<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(X) Annual Report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended DECEMBER 31, 1998 or
( ) Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
to .
Commission File Number 0-8084
CONNECTICUT WATER SERVICE, INC.
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0739839
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
93 WEST MAIN STREET, CLINTON, CT 06413
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (860) 669-8636 Securities
registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
NONE NOT APPLICABLE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229,405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ( )
<PAGE> 2
Page 2
The aggregate market value of the registrant's voting Common Stock,
computed on the price of such stock at the close of business on March 1, 1999 is
$113,894,000.
4,533,103
Number of shares of Common Stock outstanding, March 1, 1999 (excluding
12,838 common stock equivalent shares)
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K Into Which
Document Document is Incorporated
-------- ------------------------
Definitive Proxy Statement, dated Part III
March 17, 1999, for Annual Meeting of
Shareholders to be held on
April 23, 1999.
<PAGE> 3
Page 3
PART I
ITEM 1. BUSINESS
a. GENERAL DEVELOPMENT OF BUSINESS
The Registrant, Connecticut Water Service, Inc. (the Company), is the
parent company of The Connecticut Water Company (CWC) which supplies water for
residential, commercial, industrial and municipal purposes in various areas in
the State of Connecticut through three operating regions. The Company and CWC
represent the second largest investor-owned water system in Connecticut in terms
of operating revenue and utility plant investment.
The Company was organized in 1956 under the General Statutes of
Connecticut as Suburban Water Service, Inc. and has been engaged in the business
of acquiring and operating water companies through controlling stock ownership.
In addition to operating its core business, CWS offers related services on a
contract basis to other water utilities, communities, and businesses. These
services range from one-time contracts for a particular service to long-term
assignments for system operations and management. CWC is also engaged in a
program of selling off its limited excess real estate holdings. In 1975, the
Company changed its name to Connecticut Water Service, Inc. after acquiring all
of the outstanding Common Stock of CWC. CWC's First Mortgage Bonds are held
primarily by institutional investors. The Company is a non-operating company
whose income through December 31, 1998 was derived from the earnings on the
Common Stock of CWC.
Commencing January 1, 1999 the Company established a new Subsidiary,
Connecticut Water Utility Services, Inc. (CWUS) to handle unregulated business
activities previously transacted by CWC, its regulated subsidiary. In 1998 and
prior the pre-tax income associated with the activities to be carried on by CWUS
were included in "Non- Water Sales Earnings" in the Other Income (Deductions)
section of the Consolidated Statements of Income. It also transferred the
ownership of CWC's unconsolidated subsidiary, Chester Realty, Inc. directly to
the Company. In 1999 the Company's consolidated financial statements will
encompass the Company's two new subsidiaries, (CWUS and Chester Realty) in
addition to CWC.
<PAGE> 4
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Late in 1998 the Company reached agreements to acquire two smaller
water companies in Eastern Connecticut through an exchange of the Company's
common stock for the capital stock of the acquired companies. These two
companies are Gallup Water Service, Inc. headquartered in Plainfield, and
Crystal Water Utilities Corporation, headquartered in Danielson. Gallup and
Crystal have over 1,100 and 3,300 customers and annual revenues of approximately
$575,000 and $1,800,000, respectively. These two mergers are subject to approval
by the Connecticut Department of Public Utility Control and in the case of
Crystal, by the stockholders of Crystal. Assuming timely receipt of those
approvals, the mergers are expected to be finalized in 1999. Both of these
mergers are expected to qualify as tax exempt stock exchanges and are expected
to be accorded "pooling of interests" accounting treatment. The Company expects
to initially operate each of these two companies as separate subsidiaries of
Connecticut Water Service, Inc., each with its own separate rate structure.
The profitability of the operations of the water utility industry
generally and of CWC (and hence the Company) is largely dependent on the
timeliness and adequacy of the rates allowed by utility regulatory commissions.
In addition, profitability is dependent on numerous factors over which CWC has
little or no control, such as the quantity of rainfall and temperature in a
given period of time, industrial demand, prevailing rates of interest for short
and long-term borrowings, energy rates, and compliance with environmental and
water quality regulations. In addition, inflation and other factors beyond the
Company's or CWC's control impact the cost of construction, materials and
employee costs. See "Business - Financing", "Business - Rates", and "Business
- - Regulation".
b. GENERAL DESCRIPTION OF BUSINESS
The Company, a Connecticut corporation, owns all of the outstanding
Common Stock of CWC, CWUS and Chester Realty, Inc. Substantially all of the
Company's revenues and operating income are attributable to the sale and
distribution of water by the operating regions of CWC and to CWC's related
operations. In 1998 $.09 a share or approximately 6% of the Company's total net
income came from real estate sales and non-water sales earnings. See "Business
- - Consolidated Operating Statistics".
CWC is specially chartered by the General Assembly of the State of
Connecticut as a public service company, and the rates and operations of CWC are
regulated by the Connecticut Department of Public Utility Control (DPUC). See
"Business - Rates" and "Business - Regulation".
<PAGE> 5
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The Company's subsidiary, Chester Realty, was organized in 1969 to
assist in the acquisition of real estate. The assets and operations of this
subsidiary are not significant. In 1999 the ownership of this Subsidiary was
transferred directly from CWC to CWS.
CWC supplies water and, in most instances, provides fire protection
through three separate operating regions in all or portions of 35 towns in
Connecticut. The service areas have an estimated total population of
approximately 223,000 based on DPUC population estimates of 3.5 people per
average household. During the twelve months ended December 31, 1998,
approximately 64% of the Company's consolidated operating revenues were received
from residential customers, 12% from commercial customers, 4% from industrial
customers, 3% from public authority customers, and 17% from public fire
protection and other customers.
Each of the operating regions serves a separate franchise area. Rates
are the same for all regions. The systems of the three operating regions are not
physically interconnected.
The following table sets forth the percentage of the Company's utility
plant in service at each of CWC's operating regions as of December 31, 1998:
<TABLE>
<CAPTION>
Utility Plant
Regions Dollars Percent
------- ------- -------
<S> <C> <C>
Northern $98,854,000 45%
Shoreline 68,220,000 31%
Naugatuck 52,772,000 24%
----------- ----
$219,846,000* 100%
============ ====
</TABLE>
* Does not include $609,000 of plant held for future use.
At December 31, 1998, 63,780 customers were served by CWC. At that
date, all customers were metered except fire protection customers, 380 customers
of the Sound View Water System, acquired in 1995; and 374 customers of the Point
O'Woods Water System, acquired in 1997. The Company requires all applicants for
new service, other than customers at certain seasonal systems and fire
protection customers, to be metered.
The Company's principal office is located at 93 West Main Street,
Clinton, Connecticut 06413, and its telephone number is 860-669-8636.
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The business of CWC is subject to seasonal fluctuations and weather
variations. The demand for water during the warmer months is generally greater
than during the cooler months due primarily to additional requirements for water
in connection with cooling systems, and various outdoor uses such as private and
public swimming pools and lawn sprinklers. From year to year and season to
season particularly during the warmer months, demand will vary with rainfall and
temperature levels.
WATER SUPPLY
The estimated minimum dependable yields of sources of water supply for
each of the operating regions' transmission and distribution systems, as set
forth under "Business - CWC Production Facilities as of December 31, 1998" are
in excess of present average daily consumption. Except for requests for
voluntary conservation in the summers of 1988 and, in the Shoreline Region only,
1995, no restrictions on water use have been required in over 25 years.
Water is secured from both surface and subsurface supplies and supplied
through interconnections with other water systems. In 1998, surface sources
provided approximately 49% of the supply, well supplies provided approximately
50%, and interconnections with other systems supplied 1%. Studies are made
periodically to determine the supply and distribution needs of the regions. A
major study, covering a fifty year planning period required of all water
companies supplying 1,000 or more persons, was completed in 1987 and submitted
to the Connecticut Department of Public Health (DPH) for approval. An updated
plan must be prepared every five years or as requested by the DPH. Updated plans
for each of CWC's water systems have been prepared and approved by the DPH. CWC
continues to explore and develop additional ground water supplies and study
further development of surface water sources to meet anticipated future water
requirements.
See "Business - Construction Program", "Business - Rates" and "Business
- - Regulation".
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OPERATING REGIONS
NORTHERN
The Northern Region is composed of eight separate systems, not
interconnected, as listed below:
<TABLE>
<CAPTION>
Number of
Customers
System Towns (or Portions Thereof) Served at 12/31/98
------ ---------------------------------- -----------
<S> <C> <C>
Western (including Suffield, Windsor Locks, East
the former Tolland Granby, Enfield, East Windsor, South
Aquaduct System) Windsor, Vernon, Ellington, Tolland 29,282
Somers Somers 418
Crescent Lake Enfield 160
Stafford Springs Stafford 1,012
Lakewood/Lakeview Coventry 181
Nathan Hale Coventry 38
Llynwood Bolton, Vernon 75
Reservoir Heights Vernon 22
------
31,188
======
</TABLE>
The territory served is primarily residential and commercial with some
industry.
CWC has entered into an agreement with the State of Connecticut,
Department of Transportation, pursuant to which CWC operates and maintains, as
part of its Western System, the State's water distribution system for Bradley
International Airport located in Windsor Locks, Suffield and East Granby,
Connecticut.
The Western System has three emergency standby inter-connections with
the water system of the Metropolitan District Commission (MDC) (a public water
and sewer authority presently serving the City of Hartford and portions of
surrounding towns), one in South Windsor and two in Windsor Locks. The Western
System also has an emergency interconnection with the water system of the
Hazardville Water Company in Enfield. During 1995 an interconnection was
completed between the Somers System and the water system of the Hazardville
Water Company in Somers to provide water to the Hazardville Water Company.
See "Business - Franchises" with respect to proposals that the MDC
expand its operations into the Northern Region and that MDC take over CWC's
operations in South Windsor.
<PAGE> 8
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SHORELINE
The Shoreline Region is composed of eight separate systems, not
interconnected, as listed below:
<TABLE>
<CAPTION>
Number of
Customers
System Towns (or Portions Thereof) Served at 12/31/98
------ ---------------------------------- -----------
<S> <C> <C>
Guilford Guilford, Old Saybrook, Westbrook,
Clinton, Madison 15,828
Chester Chester, Deep River, Essex 2,326
Chester Village West Chester 11
Sound View Old Lyme 380
Point O'Woods Old Lyme 374
Bay Mountain Griswold 105
SDC Voluntown 54
Mason's Island Stonington 176
------
19,254
======
</TABLE>
The territory served is primarily residential with some commercial and
industry. In 1998 CWC purchased the Mason's Island system and in 1997 purchased
the Point O'Woods, Bay Mountain, and SDC water systems, all in southeastern
Connecticut. These systems increased the region's water customer base by nearly
4%.
NAUGATUCK
The Naugatuck Region is composed of four separate systems, not
interconnected, as listed below:
<TABLE>
<CAPTION>
Number of
Customers
System Towns (or Portions Thereof) Served at 12/31/98
- ------ ---------------------------------- -----------
<S> <C> <C>
Central Naugatuck, City of Waterbury, Beacon
Falls, Bethany, Prospect 8,835
Terryville Plymouth, Thomaston 1,992
Thomaston Thomaston 1,222
Collinsville Canton, Avon, Burlington 1,289
------
13,338
======
</TABLE>
The territory served is residential and industrial including a
municipality which represented approximately 7.2% of the region's 1998 revenues.
Water for the Collinsville System is supplied under an agreement with
the MDC from treatment facilities drawing from a large surface water reservoir
owned by the MDC. See "Item 2. Properties" for a description of this agreement.
<PAGE> 9
Page 9
Consolidated Operating Statistics
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Customers (Average)
<S> <C> <C> <C> <C> <C>
Residential Metered 56,839 55,799 55,404 54,727 54,464
Commercial Metered 3,953 3,977 3,953 3,906 3,827
Industrial Metered 329 359 365 368 364
Public Authorities Metered 423 474 472 470 467
Fire Protection and Other 1,855 1,806 1,403 1,373 960
------- ------- ------- ------- -------
Total 63,399 62,415 61,597 60,844 60,082
======= ======= ======= ======= =======
Production (Millions of Gallons)
Residential Metered Sales 4,006 3,974 3,862 3,988 3,874
Commercial Metered Sales 901 917 904 934 908
Industrial Metered Sales 402 451 441 446 460
Public Authorities Metered Sales 227 228 220 227 179
------- ------- ------- ------- -------
Total Metered Consumption 5,536 5,570 5,427 5,595 5,421
Fire Protection, Company Use
and Unaccounted For 691 717 612 777 808
------- ------- ------- ------- -------
Total 6,237 6,287 6,039 6,372 6,229
======= ======= ======= ======= =======
Operating Revenues (Thousands of Dollars)
Residential Metered $24,170 $24,476 $24,485 $25,147 $24,448
Commercial Metered 4,556 4,633 4,716 4,852 4,696
Industrial Metered 1,640 1,850 1,861 1,868 1,922
Public Authorities Metered 1,065 1,057 1,050 1,090 893
Fire Protection and Other Non-Metered . 6,493 6,485 6,480 6,393 6,130
------- ------- ------- ------- -------
Total $37,924 $38,501 $38,592 $39,350 $38,089
======= ======= ======= ======= =======
Average Revenue per 1,000 Gallons
Residential Metered $ 6.03 $ 6.16 $ 6.34 $ 6.31 $ 6.32
Commercial Metered $ 5.06 $ 5.05 $ 5.22 $ 5.19 $ 5.17
Industrial Metered $ 4.08 $ 4.10 $ 4.22 $ 4.19 $ 4.18
Public Authorities Metered $ 4.49 $ 4.64 $ 4.77 $ 4.80 $ 4.99
Miles of Distribution Mains
(End of Period) 1,010 1,000 980 970 955
</TABLE>
<PAGE> 10
Page 10
CONSTRUCTION PROGRAM
The projected capital expenditures of CWC are established annually by
management and are reviewed and revised from time to time to the extent
necessary to meet changing conditions, including adequacy of rate relief,
customer demand, revised construction schedules, water quality requirements,
pollution control requirements and inflation.
The Company currently estimates that the construction program for
1999-2001, excluding plant financed by customer advances and contributions in
aid of construction, will aggregate approximately $20,000,000. Routine
improvements to water systems and equipment are approximately $13,500,000, while
the remaining $6,500,000 is comprised of individual larger projects addressing
the replacement and expansion of infrastructure, water treatment facilities, and
increased storage capacity. No significant capital expenditures are anticipated
to be required by CWUS or Chester Realty during this period.
The $20,000,000 construction expenditures for 1999 through 2001 include
approximately $3,600,000 for all known costs of studies and construction of
facilities to comply with existing SDWA and OSHA regulations. Construction
expenditures which may be required in the future to comply with Federal and
State regulations, which have not yet been issued but which are required under
the SDWA, are excluded. The projected capital expenditures also include
$1,300,000 expected to be spent in 1999 to modify/replace equipment as part of
the Company's Year 2000 compliance program.
FINANCING
The Company and CWC expect to finance a significant portion of the
anticipated $20,000,000 construction expenditures through 2001 with net funds
generated from operations (net cash provided by operating activities less
dividends paid). Net funds generated from operations were $6,370,000,
$8,789,000, and $5,436,000, for the years 1998, 1997 and 1996, respectively (see
Consolidated Statements of Cash Flows for additional information). Construction
and other expenditures in excess of net funds generated from operations are
expected to be financed through short-term interim bank loans which may be
refinanced through the sale of Preferred Stock and/or long or medium-term
unsecured debt by CWC and/or the Company, and/or the sale of First Mortgage
Bonds by CWC and of Common Stock by the Company when financial market conditions
are considered favorable by management. CWC expects to receive the proceeds of
any such financings by the Company in the form of advances or capital
contributions.
<PAGE> 11
Page 11
The Company and CWC currently have lines of credit aggregating
$9,000,000, consisting of conventional lines of credit with four banks, which
management considers adequate at this time. As of December 31, 1998, the Company
had approximately $1,895,000 of borrowings outstanding under these lines of
credit.
During the period 1979 through 1988 approximately $43,000,000 of
tax-exempt long-term debt was issued by CWC to finance construction
expenditures. In 1998 CWC refinanced its $10,000,000 1991 Series Q First
Mortgage Bonds with new tax exempt financing. In conjunction with this
refinancing, CWC issued $8,000,000 additional tax exempt financing to replace
$8,000,000 of its outstanding short-term debt. Although CWC received an
$8,000,000 tax exempt financing allocation from Connecticut in 1998, due to the
Federal tax laws, the amount of new tax-exempt debt which may be issued by, or
under the authority of, the State of Connecticut is limited. Although CWC has
been able to refund all of its approximately $42,000,000 of existing tax-exempt
borrowings with tax-exempt refunding borrowings since 1990, it is uncertain
whether future tax-exempt allocations from the State will be available to CWC or
the Company. The unavailability of tax-exempt financings will require the
Company and/or CWC to issue traditional taxable debt securities and will
increase the cost of long-term debt financing.
