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Exhibit 10.6  

 
 

SOUTHWEST WATER COMPANY    
    
    DEFERRED COMPENSATION PLAN    
    
    Effective January 1, 2002    
    

 

Southwest Water Company
  Deferred Compensation Plan
 Master Plan Document  

TABLE OF CONTENTS  

	 
	 
	 
	 	Page

	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
	 	 	 	 	 

i

 

	 	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

iii

   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 

1

 

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. 

2

 

	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 

3

 

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 

4

 

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. 

5

 
	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. 

6

 
ARTICLE 2
  Selection, Enrollment, Eligibility  

	2.1
	Selection 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.

	2.2
	Enrollment 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.

	2.3
	Eligibility; 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.

	2.4
	Termination 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  

	3.1
	Minimum 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 

7

 

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

	Deferral
 
	 	Minimum Percentage
	 
	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. 

	3.2
	Maximum 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
 
	 	Maximum Percentage
	 
	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.

	3.3
	Election 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. 

8

  

	(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.

	3.4
	Withholding 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.

	3.5
	Annual 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.

	3.6
	Intentionally Deleted.

	3.7
	Stock 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.

	3.8
	Intentionally Deleted.

	3.9
	Crediting 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

 

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.

	3.10
	Interest 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).

	3.11
	FICA 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

 

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.

	3.12
	Vesting.

	(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. 

11

 

	(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  

	4.1
	Short-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.

	4.2
	Other 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.

	4.3
	Withdrawal 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.

	4.4
	Withdrawal 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 

12

 

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  

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

	5.2
	Payment 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.

	5.3
	Death 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. 

13

   ARTICLE 6
  Pre-Retirement Survivor Benefit  

	6.1
	Pre-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.

	6.2
	Payment 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  

	7.1
	Termination 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

	7.2
	Payment 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 

14

 

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

ARTICLE 8
  Disability Waiver and Benefit  

	8.1
	Disability Waiver.

	(a
	Waiver 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.

	(b
	Return 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.

	8.2
	Continued 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  

	9.1
	Beneficiary.    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. 

15

 
	9.2
	Beneficiary 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.

	9.3
	Acknowledgment.    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.

	9.4
	No 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.

	9.5
	Doubt 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.

	9.6
	Discharge 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  

	10.1
	Paid 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.

	10.2
	Unpaid 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  

	11.1
	Termination.    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 

16

 

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). 

	11.2
	Amendment.    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).

	11.3
	Plan 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.

	11.4
	Interest 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 

17

 

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. 

	11.5
	Effect 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  

	12.1
	Committee 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.

	12.2
	Administration 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.

	12.3
	Agents.    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. 

18

 
	12.4
	Binding 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.

	12.5
	Indemnity 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.

	12.6
	Employer 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  

	13.1
	Coordination 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  

	14.1
	Presentation 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.

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

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

	(b
	that
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:

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

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

	(iii
	a
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 

19

 

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

	14.3
	Review 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):

	(a
	may
review pertinent documents;

	(b
	may
submit written comments or other documents; and/or

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

	14.4
	Decision 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:

	(a
	specific
reasons for the decision;

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

	(c
	such
other matters as the Committee deems relevant.

	14.5
	Legal 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  

	15.1
	Establishment 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.

	15.2
	Interrelationship 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.

	15.3
	Distributions 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  

	16.1
	Status 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 

20

 

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. 

	16.2
	Unsecured 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.

	16.3
	Employer'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.

	16.4
	Nonassignability.    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.

	16.5
	Not 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.

	16.6
	Furnishing 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.

	16.7
	Terms.    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.

	16.8
	Captions.    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.

	16.9
	Governing 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. 

21

 
	16.10
	Notice.    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. 

	16.11
	Successors.    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.

	16.12
	Spouse'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.

	16.13
	Validity.    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.

	16.14
	Incompetent.    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.

	16.15
	Court 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.

	16.16
	Distribution in the Event of Taxation.

	(a
	General.    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 

22

 

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. 

	(b
	Trust.    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.

	16.17
	Insurance.    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.

	16.18
	Legal 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      

	 	 	Title:	VP, Human Resources

23

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SOUTHWEST WATER COMPANY DEFERRED COMPENSATION PLAN Effective January 1, 2002QuickLinks
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Exhibit 10.7    
    

        CONFIDENTIAL 

 
 

SOUTHWEST WATER COMPANY    
    
    SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN    
    
    MASTER PLAN DOCUMENT
  
    EFFECTIVE MAY 8, 2000    
    

   TABLE OF CONTENTS  

	 
	 	 
	 	Page

	Purpose	 	1
	

ARTICLE 1	
 	

Definitions	
 	

1
	

ARTICLE 2	
 	

Eligibility	
 	

8
	

2.1	
 	

Selection by Committee	
 	

8
	2.2	 	Enrollment Requirements	 	8
	2.3	 	Commencement of Participation	 	8
	

ARTICLE 3	
 	

Employment Taxes	
 	

8
	

3.1	
 	

FICA and Other Taxes	
 	

8
	

ARTICLE 4	
 	

Benefits	
 	

8
	

4.1	
 	

Eligibility for Benefits	
 	

8
	4.2	 	Commencement of Benefit Payments	 	8
	4.3	 	Forms of Payment; Elections	 	9
	4.4	 	Limitation on Benefits	 	11
	4.5	 	Withholding and Payroll Taxes	 	11
	

ARTICLE 5	
 	

Termination, Amendment or Modification of the Plan	
 	

11
	

5.1	
 	

Plan Termination	
 	

11
	5.2	 	Amendment	 	11
	5.3	 	Termination of Plan Agreement	 	11
	

ARTICLE 6	
 	

Other Benefits and Agreements	
 	

12
	

6.1	
 	

Coordination with Other Benefits	
 	

12
	

ARTICLE 7	
 	

Administration of the Plan	
 	

12
	

7.1	
 	

Committee Duties	
 	

12
	7.2	 	Agents	 	12
	7.3	 	Binding Effect of Decisions	 	12
	7.4	 	Indemnity of Committee	 	12
	7.5	 	Employer Information	 	12
	

