<PAGE> 1
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, 1994 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 0-8084
CONNECTICUT WATER SERVICE, INC.
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0739839
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
93 WEST MAIN STREET, CLINTON, CT 06413
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (203) 669-8636
Securities registered pursuant to Section 12 (b) of the Act:
<TABLE>
<CAPTION>
Title of each Class Name of each exchange on which registered
<S> <C>
NONE NOT APPLICABLE
</TABLE>
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK
(Title of Class)
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 twelve (12) months (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229,405 of this chapter) 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. / /
<PAGE> 2
Page 2
The aggregate market value of the registrant's voting Common Stock,
computed on the price of such stock at the close of business on February 1,
1995 is $66,000,000.
2,877,899
Number of shares of Common Stock outstanding, February 1, 1995
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
Part of Form 10-K Into Which
Document Document is Incorporated
-------- -----------------------------
<S> <C>
Definitive Proxy Statement, dated Part III
March 13, 1995, for Annual Meeting
of Shareholders to be held on
April 21, 1995.
</TABLE>
<PAGE> 3
Page 3
PART I
ITEM 1. BUSINESS
a. GENERAL DEVELOPMENT OF BUSINESS
The Registrant, Connecticut Water Service, Inc. (the Company), is the
parent company of The Connecticut Water Company (CWC) which supplies water for
residential, commercial, industrial and municipal purposes in various areas in
the State of Connecticut through three operating regions. The Company and CWC
represent the second largest investor-owned water system in Connecticut in
terms of operating revenue and utility plant investment.
The Company was organized in 1956 under the General Statutes of
Connecticut as Suburban Water Service, Inc. and has been engaged in the
business of acquiring and operating water companies through controlling stock
ownership. In 1975, the Company changed its name to Connecticut Water Service,
Inc. after acquiring all of the outstanding Common Stock of CWC. CWC's First
Mortgage Bonds and Preferred Stock are held primarily by institutional
investors. The Company is a non-operating company whose income is derived from
the earnings on the Common Stock of CWC.
The profitability of the operations of the water utility industry
generally and of CWC (and hence the Company) is largely dependent on the
timeliness and adequacy of the rate relief allowed by utility regulatory
commissions. In addition, profitability is dependent on numerous factors over
which CWC has little or no control, such as the quantity of rainfall and
temperature in a given period of time, industrial demand, prevailing rates of
interest for short and long-term borrowings, energy rates, and compliance with
environmental and water quality regulations. In addition, inflation and other
factors beyond the Company's or CWC's control impact on the cost of
construction, materials and employee costs. See "Business - Financing",
"Business - Rates", and "Business -Regulation".
b. GENERAL DESCRIPTION OF BUSINESS
The Company, a Connecticut corporation, owns all of the outstanding
Common Stock of CWC. Substantially all of the Company's revenues and net
income are attributable to the sale and distribution of water by the operating
regions of CWC. See "Business - Consolidated Operating Statistics".
CWC is specially chartered by the General Assembly of the State of
Connecticut as a public service company, and the rates and operations of CWC
are regulated by the Connecticut Department of Public Utility Control (DPUC).
The Company is specifically prohibited from engaging in business or activities
which are not regulated by the DPUC. See "Business - Rates" and "Business -
Regulation".
<PAGE> 4
Page 4
CWC has one subsidiary organized in 1969 to assist in the acquisition
of real estate. The assets and operations of this subsidiary are not
significant.
CWC supplies water and, in most instances, provides fire protection
through three separate operating regions in all or portions of 31 towns in
Connecticut. The service areas have an estimated total population of
approximately 211,000 based on DPUC population estimates of 3.5 people per
average household. During the twelve months ended December 31, 1994,
approximately 64% of the Company's consolidated operating revenues were
received from residential customers, 13% from commercial customers, 5% from
industrial customers, 2% from public authority customers, and 16% from public
fire protection and other customers.
Each of the operating regions serves a separate franchise area.
Rates are the same for all regions. The systems of the three operating regions
are not physically interconnected.
The following table sets forth the percentage of the Company's utility
plant in service at each of CWC's operating regions as of December 31, 1994:
<TABLE>
<CAPTION>
Utility Plant
Regions Dollars Percent
--------- ------------ -------
<S> <C> <C>
Northern $ 82,380,000 45%
Shoreline 49,355,000 28%
Naugatuck 49,344,000 27%
------------ ----
$181,079,000 100%
============ ====
</TABLE>
At December 31, 1994, 60,325 customers were served by CWC. At that
date, all customers were metered except fire protection customers. The Company
requires all applicants for new service, other than fire protection, to be
metered.
The Company's principal office is located at 93 West Main Street,
Clinton, Connecticut 06413 and its telephone number is 203-669-8636.
The business of CWC is subject to seasonal fluctuations. The demand
for water during the warmer months is generally greater than during the cooler
months due primarily to additional requirements for water in connection with
cooling systems, private and public swimming pools and lawn sprinklers.
Throughout the year, and particularly during the warmer months, demand will
vary with rainfall and temperature levels.
<PAGE> 5
Page 5
WATER SUPPLY
The estimated minimum dependable yields of sources of water supply
for each of the operating regions' transmission and distribution systems, as
set forth under "Business - CWC Production Facilities as of December 31, 1994"
are in excess of present average daily consumption. Except for a request for
voluntary conservation in the summer of 1988, no restrictions on water use have
been required in the past twenty years.
Water is secured from both surface and subsurface supplies. In 1994,
surface sources provided approximately 55% of the supply, and well supplies
provided approximately 45%. Studies are made periodically to determine the
supply and distribution needs of the regions. A major study, covering a fifty
year planning period required of all water companies supplying 1,000 or more
persons, was completed in 1987 and submitted to the Connecticut Department of
Pubic Health and Addiction Services (DPHAS) for approval. An updated plan must
be prepared every five years or as requested by the DPHAS. Updated plans for
the Collinsville, Thomaston and Terryville Systems in the Naugatuck Region were
submitted in 1992. The plan for the Collinsville System was approved in 1993.
Plans for the Shoreline Region and the Naugatuck Central System were submitted
in 1993 and 1994, respectively. A plan for all Northern Region Systems will be
submitted in 1995.
See "Business - Construction Program", "Business - Rates" and
"Business - Regulation".
OPERATING REGIONS
NORTHERN
The Northern Region is composed of nine separate systems, not
interconnected, as listed below:
<TABLE>
<CAPTION>
Number of
Customers
System Towns (or Portions Thereof) Served at 12/31/94
------ ---------------------------------- -----------
<S> <C> <C>
Western Suffield, Windsor Locks, East Granby, Enfield,
East Windsor, South Windsor, Vernon, Ellington,
Tolland 27,864
Somers Somers 411
Crescent Lake Enfield 157
Stafford Springs Stafford 1,005
Tolland Aqueduct Tolland 95
Lakewood/Lakeview Coventry 176
Nathan Hale Coventry 39
Llynwood Bolton, Vernon 74
Reservoir Heights Vernon 22
------
29,843
======
</TABLE>
The territory served is primarily residential and commercial with some
industry.
CWC has entered into an agreement with the State of Connecticut,
Department of Transportation, pursuant to which CWC operates and maintains, as
part of its Western System, the State's water supply system for Bradley
International Airport located in Windsor Locks, Suffield and East Granby,
Connecticut.
<PAGE> 6
Page 6
The Western System has three emergency standby interconnections with
the water system of the Metropolitan District Commission (MDC) (a public water
and sewer authority presently serving the City of Hartford and portions of
surrounding towns), one in South Windsor and two in Windsor Locks. The Western
System also has an emergency interconnection with the water system of the
Hazardville Water Company in Enfield.
See "Business - Franchises" with respect to proposals that the MDC
expand its operations into the Northern Region and that MDC take over CWC's
operations in South Windsor.
SHORELINE
The Shoreline Region is composed of three separate systems, not
interconnected, as listed below:
<TABLE>
<CAPTION>
Number of
Customers
System Towns (or Portions Thereof) Served at 12/31/94
------ ---------------------------------- -----------
<S> <C> <C>
Guilford Guilford, Old Saybrook, Westbrook,
Clinton, Madison 15,387
Chester Chester, Deep River, Essex 2,275
Chester Village
West Chester 11
------
17,673
======
</TABLE>
The territory served is primarily residential with some commercial and
industry.
NAUGATUCK
The Naugatuck Region is composed of four separate systems, not
inter-connected, as listed below:
<TABLE>
<CAPTION>
Number of
Customers
System Towns (or Portions Thereof) Served at 12/31/94
------ ---------------------------------- -----------
<S> <C> <C>
Central Naugatuck, City of Waterbury, Beacon Falls,
Bethany, Prospect 8,553
Terryville Plymouth 1,907
Thomaston Thomaston, Plymouth 1,176
Collinsville Canton, Avon, Burlington 1,173
------
12,809
======
</TABLE>
The territory served is residential and industrial including a
municipality which represented approximately 7% of the region's 1994 revenues.
Water for the Collinsville System is supplied under an agreement with
the MDC from treatment facilities drawing from a large surface water reservoir
owned by the MDC. See "Item 2. Properties" for a description of this
agreement.
<PAGE> 7
Page 7
Consolidated Operating Statistics
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Customers (Average)
Residential Metered 54,464 53,988 53,509 53,119 52,767
Commercial Metered 3,827 3,797 3,790 3,769 3,713
Industrial Metered 364 366 323 312 316
Public Authorities Metered 467 466 429 418 434
Fire Protection and Other 960 941 915 896 858
----------- ----------- ----------- ----------- -----------
Total 60,082 59,558 58,966 58,514 58,088
=========== =========== =========== =========== ===========
Production (Millions of Gallons)
Residential Metered Sales 3,874 3,915 3,734 3,858 3,849
Commercial Metered Sales 908 918 921 968 983
Industrial Metered Sales 460 438 507 570 635
Public Authorities Metered Sales 179 179 169 160 159
----------- ----------- ----------- ----------- -----------
Total Metered Consumption 5,421 5,450 5,331 5,556 5,626
Fire Protection, Company Use
and Unaccounted For 808 756 692 619 764
----------- ----------- ----------- ----------- -----------
Total 6,229 6,206 6,023 6,175 6,390
=========== =========== =========== =========== ===========
Operating Revenues (Thousands of Dollars)
Residential Metered $24,488 $24,574 $23,541 $23,675 $20,245
Commercial Metered 4,696 4,745 4,729 4,853 4,112
Industrial Metered 1,922 1,851 2,100 2,239 2,049
Public Authorities Metered 893 903 856 836 736
Fire Protection and Other 6,130 6,058 5,964 5,769 5,159
----------- ----------- ----------- ----------- -----------
Total $38,129 $38,131 $37,190 $37,372 $32,301
=========== =========== =========== =========== ===========
Average Revenue per 1,000 Gallons
Residential Metered $6.32 $6.28 $6.30 $6.14 $5.26
Commercial Metered $5.17 $5.17 $5.13 $5.01 $4.18
Industrial Metered $4.18 $4.23 $4.14 $3.93 $3.23
Public Authorities Metered $4.99 $5.04 $5.07 $5.23 $4.63
Miles of Distribution Mains
(End of Period) 955 950 945 940 930
</TABLE>
<PAGE> 8
Page 8
CONSTRUCTION PROGRAM
The projected capital expenditures of CWC are established annually by
management and are reviewed and revised from time to time to the extent
necessary to meet changing conditions, including adequacy of rate relief,
customer demand, revised construction schedules, water quality requirements,
pollution control requirements and inflation.
The Company currently estimates that CWC's 1995-1997 construction
program, excluding plant financed by customer advances and contributions in aid
of construction and amounts representing an allowance for funds used during
construction (AFUDC), will aggregate approximately $26,000,000 which includes
routine improvements to the water distribution system of approximately
$4,500,000 each year, approximately $1,750,000 for clean-up of the Reynolds
Bridge Well Field (see "Item 3. Legal Proceedings"), and $10,250,000 for
initial construction costs of major modifications to the Rockville Water
Treatment Plant. The preliminary construction cost estimate to complete the
modifications to the Rockville Water Treatment Plant is at least $20,000,000
with an estimated completion date of 1999.
The $26,000,000 construction expenditures for 1995 through 1997,
mentioned above, includes all known costs for studies and construction of
facilities to comply with existing Safe Drinking Water Act (SDWA) regulations.
Construction expenditures which may be required in the future to comply with
Federal and State regulations, which have not yet been issued but which are
required under the SDWA, are excluded.
FINANCING
The Company and CWC expect to finance a significant portion of the
anticipated $26,000,000 construction expenditures through 1997 with net funds
generated from operations (net cash provided by operating activities less
dividends paid). Net funds generated from operations were $6,220,000,
$6,025,000, and $7,319,000 for the years 1994, 1993 and 1992, respectively (see
Consolidated Statements of Cash Flows for additional information).
Construction and other expenditures in excess of net funds generated from
operations are expected to be financed through Common Stock issued under the
Company's Dividend Reinvestment and Common Stock Purchase Plan (DRIP) and in
part financed with short-term interim bank loans which will be refinanced
through the sale of Preferred Stock and/or long or medium-term unsecured debt
by CWC and/or the Company, and the sale of First Mortgage Bonds by CWC and of
Common Stock by the Company when financial market conditions are considered
favorable by management. CWC expects to receive the proceeds of any such
financings by the Company in the form of advances or capital contributions. Up
to 75% of the total present preliminary estimate of at least $20,000,000 for
the costs of the modifications to the Rockville Water Treatment Plant are
expected to be financed through external financings.
<PAGE> 9
Page 9
The Company and CWC currently have lines of credit aggregating
$9,000,000, consisting of conventional lines of credit with three banks, which
management considers adequate at this time. As of December 31, 1994, the
Company had slightly less than $3,000,000 of borrowings outstanding under these
lines of credit.
Because of changes in the Federal tax laws, the amount of new
tax-exempt debt which may be issued by, or under the authority of, the State of
Connecticut is limited. CWC has not received a tax exempt allocation since
1988. Although CWC has been able to refund all of its approximately
$43,000,000 of existing tax-exempt borrowings with tax-exempt refunding
borrowings since 1990, it is uncertain whether future tax-exempt allocations
from the State will be available to CWC or the Company. The unavailability of
tax-exempt financings will require the Company and/or CWC to issue traditional
taxable debt securities and will increase the cost of long-term debt financing.
During the period 1979 through 1988 approximately $43,000,000 of tax-exempt
long-term debt was issued by CWC to finance construction expenditures.
The Company has no legal restrictions on the issuance of its debt.
The ability of CWC to issue additional long or medium-term secured debt to
finance future construction expenditures depends in part on meeting the
applicable provisions of CWC's First Mortgage Indenture with respect to the
coverage of earnings over interest requirements. These provisions require, for
the issuance of additional First Mortgage Bonds, minimum earnings coverage
before income taxes of two times pro forma annual interest charges on such
mortgage debt. The interest coverage under this formula at year end has been:
1994 - 4.12 times interest charges, 1993 - 4.17 times, 1992 - 3.97 times, 1991
- 5.07 times, and 1990 - 5.10 times.
CWC's coverage of interest charges on all long-term debt at year end
has been: 1994 - 4.12 times interest charges, 1993 - 4.17 times, 1992 - 3.56
times, 1991 - 3.15 times, and 1990 - 2.32 times.
<PAGE> 10
Page 10
CWC's Times Coverage of Annual Interest
On Long-Term Indebtedness
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Utility Operating Income (a) $9,690 $10,018 $10,066 $10,435 $ 8,740
Federal and State Income Tax 4,756 4,673 4,050 3,607 2,177
State Income Tax -
Capitalization (b) (150) ( 140) (140) (120) (120)
------- ------- ------ ------- -------
Net Operating Earnings $14,296 $14,551 $13,976 $13,922 $10,797
======= ======= ======= ======= =======
Annual Interest on First
Mortgage Bonds (c) $ 3,468 $ 3,492 $ 3,524 $ 2,747 $ 2,119
======= ======= ======= ======= =======
Times Interest Coverage (d) 4.12 4.17 3.97 5.07 5.10
==== ==== ==== ==== ====
Annual Interest on Unsecured
Promissory Notes (c) -- -- 404 1,669 2,530
------- ------- ------- ------- -------
Annual Interest on Long-Term
Debt $ 3,468 $ 3,492 $ 3,928 $ 4,416 $ 4,649
======= ======= ======= ======= =======
Times Interest Coverage (e) 4.12 4.17 3.56 3.15 2.32
==== ==== ==== ==== ====
</TABLE>
(a) Connecticut Water Service, Inc.'s utility operating income for the
years 1994 to 1990 is $9,655, $9,983, $10,033, $10,402, and $8,712,
respectively.
(b) Amount of minimum State income tax based on the capitalization method.
(c) Includes interest on current portion payable.
(d) Net Operating Earnings / Annual Interest on First Mortgage Bonds per
provisions of CWC's First Mortgage Indenture.
(e) Net Operating Earnings / Annual Interest on Long-Term Debt per
provisions of CWC's First Mortgage Indenture.
During 1980 and 1981 the interest costs of long-term debt increased
more rapidly than earnings so that the coverage requirements prevented CWC from
effecting a planned issue of Bonds in mid 1981. Similar circumstances may in
the future prevent the issue of, or require a reduction in the amount of, bonds
CWC otherwise would have issued or will issue. As a consequence, the Company
may be required to meet an increased portion of its financing needs through
sales of unsecured funded debt or of additional shares of Common Stock. Sales
of Common Stock would result in a dilution of the voting power and relative
equity interests of the holders of Common Stock then outstanding.
<PAGE> 11
Page 11
During the past five years CWC has sold the following issues of
long-term debt:
- During June, 1991, CWC issued a $10,000,000, 6.9%, Series Q, First
Mortgage Bond which secures tax exempt Water Facilities Revenue Refunding Bonds
maturing in 2021. The proceeds were used to repay CWC's tax-exempt 9.25% Water
Facilities Bonds issued in 1985.
- During August, 1992, CWC issued a $15,000,000, 5 7/8%, Series R,
First Mortgage Bond which secures tax exempt Water Facilities Revenue Refunding
Bonds maturing in 2022, the proceeds of which refunded CWC's 8%, $15,000,000,
Promissory Note.
- During June, 1993, CWC issued a $5,000,000, 5.75%, Series T, First
Mortgage Bond which secures tax exempt Water Facilities Revenue Refunding Bonds
maturing in 2028, the proceeds of which refunded CWC's 8.1%, $5,000,000,
Promissory Note.
- During September, 1993, CWC issued a $4,550,000, 5.30%, Series U,
First Mortgage Bond which secures tax exempt Water Facilities Revenue Refunding
Bonds maturing in 2028, the proceeds of which refunded CWC's 7.25%, $5,000,000,
Series M, First Mortgage Bond.
- During October, 1993, CWC issued a $8,000,000, 6.65%, Series S,
First Mortgage Bond, which secures tax exempt Water Facilities Revenue
Refunding Bonds maturing in 2020. The proceeds from this transaction were used
to refund CWC's 8 3/8% (plus 1% Letter of Credit fee), Series N, $8,000,000,
First Mortgage Bond.
- On January 4, 1994, CWC issued a $4,050,000, 6.94%, Series V, First
Mortgage Bond, maturing in 2029, the proceeds of which refunded CWC's 9 3/8%,
Series L and 8 1/2%, Series O, First Mortgage Bonds. During March, 1994, an
additional $8,000,000, 6.94% Series V, First Mortgage Bond was issued. The
proceeds of this transaction were used to redeem CWC's $5,000,000, 10%, Series
P, First Mortgage Bonds as well as all 30,000 shares of CWC's $100 par, 9 1/2%
Preferred Stock.
The Company has no restriction with respect to the issuance of
additional shares of its Preferred Stock. However, the Preferred Stock
Provisions contained in the Certificate of Incorporation of CWC require, as one
of the conditions to the issuance of additional CWC Preferred Stock, that CWC's
gross income (as defined and after income taxes) be at least 1.75 times pro
forma annual interest charges on long-term debt and annual dividend
requirements on Preferred Stock to be outstanding. On the basis of this
formula, this coverage has been at year-end: 1994 - 2.83 times, 1993 - 2.70
times, 1992 - 2.43 times, 1991 - 2.24 times, and 1990 - 1.77 times. Any
long-term debt issued by CWC would reduce the amount of Preferred Stock which
could be issued.
<PAGE> 12
Page 12
CWC's Times Coverage of Annual Interest and
Annual Preferred Stock Dividends
in Accordance with Articles of General Preference
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Utility Operating Income $9,690 $10,018 $10,066 $10,435 $ 8,740
Other Income (a) 155 193 187 144 184
------ ------- ------- ------- -------
Gross Earnings Available for
Coverage $9,845 $10,211 $10,253 $10,579 $ 8,924
====== ======= ======= ======= =======
Annual Interest on Funded
Debt (b) $3,468 $ 3,492 $3,928 $4,416 $4,649
Annual Dividend on Preferred Stock (c) 2 288 294 300 393
------ ------- ------- ------- -------
Total Charges $3,470 $ 3,780 $ 4,222 $ 4,716 $ 5,042
====== ======= ======= ======= =======
Times Interest Coverage 2.83 2.70 2.43 2.24 1.77
==== ==== ==== ==== ====
</TABLE>
(a) Other income, as defined by the Articles of General Preference,
includes merchandising and jobbing income, interest and dividend
income and miscellaneous rental income less applicable taxes.
(b) Includes interest on current portion payable.
(c) Includes dividends on currently redeemable shares.
The Company's issuance of Common Stock over the past five years are as
detailed below. The $12,387,000 net proceeds from these sales were invested in
CWC in the form of capital contributions.
- Pursuant to an underwritten public offering, the Company sold 460,000
shares of Common Stock on October 24, 1990.
- The Company issued 39,030 shares of Common Stock during 1990, 43,247
shares during 1991, 37,868 shares during 1992, 33,803 during 1993 and 74,053
during 1994, pursuant to its DRIP.
- The Company issued 2,338 shares of Common Stock during 1992, 3,074
shares during 1993, and 4,061 shares during 1994, pursuant to the Company's
Performance Stock Program.
- The Company issued 1,769 shares of Common Stock during 1993 and 2,468
shares during 1994, pursuant to the Company's Employee Savings 401-K Match
Plan.
There are currently no legal limits on the amount of short-term
borrowings which may be incurred by the Company or CWC. Should construction
expenditures exceed management's current expectations, the Company will
continue to be dependent upon its ability to issue and sell additional amounts
of Common Stock, mortgage bonds of CWC and (either through the Company or CWC)
Preferred Stock and long or medium-term debt to limit short-term borrowing to
appropriate levels. However, the availability of these methods of financing
cannot be assured. The Company believes that the sale of such additional
securities will continue to depend primarily on the adequacy and timeliness of
regulatory action on future rate increase applications of CWC, on general
conditions in securities markets and on favorable market appraisal of the
securities of the Company and CWC, including the Company's Common Stock.
<PAGE> 13
Page 13
RATES
The rates of CWC have been established under the jurisdiction of, and
approved by, the DPUC. It is the Company's policy to seek rate relief as
necessary to enable CWC to achieve an adequate rate of return.
In the most recent six years the following rate increases have been
put into effect by CWC pursuant to authorization by the DPUC:
<TABLE>
<CAPTION>
Estimated Additional Annual Revenue
-----------------------------------
Effective Dates Requested Allowed
--------------- --------- -------
<S> <C> <C>
9/13/89 (a) $ 6,925,777 $5,185,069
5/30/90 (a) 564,000 552,317
3/25/91 (b) 10,067,000 6,107,948
</TABLE>
(a) The rate increase effective September 13, 1989, was based upon an
allowed rate of return of 13.6% on Common Stock equity and 10.83% on
rate base. CWC had requested 14.5% and 11.16% respectively. An
historical test year (1988) was used to establish the original cost
rate base, which was adjusted for identified facilities expected to be
placed in service during 1989 and 1990, but otherwise excluded
construction work in progress. The rate decision directed CWC to
discontinue depreciation charges on customer advances for construction
received subsequent to January 1, 1989 and allowed CWC to recover
costs associated with funding a 501(c) VEBA Trust for that portion of
CWC's future liability for retiree medical benefits permitted by
Federal income tax regulations. The rate decision approved the
reorganization of CWC's operations from seven divisions to three
regions. The rate decision also allowed for a reopening of the rate
case to allow CWC to request an additional rate increase relating to
the completion and in service operations of specific distribution
system improvements deferred in the September 13, 1989 rate decision.
Effective May 30, 1990, the DPUC approved a 1.66%, or $552,317,
increase to reflect the completion of these improvements.
(b) The rate increase effective March 25, 1991 was based upon an allowed
rate of return of 12.7% on Common Stock equity and 10.74% on rate
base. CWC had requested 14% and 11.3% respectively. A historical test
year (12 months ended March 31, 1990) was used to establish the
original cost rate base which was adjusted for identified facilities
which were placed in service by December 31, 1990, but otherwise
excluded construction work in progress. The decision disallowed both
a proposed adjustment to revenues to reflect conservation based
declines in sales and the requested provision for a Revenue
Stabilization Clause to provide for revenues to be lost through
customer participation in the Company's residential conservation kit
program. The decision did allow recovery of certain of the
conservation kit program costs over a two year amortization period.
<PAGE> 14
Page 14
In 1979, the DPUC approved a surcharge to be applied to rates charged
by water utilities in order to provide a current cash return on the major
portion of a water utility's Construction Work In Progress (CWIP) applicable to
facilities required by SDWA facilities. CWC has consistently been allowed to
collect such a surcharge. CWC expects to apply for the application of similar
surcharges with respect to any major future construction projects which may be
required by the SDWA. There is no assurance that any future surcharges will be
permitted.
Under certain circumstances the DPUC, in consultation with the DPHAS,
can order a water company with good managerial and technical resources to
acquire the water system of another company to assure the availability and
potability of water for customers of the company to be acquired. In 1989 the
DPUC promulgated regulations permitting the DPUC to approve a surcharge to be
applied to rates charged by water utilities in order to cover the costs
incurred to acquire the other system and to make improvements as required. CWC
expects to apply for the application of such a surcharge with respect to any
mandated water system acquisition. There is no assurance that any such
surcharge will be permitted.
In 1993 the DPUC approved a limited rate adjustment to compensate for
the effect of changes in certain costs for water companies. These costs
include rate changes related to the cost of purchased water, energy, and taxes.
CWC expects to apply for the application of this type of adjustment in the
future when appropriate. There is no assurance that any such rate adjustment
will be permitted.
See also "Franchises and Competition" below for a discussion of 1994
Connecticut legislation dealing with the competitiveness of water rates.
FRANCHISES AND COMPETITION
Primarily because MDC is a tax-exempt entity, MDC's water rates are
substantially lower than those of CWC. Legislation was proposed in the
Connecticut General Assembly in 1987 which was intended to have the effect of
permitting MDC to purchase the water company operations of CWC in South
Windsor, a town which is presently served by both MDC and CWC. The Company
opposed this legislation vigorously. The Connecticut General Assembly
established a Task Force to report on various issues relating to towns served
by both a privately-owned water company and a publicly-owned water company.
Although the Task Force voted not to recommend legislation which would
authorize such towns to hold referenda on consolidation and empower towns to
force an investor-owned water company to sell its water system within that town
to a governmentally-owned entity, it is not clear at this time whether such a
proposal or similar legislation may be re-introduced and adopted by the
Connecticut General Assembly. Further, even if such legislation were adopted,
the amount of the compensation to be received by CWC for its assets in South
Windsor, or the disposition of any such compensation, cannot be determined at
this time. It is also possible that any legislation in this area could be
written in a manner which would permit a similar acquisition of CWC's water
operations in towns other than South Windsor. The Company has opposed, and
will continue to oppose vigorously, any such proposed legislation.
<PAGE> 15
Page 15
Legislation was passed in 1994 by the Connecticut General Assembly
that requires the DPUC to adopt regulations regarding whether the rates that
have been charged by a water company for a period of five consecutive years are
so excessive in comparison to the rates charged by other water companies
providing the same or similar service as to inhibit the economic development of
the area serviced by the water company or impose an unreasonable cost to the
customers of such company. The DPUC has established a docket for the adoption
of regulations pursuant to this public act. CWC is participating in this
docket and will oppose vigorously the establishment of regulations that could
have an adverse effect on the Company. There is no assurance that the Company
will be successful in this effort.
In 1976, the Connecticut General Assembly created a study commission
to evaluate the feasibility of expanding the water supply services of the MDC
to include the towns of East Granby, East Windsor, Enfield, Somers, Suffield
and Windsor Locks. These towns are in the service areas of and are served in
part by CWC's Northern Region. On February 1, 1978, the study commission
reported to the Governor and the General Assembly that the expansion was
feasible and recommended that the General Assembly authorize the towns of East
Granby, Suffield and Windsor Locks to take immediate steps to acquire water
services from the MDC. It further recommended that the enabling legislation
provide a mechanism for the towns of Enfield, East Windsor and Somers, after
adequate technical, financial and institutional studies, to take the steps
necessary to acquire water services from the MDC. The study commission made no
recommendation in its report with respect to the method of implementation of
any MDC expansion and did not discuss CWC's status or that of its water
facilities should MDC provide such service. The General Assembly has not taken
any action on the report. In 1990, CWC agreed, pursuant to the Connecticut
Plan (see "Business - Regulation") that MDC would have the exclusive right to
serve that part of East Granby which is not adjacent to Bradley International
Airport and which is not presently being served by CWC. The Company will
oppose vigorously any extension of MDC water operations within its service
areas and any effort to permit the takeover by any municipal or other authority
of any significant portion of CWC's service areas.
It is not possible at this time to assess the likelihood of any
legislation being enacted to implement these or similar recommendations or the
impact of any such legislation on CWC and the Company, but such impact could be
substantial. There can be no assurance that the Connecticut General Assembly
will not take action to authorize such a takeover. As of December 31, 1994,
CWC's Northern Region represented 45% of the Company's consolidated utility
plant.
In common with most water companies in Connecticut, CWC derives its
rights and franchises to operate from special acts of the Connecticut General
Assembly, which are subject to alteration, amendment or repeal by the General
Assembly and which do not grant exclusive rights to CWC in its service areas.
<PAGE> 16
Page 16
Subject to such power of alteration, amendment or repeal by the
Connecticut General Assembly and subject to certain approvals, permits and
consents of public authority and others prescribed by statute and by its
charter, CWC has, with minor exceptions valid franchises free from burdensome
restrictions and unlimited as to time, and is authorized to sell potable water
in the towns (or parts thereof) in which water is now being supplied by CWC.
In addition to the right to sell water as set forth above, the
franchises of CWC include rights and powers to erect and maintain certain
facilities on public highways and grounds, all subject to such consents and
approvals of public authority and others as may be required by law. Under the
Connecticut General Statutes, CWC, upon payment of compensation, may (subject
to the various requirements described under "Business - Regulation") take and
use such lands, springs, streams or ponds, or such rights or interests therein
as the Connecticut Superior Court, upon application, may determine is necessary
to enable CWC to supply potable water for public or domestic use in its
franchise areas.
CWC faces competition, presently not material, from a few private
water systems operated within, or adjacent to, its franchise areas and from
municipal and public authority systems whose service areas in some cases
overlap portions of CWC's franchise areas. At the present time, except as
noted above, there are no publicly owned utilities, cooperatives or other
private utility companies competing with CWC in the areas now served, although
within certain areas there are wells owned by individuals or private
industries.
See also "Business - Regulation" for a description of the so-called
Connecticut Plan which is intended, among other things, to eliminate
competition among water systems.
<PAGE> 17
Page 17
REGULATION
DEPARTMENT OF PUBLIC UTILITY CONTROL (DPUC)
CWC is subject to regulation by the DPUC, which has jurisdiction over
rates, standards of service, accounting procedures, issuance of securities,
disposition of utility properties and related matters. The DPUC consists of
five Commissioners, appointed by the Governor of Connecticut with the advice
and consent of both houses of the Connecticut legislature.
The DPUC is required by law to institute management audits, to be
conducted periodically, of companies such as CWC. Such audits might result in
the DPUC ordering implementation of new management practices or procedures.
The DPUC has not conducted any such audit of CWC.
The Company, which is not an operating utility company, is not a
"public service company" within the meaning of the Connecticut General Statutes
and is not generally subject to regulation by the DPUC. DPUC approval is
necessary, however, before the Company may acquire or exercise control over any
public service company. In connection with the affiliation with CWC, the
Company amended its Certificate of Incorporation to prohibit the Company and
any subsidiary of the Company from engaging, unless approved by the DPUC, in
any business or activity which is not subject to regulation by the DPUC. The
Company has no present intention of engaging, either directly or through any
subsidiary, in any business or activity which is not subject to regulation by
the DPUC. The Company is currently providing management and/or operating
services to other water supply or waste water systems through CWC. CWC is
contemplating providing these services through a new subsidiary. DPUC approval
would be required for any such activity.
DEPARTMENT OF ENVIRONMENTAL PROTECTION (DEP)
While the construction of dams, reservoirs and other facilities
necessary to the impounding, storage and withdrawal of water in connection with
public water supplies is a permitted use under the Connecticut Inland Wetlands
and Water Courses Act, CWC is required, pursuant to other statutory provisions,
to obtain permits from the Connecticut Commissioner of Environmental Protection
(Commissioner) for the location, construction or alteration of any dam or
reservoir and to secure the approval of the Commissioner for the diversion and
use of water from any river or underground source for public use. Various
criteria must be satisfied under the respective statutes and regulations of the
Connecticut Department of Environmental Protection (DEP) in order to obtain
such permits or approvals and the Commissioner has the power to impose such
conditions as he deems reasonably necessary in connection with such permits or
approvals in order to assure compliance with such statutes. CWC has obtained,
and complied with the terms of, all such requisite permits or approvals.
<PAGE> 18
Page 18
Legislation was adopted in 1982 conferring upon the DEP authority to
require a permit for any new diversion of water, including both surface and
ground water, within the State of Connecticut. Any water diversion which might
be effected by CWC in the future would require compliance by CWC with a lengthy
permit application process and approval by the Commissioner. CWC has several
potential well sites which are subject to this legislation and the DEP
regulations thereunder. Such legislation requires the registration with the
Commissioner of all diversions of water maintained prior to July 1, 1982. All
of CWC diversions have been registered. Although the legislation provides that
registered diversions are not subject to the permit requirement, DEP
regulations adopted in March, 1990 are being used by DEP, on a case by case
basis, to require compliance with the permit application process before some
registered diversions can be used as a source of water supply. It is not
possible at this time to fully assess the impact of DEP's application of this
legislation and the DEP regulations on CWC and its operations, but such impact
may be substantial, particularly on sources held for future use.
The Federal Clean Water Act requires permits for discharges of
effluents into navigable waters and requires that all discharges of pollutants
comply with federally approved state water quality standards. The DEP has
adopted, and the federal government has approved, water quality standards of
receiving waters. A joint Federal and State permit system has been established
to ensure that applicable effluent limitations and water quality standards are
met in connection with the construction and operation of facilities which
affect or discharge into state or interstate waters. CWC has received all such
requisite permits.