The Company has no legal restrictions on the issuance of its debt. The
ability of CWC to issue additional long or medium-term secured debt to finance
future construction expenditures depends in part on meeting the applicable
provisions of CWC's First Mortgage Indenture with respect to the coverage of
earnings over interest requirements. These provisions require, for the issuance
of additional First Mortgage Bonds, minimum earnings coverage before income
taxes of two times pro forma annual interest charges on such mortgage debt. The
interest coverage under this formula at year end has been: 1998 - 5.16 times
interest charges, 1997 - 4.24 times, 1996 - 4.28 times, 1995 - 4.29 times, and
1994 - 4.12 times.
CWC's coverage of interest charges on all long-term debt at year end
has been: 1998 - 3.87 times interest charges, 1997 - 4.23 times, 1996 - 4.28
times, 1995 - 4.29 times, and 1994 - 4.12 times.
<PAGE> 12
Page 12
CWC's Times Coverage of Annual Interest
On Long-Term Indebtedness
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994
------ ------ ------ ------ ----
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Utility Operating Income (a) $10,480 $10,350 $10,161 $10,053 $9,690
Federal and State Income Tax 3,980 4,486 4,812 4,950 4,756
State Income Tax -
Capitalization (b) (174) (175) (157) (150) (150)
------- ------- ------- ------- ------
Net Operating Earnings $14,286 $14,661 $14,816 $14,853 $14,296
======= ======= ======= ======= =======
Annual Interest on First
Mortgage Bonds (c) $ 2,766 $ 3,456 $ 3,458 $ 3,460 $ 3,468
======= ======= ======= ======= =======
Times Interest Coverage (d) 5.16 4.24 4.28 4.29 4.12
==== ==== ==== ==== ====
Annual Interest on Unsecured
Bonds & Promissory Notes (c) 921 9 -- -- --
------- ------- ------- ------- -----
Annual Interest on Long-Term
Debt $ 3,686 $ 3,465 $ 3,458 $ 3,460 $ 3,468
======= ======= ======= ======= =======
Times Interest Coverage (e) 3.87 4.23 4.28 4.29 4.12
==== ==== ==== ==== ====
</TABLE>
(a) Connecticut Water Service, Inc.'s utility operating income for the years
1998 to 1994 is $ 10,304, $10,334, $10,128, $10,022, and $9,655,
respectively.
(b) Amount of minimum State income tax based on the capitalization method.
(c) Includes interest on current portion payable.
(d) Net Operating Earnings (divided by) Annual Interest on First Mortgage Bonds
per provisions of CWC's First Mortgage Indenture.
(e) Net Operating Earnings (divided by) Annual Interest on Long-Term Debt per
provisions of CWC's First Mortgage Indenture.
During 1980 and 1981 the interest costs of long-term debt increased
more rapidly than earnings so that the coverage requirements prevented CWC from
effecting a planned issue of Bonds in mid 1981. Similar circumstances may in the
future prevent the issue of, or require a reduction in the amount of, bonds CWC
otherwise would have issued or will issue. As a consequence, the Company may be
required to meet an increased portion of its financing needs through sales of
unsecured funded debt or of additional shares of Common Stock. Sales of Common
Stock would result in a dilution of the voting power and relative equity
interests of the holders of Common Stock then outstanding.
<PAGE> 13
Page 13
During the past five years CWC has sold the following issues of
long-term debt:
- On January 4, 1994, CWC issued a $4,050,000, 6.94%, Series V, First
Mortgage Bond, maturing in 2029, the proceeds of which refunded CWC's 9.375%,
Series L and 8.5%, Series O, First Mortgage Bonds. During March, 1994, an
additional $8,000,000, 6.94% Series V, First Mortgage Bond was issued. The
proceeds of this transaction were used to redeem CWC's $5,000,000, 10%, Series
P, First Mortgage Bonds as well as all 30,000 shares of CWC's $100 par, 9.5%
Preferred Stock.
- During 1997, CWC issued a $163,000 unsecured Promissory Note with a
5.5% interest rate as part of the purchase price for the Point O'Woods Water
System acquisition. The five year note requires CWC to make monthly payments of
interest and principal totaling $37,000 annually.
- During 1998, CWC issued $10,000,000, 5.05%, 1998 Series A Unsecured
Tax-Exempt Water Facilities Revenue Refinancing Bonds maturing in the year 2028,
the proceeds of which refunded CWC's 6.9% Series Q First Mortgage Bonds. In
conjunction with this refinancing CWC also issued $8,000,000 of 5.125%, 1998
Series B Unsecured Tax- Exempt Water Facilities Revenue Refinancing Bonds
maturing in the year 2028, the proceeds of which refinanced $8,000,000 of
interim bank loans.
- Because there is no CWC Preferred Stock outstanding at this time,
CWC has no effective restriction with respect to the issuance of additional
shares of its Preferred Stock.
<PAGE> 14
Page 14
CWC's Times Coverage of Annual Interest and
Annual Preferred Stock Dividends
in Accordance with Articles of General Preference
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Utility Operating Income $10,480 $10,350 $10,161 $10,053 $9,690
Other Income (a) 526 212 161 243 155
------ ------ ------ ------- -------
Gross Earnings Available for
Coverage $11,006 $10,562 $10,322 $10,296 $9,845
======= ======= ======= ======= ======
Annual Interest on Funded
Debt (b) $3,687 $3,465 $3,458 $ 3,460 $3,468
Annual Dividend on Preferred
Stock (c) -- -- -- -- 2
------ ------ ------ ------- -----
Total Charges $3,687 $3,465 $3,458 $ 3,460 $ 3,470
====== ====== ====== ======= =======
Times Interest Coverage 2.99 3.05 2.98 2.97 2.83
==== ==== ==== ==== ====
</TABLE>
(a) Other income, as defined by the Articles of General Preference, includes
merchandising and jobbing income, interest and dividend income and
miscellaneous rental income less applicable taxes.
(b) Includes interest on current portion payable.
(c) Includes dividends on currently redeemable shares.
In September 1998 the Company effected a three-for-two stock split. All
outstanding common stock and per share amounts in this report have been restated
to reflect this stock split.
The Company's issuances of Common Stock over the past five years are
detailed below. The $5,742,000 net proceeds from these sales were invested in
CWC in the form of capital contributions.
- The Company issued 3,702 shares of Common Stock during 1994, 3,033 shares
during 1995, 5,258 shares during 1996, 3,985 shares during 1997, and 1,955
shares during 1998, pursuant to the Company's Employee Savings 401-K Match Plan.
- The Company issued 6,092 shares of Common Stock and/or Common Stock
equivalents during 1994, 9,554 shares during 1995, 7,360 shares during 1996,
5,526 shares during 1997, and 7,281 shares during 1998, pursuant to the
Company's Performance Stock Program.
- The Company issued 50,705 shares of Common Stock during 1994, 111,580 during
1995, 131,711 during 1996, and 0 shares during 1997, and 0 shares during 1998
pursuant to its Dividend Reinvestment and Common Stock Purchase Plan (DRIP).
<PAGE> 15
Page 15
There are currently no legal limits on the amount of short-term
borrowings which may be incurred by the Company or CWC. Should construction
expenditures exceed management's current expectations, the Company will continue
to be dependent upon its ability to issue and sell additional amounts of Common
Stock, mortgage bonds of CWC and (either through the Company or CWC) Preferred
Stock and long or medium-term debt to limit short-term borrowing to appropriate
levels. However, the availability of these methods of financing cannot be
assured. The Company believes that the sale of such additional securities will
continue to depend primarily on the adequacy and timeliness of regulatory action
on future rate applications of CWC, on general conditions in securities markets
and on favorable market appraisal of the securities of the Company and CWC,
including the Company's Common Stock.
RATES
The rates of CWC have been established under the jurisdiction of, and
approved by, the DPUC. It is the Company's policy to seek rate relief as
necessary to enable CWC to achieve an adequate rate of return.
CWC's last general rate increase was requested in 1990, became
effective March 25, 1991, and was based upon an allowed rate of return of 12.7%
on Common Stock equity and 10.74% on rate base. During 1997 CWC had this
decision reopened for the limited purpose of flowing through to customers cost
savings related to a reduction in CWC's state taxes and to allow the CWC to
collect FAS 106 (Postretirement Benefits other than Pension) costs in rates.
Overall CWC's rates were reduced approximately 4 1/2% in 1997 due to these
limited reopened rate proceedings. CWC presently expects that it will not file
for a general rate increase in 1999.
In 1979, the DPUC approved a surcharge to be applied to rates charged
by water utilities in order to provide a current cash return on the major
portion of a water utility's Construction Work In Progress (CWIP) applicable to
facilities required by SDWA facilities. CWC has consistently been allowed to
collect such a surcharge. CWC expects to apply for the application of similar
surcharges with respect to any major future construction projects which may be
required by the SDWA. There is no assurance that any future surcharges will be
permitted.
<PAGE> 16
Page 16
Under certain circumstances the DPUC, in consultation with the DPH, can
order a water company with good managerial and technical resources to acquire
the water system of another company to assure the availability and potability of
water for customers of the company to be acquired. In 1989 the DPUC promulgated
regulations permitting the DPUC to approve a surcharge to be applied to rates
charged by water utilities in order to cover the costs incurred to acquire the
other system and to make improvements as required. CWC expects to apply for the
application of such a surcharge with respect to any mandated water system
acquisition. Although there is no assurance that any other such surcharge will
be permitted, such a surcharge was permitted in 1995 when the DPUC and DPH
ordered CWC to acquire the assets and facilities of the Sound View Water Company
in Old Lyme.
In 1993 the DPUC approved regulations which would permit a water
company to apply for a limited rate adjustment to compensate for the effect of
changes in certain costs. These costs include rate changes related to the cost
of purchased water, energy, and taxes. The effects of limited reopened rate
proceedings in 1997 is discussed above. CWC expects to apply for the application
of this type of adjustment in the future when appropriate. There is no assurance
that any such rate adjustment will be permitted.
See also "Franchises and Competition" below for a discussion of
Connecticut legislation dealing with the competitiveness of water rates.
FRANCHISES AND COMPETITION
The Metropolitan District Commission (MDC) is a legislatively
authorized quasi-government agency providing primarily water and sewer service
in and around the City of Hartford and adjacent to towns in CWC's Northern
Region. MDC's water rates are substantially lower than those of CWC, primarily
because MDC is a tax-exempt entity, generally serving a denser population with
older facilities. Legislation was proposed in the Connecticut General Assembly
in 1987 which was intended to have the effect of permitting MDC to purchase the
water company operations of CWC in South Windsor, a town which is presently
served by both MDC and CWC. The Company opposed this legislation vigorously. The
Connecticut General Assembly established a Task Force to report on various
issues relating to towns served by both a privately-owned water company and a
publicly-owned water company. The Task Force voted not to recommend legislation
which would authorize such towns to hold referenda on consolidation and empower
towns to force an investor-owned water company to sell its water system within
that town to a governmentally-owned entity. It is not clear at this time whether
such a proposal or similar legislation may be re-introduced and adopted by the
Connecticut General Assembly. Further, even if such legislation were adopted,
the amount of the compensation to be received by CWC for its assets in South
Windsor, or the disposition of any such compensation, cannot be determined at
this
<PAGE> 17
Page 17
time. It is also possible that any legislation in this area could be written in
a manner which would permit a similar acquisition of CWC's water operations in
towns other than South Windsor. The Company has opposed, and will continue to
oppose vigorously, any such proposed legislation.
Legislation was passed in 1994 by the Connecticut General Assembly that
required the DPUC to adopt regulations regarding whether the rates that have
been charged by a water company for a period of five consecutive years are so
excessive in comparison to the rates charged by other water companies providing
the same or similar service as to inhibit the economic development of the area
serviced by the water company or impose an unreasonable cost to the customers of
such company. If the DPUC makes such a finding and also concludes that the water
company is unable or unwilling to provide service at a reasonable cost to
customers, it may order the provision of such service or revoke the franchise
held by such company. In 1995, the DPUC adopted regulations that require a
petition on a form provided by the DPUC to be signed by 50% of the residents of
a town or other political subdivision served by the company, or by 500 customers
of the company, before the DPUC would hold a hearing thereon. CWC believes that,
in light of the tax and other advantages of governmentally-owned entities which
are not available to CWC, its rates are not excessive and would vigorously
oppose any such petition.
In 1976, the Connecticut General Assembly created a study commission to
evaluate the feasibility of expanding the water supply services of the MDC to
include the towns of East Granby, East Windsor, Enfield, Somers, Suffield and
Windsor Locks. These towns are in the service areas of and are served in part by
CWC's Northern Region. On February 1, 1978, the study commission reported to the
Governor and the General Assembly that the expansion was feasible and
recommended that the General Assembly authorize the towns of East Granby,
Suffield and Windsor Locks to take immediate steps to acquire water services
from the MDC. It further recommended that the enabling legislation provide a
mechanism for the towns of Enfield, East Windsor and Somers, after adequate
technical, financial and institutional studies, to take the steps necessary to
acquire water services from the MDC. The study commission made no recommendation
in its report with respect to the method of implementation of any MDC expansion
and did not discuss CWC's status or that of its water facilities should MDC
provide such service. The General Assembly has not taken any action on the
report. In 1990, CWC agreed, pursuant to the Connecticut Plan (see "Business -
Regulation") that MDC would have the exclusive right to serve that part of East
Granby which is not adjacent to Bradley International Airport and which is not
presently being served by CWC.
Legislation that would have had the effect of enabling the DPUC to
order a transfer to MDC of CWC's service territory in South Windsor was
introduced in the 1996 General Assembly but did not pass. Legislation has been
proposed in the 1999 General Assembly that would
<PAGE> 18
Page 18
allow the MDC to expand its service area into CWC's service area in South
Windsor. The Company has opposed, and will continue to vigorously oppose any
extension of MDC water operations within its service areas and any effort to
permit the takeover by any municipal or other authority of any significant
portion of CWC's service areas.
It is not possible at this time to assess the likelihood of any
legislation being enacted to implement these or similar recommendations or the
impact of any such legislation on CWC and the Company, but such impact could be
substantial. There can be no assurance that the Connecticut General Assembly
will not take action to authorize such a takeover. As of December 31, 1997,
CWC's Northern Region, which includes customers in the towns mentioned above,
represented approximately 50% of the Company's consolidated utility plant.
In common with most water companies in Connecticut, CWC derives its
rights and franchises to operate from special acts of the Connecticut General
Assembly, which are subject to alteration, amendment or repeal by the General
Assembly and which do not grant exclusive rights to CWC in its service areas.
Subject to such power of alteration, amendment or repeal by the
Connecticut General Assembly and subject to certain approvals, permits and
consents of public authority and others prescribed by statute and by its
charter, CWC has, with minor exceptions, valid franchises free from burdensome
restrictions and unlimited as to time, and is authorized to sell potable water
in the towns (or parts thereof) in which water is now being supplied by CWC.
In addition to the right to sell water as set forth above, the
franchises of CWC include rights and powers to erect and maintain certain
facilities on public highways and grounds, all subject to such consents and
approvals of public authority and others as may be required by law. Under the
Connecticut General Statutes, CWC, upon payment of compensation, may (subject to
the various requirements described under "Business - Regulation") take and use
such lands, springs, streams or ponds, or such rights or interests therein as
the Connecticut Superior Court, upon application, may determine is necessary to
enable CWC to supply potable water for public or domestic use in its franchise
areas.
CWC faces competition, presently not material, from a few private water
systems operated within, or adjacent to, its franchise areas and from municipal
and public authority systems whose service areas in some cases overlap portions
of CWC's franchise areas. At the present time, except as noted above, there are
no publicly owned utilities, cooperatives or other private utility companies
competing with CWC in the areas now served, although within certain areas there
are wells owned by individuals or private industries.
<PAGE> 19
Page 19
See also "Business - Regulation" for a description of the so-called
Connecticut Plan which is intended, among other things, to eliminate competition
among water systems.
REGULATION
DEPARTMENT OF PUBLIC UTILITY CONTROL (DPUC)
CWC is subject to regulation by the DPUC, which has jurisdiction over
rates, standards of service, accounting procedures, issuance of securities,
disposition of utility properties and related matters. The DPUC consists of five
Commissioners, appointed by the Governor of Connecticut with the advice and
consent of both houses of the Connecticut legislature.
The DPUC is required by law to institute management audits, to be
conducted periodically, of companies such as CWC. Such audits might result in
the DPUC ordering implementation of new management practices or procedures. The
DPUC has not conducted any such audit of CWC.
The Company, which is not an operating utility company, is not a
"public service company" within the meaning of the Connecticut General Statutes
and is not generally subject to regulation by the DPUC.
