THE CITIZENS EXECUTIVE DEFERRED SAVINGS PLAN
INDEX
Section Page No.
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SECTION 1: Purpose 1
SECTION 2: Definitions 1
SECTION 3: Administration 4
SECTION 4: Deferrals 5
SECTION 5: Company Matching Credits 6
SECTION 6: Growth of Accounts 7
SECTION 7: Distribution 8
SECTION 8: Hardship Withdrawals 9
SECTION 9: Discretionary Payment 10
SECTION 10: Change in Control 11
SECTION 11: Beneficiary Designation 12
SECTION 12: General Provisions 12
SECTION 13: Withholding 13
SECTION 14: Amendment, Suspension, or Termination 14
Section 1. Purpose
1.1 The purpose of The Citizens Executive Deferred Savings Plan (the
"Plan") is to (a) provide incentives and rewards to employees who occupy
certain management and highly compensated positions; (b) assure that the
Company's compensation programs for senior management are in alignment
with the strategic direction of the Company; and (c) assist the Company in
attracting, retaining, and motivating employees of high caliber and
experience.
Section 2. Definitions
2.1 "Account" or "Accounts" shall mean each of a Participant's
Deferral Account, and Company Matching Account or any such Accounts or all
of such Accounts, as the context requires.
2.2 "Account Balance" shall mean (a) the sum of (1) the amounts
credited to a Participant's Deferral Account, (2) the amounts credited to
a Participant's Company Matching Account, and (3) earnings and losses
credited to a Participant's Accounts, minus (b) distributions from a
Participant's Accounts, including without limitation, Hardship Withdrawals
from a Participant's Deferral Account, and forfeitures.
2.3 "Administrative Committee" shall mean the committee appointed by
the Plan Committee to supervise the day to day operation of the Plan.
2.4 "Beneficiary" shall mean the person or persons designated by a
Participant to receive the Participant's Account Balance upon the death of
the Participant or a Participant's deemed beneficiary pursuant to Section
11 hereof.
2.5 "Board" shall mean the Board of Directors of the Company.
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2.6 "Change in Control" shall mean the occurrence of any of the
following:
(a) A "change in control" as such term is used in Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as in effect at the date
hereof (the "Act"); or
(b) If there has occurred a change in control as the term
"control" is defined in Rule 12b-2 promulgated under the Act;
or
(c) When any "person" (as such term is defined in Sections 3(a)(9)
and 13(d)(3) of the Act) becomes a beneficial owner, directly
or indirectly, of securities of the Company representing 20%
or more of the Company's then outstanding securities having
the right to vote on the election of directors; or
(d) If the shareholders of the Company approve a plan of complete
liquidation of the Company; or
(e) A change in the ownership of a substantial portion of the
assets of the Company (within the meaning of Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended).
2.7 "Company" shall mean Citizens Utilities Company, its successors
and such of its subsidiary companies as shall be designated by the Board
to participate in the Plan.
2.8 "Company Matching Account" shall mean the separate account
maintained for a Participant on the books of the Company reflecting all
Company Matching Credits adjusted for earnings and losses thereon.
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2.9 "Company Matching Credit" shall have the meaning set forth in
Section 5.1.
2.10 "Compensation" shall mean a Participant's base salary for a
Plan Year without reduction for Deferrals, including before-tax
contributions made by a Participant to the Company's 401(k) Plan and
contributions to any plan maintained by the Company pursuant to Section
125 of the Internal Revenue Code of 1986, as amended (the "Code").
2.11 "Deferral" shall mean the amount credited to a Participant's
Deferral Account for a Plan Year to reflect Compensation otherwise payable
to a Participant during such Plan Year which such Participant has elected
to defer pursuant to Section 5.
2.12 "Deferral Account" shall mean the separate account maintained
for a Participant on the books of the Company to reflect Deferrals
(adjusted for earnings and losses thereon).
2.13 "Disability" shall mean a Participant's inability to engage in
the customary activities required by his employment by reason of any
medically determinable physical or mental impairment as certified by a
physician acceptable to the Plan Committee.
2.14 "Effective Date" shall mean January 1, 1996.
2.15 "Eligible Employee" shall mean any individual employed by the
Company with a base compensation of $100,000 or more who is actively
employed by the Company on December 31 of the year preceding the Plan Year
of Deferral.
2.16 "401(k) Plan" shall mean The CUC 401(k) Employee Benefit Plan.
2.17 "Participant" shall mean an Eligible Employee who elects to
make Deferrals for the Plan Year.
