a Participant is authorized by the
Participant's Employer for any reason to take a paid leave of absence from the
employment of the Employer, the Participant shall continue to be considered
employed by the Employer and the Annual Deferral Amount shall continue to be
withheld during such paid leave of absence in accordance with Section 3.4.

10.2Unpaid Leave of Absence.    If a Participant is authorized by the
Participant's Employer for any reason to take an unpaid leave of absence from
the employment of the Employer, the Participant shall continue to be considered
employed by the Employer and the Participant shall be excused from making
deferrals until the earlier of the date the leave of absence expires or the
Participant returns to a paid employment status. Upon such expiration or return,
deferrals shall resume for the remaining portion of the Plan Year in which the
expiration or return occurs, based on the deferral election, if any, made for
that Plan Year. If no election was made for that Plan Year, no deferral shall be
withheld.

ARTICLE 11
Termination, Amendment or Modification

11.1Termination.    Although the Company anticipates that it will continue the
Plan for an indefinite period of time, there is no guarantee that it will
continue the Plan or will not terminate the Plan

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at any time in the future. Accordingly, the Company reserves the right to
discontinue its sponsorship of the Plan, the sponsorship of the Plan by any
Employer and/or to terminate the Plan, at any time, with respect to the
participating Employees of any Employer or any Directors, by the action of the
Board. Upon the termination of the Plan with respect to any Employer, the Plan
Agreements of the affected Participants who are employed by that Employer, and
in the case of termination with respect to the Company, in the service of that
Company as Directors, shall terminate and their Account Balances, determined as
if they had experienced a Termination of Employment on the date of Plan
termination or, if Plan termination occurs after the date upon which a
Participant was eligible to Retire, then with respect to that Participant as if
he or she had Retired on the date of Plan termination, shall be paid to the
Participants as follows: Prior to a Change in Control, if the Plan is terminated
with respect to all the Participants of an Employer, the Company shall have the
right, in its sole discretion, and notwithstanding any elections made by the
Participant, to cause such benefits to be paid in a lump sum or annual
installments for up to 15 years, with interest credited during the installment
period as provided in Section 3.10. The lump sum payment shall be made, or
installment payments shall commence, no later than 60 days after the date the
termination. In the event installment payments are to be made, remaining annual
installments shall be paid within 60 days of the beginning of each calendar
year, commencing on the calendar year following the calendar year in which the
first installment payment is made. If the Plan is terminated with respect to
less than all of Participants of an Employer, an Employer shall be required to
pay such benefits in a lump sum. After a Change in Control, the Employer shall
be required to pay such benefits in a lump sum. The termination of the Plan
shall not adversely affect any Participant or Beneficiary who has become
entitled to the payment of any benefits under the Plan as of the date of
termination; provided however, that the Employer shall have the right to
accelerate installment payments without a premium or prepayment penalty by
paying the Account Balance in a lump sum or in installments using fewer years
(provided that the present value of all payments that will have been received by
a Participant at any given point of time under the different payment schedule
shall equal or exceed the present value of all payments that would have been
received at that point in time under the original payment schedule).

11.2Amendment.    The Company may, at any time, amend or modify the Plan in
whole or in part with respect to an Employer by action of the Board; provided,
however, that (i) no amendment or modification shall be effective to decrease or
restrict the value of a Participant's Account Balance in existence at the time
the amendment or modification is made, calculated as if the Participant had
experienced a Termination of Employment as of the effective date of the
amendment or modification, or, if the amendment or modification occurs after the
date upon which the Participant was eligible to Retire, the Participant had
Retired as of the effective date of the amendment or modification, and (ii) no
amendment or modification of this Section 11.2 or Sections 12.2, 12.4, 12.5 or
12.6 of the Plan shall be effective. The amendment or modification of the Plan
shall not affect any Participant or Beneficiary who has become entitled to the
payment of benefits under the Plan as of the date of the amendment or
modification; provided, however, that the Employer shall have the right to
accelerate installment payments by paying the Account Balance in a lump sum or
in installments using fewer years that will have been received by a Participant
at any given point in time under the different payment schedule shall equal or
exceed the present value of all payments that would have been received at that
point in time under the original payment schedule).

