<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 1999 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 06413-1600
(Address of principal executive offices) (Zip Code)
(860) 669-8636
(Registrant's telephone number, including area code)
Not Applicable
(Former name, address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a count. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
4,546,850
Number of shares of common stock outstanding, March 31, 1999
<PAGE> 2
CONNECTICUT WATER SERVICE, INC.
Financial Report
March 31, 1999 and 1998
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I, ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets at March 31, 1999
and December 31, 1998 Page 3
Consolidated Statements of Capitalization at
March 31, 1999 and December 31, 1998 Page 4
Consolidated Statements of Income for Three Months
Ended March 31, 1999 and 1998 Page 5
Consolidated Statements of Retained Earnings for Three
Months Ended March 31, 1999 and 1998 Page 6
Consolidated Statements of Cash Flows for Three Months
Ended March 31, 1999 and 1998 Page 7
Notes to Consolidated Financial Statements Page 8
PART I, ITEM 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations Page 9
PART II, ITEM 4: Submission of Matters to a Vote
of Security Holders Page 13
PART II, ITEM 6: Item 6(a) - Exhibits Page 14
Signature Page Page 15
</TABLE>
<PAGE> 3
Page 3
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 1999 AND DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
1999 DEC. 31,
ASSETS (UNAUDITED) 1998
- ------ ----------- --------
<S> <C> <C>
Utility Plant
Utility Plant $ 220,582 $ 220,455
Construction Work in Progress 5,241 4,459
Utility Plant Acquisition Adjustments (1,253) (1,253)
--------- ---------
224,570 223,661
Accumulated Provision for Depreciation (57,404) (56,335)
--------- ---------
Net Utility Plant 167,166 167,326
--------- ---------
Investments 1,933 1,900
--------- ---------
Current Assets
Cash 1,062 53
Accounts Receivable (Less Allowance, 1999- $231; 1998 - $160) 4,214 4,841
Accrued Unbilled Revenues 2,561 2,776
Materials and Supplies, at Average Cost 692 664
Prepayments and Other Current Assets 934 197
--------- ---------
Total Current Assets 9,463 8,531
--------- ---------
Deferred Charges and Regulatory Assets
Unamortized Debt Issuance Expense 5,816 5,870
Income Taxes 9,022 8,998
Postretirement Benefits Other Than Pension 1,150 1,150
Other Costs 897 811
--------- ---------
Total Deferred Charges and Regulatory Assets 16,885 16,829
--------- ---------
TOTAL ASSETS $ 195,447 $ 194,586
========= =========
CAPITALIZATION AND LIABILITIES
Capitalization (See accompanying statements)
Common Stockholders' Equity $ 58,071 $ 57,945
Preferred Stock 772 772
Long-Term Debt 62,493 62,501
--------- ---------
Total Capitalization 121,336 121,218
--------- ---------
Current Liabilities
Interim Bank Loans Payable 3,724 1,895
Accounts Payable and Accrued Taxes and Interest 6,244 7,819
Other 2,353 2,442
--------- ---------
Total Current Liabilities 12,321 12,156
--------- ---------
Long-Term Liabilities
Advances for Construction 15,089 14,746
Contributions in Aid of Construction 19,877 19,878
Deferred Federal Income Taxes 15,148 14,898
Unfunded Future Income Taxes 8,500 8,500
Unfunded Postretirement Benefits Other Than Pension 1,150 1,150
Unamortized Investment Tax Credits 2,026 2,040
--------- ---------
Total Long-Term Liabilities 61,790 61,212
--------- ---------
TOTAL CAPITALIZATION AND LIABILITIES $ 195,447 $ 194,586
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
Page 4
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
AT MARCH 31, 1999 AND DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
1999 DEC. 31,
(UNAUDITED) 1998
----------- --------
<S> <C> <C>
Common Stockholders' Equity
Common Stock Without Par Value Authorized - 7,500,000 Shares; 44,203 44,195
Shares Issued and Outstanding: 1999 - 4,546,850; 1998 - 4,536,285 (1,385) (1,385)
Stock Issuance Expense
Retained Earnings 15,253 15,135
-------- --------
Total Common Stockholders' Equity 58,071 57,945
-------- --------
Cumulative Preferred Stock of Connecticut Water Service, Inc.
Series A Voting, $20 Par Value; Authorized, Issued and
Outstanding 15,000 Shares, Redeemable at $21.00 Per Share 300 300
Series $.90 Non-Voting, $16 Par Value; Authorized 50,000 Shares
Issued and Outstanding 29,499 Shares, Redeemable at $16.00 Per Share 472 472
-------- --------
Total Preferred Stock of Connecticut Water Service, Inc. 772 772
-------- --------
Long-Term Debt
The Connecticut Water Company
First Mortgage Bonds
5 7/8% Series R, due 2022 14,800 14,800
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 12,050
-------- --------
44,400 44,400
Unsecured Water Facilities Revenue Refinancing Bonds
5.05% 1998 Series A, due 2028 10,000 10,000
5.125% 1998 Series B, due 2028 8,000 8,000
Other
5.5% Unsecured Promissory Note 124 132
-------- --------
18,124 62,532
Less Current Portion (31) (31)
-------- --------
Total Long-Term Debt 62,493 62,501
-------- --------
TOTAL CAPITALIZATION $121,336 $121,218
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
Page 5
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Operating Revenues $ 8,858 $ 8,672
------- -------
Operating Expenses
Operation and Maintenance 3,778 3,588
Depreciation 1,038 936
Federal and State Income Taxes 720 860
Municipal Taxes 862 813
Payroll Taxes 165 171
------- -------
Total Operating Expenses 6,563 6,368
------- -------
Utility Operating Income 2,295 2,304
------- -------
Other Income (Deductions)
Interest 59 24
Allowance for Funds Used During Construction 118 130
Gain on Sale of Property 5 0
Non-Water Sales Earnings 37 28
Miscellaneous Income (Deductions) (2) (3)
Taxes on Other Income (12) (17)
------- -------
Total Other Income (Deductions) 205 162
------- -------
Interest and Debt Expense
Interest on Long-Term Debt 922 867
Other Interest Charges 66 162
Amortization of Debt Expense 54 47
------- -------
Total Interest and Debt Expense 1,042 1,076
------- -------
Net Income Before Preferred Dividends 1,458 1,390
Preferred Stock Dividend Requirement 10 10
------- -------
Net Income Applicable to Common Stockholders $ 1,448 $ 1,380
======= =======
Weighted Average Common Shares Outstanding 4,540 4,534
======= =======
Basic and Fully Diluted Earnings Per Average Common Share $ 0.32 $ 0.30
======= =======
Dividends Per Common Share $0.29333 $ 0.290
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
Page 6
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Balance at Beginning of Period $15,135 $13,490
Net Income 1,458 1,390
------- -------
16,593 14,880
------- -------
Dividends Declared:
Cumulative Preferred, Class A, $.20 per share 3 3
Cumulative Preferred, Series $.90, $.225 per share 7 7
Common Stock - 1999 $.29333 per share; 1998 $.29 per share 1,330 1,313
------- -------
1,340 1,323
------- -------
Balance at End of Period $15,253 $13,557
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
Page 7
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Operating Activities:
Net Income Before Preferred Dividends $ 1,458 $ 1,390
------- -------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation (including $31 in 1999, $31 in 1998 charged to other accounts) 1,070 967
Change in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable and Accrued Unbilled Revenues 842 7
(Increase) Decrease in Other Current Assets (765) (1,023)
(Increase) Decrease in Other Non-Current Items (65) (201)
Increase (Decrease) in Accounts Payable, Accrued Expenses and
Other Current Liabilities (1,665) (1,507)
Increase (Decrease) in Deferred Federal Income Taxes and
Investment Tax Credits, Net 211 211
------- -------
Total Adjustments (372) (1,546)
------- -------
Net Cash Provided by (Used for) Operating Activities 1,086 (156)
------- -------
Investing Activities:
Gross Additions to Utility Plant (including Allowance for Funds
Used During Construction of $118 in 1999 and $130 in 1998) (910) (1,314)
------- -------
Financing Activities:
Proceeds from Interim Bank Loans 3,724 5,571
Repayment of Interim Bank Loans (1,895) (8,811)
Proceeds from Issuance of Common Stock 8 63
Net Proceeds from Issuance of Long-Term Debt 0 8,000
Repayment of Long-Term Debt (7) (8)
Advances, Contributions and Funds From Others for Construction, Net 343 49
Costs Incurred to Issue Long-Term Debt, Preferred Stock, and Common Stock 0 (1,221)
Cash Dividends Paid (1,340) (1,323)
------- -------
Net Cash Provided by (Used in) Financing Activities 833 2,320
------- -------
Net Increase (Decrease) in Cash 1,009 850
Cash at Beginning of Year 53 346
------- -------
Cash at End of Period $ 1,062 $ 1,196
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (Net of Amounts Capitalized) $ 1,599 $ 1,020
State and Federal Income Taxes $ 370 $ 325
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 8
Page 8
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been prepared by
CONNECTICUT WATER SERVICE, INC. (the Company), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission and reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for interim periods. Certain information and footnote
disclosures have been omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on 10-K.
The results for interim periods are not necessarily indicative of
results to be expected for the year since the consolidated earnings are subject
to seasonal factors.
