SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from __________ to __________
Commission file number 0-493
CONSUMERS WATER COMPANY
(Exact name of registrant as specified in its charter)
Maine 01-0049450
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
THREE CANAL PLAZA, PORTLAND, MAINE 04101 (207-773-6438)
(Address and telephone number of principal executive offices)
NONE
(Securities registered pursuant to Section 12(b) of the Act)
COMMON SHARES, PAR VALUE $1.00 PER SHARE
(Title of class of Securities registered
pursuant to Section 12(g) of the Act)
_______________________________________________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes XXX No
Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K .
The aggregate market value of all voting shares held by non-affiliates
as of March 22, 1994 was $116,586,804.
As of March 22, 1994, there were 8,113,953 Common Shares outstanding.
Documents Incorporated by Reference
The "Nominees for Election as Directors", "Other Executive Officers",
"Executive Compensation," "Compliance with Beneficial Ownership Reporting
Rules" and "Common Stock Ownership of Certain Beneficial Owners and
Management" sections of the registrant's proxy statement for its 1994 annual
meeting filed pursuant to Regulation 14A are incorporated in Part III of
this Form 10-K by reference.
PART I
Item 1. Business.
Consumers Water Company (Consumers or the Company) is a holding and
management company whose principal business is the ownership and operation of
water utility subsidiaries. Consumers owns directly or indirectly at least
90% of the voting stock of 11 water companies (the Consumers Water
Subsidiaries) which operate 28 separate systems providing water service to
approximately 218,000 customers in six states. It also owns 100% of C/P
Utility Services (C/P), a provider of technical services to utilities and
other enterprises. C/P, headquartered in Hamden, Connecticut, provides
services in the areas of meter services, contract operations, mechanical
engineering services, corrosion engineering services, environmental
engineering services and water conservation to the utility industry and
certain industrial clients primarily in the northeastern United States.
Consumers also owns Burlington Homes of New England (Burlington), a
manufactured housing company located in Oxford, Maine, that formerly sold
manufactured housing through developers and an independent dealer network
throughout New England and eastern New York. On October 6, 1993, The
Company announced its decision to discontinue the operations of Burlington,
to offer the Company for sale and to concentrate its efforts on its water
resource management business. To date, efforts to sell Burlington have
been unsuccessful. The plant has been closed and Burlington has begun the
liquidation of its assets.
Consumers was incorporated under the laws of Maine in 1926. The address
of its executive offices is Three Canal Plaza, Portland, Maine 04101, and
the Company's telephone number is (207) 773-6438.
The Company had at December 31, 1993, subsidiaries as noted on Exhibit 22
attached hereto, the accounts of which are included in the consolidated
financial statements in this report.
Consumers Water Subsidiaries
The Consumers Water Subsidiaries operate 28 primary systems in six states
for the collection, treatment and distribution of water for public use to
residential, commercial and industrial customers, to other water utilities
for resale and for private and municipal fire protection purposes. In 1993,
65% of the revenue of the Consumers Water Subsidiaries was generated from
residential accounts, while sales for commercial users, industrial users
and fire protection and miscellaneous uses accounted for 13%, 9% and 13%
of revenues, respectively. Water utility revenues for the three years ended
December 31, 1993, 1992 and 1991 were $78,171,000, $74,637,000, and
$72,427,000, respectively. At December 31, 1993, the Consumers Water
Subsidiaries owned in the aggregate 3,084 miles of main line pipe, of
which approximately 84% was six inches or larger in diameter.
Of the 28 primary systems, twelve have surface supplies (lakes, ponds and
streams) as their source of supply; twelve obtain water principally or
entirely from wells; two obtain their water supplies from adjacent systems
through wells and surface supplies; and two purchase their supplies from
adjacent systems, one of which is an affiliated utility. Less than 5% of the
Consumers Water Subsidiaries' water usage is purchased from other systems.
In general, the Company considers the surface and well supplies at the
Consumers Water Subsidiaries to be adequate for anticipated average daily
demand and normal peak day demand for the next five years. One division of
Garden State Water Company, Blackwood, serving approximately 11,000
customers has water supplies that will need to be supplemented. This work
of developing an additional water supply is underway and anticipated to
be completed within the next year.
All of the systems (except one system serving solely industrial users)
provide customers with water which has been subjected to disinfection
treatment and some of which has been subjected to additional treatment,
such as softening, sedimentation, filtration, chemical stabilization, iron
and/or manganese removal and taste and odor control. Eight systems own and
operate full scale water treatment plants. In addition, Consumers Illinois
Water Company operates four wastewater treatment facilities.
The water treatment, pumping and distribution capacities of the systems
are generally considered by management to be adequate to meet the present
requirements of their residential, commercial and industrial customers.
On a continuing basis, the Consumers Water Subsidiaries make system
improvements and additions to capacity in response to changing regulatory
standards, changing patterns of consumption and increases in the number of
customers. See "Environmental Regulation." Operating and capital costs
associated with these improvements are normally recognized by the various
state regulatory commissions in setting rates. See "Rate Regulation."
Consumers' water utility business is seasonal because the demand for
water during the warmer months is generally greater than during the cooler
months due to additional requirements for industrial and residential cooling
systems, private and public swimming pools and lawn sprinklers.
The following table indicates, for each of the Consumers Water Subsidiaries,
the number of customers at year-end, 1993 revenues and net utility plant as
of December 31, 1993:
(Dollars in Thousands)
Number Number of Utility Net Utility
Subsidiary of Systems Customers Revenue Plant (1)
Ohio Water Service Company (2) 5 70,020 $27,144 $95,840
Consumers Illinois Water Company 5 42,260 10,741 45,731
Inter-State Water Company 1 16,799 7,055 32,167
Shenango Valley Water Company (3) 2 17,044 6,335 22,544
Roaring Creek Water Company 1 16,671 5,260 21,405
Pennsylvania Water Company 1 4,451 1,370 3,872
Garden State Water Company (4) 4 28,374 9,452 40,345
Southern New Hampshire Water Company 1 7,416 5,273 30,188
Camden and Rockland Water Company 1 7,109 2,879 14,053
Maine Water Company 4 2,732 1,125 4,816
Wanakah Water Company 3 4,903 1,606 6,118
Inter-Company Eliminations - (69) ( 363)
------- ------- --------
28 217,779 $78,171 $316,716
======= ======= ========
_________________________________
(1) Includes construction work in progress.
(2) Includes the revenue from the Washington Court House Division which
was sold on December
16, 1993.
(3) Includes Masury Water Company, a wholly-owned subsidiary.
(4) Includes Califon Water Company, a 93.2% owned subsidiary.
The properties of the Consumers Water Subsidiaries consist of transmission
and distribution mains and conduits, purification plants, pumping facilities,
wells, tanks, meters, supply lines, dams, reservoirs, buildings, land,
easements, rights and other facilities and equipment used for the collection,
purification, storage and distribution of water. Substantially all of the
property and all rights and franchises of the Consumers Water Subsidiaries
are owned by the subsidiaries and are subject to liens of mortgages or
indentures. For the most part, such liens are imposed to secure bonds,
notes and/or other evidences of long-term indebtedness of the respective
companies. Management considers that its water collection, treatment and
distribution systems, facilities and properties are well maintained and
structurally sound. In addition, Consumers carries replacement cost insurance
coverage on substantially all of its and its subsidiaries' above-ground
properties, as well as liability coverages for risks incident to their
ownership and use, including consequential damage coverage.
Rate Regulation
The Consumers Water Subsidiaries are subject to regulation by their
respective state regulatory bodies. The state regulatory bodies have broad
administrative power and authority to regulate water and other public
utilities, including the power to regulate rates and charges, service and
the issuance of securities. They also establish uniform systems of accounts,
develop standards with respect to groundwater withdrawal rights, surface
water supply, potability and adequacy of treatment, and approve the terms
of contracts and relations with affiliates and customers, purchases and
sales of property and loans. Maine and Illinois have laws regulating
reorganizations of water and other utilities.
The profitability of the operations of the Consumers Water Subsidiaries
is influenced to a great extent by the timeliness and magnitude of rate
allowances by regulatory authorities in various states. Accordingly,
Consumers maintains a rate case management capability to ensure that the
tariffs of the Consumers Water Subsidiaries reflect, to the extent
possible, current costs of operations, capital, taxes, energy, materials
and compliance with environmental regulations. This process also addresses
other factors bearing on rate determinations, such as the quantity of
rainfall and temperature in a given period of time, system expansion and
industrial demand.
The approximate amount of annual rate increases allowed for the last three
years was $2,880,000 for 1991, $4,698,000 for 1992, and $1,945,000 for 1993
represented by ten, eight, and five rate decisions, respectively. Included
in the 1992 total is a $2.2 million rate allowance for Inter-State Water
Company, received on January 8, 1992. This increase was due primarily to
recovery of, and an allowance of a return on, its new $14 million water
treatment plant.
The Company currently has five rate filings pending totalling $7.3
million of requested annualized new revenue. Decisions on these cases
are expected in 1994. The number and magnitude of rate increases for the
next three years is expected to increase due to the large capital
expenditure program for the period 1994 to 1996.
Rates for some divisions of Ohio Water are fixed by negotiated agreements
with the political subdivisions that are served, instead of through a filing
with the Public Utility Commission of Ohio. Currently, two of the five
regulated divisions of Ohio Water are operating under rate ordinances.
Water Utility Competition
In general, the Company believes that the Consumers Water Subsidiaries
have valid operating rights, free from unduly burdensome restrictions,
sufficient to enable them to carry on their businesses as presently conducted.
They derive their rights to install and maintain mains in streets, highways
and other public places from the acts under which they were incorporated,
municipal consents and ordinances, permits granted for an indefinite period
of time by states and permits from state highway departments and county and
township authorities. In most instances, such operating rights are
non-exclusive. In certain cases, permits from state highway departments
and county and township authorities have not been received for service in
unincorporated areas, but service is being rendered without assertion or
lack of authority by the governmental body concerned.
Each of the Consumers Water Subsidiaries serves an area or areas in
which it is sole operator of the public water supply system. In some
instances another water utility provides service to a separate and sometimes
contiguous area within the same township or other political subdivision
served by one of the Consumers Water Subsidiaries.
In the states in which the operations of the Consumers Water Subsidiaries
are carried on, there exists the right of municipal acquisition by one or
more of the following methods: eminent domain, the right of purchase given
or reserved by a municipality or other political subdivision in granting
a franchise, and the right of purchase given or reserved under the law of
the state in which the subsidiary was incorporated or from which it received
its permit. The price to be paid upon acquisition is usually determined in
accordance with both federal law and the laws of the state governing the
taking of lands or other property under eminent domain statutes; in other
instances, the price may be negotiated, fixed by appraisers selected by the
parties or computed in accordance with a formula prescribed in the law of
the state or in the particular franchise or special charter. Certain
communities in areas served by the Consumers Water Subsidiaries have, from
time to time, expressed an interest in acquiring the water utility
serving those communities.
Environmental Regulation
The primary federal laws affecting the provision of water and wastewater
treatment services by the Consumers Water Subsidiaries are the Clean Water
Act (the CWA) and the Safe Drinking Water Act (the SDWA), and the
regulations promulgated pursuant thereto by the United States Environmental
Protection Agency (the EPA). These laws and regulations establish criteria
and standards, including those for drinking water and for discharges into
waters of the United States. States have the right to establish criteria
and standards stricter than those established by the EPA, and some of the
states in which the Consumers Water Subsidiaries operate have done so.
The CWA regulates the discharge of effluents from the drinking water and
wastewater treatment processes into the lakes, rivers, streams, and ground
water. Seven of the systems owned by the Consumers Water Subsidiaries
generate water treatment precipitate from operating conventional filtration
facilities used for producing drinking water. The water treatment
precipitate is a combination of silt and chemicals used in the treatment
process and chemicals removed from the raw water. For each of the seven
facilities, the water treatment precipitate generated from the treatment
facilities is disposed of either in a storage facility such as a lagoon
owned by the subsidiary, an off-site facility not owned by the subsidiary,
a State approved landfill, municipal sewer system or it is used for
agricultural land application. Wastewater precipitate generated from small
wastewater treatment facilities in Illinois is used as a solid additive.
Additional capital expenditures and operating costs in connection with the
management and ultimate disposal of effluent from water and wastewater
facilities may be required in the future, particularly if changes are made
in the requirements of the CWA or other applicable federal or state laws.
A small wastewater plant owned by Consumers Illinois serving the University
Park area will require approximately $2.0 to $3.0 million of capital
investment over the next three years to correct periodic excursions in
discharge permit requirements. A consent decree addressing these excursions
and the alleged resulting stream bed contamination is being negotiated with
the Illinois Environmental Protection Agency (the IEPA).
At Consumers Illinois, a small wastewater plant serving the Candlewick
area will require approximately $2.2 to $3.0 million of capital investment
due to periodic excursions in discharge permit requirements. The IEPA has
restricted Consumers Illinois from extending its sewer lines in the Candlewick
service area until the plant capital program is complete.
The Poland Filtration Plant, which is operated by Ohio Water, has been
disposing of treatment precipitate at an abandoned strip mine. The Ohio
Environmental Protection Agency has informed Ohio Water that it must find
an alternative method of disposal for the treatment precipitate. This issue
is being studied and the cost for the alternative disposal method is
estimated at $500,000 to $1.0 million.
The SDWA established uniform minimum national quality standards for
drinking water. The EPA regulations, promulgated pursuant to the SDWA,
set standards on the amount of certain inorganic and organic chemical
contaminants, microbials and radionuclides in drinking water. The 1986
amendments to the SDWA require that the EPA promulgate new primary water
standards for 83 contaminants. The EPA has not met the timetable
established in the amendments but is developing new water quality standards
and, to date, has issued regulations on volatile synthetic organic chemicals,
inorganic chemicals, surface water treatment, microbials, lead and copper.
Reauthorization of the SDWA is scheduled to be taken up by Congress in 1994.
Stricter drinking water standards currently under consideration may result
in additional capital expenditures being required of the Company.
The implications of the 1986 amendments to the SDWA and the EPA regulations
for the Company can be analyzed by grouping contaminants into four categories:
(i) microbials, (ii) inorganics, (iii) radionuclides and (iv) volatile organics.
With respect to microbials, improved disinfection and/or filtration is
required under the EPA Surface Water Treatment Rule adopted pursuant to the
SDWA. Necessary improvements to comply with the Surface Water Treatment Rule
have been completed or are under way at a number of Consumers Water
Subsidiaries. The estimated cost for 1994 and beyond for these improvements
is $20 million. Other major improvements at two water treatment plants
designed to increase capacity and upgrade facilities are estimated to cost
$11 million. In addition, open water storage reservoirs may have to be
covered or replaced at three subsidiaries at an approximate cost of $4
million.
Testing for lead and copper in finished water supplies, as required by the
SDWA provisions dealing with inorganics, has been undertaken at a number of
Consumers Water Subsidiaries. The most recent test results show that copper
and lead levels meet the applicable standards at most of the Consumers Water
Subsidiaries.
The EPA has not yet established the Maximum Contaminant Level (MCL) for
radon gas in drinking water pursuant to the SDWA provisions applicable to
radiouclides. The Company anticipates that the EPA will set those levels at
not less than 300 pico curies/liter and has budgeted for capital expenditures
of $5 million during the 1994 through 1998 period to treat groundwater
supplies to comply with this anticipated radon standard. If the standard is
set at 1,000 pico curies/liter, as proposed by an industry group, the
necessary capital expenditures would be reduced to approximately $1 million.
The Consumers Water Subsidiaries have surveillance programs in place to
provide early warning of a possible contamination threat to their water
supplies from volatile organics and other potential contaminants. Each of
the Consumers Water Subsidiaries has adopted contingency plans to respond
to such contamination, should it occur.
In 1992, Inter-State executed a Consent Decree with the Illinois
Environmental Protection Agency to comply with the MCL for nitrates by 1997
and to take additional interim steps to address the problem. Inter-State
will be required to add treatment facilities and/or new sources of supply to
reduce the level of nitrates in its finished water at certain times of the
year for an estimated project cost of $5 million.
A small satellite system owned by Consumers Illinois Water Company has
identified an organic contaminant in its groundwater supply. The problem can
be resolved by interconnecting the system to the core system at a cost of
approximately $1 million. It is felt costs associated with this problem will
be recovered from a third party.
A contractor working at the Lake Erie West water treatment facility, which
is operated by Ohio Water, caused the release of a relatively small amount of
mercury within a building at the facility. Workers tracked the mercury to
various areas of the building, necessitating the clean-up of a relatively
large area in and around the building at a cost of approximately $900,000.
Clean-up has been completed and Ohio Water is looking to the responsible
parties for reimbursement of its costs. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations - Liquidity and
Capital Resources."
The Consumers Water Subsidiaries own 12 major dams that are subject to the
requirements of the Federal Dam Safety Act of 1986. The dams normally undergo
a comprehensive engineering evaluation annually. The Company believes the
dams are structurally sound and well maintained. One of the dams owned by
Ohio Water will require structural improvements which are currently estimated
to cost $2.7 million.
In addition to the SDWA, the CWA and Federal Dam Safety Act of 1986,
numerous federal and state environmental laws affect the operations of the
Consumers Water Subsidiaries.
In addition to the capital expenditures and costs currently anticipated,
changes in environmental regulation, enforcement policies and practices or
related matters may result in additional capital expenditures and costs.
Capital expenditures and costs required as a result of water quality standards
and environmental requirements are normally recognized by state public
utility commissions as appropriate plant additions in established rates.
Water Subsidiary Information
Consumers' five largest water subsidiaries, Ohio Water Service Company
(Ohio Water), Consumers Illinois Water Company (Consumers Illinois), Garden
State Water Company (Garden State), Shenango Valley Water Company, (Shenango),
and Inter-State Water Company (Inter-State) accounted for approximately 78%
of consolidated operating revenues of the water subsidiaries in 1993 and 75%
of consolidated water utility net property, plant and equipment at
December 31, 1993.
Consumers' five largest water subsidiaries are discussed separately below.
Ohio Water Service Company
Ohio Water is the largest of the Consumers Water Subsidiaries, accounting for
approximately 35% of the operating revenues of the water subsidiaries in 1993.
As of December 31, 1993, Ohio Water operates five separate systems, five of
which deliver treated water and one of which delivers partially treated water
primarily to industrial customers. Ohio Water serves a number of communities
in northeastern and central Ohio.
The following indicates the distribution of 1993 year-end customers,
revenues and net utility plant among the five districts of Ohio Water.
(Dollars in Thousands)
Number of Utility Net Utility
Customers Revenues Plant
Lake Erie East District 7,516 $ 3,211 $ 8,789
Lake Erie West District 25,254 7,098 35,239
Massillon District 23,039 8,330 31,237
Struthers District 14,201 5,640 18,067
Washington Court House District 0 2,326 0
Mahoning Valley District 10 539 2,508
------- -------- ---------
Total 70,020 $ 27,144 $ 95,840
======= ======== =========
Consumers Illinois Water Company
Consumers Illinois serves 32,218 water customers in the City of Kankakee,
Village of Bourbonnais, and a portion of the Village of Bradley, as well as
unincorporated areas of Kankakee, Bourbonnais, Aroma, Limestone, and Manteno
Townships, all in Kankakee County; as well as the Village of University Park
and unincorporated areas of Crete and Monee Townships in Will County, and
portions of Lee, Boone and Knox Counties, all in the state of Illinois.
The Company also serves 10,042 sewer customers in the Village of
University Park, portions of Crete and Monee Townships in Will County, and
portions of Lee and Boone Counties, all in the state of Illinois.
The company sold its Bourbonnais wastewater collection operation on
January 13, 1993, for a gain, net of taxes, of approximately $847,000. The
operation generated $1.1 million in revenues and had 5,007 customers in 1992.
Consumers Illinois obtains its water supply for its customers in Kankakee
County from the Kankakee River and satellite wells. In Will, Lee, Boone and
Knox counties, its customers are supplied from deep well systems. The economy
of the Company's service areas is based on agriculture and diverse light
industries. Consumers Illinois' net utility plant at December 31, 1993,
and utility revenues for 1993 were $45,731,000 and $10,741,000, respectively.
Garden State Water Company
Garden State (and its 93.2% owned subsidiary, Califon Water Company) operates
three districts in New Jersey which serve 28,374 customers in territories
which are not contiguous. Each district draws its water from deep high
capacity wells. The Blackwood District serves a growing residential area,
primarily in Camden County. The Hamilton District serves a growing
residential area that also includes a small amount of light industry and
agriculture, primarily in Mercer County. The Phillipsburg District serves
an industrial and agricultural community and outlying municipalities,
primarily in Warren County, that are experiencing modest growth. Garden
State's net utility plant at December 31, 1993, and utility revenues for
1993 were $40,345,000 and $9,452,000 respectively.
Shenango Valley Water Company
Shenango, which draws its water from the Shenango River, and its wholly-owned
Ohio subsidiary, Masury Water Company, serve 17,044 residential, commercial,
industrial and wholesale customers in the cities of Sharon and Farrell, the
boroughs of Wheatland, New Wilmington and West Middlesex, and portions of
Hermitage, Mercer, Pulaski and Shenango Townships, all in Pennsylvania, and
Trumbull County, Ohio. The economy of the area is largely based on heavy
industrial manufacturing. Shenango's net utility plant at December 31, 1993,
and utility revenue for 1993 were $22,544,000 and $6,335,000 respectively.
Inter-State Water Company
Inter-State serves 16,799 residential, commercial, industrial and wholesale
customers in the cities of Danville, Tilton, Westville and Catlin and the Lake
Boulevard and Hooton areas in Illinois. Inter-State draws its water from
Lake Vermilion. Inter-State's corporate offices are located in Danville,
Illinois, a city of approximately 34,000 residents, with an economy based on
agriculture and heavy industrial manufacturing. Inter-State's net utility
plant at December 31, 1993 and utility revenue for 1993 were $32,167,000 and
$7,055,000 respectively.
Utility Services
C/P Utility Services, Inc. (C/P) provides services primarily in the area
of meter services, contract operations, corrosion engineering services,
environmental engineering services, and water conservation to the utility
industry and certain industrial clients, primarily in the northeastern United
States. In 1992, C/P began offering its services in the southeastern United
States from a regional office in Orlando, Florida.
On December 7, 1993, C/P Utilities acquired the assets of EnviroAudit, an
environmental services company, for $260,000.
C/P's services in the areas of environmental engineering and contract
operations subject it to possible liability in environmentally sensitive
areas such as the removal of underground storage tanks, site remediation,
and environmental assessments of sites and facilities. C/P maintains
professional liability insurance with respect to the services it provides
in amounts and subject to deductibles and exclusions believed by C/P's
management to be appropriate.
Since September of 1987, C/P has managed the operation of the Merrill
Creek Reservoir, a pumped storage facility owned by several power companies,
for the purpose of augmenting flows in the Delaware River during periods of
low flow or to replace water used by the owners for cooling purposes. C/P's
contract for the operation of this facility was renewed for an additional
five-year period at the end of 1992.
In June, 1993, C/P was awarded three contracts to install new water meters
in New York City. The total award for these three contracts is $10.7 million.
C/P began work on these projects in December.
C/P's total revenues for the years ended December 31, 1993, 1992 and 1991
were $11 million, $9.7 million, and $7.6 million, respectively. Approximately
$117,000, or approximately 1%, of C/P's 1993 revenue was derived from services
provided to the Consumers Water Subsidiaries.
Discontinued Operations
On October 6, 1993, the Company announced its intention to dispose of its
manufactured housing business, Burlington Homes of New England, Inc., and to
concentrate its effort on its water resource management business. Burlington
was offered for sale. It has had losses aggregating $1.8 million from
December 31, 1989, through September 30, 1993, and estimated losses under
the disposal equal $4.2 million, net of taxes. To date, efforts to sell
Burlington have been unsuccessful, therefore, an additional $1.1 million
reserve was recorded in the fourth quarter. The plant has been closed and
Burlington has begun the liquidation of its assets. Please see Note 13 to
the consolidated Financial Statements for further detail.
In 1990, the Company decided to discontinue the operations of The Dartmouth
Company. As of this date, Dartmouth has sold, or otherwise disposed of, all
of its properties. As a result of the successful resolution of material
uncertainties related to the disposition of the Company's real estate
operations, the Company reversed a total of $1.8 million of its reserve for
losses from discontinued operations during 1991. Please see Note 12 to the
Consolidated Financial Statements for further detail.
Employees
Consumers Water Company and its subsidiaries employed 693 people as of
December 31, 1993, of which 504 are employed by the Consumers Water
Subsidiaries. Non-supervisory personnel at Ohio, Shenango Valley, Consumers
Illinois, Roaring Creek, Inter-State and Pennsylvania water companies were
covered by collective bargaining agreements. Employee relations are
considered by management to be satisfactory throughout the Company.
Foreign Operations
The Company had no foreign operations or export sales in 1993.
Item 2. Properties.
(a)Description
See Item 1. "Consumers Water Subsidiaries" for description of Consumers'
principal properties, and encumbrances thereon.
Consumers' properties are located as follows:
Illinois
(1) Consumers Illinois Water Company with five divisions in Kankakee,
University Park, Sublette, Oak Run and Candlewick, Illinois.