ARTICLE 8	
 	

Claims Procedures	
 	

12
	

8.1	
 	

Presentation of Claim	
 	

12
	8.2	 	Notification of Decision	 	12
	8.3	 	Review of a Denied Claim	 	13
	8.4	 	Decision on Review	 	13
	8.5	 	Legal Action	 	13
	

ARTICLE 9	
 	

Beneficiary Designation	
 	

13
	

9.1	
 	

Beneficiary	
 	

13
	9.2	 	Beneficiary Designation; Change; Spousal Consent	 	13
	9.3	 	Acknowledgment	 	14
	9.4	 	No Beneficiary Designation	 	14
	9.5	 	Doubt as to Beneficiary	 	14
	9.6	 	Discharge of Obligations	 	14
	 	 	 	 	 

i

 

	

ARTICLE 10	
 	

Trust	
 	

14
	

10.1	
 	

Establishment of the Trust	
 	

14
	10.2	 	Interrelationship of the Plan and the Trust	 	14
	

ARTICLE 11	
 	

Miscellaneous	
 	

15
	

11.1	
 	

Unsecured General Creditor	
 	

15
	11.2	 	Employer's Liability	 	15
	11.3	 	Nonassignability	 	15
	11.4	 	Not a Contract of Employment	 	15
	11.5	 	Furnishing Information	 	15
	11.6	 	Terms	 	15
	11.7	 	Captions	 	15
	11.8	 	Governing Law	 	15
	11.9	 	Notice	 	16
	11.10	 	Successors	 	16
	11.11	 	Spouse's Interest	 	16
	11.12	 	Validity	 	16
	11.13	 	Incompetent	 	16
	11.14	 	Court Order	 	16
	11.15	 	Distribution in the Event of Taxation	 	16
	11.16	 	Legal Fees To Enforce Rights After a Post-Participation Change in Control	 	17

ii

   SOUTHWEST WATER COMPANY  

 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN  

 Effective May 8, 2000  

Purpose  

        The purpose of this Plan is to provide specified benefits to a select group of management and highly compensated employees who contribute materially to the
continued growth, development and future business success of SOUTHWEST WATER COMPANY, a Delaware corporation, and its subsidiaries and affiliates, 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 hereof, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 

	1.1
	"Actuarial
Equivalent" shall mean an actuarial equivalent value of an amount payable in a different form and/or at a different date computed in accordance with actuarial principles,
and based on the following actuarial assumptions: 

	

Mortality:	
 	

1983 Group Annuity Table
	

Interest Rate:	
 	

Seven percent (7%)

As
the Committee deems necessary, in its sole discretion, the above actuarial assumptions may be adjusted from time to time, and no Participant shall be deemed to have any right, vested or nonvested,
regarding the continued use of any previously adopted actuarial assumption; provided however that the mortality table shall assume no shorter life expectancies than the one provided above and provided
further that the interest rate assumption shall not exceed seven percent (7%). In addition, the interest rate used by the Pension Benefit Guaranty Corporation to value immediate and deferred annuities
shall be used at the time of a calculation under this Plan if its use will generate a greater benefit for or payment to a Participant, or create a greater contribution obligation to the Trust, than
the interest rate set forth herein. 

	1.2
	"Beneficiary"
shall mean the individual, designated in accordance with Article 9, that is entitled to receive benefits under this Plan upon the death of a Participant.

	1.3
	"Beneficiary
and Payment 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 a Beneficiary, in accordance with Article 9, and his or her initial payment elections, in accordance with Section 4.3.

	1.4
	"Board"
shall mean the board of directors of the Company.

	1..5
	"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; 

1

 

	(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 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.

	1.6
	"Claimant"
shall have the meaning set forth in Section 8.1.

	1.7
	"Code"
shall mean the Internal Revenue Code of 1986, as may be amended from time to time.

	1.8
	"Committee"
shall mean the committee described in Article 7.

	1.9
	"Company"
shall mean Southwest Water Company, a Delaware corporation.

	1.10
	"Compensation"
shall mean the annual base cash salary relating to services performed during any calendar year and reportable on Federal Income Tax Form W-2,
whether or not paid in such calendar year or included on the Federal Income Tax Form W-2 for such calendar year. Compensation shall in no event include (whether or not included in
the gross income or Federal Income Tax Form W-2 income of the Participant) cash or non-cash bonuses, overtime, relocation expenses, non-monetary awards,
fringe benefits (cash or noncash), retainers, directors fees and other fees, severance allowances, pay in lieu of vacations, insurance premiums paid by an Employer, insurance benefits paid to the
Participant or his or her beneficiary, equity based compensation arrangements such as stock option plans or phantom stock plans, Employer contributions to qualified or nonqualified plans, automobile
allowances, or expense allowances paid to or for a Participant by any Employer.    Compensation shall, however, be calculated before reduction for compensation voluntarily deferred or
contributed by the Participant pursuant to all qualified or non-qualified plans and shall be calculated to include 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 as part of the annual base cash salary to the Participant. The determination of Compensation in accordance with this definition
shall be in the sole discretion of the Committee.

	1.11
	"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 prior to a
Post-Participation Change in Control that there is a reasonable likelihood that any compensation paid to a Participant for a 

2

 

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 Post-Participation 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 be credited with interest at the Moody's Rate (as defined in the Installment Payment Method definition
below), compounded semiannually. 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 Code Section 162(m), or if earlier, the effective date of a Post-Participation Change in Control. Notwithstanding anything to the
contrary in this Plan, the Deduction Limitation shall not apply to any distributions made after a Post-Participation Change in Control, if such Participant ceases to be an employee of all
Employers within one year of such Change in Control. 