2. Earnings per average common share are calculated by dividing net income
applicable to common stock by the average number of shares of common stock
outstanding during the respective periods as detailed:
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
--------------------- -----------------------------------
3/31/99 3/31/98 3/31/99 3/31/98 12/31/98
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Common Shares Outstanding:
January 1, 1998 -- -- -- -- 4,527,636
April 1, 1998 & 1997
respectively -- 4,535,249 4,524,429 --
January 1, 1999 & 1998
respectively 4,536,285 4,527,636 -- -- --
Common Shares Issued:
To CSE - June 13, 1997 -- -- -- 60 --
To 401-K - June 30, 1997 -- -- -- 1,163 --
To CSE - September 15, 1997 -- -- -- 61 --
To 401-K - September 30, 1997 -- -- -- 1,002 --
To CSE - December 15, 1997 -- -- -- 57 --
To 401-K - December 31, 1997 -- -- -- 864 --
To PSP- February 18, 1998 -- 6,921 -- 6,921 6,921
To CSE - March 15, 1998 -- 102 -- 102 102
To 401-K - March 30, 1998 -- 590 -- 590 590
To CSE - June 15, 1998 -- -- 95 -- 95
To 401-K - June 30, 1998 -- -- 446 -- 446
Liquidation of Fractional Shares -- -- (587) -- (587)
To CSE - September 15, 1998 -- -- 82 -- 82
To 401-K - September 30, 1998 -- -- 528 -- 528
To CSE - December 15, 1998 -- -- 81 -- 81
To 401-K - December 31, 1998 -- -- 391 -- 391
To PSP - March 1, 1999 10,418 -- 10,418 -- --
To CSE - March 15, 1999 147 -- 147 -- --
--------- --------- ---------- --------- ---------
Common Shares Outstanding:
March 31, 1999 & 1998
respectively 4,546,850 4,535,249 4,546,850 4,535,249
========= ========= ========== =========
December 31, 1998 4,536,285
=========
Weighted Average Common Shares Outstanding:
Days outstanding basis* 4,539,900 4,533,741 4,529,145 4,527,627 4,535,150
========= ========= ========== ========= =========
</TABLE>
* Basic and Fully diluted are the same
PSP = Performance Stock Program
401-K = Company contribution to employees' 401-K savings plan
CSE = Common Stock Equivalents
<PAGE> 9
Page 9
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
PART I, ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CORPORATE RESOURCES
At March 31, 1999 the Company had $5,276,000 of unused lines of interim
bank loan credit available.
RESULT OF OPERATIONS
THE FOLLOWING FACTORS HAD A SIGNIFICANT EFFECT UPON THE COMPANY'S NET
INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1999 AS COMPARED WITH THE NET INCOME
FOR THE SAME PERIOD LAST YEAR.
Net income applicable to common stock for the three months ended March
31, 1999 increased from that of March 31, 1998 by $68,000, or $.02 per average
common share. The increase in net income resulted, in part, from a $186,000
increase in revenue. In addition, the Company experienced lower interest and
debt expense through a combination of long-term debt refinancing, during the
second quarter of 1998, and the accounting for common stock equivalent shares
outstanding. Income taxes were lower in part due to a reduction in the state
income tax rate and an increase in the state tax credit for investment in
equipment and machinery. These items which increased net income were partially
offset by normal increases in operating expenses.
YEAR 2000
Like many organizations, the Company is currently evaluating and
responding to its exposure to the Year 2000 problem. In general terms, the
problem arises from the fact that many existing computer systems and other
equipment containing date-sensitive embedded technology (including
non-information technology equipment and systems) use only two digits to
identify a year in the date field, with the assumption that the first two digits
of the year are always "19". As a result, such systems may misinterpret dates
after December 31, 1999, which may result in miscalculations, other malfunctions
or the total failure of such systems. Additional problems arise from the fact
that the Year 2000 is a special case leap year. Because the Company is dependent
upon the proper functioning of computer systems and other equipment containing
date-sensitive embedded technology, a failure of such systems and equipment to
be Year 2000 compliant could have a material adverse effect on the Company. If
not remedied, potential risks include business interruption or shutdown,
financial loss, regulatory actions and legal liability.
The Company has established a team of senior managers to address the
Year 2000 problem. This team is currently evaluating the Company's exposure to
the Year 2000 problem and has prepared, and is executing a plan for managing the
risks and costs associated therewith. The DPUC is reviewing the readiness of
nine utilities, of which the Company is one.
<PAGE> 10
Page 10
The Company's general process of addressing the Year 2000 problem can
be broken down into the following steps: (a) inventorying systems, equipment and
other items (including those of third parties) that potentially present a Year
2000 problem, (b) assigning priorities to identified items, (c) assessing the
Year 2000 compliance of the items determined to be material to the Company
through internal testing and outside certification,(d) repairing or replacing
items determined to be non-compliant, and (e) designing and implementing
contingency plans around items that are identified to be subject to, a Year 2000
problem but unable to be tested or otherwise determined to be compliant.
Since 1996, the Company has been implementing a new Management
Information System (MIS) encompassing operational and administrative
applications. In addition to enhanced customer service technology and increased
administrative and operational efficiencies, the new system is certified to be
Year 2000 compliant. The integration of the new system is now complete. The
costs of implementing the new system totalled approximately $2 million, which
the Company has capitalized. The Company has done preliminary internal testing
of the MIS and intends to complete its Year 2000 testing of MIS, during the
second quarter of 1999. The Company has found no indication that the MIS is not
Year 2000 compliant as certified by its software or hardware vendors.
The Company also is evaluating the Year 2000 compliance of systems and
equipment which are not linked to the MIS and is in the process of identifying
the items that could be impacted by the Year 2000 problem. The Company expects
that this inventory of items which are subject to Year 2000 susceptibility will
be completed by the end of the second quarter 1999. Once the Company determines
that an item may present a Year 2000 problem, the Company contacts the supplier
to obtain adequate assurance that it is Year 2000 compliant or determines and
addresses any non-compliance. In addition, wherever practical, the Company
independently tests the item for compliance. The Company has obtained supplier
compliance certification for approximately 80% of the items that it has
inventoried as potentially non-compliant and has completed testing or has gotten
vendor certification on approximately 50% of such items. The Company estimates
that this assessment process will be completed by the end of the second quarter
of 1999, and anticipates deploying and testing all repairs and replacements of
non-compliant systems and equipment by the end of August, 1999.
In addition to its own systems and equipment, the Company depends upon
the proper function of computer systems and other date-sensitive equipment of
outside parties. These parties include other water companies, banks,
telecommunications service providers and electric and other utilities. The
Company has initiated communications with such parties to determine the extent
to which they are vulnerable to the Year 2000 issue and, in certain
circumstances, to coordinate joint testing. The Company has not yet received
sufficient information about their remediation plans to predict the outcome of
their efforts. If the third parties with which the Company interacts have Year
2000 problems that are not remedied, resulting problems could include the loss
of telecommunications and electrical service, the receipt of inaccurate
financial and billing-related information, and the disruption of capital flows
potentially resulting in liquidity stress.
<PAGE> 11
Page 11
Due to the uncertainties presented by such third party Year 2000
problems, and the possibility that, despite its efforts, the Company is
unsuccessful in preparing its internal systems and equipment for the Year
2000,the Company will have completed contingency plans for dealing with the most
reasonably likely worst case scenario. Such plans include manual backups for
crucial automated systems, the use of electrical generators capable of
sustaining operations through a power failure, and enhanced transition-period
staffing to compensate for automation and communication failures. The Company's
assessment of its most reasonably likely worst case scenario and the exact
nature and scope of its contingency plans will be affected by the Company's
continued Year 2000 assessment and testing. The Company expects to complete such
assessment and contingency plans during the second and third quarter of 1999 and
to have all contingency systems in place and fully tested by the fourth quarter
of 1999. As the Company already has extensive disaster-contingency systems in
place, it does not believe that the cost of preparing or effecting Year 2000
contingency plans will be material.
The Company does not believe that the costs of addressing the Year 2000
problem, excluding the costs of the MIS, will be material to the Company's
financial condition. The Company anticipates spending approximately $300,000 for
effecting its Year 2000 program in 1999. The Company has funded, and expects to
continue to fund, the costs of its Year 2000 efforts through its operating cash
flow.
The costs of the Company's Year 2000 program and the timetable for
completing its Year 2000 preparations are based on current estimates, which
reflect numerous assumptions about future events, including the continued
availability of certain resources, the timing and effectiveness of third-party
remediation plans and other factors. The Company can give no assurance that
these estimates will be achieved, and actual results could differ materially
from those currently anticipated. In addition, there can be no assurance that
the Company's Year 2000 program will be effective or that its contingency plans
will be sufficient. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct relevant computer software codes
and embedded technology, the results of internal and external testing and the
timeliness and effectiveness of remediation efforts of third parties.
ACQUISITION
On April 16, 1999, the Company issued 39,130 shares of its Common Stock
in exchange for all the outstanding Common Stock of Gallup Water Service, Inc.