(2) Inter-State Water Company located in Danville, Illinois.
Ohio
(3) Ohio Water Service Company with corporate offices in Poland and five
operating districts located in Massillon, Struthers, Mahoning Valley,
Geneva and Mentor, Ohio.
(4) Masury Water Company located in Trumbull County, Ohio.
Pennsylvania
(5) Pennsylvania Water Company located in Sayre, Pennsylvania
(6) Shenango Valley Water Company located in Sharon, Pennsylvania.
(7) Roaring Creek Water Company located in Shamokin, Pennsylvania.
New Jersey
(8) Garden State Water Company with corporate offices in Hamilton and
operating districts in Blackwood, Hamilton Square and Phillipsburg,
New Jersey.
(9) Califon Water Company located in Califon, New Jersey.
Connecticut
(10) C/P Utility Services Company located in Hamden, Connecticut and
Orlando, Florida.
(11) EnviroAudit, Ltd. located in Centerbrook, Connecticut.
New Hampshire
(11) Southern New Hampshire Water Company located in Londonderry, New
Hampshire.
Maine
(12) Maine Water Company with four divisions located in Kezar Falls,
Freeport, Damariscotta and Oakland, Maine.
(13) Camden and Rockland Water Company located in Rockland, Maine.
(14) Wanakah Water Company with three divisions in Skowhegan, Greenville
and Millinocket, Maine.
(15) Burlington Homes of New England located in Oxford, Maine.
(16) Consumers' corporate headquarters located in Portland, Maine.
Item 3. Legal Proceedings.
Various environmental orders and policies affecting the Consumers Water
Subsidiaries are described above under the caption "Environmental Regulation."
In March, 1993, an outside contractor spilled a small amount of mercury
while working one of Ohio Water's water treatment plants. Several areas in
and around the plant were contaminated by the spill. Although no mercury has
contaminated Ohio Water's water supply, Ohio Water is continuously monitoring
the situation to maintain water quality. Ohio Water contacted all appropriate
regulatory agencies and the clean up has been completed. The total cost to
clean up the spill was approximately $900,000. Ohio Water has received
$100,000 from its insurer and is currently seeking recovery of all the clean
up costs from the contractor. While there can be no assurance as to the
ultimate outcome of Ohio Water's efforts to obtain such recovery, management
believes it is probable that Ohio Water will recover clean up costs from the
contractor and/or the contractor's insurers and, therefore, has deferred the
cost incurred in connection with the spill. On December 20, 1993, A.P. O'Horo
Company filed a complaint against Ohio Water in Lake County Court of Common
Pleas seeking recovery of the retainage of $250,000 that Ohio is withholding
on this project. On December 30, 1993, Ohio Water filed a counter claim
against A.P. O'Horo Company seeking recovery of all past and future costs
relating to the spill. Ohio Water is also asking the court to dismiss
A.P. O'Horo's complaint.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.
(a) Market Information
The common shares of Consumers are listed on the National Market System
of NASDAQ (symbol: CONW). The following table sets forth the high and low
last sale prices for the common shares for the periods indicated, as reported
by NASDAQ, together with cash dividends declared per common share.
DIVIDENDS
Calendar Year HIGH LOW DECLARED
1993
First Quarter 19 17 $0.285
Second Quarter 19 3/4 17 1/4 0.285
Third Quarter 21 1/4 18 1/2 0.29
Fourth Quarter 21 1/4 17 1/4 0.29
------
$1.15
1992
First Quarter 18 1/2 15 1/2 0.28
Second Quarter 19 3/4 14 1/4 0.28
Third Quarter 19 1/2 16 1/4 0.285
Fourth Quarter 19 1/4 17 1/2 0.285
-----
$1.13
(b) Holders
As of March 22, 1994, there were approximately 5,900 shareholders of
record of the Registrant's common stock.
Item 6. Selected Financial Data.
(Dollars in Thousands Except Per Share Amounts)
1993 1992 1991 1990 1989
Operating Revenue $ 89,084 $ 84,245 $ 79,965 $75,296 $ 71,574
Net Income from Continuing
Operations $ 12,003 $ 8,501 $ 9,791 $ 7,488 $ 7,212
Earnings Per Common Share:
Continuing Operations $ 1.63 $ 1.21 $ 1.52 $ 1.23 $ 1.21
Total $ .80 $ 1.14 $ 1.74 $( 0.33) $ 1.15
Dividends Declared Per
Common Share $ 1.15 $ 1.13 $ 1.11 $ 1.09 $ 1.06
Total Assets $371,657 $343,033 $315,124 $302,220 $287,404
Long-Term Debt of Continuing
Operations (including current
maturities, sinking fund
requirements and redeemable
preferred stock) $ 125,080 $ 131,667 $ 106,666 $ 113,875 $ 93,964
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis sets forth certain factors relative to
the financial condition of the Company at December 31, 1993, and the results
of its operations for the three years ended December 31, 1993, as compared to
the same period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
CONSTRUCTION PROGRAM
Capital expenditures for the year ended December 31, 1993, totaled $30.8
million, net of contributions and advances, the majority of which relates to
the Consumers Utility subsidiaries. Projects include $2.9 million spent on a
water treatment plant expansion in Ohio, $4.9 million on a new water treatment
plant in Pennsylvania, $2.0 million spent on a disinfection facility in Maine
and other smaller projects throughout the Company.
The Company expects capital expenditures for 1994 through 1996 to be
approximately $116 million, net of contributions and advances. The high
level of expected capital expenditures is in large part due to the Safe
Drinking Water Act (SDWA), the Clean Water Act (CWA) and other regulations.
Construction has begun for a $16 million water treatment plant and
transmission main in Pennsylvania required by state regulations under the
SDWA to be completed by the end of 1995.
The Company's utility subsidiaries plan to file for recovery of, and return
on, capital used to fund their capital expenditure programs. While costs which
have been prudently incurred in the judgment of the appropriate public utility
commission have been, and are expected to continue to be, recognized in rate
setting, no assurance can be given that requested rate increases or any
portion thereof will be approved. To support these capital requirements over
the next three years, some subsidiaries will be required to file for large
percentage rate increases, in large part due to the significant capital
expenditures resulting from compliance with the SDWA and the CWA.
FINANCING AND CAPITALIZATION
The table below shows the cash generated and used by the Company during 1993.
Cash was generated from: (Dollars in millions)
Operating activities $17.3
Net increase in short-term debt 10.3
Long-term debt issued 19.4
Common stock issued 15.4
Sale of properties including the
Bourbonnais wastewater system and
the Washington Court House Division
of Ohio Water Service 10.2
-------
Total cash generated $ 72.6
=======
Cash was used:
Repay long-term debt $26.0
Pay dividends 8.4
Capital expenditures net of CIAC 30.8
Increase in funds restricted for
capital projects 4.4
------
Total cash used $69.6
======
At December 31, 1993, approximately $9.5 million of tax exempt financing
proceeds remained on the balance sheet as restricted funds for specific
capital projects including $8.9 million to be used for the $16 million
water treatment plant and transmission main in Pennsylvania. Common stock
issued includes proceeds from the issuance of 690,000 shares through a public
offering in the fourth quarter of 1993.
Water utilities will require higher equity ratios to maintain current debt
ratings due to recognition by Standard & Poors' rating system of additional
risk of the SDWA requirements and uncertainty of future regulatory treatment
of the cost of these requirements. This, coupled with the size of the 1994 -
1996 capital expenditure program, makes it likely that the Company will again
return to the equity market in the next three years. Any cash flow needs not
provided through stock issuance will, as usual, be financed with short-term
lines of credit until each subsidiary's short-term debt level is high enough
to warrant a placement of long-term debt, generally in the $4-$6 million
range. As of December 31, 1993, the Company had unused lines of credit
available of over $82 million. In addition, the Company plans to continue to
use tax exempt long-term debt financing in appropriate situations. The $16
million project in Pennsylvania mentioned above is being financed, in large
part, with $14 million of 6.375% tax exempt bonds issued on behalf of Roaring
Creek Water Company in October, 1993. The Company plans to continue to take
advantage of the current low interest rates by refinancing long-term debt
whenever appropriate.
DISCONTINUED OPERATIONS
On October 6, 1993, the Company announced its intention to dispose of its
manufactured housing business, Burlington Homes of New England, Inc., and
to concentrate its effort on its water resource management business. A
reserve of $4.2 million was established in the third quarter. Burlington was
offered for sale. It had losses aggregating $1.8 million from December 31,
1989, through September 30, 1993. To date, efforts to sell Burlington have
been unsuccessful, and an additional $1.1 million reserve was recorded in the
fourth quarter. The plant has been closed and Burlington has begun the
liquidation of its assets. The operating results of Burlington prior to the
date of discontinuance is shown under "Discontinued Operations" in the Company
Consolidated Statements of Income. All of the financial statements of prior
periods have been restated to reflect the discontinuance of Burlington's
operations.
ACQUISITIONS AND DISPOSITIONS
On December 7, 1993, C/P Utilities acquired the assets of EnviroAudit Ltd.,
an environmental services company, for $260,000.
On January 13, 1993, the Company sold the Bourbonnais wastewater collection
operation of Consumers Illinois Water Company to the village of Bourbonnais
for a gain, net of taxes, of approximately $847,000. The operation generated
approximately $1.1 million in revenues and had 5,007 customers in 1992.
On December 16, 1993, the Company sold the Washington Court House Division of
Ohio Water Service Company to the City for a gain, net of taxes, of
approximately $3.0 million. The Washington Court House Division served
approximately 6,000 customers and generated approximately $2.3 million in
revenue in 1993.
Over the past five years, the Company has acquired eight water systems.
Although the Company currently has no material acquisitions pending,
management anticipates continuing the acquisition policy of recent years.
OTHER
In March, 1993, an outside contractor spilled a small amount of mercury while
working at one of Ohio Water's water treatment plants. Several areas in and
around the plant were contaminated by the spill. Although no mercury has
contaminated Ohio Water's water supply, Ohio Water is continuously monitoring
the situation to maintain water quality. Ohio Water contacted all appropriate
regulatory agencies and the cleanup has been completed. The total cost to
cleanup the spill was approximately $900,000. Ohio Water has received
$100,000 from its insurer and is currently seeking recovery of all the cleanup
costs from the contractor. While there can be no assurance as to the ultimate
outcome of Ohio Water's efforts to obtain such recovery, management believes
it is probable that Ohio Water will recover cleanup costs from the contractor
and/or the contractor's insurers and, therefore, has deferred the cost
incurred in connection with the spill.
The Company adopted Statement of Financial Accounting Standards (SFAS) 106,
Employer's Post Retirement Benefits (other than Pensions), and SFAS 109,
Accounting for Income Taxes, in the first quarter, 1993. SFAS 106 requires
the expected cost of Post Retirement Benefits (other than Pensions) be
expensed in the years employees render service. This is a significant change
in the Company's previous policy of recording these costs on a cash basis.
The annual expense under the new method was $584,200 compared to $75,000
under the old method in 1992. The Public Utilities Commissions have ruled
in generic proceedings in each of the states which the Company operates except
Illinois, that they will allow full accrual of SFAS 106 costs. They also
ordered that the Company's subsidiaries in those states record the costs as
regulatory assets until the next rate case. The Illinois Commerce Commission
has concluded that any costs associated with this statement must be expensed
until the Company's first rate proceeding. Of the $584,200 total expected
1993 cost, $136,000 is related to the Illinois' utilities. SFAS 109,
Accounting for Income Taxes, required the Consumers Water subsidiaries to
increase deferred taxes by approximately $2.8 million. This is offset by a
corresponding increase in deferred charges. There is no material impact on
the income statement. The effect of the new standard on C/P and Consumers
Parent is not material to the Consolidated Financial Statements.
RESULTS OF OPERATIONS
1993 Compared to 1992
UTILITY REVENUE
Utility revenues increased $3.5 million or 4.7% in 1993 compared to 1992 due
primarily to $2 million in rate increases, $2.1 million from the inclusion of
revenues from the properties acquired in Maine and Pennsylvania in 1992, and
increased consumption due to dry weather in some areas served by Consumers
Water subsidiaries. These increases were partially offset by the revenue
impact of the sale of the Bourbonnais wastewater system, which had revenue
in 1992 of $1.1 million. Currently, there are five rate cases pending in
which approximately $7.3 million in additional revenues is sought. These
cases are timed to seek recovery of, and a return on, funds used to finance
the large capital expenditure program.
UTILITY OPERATING EXPENSES
Water utility operating expenses increased approximately $4.1 million in 1993
compared to 1992. Increased expenses associated with the new acquisitions,
increased depreciation and property tax expense due to increased plant
balances and normal increases in labor costs accounted for most of the
increase.
OTHER OPERATIONS - REVENUE AND EXPENSE
Other operating revenue increased $1.3 million in 1993 or 13.6% over 1992,
while other operating expenses increased by $1.7 million or 17.5%. The
revenue increase is due primarily to revenue of C/P's New York City meter
installation projects. Expenses are up more than revenue due to a health
insurance adjustment recorded at the Parent company and lower profit margins
at C/P Utility Services. The Company's self insured health insurance plan
incurred an unusual amount of claims and required an additional accrual of
$500,000 in 1993 compared to $300,000 in 1992. At C/P, meter installation
sales, traditionally a low margin field, increased in 1993 over 1992, while
demand for underground storage tank testing, a high margin area, decreased.
In June, 1993, C/P was awarded contracts for $10.7 million in additional meter
installation projects in New York City. C/P began work on these projects in
December 1993. The New York City meter installation projects that C/P was
awarded in 1992 are nearing completion.
OTHER
Interest expense was up $435,000 in 1993 compared to 1992, due primarily to
increased debt balances offset by lower interest rates in 1993. Income
taxes were down $239,000 due to lower pretax income. Congress recently passed
a bill to increase corporate income taxes from a top rate of 34% to 35% for
taxable income in excess of $10 million. Management does not expect this
increase to have a material impact on the Company's financial results.
1992 Compared to 1991
UTILITY REVENUE
Utility revenues for 1992 increased $2.2 million or 3.1% over 1991, due
primarily to $4.7 million in rate increases offset by decreased consumption
and the revenue impact of the sale of the Marysville Division of Ohio Water
Service in June, 1991. At the end of 1992, there were three rate cases
pending in which over $2 million in additional revenue was sought.
Consumption was down compared to 1991 due to a wetter summer in 1992.
UTILITY OPERATING EXPENSES
Water utility operating expenses in 1992 showed a nominal increase of
approximately $200,000. Increased depreciation and property tax expense
associated with higher plant balances were offset by lower operating costs,
including a lower pension expense due to favorable investment performance
and a change in one subsidiary's vacation policy.
OTHER OPERATIONS - REVENUE AND EXPENSE
Other operating revenue increased $2.1 million or 27.5%, due primarily to
revenue of C/P from two additional New York City meter installation projects.
Interest expense was down $905,000 in 1992 compared to 1991, due primarily to
lower interest rates in 1992. This reduction was offset by $727,000 less
capitalized interest in 1992 due to the completion of the new water treatment
plant in Illinois in early 1992.
Income taxes were up $1.1 million in 1992 over 1991 due to higher pretax
income. The effective rate was 34.1% in 1992 and 34.3% in 1991.
In 1992, the Company had a small loss on the sale of a satellite of its New
Hampshire subsidiary, which was partially offset by gains from the sale of
land in Ohio and Illinois. In 1991, gains from the sales of properties
included a gain of $3.1 million (after tax) from the sale of the Marysville
Division of Ohio Water, and a net gain of $207,000 (after tax) from the sale
of land owned by the Company or its subsidiaries in Ohio, Pennsylvania, and
Illinois.
Item 8. Financial Statements and Supplementary Data.
Page
Reference
Report of Management
Report of Independent Public Accountants
Consolidated Statements of Income for Years Ended
December 31, 1993, 1992 and 1991
Consolidated Balance Sheets at December 31, 1993
and 1992
Consolidated Statements of Capitalization and
Interim Financing at December 31, 1993 and 1992
Consolidated Statements of Cash Flow for Years Ended
December 31, 1993, 1992 and 1991
Consolidated Statements of Change in Common
Shareholders' Investment for Years Ended
December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Quarterly Information Pertaining to the
Results of Operations for the Years Ended
December 31, 1993 and 1992
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Incorporated by reference are the "Nominees for Election as Directors,"
"Other Executive Officers" and "Compliance with Beneficial Ownership Reporting
Rules" sections of the Company's Definitive Proxy Statement filed pursuant to
Regulation 14A.
Item 11. Executive Compensation.
Incorporated by reference is the "Executive Compensation" section of
the Company's Definitive Proxy Statement filed pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated by reference is the "Common Stock Ownership of Certain
Beneficial Owners and Management" section of the Company's Definitive Proxy
Statement filed pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions.
Incorporated by reference is the "Executive Compensation" section of
the Company's Definitive Proxy Statement filed pursuant to Regulation 14A.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) List of financial statements, schedules and exhibits.
(1) Consolidated financial statements and notes thereto of Consumers
Water Company and its subsidiaries together with the Report of
Independent Public Accountants, are listed as part of Item 8 of
this Form 10-K.
(2) Schedules
V Property, Plant and Equipment for the Years Ended December 31,
1993, 1992 and 1991.
VI Accumulated Depreciation, Depletion and Amortization of Property,
Plant and Equipment for the Years Ended December 31, 1993, 1992
and 1991.
VIII Valuation and Qualifying Accounts for the Years Ended December 31,
1993, 1992 and 1991.
X Supplementary Income Statement Information for the Years Ended
December 31, 1993, 1992 and 1991.
All other schedules have been omitted, since they are not required,
not applicable or the information is included in the consolidated
financial statements or notes thereto.
(3) Exhibits
Exhibit
2.1 Assets Purchase and Sale Agreement between Ohio Water Service and the
City of Washington, Ohio dated October 28, 1993 is submitted herewith
as Exhibit 2.1.
3.1 Conformed Copy of Restated Articles of Incorporation of Consumers Water
Company, as amended, incorporated by reference to Exhibit 4.1.6 to
Consumers Water Company's Registration Statement on Form S-2 (No.
33-41113), filed with the Securities and Exchange Commission on June
11, 1991.
3.2 Bylaws of Consumers Water Company, as amended March 2, 1994, are
submitted herewith as Exhibit 3.2.
4.1 Instruments defining the rights of security holders, including
Indentures. The registrant agrees to furnish copies of instruments
with respect to long-term debt to the Commission upon request.
10.1 Noncompetition and Consulting Agreement between Consumers Water
Company and John H. Schiavi incorporated by reference to Exhibit 10.2
of Consumers Water Company's Annual Report on form 10-K for the year
ended December 31, 1992.
10.2* Consumers Water Company 1988 Incentive Stock Option Plan is submitted
herewith as Exhibit 10.2.
10.3* Consumers Water Company 1993 Incentive Stock Option Plan is
incorporated by reference to Appendix B to definitive proxy statement
dated April 5, 1993.
10.4* Consumers Water Company 1992 Deferred Compensation Plan for Directors,
Plan A, incorporated by reference to Exhibit 10.5.2 to Consumers Water
Company's Annual Report on Form 10K for the year ended December 31,
1991.
10.5* Consumers Water Company 1992 Deferred Compensation Plan for Directors,
Plan B, incorporated by reference to Exhibit 10.5.3 to Consumers Water
Company's Annual Report on Form 10-K for the year ended December 31,
1991.
10.6 Letter Agreement between Consumers Water Company and Anjou International
Company dated February 7, 1986, incorporated by reference to Exhibit
10.6 to Consumers Water Company's Registration Statement on Form S-2
(No. 33-41113), filed with the Securities and Exchange Commission on
June 11, 1991.
10.7 Assignment of Rights under February 7, 1986 Agreement between Consumers
Water Company and Anjou International Company to Compagnie Generale
des Eaux, dated November 12, 1987, incorporated by reference to
Exhibit 10.7 to Consumers Water Company's Annual Report on Form 10k for
the year ended December 31, 1992.
10.8 Form of Indemnification Agreement entered into between Consumers Water
Company and each of its current directors and executive officers,
incorporated by reference to Exhibit 10.8 to Consumers Water Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1989.
10.9* Employment Agreement between Peter L. Haynes and Consumers Water
Company incorporated by reference to Exhibit 10.11 to Consumers Water
Company's Annual Report on Form 10-K for the year ended December 31,
1992.
11. Statement of Computation of Per Share Earnings is submitted herewith
as Exhibit 11.
22. List of Subsidiaries of the Registrant is submitted herewith as
Exhibit 22.
23. Consent of Arthur Andersen & Co is submitted herewith as Exhibit 23.
(b)Reports on Form 8K
On November 24, 1993, Consumers Water Company filed a Form 8-K with
the Securities and Exchange Commission reporting, under Item 5 thereof, the
effectiveness of the Company's Registration Statement on Form S-3, File No.
33-71318, in connection with the public offering of its common shares and
incorporating therein the final Prospectus distributed in connection with the
offering.
- ------------------------------------------
* Management contract or compensatory plan or arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of Form 10-K.
CONSUMERS WATER COMPANY
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
By: /s/ Peter L. Haynes 03/28/94
_______________________________ _________
Peter L. Haynes Date
President and Director
(Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ John F. Isacke 03/28/94
_____________________________ _________
John F. Isacke Date
Senior Vice President -
Development and Administration
(Chief Financial Officer)
By: /s/ Gary E. Wardwell 03/28/94
_______________________________ _________
Gary E. Wardwell Date
Controller
(Chief Accounting Officer)
By: /s/ David R. Hastings, II 03/28/94
______________________________ _________
David R. Hastings, II Date
Chairman and Director
By: /s/ Jack S. Ketchum 03/28/94
______________________________ _________
Jack S. Ketchum Date
Director
By: /s/ John E. Menario 03/28/94
______________________________ _________
John E. Menario Date
Director
By: /s/ J. Bonnie Newman 03/28/94
________________________________ _________
J. Bonnie Newman Date
Director
By: /s/ John E. Palmer, Jr. 03/28/94
________________________________ _________
John E. Palmer, Jr. Date
Director
CONSUMERS WATER COMPANY
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Eliot B. Payson 03/28/94
________________________________ _________
Eliot B. Payson Date
Director
By: /s/ Elaine D. Rosen 03/28/94
_______________________________ _________
Elaine D. Rosen Date
Director
By:
-------------------------------- ---------
William B. Russell Date
Director
By: /s/ John H. Schiavi 03/28/94
_______________________________ _________
John H. Schiavi Date
Director
By: /s/ John W. L. White 03/28/94
_______________________________ _________
John W. L. White Date
Director
By: /s/ Claudio Elia 03/28/43
_______________________________ _________
Claudio Elia Date
Director
By: /s/ Peter L. Haynes 03/28/94
________________________________ _________
Peter L. Haynes Date
President and Director
(Chief Executive Officer)
Consumers Water Company and Subsidiaries
Report of Management
The accompanying consolidated financial statements of Consumers Water Company
and its subsidiaries were prepared by management, which is responsible for the
integrity and objectivity of the data presented, including amounts that must
necessarily be based on judgments or estimates. The consolidated financial
statements were prepared in conformity with generally accepted accounting
principles and financial information appearing throughout this annual report
is consistent with these statements.
In recognition of its responsibility, management maintains and relies upon
systems of internal accounting controls, which are reviewed and evaluated on
an ongoing basis. The systems are designed to provide reasonable assurance
that transactions are executed in accordance with management's authorization
and properly recorded to permit preparation of reliable financial statements,
and that assets are safeguarded. Management must assess and balance the
relative cost and expected benefits of these controls.
These financial statements have been audited by Arthur Andersen & Co., the
Company's independent public accountants. Their audit, in accordance with
generally accepted auditing standards, resulted in the expression of their
opinion. Arthur Andersen & Co.'s audit does not limit management's
responsibility for the fair presentation of the financial statements and all
other information in this annual report.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with management, internal audit, and Arthur
Andersen & Co. to review the work of each and to discuss areas relating to
internal accounting controls, audits, and financial reporting. Arthur
Andersen & Co. and the Company's internal audit personnel have free access to
meet individually with the Committee, without management present, at any time,
and they periodically do so.
/s/ John F. Isacke
- --------------------
John F. Isacke
Senior Vice President
Chief Financial Officer
Arthur Andersen & Co.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders and Board of Directors
of Consumers Water Company:
We have audited the accompanying consolidated balance sheets and the
consolidated statements of capitalization and interim financing of
CONSUMERS WATER COMPANY (a Maine corporation) and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements of income,
change in common shareholders' investment and cash flows for each of the three
years in the period ended December 31, 1993. These financial statements and
the schedules referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Consumers Water Company
and subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and its cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting
principles.
As discussed in notes 2 and 9 to the Consolidated Financial Statements,
effective January 1, 1993, the Company changed its method of accounting for
income taxes and other post-retirement benefits.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index of
financial statements are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not a required part of the
basic financial statements. These schedules have been subjected to the
auditing procedures applied in our audit of the basic financial statements
and, in our opionion, fairly state in all material respects the financial
data required to be set forth therein in relation to the basic financial
statements taken as a whole.
/s/ Arthur Andersen & Co.
--------------------------
ARTHUR ANDERSEN & CO.