11.3Plan Agreement.    Despite the provisions of Sections 11.1 and 11.2 above,
if a Participant's Plan Agreement contains benefits or limitations that are not
in this Plan document, the provisions in the Plan Agreement may only be amended
or terminated with the consent of the Participant.

11.4Interest Rate in the Event of a Change in Control.    If a Change in Control
occurs, the applicable interest rate to be used in determining a Participant's
benefit in connection with a Termination of

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Employment after the Change in Control, or a Plan termination, amendment or
modification under Sections 11.1 and 11.2, shall be the Preferred Rate. However,
the Crediting Rate for the applicable Plan Year, and not the Preferred Rate,
shall be used as the discount rate for determining present value.

11.5Effect of Payment.    The full payment of the applicable benefit under
Section 4.4 or Articles 5, 6, 7 or 8 of the Plan shall completely discharge all
obligations to a Participant and his or her designated Beneficiaries under this
Plan and the Participant's Plan Agreement shall terminate.

ARTICLE 12
Administration

12.1Committee Duties.    Except as otherwise provided in this Section 12, this
Plan shall be administered by a Committee which shall initially consist of the
Chief Executive Officer, Chief Financial Officer and Vice President of Human
Resources of the Company. The Board, in its sole discretion, shall have the
power to appoint or remove members of the Committee. Members of the Committee
may be Participants under this Plan. The Committee shall also have the
discretion and authority to (i) make, amend, interpret, and enforce all
appropriate rules and regulations for the administration of this Plan and
(ii) decide or resolve any and all questions including interpretations of this
Plan, as may arise in connection with the Plan. Any individual serving on the
Committee who is a Participant shall not vote or act on any matter relating
solely to himself or herself. When making a determination or calculation, the
Committee shall be entitled to rely on information furnished by a Participant or
the Company.

12.2Administration Upon Change In Control.    For purposes of this Plan, the
Company shall be the "Administrator" at all times prior to the occurrence of a
Change in Control. Upon and after the occurrence of a Change in Control, the
"Administrator" shall be an independent third party selected by the Trustee and
approved by the individual who, immediately prior to such event, was the
Company's Chief Executive Officer or, if not so identified, the Company's
highest ranking officer (the "Ex-CEO"). The Administrator shall have the
discretionary power to determine all questions arising in connection with the
administration of the Plan and the interpretation of the Plan and Trust
including, but not limited to benefit entitlement determinations; provided,
however, upon and after the occurrence of a Change in Control, the Administrator
shall have no power to direct the investment of Plan or Trust assets or select
any investment manager or custodial firm for the Plan or Trust. Upon and after
the occurrence of a Change in Control, the Company must: (1) pay all reasonable
administrative expenses and fees of the Administrator; (2) indemnify the
Administrator against any costs, expenses and liabilities including, without
limitation, attorney's fees and expenses arising in connection with the
performance of the Administrator hereunder, except with respect to matters
resulting from the gross negligence or willful misconduct of the Administrator
or its employees or agents; and (3) supply full and timely information to the
Administrator on all matters relating to the Plan, the Trust, the Participants
and their Beneficiaries, the Account Balances of the Participants, the date of
circumstances of the Retirement, Disability, death or Termination of Employment
of the Participants, and such other pertinent information as the Administrator
may reasonably require. Upon and after a Change in Control, the Administrator
may be terminated (and a replacement appointed) by the Trustee only with the
approval of the Ex-CEO. Upon and after a Change in Control, the Administrator
may not be terminated by the Company.

12.3Agents.    In the administration of this Plan, the Committee may, from time
to time, employ agents and delegate to them such administrative duties as it
sees fit (including acting through a duly appointed representative) and may from
time to time consult with counsel who may be counsel to any Employer.

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12.4Binding Effect of Decisions.    The decision or action of the Administrator
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules and
regulations promulgated hereunder shall be final and conclusive and binding upon
all persons having any interest in the Plan.

12.5Indemnity of Committee.    All Employers shall indemnify and hold harmless
the members of the Committee, and any Employee to whom duties of the Committee
may be delegated, and the Administrator against any and all claims, losses,
damages, expenses or liabilities arising from any action or failure to act with
respect to this Plan, except in the case of willful misconduct by the Committee,
any of its members, any such Employee or the Administrator.

