<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
CONNECTICUT WATER SERVICE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CONNECTICUT WATER SERVICE, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
cws logo
March 19, 1997
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders of
Connecticut Water Service, Inc., scheduled to be held on April 25, 1997, at the
William C. Stewart Water Treatment Plant, 119 Horton Hill Road, Naugatuck,
Connecticut commencing at 2:00 P.M. If you plan to attend the meeting, please
call 1-800-428-3985, Ext. 305 and leave your name, address and phone number.
Directions to the meeting will be mailed to you. Your Board of Directors and
management look forward to personally greeting those stockholders able to
attend.
At the Meeting, you will be asked to elect four directors, to appoint
independent auditors for the calendar year ending December 31, 1997, to act upon
a stockholder proposal for cumulative voting, and to transact such other
business as may properly be brought before the Meeting.
In addition to the specific matters to be acted upon, there will be a
report on the progress of the Company and an opportunity for questions of
general interest to the stockholders. Important information is contained in the
accompanying proxy statement which you are urged to read carefully.
It is important that your shares are represented and voted at the Meeting,
regardless of the number you own and whether or not you plan to attend.
Accordingly, you are requested to sign, date, and return the enclosed proxy at
your earliest convenience.
In our continuing effort to provide stockholders with information on the
Company's operations, we will conduct a tour of the Stewart Treatment Plant
following the meeting. If you are planning to attend the tour, please indicate
your attendance at both when you call the above toll-free number.
Your interest and participation in the affairs of the Company are sincerely
appreciated.
Sincerely,
/s/ Marshall T. Chiaraluce
Marshall T. Chiaraluce
President and Chief Executive Officer
<PAGE> 3
CONNECTICUT WATER SERVICE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
WILLIAM C. STEWART WATER TREATMENT PLANT
119 HORTON HILL ROAD
NAUGATUCK, CONNECTICUT
Notice is hereby given that the Annual Meeting of Stockholders of
Connecticut Water Service, Inc. (the "Company") will be held on April 25, 1997
at 2:00 P.M. at the William C. Stewart Water Treatment Plant, 119 Horton Hill
Road, Naugatuck, Connecticut, for the following purposes:
1. To elect four directors for three-year terms;
2. To appoint Arthur Andersen LLP, independent public accountants,
as independent auditors for the Company for the calendar year
ending December 31, 1997;
3. To act upon a stockholder proposal for cumulative voting; and
4. To transact such other business as may properly come before said
meeting or any adjournment thereof.
Only holders of the Company's Common Stock and its Cumulative Preferred
Stock -- Series A of record at the close of business on March 1, 1997 are
entitled to notice of and to vote at this meeting or any adjournment thereof.
All stockholders who find it convenient to do so are urged to attend the
meeting in person.
By Order of the Board of Directors,
Vincent F. Susco, Jr. Secretary
March 19, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, DATE, AND SIGN
THE ENCLOSED PROXY AND RETURN IT TO THE COMPANY IN THE ENVELOPE ACCOMPANYING
THIS NOTICE. IF YOU ARE PRESENT AT THE MEETING, YOU MAY VOTE IN PERSON EVEN
THOUGH YOU HAVE SENT IN YOUR PROXY.
<PAGE> 4
CONNECTICUT WATER SERVICE, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 25, 1997
The accompanying proxy is solicited by the Board of Directors of the
Company for use at the Annual Meeting of Stockholders to be held at the William
C. Stewart Water Treatment Plant, 119 Horton Hill Road, Naugatuck, Connecticut,
on April 25, 1997 at 2:00 P.M. and at any adjournment of the meeting.
Only holders of the Company's Common Stock and its Cumulative Preferred
Stock -- Series A of record at the close of business on March 1, 1997, are
entitled to notice of and to vote at the meeting. On that date, the Company had
outstanding 3,012,981 shares of Common Stock, 15,000 shares of Cumulative
Preferred Stock -- Series A, $20 par value, and 29,499 shares of $.90 Cumulative
Preferred Stock, $16 par value. Each share of Common Stock is entitled to three
votes and each share of Cumulative Preferred Stock-Series A is entitled to one
vote on all matters coming before the meeting. The holders of shares of $.90
Cumulative Preferred Stock, $16 par value, have no general voting rights.
The cost of solicitation of proxies will be borne by the Company. In
addition to this solicitation by mail being made initially on or about March 19,
1997, officers and regular employees of the Company may make solicitations by
telephone, telegraph, mail, or personal interviews, and arrangements may be made
with banks, brokerage firms, and others to forward proxy material to their
principals. The Company has retained Morrow & Company, Inc., to assist in the
solicitation of proxies at an estimated cost of $4,000 including expenses, which
will be paid by the Company.
