CITIZENS INCENTIVE PLAN

I. ESTABLISHMENT AND PURPOSE OF PLAN. Citizens Utilities Company hereby restates
its Incentive Deferred Compensation Plan. The restated Plan is effective as of
March 21, 2000 and shall be known as the "Citizens Incentive Plan." The purpose
of the Plan is to provide selected Employees with a reward for, and incentive to
continue, superior performance. This Plan is composed of two components: (i) a
short-term incentive component in which Awards are paid in cash following the
end of each fiscal year; and (ii) an unfunded, non-qualified deferred
compensation component for Top-Hat Participants (as defined in the Plan) in
which payment of Awards may be deferred until any subsequent calendar year but
not beyond termination of employment. Any Awards made prior the effective date
of this restated Plan shall be governed by the terms of the Citizens Utilities
Company Incentive Deferred Compensation Plan, as amended and in effect prior to
its restatement herein (the "Prior Plan"), except as otherwise expressly
provided in this restated Plan.

II. ELIGIBILITY TO PARTICIPATE. All Exempt Employees of the Company and its
Affiliates shall be eligible to participate in the Plan and to receive an Award
if selected by the Compensation Committee of the Board of Directors (the
"Committee"). Receipt by a Participant of an Award with respect to one Plan Year
shall not entitle the Participant to receive an Award with respect to any
subsequent Plan Year of the Company.

III.  DETERMINATION OF AWARDS.

      (a) Determining the Amount to be Contributed to Plan.  As soon as adminis-
tratively feasible,  but  not later  than 120 days, following  the close of each
fiscal year of the Company, the Board of Directors shall   determine the amount,
if any, to be made available  for contribution  to the Plan with respect  to the
fiscal  year just  ended and shall  inform the  Committee of  its decision.  The
amount  contributed to the Plan  and paid or allocated to Participants' Accounts
shall be  reflected as a  liability on the  books of the Company  as required by
generally accepted accounting principles ("GAAP") or other appropriate  account-
ing rules or conventions, but shall not be held in trust or otherwise segregated
from the Company's general assets.

      (b) Determining  the  Amount  to  be  Awarded to Plan Participants.  After
being informed by the Board of Directors of the amount to be contributed  to the
Plan  with  respect  to the  year  just ended, the  Company will  select and the
Committee will review and approve Employees  or groups of employees  who will be
entitled to Awards.   The Committee in its  discretion may  make Awards for  any
Plan Year which, in the aggregate, does not exceed the amount made available  by
the Board of Directors for contribution with respect to a fiscal year.  Partici-
pants  shall  be informed of the fact  and amount of his or her  Award following
committee action.

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IV. MAINTENANCE  OF ACCOUNTS;  INTEREST CREDITED.  All  Awards  allocated  to  a
Participant which are to be deferred shall be credited to an Account  maintained
under the Plan for each Participant.   Amounts credited  to  this Account  shall
include the value of any Awards not paid out under the terms of the Prior  Plan,
as well as any Awards made under the terms of this Plan. Each Participant's  un-
distributed Account Balance, other than that portion deemed invested in  phantom
shares  of  Company  stock  under  the  terms of  the Prior Plan or in any other
elective investment that may, from time to time be permitted under terms of this
Plan (the Participant's "uninvested Account Balance"),  shall be  credited  with
interest as of the last day of each Plan Year. The Board of Directors, excluding
any member with an Account Balance under this Plan, shall establish the interest
rate  to  be  credited  to  such  Accounts as  soon as administratively feasible
following  the  close  of such  Plan  Year  based  upon  recommendations  of the
Committee. The interest to be credited to each Account  shall equal the  product
of (a) the average of the month end uninvested Account Balance for each month of
that calendar year and (b) the interest percentage rate established by the Board
of Directors.

V. VESTING; FORFEITURE FOR CAUSE. Each Participant shall be  fully vested in his
or her Account Balance  and shall be fully  vested in  each  Award  subsequently
approved by the Committee. Notwithstanding  the foregoing, any  Participant  may
be removed from the Plan by the Committee at any time "for cause", as determined
by the Committee in its sole  discretion,  whether  or not  the Participant  has
received any benefits under  the Plan, and  whether  or  not  the  Participant's
employment  has  been  terminated.   "Cause"  shall include, without limitation,
willful  misconduct  of  the  Employee  as determined  in the sole discretion of
the Committee.   Upon removal  from the Plan, the  Participant shall forfeit any
remaining  Account  Balance,  and  neither  the Participant nor his or her bene-
ficiaries shall be entitled to receive any payments from the Plan from and after
the  date  of  the  removal.  The  Committee's determination with  respect  to a
forfeiture  shall be set forth  in a written notice given to the Participant and
to the Company and shall be final and binding on both; any forfeiture shall take
place immediately upon receipt of such notice by the Company and Participant.