	1.12
	"Deemed
Retirement Date" shall mean the first day of the month following the date a Participant or former Participant attains the age of sixty-five (65).

	1.13
	"Disability"
shall mean a Participant ceasing to be an employee of all Employers as a result of a permanent disability, as defined in the Participant's Employer's
long-term disability plan, or, if a Participant does not participate in the Employer's plan, a permanent disability under such a plan had the Participant been a participant in such a plan.
The interpretation of the definition of "permanent disability" under a plan shall be determined in the sole discretion of the Committee. If the Participant's Employer does not sponsor a
long-term disability plan or discontinues to sponsor such a plan, Disability shall be determined by the Committee in its sole discretion.

	1.14
	"Disability
Date" shall mean the first day of the month following the date of the Disability.

	1.15
	"Early
Retirement" shall mean the ceasing to be an employee of all Employers, on or after his or her attainment of both age fifty-five (55) and ten (10) or
more Years of Service, for any reason other than a Leave of Absence, Normal Retirement, Termination For Cause, death or Disability.

	1.16
	"Early
Retirement Date" shall mean the first day of the month following the date of Early Retirement.

	1.17
	"Effective
Date" shall mean May 8, 2000.

	1.18
	"Employer(s)"
shall mean the Company and/or any of its subsidiaries that have been selected by the Board to participate in the Plan.

	1.19
	"Enrolled
Actuary" shall mean a person enrolled by the Joint Board for the Enrollment of Actuaries established under subtitle C of title II of ERISA who has been engaged by the
Company to make and render all necessary actuarial determinations, statements, opinions, assumptions, reports and valuations under this Agreement. After a Change in Control, the Company and/or
Employer shall not change the Enrolled Actuary without the consent of at least a majority of the Participants.

	1.20
	"ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as may be amended from time to time.

	1.21
	"Final
Average Compensation" shall mean the average of such Participant's Compensation for his or her highest average Compensation for any period of five consecutive Plan Years
during his or her last ten Plan Years (or if he or she had fewer than ten Plan Years, during all Plan Years). If the Participant had fewer than five consecutive Plan Years, then the average of all
Plan Years shall be used. For purposes of the calculation, there shall be included as one of those Plan Years the 

3

 

annualized
Compensation for the Plan Year in which the event that entitled the Participant to a distribution of benefits under this Plan occurred if the result would be to increase Final Average
Compensation. Additionally, any Plan Year in which there are no Hours of Service shall be deemed not to exist for purposes of the five year average/ten year period if disregarding the Plan Year would
result in an increase in Final Average Compensation. 

	1.22
	"First
Applicable Compensation Percentage" shall mean:

	(a)
	In
the case of death, Retirement or Termination of Employment, 1.5% times such Participant's Years of Service. If a Participant's Years of Service exceed 35, for purposes of the
calculation in the previous sentence, such Participant's Years of Service shall be deemed to be 35.

	(b)
	In
the case of Disability, the First Applicable Compensation Percentage shall be calculated in the same manner as set forth in (a) above with respect to Retirement except that
the period from the Disability Date to what would otherwise have been such Participant's Normal Retirement Date shall be considered "Years of Service" for purposes of the calculation, whether or not
such time period has expired at the time of the calculation (the maximum of 35 shall continue to apply).

	1.23
	"Hour(s)
of Service" shall have the meaning set forth in Section 1.25 of the Qualified Retirement Plan.

	1.24
	"Installment
Payment Method" shall mean the Actuarial Equivalent of the Participant's Vested SERP Benefit, calculated under the Lump Sum Payment Method but payable in equal monthly
installments of principal on the first day of each calendar month over 5, 10 or 15 years, as properly elected by the Participant pursuant to the Committee's rules and procedures as may be in
effect from time to time, with interest at the Moody's Rate, compounded annually and payable monthly along with the principal payment. The "Moody's Rate" for any calendar year shall be an interest
rate, stated as an annual rate, that is published in Moody's Bond Record under the heading of "Moody's Corporate Bond Yield Averages—Av. Corp" (or any successor to this published rate),
for the month of November prior to the commencement of such calendar year for which the rate is to be used. Payments shall commence the first day of the calendar month after the Retirement Date,
Deemed Retirement Date, Disability Date, or the date of death, as the case may be.

	1.25
	"Joint
and Survivor Annuity Payment Method" shall mean the Actuarial Equivalent of the Participant's Vested SERP Benefit, payable on a monthly basis on the first day of the calendar
month, in the form of an annuity for the life of the Participant with a 100%, 75%, 662/3% or 50% survivor annuity for the life of the Participant's Beneficiary, as such Participant
shall designate on the Beneficiary and Payment Designation Form. Payments shall commence on the first day of the calendar month immediately following the Retirement Date, Deemed Retirement Date or
Disability Date, as the case may be.

	1.26
	"Leave
of Absence" shall mean any paid or unpaid leave of absence that is approved by the Committee in its sole and absolute discretion.

	1.27
	"Level
Benefit Annuity Payment Method" shall mean in the case of a Participant who Retires before his or her Normal Retirement Date, the Actuarial Equivalent of the Participant's
Vested SERP Benefit, payable on a monthly basis on the first day of the calendar month, in the form of an annuity for the life of the Participant but adjusted upward prior to the anticipated
commencement date of his or her anticipated old age benefits under the Social Security Act, and decreased, or if necessary eliminated, after such date, in order to provide monthly payments to the
Participant which, when added to his or her anticipated monthly old age benefits under the Social Security Act, would provide monthly payments for life that are substantially uniform in amount. For
purposes of determining a Participant's anticipated old age benefits under the Social Security Act, the assumptions set forth in the definition of Social Security Benefit shall be utilized. 