All stockholders unable to attend the meeting in person are urged to send
in proxies to assure a good representation at the meeting. A proxy may be
revoked at any time before it is voted by a writing filed with the Secretary of
the Company, by a duly executed proxy bearing a later date or by voting in
person at the meeting.
PROPOSAL (1) -- ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of not less
than nine nor more than fifteen directors, the exact number of directorships to
be determined from time to time by resolution adopted by the affirmative vote of
a majority of the Board. The directors are divided into three classes as nearly
equal in number as possible with members of each class to hold office until
successors are elected and qualified. Each class is to be elected for a
three-year term at successive annual meetings. As a result, only one class of
directors is to be elected at each Annual Meeting.
The Board of Directors has fixed the number of directors at 13, and has
selected the four nominees listed below for election to three-year terms
expiring in 2000. Of the Company's nine directors remaining in office, the terms
of five directors expire in 1998 and the terms of four directors expire in 1999.
Each nominee is presently a director of the Company.
Unless otherwise directed, it is intended that the enclosed proxy will be
voted for the election of Francis E. Baker, Rudolph E. Luginbuhl, Harvey G.
Moger, and Warren C. Packard. In case any nominee is unable or declines
1
<PAGE> 5
to serve, the persons named in the proxy may vote for some other person or
persons. Votes withheld and broker non-votes are counted for purposes of
determining whether a quorum is present at the meeting but are not considered as
voted in the election of directors. Thus, under Connecticut law sufficient votes
withheld and non-votes may result in the failure to obtain a majority vote.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
COMMITTEES OWNED AS OF
PRESENTLY PRINCIPAL OCCUPATION DIRECTOR MARCH 1, PERCENT OF
NAME SERVING(1) AGE AND DIRECTORSHIPS SINCE 1997 CLASS(2)
- ----------------------- ---------- --- -------------------------------------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS I:
NOMINEES FOR ELECTION AT THIS MEETING FOR TERMS EXPIRING IN 2000
Francis E. Baker 2,4,6 67 President and Director, Andersen 1973(3) 125 <.01
Group, Inc. (electronic and medical
manufacturing and services); Director,
Fresenius, USA
Rudolph E. Luginbuhl 1,5 68 Real Estate Agent, D. W. Fish, Better 1994 300 .01
Homes; Corporator, The Savings Bank of
Rockville.
Harvey G. Moger 1,2,3,7 69 President, GBAJ Associates (commercial 1981 2,345 .08
real estate financial consultant);
Director, Ensign Bickford Realty
Corporation.
Warren C. Packard 1,3 62 Former First Selectman, Town of 1991 250 <.01
Suffield; former President and Chief
Executive Officer, The Wiremold
Company (manufacturing); Director, The
Wiremold Company.
CLASS II
DIRECTORS WHOSE TERMS CONTINUE UNTIL 1998
Marshall T. Chiaraluce 54 President and Chief Executive Officer 1992 3,320(4) .11
of the Company.
William F. Guillaume 64 Vice President Engineering & Planning 1978 4,470(4) .15
of the Company; Director, Connwood
Foresters, Inc. (forestry service and
management).
Marcia L. Hincks 1,4,5 61 Retired; formerly Vice President and 1983 300 <.01
Senior Counsel, Aetna Life & Casualty.
William C. Lichtenfels 4,6,7 69 Retired, formerly President and Chief 1989 432 .01
Operating Officer, Emhart Corporation
(manufacturing).
Robert F. Neal 3,4,5 62 Retired; formerly Senior Vice 1990 350 .01
President -- Network Services;
Southern New England
Telecommunications Corporation.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
COMMITTEES OWNED AS OF
PRESENTLY PRINCIPAL OCCUPATION DIRECTOR MARCH 1, PERCENT OF
NAME SERVING(1) AGE AND DIRECTORSHIPS SINCE 1997 CLASS(2)
- ----------------------- ---------- --- -------------------------------------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS III
DIRECTORS WHOSE TERMS CONTINUE UNTIL 1999
Harold E. Bigler, Jr. 2,3,7 65 Chairman, Bigler Investment Management 1983 2,000 .07
Company, Inc.
Astrid T. Hanzalek 1,2,5,6,7 69 Consultant -- water resources and 1985 732 .02
various public policy issues
(self-employed); formerly Connecticut
State Representative.
Frederick E. Hennick 5,6,7 70 Chairman, State of Connecticut Freedom 1983 225 <.01
of Information Commission; retired,
formerly President and Publisher,
Naugatuck Daily News; Director,
Naugatuck Valley Savings and Loan,
Inc.
