SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
Exhibit 10.3
This Agreement, made this 20th day of March, 2006, by and between THE CONNECTICUT
WATER COMPANY (hereinafter referred to as the “Employer”) and XXXX X. XXXXXXXXX (hereinafter
referred to as the “Employee”).
WITNESSETH THAT:
WHEREAS, the Employee is and is expected to render valuable services to the Employer in his
capacity as President and Chief Executive Officer, and
WHEREAS, the Employer desires to ensure that it will have the benefit of the Employee’s
services until he reaches retirement, and
WHEREAS, the Employer wishes to assist the Employee in providing for the financial
requirements of the Employee in the event of his retirement, disability or death; and
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements
herein contained, the parties hereto agree to enter into the Agreement, as follows:
1. SUPPLEMENTAL RETIREMENT BENEFIT
a. Normal or Deferred Retirement. If, upon or after the Employee’s attainment of age
65, the Employee’s employment shall be terminated and he shall be eligible to receive a benefit
under The Connecticut Water Company Employees’ Retirement Plan (hereinafter referred to as the
“Retirement Plan”), the Employee shall be entitled to receive pursuant to this Agreement a benefit
having a value equal to an annual benefit for his life of (a) 60% of the Employee’s Average
Earnings reduced by (b) the annual benefit payable to the Employee under the Retirement Plan in the
form of a single life annuity for the life of the Employee (whether or not the benefit under the
Retirement Plan is actually paid in such form), commencing at the same time as of which benefits
commence hereunder, and further reduced by (c) the annual benefit payable to the Employee under any
qualified defined benefit plan maintained by American Water Works or any subsidiary thereof, in the
form of a single life annuity for the life of the Employee (whether or not the benefit under such
Plan is actually paid in such form) commencing at the same time as of which benefits commence
hereunder. Such benefit will be payable in accordance with Section 2 below. The date as of which
benefits commence hereunder is the first day of the month following the Employee’s retirement, even
though actual payment is delayed in accordance with Section 2 hereof.
b. Early Retirement. If, upon or after the Employee’s attainment of age 55
and prior to attainment of age 65, the Employee’s employment shall be terminated and he shall
be eligible to receive a benefit under the Retirement Plan, the Employee shall be entitled to
receive pursuant to this Agreement a benefit having a value equal to an annual benefit for his life
of (a) 60% of the Employee’s Average Earnings reduced by (b) the annual benefit payable to the
Employee under the Retirement Plan in the form of a single life annuity for the life of the
Employee (whether or not the benefit under the Retirement Plan is actually paid in such form)
commencing at age 65 (whether or not the benefit under the Retirement Plan commences at such time)
and further reduced by (c) the annual benefit payable to the Employee under any qualified defined
benefit plan maintained by American Water Works or any subsidiary thereof, in the form of a single
life annuity for the life of the Employee (whether or not the benefit payable under such Plan is
actually payable in such form) commencing at age 65 (whether or not the benefit under such Plan
commences at such time). If such benefit shall commence to be paid prior to the Employee’s
attainment of age 62, such benefit shall be reduced by 4% for each complete year by which the date
of benefit commencement precedes his attainment of age 62. Such benefit shall be paid in
accordance with Section 2 below.
c. For purposes of a. and b. above, “Average Earnings” shall have the meaning set forth in the
Retirement Plan, except that in determining Average Earnings, Annual Earnings (as defined in the
Retirement Plan) shall not be limited to the OBRA ‘93 annual compensation limit, the annual
compensation limit imposed under the Economic Growth and Tax Relief Reconciliation Act of 2001
(“EGTRRA”), or any similar limit on annual compensation under Section 401(a)(17) of the Internal
Revenue Code of 1986, as amended (the “Code”), imposed by any future legislation.
In determining Average Earnings, if the Employee retires under this Agreement on or after
attainment of age 62, Annual Earnings shall also include the value of all of the following: (1)
Cash Units, (2) Restricted Stock, and (3) Performance Shares awarded to a Participant under the
Connecticut Water Service, Inc. Performance Stock Program (the “Program”) for any year in which
such awards are made. Notwithstanding the foregoing, in no event shall awards which are long-term
awards or PARSAs be taken into account in determining Average Earnings. The value of such awards
(other than long-term awards or PARSAs) shall be included within Annual Earnings in the year in
which such amounts are finally determined and actually awarded. Such amounts, if credited to a
Performance Share Account, shall not be counted a second time when payment is made from such
Account.
The calculation of the benefit set forth in a. and b. above, and of all other benefits payable
under this Agreement, shall be performed by the Committee under the Retirement Plan, and the
calculations and interpretations of such Committee shall be final and binding on the parties
hereto.
The Employee will not be deemed to have retired unless he has experienced a separation from
service as defined in Section 409A of the Code.
d. Disability Benefit. If the Employee’s employment shall be terminated by a
disability such that the Employee is considered eligible for a full disability pension under
the provisions of the Social Security Act, the Employee shall be entitled to receive pursuant to
this Agreement a benefit having a value equal to an annual benefit for his life calculated in the
manner set forth in b. above; provided, however, that the reduction factor pursuant to b. above
shall be .72 if the Employee’s benefit commencement date precedes age 62 by more than 7 complete
years. The Employee will not be deemed to have terminated employment unless he has experienced a
separation from service as defined in Section 409A of the Code. Such benefit shall be paid in
accordance with Section 2 below.
e. Absence of Other Benefits. No benefits shall be paid to the Employee pursuant to
this Agreement other than as provided in a. through d. above.
