EX-10.5



 





Exhibit 10.5




SECOND AMENDMENT TO THE

CONNECTICUT WATER SERVICE, INC.

PERFORMANCE STOCK PROGRAM




(amended and restated as of April 26, 2002)




     WHEREAS, the Board of Directors of Connecticut Water Service, Inc. (the “Company”) adopted the
Connecticut Water Service Inc. Performance Stock Program (the “Plan”) in 1994 and the Company’s
shareholders approved the adoption of the Plan; and



     WHEREAS, the Plan was amended in 1999 and amended and restated in 2002 and further amended in
2005; and



     WHEREAS, the American Jobs Creation Act of 2004 added a new section 409A to the Internal
Revenue Code of 1986, as amended; and



     WHEREAS, the Company wishes to amend the Plan to make it compliant with Section 409A and
regulations issued thereunder (collectively, “Section 409A”).



     NOW, THEREFORE, the Plan is amended as set forth below, effective January 1, 2008:



     1. Section 8(c) is amended to read as follows:



     (c) Payment of Performance Share or Cash Unit Awards. Performance or Cash Unit Awards shall
be payable in that number of shares of Stock or that amount of cash determined in accordance with
Section 8(b). The amount of any payment made in cash shall be based upon the Fair Market Value of
the Stock on the business day prior to payment. Payments of Performance Unit Awards shall be made
as soon as practicable after the completion of an Award Period; provided, however, that if a
Participant makes the election described below, Performance Share or Cash Units (with
any Cash Units being converted into equivalent Performance Shares) shall instead be credited to the



 









 







Participant’s Performance Share Account. Such credit of Performance Shares to a Participant’s
Performance Share Account shall be made as of the same date as payment of the Award would have been
made to the Participant had no prior election been made.




     (i) Elections. Any election to have an Award or a portion of an Award credited to a
Performance Share Account shall be made on a written form provided by the Company for such
purpose and shall only be effective with respect to Awards that may be made on and after
the January 1 following the Company’s receipt of such form, provided that such form is
received by the December 24 prior to the applicable January 1. Any such election shall be
made only in increments of ten percent (10%) of the Award (rounded to the nearest whole
share) and shall be effective only for Awards made during the year in which the election
becomes effective.




     (ii) Performance Share Account. The Company shall maintain on its books and records a
Performance Share Account to record its liability for future payments to the Participant or
his beneficiary pursuant to the Plan. However, a Performance Share Account under the Plan
shall constitute an unfunded arrangement; the Company shall not be required to segregate or
earmark any of its assets for the benefit of the Participant or his beneficiary, and the
amount reflected in a Performance Share Account shall be available for the Company’s
general corporate purposes and shall be available to the Company’s general creditors. The
amount reflected in a Performance Share Account shall not be subject in any manner to
anticipation, alienation, transfer or assignment by the
Participant or his or her beneficiary, and any attempt to anticipate, alienate, transfer or
assign the same shall be void. Neither the Participant nor his or her beneficiary may
assert any right or claim against any specific assets of the



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Company in respect of a
Performance Share Account, and the Participant and his or her beneficiary shall have only a
contractual right against the Company for the amount reflected in a Performance Share
Account.




     Notwithstanding the foregoing, in order to pay amounts which may become due under the
Plan in respect of a Participant’s Performance Share Account, the Company may establish a
grantor trust (hereinafter the “Trust”) within the meaning of Section 671 of the Code.
Some or all of the assets of the Trust may be dedicated to providing benefits to the
Participants pursuant to the Plan, but, nevertheless, all assets of the Trust shall at all
times remain subject to the claims of the Company’s general creditors in the event of the
Company’s bankruptcy or insolvency.