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2.18 "Plan" shall mean The Citizens Executive Deferred Savings Plan.
2.19 "Plan Committee" shall mean the Compensation Committee of the
Board.
2.20 "Plan Year" shall mean the period commencing on the Effective
Date and ending on December 31, 1996 and thereafter, the calendar year.
2.21 "Retirement" shall mean termination of employment after attaining
eligibility for a retirement benefit under the terms of the Citizens Pension
Plan.
2.22 "Termination for Cause" or "Terminated for Cause" shall mean
any of the following:
(a) The Participant shall have willfully failed to perform any of
his material obligations as an employee of the Company and shall
have failed to cure such failure within ten (10) days after
receiving written notice thereof from the Company; or
(b) The Participant shall have committed an act of fraud, theft or
dishonesty which, in the reasonable opinion of the Company, is
likely to result in financial harm to the Company; or
(c) The Participant shall be convicted of (or pleaded nolo
contendere to) any felony or misdemeanor involving moral
turpitude, which misdemeanor might, in the reasonable opinion of
the Company, cause embarrassment to the Company.
Section 3. Administration
3.1 The Plan Committee shall retain overall supervisory authority
and responsibility for the Plan, and shall appoint the Administrative
Committee. The Plan shall be administered by the Administrative Committee.
The Administrative Committee shall have full power and authority to
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construe and interpret the Plan, establish and amend administrative
regulations to further the purposes of the Plan, and take any other action
necessary to administer the Plan. The Plan Committee's and the
Administrative Committee's decisions, actions, and interpretations
regarding the Plan shall be final and binding upon all Participants and
Beneficiaries.
3.2 The Administrative Committee shall consist of not less than
three (3) members. The Administrative Committee shall act by vote or
written consent of a majority of its members. Members of the
Administrative Committee who are either eligible to become Participants or
who are Participants may vote on or participate in any matter affecting
the administration of the Plan, provided however, that no member of the
Administrative Committee may vote on or participate in a request for a
Hardship Withdrawal to such member or any other matter concerning the
benefits of such member.
3.3 The Administrative Committee shall: (a) notify employees who are
eligible to become a Participant for a Plan Year; (b) formulate and
recommend to the Plan Committee such changes in the Plan as may facilitate
the administration of the Plan; (c) value Accounts, and maintain Accounts
and records of Deferrals, Company Matching Credits and earnings and losses
thereon, payment of Account Balances, and Beneficiary designations; (d)
prepare communications to Participants and Beneficiaries; (e) prepare
reports and data required by the Company; (f) determine Hardship
Withdrawals; (g) obtain necessary consents and approvals; (h) obtain any
data requested by the Plan Committee; and (i) take any other actions
requested by the Plan Committee or as are otherwise necessary or
appropriate, as determined by the Administrative Committee, for effective
implementation and administration of the Plan.
Section 4. Deferrals
4.1 Each employee who is eligible to become a Participant for a Plan
Year may become a Participant for such Plan Year (or, during the first
year of employment, the portion thereof after electing to participate) by
electing, prior to the commencement of the Plan Year or for the first year
of employment, within 30 days after commencement of employment on such
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form as shall be provided to the Participant by the Administrative
Committee, to make Deferrals for such Plan Year. A Participant's Deferral
for a Plan Year shall not exceed 50% of the Participant's Compensation for
such Plan Year; provided however that such 50% limit shall be reduced by
the before-tax contributions, if any, made by the Participant for such
Plan Year to the 401(k) Plan for such year. A Participant's Deferral for a
Plan Year (or a portion thereof) shall not be less than $1,000.
4.2 Each election of Deferral shall be effective only in the Plan
Year to which such election of Deferral applies. Elections to make
Deferrals for a Plan Year and the amount of such Deferrals for such Plan
Year shall be irrevocable.
4.3 A Participant's Deferrals shall be credited to a Participant's
Deferral Account in accordance with procedures determined by the
Administrative Committee.
Section 5. Company Matching Credits
5.1 Effective for each Plan Year, the Company shall accrue a Company
Matching Credit on behalf of each Participant who elects to make Deferrals
for such Plan Year. For purposes of the Plan "Company Matching Credit"
shall mean the amount credited to a Participant's Company Matching Account
for a Plan Year based on a rate determined by the Board of Directors at
its discretion. The Company Matching Credit may be represented by a
hypothetical amount in shares of Citizens Utilities Company Series B stock
or such other property as the Board may determine at its discretion.
