EX-10.3



 





Exhibit 10.3




AMENDED AND RESTATED

DEFERRED COMPENSATION AGREEMENT




     THIS AGREEMENT (the “Deferred Compensation Agreement”) is made as
of the 2nd day of January 2007 and between The Connecticut Water Company (together with any affiliated companies hereinafter
collectively referred to as the “Employer”) and Marshall T. Chiaraluce (hereinafter
referred to as the “Employee”).



WITNESSETH:




     WHEREAS, the Employee is among a select group of management or highly compensated employees
of the Employer;



     WHEREAS, the Employer and the Employee entered into an Amended and Restated Deferred
Compensation Agreement dated May 14, 1999; and



     WHEREAS, the parties wish to amend and restate the Deferred Compensation Agreement to comply
with Section 409A of the Internal Revenue Code as amended;



     WHEREAS, the Employer and the Employee are willing to enter into this Amended and Restated
Deferred Compensation Agreement (the “Agreement”) on the terms herein set forth, effective as of
the date first above written;



     NOW, THEREFORE, in consideration of the premises and the mutual and dependent promises herein,
the parties hereto agree as follows:



     1. DEFERRED COMPENSATION. The Employee may file a written election with the Employer
in the form attached to this Agreement or such other form as may be approved by the Employer to
defer up to 12 percent (12%) of the Employee’s salary. Such amount shall be credited to a Deferred
Compensation Account as provided in Section 2 hereof. This election to defer the receipt of salary
must be made before the beginning of the calendar year for which the salary is earned and shall
remain in effect, unless terminated or changed, or until the date the Employee ceases to be an
employee of the Employer. Any election termination or change of a deferral election must be made
on a form provided by the Employer for such purpose and may only be made with respect to salary
which will be earned on and after the January 1 following the Employer’s receipt of such form
provided that such form is received at least seven (7) days prior to the applicable January 1.



     2. DEFERRED COMPENSATION ACCOUNT. The Employer shall maintain on its books and
records a Deferred Compensation Account to record its liability for future payments of deferred
compensation and interest thereon required to be paid to the Employee or his beneficiary
pursuant to this Agreement. However, the Employer shall not be required to segregate or
earmark any of its assets for the benefit of the Employee or his beneficiary. The amount
reflected in said Deferred Compensation Account shall be available for the



 









 







Employer’s general corporate purposes and shall be available to the Employer’s general
creditors. The amount reflected in said Deferred Compensation Account shall not be subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment by creditors of the Employee or his beneficiary, and any attempt to
anticipate, alienate, transfer, assign or attach the same shall be void. Neither the Employee
nor his beneficiary may assert any right or claim against any specific assets of the Employer.
The Employee or his beneficiary shall have only a contractual right against the Employer for
the amount reflected in said Deferred Compensation Account and shall have the status of general
unsecured creditors. Notwithstanding the foregoing, in order to pay amounts which may become
due under this Agreement, the Employer may establish a grantor trust (hereinafter the “Trust”)
within the meaning of Section 671 of the Internal Revenue Code of 1986, as amended. The assets
in such Trust shall at all times be subject to the claims of the general creditors of the
Employer in the event of the Employer’s bankruptcy or insolvency, and neither the Employee nor
any beneficiary shall have any preferred claim or right, or any beneficial ownership interest
in, any such assets of the Trust prior to the time such assets are paid to an Employee or
beneficiary pursuant to this Agreement.



     The Employer shall credit to said Deferred Compensation Account the amount of any salary
to which the Employee becomes entitled and which is deferred pursuant to Section 1 hereof, such
amount to be credited as of the first business day of each month. The Employer shall also
credit to said Deferred Compensation Account an Interest Equivalent in the amount and manner
set forth in Section 3 hereof.



     3. PAYMENT OF DEFERRED COMPENSATION



     (a) Termination of Employment On or After Attainment of Age 55. If the Employee’s
employment should terminate on or after his attainment of age fifty-five (55) for any reason other
than death or an account of “Cause” as defined in subsection (c) below, he shall be entitled to
receive payment of the entire amount of his Deferred Compensation Account including an Interest
Equivalent, as described below, in the form of an actuarially equivalent life annuity providing for
equal annual payments for the life of the Employee. Such actuarially equivalent life annuity shall
be computed on the basis of a mortality table that assumes a life expectancy of age eighty (80) and
uses the Interest Factor described below. The first annuity payment under this subsection shall be
paid eight (8) months following the date of the Employee’s termination of employment, and
subsequent payments shall be made on anniversaries of that date.