VI. ELECTION WITH RESPECT TO DISTRIBUTION OR DEFERRAL OF AWARDS.

      (a) Election   to  Defer  by  Top-Hat  Participants.  An  active "Top-Hat"
      Participant  (as hereinafter defined) may elect, by an irrevocable written
      election  filed  with the  Committee  prior to September 1 of a Plan Year,
      with respect to any  Award that may be made in the subsequent calendar for
      such Plan Year:

            (i) to withdraw any percentage,  up to and including  100%,  of  any
            Award  which may  be  made  to the  Participant  in  the  subsequent
            calendar year; or


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            (ii) to defer distribution of any portion or all of such Award to a
            subsequent year (up until termination of service).

       Each election shall be made annually and shall be effective only with re-
       spect to the Award to be made  in the subsequent  Plan Year for  the Year
       in which the election is filed. Notwithstanding deferral by a Participant
       of the receipt of an Award,  the Company  shall  withhold FICA  taxes and
       any other payroll taxes that may be applicable with respect  to the  year
       in which the Award is made.
      (b) Top-Hat Participant Defined. A "Top-Hat" Participant includes both (i)
      an Officer of the Company (or its Affiliates) or  (ii) a Participant whose
      annual base salary is expected to be above an  amount sufficient  for this
      separate portion  of the  Plan to  qualify  as  a  non-qualified  deferred
      compensation  plan for  select management or highly compensated Employees.
      Subject  to the  issuance  of Department of  Labor regulations  or similar
      authoritative  guidance,  such  amount  shall be $100,000, as adjusted for
      cost-of-living adjustments for periods after 1996.

      (c) Effect  of Election to Defer  Receipt  of  Award  until Termination of
      Service. A request by a Participant that receipt of some portion or all of
      an Award be deferred  until the  Participant's  termination of  employment
      with the Company and its Affiliates shall create  a non-qualified deferred
      compensation plan for Top-Hat Participants which shall  be deemed  to be a
      separate program from the remainder of this Plan.

VII. ELECTION AS TO INVESTMENT OF UNINVESTED ACCOUNT BALANCE.

      (a) If  the  Committee, in  its  discretion, shall  make available  either
      actual or phantom  investment  choices, a  Top-Hat Participant  may  elect
      before September 1 of the then  current Plan Year, to invest  a portion or
      all of his Account Balance in one or more of  the investment options  then
      offered by the  Committee in such  percentages as  the Committee may offer
      from time to time. Participant investment direction over Accounts shall be
      subject to such rules and  regulations as to the  timing and  frequency of
      investment changes, limitations, allocations of expenses and other aspects
      of Plan administration as the Committee may from time to time establish in
      writing. No investment is  permitted in  actual shares  of Company  common
      stock under this Plan.

      (b) Any Participant whose Account, under the terms of the Prior Plan, was
      credited with phantom shares of Company stock, may elect in a writing
      filed with the Committee, to have the value of any such phantom shares
      deemed to be sold, and the net cash value of the proceeds of such deemed
      sale credited to the Participant's Account. If, under the terms of the
      Prior Plan, a Participant was not an Officer at the time he requested to
      have a portion of an Award deemed invested in phantom shares of Company
      Stock, and did not specify a date for the deemed sale prior to the date
      of the Award, then the phantom stock shall be deemed sold and the
      proceeds thereof transferred to such Participant's Account on July 3 of
      the year following the Participant's appointment as an Officer.


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<PAGE>

VIII. DISTRIBUTION OF ACCOUNT BALANCES.

      (a) Distribution of Incentive Awards.

            (i) any award allocated under the terms  of this Plan to the Account
            of a Participant who is not a Top-Hat Participant, and

            (ii) any portion of an Award that a Top-Hat Participant has elected
            to have withdrawn pursuant to paragraph (a)(ii) of Article VI,

      shall  be  distributed  as soon  as administratively  feasible,  after the
      Participant  is  notified  by the  Committee of the fact and amount of the
      Award for the Plan Year just ended.