Donald B. Wilbur 4,7 54 Plant Manager, Chesebrough-Pond's USA 1993 330 .01
(personal products manufacturing);
Director, Middlesex Hospital;
Director, Liberty Bank.
</TABLE>
- ---------------
(1) 1. Audit Committee
2. Finance Committee
3. Pension Trust Committee
4. Compensation Committee
5. Public Information Committee
6. Committee on Directors
7. Strategic Planning Committee
(2) The percentages have been rounded to the nearest one hundredth of one
percent. As of March 1, 1997, executive officers and directors of the
Company as a group owned 23,422 shares (.78%) of the Common Stock of the
Company. No directors or officers own any shares of the Company's Cumulative
Preferred Stock.
(3) The Connecticut Water Company is a subsidiary of the Company. The
affiliation of the Company (then Suburban Water Service, Inc.) and The
Connecticut Water Company was effected on April 10, 1975. Prior to the
affiliation, Mr. Baker was a director of The Connecticut Water Company. The
Company's Board of Directors and the Board of Directors of The Connecticut
Water Company are now identical.
(4) Includes both shares actually earned by the officer under the Company's
pre-1997 Performance Stock Programs and awarded under the 1997 Performance
Stock Program. Does not include shares deferred under the Program. See Note
1 on page 7.
With the exception of Mr. Packard whose term as First Selectman of the Town
of Suffield expired on November 21, 1995, Mrs. Hincks who retired from Aetna
Life and Casualty in 1993, and Mr. Neal who retired from Southern New England
Telecommunications Company in 1994, each of the nominees listed above has had
the same employment for more than the past five years either in the position or
positions indicated or in other similar or executive capacities with the same
company or a predecessor thereof.
The Company's Board of Directors met five times during 1996. In addition,
the Company has a number of committees, including an Audit Committee, a
Compensation Committee, a Committee on Directors, a Finance Committee, a Pension
Trust Committee, a Strategic Planning Committee and a Public Information
Committee which meet periodically during the year. The Audit Committee, composed
of Mmes. Hanzalek and Hincks and
3
<PAGE> 7
Messrs. Luginbuhl, Moger and Packard, reviews the activities, procedures and
recommendations of the independent auditors of the Company and The Connecticut
Water Company and recommends annually the appointment of independent auditors
for the coming year. The Committee met twice during 1996. The Compensation
Committee, composed of Ms. Hincks and Messrs. Baker, Lichtenfels, Neal and
Wilbur, establishes compensation levels for officers of The Connecticut Water
Company and makes recommendations to the full Board regarding officer
succession. The Committee met twice during 1996. The Committee on Directors,
consisting of Ms. Hanzalek, Messrs. Baker, Hennick and Lichtenfels, recommends
candidates for nomination as directors to the Board. The Committee did not meet
in 1996. The Finance Committee, composed of Ms. Hanzalek and Messrs. Baker,
Bigler and Moger, recommends and advises the Board of Directors on financial
policy and issuance of securities. The Committee met twice in 1996. The Pension
Trust Committee, composed of Messrs. Bigler, Moger, Neal and Packard, reviews
the Pension Trust Fund of The Connecticut Water Company Employee Retirement Fund
and the VEBA Trust Fund for retiree medical benefits, reviews and determines
actuarial policies and investment guidelines, and selects the investment
managers. The Committee met four times in 1996. The Strategic Planning
Committee, consisting of Ms. Hanzalek and Messrs. Bigler, Hennick, Lichtenfels,
Moger, and Wilbur, oversees the preparation and implementation of the Company's
Strategic Plan. The Committee met once in 1996. The Public Information
Committee, consisting of Mmes. Hanzalek and Hincks and Messrs. Hennick, Neal and
Luginbuhl, advises management on policies for communicating Company information
to the general public, government officials, investors and other interested
parties. The Committee met twice in 1996. All of the Company's directors
attended at least 75% of the aggregate number of meetings in 1996 of the Board
and committees on which they serve.
Pursuant to the Company's Bylaws, nominations for directors may be made by
any stockholder 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 has given proper and timely notice in writing
of such stockholder's intent to make such nomination to the Secretary of the
Company. To be timely a stockholder's notice must be delivered to or mailed and
received by the Secretary of the Company at the General Offices of the Company
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 than 120 days
prior to the 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 must 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 Company's books, of the stockholder making such nomination; (c) the class
and number of shares of the Company which are beneficially owned by the
stockholder; (d) a representation that the stockholder is a holder of record of
stock of the Company entitled to vote at such meeting and intends to appear in
person 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 Company if so elected.
Any such notice of nominations for consideration at the 1998 Annual Meeting must
be received by the Company's Secretary by the close of business on December 15,
1997.