     There shall be credited to the Employee’s Deferred Compensation Account as of each January 1
and July 1, commencing with January 1, 1992 until payment of such account begins, as additional
deferred compensation, an Interest Equivalent equal to fifty percent (50%) of the product of (i)
the AAA Corporate Bond Yield Averages published by Moody’s Bond Survey for the Friday ending on
or immediately preceding the applicable January 1 and July 1 plus 2 percentage points (the
“Interest Factor”), multiplied by (ii) the balance of the Employee’s Deferred Compensation
Account, including the amount of Interest Equivalent previously credited to such Employee’s
account, as of the preceding day (i.e., December 31 or June 30). The Interest Factor used to
compute the annuity payable upon the Employee’s termination of



-2-









 







employment on or after his attainment of age fifty-five (55) shall be calculated based upon
the Interest Factor as of the January 1 or July 1 immediately preceding the date of the
Employee’s termination of employment, whichever shall fall nearer to the date of the
Employee‘s termination of employment.



     (b) Termination of Employment Prior to Attainment of Age 55. If the Employee’s
employment should terminate prior to his attainment of age fifty-five (55) for any reason other
than death or on account of “Cause” as defined in subsection (c) below, the Employee shall be
entitled to receive payment in a lump sum of the entire amount of his Deferred Compensation
Account, including the same Interest Equivalent as described in subsection (a) above. Payment
under this subsection shall be made on the date which is eight (8) months following the
Employee’s termination of employment.



     (c) Termination of Employment for Cause.




     (i) If the employment of the Employee is terminated by the Employer for Cause, the
Employee shall be entitled only to a return of amounts deferred pursuant to Section 1
hereof.




     (ii) If the Employee is so terminated on or after age 55, payment shall be made in
accordance with the terms of Section 3(a) above. However, the Employee shall not be
entitled to the Interest Equivalent for any years prior to such termination, and such
Interest Equivalent shall not be included in determining Employee’s benefit hereunder.
An Interest Factor shall be utilized in calculating the amount of the annuity payable in
accordance with the last sentence of subsection (a) above.




     (iii) If the Employee is so terminated prior to attainment of age 55, payment of
the return of amounts deferred (excluding any Interest Equivalent) shall be made in a
lump sum on the date which is eight (8) months following the Employee’s termination of
employment.




     (iv) As used in this Agreement, the term “Cause” shall mean:




	 	(A)	 	the Employee’s rendering, while employed by the Employer, of
any services, assistance or advice, either directly or indirectly, to any
person, firm or organization competing with, or in opposition to, the
Employer;
	 
	 	(B)	 	the Employee’s allowing, while employed by the Employer, any
use of his name by any person, firm or organization competing with, or in
opposition to, the Employer; or
	 
	 	(C)	 	willful misconduct by the Employee, including, but not
limited to, the commission by the Employee of a felony or the perpetration
by the Employee of a common law fraud upon the Employer.





     (d) Death While Employed. Notwithstanding anything to the contrary contained in



-3-









 







the foregoing, if the Employee should die while employed by the Employer, his beneficiary,
designated pursuant to Section 4 hereof, shall receive in a lump sum, in lieu of the amount(s)
otherwise payable to the Employee under this Agreement, a death benefit equal to the greater of
(i) the Hypothetical Death Benefit, as defined in subsection (f) hereof, and (ii) the entire
amount of his Deferred Compensation Account at the date of his death, assuming that an Interest
Equivalent were credited to such account as of each January 1 and July 1, occurring after the
first deferral hereunder until the date of death at the rate set forth in subsection (a) hereof.
Such beneficiary shall receive such death benefit on the thirtieth (30th) day following
the death of the Employee.



     (e) Death After Termination of Employment.