Boston, Massachusetts
February 9, 1994
Consumers Water Company and Subsidiaries
Consolidated Statements of Income
For the years ended December 31,
(In Thousands Except Per Share Amounts) 1993 1992 1991
Revenue and Sales:
Water utility operations $78,171 $74,637 $72,427
Other operations 10,913 9,608 7,538
- ------------------------------------------------------------------
Operating revenue 89,084 84,245 79,965
- ------------------------------------------------------------------
Costs and Expenses:
Water utility operations 55,127 50,996 50,795
Other operations 11,112 9,454 8,158
- ------------------------------------------------------------------
Operating expenses 66,239 60,450 58,953
- ------------------------------------------------------------------
Operating Income 22,845 23,795 21,012
- ------------------------------------------------------------------
Other Income and (Expense):
Interest expense (11,905) (11,470)(12,375)
Construction interest capitalized 778 367 1,094
Preferred dividends and minority
interest of subsidiaries (147) (143) (146)
Other, net (Notes 3 and 11) 692 344 116
- ------------------------------------------------------------------
(10,582) (10,902)(11,311)
- ------------------------------------------------------------------
Earnings from Continuing Operations
Before Income
Taxes and Gains (Losses) from Sales
of Properties 12,263 12,893 9,701
Income Taxes (Note 2) 4,128 4,367 3,212
- ------------------------------------------------------------------
Earnings from Continuing Operations:
Before Gains (Losses) from Sales
of Properties 8,135 8,526 6,489
Gains (Losses) from Sales of
Properties, Net (Note 7) 3,868 (25) 3,302
- ------------------------------------------------------------------
Income from Continuing Operations 12,003 8,501 9,791
- ------------------------------------------------------------------
Income (Loss) from Discontinued
Operations:
Before Discontinuance (784) (479) (373)
Provision for Loss on Disposal of
Discontinued Operations (5,300) - 1,800
- ------------------------------------------------------------------
Total from Discontinued Operations
(Notes 12 and 13) (6,084) (479) 1,427
- ------------------------------------------------------------------
Net Income $5,919 $8,022 $11,218
==================================================================
Weighted Average Shares Outstanding 7,320 7,007 6,429
Earning (Loss) per Common Share:
Continuing Operations-
Before Gains (Losses) from Sales $1.10 $1.21 $1.00
Total $1.63 $1.21 $1.52
- ------------------------------------------------------------------
Discontinued Operations-
Before Discontinuance ($0.11) ($0.07) ($0.06)
Earnings (Loss) on Disposal of
Discontinued Operations ($0.72) - $0.28
- ------------------------------------------------------------------
Total ($0.83) ($0.07) $0.22
- ------------------------------------------------------------------
Total $0.80 $1.14 $1.74
==================================================================
The accompanying notes are an integral part of these consolidated
financial statements.
Consumers Water Company and Subsidiarie
Consolidated Balance Sheets
December 31, (Dollars in Thousands)
1993 1992
Assets
Property, Plant and Equipment, at cost:
Water utility plant, in service $360,115 $349,156
Less - Accumulated depreciation 63,579 59,705
---------------------
296,536 289,451
---------------------
Other subsidiaries 1,710 1,482
Less - Accumulated depreciation 881 820
---------------------
829 662
---------------------
Construction work in progress 20,180 10,252
---------------------
Net property, plant and equipment 317,545 300,365
- --------------------------------------------------------------------
Assets of Discontinued Operations, Net
(Notes 12 and 13) 1,308 5,180
Investments, at cost 2,044 1,918
- ---------------------------------------------------------------------
Current Assets:
Cash and cash equivalents (Note 4) 4,993 1,768
Accounts receivable, net of reserves
of $798 in 1993 and $702 in 1992 10,171 7,548
Unbilled revenue 6,649 8,169
Inventories (Note 1) 1,793 1,863
Prepayments and other 6,524 5,311
- --------------------------------------------------------------------
Total current assets 30,130 24,659
- --------------------------------------------------------------------
Other Assets:
Funds restricted for construction
activity (Note 3) 9,508 5,093
Deferred charges and other assets 11,122 5,818
- --------------------------------------------------------------------
20,630 10,911
- --------------------------------------------------------------------
$371,657 $343,033
====================================================================
Shareholders' Investment and Liabilities:
Capitalization (See Separate Statement)
Common shareholders' investment $96,938 $84,243
Preferred shareholders' investment 1,069 1,078
Minority interest 2,240 2,247
Long-term debt 124,050 119,832
- --------------------------------------------------------------------
Total capitalization 224,297 207,400
- --------------------------------------------------------------------
Contributions in Aid of Construction 54,045 50,064
- --------------------------------------------------------------------
Current Liabilities:
Interim Financing (See Separate
Statement) 20,606 21,071
Accounts payable 6,052 3,364
Accrued taxes (Note 2) 6,662 6,530
Accrued interest 3,318 2,992
Accrued expenses and other 11,011 8,829
- --------------------------------------------------------------------
Total current liabilities 47,649 42,786
- --------------------------------------------------------------------
Commitments and Contingencies (Note 10)
- --------------------------------------------------------------------
Deferred Credits:
Customers' advances for construction 21,338 24,544
Deferred income taxes (Note 2) 19,183 12,803
Unamortized investment tax credits 5,145 5,436
- --------------------------------------------------------------------
45,666 42,783
- --------------------------------------------------------------------
$371,657 $343,033
====================================================================
The accompanying notes are an integral part of these consolidated
financial statements.
Consumers Water Company and Subsidiaries
Consolidated Statements of Capitalization and Interim Financing
December 31, (Dollars in Thousands) 1993 1992
Capitalization (Notes 3 and 5)
Common shareholders' investment:
Common stock, $1 par value
Authorized: 15,000,000 shares in 1993 and
10,000,000 shares in 1992
Issued: 8,041,369 shares in 1993 and
7,129,639 shares in 1992 $8,041 $7,130
Amounts in excess of par value 64,662 50,157
Reinvested earnings 24,235 26,956
- -------------------------------------------------------------------
96,938 84,243
- -------------------------------------------------------------------
Preferred shareholders' investment:
Preferred stock, $100 par value 1,069 1,078
- -------------------------------------------------------------------
Minority interest:
Common stock, at equity 562 469
Preferred stock 1,678 1,778
- -------------------------------------------------------------------
2,240 2,247
- -------------------------------------------------------------------
Long-term debt:
First mortgage bonds, debentures and
promissory notes-
Maturities Interest Rate Range
1993 1.00% to 13.00% - 10,358
1994 69% of Prime to 10.50% 14 710
1995 9.00% to 13.88% 1,624 2,738
1996 6.10% to 11.00% 228 757
1997 5.94% to 7.50% 1,452 3,865
1998 5.94% to 9.38% 573 1,656
1999-2003 70% of Prime to 8.75% 5,637 7,018
2004-2008 8.00% to 10.55% 15,646 17,995
2009-2013 1.00% to 10.54% 14,135 14,193
THEREAFTER 6.10% to 10.40% 85,671 72,277
--------------------
Total first mortgage bonds, debentures
and notes 124,980 131,567
Less - Sinking fund requirements and
current maturities 930 11,735
--------------------
124,050 119,832
- -------------------------------------------------------------------
Total capitalization 224,297 207,400
- -------------------------------------------------------------------
Interim financing (Note 4):
Notes payable 19,676 9,336
Sinking fund requirements and current
maturities 930 11,735
- -------------------------------------------------------------------
Total interim financing 20,606 21,071
- -------------------------------------------------------------------
Total capitalization and interim financing $244,903 $228,471
===================================================================
The accompanying notes are an integral part of these consolidated
financial statements.
Consumers Water Company and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31,
(Dollars in Thousands)
1993 1992 1991
Operating activities:
Net income 5,919 $8,022 $11,218
---------------------------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 7,994 7,432 6,125
Deferred income taxes and
investment tax credits 6,417 1,072 1,475
(Gains) losses on sales of properties (3,869) 25 (3,302)
Changes in assets and liabilities:
Increase in accounts receivable
and unbilled revenue (1,202) (1,695) (1,027)
(Increase) decrease in
inventories 70 63 (27)
(Increase) decrease in
prepaid expenses (1,203) 432 (998)
Increase (decrease) in accounts
payable and accrued expenses 4,134 (236) 4,821
Change in other assets, net of change
in other liabilities of continuing
operations (4,847) (1,263) 337
Change in assets, net of change in
liabilities of discontinued operations (1,428) 257 (7)
(Income) loss on disposal of
discontinued operations
(Notes 12 and 13) 5,300 (1,800)
-----------------------------
Total adjustments 11,366 6,087 5,597
-----------------------------
Net cash provided by operating
activities 17,285 14,109 16,815
-----------------------------
Investing activities:
Capital expenditures (34,655) (21,877) (30,175)
Funds restricted for
construction activity (4,415) (5,093) 8,271
Increase (decrease) in
construction accounts payable 911 (1,092) 829
Net cash cost of acquisitions (Note 6) (260) (3,524) -
Net proceeds from sales of
properties (Note 7) 10,239 8 8,494
-----------------------------
Net cash used in investing activities (28,180) (31,578) (12,581)
-----------------------------
Financing activities:
Net borrowing (repayment) of
short-term debt 10,340 (7,673) (2,464)
Proceeds from issuance of
long-term debt 19,429 39,902 6,429
Repayment of long-term debt (25,989) (15,084) (13,619)
Proceeds from issuance of stock 15,408 3,570 12,328
Advances and contributions in aid
of construction, net of repayments 3,879 3,070 2,868
Taxes paid by developers on advances
and contributions in aid of
construction (583) (364) (150)
Cash dividends paid (8,364) (7,932) (7,202)
-----------------------------
Net cash provided by
(used in) financing activities 14,120 15,489 (1,810)
-----------------------------
Net increase (decrease) in cash
and cash equivalents 3,225 (1,980) 2,424
Cash and cash equivalents at
beginning of year 1,768 3,748 1,324
-----------------------------
Cash and cash equivalents
at end of year $4,993 $1,768 $3,748
=============================
Supplemental disclosures of cash flow information from continuing
operations
Cash paid during the year for:
Interest (net of amounts capitalized) $10,540 $10,612 $11,123
Income taxes $ 3,570 $ 3,713 $ 2,412
Noncash investing and financing
activities for the year:
Assets acquired by stock issuance
and/or assumption of debt of
acquired company - $ 998 -
Property advanced or contributed $ 855 $ 3,910 $ 455
Note receivable and water rights
in exchange for utility assets - $ 2,085 -
The accompanying notes are an integral part of these consolidated
financial statements.
Consumers Water Company and Subsidiaries
Consolidated Statements of Change in
Common Shareholders' Investment
Number of Shares,
$1 par value, (Dollars in Thousands)
Issued and Excess of Reinvested
For the years ended Outstanding Par Value Earnings
December 31, 1993,
1992 and 1991
Balance, December 31, 1990 6,059,761 $34,744 $23,217
Net income 11,218
Cash dividends:
Common shares (7,410)
Preferred shares (57)
Dividend Reinvestment
Plan 116,656 1,802
Employee benefit plans 25,116 349
Stock Issue 690,000 9,345
Other (5)
- -----------------------------------------------------------------------------
Balance, December 31, 1991 6,891,533 46,235 26,968
Net income 8,022
Cash dividends:
Common shares (7,977)
Preferred shares (57)
Dividend Reinvestment Plan 170,823 2,823
Employee benefit plans 32,957 542
Other 34,326 557
- -----------------------------------------------------------------------------
Balance, December 31, 1992 7,129,639 50,157 26,956
Net income 5,919
Cash dividends:
Common shares (8,584)
Preferred shares (56)
Dividend Reinvestment
Plan 187,679 3,280
Employee benefit plans 34,051 569
Stock Issue 690,000 10,652
Other 4
- -----------------------------------------------------------------------------
Balance, December 31, 1993 8,041,369 $64,662 $24,235
=============================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
Consumers Water Company and Subsidiaries
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Consumers Water Company (the Company) and its water utility and utility
services subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation. The consolidated financial statements
and related footnote information have been restated to reflect the Company's
real estate subsidiary, The Dartmouth Company, and its manufactured housing
subsidiary, Burlington Homes of New England, as discontinued operations. See
Notes 12 and 13.
Regulation
The rates, operations, accounting and certain other practices of the Company's
utility subsidiaries are subject to the regulatory authority of state public
utility commissions.
Property, Plant and Equipment
The utility subsidiaries generally capitalize interest at current rates on
short-term notes payable used to finance major construction projects. Utility
plant construction costs also include payroll, related fringe benefits and
other overhead costs associated with construction activity.
Depreciation is provided principally at straight-line composite rates.
consolidated provision, based on average amounts of depreciable utility plant
(which excludes contributions in aid of construction and customers' advances
for construction for most subsidiaries), approximated 2.4% in 1993, 2.3% in
1992 and 2.1% in 1991. Under composite depreciation, when property is
retired or sold in the normal course of business, the entire cost, including
net cost of removal, is charged to accumulated depreciation and no gain or
loss is recognized.
The utility services subsidiary depreciates property and equipment using
the straight-line method over the estimated useful lives of the assets,
generally 5 to 10 years.
Revenue Recognition
All of the utility subsidiaries accrue estimated revenue for water distributed
but not yet billed as of the balance sheet date. Unbilled revenue also
includes amounts for work performed but not yet billed for C/P Utility
Services Company, Inc. C/P accounts for contracts using the
percentage-of-completion method for long-term contracts and the completed
contract method for short-term contracts.
Cash Flows
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid instruments with an original maturity of three
months or less, which are not restricted for construction activity to be cash
equivalents.
Consumers Water Company and Subsidiaries
Notes to Consolidated Financial Statements
Disclosures about Fair Value of Financial Instruments
The carrying amount of cash, temporary investments, notes receivable, and
preferred stock approximate their fair value. The fair value of long-term
debt based on borrowing rates currently available for loans with similar terms
and maturities is approximately $139 million.
Inventories
Inventories generally consist of materials and supplies. They are stated at
the lower of cost (average cost method) or market.
Other Assets
Deferred charges consist primarily of financing charges, rate case and other
expenses, a note receivable of $1,330,000 and the net excess of acquisition
cost over book value of the net assets for the utility subsidiaries.
Deferred rate case expenses are amortized over periods allowed by the
governing regulatory authorities, generally one to three years. The net
excess of the acquisition cost over book value or market value of the net
assets of subsidiaries acquired is being amortized principally over a period
of 40 years. Other assets also include preliminary survey and investigation
costs and certain items amortized, subject to regulatory approval, over their
anticipated period of recovery. Deferred financing charges are amortized over
the lives of the related debt issues.
Customers' Advances/Contributions in Aid of Construction
The water subsidiaries receive contributions and advances for construction
from or on behalf of customers. Advances received are refundable, under
certain circumstances, either wholly or in part, over varying periods of time.
Amounts no longer refundable are reclassified to contributions in aid of
construction.
Contributions and advances received after 1986 are treated as taxable
income. Amounts that customers are required to contribute to offset the
income taxes payable by the Company are normally included in contributions or
advances.
Income Taxes
The Company and its subsidiaries file a consolidated federal income tax
return. The rate-making practices followed by most regulatory agencies allow
the utility subsidiaries to recover, through customer rates, federal and state
income taxes payable currently and deferred taxes related to certain timing
differences between pretax accounting income and taxable income. The income
tax effects of other timing differences are flowed through for rate-making and
accounting purposes. The Company expects that deferred taxes not collected
will be recovered through customer rates in the future when such taxes become
payable.
Investment Tax Credits
Investment tax credits of utility subsidiaries are deferred and amortized over
the estimated useful lives of the related properties. Effective January 1,
1986, investment tax credits were eliminated by the Tax Reform Act of 1986
except for property meeting the transitional rules.
Consumers Water Company and Subsidiaries
Notes to Consolidated Financial Statements
Earnings (Loss) Per Common Share
Earnings (loss) per common share are based on the annual weighted average
number of shares outstanding and common share equivalents. The effect of
employee stock options, which are included as common share equivalents, is not
significant.
(2) Income Tax Expense
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes, which
requires the use of the liability method in accounting for income taxes.
Under the liability method, deferred income taxes are recognized at currently
enacted income tax rates to reflect the tax effect of temporary differences
between the financial reporting and tax bases of assets and liabilities. Such
temporary differences are the result of provisions in the income tax law that
either require or permit certain items to be reported on the income tax return
in a different period than they are reported in the financial statements.
To implement SFAS 109, certain adjustments were made to accumulated deferred
income taxes. To the extent such income taxes are recoverable or payable
through future rates, regulatory assets and liabilities have been recorded in
the accompanying Consolidated Balance Sheets. The adoption of SFAS 109
resulted in the recognition of a net regulatory asset of approximately $2.8
million and had no material impact on the Company's results of operations.
At December 31, 1993, accumulated deferred taxes consisted of tax assets
of $893,000 related to alternative minimum tax offset by liabilities of
$19,665,000, which are predominanty related to accumulated depreciation and
other plant related differences. The Company believes that all deferred
income tax assets will be realized in the future; therefore, a valuation
allowance has not been recorded. The net regulatory asset was approximately
$3.1 million at December 31, 1993.
The components of income tax expense from continuing operations reflected
in the Consolidated Statements of Income are as follows:
For the Years Ended December 31,
(Dollars in Thousands) 1993 1992 1991
Federal:
Currently payable $3,077 $3,255 $ 3,345
Deferred 2,827 668 1,566
Investment tax credit,
net of amortization ( 291) ( 183) ( 246)
-------- -------- --------
$5,613 3,740 4,665
-------- -------- --------
State:
Currently payable 134 589 493
Deferred 195 ( 21) ( 63)
-------- -------- --------
329 568 430
-------- -------- --------
Total provision $5,942 $ 4,308 $ 5,095
======== ======== ========
The provision for income tax
expense is reflected in:
Income taxes $4,128 $ 4,367 $ 3,212
Gains (Losses) from sales of
properties 1,735 ( 89) 1,808
Other income 79 30 75
------- -------- --------
Total provision $5,942 $ 4,308 $ 5,095
======= ========= =========
The table below reconciles the federal statutory rate to a rate computed
by dividing income tax expense, as shown in the previous table, by income from
continuing operations before income tax expense.
1993 1992 1991
Statutory rate 34.0% 34.0% 34.0%
State taxes, net of federal benefit 1.2 3.0 1.9
Effect of decrease in statutory
rate on reversing timing items (0.1) (0.2) (0.2)
Investment tax credit (0.8) (1.6) (1.8)
Other (1.2) (1.1) 0.4
------- ------- ------
33.1% 34.1% 34.3%
======= ======= ======
The table below was required prior to the adoption of SFAS 109, therefore, it
is only presented for years prior to 1993. The major differences in the
timing of recognition of income and expense for tax and accounting purposes,
for which deferred income taxes are provided, are as follows:
(Dollars in Thousands) 1992 1991
Accelerated depreciation $ 2,896 $ 2,565
Contributions and advances ( 2,570) ( 1,151)
Gains from sales of properties - 1,893
Alternative minimum tax 526 ( 1,307)
Other, net ( 205) ( 497)
-------- --------
$ 647 $ 1,503
======== ========
(3) Long-Term Debt
Maturities and sinking fund requirements of the first mortgage bonds,
debentures and notes including capitalized leases are $930,000 in 1994,
$2,516,000 in 1995, $883,000 in 1996, $2,219,000 in 1997, $812,000 in 1998,
and $117,620,000 thereafter.
Substantially all of the Company's water utility plant is pledged as
security under various indentures or mortgages. The indentures restrict cash
dividends and purchases of the companies' common stocks. The various water
utility subsidiaries' indentures generally prohibit the payment of dividends
on common shares in excess of retained earnings plus a stated dollar amount.
Approximately $26.6 million of reinvested earnings were not so restricted at
December 31, 1993.
In 1993, funds restricted for construction activity of $9.5 million was
obtained through the issuance of tax exempt bonds, the use of which is
restricted for utility plant construction. Interest income earned is included
in Other, net in the accompanying Consolidated Statements of Income.
(4) Notes Payable
Notes payable are incurred primarily for temporary financing of plant
expansion. It is the subsidiaries' intent to repay these borrowings with the
proceeds from the issuance of long-term debt or equity securities. Certain
information related to the borrowings of the continuing operations is as
follows:
(Dollars in Thousands) 1993 1992 1991
Unused lines of bank
credit $ 82,574 $47,314 $38,566
Borrowings outstanding at
year-end 19,676 9,336 16,809
-------- ------- -------
Total lines of bank
credit $102,250 $56,650 $55,375
======== ======= =======
Monthly average borrowings
during the year $ 20,660 $17,310 $20,774
======== ======= =======
Maximum borrowings at any
month-end during the year $ 34,619 $21,612 $26,223
======== ======= =======
Weighted average annual interest
rate during the year 4.5% 6.0% 8.5%
======== ======= =======
Weighted average interest rate on
borrowings outstanding
at year-end 4.7% 5.1% 6.8%
======== ======= =======
The Company and its subsidiaries are required to maintain compensating
balances with several banks holding notes. As of December 31, 1992, cash
balances of approximately $50,000 were on deposit representing compensating
balances. There were no compensating balances in 1993. There are no legal
restrictions on the withdrawal of these funds.
(5) Shareholders' Investment
As of December 31, 1993, the Company reserved issuable common shares for the
following purposes:
Dividend Reinvestment Plan 317,728
401(k) Savings Plan 243,685
Stock Option Plans 278,377
Employee Stock Bonus Plan 64,019
---------
903,809
=========
The stock option plans approved by stockholders in 1988 and 1993 provide for
the sale of shares to eligible key employees of the Company and its
subsidiaries. The plans provide that option prices shall not be less than
100% of the fair market value on the date of the grant. The options
expire after five years. During 1993, 34,500 options were granted, 13,091
options were exercised and 13,445 options lapsed and were cancelled. During
1992, 30,700 options were granted, 12,767 options were exercised, and 25,613
options lapsed and were cancelled. During 1991, 30,700 options were granted,
no options were excercised, and 12,877 options lapsed and were cancelled.
At December 31, 1993, options for 108,739 shares were exercisable at prices of
$18.25, $18.50, $17.75, $16.50 and $19.25 per share. 13,091 stock options
were exercised in 1993 at $18.25, $17.75, $16.50, $19.25, and $16.75. 12,767
stock options were excercised in 1992 at $16.50 and $16.75. No stock options
were exercised in 1991.
Information regarding outstanding preferred stock ($100 par value) of the
Company and its subsidiaries is as follows:
<TABLE>
<CAPTION>
Par Value
of Shares
Cumulative Current Shares Outstanding
Dividend Call Price Shares Issued and (Dollars in
Rate % Per Share Authorized Outstanding Thousands)
<S> <C> <C> <C> <C> <C>
Shenango Valley Water Company 5 $110 10,000 9,964 $996
Consumers Illinois Water Company 5 1/2 107 5,000 3,577 358
Camden and Rockland Water Co. 5 105 4,000 2,739 274
Consumers Water Company 5 1/4 105 30,000 10,694 1,069
Consumers Water Company - None 120,000 - -
</TABLE>
Of the total 30,000 Consumers Water Company preferred shares authorized with
voting rights, 15,925 shares have been designated 5-1/4% Cumulative Preferred
Stock Series A. The remaining 14,075 shares are undesignated. The difference
between par value and acquisition price was credited to amounts in excess of
par value.
(6) Acquisitions
On December 7, 1993, the Company, through its subsidiary C/P Utilities
acquired the assets of EnviroAudit, an environmental services company, for
$260,000.
On December 31, 1992, the Company, through its subsidiary, Roaring Creek
Water Company, acquired the assets of Northumberland Utilities in exchange for
$590,000 of the Company's common stock and the assumption of $408,000 in debt.
On December 31, 1992, the Company, through its subsidiary Wanakah Water
Company, acquired the assets of Greenville, Millinocket and Skowhegan Water
Companies for $3.5 million.
All of these acquisitions were accounted for using the purchase method of
accounting, and the results of their operations have been included in the
consolidated financial statements since the date of acquisition.
(7) Dispositions
On December 16, 1993, the Company sold the Washington Court House Division of
Ohio Water Service Company to the City of Washington resulting in a gain, net
of taxes, of $3.0 million. In 1993, Washington Court House Division generated
$2.3 million in revenue and had 6,000 customers.
On January 13, 1993, the Company sold the Bourbonnais wastewater collection
system of Consumers Illinois Water Company to the Village of Bourbonnais for a
gain, net of taxes, of approximately $847,000. The operation generated $1.1
million in revenues and had 5,007 customers in 1992.
On December 31, 1992, Southern New Hampshire Water Company sold its Amherst
Division for $2.1 million resulting in a loss, net of taxes, of $27,000.
On December 30, 1991, the Company closed on the sale of 389 acres of land
in University Park, Illinois, for $1.1 million. This sale generated a loss,
net of taxes, of approximately $98,000.
On October 1, 1991, Roaring Creek Water Company closed on the sale of 220
acres of land to Northumberland County, Pennsylvania, for $550,000. This sale
generated a gain, net of taxes, of approximately $294,000.
On June 27, 1991, the Company sold the Marysville Division of Ohio Water
Service Company to the City of Marysville for $9.5 million resulting in a
gain, net of taxes, of $3.1 million. The Marysville Division generated $1.9
million of revenue during 1990 and served 3,328 customers.