DEPARTMENT OF ENVIRONMENTAL PROTECTION (DEP)
While the construction of dams, reservoirs and other facilities
necessary to the impounding, storage and withdrawal of water in connection with
public water supplies is a permitted use under the Connecticut Inland Wetlands
and Water Courses Act, CWC is required, pursuant to other statutory provisions,
to obtain permits from the Connecticut Commissioner of Environmental Protection
(Commissioner) for the location, construction or alteration of any dam or
reservoir and to secure the approval of the Commissioner for the diversion and
use of water from any river or underground source for public use. Various
criteria must be satisfied under the respective statutes and regulations of the
Connecticut Department of Environmental Protection (DEP) in order to obtain such
permits or approvals and the Commissioner has the power to impose such
conditions as he deems reasonably necessary in connection with such permits or
approvals in order to assure compliance with such statutes. CWC has obtained, or
applied for, and complied with the terms of, all such requisite permits or
approvals.
Legislation was adopted in 1982 conferring upon the DEP authority to
require a permit for any new diversion of water, including both surface and
ground water, within the State of Connecticut. Any water diversion which might
be effected by CWC in the future would require compliance by CWC with a lengthy
permit application process and approval by the Commissioner. CWC has several
potential well sites which are subject to this legislation and the DEP
regulations thereunder. Such legislation requires the registration with the
<PAGE> 20
Page 20
Commissioner of all diversions of water maintained prior to July 1, 1982. All of
CWC diversions have been registered. Although the legislation provides that
registered diversions are not subject to the permit requirement, DEP regulations
adopted in March, 1990 are being used by DEP, on a case by case basis, to
require compliance with the permit application process before some registered
diversions can be used as a source of water supply, and have been interpreted by
DEP to require diversion permits in situations which the Company believes were
not intended by the legislation. It is not possible at this time to fully assess
the impact of DEP's application of this legislation and the DEP regulations on
CWC and its operations, but such impact may be significant and adverse,
particularly on sources held for future use or acquired sources which may not
have been properly registered.
The Federal Clean Water Act requires permits for discharges of
effluents into navigable waters and requires that all discharges of pollutants
comply with federally approved state water quality standards. The DEP has
adopted, and the federal government has approved, water quality standards of
receiving waters. A joint Federal and State permit system has been established
to ensure that applicable effluent limitations and water quality standards are
met in connection with the construction and operation of facilities which affect
or discharge into state or interstate waters. CWC has received all such
requisite permits. A new general permit and permit renewal program for water
treatment waste water discharges was adopted by DEP in 1995. Although the new
program has some stricter monitoring and reporting requirements, CWC is in
compliance with the new program and the additional costs, while increased from
the period before the program was adopted, are not substantial.
In 1984, all CWC's dams were registered with DEP as required under
Public Act 83-38. DEP is required to investigate and periodically inspect most
registered dams to ensure they are safely maintained. CWC was also subject to
the requirements of the National Dam Inspection Act which required the United
States Army Corps of Engineers to inspect certain dams. These inspections were
completed in 1981 and the Army Corps' participation ended. Six of said dams were
inspected under the federal program, and, although certain modifications and
further studies were required, no material problems with respect to these dams
have been reported. While the Company recognizes that a certain degree of risk
is attached to CWC's ownership of dams in connection with its water collection
system, the Company believes that all of CWC's dams are well maintained and are
structurally stable. CWC has completed any necessary modifications to all but
one of the six dams. CWC believes that the future cost of such compliance at
that dam will be less than $2,000,000. These costs are included in CWC's
projected capital expenditures (see "Construction Program".)
<PAGE> 21
Page 21
The DEP has promulgated regulations requiring that certain minimum
flows be maintained in various waterways within the State of Connecticut.
Pursuant to said regulations, CWC is exempt from compliance at certain of its
facilities. However, DEP is considering making changes in the regulations. The
Company cannot predict either the substance of those changes or their impact on
the Company. However, it is possible that such changes could reduce the safe
yield of CWC's sources. The cost to CWC to restore the lost safe yield is not
now determinable but could be substantial.
DEPARTMENT OF PUBLIC HEALTH (DPH)
CWC is also subject to regulation by the Connecticut DPH with respect
to water quality matters. Plans for new water supply systems or enlargement of
existing water supply systems also must be submitted to the DPH for approval.
In 1985 the Connecticut General Assembly enacted comprehensive
legislation (the so-called Connecticut Plan) designed to maximize the efficient
and effective development of the state's public water supply systems. This
legislation authorized DPH to administer procedures designed to coordinate the
comprehensive planning of public water systems. The legislation mandates the
establishment of public water supply management areas, with each such area
having a water utility coordinating committee comprised of representatives of
the various public water systems and regional planning agencies in the area.
Each such committee is required to establish exclusive service areas for each
public water system in the area, after taking into consideration a number of
factors including existing water service areas, land use plans, etc., optimum
utilization of existing water supplies and existing franchise rights of water
companies. DPH is authorized to resolve any disagreements among members of the
respective committees. This legislation is intended not only to promote
cooperation among various water suppliers in each management area, but also to
provide (through DPH's role) for the centralized planning of water supply. In
implementing this legislation, DPH has created seven water supply management
areas and is in the process of implementing the creation of the appropriate
water utility coordinating committees. The operations of CWC, which cover many
areas of the state, fall within five of the seven management areas. CWC is
actively involved with the planning process in three of these management areas
at this time. The remaining two areas of CWC's interest are expected to begin
the planning process within the next several years. It is not possible at this
time to predict the impact on the Company of the above described legislation,
regulations and procedures, but the Company was an active participant in moving
for the adoption of this scheme, and is presently hopeful that such centralized
and cooperative planning will have a beneficial impact on its future water
supply and water supply operations.
<PAGE> 22
Page 22
SAFE DRINKING WATER ACT (SDWA)
CWC is subject to regulation of water quality under the SDWA. The SDWA
provides for the establishment of uniform minimum national quality standards by
the Federal Environmental Protection Agency (EPA), as well as governmental
authority to specify the type of treatment process to be used for public
drinking water. The EPA regulations, pursuant to the SDWA, set limits for, among
other things, certain organic and inorganic chemical contaminants, pesticides,
turbidity, microbiological contaminants, and radioactivity. The SDWA provides
that the states have primary enforcement responsibility for public drinking
water systems, as long as the states' regulations are no less stringent than
those adopted pursuant to the SDWA. The DPH has adopted regulations which are in
some cases more stringent than the Federal regulations.
The SDWA was originally enacted in 1974 with major amendments in 1986
and 1996. The original SDWA authorized EPA to establish 22 interim standards for
drinking water contaminants between 1977 and 1986. The 1986 SDWA amendments
dictated that 83 primary drinking water standards be established within three
years and an additional 25 contaminants be regulated every three years
thereafter. EPA promulgated the Surface Water Treatment Rule (SWTR), the Lead
and Copper Rule and the Total Coliform Rule (TCR) as well as establishing
standards for various volatile and synthetic organic contaminants and inorganic
contaminants pursuant to the 1986 SDWA amendments. CWC was in compliance with
each of these rules from the time they became effective and continues to be in
compliance.
At the time that the 1996 SDWA was reauthorized there were still
several schedules for establishment of various regulations required by the 1986
amendments in process. The 1996 SDWA changed these schedules. The new law also
eliminated the requirement to regulate 25 new contaminants every three years and
replace it with a requirement that the EPA consider five new contaminants for
regulation every five years. The law also changed the basis for setting
regulations to consider the costs and benefits of new regulations and to show
that new regulations improve public health.
The first regulations to be promulgated under the 1996 SDWA are the
Stage I Disinfectant and Disinfection Byproducts (D/DBP) and Interim Enhanced
Surface Water Treatment Rules. Both of these regulations were promulgated in
December 1998. The Stage II D/DBP rule is scheduled to be promulgated in 2002
while the Long Term Enhanced Surface Water Treatment Rule (LTESWTR) will be
promulgated in 2000. The Filter Backwash Recycle Rule is scheduled to be
promulgated with the LTESWTR.
<PAGE> 23
Page 23
Radionuclides, including radon, are expected to be finalized in 2000,
as is the Ground Water Disinfection Rule. Arsenic is planned to be promulgated
by 2001. A decision to regulate sulfate must be made by EPA by 2001. If the
decision is to regulate, then the final rule must be complete by 2005. Finally,
the first five contaminants that EPA must consider for regulation must be
selected in 2001. Those that are regulated will be completed by 2003.
Through December 31, 1998, the Company has expended approximately
$47,925,000 in constructing facilities and conducting aquifer mapping necessary
to comply with the requirements of the SDWA. CWC believes that it is in
substantial compliance with regulations promulgated by the EPA and DPH, as
currently applied. Connecticut's aquifer protection legislation not only
requires aquifer mapping, but also requires DEP, in consultation with DPH and
DPUC, to prepare guidelines for acquisition by water companies of lands
surrounding public water supply wellfields. The extent to which those
guidelines, not yet prepared, might lead to regulations requiring the Company to
purchase additional land around its wellfields is not known at this time. The
Company anticipates spending an additional $1,500,000 on required aquifer
mapping. Although the Company cannot predict either the substance of the
regulations required by the 1996 SDWA amendments which have not yet been
promulgated or their impact on CWC, the primary impact on CWC is expected to be
in the area of increased monitoring and reporting although it is possible that
such regulations may require modifications to existing filtration facilities.
Construction of new facilities may be required for certain groundwater sources.
It is possible that costs of compliance by CWC could be substantial.
DISPOSITION OF PROPERTY
Although CWC has established a program of selling various, relatively
small, discrete parcels of land over the next several years, the total of which
is less than 350 acres, CWC has no other significant amounts of excess land
which it presently expects to sell or otherwise dispose of.
Connecticut law presently imposes the following restrictions upon the
disposition of property owned by water companies: (a) no property greater than
three acres or any portion of a large parcel or having a value of greater than
$50,000 may be sold or otherwise transferred without the prior approval of the
DPUC; (b) the sale, transfer and change in the use of watershed land (lands
draining into a public water supply) and certain non-watershed lands which are
contiguous to reservoirs and their tributaries are subject to regulation by the
DPH; (c) when a water company intends to transfer or dispose of an interest in
any present, potential or abandoned water supply source, other water companies
which might reasonably be expected to utilize the source are given the
opportunity through the DPH to seek to acquire such source; (d) subject to such
acquisition opportunities by other
<PAGE> 24
Page 24
water companies as to water supply sources, when a water company intends to
transfer or dispose of an interest in three or more contiguous acres of its
unimproved real property, the municipality in which such property is located,
the State of Connecticut and private, nonprofit land-holding organizations have
prior options to acquire such interest in the context of priorities based on
intended use, with open space use being favored;(e) the proceeds from the sale
of water company land must generally be reinvested in utility improvements or
land necessary to protect water supply sources; and (f) land may be sold only if
consistent with the utility's water supply plan. Legislation enacted in 1988
provides that the DPUC use an accounting treatment which equitably allocates
between the utility's ratepayers and its stockholders the economic benefits of
the net proceeds from the sales of land which has ever been in the utility's
rate base. CWC and Chester Realty have sold property for capital gains before
income taxes totalling $474,000 in 1998 and $174,000 in 1997. Consistent with
the 1988 legislation, the DPUC requires that benefits of the gains pertaining to
property previously in the utility's rate base be allocated between the
Company's customers and its stockholders.
GENERAL
Federal and State regulations and controls concerning environmental
matters, water quality, pollution and the effluent from treatment facilities are
still in the process of being developed and it is not possible to predict the
scope or enforceability of regulations or standards which may be established in
the future, or the cost and affect of existing and potential regulations and
legislation upon any of the existing and proposed facilities and operations of
CWC. Further, recent and possible future developments with respect to the
identification and measurement of various elements in water supplies and concern
with respect to the impact of one or more of such elements on public health may
in the future require CWC to replace or modify all or portions of its various
water supplies, to develop replacement supplies and/or to implement new
treatment techniques. In addition, CWC anticipates that environmental concerns
including threatened and actual contamination of its water sources will become
an increasing problem in the future. CWC has expended and will in the future be
required to expend substantial amounts to prevent or remove contamination or to
develop alternative water supplies. See "Legal Proceedings" for a discussion of
a recent contamination problem. Any of the aforesaid developments may
significantly increase CWC's operating costs and capital requirements. Since the
DPUC's rate setting methodology permits a utility to recover through rates
prudently incurred expenses and investments in plant, based upon past DPUC
practice, the Company expects that such expenditures and costs should ultimately
be recoverable through rates for water service.
<PAGE> 25
Page 25
EMPLOYEES
As of December 31, 1998, CWC employed 156 full-time and part-time
employees. The Company has no employees other than its officers, who are also
officers of CWC and whose compensation is paid by CWC. All full-time employees
of CWC who meet specified age and length of service requirements participate in
an Employee's Retirement Plan which is a non-contributory trusteed pension plan
and provides for a monthly income for employees at retirement. None of the
employees is covered by a collective bargaining agreement. Management believes
that its relationship with its employees is satisfactory.
ITEM 2. PROPERTIES
The properties of CWC consist of land, easements, rights (including
water rights), buildings, reservoirs, standpipes, dams, wells, supply lines,
treatment plants, pumping plants, transmission and distribution mains and
conduits, mains and other facilities and equipment used for the collection,
purification, storage and distribution of water. CWC owns its principal
properties in fee, except that the Collinsville System's principal source of
water supply is a water supply contract with the MDC. (See below for description
of this contract.) The Company believes that CWC's properties are in good
operating condition. Water mains are located, for the most part, in public
streets and, in a few instances, are located on land owned by CWC in fee and
land occupied under easements, most of which are perpetual and valid and
sufficient for the purpose for which they are held. Although it is impractical
to investigate the validity of the title to some of the easements held by CWC
for distribution mains or to clear title in the cases where such distribution
easement titles have been found defective, any such irregularities or defects in
title which may exist do not materially impair the use of such properties in the
business of CWC. Substantially all of CWC's property is subject to the lien of
its Mortgage Indenture to secure CWC's First Mortgage Bonds.
CWC owns twelve water filtration facilities. Information about these
facilities is contained in the following table.
<PAGE> 26
Page 26
<TABLE>
<CAPTION>
Year Treatment Capacity
Filtration Placed in (in million
Facilities Operation Region gallons per day)
<S> <C> <C> <C>
Guilford Well 1965 Shoreline 0.70
Rockville 1970 Northern 5.00
Westbrook Well 1975 Shoreline 0.23
Hunt Well Field 1976 Northern 2.50
MacKenzie 1980 Shoreline 4.00
Williams 1981 Shoreline 1.00
Stafford Springs 1984 Northern 1.00
Reynolds Bridge 1986 Naugatuck 1.00
Windsor Locks 1988 Northern 0.30
Stewart 1989 Naugatuck 6.00
O'Bready Well 1994 Northern 0.50
Clinton Well 1997 Shoreline 1.00
</TABLE>
CWC has an agreement with the MDC, which provides, among other things,
for the operation and maintenance by MDC of a filtration plant (completed in
1990) to supply treated water for substantially all of CWC's Collinsville
System, with a capacity of 650,000 gallons per day, and the provision by MDC to
CWC's Collinsville System of up to 650,000 gallons per day of water from this
plant meeting all applicable Federal and State requirements. CWC has paid 40% of
the cost of construction of this plant and pays MDC an appropriate rate for
water used by CWC in excess of 400,000 gallons per day.
As of December 31, 1998, the transmission and distribution systems of
CWC consisted of approximately 1,010 miles of main, of which approximately 60
miles have been laid or acquired in the past five years. On that date,
approximately 75% of CWC's mains were eight-inch diameter or larger.
Substantially all new main installations are cement-lined ductile iron pipe of
eight-inch diameter or larger. Approximately 100 miles of the Company's
pipelines are asbestos cement.
From January 1, 1994 through December 31, 1998, CWC added $47,867,000
of gross plant additions (including plant financed by customer advances and
contributions in aid of construction, allowance for funds used during
construction and expenditures by CWC reimbursed by any other sources), and
retired or sold property having a book value of $1,904,000, resulting in net
additions during the period of $45,963,000.