4
<PAGE> 8
REPORTS UNDER SECTION 16
Under Section 16 of the Securities Exchange Act of 1934, directors,
officers and certain beneficial owners of the Company's equity securities are
required to file reports of their transactions in the Company's equity
securities with the Securities and Exchange Commission on specified due dates.
In 1996, all directors, officers and beneficial owners of the Company's equity
securities so required, filed such reports on or before the specified due dates.
In making this statement, the Company has relied on the written representations
of its directors and officers and its five percent holders and copies of the
reports that they have filed with the Securities and Exchange Commission.
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following tabulation sets forth the total compensation paid by the
Company and The Connecticut Water Company during 1996, 1995, and 1994 to each of
the executive officers, including the Chief Executive Officer of the Company,
receiving more than $100,000 aggregate compensation in 1996. The Company has no
employees. All officers are employees of The Connecticut Water Company and all
compensation is paid by The Connecticut Water Company.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------- RESTRICTED STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY($) AWARDS($)(1)
- -------------------------------------------------- ---- --------- ----------------------
<S> <C> <C> <C>
Marshall T. Chiaraluce,
President and Chief Executive Officer 1996 205,022 28,705
1995 200,000 47,091
1994 186,500 31,643
William F. Guillaume,
V.P. Engineering and Planning 1996 134,182 10,410
1995 129,500 17,621
1994 125,000 12,206
David C. Benoit,
V.P. Finance and Accounting and Treasurer 1996 105,000 12,346
1995 -- --
1994 -- --
James R. McQueen,
V.P. Customer Service & Government Affairs 1996 101,612 8,109
1995 94,500 12,644
1994 90,000 10,625
</TABLE>
- ---------------
(1) The value of the full number of shares of restricted stock initially
allocated to Messrs. Chiaraluce, Guillaume and McQueen under the Company's
Performance Stock Program was $48,423, $17,565 and $13,655 respectively in
1994; and $50,370, $18,262 and $14,212 respectively in 1995. In 1996, the
value of the full number of shares of restricted stock initially allocated
to Messrs. Chiaraluce, Guillaume, McQueen and Benoit under the Company's
Performance Stock Program were $52,111, $18,907, $14,709 and $18,907
respectively. The aggregate number of shares of restricted stock actually
earned by Messrs. Chiaraluce, Guillaume and McQueen, based upon the actual
attainment of 1994 and 1995 performance criteria were 1,361, 525 and 457
shares respectively in 1994; and 1,697, 635 and 464 shares respectively in
1995. In 1996, the aggregate number of shares of restricted stock actually
earned by Messrs. Chiaraluce, Guillaume, McQueen, and Benoit based upon the
actual attainment of 1996 performance criteria were 1,023, 371, 289 and 440
shares respectively. The values shown in the table above are of the shares
actually earned in said year, valued on the date earned which was February
10, 1995 for the 1994 plan, February 14, 1996 for the 1995 plan, and
February 14, 1997 for the 1996 plan.
5
<PAGE> 9
RETIREMENT BENEFITS
Officers and employees of the Company and The Connecticut Water Company are
entitled to receive retirement benefits under a pension plan, and executive
officers are entitled to receive benefits under supplemental executive
retirement agreements, which provide for defined benefits in the event of
retirement at a specified age and after a specified number of years of service
based on highest average annual compensation. Examples of annual full straight
life annuity allowances payable under the pension plan and supplemental
agreements to employees and executive officers are set forth in the following
table. As of December 31, 1996, the estimated credited years of service for
Messrs. Chiaraluce, Guillaume, McQueen and Benoit are 5, 32, 31, and 1
respectively. The table assumes retirement occurs at age 65 which for Messrs.
Chiaraluce, Guillaume, McQueen and Benoit would occur with 16, 33, 42, and 26
years, respectively, of credited service. Highest average annual compensation is
the highest average regular basic compensation received by an individual from
the Company and The Connecticut Water Company during any 60 consecutive months.
<TABLE>
<CAPTION>
HIGHEST AVERAGE
ANNUAL COMPENSATION
DURING
60 CONSECUTIVE 5 OR MORE YEARS
MONTHS OF SERVICE*
- ------------------- ---------------
<S> <C>
$ 100,000 $60,000
$ 125,000 $75,000
$ 150,000 $90,000
</TABLE>
- ---------------
* In the case of each of Mr. Chiaraluce and Mr. Benoit, the amounts are reduced
by benefits payable under the retirement plan of a prior employer.