(8) Retirement Plan
The Company has a defined benefit pension plan covering substantially all of
its employees. Pension benefits are based on years of service and the
employee's average salary during the last five years of employment. The
Company's funding policy is to contribute an amount that will provide for
benefits attributed to service to date and for those expected to be earned in
the future by current participants, to the extent deductible for income tax
purposes.
Net pension cost for the years ended December 31, 1993, 1992, and 1991, was
$501,000, $30,000, and $582,000, respectively.
The funded status of the Plan as of December 31 is as follows:
(Dollars in Thousands) 1993 1992
Actuarial present value of benefit obligations:
Accumulated benefit obligations
Vested $20,448 $17,350
Nonvested 2,132 1,809
------- -------
Total 22,580 19,159
Effect of future salary increases 7,361 7,502
------- -------
Projected benefit obligations for services
provided to date 29,941 26,661
Market value of plan assets, primarily
invested in stocks, bonds and short-term
funds 30,067 28,395
------- -------
Plan assets in excess of projected
benefit obligations 126 1,734
Unrecognized net asset existing
as of January 1, 1987, being amortized over
22 years (3,317) ( 3,526)
Unrecognized prior service cost 2,601 2,814
Unrecognized net gain ( 865) (1,975)
-------- -------
Accrued pension cost at year-end $(1,455) $( 953)
======== ========
Net pension cost included the following items:
(Dollars in Thousands) 1993 1992 1991
Service cost-benefits earned
during the year $ 977 $ 934 $ 941
Interest cost on projected
benefit obligations 2,022 1,860 1,740
Actual return on plan assets (2,502) (1,955) (6,549)
Net amortization and deferral 4 ( 809) 4,450
--------- ------- --------
Net periodic pension cost $ 501 $ 30 $ 582
========= ======= ========
The expected long-term rate of return on plan assets was 9.0% in 1993 and 9.5%
in 1992 and 1991 and the salary increase assumption was 5.0% in 1993 and 6% in
1992 and 1991. The discount rate used to determine the actuarial present
value of the projected benefit obligations was 7.5% in 1993, 8.0% in 1992 and
8.5% in 1991.
(9) Postretirement Benefits
Employees retiring from the Company in accordance with the retirement plan
provisions are entitled to postretirement health care and life insurance
coverage. These benefits are subject to deductibles, co-payment provisions and
other limitations. The Company may amend or change the plan periodically.
In December, 1990, the Financial Accounting Standards Board issued
Statement No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions (SFAS 106). This new standard, which the Company adopted in the
first quarter of 1993, requires that the expected cost of postretirement
benefits (other than pensions) be expensed during the years that the employees
render service. This is a significant change from the Company's previous
policy of recognizing these costs on a cash basis. The Company adopted the
new standard using the delayed recognition method. Under this method, the
unrecorded SFAS 106 liability as of January 1, 1993, will be amortized to
expense on a straight-line basis over a 20-year period.
The Company estimates that its SFAS 106 liability related to prior years of
service, based upon the current level of benefits, is approximately
$3,048,000. The annual expense is $584,200. The utility subsidiaries
generally will record some portion of the annual expense as a regulatory asset
if full SFAS 106 expense is not included in rates currently and appropriate
approval is received from their respective regulators. The public utility
commissions have ruled in generic proceedings in each of the states in which
the Company operates except Illinois that they will allow full accrual
of SFAS 106 costs. They also ordered that the Company's subsidiaries in those
states record the costs as regulatory assets until the next rate case. The
Illinois Commerce Commission has concluded that any costs associated with this
statement must be expensed until the Company's first rate proceeding. Of the
$584,200 total 1993 costs, $136,000 is related to the Illinois utilities.
The following table sets forth the postretirement health and life insurance
plans' combined funded status.
(Dollars in Thousands) 1993
Accumulated postretirement benefit
obligation ($3,873)
Plan assets at fair value -
Accumulated postretirement benefit ---------
obligation in excess of plan assets ($3,873)
Unrecognized net gain from past
experience different from that assumed
and from changes in assumptions 323
Unrecognized transition obligation 3,048
--------
Accrued postretirement benefit cost $(502)
========
The Company's postretirement health and life insurance plans are unfunded;
there are no assets for either plan and the accumulated postretirement benefit
obligation for health insurance is $3,371,961 and for life insurance is
$501,110.
Net periodic postretirement benefit cost for fiscal 1993 included the
following components;
(Dollars in Thousands) 1993
Service cost-benefits attributed to
service during the period $155
Interest cost on accumulated
postretirement benefit obligation 269
Amortization of transition obligation
over 20 years 160
------
Net periodic postretirement benefit cost $584
======
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation is 7.5%. A 15% annual rate of increase in
the per capita cost of covered health care benefits is assumed for 1993. The
health care cost trend rate is assumed to decrease annually through the year
2002 to an ultimate rate of 6%. Increasing the assumed health care cost trend
rates by 1% would increase the accumulated postretirement benefit obligation
as of December 31, 1993, by $300,000.
(10) Commitments and Contingencies
The Company is a party in or may be affected by various matters under
litigation. The Company expects that some of its operating subsidiaries, in
order to comply with the requirements of the Safe Drinking Water Act, may have
to invest in significant improvements or additions including, but not limited
to, the construction of treatment plants and the modification or replacement
of open reservoirs. Management believes that the ultimate treatment of these
expenditures and the various matters under litigation will not have a
significant adverse effect on either the Company's future results of
operations or financial position.
The Company has operating leases for buildings, vehicles, water meters and
office equipment. Rental expenses relating to these leases for the years
ended December 31, 1993, 1992 and 1991 were approximately $1,612,000,
$1,684,000 and $1,448,000,respectively. At December 31, 1993, minimum future
lease payments under noncancelable operating leases are $1,386,000 in 1994,
$916,000 in 1995, $683,000 in 1996, $467,000 in 1997, $127,000 in 1998 and
$706,000 thereafter.
In March, 1993, an outside contractor spilled a small amount of mercury while
working at the Company's subsidiary, Ohio Water Service's (OWS) water
treatment plant. Several areas in and around the plant were contaminated by
the spill, although no mercury has contaminated OWS's water supply. OWS is
continuously monitoring the situation to maintain water quality. The OWS
has contacted all the appropriate regulatory agencies and the cleanup has been
completed. The total cost to clean up the spill was approximately $900,000.
The OWS is currently seeking recovery of these costs from the contractor.
Management believes that OWS has a high probability of recovering damages from
the contractor and, therefore, has recorded no expenses related to the spill.
(11) Other, net
In the second quarter of 1991, the Company's New Hampshire utility, Southern
New Hampshire Water Company, received a decision and order on its pending rate
request, requiring that Southern New Hampshire Water Company reduce its rate
base by approximately $616,000. Accordingly, the Company has recorded a
write-off of $616,000 ($374,000 after taxes). This write-off is included in
Other, net as of December 31, 1991.
(12) Discontinuance of Real Estate Operations
On July 11, 1990, the Company announced its intention to discontinue and
dispose of its real estate business, which includes The Dartmouth Company
(Dartmouth) and its wholly owned subsidiary, Arcadia Company (Arcadia). In
February 1991, the Company decided to cease any further investment in
Dartmouth. This action was in response to increasingly stringent financing
requirements for real estate investors, recent bank failures creating a
considerable inventory of properties on the market at distressed prices and
the inability to forecast a near bottom to the New England real estate market
decline. Dartmouth had notes payable to financial institutions aggregating
$14.2 million at December 31, 1990, which were secured by its real estate
assets and other liabilities of $420,000, consisting primarily of current
liabilities.
As of December 31, 1991, Dartmouth had sold, or otherwise disposed of, all
of its properties. As a result of the successful resolution of material
uncertainties related to the disposition of the Company's real estate
operations the Company reversed $1.8 million of its reserve for loss on
disposal of discontinued operations during 1991.
The Dartmouth Company's business is being accounted for as a discontinued
operation, and accordingly, operating results to the date of discontinuance
are shown separately in the accompanying Consolidated Statements of Income,
and all financial statements presented for prior periods have been restated.
Total sales for the discontinued real estate operations were $1.7 million in
1991.
(13) Discontinuance of Manufactured Housing Operations
On October 6, 1993, the Company announced its intention to dispose of its
manufactured housing business, Burlington Homes of New England. The business
was offered for sale. The estimated loss on the disposal of $4.2 million was
recorded in the third quarter of 1993. To date, efforts to sell Burlington
have been unsuccessful, and an additional $1.1 million reserve was recorded in
the fourth quarter for a total reserve of $5.3 million, net of taxes, of
approximately $600,000. The operating results of Burlington Homes prior to
the date of discontinuance are shown separately on the accompanying
consolidated statements of income, and all financial statements for prior
periods have been restated. Total sales for Burlington Homes were $5,486,000,
$5,370,000, and $5,240,000 in 1993, 1992, and 1991, respectively.
Consumers Water Company and Subsidiaries
Unaudited Financial Information
Quarterly Financial Data
Unaudited quarterly financial data pertaining to the results of
operations for 1993 and 1992 are as follows:
(Dollars in Thousands Except Per Share Amounts)
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
1993
Operating Revenue ---
Continuing Operations $20,937 $22,503 $24,521 $21,123
Operating Income ---
Continuing Operations $4,662 $5,444 $8,026 $4,713
Net Income(Loss):
Continuing Operations $2,111 $1,738 $3,613 $4,541
Discontinued Operations($ 274) ($ 293) ($4,417) ($1,100)
Total $1,837 $1,445 ($ 804) $3,441
Earnings(Loss) Per Share:
Continuing Operations $0.29 $0.24 $0.50 $0.60
Discontinued Operations($0.04) ($0.04) ($0.61) ($0.14)
Total $0.25 $0.20 ($0.11) $0.46
1992
Operating Revenue ---
Continuing Operations $19,195 $21,142 $22,725 $21,183
Operating Income ---
Continuing Operations $4,628 $6,367 $7,132 $5,668
Net Income(Loss):
Continuing Operations $1,255 $2,331 $2,818 $2,097
Discontinued Operations($ 156) ($ 66) ($ 62) ($ 195)
Total $1,099 $2,265 $2,756 $1,902
Earnings Per Share(Loss):
Continuing Operations $0.18 $0.33 $0.40 $0.30
Discontinued Operations($0.02) ($0.01) ($0.01) ($0.03)
Total $0.16 $0.32 $0.39 $0.27
The fluctuations in revenue and operating income between quarters
reflect the seasonal nature of the water utility business,
changes in industrial usage and the timing of rate relief.
Gains from the sales of properties of continuing operations, net
of taxes, were $867,000, $6,000, $(5,000), and $2,999,000 in the
four quarters of 1993 as compared with $2,000, $0, $0, and
$(27,000) in 1992.
<TABLE>
<CAPTION>
Selected Financial Data
<S> <C> <C> <C> <C> <C>
(Dollars in Thousands Except Per Share Amounts) 1993 1992 1991 1990 1989
Operating Revenue --
Continuing Operations $89,084 $84,245 $79,965 $75,296 $71,574
Earnings(Loss) Per Common Share
Continuing Operations $1.63 $1.21 $1.52 $1.23 $1.21
Total $0.80 $1.14 $1.74 ($0.33) $1.15
Dividends Declared Per
Common Share $1.15 $1.13 $1.11 $1.09 $1.06
Total Assets $371,657 $343,033 $315,124 $302,220 $287,404
Long-Term Debt of Continuing
Operations (including current
maturities, sinking fund requirements
and redeemable preferred stock) $125,080 $131,667 $106,666 $113,875 $93,964
</TABLE>
<TABLE>
CONSUMERS WATER COMPANY AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT OF CONTINUING OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
Balance at Other Balance
Beginning Changes (D) at End of
of Period Additions Retirements Add/(Deduct) Period
1993
(20) (B)
(72) (C)
Land and rights $6,563 342 (13) (2) $6,798
Water collection, (14) (B)
storage and (1,390) (C)
treatment 77,755 6,968 (238) 4 83,085
(4,431) (B)
Transmission and (5,070) (C)
distribution 241,738 13,907 (528) 101 245,717
(5) (B)
General 46 (A) (815) (C)
plant 22,077 3,938 (1,029) (991) 23,221
Organization
and franchise (12) (C)
expense 2,102 59 (14) (46) 2,089
Utility plant
adj. being
amortized 405 130 (4) 384 915
-----------------------------------------------------------------------
350,640 25,390 (1,826) (12,379) 361,825
-----------------------------------------------------------------------
(145) (B)
Construction work (105) (C)
in progress 10,252 10,178 0 0 20,180
----------------------------------------------------------------------
$360,892 35,568 (1,826) (12,629) $382,005
=====================================================================
(A) Acquisition of EnviroAudit by C/P Utilities.
(B) Sale of Bourbonnais Wastewater System by Consumers
Illinois.
(C) Sale of the Washington Court House Division of Ohio Water
Service.
(D) Reclassifications and other miscellaneous adjustments.
</TABLE>
<TABLE>
CONSUMERS WATER COMPANY AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT OF CONTINUING OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
Balance at Other Balance
Beginning Changes (D) at End of
of Period Additions Retirements Add/(Deduct) Period
1992
58 (A)
Land and rights $5,723 803 0 (21) (C) $6,563
Water collection,
storage and 1,096 (A) (447) (C)
treatment 62,766 16,543 (2,097) (106) 77,755
Transmission and 3,744 (A) (2,355) (C)
distribution 225,101 16,708 (1,401) (59) 241,738
992 (B)
General 541 (A) (3) (C)
plant 17,275 3,051 (464) 685 22,077
Organization
and franchise 22 (A) (264) (C)
expense 2,292 56 0 (4) 2,102
Utility plant
adj. being (255) (A)
amortized 1,316 42 0 (698) 405
--------------------------------------------------------------------------
314,473 43,401 (3,962) (3,272) 350,640
--------------------------------------------------------------------------
Construction work 599 (A)
in progress 21,063 (11,408) 0 (2) (C) 10,252
-------------------------------------------------------------------------
$335,536 32,592 (3,962) (3,274) $360,892
=========================================================================
(A) Acquisition of Greenville, Millinocket and Skowhegan
Water Companies (Maine systems) by Wanakah Water Company.
(B) Acquisition of Northumberland Utilities by Roaring Creek
Water Company.
(C) Sale of Amherst Division of Southern New Hampshire Water
Company.
(D) Reclassifications and other miscellaneous adjustments.
</TABLE>
<TABLE>
CONSUMERS WATER COMPANY AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT OF CONTINUING OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
Balance at Other Balance
Beginning Changes (B) at End of
of Period Additions Retirements Add/(Deduct) Period
1991
(185) (A)
Land and rights $5,536 393 (26) 5 $5,723
Water collection,
storage and (1,886) (A)
treatment 62,004 4,024 (707) (669) 62,766
Transmission and (4,796) (A)
distribution 217,118 12,973 (720) 526 225,101
General (290) (A)
plant 16,425 1,602 (475) 13 17,275
Organization
and franchise (23) (A)
expense 2,347 14 0 (46) 2,292
Utility plant
adj. being
amortized 1,371 309 0 (364) 1,316
------------------------------------------------------------------------------
304,801 19,315 (1,928) (7,715) 314,473
------------------------------------------------------------------------------
Construction work
in progress 9,600 12,461 (360) (638) 21,063
------------------------------------------------------------------------------
$314,401 31,776 (2,288) (8,353) $335,536
==============================================================================
(A) Sale of Marysville Division of Ohio Water Service.
(B) Reclassifications and other miscellaneous adjustments.
</TABLE>
<TABLE>
CONSUMERS WATER COMPANY AND SUBSIDIARIES
Schedule VI
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT OF CONTINUING OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Dollars in Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
Balance at Other Balance
Beginning Changes at End of
of Period Additions Retirements Add/(Deduct) Period
1993
Reserve for
Depreciation $60,525 $6,741 ($1,774) $51 (A)
($19) (B)
$1,271 (C)
($896) (F)
($1,439) (G) $64,460
1992
Reserve for
Depreciation $55,922 $5,881 ($3,859) $33 (A)
($131) (B)
$985 (C)
$1,694 (E) $60,525
1991
Reserve for
Depreciation $52,977 $5,298 ($1,891) $19 (A)
$29 (B)
$554 (C)
($1,064) (D) $55,922
(A) Depreciation on transportation equipment either capitalized
or charged to clearing account.
(B) Cost of removing property retired or sold, net of salvage.
(C) Changes due to original cost adjustments, additions of
assets and other miscellaneous adjustments.
(D) Sale of Marysville District of Ohio Water Service Company.
(E) Acquisition of assets of Skowhegan, Millinocket and
Greenville Water Companies (Maine systems) by Wanakah Water Company.
(F) Sale of Bourbonnais wastewater collection operation of Consumers
Illinois Water Company.
(G) Sale of Washington Court House District of Ohio Water Service
Company.
The reserve for depreciation is not segregated on the books
to correspond with the classifications of property as set forth in
Schedule V.
</TABLE>
<TABLE>
Schedule VIII
CONSUMERS WATER COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Additions Deductions
_________________________ _____________
Balance at Provision Balance at
Beginning of Charged to Accounts End of
Description Year Operations Recoveries Written-Off Year
Allowance for
Doubtful Year Ended December 31, 1993
Accounts -----------------------------------------
$702 $599 $60 $563 $798
Year Ended December 31, 1992
-----------------------------------------
$1,121 $645 $57 $1,121 $702
Year Ended December 31, 1991
-----------------------------------------
$777 $792 $54 $502 $1,121
</TABLE>
Schedule X
CONSUMERS WATER COMPANY AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR CONTINUING OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Dollars in Thousands)
Column A Column B
Item Charged to Costs
and Expenses
1993 1992 1991
Maintenance and repairs $4,806 $5,275 $5,696
=========================
Depreciation and amortization $7,994 $7,432 $6,125
=========================
Taxes other than payroll and
income taxes:
Municipal property $4,983 $4,521 $4,137
State, franchise and excise $3,098 $2,902 $2,730
Other $291 $298 $281
Total taxes other than payroll and -------------------------
income taxes $8,372 $7,721 $7,148
=========================
The amounts of royalties and advertising expenses are
not presented as such amounts are less than one percent of total
revenues and sales.
EXHIBIT INDEX
Sequentially
Numbered
Exhibit Page
2.1 Assets Purchase and Sale Agreement between Ohio Water Service
and the City of Washington, Ohio dated October 28, 1993 is
submitted herewith as Exhibit 2.1.........................
3.1 Conformed Copy of Restated Articles of Incorporation of
Consumers Water Company, as amended, incorporated by reference
to Exhibit 4.1.6 to Consumers Water Company's Registration
Statement on Form S-2 (No. 33-41113), filed with the Securities
and Exchange Commission on June 11, 1991.
3.2 Bylaws of Consumers Water Company, as amended March 2, 1994,
are submitted herewith as Exhibit 3.2.....................
4.1 Instruments defining the rights of security holders,
including Indentures. The registrant agrees to furnish copies
of instruments with respect to long-term debt to the
Commission upon request.
10.1 Noncompetition and Consulting Agreement between Consumers
Water Company and John H. Schiavi incorporated by reference
to Exhibit 10.2 of Consumers Water Company's Annual Report on
form 10-K for the year ended December 31, 1992.
10.2* Consumers Water Company 1988 Incentive Stock Option Plan is
submitted herewith as Exhibit 10.2........................
10.3* Consumers Water Company 1993 Incentive Stock Option Plan is
incorporated by reference to Appendix B to definitive proxy
statement dated April 5, 1993.
10.4* Consumers Water Company 1992 Deferred Compensation Plan for
Directors, Plan A, incorporated by reference to Exhibit 10.5.2
to Consumers Water Company's Annual Report on Form 10-K for the
year ended December 31, 1991.
10.5* Consumers Water Company 1992 Deferred Compensation Plan for
Directors, Plan B, incorporated by reference to Exhibit 10.5.3
to Consumers Water Company's Annual Report on Form 10-K for
the year ended December 31, 1991.
- ------------------------------------
* Management or compensating plan or arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of Form 10-K.
Sequentially
Numbered
Exhibit Page
10.6 Letter Agreement between Consumers Water Company and Anjou
International Company dated February 7, 1986, incorporated
by reference to Exhibit 10.6 to Consumers Water Company's
Registration Statement on Form S-2 (No. 33-41113), filed with
the Securities and Exchange Commission on June 11, 1991.
10.7 Assignment of Rights under February 7, 1986 Agreement between
Consumers Water Company and Anjou International Company to
Compagnie Generale des Eaux, dated November 12, 1987,
incorporated by reference to Exhibit 10.7 to Consumers Water
Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10.8 Form of Indemnification Agreement entered into between
Consumers Water Company and each of its current directors and
executive officers, incorporated by reference to Exhibit 10.8
to Consumers Water Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1989.
10.9* Employment Agreement between Peter L. Haynes and Consumers
Water Company incorporated by reference to Exhibit 10.11
to Consumers Water Company's Annual Report on Form 10-K for
the year ended December 31, 1992.
11. Statement of Computation of Per Share Earnings is submitted
herewith as Exhibit 11....................................
22. List of Subsidiaries of the Registrant is submitted herewith
as Exhibit 22.............................................
23. Consent of Arthur Andersen & Co is submitted herewith as
Exhibit 23................................................
- ------------------------------------
* Management or compensating plan or arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of Form 10-K.
Exhibit 2.1
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS (this
"Agreement") is dated as of October 28, 1993 by and between Ohio
Water Service Company, an Ohio corporation with its principal
office at 6650 South Avenue, Boardman, Ohio 44512 ("Seller"); and
the City of Washington, Ohio, a municipal corporation existing
under the laws of the State of Ohio, with its principal office at
215 East Market Street, Washington Court House, Ohio 43160
("Purchaser");
W I T N E S S E T H T H A T:
WHEREAS, Seller owns properties and assets constituting
water districts which provide water service to residents within
several different counties in the State of Ohio, among which are
certain properties and assets owned by Seller to provide such
water service to certain residents of the Washington Court House,
Ohio area; and
WHEREAS, Purchaser previously filed an appropriation action,
styled City of Washington vs. Ohio Water Service Company, et al.,
Case No. C.I.V. 93-0373, Fayette County, Ohio, Court of Common
Pleas (the "Condemnation Action"), in order to acquire Seller's
water district in Fayette County, Ohio, and certain citizens of
Fayette County, Ohio filed a mandamus action, styled John S.
Lago, et al. v. City of Washington, Ohio, Case No. 93-1549, which
is now before the Supreme Court of Ohio on appeal from the Court
of Appeals for the 12th Judicial District (the "Mandamus Action")
challenging certain aspects of the appropriation procedure used
by Purchaser, but the parties hereto now desire to enter into
this Agreement in order to provide for the acquisition of such
water district by Purchaser in a more amicable fashion; and
WHEREAS, Seller and Purchaser have engaged in extensive
negotiations to avoid any further time and expense in continuing
the Condemnation Action as a contested proceeding, which in the
absence of any agreement between the parties would otherwise be
necessary; and
WHEREAS, Purchaser desires to purchase such properties and
assets from Seller, and Seller desires to sell the same to
Purchaser, on the terms and conditions herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereby agree as
follows:
1. PURCHASE AND SALE OF BUSINESS AND ASSETS.
1.1 Transfer of Seller's Assets. Subject to and upon the
terms and conditions set forth in this Agreement, Seller will
sell, transfer, convey, assign and deliver to Purchaser, and
Purchaser will purchase, at the Closing hereunder (as defined
herein), all of the business, assets, properties, goodwill and
rights of Seller as a going concern, of every nature, kind and
description, tangible and intangible, wheresoever located and
whether or not carried or reflected on the books and records of
Seller, directly and particularly related to the business (the
"Washington Court House Business") now or heretofore conducted by
Seller in providing water service to, within or adjacent to the
City of Washington in Fayette County, Ohio (collectively
"Seller's Assets"), including, without limitation, (i) the real
estate assets located in Fayette County, Ohio and specifically
identified on Exhibit "1.1" attached hereto (the "Real Estate
Assets"), (ii) the personalty, fixtures and other assets of
Seller referred to in Schedule 5.11 attached hereto as updated as
of the Closing Date (as hereinafter defined) pursuant to the form
of Bill of Sale attached hereto as Exhibit "2.1", (iii) Seller's
accounts receivable and unbilled accounts as required to be
identified on Schedule 5.11.2 attached hereto, and all account
information related thereto, (iv) the books, records and computer
data in Seller's possession directly and particularly relating to
or arising out of the conduct of the Washington Court House
Business, including but not limited to all plans, diagrams,
blueprints, as-built plans, specifications, inventories, capital
improvement schedules and progress reports, computer files,
environmental surveys and legal notices relating to the
Washington Court House Business (the "Washington Court House
Business Records"), (v) all rights and choses in action of
Seller, whether arising by contract or otherwise, arising out of
Seller's conduct of the Washington Court House Business, (vi) all
deposits and deposit accounts held by Seller which were paid to
Seller by Seller's customers and others relative to the
Washington Court House Business, (vii) Seller's transferable
contract rights by which Seller is licensed to use any computer
software used in the operation of the Washington Court House
Business as required to be identified on Schedule 5.11 (the
"Software Licenses"), and (viii) such other assets of Seller not
specifically referred to herein as are necessary or appropriate
for the conducting of the Washington Court House Business, with
only such dispositions of such assets and write-offs of accounts
as shall have occurred in the ordinary course of Seller's
business between the Valuation Date (as hereafter defined) and
the Closing Date and which are permitted by the terms hereof.