(Gallup). It also issued 8,696 shares of its Common Stock for the office
building housing the Gallup operations. The merger qualified as a tax-free
reorganization and will be accounted for as a pooling of interests. In this
report, March financial statements have not been restated for this subsequent
transaction. Condensed Statements of Income and Condensed Balance Sheets of
Gallup are as follows:
<PAGE> 12
Page 12
The Gallup Water Service, Incorporated
Condensed Statements of Income
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
1998 1997
---- ----
<S> <C> <C>
Operating Revenues $583 $592
Operating Expense 486 528
Operating Income 97 64
Other Income 3 6
Interest and Debt Expense 31 38
Net Income Applicable to Common Shareholders $ 69 $ 32
CWS Common Stock Shares Issued for
Gallup stock (in thousands) 39 39
Earnings Per Share on CWS Shares Issued to
Acquire Gallup $1.77 $.82
</TABLE>
The Gallup Water Service, Incorporated
Condensed Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Net Utility Plant $1,378 $1,374
Current Assets 225 235
Other Assets 157 203
------ ------
Total Assets $1,760 $1,812
====== ======
CAPITALIZATION AND LIABILITIES
Shareholders Equity $ 460 $ 387
Long-Term Debt 255 283
Current Liabilities 19 126
Other Liabilities and Deferred Credits 1,026 1,016
------ ------
Total Capitalization and Liabilities $1,760 $1,812
====== ======
</TABLE>
FORWARD LOOKING INFORMATION
This report, including management's discussion and analysis, contains
certain forward looking statements regarding the Company's results of operations
and financial position. These forward looking statements are based on current
information and expectations, and are subject to risks and uncertainties, which
could cause the Company's actual results to differ materially from expected
results.
<PAGE> 13
Page 13
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
PART II, ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 23, 1999, at its annual meeting, the stockholders of
Connecticut Water Service, Inc. elected the following directors for,
<TABLE>
<CAPTION>
Number of Common Shares Cast
----------------------------
Abstentions
Affirmative Negative and Non-Votes
----------- -------- -------------
<S> <C> <C> <C>
a two year term until 2001:
Arthur C. Reeds 3,218,535 0 39,937
a three year term until 2002:
Harold E. Bigler 3,211,274 0 47,198
Mary Ann Hanley 3,216,622 0 41,850
Ronald D. Lengyel 3,220,893 0 37,579
Donald B. Wilbur 3,220,447 0 38,025
</TABLE>
Preferred Series A stockholders cast 10,029 affirmative votes for each
of the Directors listed above. There were 150 abstentions for each of the
Directors listed above.
Directors whose term of office continue until 2000 are Francis E.
Baker, Rudolph E. Luginbuhl, Harvey G. Moger, Warren C. Packard.
Directors whose term of office continue until 2001 are Marcia L. Hicks,
Marshall T. Chiaraluce, Robert F. Neal.
Other matters voted on at the annual meeting are the appointment of
Arthur Andersen LLP as independent auditor and proposed amendments to the
Company's Performance Stock Program:
<TABLE>
<CAPTION>
Number of Shares Cast
---------------------
Abstentions
Arthur Andersen LLP Affirmative Negative and Non-Votes
- ------------------- ----------- -------- -------------
<S> <C> <C> <C>
Common Stock 3,188,616 39,267 30,589
Preferred Series A Stock 9,779 250 150
</TABLE>
Performance Stock Program:
<TABLE>
<CAPTION>
Number of Shares Cast
---------------------
Abstentions
Voting Affirmative Negative and Non-Votes
- ------ ----------- -------- -------------
<S> <C> <C> <C>
Common Stock 2,800,407 332,497 125,568
Preferred Series A Stock 9,054 150 975
</TABLE>
<PAGE> 14
Page 14
PART II, ITEM 6(A): EXHIBITS
Exhibits to Part I:
Exhibit 10.23 - Amended and Restated to Company's Performance
Stock Program effective April 23, 1999
<PAGE> 15
Page 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Connecticut Water Service, Inc.
(Registrant)
Date: May 7, 1999 By /s/ David C. Benoit
-----------------------
David C. Benoit
Vice President - Finance
Date: May 7, 1999 By: /s/ Peter J. Bancroft
----------------------
Peter J. Bancroft
Assistant Treasurer
<PAGE> 1
EXHIBIT 10.23
CONNECTICUT WATER SERVICE, INC.
PERFORMANCE STOCK PROGRAM
AMENDED AND RESTATED AS OF APRIL 23, 1999
1. PURPOSE
The purpose of the Plan is to provide a means through which the Company
may attract able persons to enter and remain in the employ with the Company and
its Subsidiaries and to provide a means whereby they can acquire and maintain
Common Stock ownership, or be paid incentive compensation measured by reference
to the value of Common Stock, thereby strengthening their commitment to the
welfare of the Company and promoting an identity of interest between
stockholders of the Company and these employees.
So that the appropriate incentive can be provided, the Plan provides
for granting Incentive Stock Options, Nonqualified Stock Options, Restricted
Stock Awards, and Performance Share or Cash Unit Awards, or any combination of
the foregoing.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan.
(a) "Award" means, individually or collectively, any Incentive Stock
Option, Nonqualified Stock Option, Restricted Stock Award, or Performance Share
or Cash Unit Award under the Plan.
(b) "Award Agreement" means the agreement between the Company and a
Participant who has been granted an Award which defines the rights and
obligations of the parties with respect to such Award.
(c) "Award Period" means a period of time within which performance is
measured for the purpose of determining whether an Award of Performance Share or
Cash Units has been earned.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.
(f) "Committee" means the Compensation Committee of the Board, or, if
the Board so directs, the full Board or another committee appointed by the Board
to administer the Plan as described in Section 4.
(g) "Common Stock" means the common stock of the Company.
<PAGE> 2
(h) "Company" means Connecticut Water Services, Inc.
(i) "Date of Grant" means the date on which the granting of an Award is
authorized or such other date as may be specified in such authorization.
(j) "Disability" means "permanent and total disability" as defined in
Section 22(e)(3) of the Code.
(k) "Eligible Person" means any person regularly employed by the
Company or a Subsidiary.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" on a given date means (i) if the Stock is
listed on a national securities exchange, the mean between the highest and
lowest sale prices reported as having occurred on the primary exchange with
which the Stock is listed and traded on the date prior to such date, or, if
there is no such sale on that date, then on the last preceding date on which
such a sale was reported; (ii) if the Stock is not listed on any national
securities exchange but is quoted in the National Market System of the National
Association of Securities Dealers Automated Quotation System on a last sale
basis, the average between the high bid price and low ask price reported on the
date prior to such date, or, if there is no such sale on that date, then on the
last preceding date on which a sale was reported; or (iii) if the Stock is not
listed on a national securities exchange nor quoted in the National Market
System of the National Association of Securities Dealers Automated Quotation
System on a last sale basis, the amount determined by the Committee to be the
fair market value based upon a good faith attempt to value the Stock accurately.
(n) "Holder" means a Participant who has been granted an Award, or a
permitted transferee of such a Participant.
(o) "Incentive Stock Option" means an Option granted by the Committee
to a Participant under the Plan which is designated by the Committee as an
"incentive stock option" within the meaning of Section 422 of the Code.
(p) "Nonqualified Stock Option" means an Option granted under the Plan
which is not designated as an Incentive Stock Option.
(q) "Normal Termination" means termination of employment or service
with the Company or a Subsidiary other than by reason of death or Disability:
(r) "Option" means an Award granted under Section 7 of the Plan.
(s) "Option Period" means the period described in Section 7(c).
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<PAGE> 3
(t) "Option Price" means the exercise price set for an Option described
in Section 7(a).
(u) "Participant" means an Eligible Person who has been selected by the
Committee to participate in the Plan and to receive an Award pursuant to Section
6.
(v) "Performance Goals" means the performance objectives established by
the Committee with respect to an Award Period or Restricted Period, with respect
to Performance Share or Cash Units or Restricted Stock, respectively,
established for the purpose of determining whether, and to what extent, such
Awards will be earned for an Award Period or Restricted Period.
(w) "Performance Cash Unit" means a hypothetical equivalent to a number
of dollars established by the Committee and granted in connection with an Award
made under Section 8 of the Plan.
(x) "Performance Share Unit" means a hypothetical investment equivalent
equal to one share of Stock granted in connection with an Award made under
Section 8 of the Plan.
(y) "Plan" means the Company's Performance Stock Program, as amended.
(z) "Restricted Period" means, with respect to any share of Restricted
Stock, the period of time determined by the Committee during which such Award is
subject to the restrictions set forth in Section 9 of the Plan.
(a) "Restricted Stock" means shares of Stock issued or transferred to a
Participant subject to forfeiture and the other restrictions set forth in
Section 9 of the Plan.
(bb) "Restricted Stock Award" means an Award of Restricted Stock
granted under Section 9 of the Plan.
(cc) "Securities Act" means the Securities Act of 1933, as amended.
(dd) "Stock" means the Common Stock or such other authorized shares of
stock of the Company as from time to time may be authorized for use under the
Plan.
(ee) "Subsidiary" means any corporation 50% or more of whose stock
having general voting power is owned by the Company, or by another Subsidiary,
as herein defined, of the Company.
3. EFFECTIVE DATE, DURATION AND SHAREHOLDER APPROVAL
The Plan was first made effective as of April 19, 1991. This amendment
and restatement of the Plan to be effective as of April 23, 1999, and the
validity of any and all Awards granted
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<PAGE> 4
pursuant to the amended and restated Plan is contingent upon approval of the
Plan by the stockholders of the Company in a manner which complies with Section
422(b)(1) of the Code and Section 162(m)(4)(C)(ii) of the Code.
The expiration date of the Plan, after which no Awards may be granted
hereunder, shall be April 22, 2004; provided, however, that the administration
of the Plan shall continue in effect until all matters relating to the payment
of Awards previously granted have been settled.