In 1984, all CWC's dams were registered with the Connecticut
Department of Environmental Protection (DEP) as required under Public Act
83-38. DEP is required to investigate and periodically inspect most registered
dams to ensure they are safely maintained. CWC was also subject to the
requirements of the National Dam Inspection Act which required the United
States Army Corps of Engineers to inspect certain dams. These inspections were
completed in 1981 and the Army Corps' participation ended. Six of said dams
have been inspected and, although certain modifications and further studies
have been required, no material problems with respect to these dams have been
reported. While the Company recognizes that a certain degree of risk is
attached to CWC's ownership of dams in connection with its water collection
system, the Company believes that all of CWC's dams are well maintained and are
structurally stable. CWC believes that it will be able to comply with any
modifications to its dams that are likely to be required as a result of these
six inspections. CWC believes that the future cost of such compliance will be
less than $5,000,000. These costs are considered in CWC's projected capital
expenditures (see "Construction Program".)
<PAGE> 19
Page 19
The DEP has promulgated regulations requiring that certain minimum
flows be maintained in various waterways within the State of Connecticut.
Pursuant to said regulations, CWC is exempt from compliance at certain of its
facilities. However, DEP is considering making changes in the regulations. The
Company cannot predict either the substance of those changes or their impact on
the Company. However, it is possible that such changes could reduce the safe
yield of CWC's sources. The cost to CWC to restore the lost safe yield is not
now determinable but could be substantial.
DEPARTMENT OF PUBLIC HEALTH AND ADDICTION SERVICES (DPHAS)
CWC is also subject to regulation by the Connecticut DPHAS with
respect to water quality matters. Plans for new water supply systems or
enlargement of existing water supply systems also must be submitted to the
DPHAS for approval.
In 1985 the Connecticut General Assembly enacted comprehensive
legislation (the so-called Connecticut Plan) designed to maximize the efficient
and effective development of the state's public water supply systems. This
legislation authorized DPHAS to administer procedures designed to coordinate
the comprehensive planning of public water systems. The legislation mandates
the establishment of public water supply management areas, with each such area
having a water utility coordinating committee comprised of representatives of
the various public water systems and regional planning agencies in the area.
Each such committee is required to establish exclusive service areas for each
public water system in the area, after taking into consideration a number of
factors including existing water service areas, land use plans, etc., optimum
utilization of existing water supplies and existing franchise rights of water
companies. DPHAS is authorized to resolve any disagreements among members of
the respective committees. This legislation is intended not only to promote
cooperation among various water suppliers in each management area, but also to
provide (through DPHAS' role) for the centralized planning of water supply. In
implementing this legislation, DPHAS has created seven water supply management
areas and is in the process of implementing the creation of the appropriate
water utility coordinating committees. The operations of CWC, which cover many
areas of the state, fall within four of the seven management areas. CWC is
actively involved with the planning process in two of these management areas at
this time. The remaining two areas of the Company's interest are expected to
begin the planning process within the next several years. It is not possible
at this time to predict the impact on the Company of the above described
legislation, regulations and procedures, but the Company was an active
participant in moving for the adoption of this scheme, and is presently hopeful
that such centralized and cooperative planning will have a beneficial impact on
its future water supply and water supply operations.
<PAGE> 20
Page 20
SAFE DRINKING WATER ACT (SDWA)
CWC is subject to regulation of water quality under the SDWA. The
SDWA provides for the establishment of uniform minimum national quality
standards by the Federal Environmental Protection Agency (EPA), as well as
governmental authority to specify the type of treatment process to be used for
public drinking water. The EPA regulations, pursuant to the SDWA, set limits,
among other things, on certain organic and inorganic chemical contaminants,
pesticides, turbidity, microbiological contaminants, and radioactivity. The
DPHAS has adopted regulations which are in some cases more stringent than the
Federal regulations.
The 1986 SDWA amendments dictate that 83 new primary drinking water
standards be established within three years of enactment. These new standards
supersede the 22 interim standards which EPA established between 1977 and 1986.
In addition to the 83 primary standards, the SDWA amendments require that EPA
publish a list every three years of an additional 25 contaminants which it
intends to regulate in drinking water.
Although unable to meet the three year timetable required by the SDWA
amendments, EPA has actively developed the 83 drinking water standards in six
phases. Phase I, volatile organic chemicals, was promulgated in 1987 and
initial and continued monitoring of sources has taken place. Phase II, which
contains 26 synthetic organic chemicals including pesticides and seven
inorganic chemicals, was promulgated in 1991 with initial monitoring for
systems serving more than 500 people beginning in 1993. Phase IIB, the
aldicarbs, was promulgated in 1992 but implementation is currently delayed by
court order. Lead and copper, which were originally included in Phase II, were
promulgated in 1991 and monitoring for large systems (serving more than 50,000
people) and medium systems (serving 3,301 to 50,000 people) began in 1992,
small system monitoring (serving 3,300 people or less) began in July, 1993.
Phase III, radionuclides, including radon, has been proposed but promulgation
has been delayed by law and is now scheduled for the fall of 1995. Phase IV,
the Surface Water Treatment Rule, was promulgated in 1989 and became effective
June 29, 1993. Phase V, other synthetic organic chemicals and inorganic
chemicals, was promulgated in 1992 and monitoring was implemented at the same
time as Phase II. Phase VIA, disinfectants and disinfection by-products, is
EPA's first list of 25 additional compounds to be regulated. Phase VIA is
scheduled for promulgation in 1996. Phase VIB, additional organic and
inorganic compounds, is not presently scheduled.
<PAGE> 21
Page 21
The SDWA amendments also require EPA to establish criteria and rules
which provide for filtration of surface water supplies and disinfection of all
public water supplies. The Surface Water Treatment Rule mandates filtration
for surface supplies which do not meet stringent requirements and establishes
performance criteria for the operation of filtration plants. This rule also
establishes guidelines which may redefine some public water supplies which have
traditionally been considered groundwater as surface supplies subject to the
provisions of the rule. The Company has tested its groundwater supplies.
Determination by the State as to which groundwater supplies are considered to
be under the direct influence of surface water, and therefore subject to the
Surface Water Treatment Rule, has been completed. Only one system has been so
determined as under the influence. That system, consisting of two caisson
wells, has been scheduled for replacement prior to the compliance deadline of
January 1, 1996. Connecticut has adopted the Surface Water Treatment Rule into
its regulations and does not allow for exceptions to the filtration
requirement. The draft Ground Water Disinfection Rule was published in 1992
and is currently scheduled to be proposed in 1995. This rule may require
disinfection and increased disinfection contact time to be added to groundwater
supplies.
Through December 31, 1994, the Company has expended approximately
$37,500,000 in constructing facilities and conducting aquifer mapping necessary
to comply with the requirements of the SDWA. CWC believes that it is in
substantial compliance with regulations promulgated by the EPA and DPHAS, as
currently applied. Connecticut's aquifer protection legislation not only
requires aquifer mapping, but also requires DEP, in consultation with DPHAS and
DPUC, to prepare guidelines for acquisition by water companies of lands
surrounding public water supply wellfields. The extent to which those
guidelines, not yet prepared, might lead to regulations requiring the Company
to purchase additional land around its wellfields is not known at this time.
The Company anticipates spending an additional $2,000,000 on required aquifer
mapping. Although the Company cannot predict either the substance of the
regulations required by the 1986 SDWA amendments which have not yet been
promulgated or their impact on CWC, the primary impact on CWC is expected to be
in the area of increased monitoring and reporting with the potential for
required modifications to existing filtration facilities. Construction of new
facilities may be required for certain groundwater sources. It is possible
that costs of compliance by CWC could be substantial.
<PAGE> 22
Page 22
DISPOSITION OF PROPERTY
Connecticut law presently imposes the following restrictions upon the
disposition of property owned by water companies: (a) no property may be sold
or otherwise transferred without the prior approval of the DPUC; (b) the sale,
transfer and change in the use of watershed land (lands draining into a public
water supply) and certain non-watershed lands which are contiguous to
reservoirs and their tributaries are subject to regulation by the DPHAS; (c)
when a water company intends to transfer or dispose of an interest in any
present, potential or abandoned water supply source, other water companies
which might reasonably be expected to utilize the source are given the
opportunity through the DPHAS to seek to acquire such source; and (d) subject
to such acquisition opportunities by other water companies as to water supply
sources, when a water company intends to transfer or dispose of an interest in
three or more contiguous acres of its unimproved real property, the
municipality in which such property is located, the State of Connecticut and
private, nonprofit land-holding organizations have prior options to acquire
such interest in the context of priorities based on intended use, with open
space use being favored; (e) if the municipality or the State chooses to
exercise its option, and the purchase price cannot be established by agreement,
the acquisition may be accomplished by eminent domain and (f) the proceeds from
the sale of water company land must generally be reinvested in utility
improvements or land necessary to protect water supply sources; and land may be
sold only if consistent with the utility's water supply plan. Legislation
enacted in 1988 provides that the DPUC use an accounting treatment which
equitably allocates between the utility's ratepayers and its stockholders the
economic benefits of the net proceeds from the sales of land which has ever
been in the utility's rate base. Although CWC has plans to sell small,
discrete parcels of land, CWC has no significant amounts of excess land which
it presently expects to sell or otherwise dispose of.
<PAGE> 23
Page 23
GENERAL
Federal and State regulations and controls concerning water quality,
pollution and the effluent from treatment facilities are still in the process
of being developed and it is not possible to predict the scope or
enforceability of regulations or standards which may be established in the
future, or the cost and affect of existing and potential regulations and
legislation upon any of the existing and proposed facilities and operations of
CWC. Further, recent and possible future developments with respect to the
identification and measurement of various elements in water supplies and
concern with respect to the impact of one or more of such elements on public
health may in the future require CWC to replace or modify all or portions of
its various water supplies, to develop replacement supplies and/or to implement
new treatment techniques. In addition, CWC anticipates that threatened and
actual contamination of its water sources will become an increasing problem in
the future. CWC has expended and will in the future be required to expend
substantial amounts to prevent or remove said contamination or to develop
alternative water supplies. See "Legal Proceedings" for a discussion of a
recent contamination problem. Any of the aforesaid developments may
significantly increase CWC's operating costs and capital requirements. Since
the DPUC's rate setting methodology permits a utility to recover through rates
prudently incurred expenses and investments in plant, based upon past DPUC
practice, the Company expects that such expenditures and costs should
ultimately be recoverable through rates for water service.
EMPLOYEES
As of December 31, 1994, CWC employed 164 full-time and part-time
employees. The Company has no employees other than its officers, who are also
officers of CWC and whose compensation is paid by CWC. All full-time employees
of CWC who meet specified age and length of service requirements participate in
an Employee's Retirement Plan which is a non-contributory trusteed pension plan
and provides for a monthly income for employees at retirement. None of the
employees is covered by a collective bargaining agreement. Management believes
that its relationship with its employees is satisfactory.
<PAGE> 24
Page 24
ITEM 2. PROPERTIES
The properties of CWC consist of land, easements, rights (including
water rights), buildings, reservoirs, standpipes, dams, wells, supply lines,
treatment plants, pumping plants, transmission and distribution mains and
conduits, mains and other facilities and equipment used for the collection,
purification, storage and distribution of water. CWC owns its principal
properties in fee, except that the Collinsville System's principal source of
water supply is a water supply contract with the MDC. (See below for
description of this contract.) The Company believes that CWC's properties are
in good operating condition. Water mains are located, for the most part, in
public streets and, in a few instances, are located on land owned by CWC in fee
and land occupied under easements, most of which are perpetual and valid and
sufficient for the purpose for which they are held. Although it is impractical
to investigate the validity of the title to some of the easements held by CWC
for distribution mains or to clear title in the cases where such distribution
easement titles have been found defective, any such irregularities or defects
in title which may exist do not materially impair the use of such properties in
the business of CWC. Substantially all of CWC's property is subject to the
lien of its Mortgage Indenture to secure CWC's First Mortgage Bonds.
CWC owns ten water filtration treatment plants. Information about
these facilities is contained in the following table.
<TABLE>
<CAPTION>
Year Treatment Capacity
Placed in (in million
Filtration Plant Operation Region gallons per day)
---------------- --------- ------ ----------------
<S> <C> <C> <C>
Guilford Well 1965 Shoreline 0.70
Rockville 1970 Northern 5.00
Westbrook Well 1975 Shoreline 0.23
Hunt Well Field 1976 Northern 2.50
MacKenzie 1980 Shoreline 4.00
Williams 1981 Shoreline 1.00
Stafford Springs 1984 Northern 1.00
Reynolds Bridge 1986 Naugatuck 1.00
Stewart 1989 Naugatuck 6.00
O'Bready Well 1994 Northern 0.50
</TABLE>
<PAGE> 25
Page 25
CWC has an agreement with the Metropolitan District Commission, a
public water authority serving portions of Hartford County ("MDC"), to provide,
among other things, the construction, operation and maintenance by MDC of a new
filter plant to supply treated water for substantially all of CWC's
Collinsville System, with a capacity of 650,000 gallons per day, and the
provision by MDC to CWC's Collinsville System of up to 650,000 gallons per day
of water from this plant meeting all applicable Federal and State requirements.
CWC has paid 40% of the cost of construction of this plant and pays MDC an
appropriate rate for water used by CWC in excess of 400,000 gallons per day.
The water treatment plant went into service in December, 1990 following DPHAS
approval.
As of December 31, 1994, the transmission and distribution systems of
CWC consisted of approximately 955 miles of main, of which approximately 30
miles have been laid in the past five years. On that date, approximately 75%
of CWC's mains were eight-inch diameter or larger. Substantially all new main
installations are cement-lined ductile iron pipe of eight-inch diameter or
larger. Approximately 100 miles of the Company's pipelines are asbestos
cement.
From January 1, 1990 through December 31, 1994, CWC added $30,368,000
of gross plant additions (including plant financed by customer advances and
contributions in aid of construction, allowance for funds used during
construction and expenditures by CWC reimbursed by any other sources), and
retired or sold property having a book value of $2,395,000, resulting in net
additions during the period of $27,973,000.
<PAGE> 26
Page 26
CWC PRODUCTION FACILITIES AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
Total Dependable Greatest 1994
Storage Yield (1) Avg. Daily Avg. Daily
Capacity (thousands Delivery Delivery
(thousands of gallons (thousands (thousands
of gallons) per day) of gallons) of gallons)
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Northern Region:
Western System
Enfield-East Windsor System Wells 7,200
Suffield System Wells 200
South Windsor Wells 720
Ellsworth Wells 100
Lake Shenipsit 5,050,000 11,200
Talcottville Well 300
Vernon Wells 690
Windsor Locks Wells 300
---------
20,710 9,026 (2) 8,398
--------- --------- ---------
Somers System Wells 390 108 (3) 99
--------- --------- ---------
Crescent Lake System (4) -- 31 (5) 31
--------- --------- ---------
Reservoir Heights (6) -- 4 (7) 4
--------- --------- ---------
Stafford Springs System
#4 Reservoir 51,000 )
#3 Reservoir 15,000 ) 700
#2 Reservoir 60,000 )
---------
700 629 (8) 499
--------- --------- ---------
Tolland Aqueduct System Wells 42 25 (3) 21
--------- --------- ---------
Llynwood System Wells 30 13 (3) 9
--------- --------- ---------
Lakewood/Lakeview System Wells 49 30 (5) 30
--------- --------- ---------
Nathan Hale System Wells 20 9 (8) 5
--------- --------- ---------
Shoreline Region:
Guilford System
Killingworth & Kelseytown Reservoirs 273,000 2,300
Wells 4,540
---------
6,840 3,676 (9) 3,475
--------- --------- ---------
Chester System
Upper and Lower Reservoirs 176,000 )
Turkey Hill Reservoir - Haddam 149,000 ) 1,200
Wilcox Reservoir - Chester 65,000 )
Deuse Pond - Chester 4,800 )
Well 190
---------
1,390 900 (10) 636
--------- --------- ---------
Chester Village West Wells 30 5 (5) 5
--------- --------- ---------
</TABLE>
<PAGE> 27
Page 27
<TABLE>
<CAPTION>
Total Dependable Greatest 1994
Storage Yield (1) Avg. Daily Avg. Daily
Capacity (thousands Delivery Delivery
(thousands of gallons (thousands (thousands
of gallons) per day) of gallons) of gallons)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Naugatuck Region:
Central System
Long Hill Reservoir 506,000 )
Twitchell Reservoir 1,000 )
Candee Reservoirs (11) 7,000 ) 3,600
W. H. Moody Reservoir 335,000 )
Straitsville Reservoir 7,000 )
Mulberry Reservoir 50,000 )
Beacon Valley Brook Supply -- )
Meshaddock Brook Supply 300
Wells 1,000
---------
4,900 4,970 (13) 2,674
--------- --------- ---------
Terryville System
Harwinton Ave. Reservoir (11) 14,800 50
Wells 910
---------
960 498 (2) 484
--------- --------- ---------
Thomaston System
Thomaston Reservoir (11) 93,000 310
Wells 0
Waterbury Interconnection (12) 864
---------
1,174 852 (14) 378
--------- --------- ---------
Collinsville System
Water Acquired by Contract (15) 650
Reservoir (distribution) 100
---------
650 391 (3) 318
--------- --------- ---------
</TABLE>
(1) Dependable yield is the maximum continuous rate of withdrawal available
from a source of supply without seriously depleting the source.
Dependable yield is based on long-term (99% dry year) rainfall records,
storage capacity and watershed area.
(2) Occurred in 1988.
(3) Occurred in 1989.
(4) Supplied by water purchased from the Town of East Longmeadow,
Massachusetts.
(5) Occurred in 1994.
(6) Supplied by water purchased from the Town of Manchester.
(7) First occurred in 1992.
(8) Occurred in 1990.
(9) Occurred in 1987.
(10) Occurred in 1969.
(11) Reservoir held in reserve and used for emergencies only.
(12) Generally used for emergencies. However, see "Item 3. Legal Proceedings"
for a discussion of the contamination of the Thomaston Wells. CWC
presently uses the Waterbury emergency water connection to purchase
substantially all of its water supply requirements for the Thomaston
System from the Waterbury Municipal Water Department.
(13) Occurred in 1964.
(14) Occurred in 1966.
(15) The Collinsville System has a right to up to 650,000 gallons per day
through agreement with MDC. The source is Nepaug Reservoir with a storage
capacity of 9.5 billion gallons. See "Item 2. Properties" for a
description of this agreement.
<PAGE> 28
Page 28
ITEM 3. LEGAL PROCEEDINGS
During the latter part of 1992 it was discovered that the CWC's Reynolds Bridge
well field in Thomaston, Connecticut, was contaminated with methyl tertiary
butyl ether ("MTBE"), a gasoline additive. At this time CWC is implementing an
appropriate remediation program to clean up the well site. In 1994 legal
action was initiated against all parties deemed responsible for such
contamination in order to obtain recovery of CWC's investigation, clean-up and
water treatment and supply costs. The lawsuit is still in the discovery stage.
The magnitude of such costs is unknown at this time, but it is presently
estimated that such costs may exceed $4,700,000 of which approximately
$1,400,000 has been incurred at December 31, 1994, and $500,000 is expected to
be incurred in 1995. The clean-up process may take ten years or more to
complete. The Company has reflected the total estimated clean-up costs as a
deferred asset in the accompanying consolidated balance sheets representing
costs which management believes will be recoverable from third parties or
future ratepayers. An offsetting liability has been recorded, net of payments,
through December 31, 1994. CWC is presently purchasing water from a public
water supply system to provide service to its customers at normal levels. The
Company and its legal counsel presently believe that any such costs which are
not recovered from third parties should be allowed to be recovered through
rates charged for water service and that the ultimate resolution of this matter
will not have a material impact on the results of operations or financial
condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE> 29
Page 29
ITEM 4.1 EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
Period Held or Term of Office
Name Age Office Prior Position Expires
--------------- --- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
M. T. Chiaraluce 52 President and Chief Held position of President 1995 Annual Meeting
Executive Officer since January, 1992 and
Chief Executive Officer
position with the Company
since July, 1992
W. F. Guillaume 62 Vice President - Held current position or 1995 Annual Meeting
Engineering and other executive position
Planning with the Company since
April, 1970
B. L. Lenz 55 Vice President - Held current position or 1995 Annual Meeting
Finance and Accounting other executive position
and Treasurer with the Company since
March, 1979
J. R. McQueen 52 Vice President - Held current position or 1995 Annual Meeting
Customer Service and other management or
Government Affairs engineering position with
the Company since October,
1965
K. W. Kells 51 Vice President - Design Held current position or 1995 Annual Meeting
and Construction other engineering position
with the Company since
June, 1970
V. F. Susco, Jr. 43 Vice President - Held current position or 1995 Annual Meeting
Administration and engineering position with
Secretary the Company since May, 1978
T. P. O'Neill 41 Vice President - Held current position or 1995 Annual Meeting
Operations other engineering position
with the Company since
February, 1980
P. J. Bancroft 45 Assistant Treasurer and Held current position or 1995 Annual Meeting
Controller other accounting position
with the Company since
October, 1979
</TABLE>
There are no family relationships between any of the Directors and
Executive Officers of the Company.
<PAGE> 30
Page 30
Part II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over-the-counter market
under the symbol CTWS and is included in the NASDAQ National Market System.
The following table sets forth, for the periods indicated, the high and low
last sale prices of the Company's Common Stock in the over-the-counter market
and the dividends paid by the Company during the two most recent calendar
years. The quotations represent actual sales prices, but the sales reflected
may be inter-dealer transactions which do not reflect retail mark-up, mark-down
or commission. NASDAQ is the source of the quotations for all periods. Since
its affiliation with CWC in 1975, the Company has paid quarterly cash dividends
on its Common Stock.
<TABLE>
<CAPTION>
Price
-------------------------
Dividends
Period High Low Paid
------ ---- --- ----------
<S> <C> <C> <C>
1994:
First Quarter $28.00 $25.00 $ .41
Second Quarter 26.00 22.75 .41
Third Quarter 25.00 22.75 .41
Fourth Quarter 24.75 22.75 .42
1993:
First Quarter $28.25 $25.25 $ .41
Second Quarter 29.00 26.75 .41
Third Quarter 31.875 27.25 .41
Fourth Quarter 30.75 27.00 .41
</TABLE>
As of March 1, 1995, there were approximately 5,300 holders of record
of the Company's Common Stock.
Holders of Common Stock are entitled to receive such dividends as may
be declared by the Board of Directors from funds legally available therefor.
Future dividends of the Company will be dependent upon timely and adequate rate
relief, consolidated and parent company net income, availability of cash to the
Company and CWC, the financial condition of the Company and CWC, the ability of
the Company and CWC to sell their securities, the requirements of the
construction program of CWC and other conditions existing at the time.
The Company is not permitted to pay any dividends on its Common Stock
unless full cumulative dividends to the last preceding dividend date for all
outstanding shares of Cumulative Preferred Stock of the Company have been paid
or set aside for payment.
<PAGE> 31
Page 31
The income of the Company is derived mainly from earnings on its equity
investment in CWC. At December 31, 1994, the retained earnings of CWC
aggregated $9,363,000. As a result of dividend restrictions contained in CWC's
mortgage indenture and Preferred Stock provisions, the amount of cash dividends
payable on CWC's common equity capital out of CWC's retained earnings was
limited to $9,113,000.
The terms of CWC's outstanding Preferred Stock prohibit payment of
cash dividends on CWC's Common Stock in the event of an arrearage in the
payment of cumulative dividends on the Preferred Stock. CWC is in compliance
with these Preferred Stock restrictions.
The Company has a Dividend Reinvestment and Common Stock Purchase
Plan. Under the plan, customers and employees of CWC and holders of Common
Stock who elect to participate may automatically reinvest all or specified
percentages of their dividends in additional shares of Common Stock (at a price
equal to 95% of the average market price for the five days preceding the
purchase) and may also make optional cash payments of up to $10,000 per
calendar quarter to purchase additional shares of Common Stock at 100% of said
average market price. The Company issues authorized but unissued shares of
Common Stock to meet the requirements of the plan, and 1,500,000 shares have
been registered with the Securities and Exchange Commission for that purpose.
Under the plan, approximately 655,000 shares had been issued by the Company as
of December 31, 1994
The Company has a Performance Stock Program that provides for an
aggregate maximum of up to 50,000 shares of Common Stock of the Company to be
issued as awards of restricted stock to eligible employees of CWC, conditioned
on the attainment of performance goals established by the Salary Committee.
Under the plan approximately 9,500 shares, 5,900 of which are restricted, had
been issued by the Company as of December 31, 1994.
The Company has an Employee Savings 401-K Match Plan. Under the Plan
approximately 4,000 shares of Common Stock had been issued by the Company as of
December 31, 1994.
<PAGE> 32
Page 32
ITEM 6. SELECTED FINANCIAL DATA
(Not covered by Report of Independent Public Accountants)
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS EXCEPT WHERE INDICATED) YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME
Operating revenues................................................ $38,129 $38,131 $37,190 $37,372 $32,301
Operating expenses................................................ $28,474 $28,148 $27,157 $26,970 $23,589
Operating Income.................................................. $9,655 $9,983 $10,033 $10,402 $8,712
Interest and debt expense......................................... $3,940 $4,338 $4,872 $5,321 $5,650
Net income applicable to common stock............................. $5,842 $5,529 $5,111 $4,839 $2,945
Weighted average common shares outstanding........................ 2,812,456 2,769,347 2,728,573 2,686,337 2,272,114
Earnings per average common share ................................ $2.08 $2.00 $1.87 $1.80 $1.30
Number of shares outstanding at year end.......................... 2,870,559 2,789,977 2,751,331 2,711,125 2,667,878
ROE on year end common equity..................................... 12.2% 12.2% 11.8% 11.7% 7.3%
Cash dividends paid per common share.............................. $1.65 $1.64 $1.61 $1.60 $1.57
Dividend payout ratio............................................. 79.3% 82.0% 86.1% 88.9% 120.8%
Interest coverage - long-term debt (a)............................ 4.1X 4.2X 3.5X 3.1X 2.3X
Effective Federal income tax rate (percentage of pre-tax income).. 38.5% 38.3% 36.7% 34.8% 35.1%
Accumulated depreciation to depreciable plant (b)................. 25.28% 24.49% 22.85% 21.25% 19.73%
CASH FLOWS
Dividends to common stockholders.................................. $4,637 $4,539 $4,391 $4,295 $3,612
Deferred income taxes and investment tax credits.................. $1,080 $994 $968 $963 $889
Depreciation...................................................... $3,236 $3,194 $3,126 $3,115 $3,009
Gross additions to utility plant.................................. $6,514 $5,688 $4,272 $5,218 $8,682
BALANCE SHEET
Net utility plant................................................. $140,784 $137,568 $135,697 $135,132 $133,103
Total capitalization.............................................. $103,355 $100,508 $98,510 $97,771 $97,615
Long-term debt.................................................... $54,600 $51,600 $51,600 $52,412 $52,953
Preferred stock (consolidated, excluding current maturities)...... $772 $3,748 $3,772 $3,869 $4,516
Book value - per common share .................................... $16.72 $16.19 $15.68 $15.30 $15.05
Capitalization ratios:
Common stockholders' equity..................................... 46% 45% 44% 42% 41%
Preferred stock................................................. 1% 4% 4% 4% 5%
Long-term debt.................................................. 53% 51% 52% 54% 54%
</TABLE>
(a) Interest coverage represents the ratio of utility operating income plus
Federal and State income tax to annualized interest expense on
outstanding long-term debt.
(b) Year end depreciable plant
<TABLE>
<CAPTION>
OPERATING DATA 1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUE CLASS (Thousands of dollars)
Residential....................................................... $24,488 $24,574 $23,541 $23,675 $20,245
Commerical........................................................ 4,696 4,745 4,729 4,823 4,112
Industrial........................................................ 1,922 1,851 2,100 2,239 2,049
Public authority.................................................. 893 903 856 836 736
Fire protection................................................... 6,021 5,967 5,881 5,691 5,083
Other............................................................. 109 91 83 108 76
--------- --------- --------- --------- ---------
Total operating revenues........................................ $38,129 $38,131 $37,190 $37,372 $32,301
========= ========= ========= ========= =========
Number of customers (average)..................................... 60,082 59,558 58,966 58,514 58,088
Production (millions of gallons).................................. 6,229 6,206 6,023 6,175 6,390
Number of employees............................................... 164 168 179 177 204
</TABLE>
<PAGE> 33
Page 33
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and the notes thereto.
LIQUIDITY AND CAPITAL RESOURCES
During 1994 our Dividend Reinvestment and Common Stock Purchase Plan (DRIP)
provided over $1,700,000 of new equity capital including approximately $750,000
of new equity from the over 750 customers participating in the Customer Stock
Purchase Plan (CSPP), a recent amendment to the DRIP. These customers acquired
common shares near the market price low for the year. The decline in market
price during 1994 generally reflects the interest rate sensitivity of utility
common stocks whereby the stock market price will decline when long-term
interest rates rise.
Utility plant additions were financed through cash provided by operating
activities and funds received from others. Seasonal cash requirements were
provided through interim bank borrowings.
Interim bank loans payable at year end were approximately $1,250,000 lower than
last year. Management considers the current $9,000,000 line of credit with
three banks adequate to finance expected short-term borrowing requirements that
may arise from operations during 1995. Interest expense charged on interim
bank loans will fluctuate subject to financial market conditions experienced
during the year.
Management continued to reduce the Subsidiary's cost of capital through the
issuance of $12,050,000, 6.94%, First Mortgage Bonds, the proceeds of which
were used to refinance higher cost First Mortgage Bonds as well as the
$3,000,000, 9 1/2%, Preferred Stock issue.
A 12.5% return on average common equity was achieved again this year.
Likewise, for the second consecutive year interest coverage, the ratio of
utility operating income plus Federal and State income tax to annualized
interest expense on outstanding long-term debt, exceeded 4.0 times coverage.
RATE RELIEF AND INFLATION
The Subsidiary's last rate increase was effective March 25, 1991. That rate
decision included a 12.7% allowed return on common equity and a 10.74% allowed
return on rate base. Future economic and financial market conditions, coupled
with governmental regulations and fiscal policy, plus other factors which are
unpredictable and often beyond the control of the Company, will influence when
future rate relief will be required. Construction expenditures mandated to
comply with the amendments to the 1986 Safe Drinking Water Act (SDWA) will also
affect water rates charged to customers.
<PAGE> 34
Page 34
A Construction Work in Progress (CWIP) rate surcharge calculated at the
utility's last allowed return on rate base, applied to 90% of construction
expenditures for new facilities mandated by the SDWA, is available to provide a
cash return on the Subsidiary's mandated SDWA construction expenditures. The
Subsidiary has collected a CWIP surcharge in the past and expects to receive
approval of a similar surcharge with respect to any future significant SDWA
projects.
Likewise, the Department of Public Utility Control (DPUC) is currently
authorized to approve an acquisition surcharge when it determines, in
consultation with the Department of Public Health and Addiction Services
(DPHAS), that a distressed water system should, or must, be acquired by a
stockholder owned water company so as to assure the availability and potability
of water and the provision of water at adequate volume and pressure to the
customers served by the distressed water system. This surcharge is based on
the acquisition costs and construction improvements necessary to rehabilitate
the acquired water company's system and is calculated in a manner similar to
the CWIP surcharge. The Subsidiary has previously not requested or received
approval of such an acquisition surcharge. Although the Subsidiary is now
requesting an acquisition surcharge in connection with its probable acquisition
of a distressed water company and intends to apply for approval of an
acquisition surcharge with respect to any other mandated water company
acquisition, there is no assurance that the DPUC will permit such a surcharge.
The Company, like all other businesses, is affected by inflation, most notably
by the continually increasing costs required to maintain, improve, and expand
its service capacity. The cumulative effect of inflation results in
significantly higher facility replacement costs which must be recovered from
future cash flow. The ability of the Company to recover this increased
investment in facilities is dependent upon future revenue increases which are
subject to approval by the DPUC.
Management does not presently plan to petition the DPUC for an increase in
permanent rates or to implement a CWIP surcharge in 1995.
OUTLOOK FOR 1995
The Company's profitability is attributable to the sale and distribution of
water, the amount of which is dependent on seasonal weather fluctuations
throughout the year and particularly during the summer months when water demand
will vary with rainfall and temperature levels.
The Board of Directors has approved a $5,750,000 construction budget for 1995.
Funds provided by operating activities, given normal weather patterns and
related operating revenue billings, are expected to finance this construction
program. Refer to Note 14, Utility Plant and Construction Program, in Notes to
Consolidated Financial Statements for additional discussion of the Subsidiary's
future construction program. The improvements to the Killingworth Reservoir,
mentioned in last year's "Outlook", have been delayed due to environmental and
other regulatory requirements and are not included in the current three year
projection of construction costs.
<PAGE> 35
Page 35
Through December 31, 1994, the Company has incurred approximately $1,400,000 in
its effort to clean up the Reynolds Bridge Well Field (RBWF) contaminated with
MTBE, a gasoline additive. Additional expenditures of approximately $500,000
related to this clean-up effort are expected to be incurred in 1995. Refer to
Note 13, Recoverable Contamination Clean-Up Costs, for additional discussion of
RBWF clean-up costs. Management believes that these costs and future related
costs should be recovered from the responsible parties.
The DPUC is expected to mandate the takeover of a distressed water system in
1995. This water system, with over 400 customers, will cost the Company
approximately $1,300,000 to acquire and require approximately $1,500,000 of
water system improvements over the next three years. The related rate impact
on these customers is unknown at this time. However, the Company has requested
that an acquisition surcharge be implemented on the customers of the distressed
water system. A decision from the Department of Public Utility Control is
expected in March or April, 1995. The outcome of this mandated acquisition is
not expected to have a material impact on the Company's future financial
results.
The present dividend rate of $.42 per quarter, if maintained (subject to Board
of Directors' approval) represents an annual common stock dividend rate of
$1.68 per share.
The RBWF clean-up costs, plus the acquisition and improvement costs of the
distressed water system, in the amounts mentioned above, may be financed by a
combination of interim bank debt and common equity proceeds received through
the DRIP.
RESULTS OF OPERATIONS
1994 COMPARED WITH 1993
Net income applicable to common stock for 1994 increased from that of 1993 by
$313,000, or $.08 per average common share on an increased number of common
shares outstanding providing a 12.2% return on year end common equity for the
second consecutive year.
This improvement to net income resulted from a $398,000 decrease in interest
and debt expense, a $217,000 decline in preferred stock dividends of the
Subsidiary, and a $26,000 increase in other income and deductions, partially
offset by a $328,000 decrease in operating income.
The decrease in interest and debt expense and preferred dividends is primarily
due to the refinancing of 10%, 9 3/8%, and 8 1/2% First Mortgage Bonds and a 9
1/2% Preferred Stock issue with 6.94% First Mortgage Bonds in 1994, in addition
to the interest savings from the refinancings completed in 1993. Details of
these transactions are provided in Notes 7 and 8, Preferred Stock and Long-Term
Debt, in Notes to the Consolidated Financial Statements. The increase in other
income and deductions is primarily due to increased Allowance For Funds Used
During Construction.