12.6Employer Information.    To enable the Committee and/or Administrator to
perform its functions, the Company and each Employer shall supply full and
timely information to the Committee and/or Administrator, as the case may be, on
all matters relating to the compensation of its Participants, the date and
circumstances of the Retirement, Disability, death or Termination of Employment
of its Participants, and such other pertinent information as the Committee or
Administrator may reasonably require.

ARTICLE 13
Other Benefits and Agreements

13.1Coordination with Other Benefits.    The benefits provided for a Participant
and Participant's Beneficiary under the Plan are in addition to any other
benefits available to such Participant under any other plan or program for
employees of the Participant's Employer. The Plan shall supplement and shall not
supersede, modify or amend any other such plan or program except as may
otherwise be expressly provided.

ARTICLE 14
Claims Procedures

14.1Presentation of Claim.    Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below as a
"Claimant") may deliver to the Committee a written claim for a determination
with respect to the amounts distributable to such Claimant from the Plan. If
such a claim relates to the contents of a notice received by the Claimant, the
claim must be made within 60 days after such notice was received by the
Claimant. All other claims must be made within 180 days of the date on which the
event that caused the claim to arise occurred. The claim must state with
particularity the determination desired by the Claimant.

14.2Notification of Decision.    The Committee shall consider a Claimant's claim
within a reasonable time, and shall notify the Claimant in writing:

(athat the Claimant's requested determination has been made, and that the claim
has been allowed in full; or

(bthat the Committee has reached a conclusion contrary, in whole or in part, to
the Claimant's requested determination, and such notice must set forth in a
manner calculated to be understood by the Claimant:

(ithe specific reason(s) for the denial of the claim, or any part of it;

(iispecific reference(s) to pertinent provisions of the Plan upon which such
denial was based;

(iiia description of any additional material or information necessary for the
Claimant to perfect the claim, and an explanation of why such material or
information is necessary; and

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(ivan explanation of the claim review procedure set forth in Section 14.3 below.

14.3Review of a Denied Claim.    Within 60 days after receiving a notice from
the Committee that a claim has been denied, in whole or in part, a Claimant (or
the Claimant's duly authorized representative) may file with the Committee a
written request for a review of the denial of the claim. Thereafter, but not
later than 30 days after the review procedure began, the Claimant (or the
Claimant's duly authorized representative):

(amay review pertinent documents;

(bmay submit written comments or other documents; and/or

(cmay request a hearing, which the Committee, in its sole discretion, may grant.

14.4Decision on Review.    The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written request for
review of the denial, unless a hearing is held or other special circumstances
require additional time, in which case the Committee's decision must be rendered
within 120 days after such date. Such decision must be written in a manner
calculated to be understood by the Claimant, and it must contain:

(aspecific reasons for the decision;

(bspecific reference(s) to the pertinent Plan provisions upon which the decision
was based; and

(csuch other matters as the Committee deems relevant.

14.5Legal Action.    A Claimant's compliance with the foregoing provisions of
this Article 14 is a mandatory prerequisite to a Claimant's right to commence
any legal action with respect to any claim for benefits under this Plan.

ARTICLE 15
Trust

15.1Establishment of the Trust.    The Company shall establish the Trust, and
each Employer shall at least annually transfer over to the Trust such assets as
the Employer determines, in its sole discretion, are necessary to provide, on a
present value basis, for its respective future liabilities created with respect
to the Annual Deferral Amounts, Annual Company Amounts, Annual Stock Option
Deferral Amounts, as well as any debits and credits to the Participants' Account
Balances for all periods prior to the transfer, taking into consideration the
value of the assets in the Trust at the time of the transfer.

15.2Interrelationship of the Plan and the Trust.    The provisions of the Plan
and the Plan Agreement shall govern the rights of a Participant to receive
distributions pursuant to the Plan. The provisions of the Trust shall govern the
rights of the Employers, Participants and the creditors of the Employers to the
assets transferred to the Trust. Each Employer shall at all times remain liable
to carry out its obligations under the Plan.

15.3Distributions From the Trust.    Each Employer's obligations under the Plan
may be satisfied with Trust assets distributed pursuant to the terms of the
Trust, and any such distribution shall reduce the Employer's obligations under
this Agreement.