<PAGE> 27
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CWC PRODUCTION FACILITIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Total Dependable Greatest 1998
Storage Yield (1) Avg. Daily Avg. Daily
Capacity (thousands Delivery Delivery
(thousands of gallons (thousands (thousands
of gallons) per day) of gallons) of gallons)
---------------- ------------------ ------------------ ------------
<S> <C> <C> <C> <C>
Northern Region:
Western System
Enfield-East Windsor System Wells 7,200
Suffield System Wells 200
South Windsor Wells 720
Ellsworth Wells 100
Lake Shenipsit 5,050,000 11,200
Talcottville Well 300
Vernon Wells 690
Windsor Locks Wells 300
Tolland Aqueduct Wells (16) 42
--------------
20,752 9,026 (2) 8,538
-------------- ------------------ ---------------
Somers System Wells 390 121 (18) 119
-------------- ------------------ ---------------
Crescent Lake System (4) - 33 (19) 33
-------------- ------------------ ---------------
Reservoir Heights (6) - 5 (7) 4
-------------- ------------------ ---------------
Stafford Springs System
#4 Reservoir 51,000
#3 Reservoir 15,000 700
#2 Reservoir 60,000
--------------
700 629 (8) 461
-------------- ------------------ ---------------
Llynwood System Wells 30 13 (3) 9
-------------- ------------------ ---------------
Lakewood/Lakeview System Wells 49 30 (5) 23
-------------- ------------------ ---------------
Nathan Hale System Wells 20 9 (8) 5
-------------- ------------------ ---------------
Shoreline Region:
Guilford System
Killingworth & Kelseytown Reservoirs 273,000 2,300
Wells 4,540
--------------
6,840 3,676 (9) 3,363
-------------- ------------------ ---------------
Chester System
Upper and Lower Reservoirs 176,000
Turkey Hill Reservoir - Haddam 149,000 1,200
Wilcox Reservoir - Chester 65,000
Deuse Pond - Chester 4,800
Well 190
--------------
1,390 900 (10) 585
-------------- ------------------ ---------------
Chester Village West Wells 30 13 (17) 11
-------------- ------------------ ---------------
Sound View System Wells 182 42 (17) 26
-------------- ------------------ ---------------
Point O'Woods 114 43 (19) 43
-------------- ------------------ ---------------
Bay Mountain 56 21 (19) 21
-------------- ------------------ ---------------
SDC 94 8 (19) 8
-------------- ------------------ ---------------
Masons Island (20) - - 34 (19) 34
-------------- ------------------ ---------------
</TABLE>
<PAGE> 28
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CWC PRODUCTION FACILITIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Total Dependable Greatest 1998
Storage Yield (1) Avg. Daily Avg. Daily
Capacity (thousands Delivery Delivery
(thousands of gallons (thousands (thousands
of gallons) per day) of gallons) of gallons)
----------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Naugatuck Region:
Central System
Long Hill Reservoir 506,000
Twitchell Reservoir 1,000
Candee Reservoirs (11) 7,000 3,600
W. H. Moody Reservoir 335,000
Straitsville Reservoir 7,000
Mulberry Reservoir 50,000
Beacon Valley Brook Supply
Meshaddock Brook Supply 300
Wells 1,000
------------------
4,900 4,970 (13) 2,653
------------------ ----------- -----------------
Terryville System
Harwinton Ave. Reservoir (11) 14,800 50
Wells 910
------------------
960 498 (2) 458
------------------ ----------- -----------------
Thomaston System
Thomaston Reservoir (11) 93,000 310
Wells 1,080
Waterbury Interconnection (12) 864
------------------
2,254 852 (14) 350
------------------ ----------- -----------------
Collinsville System
Water Acquired by Contract (15) 650
Reservoir (distribution) 100
------------------
650 391 (3) 358
------------------ ----------- -----------------
</TABLE>
(1) Dependable yield is the maximum continuous rate of withdrawal available
from a source of supply without seriously depleting the source. Dependable
yield is based on long-term (99% dry year) rainfall records, storage
capacity and watershed area.
(2) Occurred in 1988.
(3) Occurred in 1989.
(4) Supplied by water purchased from the Town of East Longmeadow,
Massachusetts.
(5) Occurred in 1994.
(6) Supplied by water purchased from the Town of Manchester.
(7) Occurred in 1995
(8) Occurred in 1990.
(9) Occurred in 1987.
(10) Occurred in 1969.
(11) Reservoir held in reserve and used for emergencies only.
(12) Generally used for emergencies. However, see "Item 3. Legal Proceedings"
for a discussion of the contamination of the Thomaston Wells. In January
1998 CWC reactivated the Reynolds Bridge wellfield and discontinued the
routine purchase of water from Waterbury.
(13) Occurred in 1964.
(14) Occurred in 1966.
(15) The Collinsville System has a right to up to 650,000 gallons per day
through agreement with MDC. The source is Nepaug Reservoir with a storage
capacity of 9.5 billion gallons. See Item 2. Properties" for a
description of this agreement.
(16) Connected to Northern Region, Western System on August 9, 1995.
(17) Occurred in 1996.
(18) Occurred in 1997.
(19) Occurred in 1998.
(20) Supplied by water purchased from Connecticut-American Water Company, Mystic
Division
<PAGE> 29
Page 29
ITEM 3. LEGAL PROCEEDINGS
In November 1997, CWC settled its lawsuit against the two parties deemed
responsible for the 1992 contamination of the Thomaston System's Reynolds Bridge
well field. The settlement agreement provided CWC with funds to cover expenses
already incurred in addition to covering potential future expenses stemming from
the contamination. As a result of remediation efforts by one of the two parties,
in early 1998 CWC was able to place in service its Thomaston well field having a
dependable yield of one million gallons per day. As a result of the
contamination this well field had been taken out of service in 1992, with CWC
obtaining necessary water supplies from its Waterbury interconnection. The
settlement agreement requires one of the parties deemed responsible for the
contamination to complete remediation of the site and binds that party to
reimburse CWC for specific ongoing costs incurred in operation of this well site
as well as additional costs required to provide safe, potable water to the
customers served by this portion of its distribution system. As a result of this
settlement CWC no longer has a liability for future clean up costs. This party
is currently reimbursing CWC for certain additional costs being presently
incurred by CWC in monitoring the well field and in treating the water.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE> 30
Page 30
ITEM 4.1 EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
Period Held or Term of Office
Name Age Office Prior Position Expires
---- --- ------ -------------- -------
<S> <C> <C> <C> <C>
M. T. Chiaraluce 56 President and Held position of 1999 Annual
Chief Executive President since Meeting
Officer January, 1992 and
Chief Executive
Officer position
with the Company
since July, 1992
D. C. Benoit 41 Vice President - Held current 1999 Annual
Finance, position or other Meeting
Accounting and executive position
Treasurer with the Company
since April, 1996
J. R. McQueen 56 Vice President - Held current 1999 Annual
Engineering and position or other Meeting
Planning management or
engineering
position with the
Company since
October, 1965
T. P. O'Neill 45 Vice President - Held current 1999 Annual
Operations position or other Meeting
engineering
position with the
Company since
February, 1980
M. P. Westbrook 39 Vice President - Held current 1999 Annual
Administration position or other Meeting
and Governmental management position
Affairs with the Company
since September,
1988
P. J. Bancroft 49 Assistant Held current 1999 Annual
Treasurer and position or other Meeting
Controller accounting position
with the Company
since October, 1979
M. G. DiAcri 53 Corporate Held administrative 1999 Annual
Secretary position with the Meeting
Company since
February, 1990
</TABLE>
There are no family relationships between any of the Directors and
Executive Officers of the Company.
<PAGE> 31
Page 31
Part II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over-the-counter market
under the symbol CTWS and is included in the NASDAQ National Market System. The
following table sets forth, for the periods indicated, the high and low last
sale prices of the Company's Common Stock in the over-the-counter market and the
dividends paid by the Company during the two most recent calendar years. The
quotations represent actual sales prices, but the sales reflected may be
inter-dealer transactions which do not reflect retail mark-up, mark-down or
commission. NASDAQ is the source of the quotations for all periods. Since its
affiliation with CWC in 1975, the Company has paid quarterly cash dividends on
its Common Stock.
<TABLE>
<CAPTION> Price *
------------------------- Dividends
Period High Low Paid*
------ ---- --- ---------
1998:
<S> <C> <C> <C>
First Quarter $23.000 $20.000 $ .29000
Second Quarter 24.000 21.420 .29000
Third Quarter 24.420 22.917 .29333
Fourth Quarter 28.375 25.000 .29333
1997:
First Quarter $20.000 $18.334 $ .28670
Second Quarter 19.667 18.334 .28670
Third Quarter 19.417 18.584 .29000
Fourth Quarter 22.667 18.917 .29000
</TABLE>
* Restated to reflect three-for-two stock split.
As of March 1, 1999 there were approximately 5,250 holders of record of
the Company's Common Stock.
Holders of Common Stock are entitled to receive such dividends as may
be declared by the Board of Directors from funds legally available therefor.
Future dividends of the Company will be dependent upon timely and adequate rate
relief, consolidated and parent company net income, availability of cash to the
Company and CWC, the financial condition of the Company and CWC, the ability of
CWC to pay dividends to the Company, the ability of the Company and CWC to sell
their securities, the requirements of the construction program of CWC and other
conditions existing at the time.
The Company is not permitted to pay any dividends on its Common Stock
unless full cumulative dividends to the last preceding dividend date for all
outstanding shares of Cumulative Preferred Stock of the Company have been paid
or set aside for payment.
<PAGE> 32
Page 32
The income of the Company is derived mainly from earnings on its equity
investment in CWC. At December 31, 1998 the retained earnings of CWC aggregated
$15,770,000. As a result of dividend restrictions contained in CWC's mortgage
indenture and Preferred Stock provisions, the amount of cash dividends payable
on CWC's common equity capital out of CWC's retained earnings was limited to
$15,520,000.
The Company has a Dividend Reinvestment and Common Stock Purchase Plan.
Under the plan, customers and employees of CWC and holders of Common Stock who
elect to participate may automatically reinvest all or specified percentages of
their dividends in additional shares of Common Stock and may also make optional
cash payments of up to $1,000 per month to purchase additional shares of Common
Stock. The Company may issue authorized but unissued shares of Common Stock to
meet the requirements of the plan, or buy the shares on the open market at its
discretion. 1,500,000 shares have been registered with the Securities and
Exchange Commission for that purpose. Under the plan, approximately 1,170,000
shares had been issued by the Company as of December 31, 1998. Since the third
quarter of 1996, the Company has been buying shares on the open market to
satisfy plan requirements.
The Company has a Performance Stock Program that provides for an
aggregate maximum of up to 50,000 shares of Common Stock of the Company to be
issued as awards of restricted stock to eligible employees of CWC, conditioned
on the attainment of performance goals established by the Salary Committee.
Under the plan 43,926 shares, 8,483 of which are restricted, and 7,797 of which
are common stock equivalent shares had been issued by the Company as of December
31, 1998.
The Company has an Employee Savings 401-K Match Plan. Under the Plan
approximately 20,550 shares of Common Stock had been issued by the Company as of
December 31, 1998.
On August 12, 1998 the Company's Board of Directors authorized a new
Shareholder Rights Plan to replace the previous Rights Plan which had been
adopted in 1988 and expired on October 11, 1998. Pursuant to the new Plan, the
Board authorized a dividend distribution of one Right to purchase one
one-hundredth of a share of Series A Junior Participating Preference Stock of
the Company for each outstanding share of the Company's Common Stock. The
distribution was effected October 11, 1998.
Upon the terms of the new Shareholder Rights Plan, each Right will
entitle shareholders to buy one one-hundredth of a share of Series A Junior
Participating Preference Stock at a purchase price of $90, and the Rights will
expire October 11, 2008. The Rights will be exercisable only if a person or
group acquires 15% or more of the Company's Common Stock or announces a tender
or exchange offer for 15% or more of the Company's Common Stock. The Board will
be entitled to redeem the Rights at $0.01 per Right at any time before such
<PAGE> 33
Page 33
acquisition occurs and upon certain conditions after such a position has been
acquired.
Upon the acquisition of 15% or more of the Company's Common Stock by
any person or group, each Right will entitle its holder to purchase, at the
Right's purchase price, a number of shares of the Company's Common Stock having
a market value equal to twice the Right's purchase price. In such event, Rights
held by the acquiring person will not be allowed to purchase any of the
Company's Common Stock or other securities of the Company. If, after the
acquisition of 15% or more of the Company's Common Stock by any person or group,
the Company should consolidate with or merge with and into any person and the
Company should not be the surviving company, or, if the Company should be the
surviving company and all or part of its Common Stock should be exchanged for
the securities of any other person, or if more than 50% of the assets or earning
power of the Company were sold, each Right (other than Rights held by the
acquiring person, which will become void) will entitle its holder to purchase,
at the Right's purchase price, a number of shares of the acquiring company's
common stock having a market value at that time equal to twice the Right's
purchase price.
<PAGE> 34
Page 34
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARY
SUPPLEMENTAL INFORMATION (Unaudited)
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(Thousands of dollars except where indicated)
Years Ended December 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME
<S> <C> <C> <C>
Operating Revenues $37,924 $38,501 $38,592
Operating Expenses $27,620 $28,167 $28,464
Operating Income $10,304 $10,334 $10,128
Interest and Debt Expense $4,316 $4,304 $3,967
Net Income Applicable to Common Stock $6,927 $6,766 $6,565
Weighted Average Common Shares Outstanding* 4,535,150 4,524,419 4,496,006
Basic Earnings Per Average Common Share* $1.53 $1.50 $1.46
Number of Shares Outstanding at Year End* 4,536,285 4,527,636 4,518,125
ROE on Year End Common Equity 12.0% 12.1% 12.1%
Cash Dividends Paid Per Common Share* $1.167 $1.153 $1.133
Dividend Payout Ratio 76.0% 77.0% 78.0%
BALANCE SHEET
Common Stockholders' Equity $57,945 $56,069 $54,395
Long-Term Debt $62,501 $54,532 $54,430
Preferred Stock (Consolidated, Excluding Current Maturities) $772 $772 $772
- ----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $121,218 $111,373 $109,597
Stockholders' Equity (Includes Preferred Stock) 48% 51% 50%
Long-Term Debt 52% 49% 50%
Net Utility Plant $167,326 $163,757 $153,898
Book Value - Per Common Share* $12.77 $12.38 $12.04
* Reflects three-for-two stock split of September 1998.
OPERATING DATA
(Thousands of dollars except where indicated) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
REVENUE CLASS
Residential $24,170 $24,476 $24,485
Commercial 4,556 4,633 4,716
Industrial 1,640 1,850 1,861
Public Authority 1,065 1,057 1,050
Fire Protection 6,169 6,197 6,226
Other (including non-metered accounts) 324 288 254
- ----------------------------------------------------------------------------------------------------------------------------------
Total Operating Revenues $37,924 $38,501 $38,592
- ----------------------------------------------------------------------------------------------------------------------------------
Number of Customers (Average) 63,399 62,415 61,597
Billed Consumption (Millions of Gallons) 5,560 5,556 5,427
Number of Employees 156 157 162
</TABLE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(Thousands of dollars except where indicated)
Years Ended December 31, 1995 1994
- -----------------------------------------------------------------------------------------------------------------
INCOME <C> <C>
Operating Revenues $39,350 $38,129
Operating Expenses $29,328 $28,474
Operating Income $10,022 $9,655
Interest and Debt Expense $3,946 $3,940
Net Income Applicable to Common Stock $6,325 $5,842
Weighted Average Common Shares Outstanding* 4,377,626 4,218,684
Basic Earnings Per Average Common Share* $1.44 $1.38
Number of Shares Outstanding at Year End* 4,450,136 4,305,839
ROE on Year End Common Equity 12.2% 12.2%
Cash Dividends Paid Per Common Share* $1.120 $1.10
Dividend Payout Ratio 78.0% 80.0%
BALANCE SHEET
Common Stockholders' Equity $51,788 $47,983
Long-Term Debt $54,460 $54,600
Preferred Stock (Consolidated, Excluding Current Maturities) $772 $772
- -----------------------------------------------------------------------------------------------------
Total Capitalization $107,020 $103,355
Stockholders' Equity (Includes Preferred Stock) 49% 47%
Long-Term Debt 51% 53%
Net Utility Plant $146,536 $140,784
Book Value - Per Common Share* $11.64 $11.14
* Reflects three-for-two stock split of September 1998.
OPERATING DATA
(Thousands of dollars except where indicated) 1995 1994
- ----------------------------------------------------------------------------------------------------
REVENUE CLASS
Residential $25,147 $24,488
Commercial 4,852 4,696
Industrial 1,868 1,922
Public Authority 1,090 893
Fire Protection 6,129 6,021
Other (including non-metered accounts) 264 109
- -----------------------------------------------------------------------------------------------------
Total Operating Revenues $39,350 $38,129
- -----------------------------------------------------------------------------------------------------
Number of Customers (Average) 60,844 60,082
Billed Consumption (Millions of Gallons) 5,595 5,421
Number of Employees 163 164
</TABLE>
<PAGE> 35
Page 35
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
OVERVIEW
Connecticut Water Service, Inc. (the Company) is a
non-operating holding company, whose income is derived primarily from The
Connecticut Water Company (the Subsidiary). The Subsidiary supplies water to
over 63,000 customers in 35 towns throughout the State of Connecticut and is
subject to regulation by the Connecticut Department of Public Utility Control
(DPUC) regarding financial issues, rates, and operating issues; and various
other state and federal regulatory agencies concerning water quality and
environmental standards.
The Company's 1998 consolidated net income is $6,927,000 or
$1.53 a share. This is the Company's 8th consecutive year of increased earnings.
The Company paid common dividends of $1.167 a share in 1998. This is the
Company's 29th consecutive year of increased dividend per share payments. In
1998, the Company earned a 12.0% return on year end common equity.
REGULATORY MATTERS AND INFLATION
The Subsidiary's last general rate proceeding was in 1991. The
resulting rate decision granted the Subsidiary a 12.7% allowed return on common
equity and a 10.74% allowed return on rate base. During 1997 this decision was
reopened for the limited purposes of flowing through to customers cost savings
related to a reduction in state gross earnings taxes payable by the Subsidiary
and allowing the Subsidiary to collect certain costs related to postretirement
benefits other than pension. The Subsidiary's rates were reduced approximately
4.5% due to the limited reopened rate proceeding. The Subsidiary's resulting
reduction in revenues was offset by a corresponding reduction in its operating
expenses.