Notwithstanding the foregoing provisions of this Section 5.1, the Company
Matching Credit for a Plan Year shall be reduced (but not below zero) by
any Company Matching Contributions (as defined under the 401(k) Plan) made
for the Participant for such Plan Year under the 401(k) Plan in respect of
before-tax contributions.
5.2 Company Matching Credits, if any, for a Plan Year shall be
accrued in each Participant's Company Matching Account on or about the
time that the Company Matching Contribution (as defined under the 401(k)
Plan) for such Plan Year is made to the 401(k) Plan.
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Upon attaining the age of 55 years, a Participant may elect to transfer
amounts from his/her "Company Matching Account" to any of the investment
categories then available and/or elect to have participating Company
Matching Credits invested in the investment categories elected for their
elective Deferred Account.
5.3 Subject to Section 5.4 below, a Participant shall be vested in
Company Matching Credits and the earnings and losses accrued in his/her
Company Matching Account upon the earliest of the following events: (a)
retirement, or (b) completion of five years of service. A Participant is
always fully vested in salary deferrals and earnings and losses on salary
deferrals.
Notwithstanding the foregoing, (a) in the event of a Change in
Control, a participant shall be deemed to be 100% vested in his/her
Company Matching Account, and (b) a Participant whose employment by the
Company ceases on account of death or Disability shall be 100% vested in
his/her Company Matching Account. For purposes of this Section 5.3, the
term Years of Service shall have the same meaning and shall be calculated
in the same manner as set forth under the 401(k) Plan.
5.4 Notwithstanding anything set forth in Section 5.3 above, in the
event that a Participant's employment with the Company is Terminated for
Cause, then such Participant shall be deemed to have forfeited any and all
non-vested Company Matching Credits and earnings, gains and losses thereon
theretofore accrued in his/her Company Matching Account.
Section 6. Growth of Accounts
6.1 Subject to Section 6.3 below and Section 5.1, a Participant's
Deferral and Company Matching Accounts shall be increased by the amount of
income and gains and reduced by the amount of losses which would be
realized if the amounts credited to each such account were invested in one
or more investment mutual funds made available by the Plan Committee under
the Plan or in shares of Citizens Utilities Company Series B stock, as
elected by the Participant or for the company matching accounts, as
determined by the Board of Directors.
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Expenses incurred in connection with any such investment mutual funds
shall be deducted from a Participant's Accounts. Investment elections
shall be made in multiples of five percent (5%) of the amount of the
Participant's Deferral. Any investment election shall be made on a form
prescribed by the Administrative Committee. Notwithstanding anything to
the contrary set forth herein, in no event shall the Company, the Plan
Committee or the Administrative Committee be responsible for and shall not
be held liable for the investment performance of any investment made
available hereunder.
6.2 Subject to Section 6.3, a Participant shall be permitted to
change his/her deemed investment election with regard to existing and
future balances in his/her Deferral Account one (1) time during each
calendar quarter. Any such change in investment election shall be on such
form as prescribed by the Administrative Committee and in accordance with
such rules and procedures prescribed by the Administrative Committee. Upon
attaining the age of 55 years, a participant may elect to transfer amounts
from his Company Matching Account to any of the other investment
categories then available and/or redirect any Company Matching Credits to
any of the investment categories then available.
6.3 Notwithstanding anything to the contrary set forth herein, the
Company shall not be required to invest all or any portion of a
Participant's Deferral Account or Company Matching Account, in any of the
investment funds set forth in Section 6.1, but may invest such Accounts in
any manner it may determine, or not invest such Accounts.
Section 7. Distribution
7.1 Except as set forth in Sections 8, 9 and 10, a Participant shall
irrevocably elect in writing, and file with the Administrative Committee,
at the same time as such Participant makes any election to defer
Compensation, the period of deferral with respect to such election. A
Participant may elect to defer until termination of employment or for a
fixed period not exceeding 10 years, subject to the minimum required
period of deferral, which is two full calendar years following the year of
deferral. Notwithstanding the foregoing, the two-year minimum deferral
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period shall not apply to payments made as a result of death, Disability,
Retirement, or pre-Retirement termination.
7.2 Except as set forth in Sections 8, 9 and 10, a Participant shall
irrevocably elect in writing, and file with the Administrative Committee,
at the same time as any election to defer, a method of payment of vested
amounts deferred under this Plan from the following methods:
(a) Payment of vested amounts credited to the Participant's
Account in a specified number of annual installments, the
first installment to be paid in January of the year following
the year in which the Participant terminates employment due to
his retirement, disability or death.
(b) Payment of vested amounts credited to the Participant's
Account in a single lump sum in the month and year specified
by the Participant, or if not specified by the Participant in
January of the year next following the year of the
Participant's termination for Retirement, Disability, or
death.