The transfer of Seller's Assets to Purchaser shall exclude (a)
Seller's cash on hand, bank account balances and bank accounts,
(b) Seller's insurance policies, (c) the computer equipment and
software not listed on Schedule 5.21 attached hereto which is
part of Seller's central computer system, (d) all other business
assets of Seller not specifically related to the Washington Court
House Business, and (e) the corporate name, minute books,
corporate seal and stock records of Seller.
1.2 Liabilities and Encumbrances. Seller's Assets shall
be conveyed to the Purchaser free and clear of all liabilities,
obligations, liens and encumbrances excepting only those
liabilities and obligations which are expressly to be assumed by
Purchaser hereunder and those liens and encumbrances securing the
same which are expressly permitted by the terms hereof.
2. PURCHASE PRICE.
2.1 Assets Purchase Price. In consideration of the sale,
transfer, conveyance, assignment and delivery of Seller's Assets
existing as of September 16, 1993 (the "Valuation Date") by
Seller to Purchaser, and in reliance upon the representations and
warranties made herein by Seller and the delivery of the Bill of
Sale in the form attached hereto as Exhibit "2.1", Purchaser
will, in full payment thereof, pay to Seller at the Closing a
total purchase price of Ten Million Four Hundred and Fifty
Thousand Dollars ($10,450,000.00) (the "Assets Purchase Price").
2.2 Additional Assets Purchase Price. In consideration of
the sale, transfer, conveyance, assignment and delivery of
Seller's Assets which were acquired by Seller between the
Valuation Date and the Closing Date, (which together with
Seller's Assets as of the Valuation Date are as set forth in
Schedule 5.11 attached hereto, as updated and delivered at the
Closing), by Seller to Purchaser, and in reliance upon the
representations and warranties made herein by Seller, Purchaser
will, in full payment thereof, pay to Seller at the Closing a
purchase price equal to Seller's actual cost thereof (as
reflected upon Seller's invoices therefor), less any retired
assets and the amount of any increase in depreciation thereupon
as reflected on the books of Seller from the Valuation Date
through such date (the "Additional Assets Purchase Price").
2.3 Supplies Purchase Price. In consideration of the sale,
transfer, conveyance, assignment and delivery of all materials
and supplies of Seller relating to the Washington Court House
Business on hand at the Closing Date (as set forth in Schedule
5.11 attached hereto as updated and delivered at the Closing), by
Seller to Purchaser, and in reliance upon the representations and
warranties made herein by Seller, Purchaser will, in full payment
thereof, pay to Seller at the Closing a purchase price equal to
the book value of such materials and supplies as reflected on the
books of Seller as of the end of the calendar month preceding the
Closing Date (the "Supplies Purchase Price").
2.4 Accounts Purchase Price. In consideration of the sale,
transfer, conveyance, assignment and delivery of all accounts
receivable and unbilled accounts of Seller relating to the
Washington Court House Business as of the Closing Date (the
"Accounts"), as set forth on Schedule 5.11 attached hereto as
updated and delivered at Closing, by Seller to Purchaser, and in
reliance upon the representations and warranties made herein by
Seller, Purchaser will, in full payment thereof, pay to Seller a
purchase price equal to $239,875 (the "Accounts Purchase Price").
2.5 Aggregate Purchase Price. The Assets Purchase Price,
the Additional Assets Purchase Price, the Accounts Purchase Price
and the Supplies Purchase Price are collectively referred to
herein as the "Aggregate Purchase Price". The Aggregate Purchase
Price shall be payable by Purchaser to Seller as of the Closing
by the wire transfer of immediately available funds to bank
accounts as per written instructions of Seller given to Purchaser
at least 24 hours prior to the Closing.
2.6 Liabilities Undertaking. In addition to the foregoing,
Purchaser and Seller will execute at the Closing a Liabilities
Undertaking in the form of Exhibit "2.6" attached hereto relating
to the contractual obligations of Seller identified on Annex A
attached thereto.
3. CLOSING AND PRECLOSING.
3.1 Closing. The purchase and sale and other transactions
contemplated by this Agreement shall be consummated at a closing
(the "Closing") which shall take place at 8:30 a.m., local time,
on December 16, 1993, or such other date which is at least two
business days after all conditions to Closing set forth in
Articles 11 and 12 hereof shall have been satisfied or waived by
the appropriate parties, at the offices of Bricker & Eckler, 100
South Third Street, Columbus, Ohio 43215, or at such other time
and place as the parties may agree. The day on which the Closing
shall occur is herein sometimes referred to as the "Closing
Date". All parties shall use their best efforts to cause the
Closing to happen as quickly as possible, but in no event earlier
than December 16, 1993 or later than December 31, 1993.
3.2 Preclosing. On November __, 1993, or another date not
later than ten business days prior to the date on which the
parties expect the Closing to occur, the parties shall hold a
preclosing relating to the transactions contemplated by this
Agreement (the "Preclosing"), at the offices of Bricker & Eckler,
100 South Third Street, Columbus, Ohio 43215, or at such other
time and place as the parties may agree. At the Preclosing, the
parties shall review and agree upon the forms of all documents to
be delivered at the Closing pursuant to Article 4 and Sections 11
and 12 of this Agreement, and shall execute a Preclosing
Agreement in the form attached hereto as Exhibit 3.2 to the
effect that the specific conditions to Closing referenced therein
have been satisfied or waived to the satisfaction of the parties,
and that the only conditions remaining to be satisfied as of the
Closing Date are those specifically referenced therein.
4. SELLER'S OBLIGATIONS AT CLOSING; FURTHER ASSURANCES.
4.1 Deliveries at Closing. At the Closing, Seller will
deliver to Purchaser:
4.1.1 A Bill of Sale duly executed by Seller in the
form of Exhibit "2.1" attached hereto conveying all of
Seller's Assets to Purchaser (other than the Real Estate
Assets);
4.1.2 Limited warranty deeds conveying all of the
Real Estate Assets to Purchaser, in form and substance
satisfactory to Purchaser, duly executed by Seller, together
with the affidavits contemplated by Sections 7.4.2 and 11.9
hereof, with real estate taxes on the Real Estate Assets to
be prorated between Purchaser and Seller through the Closing
Date, and with Seller to pay (or prorate) all charges for
gas, electricity, telephone, water, sewer, trash removal and
street cleaning through the Closing Date (it being
understood that Seller shall have paid any delinquent real
estate taxes and assessments);
4.1.3 Such other good and sufficient instruments of
conveyance, assignment and transfer (including certificates
of title for all motor vehicle transfers), in form and
substance satisfactory to Purchaser's counsel, as shall be
effective to vest in Purchaser good and marketable title to
Seller's Assets;
4.1.4 All contracts, files and other data and
documents directly and particularly pertaining to the
Washington Court House Business, including but not limited
to the Washington Court House Business Records (which may be
delivered at the Washington Court House, Ohio offices of
Seller), except Seller may elect to retain originals of any
such records if true and correct copies thereof certified by
the Secretary of Seller are delivered to Purchaser at the
Closing; and
4.1.5 All updated Schedules, closing certificates and
other documents required to be delivered to Purchaser under
the provisions of this Agreement.
4.2 Further Assurances. At any time and from time to time
after the Closing, at Purchaser's request without further
consideration, Seller will execute and deliver such other
instruments of sale, transfer, conveyance, assignment and
confirmation and take such action as Purchaser may reasonably
deem necessary or desirable in order to more effectively
transfer, convey and assign to Purchaser, and to confirm
Purchaser's title to, all of Seller's Assets, to put Purchaser in
actual possession and operating control thereof and to assist
Purchaser in exercising all rights with respect thereto. After
the Closing, at reasonable times and on reasonable notice Seller
shall have access to the books and records pertaining to its
operations of Seller which have been transferred to Purchaser,
and Purchaser shall retain such books and records for a period of
eight years after the Closing. With respect to any original
records retained by Seller pursuant to Section 4.1.4 of this
Agreement, at reasonable times and on reasonable notice Seller
shall make such original records available to Purchaser for any
proper purpose after the Closing.
4.3 Collection of Accounts and Other Items. Purchaser
shall have the right and authority to bill, re-bill and collect
for its own account all Accounts which shall be transferred to
Purchaser as provided herein and to endorse with the name of
Seller any checks received on account of any such Accounts.
Seller will promptly transfer and deliver to Purchaser any cash
or other property which Seller may receive after the Closing in
respect of any such Accounts or other items relative to the
Washington Court House Business, it being understood that
Purchaser shall be the owner of such Accounts (and all rights to
collection and proceeds thereof), and that Seller shall have no
further interest therein. Purchaser shall be entitled to use all
legal means available to collect and enforce payment of all
Accounts for its own account following the Closing as owner
thereof.
5. REPRESENTATIONS AND WARRANTIES BY SELLER. Seller
represents and warrants to Purchaser, which representations and
warranties shall be true and correct as of the date hereof and
again as of the Closing Date, as follows:
5.1 Organization, Standing and Qualification. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio; it has all requisite
corporate power and authority and is entitled to carry on its
business as now being conducted, and to own, lease or operate its
properties in connection with the Washington Court House Business
as and in the places where such business is now conducted and
such properties are now owned, leased or operated. Seller has
delivered to Purchaser true and complete copies of Seller's
certificate of incorporation and all amendments thereto,
certified by the Secretary of State of the State of Ohio, and the
bylaws (or other similar governing documents) of Seller as
presently in effect, certified as true and correct by Seller's
Secretary.
5.2 Parents and Subsidiaries. Consumers Water Company is
the sole shareholder of Seller. Seller has no subsidiaries. The
Washington Court House Business carried on by Seller has not been
conducted through any other direct or indirect subsidiary or
affiliate of a shareholder of Seller or any other person.
5.3 Execution, Delivery and Performance of Agreement;
Authority. Seller has the full corporate power and authority to
enter into this Agreement and to carry out the transactions
contemplated hereby. This Agreement is duly executed and
delivered by Seller. All corporate and other proceedings
required to be taken by Seller or its shareholder to authorize
the execution, delivery and performance of this Agreement and the
agreements relating hereto have been properly taken, and this
Agreement and each other agreement contemplated to be executed
and delivered by Seller hereby constitutes a valid and binding
obligation of Seller enforceable against it in accordance with
its terms.
5.4 Financial Statements. Seller has delivered or will
deliver to Purchaser copies of the following financial statements
(hereinafter collectively referred to as the "Financial
Statements"), all of which are or will be as of the Closing
complete and correct, have been or will be prepared from the
books and records of Seller in accordance with generally accepted
accounting principles consistently applied and maintained
throughout the periods indicated and fairly present the financial
condition of Seller's Washington Court House Business as at their
respective dates and the results of its operations for the
periods covered thereby:
5.4.1 The unaudited balance sheets and statements of
income relating to the Washington Court House Business for
each of the twelve months ended December 31, 1989, 1990,
1991, and 1992, and an unaudited balance sheet and statement
of income for each month thereafter through the month ended
August 30, 1993, and
5.4.2 unaudited statements of income relating to the
Washington Court House Business for each calendar month
after August, 1993 prior to the Closing Date (it being
understood that such interim income statements shall not be
available until at least twenty-five (25) days following the
end of each calendar month).
Such statements of income do not contain any material items of
special or nonrecurring income or any other material income not
earned in the ordinary course of business except as expressly
specified therein, and such interim financial statements include
all adjustments, which consist only of normal recurring accruals,
necessary for such fair presentation.
5.5 Absence of Undisclosed Liabilities. Except as and to
the extent reflected or reserved against on the face of the
Financial Statements (excluding the notes thereto) or expressly
disclosed in the Schedules attached hereto, as of the last day of
the calendar month prior to the Valuation Date Seller had (and as
of the Closing Date Seller shall have) no debts, liabilities or
obligations (whether absolute, accrued, contingent or otherwise)
in any way affecting Seller's Assets or the Washington Court
House Business of any nature whatsoever, including, without
limitation, any foreign or domestic tax liabilities or deferred
tax liabilities incurred in respect of or measured by Seller's
income, or its period prior to the close of business on the last
day of the calendar month prior to the Valuation Date or any
other debts, liabilities or obligations relating to or arising
out of any act, omission, transaction, circumstance, sale of
goods or services, state of facts or other condition which
occurred or existed on or before such date, whether or not then
known, due or payable, which relate to or could become a lien
upon Seller's Assets or the Washington Court House Business.
5.6 Taxes. All taxes which after the Closing could become
a lien upon Seller's Assets or result in any liability to the
Purchaser, including, without limitation, income, property,
sales, use, franchise, added value, employees' income withholding
and social security taxes, imposed by the United States or by any
foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country,
or by any other taxing authority, which are or will be due and
payable by Seller, and all interest and penalties thereon,
whether disputed or not, have been or will be paid in full, all
tax returns required to be filed in connection therewith have
been or will be accurately prepared and duly and timely filed and
all deposits required by law to be made by Seller with respect to
employees' withholding taxes have been or will be duly made.
5.7 Absence of Changes or Events. Except as set forth on
Schedule 5.7 attached hereto, since the Valuation Date Seller has
conducted the Washington Court House Business only in the
ordinary course and has not:
5.7.1 incurred any obligation or liability related to
the Washington Court House Business or Seller's Assets,
absolute, accrued, contingent or otherwise, whether due or
to become due, except current liabilities for trade or
business obligations incurred in connection with the
purchase of goods and services in the ordinary course of
business and consistent with its prior practice, none of
which liabilities, in any case or in the aggregate,
materially and adversely affects the business, liabilities
or financial condition of the Washington Court House
Business or Seller's Assets;
5.7.2 discharged or satisfied any lien, charge or
encumbrance related to the Washington Court House Business
or Seller's Assets, other than those then required to be
discharged or satisfied, or paid any obligation or
liability, absolute, accrued, contingent or otherwise,
whether due or to become due, other than current liabilities
shown on the Financial Statements and current liabilities
incurred since the Valuation Date in the ordinary course of
business and consistent with its prior practice in
conducting the Washington Court House Business;
5.7.3 mortgaged, pledged or subjected to lien,
charge, security interest or any other encumbrance or
restriction any of Seller's Assets, tangible or intangible;
5.7.4 sold, transferred, leased to others or
otherwise disposed of any of Seller's Assets, except for
inventory sold in the ordinary course of business, or
canceled or compromised any debt or claim, or waived or
released any right of substantial value;
5.7.5 received any notice of termination of any
contract, lease or other agreement or suffered any damage,
destruction or loss (whether or not covered by insurance)
related to the Washington Court House Business or Seller's
Assets which, in any case or in the aggregate, has had a
materially adverse effect on the assets, operations or
prospects of the Washington Court House Business;
5.7.6 in connection with or affecting the Washington
Court House Business, encountered any labor union organizing
activity, had any actual or threatened employee strikes,
work stoppages, slow-downs or lock-outs, or had any material
change in its relations with its employees, agents,
customers or suppliers;
5.7.7 made any change in the rate of compensation,
commission, bonus or other direct or indirect remuneration
payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus, extra compensation,
pension or severance or vacation pay, to any employee or
agent of Seller related to the Washington Court House
Business except as previously disclosed to Purchaser in
writing prior to the date hereof;
5.7.8 instituted, settled or agreed to settle any
litigation, action or proceeding before any court or
governmental body relating to the Washington Court House
Business or Seller's Assets, other than the Condemnation
Action, with any counter-claims of Seller therein to be
dismissed with prejudice at or prior to the Closing;
5.7.9 failed to replenish its inventories and
supplies relative to the Washington Court House Business in
a normal and customary manner consistent with its prior
practice and prudent business practices prevailing in the
industry, or made any purchase commitment affecting the
Washington Court House Business in excess of the normal,
ordinary and usual requirements of its business or at any
price in excess of the then current market price or upon
terms and conditions more onerous than those usual and
customary in the industry, or made any change in its
service, selling, pricing, advertising or personnel
practices inconsistent with its prior practice and prudent
business practices prevailing in the industry;
5.7.10 suffered any change, event or condition which,
in any case or in the aggregate, has had or may have a
materially adverse effect on Seller's Assets or the
Washington Court House Business (financial or otherwise), or
the operations or prospects of the Washington Court House
Business, including, without limitation, any material change
in the Washington Court House Business' revenues, costs or
relations with its employees, agents, customers or
suppliers;
5.7.11 entered into any transaction, contract or
commitment affecting the Washington Court House Business
other than in the ordinary course of business or paid or
agreed to pay any brokerage or finder's fee, taxes or other
expenses in connection with this Agreement or the
transactions contemplated hereby;
5.7.12 removed (or permitted to be removed) any
Washington Court House Business Records from the premises of
the Washington Court House Business, or removed or destroyed
(or permitted to be removed or destroyed) any computer files
relating to the Washington Court House Business, except for
those records and files being retained by Seller pursuant to
Section 4.1.4, and excepting any records and files which are
not Washington Court House Business Records, or
5.7.13 entered into any agreement or made any
commitment to take any of the types of action described in
subparagraphs 5.7.1 through 5.7.12 above.
5.8 Litigation. Except as set forth in Schedule 5.8
attached hereto, there is no claim, legal action, suit,
arbitration, governmental investigation or other legal or
administrative proceeding, nor any order, decree or judgment in
progress, pending or in effect, or to the knowledge of Seller or
the Shareholder threatened, against or relating to the Washington
Court House Business, its employees, Seller's Assets, or the
transactions contemplated by this Agreement, and Seller does not
know, and has no reason to be aware, of any basis for the same.
Schedule 5.8 also identifies each civil, criminal or
administrative proceeding or investigation to which Seller has
been a party during the five year period prior to the date hereof
which sought (i) payment of any criminal or administrative fines
or penalties by Seller in connection with the operation of the
Washington Court House Business, (ii) civil damages in excess of
$5,000.00 in connection with the operations of the Washington
Court House Business, or (iii) injunctive relief of any type or
nature against Seller as a result of or connected with the
Washington Court House Business.
5.9 Regulatory Matters; Compliance with Laws and Other
Instruments. Except as set forth on Schedule 5.9 attached
hereto, to the best of Seller's knowledge and belief, after due
investigation, neither the ownership nor use of Seller's Assets
nor the conduct of the Washington Court House Business nor the
transfer of Seller's Assets to Purchaser pursuant hereto
conflicts with the rights of any other person, firm or entity or
violates, or with or without the giving of notice or the passage
of time, or both, will violate, conflict with or result in a
default, right to accelerate or loss of rights under, any terms
or provisions of its articles of incorporation or bylaws (or
similar organization document) as presently in effect, or any
lien, encumbrance, mortgage, deed of trust, lease, license,
agreement, understanding, law, ordinance, rule or regulation, or
any order, judgment or decree to which Seller is a party or by
which it may be bound or affected.
5.10 Title to Properties; Encumbrances.
5.10.1 Seller has (or shall cause Purchaser to have,
as of the Closing Date) good, marketable and insurable title
to all the properties and assets it owns in connection with
the Washington Court House Business or purports to own,
including, without limitation, those reflected in its books
and records and in the Financial Statements as of the last
day of the calendar month prior to the Valuation Date.
Those certain properties relating to the Washington Court
House Business owned by the Ohio Water Development Authority
(the "OWDA Properties"), which are specifically identified
as being the OWDA Properties on Exhibit "1", shall either
(i) be transferred to Seller by the Ohio Water Development
Authority prior to the Closing, and then transferred by
Seller to Purchaser with the other Real Estate Assets at the
Closing, or (ii) be transferred directly to Purchaser by the
Ohio Water Development Authority on the Closing Date, by
means of a limited warranty deed, at no cost to Purchaser.
All Real Estate Assets of Seller, including the OWDA
Properties, are listed on Exhibit "1" attached hereto. All
personal property of Seller included in Seller's Assets,
including inventory and supplies, is listed on Schedule 5.10
attached hereto.
5.10.2 None of Seller's Assets or the OWDA Properties
are subject to any mortgage, pledge, lien, charge, security
interest, encumbrance, restriction, lease, license,
easement, liability or adverse claim of any nature
whatsoever, direct or indirect, whether accrued, absolute,
contingent or otherwise, except (i) as disclosed on Schedule
5.10 attached hereto, (ii) as expressly set forth in the
Financial Statements as securing specific liabilities or as
otherwise expressly permitted by the terms hereof, or (iii)
those imperfections of title and encumbrances, if any, which
(A) are not substantial in character, amount or extent and
do not materially detract from the value of the properties
subject thereto, (B) do not interfere with either the
present and continued use of such property or the conduct of
the normal operations of the Washington Court House
Business, and (C) have arisen only in the ordinary course of
business.
5.10.3 With respect to each of the buildings,
structures or appurtenances included within the Real Estate
Assets, Seller has adequate rights of ingress and egress
thereto for operation of the Washington Court House
Business, and none of such buildings, structures or
appurtenances (or any equipment therein), nor the operation
or maintenance thereof, violates any restrictive covenant
binding upon Seller or encroaches on any property owned by
others. With respect to the personal property and equipment
included among Seller's Assets, Seller knows of no latent or
hidden defects or conditions therein. Seller has provided
to Purchaser complete copies of the most recent owner's
title insurance policies, binders and certificates or
opinions of title heretofore issued to Seller with respect
to each parcel of owned real estate included in the Real
Estate Assets.
5.11 Schedules. Attached hereto as Schedule 5.11 is a
separate schedule containing an accurate and complete list and
description of:
5.11.1 Other than the Real Estate Assets, all real
property owned by Seller or in which Seller has a leasehold
or other interest which is used by Seller in connection with
the operation of the Washington Court House Business,
together with a description of each lease, sublease,
license, or any other instrument under which Seller claims
or holds such leasehold or other interest or right to the
use thereof or pursuant to which Seller has assigned, sublet
or granted any rights therein, identifying the parties
thereto, the rental or other payment terms, expiration date
and cancellation and renewal terms thereof;
5.11.2 All of Seller's receivables related to the
Washington Court House Business (which shall include all
Accounts as the end of the most recent calendar month, all
loans receivable and any advances made by Seller), together
with detailed information as to each such listed receivable
which has been outstanding for more than 30 days;
5.11.3 Other than those items of personal property
owned by Seller and listed on Schedule 5.11, all machinery,
tools, equipment, motor vehicles, rolling stock and other
tangible personal property (other than inventory and
supplies), leased or used by Seller, except for individual
items having a value of less than $500.00 which do not, in
the aggregate, have a total value of more than $5,000.00,
setting forth with respect to all such listed property a
summary description of all leases, liens, claims,
encumbrances, charges, restrictions, covenants and
conditions relating thereto, identifying the parties
thereto, the rental or other payment terms, expiration date
and cancellation and renewal terms thereof;
5.11.4 All agreements or arrangements providing for
the services of any independent contractor performing
services for Seller with respect to Seller's Assets and to
which Seller is a party or by which it is bound;
5.11.5 All individual contracts, agreements and
commitments or other understandings or arrangements to which
Seller is or has been a party since January 1, 1992, which
relate to the Washington Court House Business and which call
for (i) payments or receipts of more than $5,000, and (ii)
all water treatment chemical purchases aggregating more than
$5,000;
5.11.6 The classifications and current annual or
hourly salary rates (by class) of all non-management persons
directly employed by Seller in any way relating to the
Washington Court House Business (including independent
agents) and showing separately for each such classification
the amounts paid or payable as salary, bonus payments and
any indirect compensation for the year ended December 31,
1992;
5.11.7 A listing of all of Seller's Assets relating
to the Washington Court House Business acquired by Seller
since the Valuation Date;
5.11.8 A listing of all supplies on hand (as referred
to in Section 2.3) included among Seller's Assets; and
5.11.9 A listing of all Software Licenses for
software directly and particularly used in the Washington
Court House Business.
All of the contracts, agreements, leases, licenses and
commitments required to be listed on Schedule 5.11 (other than
those which have been fully performed) are valid and binding,
enforceable in accordance with their respective terms, in full
force and effect. Except as disclosed in Schedule 5.11, none of
the payments required to be made under any such contract,
agreement, lease, license and commitment has been prepaid more
than 30 days prior to the due date of such payment thereunder,
and there is not thereunder any existing default, or event which,
after notice or lapse of time, or both, would constitute a
default or result in a right to accelerate or loss of rights, and
none of such contracts, agreements, leases, licenses and
commitments is, either when considered singly or in the aggregate
with others, unduly burdensome, onerous or materially adverse to
the Washington Court House Business or Seller's Assets, or
likely, either before or after the Closing, to result in any
material loss or liability. None of Seller's existing or
completed contracts relating to or affecting the Washington Court
House Business is subject to renegotiation with any governmental
body, except as otherwise set forth on the face of any such
underlying document. True and complete copies of all such
contracts, agreements, leases, licenses and other documents
required to be listed on Schedule 5.11 (together with any and all
amendments thereto) have been delivered to Purchaser and
identified with a reference to this Section of this Agreement.
5.12 No Guaranties. Except as set forth on Schedule 5.12
attached hereto, none of the obligations or liabilities of Seller
relating to the Washington Court House Business is guaranteed by
any other person, firm or corporation.
