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                                  EXHIBIT 10.12
                       SPECIAL EARLY RETIREMENT BENEFIT OF
            THE CONNECTICUT WATER COMPANY EMPLOYEES' RETIREMENT PLAN,
                              ADOPTED MARCH 5, 1997


                                   APPENDIX B
                        SPECIAL EARLY RETIREMENT BENEFIT

B.1      Eligibility

         A special early retirement benefit, as set forth in Section B.2 hereof,
         shall be offered to all eligible Participants. For purposes of this
         Appendix B, the term 'Eligible Participant' shall mean each Participant
         who as of July 1, 1997 (a) will have completed ten (10) or more years
         of Credited Service, and (b) will have attained the age of fifty-five
         (55). Each such Eligible Participant will be offered the special early
         retirement benefit described in Section B.2 and may make a written
         election during an election period beginning on March 15, 1997 and
         ending at 4:30 P.M. on April 30, 1997 to retire between July 1, 1997
         through December 31, 1997 and receive such special early retirement
         benefit commencing as of said date; provided, however, that such
         Eligible Participant either electing or declining to retire and receive
         the special early retirement benefit described in Section B.2 may
         revoke said decision during the period beginning on May 1, 1997 and
         ending at 4:30 P.M. on May 7, 1997, after which date such decision
         shall be irrevocable.

B.2      Special Early Retirement Benefit

         (a) Each Eligible Participant who, pursuant to Section B.1, has elected
         to retire and receive the special early retirement benefit shall be
         credited with an additional five (5) years of Credited Service for
         purposes of the calculation of the benefit under Articles IV, V and VI.
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         (b) Each Eligible Participant who, pursuant to Section B.1, has elected
         to retire and receive the special early retirement benefit and whose
         retirement occurs prior to attainment of age sixty-two (62) shall also
         receive an additional benefit of $500 each month ending with the month
         in which such Eligible Participant attains age sixty-two (62), or, if
         earlier, dies. The benefit described in this subsection (b) shall not
         be provided to an Eligible Participant who is age sixty-two (62) or
         older as of the date of commencement of his Retirement Income and no
         benefits shall be payable to any Contingent Annuitant with respect to
         the benefit described in this subsection (b) following an Eligible
         Participant's death regardless of the form in which such Eligible
         Participant's Retirement Income is being paid.