4

 
	1.28
	"Life
Annuity Payment Method" shall mean the Actuarial Equivalent of the Participant's Vested SERP Benefit, payable on a monthly basis on the first day of the calendar month, in the
form of an annuity for the life of the Participant, with the provision that if the Participant dies before receiving 36, 60 or 120 monthly payments, as he or she shall designate on the
Beneficiary and Payment Designation Form, his or her Beneficiary shall receive the remainder of such monthly payments. Payments shall commence on the first day of the calendar quarter immediately
following the Retirement Date, Deemed Retirement Date or Disability Date, as the case may be.

	1.29
	"Life
Annuity Benefit" shall mean a benefit that is calculated in the form of an annuity, payable on a monthly basis on the first day of the calendar month and commencing on the
first day of the calendar quarter immediately following the date that gives rise to the benefit, for the life of the Participant, calculated using the actuarial assumptions set forth in the definition
of "Actuarial Equivalent".

	1.30
	"Lump
Sum Cash-Out Option" shall have the meaning set forth in Section 4.3(d).

	1.31
	"Lump
Sum Payment Method" shall mean the Actuarial Equivalent of the Participant's Vested SERP Benefit, payable in a lump sum on the Retirement Date, Disability Date or thirty
(30) days after the date of death, as the case may be.

	1.32
	"Normal
Retirement" shall mean a Participant ceasing to be an employee of all Employers, on or after the attainment of age sixty-five (65) for any reason other
than a Leave of Absence, Termination For Cause, death or Disability.

	1.33
	"Normal
Retirement Date" shall mean the first day of the month following the date of Normal Retirement.

	1.34
	"Partial
Lump Sum Payment Method" shall mean the Actuarial Equivalent of the Participant's Vested SERP Benefit, a percentage of which shall be payable in a lump sum (as such
Participant shall designate on the Beneficiary and Payment Designation Form) on the first day of the calendar month after the Retirement Date, Deemed Retirement Date, Disability Date or the date of
death, as the case may be, and the remainder of which shall be payable under the Life Annuity Payment Method or the Joint and Survivor Annuity Payment Method, as the case may be (as such Participant
shall designate on the Beneficiary and Payment Designation Form).

	1.35
	"Participant"
shall mean any employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Plan
Agreement and a Beneficiary and Payment Designation Form, (iv) whose signed Plan Agreement and Beneficiary and Payment Designation Form are accepted by the Committee, and (v) whose Plan
Agreement has not terminated. Despite the foregoing, a spouse or former spouse of a Participant shall not be treated as a Participant in the Plan, even if he or she has an interest in the
Participant's benefits under this Plan as a result of state property or family law, or property settlements resulting from a legal separation or divorce.

	1.36
	"Plan"
shall mean the Company's Supplemental Executive Retirement Plan, which shall be evidenced by this instrument and by each Plan Agreement, as amended from time to time.

	1.37
	"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 shall provide for the entire benefit to which such Participant is entitled under the Plan, and the Plan Agreement bearing the latest date of acceptance by the Committee shall govern
such entitlement. 

5

  

	1.38
	"Plan
Year" shall begin on January 1 of each year and continue through December 31.

	1.39
	"Post-Participation
Change in Control" with respect to a Participant shall mean a Change in Control that occurs on or after the date such person becomes a Participant. If
a Change in Control occurs before such period, such Change in Control shall not be considered a Post-Participation Change in Control with respect to that Participant.

	1.40
	"Pre-Retirement
Survivor Annuity Payment Method" shall mean a benefit that is the Actuarial Equivalent of the Participant's Vested SERP Benefit, payable on a monthly
basis on the first day of the calendar month, to such Participant's Beneficiary in the form of an annuity for the life of such Beneficiary. Payments shall commence on the first day of the calendar
quarter immediately following the date of death.

	1.41
	"Qualified
Retirement Plan" shall mean that certain Utility Employees' Retirement Plan, established on December 30, 1957, effective as of December 31, 1957, by Suburban
Water Systems, a California corporation, amended multiple times until amended and restated as of December 31, 1987 by that certain "Thirteenth Amendment to The Utility Employees' Retirement
Plan," further amended by amendments fourteen (adopted December 12, 1996), fifteen and sixteen (adopted as of December 30, 1999) and terminated effective as of December 30, 1999,
with benefit accruals under the plan ceasing as of December 30, 1999.

	1.42
	"Qualified
Retirement Plan Benefit" shall mean the annual amount resulting from calculating the Actuarial Equivalent of Participant's anticipated benefits under the Qualified
Retirement Plan as a Life Annuity Benefit commencing on the Retirement Date, Disability Date, Termination Date or date of death, as the case may be.

	1.43
	"Retirement",
"Retires" or "Retired" shall mean, in each instance, Early Retirement or Normal Retirement, as the case may be.

	1.44
	"Retirement
Date" shall mean, in each instance, the Early Retirement Date or the Normal Retirement Date, as the case may be.

	1.45
	"Second
Applicable Compensation Percentage" shall mean:

	(a)
	In
the case of death, Retirement or Termination of Employment, 0.5% times such Participant's Years of Service. If a Participant's Years of Service exceed 35, for purposes of the
calculation in the previous sentence, such Participant's Years of Service shall be deemed to be 35.

	(b)
	In
the case of Disability, the Second Applicable Compensation Percentage shall be calculated in the same manner as set forth in (a) above with respect to Retirement except that
the period from the Disability Date to what would otherwise have been such Participant's Normal Retirement Date shall be considered "Years of Service" for purposes of the calculation, whether or not
such time period has expired at the time of the calculation (the maximum of 35 shall continue to apply).