The Company, like all other businesses, is affected by
inflation, most notably by the continually increasing costs required to
maintain, improve and expand its service capability. The cumulative effect of
inflation results in significantly higher facility replacement costs which must
be recovered from future cash flow. The ability of the Subsidiary to recover
this increased investment in facilities is dependent upon future revenue
increases which are subject to approval by the Connecticut Department of Public
Utility Control.
<PAGE> 36
Page 36
Management does not presently plan to petition the DPUC for an
increase in permanent rates in 1999. Future economic and financial market
conditions, coupled with governmental regulations and fiscal policy, plus other
factors which are unpredictable and often beyond the control of the Subsidiary,
will influence when the Subsidiary requests a revision to rates charged to its
customers.
OUTLOOK
The Company's profitability is primarily attributable to the
sale and distribution of water, the amount of which is dependent on seasonal
weather fluctuations, particularly during the summer months when water demand
will vary with rainfall and temperature levels.
Commencing January 1, 1999 the Company established a new
Subsidiary, Connecticut Water Utility Services, Inc. (CWUS) to handle
unregulated business activities previously transacted by The Connecticut Water
Company, its regulated subsidiary. It also transferred the ownership of The
Connecticut Water Company's unconsolidated subsidiary, Chester Realty, Inc.
directly to Connecticut Water Service, Inc. In 1999 the Company's consolidated
financial statements will encompass the Company's two new subsidiaries, (CWUS
and Chester Realty) in addition to The Connecticut Water Company.
Late in 1998 the Company reached agreements to acquire two
smaller water companies in Eastern Connecticut through an exchange of the
Company's common stock for the capital stock of the acquired companies. These
two companies are Gallup Water Service, Inc., headquartered in Plainfield, and
Crystal Water Utilities Corporation, headquartered in Danielson. Gallup and
Crystal have over 1,100 and 3,300 customers and annual revenues of approximately
$575,000 and $1,800,000, respectively. These two mergers are expected to be
finalized in 1999. Both of these mergers are expected to qualify as tax exempt
stock exchanges and are expected to be accorded "pooling of interests"
accounting treatment. The Company expects to initially operate these two
companies as separate subsidiaries of Connecticut Water Service, Inc., each with
its own rate structure.
RESULTS OF OPERATIONS
1998 COMPARED WITH 1997
Net income applicable to common stock for 1998 increased from
that of 1997 by $161,000, or $.03 per average common share, on an increased
number of common shares outstanding due primarily to the following:
- Other income increased $203,000, or 26%, primarily due to increased
profits from land sales.
<PAGE> 37
Page 37
partially offset by
- An increase in interest and debt expense by $12,000 due to a higher
level of debt (long and short-term combined) outstanding in 1998 as
compared to 1997. Refinancing $18,000,000 of debt in 1998 at lower
interest rates minimized the overall increase in interest expense.
- A decrease in operating income of $30,000. The elimination of
the Connecticut Gross Earnings Tax for the water companies on
July 1, 1997 and the third quarter 1997 adoption of FAS 106 for
rates had no impact on operating income but did reduce both
revenues and operating expenses by approximately $775,000 in
1998 as compared to 1997. (Reduction in Gross Earnings Tax of
$930,000 less an increase of $155,000 in FAS 106 costs).
- Operating revenues decreased 1.5% primarily due to:
- The overall 4.5% rate reduction during the second half of
1997 primarily related to the elimination of the Connecticut
Gross Earnings Tax for water companies.
partially offset by
- Increase in metered revenues due to expansion of the
customer base achieved through the Company's ongoing growth
strategy.
- Higher unmetered revenues due to an increasing basis for
billing fire protection charges related to the expansion of
the water systems.
- Operating expenses decreased 2.0% primarily due to:
- The elimination of the Connecticut Gross Earnings Tax
- The 1997 Early Retirement Program
- Reduced income tax expense due to lower taxable income, a
decline in the State Corporate tax rate and utilization of
new State Corporation Tax Credits
partially offset by
- Increased operation and maintenance expense
- Increased depreciation expense
1997 COMPARED WITH 1996
Net income applicable to common stock for 1997 increased from that of
1996 by $201,000, or $0.05 per average common share, on an increased number of
common shares outstanding due primarily to the following:
<PAGE> 38
Page 38
- Operating income increased $206,000 primarily due to
increased water sales in 1997 resulting from both the hot,
dry summer of 1997, compared to the cool, wet summer of 1996,
as well as customer growth through acquisition and expansion
within the Company's existing service territory. The
elimination of the Connecticut Gross Earnings Tax for water
companies on July 1, 1997 had no impact on operating income
but did reduce both revenues and operating expenses by
approximately $1,000,000 in 1997.
- Operating revenues decreased .2% primarily due to:
- The overall 4.5% rate reduction during the second half of
1997 primarily related to the elimination of the Connecticut
Gross Earnings Tax for water companies.
partially offset by
- A 2.4% increase in the volume of water sold to customers due
to the hot, dry 1997 summer weather and an increasing
customer base.
- An increase in unmetered revenues due to higher fire
protection billings plus additional unmetered customers from
the Point O'Woods acquisition.
- Operating expenses decreased 1.0% primarily due to:
- Decreased tax expense primarily resulting from July 1,
1997 elimination of the Connecticut Gross Earnings Tax.
partially offset by
- A 1997 organizational charge reflecting charges associated
with the Subsidiary's 1997 early retirement program. This
charge represents the actuarially determined expense for the
employees who accepted the offer of early retirement and the
administrative costs related to the early retirement plan.
- Other income increased $332,000, or 75% primarily due to
increased land sales, non-water sales earnings and higher
Allowance for Funds Used During Construction (AFUDC).
- Interest expense increased $337,000, or 8.5%, primarily due to a
higher average balance of interim loans outstanding in 1997 at
higher average interest rates.
<PAGE> 39
Page 39
LIQUIDITY AND CAPITAL RESOURCES
Interim bank loans payable at year end 1998 were $1,895,000,
approximately $6,916,000 lower than the same time the prior year. During 1998
$8,000,000 of the Company's interim bank loans were refinanced with proceeds
from the Subsidiary's issuance of 30 year, 5.125% tax exempt unsecured bonds.
The Company elected not to fund any of the 1998 construction expenditures with
equity funding through its Dividend Reinvestment Program (DRIP) by issuing new
share of common stock, but instead provided DRIP shares through open market
purchases and negotiated transactions.
Management considers the current $9,000,000 line of credit with three
banks adequate to finance any expected short-term borrowing requirements that
may arise from operations during 1999. Interest expense charged on interim bank
loans will fluctuate subject to financial market conditions experienced during
the year.
The Board of Directors has approved a construction budget for 1999 of
$7,300,000 net of amounts to be financed by customer advances and contributions
in aid of construction. Funds provided by operating activities are expected to
finance all of this construction program given normal weather patterns and
related operating revenue billings. Refer to Note 10, Utility Plant and
Construction Program, in Notes to Consolidated Financial Statements for
additional discussion for the Subsidiary's future construction program.
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.
<PAGE> 40
Page 40
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 is preparing a plan for managing the risks and costs
associated therewith. The DPUC has informed the Company that it will review the
readiness of nine utilities, of which the Company is one.
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 may not be Year 2000
compliant will be completed by the end of the first 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 40% of the
items that it has inventoried as potentially non-compliant and has completed
testing or has gotten vendor certification on approximately 25% of such items.
The Company estimates that this assessment process will be completed by the end
of the first quarter of 1999, and anticipates deploying and testing all repairs
and replacements of non-compliant systems and equipment by July, 1999.
<PAGE> 41
Page 41
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.
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 is developing contingency plans for dealing with the most
reasonably likely worst case scenario. Such plans include manual back-ups 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 effected by the Company's
continued Year 2000 assessment and testing. The Company expects to complete such
assessment and contingency plans during the second or 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
<PAGE> 42
Page 42
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.
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> 43
Page 43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Connecticut Water Service, Inc.:
We have audited the accompanying consolidated balance sheets of Connecticut
Water Service, Inc. (a Connecticut corporation) and Subsidiary as of December
31, 1998 and 1997, and the related consolidated statements of income and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Connecticut Water
Service, Inc. and Subsidiary as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 11, 1999
<PAGE> 44
Page 44
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Years Ended December 31, (In thousands except per share amounts) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues $37,924 $38,501 $38,592
- -------------------------------------------------------------------------------------------------------------------------------
Operating Expenses
Operation 13,783 13,098 12,964
Maintenance 2,055 1,952 1,664
Depreciation 3,854 3,505 3,315
Federal Income Taxes 3,379 3,661 3,878
Connecticut Corporation Business Taxes 601 825 934
Taxes Other Than Income Taxes 3,948 4,702 5,709
Organizational Charges -- 424 --
- -------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 27,620 28,167 28,464
- -------------------------------------------------------------------------------------------------------------------------------
Utility Operating Income 10,304 10,334 10,128
- -------------------------------------------------------------------------------------------------------------------------------
Other Income (Deductions)
Interest 139 122 179
Allowance for Funds Used During Construction 476 575 337
Gain on Sale of Property 475 183 19
Non-Water Sales Earnings 186 174 (3)
Miscellaneous Income (Deductions) (37) (65) (69)
Taxes on Other Income (262) (215) (21)
- -------------------------------------------------------------------------------------------------------------------------------
Total Other Income (Deductions) 977 774 442
- -------------------------------------------------------------------------------------------------------------------------------
Interest and Debt Expenses
Interest on Long-Term Debt 3,636 3,460 3,460
Other Interest Charges 472 656 319
Amortization of Debt Expense 208 188 188
- -------------------------------------------------------------------------------------------------------------------------------
Total Interest and Debt Expenses 4,316 4,304 3,967
- -------------------------------------------------------------------------------------------------------------------------------
Net Income Before Preferred Dividends 6,965 6,804 6,603
Preferred Stock Dividend Requirement 38 38 38
- -------------------------------------------------------------------------------------------------------------------------------
Net Income Applicable to Common Stock $6,927 $6,766 $6,565
- -------------------------------------------------------------------------------------------------------------------------------
Weighted Average Common Shares Outstanding* 4,535 4,524 4,496
- -------------------------------------------------------------------------------------------------------------------------------
Basic and Fully Diluted Earnings Per Average Common Share* $1.53 $1.50 $1.46
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Reflects three-for-two stock split as described in Note 2 of the Notes to
Consolidated Financial Statements.
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 45
Page 45
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, (Thousands of dollars) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Net Income Before Preferred Dividends $6,965 $6,804 $6,603
- ----------------------------------------------------------------------------------------------------------------------------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation (including $127 in 1998, $119 in 1997,
and $105 in 1996 charged to other accounts) 3,981 3,624 3,420
Change in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable and
Accrued Unbilled Revenues (364) (686) 235
(Increase) Decrease in Other Current Assets (104) (22) (32)
(Increase) Decrease in Other Non-Current Items (67) 51 (107)
Increase (Decrease) in Accounts Payable, Accrued
Expenses and Other Current Liabilities 277 866 (97)
Increase in Deferred Income Taxes and
Investment Tax Credits, Net 1,002 1,062 1,051
Recoverable Cleanup Costs (net) -- 2,343 (505)
- ----------------------------------------------------------------------------------------------------------------------------
Total Adjustments 4,725 7,238 3,965
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 11,690 14,042 10,568
- ----------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross Additions to Utility Plant (including
Allowance For Funds Used During Construction of
$476 in 1998, $575 in 1997 and $337 in 1996) (7,638) (13,546) (10,971)
- ----------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds from Interim Bank Loans 1,895 8,811 5,795
Repayment of Interim Bank Loans (8,811) (5,795) (2,646)
Proceeds from Issuance of Long-Term Debt 18,000 132 --
Reduction of Long-Term Debt Including Current Portion (10,030) (30) (30)
Proceeds from Issuance of Common Stock 267 256 1,136
Advances, Contributions and Funds from
Others for Construction, Net 745 1,827 1,191
Costs Incurred to Issue Long-Term Debt, Preferred Stock,
and Common Stock (1,091) (133) --
Cash Dividends Paid (5,320) (5,253) (5,132)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities (4,345) (185) 314
- ----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash (293) 311 (89)
Cash at Beginning of Year 346 35 124
- ----------------------------------------------------------------------------------------------------------------------------
Cash at End of Year $53 $346 $35
- ----------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (Net of Amounts Capitalized) $3,605 $4,370 $3,773
State and Federal Income Taxes $3,269 $3,425 $3,715
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 46
Page 46
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 31, (Thousands of dollars) 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Utility Plant
Utility Plant $220,455 $207,476
Construction Work in Progress 4,459 9,882
Utility Plant Acquisition Adjustments (1,253) (1,255)
- ------------------------------------------------------------------------------------------------------------
223,661 216,103
Accumulated Provision for Depreciation (56,335) (52,346)
- ------------------------------------------------------------------------------------------------------------
Net Utility Plant 167,326 163,757
- ------------------------------------------------------------------------------------------------------------
Investments
Unconsolidated Subsidiary at Underlying Equity 129 138
Other 1,771 1,432
- ------------------------------------------------------------------------------------------------------------
Total Investments 1,900 1,570
- ------------------------------------------------------------------------------------------------------------
Current Assets
Cash 53 346
Accounts Receivable (Less Allowance, 1998 - $200; 1997 - $126) 4,841 4,568
Accrued Unbilled Revenues 2,776 2,684
Materials and Supplies, at Average Cost 664 643
Prepayments and Other Current Assets 197 115
- ------------------------------------------------------------------------------------------------------------
Total Current Assets 8,531 8,356
- ------------------------------------------------------------------------------------------------------------
Deferred Charges and Regulatory Assets
Unamortized Debt Issuance Expense 5,870 5,023
Income Taxes 8,998 8,623
Postretirement Benefits Other Than Pension 1,150 1,220
Other Costs 811 728
- ------------------------------------------------------------------------------------------------------------
Total Deferred Charges and Regulatory Assets 16,829 15,594
- ------------------------------------------------------------------------------------------------------------
Total Assets $194,586 $189,277
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 47
Page 47
<TABLE>
<CAPTION>
December 31, (Thousands of dollars) 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
Common Stockholders' Equity:
Common Stock $42,810 $42,579
Retained Earnings 15,135 13,490
Preferred Stock 772 772
Long-Term Debt 62,501 54,532
- ------------------------------------------------------------------------------------------------------------
Total Capitalization 121,218 111,373
- ------------------------------------------------------------------------------------------------------------
Current Liabilities
Interim Bank Loans Payable 1,895 8,811
Accounts Payable 5,857 6,052
Accrued Taxes 752 1,014
Accrued Interest 1,210 709
Other 2,442 2,208
- ------------------------------------------------------------------------------------------------------------
Total Current Liabilities 12,156 18,794
- ------------------------------------------------------------------------------------------------------------
Advances for Construction 14,746 15,203
- ------------------------------------------------------------------------------------------------------------
Contributions in Aid of Construction 19,878 18,750
- ------------------------------------------------------------------------------------------------------------
Deferred Federal Income Taxes 14,898 13,838
- ------------------------------------------------------------------------------------------------------------
Unfunded Future Income Taxes 8,500 8,000
- ------------------------------------------------------------------------------------------------------------
Unfunded Postretirement Benefits Other Than Pensions 1,150 1,220
- ------------------------------------------------------------------------------------------------------------
Unamortized Investment Tax Credits 2,040 2,099
- ------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $194,586 $189,277
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 48
Page 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - Connecticut Water Service, Inc. (the Company) is the parent
company of The Connecticut Water Company (the Subsidiary). Intercompany accounts
and transactions have been eliminated in the accompanying consolidated financial
statements.
PUBLIC UTILITY REGULATION - The Subsidiary is subject to regulation for rates
and other matters by the Connecticut Department of Public Utility Control (DPUC)
and follows accounting policies prescribed by the DPUC. The Company prepares its
financial statements in accordance with generally accepted accounting principles
which includes the provisions of Statement of Financial Accounting Standards No.
71, "Accounting for the Effects of Certain Types of Regulation," (FAS 71). FAS
71 requires a cost-based, rate-regulated enterprise such as the Subsidiary to
reflect the impact of regulatory decisions in its financial statements. The
DPUC, through the rate regulation process, can create regulatory assets that
result when costs are allowed for ratemaking purposes in a period other than the
period in which the costs would be charged to expense by an unregulated
enterprise.
In accordance with FAS 71, the Subsidiary has recorded regulatory assets or
liabilities as appropriate, primarily related to income taxes and postretirement
benefits costs. The specific amounts related to these items are disclosed in the
consolidated balance sheets. The Company believes, based on current regulatory
circumstances, that regulatory assets are probable of recovery.