<PAGE> 36
Page 36
Operating revenues were virtually the same as the prior year. Last year the
Subsidiary experienced an unusually hot and dry summer that increased
residential customers' water consumption. This year residential and commercial
consumption both dropped 1% from 1993 levels while industrial consumption
increased 5%. Fire protection and other revenues also increased by
approximately $75,000.
Details of the $326,000, or 1.2% increase in operating expense includes the
following:
Increase in expenses:
- Maintenance Expense - The expense savings from the debt refinancings
provided an opportunity to implement planned preventative maintenance
and non-critical repairs to our utility plant . . . . . . . . $177,000
- Income Taxes - Higher taxable income is the primary reason for this
increase. Refer to Notes 9 and 10, Federal Income Tax and Connecticut
Corporation Business Tax Expense, in Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,000
- Operation Expense - These expenses increased in total only 1/2% from
last year. Cost reduction and efficiencies offset the 4% average wage
increase granted to employees . . . . . . . . . . . . . . . . $ 65,000
- Depreciation Expense - Primarily due to utility plant placed in
service during 1994 and 1993 . . . . . . . . . . . . . . . . $ 49,000
- Payroll Taxes - Reflects the increase in FICA, Medicare, and State
Unemployment taxable wage bases and a higher State Unemployment tax
rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,000
Decrease in expenses:
- Municipal Taxes - Reflects lower assessed valuations following
revaluation in several towns . . . . . . . . . . . . . . . . $ 71,000
<PAGE> 37
Page 37
1993 COMPARED WITH 1992
Net income applicable to common stock for 1993 increased from that of 1992 by
$418,000, or $.13 per average common share on an increased number of common
shares outstanding.
This improvement resulted from a $534,000 decrease in interest and debt expense
partially offset by a $50,000 decrease in operating income and a $66,000
decrease in other income and deductions.
The $457,000 decrease in long-term debt expense reflects the refinancings of
long-term debt through the issuance of Series R, T and U First Mortgage Bonds
completed in 1992 and 1993. Additional details of these transactions are
provided in Note 8, Long-Term Debt in Notes to Consolidated Financial
Statements. The $77,000 decrease in other interest reflects a lower average
balance of interim loans outstanding in 1993 at reduced interest rates.
Operating revenues increased $941,000, or 2.5%, primarily due to a dry, hot
1993 summer season (as compared to a wet, cool 1992 summer) which increased
residential customers' water consumption by approximately 4%, partially offset
by a 14% decline in water volume consumed by industrial customers.
The $991,000 increase in operating expense is primarily due to increased income
and gross revenue taxes, $669,000 (principally due to higher taxable income),
increased maintenance expense, $319,000 (due primarily to implementation of
planned preventative maintenance and non-critical repairs to utility plant),
increase in depreciation expense, $125,000, partially offset by a net reduction
of $122,000 in all other expenses such as operation expenses and municipal
property taxes.
<PAGE> 38
Page 38
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Connecticut Water Service, Inc.:
We have audited the accompanying consolidated balance sheets and consolidated
statements of capitalization of Connecticut Water Service, Inc. (a Connecticut
corporation) and Subsidiary as of December 31, 1994, 1993 and 1992, and the
related consolidated statements of income and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Connecticut Water Service,
Inc. and Subsidiary as of December 31, 1994, 1993 and 1992, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
As discussed in Notes 1 and 2 to the financial statements, effective January 1,
1993, the Company changed its methods of accounting for income taxes and
postretirement benefits other than pensions.
/s/ Arthur Andersen LLP
Hartford, Connecticut
February 10, 1995
<PAGE> 39
Page 39
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
ASSETS 1994 1993 1992
------ --------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Utility Plant
Utility Plant.......................................................... $181,079 $176,308 $171,820
Construction Work in Progress.......................................... 3,369 2,596 1,617
Utility Plant Acquisition Adjustments.................................. (1,206) (1,206) (1,196)
--------- --------- ---------
183,242 177,698 172,241
Accumulated Provision for Depreciation................................. (42,458) (40,130) (36,544)
--------- --------- ---------
Net Utility Plant.................................................... 140,784 137,568 135,697
--------- --------- ---------
Investments
Unconsolidated Subsidiary at Underlying Equity......................... 35 35 35
Other.................................................................. 846 727 614
--------- --------- ---------
Total Investments.................................................... 881 762 649
--------- --------- ---------
Current Assets
Cash................................................................... 18 44 60
Accounts Receivable (Less Allowance,
1994 - $149; 1993 - $166; 1992 - $256)............................... 3,599 3,425 3,861
Accrued Unbilled Revenues.............................................. 2,800 2,798 2,841
Materials and Supplies, at Average Cost................................ 651 681 827
Prepayments and Other Current Assets................................... 864 255 323
--------- --------- ---------
Total Current Assets................................................. 7,932 7,203 7,912
--------- --------- ---------
Deferred Charges
Unamortized Debt Issuance Expense...................................... 5,587 5,111 4,315
Taxes Recoverable Through Future Rates................................. 9,200 10,000 --
Postretirement Benefits Other Than Pension Recoverable
Through Future Rates................................................. 757 640 --
Recoverable Contamination Clean-Up Costs............................... 4,700 912 200
Prepaid Income Taxes on Contributions in Aid of Construction........... 450 439 443
Other Costs............................................................ 950 445 480
--------- --------- ---------
Total Deferred Charges............................................... 21,644 17,547 5,438
--------- --------- ---------
Total Assets....................................................... $171,241 $163,080 $149,696
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 40
Page 40
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
CAPITALIZATION AND LIABILITIES 1994 1993 1992
------------------------------ --------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Capitalization (See Accompanying Statements)
Common Stockholders' Equity............................................ $47,983 $45,160 $43,138
Preferred Stock........................................................ 772 772 772
Preferred Stock with Mandatory Redemption Provisions................... -- 2,976 3,000
Long-Term Debt ........................................................ 54,600 51,600 51,600
--------- --------- ---------
Total Capitalization................................................. 103,355 100,508 98,510
--------- --------- ---------
Current Liabilities
Interim Bank Loans Payable............................................. 2,700 3,950 4,983
Current Portion of Long-Term Debt...................................... -- -- 150
Current Portion of Preferred Stock..................................... 30 30 102
Accounts Payable....................................................... 4,219 2,574 1,771
Accrued Taxes.......................................................... 1,810 1,466 1,787
Accrued Interest....................................................... 1,250 1,196 1,135
Accrued Recoverable Contamination Clean-Up Costs....................... 500 -- --
Other.................................................................. 1,544 1,263 1,082
--------- --------- ---------
Total Current Liabilities............................................ 12,053 10,479 11,010
--------- --------- ---------
Accrued Recoverable Contamination Clean-Up Costs......................... 2,811 -- --
--------- --------- ---------
Advances for Construction................................................ 12,099 11,584 11,995
--------- --------- ---------
Contributions in Aid of Construction..................................... 18,145 18,128 17,434
--------- --------- ---------
Deferred Federal Income Taxes............................................ 10,547 9,408 8,355
--------- --------- ---------
Unfunded Future Income Taxes............................................. 9,200 10,000 --
--------- --------- ---------
Unfunded Postretirement Benefits Other Than Pension...................... 757 640 --
--------- --------- ---------
Unamortized Investment Tax Credits....................................... 2,274 2,333 2,392
--------- --------- ---------
Total Capitalization and Liabilities............................... $171,241 $163,080 $149,696
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 41
Page 41
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<TABLE>
<CAPTION>
DECEMBER 31,
1994 1993 1992
--------- --------- ---------
Common Stockholders' Equity (THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Common Stock Without Par Value; Authorized -
7,500,000 Shares;
Shares Issued and Outstanding: 1994 - 2,870,559;
1993 - 2,789,977; 1992 - 2,751,331................................. $40,126 $38,218 $37,186
Stock Issuance Expense............................................... (1,183) (1,150) (1,150)
Retained Earnings.................................................... 9,040 8,092 7,102
--------- --------- ---------
Total Common Stockholders' Equity................................ 47,983 45,160 43,138
--------- --------- ---------
Cumulative Preferred Stock of
Connecticut Water Service, Inc.
Series A Voting, $20 Par Value; Authorized,
Issued and Outstanding 15,000 Shares............................... 300 300 300
Series $.90 Non-Voting, $16 Par Value;
Authorized 50,000 Shares, Issued and
Outstanding 29,499 Shares.......................................... 472 472 472
--------- --------- ---------
Total Preferred Stock of
Connecticut Water Service, Inc.................................. 772 772 772
--------- --------- ---------
Cumulative Preferred Stock of The Connecticut
Water Company, with Mandatory Redemption
Provisions, Voting, $100 Par Value; Authorized
50,000 Shares, Issued and Outstanding:
SHARES
--------------------------
SERIES 1994 1993 1992
------------- -------- ------- -------
4 3/4% 300 600 900 30 60 90
5 7/8% 0 0 400 -- -- 40
7% 0 0 320 -- -- 32
9 1/2% 0 30,000 30,000 -- 3,000 3,000
Stock Issuance Expense............................................... -- (54) (60)
--------- --------- ---------
30 3,006 3,102
Less Current Portion of Preferred Stock............................. 30 30 102
--------- --------- ---------
Total Preferred Stock of
The Connecticut Water Company................................... -- 2,976 3,000
--------- --------- ---------
Long-Term Debt
The Connecticut Water Company
First Mortgage Bonds
9 3/8% Series L, due 1997......................................... -- 1,800 1,875
7 1/4% Series M, due 2004......................................... -- -- 4,625
8 3/8% Series N, due 1993......................................... -- -- 8,000
8 1/2% Series O, due 1999......................................... -- 2,250 2,250
10% Series P, due 2004......................................... -- 5,000 5,000
6.9% Series Q, due 2021......................................... 10,000 10,000 10,000
5 7/8% Series R, due 2022......................................... 15,000 15,000 15,000
6.65% Series S, due 2020......................................... 8,000 8,000 --
5 3/4% Series T, due 2028......................................... 5,000 5,000 --
5.3% Series U, due 2028......................................... 4,550 4,550 --
6.94% Series V, due 2029......................................... 12,050 -- --
--------- --------- ---------
54,600 51,600 46,750
8.1% Unsecured Promissory Note, due 2008............................. -- -- 5,000
--------- --------- ---------
54,600 51,600 51,750
Less Current Portion of Long-Term Debt............................... -- -- 150
--------- --------- ---------
Total Long-Term Debt............................................. 54,600 51,600 51,600
--------- --------- ---------
Total Capitalization........................................... $103,355 $100,508 $98,510
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 42
Page 42
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992
--------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Operating Revenues....................................................... $38,129 $38,131 $37,190
--------- --------- ---------
Operating Expenses
Operation.............................................................. 12,929 12,864 12,950
Maintenance............................................................ 1,970 1,793 1,474
Depreciation........................................................... 3,086 3,037 2,912
Federal Income Taxes................................................... 3,769 3,710 3,163
Connecticut Corporation Business Taxes................................. 987 963 887
Taxes Other Than Income Taxes.......................................... 5,733 5,781 5,771
--------- --------- ---------
Total Operating Expenses.......................................... 28,474 28,148 27,157
--------- --------- ---------
Utility Operating Income................................................. 9,655 9,983 10,033
--------- --------- ---------
Other Income (Deductions)
Interest............................................................... 100 105 113
Allowance for Funds Used During Construction........................... 89 71 108
Preferred Stock Dividends of Subsidiary................................ (73) (290) (296)
Other.................................................................. 23 (29) 75
Taxes on Other Income.................................................. 26 65 (12)
--------- --------- ---------
Total Other Income (Deductions)................................... 165 (78) (12)
--------- --------- ---------
Interest and Debt Expense
Interest on Long-Term Debt............................................. 3,457 3,855 4,340
Other Interest Charges................................................. 295 273 350
Amortization of Debt Expense........................................... 188 210 182
--------- --------- ---------
Total Interest and Debt Expense................................... 3,940 4,338 4,872
--------- --------- ---------
Net Income Before Preferred Dividends.................................... 5,880 5,567 5,149
Preferred Stock Dividend Requirement..................................... 38 38 38
--------- --------- ---------
Net Income Applicable to Common Stockholders............................. $5,842 $5,529 $5,111
========= ========= =========
Weighted Average Common Shares Outstanding............................... 2,812 2,769 2,729
========= ========= =========
Earnings Per Average Common Share........................................ $2.08 $2.00 $1.87
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 43
Page 43
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Operating Activities:
Net Income Before Preferred Dividends of Parent........................ $5,880 $5,567 $5,149
--------- --------- ---------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation (including $150 in 1994, $157 in 1993 and
$214 in 1992 charged to other accounts)............................ 3,236 3,194 3,126
Change in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable and
Accrued Unbilled Revenues........................................ (176) 479 744
(Increase) Decrease in Other Current Assets........................ (579) 214 172
(Increase) Decrease in Other Non-Current Items..................... (870) (570) 207
Increase (Decrease) in Accounts Payable, Accrued
Expenses and Other Current Liabilities........................... 2,324 724 1,382
Increase (Decrease) in Deferred Income Taxes and
Investment Tax Credits, Net...................................... 1,080 994 968
--------- --------- ---------
Total Adjustments.............................................. 5,015 5,035 6,599
--------- --------- ---------
Net Cash Provided by Operating Activities...................... 10,895 10,602 11,748
--------- --------- ---------
Investing Activities:
Gross Additions to Utility Plant (including
Allowance for Funds Used During Construction of
$89 in 1994, $71 in 1993 and $108 in 1992)........................... (6,514) (5,688) (4,272)
--------- --------- ---------
Financing Activities:
Proceeds from Interim Bank Loans....................................... 2,700 3,950 4,983
Repayment of Interim Bank Loans........................................ (3,950) (4,983) (6,413)
Proceeds from Issuance of Long-Term Debt............................... 12,050 17,550 15,000
Reduction of Long-Term Debt Including Current Portion.................. (9,050) (17,700) (17,001)
Proceeds from Issuance of Common Stock................................. 1,908 1,032 930
Retirement of Preferred Stock.......................................... (3,030) (102) (102)
Charges Related to Redemption of Subsidiary's 9 1/2% Series
Preferred Stock...................................................... (257) -- --
Advances, Contributions and Funds From
Others for Construction, Net......................................... 594 906 1,182
Costs Incurred to Issue Long-Term Debt, Preferred
Stock, and Common Stock............................................. (697) (1,006) (1,690)
Cash Dividends Paid.................................................... (4,675) (4,577) (4,429)
--------- --------- ---------
Net Cash Provided by (Used in) Financing Activities............ (4,407) (4,930) (7,540)
--------- --------- ---------
Net Increase (Decrease) in Cash.......................................... (26) (16) (64)
Cash at Beginning of Year................................................ 44 60 124
--------- --------- ---------
Cash at End of Year...................................................... $18 $44 $60
========= ========= =========
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (Net of Amounts Capitalized)................................ $3,698 $4,189 $5,035
State and Federal Income Taxes....................................... $3,480 $3,945 $2,270
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 44
Page 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - Connecticut Water Service, Inc. (the Company) is the parent
company of The Connecticut Water Company (the Subsidiary). Intercompany
accounts and transactions have been eliminated in the accompanying consolidated
financial statements.
REGULATION - The Subsidiary's accounting policies conform to the Uniform System
of Accounts prescribed by the State of Connecticut Department of Public Utility
Control (DPUC) and to generally accepted accounting principles.
REVENUES - The Subsidiary accrues an estimate for the amount of revenues
relating to sales unbilled at the end of each quarter. Generally, all
customers are billed quarterly, except larger commercial and industrial
customers, and public fire protection customers, who are billed monthly. All
customers, except fire protection customers, are metered. Public fire
protection charges are based on the length and diameter of the water main and
number of hydrants in service. Private fire protection charges are based on
the diameter of the connection to the water main.
UTILITY PLANT - Utility plant is stated at original cost of such property when
first devoted to public service. The difference between the original cost and
the cost to the Subsidiary is charged or credited to utility plant acquisition
adjustments. Utility Plant accounts are charged with the cost of improvements
and replacements of property including an allowance for funds used during
construction. Retired or disposed of depreciable plant is charged to
accumulated provision for depreciation together with any costs applicable to
retirement, less any salvage received. Maintenance of utility plant is charged
to expense.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION - The Allowance for Funds Used
During Construction (AFUDC) represents the estimated cost of funds used to
finance the construction of the Subsidiary's utility plant. Generally, utility
plant under construction is not recognized as part of the Subsidiary's rate
base for ratemaking purposes until facilities are placed into service, and
accordingly, the Subsidiary charges AFUDC to the construction cost of utility
plant. Capitalized AFUDC, which does not represent current cash income, is
recovered through rates over the service lives of the facilities. The AFUDC
rate applied by the Subsidiary was 10.74% for all years reported.
<PAGE> 45
Page 45
DEPRECIATION - Depreciation is computed on a straight line basis at various
rates, approved by the DPUC, estimated to be sufficient to provide for the
recovery of the investment in utility plant over its useful life. Water
treatment facilities are depreciated using a 2.5% composite rate while most
other utility plant items use a composite rate of 1.64%. The provisions for
depreciation based on the average balance of depreciable property were 2.0% for
1994, 1993 and 1992.
CUSTOMERS' ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF CONSTRUCTION
AND RELATED PREPAID INCOME TAXES - Under the terms of construction contracts
with real estate developers and others, the Subsidiary receives advances for
the costs of new main installations. Refunds are made, without interest, as
services are connected to the main, over periods not exceeding fifteen years
and not in excess of the original advance. Unrefunded balances, at the end of
the contract period, are credited to Contributions in Aid of Construction
(CIAC) and are no longer refundable. Advances and CIAC received from
developers subsequent to 1986 are taxable to the Subsidiary for income tax
purposes when received. The DPUC allows partial recovery of this tax from real
estate developers and other third parties. The tax collected from third
parties is discounted by the present value of the tax depreciation benefits.
The difference between the tax paid by the Subsidiary and the tax collected is
recorded as a prepaid tax asset. This will be recovered through future tax
depreciation deductions.
INCOME TAXES - 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 the extent such income taxes are recoverable or
payable through future rates, an offsetting regulatory asset and liability have
been recorded in the accompanying Consolidated Balance Sheets. Since the
offsetting deferred asset and liability have no cash flow implications, there
is no impact shown on the Company's Cash Flow Statements.
The Company believes that all deferred income tax assets will be realized in
the future. Approximately $1,500,000 and $2,575,000, respectively, of the
December 31, 1994 and 1993 Unfunded Future Income Taxes is related to deferred
Federal income taxes. The remaining $7,700,000 and $7,425,000, respectively,
of the Unfunded Future Income Taxes on the balance sheet at December 31, 1994
and 1993, is related to deferred State income taxes.
<PAGE> 46
Page 46
Prior years' financial statements have not been restated for the adoption of
SFAS 109.
Deferred Federal income taxes have been provided for Federal investment tax
credits and accelerated depreciation subsequent to 1981, as required by Federal
income tax regulations. Deferred taxes have also been provided for temporary
differences in the recognition of certain expenses for tax and financial
statement purposes as allowed by DPUC ratemaking policies. The total of these
"Deferred Federal Income Taxes" are listed separately on the balance sheet from
the Unfunded Future Income Taxes which arose from the implementation of SFAS
109.
Connecticut Corporation Business Tax (CCBT) has been reflected using the
flow-through method of accounting for all tax accounting timing differences in
accordance with required DPUC ratemaking policies.
MUNICIPAL TAXES - Municipal taxes are expensed over the 12 month period
beginning on July 1 following the lien date, corresponding with the period in
which the municipal services are provided.
OTHER DEFERRED COSTS - In accordance with DPUC ratemaking procedures, costs
benefiting future periods, such as tank painting, are expensed over the periods
they benefit.
UNAMORTIZED DEBT ISSUANCE EXPENSE - The issuance costs of long-term debt,
including the remaining balance of issuance costs on long-term debt issues
that have been refinanced prior to maturity and related call premiums, are
amortized over the respective life of the outstanding debt, as approved by the
DPUC.
<PAGE> 47
Page 47
NOTE 2: PENSION COST AND OTHER EMPLOYEE BENEFITS
PENSION - The Subsidiary has a trusteed, non-contributory defined benefit
retirement plan (the Pension Plan) which covers all employees who have
completed one year of service. Benefits under the Pension Plan are based on
credited years of service and "average earnings", as defined in the Pension
Plan. The Subsidiary's policy is to fund accrued pension costs as permitted by
Federal income tax regulations. No funding was permitted for 1994 and 1993.
The table below sets forth the Pension Plan's funded status and amounts
recognized in the Company's year end Balance Sheets.
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(Thousands of dollars)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . . . . . . . . . . . . . . . . . $ 6,044 $ 6,776 $ 5,355
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . 6,322 6,909 5,431
Projected benefit obligation . . . . . . . . . . . . . . . . . . . 8,184 9,568 7,694
Pension Plan assets at fair value, primarily
equity securities and U.S. bonds . . . . . . . . . . . . . . . . . 8,825 9,412 8,753
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . (8,184) (9,568) (7,694)
------- ------- -------
Pension Plan assets in excess of (under) projected
benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . 641 (156) 1,059
Add (Deduct):
Unrecognized net gain from past experience
different from that assumed and effects
of changes in assumptions . . . . . . . . . . . . . . . . . . . (1,768) (534) (1,791)
Unrecognized net transition asset at January 1,
1986 being recognized over 15 years . . . . . . . . . . . . . . (226) (259) (291)
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . 347 388 421
------- ------- -------
Prepaid (accrued) pension cost as of December 31 . . . . . . . . . $(1,006) $ (561) $ (602)
======= ======= =======
</TABLE>
Net periodic pension cost for 1994, 1993, and 1992 included the following
components:
<TABLE>
<S> <C> <C> <C>
Service cost-benefits earned during the period . . . . . . . . . . . . $ 469 $ 388 $ 331
Interest cost on projected benefit obligation . . . . . . . . . . . . . 631 618 578
Actual return on Pension Plan assets . . . . . . . . . . . . . . . . . 144 (796) (696)
Deferred investment gain (loss) . . . . . . . . . . . . . . . . . . . . (813) 117 114
Amortization of:
Unrecognized net transition asset . . . . . . . . . . . . . . . . . . (32) (32) (32)
Unrecognized net (gain) loss . . . . . . . . . . . . . . . . . . . . 14 (89) (106)
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . 32 33 33
------- ------- -------
Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . . $ 445 $ 239 $ 222
======= ======= =======
</TABLE>
<PAGE> 48
Page 48
The actuarial present value of the projected benefit obligation was
determined based on the following assumptions:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate . . . . . . 7.75% 6.5% 8.0%
and
Rate of increase in future
compensation levels. . . . . . . . . . . . 5.3% 5.3% 6.6%
The long-term expected rate of return
on plan assets used in the determination
of pension costs . . . . . . . . . . . . . . 8.0% 8.5% 8.0%
</TABLE>
The weighted average discount rate assumption is based on the return
provided by high quality fixed income investments at year end. This rate of
return assumption will more than likely change annually. The wage rate
assumption and the rate of return on plan assets are longer out-looking
assumptions which may be revised to reflect changes in economic conditions.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN - The Subsidiary provides additional
pension benefits to senior management through a supplemental executive
retirement plan. At December 31, 1994 the actuarial present value of the
projected benefit obligation was $190,000. Expense associated with this plan
was $72,000 for 1994, $123,000 for 1993, and $95,000 for 1992.
POSTRETIREMENT BENEFITS OTHER THAN PENSION (PBOP) - In addition to providing
pension benefits, the Subsidiary provides certain medical, dental and life
insurance benefits to retired employees partially funded by a 501(c)(9)
Voluntary Employee Beneficiary Association Trust (VEBA) that has been approved
by the DPUC. Substantially all of the Subsidiary's employees may become
eligible for these benefits if they retire from the Company on or after age 55
with 10 years of service with the Subsidiary. The contributions for calendar
years 1994, 1993, and 1992 were $250,000, $250,000, and $345,000, respectively
and were deductible by the Subsidiary for Federal Income Tax purposes.
<PAGE> 49
Page 49
The Financial Accounting Standards Board (FASB) issued new standards of
accounting for postretirement health care benefits (SFAS 106) which the Company
adopted in 1993. A deferred regulatory asset has been recorded on the
Company's books to reflect the amount which represents the future operating
revenues expected to be collected in customer rates when the associated
liabilities become payable, including appropriate income and gross earnings
taxes. The Company believes that the deferred asset recorded from the adoption
of this statement will be recovered in the future through the ratemaking
process as the DPUC has issued decisions for other water companies authorizing
rate recovery of SFAS 106 expense and has allowed the recording of a regulatory
asset for the portion of the costs to be recovered through future rates. Since
the offsetting deferred asset and liability have no cash flow implications,
there is no impact shown on the Company's cash flow statements.
For SFAS 106, the Company has elected to recognize the transition obligation on
a delayed basis over a period equal to the plan participants' 21.6 years of
average future service.
Prior years' financial statements have not been restated for the adoption of
SFAS 106.
During 1993, three changes in the Company's policy of providing PBOP's
provisions were adopted effective January 1, 1994 and are reflected in the
Accumulated Postretirement Benefit Obligation (APBO) as of December 31, 1993.
These changes are summarized below:
- Participants retiring on or after January 1, 1994 will contribute
20% of the annual medical premium for medical coverage.
- Active employees will be eligible to participate at age 45.
- Participants hired on or after January 1, 1994 will receive full
PBOP benefits after 30 years of service. Benefits will be prorated
for less than 30 years of service.
<PAGE> 50
Page 50
The table below sets forth the PBOP plan's funded status and unfunded amounts
recognized in the Company's 1994 and 1993 year end Balance Sheets.
<TABLE>
<CAPTION>
1994 1993
---- ----
(Thousands of dollars)
<S> <C> <C>
Accumulated Postretirement Benefit Obligation (APBO):
Current retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,757) $(2,345)
Active employees fully eligible for benefits . . . . . . . . . . . . . . . . (401) (354)
Other active employees . . . . . . . . . . . . . . . . . . . . . . . . . . . (784) (1,145)
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,942) (3,844)
Fair value of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 901 836
------- -------
APBO in excess of fair value of assets . . . . . . . . . . . . . . . . . . . . . . (2,041) (3,008)
------- -------
Unrecognized amounts:
Transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,968 2,616
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Net loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,684) (248)
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,284 2,368
------- -------
Unfunded PBOP at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 757 $ 640
======= =======
Net periodic PBOP costs include the following components:
Service cost - benefits attributed to service
during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 158 $ 273
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 429
Actual return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) (24)
Amortization of transition obligation . . . . . . . . . . . . . . . . . . . . . . . 165 221
Amortization of Losses (Gains) . . . . . . . . . . . . . . . . . . . . . . . . . . (128) --
Deferral of asset (loss) gain during the year . . . . . . . . . . . . . . . . . . . (29) (9)
------- -------
Net Periodic PBOP Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 366 $ 890
======= =======
</TABLE>
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation for 1994 was 7.75% and 6.5% for 1993. The
expected long-term after tax return on PBOP assets was 5% for both 1994 and
1993.
In determining the accumulated postretirement benefit obligation, two sets of
medical cost trend rates were used; for retired employees prior to age 65 and
for retirees age 65 and over. Health care cost trends of 14% and 10%,
respectively, were assumed for 1994, grading down over the years to 5.5% in
1999 and after.
<PAGE> 51
Page 51
The health care cost trend rate has a significant effect on the accumulated
postretirement benefit obligation and net periodic cost. A
one-percentage-point increase in the assumed health care cost trend rates would
increase the accumulated postretirement benefit obligation at December 31, 1994
by $300,000 and would increase the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for the year then ended
by $50,000. Accordingly, subsequent changes would increase or decrease the
regulatory assets and liabilities discussed above.
SAVINGS PLAN - The Subsidiary maintains an employee savings plan which allows
participants to contribute from 1% to 10% of pre-tax compensation. Beginning
January 1, 1993 the Subsidiary matches either 25 or 50 cents for each dollar
contributed by the employee up to 3% of the employees' compensation depending
on the Company's earnings per average common share (EPS). If EPS in the prior
year exceeds 110% of dividends paid per common share, the applicable percentage
is 50%; otherwise the match is 25%. The Subsidiary's contribution charged to
expense in 1994 and 1993 was $60,000 and $47,000, respectively, in each case
based on a 50% match.
PERFORMANCE STOCK PROGRAM - The Company has a Performance Stock Program whereby
restricted shares of Common Stock may be awarded annually to Officers of the
Subsidiary. When the goals established by the Compensation Committee have been
attained, the restrictions on the stock are removed. Amounts charged to
expense pursuant to this plan were $120,000, $66,000 and $25,000 for 1994, 1993
and 1992, respectively.
<PAGE> 52
Page 52
NOTE 3: COMMON STOCK
The summary of the changes in the common stock accounts for the period January
1, 1992 through December 31, 1994, appears below:
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------------
ISSUANCE
SHARES AMOUNT EXPENSE
------ ------ -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Balance, January 1, 1992 . . . . . . . . . . . . . . . . . . 2,711,125 $36,256 $1,148
Stock issued through Dividend Reinvestment Plan . . . 37,868 905 2
Stock issued through Performance Stock Program . . . . 2,338 25 --
--------- ------- ------
Balance, December 31, 1992 . . . . . . . . . . . . . . . . . 2,751,331 37,186 1,150
Stock issued through Dividend Reinvestment Plan . . . 33,803 916 --
Stock issued through Performance Stock Program . . . . 3,074 66 --
Stock issued to Employee Savings 401-K Match Plan . . 1,769 50 --
--------- ------- -------
Balance, December 31, 1993 . . . . . . . . . . . . . . . . . 2,789,977 38,218 1,150
STOCK ISSUED THROUGH DIVIDEND
REINVESTMENT PLAN (1) . . . . . . . . . . . . . . . . 74,053 1,728 33
STOCK ISSUED THROUGH
PERFORMANCE STOCK PROGRAM . . . . . . . . . . . . . . 4,061 120 --
STOCK ISSUED TO EMPLOYEE SAVINGS 401-K MATCH PLAN . . 2,468 60 --
--------- ------- -------
BALANCE, DECEMBER 31, 1994 (2) . . . . . . . . . . . . . . . 2,870,559 $40,126 $ 1,183
========= ======= =======
</TABLE>
(1) Includes approximately 33,000 shares issued through the Customer Stock
Purchase Plan, a 1994 amendment to the Dividend Reinvestment Plan.
(2) Includes 5,847 restricted shares issued through the Performance Stock
Program.
<PAGE> 53
Page 53
NOTE 4: COMMON STOCK RIGHTS PLAN
In 1988 the Board of Directors authorized a dividend distribution of one right
to purchase Common Stock (Right) for each outstanding share of Common Stock.
Each Right entitles the registered holder under certain circumstances to
purchase from the Company one share of Common Stock (or substitute equity or
debt securities) at an exercise price (subject to antidilution adjustments) of
$50 per share, or under other circumstances, common stock or other securities
or assets of an acquiring entity or of the Company. The Rights are not
currently exercisable or separately transferable apart from the Common Stock.
The Rights can be redeemed by the Board of Directors under certain
circumstances at a price of $.01 per Right. The Agreement pursuant to which
the Rights were issued may be amended by the Board of Directors under certain
circumstances. The Rights expire on October 11, 1998.
NOTE 5: ANALYSIS OF RETAINED EARNINGS
The summary of the changes in Retained Earnings for the period January 1, 1992
through December 31, 1994, appears below:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Balance at beginning of year . . . . . . . . . . . . . . . . $ 8,092 $ 7,102 $ 6,382
Income before preferred stock dividends of Company . . . . . 5,880 5,567 5,149
------- ------- -------
13,972 12,669 11,531
------- ------- -------
Charges Related to Redemption of Subsidiary's 9 1/2% Series
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . 257 -- --
------- ------- -------
Dividends declared:
Cumulative preferred, Series A, $.80 per share . . . . . 12 12 12
Cumulative preferred, Series $.90, $.90 per share . . . . 26 26 26
Common stock:
1994 $1.65 per share . . . . . . . . . . . . . . . . . . 4,637 -- --
1993 $1.64 per share . . . . . . . . . . . . . . . . . . -- 4,539 --
1992 $1.61 per share . . . . . . . . . . . . . . . . . . -- -- 4,391
------- ------- -------
4,675 4,577 4,429
------- ------- -------
Balance at end of year . . . . . . . . . . . . . . . . . . . $ 9,040 $ 8,092 $ 7,102
======= ======= =======
</TABLE>
<PAGE> 54
Page 54
NOTE 6: RESTRICTIONS ON DIVIDENDS
The Company may not pay any dividends on its Common Stock unless full
cumulative dividends to the preceding dividend date for all outstanding shares
of Preferred Stock of the Company have been paid or set aside for payment. All
such preferred stock dividends have been paid.
The income of the Company is derived mainly from the earnings of its
Subsidiary. At December 31, 1994, the retained earnings of the Subsidiary
aggregated $9,363,000. Restrictions contained in the Subsidiary's mortgage
indenture limit the amount of cash dividends payable on the Subsidiary's Common
Stock to $9,113,000. The terms of the Subsidiary's outstanding Preferred Stock
prohibit payment of cash dividends on the Subsidiary's Common Stock in the
event of an arrearage in the payment of cumulative dividends on the preferred
stock. The Subsidiary is in compliance with the preferred stock restrictions.
NOTE 7: PREFERRED STOCK
All or any part of any Series of either class of the Company's issued Preferred
Stock may be called for redemption by the Company at any time. The per share
redemption price of the Series A and Series $.90 Preferred Stock, if called by
the Company, is $21.00 and $16.00, respectively.
The Company is authorized to issue 400,000 shares of an additional class of
Preferred Stock, $25 par value, the general preferences, voting powers,
restrictions and qualifications of which are generally similar to the Company's
existing Preferred Stock. No shares of the $25 par value Preferred Stock have
been issued to date.
The Company is also authorized to issue 1,000,000 shares of $1 par value
preference stock junior to the Company's existing Preferred Stock in rights to
dividends and upon liquidation of the Company. No shares of the preference
stock have been issued.
The Subsidiary redeemed all 30,000 shares of the $100 par, 9 1/2% Series
Preferred Stock during March, 1994 with the proceeds received from the Series
V, First Mortgage Bond that was issued on that date. (See Note 8 - Long-Term
Debt)
In 1995, the remaining $30,000 balance, or 300 shares at par, of the 4 3/4%
Series Preferred Stock will be redeemed in accordance with the sinking fund
provisions.
<PAGE> 55
Page 55
NOTE 8: LONG-TERM DEBT
In June, 1993, the Subsidiary issued a $5,000,000, 5 3/4%, Series T, First
Mortgage Bond, which secures tax exempt Water Facilities Revenue Refunding
Bonds maturing June 1, 2028, the proceeds of which were used to redeem the
Subsidiary's $5,000,000, 8.1% unsecured promissory note on July 6, 1993.
In September, 1993, the Subsidiary issued a $4,550,000, 5.3%, Series U, First
Mortgage Bond, which secures tax exempt Water Facilities Revenue Refunding
Bonds maturing September 1, 2028, the proceeds of which were used to redeem the
$4,550,000, 7 1/4% Series M, First Mortgage Bond on October 4, 1993.