	1.46
	"SERP
Benefit" shall mean, in all cases other than Early Retirement, Disability, Termination of Employment or Termination For Cause, a Life Annuity Benefit, commencing on the
Retirement Date or the date of death, as the case may be, that provides an annual amount equal to:

	(a)
	the
Participant's Final Average Compensation multiplied by the First Applicable Compensation Percentage; plus

	(b)
	the
Participant's Final Average Compensation minus $825.00 multiplied by the Second Applicable Compensation Percentage; less

	(c)
	the
Social Security Benefit; less

	(d)
	the
Qualified Retirement Plan Benefit. 

6

 

In
the case of Disability or Termination of Employment, the SERP Benefit shall be calculated in the manner provided above, except that the Life Annuity Benefit shall be calculated commencing on the
later of: (i) age sixty-five (65) or (ii) the Disability Date or the Termination Date, as the case may be. 

In
the case of Early Retirement, the SERP Benefit shall be the greater of: (1) the amount calculated in the manner provided above, reduced by a percentage equal to 0.35 percent (0.35%)
multiplied by the number of complete months by which such Participant's Early Retirement Date precedes his or her Normal Retirement Date; or (2) the Actuarial Equivalent of the benefit
calculated above, calculated as if payments would commence on what would have been such Participant's Normal Retirement Date. 

Notwithstanding
anything to the contrary contained herein, in the event of a Termination For Cause, a Participant's SERP Benefit shall be zero. 

	1.47
	"Social
Security Benefit" shall mean the annual amount resulting from calculating the Actuarial Equivalent of Participant's anticipated old age benefits under the Social Security
Act, as a Life Annuity Benefit commencing on the Retirement Date, Disability Date, Termination Date or date of death, as the case may be. In calculating a Participant's anticipated old age benefits
under the Social Security Act in all cases other than Disability and Termination of Employment, it shall be assumed that (i) the Participant will receive no future wages that would be treated
as wages for purposes of the Social Security Act, (ii) the Participant will begin receiving Social Security benefits at age 65, and (iii) the Social Security benefits will be calculated
in accordance with the law in effect at the Retirement Date or date of death, as the case may be. In the case of Disability or Termination of Employment, it shall be assumed that (i) the
Participant will receive through age 65 future annual wages that would be treated as wages for purposes of the Social Security Act equal to the greater of his or her Compensation received in the year
of the Disability or Termination of Employment or the prior calendar year, (ii) the Participant will begin receiving Social Security benefits at age 65, and (iii) the Social Security
benefits will be calculated in accordance with the law in effect at the Disability Date or the Termination Date, as the case may be. The Social Security Benefit, once calculated, shall be frozen as of
the Retirement Date, Disability Date, Termination Date or date of death, as the case may be.

	1.48
	"Termination
Date" shall mean the first day of the month following the date of a Termination of Employment.

	1.49
	"Termination
For Cause" shall mean ceasing to be an employee of all Employers after a determination by an Employer that the Participant had willfully violated a Company policy that
materially adversely affected, or is reasonably believed will materially adversely affect, the operations or financial condition of the Company.

	1.50
	"Termination
of Employment" shall mean a Participant ceasing to be an employee of all Employers, voluntarily or involuntarily, but shall exclude cessation of employment with all
Employers as a result of a Leave of Absence, Retirement, death, Disability or a Termination for Cause.

	1.51
	"Trust"
shall mean the trust established pursuant to that certain Master Trust Agreement, dated as of May 8, 2000 between the Company and the trustee named therein, as amended
from time to time.

	1.52
	"Vested
SERP Benefit" shall mean: (i) in the case of Retirement, death or Disability, the SERP Benefit; (ii) in the case of Termination of Employment with five or more
Years of Service, the SERP Benefit; and (iii) in the case of Termination of Employment with less than five Years of Service, zero. 

7

  

	1.53
	"Year(s)
of Service" shall have the meaning set forth in Section 1.48 of the Qualified Retirement Plan except that for purposes of such definition, the term "Plan Year" shall
have the meaning set forth in this Plan. In the event the Participant's last Plan Year to be utilized for a calculation set forth in this Plan does not constitute a Year of Service solely because he
or she has less than one thousand Hours of Service, such Participant shall be credited with twelfth-Years of Service, the number of which shall equal the number of calendar months in such Plan Year in
each of which he or she had at least one Hour of Service. 

ARTICLE 2
  Eligibility  

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

	2.2
	Enrollment Requirements.    As a condition to participation, each selected employee shall complete, execute and return to the
Committee a Plan Agreement and a Beneficiary and Payment Designation Form. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole
discretion are necessary.

	2.3
	Commencement of Participation.    Provided an employee 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, that employee shall commence participation in the Plan on the date
specified by the Committee. If a selected employee fails to meet all such requirements prior to that date, that employee shall not be eligible to participate in the Plan until the completion of those
requirements. 

ARTICLE 3
  Employment Taxes  

	3.1
	FICA and Other Taxes.    A Participant's Employer shall withhold, from a Participant's compensation otherwise payable during
a Plan Year, the Participant's share of FICA and other employment taxes, if any, that are attributable to his or her benefits under this Plan. Such amounts shall be withheld in a manner determined by
the Employer. 

ARTICLE 4
  Benefits  

	4.1
	Eligibility for Benefits.    If a Participant dies, Retires or suffers a Disability or a Termination of Employment, he, she
and/or his or her Beneficiary shall be entitled to his or her Vested SERP Benefit payable in the manner provided in this Article. If a Participant suffers a Termination For Cause, such Participant's
Vested SERP Benefit shall be zero. Except as otherwise provided herein, any payments otherwise payable pursuant to this Article 4 shall be subject to the Deduction Limitation.