      (b) Distribution of Deferred Amounts. Any other Award shall be distributed
          in accordance with the following provisions:

            (i) any  Award (or any portion thereof)  which has been deferred, in
            accordance with  the provisions of paragraph  (a)(ii) of Article VI,
            to a subsequent calendar year shall be paid in full in a single sum,
            provided, however, that  any portion  of such Award representing the
            deemed sale of phantom stock shall not  be paid to any Officer until
            six months and  one  day following the  commencement of the calendar
            year;

            (ii) any  Award  (or any portion thereof) which  has  been  deferred
            until termination of service shall be paid in full in  a single  sum
            within  thirty  (30)  days  of  the  date on which  the  Participant
            terminates  service with the  Company and  its Affiliates  provided,
            however, that any portion of such Award representing the deemed sale
            of  phantom stock shall  not be paid to any Officer until six months
            and one day following the Officer's termination of service; and

            (iii) any  portion  of  a  Participant's  Account  Balance  that  is
            scheduled   to  be  distributed  pursuant   to   the   Participant's
            irrevocable election of up to a five (5) year payout pursuant to the
            terms of the Prior Plan shall be  paid in  accordance with the terms
            of such irrevocable election.

      In addition,  to the amounts specified in paragraph  (b)(ii) above, upon a
      Participant's termination by reason of his or her retirement  (on or after
      his Early or Normal Retirement Date, as  defined in the Company's  Pension
      Plan), death, or Permanent Disability, the Participant (or, if applicable,
      hi  beneficiary (ies) or legal representative) shall be entitled to 100%


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<PAGE>

      of any Award allocated to the Employee for the Plan  Year in which  his or
      her termination occurs, together with  credited interest  provided for  in
      Article IV.

      (c) Distribution due to Unforeseeable Emergency. Upon written  application
      of  the  Participant  to the  Committee, the  Committee  may, in its  sole
      judgment, pay a portion or all of a Participant's  Account Balance  to the
      Participant sooner than upon his or her  termination of service,  provided
      that  (i)  the  Committee   determines   that   the  Participant  has   an
      unforeseeable emergency that is caused by an  event beyond the control  of
      the Participant which would  result in  severe  financial hardship to  the
      Participant  absent the early  distribution,  and (ii) the Chief Executive
      Officer or Chief  Operating  Officer of the Company approves the distribu-
      tion in writing. Any distribution hereunder shall be limited to the amount
      necessary to meet the unforeseeable emergency and may be made in a single
      sum or in installments (with interest  on the  unpaid  balance  being cal-
      culated in accordance with Article IV.)

      (d) Deferral  of Payment  of Awards Due to  the Imposition of Code Section
      162(m). If the Committee determines that the payment of any portion or all
      of an Award or  the  Participant's Account Balance  would  result  in  the
      Company not being able to take a tax deduction under Section 162(m) of the
      Code, it  may  elect  instead  to  defer  payment of such Award or Account
      Balance  until  the next   succeeding  year  (or  years)  in   which   the
      Participant's compensation either does not  exceed the limit  set forth in
      Code Section 162(m) or is not subject to Code Section 162(m).

IX. DESIGNATION OF BENEFICIARIES; DEATH BENEFITS.

      (a) A Participant may designate a beneficiary  or beneficiaries to receive
      the  Participant's  remaining Account Balance, if any, in the event of his
      or  her  death,  and  may  from time to time  change any  such beneficiary
      designation. All beneficiary designations  and changes therein shall be in
      writing and shall be effective only when delivered to the Committee during
      the  lifetime  of  the  Participant.    In  the  event  that no  effective
      beneficiary  designation  has  been  made,  any  Account  Balance  of  the
      Participant  remaining undistributed  at his or her death shall be paid to
      the Participant's spouse, if any, and if none to the Participant's estate.

      (b) A Participant's death benefits under this Plan shall be equal to the
      sum of the value of the Participant's Account Balance remaining
      undistributed at his death, together with the 100% of the value of any
      Award allocated to the Employee for the Plan Year in which his or her
      death occurs, together with credited interest provided for in Article IV.

X. ADMINISTRATION OF PLAN.  The Plan  shall be administered  by the Compensation
Committee  of the Board of Directors (the "Committee") as that  Committee may be
constituted  from time to time.  The Committee shall have the absolute power and
discretion  to administer  the Plan,  including, but not limited to the power to
(a) approve  Plan Participants, (b) determine  the amount,  vesting  requirement


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<PAGE>

and other  features and  conditions of Awards,  (c) interpret the Plan,  and (d)
make all other decisions  relating to the operation of the Plan. The Committee's
determinations  under the Plan  shall be final and  binding on all  persons.  No
member of the Committee  shall be liable for any action taken, or decision made,
in good faith in connection  with the exercise of the  Committee's  duties under
the Plan.