4. ADMINISTRATION
The Plan shall be administered by the Committee, which shall be
composed of at least two persons, each member of which, at the time he or she
takes any action with respect to an Award under the Plan, shall be a
"Non-Employee Director", as defined in Rule 16b-3 under the Exchange Act, or any
successor rule or regulation, and an "outside director", as defined in Treasury
Regulations Section 1.162-27(e)(3), or any successor regulation. The majority of
the members of the Committee shall constitute a quorum. The acts of a majority
of the members present at any meeting at which a quorum is present or acts
approved in writing by a majority of the Committee shall be deemed the acts of
the Committee.
Subject to the provisions of the Plan, the Committee shall have
exclusive power to:
(a) Select the Eligible Persons to participate in the Plan;
(b) Determine the nature and extent of the Awards to be made to each
Participant;
(c) Determine the time or times when Awards will be made to Eligible
Persons;
(d) Determine the duration of each Award Period and Restricted Period;
(e) Determine the conditions to which the payment of Awards may be
subject;
(f) Establish the Performance Goals, if any, for each Award Period;
(g) Prescribe the form of Award Agreement or other form or forms
evidencing Awards; and
(h) Cause records to be established in which there shall be entered,
from time to time as Awards are made to Eligible Persons, the date of each
Award, the number of Incentive Stock Options, Nonqualified Stock Options,
Performance Share or Cash Units, and shares of Restricted Stock awarded by the
Committee to each Eligible Person, and the expiration date and the duration of
any applicable Award Period or Restricted Period.
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<PAGE> 5
The Committee shall have the authority, subject to the provisions of
the Plan, to establish, adopt, or revise such rules and regulations and to make
all such determinations relating to the Plan as it may deem necessary or
advisable for the administration of the Plan. The Committee's interpretation of
the Plan or any documents evidencing Awards granted pursuant thereto and all
decisions and determinations by the Committee with respect to the Plan shall be
final, binding, and conclusive on all parties unless otherwise determined by the
Board.
5. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant Awards of Options,
Restricted Stock, and/or Performance Share or Cash Units to one or more Eligible
Persons; provided, however, that:
(a) Subject to Section 12, the aggregate number of shares of Stock made
subject to all Awards may not exceed 300,000, and the aggregate number of shares
of Stock subject to Awards to any single individual may not exceed 150,000.
(b) Such shares shall be deemed to have been used in payment of Awards
whether they are actually delivered or the Fair Market Value equivalent of such
shares is paid in cash. In the event any Option, Restricted Stock Award, or
Performance Share or Cash Unit shall be surrendered, terminate, expire, or be
forfeited, the number of shares of Stock no longer subject thereto shall
thereupon be released and shall thereafter be available for new Awards under the
Plan;
(c) Stock delivered by the Company in settlement of Awards under the
Plan may be authorized and unissued Stock or Stock held in the treasury of the
Company or may be purchased on the open market or by private purchase;
(d) The Committee may, in its sole discretion, require a Participant to
pay consideration for an Award in an amount and in a manner as the Committee
deems appropriate.
6. ELIGIBILITY
Participation shall be limited to Eligible Persons selected by the Committee.
7. STOCK OPTIONS
The Committee is authorized to grant one or more Incentive Stock
Options or Nonqualified Stock Options to any Eligible Person. Each Option so
granted shall be subject to the following conditions or to such other conditions
as may be reflected in the applicable Award Agreement.
(a) OPTION PRICE. The exercise price ("Option Price") per share of
Stock for each Option shall be set by the Committee at the time of grant but
shall not be less than the Fair Market Value of a share of Stock at the Date of
Grant.
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<PAGE> 6
(b) MANNER OF EXERCISE AND FORM OF PAYMENT. Options which have become
exercisable may be exercised by delivery of written notice of exercise to the
Committee accompanied by payment of the Option Price. The Option Price shall be
payable either by (i) United States dollars in cash or by check, (ii) at the
discretion of the Committee, through shares of Stock valued at the Fair Market
Value at the time the Option is exercised (provided that such Stock has been
held by the Participant for at least six months), or (iii) at the discretion of
the Committee, by any combination of (i) and (ii) above.
(c) OPTION PERIOD AND EXPIRATION. Options shall vest and become
exercisable in such manner and on such date or dates determined by the Committee
and shall expire after such period, not to exceed ten years with respect to
Incentive Stock Options, as may be determined by the Committee (the "Option
Period"); provided, however, that notwithstanding any vesting dates set by the
Committee, the Committee may, in its sole discretion, accelerate the
exercisability of any Option, which acceleration shall not affect the terms and
conditions of any such Option other than with respect to exercisability. If an
Option is exercisable in installments, such installments or portions thereof
which become exercisable shall remain exercisable until the Option expires.
Unless otherwise stated in the applicable Option Award Agreement, an Incentive
Stock Option shall expire earlier than the end of the Option Period in the
following circumstances:
(i) If prior to the end of the Option Period, the
Participant shall undergo a Normal Termination, the
Incentive Stock Option shall expire on the earlier of
the last day of the Option Period or the date that is
ninety days after the date of such Normal
Termination. In such event, the Incentive Stock
Option shall remain exercisable by the Holder until
its expiration, only to the extent the Option was
exercisable at the time of such Normal Termination;
(ii) If the Participant dies prior to the end of the
Option Period and while still in the employ of the
Company or such Participant becomes Disabled, the
Incentive Stock Option shall expire on the earlier of
the last day of the Option Period or the date that is
one year after the date of death or Disability of the
Participant. In the event of death or Disability, the
Incentive Stock Option shall remain exercisable by
the Participant or the Holder or Holders to whom the
Participant's rights under the Incentive Stock Option
pass by will or the applicable laws of descent and
distribution until its expiration, only to the extent
the Incentive Stock Option was exercisable by the
Participant at the time of death or Disability.
In granting any Nonqualified Stock Option, the Committee may specify
that such Nonqualified Stock Option shall be subject to the restrictions set
forth in Section 7(c)(i) or (ii)
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<PAGE> 7
herein with respect to Incentive Stock Options, or such other termination and
cancellation provisions as the Committee may determine.
(d) OTHER TERMS AND CONDITIONS. In addition, each Option granted under
the Plan shall be evidenced by an Award Agreement, which shall contain such
provisions as may be determined by the Committee and, except as may be
specifically stated otherwise in such Award Agreement, which shall be subject to
the following terms and conditions:
(i) Each Option issued pursuant to this Section 7 or
portion thereof that is exercisable shall be
exercisable for the full amount or for any part
thereof.
(ii) Each share of Stock purchased through the exercise of
an Option issued pursuant to this Section 7 shall be
paid for in full at the time of the exercise. Each
Option shall cease to be exercisable, as to any share
of Stock, when the Holder purchases the share or when
the Option expires.
(iii) Subject to Section 11(k), Options issued pursuant to
this Section 7 shall not be transferable by the
Holder except by will or the laws of descent and
distribution and shall be exercisable during the
Holder's lifetime only by the Holder.
(iv) Each Option issued pursuant to this Section 7 shall
vest and become exercisable by the Holder in
accordance with the vesting schedule established by
the Committee and set forth in the Award Agreement.
(v) Each Award Agreement may contain a provision that,
upon demand by the Committee for such a
representation, the Holder shall deliver to the
Committee at the time of any exercise of an Option
issued pursuant to this Section 7 a written
representation that the shares to be acquired upon
such exercise are to be acquired for investment and
not for resale or with a view to the distribution
thereof. Upon such demand, delivery of such
representation prior to the delivery of any shares
issued upon exercise of an Option issued pursuant to
this Section 7 shall be a condition precedent to the
right of the Holder to purchase any shares. In the
event certificates for Stock are delivered under the
Plan with respect to which such investment
representation has been obtained, the Committee may
cause a legend or legends to be placed on such
certificates to make appropriate reference to such
representation and to restrict transfer in the
absence of compliance with applicable federal or
state securities laws.
(vi) Each Incentive Stock Option Award Agreement shall
contain a provision requiring the Holder to notify
the Company in writing immediately after
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<PAGE> 8
the Holder makes a disqualifying disposition of any
Stock acquired pursuant to the exercise of such
Incentive Stock Option. A disqualifying disposition
is any disposition (including any sale) of such Stock
before the later of (a) two years after the Date of
Grant of the Incentive Stock Option or (b) one year
after the date the Holder acquired the Stock by
exercising the Incentive Stock Option.
(e) INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS. Notwithstanding
anything to the contrary in this Section 7, if an Incentive Stock Option is
granted to a Participant who owns stock representing more than ten percent of
the voting power of all classes of stock of the Company or of a Subsidiary, the
Option Period shall not exceed five years from the Date of Grant of such Option
and the Option Price shall be at least 110 percent of the Fair Market Value (on
the Date of Grant) of the Stock subject to the Option.
(f) $100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK OPTIONS. To the
extent the aggregate Fair Market Value (determined as of the Date of Grant) of
Stock for which Incentive Stock Options are exercisable for the first time by
any Participant during any calendar year (under all plans of the Company and its
Subsidiaries) exceeds $100,000, such excess Incentive Stock Options shall be
treated as Nonqualified Stock Options.