In October, 1993, the Subsidiary issued an $8,000,000, 6.65%, Series S, First
Mortgage Bond, which secures tax exempt Water Facilities Revenue Refunding
Bonds maturing in 2020, the proceeds of which were used to refund the
$8,000,000, 8 3/8% (plus 1% letter of credit fee), Series N, First Mortgage
Bond that matured December 15, 1993.
On January 4, 1994, the Subsidiary issued a $4,050,000, 6.94%, Series V, First
Mortgage Bond, maturing January, 2029, the proceeds of which were used to
redeem the 9 3/8%, Series L and 8 1/2%, Series O, First Mortgage Bonds. During
March, 1994, an additional $8,000,000, 6.94%, Series V, First Mortgage Bond
was issued. The proceeds of this transaction were used to redeem the
$5,000,000, 10%, Series P, First Mortgage Bonds as well as all 30,000 shares of
the Subsidiary's $100 par, 9 1/2% Preferred Stock.
Substantially all utility plant is pledged as collateral for the Subsidiary's
long-term debt.
There are no mandatory sinking fund payments required on the outstanding First
Mortgage Bonds at December 31, 1994. However, Series Q and R First Mortgage
Bonds provide for an estate redemption right whereby the estate of deceased
bondholders or surviving joint owners may submit bonds to the Trustee for
redemption at par subject to a $25,000 per individual holder and a 3% annual
aggregate limitation.
<PAGE> 56
Page 56
NOTE 9: FEDERAL INCOME TAX EXPENSE
The following is an analysis of the consolidated Federal income tax provision
and a reconciliation of the consolidated expected Federal income tax, at the
statutory Federal income tax rate, to the actual tax expense:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Charged to operations:
Current provision . . . . . . . . . . . . . . . . . . . . . . . . . . $2,563 $2,581 $2,047
------ ------ ------
Deferred tax:
Investment tax credit - amortization . . . . . . . . . . . . . . . (18) (19) (18)
Capitalized interest - net . . . . . . . . . . . . . . . . . . . . 24 28 32
Depreciation - net . . . . . . . . . . . . . . . . . . . . . . . . 1,115 1,025 994
Advances and CIAC - net . . . . . . . . . . . . . . . . . . . . . 85 95 108
------ ------ ------
Total deferred tax . . . . . . . . . . . . . . . . . . . . . . 1,206 1,129 1,116
------ ------ ------
Total charged to operations . . . . . . . . . . . . . . . . . . 3,769 3,710 3,163
------ ------ ------
Charged to other income:
Current provision . . . . . . . . . . . . . . . . . . . . . . . . . . -- (30) 29
Deferred investment tax credit - amortization . . . . . . . . . . . (39) (40) (40)
------ ------ ------
Total charged to other income . . . . . . . . . . . . . . . . . (39) (70) (11)
------ ------ ------
Total Federal income tax expense . . . . . . . . . . . . . . $3,730 $3,640 $3,152
====== ====== ======
Pre-tax income before preferred stock dividends of
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,683 $9,497 $8,597
====== ====== ======
Computed tax expense at 34% . . . . . . . . . . . . . . . . . . . . . . . $3,292 $3,229 $2,923
Increase (reduction) in taxes resulting from
"flow through" accounting for:
Excess of book over tax depreciation . . . . . . . . . . . . . . . 163 156 129
Property taxes deducted for tax less than
expense per books . . . . . . . . . . . . . . . . . . . . . . . 74 181 178
Customer conservation program costs . . . . . . . . . . . . . . . -- -- 113
Issuance expense of refunded debt issues
deducted for tax in excess of expense
per books . . . . . . . . . . . . . . . . . . . . . . . . . . . (27) (85) (236)
Pension costs deducted for tax less than (in
excess of) expense per books . . . . . . . . . . . . . . . . . 149 121 (22)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 38 67
------ ------ ------
Total Federal income tax expense . . . . . . . . . . . . . . $3,730 $3,640 $3,152
====== ====== ======
Effective tax rate (% of pre-tax income) . . . . . . . . . . . . . . . . 38.5% 38.3% 36.7%
==== ==== ====
</TABLE>
<PAGE> 57
Page 57
NOTE 10: CONNECTICUT CORPORATION BUSINESS TAX EXPENSE
The following is an analysis of the consolidated Connecticut Corporation
Business tax expense and a reconciliation of the consolidated expected tax at
the statutory rate to the actual tax expense:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Charged to operations:
Current provision . . . . . . . . . . . . . . . . . . . . . . . . . . $ 987 $ 963 $ 887
Charged to other income:
Current provision . . . . . . . . . . . . . . . . . . . . . . . . . . -- (12) 9
------- ------ ------
Total Connecticut Corporation
Business tax expense . . . . . . . . . . . . . . . . . . . . $ 987 $ 951 $ 896
======= ====== ======
Pre-tax income before preferred stock
dividends of Subsidiary . . . . . . . . . . . . . . . . . . . . . . . $10,670 $10,448 $9,493
======= ======= ======
Computed tax expense at 11.5% . . . . . . . . . . . . . . . . . . . . . . $ 1,227 $ 1,202 $ --
Computed tax expense at 12.65% . . . . . . . . . . . . . . . . . . . . . -- -- 1,201
Increase (reduction) in taxes resulting from "flow
through" accounting for:
Excess of tax over book depreciation . . . . . . . . . . . . . . . . (367) (348) (394)
Other timing differences . . . . . . . . . . . . . . . . . . . . . . 127 97 89
------- ------- ------
Total Connecticut Corporation Business tax
expense . . . . . . . . . . . . . . . . . . . . . . . . . . $ 987 $ 951 $ 896
======= ======= ======
Effective tax rate (% of pre-tax income) . . . . . . . . . . . . . . . . 9.3% 9.1% 9.4%
=== === ===
</TABLE>
<PAGE> 58
Page 58
NOTE 11: TAXES OTHER THAN INCOME TAXES
Taxes Other than Income Taxes consist of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Municipal property taxes . . . . . . . . . . . . . . . . . . . . . . . $3,331 $3,402 $3,456
Payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496 473 455
Connecticut gross earnings tax . . . . . . . . . . . . . . . . . . . . 1,906 1,906 1,860
------ ------ ------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,733 $5,781 $5,771
====== ====== ======
</TABLE>
NOTE 12: LINES OF CREDIT
During 1994 bank lines of credit were reduced to $9,000,000 relative to the
construction program. The unused lines of credit at December 31, 1994 was
$6,300,000, which is similar to the previous two years. Commitment fees of
approximately $14,000, $20,000, and $34,000 were paid in 1994, 1993, and 1992,
respectively, on the lines of credit.
At December 31, 1994, 1993, and 1992, the weighted average interest rate on
short-term borrowings outstanding were 6.32%, 3.38%, and 4.03%, respectively.
NOTE 13: RECOVERABLE CONTAMINATION CLEAN-UP COSTS
During the latter part of 1992 it was discovered that the Subsidiary's Reynolds
Bridge well field in Thomaston, Connecticut, was contaminated with methyl
tertiary butyl ether (MTBE), a gasoline additive. At this time the Subsidiary
is implementing an appropriate remediation program to clean up the well site.
In 1994 legal action was initiated by the Company against all parties deemed
responsible for such contamination in order to obtain recovery of the
Subsidiary's investigation, clean-up and water treatment and supply costs. The
lawsuit is still in the discovery stage. The magnitude of such costs is
unknown at this time, but it is presently estimated that such costs may exceed
$4,700,000 of which approximately $1,400,000 has been incurred at December 31,
1994, and $500,000 is expected to be incurred in 1995. The clean-up process
may take ten years or more to complete. The Company has reflected the total
estimated clean-up costs as a deferred asset in the accompanying consolidated
balance sheets representing costs which management believes will be recoverable
from third parties or through future rates. A related liability has been
recorded representing expected future clean-up costs. The offsetting deferred
asset and short and long-term liabilities have no cash flow implications,
therefore, no impact is shown on the Company's cash flow statement. The
Subsidiary is presently purchasing water from a public water supply system to
provide service to its customers at normal levels. The Company and its legal
counsel presently believe that any such costs which are not recovered from
third parties should be allowed to be recovered through rates charged for water
service and that the ultimate resolution of this matter will not have a
material impact on the results of operations or financial condition of the
Company.
<PAGE> 59
Page 59
NOTE 14: UTILITY PLANT AND CONSTRUCTION PROGRAM
The components of utility plant and equipment are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Source of Supply . . . . . . . . . . . . . . . . . . . . . $ 14,814 $ 13,562 $ 13,062
Pumping . . . . . . . . . . . . . . . . . . . . . . . . . . 10,039 9,980 9,644
Water Treatment . . . . . . . . . . . . . . . . . . . . . . 35,147 35,335 34,885
Transmission and Distribution . . . . . . . . . . . . . . . 110,425 108,127 105,480
General (including intangible) . . . . . . . . . . . . . . 8,726 8,747 8,194
Held for Future Use . . . . . . . . . . . . . . . . . . . . 1,928 557 555
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . $181,079 $176,308 $171,820
======== ======== ========
</TABLE>
The amounts of depreciable plant at December 31, 1994, 1993, and 1992, included
in total plant were $167,944,000, $163,848,000, and $159,941,000, respectively.
The Subsidiary is engaged in a continuous construction program. The
Subsidiary's estimated annual capital expenditures, net of amounts financed by
customer advances and contributions in aid of construction, are expected to be
$5,750,000 during 1995 and $6,600,000 during 1996, increasing to $11,850,000 in
1997. The 1997 projection includes engineering and initial construction phases
for the modifications to the Rockville Water Treatment Plant which are
anticipated to be completed by 1999. A preliminary construction cost estimate
for this project is at least $20,000,000. During the period 1998 to 2000
construction expenditures for routine improvements to the water distribution
system are expected to be approximately $5,000,000 each year.
<PAGE> 60
Page 60
NOTE 15: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each of the following financial instruments.
CASH AND TEMPORARY CASH INVESTMENTS - The carrying amount approximates fair
value.
FIRST MORTGAGE BONDS - The fair value of the Company's fixed rate long-term
debt is based upon borrowing rates currently available to the Company.
As of December 31, 1994 and 1993, the estimated fair value of the Company's
long-term debt was $47,600,000 and $59,100,000, respectively, as compared to
the carrying amounts of $54,600,000 and $51,600,000, respectively.
The fair values shown above have been reported to meet the disclosure
requirements of Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Values of Financial Instruments" and do not purport to
represent the amounts at which those obligations would be settled.
NOTE 16: QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the years ended December 31, 1994 and
1993 appears below:
<TABLE>
<CAPTION>
NET INCOME EARNINGS
UTILITY APPLICABLE TO PER AVERAGE
OPERATING REVENUES OPERATING INCOME COMMON STOCK COMMON SHARE
------------------ ------------------- ---------------- ---------------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
Quarter 1994 1993 1994 1993 1994 1993 1994 1993
------- ------ ------ ------ ------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First............... $ 8,864 $ 8,760 $ 2,111 $ 2,132 $1,099 $1,012 $ .39 $ .37
Second.............. 9,201 9,099 2,008 2,154 1,077 995 .38 .36
Third............... 11,022 11,230 3,467 3,501 2,518 2,372 .90 .86
Fourth.............. 9,042 9,042 2,069 2,196 1,148 1,150 .41 .41
------- ------- ------- ------- ------ ------ ----- -----
Year............. $38,129 $38,131 $ 9,655 $9,983 $5,842 $5,529 $2.08 $2.00
======= ======= ======= ====== ====== ====== ===== =====
</TABLE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE> 61
Page 61
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3), the information called for by
Items 10, (except for information concerning the executive officers of the
Company) 11, 12, and 13 is hereby incorporated by reference from the Company's
definitive proxy statement filed by EDGAR on or about March 13, 1995.
Information concerning the executive officers of the Company is included as
Item 4.1 of this report.
<PAGE> 62
Page 62
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(A) Documents filed as part of this report:
(1) Consolidated Financial Statements:
<TABLE>
<CAPTION>
Page Number
in this Report
--------------
<S> <C>
Report to Independent Auditors . . . . . . . . . . . . . . . . . . . . . . 38
Consolidated Balance Sheets -
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . 39-40
Consolidated Statements of Capitalization -
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . 41
Consolidated Statements of Income -
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . 42
Consolidated Statements of Cash Flows -
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . 43
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 44-60
</TABLE>
(2) Financial Statement Schedules for the years ended December 31,
1994, 1993 and 1992:
Report of Independent Public Accountants on Schedules
Schedule II - Valuation and Qualifying Accounts
All other schedules provided for in the applicable accounting
regulations of the Securities and Exchange Commission have been
omitted because of the absence of conditions under which they are
required or because the required information is set forth in the
financial statements or notes thereto.
(3) Exhibits:
Exhibits heretofore filed with the Securities and Exchange Commission
as indicated below are incorporated herein by reference and made a
part hereof as if filed herewith. Exhibits marked by asterisk (*) are
being filed herewith.
<PAGE> 63
Page 63
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1 Certificate of Incorporation of Connecticut Water Service, Inc. amended and restated September 15, 1988.(Exhibit
3.1 to Form 10-K for year ended December 31, 1989)
3.2 Certificate Amending Certificate of Incorporation of Connecticut Water Service, Inc. creating $25 par value
Preferred Stock dated September 5, 1989. (Exhibit 3.1a to Form 10-K for year ended December 31, 1989)
3.3 * By-Laws, as amended, of Connecticut Water Service, Inc. as amended January 18, 1995.
3.4 Charter of The Connecticut Water Company and amendments thereto (Certificate of Incorporation) through November 13,
1960. (Exhibit 3.2 to Registration Statement No. 2-61843)
3.5 Articles of General Preferences, Voting Powers, Restrictions and Qualifications of the Preferred Stock of The
Connecticut Water Company. (Exhibit 3.3 to Registration Statement No. 2-61843)
3.6 Certificate Amending Certificate of Incorporation of The Connecticut Water Company effective May 4, 1970 increasing
authorized Preferred Stock. (Exhibit 3.4 to Registration Statement No. 2-61843)
3.7 Resolutions of stockholders of The Connecticut Water Company adopted November 14, 1960 creating Preferred Stock, 5
7/8% Series. (Exhibit 3.5 to Registration Statement No. 2-61843)
3.8 Certificate Amending Certificate of Incorporation of The Connecticut Water Company dated May 8, 1965 creating
Preferred Stock, 4 3/4% Series. (Exhibit 3.6 to Registration Statement No. 2-61843)
3.9 Certificate Amending Certificate of Incorporation of The Connecticut Water Company dated June 20, 1968 creating
Preferred Stock, 7% Series. (Exhibit 3.6 to Registration Statement No. 2-61843)
3.10 Purchase Agreement dated May 20 1968 with respect to sale of Preferred Stock, 7% Series, including Common Stock
dividend restriction in Section 6(e) thereof of The Connecticut Water Company (Exhibit 3.8 to Registration
Statement No. 2-61843)
3.11 Certificate Amending Certificate of Incorporation of The Connecticut Water Company dated April 10, 1975. (Exhibit
3.9 to Registration Statement No. 2-54353)
</TABLE>
<PAGE> 64
Page 64
<TABLE>
<S> <C>
3.12 Certificate Amending Certificate of Incorporation of The Connecticut Water Company dated December 22, 1980,
creating Preferred Stock, 12 1/2% Series. (Exhibit 2(k) to Form 10-K for the year ended December 31, 1980)
3.13 Purchase Agreement dated December 1, 1980 with respect to sale of Preferred Stock, 12 1/2% Series. (Exhibit 2(1)
to Form 10-K for the year ended December 31, 1980)
3.14 Resolution of The Connecticut Water Company Board of Directors creating Preferred Stock, 9 1/2% Series dated
March 30, 1989. (Exhibit 3.13 to Form 10-K for year ended December 31, 1989)
3.15 Purchase Agreement with respect to sale of Preferred Stock, 9 1/2% Series dated March 1, 1989. (Exhibit 3.14 to
Form 10-K for year ended December 31, 1989)
3.16 Certificate Amending Certificate of Incorporation by Action of Board of Directors and Shareholders of The
Connecticut Water Company to reduce Director's Liability dated November, 1989. (Exhibit 3.15 to Form 10-K for year
ended December 31, 1989)
4.1 Indenture of Mortgage and Deed of Trust from The Connecticut Water Company to The Connecticut Bank and Trust
Company, Trustee, dated as of June 1, 1956. (Exhibit 4.3(a) to Registration Statement No. 2-61843)
4.2 Supplemental Indentures thereto dated as of
(i) February 1, 1958 (Exhibit 4.3(b) (i) to Registration Statement No. 2-61843)
(ii) September 1, 1962 (Exhibit 4.3(b) (ii) to Registration Statement No. 2-61843)
(iii) January 1, 1966 (Exhibit 4.3(b) (iii) to Registration Statement No. 2-61843)
(iv) July 1, 1966 (Exhibit 4.3(b) (iv) to Registration Statement No. 2-61843)
(v) January 1, 1971 (Exhibit 4.3(b) (v) to Registration Statement No. 2-61843)
(vi) September 1, 1974 (Exhibit 4.3(b) (vi) to Registration Statement No. 2-61843)
(vii) December 1, 1974 (Exhibit 4.3(b) (vii) to Registration Statement No. 2-61843)
(viii) January 1, 1976 (Exhibit 4(b) to Form 10-K for the year ended 12/31/76)
(ix) January 1, 1977 (Exhibit 4(b) to Form 10-K for the year ended 12/31/76)
(x) September 1, 1978 (Exhibit 2.12(b) (x) to Registration Statement No. 2-66855)
(xi) December 1, 1978 (Exhibit 2.12(b) (xi) to Registration Statement No. 2-66855)
(xii) June 1, 1979 (Exhibit 2.12(b) (xii) to Registration Statement No. 2-66855)
(xiii) December 1, 1983 (Exhibit 4.2 (xiii) to Form 10-K for the year ended 12/31/83)
(xiv) January 1, 1987 (Exhibit 4.2 (xiv) to Form 10-K for the year ended 12/31/86)
</TABLE>
<PAGE> 65
Page 65
<TABLE>
<S> <C>
(xv) May 1, 1989 (Exhibit 4.2 (xv) to Form 10-K for year ended 12/31/89)
(xvi) June 1, 1991 (Exhibit 4.2 (xvi) to Form 10-K for year ended 12/31/91)
(xvii) August 1, 1992 (Exhibit 4.2 (xvii) to Form 10-K for year ended 12/31/92)
(xviii) October 1, 1993 (Exhibit 4.2 (xviii) to Form 10-K for year ended 12/31/93)
(xix) June 1, 1993 (Exhibit 4.2 (xix) to Form 10-K for year ended 12/31/93)
(xx) September 1, 1993 (Exhibit 4.2 (xx) to Form 10-K for year ended 12/31/93)
(xxi) December 1, 1993 (Exhibit 4.2 (xxi) to Form 10-K for year ended 12/31/93)
* (xxii) March 1, 1994
4.3 Loan Agreement dated as of October 1, 1993, between the Connecticut Development Authority and The Connecticut Water
Company. (Exhibit 4.3 to Form 10-K for year ended December 31, 1993)
4.4 Loan Agreement dated as of June 1, 1993, between the Connecticut Development Authority and The Connecticut Water
Company. (Exhibit 4.4 to Form 10-K for year ended December 31, 1993)
4.5 Loan Agreement dated as of September 1, 1993, between the Connecticut Development Authority and The Connecticut
Water Company. (Exhibit 4.5 to Form 10-K for year ended December 31, 1993)
4.6 Loan Agreement dated as of June 1, 1991, between the Connecticut Development Authority and The Connecticut Water
Company. (Exhibit 4.10 to Form 10-K for year ended December 31, 1991)
4.7 Loan Agreement dated as of August 1, 1992 between the Connecticut Development Authority and The Connecticut Water
Company. (Exhibit 4.10 to Form 10-K for the year ended December 31, 1992)
4.8 Bond Purchase Agreement dated as of December 1, 1993. (Exhibit 4.8 to Form 10-K for year ended December 31, 1993)
10.1 Pension Plan Fiduciary Liability Insurance for The Connecticut Water Company Employees' Retirement Plan and Trust,
The Connecticut Water Company Tax Credit Employee Stock Ownership Plan, as Amended and Restated, Savings Plan of
The Connecticut Water Company and The Connecticut Water Company VEBA Trust Fund. (Exhibit 10.1 to Registration
Statement No. 2-74938)
</TABLE>
<PAGE> 66
Page 66
<TABLE>
<S> <C>
10.2 Directors and Officers Liability and Corporation Reimbursement Insurance. (Exhibit 10.2 to Registration Statement
No. 2-74938)
10.3 Directors Deferred Compensation Plan, effective as of January 1, 1980, as amended as of March 20, 1981. (Exhibit
10.3 to Registration Statement No. 2-74938)
10.4 The Connecticut Water Company Deferred Compensation Agreement dated December 1, 1984. (Exhibit 10.4 to Form 10-K
for the year ended December 31, 1984)
10.5 The Connecticut Water Company Deferred Compensation Agreement dated January 1, 1989. (Exhibit 10.5 to Form 10-K
for the year ended December 31, 1988)
10.6 The Connecticut Water Company Supplemental Executive Retirement Agreement with William C. Stewart. (Exhibit 10.6a
to Form 10-K for year ended December 31, 1991
10.7 The Connecticut Water Company Supplemental Executive Retirement Agreement with Marshall T. Chiaraluce. (Exhibit
10.6b to Form 10-K for year ended December 31, 1991)
10.8 The Connecticut Water Company Supplemental Executive Retirement Agreement - standard form for other officers.
(Exhibit 10.6c to Form 10-K for year ended December 31, 1991)
10.9 Savings Plan of The Connecticut Water Company, amended and restated effective as of January 1, 1989.
10.10 Amendment to The Connecticut Water Company Savings Plan, adopted August 19, 1992. (Exhibit 10.10 to Form 10-K for
the year ended December 31, 1992)
10.11 Second Amendment to The Connecticut Water Company Savings Plan, adopted August 19, 1992. (Exhibit 10.11 to Form
10-K for the year ended December 31, 1992)
10.12 Third Amendment to The Connecticut Water Company Savings Plan, adopted August 18, 1993. (Exhibit 10.12 to Form 10-K
for year ended December 31, 1993)
10.13 * Amendment to The Connecticut Water Company Savings Plan, adopted November 16, 1994.
10.14 * The Connecticut Water Company Employees' Retirement Plan as amended and restated as of January 1, 1994.
10.15 * Water Supply Agreement dated June 13, 1994, between The Connecticut Water Company and the Hazardville Water
Company.
10.16 * Memorandum of Agreement dated December 11, 1957 between The Connecticut Water Company (successor to the Thomaston
Water Company) and the City of Waterbury.
</TABLE>
<PAGE> 67
Page 67
<TABLE>
<S> <C>
10.17 Contract between The Connecticut Water Company and The Rockville Water and Aqueduct Company dated as of January 1,
1976. (Exhibit 9(b) to Form 10-K for the year ended December 31, 1975)
10.18 Agreement dated August 13, 1986 between The Connecticut Water Co. and the Metropolitan District. (Exhibit 10.14 to
Form 10-K for the year ended December 31, 1986)
10.19 Report of the Commission to Study the Feasibility of Expanding the Water Supply Services of the Metropolitan
District. (Exhibit 14 to Registration Statement No. 2-61843)
10.20 Plan of Merger dated December 18, 1978 of Broad Brook Water Company, The Collinsville Water Company, The Rockville
Water and Aqueduct Company, The Terryville Water Company and The Thomaston Water Company with and into The
Connecticut Water Company. (Exhibit 13 to Form 10-K for the year ended December 31, 1978)
10.21 Bond Exchange Agreements between Connecticut Water Service, Inc., The Connecticut Water Company Bankers Life
Company and Connecticut Mutual Life Insurance Company dated October 23, 1978. (Exhibit 14 to Form 10-K for the
year ended December 31, 1978)
10.22 Dividend Reinvestment and Common Stock Purchase Plan as amended. (Registration Statement No. 33-53211 as amended)
10.23 Contract for Supplying Bradley International Airport. (Exhibit 10.21 to Form 10-K for the year ended December 31,
1984)
10.24 Report of South Windsor Task Force. (Exhibit 10.23 to Form 10-K for the year ended December 31, 1987)
10.25 Trust Agreement for The Connecticut Water Company Welfare Benefits Plan (VEBA) dated January 1, 1989. (Exhibit
10.21 to Form 10-K for year ended December 31, 1989)
10.26 Performance Stock Plan. (Registration Statement No.
33-49058.)
24.1 * Consent of Arthur Andersen LLP
</TABLE>
----------
Note: Exhibits 10.1 through 10.14 set forth each management contract
or compensatory plan or arrangement required to be filed as an
exhibit to this Form-10K.
(b) No reports on Form 8-K were filed during the
last quarter of 1994.
<PAGE> 68
Page 68
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CONNECTICUT WATER SERVICE, INC.
Registrant
By /s/ Marshall T. Chiaraluce
----------------------------
Marshall T. Chiaraluce
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of Connecticut
Water Service, Inc. in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marshall T. Chiaraluce
------------------------------
Marshall T. Chiaraluce Director and March 22, 1995
(Principal Executive Officer) President and Chief Executive
Officer
/s/ Bertram L. Lenz
------------------------------
Bertram L. Lenz Director and Vice President - March 22, 1995
(Principal Financial and Finance and Accounting, and
Accounting Officer) Treasurer
/s/ William F. Guillaume Director and Vice President - March 22, 1995
------------------------------ Engineering and Planning
William F. Guillaume
</TABLE>
<PAGE> 69
Page 69
<TABLE>
<S> <C> <C>
/S/ Francis E. Baker
------------------------------ Director March 11, 1995
Francis E. Baker, Jr.
/S/ Harold E. Bigler
------------------------------ Director March 11, 1995
Harold E. Bigler, Jr.
/S/ Astrid T. Hanzalek Director March 7, 1995
------------------------------
Astrid T. Hanzalek
/S/ Frederick E. Hennick Director March 4, 1995
------------------------------
Frederick E. Hennick
/S/ Marcia L. Hincks Director March 7, 1995
-------------------------------
Marcia L. Hincks
Director March , 1995
------------------------------
William C. Lichtenfels
/S/ Rodolph E. Lunginbuhl Director March 6, 1995
------------------------------
Rudolph E. Lunginbuhl
/S/ Harvey G. Moger Director March 6, 1995
------------------------------
Harvey G. Moger
/S/ Robert F. Neal Director March 6, 1995
------------------------------
Robert F. Neal
/S/ Warren C. Packard Director March 6, 1995
------------------------------
Warren C. Packard
/S/ Donald B. Wilbur Director March 6, 1995
------------------------------
Donald B. Wilbur
</TABLE>
<PAGE> 70
SCHEDULES
<PAGE> 71
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
We have audited, in accordance with generally accepted auditing standards, the
financial statements of Connecticut Water Service, Inc. included in this Form
10-K, and have issued our report thereon dated February 10, 1995. As discussed
in Notes 1 and 2 to the financial statements, effective January 1, 1993, the
Company changed its methods of accounting for income taxes and postretirement
benefits other than pension. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed in the
accompanying index to financial statements and schedule is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states 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 LLP
-----------------------
Hartford, Connecticut
February 10, 1995
<PAGE> 72
CONNECTICUT WATER SERVICE, INC. and SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance Additions Deductions Balance
Beginning Charged to From End of
Description of Year Income Reserves (1) Year
------------------------------------ --------- --------- ------------ ------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Allowance for Uncollectible Accounts
Year Ended December 31, 1994 $166 $115 $132 $149
==== ==== ==== ====
Year Ended December 31, 1993 $256 $189 $279 $166
==== ==== ==== ====
Year Ended December 31, 1992 $355 $196 $295 $256
==== ==== ==== ====
</TABLE>
(1) Amounts charged off as uncollectible after deducting recoveries
<PAGE> 73
EXHIBITS
TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR
ENDED DECEMBER 31, 1994
3.3 By-Laws as Amended January 18, 1995
4.2 (xxii) 22nd Supplemental Bond Indenture
10.13 Amendment to Savings Plan
10.14 Amendment to Retirement Plan
10.15 Water Supply Agreement Between CWC and
Hazardville Water Company
10.16 Agreement Between CWC and City of Waterbury
24.1 Consent of Arthur Andersen LLP
<PAGE> 1
Exhibit 3.3
BYLAWS
of
CONNECTICUT WATER SERVICE, INC.
ARTICLE I
GENERAL
These Bylaws are intended supplement and implement applicable
provisions of law and of the Certificate of Incorporation of the Corporation
with respect to the regulation of the affairs of this Corporation.
ARTICLE II
MEETING OF STOCKHOLDERS
SECTION 1. Place of Meeting: Stockholders' meetings shall be
held at the principal office of the Corporation or at such other place, either
within or without the State of Connecticut, as shall be designated in the
notice of meeting.
SECTION 2. Annual Meeting; Business at Annual Meeting:
The annual meeting of the stockholders shall be held in each year at the place,
on the date and at the hour designated in the call therefor. At such meeting
the stockholders shall elect the Board of Directors and shall transact such
other business as shall properly be brought before them. At an annual meeting
of the
<PAGE> 2
2
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors or (c) otherwise properly brought before the meeting by a
stockholder.
For business to be properly brought before a annual meeting by a
stockholder, the business must be an appropriate matter to be acted on by the
stockholders at an annual meeting and the stockholder must have given proper
and timely notice thereof in writing to the Secretary of the Corporation. To
be timely, a stockholder's notice must be delivered to or mailed and received
by the Secretary of the Corporation at the principal executive offices of the
Corporation not later than the close of business on a day which is not less
that 120 days prior to the anniversary date of the immediately preceding annual
meeting. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name
and address, as they appear on the Corporation's books, of the stockholder
proposing such business, (c) the class and number of shares of the Corporation
which are beneficially owned by the stockholder
<PAGE> 3
3
and (d) any material interest of the stockholder in such business. The
presiding officer of an annual meeting shall determine whether such proposal is
or is not an appropriate matter to be acted on by the stockholders at such
annual meeting, and, if the facts warrant that a matter of business was not
properly brought before the meeting in accordance with the provisions of this
Section 2, and if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
acted on at the meeting.
SECTION 3. Special Meetings: Subject to Article Fourth, Section
5 of the Corporation's Certificate of Incorporation, special meetings of
stockholders of the Corporation may be called only by the Board of Directors
pursuant to a resolution adopted by the concurring vote of Directors holding a
majority of the total number of directorships. The general purpose or purposes
for which a special meeting is called shall be stated in the notice thereof,
and no other business shall be transacted at such meeting. No proposal may be
brought before a special meeting unless it is directly related to the business
specified in the notice of such meeting and it is properly brought before such
meeting. To be properly brought before a special meeting, a proposal must be
(a) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (b) otherwise brought before the
meeting by or at the
<PAGE> 4
4
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder.
For a proposal to be properly brought by a stockholder before a
special meeting (other than nominations for election of Directors, which shall
be governed by Article II, Section 7 of these Bylaws), the stockholder must
have given proper and timely notice thereof in writing to the Secretary of the
Corporation. To be a timely stockholder's notice must be delivered to or
mailed and received by the Secretary of the Corporation at the principal
executive offices of the Corporation not later than the close of business on
the tenth day following the date on which notice of such meeting is first
mailed to stockholders. A stockholder's notice to the Secretary shall set
forth as to such proposal the stockholder proposes to bring before a special
meeting; (a) a brief description of the matter desired to be brought before the
special meeting and the reasons why such proposal is directly related to the
business contained in the notice of meeting; (b) the name and address, as they
appear on the Corporation's books, of the stockholder proposing such matter;
(c) the class and number of shares of the Corporation which are beneficially
owned by the stockholder; and (d) any material interest of the stockholder in
the proposal. The presiding officer of a special meeting shall determine
whether such proposal is or is not directly related to the business of the
meeting as stated in the notice thereof, and, if the facts
<PAGE> 5
5
warrant, that such proposal was not properly brought before the meeting in
accordance with the provisions of this Section 3, and if he should so
determine, he shall so declare to the meeting and any such proposal not
properly brought before the meeting shall not be acted on at the meeting.
SECTION 4. Notice of Meeting: Written notice of the date, time
and place of each Annual Meeting and any Special Meeting, and in case of a
Special Meeting, the general purpose or purposes for such meeting, shall be
mailed or delivered, at least seven days prior to the date of such meeting, to
each stockholder entitled to vote at a such meeting at his residence or usual
place of business, as shown on the records of the Corporation, provided that
anyone or more of such stockholders, as to himself or themselves, may waive
such notice in writing or by attendance without protest at such meeting.
SECTION 5. Quorum: The holders of a majority of the shares of
the issued and outstanding stock entitled to vote at a meeting, present either
in person or by proxy, shall constitute a quorum for the transaction of
business at such meeting of the stockholders. If a quorum be not present at
such meeting, the stockholders present in person or by proxy may adjourn to
such future time as shall be agreed upon by them, and notice of such
adjournment shall be given to the stockholders not present or represented at
the meeting.
<PAGE> 6
6
SECTION 6. Stockholders' Action Without Meeting:
Any action which, under any provision of the Connecticut Stock Corporation Act,
may be taken at a meeting of stockholders may be taken without such a meeting
if consent in writing, setting forth the action so taken or to be taken, is
signed severally or collectively by all of the persons who would be entitled to
vote upon such action at a meeting or by their duly authorized attorneys. The
Secretary of the Corporation shall file such consent or consents with the
minutes of the stockholders' meetings.
SECTION 7. Advance Notice of Nominations: No person shall be
eligible for election as a director at any annual or special meeting of
stockholders unless such person was nominated by or at the direction of the
Board of Directors or by any stockholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the following
procedures. A nomination by a stockholder shall be made only if such
stockholder had given proper and timely notice in writing of such stockholder's
intent to make such nomination to the Secretary of the Corporation. To be
timely a stockholder's notice must be delivered to or mailed and received by
the Secretary of the Corporation at the principal executive offices of the
Corporation not later than (i) with respect to an election to be held at an
annual meeting of stockholders, the close of business on a day which is not
less that 120 days prior to the
<PAGE> 7
7
anniversary date of the immediately preceding annual meeting, and (ii) with
respect to an election to be held at a special meeting of stockholders called
for the election of directors, the close of business on the tenth day following
the date on which notice of such meeting is first mailed to stockholders. Each
such notice shall set forth: (a) the name and address of the person or persons
to be nominated; (b) the name and address, as they appear on the Corporation's
books, of the stockholder making such nomination; (c) the class and number of
shares of the Corporation which are beneficially owned by the stockholder; (d)
a representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in persons
or by proxy at the meeting to nominate the person or persons specified in the
notice; (e) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (f) such other information regarding each nominee
proposed by the stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission; and (g) the consent of each nominee to serve as a director of the
Corporation if so elected. The presiding officer of the meeting shall
determine, if the facts warrant, that such nomination was not made in
accordance with the provision of this Section 7, and if he should so determine,
he shall so declare to
<PAGE> 8
8
the meeting and any nominations not properly made shall be disregarded.