(c) Payment in a lump sum as soon as administratively feasible
upon termination prior to age 55 with less than five (5) years
of service, after the date of termination.
Section 8. Hardship Withdrawals
8.1 The Administrative Committee may, in its sole discretion, permit
a Participant to withdraw all or a portion of the Deferrals credited to
his/her Deferral Account without regard to earnings thereon if such
Participant demonstrates a Hardship (as defined in Section 8.2 below) to
the satisfaction of the Administrative Committee. Hardship Withdrawals
from a Participant's Company Matching Account shall not be permitted. In
determining whether to grant a Participant's request for a Hardship
Withdrawal, the Administrative Committee may consider the resources
currently available to a Participant and any resources that may in the
future become available to the Participant.
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8.2 For purposes of the Plan, the term "Hardship" means a circumstance
resulting from an immediate and heavy financial need of the Participant and
arising from an emergency, and shall mean, (a) extraordinary medical
expenses, (b) the purchase of a primary residence, (c) college education
expenses for a member of the Participant's immediate family, or (d) any
other event beyond the Participant's control, as determined in each such
event, by the Administrative Committee in its discretion.
8.3 A withdrawal on account of Hardship shall only be granted if the
Participant demonstrates to the Administrative Committee's satisfaction,
by submitting written documentation, incorporating such statements and
evidence that the Administrative Committee deems to be relevant, that the
Participant's circumstances satisfy the definition of Hardship set forth
in Section 8.2 and that the Hardship withdrawal is necessary to satisfy
the Participant's financial need.
8.4 Hardship Withdrawals shall be limited to the amount, determined
by the Administrative Committee, in its sole discretion, necessary to
relieve the Participant's Hardship. Hardship Withdrawals shall be paid as
soon as practicable after the Administrative Committee's approval of the
Participant's request. A Participant's Deferral Account shall be reduced
by the amount of any Hardship Withdrawals distributed to the Participant.
8.5 Hardship withdrawals shall be allocated by class year spread
across Vested Account Balances.
Section 9. Discretionary Payment
9.1 Notwithstanding anything to the contrary set forth herein, the
Plan Committee may, in its sole and absolute discretion, direct an
immediate payment to any or all the Participants or their beneficiary(ies)
of all of his/her vested Account Balances in cash, if the Plan Committee
determines that such action is in the best interest of either the Company,
the Participant(s) or their Beneficiary(ies).
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9.2 In the event that the Plan Committee shall so direct an immediate
payment, in accordance with Section 9.1, then:
(a) The vested Account Balances to be paid shall be determined by the
Plan Committee so as to reflect fairly and equitably appropriate
earnings since the last preceding valuation and so as to reflect
fairly and equitably such other facts and circumstances as the Plan
Committee deems appropriate;
(b) Compensation which was deferred or was to be deferred with respect
to the Plan Year in which such payment occurs shall be paid when
otherwise payable (such amounts that would otherwise have been
payable prior to the date of such payment or distribution shall be
paid as soon as practicable thereafter);
(c) In the event that vested Account Balances are not paid or made
available to a Participant in accordance with Section 9.1 when
otherwise due, then such Participant may file a claim for such
payment and, if such Participant is successful, then the Company
shall reimburse such Participant for reasonable attorneys' fees
actually paid by such Participant in enforcing such Participant's
rights to such payment; and
(d) In the event that vested Account Balances are not paid or made
available to Participants in accordance with Section 9.1 when
otherwise due, then with respect to such unpaid amounts, interest
will be credited each month on the last day of the month from the
date it was otherwise due until the date it is actually paid at a
rate equal to the prime rate in effect at the PNC Bank, Pittsburgh,
Pennsylvania, on the last business day of each month.
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Section 10. Change in Control
10.1 Notwithstanding anything to the contrary set forth herein, (a)
a Participant's Account Balance under the Plan and (b) all Deferrals and
Company Matching Credits which have been accrued but not yet credited to a
Participant's Accounts, shall be paid to each Participant in a lump sum on
the occurrence of a Change in Control or as soon thereafter as
practicable, but in no event later than five (5) days after the occurrence
of the Change in Control, unless, in the opinion of the Plan Committee, it
is not in the best interests of the Company, the Participants and their
Beneficiaries to cause such payment to be made and to invoke the foregoing
provisions of this Section 10.1. In the event of any such distribution,
the amounts of each Participant's Account Balance shall be determined by
the Plan Committee (which, for this purpose, shall be comprised of members
of the Board prior to the Change in Control) so as to reflect fairly and
equitably appropriate interest and dividends since the last preceding
valuation and so as to reflect fairly and equitably such other facts and
circumstances as the Plan Committee deems appropriate.