ARTICLE 16
Miscellaneous

16.1Status of Plan.    The Plan is intended to be a plan that is not qualified
within the meaning of Code Section 401(a) and that "is unfunded and is
maintained by an employer primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated

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employees" within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(l).
The Plan shall be administered and interpreted to the extent possible in a
manner consistent with that intent.

16.2Unsecured General Creditor.    Participants and their Beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interests or
claims in any property or assets of an Employer. For purposes of the payment of
benefits under this Plan, any and all of an Employer's assets shall be, and
remain, the general, unpledged unrestricted assets of the Employer. An
Employer's obligation under the Plan shall be merely that of an unfunded and
unsecured promise to pay money in the future.

16.3Employer's Liability.    An Employer's liability for the payment of benefits
shall be defined only by the Plan and the Plan Agreement, as entered into
between the Employer and a Participant. An Employer shall have no obligation to
a Participant under the Plan except as expressly provided in the Plan and his or
her Plan Agreement.

16.4Nonassignability.    Neither a Participant nor any other person shall have
any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate, alienate or convey in advance of
actual receipt, the amounts, if any, payable hereunder, or any part thereof,
which are, and all rights to which are expressly declared to be, unassignable
and non-transferable. No part of the amounts payable shall, prior to actual
payment, be subject to seizure, attachment, garnishment or sequestration for the
payment of any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, be transferable by operation of law in the
event of a Participant's or any other person's bankruptcy or insolvency or be
transferable to a spouse as a result of a property settlement or otherwise.

16.5Not a Contract of Employment.    The terms and conditions of this Plan shall
not be deemed to constitute a contract of employment between any Employer and
the Participant. Such employment is hereby acknowledged to be an "at will"
employment relationship that can be terminated at any time for any reason, or no
reason, with or without cause, and with or without notice, unless expressly
provided in a written employment agreement. Nothing in this Plan shall be deemed
to give a Participant the right to be retained in the service of any Employer,
either as an Employee or a Director, or to interfere with the right of any
Employer to discipline or discharge the Participant at any time.

16.6Furnishing Information.    A Participant or his or her Beneficiary will
cooperate with the Committee by furnishing any and all information requested by
the Committee and take such other actions as may be requested in order to
facilitate the administration of the Plan and the payments of benefits
hereunder, including but not limited to taking such physical examinations as the
Committee may deem necessary.

16.7Terms.    Whenever any words are used herein in the masculine, they shall be
construed as though they were in the feminine in all cases where they would so
apply; and whenever any words are used herein in the singular or in the plural,
they shall be construed as though they were used in the plural or the singular,
as the case may be, in all cases where they would so apply.

16.8Captions.    The captions of the articles, sections and paragraphs of this
Plan are for convenience only and shall not control or affect the meaning or
construction of any of its provisions.

16.9Governing Law.    Subject to ERISA, the provisions of this Plan shall be
construed and interpreted according to the internal laws of the State of
California without regard to its conflicts of laws principles.

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16.10Notice.    Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and hand-delivered,
or sent by registered or certified mail, to the address below:

DCP Committee
Southwest Water Company
225 North Barranca Avenue, Suite 200
West Covina, California 91791-1605

Such notice shall be deemed given as of the date of delivery or, if delivery is
made by mail, as of the date shown on the postmark on the receipt for
registration or certification.

Any notice or filing required or permitted to be given to a Participant under
this Plan shall be sufficient if in writing and hand-delivered, or sent by mail,
to the last known address of the Participant.

16.11Successors.    The provisions of this Plan shall bind and inure to the
benefit of the Participant's Employer and its successors and assigns and the
Participant and the Participant's designated Beneficiaries.

16.12Spouse's Interest.    The interest in the benefits hereunder of a spouse of
a Participant who has predeceased the Participant shall automatically pass to
the Participant and shall not be transferable by such spouse in any manner,
including but not limited to such spouse's will, nor shall such interest pass
under the laws of intestate succession.

16.13Validity.    In case any provision of this Plan shall be illegal or invalid
for any reason, said illegality or invalidity shall not affect the remaining
parts hereof, but this Plan shall be construed and enforced as if such illegal
or invalid provision had never been inserted herein.