     (iii) Dividend Equivalents. On every date on which a dividend or other distribution
is paid with respect to Common Stock, commencing with the first such payment date after the
date on which a Performance Share is credited to a Participant’s Performance Share Account
and continuing until such Performance Share is either forfeited or paid out, there shall be
credited to the Participant’s Performance Share Account a Dividend Equivalent in respect of
such Performance Share. A Dividend Equivalent shall mean, with respect to a whole
Performance Share credited to a Participant’s Performance Share Account, a measure of value
equal to the fractional share of Common Stock that could be purchased with the amount that
would have been paid to the Participant
as a dividend or other distribution if the Participant had owned a whole share of Common
Stock in lieu of said whole Performance Share, the date of such deemed purchase being the
dividend payment date. Dividend Equivalents are expressed in the form of Performance
Shares.



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     (iv) Participant Not a Stockholder. The Participant shall have no stockholder rights
with respect to any shares of Common Stock in respect of which Performance Shares are
credited to his or her Performance Share Account.




     (v) Payments in Respect of Performance Shares.




     1. Termination of Employment for Reasons Other than Death: In the event of a
Participant’s Normal Termination or termination by reason of Disability without a
payment date having been specified as provided below, such Participant shall be
entitled to receive payment in respect of the entire amount then credited to his or
her Performance Share Account. For purposes of this Section 8, Normal Termination
or termination by reason of Disability shall be deemed to occur at the time the
Participant experiences a “separation from service” as that term is defined under
Section 409A of the Code. Such payment shall be made in the form of the number of
shares of Common Stock equal to the number of whole Performance Shares then
credited to the Participant’s Performance Share Account, with any fractional
Performance Share being paid in cash determined on the basis of the value of a
corresponding fractional share of Common Stock on the business day preceding the
date of payment. Said shares of Common
Stock and any cash amount shall be transferred to the Participant sixty (60)
days after the Participant’s separation from service. Notwithstanding the
foregoing sentence, if a Participant is a “specified employee” as defined under
Section 409A of the Code, at the time of termination, payment hereunder shall be
made six (6) months following the date on which the Participant would have been
paid had he not been a specified employee on the date of termination.



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     2. Death While Employed by the Company: In the event of a Participant’s death
prior to separation from service, the Participant’s beneficiary shall be entitled
to receive payment in respect of the entire amount then credited to his or her
Performance Share Account. Such payment shall be made in the form of the number of
shares of Common Stock equal to the number of whole Performance Shares then
credited to the Participant’s Performance Share Account, with any fractional
Performance Share being paid in cash determined on the basis of the value of a
corresponding fractional share of Common Stock on the business day preceding the
date of payment. Said shares of Common Stock and any cash amount shall be
transferred to the Participant’s beneficiary sixty (60) days after the death of the
Participant.




     3. Hardship Payment: Notwithstanding anything to the contrary herein, if the
Committee, upon written petition of the Participant, determines in the Committee’s
sole discretion, that the Participant has suffered an unforeseeable emergency (as
hereinafter defined), the Participant shall be entitled to receive an amount not to
exceed the lesser of (i) the amount reasonably necessary to satisfy the
emergency need (including amounts necessary to pay any federal, state or local
income taxes or penalties reasonably anticipated to result from the distribution),
as determined by the Committee; and (ii) the number of Whole Performance Share
Units then credited to the Participant’s Performance Share Account. Such payment
shall be made in cash. In the event of hardship payment in respect of the
Participant’s entire Performance Share Account, any fractional Performance Share
Unit shall be paid in cash determined on the



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basis of the value of a corresponding
fractional share of Common Stock on the business day preceding the date of payment.
For purposes of the foregoing, an “Unforeseeable Emergency” shall mean a severe
financial hardship to the Participant resulting from an illness or accident of the
Participant, the Participant’s spouse, the Participant’s beneficiary, or the
Participant’s dependent (as defined in Section 152 of the Code without regard to
Sections 152(b)(1), (b)(2), and (d)(1)(B); loss of the Participant’s property due
to casualty (including the need to rebuilt a home not otherwise covered by
insurance) or other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the Participant or the need to pay the funeral
expenses of a spouse, beneficiary or a dependent (as defined in Section 152 of the
Code without regard to Section 152(a)(1), (b)(2), and (d)(1)(B).



     2. Section 9(g) is amended in its entirety and the following is substituted in lieu thereof:
[Intentionally omitted]



     3. This Amendment is effective as of January 1, 2008.




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