DIRECTOR COMPENSATION
Since the Boards of Directors of the Company and The Connecticut Water
Company are identical, regular meetings of each are generally held on the same
day. Directors of the Company receive $250 for each regular meeting of the Board
of Directors of the Company and $350 for each special Board meeting and $400 for
each committee meeting of the Company which they attend. In addition, Directors
of The Connecticut Water Company receive an annual retainer of $4,000, $450 for
each regular or special meeting of the Board of Directors, and $400 for each
committee meeting which they attend. Directors who are salaried officers receive
the same retainer and meeting fees as other directors. These amounts have been
included in the Summary Compensation Table on Page 5. Directors who are not
officers are not entitled to retirement benefits from the Company or The
Connecticut Water Company.
Pursuant to a Directors Deferred Compensation Plan, the Directors of the
Company and The Connecticut Water Company may elect to defer receipt of all or a
specified portion of the compensation payable to them for services as Directors
until after retiring as Directors. Any amounts so deferred are credited to
accounts maintained for each participating Director, and interest at an annual
rate of 10.74% is currently credited monthly to all deferred amounts.
Distribution of amounts deferred and accumulated interest may be made, at the
election of each participating Director, in a lump sum or in annual installments
over a period of years specified by the Director, such distribution to commence
in the year following the year in which the individual ceases to be a Director.
In 1996, five Directors elected to participate in the Plan.
6
<PAGE> 10
COMPENSATION COMMITTEE REPORT
The Committee is responsible for making recommendations to the Board on
executive compensation and administering the Company's Performance Stock Program
(the "Program").
EXECUTIVE COMPENSATION PRINCIPLES
The Company's executive compensation plan is designed to align executive
compensation with the Company's and/or The Connecticut Water Company's strategic
business planning which includes management initiatives and business financial
performance. Through this process the Committee has established a program to:
- Attract and retain key executives critical to the long-term success of
the Company.
- Reward executives for the accomplishment of strategic goals which reflect
customer service and satisfaction as well as the enhancement of
stockholder value.
- Integrate compensation programs with both The Connecticut Water Company's
annual performance review and the Company's and/or The Connecticut Water
Company's strategic planning and measuring processes.
- Support a performance-oriented environment that rewards performance with
respect to overall performance goals and performance on individual goals
for each participant in the plan.
EXECUTIVE COMPENSATION PROGRAM
The total compensation program consists of both cash and equity based
compensation. The annual compensation consists of a base salary and any Common
Stock awarded through the Program. The Committee determines a salary range and a
level of salary for executive officers. The Committee determines the salary or
salary range based upon competitive norms from periodic studies of a peer group
of other water companies. Actual salary changes are based upon such norms and
upon performance. Additional incentives are provided through the Program.(1) The
Committee reviews and approves the participation of executive officers of The
Connecticut Water Company under the Program. The Committee also approves the
award value each year as a percentage of base salary and the basis for judging
performance over the following year. Awards are currently based on whether the
Company and/or The Connecticut Water Company has met certain goals based on
objective performance criteria and attainment by participants of individual
goals. The Committee determines what these criteria and goals are each year. The
Criteria for the 1996 awards were based on The Connecticut Water Company's
customer value rating and water quality measures, the Company's return on
equity, other service and financial measures, and specific individual
performance goals. The Committee has approved and implemented an award program
for 1997 based upon similar criteria and goals.
- ---------------
(1) The Program 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. An award of a share of restricted stock is an award to a
participant of a share of the Common Stock of the Company generally
conditioned upon the attainment of performance goals established by the
Committee for the performance period to which the award relates and the
continued employment of the participant with the Company or any
majority-owned subsidiary of the Company through the end of the performance
period. During the performance period, the participant has all of the rights
of a stockholder of the Company, including the right to receive dividends,
except that the participant does not have custody of the shares of Common
Stock nor the right to transfer ownership of the shares during the
performance period. Commencing with 1997 awards, the Program has been
amended to permit participants to defer income taxation of all or a portion
of such restricted stock awards by electing instead to receive "performance
shares" at the end of a chosen deferral period. Until the end of the
deferral period, a participant holding performance shares has no rights as a
stockholder of the Company. However, dividend equivalents are credited to
such participant as additional performance shares.
7
<PAGE> 11
Executive officers may also participate in the Company's Savings and
Investment 401(k) Plan and other benefit plans generally available to all levels
of salaried employees. Also, executive officers may elect to defer compensation
under a non-qualified salary deferral plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee determined the compensation for 1996 of Mr. Chiaraluce, the
Chief Executive Officer ("CEO"), based upon a number of factors and criteria,
including a review of the salaries of Chief Executive Officers for similar
companies of comparable size and capitalization and a review by the Committee of
the CEO's performance. The Committee approved the CEO's participation in the
Program for 1996. The Committee noted the continued efforts of Mr. Chiaraluce to
avoid requesting a general rate increase for 6 years while achieving
consistently higher earnings and increasing shareholder value during his 5 years
as CEO. The awarding of only 54% (1,023 of 1,894 shares originally allocated) of
the Common Stock allocated to Mr. Chiaraluce in 1996 was based upon certain
targeted individual and corporate goals, such as increasing non-rate revenue and
increasing the customer satisfaction index, not being fully met.