(g) VOLUNTARY SURRENDER. The Committee may permit the voluntary
surrender of all or any portion of any Nonqualified Stock Option issued pursuant
to this Section 7 granted under the Plan to be conditioned upon the granting to
the Holder of a new Option for the same or a different number of shares as the
Option surrendered or require such voluntary surrender as a condition precedent
to a grant of a new Option to such Participant. Such new Option shall be
exercisable at an Option Price, during an Option Period, and in accordance with
any other terms or conditions specified by the Committee at the time the new
Option is granted, all determined in accordance with the provisions of the Plan
without regard to the Option Price, Option Period, or any other terms and
conditions of the Nonqualified Stock Option surrendered.
(h) CONVERSION OF INCENTIVE STOCK OPTIONS INTO NONQUALIFIED STOCK
OPTIONS; TERMINATION OF INCENTIVE STOCK OPTIONS. The Committee, at the written
request of any Holder, may in its discretion, take such actions as may be
necessary to convert such Holder's Incentive Stock Options (or any installments
or portions of installments thereof) that have not been exercised on the date of
conversion into Nonqualified Stock Options at any time prior to the expiration
of such Incentive Stock Options, regardless of whether the Holder is an employee
of the Company or a Subsidiary at the time of such conversion. Such actions may
include, but not be limited to, extending the Option Period or reducing the
exercise price of the appropriate installments of such Incentive Stock Options.
At the time of such conversion, the Committee (with the consent of the Holder)
may impose such conditions on the exercise of the resulting Nonqualified Stock
Options as the Committee in its discretion may determine, provided that such
conditions shall not be inconsistent with the Plan. Nothing in the Plan shall be
deemed to give any Holder the right to have such Holder's Incentive Stock
Options converted into Nonqualified Stock Options, and no such
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<PAGE> 9
conversion shall occur until and unless the Committee takes appropriate action.
The Committee, with the consent of the Holder, may also terminate any portion of
any Incentive Stock Option that has not been exercised at the time of such
termination.
8. PERFORMANCE SHARE OR CASH UNITS
(a) AWARD GRANTS. The Committee is authorized to establish performance
programs to be effective over designated Award Periods determined by the
Committee. The Committee may grant Awards of Performance Share or Cash Units to
Eligible Persons in accordance with such performance programs. Before or within
90 days after the beginning of each Award Period, the Committee will establish
written Performance Goals based upon financial objectives for the Company for
such Award Period and a schedule relating the accomplishment of the Performance
Goals to the Awards to be earned by Participants. Performance Goals may include
absolute or relative growth in earnings per share or rate of return on
stockholders' equity or other measurement of corporate performance and may be
determined on an individual basis or by categories of Participants. The
Committee shall determine the number of Performance Share or Cash Units to be
awarded, if any, to each Eligible Person who is selected to receive such an
Award.
(b) DETERMINATION OF AWARD. At the completion of a Performance Award
Period, or at other times as specified by the Committee, the Committee shall
calculate the number of shares of Stock or amount of cash earned with respect to
each Participant's Performance Share or Cash Unit Award by multiplying the
number of Performance Units granted to the Participant by a performance factor
representing the degree of attainment of the Performance Goals.
(c) PAYMENT OF PERFORMANCE SHARE OR CASH UNIT AWARDS. Performance Share
or Cash Unit Awards shall be payable in that number of shares of Stock or that
amount of cash determined in accordance with Section 8(b); provided, however,
that, at its discretion, the Committee may make payment to any Participant of
Performance Share Units in the form of cash upon the specific request of such
Participant. The amount of any payment made in cash shall be based upon the Fair
Market Value of the Stock on the business day prior to payment. Payments of
Performance Unit Awards shall be made as soon as practicable after the
completion of an Award Period; provided, however, that if a Participant makes
the election described below, Performance Share or Cash Units (with any Cash
Units being converted into equivalent Performance Shares) shall instead be
credited to the Participant's Performance Share Account. Such credit of
Performance Shares to a Participant's Performance Share Account shall be made as
of the same date as payment of the Award would have been made to the Participant
had no prior election been made.
(i) ELECTIONS.
Any election to have an Award or a portion of an Award
credited to a Performance Share Account shall be made on a
written form provided by the Company for such
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<PAGE> 10
purpose and shall only be effective with respect to Awards
that may be made on and after the January 1 following the
Company's receipt of such form, provided that such form is
received by the December 24 prior to the applicable January 1.
Any such election shall be made only in increments of ten
percent (10%) of the Award (rounded to the nearest whole
share) and shall be effective only for Awards made during the
year in which the election becomes effective.
(ii) PERFORMANCE SHARE ACCOUNT.
The Company shall maintain on its books and records a
Performance Share Account to record its liability for future
payments to the Participant or his beneficiary pursuant to the
Plan. However, a Performance Share Account under the Plan
shall constitute an unfunded arrangement; the Company shall
not be required to segregate or earmark any of its assets for
the benefit of the Participant or his beneficiary, and the
amount reflected in a Performance Share Account shall be
available for the Company's general corporate purposes and
shall be available to the Company's general creditors. The
amount reflected in a Performance Share Account shall not be
subject in any manner to anticipation, alienation, transfer or
assignment by the Participant or his or her beneficiary, and
any attempt to anticipate, alienate, transfer or assign the
same shall be void. Neither the Participant nor his or her
beneficiary may assert any right or claim against any specific
assets of the Company in respect of a Performance Share
Account, and the Participant and his or her beneficiary shall
have only a contractual right against the Company for the
amount reflected in a Performance Share Account.
Notwithstanding the foregoing, in order to pay amounts which
may become due under the Plan in respect of a Participant's
Performance Share Account, the Company may establish a grantor
trust (hereinafter the "Trust") within the meaning of Section
671 of the Code. Some or all of the assets of the Trust may be
dedicated to providing benefits to the Participants pursuant
to the Plan, but, nevertheless, all assets of the Trust shall
at all times remain subject to the claims of the Company's
general creditors in the event of the Company's bankruptcy or
insolvency.
(iii) DIVIDEND EQUIVALENTS.
On every date on which a dividend or other distribution is
paid with respect to Common Stock, commencing with the first
such payment date after the date on which a Performance Share
is credited to a Participant's Performance Share Account and
continuing until such Performance Share is either forfeited or
paid out, there shall be credited to the Participant's
Performance Share Account a Dividend Equivalent in respect of
such Performance Share. A Dividend Equivalent shall mean, with
respect to a whole Performance Share credited to a
Participant's Performance Share Account, a measure of value
equal to the fractional share of
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Common Stock that could be purchased with the amount that
would have been paid to the Participant as a dividend or other
distribution if the Participant had owned a whole share of
Common Stock in lieu of said whole Performance Share, the date
of such deemed purchase being the dividend payment date.
Dividend Equivalents are expressed in the form of Performance
Shares.
(iv) PARTICIPANT NOT A STOCKHOLDER.
The Participant shall have no stockholder's rights with
respect to any shares of Common Stock in respect of which
Performance Shares are credited to his or her Performance
Share Account.
(v) PAYMENTS IN RESPECT OF PERFORMANCE SHARES.
1. Termination of Employment: In the event of a
Participant's Normal Termination and without a
payment date having been specified as provided below,
such Participant shall be entitled to receive payment
in respect of the entire amount then credited to his
or her Performance Share Account. Such payment shall
be made in the form of the number of shares of Common
Stock equal to the number of whole Performance Shares
then credited to the Participant's Performance Share
Account, with any fractional Performance Share being
paid in cash determined on the basis of the value of
a corresponding fractional share of Common Stock on
the business day preceding the date of payment. Said
shares of Common Stock and any cash amount shall be
transferred to the Participant within sixty (60) days
after the Participant's termination of employment.
2. Election of Participant: Upon prior written election
by a Participant, the Participant shall be entitled
to receive payment in respect of an Award of
Performance Shares, to the extent then vested, and
any Dividend Equivalents earned on such Award on the
date or dates specified in such written election.
Such election must either be made as part of the
election to have such Award of Performance Shares
credited to a Performance Share Account as provided
above, or at any time at least one year prior to the
date on which such payment would otherwise be made.
Such payment shall be made in the form of the number
of shares of Common Stock equal to the number of
whole Performance Shares, including related Dividend
Equivalents, then credited to the Participant's
Performance Share Account with respect to such Award,
with any fractional Performance Share being paid in
cash determined on the basis of the value of a
corresponding fractional share of Common Stock on the
business day preceding the date of payment. The
Participant's Performance Share Account thereafter
shall be reduced to reflect the
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foregoing payment. Nothing herein shall preclude
separate elections with respect to separate Awards.
3. Disability or Death While Employed by the Company:
Notwithstanding an election made pursuant to the
preceding section, in the event of a Participant's
termination of employment for reasons of Disability
or death, the Participant or his or her beneficiary,
as the case may be, shall be entitled to receive
payment in respect of the entire amount then credited
to his or her Performance Share Account. Such payment
shall be made in the form of the number of shares of
Common Stock equal to the number of whole Performance
Shares then credited to the Participant's Performance
Share Account, with any fractional Performance Share
being paid in cash determined on the basis of the
value of a corresponding fractional share of Common
Stock on the business day preceding the date of
payment. Said shares of Common Stock and any cash
amount shall be transferred to the Participant or his
or her beneficiary within sixty (60) days after the
Company has been notified in writing of the
Disability or death of the Participant and has been
provided with any additional information, forms or
other documents it may reasonably request.