2. TERMS AND CONDITIONS OF BENEFIT. The annual lifetime benefit calculated in
accordance with Section 1 hereof shall be paid in monthly installments on the first day of each
month. Such installments paid pursuant to 1.a, 1.b or 1.d shall be calculated as if the were to
commence to be paid on the first day of the first month following the Employee’s retirement or
termination of employment. However, actual payment will commence on the first day of the seventh
(7th) month following the date of the Employee’s retirement or termination of
employment, although the first payment shall include all payments that would have been made had
payments commenced on the first day of the month following the Employee’s retirement or termination
of employment. The first installment made pursuant to 1.a., 1.b. or 1.d shall be equal to seven
(7) such installments.
The form in which the benefit hereunder shall be paid is, if the Employee is unmarried, an
annuity for the life of the Employee only and, if the Employee is married, an annuity for the life
of the Employee with the provision that after the Employee’s death, 50% of the annual benefit that
was payable to the Employee shall be continued to the Employee’s surviving spouse for life (a
“Joint and Survivor Annuity”). The benefit payable as a Joint and Survivor Annuity shall be
calculated by applying to the benefit calculated in accordance with Section 1.a., l.b. or 1.d.
hereof, as appropriate, the factors for the 50% contingent annuity option set forth in the
Retirement Plan.
Monthly installments of benefits shall cease to be paid as of the first day of the month
following the date of the Employee’s death, unless a Joint and Survivor Annuity was then in effect,
in which event the installments shall cease as of the first day of the month following the death of
the Employee’s surviving spouse.
3. DEATH BENEFIT. If the Employee has attained age 55 while in service with the
Employer and dies thereafter but prior to the commencement of benefits pursuant to this Agreement,
and if the Employee’s spouse or other beneficiary is entitled, to a death benefit under
the Retirement Plan, said spouse or other beneficiary shall be entitled to receive a death benefit
pursuant to this Plan. However, if the Employee is survived by his spouse, such spouse shall be
deemed to be entitled to receive a spousal pre-retirement death benefit under the Retirement Plan
even if a waiver of such spousal
pre-retirement death benefit is in effect under such Plan. The amount of said death benefit
shall be determined as if the Employee had retired on the day prior to his death with either a
Joint and Survivor Annuity in effect, if his spouse survives him, or a five years certain and life
annuity (as described in the Retirement Plan) in effect, if his spouse does not survive him. If
the benefit is determined under a Joint and Survivor Annuity, installment payments shall begin on
the first day of the first month following the Employee’s death. If the benefit is determined
under a five years certain and life annuity, it shall be paid in an actuarially equivalent lump
sum, as determined by the Committee under the Retirement Plan using the appropriate factors set
forth in the Retirement Plan. Such lump sum payment shall be made on the fifteenth
(15th) day following the Employee’s death.
No other death benefits shall be payable in the event of the Employee’s death prior to the
commencement of benefits hereunder.
4. LIMITATION OF BENEFIT. If the Employee’s employment shall be terminated for cause
involving fraud, dishonesty, moral turpitude, gross misconduct, gross failure to perform his
duties, or disclosure of secret or other confidential information of the Employer to any competitor
or to any person not authorized to receive such information, neither the Employee, his spouse nor
his estate shall be entitled to receive any benefit under this Agreement.
5. ABSENCE OF FUNDING. Benefits payable pursuant to this Agreement shall not be
funded, and the Employer shall not be required to segregate or earmark any of its assets for the
benefit of the Employee, his spouse or his estate. Such benefits shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of the Employee, his spouse or his estate, and any attempt to anticipate,
alienate, transfer, assign or attach these benefits shall be void. The Employee, his spouse or his
estate shall have only a contractual right against the Employer for the benefits hereunder and
shall have the status of general unsecured creditors. Notwithstanding the foregoing, in order to
pay benefits pursuant to this Agreement, the Employer may establish a grantor trust (hereinafter
the “Trust”) within the meaning of Section 671 of the Internal Revenue Code of 1986, as amended.
Some or all of the assets of the Trust may be dedicated to providing benefits to the Employee, his
spouse or his estate pursuant to this Agreement, but, nevertheless, all assets of the Trust shall
at all times remain subject to the claims of the Employer’s general creditors in the event of the
Employer’s bankruptcy or insolvency.
6. MISCELLANEOUS.
a. This Agreement may be amended at any time by mutual written agreement of the parties
hereto, but no amendment shall operate to give the Employee, his spouse, his estate or any other
beneficiary, either directly or indirectly, any interest whatsoever in any funds or assets of the
Employer, except the right to receive the payments herein provided and the right to receive such
payments from assets held in the Trust.
b. This Agreement shall not supersede any other contract of employment, whether oral or in
writing, between the Employer and the Employee, nor shall it affect or impair the rights and
obligations of the Employer and the Employee, respectively, thereunder. Nothing contained herein
shall impose any obligation on the Employer to continue the employment of the Employee.
c. This Agreement shall be construed in all respects under the laws of the State of
Connecticut.
d. This Agreement has been prepared with reference to Section 409A of the Internal Revenue
Code and should be interpreted in a manner consistent with Section 409A. In the event that any
part of the Agreement is determined to be in violation of 409A, such part of the Agreement shall be
automatically revised to be in compliance with Section 409A in such way as most closely
approximates the intent of the parties.
IN WITNESS WHEREOF, the Employer and the Employee have executed this Agreement as of the day
and year above written.
| THE CONNECTICUT WATER COMPANY |
||||
| By: | Xxxxxxx X. XxXxxx | |||
| Its Corporate Secretary | ||||
| /s/ Xxxx X. Xxxxxxxxx | ||||
| Xxxx X. Xxxxxxxxx | ||||