COMPENSATION COMMITTEE
William C. Lichtenfels, Chairman
Francis E. Baker, Jr.
Marcia L. Hincks
Robert F. Neal
Donald B. Wilbur
8
<PAGE> 12
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return for each of the years 1991-1996 on the Company's Common Stock, based on
the market price of the Common Stock and assuming reinvestment of dividends,
with the cumulative total stockholder return of companies on the Standard &
Poor's 500 Stock Index and the Standard & Poor's Utilities Index.
<TABLE>
<CAPTION>
CONNECTICUT
MEASUREMENT PERIOD WATER STANDARD & STANDARD &
(FISCAL YEAR COVERED) SERVICE, INC. POOR'S 500 POOR'S UTILITIES
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 116.77 107.61 108.07
1993 133.25 118.40 123.58
1994 115.54 120.01 113.85
1995 149.07 164.95 161.48
1996 166.59 202.72 166.50
</TABLE>
9
<PAGE> 13
BENEFICIAL SHAREHOLDINGS OF CERTAIN PERSONS
The Company does not know of any beneficial owner of more than 5% of its
$.90 Cumulative Preferred Stock, $16 par value. The Company does not know of any
beneficial owner of more than 5% of its Common Stock and does not know of any
beneficial owner of more than 5% of its Cumulative Preferred Stock -- Series A,
$20 par value, except as follows:
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY
OWNED AS OF PERCENT
NAME AND ADDRESS OF BENEFICIAL DECEMBER 31, OF
TITLE OF CLASS OWNER 1996 CLASS
- ----------------------------------- --------------------------------- --------------- ------
<S> <C> <C> <C>
Common Stock Dimensional Fund Advisors, Inc. 151,500(1) 5.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Cumulative Preferred Stock -- William Neal MacKenzie 1,850 12.3%
Series A, $20 par value 222 North Main Street
Wallingford, CT 06492
Herbert I. Johnson and 900 6.0%
Annabelle C. Johnson
35 Carter Street, Bolton, CT
06040
Shearson Lehman American Express 900 6.0%
One Western Union Int'l Plaza
New York, NY 1004-1008
Dorothy L. Bach 825 5.5%
55 Mountain Spring Road
Tolland, CT 06084
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(1) Information relating to such beneficial ownership is based on a statement on
Schedule 13G filed with the Securities and Exchange Commission.
CERTAIN TRANSACTIONS
During the year 1996, the law firm of Day, Berry & Howard, of which Michael
F. Halloran, Assistant Secretary of the Company and The Connecticut Water
Company, is a partner, performed certain legal services for the Company and The
Connecticut Water Company. The Company believes that the charges made by said
firm for legal services were not more than others would have charged for similar
services.
PROPOSAL (2) -- ELECTION OF AUDITORS
Arthur Andersen LLP served as independent auditors for the Company and its
subsidiary, The Connecticut Water Company, for the calendar year ending December
31, 1996. One or more representatives of Arthur Andersen LLP will attend the
annual meeting, with the opportunity to make a statement if they desire to do so
and to respond to appropriate questions.
It is intended that unless otherwise specified, proxies will be voted in
favor of the appointment of Arthur Andersen LLP, independent public accountants,
of Hartford, Connecticut, as independent auditors for the
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Company for the calendar year ending December 31, 1997. The Company's Audit
Committee has recommended that Arthur Andersen LLP be so appointed. Arthur
Andersen LLP has no direct or indirect financial interest in the Company. The
favorable vote of a majority of the shares of Common Stock and Cumulative
Preferred Stock -- Series A, $20 par value, represented at the meeting is
required for such approval.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL (2).
PROPOSAL (3) -- STOCKHOLDER PROPOSAL (CUMULATIVE VOTING)
The following proposal and supporting statement have been submitted by John
J. Gilbert and Margaret R. Gilbert, 29 East 64th Street, New York, New York,
10021-7043. John J. Gilbert holds 200 shares of Company stock; Margaret R.
Gilbert holds 200 shares of Company stock.
STOCKHOLDER PROPOSAL: CUMULATIVE VOTING
Resolved: That the stockholders of Connecticut Water Service, Inc. assembled in
annual meeting in person and by proxy, hereby request the Board of
Directors to take the steps necessary to provide for cumulative voting
in the election of directors, which means each stockholder shall be
entitled to as many votes as shall equal the number of shares he or
she owns multiplied by the number of directors to be elected, and he
or she may cast all of such votes for a single candidate, or any two
or more of them as he or she may see fit.