     (i) If the Employee should die after the termination of his employment, whether
prior to or on or after attainment of age 55, and prior to the date on which payment of
his Deferred Compensation Account has commenced in the form of an annuity in accordance
with subsection (a) or has been paid in the form of a lump sum as provided in subsection
(b), his beneficiary, designated pursuant to Section 4 hereof, shall receive in a lump
sum, in lieu of the amount(s) otherwise payable to the Employee under this Agreement, a
death benefit equal to the entire amount of the Employee’s Deferred Compensation
Account, including the same Interest Equivalent as described in subsection (a) above, at
the date of his death, provided that the Employee’s employment shall not have terminated
on account of “Cause” as defined in subsection (c) hereof. In the event that the
Employee should die after the termination of his employment for “Cause,” whether prior
to or on or after attainment of age 55, and in either case prior to the date upon which
payment of his Deferred Compensation Account has been made or has commenced, his
beneficiary, designated pursuant to Section 4 hereof, shall receive a return of the
amounts deferred (excluding any Interest Equivalent). No Interest Equivalent shall be
credited to the Employee‘s Deferred Compensation Account in the event of the
Employee’s death after his termination on account of “Cause” as provided in subsection
(c) hereof. In either case, the Employee’s beneficiary shall receive such death benefit
on the thirtieth (30th) day following the death of the Employee.




     (ii) If the Employee should die after the termination of his employment with the
Employer on or after attainment of age 55 (not on account of “Cause”) and after the date
on which payment of his Deferred Compensation Account and the Interest Equivalent set
forth in subsection (a) hereof has commenced in the form of an annuity as provided in
subsection (a), no additional benefits shall be payable under this Agreement after the
Employee’s death except to the extent that the Employee did not receive prior to his
death benefits in an amount equal to or greater than the Employee’s Deferred
Compensation Account plus any Interest Equivalent credited thereto, as of the date of
the Employee’s death. If the Employee dies prior to receiving benefits equal to or
greater than the Employee’s Deferred Compensation Account plus any Interest Equivalent
credited thereto as of the date of the Employee’s death, his beneficiary shall be
entitled to a lump sum payment, thirty (30) days following Employee’s death, equal to
the difference between benefits paid to the



-4-









 







Employee hereunder and the Employee’s Deferred Compensation account, plus any
Interest Equivalent credited thereto, as of the date of the Employee’s death.




     (iii) If the Employee should die after the termination of his employment with the
Employer on or after attainment of age 55 on account of “Cause” and after the date
payments have commenced to him in the form of an annuity as provided in subsection (c),
no additional benefits shall be payable under this Agreement after the Employee’s death
except to the extent the Employee did not receive prior to his death benefits in an
amount equal to or greater than the amounts deferred (excluding any Interest Equivalent
earned while employed). In such event, his beneficiary shall be entitled to a lump sum
payment, thirty (30) days following Employee’s death, equal to the difference between
benefits paid to the Employee hereunder and the amounts deferred (excluding any Interest
Equivalent earned while employed).




     (iv) If the Employee should die after the termination of his employment with the
Employer and after the date on which payment has been paid to him in the form of a lump
sum pursuant to subsection (b) or (c), no additional benefits shall be payable upon the
Employee’s death.



     (f) Hypothetical Death Benefit. For purposes of this Agreement, the term
“Hypothetical Death Benefit” shall mean a lump sum benefit equal to the proceeds of any policy of
key-man life insurance on the life of the Employee, of which the Employer is owner and beneficiary,
and which policy is designated by the Employer as subject to the provisions hereof, reduced
by (i) the amount of any tax imposed on the Employer with respect to such proceeds and (ii) the
cost to the Employer of any tax deductions postponed as a result of salary deferrals pursuant to
Section 1 hereof and increased by (iii) the tax deduction to the Employer which would
result from payment of the Hypothetical Death Benefit to a beneficiary of the Employee. For
purposes of (ii) above, an opportunity cost factor of six (6) percent pre-tax interest will be
applied during the period of postponed deductions under (ii). The calculation of the Hypothetical
Death Benefit shall be done by the Employer, whose calculation shall be final and binding on the
Employee and his beneficiary. Anything herein to the contrary notwithstanding, the Employer shall
not be required to purchase a policy of key-man life insurance on the life of any Employee, and any
such policy purchased by the Employer, and all proceeds thereof, shall remain at all times
available to the Employer’s general creditors.



     (g) Termination of Employment. In order for the Employee to be considered to have
terminated employment with the Employer, the Employee must have incurred a separation from service
from the Employer (and all related companies) within the meaning of Section 409A of the Code.