4. Hardship Payment: Notwithstanding an election made
pursuant the Plan or the Participant's continued
employment with the Company, if the Committee, upon
written petition of the Participant, determines, in
the Committee's sole discretion, that the Participant
has suffered an unforeseeable financial emergency,
the Participant shall be entitled to receive, as soon
as practicable following such determination, payment
sufficient to meet the cash needs arising from the
unforeseeable financial emergency, not in excess of
the number of whole Performance Shares then credited
to the Participant's Performance Share Account. Such
payment shall be made, at the election of the
Participant, either (i) in the form of the number of
whole shares of Common Stock, the proceeds from the
sale of which would be sufficient to meet the cash
needs arising from the unforeseeable financial
emergency, not in excess of the number of whole
Performance Shares then credited to the Participant's
Performance Share Account; (ii) in cash equal to the
value on the business day preceding the date of
payment of the number of whole shares of Common Stock
available for payment under clause (i) of this
sentence; or (iii) in any combination of the methods
of payment provided for in clauses (i) and (ii) of
this sentence. In the event of a hardship payment in
respect of the Participant's entire Performance Share
Account, any fractional Performance Share shall be
paid in cash determined on the basis of the value of
a corresponding fractional share of Common Stock on
the business day preceding the date of payment. For
purposes of the foregoing, an unforeseeable financial
emergency is an
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unexpected need for cash arising from an illness,
casualty loss, sudden financial reversal, or other
such unforeseeable occurrence. Cash needs arising
from foreseeable events such as generally the
purchase of a house or educational expenses for
children shall not be considered to be the result of
an unforeseeable financial emergency. Said shares of
Common Stock and any cash amount shall be transferred
to the Participant as soon as practicable after the
Committee determines that the Participant has
suffered an unforeseeable financial emergency. The
Participant's Performance Share Account thereafter
shall be reduced to reflect the foregoing payment.
5. Early Withdrawal: Notwithstanding an election made
pursuant to the Plan or the Participant's continued
employment with the Company, the Participant, upon
written petition to the Committee at any time, shall
be entitled to receive payment in respect of all or
any portion of the amount then credited to his or her
Performance Share Account, subject to a forfeiture
penalty of six percent (6%) of the amount of the
payment requested by the Participant. Such payment
shall be made, at the election of the Participant,
either (i) in the form of the number of shares of
Common Stock equal to the number of whole Performance
Shares requested by the Participant in the written
petition and then credited to the Participant's
Performance Share Account; (ii) in cash equal to the
value on the business day preceding the date of
payment of the number of whole shares of Common Stock
available for payment under clause (i) of this
sentence; or (iii) in any combination of the methods
of payment provided for in clauses (i) and (ii) of
this sentence. In the event of an early withdrawal in
respect of the Participant's entire Performance Share
Account, any fractional Performance Share shall be
paid in cash determined on the basis of the value of
a corresponding fractional share of Common Stock on
the business day preceding the date of payment. Said
shares of Common Stock and any cash amount shall be
transferred to the Participant within sixty (60) days
after the Company has received the Participant's
written petition. The Participant's Performance Share
Account thereafter shall be reduced to reflect the
foregoing payment and the six percent (6%) forfeiture
penalty.
(d) ADJUSTMENT OF PERFORMANCE GOALS. The Committee may, during the
Award Period, make such adjustments to Performance Goals as it may deem
appropriate, to compensate for, or reflect, (i) extraordinary or non-recurring
events experienced during an Award Period by the Company or by any other
corporation whose performance is relevant to the determination of whether
Performance Goals have been attained; (ii) any significant changes that may have
occurred during such Award Period in applicable accounting rules or principles
or changes in the Company's method of accounting or in that of any other
corporation whose performance is relevant to the determination of whether an
Award has been earned; (iii) any significant changes that may have
13
<PAGE> 14
occurred during such Award Period in tax laws or other laws or regulations that
alter or affect the computation of the measures of Performance Goals used for
the calculation of Awards; or (iv) any other factors which the Committee deems
appropriate; provided, however, that no such change may increase the amount of
an Award that would otherwise be payable to any "covered employee" as defined in
Section 162(m)(3) of the Code.
9. RESTRICTED STOCK AWARDS
(a) AWARD OF RESTRICTED STOCK.
(i) The Committee shall have the authority (1) to grant
Restricted Stock Awards, (2) to issue or transfer
Restricted Stock to Eligible Persons, and (3) to
establish terms, conditions and restrictions
applicable to such Restricted Stock, including the
Restricted Period, which may differ with respect to
each grantee, the time or times at which Restricted
Stock shall be granted or become vested and the
number of shares to be covered by each grant.
(ii) The Holder of a Restricted Stock Award shall execute
and deliver to the Company an Award Agreement with
respect to the Restricted Stock setting forth the
restrictions applicable to such Restricted Stock. If
the Committee determines that the Restricted Stock
shall be held in escrow rather than delivered to the
Holder pending the release of the applicable
restrictions, the Holder additionally shall execute
and deliver to the Company (1) an escrow agreement
satisfactory to the Committee, and (2) the
appropriate blank stock powers with respect to the
Restricted Stock covered by such agreements. If a
Holder shall fail to execute a Restricted Stock Award
Agreement and, if applicable, an escrow agreement and
stock powers, the Award shall be null and void.
Subject to the restrictions set forth in Section
9(b), the Holder shall generally have the rights and
privileges of a stockholder as to such Restricted
Stock, including the right to vote such Restricted
Stock, and to receive dividends paid thereon.
(iii) Upon the Award of Restricted Stock, the Committee
shall cause a Stock certificate registered in the
name of the Holder to be issued and, if it so
determines, deposited together with the Stock powers
with an escrow agent designated by the Committee. If
an escrow arrangement is used, the Committee shall
cause the escrow agent to issue to the Holder a
receipt evidencing any Stock certificate held by it
registered in the name of the Holder.
(b) RESTRICTIONS.
14
<PAGE> 15
(i) Restricted Stock awarded to a Participant shall be
subject to the following restrictions until the
expiration of the Restricted Period, and to such
other terms and conditions as may be set forth in the
applicable Award Agreement: (1) if an escrow
arrangement is used, the Holder shall not be entitled
to delivery of the Stock certificate; (2) the shares
shall be subject to the restrictions on
transferability set forth in the Award Agreement; and
(3) the shares shall be subject to forfeiture to the
extent provided in subparagraph (d) and the Award
Agreement and, to the extent such shares are
forfeited, the Stock certificates shall be returned
to the Company, and all rights of the Holder to such
shares and as a shareholder shall terminate without
further obligation on the part of the Company.
(ii) The Committee shall have the authority to remove any
or all of the restrictions on the Restricted Stock
whenever it may determine that, by reason of changes
in applicable laws or other changes in circumstances
arising after the date of the Restricted Stock Award,
such action is appropriate.
(c) RESTRICTED PERIOD. The Restricted Period of Restricted Stock shall
commence on the Date of Grant and shall expire from time to time as to that part
of the Restricted Stock indicated in a schedule established by the Committee and
set forth in the written Award Agreement.
(d) FORFEITURE PROVISIONS. Except to the extent determined by the
Committee and reflected in the underlying Award Agreement, in the event a
Participant terminates employment with the Company during a Restricted Period
for any reason, that portion of the Award with respect to which restrictions
have not expired shall be completely forfeited to the Company. In the event of
such a forfeiture, the amount of an Award that would otherwise be payable shall
be reduced, but not below zero, by the amount of any dividends previously paid
to the Holder with respect to the forfeited Restricted Stock.
(e) DELIVERY OF RESTRICTED STOCK. Upon the expiration of the Restricted
Period with respect to any shares of Stock covered by a Restricted Stock Award,
the restrictions set forth in Section 9(b) and the Award Agreement shall be of
no further force or effect with respect to shares of Restricted Stock which have
not then been forfeited. If an escrow arrangement is used, upon such expiration,
the Company shall deliver to the Holder, or his or her beneficiary, without
charge, the Stock certificate evidencing the shares of Restricted Stock which
have not then been forfeited and with respect to which the Restricted Period has
expired (to the nearest full share) and any cash dividends or Stock dividends
credited to the Holder's account with respect to such Restricted Stock and the
interest thereon, if any.
15
<PAGE> 16
(f) STOCK RESTRICTIONS. Each certificate representing Restricted Stock
awarded under the Plan shall bear the following legend until the end of the
Restricted Period with respect to such Stock:
"Transfer of this certificate and the shares represented
hereby is restricted pursuant to the terms of a Restricted Stock
Agreement, dated as of _______________, between Connecticut Water
Service, Inc. and _______________. A copy of such Agreement is on file
at the offices of the Company."
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
(g) DEFERRAL. Upon election by a Participant, a whole share of
Restricted Stock that would otherwise have been granted to the Participant shall
instead be made in the form of Performance Shares, and such Performance Shares
shall be credited to the Participant's Performance Share Account, subject to the
provisions of Section 8. Such credit of Performance Shares shall be made as of
the same date as Restricted Stock would have been awarded to the Participant had
no prior election been made. Any such election shall be made by December 24
prior to the year in which the Award for which the election is made will be
made, and shall otherwise comply with the requirements for elections in Section
8(c). If an event occurs which would have caused forfeiture of the Restricted
Stock for which an election pursuant to this paragraph is made, then the
equivalent Performance Shares, along with any related Dividend Equivalents,
shall be forfeited.
10. NON-COMPETITION PROVISIONS
In addition to such other conditions as may be established by the
Committee, in consideration of the granting of Awards under the terms of the
Plan, the Committee, in its discretion, may include non-competition provisions
in the applicable Award Agreement.