Reasons:
A California law provides that all state pension holdings and state college
funds, invested in shares must be voted in favor of cumulative voting proposals,
showing increasing recognition of the importance of this democratic means of
electing directors.
The National Bank Act provides for cumulative voting. In many cases
companies get around it by forming holding companies without cumulative voting.
Banking authorities have the right to question the capability of directors to be
on banking boards. In many cases authorities come in after and say the director
or directors were not qualified. We were delighted to see the SEC has finally
taken action to prevent bad directors from being on boards of public companies.
The SEC should have hearings to prevent such persons becoming directors before
they harm investors.
We think cumulative voting is the answer to find new directors for various
committees. Some recommendations have been made to carry out the CERES 10
points. The 11th, in our opinion, should be having cumulative voting and ending
staggered boards.
When Alaska became a state it took away cumulative voting over our
objections. The Valdez oil spill might have been prevented if environmental
directors were elected through cumulative voting. The huge derivative losses
might have also been prevented with cumulative voting.
Many successful corporations have cumulative voting. Example, Pennzoil
defeated Texaco in that famous case. Ingersoll-Rand, also having cumulative
voting, won two awards. FORTUNE magazine ranked it second in its industry as
"America's Most Admired Corporations" and the WALL STREET TRANSCRIPT noted "on
almost any criteria used to evaluate management, Ingersoll-Rank excels." In 1994
and 1995 they raise their dividend.
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Lockheed-Martin, as well as VWR Corporation now have a provision that if
anyone has 40% or more of the shares cumulative voting applies, it does apply at
the latter company.
In 1995 American Premier adopted cumulative voting. Alleghany Power System
tried to take away cumulative voting, as well as put in a stagger system and
stockholders defeated it, showing stockholders are interested in their rights.
If you agree, please mark your proxy for this resolution; otherwise it is
automatically cast against it, unless you have marked to abstain.
BOARD RESPONSE
The Board of Directors believes that each director should be chosen for his
or her qualifications and ability to serve the Company and all of its
stockholders. Cumulative voting introduces the possibility of a director being
committed to serve the special interests of a small faction of stockholders who
are responsible for the director's election, rather than the director's acting
in the best interests of the stockholders as a whole. The present system of
voting for the election of directors has been in effect since the Company's
organization and has consistently served the Company well. The present system
avoids the conflict created when a director is elected by a limited
constituency. The Company believes that all directors should continue to be
elected by all of its stockholders and that directors should act in a manner
which best serves the interests of all stockholders.
The Board of Directors believes that the present system of voting for
directors has been and continues to be in the best interests of the Company and
recommends that stockholders vote AGAINST this stockholder proposal. Proxies
solicited by the Board of Directors will be so voted unless stockholders specify
a different choice.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "AGAINST" PROPOSAL (3).
OTHER MATTERS (4)
The Board of Directors knows of no other matters which may be presented for
consideration at the meeting. However, if any other matters properly come before
such meeting, the persons named in the enclosed proxy will vote in their
discretion on such matters.
STOCKHOLDER PROPOSALS
For business to be properly brought before an annual meeting by a
stockholder, the business must be an appropriate matter to be acted upon 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 Company. To be timely,
a stockholder's notice must be delivered to or mailed and received by the
Secretary of the Company at the General Offices of the Company not later than
the close of business on a day which is not less than 120 days prior to the
anniversary date of the immediately preceding annual meeting. A stockholder's
notice to the Secretary must 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 Company's books, of the stockholder proposing such business,
(c) the class
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and number of shares of the Company which are beneficially owned by the
stockholder and (d) any material interest of the stockholder in such business.
Stockholder proposals intended to be presented at the Annual Meeting of
Stockholders in 1998 must be received by the Company not later than December 15,
1997 in order to be considered for inclusion in the Company's proxy statement
and form of proxy relating to the 1998 Annual Meeting of Stockholders.
Vincent F. Susco, Jr.
Secretary
March 19, 1997
THE COMPANY IS SUBJECT TO THE INFORMATIONAL REQUIREMENTS OF THE SECURITIES
EXCHANGE ACT OF 1934 AND IN ACCORDANCE THEREWITH FILES AN ANNUAL REPORT ON FORM
10-K WITH THE SECURITIES AND EXCHANGE COMMISSION. THE COMPANY WILL FURNISH A
COPY OF THE 1996 ANNUAL REPORT ON FORM 10-K FILED BY THE COMPANY, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES THERETO, BUT WITHOUT EXHIBITS, WITHOUT CHARGE
TO ANY STOCKHOLDER MAKING A WRITTEN REQUEST THEREFOR ADDRESSED TO: VICE
PRESIDENT -- FINANCE, CONNECTICUT WATER SERVICE, INC., 93 WEST MAIN STREET,
CLINTON, CONNECTICUT, 06413.