5.13 Inventory. Seller's Assets include inventory and
supplies necessary to meet the normal requirements of the
Washington Court House Business and its operations. Since the
Valuation Date, Seller has added to its inventory and supplies
only in the ordinary course of business, replenishing such
inventory and supplies only with items of like quality and cost
as those existing at the Valuation Date.
5.14 Receivables. All receivables of Seller relating to
the Washington Court House Business (including the Accounts,
other accounts receivable, loans receivable and advances), and
all unbilled accounts relating to the Washington Court House
Business, have arisen only from bona fide transactions in the
ordinary course of Seller's business and to the best knowledge of
Seller shall be (or have been) fully collected when due, or in
the case of each account receivable within 90 days after it
arose, without resort to litigation and without offset or
counterclaim, in the aggregate face amounts thereof except to the
extent of the normal allowance for doubtful accounts with respect
to accounts receivable computed as a percentage of sales
consistent with Seller's prior practices as reflected on the
Balance Sheet. Since the Valuation Date, Seller has not
materially altered or accelerated its collection efforts or
practices with respect to its accounts receivable.
5.15 Records. The books of account relative to the
Washington Court House Business are complete and correct in all
material respects, and there have been no transactions involving
the Washington Court House Business which properly should have
been set forth therein and which have not been accurately so set
forth.
5.16 Employee Benefit Plans. Schedule 5.16 attached
hereto contains a true and complete list of all employee benefit
plans ("Employee Benefit Plans") within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), whether or not any such plans are otherwise
exempt from the provisions of ERISA, established, maintained,
sponsored or contributed to by Seller and all other employers,
whether or not incorporated, which by reason of a control group,
a group under common control or an affiliated service group are
treated together with Seller and/or the Shareholder as a single
employer within the meaning of Section 414(b), (c) or (m) of the
Code. No activities of, or failure to act by, Seller in
connection with any Employee Benefit Plan shall result in any
liability to Purchaser following the Closing, and Purchaser shall
not be obligated to assume any liabilities of Seller pursuant to
any Employee Benefit Plan. There has not been any (i)
termination of any "defined benefit plan" within the meaning of
ERISA maintained by Seller or any person, firm or entity
("Affiliate") which is under "common control" (within the meaning
of Section 4001(b) of ERISA) with Seller, or (ii) commencement of
any proceeding to terminate any such plan pursuant to ERISA, or
otherwise, or (iii) written notice given to Seller or any
Affiliate of the intention to commence or seek the commencement
of any such proceeding. Except as set forth in the Schedules
attached to this Agreement, Seller has no knowledge or
information of any planned or required increase in the level of
contributions or benefits under any Employee Benefit Plan, or of
any circumstances which would suggest that such an increase may
be required. In the case of each Employee Benefit Plan to which
Seller makes contributions on behalf of employees who are to be
offered employment by Purchaser after the Closing ("Transferred
Employees") under which contributions are fixed pursuant to a
collective bargaining agreement, such Employee Benefit Plan
satisfies all relevant provisions of the applicable collective
bargaining agreement currently in effect, and the level of
contributions currently provided for in the applicable collective
bargaining agreement is sufficient to meet the funding
requirements of ERISA applicable to such plan, based on
acceptable actuarial assumptions. Each funded Employee Benefit
Plan maintained by Seller for one or more Transferred Employees
constitutes a qualified plan under Section 401(a) of the Code and
meets all applicable requirements of ERISA. Seller has not
incurred any withdrawal liability within the meaning of Section
4201 and 4204 of ERISA to any pension plan which is a
Multiemployer Plan (as defined in Section 4001 of ERISA), and no
event has occurred, and there exists no condition or set of
circumstances (as a result of the execution, delivery and
performance of this Agreement or otherwise) which presents any
risk of the occurrence of any withdrawal from or the partition,
termination, reorganization or insolvency of any Multiemployer
Plan which could result in any liability to Purchaser.
5.17 Environmental Matters.
5.17.1 Except as set forth on Schedule 5.17 attached
hereto, (i) no "Hazardous Substance" (as hereinafter
defined) has been disposed of on, generated on, treated on,
buried beneath, or percolated beneath, (ii) no such
disposal, generation, treatment, burial or percolation has
been threatened, and (iii) there has been no "Release" (as
hereafter defined) thereof on or (to the best knowledge of
Seller) near, any real estate owned or leased by Seller in
connection with the Washington Court House Business, or any
improvements thereon (collectively the "Real Property").
Except as set forth on Schedule 5.17, Seller and (to the
best knowledge of Seller) all owners and users of the Real
Property are and have been in compliance with all applicable
federal, state and local laws, administrative rulings and
regulations of any court, administrative agency or other
governmental or quasi-governmental authority, relating to
the protection of the environment (including but not limited
to laws prohibiting the creation of a public nuisance).
Attached to Schedule 5.17 are copies of all correspondence
between Seller and either the United States Environmental
Protection Agency or the Ohio Environmental Protection
Agency relating to Seller's Assets or the Washington Court
House Business since January 1, 1990. Neither Seller nor
(to the best knowledge of Seller) any past or present owner
or user of the Real Property is a potentially responsible
party under Section 107 of the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended
("CERCLA"), or is or has been subject to an action under
Section 7003 of the Resource Conservation and Recovery Act
of 1976, as amended ("RCRA"), and neither Seller nor (to the
best knowledge of Seller) any past or present owner of the
Real Property has received notification from any federal,
state or local government, agency or regulatory body, of a
violation under any federal, state or local law regulating
the Release, disposal or discharge of any toxic, explosive
or other Hazardous Substance. No Environmental Condition
(as hereafter defined) exists in or (to the best knowledge
of Seller) near the Real Property.
5.17.2 Except as set forth on Schedule 5.17, the Real
Property is free from the harmful effects of asbestos or
asbestos-containing materials.
5.17.3 Except as set forth on Schedule 5.17, no
Underground Storage Tanks (as hereafter defined) are now
present on or beneath the premises of the Real Estate
Assets.
5.17.4 For purposes of this Agreement: (i)
"Hazardous Substance" means any one or more of (A) any
substance defined as a hazardous substance under Section
101(14) of CERCLA, (B) any other substance deemed hazardous
by the United States Environmental Protection Agency
pursuant to Section 102(a) of CERCLA, (C) petroleum
(including crude oil or any fraction thereof), (D) any
substance deemed hazardous pursuant to Section 1004(5) of
RCRA, (E) any substance regulated under the Toxic Substance
Control Act, as amended, or (F) any other hazardous or toxic
substance, materials, compound, mixture, solution, element,
pollutant or waste regulated under any federal, state or
local statute, ordinance or regulation; (ii) "Release" shall
have the meaning given to such term in Section 101(22) of
CERCLA; (iii) "Underground Storage Tanks" shall be as
defined in Ohio Administrative Code 1301:7-9-02(B)(52) and
shall further include all other underground storage tanks
not included in the foregoing definition because of size,
content or purpose thereof; and (iv) "Environmental
Condition" shall mean conditions of the environment,
including natural resources (including flora and fauna),
soil, surface water, groundwater, any present or potential
drinking water supply, subsurface strata or the ambient air,
relating to or arising out of the use, handling, storage,
treatment, recycling, generation, transportation, spilling,
leaking, pumping, pouring, emptying, discharging, injecting,
escaping, leaching, disposal, dumping, Release or threatened
Release of Hazardous Substances upon or near the Real
Property by Seller or Seller's agents, lessees,
representatives, employees, independent contractors or (to
the best of Seller's knowledge) predecessors in interest.
5.18 Mechanics and Other Liens. No labor, services or
material has been made or furnished to Seller by any person or
entity, including, without limitation, contractors,
subcontractors, mechanics or materialmen, which to the knowledge
and belief of Seller could rise to any lien upon Seller's Assets
as provided under the laws of the State of Ohio.
5.19 Permits and Licenses. Schedule 5.19 attached hereto
sets forth all licenses and permits issued by applicable
governmental authorities presently held by Seller with respect to
the Washington Court House Business, excluding all licenses and
certificates of authority or public convenience and necessity
issued by the Public Utilities Commission of Ohio or the City of
Washington relating to the Washington Court House Business. Such
licenses and permits constitute all of the licenses and permits
necessary or appropriate to operate the Washington Court House
Business in the manner in which the same is operated as of the
date hereof.
5.20 Data Processing Matters.
5.20.1 Except as set forth in Schedule 5.20 attached
hereto, Seller does not have any of its respective records,
systems, controls, data or information relating to the
Washington Court House Business recorded, stored,
maintained, operated or otherwise wholly or partly dependent
upon or held by any means (including any electronic,
mechanical or photographic process, whether computerized or
not) which (including all means of access thereto and
therefrom) are not under the exclusive ownership and control
of Seller.
5.20.2 Seller owns, leases or licenses certain
computer equipment, associated peripheral devices, and
related operating and application systems and other software
utilized in connection with the Washington Court House
Business and operations (the "Data Processing Systems").
All Data Processing Systems assets listed on Schedule 5.20
will be transferred to Purchaser as part of Seller's Assets.
Seller's billing system and any facilities, computers,
software and data processing systems not located in Fayette
County, Ohio shall be excluded from such transfer. All
agreements and licenses relating to leased or licensed Data
Processing Systems which are being transferred are
identified on Schedule 5.11. Purchaser shall pay any
licensor charges or fees necessary to transfer such Data
Processing Systems.
5.21 Finder's Fees. Neither Seller nor any person acting
on behalf of Seller is a party to any contract, arrangement or
understanding pursuant to which any third person or entity is
entitled to any brokerage commission, finder's fee or similar
compensation from any party in connection with the execution and
delivery of this Agreement or the consummation of the
transactions herein contemplated.
5.23 Disclosure. No representation or warranty by Seller
contained in this Agreement nor any statement or certificate
furnished or to be furnished by Seller to Purchaser or its
representatives in connection herewith or pursuant hereto
contains or will contain any untrue statement of a material fact,
or omits or will omit to state any material fact required to make
the statements herein or therein contained not misleading. The
representations and warranties contained in this Article 5 or
elsewhere in this Agreement or any document delivered pursuant
hereto shall not be affected or deemed waived by reason of the
fact that Purchaser and/or its representatives knew or should
have known that any such representation or warranty is or might
be inaccurate in any respect.
6. REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser
represents and warrants to Seller, which representations and
warranties shall be true and correct as of the date hereof and as
of the Closing Date, as follows:
6.1 Organization. Purchaser is a municipal corporation
and political subdivision in and of the State of Ohio, duly
organized and validly existing under the laws of the State of
Ohio and has full municipal power and authority to enter into
this Agreement and the related agreements referred to herein and
to carry out the transactions contemplated by this Agreement.
6.2 Authorization and Approval of Agreement. All
municipal governmental action required to be taken by Purchaser
relating to the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have
been taken at or prior to the Closing. Such action includes a
municipal ordinance authorizing Purchaser's authorized officials
to enter into and perform the obligations contemplated by this
Agreement for the Aggregate Purchase Price set forth in Article 2
hereof. Said legislation shall provide that the Closing (as
defined herein) shall not occur prior to December 16, 1993.
Purchaser has provided Seller with a certified copy of said
legislation prior to the execution hereof.
6.3 Execution, Delivery and Performance of Agreement.
Neither the execution, delivery nor performance of this Agreement
by Purchaser will, with or without the giving of notice or the
passage of time, or both, conflict with, result in a default,
right to accelerate or loss of rights under, or result in the
creation of any lien, charge or encumbrance pursuant to, any
franchise, mortgage, deed of trust, lease, license, agreement,
understanding, law, ordinance, rule or regulation or any order,
judgment or decree to which Purchaser is a party or by which it
may be bound. Purchaser has full municipal power and authority
to enter into this Agreement and to carry out the transactions
contemplated hereby, and as of the Closing Date all municipal
governmental proceedings required to be taken by Purchaser to
authorize the execution, delivery and performance of this
Agreement and the agreements relating hereto shall have been
properly taken and this Agreement shall constitute a valid and
binding obligation of Purchaser enforceable against it in
accordance with its terms.
6.4 Litigation. Except for the Mandamus Action and the
Condemnation Action, there is no legal action, suit, arbitration,
governmental investigation or other legal or administrative
proceeding, nor any order, decree or judgment in progress,
pending or in effect, or to the knowledge of Purchaser
threatened, against or relating to Purchaser in connection with
or relating to the transactions contemplated by this Agreement,
and Purchaser does not know or have any reason to be aware of any
basis for the same.
6.5 Finder's Fees. Neither Purchaser nor any person
acting on behalf of Purchaser is a party to any contract,
arrangement or understanding pursuant to which any third person
or entity is entitled to any brokerage commission, finder's fee
or similar compensation from any party in connection with the
execution and delivery of this Agreement or the consummation of
the transactions herein contemplated.
7. OTHER OBLIGATIONS OF THE PARTIES.
7.1 Conduct of Business. Prior to the Closing, Seller
shall conduct its business and affairs related to the Washington
Court House Business only in the ordinary course and consistent
with its prior practice and shall maintain, keep and preserve
Seller's Assets in good condition and repair and maintain
insurance thereon in accordance with present practices, and
Seller will use its best efforts (i) to preserve the Washington
Court House Business intact, (ii) to keep available to Purchaser
the services of Seller's present employees, agents and
independent contractors related to the Washington Court House
Business, (iii) to preserve for the benefit of Purchaser the
goodwill of Seller's suppliers, customers, landlords and others
having business relations with the Washington Court House
Business, (iv) to cooperate with Purchaser and use reasonable
efforts to assist Purchaser in obtaining the consent of any
landlord or other party to any lease or contract with Seller
related to the Washington Court House Business (including but not
limited to those identified on Schedule 5.11) where the consent
of such landlord or other party may be required by reason of the
transactions contemplated hereby and (v) to cooperate with
Purchaser in its efforts to obtain the financing of the purchase
price by the sale of the Bonds (as defined in Section 11.8 below)
in accordance with the provisions of Section 11.8 hereof.
Without limiting the generality of the foregoing, prior to the
Closing Seller will not without Purchaser's prior written
approval:
7.1.1 enter into any contract, agreement, commitment
or other understanding or arrangement related to or
affecting Seller's Assets or the Washington Court House
Business except for those of the type which would not have
to be listed and described under Section 5.11 above;
7.1.2 remove (or permit to be removed) any Washington
Court House Business Records from the premises of the
Washington Court House Business, or remove or destroy (or
permit to be removed or destroyed) any computer files
directly and particularly relating to the Washington Court
House Business, except as specifically agreed to in writing
by Seller; or
7.1.3 perform, take any action or incur or permit to
exist any of the acts, transactions, events or occurrences
of the type described in Section 5.7 of the Agreement which
are inconsistent with the representations and warranties set
forth therein.
At or prior to the Closing, Seller shall cause all contracts,
licenses and leases which relate to the Washington Court House
Business to which Seller is a party and which are to be assigned
to Purchaser hereunder (including the advance contracts disclosed
on the Schedules attached to this Agreement), which by their
terms will require future payments by Seller (or by Purchaser
following the assignment thereof) to a third party, to be paid in
full through the Closing Date or prorated through the Closing
Date. If Seller elects to have such payment amounts thereunder
prorated, Seller shall notify Purchaser in writing at or prior to
the Closing such that the Aggregate Purchaser Price may be
adjusted with a credit to Purchaser reflecting the amounts which
shall be owed thereunder through the Closing Date.
7.2 Changes in Information. Seller shall give Purchaser
prompt written notice of any change in any of the information
contained in the representations and warranties made in Article 5
or elsewhere in this Agreement or the Schedules referred to
herein which occurs prior to the Closing.
7.3 Consultation with Purchaser. Seller shall consult
with and follow the recommendations of Purchaser with respect to
(i) the cancellation of contracts, agreements, commitments or
other understandings or arrangements to which Seller is a party
and which relate to the Washington Court House Business,
including, without limitation, purchase orders and commitments
for capital expenditures or improvements, (ii) the discontinuance
of any Washington Court House Business operations, and (iii)
purchasing, pricing or selling policies with respect to the
Washington Court House Business; provided, however, that nothing
contained in this Section 7.3 shall require Seller to take or
fail to take any action that, in Seller's reasonable judgment, is
likely to give rise to any penalty or a claim for damages by any
third party against Seller, or is likely to result in material
losses to Seller, or is otherwise likely to prejudice in any
material respect or unduly interfere with the conduct of the
Washington Court House Business in the ordinary course consistent
with prior practice, or is likely to result in a breach by Seller
of any of its representations, warranties or covenants contained
in this Agreement (unless any such breach is first waived in
writing by Purchaser).
7.4 Certain Matters Affecting the Real Estate Assets.
7.4.1 Within thirty (30) days after the date of this
Agreement, Purchaser shall obtain and pay for (and provide a
copy to Seller upon request) from Lawyers Title Insurance
Corporation (or another nationally known title insurance
company selected by and acceptable to Purchaser) a Lender's
Title Insurance Commitment, for the benefit of the trustee
bank (the "Trustee") under the Indenture of Mortgage
securing the Bonds (as defined below), together with copies
of all documents referred to therein (the "Commitment"), for
those Real Estate Assets which Seller owns in fee as well
the OWDA Properties, and those upon which Seller has above-
ground improvements pursuant to an easement, in an aggregate
dollar amount determined appropriate by Purchaser, showing
that Seller has (or, with respect to the OWDA Properties,
upon transfer in accordance with this Agreement, Purchaser
will acquire) good and marketable title in fee simple to
each of such properties, subject to no liens or encumbrances
other than current taxes and assessments not yet due and
payable and utility easements of record which, in
Purchaser's opinion, do not materially affect the operation
of the Washington Court House Business, other than those
liens which shall be released at Closing. Seller will
cooperate with Purchaser and such title company to the
extent reasonably necessary to cause the Commitment to be
issued within such thirty (30) day period, to enable the
surveys described in Section 7.4.3 to be prepared at
Purchaser's expense, and to cause the Policy (as defined
below) to be issued by the aforesaid title insurance company
at and as of the Closing. Seller shall have no financial or
other obligations with respect to the Commitment, the Policy
and such surveys, except as set forth in this Section 7.4.
7.4.2 At the Closing Purchaser shall obtain and pay
for and deliver a Lender's Title Insurance Policy (the
"Policy") in an amount determined appropriate by Purchaser,
insuring the Trustee and such title as shown in the
Commitment with respect to the Real Estate Assets. The
Policy shall not contain a survey exception as to parcels
for which surveys are obtained by Purchaser prior to
Closing, or an exception for unfiled mechanics' liens. At
the Closing Seller shall execute and deliver to Purchaser
and the foregoing title insurance company an affidavit as to
each Real Estate Asset certifying that (i) there are no
mortgages, judgment liens or other encumbrances of record
affecting such property except as set forth in the Policy,
(ii) there are no rights of possession, use or otherwise,
outstanding in third parties by reasons of unrecorded
leases, land contracts, sale contracts, options or other
documents, and (iii) no unpaid-for improvements have been
made, or materials, machinery or fuel delivered to such
property within the sixty (60) days immediately preceding
the Closing which might form the basis for a mechanics' lien
thereon.
7.4.3 Purchaser shall obtain at its expense currently
certified "as built" surveys and legal descriptions of the
Real Estate Assets for which the Commitment is to be
obtained pursuant to Section 7.4.1, prepared by a surveyor
registered in the State of Ohio, prepared in accordance with
ALTA standards. Such surveys shall include the locations of
all improvements, encroachments, easements and rights of
way, and shall be delivered to Purchaser and the title
company at or prior to the Preclosing. Seller shall have no
obligation to pay for or otherwise obtain surveys for any
Real Estate Assets, but shall provide to Purchaser copies of
all existing surveys (if any) in its possession relating to
the Real Estate Assets.
7.4.4 The obligations of Purchaser set forth in this
Section 7.4 are for the sole benefit of Purchaser, and not
of Seller, and Purchaser may alter or waive such obligations
relating to the Commitment, the Policy or the aforesaid
surveys at or prior to the Closing if Purchaser determines
that waiving or altering its obligations to obtain the same
is appropriate.
7.5 Certain Legal Proceedings. Seller and Purchaser filed
with the Fayette County Common Pleas Court a standstill motion
which the court has granted with respect to, and prior to Closing
shall cooperate in attempting to obtain any further extensions
necessary in order to delay the need for either party to incur
any additional professional fees and other costs and expenses
after the date hereof in connection with, the Condemnation
Action. As of the Closing, Purchaser and Seller shall submit to
such court a final agreed judgment entry in substantially the
form of Exhibit 7.5 attached hereto (the "Agreed Entry")
providing for the transfer of Seller's Assets to Purchaser (in
consideration of the completion of Seller's and Purchaser's
obligations to be performed at Closing) as an "agreed take" of
Seller's Assets by Purchaser pursuant to the Condemnation Action,
and Seller shall dismiss all counter-claims thereunder with
prejudice. All court costs relating to the Condemnation Action
shall be paid by Purchaser. Seller shall provide no further
cooperation or support to the plaintiffs in the Mandamus Action
and shall use its best efforts to cause the Mandamus Action to be
dismissed with prejudice on or prior to November 1, 1993.
7.6 Transferred Employees. Immediately prior to the
Closing, Purchaser shall offer employment (conditioned upon the
occurrence of the Closing and commencing as of the Closing Date)
to all Seller's hourly employees employed in connection with the
Washington Court House Business in Fayette County, Ohio.
7.7 Certain Records. If at any time after the date hereof
but before the expiration of the period ending one (1) year after
the Closing Date, Purchaser discovers any breach of the
representations and warranties set forth in Section 5.7.12, or
the covenant set forth in Section 7.1.2 , Purchaser shall notify
Seller in writing and Seller shall immediately upon receipt
thereof provide Seller with complete and accurate backup copies
(if available) of any computer files or other Washington Court
House Business Records. If such backup copies of computer files
or other records do not exist, Seller shall immediately provide
such support and information to Purchaser from Seller's existing
files and records as may be necessary to recreate such files or
records for Purchaser, but in such case Purchaser shall agree to
reimburse Seller's reasonable costs associated with providing
such support and information.
7.8 Transition of Data Processing. Purchaser intends to
use its own data processing systems to operate the Washington
Court House Business after the Closing. Seller shall cooperate
with Purchaser to provide an orderly transition to Purchaser's
data processing system, which shall include (without limitation)
providing access to Seller's information and systems prior to
Closing and consultation to Purchaser with respect to data
processing matters both prior to the Closing and for a reasonable
period thereafter.
7.9 Best Efforts Covenant. Purchaser and Seller shall use
their respective best efforts to cause all conditions to Closing
set forth in Article 11 and Article 12 of this Agreement to be
satisfied at or prior to Closing.
8. ACCESS TO SELLER'S ASSETS, INFORMATION AND DOCUMENTS.
Upon reasonable notice and during regular business hours, Seller
will give Purchaser and Purchaser's attorneys, accountants and
other representatives full access to Seller's personnel and all
properties, documents, contracts, books and records of Seller and
will furnish Purchaser with copies of such documents (certified
by Seller's officers if so requested) and with such information
with respect to the affairs of Seller pertaining directly and
particularly to the Washington Court House Business as Purchaser
may from time to time request, and Purchaser will not improperly
disclose the same prior to the Closing. Upon reasonable notice
and during regular business hours, Purchaser may conduct or cause
to be conducted inspections of the Real Estate Assets (and all
improvements thereon) as to insect infestation, engineering,
structural, roofing, heating, plumbing, electrical, mechanical
and similar matters at Purchaser's sole expense, and reasonable
inspections of all other Seller's Assets.
9. DIRECTORS' AND SHAREHOLDERS' AUTHORIZATION. At or
prior to the Closing, Seller will deliver to Purchaser a copy of
the resolutions of the Board of Directors and sole shareholder of
Seller approving the execution and delivery of this Agreement and
the consummation of all of the transactions contemplated hereby,
duly certified by an officer of Seller.
10. BULK SALES COMPLIANCE. Purchaser hereby waives
compliance by Seller with the provisions of the Ohio Bulk Sales
Law, Chapter 1306, Ohio Revised Code.
11. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. All
obligations of Purchaser hereunder are subject, at the option of
Purchaser, to the fulfillment of each of the following conditions
at or prior to the Closing, and Seller shall use best efforts to
cause each such condition to be so fulfilled:
11.1 Representations and Warranties. All representations
and warranties of Seller contained herein or in any document
delivered pursuant hereto shall be true and correct in all
material respects when made and shall be deemed to have been made
again at and as of the Closing Date, and shall then be true and
correct in all material respects except for changes in the
ordinary course of business after the date hereof in conformity
with the covenants and agreements contained herein. Updated
disclosure schedules which are true and correct shall be
delivered by Seller to Purchaser as of the Closing Date.
11.2 Covenants. All covenants, agreements and obligations
required by the terms of this Agreement to be performed by Seller
at or before the Closing shall have been duly and properly
performed in all material respects.
11.3 No Material Adverse Change. Since the date of this
Agreement there shall not have occurred any material adverse
change in the condition of Seller's Assets or the Washington
Court House Business.
11.4 Closing Certificate. There shall be delivered to
Purchaser a certificate duly executed by the President and
Secretary of Seller, individually, dated the Closing Date,
certifying that the conditions set forth in Sections 11.1, 11.2
and 11.3 have been fulfilled.