The Subsidiary continues to be subject to cost-of-service based rate regulation
by the DPUC. Based upon current regulation and recent regulatory decisions, the
Company believes that its use of regulatory accounting is appropriate and in
accordance with the provisions of FAS 71.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
<PAGE> 49
Page 49
REVENUES - The Subsidiary accrues an estimate for the amount of revenues
relating to sales unbilled at the end of each quarter. Generally, all customers
are billed quarterly, except larger commercial and industrial customers, and
public fire protection customers, who are billed monthly. Substantially all
customers, except fire protection customers, are metered. Public fire protection
charges are based on the length and diameter of the water main and number of
hydrants in service. Private fire protection charges are based on the diameter
of the connection to the water main.
UTILITY PLANT - Utility plant is stated at original cost of such property when
first devoted to public service. The difference between the original cost and
the cost to the Subsidiary is charged or credited to utility plant acquisition
adjustments. Utility plant accounts are charged with the cost of improvements
and replacements of property including an allowance for funds used during
construction. Retired or disposed of depreciable plant is charged to accumulated
provision for depreciation together with any costs applicable to retirement,
less any salvage received. Maintenance of utility plant is charged to expense.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION - Allowance for Funds Used During
Construction (AFUDC) generally represents the cost of funds used to finance the
construction of the Subsidiary's utility plant. Generally, utility plant under
construction is not recognized as part of the Subsidiary's rate base for
ratemaking purposes until facilities are placed into service, and accordingly,
the Subsidiary charges AFUDC to the construction cost of utility plant.
Capitalized AFUDC, which does not represent current cash income, is recovered
through rates over the service lives of the facilities.
In order for certain acquisitions of failing water systems not to degrade the
Subsidiary's earnings, the Subsidiary has requested that the DPUC allow it to
record AFUDC on its investments in these systems. Starting with the 1995 DPUC
decision which approved the Subsidiary's acquisition of the Sound View Water
System, the DPUC has allowed the Subsidiary to capitalize financing costs
relating to several of its acquisitions until its next general rate proceeding.
Capitalized financing costs relating to these acquisitions amounted to $354,000
in 1998 and $256,000 in 1997.
The Subsidiary's allowed rate of return on rate base is used to calculate AFUDC.
<PAGE> 50
Page 50
DEPRECIATION - Depreciation is computed on a straight line basis at various
rates, approved by the DPUC, estimated to be sufficient to provide for the
recovery of the investment in utility plant over its useful life. Water
treatment facilities are depreciated using a 2.5% composite rate, while most
other utility plant is depreciated at a composite rate of 1.6%. The depreciation
rates, based on the average balance of depreciable property, were 2.0% for 1998,
and 1.9% for 1997 and 1996.
CUSTOMERS' ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF CONSTRUCTION -
Under the terms of construction contracts with real estate developers and
others, the Subsidiary receives advances for the costs of new main
installations. Refunds are made, without interest, as services are connected to
the main, over periods not exceeding fifteen years and not in excess of the
original advance. Unrefunded balances, at the end of the contract period, are
credited to contributions in aid of construction (CIAC) and are no longer
refundable.
INCOME TAXES - The Company provided deferred taxes for all temporary book-tax
differences using the liability method. Under the liability method, deferred
income taxes are recognized at currently enacted income tax rates to reflect the
tax effect of temporary differences between the financial reporting and tax
bases of assets and liabilities. Such temporary differences are the result of
provisions in the income tax law that either require or permit certain items to
be reported on the income tax return in a different period than they are
reported in the financial statements. To the extent such income taxes increase
or decrease future rates, an offsetting regulatory asset and liability have been
recorded in the accompanying consolidated balance sheets.
The Company believes that all deferred income tax assets will be realized in the
future. Approximately $900,000 of the December 31, 1998 and $500,000 of the 1997
unfunded future income taxes are related to deferred Federal income taxes. The
remaining balance of the unfunded future income taxes is related to deferred
State income taxes.
Deferred Federal income taxes consist primarily of amounts that have been
provided for accelerated depreciation subsequent to 1981, as required by Federal
income tax regulations. Deferred taxes have also been provided for temporary
differences in the recognition of certain expenses for tax and financial
statement purposes as allowed by DPUC ratemaking policies.
Connecticut Corporation Business Taxes have been reflected primarily using the
flow-through method of accounting for temporary differences in accordance with
required DPUC ratemaking policies.
<PAGE> 51
Page 51
MUNICIPAL TAXES - Municipal taxes are expensed over the 12 month period
beginning on July 1 following the lien date, corresponding with the period in
which the municipal services are provided.
OTHER DEFERRED COSTS - In accordance with DPUC ratemaking procedures, costs
which benefit future periods, such as tank painting, are expensed over the
periods they benefit.
UNAMORTIZED DEBT ISSUANCE EXPENSE - The issuance costs of long-term debt,
including the remaining balance of issuance costs on long-term debt issues that
have been refinanced prior to maturity and related call premiums, are amortized
over the respective lives of the outstanding debt, as approved by the DPUC.
EARNINGS PER SHARE - Earnings per share is computed on the weighted average
number of common shares outstanding during each year. Basic and fully diluted
earnings per share are the same amounts.
RECLASSIFICATION - Certain reclassifications have been made to conform
previously reported data to the current presentation.
NOTE 2: STOCK SPLIT
In September 1998 the Company effected a three-for-two stock split. The
distribution of these shares increased the number of shares outstanding by
1,511,838 shares. In conjunction with the stock split, a cash payment was issued
to shareholders in lieu of issuance of any fractional shares. The fractional
share adjustment amounted to a reduction in shares outstanding of 587 shares,
post split. All outstanding common shares and per share amounts in this report
have been restated to reflect this stock split. Appropriate adjustments to
reflect the stock split were made to the Company's Performance Stock Program.
NOTE 3: INCOME TAX EXPENSE
Income Tax Expense is comprised of the following:
<TABLE>
<CAPTION>
(Thousands of dollars) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal Classified as Operating Expense $ 3,379 $ 3,661 $ 3,878
Federal Classified as Other Income 193 143 30
- -------------------------------------------------------------------------------------------------------------------
Total Federal Income Tax Expense 3,572 3,804 3,908
- -------------------------------------------------------------------------------------------------------------------
State Classified as Operating Expense 601 825 934
State Classified as Other Income 69 63 (27)
- -------------------------------------------------------------------------------------------------------------------
Total State Income Tax Expense 670 888 907
- -------------------------------------------------------------------------------------------------------------------
Total Income Tax Expense $ 4,242 $ 4,692 $ 4,815
==================================================================================================================
</TABLE>
<PAGE> 52
Page 52
The components of the Federal and State income tax provisions are:
<TABLE>
<S> <C> <C> <C>
Current:
Federal $ 2,571 $ 2,742 $ 2,833
State 670 888 907
- -------------------------------------------------------------------------------------------------------------------
Total Current 3,241 3,630 3,740
- -------------------------------------------------------------------------------------------------------------------
Deferred Income Taxes, Net:
Federal
Investment Tax Credit (59) (59) (59)
Capitalized Interest 32 47 38
Depreciation 1,028 1,074 1,071
Advances and CIAC -- -- 25
- -------------------------------------------------------------------------------------------------------------------
Total Deferred Income Taxes, Net 1,001 1,062 1,075
- -------------------------------------------------------------------------------------------------------------------
Total $ 4,242 $ 4,692 $ 4,815
The calculation of Pre-Tax Income is as follows:
Pre-Tax Income
Net Income Before Preferred Dividends of Parent $ 6,965 $ 6,804 $ 6,603
Income Taxes 4,242 4,692 4,815
Total Pre-Tax Income $11,207 $11,496 $11,418
</TABLE>
In accordance with required regulatory treatment, deferred income taxes are not
provided for certain timing differences. This treatment, along with other items,
causes differences between the statutory income tax rate and the effective
income tax rate. The differences between the effective income tax rate recorded
by the Company and the statutory Federal tax rate are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal Statutory Income Tax Rate 34.0% 34.0% 34.0%
Tax Effect of Differences:
State Income Taxes Net of Federal Benefit 3.9% 5.1% 5.3%
Depreciation 1.4% 1.5% 1.5%
Pension Costs .5% .6% .6%
Debt Refinancing Costs (2.7%) .2% .2%
Other .8% (.6%) .6%
- -------------------------------------------------------------------------------------------------------------------
Effective Income Tax Rate 37.9% 40.8% 42.2%
===================================================================================================================
</TABLE>
<PAGE> 53
Page 53
NOTE 4: COMMON STOCK
The Company has 7,500,000 authorized shares of common stock, no par value. A
summary of the changes in the common stock accounts for the period January 1,
1996 through December 31, 1998, appears below:
<TABLE>
<CAPTION>
Issuance
(Thousands of dollars except share amounts) Shares* Amount Expense Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996 4,450,136 $4,536 $(1,216) $41,320
Stock issued through Dividend Reinvestment Plan 55,371 940 -- 940
Stock issued through Performance Stock Program 7,361 100 -- 100
Stock issued to Employee Savings 401-K Match Plan 5,257 96 -- 96
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 4,518,125 43,672 (1,216) 42,456
Dividend Reinvestment Plan -- -- (133) (133)
Stock and equivalents issued through
Performance Stock Program 5,526 178 -- 178
Stock issued to Employee Savings 401-K Match Plan 3,985 78 -- 78
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 4,527,636 43,928 (1,349) 42,579
Stock Split (587)* -- (36) (36)
Stock and equivalents issued through
Performance Stock Program 7,281 211 -- 211
Stock issued to Employee Savings 401-K Match Plan 1,955 56 -- 56
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998(1) 4,536,285 $44,195 $(1,385) $42,810
===================================================================================================================
</TABLE>
(1) Includes 8,483 restricted and 7,797 common stock equivalent shares issued
through the Performance Stock Program.
* Reflects three-for-two stock split as described in Note 2.
On August 12, 1998 the Board and Directors authorized a new Shareholder Rights
Plan to replace the previous Rights Plan which had been adopted in 1988 and
expired on October 11, 1998. Pursuant to the new Plan, the Board authorized a
dividend distribution of one Right to purchase one one-hundredth of a share of
Series A Junior Participating Preference Stock of the Company for each
outstanding share of the Company's Common Stock. The distribution was effected
October 11, 1998.
Upon the terms of the new Shareholder Rights Plan, each Right will entitle
shareholders to buy one one-hundredth of a share of Series A Junior
Participating Preference Stock at a purchase price of $90, and the Rights will
expire October 11, 2008. The Rights will be exercisable only if a person or
group acquires 15% or more of the Company's Common Stock or announces a tender
or exchange offer for 15% or more of the Company's Common Stock. The Board will
be entitled to redeem the Rights at $0.01 per Right at any time before such
acquisition occurs and upon certain conditions after such a position has been
acquired.
<PAGE> 54
Page 54
Upon the acquisition of 15% or more of the Company's Common Stock by any person
or group, each Right will entitle its holder to purchase, at the Right's
purchase price, a number of shares of the Company's Common Stock having a market
value equal to twice the Right's purchase price. In such event, Rights held by
the acquiring person will not be allowed to purchase any of the Company's Common
Stock or other securities of the Company. If, after the acquisition of 15% or
more of the Company's Common Stock by any person or group the Company should
consolidate with or merge with and into any person and the Company should not be
the surviving company, or, if the Company should be the surviving company and
all or part of its Common Stock should be exchanged for the securities of any
other person, or if more than 50% of the assets or earning power of the Company
were sold, each Right (other than Rights held by the acquiring person, which
will become void) will entitle its holder to purchase, at the Right's purchase
price, a number of shares of the acquiring Company's Common Stock having a
market value at that time equal to twice the Right's purchase price.
The Company may not pay any dividends on its Common Stock unless full cumulative
dividends to the preceding dividend date for all outstanding shares of Preferred
Stock of the Company have been paid or set aside for payment. All such Preferred
Stock dividends have been paid.
NOTE 5: ANALYSIS OF RETAINED EARNINGS
The summary of the changes in Retained Earnings for the period January 1, 1996
through December 31, 1998, appears below:
<TABLE>
<CAPTION>
(Thousands of dollars) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at Beginning of Year $13,490 $ 11,939 $ 10,468
Income Before Preferred Dividends 6,965 6,804 6,603
- -------------------------------------------------------------------------------------------------------------------
20,455 18,743 17,071
- -------------------------------------------------------------------------------------------------------------------
Dividends Declared:
Cumulative Preferred, Series A, $.80 Per Share $ 12 12 12
Cumulative Preferred, Series $.90, $.90 Per Share 26 26 26
Common Stock*:
1998 $1.167 Per Share 5,282 -- --
1997 $1.153 Per Share -- 5,215 --
1996 $1.133 Per Share -- -- 5,094
- -------------------------------------------------------------------------------------------------------------------
5,320 5,253 5,132
- -------------------------------------------------------------------------------------------------------------------
Balance at End of Year $15,135 $13,490 $11,939
===================================================================================================================
</TABLE>
* Reflects three-for-two stock split as described in Note 2.
<PAGE> 55
Page 55
NOTE 6: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each of the following financial instruments.
CASH - The carrying amount approximates fair value.
LONG-TERM DEBT - The fair value of the Company's fixed rate long-term debt is
based upon borrowing rates currently available to the Company. As of December
31, 1998 and 1997, the estimated fair value of the Company's long-term debt was
$65,400,000 and $61,000,000, respectively, as compared to the carrying amounts
of $62,501,000 and $54,532,000, respectively.
The fair values shown above have been reported to meet the disclosure
requirements of Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Values of Financial Instruments" and do not purport to
represent the amounts at which those obligations would be settled.
NOTE 7: LONG-TERM DEBT
Long-Term Debt at December 31, consisted of the following:
<TABLE>
<CAPTION>
(Thousands of dollars) 1998 1997
- -------------------------------------------------------------------------------------------------------------------
The Connecticut Water Company
First Mortgage Bonds:
<S> <C> <C> <C>
6.9% Series Q, Due 2021 $0 $10,000
5.875% Series R, Due 2022 14,800 14,800
6.65% Series S, Due 2020 8,000 8,000
5.75% 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 54,400
Unsecured Water Facilities Revenue Refinancing Bonds
5.05% 1998 Series A, Due 2028 $10,000 --
5.125% 1998 Series B, Due 2028 8,000 --
- -------------------------------------------------------------------------------------------------------------------
18,000 --
Other
5.5% Unsecured Promissory Note, Due 2002 132 61
Less Current Portion (31) (29)
- -------------------------------------------------------------------------------------------------------------------
101 132
Total Long-Term Debt $62,501 $54,532
===================================================================================================================
</TABLE>
Substantially all utility plant is pledged as collateral for the Subsidiary's
long-term debt.
<PAGE> 56
Page 56
There are no mandatory sinking fund payments required on the outstanding First
Mortgage Bonds or the Unsecured Water Facilities Revenue Refinancing Bonds at
December 31, 1998. However, the Series R First Mortgage Bonds and the 1998
Series A & B Unsecured Water Facilities Revenue Refinancing Bonds provide for an
estate redemption right whereby the estate of deceased bondholders or surviving
joint owners may submit bonds to the Trustee for redemption at par subject to a
$25,000 per individual holder and a 3% annual aggregate limitation.
The call price of the Series R bonds will reduce annually until the year 2003,
when the call prices become 100%. Series R bonds are callable for redemption at
102.5% through August 31, 1999 then at 102% from September 1, 1999 through
August 31, 2000.
The other outstanding bonds may be initially called for redemption by the
Company at the following dates and prices - Series S, December 15, 2003 at 102%;
Series T, July 1, 2003 and Series U, September 1, 2003 at 100% plus accrued
interest to the date of redemption; Series V, January 1, 2004 at 103.5%, 1998
Series A & B Unsecured Water Facilities Revenue Refinancing Bonds, March 1, 2008
at 100% plus accrued interest.
During 1997 the Subsidiary issued a $163,000, 5.5% unsecured promissory note as
part of the purchase price of the Point O'Woods Water System acquisition. This
5-year note requires the Subsidiary to make monthly payments of interest and
principal totalling $37,000 annually.
In 1998 the Subsidiary refinanced its Series Q, First Mortgage Bonds with 5.05%
1998 Series A Unsecured, Tax-Exempt Water Facilities Revenue Refinancing Bonds,
and refinanced $8,000,000 of interim bank loans with 5.125% tax exempt, 1998
Series B Unsecured Water Facilities Revenue Refinancing Bonds.
NOTE 8: PREFERRED STOCK
Preferred Stock at December 31, consisted of the following:
<TABLE>
<CAPTION>
(Thousands of dollars) 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Series A Voting, $20 Par Value; Authorized Issued and
Outstanding 15,000 Shares $300 $300
Cumulative Series $.90 Non-Voting, $16 Par Value; Authorized 50,000
Shares, Issued and Outstanding 29,499 Shares 472 472
- -------------------------------------------------------------------------------------------------------------------
Total $772 $772
===================================================================================================================
</TABLE>
<PAGE> 57
Page 57
All or any part of any series of either class of the Company's issued Preferred
Stock may be called for redemption by the Company at any time. The per share
redemption prices of the Series A and Series $.90 Preferred Stock, if called by
the Company, are $21.00 and $16.00, respectively.