	4.2
	Commencement of Benefit Payments.    The payment of benefits shall commence as follows:

	(a)
	Retirement.    If a Participant's benefits become payable because of his or her Retirement, such Participant's benefit
payments shall commence as soon as administratively practicable after the date on which such Participant Retired, consistent with the payment method selected.

	(b)
	Termination of Employment.    If a Participant's benefits become payable because of his or her Termination of Employment,
unless the Company exercises the Lump Sum Cash-Out Option, such Participant's benefit payments shall commence as soon as administratively practicable after the Deemed Retirement Date. If
the Company exercises its Lump Sum Cash-Out 

8

 

Option,
such Participant's benefit payments shall commence as soon as administratively practicable after the Termination Date. 

	(c)
	Disability or Death.    If benefits become payable because of a Participant's death or Disability, such benefit payments
shall commence as soon as administratively practicable following the Committee's receipt of written proof or determination of such Participant's death or Disability, consistent with the payment method
selected.

	(d)
	Reasonable Time; Adjustment in Payments.    For purposes of this Section 4.2, "as soon as administratively
practicable" shall not exceed 120 days from the date of the specified event, except in extraordinary circumstances, as determined in the sole discretion of the Committee. Payments under the
method of payment elected by the Participant shall be adjusted on an Actuarial Equivalent basis should the payments commence on a date that is different than the date anticipated under the payment
method.

	4.3
	Forms of Payment; Elections.

	(a)
	Retirement or Disability.    A Participant who is entitled to receive a benefit under Section 4.1 because of
Retirement or Disability, may elect to receive the Vested SERP Benefit under the Joint and Survivor Annuity Payment Method, the Life Annuity Payment Method, Level Benefit Annuity Payment Method, the
Lump Sum Payment Method, the Partial Lump Sum Payment Method or the Installment Payment Method. A Participant may elect (or change any prior election), in the case of Retirement, at any time prior to
one year before his or her Retirement or, in the case of a Disability, at any time prior to suffering the Disability, to receive his or her Vested SERP Benefit under any of these payment methods. The
election must be consented to in writing by the electing Participant's spouse before the election is valid. Such an election shall be made in accordance with the Committee's rules and procedures as
may be in effect from time to time. If no valid election is made within the time limits set forth above, the Vested SERP Benefit will be paid under the Joint and Survivor Annuity Payment Method using
50% as the survivor annuity, if a Beneficiary has been designated in accordance with Article 9 and is alive, or the Life Annuity Payment Method, in all other cases.

	(b)
	Death before Retirement, Disability, Termination of Employment or Termination For Cause.    A Participant may elect to have
his or her Beneficiary receive the Vested SERP Benefit under the Pre-Retirement Survivor Annuity Payment Method, the Lump Sum Payment Method or the Installment Payment Method in the event
the Participant's Beneficiary is entitled to receive a benefit under Section 4.1 because of Participant's death before Retirement, Disability, Termination of Employment or Termination For
Cause. A Participant may elect (or change any prior election) at any time prior to death to have his or her Beneficiary receive his or her Vested SERP Benefit under any of these payment methods. The
election must be consented to in writing by the electing Participant's spouse before the election is valid. Such an election shall be made in accordance with the Committee's rules and procedures as
may be in effect from time to time. If no valid election is made prior to the Participant's death, the Vested SERP Benefit will be paid under the Pre-Retirement Survivor Annuity Payment
Method, if a Beneficiary has been designated in accordance with Article 9 and is alive, or the Lump Sum Payment Method in all other cases.

	(c)
	Death after Retirement, Disability or Termination of Employment.    If a Participant dies after he or she Retires, suffers a
Disability or suffers a Termination of Employment (and the Company did not exercise the Lump Sum Cash-Out Option), his or her payment of the Vested SERP Benefit shall be governed by
Section 4.3(a) or 4.3(d), as the case may be, and not Section 4.3(b). Payments, if any, that become due and payable after Participant's death shall be paid to the Participant's
Beneficiary. 

9

 

	(d)
	Termination of Employment.    A Participant who is entitled to receive a benefit under Section 4.1 because of a
Termination of Employment may elect to receive the Vested SERP Benefit under the Joint and Survivor Annuity Payment Method, the Life Annuity Payment Method, the Lump Sum Payment Method, the Partial
Lump Sum Payment Method or the Installment Payment Method. A Participant may elect (or change any prior election) at any time prior to one year prior to suffering the Termination of Employment to
receive his or her Vested SERP Benefit under any of these payment methods. The election must be consented to in writing by the electing Participant's spouse before the election is valid. Such an
election shall be made in accordance with the Committee's rules and procedures as may be in effect from time to time. If no valid election is made within the time limits set forth above, the Vested
SERP Benefit will be paid under the Joint and Survivor Annuity Payment Method using 50% as the survivor annuity, if a Beneficiary has been designated in accordance with Article 9 and is alive,
or the Life Annuity Payment Method, in all other cases. At the option of the Company, to be exercised in the sole and absolute discretion of the Committee (the "Lump Sum Cash-Out Option"),
in lieu of the payment method selected pursuant to the terms of this Section 4.3(d), the Company shall have the right to pay the Participant the Vested SERP Benefit under the Lump Sum Payment
Method, but payable on the Termination Date instead of the dates set forth in the Lump Sum Payment Method definition.