11. GENERAL
(a) ADDITIONAL PROVISIONS OF AN AWARD. Awards under the Plan also may
be subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as the Committee determines appropriate
including, without limitation, provisions to assist the Participant in financing
the purchase of Stock upon the exercise of Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of Stock
acquired under any Award, provisions giving the Company the right to repurchase
shares of Stock acquired under any Award in the event the Participant elects to
dispose of such shares, and provisions to comply with Federal and state
securities laws and Federal and state tax withholding requirements. Any such
provisions shall be reflected in the applicable Award agreement.
16
<PAGE> 17
(b) PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise specifically
provided in the Plan, no person shall be entitled to the privileges of stock
ownership in respect of shares of Stock which are subject to Awards hereunder
until such shares have been issued to that person.
(c) GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to
make payment of Awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by governmental agencies as
may be required. Notwithstanding any terms or conditions of any Award to the
contrary, the Company shall be under no obligation to offer to sell or to sell
and shall be prohibited from offering to sell or selling any shares of Stock
pursuant to an Award unless such shares have been properly registered for sale
pursuant to the Securities Act with the Securities and Exchange Commission or
unless the Company has received an opinion of counsel, satisfactory to the
Company, that such shares may be offered or sold without such registration
pursuant to an available exemption therefrom and the terms and conditions of
such exemption have been fully complied with. The Company shall be under no
obligation to register for sale under the Securities Act any of the shares of
Stock to be offered or sold under the Plan. If the shares of Stock offered for
sale or sold under the Plan are offered or sold pursuant to an exemption from
registration under the Securities Act, the Company may restrict the transfer of
such shares and may legend the Stock certificates representing such shares in
such manner as it deems advisable to ensure the availability of any such
exemption.
(d) TAX WITHHOLDING. Notwithstanding any other provision of the Plan,
the Company or a Subsidiary, as appropriate, shall have the right to deduct from
all Awards cash and/or Stock, valued at Fair Market Value on the date of
payment, in an amount necessary to satisfy all Federal, state or local taxes as
required by law to be withheld with respect to such Awards and, in the case of
Awards paid in Stock, the Holder may be required to pay to the Company prior to
delivery of such Stock, the amount of any such taxes which the Company is
required to withhold, if any, with respect to such Stock. The Company shall
accept shares of Stock of equivalent Fair Market Value in payment of such
withholding tax obligations if the Holder of the Award elects to make payment in
such manner.
(e) CLAIM TO AWARDS AND EMPLOYMENT OR SERVICE RIGHTS. No employee or
other person shall have any claim or right to be granted an Award under the Plan
or, having been selected for the grant of an Award, to be selected for a grant
of any other Award. Neither the Plan nor any action taken hereunder shall be
construed as giving any Participant any right to be retained in the employ or
service of the Company or any Subsidiary.
(f) DESIGNATION AND CHANGE OF BENEFICIARY. Each Participant may file
with the Committee a written designation of one or more persons as the
beneficiary who shall be entitled to receive the rights or amounts payable with
respect to an Award due under the Plan upon his or her death. A Participant may,
from time to time, revoke or change his or her beneficiary designation without
the consent of any prior beneficiary by filing a new designation with the
Committee. The last such designation received by the Committee shall be
controlling; provided, however, that no
17
<PAGE> 18
designation, or change or revocation thereof, shall be effective unless received
by the Committee prior to the Participant's death, and in no event shall it be
effective as of a date prior to such receipt. If no beneficiary designation is
filed by the Participant, the beneficiary shall be deemed to be his or her
spouse or, if the Participant is unmarried at the time of death, his or her
estate.
(g) PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS. If the Committee shall
find that any person to whom any amount is payable under the Plan is unable to
care for his or her affairs because of illness or accident, or is a minor, or
has died, then any payment due to such person or his or her estate (unless a
prior claim therefor has been made by a duly appointed legal representative)
may, if the Committee so directs the Company, be paid to his or her spouse,
child, relative, an institution maintaining or having custody of such person, or
any other person deemed by the Committee to be a proper recipient on behalf of
such person otherwise entitled to payment. Any such payment shall be a complete
discharge of the liability of the Committee and the Company therefor.
(h) NO LIABILITY OF COMMITTEE MEMBERS. No member of the Committee shall
be personally liable by reason of any contract or other instrument executed by
such member or on such member's behalf in such member's capacity as a member of
the Committee nor for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless each member of the Committee and each
other employee, officer or director of the Company to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or willful bad faith; provided, however, that approval of the Board
shall be required for the payment of any amount in settlement of a claim against
any such person. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Certificate of Incorporation or By-Laws, as a matter of law,
or otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
(i) GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the internal laws of the State of Connecticut without regard to
the principles of conflicts of law thereof.
(j) FUNDING. No provision of the Plan shall require the Company, for
the purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Holders shall have
no rights under the Plan other than as unsecured general creditors of the
Company, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.
18
<PAGE> 19
(k) NONTRANSFERABILITY. A person's rights and interest under the Plan,
including amounts payable, may not be sold, assigned, donated, or transferred or
otherwise disposed of, mortgaged, pledged or encumbered except, in the event of
a Holder's death, to a designated beneficiary to the extent permitted by the
Plan, or in the absence of such designation, by will or the laws of descent and
distribution; provided, however, the Committee may, in its sole discretion,
allow in an Award Agreement for transfer of Awards other than Incentive Stock
Options to other persons or entities.
(l) RELIANCE ON REPORTS. Each member of the Committee and each member
of the Board shall be fully justified in relying, acting or failing to act, and
shall not be liable for having so relied, acted or failed to act in good faith,
upon any report made by the independent public accountant of the Company and its
Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than such member.
(m) RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company except as
otherwise specifically provided in such other plan.
(n) EXPENSES. The expenses of administering the Plan shall be borne by
the Company.
(o) TITLES AND HEADINGS. The titles and headings of the sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings shall control.
(p) CHANGE-IN-CONTROL. Notwithstanding anything in the Plan to the
contrary, in the event of a "Change-in-Control", as defined below, all Awards
made pursuant to the Plan shall become fully vested immediately, and all Options
shall be immediately exercisable (provided that if the "Change-in-Control"
occurs with respect to a Subsidiary, only Awards and Options granted to
employees of such Subsidiary shall be affected), unless the Committee provides
otherwise in an Award Agreement. A "Change-in-Control" shall be deemed to have
occurred if after the date an Award is granted (i) a public announcement shall
be made or a report on Schedule 13D shall be filed with the Securities and
Exchange Commission pursuant to Section 13(d) of the Exchange Act disclosing
that any Person (as defined below), other than Company or a Subsidiary or any
employee benefit plan sponsored by Company or a Subsidiary, is the beneficial
owner (as the term is defined in Rule 13d-3 under the Exchange Act) directly or
indirectly, of twenty percent (20%) or more of the total voting power
represented by Company's or a Subsidiary's then outstanding voting common stock
(calculated as provided in paragraph (d) of Rule 13d-3 under the Exchange Act in
the case of rights to acquire voting common stock); or (ii) any Person, other
than Company or a Subsidiary or any employee benefit plan sponsored by Company
or a Subsidiary, shall purchase shares pursuant to a tender offer or exchange
offer to acquire any voting common stock of Company or a Subsidiary (or
securities convertible into such voting common stock) for cash, securities or
any other consideration, provided that after consummation of the offer, the
Person in
19
<PAGE> 20
question is the beneficial owner directly or indirectly, of twenty percent (20%)
or more of the total voting power represented by Company's or a Subsidiary's
then outstanding voting common stock (all as calculated under clause (i)); or
(iii) the stockholders of Company or a Subsidiary shall approve (A) any
consolidation or merger of Company or a Subsidiary in which Company or a
Subsidiary is not the continuing or surviving corporation (other than a merger
of Company or a Subsidiary in which holders of the outstanding capital stock of
Company or the Subsidiary immediately prior to the merger have the same
proportionate ownership of the outstanding capital stock of the surviving
corporation immediately after the merger as immediately before), or pursuant to
which the outstanding capital stock of Company or a Subsidiary would be
converted into cash, securities or other property, or (B) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of Company or a Subsidiary;
or (iv) there shall have been a change in the composition of the Board of
Directors of Company or a Subsidiary at any time during any consecutive
twenty-four (24) month period such that "continuing directors" cease for any
reason to constitute at least a majority of the Board unless the election, or
the nomination for election of each new Director was approved by a vote of at
least two-thirds (2/3) of the Directors then still in office who were Directors
at the beginning of such period; or (v) the Board of Directors of Company or a
Subsidiary, by a vote of a majority of all the Directors adopts a resolution to
the effect that a "Change-in-Control" has occurred for purposes of this
Agreement. "Person" shall mean any individual, corporation, partnership, company
or other entity, and shall include a "group" within the meaning of Section
13(d)(3) of the Exchange Act.
12. CHANGES IN CAPITAL STRUCTURE
Awards granted under the Plan and any Award Agreements shall be subject
to equitable adjustment or substitution, as determined by the Committee in its
sole discretion, as to the number, price or kind of a share of Stock or other
consideration subject to such Awards (i) in the event of changes in the
outstanding Common Stock or in the capital structure of the Company by reason of
stock dividends, stock splits, reverse stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges, or other
relevant changes in capitalization occurring after the Date of Grant of any such
Award, (ii) in the event of any change in applicable laws or any change in
circumstances which results in or would result in any substantial dilution or
enlargement of the rights granted to, or available for, Participants in the
Plan, or (iii) upon the occurrence of any other event which otherwise warrants
equitable adjustment because it interferes with the intended operation of the
Plan. In addition, in the event of any such corporate or other event, the
aggregate number of shares of Stock available under the Plan and the maximum
number of shares of Stock with respect to which any one person may be granted in
connection with Awards shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.