16.14Incompetent.    If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a minor, a person declared incompetent
or to a person incapable of handling the disposition of that person's property,
the Committee may direct payment of such benefit to the guardian, legal
representative or person having the care and custody of such minor, incompetent
or incapable person. The Committee may require proof of minority, incompetence,
incapacity or guardianship, as it may deem appropriate prior to distribution of
the benefit. Any payment of a benefit shall be a payment for the account of the
Participant and the Participant's Beneficiary, as the case may be, and shall be
a complete discharge of any liability under the Plan for such payment amount.

16.15Court Order.    The Committee is authorized to make any payments directed
by court order in any action in which the Plan or the Committee has been named
as a party. In addition, if a court determines that a spouse or former spouse of
a Participant has an interest in the Participant's benefits under the Plan in
connection with a property settlement or otherwise, the Committee, in its sole
discretion, shall have the right, notwithstanding any election made by a
Participant, to immediately distribute the spouse's or former spouse's interest
in the Participant's benefits under the Plan to that spouse or former spouse.

16.16Distribution in the Event of Taxation.

(aGeneral.    If, for any reason, all or any portion of a Participant's benefit
under this Plan becomes taxable to the Participant prior to receipt, a
Participant may petition the Committee before a Change in Control, or the
Trustee after a Change in Control, for a distribution of that portion of his or
her benefit that has become taxable. Upon the grant of such a petition, which
grant shall not be unreasonably withheld (and, after a Change in Control, shall
be granted), a Participant's Employer shall distribute to the Participant
immediately available funds in an amount equal to the taxable portion of his or
her benefit (which amount shall not

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exceed a Participant's unpaid Account Balance under the Plan). If the petition
is granted, the tax liability distribution shall be made within 90 days of the
date when the Participant's petition is granted. Such a distribution shall
affect and reduce the benefits to be paid under this Plan.

(bTrust.    If the Trust terminates in accordance with [Section 3.6(e)] of the
Trust and benefits are distributed from the Trust to a Participant in accordance
with that Section, the Participant's benefits under this Plan shall be reduced
to the extent of such distributions.

16.17Insurance.    The Employers, on their own behalf or on behalf of the
Trustee, and, in their sole discretion, may apply for and procure insurance on
the life of the Participant, in such amounts and in such forms as the Trust may
choose. The Employers or the Trustee, as the case may be, shall be the sole
owner and beneficiary of any such insurance. The Participant shall have no
interest whatsoever in any such policy or policies, and at the request of the
Employers shall submit to medical examinations and supply such information and
execute such documents as may be required by the insurance company or companies
to whom the Employers have applied for insurance.

16.18Legal Fees To Enforce Rights After Change in Control.    The Company and
each Employer is aware that upon the occurrence of a Change in Control, the
Board or the board of directors of the Participant's Employer (which might then
be composed of new members) or a shareholder of the Company or the Participant's
Employer, or of any successor corporation might then cause or attempt to cause
the Company or the Participant's Employer or such successor to refuse to comply
with its obligations under the Plan and might cause or attempt to cause the
Company or the Participant's Employer to institute, or may institute, litigation
seeking to deny Participants the benefits intended under the Plan. In these
circumstances, the purpose of the Plan could be frustrated. Accordingly, if,
following a Change in Control, it should appear to any Participant that the
Company, the Participant's Employer or any successor corporation has failed to
comply with any of its obligations under the Plan or any agreement thereunder
or, if the Company, such Employer or any other person takes any action to
declare the Plan void or unenforceable or institutes any litigation or other
legal action designed to deny, diminish or to recover from any Participant the
benefits intended to be provided, then the Company and the Participant's
Employer irrevocably authorize such Participant to retain counsel of his or her
choice at the expense of the Company and the Employer (who shall be jointly and
severally liable) to represent such Participant in connection with the
initiation or defense of any litigation or other legal action, whether by or
against the Company, the Participant's Employer or any director, officer,
shareholder or other person affiliated with the Company, the Participant's
Employer or any successor thereto in any jurisdiction.

        IN WITNESS WHEREOF, the Company has signed this Plan document as of
January 1, 2002.

    "Company"
 
 
SOUTHWEST WATER COMPANY
a Delaware corporation
    
 
 
      By: /s/  SHELLEY A. FARNHAM      

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    Title: VP, Human Resources

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SOUTHWEST WATER COMPANY DEFERRED COMPENSATION PLAN Effective January 1, 2002