ARTICLE III
SHARES
Share certificates shall be in a form adopted by the Board of
Directors and shall be signed by the President and by the Secretary. Such
certificates shall bear the seal of the Corporation. The name of the persons
to whom issued, the number of such shares which such certificate represents,
the consideration for which the shares were issued and the date of issue shall
be entered on the Corporation's books.
ARTICLE IV
DIRECTORS
SECTION 1. Number, Election and Term of Office:
The Board of Directors shall consist of no fewer than nine or more than fifteen
persons (exclusive of directors, if any, elected by the holders of one or more
series of Preference Stock, which may at any time be outstanding, voting
separately as a class pursuant to the provisions of the Corporation's
Certificate of Incorporation applicable thereto), the exact number to be fixed
from time to time within the foregoing limits exclusively by the Board of
Directors pursuant to a resolution adopted by the Board of Directors. The
number of positions of the Board of
<PAGE> 9
9
Directors, as fixed in accordance with the foregoing, is referred to herein as
the "number of directorships." The directors shall be classified (exclusive of
directors, if any, elected by the holders of one or more series of Preference
Stock voting separately as a class) as provided in Article Fifth of the
Corporation's Certificate of Incorporation, and the term of office of each
director shall be as provided therein. No director shall be eligible for
re-election as a director of the Corporation after such director shall have
attained the age of 70; and no officer of the Corporation, other than a person
who has served as Chief Executive Officer of the Corporation, shall be eligible
for re-election as a director of the Corporation after such person shall no
longer be an officer of the Corporation or shall have attained the age of 65.
SECTION 2. Resignation and Removal of Directors:
Any director of the Corporation may resign and any director may be removed from
office, but only in accordance with the provisions of Article Fifth of the
Corporation's Certificate of Incorporation.
SECTION 3. Vacancies: Newly created directorships
resulting from any increase in the authorized number of directorships and
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal
<PAGE> 10
10
from office or other cause shall be filled by the Board of Directors in
accordance with the provisions of Article Fifth of the Corporation's
Certificate of Incorporation, and any director elected to fill any newly
created directorship or vacancy shall hold office for such term as is specified
therein.
SECTION 4. Powers: The property, business and affairs of the
Corporation shall be managed by the Directors who may exercise all power and do
all the things that may be done by the Corporation subject to provisions of
law, the statutes of the State of Connecticut, the Certificate of
Incorporation, these Bylaws and any vote of the stockholders.
SECTION 5. Committees: The Board of Directors, by the
affirmative vote of Directors holding a majority of the number of
directorships, may appoint from the Directors an executive committee and such
other committee as it may deem appropriate and may, to the extent permitted by
law, delegate to such committees any of the powers of the Board of Directors.
A majority of the committee shall have the power to act. All committees shall
keep full records of their proceedings and shall report the same to the Board
of Directors.
SECTION 6. Compensation: The Directors may be paid their
expenses, if any, of attendance of each meeting of the Board of Directors and
may be paid a fixed sum for attendance at
<PAGE> 11
11
each meeting of the Board of Directors or a stated salary as directors, or
both. No such payment shall preclude any Director from serving the Corporation
in any other capacity and receiving compensation therefor. Members of special
or standing committees may be allowed like compensation for attending committee
meetings.
SECTION 7. Directors Emeritus: There shall be a class of
Directors Emeritus, eligibility for which shall be limited to those Directors
who have served for thirty or more consecutive years on the Board of Directors
of the Corporation or its predecessor Companies and who, by reason of attaining
the age of seventy, have become ineligible for further election to the Board of
Directors of the Corporation. Election to the position of Director Emeritus
shall be for life, unless such a person earlier resigns, and shall be effective
upon the affirmative vote of a majority of Directors present at a duly
constituted meeting of the Corporation's Board of Directors. The position of
Director Emeritus shall be in recognition of past contributions to the
Corporation, and any person so elected shall have no duties or responsibilities
to the Corporation. No Director Emeritus shall be entitled to vote on any
matter presented to the Board. The Board of Directors by annual resolution may
invite one or more Directors Emeritus to attend Board meetings for the
succeeding twelve months, in which event such person or persons shall be
<PAGE> 12
12
compensated at the same rate paid to each Director for attendance at such
meetings.
ARTICLE V
MEETINGS OF DIRECTORS
SECTION 1. Annual Meetings: A regular meeting of the
Board of Directors shall be held without notice immediately after the Annual
Meeting of stockholders, or as soon thereafter as convenient. At such meeting
the Board of Directors shall choose and appoint the officers of the Corporation
who shall hold their offices, subject to prior removal by the Board of
Directors, until the next annual meeting or until their successors are chosen
and qualify.
SECTION 2. Regular Meetings: All other regular meetings
of the Board of Directors may be held without notice at such date, time and
place as the Board of Directors may determine and fix by resolutions.
SECTION 3. Special Meetings: Special meetings of the
Board of Directors may be held upon call of the President, or upon call of any
one or more Directors.
SECTION 4. Notice: Written or oral notice of the date, time
and place of all special meetings of the Board of Directors shall be given to
each Director personally or mailed to his/her
<PAGE> 13
13
residence or usual place of business at least two days prior to the date of the
meeting, provided that any one or more Directors, as to himself or themselves,
may waive such notice in writing before or after a meeting or by attendance
without protest at such meeting.
SECTION 5. Quorum: Directors holding a majority of the number
of directorships shall constitute a quorum. Except as otherwise provided by
law or these Bylaws, all questions shall be decided by vote of a majority of
the Directors present at any meeting of the Board of Directors at which a
quorum is present.
SECTION 6. Director Participation in Meeting by Telephone: A
Director may participate in a meeting of the Board of Directors by means of
conference telephone or similar communications equipment enabling all Directors
participating in the meeting to hear one another, and participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting.
SECTION 7. Directors' Action Without Meeting: If all the
Directors severally or collectively consent in writing to any action taken or
to be taken by the Corporation, such action shall be as valid as though it has
been authorized at a meeting of the Board of Directors. The Secretary of the
Corporation shall file
<PAGE> 14
14
such consent or consents with the minutes of the meeting of the Board of
Directors.
ARTICLE VI
OFFICERS
SECTION 1. Title, Election and Duties: The Board of
Directors shall appoint a President, one or more Vice Presidents, a Secretary,
a Treasurer and such other officers as the Directors may from time to time deem
appropriate. The duties of the officers of the Corporation shall be such as
are specified below and such as usually pertain to such offices, as well as
such as may be prescribed from time to time by the Board of Directors.
SECTION 2. President: The President shall preside at all
meetings of the Board of Directors and stockholders, shall have general charge
and direction of the business of the Corporation and shall perform such other
duties as are properly required of him by the Board of Directors.
SECTION 3. Vice President: A Vice President shall act in the
place of the President in the event of the absence or incapacity of the
President and shall have such other duties as may from time to time be
prescribed by the Board of Directors.
SECTION 4. Secretary: The Secretary shall keep the minutes
of the meetings of stockholders and the Board of
<PAGE> 15
15
Directors and shall give notice of all such meetings as required in these
Bylaws. He shall have custody of such minutes, the seal of the Corporation and
the stock certificate records of the Corporation, except to the extent some
other person is authorized to have custody and possession thereof by a
resolution by the Board of Directors.
SECTION 5. Treasurer: The Treasurer shall keep the fiscal
accounts of the Corporation including an account of all moneys received or
disbursed.
ARTICLE VII
SEAL
The corporate seal shall consist of a circular disc with the name of
the Corporation and the words "Connecticut" and "Seal" thereon.
ARTICLE VIII
INDEMNIFICATION OF STOCKHOLDERS, DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS AND OTHERS
The Corporation shall, to the fullest extent permitted by and in
accordance with the Connecticut Stock Corporation Act, indemnify each person
who is or was a stockholder, director, officer, employee or agent of the
Corporation and each other person who may be entitled to indemnification under
said Act.
<PAGE> 16
16
ARTICLE IX
AMENDMENTS
These Bylaws may be amended, added to, rescinded or repealed by the
affirmative vote of directors holding a majority of the authorized
directorships or by the affirmative vote of a majority of the voting power of
the shares entitled to vote thereon, provided notice of the proposed change was
given in the notice of the meeting, or, in the case of a meeting of the Board
of Directors, in a notice given not less than two days prior to the meeting;
provided, however, that, notwithstanding any other provisions of these Bylaws
or any provisions of law or the Corporation's Certificate of Incorporation
which might otherwise permit a less vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of the Voting
Stock (as that term is defined in Article Fifth of the Corporation's
Certificate of Incorporation) required by law, the Corporation's Certificate of
Incorporation or these Bylaws, the affirmative vote of the holders of at least
80 percent of the combined voting power of all the then-outstanding shares of
the Voting Stock, voting together as a single class, shall be required to
alter, amend or repeal Sections 2, 3, or 7 of ARTICLE II of these Bylaws,
Section 1, 2 or 3 of ARTICLE IV of these Bylaws or this proviso in this ARTICLE
IX.
As amended January 18, 1995.
<PAGE> 1
Exhibit 4.2
THE CONNECTICUT WATER COMPANY
TO
STATE STREET BANK
AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION
TRUSTEE
TWENTY-SECOND SUPPLEMENTAL INDENTURE
DATED AS OF MARCH 1, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - AMENDMENT OF ORIGINAL INDENTURE . . . . . . . . . . . . . 3
ARTICLE II - ADDITIONAL PROVISIONS . . . . . . . . . . . . . . . . . 5
</TABLE>
<PAGE> 3
THIS TWENTY-SECOND SUPPLEMENTAL INDENTURE, dated and entered into as
of March 1, 1994, by and between THE CONNECTICUT WATER COMPANY, a corporation
duly organized and existing under and by virtue of the laws of the State of
Connecticut, having its principal office and place of business in Clinton,
County of Middlesex and State of Connecticut (herein sometimes called the
"Company"), and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION (successor to The Connecticut Bank and Trust Company), a national
banking association duly organized and existing under and by virtue of the laws
of the United States, having its principal office and place of business in
Hartford, County of Hartford and State of Connecticut, as trustee (herein
sometimes called the "Trustee"):
WHEREAS the Company executed and delivered to (i) the original
Trustee, The Connecticut Bank and Trust Company, an Indenture of Mortgage and
Deed of Trust dated as of June 1, 1956, and twelve (12) indentures supplemental
thereto (said instruments being herein sometimes called, respectively, the
Original Indenture, the First Supplemental Indenture, the Second Supplemental
Indenture, et seq. through the Twelfth Supplemental Indenture), (ii) The
Connecticut Bank and Trust Company, N.A., the successor to The Connecticut Bank
and Trust Company, three (3) indentures supplemental to the Original Indenture
(said instruments being herein sometimes called, respectively, the Thirteenth
Supplemental Indenture, the Fourteenth Supplemental Indenture and the Fifteenth
Supplemental Indenture), (iii) The New Connecticut Bank and Trust Company,
N.A., the successor to The Connecticut Bank and Trust Company, N.A., one (1)
indenture supplemental to the Original Indenture (said instrument being herein
sometimes called the Sixteenth Supplemental Indenture), (iv) State Street Bank
and Trust Company of Connecticut, National Association, the successor to The
New Connecticut Bank and Trust Company, N.A., five (5) indentures supplemental
to the Original Indenture (said instruments being herein sometimes called,
respectively, the Seventeenth Supplemental Indenture, the Eighteenth
Supplemental Indenture, the Nineteenth Supplemental Indenture, the Twentieth
Supplemental Indenture and the Twenty-First Supplemental Indenture), in all
cases to secure its First Mortgage Bonds wherein it is provided that the bonds
secured thereby may be issued in one or more series and each series, other than
the First Mortgage Bonds, Series A, and First Mortgage Bonds, Series B, shall
be created by an indenture supplemental thereto designating the new series to
be created and describing and defining the bonds of such series;
WHEREAS, on September 17, 1990, State Street Bank and Trust Company of
Connecticut, National Association acquired and succeeded to all rights, title,
interest, authority and appointment of The New Connecticut Bank and Trust
Company, N.A., as Trustee under the Indenture, which succession and appointment
were ratified and confirmed by the Board of Directors of the Company on May 15,
1991.
<PAGE> 4
-2-
WHEREAS the Company has determined to provide for the amendment of
Section 10.03 of the Original Mortgage in compliance with the provisions of
Section 16.04 of the Original Mortgage.
WHEREAS all acts, proceedings and things necessary to authorize the
execution and delivery of these presents and to make these presents and the
Original Indenture, the First Supplemental Indenture, the Second Supplemental
Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture,
the Fifth Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh
Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth
Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh
Supplemental Indenture, the Twelfth Supplemental Indenture, the Thirteenth
Supplemental Indenture, the Fourteenth Supplemental Indenture, the Fifteenth
Supplemental Indenture, the Sixteenth Supplemental Indenture, the Seventeenth
Supplemental Indenture, the Eighteenth Supplemental Indenture, the Nineteenth
Supplemental Indenture, the Twentieth Supplemental Indenture and the
Twenty-First Supplemental Indenture (said twenty-three instruments being herein
sometimes collectively referred to as the "Indenture") a valid mortgage to
secure the payment of the principal of and interest on all bonds at any time
issued and outstanding under the Indenture equally and ratably in accordance
with the terms of said bonds, have been done and performed;
NOW, THEREFORE, THIS TWENTY-SECOND SUPPLEMENTAL INDENTURE WITNESSETH:
That THE CONNECTICUT WATER COMPANY, in consideration of the premises
and of the acceptance by the Trustee of the trusts hereby created and of the
purchase and acceptance of said bonds by the owners thereof and of the sum of
One Dollar lawful money of the United States of America to it duly paid by the
Trustee, the receipt whereof is hereby acknowledged, in order to secure the
payment both of the principal of and interest on all bonds that may at any time
be issued and outstanding under the Indenture according to their tenor and
effect and the performance and observance by the Company of all the covenants
expressed and implied in the Indenture and in said bonds, without intending in
any way to limit or to impugn the validity of the grant of after-acquired
property contained in the Original Indenture, has given, granted, bargained,
sold, released, conveyed, aligned, assigned, confirmed, transferred, mortgaged,
warranted, pledged and set over and does by these presents give, grant,
bargain, sell, release, convey, alien, assign, confirm, transfer, mortgage,
warrant, pledge and set over unto State Street Bank and Trust Company of
Connecticut, National Association (successor to The Connecticut Bank and Trust
Company, The Connecticut Bank and Trust Company, N.A. and The New Connecticut
Bank and Trust Company, N.A.), as trustee, and to its
<PAGE> 5
-3-
successors in the trusts hereby and in said Original Indenture created and to
them and their assigns forever:
All and singular the premises, property and franchises of the Company
constructed or acquired since the delivery of the Twenty-First Supplemental
Indenture (other than property of the nature of that excluded by the granting
clauses of the Original Indenture and property properly released from the lien
of the Indenture under the terms thereof).
TO HAVE AND TO HOLD all said franchises and property, real, personal
and mixed, conveyed, transferred, assigned, mortgaged or pledged by the Company
as aforesaid or intended so to be unto the Trustee, and to its successors in
said trust and to them and their assigns forever;
IN TRUST, nevertheless, for the purposes, with the powers and subject
to the agreements, covenants and conditions set forth and expressed in the
Original Indenture as heretofore and hereby supplemented, it being agreed as
follows, to wit:
ARTICLE I
AMENDMENT OF ORIGINAL INDENTURE
Section 10.03 of the Original Indenture is hereby amended to read as
follows:
SECTION 10.03. (a) While in possession of the mortgaged property and
not in default, the Company may, subject to compliance with the requirements of
Subsection (b) hereof, (1) dispose of any of its office furniture, furnishings
or equipment and any machinery, apparatus, appliances, tools and implements,
materials or other movable property, free from the lien of this Indenture,
which may have become worn out, disused or undesirable for use; provided that
upon so doing the Company shall substitute therefor other property suitable to
its business and of equal or greater value, and shall subject such substituted
property to the lien hereof; (2) sell, exchange or otherwise dispose of
property having an aggregate cost or fair market value, whichever is less, of
not more than $5,000; provided that the aggregate cost or fair market value,
whichever is less, of all such sales, exchanges or dispositions does not exceed
$100,000 in any calendar year; and provided further that the Trustee has
received the written certificate of any duly authorized officer of the Company
stating that (i) it is no longer necessary or desirable in the proper conduct
of the Company's business, or it is otherwise no longer in the best interests
of the Company to utilize or operate such property, and (ii) the value and
operation of all of the Company's properties subject to the lien hereof, as an
entirety, and the
<PAGE> 6
-4-
security for the bonds, will not thereby be adversely affected; (3) grant,
either with or without consideration, easements, rights-of-way, leases,
licenses, authority or permits, for fixed periods of time or in perpetuity,
over or with respect to any of its property; provided that the Trustee has
received the written certificate of any duly authorized officer of the Company
stating that (i) the granting of any such easements, rights-of-way, leases,
licenses, authority or permits does not substantially impair the continued use
and enjoyment by the Company of the property over or in respect of which said
easements, rights-of-way, leases, licenses, authority or permits are granted
for the purpose for which such property is used by the Company, and (ii) the
value and operation of all the Company's properties subject to the lien hereof,
as an entirety, and the security for the bonds, will not thereby be adversely
affected; and (4) sell, release, surrender, abandon or otherwise dispose of, or
assent to or procure a modification of, either with or without consideration,
any easement, right-of-way, lease, license, authority or permit over private
property or under which it utilizes or operates any of its properties; provided
that the Trustee has received the written certificate of any duly authorized
officer of the Company stating that (i) it is no longer necessary or desirable
in the proper conduct of the Company's business, or it is otherwise no longer
in the best interests of the Company, to utilize or operate such properties or
to comply with the terms and provisions of such easement, right-of-way, lease,
license, authority or permit, and (ii) the value and operation of all the
Company's properties subject to the lien hereof, as an entirety, and the
security for the bonds, will not thereby be adversely affected.
(b) The net cash proceeds, if any, received by or on behalf of the
Company in consideration for any of the transactions contemplated by clauses
(2), (3) and (4) of subsection (a) hereof, shall be deposited with the Trustee.
Any property received by the Company in consideration for any of said
transactions shall be subject to the lien hereof.
(c) In case the Company proposes to transfer or otherwise dispose
of or has transferred or otherwise disposed of any property under the
conditions authorized by subsection (a) hereof, the Trustee shall, from time to
time, execute such instruments of disclaimer, release, quitclaim, waiver,
consent or confirmation as may be appropriate upon receipt by the Trustee of a
certificate of any duly authorized officer of the Company requesting such
action by the Trustee; generally describing the transfer or other disposition;
describing the property transferred or disposed of or to be transferred or
disposed of; stating that such transfer or other disposition thereof is
authorized by subsection (a) hereof; stating that a written disclaimer,
release, quitclaim, waiver, consent or confirmation by the Trustee is
appropriate; stating that
<PAGE> 7
-5-
no event of default has happened and is continuing; and stating that such
officer has been duly authorized by the Company to provide such certificate.
(d) In case the Company proposes to transfer or otherwise dispose
of or has transferred or otherwise disposed of any property of the character
excepted from the lien hereof, the Trustee may, from time to time, execute such
instruments of disclaimer, release, quitclaim, waiver, consent or confirmation
as may be appropriate upon receipt by the Trustee of a certificate of any duly
authorized officer of the Company requesting such action by the Trustee;
generally describing the transfer or other disposition and the property
transferred or disposed of or to be transferred or disposed of; stating that
such property is not subject to the lien hereof; stating that a written
disclaimer, release, quitclaim, waiver, consent or confirmation by the Trustee
is appropriate; and stating that such officer has been duly authorized by the
Company to provide such certificate.
ARTICLE II
ADDITIONAL PROVISIONS
Section 2.01. The Company covenants that it is lawfully seized and
possessed of the property described in the granting clauses of this
Twenty-Second Supplemental Indenture and that it will warrant and defend the
title to said property to the Trustee for the equal pro rata benefit of the
holders of all bonds at any time outstanding under the Indenture against the
claims and demands of all persons whatsoever.
Section 2.02. For any default by the Company in the covenants,
stipulations, promises and agreements herein contained, the Trustee and the
bondholders shall have the same rights and remedies, subject to the same
limitations, as are provided in the Original Indenture.
Section 2.03. The Company covenants that the recitals of fact and
statements contained in this Twenty-Second Supplemental Indenture are true, and
that the Company is not in default in any respect under any of the provisions
of the Original Indenture as heretofore amended or of any of the outstanding
bonds.
Section 2.04. Whenever reference is herein in this Twenty-Second
Supplemental Indenture made to a Section or Article of the Original Indenture
and such Section or Article has been heretofore amended, then such reference
shall be to such Section or Article as so amended, whether or not herein
expressly so stated.
<PAGE> 8
-6-
Section 2.05. The Company hereby expressly ratifies, adopts, renews,
confirms and continues in full force and effect, without limitation, each and
every covenant, agreement, condition and provision contained in the Original
Indenture as heretofore amended.
Section 2.06. This Twenty-Second Supplemental Indenture shall be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, THE CONNECTICUT WATER COMPANY has caused these
presents to be signed in its name and behalf by its President or Vice President
and its corporate seal to be hereunto affixed and attested by its Secretary or
Assistant Secretary, and, to evidence its acceptance of the trusts hereby
created, STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION has caused these presents to be signed in its name and behalf and
its corporate seal to be hereunto affixed and attested by its authorized
officials, on the dates hereinafter set forth in the acknowledgement clauses
but as of the day and year first above written.
THE CONNECTICUT WATER COMPANY
Attest:
By /s/ Bertram L. Lenz
---------------------------
Vice President
/s/ Vincent F. Susco, Jr.
--------------------------
Secretary
Signed, sealed and delivered by
The Connecticut Water Company
in the presence of:
/s/ Wendy L. Mahon
--------------------------
/s/ Lynn Robinson
--------------------------
<PAGE> 9
-7-
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION
Attest:
/s/ Steven Freedman By /s/ Cauna M. Antonacci
------------------------ ----------------------------
Signed, sealed and delivered by
State Street Bank and Trust
Company of Connecticut,
National Association
in the presence of:
/s/ W. Jeffrey Kramer
-----------------------------
/s/ William Callahan
-----------------------------
<PAGE> 10
-8-
STATE OF CONNECTICUT )
) ss. Clinton
COUNTY OF MIDDLESEX )
On this the 14th day of March, 1994, before me appeared Bertram L.
Lenz, Vice President, and Vincent F. Susco, Jr., Secretary, of THE CONNECTICUT
WATER COMPANY, a corporation, each of whom severally acknowledged himself to be
such respective officer, and Bertram L. Lenz acknowledged that he, as such Vice
President, being authorized so to do, executed the foregoing instrument for the
purposes therein contained by signing the name of the corporation by himself as
such Vice President, and Vincent F. Susco, Jr., acknowledged that he, as such
Secretary, being authorized so to do, affixed the corporate seal of said
corporation to the foregoing instrument and attested the same.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Annette F. Scharf
-----------------------------
Notary Public
My commission expires: 8/31/97
<PAGE> 11
-9-
STATE OF CONNECTICUT )
) ss. Hartford
COUNTY OF HARTFORD )
On this the 11th day of March, 1994, before me appeared Cauna M.
Antonacci, Assistant Vice President and Steven M. Freedman, Assistant
Secretary of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, each of whom severally
acknowledged himself or herself to be such respective officer, and Cauna M.
Antonacci acknowledged that he or she, as such Assistant Vice President, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained by signing the name of the association by himself or herself as such
Assistant Vice President, and Steven M. Freedman acknowledged that he or she,
as such Assistant Secretary, being authorized so to do, affixed the seal of
said corporation to the foregoing instrument and attested the same.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Christina Van Ryzin
------------------------
Notary Public
My commission expires: Nov. 30, 1998
<PAGE> 1
Exhibit 10.13
AMENDMENT
The Connecticut Water Company Savings Plan is hereby amended
by adding the flowing new provisions:
"DIRECT ROLLOVER
(a) This Section applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of the
plan to the contrary that would otherwise limit a
distributee's election under this Section, a distributee may
elect, at any time and in the manner prescribed by the plan
administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
(b) Definitions.
(1) Eligible rollover distribution: An
eligible rollover distribution is any
distribution of all or any portion of the
balance to the credit of the distributee,
except that an eligible rollover distribution
does not include: any distribution that is
one of a series of substantially equal
periodic payments (not less frequently than
annually) made for the life (or life
expectancy) of the distributee or the joint
lives (or joint life expectancies) of the
distributee and the distributee's designated
beneficiary, or for a specified period of ten
years or more; any distribution to the extent
such distribution is required under section
401(a) (9) of the Code; and the portion of
any distribution that is not includible in
gross income (determined without regard to
the exclusion for net unrealized appreciation
with respect to employer securities).
(2) Eligible retirement plan: An eligible
retirement plan is an individual retirement
account described in section 408(a) of the
Code, an individual retirement annuity
described in section 408(b) of the Code, and
annuity plan described in section 403(a) of
the Code, or a qualified trust described in
section 401(a) of the Code, that accepts the
distributee's eligible rollover distribution.
<PAGE> 2
However, in the case of an eligible rollover
distribution to the surviving spouse, an
eligible retirement plan is an individual
retirement account or individual retirement
annuity.
(3) Distributee: A distributee includes an
employee or former employee. In addition,
the employee's or former employee's surviving
spouse and the employee's or former
employee's spouse or former spouse who is the
alternate payee under a qualified domestic
relations order, as defined in section 414(p)
of the Code, are distributees with regard to
the interest of the spouse or former spouse.
(4) Direct rollover: A direct rollover is a
payment by the plan to the eligible
retirement plan specified by the distributee.
COMPENSATION LIMITATION
In addition to other applicable limitations
set forth in the plan, and notwithstanding any other
provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual
compensation of each employee taken into account
under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation
limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance
with Section 401(a) (17) (B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a
calendar year applies to any period, not exceeding 12
months, over which compensation is determined
(determination Period) beginning in such calendar
year. If a determination period consists of fewer
than 12 months, the OBRA '93 annual compensation
limit will be multiplied by a fraction, the numerator
of which is the number of months in the determination
period, and the denominator of which is 12.
For plan years beginning on or after January
1, 1994, any reference in this plan to the limitation
under Section 401(a) (17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this
provision."
<PAGE> 3
CERTIFICATE
The undersigned hereby certifies that the Amendment to The Connecticut
Water Company Savings Plan, effective as set forth in said Amendment, was duly
adopted by the Board of Directors of The Connecticut Water Company on November
16, 1994 and is in full force and effect.
11/23/94 /s/ Vincent F. Susco, Jr.
---------------------------- --------------------------------
Date
Corporate Secretary
--------------------------------
<PAGE> 1
Exhibit 10.14
THE CONNECTICUT WATER COMPANY
EMPLOYEES' RETIREMENT PLAN
Amended and Restated as of
January 1, 1994
(except as otherwise indicated herein)
<PAGE> 2
AMENDMENT AND RESTATEMENT OF
THE CONNECTICUT WATER COMPANY
EMPLOYEES' RETIREMENT PLAN
THE CONNECTICUT WATER COMPANY, a corporation organized and existing under the
laws of the State of Connecticut, with its principal place of business at
Clinton, Connecticut, pursuant to ARTICLE XI, Section A of The Connecticut
Water Company Employees' Retirement Plan and Trust, dated October 23, 1957, as
amended, does hereby further amend and restate said Plan in its entirety,
effective as of January 1, 1994, except as otherwise indicated herein, as
follows:
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I INTRODUCTION
ARTICLE II DEFINITIONS
ARTICLE III PARTICIPATION
ARTICLE IV NORMAL RETIREMENT
ARTICLE V EARLY RETIREMENT
ARTICLE VI POSTPONED RETIREMENT
ARTICLE VII TERMINATION OF EMPLOYMENT
AND VESTED RIGHTS
ARTICLE VIII DISABILITY
ARTICLE IX PRE-RETIREMENT DEATH
BENEFIT
ARTICLE X NORMAL AND OPTIONAL FORMS
OF RETIREMENT INCOME
ARTICLE XI FIDUCIARIES-ADMINISTRATION OF THE
PLAN
ARTICLE XII METHOD OF FINANCING
ARTICLE XIII AMENDMENT OR TERMINATION
ARTICLE XIV GENERAL PROVISIONS
</TABLE>
<PAGE> 4
CONNECTICUT WATER COMPANY
EMPLOYEES' RETIREMENT PLAN
ARTICLE I
INTRODUCTION
1.1 This Plan shall be known as The Connecticut Water Company
Employees' Retirement Plan.
1.2 The purpose of this Plan is to provide eligible Employees with
retirement income benefits which will provide periodic income
during the Employees' retirement years, and support their
beneficiaries upon the death of such Employees.
1.3 It is the intention of the Company that The Connecticut Water
Company Employees' Retirement Trust, which is a part of this
Plan, shall meet the requirements of the Employee Retirement
Income Security Act of 1974 (ERISA) and shall be qualified and
exempt under Sections 401(a) and 501(a) of the Internal
Revenue Code of 1986, as amended from time to time.
I-4
<PAGE> 5
ARTICLE II
DEFINITIONS
Unless otherwise required by the context, the terms used herein shall have the
meanings set forth in the remaining paragraphs of this Article II.
2.1 Actuarial Equivalent shall mean a benefit of equivalent
current value to the benefit which would otherwise have been
provided to the Participant, determined as described in
Exhibit I attached to and made part of this Plan.
2.2 Actuary shall mean an actuary selected by the Committee who
has been "enrolled" in accordance with ERISA.
2.3 Administrator shall mean the person or persons designated by
the Committee in accordance with Article XI as the
Administrator of the Plan within the meaning of Section 3(16)
of ERISA.
2.4 Affiliated Company shall mean any company which is included
within a "controlled group of corporations" within which the
Company is also included, as determined under Section 1563 of
the Code without regard to Subsections (a)(4) and (e)(3)(C) of
said
II-2
<PAGE> 6
Section 1563. Notwithstanding the foregoing, with respect to
the benefit limitation set forth in Section 4.4 of this Plan,
such determination under Section 1563 shall be made assuming
the phrase "more than 50 percent" were substituted for the
phrase "at least 80 percent" each place it appears in Section
1563(a)(1).
2.5 Anniversary Date shall mean January 1 of each year commencing
on or after January 1, 1958.
2.6 Annual Earnings shall mean the regular basic earnings paid to
a Participant by his Employer during a Plan Year, excluding
any other items of compensation such as overtime earnings,
bonuses, or contributions made by the Employer to or under any
form of employee benefit program expressed on an annual basis.
For hourly Employees, Annual Earnings shall mean the average
hourly straight time rate, determined by dividing total
straight time earnings by actual hours worked, times 2080
hours. Notwithstanding the foregoing, any amounts which would
otherwise be Annual Earnings and which are deferred by a
Participant pursuant to a cash or deferred arrangement
qualified under Section 401(k) of the Code or a cafeteria plan
pursuant to Section 125 of the Code shall, with the exception
of Sections 4.4 and
II-3
<PAGE> 7
4.5 hereof, be regarded as Annual Earnings for purposes of
this Plan.
In addition to other applicable limitations set forth in the
Plan, and notwithstanding any provision of the Plan to the
contrary, for Plan Years beginning on or after January 1,
1994, the Annual Earnings of each Employee taken into account
under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner of Internal Revenue
for increases in the cost of living in accordance with Section
401(a)(17)(B) of the Code. The cost-of-living adjustment in
effect for a calendar year applies to any period, not
exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the
OBRA' 93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in
the determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under
II-4
<PAGE> 8
Section 401(a)(17) of the Code shall mean the OBRA '93 annual
compensation limit set forth in this provision.
If Annual Earnings for any prior determination period is taken
into account in determining an employee's benefits accruing in
the current Plan Year, the Annual Earnings for that prior
determination period is subject to the OBRA '93 annual
compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning
before the first day of the first Plan Year beginning on or
after January 1, 1994, the OBRA '93 annual compensation limit
is $150.000.
2.7 Average Earnings shall mean the average Annual Earnings earned
during the sixty consecutive months of highest Annual Earnings
of a Participant (or during his total Employment if less than
60 months).
2.8 Beneficiary shall mean any person entitled to receive benefits
under the Plan which are payable upon the death of a
Participant.
2.9 Board shall mean the Board of Directors of the Company.
II-5
<PAGE> 9
2.10 Code shall mean the Internal Revenue Code of 1986, as amended
from time to time.
2.11 Committee shall mean the Committee as provided for in Article
XI.
2.12 Company shall mean The Connecticut Water Company, a
Connecticut corporation, or any successor thereto.
2.13 Contingent Annuitant shall mean any person designated by a
Participant and entitled to receive benefits pursuant to the
Contingent Annuitant Option described in Section 10.3(b).
2.14 Covered Compensation shall mean for each Participant the
average of the contribution and benefit bases in effect under
Section 230 of the Social Security Act for each year in the
thirty-five (35) year period ending with the year in which the
Participant attains the Social Security Retirement Age. The
determination for any Plan Year preceding the year in which
the Participant attains the Social Security Retirement Age
shall be made by assuming that there is no increase in the
bases described herein after the beginning of the Plan Year
and before the Participant attains the Social Security
Retirement Age.
II-6
<PAGE> 10
2.15 Credited Service shall mean the number of years of service as
an Employee, in completed twelfths of a year commencing with
the Employee's earliest date of hire and ending on the earlier
of his Termination Date or Retirement Date, subject to
adjustment as follows:
(a) a full year of Credited Service shall be granted for
each Plan Year for which an Employee completes at
least 1,000 Hours of service;
(b) no credit shall be granted for any Plan Year in which
an Employee has less than 1,000 Hours of service;
except that (i) for each Employee, pro rata credit
shall be granted for the Plan Year in which the
Employee was hired if he is a Participant and is
credited with at least 2,000 Hours of service in the
next succeeding Plan Year and (ii) for each Employee,
pro rata credit shall be granted for the Plan Year in
which the earlier of the Employee's Termination Date
or Retirement Date occurs if he was a Participant and
was credited with at least 2,000 Hours of service in
the immediately preceding Plan Year; and
(c) no credit shall be granted for any period of
employment during which an Employee waived his
II-7
<PAGE> 11
right to participate in the Plan pursuant to Section
3.3.
For purposes of this Section 2.15, pro rata credit shall be
granted in completed twelfths of a year, based upon a full
year of 1,000 Hours of service, but no more than one full year
of Credited Service shall be granted with respect to any Plan
Year.
2.16 Effective Date shall mean November 1, 1957.
2.17 Employee shall mean any person who is engaged in rendering
personal services to the Employer other than as an independent
contractor.
2.18 Employer shall mean the Company and any Participating Company.
2.19 Employment shall mean the service of an Employee with an
Employer or a Predecessor Company.
2.20 ERISA shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and any regulations
issued pursuant thereto.
II-8
<PAGE> 12
2.21 Fiduciary shall mean any person who exercises discretionary
authority or control over the management of the Plan, assets
held under the Plan or disposition of Plan assets; who renders
investment advice for direct or indirect compensation as to
assets held under the Plan or has any authority or
responsibility to do so; or who has any discretionary
authority or responsibility in the administration of the Plan;
but only to the extent required by ERISA.