	(e)
	Withdrawal Election.    A Participant may elect, at any time after he or she becomes eligible to receive benefit payments
under this Plan, to receive those payments in a lump sum, calculated as follows: First, the amount he or she would have received at the applicable commencement date set forth in Section 4.2 had
the Lump Sum Payment Method been elected (based on the applicable life expectancies of Participant and/or Beneficiary as of the applicable commencement date, if life expectancy is involved in the
calculation) shall be calculated, using the interest rate under the Actuarial Equivalent definition in effect as of the election date as the discount rate. Next, the present value of all payments
received through the date of the election, calculated as of the applicable commencement date and using the interest rate under the Actuarial Equivalent definition in effect as of the election date as
the discount rate, shall be subtracted from the amount calculated in the preceding sentence. The remainder described in the preceding sentence shall next be increased for interest from the date of the
applicable commencement date to the date of the election, using an interest rate equal to the interest rate under the Actuarial Equivalent definition in effect as of the election date, compounded
annually. Finally, the figure arrived at in the preceding sentence shall be reduced by a 10% penalty (this net amount shall be referred to as the "Participant Benefit Amount"). 

A
Beneficiary may elect, at any time after he or she becomes eligible to receive benefit payments under this Plan, to receive those payments in a lump sum, calculated as follows: First, the present
value of all payments he or she would be expected to receive, calculated as of the date of the death of the Participant (based on the Beneficiary's life expectancy as of the date of death of the
Participant, if life expectancy is involved in the calculation) shall be calculated, using the interest rate under the Actuarial Equivalent definition in effect as of the election date as the discount
rate. Next, the present value of all payments received through the date of the election, calculated as of the date of death of the Participant and using the interest rate under the Actuarial
Equivalent definition in effect as of the election date as the discount rate, shall be subtracted from the amount calculated in the preceding sentence. The remainder described in the preceding
sentence shall next be increased for interest from the date of death of the Participant to the date of the election, using an interest rate equal to the interest rate under the Actuarial Equivalent
definition in effect as of the election date, compounded annually. Finally, the figure arrived at in the preceding sentence shall be reduced by a 10% penalty (this net amount shall be referred to as
the "Beneficiary Benefit Amount"). 

10

 

No
election to partially accelerate benefits shall be allowed. The Participant or Beneficiary, as the case may be, 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 Beneficiary, as the case may be, shall be paid the Participant Benefit Amount or Beneficiary Benefit Amount within
60 days of his or her election, and such payment shall not be subject to the Deduction Limitation. Once the applicable Benefit Amount is paid, participation in the Plan shall terminate and the
Participant, if still alive, shall not be eligible to participate in the Plan in the future. 

	(f)
	Committee Discretion.    Upon the request of a Participant, the Committee, in its sole discretion and consistent with its
established procedures and rules, may consider other forms of benefit payments, or the timing of benefit payments, as it deems necessary or prudent under the circumstances.

	4.4
	Limitation on Benefits.    Notwithstanding anything that could be construed to the contrary in this Article 4, in no
event shall a Participant or his or her Beneficiary receive more than one form of benefit under this Article 4.

	4.5
	Withholding and Payroll Taxes.    The Employers shall withhold from any and all benefits paid under this Article 4,
all federal, state and local income, employment and other taxes required to be withheld by the Employer in connection with the benefits hereunder, in amounts and in a manner to be determined in the
sole discretion of the Employers. 

ARTICLE 5
  Termination, Amendment or Modification of the Plan  

	5.1
	Plan Termination.    Each Employer reserves the right to terminate the Plan at any time with respect to its participating
employees by the actions of its board of directors. The termination of the Plan shall not adversely affect any Participant or his or her 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 payments by paying the Actuarial Equivalent value of such payments. For
all other Participants, upon the termination of the Plan, all Plan Agreements shall terminate and the Actuarial Equivalent of a Participant's Vested SERP Benefit assuming such Participant Retired (if
eligible) or suffered a Termination of Employment as of the date of the termination (which ever provides the Participant with a greater Vested SERP Benefit) shall be paid out in a lump sum.

	5.2
	Amendment.    Any Employer may, at any time, amend or modify the Plan in whole or in part with respect to its participating
employees by the actions of its board of directors; provided, however, that no amendment or modification shall be effective to decrease or restrict a Participant's Vested SERP Benefit assuming such
Participant Retired (if eligible) or suffered a Termination of Employment as of the date of the amendment (which ever provides the Participant with a greater Vested SERP Benefit), determined on an
Actuarial Equivalent basis. The amendment or modification of the Plan shall not affect any Participant or his or her 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 Actuarial Equivalent value of such payments either
in a lump sum or in some other accelerated form of payment.

	5.3
	Termination of Plan Agreement.    Absent the earlier termination, modification or amendment of the Plan, the Plan Agreement
of any Participant shall terminate upon the full payment of the applicable benefit provided under Article 4. 

11

   ARTICLE 6
  Other Benefits and Agreements  

	6.1
	Coordination with Other Benefits.    The benefits provided for a Participant under this Plan are in addition to any other
benefits available to such Participant under any other plan or program for employees of the Employers. 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 7
  Administration of the Plan  

	7.1
	Committee Duties.    This Plan shall be administered by a Committee which shall consist of the Board, or such committee as
the Board shall appoint. 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.

	7.2
	Agents.    In the administration of this Plan, the Committee may 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.

	7.3
	Binding Effect of Decisions.    The decision or action of the Committee 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.

	7.4
	Indemnity of Committee.    All Employers shall indemnify and hold harmless the members of the Committee 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 or any of its members.

	7.5
	Employer Information.    To enable the Committee to perform its functions, each Employer shall supply full and timely
information to the Committee on all matters relating to the compensation of its Participants, the date and circumstances of the Retirement, Disability or death of its Participants, and such other
pertinent information as the Committee may reasonably require. 

ARTICLE 8
  Claims Procedures  

	8.1
	Presentation 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. The claim must state with particularity the
determination desired 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.

	8.2
	Notification of Decision.    The Committee shall consider a Claimant's claim within a reasonable time, and shall notify the
Claimant in writing:

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

12

 

	(b)
	that
the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth such conclusion in a manner that
it believes will be understood by the Claimant:

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

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

	(iii)
	a
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

	(iv)
	an
explanation of the claim review procedure set forth in Section 8.3 below.