11.5 Schedules and Other Documents. All documents,
schedules, reports and consents required to be delivered to
Purchaser at or prior to the Closing shall have been so
delivered, including the schedules referred to in Article 5 which
shall have been updated as of the Closing Date.
11.6 Opinion of Counsel. Purchaser shall have received an
opinion of Seller's counsel, Harrington, Huxley, Smith, Mitchell
& Reed, dated the Closing Date, substantially in accordance with
Exhibit 11.6 attached hereto.
11.7 Written Consents. Purchaser shall have obtained
written consents to the transfer or assignment to Purchaser of
all consignment agreements, licenses (including without
limitation the Software Licenses), leases and other material
contracts of Seller related to the Washington Court House
Business or Seller's Assets as Purchaser may deem necessary or
appropriate, where the consent of any other party to any such
contract may, in the opinion of Purchaser's counsel, be required
for such assignment or transfer.
11.8 Financing. Purchaser shall have obtained financing
for the Aggregate Purchase Price referred to in Article 2 of this
Agreement by the issue of Purchaser's Water System First Mortgage
Revenue Bonds, in an aggregate principal amount of up to
$16,500,000 (the "Bonds"), with an average coupon rate on such
bonds not to exceed six-and-one-quarter percent (6.25%) per
annum, and on such other terms and conditions satisfactory to
Purchaser.
11.9 Title Insurance. The Policy with respect to the Real
Estate Assets, insuring title and the Trustee subject to no other
exceptions, liens or encumbrances other than as permitted by
Section 7.4 hereof, shall have been issued at Purchaser's cost by
the title insurance company selected by Purchaser pursuant to the
Commitment obtained in accordance with Section 7.4.1 hereof, the
surveys contemplated by Section 7.4.3 shall have been obtained by
Purchaser in form and substance satisfactory to Purchaser, and
the affidavits required by Sections 7.4.2 shall have been
executed and delivered by Seller.
11.10 Evidence of Liens. Seller shall have delivered to
Purchaser copies of Forms UCC-11, certified by the County
Recorder, Fayette County, Ohio, and the Secretary of State of
Ohio, identifying all financing statements showing Seller as
"debtor" thereon and describing any lien or security interest
with respect to Seller's Assets which are on file with such
offices as of the business day immediately prior to the Closing
Date, as well as evidence satisfactory to Purchaser that such
liens and/or security interests shown thereon shall be released
as to Seller's Assets by the secured party upon Closing (with the
costs of obtaining such releases to be borne by Seller).
11.11 Transfer of OWDA Properties. The OWDA Properties
shall either (i) have been transferred to Seller by limited
warranty deed, such that title thereto may be transferred to
Purchaser by Seller as of the Closing, or (ii) have been
transferred by the fee owner to Purchaser as of the Closing Date,
and all representations and warranties set forth herein with
respect to the Real Estate Assets shall be true as to the OWDA
Properties as of the Closing Date.
11.12 Consent of and Release by Fayette County
Commissioners. The Board of Commissioners of Fayette County,
Ohio (the "County Commissioners") shall have consented in writing
to the assignment by Seller to Purchaser as of the Closing Date
of that certain Agreement dated November 23, 1987 between the
Board of Commissioners and Seller relating to the YUSA, Inc.
water storage tank. Such consent shall have been obtained by
Purchaser, with any costs to be borne by Purchaser. Such consent
shall include a release of Seller by the County Commissioners
from any ongoing obligations under said agreement, as well as a
release from all prospective service obligations, contractual or
otherwise, arising from agreements or arrangements between Seller
and the County Commissioners relating to the providing of water
service to residents of Fayette County, Ohio, with said releases
to be in form and substance reasonably satisfactory to Seller.
11.13 Consent to Transfer of Software Licenses and Other
Agreements. The other parties to all agreements to which Seller
is a party relating to the Washington Court House Business which
Purchaser, in its sole discretion, shall deem material, shall
have consented in writing to the transfer of such agreements by
Seller to Purchaser as of the Closing, or shall have entered into
replacement agreements or licenses with Purchaser on terms
satisfactory to Purchaser.
11.14 Dismissal of Mandamus Action. The Mandamus Action
shall have been dismissed with prejudice by all parties plaintiff
thereto, and all cross-claims and counterclaims shall have been
dismissed with prejudice by all other parties thereto, or the
Mandamus Action shall otherwise have been dismissed by the Ohio
Supreme Court with prejudice, with court costs to be paid by
plaintiffs (or by Seller).
11.15 Expiration of Notice Period. A period of at least
sixty (60) days shall have elapsed following the giving of notice
by Seller to Seller's employees associated with the Washington
Court House Business, as required by Seller's collective
bargaining agreement with employees.
12. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. All
obligations of Seller at the Closing are subject, at the option
of Seller, to the fulfillment of each of the following conditions
at or prior to the Closing, and Purchaser shall exert its best
efforts to cause each such condition to be so fulfilled:
12.1 Representations and Warranties. All representations
and warranties of Purchaser contained herein or in any document
delivered pursuant hereto shall be true and correct in all
material respects when made and as of the Closing.
12.2 Covenants. All obligations required by the terms of
this Agreement to be performed by Purchaser at or before the
Closing shall have been duly and properly performed in all
material respects.
12.3 Closing Certificate. There shall be delivered to
Seller a certificate executed by the City Manager and the Auditor
of Purchaser, dated the Closing Date, certifying that the
conditions set forth in Sections 12.1 and 12.2 have been
fulfilled.
12.4 Opinion of Counsel. Seller shall have received the
opinion of Bricker & Eckler, Purchaser's special counsel, dated
the Closing Date, substantially in accordance with Exhibit 12.4
attached hereto.
12.5 Release of County Commissioners. The County
Commissioners shall have executed documents evidencing the
consent and releases contemplated by Section 11.12, in form and
substance reasonably satisfactory to Seller.
12.6 CP Utility Agreement. Purchaser shall have entered
into (or committed to enter into) an agreement with CP Utility
Services Company, an affiliate of Seller pursuant to which CP
Utility Services Company shall provide certain inspection and
water conservation services to Purchaser in connection with the
Washington Court House Business through 1995 (minimum two years)
at a rate of $50.00 per hour, with aggregate compensation to be
not less than $16,000 per year.
12.7 PUCO Order. Purchaser shall have obtained and
delivered to Seller an order of the Public Utilities Commission
of Ohio (the "PUCO"), in form and substance reasonably
satisfactory to Seller, acknowledging that after the Closing Date
Seller shall have no further obligation to the PUCO to provide
water service to the residents of Purchaser or of Fayette County,
Ohio, and consenting to the discontinuance of such service by
Seller as of the Closing Date. Although Purchaser is willing to
include the issuance of such order as a condition to Seller's
obligations to close the transactions contemplated by this
Agreement, Seller acknowledges that Purchaser does not agree the
issuance of such order is required by Ohio law.
12.8 Expiration of Notice Period. A period of at least
sixty (60) days shall have elapsed following the giving of notice
by Seller to Seller's employees associated with the Washington
Court House Business, as required by Seller's collective
bargaining agreement with employees.
13. INDEMNIFICATION.
13.1 Indemnification by Seller. Seller hereby indemnifies
and agrees to hold Purchaser harmless from, against and in
respect of (and shall on demand reimburse Purchaser for):
13.1.1 any and all loss, liability or damage suffered
or incurred by Purchaser by reason of any untrue
representation, breach of warranty or nonfulfillment of any
covenant by Seller contained herein or in any certificate,
document or instrument delivered to Purchaser pursuant
hereto or in connection herewith;
13.1.2 any and all loss, liability or damage suffered
or incurred by Purchaser in respect of or in connection with
any liabilities of Seller not expressly assumed by Purchaser
pursuant to the terms of the Liabilities Undertaking;
13.1.3 any and all debts, liabilities or obligations
of Seller, direct or indirect, fixed, contingent or
otherwise, which exist at or as of the Closing Date or which
arise after the Closing Date but which are based upon or
arise from any act, omission, transaction, circumstance,
sale of goods or services, state of facts or other condition
which occurred or existed on or before the Closing Date,
whether or not then known, due or payable, except to the
extent expressly assumed by Purchaser pursuant to the terms
of the Liabilities Undertaking;
13.1.4 any and all loss, liability or damage suffered
or incurred by Purchaser by reason of or in connection with
any claim for finder's fee or brokerage or other commission
arising by reason of any services alleged to have been
rendered to or at the instance of Seller or the Shareholder
with respect to this Agreement or any of the transactions
contemplated hereby; and
13.1.5 any and all actions, suits, proceedings,
claims, demands, assessments, judgments, costs and expenses,
including, without limitation, legal, accounting and other
professional fees and expenses, incident to any of the
foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
13.2 Indemnification by Purchaser. Purchaser hereby
indemnifies and shall hold Seller harmless from, against and in
respect of (and shall on demand reimburse Seller for):
13.2.1 any and all loss, liability or damage
resulting from an untrue representation, breach of warranty
or non-fulfillment of any covenant or agreement by Purchaser
contained herein or in any certificate, document or
instrument delivered to Seller hereunder;
13.2.2 any and all liabilities or obligations of
Seller specifically assumed by Purchaser pursuant to this
Agreement;
13.1.3 any and all debts, liabilities or obligations
of Purchaser, direct or indirect, fixed, contingent or
otherwise, which relate to the operation of the Washington
Court House Business by Purchaser after the Closing Date,
based upon or arising from any act, omission, transaction,
circumstance, sale of goods or services, state of facts or
other condition which occurs after the Closing Date;
13.1.4 any and all loss, liability or damage suffered
or incurred by Seller by reason of or in connection with any
claim for finder's fee or brokerage or other commission
arising by reason of any services alleged to have been
rendered to or at the instance of Purchaser with respect to
this Agreement or any of the transactions contemplated
hereby; and
13.2.5 any and all actions, suits, proceedings,
claims, demands, assessments, judgments, costs and expenses,
including, without limitation, legal fees and expenses,
incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to oppose
the imposition thereof, or in enforcing this indemnity.
13.3 Certain Limitations on Claims. Any claim or cause of
action arising out of this Agreement must be instituted within
three years of the Closing Date, except for claims under the
representations and warranties set forth in Sections 5.17 hereof
(the "Excepted Claims"), as to which any claim or cause of action
must be instituted within five years of the Closing Date. The
failure to institute a claim or cause of action within such
period shall constitute an absolute bar to the institution of any
proceedings or actions based upon, and will constitute a waiver
of, all the claims and/or causes of action not so asserted.
14. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All statements, representations, warranties, indemnities,
covenants and agreements made by each party hereto shall survive
the Closing.
15. NOTICES. Any and all notices or other communications
required or permitted to be given under any of the provisions of
this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or mailed by first
class mail, return receipt requested, addressed (i) if to Seller,
to Walter J. Pishkur, President, Ohio Water Service Company, 6650
South Avenue, Boardman, Ohio 44512, with a copy to Alan D.
Wenger, Esq., Harrington, Huxley, Smith, Mitchell & Reed, Suite
1200, Mahoning Bank Building, Youngstown, Ohio 44503-1769, and
(ii) if to Purchaser, to the City of Washington, City Hall, 215
East Market Street, Washington Court House, Ohio 43160,
Attention: R. Mark Rohr, City Manager, with a copy to Richard C.
Simpson, Esq., Bricker & Eckler, 100 South Third Street,
Columbus, Ohio 43215-4291. If any party desires to change the
address at which it is to receive notice, such party may change
the address at which it is to receive notice under this Agreement
by written notice to each other party set forth herein given as
aforesaid.
16. MISCELLANEOUS.
16.1 Entire Agreement. This Agreement (including the
exhibits hereto and the schedules, annexes and other documents
delivered pursuant hereto, which are a part hereof) constitutes
the entire agreement of the parties with respect to the subject
matter hereof, and supersedes any and all prior understandings,
written or oral, among the parties, including without limitation
that certain Memorandum of Understanding between Purchaser and
Seller dated September 16, 1993. This Agreement may not be
modified, amended or terminated except by a written agreement
specifically referring to this Agreement signed by all of the
parties hereto.
16.2 Waivers. No waiver of any breach or default
hereunder shall be considered valid unless in writing and signed
by the party giving such waiver, and no such waiver shall be
deemed a waiver of any subsequent breach or default of the same
or similar nature.
16.3 Supplementing of Schedules. Seller shall have the
right to supplement the disclosure schedules attached to this
Agreement at any time prior to the Preclosing, without liability
for failing to have provided a complete disclosure schedule as of
the date hereof. If any schedule which is so updated by Seller
after the date hereof but prior to the Preclosing contains any
new information which, in Purchaser's opinion, is materially
adverse, Purchaser may terminate this Agreement without liability
as of the Preclosing by delivery of a writing to Seller referring
to this Section.
16.4 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of each corporate party
hereto, its successors and assigns.
16.5 Headings. The paragraph headings contained herein
are for the purposes of convenience only and are not intended to
define or limit the contents of said paragraphs.
16.6 Further Actions. Each party hereto shall cooperate,
shall take such further action and shall execute and deliver such
further documents as may be reasonably requested by any other
party in order to carry out the provisions and purposes of this
Agreement.
16.7 Transfer Taxes. Notwithstanding any other provision
hereof to the contrary, Purchaser will pay any sales, transfer
and documentary taxes payable in connection with the sale,
conveyance, assignments and transfers to be made to Purchaser
hereunder.
16.8 Counterparts. This Agreement may be executed in one
or more counterparts, all of which taken together shall be deemed
one original.
16.9 Governing Law. This Agreement and all amendments
hereto shall be governed by and construed in accordance with the
laws of the State of Ohio applicable to contracts made and to be
performed therein.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed as of the day and year first above written.
OHIO WATER SERVICE COMPANY
By /s/ Walter J. Pishkur
------------------------
ATTEST: President
/s/ Stanley M. Massarelli
- ----------------------------
Secretary
THE CITY OF WASHINGTON
By /s/ R. Mark Rohr
-------------------------
ATTEST: City Manager
/s/ Tom L. Riley
- ----------------------------
Clerk of Council
APPROVED:
/s/ Robert Hammond
____________________________
City Law Director
<PAGE>
CERTIFICATE OF AVAILABLE FUNDS
The undersigned fiscal officer of the City of Washington, Ohio
hereby certifies that the moneys required to meet the obligations
of the City under the aforesaid Agreement of Purchase and Sale of
Assets have been lawfully appropriated by the Council of the City
for such purpose and are in the treasury of the city or in the
process of collection to the credit of an appropriate fund, free
from any previous encumbrances. This certificate is given in
compliance with Sections 5705.41 and 5705.44, Ohio Revised Code.
/s/ Tom L. Riley
______________________________
Tom L. Riley
City Auditor/City Clerk
As amended March 2, 1994
The following documents will be furnished upon request.
Index to Documents
Closing Statement
Bill of Sale (with Exhibit A)
Liabilities Undertaking (with Annex A)
Closing Escrow Letters
Limited Warranty Deed of OWDA to Seller
Limited Warranty Deed of Seller to Purchaser
Seller's Affidavit Concerning Real Estate Assets
Entity certification of Seller regarding non-foreign status
Agreement for Assignment of Assignor's Rights Under Easements
Title Commitment of Title Agency and Title Policy Issued by Title Agency
UCC-1 Financing Statements (Bond Trustee/Purchaser's Bonds)
UCC Partial Release Statements (Indenture Trustee & Mahoning Bank)
UCC Termination Statements
Releases of Part of Premises from Lien of Mortgage (Indenture Trustee and
Mahoning Bank)
Transfer Applications for FCC License (Seller and Purchaser)
Transfer Application for NPDES permit (Ohio EPA)
Assignments of License Agreements (eight licenses), and consents of Grand
Trunk and CSX
Waiver and Revision Agreement
Side letter regarding FCC License and Chrysler Capital Corp. lien
CP Utility Letter Agreement
Certified copies of Seller's Articles of Incorporation and Code of
Regulations
Seller's good standing certificate
Certified Resolutions of Seller's shareholder and Board of Directors
authorizing Agreement for Purchase and Sale of Assets
Certified Ordinance of Purchaser authorizing Agreement for Purchase and
Sale of Assets
Motor Vehicels Titles (10)
Seller's Closing Certificate
Purchaser's Closing Certificate
Opinion Letter of Seller's Legal Counsel, Harrington, Huxley, Smith,
Mitchell & Reed
Opinion Letter of Purchaser's Legal Counsel, Bricker & Ecklerr
Opinion Certificate Provided to Bricker & Eckler by Purchaser
Copy of Public Utilities Commission Order
Copy of Resolution of County Commissioners
Dismissal Entry of Condemnation Action
Dismissal Entry of Mandamus Action
Exhibit 3.2
BYLAWS
OF
CONSUMERS WATER COMPANY
ARTICLE I. Name.
The name of the Company shall be Consumers Water Company.
ARTICLE II. Shareholders' Meetings.
All meetings of the shareholders shall be held at the
principal office of the Company in Portland, Maine, or at such
other place as is stated in the notice, except that a special
meeting of shareholders called by the holder or holders of less
than 50% of the shares entitled to vote shall be held in
Portland, Maine.
ARTICLE III. Annual Meeting.
The Annual Meeting of the Shareholders of the Company shall
be held on the first Wednesday of May in each year, if not a
legal holiday, and if a legal holiday, then on the first business
day thereafter. In the event that such annual meeting is omitted
by oversight, or otherwise, on the date herein provided for, a
substitute annual meeting may be held in place thereof, and any
business transacted or elections held at such meeting shall be as
valid as if transacted or held at the annual meeting. Such
substitute annual meeting shall be called in the same manner as
prescribed for special shareholders' meeting.
ARTICLE IV. Special Meetings.
Special meetings of the shareholders of the Company shall be
held whenever called by the Chairman of the Board, the President,
or a majority of the Board of Directors, or whenever the holder
or holders of ten percent of the shares entitled to vote, issued
and outstanding shall make application therefor to the Clerk,
stating the time, place and purposes of the meeting applied for.
ARTICLE V. Notice of Shareholders' Meetings.
Notice of all annual shareholders' meetings, stating the
time and place, shall be given by the Clerk by mail to each
shareholder of record, entitled to vote, at his or her registered
address not less than ten (10) nor more than sixty (60) days
prior to the date of the meeting, and the person giving such
notice shall make affidavit in relation thereto.
Notice of all special shareholders' meetings, stating the
time and place, and the purposes for which such meetings are
called, shall be given by the Clerk by mail to each shareholder
of record, entitled to vote, at his or her registered address not
less than ten (10) nor more than sixty (60) days prior to the
date of the meeting, and the person giving such notice shall make
affidavit in relation thereto.
ARTICLE VI. Quorum, Proxy and Voting.
At any meeting of the shareholders a majority of the shares,
entitled to vote, issued and outstanding, represented by
shareholders of record, in person or by proxy, shall constitute a
quorum, but a less number may adjourn any meeting from time to
time, and the meeting may be held as adjourned with such notice
as is required by law. When a quorum is present at any meeting,
a majority of the shares, entitled to vote, represented thereat
shall decide any question brought before such meeting, except
that, in the election of directors, those candidates receiving
the greatest number of votes cast, though not a majority, shall
be deemed elected.
Shareholders of record, entitled to vote, may vote at any
meeting either in person or by proxy in writing which shall be
filed with the Clerk of the meeting before being voted. Except
as otherwise provided herein or by law, each shareholder present
in person or by proxy at a meeting of the shareholders shall be
entitled to one vote for each share of the Company registered in
the name of such shareholder on the books of the Company and
entitled to vote at such meeting.
ARTICLE VII. Board of Directors.
A Board of not less than five nor more than seventeen
Directors shall be chosen from the holders of any class of shares
of the Company at the annual meeting of the shareholders.
Vacancies occurring between annual meetings, whether by reason of
an increase in the number of Directors or otherwise, may be
filled by resolution of the Board of Directors. The number of
Directors shall be fixed from time to time by a vote of the
shareholders at an annual or a special meeting or by resolution
of the Directors. No decrease in the number of Directors shall
have the effect of shortening the term of any incumbent Director.
Each Director shall hold office until the next annual meeting of
shareholders and until his successor is elected and qualified,
but any Director ceasing to be the holder of at least one share
of the Company shall be deemed to have vacated his office as a
Director.
ARTICLE VIII. Powers of Directors.
The Board of Directors shall have the entire management of
the business of the Company. In the management and control of
the property, business and affairs of the Company, the Board of
Directors is hereby vested with all the powers possessed by the
Company itself, so far as this delegation of authority is not
inconsistent with the laws of the State of Maine, with the
Articles of Incorporation or with these bylaws.
ARTICLE IX. Meetings of Directors.
Regular meetings of the Board of Directors shall be held in
such place within or without the State of Maine and at such times
as the Board may by vote from time to time determine, and if so
determined no notice thereof need be given. Special meetings of
the Board of Directors may be held at any time or place, whenever
called by the Chairman of the Board, the President or two or more
Directors, upon not less than 72 hours' notice thereof being
given by the Officer or Directors calling the meeting to each
Director, or at any time without formal notice, provided all the
Directors are present or those not present sign a waiver of
notice, either before or after the meeting. Such special
meetings shall be held at such times and places within or without
the State of Maine as the notice thereof or waiver shall specify.
ARTICLE X. Quorum of Directors.
A majority of the Board of Directors then in office shall
constitute a quorum for the transaction of business, but a less
number may adjourn any meeting from time to time, and the same
may be held as adjourned without further notice. When a quorum
is present at any meeting, a majority of the members present
thereat shall decide any question brought before such meeting.
ARTICLE XI. Unanimous Action.
Unless otherwise provided by the Articles of Incorporation
or bylaws, any action required to be taken at a meeting of the
Directors of the Company, or any action which may be taken at a
meeting of the Directors or of a committee of the Directors, may
be taken without a meeting if all of the Directors, or all of the
members of the committee as the case may be, sign written
consents setting forth the action taken or to be taken, at any
time before or after the intended effective date of such action.
Such consents shall be filed with the minutes of directors'
meetings or committee meetings, as the case may be, and shall
have the same effect as a unanimous vote.
<PAGE>
ARTICLE XII. Committees.
The Board of Directors may, by resolution or resolutions,
adopted by a majority of the whole Board, designate one or more
committees, each committee to consist of two or more of the
Directors of the Company, which shall have and may exercise such
of the powers of the Board of Directors in the management of the
business and affairs of the Company as it may deem advisable but
only to the extent provided in said resolution or resolutions or
in these bylaws and permitted by law, and, if so provided in such
resolution or resolutions, may have power to authorize the seal
of the Company to be affixed to all papers which may require it.
Such committee or committees shall have such name or names as may
be stated in these bylaws or as may be determined from time to
time by resolution adopted by the Board of Directors.
The committees shall keep regular minutes of their
proceedings and report the same to the Board when required.
ARTICLE XIII. Compensation of Directors and Others.
Directors may be paid as compensation for their services a
periodic fee or retainer, or a fixed fee for attendance at each
regular or special meeting of the Board, or both, and may be paid
their expenses, if any, of attendance at Board meetings, as the
Board may from time to time determine. Nothing herein contained
shall be construed to preclude any Director from serving this
Company in any other capacity and receiving compensation for such
services. Members of special or standing committees may be
allowed compensation for attending committee meetings and their
reasonable expenses, if any, of attendance, as the Board from
time to time may determine. In addition, the Board may from time
to time fix the compensation of Directors for services which are
not covered by the foregoing.
ARTICLE XIV. Indemnification of Directors, Officers
and Employees.
(a) To the maximum extent permitted by law, the Company
shall hold harmless and indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact
that he is or was a Director or executive officer of the Company,
or is or was a Director, officer, trustee, partner, fiduciary,
employee or agent of any other corporation, partnership, joint
venture, trust, pension or other employee benefit plan or other
enterprise which such Director or executive officer serves or
served as such at the request of the Company against any and all
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding; provided,
however, that no indemnification shall be provided for any person
with respect to any matter as to which he shall have been finally
adjudicated (i) not to have acted honestly or in the reasonable
belief that his action was in or not opposed to the best
interests of the Company or its shareholders or, in the case of a
person serving as a fiduciary of any employee benefit plan or
trust, in or not opposed to the best interests of such plan or
trust or its participants or beneficiaries; or (ii) with respect
to any criminal action or proceeding, to have had reasonable
cause to believe that his conduct was unlawful. The termination
of any action, suit or proceeding, by judgment, order or
conviction adverse to such person, or by settlement or plea of
nolo contendere, or its equivalent, shall not of itself create a
presumption that such person did not meet the standards of
conduct set forth in the above proviso of this paragraph (a).
(b) For the purposes of this Article XIV, "executive
officer" shall mean any of the President or any Vice President of
the Company.
(c) Notwithstanding any provision of paragraph (a) hereof
to the contrary, the Company shall not indemnify or hold harmless
any person with respect to any claim, issue or matter asserted by
or in the right of the Company as to which such person is finally
adjudicated to be liable to the Company unless the court in which
the action, suit or proceeding was brought shall determine that,
in view of all the circumstances of the case, such person is
fairly and reasonably entitled to be indemnified or held harmless
for such amounts as the court shall deem reasonable.