     4. BENEFICIARY. The Employee has notified or will in the future notify the Employer
of the person or persons entitled to receive payments on the death of the Employee. For the
purposes of this Agreement, such person or persons are herein referred to collectively as the
“beneficiary.” The person whom an Employee designates as his beneficiary for this purpose must
be one of the following: the Employee‘s spouse; father, mother, sister, brother, son
or daughter. The beneficiary may also be a legal ward living with and dependent on the



-5-









 







Employee at the time of his death. If the Employee dies and has not designated a
beneficiary, his beneficiary shall be his spouse, if living; otherwise, his beneficiary shall be
deemed to be his estate. An Employee’s beneficiary designation may be changed at any time by the
Employee giving written notice to the Employer of such change. The rights of any beneficiary
presently or hereafter designated are subject to any changes made in this Agreement by the
Employee and the Employer.



     5. WITHHOLDING. The Employer shall be permitted to withhold from any payment to the
Employee or his beneficiary hereunder all federal, state or other taxes which may be required with
respect to such payment.



     6. ARBITRATION. In the event that a dispute shall arise with respect to any of the
provisions of this Agreement, either the Employer or the Employee or his beneficiary, as the case
may be, may give written notice to the other stating the claims that said party desires to
arbitrate, and naming an arbitrator. Within ten (10) days after the receipt of such notice, the
party receiving same shall appoint a second arbitrator by written notice to be sent to the party
who requested arbitration. Within ten (10) days after receipt of such notice of appointment of
the second arbitrator, the two (2) arbitrators so appointed shall meet to select a third
arbitrator and shall give written notice of such selection to the Employer and the Employee or
his beneficiary. The decision of a majority of the arbitrators shall be conclusive and binding
upon the Employer and the Employee or his beneficiary. All notices hereunder shall be by
registered mail addressed to the last known address of the party entitled to receive notice. The
Employer and the Employee shall each pay their own costs incurred in the arbitration proceeding;
provided, however, that the arbitrators may require that the losing party reimburse the
prevailing party for its costs if it shall be determined that the claim which gave rise to the
dispute was without substantial foundation.



     7. MISCELLANEOUS.



     (a) This Agreement shall be binding upon the parties hereto, their heirs, executors,
administrators, successors and assigns. The Employer agrees that it will not be a party to any
merger, consolidation or reorganization unless and until its obligations hereunder shall be
expressly assumed by its successor or successors.



     (b) This Agreement may be amended at any time by mutual written agreement of the parties
hereto, but no amendment shall operate to give the Employee, or any beneficiary designated by him,
either directly or indirectly, any interest whatsoever in any funds or assets of the Employer,
except the right to receive the payments herein provided.



     (c) Deferrals under this Agreement may be suspended by the Employer effective as of any
January 1, following the time that tax or other laws are enacted or interpreted which result or
will result in costs to the Employer significantly in excess of those contemplated at the time of
the execution hereof. In the event of such suspension, the Employer‘s sole obligation
shall be to pay to the Employee in accordance with Section 3 above. In no event may deferrals be
ceased during a calendar year by action of either the Employer or the Employee, or both.



-6-









 





     (e) This Agreement shall not supersede any contract of employment, whether oral or written,
between the Employer and the Employee, nor shall it affect or impair the rights and obligations of
the Employer and the Employee, respectively, thereunder. Nothing contained herein shall impose any
obligation on the Employer to continue the employment of the Employee.



     (f) If Moody’s Bond Survey shall cease to publish the Corporate Bond Yield Averages referred
to in Section 3 hereof, a similar average selected by the Board of Directors of the Employer, in
its sole discretion, shall be used.



     (g) This Agreement shall be executed in duplicate, and each executed copy of this
Agreement shall be deemed an original.



     (h) This Agreement shall be construed in all respects under the laws of the State of
Connecticut, subject to applicable federal law.



     (i) This Agreement has been prepared with reference to Section 409A of the Internal
Revenue Code and should be interpreted and administered in a manner consistent with Section
409A. In the event that any part of the Agreement is determined to be in violation of 409A,
such part of the Agreement shall be automatically revised to be in compliance with Section 409A
in such way as most closely approximates the intent of the parties.



     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of
the day and year first above written.



	 	 	 	 	 	 	 
	 	 	THE CONNECTICUT WATER COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Michele G. DiAcri	 	 
	 

	 	 	 	 

     Its Assistant Corporate Secretary
	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Marshall T. Chiaraluce	 	 
	 	 	 	 	 
	 	 	Marshall T. Chiaraluce	 	 






-7-