The Company is authorized to issue 400,000 shares of an additional class of
Preferred Stock, $25 par value, the general preferences, voting powers,
restrictions and qualifications of which are similar to the Company's existing
Preferred Stock. No shares of the $25 par value Preferred Stock have been
issued.
The Company is also authorized to issue 1,000,000 shares of $1 par value
Preference Stock, junior to the Company's existing Preferred Stock in rights to
dividends and upon liquidation of the Company. 150,000 of such shares have been
designated as "Series A Junior Participating Preference Stock". Pursuant to the
new Shareholder Rights Plan, described in Note 4, the Company keeps reserved and
available for issuance one one-hundredth of a share of Series A Junior
Participating Preference Stock for each outstanding share of the Company's
Common Stock.
NOTE 9: BANK LINES OF CREDIT
A $9,000,000 line of credit is provided by three banks. The unused lines of
credit as of December 31, 1998 totalled $7,105,000. Bank commitment fees of
approximately $19,000, $20,000, and $15,000 were paid in 1998, 1997, and 1996,
respectively, on the lines of credit.
At December 31, 1998 and 1997, the weighted average interest rates on short-term
borrowings outstanding were 5.82% and 6.22%, respectively.
NOTE 10: UTILITY PLANT AND CONSTRUCTION PROGRAM
The components of utility plant and equipment at December 31, are as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Source of Supply $19,214 $ 17,327
Pumping 15,286 14,210
Water Treatment 42,020 38,250
Transmission and Distribution 129,741 124,105
General (including intangible) 13,585 11,390
Held for Future Use 609 2,194
- -------------------------------------------------------------------------------------------------------------------
Total $220,455 $207,476
===================================================================================================================
</TABLE>
<PAGE> 58
Page 58
The amounts of depreciable plant at December 31, 1998 and 1997 included in total
plant were $208,803,000 and $196,286,000, respectively.
The Subsidiary is engaged in a continuous construction program. The Subsidiary's
estimated annual capital expenditures, net of amounts financed by customer
advances and contributions in aid of construction, are expected to be $7,300,000
during 1999, $6,675,000 during 2000, and $6,400,000 in 2001. During the period
2002 to 2003, construction expenditures for routine improvements to the water
distribution system are expected to be approximately $5,000,000 each year.
NOTE 11: TAXES OTHER THAN INCOME TAXES
Taxes Other than Income Taxes consist of the following:
<TABLE>
<CAPTION>
(Thousands of dollars) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Property Taxes $3,450 $3,270 $3,284
Payroll Taxes 498 501 495
- -------------------------------------------------------------------------------------------------------------------
Connecticut Gross Earnings Tax (A) -- 931 1,930
Total $3,948 $4,702 $5,790
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) This tax was legislatively eliminated for water companies effective July 1,
1997. The Subsidiary's rates were correspondingly reduced at the same time.
NOTE 12: PENSION AND OTHER EMPLOYEE BENEFITS
PENSION - The Subsidiary has a trusteed, non-contributory defined benefit
retirement plan (the Pension Plan) which covers all employees who have completed
one year of service. Benefits under the Pension Plan are based on credited years
of service and "average earnings", as defined in the Pension Plan. The
Subsidiary's policy is to fund accrued pension costs as permitted by Federal
income tax regulations. Funding of $159,000 was made for 1998. No funding was
required for 1997.
POSTRETIREMENT BENEFITS OTHER THAN PENSION (PBOP) - In addition to providing
pension benefits, the Subsidiary provides certain medical, dental and life
insurance benefits to retired employees partially funded by a 501(c)(9)
Voluntary Employee Beneficiary Association Trust (VEBA) that has been approved
by the DPUC. Substantially all of the Subsidiary's employees may become eligible
for these benefits if they retire from the Company on or after age 55 with 10
years of service with the Subsidiary. The contributions for calendar years 1998,
1997, and 1996 were $473,000, $317,000, and $265,000, respectively.
<PAGE> 59
Page 59
A deferred regulatory asset has been recorded to reflect the amount which
represents the future operating revenues expected to be recovered in customers
rates under FAS 106. In 1997 the Subsidiary requested and received approval from
the DPUC to include FAS 106 costs in customer rates. The DPUC's 1997 limited
reopener of the Subsidiary's general rate proceeding allowed the Subsidiary to
increase customer rates $208,000 annually for FAS 106 costs. The Subsidiary's
current rates now allow for recovery of $473,000 annually for postretirement
benefits costs other than pension.
The Company has elected to recognize the transition obligation on a delayed
basis over a period equal to the plan participants' 21.6 years of average future
service.
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
(Thousand of Dollars) 1998 1997 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation, beginning of year $ 11,472 $ 9,414 $ 3,907 $ 3,197
Service Cost 392 392 152 164
Interest Cost 872 740 262 272
Actuarial loss/(gain) 541 1,375 (321) 529
Benefits paid (720) (449) (134) (255)
BENEFIT OBLIGATION, END OF YEAR $ 12,557 $ 11,472 $ 3,866 $ 3,907
- ------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair Value, beginning of year $ 14,851 $ 12,681 $ 1,558 $ 1,290
Actual return on plan assets 2,625 2,619 130 152
Employer contribution 159 -- 473 317
Participant's contributions N/A N/A 30 54
Benefits paid (720) (449) (134) (255)
- ------------------------------------------------------------------------------------
FAIR VALUE, END OF YEAR $ 16,915 $ 14,851 $ 2,057 $ 1,558
Funded Status $ 4,358 $ 3,379 $ (1,809) $ (2,349)
Unrecognized net actuarial gain (6,090) (5,050) (1,650) (1,345)
Unrecognized transition obligation (97) (129) 2,309 2,474
Unrecognized prior service cost 218 250 N/A N/A
- ------------------------------------------------------------------------------------
ACCRUED BENEFIT (COST) $ (1,611) $ (1,550) $ (1,150) $ (1,220)
</TABLE>
<PAGE> 60
Page 60
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted-average assumptions as of December 31
Discount rate 7.0% 7.25% 7.0% 7.25%
Expected return on plan assets 8.0% 8.0% 5.0% 5.0%
Rate of compensation increase 4.5% 4.5% N/A N/A
</TABLE>
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
(Thousands of Dollars) 1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COSTS
Service cost $ 393 $ 392 $152 $164
Interest cost 872 740 262 272
Expected return on plan assets (928) (835) (63) (54)
Amortization of:
Unrecognized Net Transition Asset (32) (32) 165 165
Unrecognized net (Gain) Loss (118) (190) (113) (127)
Unrecognized Prior Service Cost 32 32 ---- ---
- -------------------------------------------------------------------------------------------------------------------
Subtotal 219 107 403 420
- -------------------------------------------------------------------------------------------------------------------
FAS88 Early Retirement Costs -- 366 -- 81
- -------------------------------------------------------------------------------------------------------------------
Net Periodic Pension Costs $219 $473 $403 $501
===================================================================================================================
</TABLE>
In determining the accumulated postretirement benefit obligation, health care
cost trends of 6% were assumed for 1998, grading down to 5.5% in 1999 and after.
Assumed health care costs trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT
(Thousands of Dollars) INCREASE DECREASE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost
components $ 60 $ (56)
Effect on postretirement benefit obligation $ 446 $ (421)
</TABLE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN - The Subsidiary provides additional
pension benefits to senior management through a supplemental executive
retirement plan. At December 31, 1998 the actuarial present value of the
projected benefit obligation was $423,000. Expense associated with this plan was
$99,000 for 1998, $99,000 for 1997, and $115,000 for 1996.
<PAGE> 61
Page 61
SAVINGS PLAN - The Subsidiary maintains an employee savings plan which, prior to
January 1, 1999, allowed participants to contribute from 1% to 10% of pre-tax
compensation. The Subsidiary matched either 25 or 50 cents for each dollar
contributed by the employee up to 3% of the employees' compensation depending on
the Company's earnings per average common share (EPS). If EPS in the prior year
exceeded 110% of dividends paid per common share, the applicable percentage was
50%; otherwise, the match was 25%. The Subsidiary's contribution charged to
expense in 1998, 1997 and 1996 was $85,000, $78,000 and $78,000, respectively,
in each case based on a 50% match.
Effective January 1, 1999 the Plan was modified to increase the maximum amount
the employees can contribute to 15% of their pre-tax compensation subject to IRS
limitations; increase the match to $.50 for each dollar contributed by the
employee up to 4% of their compensation; eliminate the tie in to the Company's
earnings and dividend levels; and create the possibility for a new "incentive
bonus" contribution to the 401(k) plan tied to the attainment of a specific goal
or goals to be identified each year starting in 1999. If the specific goal or
goals are attained by the end of the year, all employees, except officers and
certain key employees, will receive an additional 1% of their annual base salary
as a direct contribution to their 401(k) account.
PERFORMANCE STOCK PROGRAM - The Company has a Performance Stock Program whereby
restricted shares of Common Stock may be awarded annually to Officers of the
Subsidiary. When the goals established by the Compensation Committee have been
attained, the restrictions on the stock are removed. Amounts charged to expense
pursuant to this plan were $170,000, $173,000, and $100,000 for 1998, 1997 and
1996, respectively.
NOTE 13: QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the years ended December 31, 1998 and 1997
appears below:
<TABLE>
<CAPTION>
Net Income Earnings
Utility Applicable to Per Average
Operating Revenues Operating Income Common Stock Common Share*
- ------------------------------------------------------------------------------------------------------------------------------------
(Thousands of dollars
except per share amounts)
1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter $8,672 $9,012 $2,304 $2,249 $1,380 $1,448 $0.31 $0.32
Second Quarter 8,796 9,633 2,245 2,056 1,470 1,191 0.32 0.26
Third Quarter 11,392 10,855 3,515 3,555 2,600 2,654 0.57 0.59
Fourth Quarter 9,064 9,001 2,240 2,474 1,477 1,473 0.33 0.33
- ----------------------------------------------------------------------------------------------------------------------------------
Year $37,924 $38,501 $10,304 $10,334 $6,927 $6,766 $1.53 $1.50
</TABLE>
*Reflects three-for-two stock split as described in Note 2.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AT FINANCIAL DISCLOSURE
None.
<PAGE> 62
Page 62
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3), the information called for by Items
10, (except for information concerning the executive officers of the Company)
11, 12, and 13 is hereby incorporated by reference from the Company's definitive
proxy statement filed by EDGAR on or about March 17, 1999. Information
concerning the executive officers of the Company is included as Item 4.1 of this
report.
<PAGE> 63
Page 63
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) Documents filed as part of this report:
(1)Consolidated Financial Statements:
Page Number
in this Report
--------------
Report to Independent Auditors................................. 43
Consolidated Statements of Income -
December 31, 1998, 1997 and 1996............... 44
Consolidated Statements of Cash Flows -
December 31, 1998, 1997 and 1996............... 45
Consolidated Balance Sheets -
December 31, 1998 and 1997..................... 46-47
Notes to Consolidated Financial Statements..................... 48-61
(2) Financial Statement Schedules for the years ended December 31, 1998,
1997 and 1996:
Report of Independent Public Accountants on Schedules
Schedule II - Valuation and Qualifying Accounts
All other schedules provided for in the applicable accounting regulations
of the Securities and Exchange Commission have been omitted because of the
absence of conditions under which they are required or because the
required information is set forth in the financial statements or notes
thereto.
(3)Exhibits:
Exhibits heretofore filed with the Securities and Exchange Commission as
indicated below are incorporated herein by reference and made a part
hereof as if filed herewith. Exhibits marked by asterisk (*) are being
filed herewith.
<PAGE> 64
Page 64
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1* Certificate of Incorporation of Connecticut Water Service,
Inc. amended and restated as of April, 1998.
3.2* By-Laws, as amended, of Connecticut Water Service, Inc. as
amended and restated as of April, 1998.
3.3* Certification of Incorporation of The Connecticut Water
Company effective April, 1998.
4.1 Indenture of Mortgage and Deed of Trust from The Connecticut
Water Company to The Connecticut Bank and Trust Company,
Trustee, dated as of June 1, 1956. (Exhibit 4.3(a) to
Registration Statement No. 2-61843)
4.2 Supplemental Indentures thereto dated as of
(i) February 1, 1958 (Exhibit 4.3(b) (i) to
Registration Statement No. 2-61843)
(ii) September 1, 1962 (Exhibit 4.3(b) (ii) to
Registration Statement No. 2-61843)
(iii) January 1, 1966 (Exhibit 4.3(b) (iii) to
Registration Statement No. 2-61843)
(iv) July 1, 1966 (Exhibit 4.3(b) (iv) to
Registration Statement No. 2-61843)
(v) January 1, 1971 (Exhibit 4.3(b) (v) to
Registration Statement No. 2-61843)
(vi) September 1, 1974 (Exhibit 4.3(b) (vi) to
Registration Statement No. 2-61843)
(vii) December 1, 1974 (Exhibit 4.3(b) (vii) to
Registration Statement No. 2-61843)
(viii) January 1, 1976 (Exhibit 4(b) to Form 10-K
for the year ended 12/31/76)
(ix) January 1, 1977 (Exhibit 4(b) to Form 10-K
for the year ended 12/31/76)
(x) September 1, 1978 (Exhibit 2.12(b) (x) to
Registration Statement No. 2-66855)
(xi) December 1, 1978 (Exhibit 2.12(b) (xi) to
Registration Statement No. 2-66855)
(xii) June 1, 1979 (Exhibit 2.12(b) (xii) to
Registration Statement No. 2-66855)
(xiii) December 1, 1983 (Exhibit 4.2 (xiii) to Form
10-K for the year ended 12/31/83)
(xiv) January 1, 1987 (Exhibit 4.2 (xiv) to Form
10-K for the year ended 12/31/86)
(xv) May 1, 1989 (Exhibit 4.2 (xv) to Form 10-K
for year
<PAGE> 65
Page 65
ended 12/31/89)
(xvi) June 1, 1991 (Exhibit 4.2 (xvi) to Form 10-K for year
ended 12/31/91)
(xvii) August 1, 1992 (Exhibit 4.2 (xvii) to Form 10-K for
year ended 12/31/92)
(xviii) October 1, 1993 (Exhibit 4.2 (xviii) to Form 10-K for
year ended 12/31/93)
(xix) June 1, 1993 (Exhibit 4.2 (xix) to Form 10-K for year
ended 12/31/93)
(xx) September 1, 1993 (Exhibit 4.2 (xx) to Form 10-K for
year ended 12/31/93)
(xxi) December 1, 1993 (Exhibit 4.2 (xxi) to Form 10-K for
year ended 12/31/93)
(xxii) March 1, 1994 (Exhibit 4.2 (xxii) to Form 10-K for
year ended 12/31/94)
4.3 Loan Agreement dated as of October 1, 1993, between the
Connecticut Development Authority and The Connecticut Water
Company. (Exhibit 4.3 to Form 10-K for year ended
December 31, 1993)
4.4 Loan Agreement dated as of June 1, 1993, between the
Connecticut Development Authority and The Connecticut Water
Company. (Exhibit 4.4 to Form 10-K for year ended
December 31, 1993)
4.5 Loan Agreement dated as of September 1, 1993, between the
Connecticut Development Authority and The Connecticut Water
Company. (Exhibit 4.5 to Form 10-K for year ended
December 31, 1993)
4.6 Loan Agreement dated as of August 1, 1992 between the
Connecticut Development Authority and The Connecticut Water
Company. (Exhibit 4.10 to Form 10-K for the year ended
December 31, 1992)
4.7 Bond Purchase Agreement dated as of December 1, 1993.
(Exhibit 4.8 to Form 10-K for year ended December 31, 1993)
4.8* Loan Agreement dated as of March 9, 1998 between the
Connecticut Development Authority and The Connecticut Water
Company.
<PAGE> 66
Page 66
10.1 Pension Plan Fiduciary Liability Insurance for The
Connecticut Water Company Employees' Retirement Plan and
Trust, The Connecticut Water Company Tax Credit Employee
Stock Ownership Plan, as Amended and Restated, Savings Plan
of The Connecticut Water Company and The Connecticut Water
Company VEBA Trust Fund. (Exhibit 10.1 to Registration
Statement No. 2-74938)
10.2 Directors and Officers Liability and Corporation
Reimbursement Insurance. (Exhibit 10.2 to Registration
Statement No. 2-74938)
10.3 Directors Deferred Compensation Plan, effective as of
January 1, 1980, as amended as of March 20, 1981. (Exhibit
10.3 to Registration Statement No. 2-74938)
10.4 The Connecticut Water Company Deferred Compensation
Agreement dated December 1, 1984. (Exhibit 10.4 to Form
10-K for the year ended December 31, 1984)
10.5 The Connecticut Water Company Deferred Compensation
Agreement dated January 1, 1989. (Exhibit 10.5 to Form 10-K
for the year ended December 31, 1988)
10.6 The Connecticut Water Company Supplemental Executive
Retirement Agreement with William C. Stewart. (Exhibit
10.6a to Form 10-K for year ended December 31, 1991)
10.7 The Connecticut Water Company Supplemental Executive
Retirement Agreement with Marshall T. Chiaraluce. (Exhibit
10.6b to Form 10-K for year ended December 31, 1991)
10.8 The Connecticut Water Company Supplemental Executive
Retirement Agreement - standard form for other officers.