2.22 Hour shall mean:
(a) each hour for which the Employee is directly or
indirectly paid, or entitled to payment, by the
Employer for the performance of duties (to be
credited as of the time when the duties are
performed);
(b) each hour for which the Employee is directly or
indirectly paid, or entitled to payment, by the
Employer for reasons other than the performance of
duties, such as vacation or holidays (to be credited
in accordance with Labor Department Regulation
2530.200b-2(c) or any successor regulation); and
II-9
<PAGE> 13
(c) each hour for which back pay, irrespective of
mitigation of damages, has been either awarded or
agreed to by the Employer (to be credited as of the
time to which the award or agreement pertains). The
same hour shall not be credited under more than one
of the above clauses. In determining Hours of service
for the purposes of clause (b) above, the provisions
of Labor Department Regulation 2530.200b-2(b) or any
successor regulation shall be applicable. Hours of
service shall also include each hour, based on the
Employee's standard work week and work day as in
effect from time to time, during which an Employee is
absent from work:
(i) temporarily, on account of illness or with
the consent of the Employer for a period not
to exceed six months. In the event of any
absence approved by the Employer and
exceeding six months the Committee shall
establish uniform rules for the inclusion or
exclusion of any hour as an Hour of service
on account of such absence in excess of six
months; or
II-10
<PAGE> 14
(ii) on account of service in the armed forces of
the United States, provided that the Employee
returns to work within the period during
which his reemployment rights are guaranteed
by applicable Federal law following his or
her discharge or severance from such service.
2.23 Participant shall mean any Employee who is or becomes eligible
to participate in the Plan pursuant to Article III and who has
taken all the steps required by said Article III to
participate in the Plan.
2.24 Participating Company shall mean any Affiliated Company which
is designated by the Board as a Participating Company under
the Plan and whose designation as such has become effective
and has continued in effect. The designation shall become
effective only when it shall have been accepted by the Board
of Directors of the Participating Company. A Participating
Company may revoke its acceptance of such designation at any
time, but until such acceptance has been revoked, all of the
provisions of the Plan and amendments thereto shall apply to
the Employees (and their Beneficiaries) of the Participating
Company. In the event the designation of a Participating
Company as such is revoked by the Board of Directors of the
Participating Company, the Plan
II-11
<PAGE> 15
will be deemed terminated only as to such Participating
Company in accordance with Article XIII.
2.25 Plan shall mean The Connecticut Water Company Employees'
Retirement Plan set forth in its entirety in this document and
the Trust Agreement, as this document and such Agreement may
be amended from time to time.
2.26 Plan Year shall mean each calendar year, except that the
period beginning on November 1, 1957 and ending on December
31, 1958 shall be considered the first Plan Year.
2.27 Predecessor Company shall mean any organization which was
acquired by the Employer or an Affiliated Company.
2.28 Retirement Date shall mean a Participant's Normal, Early or
Postponed Retirement Date as defined in Articles IV through
VI, whichever is applicable.
2.29 Retirement Income shall mean a Participant's monthly benefit
payable beginning on his Retirement Date.
2.30 Social Security Retirement Age shall mean the age used as the
retirement age under Section 216(1) of the Social Security
Act, except that such Section shall be
II-12
<PAGE> 16
applied without regard to the age increase factor and as if
the early retirement age under Section 216(1)(2) of the Social
Security Act were 62.
2.31 Spouse shall mean the spouse to whom a Participant shall be
married on the date payment of his benefits commences or to
whom a Participant shall be married at the time of his death.
2.32 Termination Date shall mean the date on which the Participant
ceases to be an Employee other than by reason of retirement.
2.33 Trust Agreement shall mean The Connecticut Water Company
Employees' Retirement Trust entered into between the Company
and the Trustee to carry out the purposes of the Plan, as
set forth herein, which Trust Agreement shall form a part of
the Plan.
2.34 Trustee shall mean the Trustee selected by the Company in
accordance with Article XII.
2.35 Trust Fund or Fund shall mean the cash and other properties
held and administered by the Trustee in accordance with the
provisions of the Trust Agreement and the Plan.
II-13
<PAGE> 17
2.36 Vesting Service shall mean the number of years of service as
an Employee, in completed twelfths of a year, commencing with
the Employee's earliest date of hire and ending on the earlier
of his Termination Date or Retirement Date, subject to
adjustment as follows:
(a) a full year of Vesting Service shall be granted for
each Plan Year in which an Employee completes at
least 1,000 Hours of service;
(b) no Vesting Service shall be granted for any Plan Year
in which an Employee has less than 1,000 Hours of
service; except that (i) for each Employee, pro rata
vesting credit shall be granted for the Plan Year in
which the Employee was hired if he is a Participant
and is credited with at least 2,000 Hours of service
in the next succeeding Plan Year, and (ii) for each
Employee, pro rata vesting credit shall be granted
for the Plan Year in which the earlier of the
Employee's Termination Date or Retirement Date occurs
if he was a Participant and was credited with at
least 2,000 Hours of service in the immediately
preceding Plan Year.
(c) no Vesting Service shall be granted for any period
II-14
<PAGE> 18
of employment during which an Employee waived his
right to participate in the Plan pursuant to
Section 3.3.
For purposes of this Section 2.36, pro rata vesting credit
shall be granted in completed twelfths of a year, based upon a
full year of 2,000 Hours of service, but no more than one full
year of Vesting Service shall be granted with respect to any
Plan Year.
Masculine pronouns used herein shall refer to men or women or both and nouns
and pronouns when stated in the singular shall include the plural and when
stated in the plural shall include the singular, wherever appropriate.
II-15
<PAGE> 19
ARTICLE III
PARTICIPATION
3.1 Former Employees. Any person who either retired or terminated
Employment prior to June 3, 1975 shall be entitled to benefits
in accordance with the Plan as in effect on his Retirement
Date or Termination Date, whichever is applicable.
3.2 Current and Future Employees. Except as provided for in
Section 3.3, each Employee shall participate in the Plan, as
described herein provided that he has completed 1,000 Hours of
service within the consecutive 12-month period beginning on
his date of hire. Any Employee who had at least one Hour of
service on or after January 1, 1988, who fulfilled the 1,000
Hours of service requirement as of January 1, 1988, but who
has been excluded from participation in the Plan because of
the prior provisions of the Plan which excluded Employees
hired at or after age 60, shall retroactively participate in
the Plan as of January 1, 1988. Employees affected by this
rule of retroactive Plan participation shall have their years
of service commencing January 1, 1988 counted toward their
Credited Service. In the event an Employee fails to
III-15
<PAGE> 20
complete 1,000 Hours of service as described above, he shall
participate in the Plan after completing 1,000 Hours of
service in any Plan Year beginning after his date of hire. If
a Participant terminates his employment but is rehired by the
Employer, he shall again be eligible to participate in the
Plan as of his date of rehire.
3.3 Waiver of Participation. Any Employee may waive his right to
become a Participant under this Plan by electing such waiver
in writing on a form supplied by the Administrator. Such
Employee may, also in writing, withdraw such waiver and,
subject to Section 3.2, be eligible to participate in this
Plan.
III-16
<PAGE> 21
ARTICLE IV
NORMAL RETIREMENT
4.1 Normal Retirement Date. The Normal Retirement Date of a
Participant shall be the first day of the month coinciding
with or next following his 65th birthday, or the fifth
anniversary of his entry into the Plan, if later, but in no
event later than the first day of the month coinciding with or
next following his 70th birthday.
4.2 Basic Retirement Income. The monthly Basic Retirement Income
with payments commencing at Normal Retirement Date under this
Plan is equal to 1/12 of the sum of (a) plus (b) where:
(a) equals the sum of 1.2% of Average Earnings up to
Covered Compensation and 1.5% of Average Earnings in
excess of Covered Compensation multiplied times years
of Credited Service prior to January 1, 1981, and
(b) equals the sum of 1.45% of Average Earnings up to
Covered Compensation and 1.75% of Average Earnings in
excess of Covered Compensation times years of
Credited Service after December 31, 1980.
IV-3
<PAGE> 22
Notwithstanding the foregoing, the minimum Basic
Retirement Income with payments commencing at Normal
Retirement Date under this Plan is equal to 1/12 of
$1,000, except that for an Employee who has less than
10 years of Credited Service, the $1,000 shall be
reduced by the ratio of Credited Service to 10 years.
Unless otherwise provided under the Plan, the accrued benefit
of each "section 401(a)(17) employee" under this Plan will be
the greater of the accrued benefit determined for the employee
under 1 or 2 below:
(1) the employee's accrued benefit determined
with respect to the benefit formula
applicable for the Plan Year beginning on or
after January 1, 1994, as applied to the
employee's total years of Service taken into
account under the Plan for the purposes of
benefit accruals, or
(2) the sum of:
(a) the employee's accrued benefit as of
the last day of the last Plan Year
beginning before January 1, 1994,
frozen in
IV-4
<PAGE> 23
accordance with
Section 1.401(a)(4)-13 of the
Treasury Regulations, and
(b) the employee's accrued benefit
determined under the benefit formula
applicable for the Plan Year
beginning on or after January 1,
1994, as applied to the employee's
Years of Service credited to the
employee for Plan Years beginning on
or after January 1, 1994, for
purposes of benefit accruals.
A "section 401(a)(17) employee" means an Employee whose
current accrued benefit as of a date on or after the first day
of the first Plan Year beginning on or after January 1, 1994,
is based on Annual Earnings for a year beginning prior to the
first day of the first Plan Year beginning on or after January
1, 1994, that exceeded $150,000.
4.3 Normal Retirement Income. The Retirement Income of a
Participant who retires on his Normal Retirement Date shall be
determined as follows:
(a) If the Participant does not have a Spouse and has
made no election as to the form of payment of
IV-5
<PAGE> 24
pension benefits, then his Retirement Income shall be
equal to his Basic Retirement Income as determined
under Section 4.2 and shall be paid in the form of a
Straight Life Annuity.
(b) If the Participant has a Spouse and has not made a
qualified waiver of the 50% Contingent Annuitant
Option described in Subsection 10.3(b) with his
Spouse as Contingent Annuitant, his Retirement Income
payable as of the date payment of his Retirement
Income commences shall equal the product of (i) and
(ii) where:
(i) equals the Basic Retirement Income as
determined under Section 4.2, and
(ii) equals the Actuarial Equivalent factor for
such Contingent Annuitant Option, and shall
be paid in the manner described under such
optional form.
(c) If the Participant elects an optional form of payment
under Article X, his Retirement Income payable as of
the date payment of his Retirement Income commences
shall equal the product of (i) and (ii) where:
IV-6
<PAGE> 25
(i) equals his Basic Retirement Income as
determined under Section 4.2, and
(ii) equals the Actuarial Equivalent factor for
the particular optional form elected as of
the date payment of his Retirement Income
commences, and shall be paid in the manner
described under such optional form.
4.4 Maximum Benefit. Except as set forth below, in no event shall
the Basic Retirement Income of a Participant under the Plan
exceed one twelfth of the lesser of (i) $90,000, or (ii) 100%
of the Participant's Average Compensation for the three (3)
consecutive Plan Years during which the Employee was an active
Participant and received the greatest Compensation from the
Employer. For the purposes of this Section, Compensation
shall mean all compensation of the Participant from the
Employer. For Plan Years commencing on or after January 1,
1987, the foregoing maximum benefit shall be subject to
adjustment as follows:
(a) The $90,000 amount referred to in (i) shall be
subject to an annual cost of living adjustment as
provided by Treasury Regulations in effect from
IV-7
<PAGE> 26
time to time under Section 415 of the Code and shall
be increased to the extent necessary to equal the
Participant's current accrued benefit (as defined in
Section 235(g)(4) of the Tax Equity and Fiscal
Responsibility Act of 1982) as of September 30, 1983;
(b) In the case of a Participant who has less than ten
(10) years of Plan participation, the maximum benefit
shall be reduced by multiplying the maximum benefit
stated above by a fraction the numerator of which is
the number of years of Plan participation (or parts
thereof) with the Employer and the denominator of
which is 10;
(c) In the event that the Participant's retirement
benefits commence prior to his Social Security
Retirement Age, the maximum dollar limitation
referred to in (i) shall be reduced in such manner as
the Secretary of the Treasury shall prescribe which
is consistent with the reduction for old-age
insurance benefits commencing before the Social
Security Retirement Age under the Social Security
Act, provided, however, that the interest rate
assumption used may not be less than five percent
(5%) to reflect such early commencement;
IV-8
<PAGE> 27
(d) If the Participant's retirement benefits commence
subsequent to his Social Security Retirement Age, the
maximum dollar limitation referred to in (i) shall be
increased so that it is the Actuarial Equivalent of
the maximum dollar limitation referred to above,
provided, however, that the interest rate assumption
may not exceed five percent (5%) to reflect such late
commencement;
(e) Any benefit payable in a form other than a straight
life annuity must be adjusted to an actuarially
equivalent straight life annuity before applying the
limitations of this Section 4.4. The interest rate
assumption used to determine actuarial equivalence
will be the greater of the interest rate specified in
the definition of Actuarial Equivalent or five
percent (5%). The annual benefit does not include
any benefits attributable to employee contributions
or rollover contributions, or the assets transferred
from a qualified plan that was not maintained by the
Employer. No actuarial adjustment to the benefit is
required for (1) the value of a qualified joint and
survivor annuity, (2) the value of benefits that are
not directly related to retirement benefits (such as
qualified disability
IV-9
<PAGE> 28
benefits, pre-retirement death benefits, and
post-retirement medical benefits), and (3) the value
of post-retirement cost-of-living increases made in
accordance with the Federal Income Tax Regulations.
(f) Notwithstanding anything in this Article to the
contrary, the maximum benefit for any individual who
is a Participant as of January 1, 1987 shall not be
less than the Participant's accrued benefit under the
Plan expressed as an annual benefit within the
meaning of Code Section 415(b)(2) and determined as
if the Participant had separated from service as of
December 31, 1986. For purposes of this clause, in
determining the amount of such Participant's accrued
benefit, the following shall be disregarded: (1) any
change in the terms and conditions of the Plan after
May 5, 1986; and (2) any cost of living adjustment
occurring after May 5, 1986.
Notwithstanding the foregoing, so long as the Employer does
not maintain a defined contribution plan in which the
Participant participates, the maximum benefit limitation
stated above shall not be deemed to be exceeded if the
retirement benefits payable with
IV-10
<PAGE> 29
respect to a Participant hereunder (and under any other
defined benefit plan which the Employer may establish) do not
exceed $10,000 for the Plan Year or for any prior Plan Year;
provided that in the case of a Participant who has less than
ten (10) years of Plan participation, the $10,000 figure shall
be adjusted in the manner provided in (b) above.
4.5 Additional Limitation-Members of Defined Contribution Plan.
In the case of any Participant who is entitled to benefits due
to Employer contributions under any defined contribution plan
maintained by the Employer, in addition to the limitations
under Section 4.4 hereof, the sum of the defined benefit plan
fraction and the defined contribution plan fraction for any
Plan Year may not exceed 1.0. The "defined benefit plan
fraction" for any Plan Year is a fraction (a) the numerator of
which is the projected annual benefit of the Participant under
this Plan (determined as of the close of the Plan Year), and
(b) the denominator of which is the lesser of: (1) the product
of 1.25 multiplied by the maximum dollar limitation in effect
under Section 415(b)(1)(A) of the Code for such Plan Year, or
(2) the product of 1.4 multiplied by the amount which may be
taken into account under Section 415(b)(1)(B) of the Code for
such Participant for such
IV-11
<PAGE> 30
Plan Year. The "defined contribution plan fraction" for any
Plan Year is a fraction (a) the numerator of which is the sum
of the annual additions to the Participant's account as of the
close of the Plan Year, and (b) the denominator of which is
the sum of the lesser of the following amounts determined for
such year and for each prior year of service with the
Employer: (1) the product of 1.25 multiplied by the maximum
dollar limitation in effect under Section 415(c)(1)(A) of the
Code for such Plan Year (determined without regard to Section
415(c)(6) of the Code), or (2) the product of 1.4 multiplied
by the amount which may be taken into account under section
415(c)(1)(B) of the Code for such Participant for such Plan
Year; provided, however, that the foregoing denominator may
instead, at the election of the Administrator, be determined
in accordance with the special transition rule set forth in
Section 415(e)(6) of the Code, and further provided that the
defined contribution plan fraction may be reduced in
accordance with Section 235(g)(3) of the Tax Equity and Fiscal
Responsibility Act of 1982. In the event that the said
projected annual benefit of a Participant under this Plan
should cause the aforesaid limitation to be exceeded, the
Administrator shall have the right to accomplish the
aforementioned compliance by reducing or limiting
IV-12
<PAGE> 31
either benefits under this Plan in the manner set forth above
or annual additions under any defined contribution plan in the
manner set forth in such defined contribution plan, and may
vary the extent to which the reduction or limitation will be
applied to either, provided that any such reduction or
limitation shall be made in a nondiscriminatory manner.
IV-13
<PAGE> 32
ARTICLE V
EARLY RETIREMENT
5.1 Early Retirement Date. A Participant may retire on the first
of any month between his 55th and 65th birthdays, provided he
has then completed at least 10 years of Credited Service, any
such date being his Early Retirement Date. Any such
Participant may elect to receive his Retirement Income
commencing on his Early Retirement Date in a reduced amount as
set forth in Section 5.2 or to receive his Retirement Income
commencing on his Normal Retirement Date as determined under
Section 4.3 based on his Average Earnings and Credited Service
as of his Early Retirement Date.
5.2 Early Commencement. A Participant who retires in accordance
with the provisions of Section 5.1 and elects to have payment
of his Retirement Income commence on his Early Retirement Date
shall be entitled to receive a reduced Annual Retirement
Income in the form stated in Section 4.3. The amount of such
reduced Retirement Income shall equal (a) times (b) where:
(a) equals such Participant's Normal Retirement Income as
determined under Section 4.3 based on his Average
Earnings and his Credited Service as of
V-12
<PAGE> 33
his Early Retirement Date and with the Actuarial
Equivalent factors described in Subsections 4.3(b)
and 4.3(c) being determined as of his Early
Retirement Date; and
(b) equals the appropriate percentage factor from the
following table:
<TABLE>
<CAPTION>
Complete Years by Which
Early Retirement Date Early Retirement
Precedes Age 65 Percentage Factors
----------------------- ------------------
<S> <C>
10 .72
9 .76
8 .80
7 .84
6 .88
5 .92
4 .96
3 1.00
2 1.00
1 1.00
0 1.00
</TABLE>
5.3 Delayed Commencement of Pension. A Participant who retires in
accordance with the provisions of Section 5.1 but elects to
have payment of his Retirement Income commence at a later
date, may defer such commencement of payment to the first of
any subsequent month which is not later than his Normal
Retirement Date. Notice of the selected payment commencement
date must be given to the Administrator at least 30 days prior
to such date. The amount of pension payable to the
Participant
V-13
<PAGE> 34
shall be determined in accordance with Section 5.2, except
that the selected payment commencement date shall be
considered the Participant's Early Retirement Date for
purposes of this benefit determination.
V-14
<PAGE> 35
ARTICLE VI
POSTPONED RETIREMENT
6.1 Delayed Retirement. Subject to the provisions of Article XIV,
Section 14.1, any Employee may remain in the Company's
employment after his Normal Retirement Date.
6.2 Commencement of Pension. A Participant whose retirement is
postponed beyond his Normal Retirement Date shall begin
receiving his monthly Retirement Income on the first day of
the month coinciding with or next following his actual
retirement. The amount and form of the Participant's
Retirement Income payable monthly commencing on his Postponed
Retirement Date shall be the same as the Participant's
Retirement Income that would have been had he retired on his
Normal Retirement Date except the Basic Retirement Income
shall be determined based on Credited Service and Average
Earnings of the Participant as of his Postponed Retirement
Date. The Retirement Income shall be offset by the Actuarial
Equivalent of the total benefit distributions made to the
Participant by the close of the Plan Year pursuant to Section
14.9. If the Participant should die after Normal Retirement
VI-4
<PAGE> 36
Date, but before his actual retirement date, it shall be
presumed that the Participant had retired as of the first day
of the month coinciding with or next preceding his date of
death.
VI-5
<PAGE> 37
ARTICLE VII
TERMINATION OF EMPLOYMENT AND VESTED RIGHTS
7.1 Vesting Requirements. A Participant whose Employment is
terminated other than by retirement, disability or death, and
prior to having completed 5 years of Vesting Service shall not
be entitled to any benefit under this Plan. A Participant
whose Employment is terminated after having completed at least
5 years of Vesting Service shall be entitled to receive a
Retirement Income equal to his Vested Benefit determined as of
his Termination Date as set forth in Section 7.2.
7.2 Vested Benefit. A Participant's Vested Benefit shall be the
Retirement Income payable at Normal Retirement Date in the
form and amount as set forth in Section 4.3 based on his
Average Earnings and Credited Service as of his Termination
Date, multiplied by the applicable percentage specified below:
<TABLE>
<CAPTION>
If Years of Vesting Then Vested
Service Are Percentage Is
------------------- -------------
<S> <C>
Less than 5 0%
5 or more 100%
</TABLE>
VII-3
<PAGE> 38
Notwithstanding the foregoing, a Participant shall be 100%
vested upon the later of his 65th birthday or the fifth
anniversary of his entry into the Plan.
7.3 Commencement of Payments. Retirement Income payments in the
form stated in Section 4.3 shall commence at the terminated
Participant's Normal Retirement Date unless the Participant
elects in writing on a form supplied by the Administrator to
have reduced payments commence at an earlier date provided
that such earlier date shall not be prior to the first day of
the calendar month coinciding with or next following the
terminated Participant's attainment of age 55. Such written
election must be received by the Administrator at least six
months prior to the commencement of benefits.
If a terminated Participant elects to have payments commence
prior to his Normal Retirement Date, the terminated
Participant's Retirement Income shall be reduced by .5% for
each complete month by which the date payments commence
precedes his Normal Retirement Date.
VII-4
<PAGE> 39
ARTICLE VIII
DISABILITY
8.1 Eligibility and Disability Determination. If a medical
examiner selected by the Employer certifies that an Employee
who has completed 5 years of Credited Service is mentally or
physically disabled for further performance of duty and that
such disability is likely to be permanent, such that the
Employee is considered eligible for a full disability pension
under the provisions of the Social Security Act, this Employee
may be terminated and he shall be entitled to a monthly
benefit in amount and form described below.
8.2 Disability Benefit. The monthly income of an Employee who
becomes eligible for a monthly benefit in accordance with
Section 8.1 shall equal the Basic Retirement Income as
determined in Section 4.2 based on his Average Earnings and
his Credited Service as of his Termination Date reduced by the
appropriate Early Retirement Percentage Factor from Subsection
5.2(b) (with a Percentage Factor of .72 if his Termination
Date precedes age 65 by more than 9 complete years).
8.3 Form and Commencement of Payments. An Employee who becomes
eligible for a monthly benefit in accordance
VIII-3
<PAGE> 40
with Section 8.1 shall receive such benefit in the form stated
in Section 4.3 commencing on the first day of the month next
following his Termination Date; provided, however, that no
payments shall be made under this Article VIII while the
Employee is receiving disability benefits from the Employer's
long-term disability plan.
8.4 Recovery. A Participant whose Employment is terminated in
accordance with Section 8.1 and subsequently recovers, shall
be considered an active Employee with Credited Service both
before and after termination of Employment aggregated for
purposes of determining all benefits under this Plan.
VIII-4
<PAGE> 41
ARTICLE IX
PRE-RETIREMENT DEATH BENEFIT
9.1 Death While Employed and Eligible for Early Retirement. If a
Participant dies while he is actively employed and eligible
for Early Retirement as provided in Section 5.1 but before the
earlier of his actual date of retirement or Normal Retirement
Date, his surviving Spouse (if designated or deemed his
Beneficiary in accordance with Section 9.4), if any, shall
receive monthly benefits equal to 50% of the Retirement Income
the Participant would have received under Section 5.2 had he
retired early as of the first day of the month coinciding with
or next preceding his date of death and elected the 50%
Contingent Annuitant Option under Subsection 10.3(b) with his
Beneficiary as Contingent Annuitant. Payment shall commence
on the first day of the calendar month following the
Participant's death and shall continue each month thereafter
through the month in which the Beneficiary's death occurs. If
a Participant dies while he is actively employed and eligible
for Early Retirement as provided in Section 5.1 but before the
earlier of his actual date of retirement or Normal Retirement
Date, with no surviving Spouse designated or deemed his
Beneficiary, his Beneficiary (as determined in accordance with
Section
IX-3
<PAGE> 42
9.4), if any, shall receive a death benefit. This death
benefit shall be paid in the form of a lump sum which shall be
the Actuarial Equivalent of the Retirement Income which the
Beneficiary would have received had the Participant retired on
the date of his death with the optional form of benefit under
Subsection 10.3(d) (Five Years Certain and Life Option) in
effect.
9.2 Death After Early Retirement But Before Commencement of
Pension. If a Participant retires on his Early Retirement
Date but dies before payment of his Retirement Income
commences, his surviving Spouse (if designated or deemed his
Beneficiary in accordance with Section 9.4), if any, shall
receive monthly benefits equal to 50% of the Retirement Income
the Participant would have received under Section 5.3 had he
elected to have payment of his Retirement Income commence as
of the first day of the month coinciding with or next
preceding his date of death and elected the 50% Contingent
Annuitant Option under Subsection 10.3(b) with his Spouse as
Contingent Annuitant.
If a Participant retires on his Early Retirement Date but dies
before payment of his Retirement Income commences with no
surviving Spouse designated or deemed
IX-4
<PAGE> 43
his Beneficiary, his Beneficiary (as determined in accordance
with Section 9.4), if any, shall receive a death benefit.
This death benefit shall be paid in the form of a lump sum
which shall be the Actuarial Equivalent of the Retirement
Income which the Beneficiary would have received had the
Participant retired on the date of his death with the optional
form of benefit under Subsection 10.3(d) (Five Years Certain
and Life Option) in effect.
9.3 Death Before Retirement.
(a) Unless waived within the Waiver Period pursuant to a
qualified waiver as described in Section 10.2, if a
Participant who is no longer actively employed dies
after attaining the Earliest Retirement Age, the
Participant's surviving Spouse (if any) shall receive
the same benefit that would be payable if the
Participant had retired with the 50% Contingent
Annuitant Option as described in Subsection 10.3(b)
on the day before the Participant's date of death.
(b) Unless waived within the Waiver Period pursuant to a
qualified waiver as described in Section 10.2, if a
Participant dies on or before attaining the
IX-5
<PAGE> 44
Earliest Retirement Age, the Participant's surviving
Spouse (if any) shall receive the same benefit that
would be payable if the Participant had:
(i) separated from service on the date of death,
or date of actual separation from service, if
earlier,
(ii) survived to the Earliest Retirement Age,
(iii) retired with an immediate 50% Contingent
Annuitant Option as described in Subsection
10.3(b) at the Earliest Retirement Age, and
(iv) died on the day after the Earliest Retirement
Age; provided, however, that in calculating
the benefit of a surviving Spouse of a
Participant who dies while actively employed,
the Retirement Income to which the
Participant would have been entitled at his
Normal Retirement Date shall be reduced in
accordance with the formula described in
Section 5.2, rather than that described in
Section 7.3.
IX-6
<PAGE> 45
(c) For purposes of this Section 9.3, a surviving Spouse
shall begin to receive payments at the later of (i)
the date of the Participant's death, or (ii) the
Earliest Retirement Age, unless such surviving Spouse
elects a later date.
(d) For purposes of this Section 9.3, the following
definitions shall apply:
(i) Waiver Period: The period which begins on the
date the Participant separates from service
and ends on the date of the Participant's
death.
(ii) Earliest Retirement Age: The earliest date on
which, under the Plan, the Participant could
have elected to receive retirement benefits.
(e) For the period during which a Participant who is no
longer actively employed has not waived the pre-
retirement survivor annuity described in this Section
9.3, the Participant's Retirement Income shall be
reduced as follows:
<TABLE>
<CAPTION>
Reduction in Retirement Income
Attained Age for each Month of Coverage
------------ ------------------------------
<S> <C>
Under 45 1/120%
45-54 1/60%
55 and over 1/24%
</TABLE>
IX-7
<PAGE> 46
9.4 Designation of Beneficiary. The Administrator shall provide
to each actively employed Participant at least 90 days before
the date on which he meets the age and service requirements
for early retirement, a form on which he may designate his
Beneficiary. The person whom a Participant designates as his
Beneficiary must be his Spouse, unless a qualified waiver of
the qualified pre-retirement survivor annuity has been made in
accordance with Section 10.2. If such a qualified waiver has
been made, the Participant's Beneficiary for this purpose must
be one of the following: the Participant's spouse, father,
mother, sister, brother, son or daughter. The beneficiary may
also be a legal ward living with and dependent on the
Participant at the time of his death. If the Participant dies
after satisfying the requirements for early retirement, and
has not designated a Beneficiary, his Beneficiary shall be his
Spouse, if living; otherwise, he shall have no Beneficiary and
no payments shall be made pursuant to this Article IX.
IX-8
<PAGE> 47
ARTICLE X
NORMAL AND OPTIONAL FORMS OF RETIREMENT INCOME
10.1 Normal Form of Payments. If a Participant does not make a
timely election of one of the optional forms of payment
described below, then his Retirement Income shall be payable
in the form and amount under Section 4.3, if he retires as of
his Normal or Postponed Retirement Date; under Section 7.3, if
he terminates his employment other than by reason of death,
disability or retirement; and under Section 8.3, if he is
disabled.
10.2 Election of Optional Form of Payment. A Participant whose
Retirement Income is otherwise payable under the Normal Form
may elect in writing to the Employer to receive his benefit
under one of the optional forms set forth in Section 10.3.
The Administrator shall provide to each active Participant and
each terminated Participant with a vested interest whose
benefits have not yet commenced, by personal delivery or mail,
at least 90 days before the date on which he meets the age and
service requirements for early retirement, the following
information in written nontechnical language: (1) a general
description of the Normal Form and optional forms of payment
and the availability of the
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election not to receive the Normal Form; (2) a general
explanation of the relative financial effect of an election
not to receive the Normal Form; (3) the right to make, and the
effect of, a revocation of a previous election not to receive
the Normal Form; (4) the rights of a Participant's Spouse; and
(5) notification of the availability upon written request of a
written explanation of the financial effect (in dollars per
annuity payment) upon the particular Participant's annuity of
an election not to take the Normal Form. The Administrator
shall furnish this additional information to a Participant by
personal delivery or first-class mail within 30 days from the
date of the Participant's written request. An election of an
optional form of payment pursuant to Section 10.3 shall not be
effective unless it is filed with the Administrator within the
90-day period before pension benefit payments are to commence.
Notwithstanding the foregoing, if a Participant requests the
additional information described in clause (3) above, he shall
have the right to elect an optional form of payment for a
period of at least 90 days following the day this information
is personally delivered or mailed and the commencement of his
benefits may be delayed until the form of payment is
determined.
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Notwithstanding the foregoing, no election of an optional form
of benefit or election to waive the pre-retirement survivor
annuity by a married Participant will be effective without a
qualified waiver. Such waiver must be in writing and may only
be made with the written consent of the Participant's Spouse.
The Spouse's consent to a waiver must be witnessed by the
Administrator or his representative or by a notary public.
Notwithstanding the foregoing requirement of spousal consent,
if the Participant establishes to the satisfaction of the
Administrator that such written consent may not be obtained
because there is no Spouse or the Spouse cannot be located, a
waiver will be deemed to be a qualified waiver. Any consent
necessary under this provision will be valid only with respect
to the Spouse who signs the consent, or in the event of a
deemed qualified waiver, the designated Spouse, if any.
Additionally, a revocation of a prior qualified waiver may be
made by a Participant without the consent of the Spouse at any
time before the date payment of benefits commences. The
number of revocations shall not be limited.
10.3 Optional Forms of Payment. The optional forms of benefit
payment available shall be the Actuarial
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Equivalent of the Retirement Income otherwise payable to the
Participant.
(a) Straight Life Annuity Option - Retirement Income
payable monthly during the Participant's lifetime,
with no further payments on his behalf after his
death. If this option is elected, the Participant's
Retirement Income shall equal his Basic Retirement
Income without actuarial adjustment except as
provided for election of early commencement of
payments, as applicable.
(b) Contingent Annuitant Option - Retirement Income
payable monthly during the Participant's lifetime
with the provision that after his death such
Retirement Income shall be continued to the
Contingent Annuitant, in the same or a lesser amount,
as specified by the Participant, during the life of
such Contingent Annuitant. The lesser percentage
which may be specified by a Participant shall be
either 75% or 50% of the Participant's Retirement
Income.
Except as provided for in Article IX, if a
Participant shall elect the Contingent Annuitant
Option and he shall die before the earlier of his
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Early Retirement Date, or Normal Retirement Date,
whichever is applicable, his Contingent Annuitant
shall not be entitled to any Retirement Income under
this Plan.
If a Participant shall elect the Contingent Annuitant
Option and his Contingent Annuitant shall die before
the Participant does, but such death occurs after the
retirement of the Participant, the Participant shall
continue to receive the Retirement Income payable to
him prior to the death of his Contingent Annuitant.
(c) Ten Years Certain and Life Option - Retirement Income
payable monthly during the Participant's lifetime and
in the event of the Participant's death within a
period of 10 years after benefits hereunder have
commenced, the Actuarial Equivalent of the value of
the Retirement Income remaining to be paid during the
aforementioned 10-year period shall be paid to the
Participant's Beneficiary in a lump sum within 5
years of the date of the Participant's death.
Except as provided for in Article IX, if a
Participant shall elect the Ten Years Certain and
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Life Option and he shall die before the earlier of
his Early Retirement Date, or Normal Retirement Date,
whichever is applicable, his Beneficiary shall not be
entitled to any Retirement Income under this Plan.
If a Participant shall elect the Ten Years Certain
and Life Option and his Beneficiary shall die before
the Participant does, but such death occurs after the
retirement of the Participant, the Participant shall
continue to receive the Retirement Income payable to
him prior to the death of his Beneficiary and shall
designate a new Beneficiary.
(d) Five Years Certain and Life Option - Retirement
Income payable monthly during the Participant's
lifetime and in the event of the Participant's death
within a period of 5 years after benefits hereunder
have commenced, the Actuarial Equivalent of the value
of the Retirement Income remaining to be paid during
the aforementioned 5-year period shall be paid to the
Participant's Beneficiary in a lump sum within 5
years of the date of the Participant's death.
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Except as provided for in Article IX, if a
Participant shall elect the Five Years Certain and
Life Option and he shall die before the earlier of
his Early Retirement Date, or Normal Retirement Date,
whichever is applicable, his Beneficiary shall not be
entitled to any Retirement Income under this Plan.
If a Participant shall elect the Five Years Certain
and Life Option and his Beneficiary shall die before
the Participant does, but such death occurs after the
retirement of the Participant, the Participant shall
continue to receive the Retirement Income payable to
him prior to the death of his Beneficiary and shall
designate a new Beneficiary.
For purposes of the optional forms of payment set forth in
Subsections (b), (c) and (d) hereof, the Participant's
Beneficiary shall be designated on a form provided by the
Administrator. Any person may be designated a Beneficiary for
these purposes; provided, however, that if no other
Beneficiary shall have been effectively designated, the
executor or administrator of the Participant's estate shall be
deemed his Beneficiary.