(d) Expenses incurred with respect to any action, suit or
proceeding of the character described in paragraph (a) of this
Article XIV shall be paid by the Company in advance of the final
disposition thereof upon receipt of a written affirmation by or
on behalf of the Director or executive officer that he has met
the standard of conduct necessary for indemnification under
paragraph (a) above together with a written commitment by or on
behalf of such Director or executive officer to repay such amount
if it shall ultimately be determined that he is not entitled to
indemnification under this Article XIV.
(e) The rights of indemnification and entitlement to
advances of expenses provided in this Article XIV shall not be
deemed exclusive of any other rights to which a Director or
executive officer of the Company may otherwise be entitled by
contract, vote of shareholders or disinterested Directors or
otherwise; and in the event of such person's death, such rights
shall continue and extend to his heirs, executors and
administrators. The foregoing rights shall be available whether
or not such person continues to be a Director or executive
officer at the time of incurring or becoming subject to such
liability and expenses, and whether or not the claim asserted
against him is based on matters which antedate the adoption of
this Article XIV.
(f) The Company may purchase and maintain insurance on
behalf of any person who is or was a Director, officer, employee
or agent of the Company, or is or was serving at the request of
the Company as a Director, officer, trustee, partner, fiduciary,
employee or agent of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan or other
enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his
status as such, whether or not the Company would have the power
to indemnify him against such liability under Section 719 of the
Maine Business Corporation Act, as currently in effect or as
hereafter amended or any successor to such statutory provision.
(g) If any word, clause or provision of this Article XIV or
any award made hereunder shall for any reason be determined to be
invalid, the other provisions hereof shall not otherwise be
affected thereby but shall remain in full force and effect.
ARTICLE XV. Officers.
At its first meeting held after each annual meeting of the
Shareholders, the Board of Directors shall elect, as the officers
of the Company, to serve until their successors are elected and
qualify, a Chairman of the Board and Vice-Chairman of the Board
(when deemed appropriate by the Board of Directors), a President,
a Secretary, a Treasurer and a Clerk, and may elect or appoint
one or more Vice Presidents, with or without designated areas of
responsibility (one or more of whom may be designated Executive
Vice Presidents or Senior Vice Presidents by the Board), such
Assistant Treasurers, Assistant Secretaries and other officers or
agents as it deems advisable, and may specify the powers and
duties thereof in addition to the powers and duties required by
these bylaws or permitted by law. If any such officers or agents
are not elected or appointed at such first meeting, they may be
elected or appointed, if desired, at any subsequent meeting of
the Board of Directors.
ARTICLE XVI. Eligibility of Officers.
The Chairman of the Board, Vice-Chairman of the Board, and
the President shall be shareholders and Directors of the Company.
The other officers of the Company, whether elected or appointed,
may be, but need not be, shareholders or Directors of the
Company. The Clerk shall be a resident of the State of Maine.
Except as otherwise provided by law, two or more offices may be
held by the same officer.
ARTICLE XVII. Chairman of the Board, Vice-Chairman of the
Board, and President.
(a) Chairman of the Board. If specifically designated by
the Board of Directors, the Chairman of the Board shall be the
chief executive officer of the Company and shall have the general
and active management of the business of the Company and general
and
active supervision and direction over the other officers, agents
and employees, and shall see that their duties are properly
performed. He shall, if present, preside at each meeting of the
shareholders and of the Board of Directors of the Company. He
shall perform all the duties incident to the office of Chairman
of the Board and chief executive officer, and such other duties
as may be assigned to him by the Board from time to time. If a
Chairman of the Board has not been elected, or if elected, has
not specifically been designated chief executive officer, then
the President shall be the chief executive officer and shall
have, in addition to his other duties and responsibilities, the
duties and responsibilities established pursuant to this
paragraph.
Notwithstanding the foregoing paragraph, the Chairman of the
Board shall preside at all meetings of the shareholders and Board
of Directors when present, or shall delegate to the President the
duty of presiding at all or some of such meetings.
(b) Vice-Chairman of the Board. In the absence or
disability of the Chairman of the Board, Article XVIII
notwithstanding, the Vice-Chairman of the Board shall chair
meetings of the Board of Directors, unless that duty has been
delegated to the President or unless otherwise determined by vote
of the Board, and shall perform such other duties and have such
other powers as the Board of Directors shall, from time to time,
designate.
(c) President. Unless the Chairman of the Board has been
so designated, the President shall be chief executive officer of
the Company. Unless otherwise delegated, the President shall
also be the chief operating officer of the Company and shall have
the general management of the business of the Company, subject to
the direction of the chief executive officer and the control of
the Board of Directors. He shall also perform such other duties
and have such other powers as are commonly incident to his office
and as the Board of Directors may designate from time to time.
In the absence or disability of the Chairman of the Board or
Vice-Chairman of the Board, the President may act in their stead.
ARTICLE XVIII. Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents.
Unless otherwise provided by vote of the Board of Directors,
the most senior Executive Vice President present shall, in the
absence or disability of the Chairman of the Board and the
President, or in the absence or disability of the Chairman of the
Board, the President and any Executive Vice President, the most
senior Senior Vice President present shall, exercise the powers
and perform the duties of the Chairman of the Board and the
President. In the absence or disability of all of the above
named officers, the most senior Vice President present shall
exercise the powers and perform the duties of the Chairman of the
Board and the President. The Executive Vice Presidents, the
Senior Vice President and the Vice Presidents shall perform such
other duties and have such other powers as the Board of Directors
shall, from time to time, designate.
ARTICLE XIX. Treasurer and Assistant Treasurers.
The Treasurer shall have the care and custody of the money,
funds, valuable papers, and documents of the Company and shall
have and exercise under the supervision of the Board of
Directors, all the powers and duties commonly incident to his
office. He shall deposit all funds of the Company in such bank
or banks, trust company or trust companies, or with such firm or
firms doing a banking business as the Directors shall designate.
He may endorse for deposit or collection all notes, checks, et
cetera, payable to the Company or its order and may accept drafts
on behalf of the Company. He shall keep accurate books of
account of the Company's transactions, which shall be the
property of the Company, and together with all its property in
his possession, shall be subject at all times to the inspection
and control of the Board of Directors. All checks, drafts, notes
or other obligations for the payment of money shall be signed by
such officer or officers of the Company as the Directors shall
from time to time by resolution direct.
The Assistant Treasurers shall perform such duties and have
such powers as the Board of Directors shall from time to time
designate.
ARTICLE XX. Secretary.
The Secretary shall keep accurate minutes of all meetings of
the Board of Directors and shall perform such other duties and
have such other powers as are required or permitted by law and as
the Board of Directors shall from time to time designate. In his
absence an Assistant Secretary or a Secretary pro tempore shall
perform his duties and the Assistant Secretaries shall have such
other powers and duties as the Board of Directors shall from time
to time designate.
ARTICLE XXI. Clerk.
The Clerk of the Company shall be present at all meetings of
the shareholders and shall keep accurate records of the
proceedings of such meetings in books provided for that purpose,
which books shall be open at all reasonable times to the
inspection of any shareholder and shall perform such other duties
and have such other powers as are required or permitted by law or
as the Board of Directors shall from time to time designate.
ARTICLE XXII. Removals.
The shareholders may at any meeting called for the purpose,
by vote of a majority of the shares, entitled to vote, issued and
outstanding, remove from office any Director or officer elected
by the shareholders or by the Board of Directors, and elect his
successor. The Board of Directors may, by vote of not less than
a majority of the entire Board, remove from office any officer or
agent or member of a committee elected or appointed by it.
ARTICLE XXIII. Vacancies.
If the office of any Director or officer or agent, one or
more, becomes vacant by reason of death, resignation, removal,
disqualification, or otherwise, and the vacancy, if in the office
of a Director, shall not have been filled by the shareholders,
the remaining Directors, though less than a quorum, may, by a
majority vote, choose a successor or successors who shall hold
office for the unexpired term. Vacancies in the Board of
Directors may also be filled for the unexpired term by the
shareholders, entitled to vote, at a meeting called for that
purpose.
ARTICLE XXIV. Share Certificates.
Every shareholder shall be entitled to a certificate or
certificates of the shares of the Company in such form as the
Board of Directors may from time to time prescribe and signed by
the President or a Vice President and by the Treasurer or an
Assistant Treasurer of the Company, and shall have the Company
seal or a facsimile thereof affixed thereto.
The Board of Directors may also appoint one or more Transfer
Agents or Transfer Clerks and/or Registrars for its shares of any
class and may require share certificates to be countersigned
and/or registered by one or more such Transfer Agents or Transfer
Clerks and/or Registrars. If certificates of shares of the
Company are signed by a Transfer Agent or Transfer Clerk or
Registrar, the signature of any officer thereon may be a
facsimile, engraved or printed. In case any officer who has
signed, or whose facsimile signature has been placed upon any
share certificate, shall have ceased to be such officer because
of death, resignation or otherwise, before the certificate is
issued, it may be issued by the Company with the same effect as
if the officer had not ceased to be such at the time of its
issue.
ARTICLE XXV. Transfers of Shares.
Shares of the Company may be transferred only by delivery of
the certificate endorsed, either in blank or to a specified
person, by the person appearing by the certificate to be the
owner of the shares represented thereby, or by delivery of the
certificate and a separate document containing a written
assignment of the certificate or a power of attorney to sell,
assign, or transfer the same or the shares represented thereby
signed by the person appearing by the certificate to be the owner
of the shares represented thereby. Such assignment or power of
attorney may be either in blank or to a specified person. No
transfer shall be construed to forbid the Company to recognize
the exclusive right of a person registered upon its books as the
owner of shares to receive dividends and to vote as such owner,
until such transfer is recorded on the books of the Company or a
new certificate is issued to the person to whom it has been so
transferred.
ARTICLE XXVI. Record Date.
(a) For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of a dividend
or other distribution, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors
may fix in advance a record date for any such determination of
shareholders. Such date shall not be more than sixty (60) days
and, in the case of a meeting of shareholders not less than ten
(10) full days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken.
(b) If no record date is fixed for determination of
shareholders entitled to notice of or to vote at a meeting of
shareholders or shareholders entitled to receive payment of a
dividend or other distribution, the day next preceding the date
on which notice of the meeting is mailed, or the day next
preceding the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be
shall be the record date for determination of shareholders.
(c) The Directors may, in lieu of fixing a record date as
provided in paragraph (a), close the stock transfer books for a
stated period. Such period shall not in any case exceed sixty
(60) days and, in case of a meeting of shareholders the books
shall be closed not less than ten (10) full days immediately
preceding the date of such meeting.
(d) When a meeting of the shareholders is adjourned for
less than 30 days, the determination of shareholders entitled to
vote at the original meeting, made as provided in this Article,
shall apply to the adjourned meeting unless the Directors fix a
new record date for such adjourned meeting to be given as for an
original meeting. When a meeting of the shareholders is
adjourned for 30 days or more, a new record date shall be fixed
for the adjourned meeting in accordance with paragraph (a).
ARTICLE XXVII. Loss of Certificate.
In case of the loss, mutilation or destruction of a
share certificate, a duplicate certificate may be issued upon
such terms as the Directors may prescribe.
ARTICLE XXVIII. Seal.
The Seal of the Company shall consist of a flat-faced
circular die, with the words, "CONSUMERS WATER COMPANY - MAINE -
CORPORATE SEAL 1926" cut or engraved thereon and such other words
or devices, if any, as the Directors may order.
<PAGE>
ARTICLE XXIX. Amendments.
Except as otherwise required by law, these bylaws may be
amended, added to or repealed at any annual or special meeting of
the shareholders entitled to vote by vote of a majority of the
shares issued and outstanding and entitled to vote provided that
notice of the proposed amendment, addition or repeal is given in
the notice of said meeting. Except for an amendment, addition or
repeal which is required by law to be made by shareholders, these
bylaws may be amended, added to or repealed at any regular or
special meeting of the Board of Directors by vote of a majority
of the Board of Directors provided that notice of the proposed
amendment, addition or repeal is given in the notice of said
meeting.
Exhibit 10.2
CONSUMERS WATER COMPANY
1988 INCENTIVE STOCK OPTION PLAN
1. PURPOSE OF PLAN. The general purpose of this 1988
Incentive Stock Option Plan (the "Plan") is to authorize the
grant to eligible employees of Consumers Water Company (the
"Company") or any present or future subsidiary thereof as
hereinafter defined of options to purchase the Company's common
shares and thus benefit the Company by giving such employees a
greater personal interest in the success of the enterprise and an
added incentive to continue to advance their employment.
2. SHARES AVAILABLE FOR OPTIONS. Subject to the
provisions of Section 11 hereof, the maximum number of shares
which will be the subject of options granted under the Plan will
not exceed 150,000 common shares, par value $1.00 per share, of
the Company. If options granted under the Plan shall expire or
terminate without being wholly exercised, new options may be
granted under the Plan covering the number of shares to which
such termination or expiration relates. The shares to be offered
under the Plan will be common shares of the Company which are
authorized but unissued, or common shares of the Company
heretofore or hereafter reacquired by the Company.
3. ADMINISTRATION. The Plan shall be administered by a
Compensation Committee (the "Committee"), to consist of at least
three persons to be appointed by the Board of Directors of the
Company (the "Board") from the members of the Board who are not
eligible to participate in the Plan. The Company shall grant
options under the Plan, in accordance with determinations made by
the Committee pursuant to the provisions of the Plan, by
execution of instruments in writing in form approved by the
Committee. The Committee is authorized, subject to the
provisions of the Plan and any orders or votes issued or adopted
by the Board, from time to time, to interpret the Plan and to
establish such rules and regulations as it deems necessary for
the proper administration of the Plan, and to make such
determinations and to take such action in connection therewith as
it deems necessary or advisable. All determinations by the
Committee shall be made by the affirmative vote of a majority of
its members, but any determination reduced to writing and signed
by a majority of the members shall be fully as effective as if it
had been made by a majority vote at a meeting duly called and
held.
4. ELIGIBILITY. Options shall be granted only to
employees who, in the judgment of the Committee, are regular,
full-time salaried officers or other key management and
administrative employees of the Company or its present or future
subsidiaries, who are under 65 years of age, and who, at the time
of the grant, are employees of the Company or any subsidiary.
Members of the Board of Directors of the Company who are not
employed as regular, full-time salaried officers or employees of
the Company or any subsidiary may not participate in the Plan.
The term "subsidiary" as used in the Plan shall mean any
corporation in which the Company owns, directly or indirectly,
shares possessing 50% or more of the total combined voting power
of all classes of stock.
Subject to the provisions of Section 11 hereof, the
aggregate number of shares as to which an option or options may
be granted hereunder to any one individual shall not exceed
15,000 common shares; provided, however, that in the event any
shares covered by any option granted to any employee under the
Plan remain unpurchased upon expiration of the time permitted for
exercise of the option, then the number of such unpurchased
shares shall not be counted in the computation of the maximum
15,000 shares as to which such employee may be granted an option
or options.
The aggregate fair market value (determined at the time an
option is granted) of the stock with respect to which options
granted after December 31, 1986 are exercisable for the first
time by any employee during any calendar year (under all such
plans of his employer corporation and its parent and subsidiary
corporations) shall not exceed $100,000. No option shall be
granted to any employee who owns, at the time the grant would
otherwise be made, directly or indirectly, more than 10 percent
of the total combined voting power of all classes of stock of the
Company or any subsidiary.
Subject to the limitations of the Plan, the Committee shall
select the employees to be granted options, determine the number
of shares subject to each option, the option price and the times
when each option shall be granted. More than one option may be
granted to the same employee.
No options shall be granted under the Plan after June 30,
1993.
5. OPTION PRICES. The purchase price of the common shares
under each option will be determined by the Committee but will
not be less than the fair market value of the common shares on
the date of granting the option, as determined by the Committee
in accordance with the relevant provisions of the Internal
Revenue Code of 1986, as amended (the "Code") and the regulations
promulgated pursuant thereto and from time to time in effect. In
no event shall the purchase price be less than the par value of
the common shares.
6. EXERCISE OF OPTIONS. Except as provided in Sections 9
and 10 hereof, an option granted under the Plan shall become
exercisable in installments as follows: to the extent of not
more than 50% of the number of shares originally covered thereby
within the first year of the term of the option; and to the
extent of not more than an additional 25% within each of the
second and third years of the term of the option; and such
installments shall be cumulative. Within such limits an option
may be exercised, at any time or from time to time during the
term of the option, as to any or all shares which have become
purchasable under the provisions of the option. The term of each
option shall be five years from the date of granting thereof.
Except as provided in Sections 9 and 10 hereof, no option may be
exercised at any time unless the holder thereof has been
continuously an employee, within the meaning of the Code, of the
Company or any of its subsidiaries from the date of granting of
the option until the day three months before the exercise
thereof, except that in the case of any employee who is disabled
(within the meaning of Section 22(e)(3) of the Code) the three-
month period shall be one year. The holder of an option shall
not have any of the rights of a shareholder with respect to the
shares subject to option until such shares shall be issued to him
upon the due exercise of his option. Options shall be exercised
by notice to the corporation in writing in the manner prescribed
by the Committee.
7. PAYMENT FOR SHARES AND INVESTMENT REPRESENTATIONS.
Shares shall be issued upon exercise of an option only upon
payment in full, in cash, of the option price and, if the shares
reserved for issue upon the exercise of any options granted under
the Plan are not registered under the Securities Act of 1933, as
amended, only upon the agreement by the optionee that he is
purchasing the shares for investment only and not with a view to
distribution or resale thereof, and that he will not sell any of
such shares in violation of any laws, rules or regulations
governing resales of restricted securities.
8. NON-TRANSFERABILITY OF OPTIONS. No option granted
under the Plan shall be transferable otherwise than by will or
the laws of descent and distribution, and an option may be
exercised, during the lifetime of the holder thereof, only by
him.
9. DEATH OF AN EMPLOYEE. If any employee to whom an
option has been granted under the Plan, who has been continuously
an employee, within the meaning of the Code, of the Company or
any of its subsidiaries since the date of granting thereof, shall
die while he is employed by the Company or a subsidiary, such
option may be exercised to the extent provided in this Section 9
by his executor or administrator or any other person at the time
entitled by law to such employee's rights under the option, at
anytime within a period of one year after his death, provided
that in no event shall an option be exercised more than five
years after the date of granting thereof. Such option may be
exercised with respect to the number of shares, if any, which the
employee could have purchased upon exercise thereof if he had
exercised the option on the date of his death, plus an additional
25% of the number of shares originally covered thereby if such
option has not become fully exercisable by the date of the
employee's death.
10. TERMINATION OF EMPLOYMENT. In the event that the
employment of any employee to whom an option has been granted
under the Plan shall be terminated by reason of retirement prior
to age 65 or for any other reason (except by reason of death or
retirement at or after age 65 under a pension plan of the Company
or a subsidiary), such option may be exercised at any time within
three months after such termination with respect to the number of
shares, if any, which the employee could have purchased upon
exercise thereof if he had exercised the option on the date of
termination of his employment, or, in the event of the death of
the employee after such termination and within such three month
period, such option may be exercised at any time within a period
of one year after his death by his executor, administrator or any
other person at the time entitled by law to such employee's
rights under such option, with respect to the same number of
shares as hereinabove in this paragraph of Section 10 provided;
except that in no event shall an option be exercised more than
five years after the date of granting thereof.
Any optionee retiring at or after age 65 under any pension
plan of the Company or a subsidiary may exercise, within three
months after such retirement, his options with respect to all
shares then subject to such options, his right to exercise not
being limited by the installments referred to in Section 6, or in
the event of death of the employee after such retirement and
within such three month period, such option may be exercised at
any time within a period of one year after his death by his
personal representative, executor, administrator or any other
person at the time entitled by law to such employee's rights
under such option, with respect to the same number of shares as
hereinabove in this paragraph of Section 10 provided; except that
in no event shall an option be exercised more than five years
after the date of granting thereof.
The options may contain such provisions as the Committee
shall approve with respect to the effect of approved leaves of
absence. Nothing in the Plan or in any option granted pursuant
to the Plan shall confer upon any employee any right to continue
in the employ of the Company or of any subsidiary or interfere in
any way with the right of the Company or any subsidiary to
terminate his employment at any time.
An optionee who enters the Armed Forces of the United States
or who, with the approval of the Board of Directors, temporarily
enters the service of the United States Government in a civilian
capacity, shall not be deemed thereby to have ceased to be
employed by the Company or a subsidiary, as the case may be,
provided that if he shall fail to return to active employment by
the Company or some subsidiary of the Company within ninety days
after his separation from the Armed Forces or from such civilian
Government service, his option shall terminate at the expiration
of said ninety day period if it has not theretofore terminated.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the
event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, rights
offering, or any other change in the corporate structure or
shares of the Company that becomes effective after the approval
of the Plan by the holders of the Company's voting shares, the
Committee may make such adjustments as it may deem appropriate in
the number and class of shares which may be the subject of
options under the Plan, in the maximum number and class of shares
for which options may be granted to any one employee and in the
number, class and prices of shares subject to outstanding
options.
12. AMENDMENT AND TERMINATION OF THE PLAN. The Board of
Directors shall have the power to terminate the Plan or to make
such modifications or amendments thereof as it shall deem
advisable; provided, however, that the Board of Directors may
not, without further approval by the holders of a majority of the
outstanding shares of the Company having general voting power,
(a) increase the maximum number of shares for which options may
be granted under the Plan either in the aggregate or to any
individual employee (except adjustments by the Committee as
hereinabove in Section 11 provided), (b) change the manner of
determining the minimum option prices, other than to change
prospectively the manner of determining the fair market value of
the common shares, as set forth in Section 5 above, to conform to
any practice or procedure meeting the requirements of the then
applicable provisions of the Internal Revenue Code or regulations
or rulings thereunder, (c) change the period during which options
may be exercised, or (d) change the class of employees eligible
to receive options. No termination, modification or amendment of
the Plan may, without the consent of the employee to whom any
option shall theretofore have been granted, adversely affect the
rights of such employee under such option.
13. SHAREHOLDER APPROVAL. The Plan shall not become
effective unless approved by the holders of a majority of the
issued and outstanding voting shares of the Company.
14. MISCELLANEOUS. The Board of Directors may, in its
discretion, require as conditions to the exercise of any options
granted under the Plan that (a) the common shares reserved for
issue upon the exercise of options granted under the Plan shall
have been duly listed, upon official notice of issuance, upon any
national securities exchange, or (b) a Registration Statement
under the Securities Act of 1933, as amended, with respect to
such shares shall have become effective.
Exhibit 11
Statement of Computation of Per Share Earnings
(Amounts in Thousands
except per share data) 1993 1992 1991
PRIMARY
Weighted average number of
shares outstanding 7,314 7,003 6,428
Net effect of dilutive common
stock equivalents 6 4 1
--------------------------------------
Weighted average primary shares 7,320 7,007 6,429
======================================
Net income (loss) $5,919 $8,022 $11,218
Preferred dividends ( 56) ( 57) ( 57)
--------------------------------------
Earnings applicable to common
shares $5,863 $7,965 $11,161
======================================
Primary earnings (loss) per
common share $0.80 $1.14 $1.74
======================================
FULLY DILUTED
Weighted average number of
shares outstanding 7,321 7,003 6,428
Net effect of dilutive common
stock equivalents 6 5 1
Weighted average fully diluted --------------------------------------
shares 7,327 7,008 6,429
======================================
Earnings (loss) applicable to
common shares $5,863 $7,965 $11,161
--------------------------------------
Fully diluted earnings (loss)
per common share $0.80 $1.14 $1.74
======================================
Exhibit 22
Subsidiaries of Registrant
December 31, 1993
Percentage
Voting
State in Which Year Acquired Securities
Name of Subsidiary Incorporated or Formed Owned
Burlington Homes of New England, Maine 1983 100.00%
Inc. (and its wholly-owned
subsidiary Burlington International,
Inc.)
Camden & Rockland Water Company Maine 1959 97.0%
Consumers Illinois Water Company Illinois 1926 100.0%
C/P Utility Services Company, Inc. Maine 1984 100.0%
(and its wholly owned subsidiary
EnviroAudit)
Consumers Land Management Co. Maine 1984 100.0%
The Dartmouth Company Maine 1940 100.0%
Garden State Water Company New Jersey 1969 96.5%
(and its 93.2% owned subsidiary,
Califon Water Company)
Inter-State Water Company Illinois 1986 100.0%
Maine Water Company Maine 1973 99.6%
Ohio Water Service Company Ohio 1973 100.0%
Pennsylvania Water Company Pennsylvania 1971 94.6%
Roaring Creek Water Company Pennsylvania 1985 100.0%
Shenango Valley Water Company Pennsylvania 1926 100.0%
(and its wholly-
owned subisidiary, Masury Ohio 1926 100.0%
Water Company)
Southern New Hampshire New Hampshire 1930 100.0%
Water Company, Inc.
Wanakah Water Company Maine 1965 100.0%
d/b/a Greenville Water Company,
Millinocket Water Company and
Skowhegan Water Company
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated February 9, 1994, included in this Form 10-K, into the
Company's previously filed Registration Statement (Forms, S-3 No. 33-55584
and Forms S-8 Nos. 33-68858, 33-20994, 33-22032 and 33-57618).
s/Arthur Andersen & Co.
--------------------------
Arthur Andersen & Co.
Boston, Massachusetts
March 21, 1994