The  Committee  shall  adopt  such  rules  as  it  may  determine appropriate or
necessary to regulate its affairs and administer the Plan.

XI. AMENDMENT AND TERMINATION.   The  Plan may  be amended  or terminated by the
Board of Directors of the Company at any time. If the Plan  is terminated, final
payment shall be made of the then existing Account Balances,  provided, however,
that if the Committee determines that the  payment of  any portion or all  of an
Account  Balance  would result  in the  Company  not  being able to  take a  tax
deduction  under Section 162(m)  of the Code,  it may elect  to defer payment in
accordance  with Article VIII(d).  Termination  of the Plan shall not accelerate
the  payout  or  transfer of  phantom shares  of Company  stock from the Account
Balance  of  any Officer.   Any  amendment  or  termination  shall  not divest a
Participant of his or her vested Account Balance.

XII.  MISCELLANEOUS.

      (a) Rights of Participants as Creditors of the Company. Participants shall
          have the rights of unsecured general creditors with respect to amounts
          due under the Plan. The Company shall not be required to establish any
          trust fund or separate account with respect to any  amounts due  under
          the Plan.

      (b) Withholding. The obligation of the Company to make payments  under the
          Plan shall be subject to applicable federal, state and local tax with-
          holding requirements.

      (c) Nonassignability. A Participant  may not assign,  pledge, encumber, or
          transfer  the  right  to  receive payments provided for under the Plan
          other than by will or the laws of descent and distribution.

      (d) No Employment Contract.   The  Plan  shall  not  create  an employment
          agreement  and shall  not entitle any Employee who has participated in
          the  Plan to  remain in the employ of the Company or to obtain damages
          if employment is terminated.

      (e) Governing Law. The Plan shall be governed by the laws of the State of
          Connecticut.

      (f) Statement of Account Balances.   After the  end of each Plan Year each
          deferring Participant  will be furnished a statement  of the amount of
          his or her Account  Balance as of  the end of  that Year,  and of  all
          credits to, distributions from, and charges to the account during that
          Year.


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<PAGE>

      (g) Binding Effect. The terms of the  Plan shall be binding  upon any suc-
          cessor to the Company's  business, whether by merger  or sale  of sub-
          stantially all of the assets or otherwise.

      (h) Notices. All notices under  the Plan  shall be in writing and shall be
          deemed given when delivered personally  or mailed by  registered mail,
          return receipt requested, to  a Participant  at the Participant's last
          address set forth in the Company's records,  or to the  Company at the
          address of its principal office.

XIII. DEFINITIONS. The following terms (whether used in the singular or plural)
shall have the following meanings indicated when used in the Plan:

      (a) "Affiliated Company" or "Affiliate" means any entity controlled by the
          Company, controlling the Company or under common control with the
          Company.

      (b) "Award" means the actual dollar  amount of the  annual cash  incentive
          determined by the Committee to be payable  to a Participant under  the
          Plan.

      (c) "Board" means the Board of Directors of the Company.

      (d) "Code" means the Internal Revenue Code of 1986, as amended from time
          to time or any successor statute(s) thereto.

      (e) "Committee" means the Compensation Committee of the Board, which shall
          be the administrator of this Plan.

      (f) "Company" means Citizens Utilities Company.

      (g) "Employee" means any common law employee of the Company or its
          Affiliates.

      (h) "Exempt" means any Employee who is exempt  from  overtime pay require-
          ments of state and federal law.

      (i) "Officer" means an officer of the Company as defined  in Rule 16a-1 of
          the Securities Exchange Commission ("SEC").

      (j) "Participant" means any Employee  who has received an Award  under the
          Plan.

      (k) "Permanent Disability"  means  any mental or physical incapacity  of a
          Participant  which,  in the  sole judgement of the Committee, has ren-
          dered  the  Participant incapable  of performing  the  duties  of  his
          regular occupation with the Company and its Affiliates for a period of
          at least six months, and  which can be expected  to result in death or
          to last indefinitely.


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<PAGE>

      (l) "Plan" means the Citizens Incentive Plan.

      (m) "Plan Year" means each calendar year.

      (n) "Prior Plan"  means the  Citizens Utilities Company Incentive Deferred
          Compensation Plan, as  amended and  in effect prior to its restatement
          in  this Plan.

     Dated:  March 21, 2000               CITIZENS UTILITIES COMPANY





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