Section 11. Beneficiary Designation
11.1 Each Participant shall file with the Administrative Committee a
written designation of a Beneficiary on such form as may be prescribed by
the Administrative Committee. A Participant may, from time to time, amend
or revoke the designation of Beneficiary.
11.2 If a Participant fails to designate a Beneficiary or if a
Participant's designation of Beneficiary fails for any reason, then the
Beneficiary or Beneficiaries designated by the Participant, or deemed to
have been designated by the Participant under the 401(k) Plan shall be
deemed to be the Participant's Beneficiary. If a Participant does not
participate in the 401(k) Plan, or if the Participant participates in the
401(k) Plan and has not designated or been deemed to have designated a
Beneficiary thereunder, then the Beneficiary or Beneficiaries of such
Participant under the Company's defined benefit plan (the Retirement Plan)
shall be deemed to be such Participant's Beneficiary. If a Participant
does not participate in the Company's Retirement Plan, or if a Participant
participates in the Retirement Plan and has not designated or been deemed
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to have designated a Beneficiary thereunder, then the Beneficiary or
Beneficiaries of such Participant under the Company's Group Life Insurance
Plan shall be deemed to be such Participant's Beneficiary. If a
Participant does not participate in the Company's Group Life Insurance
Plan, or participates in such Plan, but has not designated or been deemed
to have designated a Beneficiary thereunder, and such Participant dies
without designating a Beneficiary, then the Administrative Committee shall
distribute such Participant's Account Balance to the Participant's estate.
If a Beneficiary does not survive the Participant, then the Administrative
Committee shall cause such Participant's Account Balance to be distributed
to the Participant's estate. If the Beneficiary of a deceased Participant
survives the Participant, and dies before such Participant's Account
Balance is distributed, then the Plan Committee shall cause such
Participant's Account Balance to be distributed to the Beneficiary's
estate.
Section 12. General Provisions
12.1 The rights of a Participant to the payment of deferred
compensation as provided in the Plan shall not be assigned, transferred,
pledged, or encumbered or be subject in any manner to alienation or
anticipation. No Participant may borrow against his/her Account Balance.
Accounts shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, charge, garnishment,
execution or levy of any kind, whether voluntary or involuntary, including
but not limited to any liability which is for alimony or other payments
for the support of a spouse or former spouse, or for any other relative of
any Participant. Any such attempted assignment or transfer shall be void.
12.2 The Plan is intended to constitute an unfunded deferred
compensation arrangement for a select group of management and highly
compensated employees. Nothing contained in the Plan, and no action taken
pursuant to the Plan, shall create or be construed to create a trust of
any kind. The Company's obligations hereunder shall be an unfunded and
unsecured promise to pay money in the future for tax purposes and for
purposes of Title I of ERISA. A Participant's right to receive his/her
Account Balance shall be no greater than the right of an unsecured general
creditor of the Company. Account Balances shall be paid from the general
funds of the Company,
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and no special or separate fund shall be established and no segregation of
assets shall be made to assure payment of such Account Balances.
12.3 Nothing contained in the Plan shall give any Participant the
right to continue in the employment of the Company, or affect the right of
the Company to discharge a Participant.
12.4 The Plan shall be construed and governed in accordance with the
laws of the State of Connecticut.
Section 13. Withholding
13.1 The Company shall deduct from all amounts paid under this Plan
any taxes required to be withheld by any federal, state, or local
government tax statutes. The Participants and their Beneficiaries,
distributees, and personal representatives will be responsible for the
payment of any and all federal, foreign, state, local, or other income or
other taxes imposed on amounts paid under this Plan.
Section 14. Amendment, Suspension, or Termination
14.1 The Plan Committee reserves the right to amend, suspend, or
terminate the Plan at any time and for any reason; provided, however, that
any amendment, suspension, or termination shall not adversely affect the
rights of the Participants or Beneficiaries to receive Deferrals, vested
Company Matching Credits, and earnings thereon credited to their accounts
prior to such action. In the event the Plan is terminated, Account
Balances shall be distributed to Participants and Beneficiaries, in a lump
sum, as soon as practicable thereafter.
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Executed as of the 1st day of January, 1996.
Citizens Utilities Company
By: /s/ James D. Ranton
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Vice President, Human Resources
Attest: /s/
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Secretary
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