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10.4 General Limitation. Anything in the foregoing to the contrary
notwithstanding, no method of distribution may be made under
this Article which would result in the Actuarial Equivalent of
a Contingent Annuitant's or Beneficiary's interest equaling or
exceeding 50% of the Actuarial Equivalent of the Participant's
full retirement benefit, both equivalents being determined as
of the Participant's actual Retirement Date.
10.5 Lump Sum Distributions. Anything in the Plan to the contrary
notwithstanding, the Committee shall pay benefits to a
Participant who retires or otherwise terminates Employment
with the Employer in a lump sum; provided, however, that the
lump sum value of such benefits may not exceed (or have ever
exceeded) $3,500 (or such greater amount as may be permitted
by law or regulation at the time of payment); and, provided,
further, that such distribution must be made by the end of the
second Plan Year following the Plan Year in which termination
of employment occurs. A Participant who receives a lump sum
distribution pursuant to this Section 10.5 shall forfeit all
Credited Service accrued prior to such distribution, and such
forfeited Credited Service shall be disregarded if such
Participant is subsequently reemployed by the Employer unless
the Participant repays the entire amount of the
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distribution, plus interest compounded annually from the date
of the distribution at the rate of 5 percent per year, prior
to the earlier of (1) the expiration of the fifth consecutive
Plan Year in which the Participant completed 500 or fewer
Hours of service or (2) the fifth anniversary of the date of
the Participant's reemployment.
10.6 Direct Rollover.
(a) This Section applies to distributions made on or
after January 1, 1993. Notwithstanding any provision
of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a
distributee may elect, at the time and in the manner
prescribed by the Administrator, to have any portion
of an eligible rollover distribution paid directly to
an eligible retirement plan specified by the
distributee in a direct rollover.
(b) Definitions.
(1) Eligible rollover distribution: An eligible
rollover distribution is any distribution of
all or any portion of the balance to the
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credit of the distributee, except that an
eligible rollover distribution does not
include: any distribution that is one of a
series of substantially equal periodic
payments (not less frequently than annually)
made for the life (or life expectancy) of the
distributee or the joint lives (or joint life
expectancies) of the distributee and the
distributee's designated beneficiary, or for
a specified period of ten years or more; any
distribution to the extent such distribution
is required under Section 401(a)(9) of the
Code; and the portion of any distribution
that is not includible in gross income
(determined without regard to the exclusion
for net unrealized appreciation with respect
to employer securities).
(2) Eligible retirement plan: An eligible
retirement plan is an individual retirement
account described in Section 408(a) of the
Code, an individual retirement annuity
described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of
the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the
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distributee's eligible rollover distribution.
However, in the case of an eligible rollover
distribution to the surviving spouse, an
eligible retirement plan is an individual
retirement account or individual retirement
annuity.
(3) Distributee: A distributee includes an
Employee or former Employee. In addition,
the Employee's or former Employee's surviving
Spouse and the Employee's or former
Employee's Spouse or former Spouse who is the
alternate payee under a qualified domestic
relations order, as defined in Section 414(p)
of the Code, are distributees with regard to
the interest of the Spouse or former Spouse.
(4) Direct rollover: A direct rollover is a
payment by the Plan to the eligible
retirement plan specified by the distributee.
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ARTICLE XI
FIDUCIARIES -
ADMINISTRATION OF THE PLAN
11.1 Appointment of Named Fiduciary. The Committee is hereby
designated as the Named Fiduciary of the Plan.
11.2 Authority of Named Fiduciary. Subject to the provisions of
Section 11.4, the Committee shall have the authority to
control and manage the operation and administration of the
Plan in accordance with the terms hereof.
11.3 Discharge of Duties - Fiduciaries. Any Fiduciary with respect
to the Plan shall discharge its duties solely in the interest
of the Participants and Beneficiaries for the exclusive
purpose of providing benefits to Participants and
Beneficiaries and defraying reasonable expenses of
administering the Plan. In addition any Fiduciary with
respect to the Plan shall discharge its duties with the care,
skill, prudence and vigilance under the circumstances then
prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims.
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11.4 Delegation of Duties. The Committee shall have authority and
discretion to designate or appoint in writing (i) persons to
carry out specified fiduciary responsibilities, other than
Trustee responsibilities, to manage and control the assets of
the Plan, and (ii) investment advisors and managers to manage
(including the power to acquire and dispose of) any assets of
the Plan. Any such person shall serve at the pleasure of the
Committee and may resign by delivering a written notice to the
Committee. Any delegation of duties shall be made and
acknowledged in writing and shall clearly state the powers and
duties so delegated.
11.5 Appointment of Committee. The Board shall appoint the
Committee which shall consist of not less than three members,
who shall serve at the pleasure of the Board. The members of
the Committee shall elect a chairman and a secretary, the
latter of whom may, but need not be, a member of the
Committee.
11.6 Meetings. The Committee shall hold meetings upon such notice,
and at such place or places, and at such intervals as it may
from time to time determine.
11.7 Quorum. A majority of the members of the Committee at any
time in office shall constitute a quorum for the
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transaction of business. All resolutions or other actions
taken by the Committee shall be by vote of a majority of those
present at a meeting of the Committee; or without a meeting by
instrument in writing signed by a majority of the members of
the Committee.
11.8 Expenses. The reasonable expenses incident to the operation
of the Plan, including premiums for termination insurance
payable to the Pension Benefit Guaranty Corporation, the
compensation of the Trustee, Actuary, attorney, advisors,
Fiduciaries, and such other technical and clerical assistance
as may be required, shall be paid out of the Fund, but the
Employer in its discretion may elect at any time to pay part
or all thereof directly, and any such election shall not bind
the Employer as to its right to elect with respect to the same
or other expenses at any other time to have such compensation
paid from the Fund.
11.9 Powers and Duties of the Committee. In addition to any
implied powers and duties which may be needed to carry out the
provisions of the Plan, the Committee, subject to the
provisions of Section 11.4, shall have the following specific
powers and duties.
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(a) To make and enforce such rules and regulations as it
shall deem necessary or proper for the efficient
administration of the Plan;
(b) To interpret the Plan and to decide any and all
matters arising hereunder; including the right to
remedy possible ambiguities, inconsistencies or
omissions; provided, however, that all such
interpretations and decisions shall be applied in a
uniform and nondiscriminatory manner to all Employees
similarly situated;
(c) To compute the amount of Retirement Income which
shall be payable to any Participant, Spouse or
Beneficiary in accordance with the provisions of the
Plan; and
(d) To authorize disbursements from the Fund, any
instructions of the Committee to the Trustee to be
evidenced in writing and signed by a member of the
Committee delegated with such authority by a majority
of the Committee.
11.10 Administrator. The Committee may designate an Administrator
of the Plan, and may delegate to the Administrator such duties
as the Committee may decide
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including the responsibility to prepare and file, or to cause
to be prepared and filed, such reports, descriptions,
summaries financial and other statements as may be required
from time to time under applicable provisions of ERISA, within
the time prescribed for the preparation or filing of such
documents, and to furnish such reports, statements and
documents to Participants and Beneficiaries of the Plan as may
be required by ERISA, within the time specified for furnishing
such documents. Any such designation and delegation shall be
made in the manner provided in Section 11.4.
11.11 Agent for Service. The Committee, or the Administrator if one
shall be appointed, shall be the agent for service of legal
process in connection with any claim or proceeding relating to
the Plan.
11.12 Use of Enrolled Actuary. The Company shall employ or engage
an Actuary to make actuarial valuations of the liabilities
under this Plan and to recommend the amounts of contributions
to be made and to perform such other services deemed necessary
or advisable in connection with the administration of the
Plan.
11.13 Bonding; Liability of Committee. The Committee, or its
delegee, shall ensure that each Fiduciary of the Plan,
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including members of the Committee, is bonded in accordance
with ERISA. The Employer shall indemnify and hold harmless
each member of the Committee, the Administrator, and any
Director or Employee held to be a Fiduciary with respect to
the Plan from any liability, claim, demand, suit or action of
any type arising from any action or failure to act; provided
that such person acted in good faith and in a manner he
reasonably believed to be in the best interests of the
Participants and Beneficiaries and consistent with the
provisions of the Plan and, with respect to any criminal
action or proceeding, that he had no reasonable cause to
believe his conduct was unlawful.
11.14 Reliance on Reports and Certificates. The Committee, and its
delegees, shall be entitled to rely conclusively upon all
tables, valuations, certificates, opinions and reports which
will be furnished by an Actuary, accountant, controller,
counsel or other person who is employed or engaged for such
purposes.
11.15 Member's Own Participation. No member of the Committee may
act, vote or otherwise influence a decision of the Committee
specifically relating to his own participation under the Plan.
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11.16 Claims Procedure. Each Participant and Beneficiary of the
Plan shall submit all claims for benefits, claims relating to
the amount or manner of any distribution, and any other
request relating to any account, in writing, to the
Administrator of the Plan. The Administrator shall within a
reasonable period of time, but not later than 60 days after
receipt thereof, either approve or deny such claim or request
either wholly or in part, and notify the claimant in writing
of the action taken.
11.17 Notice of Denial. If such claim or request is wholly or
partially denied, the written notice of the Administrator
shall set forth in a manner calculated to be understood by the
claimant:
(a) specific reasons for the denial;
(b) specific references to the pertinent Plan provisions
on which the denial is based;
(c) specific reference to any additional material or
information necessary for the claimant to perfect
review of the claim and an explanation of why such
material or information is necessary; and
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(d) an explanation of the Plan's claims review procedure.
If the notice of the denial is not furnished to the
Participant in accordance with this Section within a
reasonable period of time, such Participant's claim shall be
deemed denied.
11.18 Review. Upon denial of such a claim or request, the claimant
shall be entitled within 60 days after the receipt of written
notice of denial by the Administrator:
(a) to request, in writing, a review by the Committee of
the denial;
(b) to review pertinent documents; and
(c) to submit issues and comments in writing.
The Committee shall render a decision on its review of the
denial promptly, but not later than 60 days after the receipt
of the request for review, unless special circumstances
require an extension of time, in which case a decision shall
be rendered not later than 120 days after the receipt of a
request for review.
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If the Committee's decision on review is not furnished to the
Participant within the time limitations described herein, the
claim shall be deemed denied upon review.
The decision of the Committee shall be in writing and shall
set forth reasons therefor stated in a manner calculated to be
understood by the claimant, including specific references to
the pertinent Plan provisions. Determinations, decisions and
other actions of the Committee, taken in accordance with the
provisions hereof shall be final, conclusive and binding on
all parties.
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ARTICLE XII
METHOD OF FINANCING
12.1 Appointment of Trustee. The Trustee under the Plan will be
appointed by the Board, with such powers, as to investments,
reinvestment, control and disbursement of the Fund, as set
forth in the Trust Agreement, or in such Trust Agreement as
modified from time to time. The Board may remove the Trustee
at any time on the notice required by the terms of such Trust
Agreement, and upon such removal or upon the resignation of
any such Trustee, such Board will designate a successor
Trustee.
12.2 The Employer shall contribute to the Trust Fund such amounts
as are deemed necessary by an Actuary to fund the benefits
provided by the Plan on an acceptable basis in accordance with
Title I, Section 302 and Title II, Section 1013 of ERISA. Any
actuarial gains arising from actual experience under the Plan
will be used to reduce future Employer contributions and will
not be used to increase any benefits payable under the Plan.
All contributions made under this Plan are made on the
condition that they are deductible under Section 404 of the
Code.
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12.3 Except as provided in Section 12.6, all Employer contributions
when made to the Trust Fund and all property of the Trust
Fund, including income from investments and all other sources,
shall be retained for the exclusive benefit of Participants,
Spouses, or their Beneficiaries and shall be used to pay
benefits provided hereunder or to pay expenses of
administration of the Plan and the Trust Fund to the extent
not paid by the Employer.
12.4 The Employer shall not be required to make, but may make in
any calendar or fiscal year, any contributions to the Trust
Fund in any amount which is greater than the amount specified
in Section 12.2. The timing of all contributions shall be
entirely discretionary with the Employer to the extent
permitted by ERISA.
12.5 Participants will not be required or permitted to make
contributions to the Plan.
12.6 Amounts forfeited by any Participant shall be used to reduce
Employer contributions.
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ARTICLE XIII
AMENDMENT OR TERMINATION
13.1 Right to Amend or Terminate. The Employer hopes and expects
to continue the Plan indefinitely. Nevertheless, each Employer
maintains the right to suspend, terminate, or completely
discontinue contributions under the Plan with respect to its
Employees and the Board may terminate the Plan for any reason
at any time; subject to the requirement that the Administrator
shall file a notice of intent to terminate with the Pension
Benefit Guaranty Corporation ("PBGC") at least 60 days prior
to the proposed date of termination of the Plan, and shall
comply with all other provisions of ERISA or the PBGC relating
to plan terminations. In addition, the Board may amend or
modify the Plan from time to time, provided, however, that no
such action shall adversely affect Participants to the extent
of their vested benefits, nor shall such action decrease a
Participant's accrued benefit or eliminate an optional form of
distribution. Notwithstanding the foregoing, however, any
modification or amendment of the Plan may be made
retroactively, if necessary or appropriate to qualify or
maintain the Plan as a Plan meeting the requirements of the
Code and ERISA. Upon any termination or partial
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termination of the Plan all accrued benefits, to the extent
funded, shall become nonforfeitable on the date of the
termination.
13.2 Change in Vesting. If an amendment or a change in the
top-heavy status of the Plan changes the vesting schedule of
the Plan, as set forth in Section 7.2 hereof, any Participant
having three (3) or more years of service on the date which is
sixty (60) days after such amendment or change is adopted or
becomes effective (or, if later, sixty (60) days after written
notice of the amendment is given) may, no later than the end
of the election period, elect to remain subject to the vesting
schedule in effect prior to such amendment or change. For
purposes of the foregoing, the "election period" shall begin
on the date the amendment changing the vesting schedule is
adopted or the date on which the Plan's top-heavy status is
changed and shall end no earlier than the latest of the
following dates (provided that in the case of a change in the
Plan's top-heavy status, only clause (b) shall apply):
(a) the date which is 60 days after the day the Plan
amendment is adopted;
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(b) the date which is 60 days after the day the Plan
amendment becomes effective or the top-heavy status
of the Plan changes; or
(c) the date which is 60 days after the day the
Participant is issued written notice of the Plan
amendment by the Employer or Administrator.
13.3 Mergers, Consolidations and Transfers. The Plan shall not be
automatically terminated by the Employer's acquisition by or
merger into any other company, but the Plan shall be continued
after such merger provided the successor company agrees to
continue the Plan. All rights to amend, modify, suspend, or
terminate the Plan shall be transferred to the successor
company, effective as of the date of the merger.
The merger or consolidation with, or transfer of assets and
liabilities to, any other qualified retirement plan shall be
permitted only if the benefit each plan participant would
receive if the plan were terminated immediately after such
merger or consolidation, or transfer of assets and
liabilities, would be at least as great as the benefit he
would have received had the Plan been terminated immediately
before any such transaction.
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13.4 Distribution of Funds upon Termination. In the event the Plan
shall be terminated or contributions permanently discontinued,
the then present value of benefits vested in each Participant
in accordance with Article VII shall be determined as of the
Plan termination date and the assets of any Fund then held by
the Trustee as reserves for Retirement Income for Participants
under this Plan shall be allocated to the extent that they
shall be sufficient, after providing for expenses of
administration, in the order of precedence set forth below:
(a) There shall first be set aside an amount which will
provide Retirement Income for Participants, Spouses,
or Beneficiaries who were receiving benefits or who
were eligible to receive benefits at least three
years prior to termination of the Plan based on Plan
provisions in effect five years prior to the date of
the Plan's termination.
(b) There shall next be set aside an amount which will
provide all other benefits insured by the PBGC.
(c) There shall next be set aside an amount which will
provide all other vested benefits, under the
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provisions of the Plan on its termination date, but
which are not incurred under ERISA.
(d) Finally, there shall be set aside an amount which
will provide all other accrued benefits for
Participants who were not vested as of the date of
Plan termination.
If the assets of the Fund held by the Trustee as reserves for
Retirement Income for Participants of the Plan, as of the date
of the Plan is terminated, are not sufficient to provide in
whole the amounts required within the classes described above,
such assets will be allocated pro rata within the class in
which the amounts first cannot be provided in full.
Allocation in any of the above listed categories is adjusted
for any allocation already made to the same Participant under
a prior category. Allocation of assets may be modified by the
Internal Revenue Service to meet nondiscrimination
requirements. After all liabilities of the Plan have been
satisfied, the Employer shall be entitled to any balance of
the Fund which shall remain.
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13.5 Provision of Benefits. The Retirement Income payable in
accordance with Section 13.3 shall be provided through
continuance of the existing Trust Agreement or through a new
instrument entered into for that purpose or through the
purchase of nontransferable annuity contract or contracts from
a commercial life insurance company or by a combination
thereof. If the allocations produce Retirement Income of less
than $120 a year, a lump sum payment which is the Actuarial
Equivalent of such Retirement Income may be paid in lieu
thereof.
13.6 Special Limitations. Subject to the limitations expressed in
Sections 4.3, 4.4 and 13.4, if, at any time prior to June 3,
1985 the Plan shall be terminated or the full current cost of
the Plan shall not have been met, then the amount of the
contributions by the Employer, or funds attributable thereto,
that may be applied for the benefit of any Participant who on
June 3, 1975 is one of the 25 highest paid Employees and whose
anticipated annual Normal Retirement Income resulting from
contributions of the Employer is more than $1,500 shall not
exceed:
(a) the greater of $20,000 or an amount computed by
multiplying the number of years or parts thereof
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from June 3, 1975, to the date of failure to meet the
full current costs of the Plan or the date of
termination of the Plan, as the case may be, by 20%
of the first $50,000 of the Employee's average Annual
Earnings during the five year period preceding the
date of failure to meet the full current costs of the
Plan or the date of termination of the Plan, or
(b) such larger amount as may be permissible under
relevant laws and regulations at the time in force.
The provisions of this Section shall not restrict the current
payment of full benefits called for by the Plan to any person
while the Plan is in full effect and its full current costs
have been met; nor shall it restrict payment of any benefit
withheld for a prior year (under the foregoing provisions)
after all deficits for all prior years and full current costs
have been met. Notwithstanding the otherwise applicable
restrictions on distributions of benefits incident to early
Plan termination, a Participant's otherwise restricted benefit
may be distributed in full upon such Participant's depositing
with an acceptable depository property having a fair market
value equal to 125% of
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the amount which would be repayable had the Plan terminated on
the date of the lump sum distribution. If the fair market
value of the property held by the depository falls below 110%
of the amount which would be repayable if the Plan were then
to terminate, additional property necessary to bring the value
of the property held by the depository up to 125% of such
amount shall be deposited.
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ARTICLE XIV
GENERAL PROVISIONS
14.1 No Guarantee of Employment. The Plan shall not be deemed to
constitute a contract between an Employer and any Employee or
to be a consideration for, or an inducement for, the
employment of any Employee by an Employer. Nothing contained
in the Plan shall be deemed to give any Employee the right to
be retained in the service of any Employer or to interfere
with the right of the Employer to discharge or to terminate
the service of any Employee at any time without regard to the
effect such discharge or termination may have on any rights
under the Plan.
14.2 Payments to Minors and Incompetents. If a Participant,
Contingent Annuitant or Beneficiary entitled to receive any
benefits hereunder is a minor or is deemed by the Committee or
is adjudged to be legally incapable of giving valid receipt
and discharge for such benefits, they will be paid to such
persons as the Committee might designate or to the duly
appointed guardian. Such payment shall, to the extent made,
be deemed a complete discharge of any liability for such
payment under the Plan.
XIV-9
<PAGE> 78
14.3 Nonalienation of Benefits. To the extent permitted by law and
with the exception of payments pursuant to a qualified
domestic relations order within the meaning of Section 414(p)
of the Code, no benefit payable under this Plan will be
subject in any manner to anticipation, alienation, assignment,
garnishment, or pledge; and any attempt to anticipate,
alienate, assign, garnishee or pledge the same will be void;
and no such benefits will be in any manner liable for or
subject to the debts, liabilities, engagements, or torts of
any Participant; and if any Participant is adjudicated
bankrupt or attempts to anticipate, alienate, assign, or
pledge any benefits, then such benefits will, in the
discretion of the Committee, cease, and in this event, the
Committee will have the authority to cause the same or any
part thereof to be held or applied to or for the benefit of
such Participant, his Spouse, his children or other
dependents, or any of them, in such manner and in such
proportion as the Committee may deem proper.
14.4 Purchase of Annuities. If the Committee for any reason deems
it advisable, the Retirement Income benefits payable at
retirement date under the Plan may be provided through the
purchase of non-transferable annuities from such insurance
company or companies as
XIV-10
<PAGE> 79
may be approved by the Committee. Payment thereof will be
made from the Fund held by the Trustee.
14.5 Notwithstanding any other provision of the Plan, a former
Participant shall not be entitled to payment of duplicate
benefits upon again becoming a Participant.
14.6 A Participant shall not, with or without cause be divested of
any annual benefits that are vested under the terms of the
Plan.
14.7 Governing Law. The provisions of the Plan will be construed
according to the laws of the State of Connecticut, subject to
ERISA.
14.8 Preservation of Prior Methods of Payment. Notwithstanding any
of the methods of payment of benefits provided in Articles IX
and X, in the case of a Participant who has made a designation
prior to January 1, 1984 which conforms to the requirements of
Section 242(b)(2) of the Tax Equity and Fiscal Responsibility
Act of 1982 and which provides that one or more of the payment
methods contained in the Plan prior to January 1, 1984 shall
apply to such Participant's benefits, the Participant and any
Beneficiary shall be entitled to receive such benefits in
accordance with the payment
XIV-11
<PAGE> 80
methods in effect under the Plan prior to January 1, 1984.
The Committee shall be authorized to disregard any
designation, or any portion thereof, which has been made in
accordance with the preceding sentence if it determines that
such action is necessary to preserve the tax qualification of
the Plan.
14.9 Commencement of Benefits. In no case shall distributions of
benefits under the Plan be made or commence later than April 1
of the calendar year following the calendar year in which a
Participant attains age 70 1/2 whether or not he has retired
or otherwise terminated his Employment at that time; provided
that, however, if a Participant had attained age 70 1/2 before
January 1, 1988 and was not a five percent (5%) owner at any
time during the Plan Year ending with or within the calendar
year in which the Participant had attained age 66 1/2 or any
subsequent Plan Year, such Participant may elect to delay his
distribution until the calendar year in which the Participant
retires, and, provided further, that if a Participant has made
a designation prior to January 1, 1984 which conforms to the
requirements of Section 242(b)(2) of the Tax Equity and Fiscal
Responsibility Act of 1982, distributions of benefits under
the Plan
XIV-12
<PAGE> 81
may be made or commence in accordance with the terms of such
designation.
14.10 Notwithstanding any other provision of the Plan, in no event
shall a Participant's benefit payments under the Plan decrease
due to any increase in such Participant's social security
benefits.
14.11 Suspension of Benefits.
(a) Except for payments required by Section 14.9 hereof,
benefits under this Plan are payable only after
termination of employment; provided, however, that
benefits shall be paid to a Participant who is
otherwise entitled to receive benefits hereunder even
if such Participant has not terminated Employment,
but only if such Participant does not complete at
least 40 Hours of service during a calendar month in
Section 203(a)(3)(B) service, within the meaning of
Section 203(a)(3)(B) of ERISA and Section 2530.203-3
of the Code of Federal Regulations. In addition,
normal or early retirement benefits in pay status
will be suspended for each calendar month during
which the Participant completes at least 40 Hours of
service in Section 203(a)(3)(B)
XIV-13
<PAGE> 82
service. In accordance with the foregoing, the
actuarial value of benefits which commence later than
a Participant's Normal Retirement Date will be
computed without regard to amounts which would have
been suspended under the preceding sentences as if
the Participant had been receiving benefits since
Normal Retirement Date.
(b) If benefit payments have been suspended, payments
shall resume no later than the first day of the third
calendar month after the calendar month in which the
Participant ceases to be employed for at least 40
Hours of service for a calendar month in Section
203(a)(3)(B) service. The initial payment upon
resumption shall include the payment scheduled to
occur in the calendar month when payments resume and
any amounts withheld during the period between the
cessation of such Section 203(a)(3)(B) service and
the resumption of payments.
(c) No payment shall be withheld by the Plan pursuant to
this Section unless the Plan notifies the Participant
by personal delivery or first class mail during the
first calendar month or payroll period in which the
Plan withholds payments that
XIV-14
<PAGE> 83
his or her benefits are suspended. Such notification
shall contain a description of the specific reasons
why benefit payments are being suspended, a
description of the Plan provision relating to the
suspension of payments, a copy of such provisions,
and a statement to the effect that applicable
Department of Labor regulations may be found in
Section 2530.203-3 of the Code of Federal
Regulations. In addition, the notice shall inform
the Participant of the Plan's procedures for
affording a review of the suspension of benefits.
Requests for such review may be considered in
accordance with the claims procedure adopted by the
Plan pursuant to Section 503 of ERISA and applicable
regulations.
(d) The amount suspended shall be an amount equal to the
portion of a monthly benefit payment derived from
Company contributions.
(e) This paragraph does not apply to the minimum benefit
to which the Participant may become entitled under
the top-heavy rules of Article XV.
XIV-15
<PAGE> 84
ARTICLE XV
TOP-HEAVY PLAN PROVISIONS
(Paragraphs 15.1 - 15.10 provide definitions for Article XV)
15.1 Compensation. Compensation of an Employee which is reportable
on Form W-2 for the calendar year ending with or within the
Plan Year.
15.2 Key Employee. Any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the
Determination Period was an officer of the Employer with
Compensation greater than 150 percent of the dollar limitation
under Section 4l5(c)(1)(A) of the Code, an owner (or
considered an owner under Section 318 of the Code) of one of
the ten largest interests in the Employer if such individual's
Compensation exceeds the dollar limitation under Section
4l5(c)(1)(A) of the Code and such individual's ownership
interest exceeds 1/2 percent, a 5-percent owner of the
Employer, or a 1-percent owner of the Employer who has
Compensation of more than $150,000. The determination of who
is a Key Employee shall be made in accordance with Section
416(i)(1) of the Code.
XV-8
<PAGE> 85
15.3 Top-Heavy Plan. For any Plan Year beginning after December
31, 1983, this Plan is top-heavy if any of the following
conditions exists:
(a) If the Top-Heavy Ratio for this Plan exceeds 60
percent and this Plan is not part of any Required
Aggregation Group or Permissive Aggregation Group of
plans.
(b) If this Plan is a part of a Required Aggregation
Group of plans (but which is not part of a Permissive
Aggregation Group) and the Top-Heavy Ratio for the
Required Aggregation Group of plans exceeds 60
percent.
(c) If this Plan is a part of a Required Aggregation
Group of plans and part of a Permissive Aggregation
Group and the Top-Heavy Ratio for the Permissive
Aggregation Group exceeds 60 percent.
15.4 Top-Heavy Ratio.
(a) If the Employer maintains one or more defined benefit
plans and the Employer has not maintained any defined
contribution plan (including any simplified employee
pension plan) which during the Determination
Period(s) has or has had account
XV-9
<PAGE> 86
balances, the Top-Heavy Ratio for this Plan alone or
for the Required or Permissive Aggregation Group as
appropriate is a fraction, the numerator of which is
the sum of the Present Values of accrued benefits of
all Key Employees as of the Determination Date(s)
(including any part of any accrued benefit
distributed in the Determination Period(s)), and the
denominator of which is the sum of the Present Values
of all accrued benefits (including any part of any
accrued benefit distributed in the Determination
Period(s)), determined in accordance with Section 416
of the Code and the Regulations thereunder.
(b) If the Employer maintains one or more defined benefit
plans and the Employer maintains or has maintained
one or more defined contribution plans (including any
simplified employee pension plan) which during the
Determination Period(s) has or has had any account
balances, the Top-Heavy Ratio for any Required or
Permissive Aggregation Group as appropriate is a
fraction, the numerator of which is the sum of the
Present Values of accrued benefits under the
aggregated defined benefit plan or plans for all Key
Employees, determined in accordance with (a) above,
and the sum of account balances under the aggregated
defined contribution plan or plans for all Key
Employees as of the Determination Date(s), and the
denominator of
XV-10
<PAGE> 87
which is the sum of the Present Values of accrued
benefits under the aggregated defined benefit plan or
plans, determined in accordance with (a) above for
all Participants, and the sum of the account balances
under the aggregated defined contribution plan or
plans for all Participants as of the Determination
Date(s), all determined in accordance with Section
416 of the Code and the Regulations thereunder. The
account balances under a defined contribution plan in
both the numerator and denominator of the Top-Heavy
Ratio are adjusted for any distribution of an account
balance made in the Determination Period.
(c) For purposes of (a) and (b) above, the value of
account balances and the Present Value of accrued
benefits shall be determined as of the most recent
Valuation Date that falls within or ends with the
12-month period ending on the Determination Date,
except as provided in Section 416 of the Code and the
Regulations thereunder for the first and second plan
year of a defined benefit plan. The account balances
and accrued benefits of a Participant (1) who is not
a Key Employee but who was a Key Employee in a prior
year, or (2) who has not received any compensation
from any Employer
XV-11
<PAGE> 88
maintaining the plan at any time during the
Determination Period shall be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to
which distributions, rollovers, and transfers are
taken into account will be made in accordance with
Section 416 of the Code and the Regulations
thereunder. Deductible Employee contributions shall
not be taken into account for purposes of computing
the Top-Heavy Ratio. When aggregating plans, the
value of account balances and accrued benefits shall
be calculated with reference to the Determination
Date(s) that falls within the same calendar year.
15.5 Permissive Aggregation Group. The Required Aggregation Group
of plans plus any other plan or plans of the Employer which,
when considered as a group with the Required Aggregation
Group, would continue to satisfy the requirements of Sections
401(a)(4) and 410 of the Code.
15.6 Required Aggregation Group. (1) Each qualified plan of the
Employer in which at least one Key Employee participated
during the Determination Period, and (2) any other qualified
plan of the Company which enables a plan described in (1) to
meet the requirements of
XV-12
<PAGE> 89
Sections 410(a)(4) and 410 of the Code during the
Determination Period.
15.7 Determination Date. For any Plan Year, the last day of the
preceding Plan Year.
15.8 Determination Period. The Plan Year containing the
Determination Date and the four (4) preceding Plan Years.
15.9 Valuation Date. For purposes of computing the Top-Heavy
Ratio, the Valuation Date shall be the normal annual valuation
date for the Plan.
15.10 Present Value. For purposes of computing the Top-Heavy Ratio,
any benefit shall be discounted only for mortality and
interest as follows:
Interest rate: 5%
Mortality table: 1971 TPF&C Forecast Mortality Table
15.11 If the Plan is or becomes a Top-Heavy Plan in any Plan Year
beginning after December 31, 1983, the following provisions
shall supersede any conflicting provision in the Plan.
(a) Vesting.
XV-13
<PAGE> 90
Notwithstanding the provisions of Section 7.2, a
Participant's Vested Benefit shall be the Retirement
Income payable at Normal Retirement Date in the form
and amount as set forth in Section 4.3 based on his
Average Earnings and Credited Service as of his
Termination Date, multiplied by the applicable
percentage specified below:
<TABLE>
<CAPTION>
If Years of Then Vested
Vesting Service Are Percentage Is
------------------- -------------
<S> <C>
less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
</TABLE>
Notwithstanding the foregoing, a Participant shall be
100% vested upon the later of his 65th birthday or
the fifth anniversary of his entry into the Plan. In
the event of a change in the top-heavy status of the
Plan, Section 13.2 of the Plan shall apply.
(b) Minimum Accrued Benefit.
(i) Notwithstanding any other provision in this
Plan except (iii), (iv) and (v) below, for
any Plan Year in which this Plan is a Top
XV-14
<PAGE> 91
Heavy Plan, each Participant who is not a Key
Employee and has completed 1,000 Hours of
service shall accrue a benefit (to be
provided solely by Employer contributions and
expressed as a life annuity commencing at
normal retirement age) of not less than two
percent of his or her highest average
Compensation for the five consecutive years
for which the Participant had the highest
Compensation. The minimum accrual is
determined without regard to any Social
Security contribution. The minimum accrual
applies even though under other Plan
provisions the Participant would not
otherwise be entitled to receive an accrual,
or would have received a lesser accrual for
the year because (1) the non-Key Employee
fails to make mandatory contributions to the
Plan, (2) the non-Key Employee's Compensation
is less than a stated amount, (3) the non-Key
Employee is not employed on the last day of
the accrual computation period, or (4) the
Plan is integrated with Social Security.
(ii) No additional benefit accruals shall be
provided pursuant to (i) above to the extent
XV-15
<PAGE> 92
that the total accruals on behalf of the
Participant attributable to Employer
contributions will provide a benefit
expressed as a life annuity commencing at age
65 that equals or exceeds 20 percent of the
Participant's highest average Compensation
for the five consecutive years for which the
Participant had the highest Compensation.
(iii) The provisions in (i) above shall not apply
to any Participant to the extent that the
Participant is covered under any other plan
or plans of the Employer which provide(s) for
the minimum allocation or benefit applicable
to Top-Heavy Plans.
(iv) All accruals of Employer derived benefit,
whether or not attributable to years for
which the Plan is a Top-Heavy Plan, may be
used in computing whether the minimum accrual
requirements of Section (ii) above are
satisfied.
(c) Additional Limitation - Members of Retirement Plan.
With respect to any Plan Year for which the Plan is
determined to be a Top-Heavy Plan,
XV-16
<PAGE> 93
paragraphs (2)(B) and (3)(B) of Section 415(e) of the
Code, as incorporated in Section 4.5 hereof, shall be
applied by substituting "1.0" for "1.25" in the
calculation of the defined benefit and defined
contribution fractions unless the requirements of
Section 416(h)(2) of the Code are met.
XV-17
<PAGE> 94
THE CONNECTICUT WATER COMPANY
EMPLOYEES' RETIREMENT PLAN
EXHIBIT I
This Exhibit is attached to and made a part of the Plan.
Actuarial Equivalent shall mean a benefit of equivalent current value to the
benefit which would otherwise have been provided to the Participant. The
factors used to determine equivalencies shall be determined as follows:
- 50% Contingent Annuity Option
90% (less)(plus) .5% for each year by which the age of the
Contingent Annuitant (is less than)(exceeds) the age of the
Participant. Such factor not to exceed 1.0.
- 75% Contingent Annuity Option
86% (less)(plus) .6% for each year by which the age of the
Contingent Annuitant (is less than)(exceeds) the age of the
Participant. Such factor not to exceed 1.0.
- Lump Sum Distribution
Actuarial Equivalent factors shall be determined using the
UP-1984 Mortality Table and, for any Plan Year, the interest
rates promulgated by the Pension Benefit Guaranty Corporation
for the purposes of determining the present value of a lump
sum distribution on plan
<PAGE> 95
termination for the month containing the first day of such
Plan Year.