	8.3
	Review 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):

	(a)
	may
review pertinent documents;

	(b)
	may
submit written comments or other documents; and/or

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

	8.4
	Decision 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 the Committee believes will be understood by the Claimant, and it must contain:

	(a)
	specific
reasons for the decision;

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

	(c)
	such
other matters as the Committee deems relevant.

	8.5
	Legal Action.    A Claimant's compliance with the foregoing provisions of this Article 8 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 9
  Beneficiary Designation  

	9.1
	Beneficiary.    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.

	9.2
	Beneficiary Designation; Change; Spousal Consent.    A Participant shall designate his or her Beneficiary by completing and
signing the Beneficiary and Payment 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 and Payment 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 

13

 

consent,
in the form designated by the Committee, must be signed by that Participant's spouse and returned to the Committee. If the Participant names an entity as the Beneficiary and selects an
annuity payment method that must be calculated by using the life expectancy of the Beneficiary, he or she shall also name an individual as the measuring life for purposes of the annuity. Upon the
acceptance by the Committee of a new Beneficiary and Payment Designation Form, all Beneficiary designations previously filed shall be cancelled. The Committee shall be entitled to rely on the last
Beneficiary and Payment Designation Form filed by the Participant and accepted by the Committee prior to his or her death. 

	9.3
	Acknowledgment.    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.

	9.4
	No 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 shall be payable to his or her estate (and if a life expectancy is needed in order
to calculate the benefits remaining, the estate will be deemed to have a life expectancy equal to the Participant's life expectancy at the date of death).

	9.5
	Doubt 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.

	9.6
	Discharge 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
  Trust  

	10.1
	Establishment of the Trust.    The Company shall establish the Trust, and the Employers shall at least annually transfer
over to the Trust such amounts as the Enrolled Actuary shall certify as necessary to fund all anticipated Vested SERP Benefits, and for utilizing the aggregate cost method with the following
assumptions: 

	Annual earnings rate:	 	7.5%
	Mortality:	 	 
	 	Pre-retirement	 	None
	 	Post-retirement	 	Death at age 80
	Compensation Increases:	 	5.0% annually
	Retirement age:	 	55
	Social Security Increases:	 	3% annually

	10.2
	Interrelationship 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. 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. 

14

   ARTICLE 11
  Miscellaneous  

	11.1
	Unsecured General Creditor.    Participants and their Beneficiaries, successors and assigns shall have no legal or equitable
rights, interests or claims in any property or assets of an Employer. 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.

	11.2
	Employer'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.

	11.3
	Nonassignability.    Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer,
pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate 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, except that the foregoing shall not apply to any family support obligations set forth in a court order. No part of
the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other
person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency.

	11.4
	Not 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, with or
without cause, unless otherwise 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
or to interfere with the right of any Employer to discipline or discharge the Participant at any time.

	11.5
	Furnishing 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.

	11.6
	Terms.    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 wherever 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.

	11.7
	Captions.    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.

	11.8
	Governing 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. 

15

 
	11.9
	Notice.    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: 

SERP
Committee

Southwest Water Company

225 North Barranca Avenue, Suite 200

West Covina, California 91791-1605 

or
to such other address as may furnished to the Participant in writing in accordance with this notice provision. 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. 

	11.10
	Successors.    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 Beneficiary.

	11.11
	Spouse'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.

	11.12
	Validity.    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 and invalid provision had never been inserted herein.

	11.13
	Incompetent.    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, in competency, 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.

	11.14
	Court 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.

	11.15
	Distribution in the Event of Taxation.

	(a)
	General.    If, prior to a Post-Participation Change in Control, all or any portion of an affected Participant's
benefit under this Plan becomes taxable to the Participant for any reason prior to receipt, a Participant may petition the Committee 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, a Participant's Employer shall distribute to the Participant immediately available funds in an amount
that is sufficient to pay all federal, state and local taxes that have resulted from any benefit that has become taxable, plus interest and penalties thereon. 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. 

If,
after a Post-Participation Change in Control, all or any portion of an affected Participant's benefit under this Plan becomes taxable to the Participant for any reason prior to
receipt, a 

16

 

Participant
may petition the Trustee for a distribution of an amount up to 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, the Trustee shall distribute to the Participant immediately available funds in an amount that is sufficient to pay all federal, state and local taxes that have resulted from any
benefit that has become taxable, plus interest and penalties thereon. 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. 

	(b)
	Trust.    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.

	11.16
	Legal Fees To Enforce Rights After a Post-Participation Change in Control.    The Company is aware that upon
the occurrence of a Post-Participation Change in Control, the Board (which might then be composed of new members) or a shareholder of the Company, or of any successor corporation might
then cause or attempt to cause the Company or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Company to institute, or may institute,
litigation seeking to deny affected Participants the benefits intended under the Plan. In these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, following a
Post-Participation Change in Control, it should appear to any affected Participant that the Company or an Employer has failed to comply with any of its obligations under the Plan or any
agreement thereunder or, if the Company, an 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 irrevocably authorizes such Participant to retain counsel of his or her choice at the expense
of the Company to represent such Participant in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company, an Employer or any director,
officer, shareholder or other person affiliated with the Company or an Employer or any successor thereto in any jurisdiction. 

        IN
WITNESS WHEREOF, the Company has signed this Plan document as of May 8, 2000. 

	 	 	"Company"
	

 	
 	

SOUTHWEST WATER COMPANY

    a Delaware corporation
	

 	
 	

By:	
 	

/s/  SHELLEY A. FARNHAM      

	

 	
 	

Title:	
 	

VP, Human Resources

17

QuickLinks

Exhibit 10.7

SOUTHWEST WATER COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN MASTER PLAN DOCUMENT EFFECTIVE MAY 8, 2000

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