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PLEASE MARK VOTES AS IN THIS EXAMPLE
For With- For All
hold Except
1) For election of all Directors, / / / / / /
F. Baker, R. Luginbuhl, H. Moger, W. Packard
If you do not wish your shares voted "FOR" a particular nominee, mark the "For
All Except" box and strike a line through the nominee(s) name. Your shares will
be voted for the remaining nominee(s).
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date_____________________________
___________________________________________ _________________________________
Shareholder sign here Co-owner sign here
2) Appointment of Arthur Andersen LLP
as independent Auditors. For Against Abstain
/ / / / / /
3) Cumulative Voting For Against Abstain
/ / / / / /
4) In their discretion the proxies are For Against Abstain
authorized to vote upon such other / / / / / /
business as may properly come before
the meeting.
Mark box at right if comments or address change / /
have been noted on the reverse side of this card.
DETACH CARD
CONNECTICUT WATER SERVICE, INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are discussed
in detail in the enclosed proxy material.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the proxy card to indicate how your shares shall be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, April
25, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Connecticut Water Service, Inc.
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CONNECTICUT WATER SERVICE, INC.
COMMON STOCK
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING APRIL 25, 1997
The undersigned stockholder of Connecticut Water Service, Inc. hereby appoints
Marshall T. Chiaraluce and William F. Guillaume or either of them, attorneys and
proxies for the undersigned, with power of substitution, to act for and to vote,
as designated herein, with the same force and effect as the undersigned, all
shares of the Company's Common Stock standing in the name of the undersigned at
the Annual Meeting of Stockholders of Connecticut Water Service, Inc. to be held
at the William C. Stewart Water Treatment Plant, 119 Horton Hill Road,
Naugatuck, Connecticut, April 25, 1997, at 2 p.m., and any adjournments thereof.
When properly executed, this proxy will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will grant
authority to vote for all nominees for Director and will be voted "FOR" Proposal
(2) and "AGAINST" Proposal (3).
The undersigned hereby acknowledges receipt of notice of said meeting and the
related Proxy Statement.
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign this proxy exactly as your name appears on the books of the Company.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_________________________ _________________________
_________________________ _________________________
_________________________ _________________________
<PAGE> 19
PLEASE MARK VOTES AS IN THIS EXAMPLE
For With- For All
hold Except
1) For election of all Directors, / / / / / /
F. Baker, R. Luginbuhl, H. Moger, W. Packard
If you do not wish your shares voted "FOR" a particular nominee, mark the "For
All Except" box and strike a line through the nominee(s) name. Your shares will
be voted for the remaining nominee(s).
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date_____________________________
__________________________________________ _________________________________
Shareholder sign here Co-owner sign here
2) Appointment of Arthur Andersen LLP For Against Abstain
as independent Auditors. / / / / / /
3) Cumulative Voting For Against Abstain
/ / / / / /
4) In their discretion the proxies are For Against Abstain
authorized to vote upon such other / / / / / /
business as may properly come before
the meeting.
Mark box at right if comments or address change / /
have been noted on the reverse side of this card.
DETACH CARD
CONNECTICUT WATER SERVICE, INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are discussed
in detail in the enclosed proxy material.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the proxy card to indicate how your shares shall be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, April
25, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Connecticut Water Service, Inc.
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CONNECTICUT WATER SERVICE, INC.
CUMULATIVE PREFERRED STOCK -- SERIES A
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING APRIL 25, 1997
The undersigned stockholder of Connecticut Water Service, Inc. hereby appoints
Marshall T. Chiaraluce and William F. Guillaume or either of them, attorneys and
proxies for the undersigned, with power of substitution, to act for and to vote,
as designated herein, with the same force and effect as the undersigned, all
shares of the Company's Cumulative Preferred Stock - Series A standing in the
name of the undersigned at the Annual Meeting of Stockholders of Connecticut
Water Service, Inc. to be held at the William C. Stewart Water Treatment Plant,
119 Horton Hill Road, Naugatuck, Connecticut, April 25, 1997, at 2 p.m., and any
adjournments thereof.
When properly executed, this proxy will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will grant
authority to vote for all nominees for Director and will be voted "FOR" Proposal
(2) and "AGAINST" Proposal (3)..
The undersigned hereby acknowledges receipt of notice of said meeting and the
related Proxy Statement.
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign this proxy exactly as your name appears on the books of the Company.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_________________________ _________________________
_________________________ _________________________
_________________________ _________________________