- Five-Year Certain and Life Option: 98%
- 10-Year Certain and Life Option: 93%
-12-
<PAGE> 96
APPENDIX A
SPECIAL EARLY RETIREMENT BENEFIT
A.1 Eligibility
A special early retirement benefit, as set forth in Section A.2
hereof, shall be offered to all eligible Participants; provided,
however, that said special early retirement benefit shall not be
available to any Eligible Participant if fewer than six (6) Eligible
Participants elect to retire and receive such benefit. For purposes
of this Appendix A, the term 'Eligible Participant' shall mean each
Participant who as of September 1, 1991 (a) will have completed ten
(10) or more years of Credited Service, and (b) will have attained the
age of fifty-five (55). Each such Eligible Participant will be
offered the special early retirement benefit described in Section A.2
and may make a written election during an election period beginning on
July 10, 1991 and ending at 4:30 P.M. on August 9, 1991 to retire on
September 1, 1991 and receive such special early retirement benefit
commencing as of said date; provided, however, that such Eligible
Participant either electing or declining to retire and receive the
special early retirement benefit described in Section A.2 may revoke
said decision during the period beginning on August 10, 1991 and
ending at 4:30 P.M.
<PAGE> 97
on August 16, 1991, after which date such decision shall be
irrevocable.
A.2 Special Early Retirement Benefit
Each Eligible Participant who, pursuant to Section A.1, has elected to
retire and receive the special early retirement benefit shall be
credited with an additional five (5) years of Credited Service for
purposes of the calculation of the benefit under Articles IV, V and VI
and, if such retirement occurs prior to attainment of age sixty-two
(62), shall receive an additional benefit of $500 each month ending
with the month in which such Eligible Participant attains age
sixty-two (62).
A.3 Limitation
The limitations of Section 415 of the Code, as set forth in Section
4.4, shall apply to the special early retirement benefit and, for
purposes of Section 415(b)(5)(D) of the Code, the adoption of the
special early retirement benefit shall be considered a change in
benefit structure, unless otherwise provided by Treasury Regulations
or other determinative authority.
-4-
<PAGE> 1
Exhibit 10.15
WATER SUPPLY AGREEMENT
This Agreement made this 13th day of June, 1994, by and between THE
CONNECTICUT WATER COMPANY, having its principal office in the Town of Clinton,
County of Middlesex and State of Connecticut (the "Company"), and THE
HAZARDVILLE WATER COMPANY, having its principal office in the Town of Enfield,
County of Hartford and State of Connecticut ("HWC").
W I T N E S S E T H :
WHEREAS, the Company has agreed to construct and operate a regional
pipeline to be owned by the Town of Somers and/or the State of Connecticut for
the purpose of providing water service to certain areas outside the present
boundaries of the Company's Somers System; and
WHEREAS, HWC has need of water from the Company to be delivered to HWC
through said regional pipeline for limited use in HWC's service area; and
WHEREAS, HWC and the Company mutually desire to establish an agreement
pursuant to which the Company would provide water to HWC to meet such needs.
NOW THEREFORE,
It is mutually agreed between the parties hereto as follows:
<PAGE> 2
-2-
1. (a) The Company shall enter into one or more contracts with the
Town of Somers and/or the State of Connecticut with respect to the
construction, operation and maintenance of a regional water pipeline to be
constructed from the Company's Somers System to the Rye Hill Circle area in
Somers, Connecticut (herein, the "Regional Pipeline"). These contractual
arrangements will be substantially in the form of Exhibit A hereto (which
exhibit is the Installation and Service Agreement dated as of June 5, 1992
between the Company and the Town of Guilford, Connecticut), but with such
changes therein as may be satisfactory to the Company. HWC shall enter into an
agreement or agreements with the Town of Somers and/or the State of Connecticut
with respect to the construction of a water distribution system within the
exclusive service area (herein "ESA") of HWC, as determined by the Upper
Connecticut River Water Utility Coordinating Committee, such system to be
interconnected with the Regional Pipeline and provide water service within the
Rye Hill Circle area. HWC may, from time to time enter into additional similar
agreements with respect to other homes within the ESA of HWC. Said contracts
between HWC and the Town of Somers and/or the State of Connecticut shall
contain such provisions as to ownership and use thereof by HWC as shall be
acceptable to HWC. The Company or HWC, as the case may be, in its sole
discretion, may modify or supplement any of its contractual arrangements as it
considers appropriate.
(b) Said agreements between the Company and the Town of Somers
and/or the State of Connecticut shall provide that the said Town and/or State
shall own the Regional Pipeline for a term of sixty-one years, with the
Regional Pipeline then being conveyed to the Company at no cost to the Company;
provided, however, that said agreements shall also expressly provide that,
after such conveyances upon expiration of said sixty-one year period, (i) the
Company shall be permitted, without limitation as to time and at no cost
(whether direct or indirect) to the Company, to continue to utilize the entire
Regional Pipeline for the purposes, including the transmission of water in such
quantities, then utilized by the Company or thereafter deemed
<PAGE> 3
-3-
necessary or desirable by the Company; and (ii) HWC shall be permitted to
utilize the Regional Pipeline as permitted by this Agreement, without
limitation as to time and at no additional cost to HWC beyond (A) the costs to
HWC reflected in this Agreement and (B) HWC's proportionate share of those
additional costs incurred by the Company as a result of ownership of the
Regional Pipeline.
2. (a) Said agreements between the Company and the Town of
Somers and/or the State of Connecticut shall include obligations on the part of
the Company to maintain in good working order all improvements constructed by
the Town of Somers and/or the State of Connecticut for the aforesaid Regional
Pipeline and any distribution system or domestic service lines extending from
the Regional Pipeline to areas not within the ESA of HWC. Such maintenance and
operation by the Company of the Regional Pipeline and the aforesaid
improvements shall be in accordance with the standards set by the State of
Connecticut Department of Public Health and Addiction Services ("DPHAS") or any
successor agency and the State of Connecticut Department of Public Utility
Control ("DPUC").
(b) Said agreements between HWC and the Town of Somers and/or the
State of Connecticut shall include obligations on the part of HWC to maintain
in good working order any and all such improvements, all in accordance with
standards set by DPHAS and DPUC.
3. (a) The Company hereby agrees to provide potable water, fire
protection and related services to HWC but only for resale by HWC solely to
customers of HWC who are within the ESA of HWC and for whom HWC has received
specific approval to serve from the Connecticut Department of Environmental
Protection. The water supplied by the Company under this Agreement shall meet
all federal, state and other water quality requirements applicable to the
Company. The Company shall indemnify and hold harmless HWC for any and all
costs,
<PAGE> 4
-4-
fees, expenses, damages and loss of any type or nature incurred as a result of
any failure of the Company to comply with the aforesaid water quality
requirements.
(b) HWC agrees to, and does hereby consent to, all operations of
the Company contemplated by this Agreement.
4. (a) HWC will pay the established charges (based on the size
of the master meter located on the Regional Pipeline at the boundary of the ESA
of HWC and the quantity of water used) for all water supplied hereunder in
accordance with the established rates of the Company's Somers System, which
rates may from time to time be revised with the approval of the DPUC. The
charges by the Company to HWC shall also include, without limitation, the
Company's then existing standard inch foot charges as calculated for the
Regional Pipeline, standard charges for all private fire connections made to
the Regional Pipeline, standard charges for any and all hydrants installed
along the Regional Pipeline within the ESA of HWC as may be authorized from
time to time by the Town of Somers and standard charges for each service
connection made to the Regional Pipeline. HWC shall be billed for all water
delivered to HWC through the Regional Pipeline, as measured by the meters
contemplated by Section 10 hereof, except that water taken directly from the
Regional Pipeline as a result of main breaks, fire protection or flushing shall
be excluded. The Company will bill HWC for meter charges and other charges and
rates in accordance with its rules and regulations, except to the extent
otherwise directed by the DPUC.
(b) Notwithstanding the provisions of subsection (a), at such time
as HWC complies with the requirements of Section 8(a) hereof, and is capable of
inserting water into the Regional Pipeline, HWC shall continue to pay all other
charges then applicable in accordance with subsection (a) hereof and, in
addition, the quarterly bill for the last quarter of each calendar year
<PAGE> 5
-5-
thereafter during the term of this Agreement shall include, in addition to all
other amounts payable by HWC under subsection (a) hereof, a minimum purchase
charge equal to (1) the amount, if any, by which (A) the amount of water
delivered by the Company to HWC, as measured by the master meter, during the
twelve month period immediately preceding the month in which HWC so complies
with Section 8(a) hereof (adjusted, if necessary, to reflect a full year's
consumption), exceeds (B) the amount of water actually purchased pursuant to
this Agreement from the Company by HWC during such calendar year, times (2) the
then applicable rates of the Company.
(c) The Company agrees to provide and be responsible for providing
water for public and private fire service along the length of the Regional
Pipeline through the use of direct connections to the Regional Pipeline,
including the installation and maintenance of hydrants in the Town of Somers.
The Company will bill any such service within the ESA of HWC to HWC as provided
in subsection (a) hereof.
(d) The rates at which HWC shall resell water purchased by HWC from
the Company pursuant to this Agreement to HWC's customers shall be set by the
DPUC.
5. (a) The maximum amount of water which the Company shall be
obligated to provide to HWC pursuant to this Agreement shall in no event exceed
100,000 gallons in any one day. The Company shall be under no obligation to
supply amounts of water to HWC pursuant to the Regional Pipeline in excess of
said 100,000 gallons per day, except for emergency use in the event of a fire
or main break within that portion of the ESA of HWC serviced through the
Regional Pipeline, and excluding water lost from the Regional Pipeline as a
result of main breaks or flushing.
<PAGE> 6
-6-
(b) The Company will design, and use its best efforts to operate,
the Regional Pipeline so that the Regional Pipeline is capable of delivering
1,100 gallons per minute at a residual pressure of 50 psi at the intersection
of George Wood Road and Rye Hill Circle. The Pipeline will be designed to
provide adequate service up to ground elevation 400 USGS datum. The Company
undertakes only to supply water to HWC in such quantity existing in the
Company's Somers System at any time. The Company will make all reasonable
efforts to prevent interruptions of service and, when such interruptions occur,
will endeavor to reestablish service with the shortest possible delay
consistent with the safety of customers and the general public.
(c) The parties hereto will jointly apply to DEP for a diversion
permit with respect to 100,000 gallons per day of water to be sold by the
Company to HWC through the Regional Pipeline pursuant to this Agreement. It
shall be the Company's obligation to obtain any and all such approvals (other
than the diversion permit and approval of this Agreement by the DPUC) as may be
required to enable the parties to carry out this Agreement. HWC agrees to
cooperate with the Company in pursuing any such approvals which may be needed.
The Company shall undertake primary responsibility for obtaining the requisite
diversion permit from DEP, and HWC shall cooperate with respect thereto.
6. The Company shall be permitted to extend, enlarge and expand
the Regional Pipeline and/or to interconnect with said Pipeline at any time and
from time to time in such manner as the Company deems necessary or desirable in
connection with its operations. HWC hereby grants the Company such approvals
as may be necessary or desirable to enable the Company to effect such
extensions, enlargements, expansions and interconnections within the ESA of
HWC. Nothing in this section is intended to address the issue of what entities
may provide water service within the ESA of CWC or of HWC.
<PAGE> 7
-7-
7. Upon compliance with all water quality and technical
engineering requirements deemed by the Company to be reasonably necessary,
using good standard engineering practice, to ensure proper operation of the
Regional Pipeline and upon payment of all reasonable costs relating to said
interconnection: (i) HWC may interconnect with the Regional Pipeline in order
to provide water service to homes experiencing present or future pollution
problems; and (ii) additionally, upon confirmation by DPUC of compliance by HWC
with the interconnection requirements set forth in the third paragraph of
Section II of the so-called Rye Circle Memorandum of Understanding dated May 3,
1994 (the "MOU"), HWC may interconnect with the Regional Pipeline any portion
of the HWC system within the ESA of HWC now or hereafter in existence.
8. (a) Upon compliance with the requirements of Section 7, HWC
may, through one or more of the interconnections contemplated by Section 7(ii),
insert water into the Regional Pipeline and thereby utilize the Regional
Pipeline to supply water to existing or future customers of HWC located within
the ESA of HWC; provided, however, that HWC shall (i) inject into the Regional
Pipeline only potable water which meets all federal, state and other water
quality requirements applicable to either the Company or HWC; (ii) be fully
responsible for complying, and shall indemnify and hold harmless the Company
for any and all costs, fees, expenses, damages and loss of any type or nature
incurred as a result of any failure of HWC to comply, with the aforesaid water
quality requirements and standards, and any and all technical or operational
conditions reasonably requested by the Company to ensure proper operation and
maintenance of the Regional Pipeline and HWC's interconnections thereto; and
(iii) be limited to a total use of the Regional Pipeline to transmit a maximum
of 400,000 gallons of water per day, regardless of whether such water is
purchased from the Company or supplied to the Regional Pipeline by HWC, it
being the intent of this clause (iii) that the aggregate amount of
<PAGE> 8
-8-
water (A) sold by the Company to HWC pursuant to this Agreement, and (B)
inserted by HWC into the Regional Pipeline pursuant to this Section 8 (a) shall
in no event exceed 400,000 gallons per day (except for emergency use for fire
flow).
(b) HWC may also construct or receive contributions of additional
plant which, subject to the requirements of Section 7, may be interconnected to
the Regional Pipeline to fulfill HWC's service obligations within its ESA in
the vicinity of the Regional Pipeline.
9. (a) HWC will install at its expense all necessary pipes,
valves, meters and pits and other appurtenances required to effect any and all
interconnections between HWC and the Regional Pipeline, including water meters.
The Company shall have the right to approve the design, construction and
operation of all connections to the Company water system and the Regional
Pipeline, and all meter vaults, metering devices, and any other appurtenances
thereto. The cost of all such work shall be paid by HWC. Meters and piping up
to the main line gate valve on the Company side of each meter pit shall be and
at all times remain the property of the entity then owning the applicable
portion of the Regional Pipeline. The Company shall be responsible for the
maintenance of the meters. The necessity for, and selection of, all
connections, materials, and the location thereof shall be within the sole and
exclusive judgment of the Company and shall be based solely upon good water
utility engineering practices to ensure proper operation and maintenance of the
Regional Pipeline and to preserve the ability of the Company and of HWC to
carry out their respective rights and obligations under this Agreement;
provided that no meters shall be required on those interconnections to the
Regional Pipeline where HWC is not capable of inserting water into the Regional
Pipeline.
(b) HWC agrees that any and all modifications to its existing water
supply system that are necessary or desirable to enable it to accept delivery
of water delivered through the Regional
<PAGE> 9
-9-
Pipeline shall be undertaken by HWC at its own expense. Any such
interconnections will be made only within the ESA of HWC within the Town of
Somers.
(c) HWC shall, at its expense, obtain such permits and other rights
which may be necessary or desirable to enable HWC to interconnect with the
Regional Pipeline.
10. The measurement of water delivered to HWC shall be undertaken by
the Company. Such flow measurements shall be made by approved metering devices
to be installed on the Regional Pipeline at the border of the ESA of HWC and at
such other locations (such as at the border of the ESA of HWC and the ESA of
the Company's Northern Division if the Regional Pipeline is so extended, and at
those interconnections where HWC is capable of inserting water into the
Regional Pipeline), as may be deemed necessary by the Company to ensure proper
calculation of the amount of water actually delivered by the Company to HWC.
All such metering devices shall be inspected at least annually and calibrated
periodically by the Company. A copy of the inspection and calibration reports
shall be provided to HWC. HWC shall have the right, upon reasonable notice to
the Company, to inspect each such meter. The Company shall give HWC reasonable
notice of each annual inspection and calibration of such meters and HWC shall
have the right to be present during such operations.
11. The Company shall operate and maintain the Regional Pipeline
in accordance with customary water utility engineering practices. HWC shall
operate and maintain that portion of its water system connected at any time to
the Regional Pipeline in accordance with customary water utility engineering
practices and with the guidelines set forth below:
(i) HWC shall use its best efforts to minimize the wasteful use of
water within that portion of its service area connected to the Regional
Pipeline. Should the Company impose
<PAGE> 10
-10-
restrictions on water use on its customers (e.g., sprinkling bans) HWC shall
likewise impose such restrictions on its customers within said area. The
imposition of said restrictions shall be within the sole and exclusive
discretion of the Company. Nothing in this Agreement shall prevent HWC from
imposing its own restrictions above and beyond those imposed by the Company.
(ii) HWC shall ensure that all users connected to that portion of its
water system connected to the Regional Pipeline who raise the water pressure
install suitable backflow prevention devices as required by state or federal
law. HWC shall ensure that all users connected to that portion of its water
system connected to the Regional Pipeline which repump the water supplied by
HWC do all such repumping on a schedule approved by HWC and in conformance with
all existing cross connection regulations.
12. HWC shall, and to the extent necessary shall cause those
customers of HWC served through the Regional Pipeline to, comply in all
respects with all of the rules and regulations of the Company which may from
time to time be in effect and approved by the DPUC and applicable to the
matters contemplated by this Agreement.
13. The Company shall bill HWC monthly for fire protection and
quarterly for water purchased and all other charges. All bills for services
rendered or obligations payable hereunder shall be due and payable within
thirty (30) days of the receipt of a bill therefor by HWC. Any amount
remaining unpaid after such 30-day period shall thereafter bear interest to the
date of payment at a rate per annum equal to (i) the prime rate of interest of
Fleet Bank of Connecticut, as established and announced by such bank from time
to time, plus (ii) 2 percent. If HWC fails to pay any sum due under this
Agreement or otherwise fails to comply with any other provision of this
Agreement, HWC will pay to the Company, to the extent permitted by law, such
further
<PAGE> 11
-11-
amounts as shall be sufficient to cover the cost and expenses, including
without limitation reasonable attorneys' fees, incurred by the Company in
collecting any sums due hereunder or in otherwise enforcing any of its rights.
In addition to any other rights which it may have, the Company shall have the
right to refuse to provide water service to HWC if it has failed to make any
payment required by this Agreement for more than 60 days after receipt of a
bill therefor.
14. HWC agrees that, except as specifically provided in this
Agreement, it will indemnify and save the Company harmless from and against any
and all loss, cost, liability or damage incurred directly or indirectly by the
Company as a result of any negligence or misconduct on the part of HWC, its
employees or agents, in connection with the construction or use of any of the
HWC interconnections with the Regional Pipeline and the taking by HWC of any
action contemplated by this Agreement. The Company agrees that, except as
specifically provided in this Agreement, it will indemnify and save HWC
harmless from and against any and all loss, cost, liability or damage incurred
directly or indirectly by HWC as a result of any negligence or misconduct on
the part of the Company, its employees or agents, in connection with the
Company's operation or use of the Regional Pipeline and the taking by the
Company of any action contemplated by this Agreement.
15. Neither the Company nor HWC shall be liable in damages or
otherwise for any failure to perform any obligation, except that HWC shall not
be relieved of its payment obligations under this Agreement because of any
failure which is occasioned by or in consequence of any act of God, act of
public enemy, war, blockages, insurrection, riot, epidemic, land slide,
lightning, earthquake, fire, storm, flood, washout, civil disturbance, strike,
lockout or other industrial disturbance, power failure, explosion, breakage or
accident to machinery or lines of pipe, failure or want of water supply,
binding order, decree, regulation
<PAGE> 12
-12-
or judgment of any court or governmental authority or any other cause, whether
of the kind enumerated or otherwise, not completely within the control of the
Company or HWC, as the case may be, which act, omission, or circumstance the
Company or HWC, as the case may be, is unable to prevent or overcome by the
exercise of due diligence ("force majeure"). It is understood and agreed that
the settlement of any such existing or impending strike, lockout or other
industrial disturbance shall be entirely within the discretion of the Company
or HWC, as the case may be, and that the foregoing requirement that any force
majeure shall be beyond the complete control of the Company or HWC, as the case
may be, and shall be prevented or overcome by the exercise of due diligence
shall be deemed to be fulfilled even though such strike, lockout or other
industrial disturbance may not be settled and could have been settled by
acceding to the demands of the opposing party. It also is understood and
agreed that the foregoing requirement that any force majeure shall be beyond
the complete control of the Company and shall be prevented or overcome by the
exercise of due diligence shall be deemed to be fulfilled even though any such
force majeure may not be prevented or overcome and could have been prevented or
overcome had the Company undertaken treatment or other techniques with respect
to water delivered and sold pursuant to this Agreement if such techniques
exceed the treatment or other techniques undertaken by the Company with respect
to water supplied by the Company from the same sources to its retail customers.
16. The Company assumes no responsibility for operation and
maintenance of any portion of the water systems constructed and owned by HWC.
17. The respective obligations of the parties hereto are subject
to the following conditions precedent:
<PAGE> 13
-13-
(i) Such approval of this Agreement as may be required by
the DPUC and the DPHAS.
(ii) (a) Delivery to the Company of an opinion of counsel
for HWC that HWC has authority to enter into this
Agreement and carry out all of its obligations
hereunder, and that this Agreement has been duly
authorized, executed and delivered on behalf of HWC
and is a legal, valid and binding agreement
enforceable against HWC in accordance with its terms;
and (b) Delivery to HWC of an opinion of counsel for
the Company that the Company has authority to enter
into the Agreement and carry out all of its
obligations hereunder, and that this Agreement has
been duly authorized, executed and delivered on
behalf of the Company and is a legal, valid and
binding agreement enforceable against the Company in
accordance with its terms.
(iii) Approval by DPUC of rates for HWC to be charged to
those customers of HWC served from the Regional
Pipeline, which rates observe the principles set
forth in the first paragraph of Section II of the
MOU.
(iv) Assurances, satisfactory to the Company and to HWC,
that, except for the incremental costs, if any, of
increasing the joint application to the DEP for the
diversion permit contemplated by Section 5(b)) from
62,500 gallons per day to 100,000 gallons per day,
which incremental cost will be paid by HWC, neither
the Company nor HWC shall bear any costs, and shall
be fully reimbursed for all expenses, incurred
directly or indirectly with respect to obtaining such
diversion permit; and
<PAGE> 14
-14-
(v) the receipt by HWC of written confirmation by DPHAS
of the principle set forth in the last sentence of
Section IV of the MOU.
18. This Agreement shall be effective as of the date of
satisfaction (or waiver) of the last of the conditions set forth in Section 17
and, unless sooner terminated by mutual agreement, shall remain in full force
and effect until December 31, 2060.
19. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.
20. In the event of any dispute or disagreement between the
parties either with respect to the interpretation of any provisions of this
Agreement or with respect to the performance by the Company or by HWC
hereunder, then upon the written request of either party, each of the parties
will appoint a designated officer whose task it will be to meet for the purpose
of endeavoring to resolve such dispute or to reach agreement upon a mutual
satisfactory alternative dispute resolution mechanism. The designated officers
shall meet at a mutually agreeable location as often as the parties reasonably
deem necessary in order to gather and furnish to the other all information with
respect to the matter in issue which the parties believe to be appropriate and
germane in connection with its resolution. Such officers shall discuss the
problem and/or negotiate in good faith in an effort to resolve the dispute
without the necessity of any formal proceeding and/or to reach agreement upon a
mutually satisfactory alternative dispute resolution mechanism. All verbal and
written communications between the parties and issued or prepared in connection
with this section shall be deemed prepared and communicated in furtherance, and
in the context, of dispute settlement, and shall be exempt from discovery and
production, and shall not be admissible in evidence (whether as an admission or
otherwise), in
<PAGE> 15
-15-
any proceedings for the resolution of the dispute. No formal proceedings for
the litigation of such dispute shall be commenced until either of the
designated officers concludes in good faith that continued negotiations of the
matter in issue does not appear likely to produce a mutually acceptable
resolution or agreement upon a mutually satisfactory alternative dispute
resolution mechanism.
21. This Agreement constitutes the complete agreement of the
parties. No amendment of this Agreement shall be effective unless in writing
and signed by each of the parties hereto.
22. All communications under this Agreement shall be in writing
and shall be mailed by first class mail, postage prepaid, to the addressee's
respective address as shown below, marked for attention as there indicated, or
at such other address as such addressee may have furnished in writing to the
other party hereto:
The Connecticut Water Company
93 West Main Street
Clinton, CT 06413
Attention: Vice President-Operations
and
The Hazardville Water Company
10 Kearney Road, Suite 301
Needham, MA 02194
Attention: Jonathan S. Avery, President
23. Two or more duplicate originals of this Agreement may be
signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument.
<PAGE> 16
-16-
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the day and year first above written.
THE CONNECTICUT WATER COMPANY
By /s/ Marshall T. Chiaraluce
-----------------------------------
Its President and CEO
------------------------------------
THE HAZARDVILLE WATER COMPANY
By /s/ Jonathan S. Avery
-----------------------------------
Its President
------------------------------------
<PAGE> 1
Exhibit 10.16
AMENDMENT TO
THE MEMORANDUM OF AGREEMENT
ENTERED INTO DECEMBER 11, 1957
BETWEEN
THE CITY OF WATERBURY
AND
THE THOMASTON WATER COMPANY
The Connecticut Water Company (successor to The Thomaston Water
Company), a corporation organized and doing business in the State of
Connecticut and having its principal office in the Town of Clinton, County of
Middlesex and State of Connecticut (the "Company") and the City of Waterbury, a
municipal corporation chartered by the State of Connecticut, situated in New
Haven County in said state, acting hereby by the hand of its Mayor duly
authorized by the Board of Aldermen of the City of Waterbury (the "City"),
hereby agree to amend the Memorandum of Agreement dated December 11, 1957
between the Company and the City (the "Original Agreement") as follows:
1.) All references to The Thomaston Water Company or to the Company in the
Original Agreement (as hereby amended, the Original Agreement is
herein referred to as "the Agreement") now refer to its successor, The
Connecticut Water Company.
2.) Section 1 of the Original Agreement is deleted and the following
Section 1 inserted in its place:
"1.) The City agrees to sell to the Company up to 650,000 gallons
per day of treated water to be made available to the Company
at the connection (the "Connection") between the City's water
system and the Company's water system located on Reynolds
Bridge Road in Thomaston, Connecticut. The City's obligation
to make
<PAGE> 2
-2-
such sales, and the Company's obligation to purchase and pay
for such water, shall continue for the term of this Agreement;
provided, however, that the Company shall be under no
obligation to take, or to pay for, any such water whose
quality does not meet State or Federal standards. The Company
agrees to purchase from the City at least 739,125,000 gallons
of treated water over the five year period beginning on
January 1, 1993, which amount represents an average of 405,000
gallons per day over said five year period."
3.) Section 3 of the Original Agreement is deleted and the following
Section 3 inserted in its place:
"3.) a.) The Company agrees to pay the City for all water
taken through the Connection pursuant to this
Agreement. Except as specified in this Section 3 and
in Section 5 hereof, and notwithstanding any other
provisions of this Agreement, no other charges or
expenses shall be payable by the Company to the City.
b.) The Company agrees to pay the City for water at the
Current Rate (as defined in Section 3(c)) until the
cumulative difference between the total amount billed
to the Company by the City at the Current Rate from
January 1, 1993 through the date of said calculation
and the total amount that would have been so billed
at the Established Rate (as defined in Section 3(c))
shall equal $585,000.
c.) The Current Rate is 110% of the current Standard Rate
Schedule of the City for service within the City, and
the Established Rate shall be $1.00
<PAGE> 3
-3-
for each 100 cubic feet of water delivered to the
Company. The Established Rate equals 110% of the
cost of service rate determined by the City as the
City's cost of providing service under this
Agreement.
d.) Once the cumulative difference between the amount
billed to the Company by the City at the Current Rate
and the amount that would have been so billed at the
Established Rate equals $585,000, the City shall
thereafter bill the Company at the Established Rate
for all subsequent usage.
e.) (i) The Established Rate, as defined in Section
3(c), shall remain unchanged through the first five
years of this Agreement. Subsequent to January 1,
1998, the Established Rate shall change in proportion
to any changes in the City's standard Rate Schedule
in effect on December 31, 1994. Should the City
adopt a rate schedule that includes multiple customer
classes and/or rate blocks, the Established Rate
shall change in proportion to the City's weighted
average rate.
(ii) In addition, if during the term of this
Agreement, the City incurs additional expenses for
capital improvements, excluding those related to
increased capacity, made to its treatment plant(s),
transmission system(s) or reservoir facilities which
are upgradient to the Connection and which relate
directly to providing service to the Company through
the Connection, which expenses are not reflected in
the Established Rate, as the Established Rate may be
changed from time to time, then commencing on January
1, 1998 or on January 1 of the year following
completion of said capital improvements, whichever is
later, the Company shall pay, in
<PAGE> 4
-4-
addition to the Established Rate, a one-time charge
equal to 1.7% of said excess expenses, said payment
to be made in a manner mutually acceptable to both
parties."
4.) Section 4 of the Original Agreement is deleted and the following
Section 4 inserted in its place:
"4.) (i) This Agreement shall be effective as of the date
first above written. This Agreement shall be in full
force and effect and shall be binding on the Company
and the City for ten (10) years from the effective
date, as long as the Company shall not be in default
of its obligations hereunder. Further, the Company
shall have the right of automatic renewal of this
Contract for six (6) additional periods of ten (10)
years, under the same terms and conditions unless the
Company decides to reject the right to renew. Said
rejection of the automatic right to renew must be
given to the Mayor of the City in writing at least
six (6) months prior to the time for renewal. To the
extent required by law, said six (6) automatic
renewals will be contingent upon approval of the
DPHAS, pursuant to Public Act 85-142.
(ii) Notwithstanding the provisions of clause (i) above,
the City shall have the unilateral right to terminate
this Agreement from the point of the first contract
renewal onwards. Any such termination shall be
effective on the later of (1) the date which is five
years after the City has delivered its notice of
termination in writing to the Company, except the
Company shall have the right to extend the date by
two years if needed to secure the
<PAGE> 5
-5-
necessary permits and complete needed construction,
and (2) the date on which the City shall have paid to
the Company an amount equal to the prorated share of
the sum of (a) $585,500 plus (b) any amounts paid by
the Company to the City pursuant to the requirements
of clause (ii) of Subsection 3(e) hereof. The
prorated share shall be an amount equal to the sum
of the amounts referred to in (a) and (b) of the
preceding sentence, multiplied by a percentage, the
denominator of which shall be 70, and the numerator
of which shall be a number equal to the difference
between (A) 70, and (B) the number of full years
which will have been completed under the Agreement by
such termination date. Such payment may be made by
the City within the five-year period contemplated by
clause (1) above through a reduction in the water
rates payable by the Company during such period or in
any other manner mutually acceptable to both parties.
5.) A new Section 6 is added to the Original Agreement as follows:
"6.) The City will deliver water ready for consumption to the
Company. The City will not be held liable for the failure to
deliver water as aforesaid in the event of ruptured mains,
acts of God, or other failure resulting from acts beyond the
control of the City; provided, however, the City shall make
every reasonable effort to prevent interruptions of service
and, when such interruptions occur, shall endeavor to
re-establish service with the shortest possible delay
consistent with the safety of its customers and the general
public. It is understood and agreed that the City will not in
any event be liable to users of water in the system of the
Company for damages for interrupting or diminishing the supply
of water in
<PAGE> 6
-6-
Thomaston, nor shall the City in any event be liable for
damages arising out of any injuries to persons or property on
account of said installation, lack of water supply or water
pressure. It is further agreed that the Company, its
successors or assigns, shall save the City harmless from
claims by any of its customers on account of lack of water
supply or water pressure attributable to the Connection."
6.) A new Section 7 is added to the Original Agreement as follows:
"7.) It is agreed that whenever this Agreement is terminated, the
Company and the City shall automatically be returned to their
respective positions as in effect under the terms of the
Original Agreement prior to the execution of this Amendment."
7.) A new Section 8 is added to the Original Agreement as follows:
"8.) The respective obligations of the parties hereto are subject
to, and contingent upon, such approval of this Agreement as
may be required by the Connecticut Department of Public
Utility Control ("DPUC") and the Connecticut Department of
Public Health and Addiction Services ("DPHAS"). The Company
shall be responsible for the preparation of the DPUC
application for approval and the City shall be responsible for
preparation of the DPHAS application for approval."
All other provisions of the Original Agreement other than as affected
by the foregoing amendments are hereby ratified and affirmed and shall remain
in full force and effect.
<PAGE> 7
-7-
In Witness Whereof, the parties have hereunto executed this Amendment
as of the 4th day of November, 1994.
Signed and delivered in the
presence of
/s/ Michele DiAcri THE CONNECTICUT WATER COMPANY
---------------------------------------
/s/ William F. Guillaume By /s/ Marshall T. Chiaraluce
-------------------------------------- -------------------------------
Its President
/s/ William J. Cook III THE CITY OF WATERBURY
---------------------------------------
/s/ Eileen Walsh By /s/ Edward D. Bergin
---------------------------------------- -------------------------------
Its Mayor
<PAGE> 8
-8-
STATE OF CONNECTICUT )
) ss. Clinton
COUNTY OF MIDDLESEX )
Personally appeared Marshall T. Chiaraluce, duly authorized officer
of The Connecticut Water Company, signer and sealer of the foregoing instrument
and acknowledged the same to be the free act and deed of said corporation, and
his free act and deed as the duly authorized officer of The Connecticut Water
Company, before me.
Elizabeth D. Lebert
------------------------------------------
Notary Public
STATE OF CONNECTICUT )
) ss. Waterbury
COUNTY OF NEW HAVEN )
Personally appeared Edward D. Bergin, mayor of the City of Waterbury,
the signer and sealer of the foregoing instrument and acknowledged the same to
be his free act and deed and the free act and deed of the City of Waterbury,
before me.
William J. Cook
------------------------------------------
Commission of the Superior Court
Approved as to Form
-----------------------------
Corporation Counsel
<PAGE> 1
Exhibit 24.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accounts, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 2-9822.
/s/ Arthur Andersen LLP
Hartford, Connecticut
March 10, 1995
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 140,784
<OTHER-PROPERTY-AND-INVEST> 881
<TOTAL-CURRENT-ASSETS> 7,932
<TOTAL-DEFERRED-CHARGES> 21,644
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 171,241
<COMMON> 38,943
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 9,040
<TOTAL-COMMON-STOCKHOLDERS-EQ> 47,983
0
772
<LONG-TERM-DEBT-NET> 54,600
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
30
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 67,856
<TOT-CAPITALIZATION-AND-LIAB> 171,241
<GROSS-OPERATING-REVENUE> 38,129
<INCOME-TAX-EXPENSE> 4,756
<OTHER-OPERATING-EXPENSES> 23,718
<TOTAL-OPERATING-EXPENSES> 28,474
<OPERATING-INCOME-LOSS> 9,655
<OTHER-INCOME-NET> 165
<INCOME-BEFORE-INTEREST-EXPEN> 9,820
<TOTAL-INTEREST-EXPENSE> 3,940
<NET-INCOME> 5,880
38
<EARNINGS-AVAILABLE-FOR-COMM> 5,842
<COMMON-STOCK-DIVIDENDS> 4,675
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 10,895
<EPS-PRIMARY> 2.08
<EPS-DILUTED> 2.08
</TABLE>