Notwithstanding the above, in the event of any of the following:
A. The Company is merged or consolidated with another
corporation or entity and, in connection therewith,
consideration is received by stockholders of the Company in a
form other than stock or other equity interests of the
surviving entity;
20
<PAGE> 21
B. All or substantially all of the assets of the
Company are acquired by another person;
C. The reorganization or liquidation of the Company;
or
D. The Company shall enter into a written agreement
to undergo an event described in clauses A, B or C above,
then the Committee may, in its sole discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Awards and pay to the
Holders thereof, in cash, the value of such Awards based upon the price per
share of Stock received or to be received by other stockholders of the Company
in the event. The terms of this Section 12 may be varied by the Committee in any
particular Award agreement.
13. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either applicable generally or only in specific cases.
14. AMENDMENT AND TERMINATION
The Board may at any time terminate the Plan. With the express written
consent of an individual Participant, the Committee may cancel or reduce or
otherwise alter outstanding Awards. The Committee may, at any time, or from time
to time, amend or suspend and, if suspended, reinstate, the Plan in whole or in
part; provided that any such amendment shall be contingent on obtaining the
approval of the stockholders of the Company if the Committee determines that
such approval is necessary to comply with any requirement of law, including the
requirements for qualification of Incentive Stock Options or rule of any stock
exchange or automated quotation system on which the Company's equity securities
are traded or quoted.
* * *
As adopted by the Board of Directors of
Connecticut Water Service, Inc. on January 13, 1999
21
<PAGE> 22
CONNECTICUT WATER SERVICE, INC.
No. _____
INCENTIVE STOCK OPTION
THIS AGREEMENT, made as of the grant date indicated in Section 3 below,
and between Connecticut Water Service, Inc. (the "Company"), and the undersigned
individual (the "Optionee"), pursuant to the Connecticut Water Service, Inc.
Performance Stock Program (the "Plan"). (Terms not defined herein shall have the
same meaning as in the Plan.)
WHEREAS, the Optionee is an eligible employee of the Company or a
Subsidiary and the Company through the Plan's Committee has approved the grant
of Incentive Stock Options ("Options") under the Plan to the Optionee.
NOW, THEREFORE, in consideration of the terms and conditions of this
Agreement and pursuant to the Plan, the parties agree as follows:
1. GRANT OF OPTIONS. The Company hereby grants to the Optionee the right
and option to purchase from the Company, at the exercise price set
forth in Section 3 below, all or any part of the aggregate number of
shares of common stock of the Company (the "Stock") set forth in said
Section 3.
2. TERMS AND CONDITIONS. It is understood and agreed that the Option
evidenced hereby is subject to the provisions of the Plan (which are
incorporated herein by reference) and the following terms and
conditions:
a. EXPIRATION DATE: The Option evidenced hereby shall expire on
the date specified in Section 3 below, or at such earlier date
as is provided in the Plan upon termination of Optionee's
employment.
b. EXERCISE OF OPTION. The Option evidenced hereby shall be
exercisable from time to time by submitting an appropriate
notice of exercise ten days prior to the date of exercise
specifying the number of shares for which the Option is being
exercised, addressed to the Company at its principal place of
business
and either:
(i) CASH ONLY EXERCISE -- submitting
the full cash purchase price of the
exercised stock; or
(ii) STOCK EXERCISE -- tendering Stock
(which has been held at least 6
months) in an amount sufficient to
provide the full purchase price, or
<PAGE> 23
2
(iii) COMBINATION -- tendering a
combination of (i) and (ii) above.
c. WITHHOLDING TAXES. Without regard to the method of exercise
and payment, the Optionee shall pay to the Company, upon
notice of the amount due, any withholding taxes payable with
respect to such exercise, which payment may be made with
shares of Stock which would otherwise be issued pursuant to
the Option.
d. EXERCISE SCHEDULE. The Option will become exercisable with
respect to __% of the Option on each anniversary of the date
of grant; provided that Optionee is employed by the Company or
a Subsidiary on such date.
e. COMPLIANCE WITH LAWS AND REGULATIONS. The Option evidenced
hereby is subject to restrictions imposed at any time on the
exercise or delivery of shares in violation of the By-Laws of
the Company or of any law or governmental regulation that the
Company may find to be valid and applicable.
f. NOTIFICATION OF DISQUALIFYING DISPOSITIONS. The Optionee
hereby agrees to immediately notify the Company in writing if
any Stock acquired through exercise of the Option is sold
within one year of the date such Stock is acquired or two
years from the date the Option is granted.
g. INTERPRETATION. Optionee hereby acknowledges that this
Agreement is governed by the Plan, a copy of which Optionee
hereby acknowledges having received, and by such
administrative rules and regulations relative to the Plan and
not inconsistent therewith as may be adopted and amended from
time by the Committee (the "Rules"). Optionee agrees to be
bound by the terms and provisions of the Plan and the Rules.
3. Option Data.
Optionee's Name: ______________________________
Number of shares of Stock
Subject to this Option: ______________________________
Grant Date: ______________________________
<PAGE> 24
3
Exercise Price Per Share: ______________________________
Expiration Date: ______________________________
Beneficiary: ______________________________
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its authorized officer, as of the Grant Date identified in Section
3.
Agreed to: Connecticut Water Service, Inc.
______________________________ BY: __________________________
Optionee: Name:
Title:
Date: ________________________
<PAGE> 25
CONNECTICUT WATER SERVICE, INC.
No. ______
NONQUALIFIED STOCK OPTION
THIS AGREEMENT, made as of the grant date indicated in Section 3 below,
and between Connecticut Water Service, Inc. (the "Company"), and the undersigned
individual (the "Optionee"), pursuant to the Connecticut Water Service, Inc.
Performance Stock Program (the "Plan"). (Terms not defined herein shall have the
same meaning as in the Plan.)
WHEREAS, the Optionee is an eligible employee of the Company or a
Subsidiary and the Company through the Plan's Committee has approved the grant
of Nonqualified Stock Options ("Options") under the Plan to the Optionee.
NOW, THEREFORE, in consideration of the terms and conditions of this
Agreement and pursuant to the Plan, the parties agree as follows:
1. GRANT OF OPTIONS. The Company hereby grants to the Optionee the right
and option to purchase from the Company, at the exercise price set
forth in Section 3 below, all or any part of the aggregate number of
shares of common stock of the Company (the "Stock") set forth in said
Section 3.
2. TERMS AND CONDITIONS. It is understood and agreed that the Option
evidenced hereby is subject to the provisions of the Plan (which are
incorporated herein by reference) and the following terms and
conditions:
a. EXPIRATION DATE: The Option evidenced hereby shall expire on
the date specified in Section 3 below, or at such earlier date
as is provided in Sections 7(i) and (ii) of the Plan upon
termination of Optionee's employment.
b. EXERCISE OF OPTION. The Option evidenced hereby shall be
exercisable from time to time by submitting an appropriate
notice of exercise ten days prior to the date of exercise
specifying the number of shares for which the Option is being
exercised, addressed to the Company at its principal place of
business
and either:
(i) CASH ONLY EXERCISE -- submitting
the full cash purchase price of the
exercised stock; or
(ii) STOCK EXERCISE -- tendering Stock
(which has been held at least 6
months) in an amount sufficient to
provide the full purchase price, or
<PAGE> 26
2
(iii) COMBINATION -- tendering a
combination of (i) and (ii) above.
c. WITHHOLDING TAXES. Without regard to the method of exercise
and payment, the Optionee shall pay to the Company, upon
notice of the amount due, any withholding taxes payable with
respect to such exercise, which payment may be made with
shares of Stock which would otherwise be issued pursuant to
the Option.
d. EXERCISE SCHEDULE. The Option will become exercisable with
respect to __% of the Option on each anniversary of the date
of grant; provided that Optionee is employed by the Company or
a Subsidiary on such date.
e. COMPLIANCE WITH LAWS AND REGULATIONS. The Option evidenced
hereby is subject to restrictions imposed at any time on the
exercise or delivery of shares in violation of the By-Laws of
the Company or of any law or governmental regulation that the
Company may find to be valid and applicable.
f. INTERPRETATION. Optionee hereby acknowledges that this
Agreement is governed by the Plan, a copy of which Optionee
hereby acknowledges having received, and by such
administrative rules and regulations relative to the Plan and
not inconsistent therewith as may be adopted and amended from
time by the Committee (the "Rules"). Optionee agrees to be
bound by the terms and provisions of the Plan and the Rules.
3. Option Data.
Optionee's Name: ______________________________
Number of shares of Stock
Subject to this Option: ______________________________
Grant Date: ______________________________
Exercise Price Per Share: ______________________________
Expiration Date: ______________________________
<PAGE> 27
3
Beneficiary: ______________________________
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its authorized officer, as of the Grant Date identified in Section
3.
Agreed to: Connecticut Water Service, Inc.
______________________________ BY: __________________________
Optionee: Name:
Title:
Date: ________________________
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 167,166
<OTHER-PROPERTY-AND-INVEST> 1,933
<TOTAL-CURRENT-ASSETS> 9,463
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0
772
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0
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10
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</TABLE>