(Exhibit 10.6c to Form 10-K for year ended December 31,
1991)
10.9* The Connecticut Water Company Employment Agreements with
Officers, amended and restated as of December 15, 1998.
a) Marshall T. Chiaraluce
b) Michele G. DiAcri
c) James R. McQueen
d) David C. Benoit
e) Peter J. Bancroft
f) Maureen P. Westbrook
g) Terrance P. O'Neill
10.10* Savings Plan of The Connecticut Water Company, amended and
restated effective as of January 1, 1999
<PAGE> 67
Page 67
10.11* The Connecticut Water Company Employees' Retirement Plan as
amended and restated as of January 1, 1997
10.12 Water Supply Agreement dated June 13, 1994, between The
Connecticut Water Company and the Hazardville Water Company.
(Exhibit 10.15 to Form 10-K for year ended December 31,
1994)
10.13 November 4, 1994 Amendment to Agreement dated December 11,
1957 between The Connecticut Water Company (successor to the
Thomaston Water Company) and the City of Waterbury.
(Exhibit 10.16 to Form 10-K for year ended December 31,
1994)
10.14 Contract between The Connecticut Water Company and The
Rockville Water and Aqueduct Company dated as of January 1,
1976. (Exhibit 9(b) to Form 10-K for the year ended
December 31, 1975)
10.15 Agreement dated August 13, 1986 between The Connecticut
Water Co. and the Metropolitan District. (Exhibit 10.14 to
Form 10-K for the year ended December 31, 1986)
10.16 Report of the Commission to Study the Feasibility of
Expanding the Water Supply Services of the Metropolitan
District. (Exhibit 14 to Registration Statement
No. 2-61843)
10.17 Plan of Merger dated December 18, 1978 of Broad Brook Water
Company, The Collinsville Water Company, The Rockville Water
and Aqueduct Company, The Terryville Water Company and The
Thomaston Water Company with and into The Connecticut Water
Company. (Exhibit 13 to Form 10-K for the year ended
December 31, 1978)
10.18 Bond Exchange Agreements between Connecticut Water Service,
Inc., The Connecticut Water Company Bankers Life Company and
Connecticut Mutual Life Insurance Company dated October 23,
1978. (Exhibit 14 to Form 10-K for the year ended
December 31, 1978)
10.19 Dividend Reinvestment and Common Stock Purchase Plan as
amended. (Registration Statement No. 33-53211 as amended)
10.20 Contract for Supplying Bradley International Airport.
(Exhibit 10.21 to Form 10-K for the year ended December 31,
1984)
<PAGE> 68
Page 68
10.21 Report of South Windsor Task Force. (Exhibit 10.23 to Form
10-K for the year ended December 31, 1987)
10.22 Trust Agreement for The Connecticut Water Company Welfare
Benefits Plan (VEBA) dated January 1, 1989. (Exhibit 10.21
to Form 10-K for year ended December 31, 1989)
10.23 Performance Stock Program. (Registration Statement No.
33-49058.)
24.1 * Consent of Arthur Andersen LLP
27.0 * Financial Data Schedule
- ----------
Note: Exhibits 10.1 through 10.11, 10.22 and 10.23 set forth each
management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Form-10K.
(b) No reports on Form 8-K were filed during the
last quarter of 1998.
<PAGE> 69
Page 69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CONNECTICUT WATER SERVICE, INC.
Registrant
By /s/ Marshall T. Chiaraluce
----------------------------
Marshall T. Chiaraluce
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of Connecticut
Water Service, Inc. in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Marshall T. Chiaraluce Director and March 19, 1999
- --------------------------- President and
Marshall T. Chiaraluce Chief Executive
(Principal Executive Officer) Officer
/s/ David C. Benoit Vice President - March 19, 1999
- ------------------------------ Finance,
David C. Benoit Accounting, and
(Principal Financial and Treasurer
Accounting Officer)
<PAGE> 70
Page 70
/s/ Francis E. Baker, Jr. Director March 09, 1999
- --------------------
Francis E. Baker, Jr.
/s/ Harold E. Bigler, Jr. Director March 11, 1999
- ---------------------
Harold E. Bigler, Jr.
/s/Astrid T. Hanzalek Director March 04, 1999
- ---------------------
Astrid T. Hanzalek
/s/ Frederick E. Hennick Director March 05, 1999
- ---------------------
Frederick E. Hennick
/s/ Marcia L. Hincks Director March 09, 1999
- ---------------------
Marcia L. Hincks
Director March 09, 1999
/s/ Rudolph E. Luginbuhl
- ---------------------
Rudolph E. Luginbuhl
Director March 12, 1999
/s/ Harvey G. Moger
- ---------------------
Harvey G. Moger
Director March 05, 1999
/s/ Robert F. Neal
- ---------------------
Robert F. Neal
Director March 12, 1999
/s/ Warren C. Packard
- ---------------------
Warren C. Packard
Director March 12, 1999
/s/ Donald B. Wilbur
- ---------------------
Donald B. Wilbur
<PAGE> 71
SCHEDULES
<PAGE> 72
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
We have audited, in accordance with generally accepted auditing standards, the
financial statements of Connecticut Water Service, Inc. included in this Form
10-K, and have issued our report thereon dated February 11, 1999. Our audit was
made for the purpose of forming an opinion on those statements taken as a whole.
The schedule listed in the accompanying index to financial statements and
schedule is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Hartford, Connecticut
February 11, 1999
<PAGE> 73
CONNECTICUT WATER SERVICE, INC. and SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance Additions Deductions Balance
Beginning Charged to From End of
Description of Year Income Reserves (1) Year
------------- --------- --------- ------------ -----
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Allowance for Uncollectible Accounts
Year Ended December 31, 1998 $126 $161 $87 $200
==== ==== === ====
Year Ended December 31, 1997 $140 $135 $149 $126
==== ==== ==== ====
Year Ended December 31, 1996 $164 $128 $152 $140
==== ==== ==== ====
</TABLE>
(1) Amounts charged off as uncollectible after deducting recoveries
<PAGE> 74
EXHIBITS
TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR
ENDED DECEMBER 31, 1998
24.1 Consent of Arthur Andersen LLP
27.0 Financial Data Schedule
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
of
CONNECTICUT WATER SERVICE, INC.
FIRST: The name of the corporation is CONNECTICUT WATER SERVICE, INC.
(the "Company").
SECOND: The Company is to be located in the Town of Clinton, County of
Middlesex and State of Connecticut.
THIRD: Except as specifically limited by the provisions of Paragraph F
of this Article Third, the nature of the business to be transacted and the
purposes to be promoted or carried out by the Company are as follows:
A. To purchase, subscribe for, or otherwise acquire and own, hold, use,
sell, assign, transfer, mortgage, pledge, exchange, or otherwise dispose of
shares of stock, bonds, debentures, notes, evidences of indebtedness, and other
securities, contracts, or obligations of any public service company or public
utility company or of any corporation or corporations, person or persons, trust
or trusts, or partnership or partnerships, and to pay therefor in whole or in
part in cash or by exchanging therefor stocks, bonds, or other evidences of
indebtedness or securities of this or any other corporation, and while the owner
or holder of any such stocks, bonds, debentures, notes, evidences of
indebtedness or other securities, contracts, or obligations, to receive,
collect, and dispose of the interest, dividends and income arising therefrom,
and to possess and exercise in respect thereof, all the rights, powers and
privileges of ownership, including all voting powers on any stocks so owned.
B. To aid, either by loans or by guaranty of securities or in any other
manner, any corporation, person, trust or partnership, any shares of stock, or
any bonds, debentures, evidences of indebtedness or other securities whereof are
held by the Company or in which the Company shall have any interest, and to do
any acts designed to protect, preserve, improve, or enhance the value of any
property at any time held or controlled by the Company or in which it at that
time may be interested.
C. To purchase, lease, option, hold, improve, deal in, mortgage and
sell real estate and interests in real estate and personal property; to develop
and operate watersheds, reservoirs,
<PAGE> 2
-2-
wells, water pipelines and water properties in any manner not inconsistent with
law.
D. To enter into, make and perform any contracts suitable or convenient
to the business of the Company with any person, firm, association, corporation,
municipality or body politic; to borrow or raise moneys without limit as to
amount; to draw, make, accept, endorse, execute, pledge, issue, sell or
otherwise dispose of promissory notes, drafts, warrants, bonds, debentures and
other instruments, whether negotiable or nonnegotiable, transferable or
nontransferable, and evidences of indebtedness whether secured by mortgage or
otherwise, as well as to secure the same, and all obligations arising therefrom,
by mortgage or otherwise, either alone or jointly with any other person or
corporation, of the whole or any part of the property of the corporations
presently owned or to be acquired; to confer upon the holders of any of these
obligations such powers, rights, and privileges as from time to time may be
deemed advisable by the Board of Directors, except as may be specifically
prohibited by law; to loan money with or without collateral or other security.
E. To do any or all of the things herein set forth to the same extent
as natural persons might or could do, as principals, agents, contractors or
otherwise, and either alone or in company with others.
F. Notwithstanding any contrary provisions of law or of this Article
Third, said corporation and any and all subsidiaries are hereby expressly
prohibited from engaging in any business or activity that it not then subject to
regulation by the Connecticut Public Utilities Commission (or any regulatory
body which may succeed to the jurisdiction of said Commission) unless said
Commission shall approve such business or activity or unless said Commission
shall have waived the requirements of, or shall have approved an amendment to,
or deletion of the provisions of this Paragraph F.
FOURTH: The amount of the capital stock of the Company hereby
authorized is (a) $300,000, divided into 15,000 shares of Cumulative Preferred
Stock of the par value of $20 each, (b) $800,000, divided into 50,000 shares of
Cumulative Preferred Stock of the par value of $16 each, (c) $10,000,000,
divided into 400,000 shares of Cumulative Preferred Stock of the par value of
$25 each, (d) 7,500,000 shares of Common Stock without par value, and (e)
1,000,000 shares of Preference Stock, $1 par value.
A. The voting powers, restrictions and qualifications of the Common
Stock shall be as follows:
1. The holders of the Common Stock shall each be entitled to three
(3) votes per share.
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2. No holder of Common Stock shall be entitled as such as a
matter of right to subscribe for or purchase any part of any stock of any class
of the Company or securities convertible into such stock now or hereafter
authorized or issued.
B. The general preferences, voting powers, restrictions and
qualifications of the Cumulative Preferred Stock of the par value of $20 per
share, of the Cumulative Preferred Stock of the par value of $16 per share, and
of the Cumulative Preferred Stock of the par value of $25 per share and
applicable to all such classes of Cumulative Preferred Stock (hereinafter called
the "Preferred Stock") shall be as follows:
1. General. The Board of Directors is authorized from time to
time to establish the series and to fix and determine the variations among
series of any class of Preferred Stock; to fix and determine the dividend rate,
the redemption prices, the amounts to be paid upon liquidation and any other
terms, limitations, rights and preferences of any series of any class of
Preferred Stock to the extent not fixed and determined by this Amended and
Restated Certificate of Incorporation; and from time to time to issue any shares
of Preferred Stock in one or more series, in such amounts, on such terms and
conditions and for such consideration as may be determined by the Board of
Directors and without first offering said shares to the stockholders and without
giving the stockholders the right to subscribe thereto.
2. Dividends. The holders of any series of Preferred Stock of
any class shall receive, when declared by the Board of Directors, preferential
quarterly dividends at such rate and payable on such dividend payment dates in
each year as said Board may determine at the time of its vote to issue said
series, such dividends to be payable to Preferred Stockholders of record on such
dates as may be fixed by said Board, but not more than forty-five (45) days
before each dividend date.
Dividends on each share of the Preferred Stock shall be cumulative from
the date of issue thereof or from such date as the Board of Directors may
determine at the time of its vote to issue such share.
Unless full cumulative dividends to the last preceding dividend date
shall have been paid or set apart for payment on all outstanding shares of
Preferred Stock, no dividend shall be paid on any junior stock. The term "junior
stock" as used herein means stock of the Company subordinate to the Preferred
Stock in respect of dividends or payment in case of liquidation.
3. Redemption or Purchase of Preferred Stock. All or any part
of any series of the Preferred Stock at any time outstanding may be called by
vote of the Board of Directors for redemption at any time and in the manner
hereinbelow provided. If less than all of any series of any class of Preferred
Stock is so called, the Company shall determine by lot the shares of
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such series of Preferred Stock to be called. The redemption prices with respect
to any series of any class of Preferred Stock shall be determined by the Board
of Directors at the time of its vote to issue said series.
No call of less than all of the Preferred Stock of any class
outstanding shall be made without setting aside an amount equal to the dividends
accumulated to the redemption date fixed in such call on all of the Preferred
Stock of such class then outstanding and not called.
All or any part of any series of any class of Preferred Stock may be
called for redemption without calling any part or all of any other series or
class of Preferred Stock.
The sums payable in respect of any Preferred Stock so called shall be
payable at the office of the Company or an incorporated bank or trust company in
good standing designated by the Company. Notice of such call, stating the
redemption date and the place where the stock so called is payable, shall be
mailed not less than thirty (30) days before the redemption date to each holder
of stock so called at his address as it appears upon the books of the Company.
If the Company shall, before the redemption date, deposit with such
bank or trust company all sums payable with respect to the Preferred Stock so
called, then, after such mailing and deposit, the holders of the Preferred Stock
so called for redemption shall cease to have any right to future dividends or
other rights or privileges as stockholders in respect of such stock and shall be
entitled only to the payment on the redemption date of the sums so deposited
with such bank or trust company for their respective accounts. Stock so redeemed
may be reissued but only subject to the limitations imposed by this Article
Fourth upon the issue of Preferred Stock.
At any time when there is no default in the payment of any dividend on
the Preferred Stock and there is no event of default with respect thereto, the
Company may purchase all or any of the then outstanding shares of the Preferred
Stock of any series of any class upon the best terms reasonably obtainable, but
not exceeding the then current redemption price of such shares.
4. Amounts Payable on Liquidation. The provisions relating to
the amount payable to the holder of shares of any series of any class of
Preferred Stock upon liquidation, dissolution or winding-up of the Company shall
be determined by the Board of Directors at the time of its vote to issue said
series. If the net assets of the Company shall be insufficient to pay said
amounts in full, then the entire net assets of the Company shall be distributed
among the holders of the shares of all classes of Preferred Stock, who shall
receive amounts proportionate to the respective involuntary liquidation values
of such shares.
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5. Voting Rights. Except as otherwise provided by this Article
Fourth or as provided by law, the holders of the Preferred Stock shall have no
voting power or right to notice of any meeting.
Whenever dividends on any share of the Preferred Stock of any class
shall be in arrears in an amount equal to or exceeding six (6) quarterly
dividends thereon, or whenever the Company shall fail to set aside moneys for
any sinking fund provided for any series of Preferred Stock, or whenever there
shall have occurred some default in the observance of any of the Preferred Stock
provisions or some default on which action has been taken to declare due prior
to their stated maturity any debentures or bonds on the Company by their holders
or the trustee of any mortgage or trust indenture of the Company, or whenever
the Company shall have been declared bankrupt or a receiver of its property
shall have been appointed (any of said conditions being herein called an "event
of default"), then the holders of the Preferred Stock shall be given notice of
all stockholders' meetings and shall have the right, voting as one class, to
elect the smallest number of directors necessary to constitute a majority of the
Board of Directors of the Company. When all such arrears of dividends shall have
been paid and the current quarterly dividend thereon for the current quarterly
dividend period shall have been declared and set apart for payment, or when the
Company shall have made up the deficiency in any such sinking fund or any other
event of default shall have terminated, such right and power of the holders of
the Preferred Stock shall cease, subject to being again revived on any
subsequent default in the payment of dividends or application of moneys to any
such sinking fund or occurrence of any event of default.
When the holders of the Preferred Stock shall have acquired such right
to elect a majority of the Board of Directors, or such right shall cease, the
Company shall, within seven (7) days from the delivery to the Company of a
written request therefor by (a) the holders of ten percent (10%) or more of the
then outstanding Preferred Stock in the event the holders of Preferred Stock
shall have acquired the right to elect a majority of the Board of Directors, or
(b) any stockholder in the event such right shall have ceased, cause a special
meeting of the stockholders to be held within thirty (30) days from the delivery
of such request for the purpose of electing a new Board of Directors. Forthwith,
upon the election and qualification of the new Board of Directors, the terms of
office of the existing directors shall terminate.
6. Action Requiring Consent of Preferred Stockholders. So long
as any shares of any class of Preferred stock are outstanding, and unless a
greater vote or consent shall then be required by law, the Company shall not,
without the affirmative vote of at least two-thirds of the then outstanding
shares of each class of Preferred Stock, each class voting separately, given at
a meeting the notice of which shall be mailed to all holders of Preferred Stock
and shall state the general character of the matters to be submitted thereat:
(a) increase the authorized amounts of any class of
Preferred Stock or
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authorize or create, or increase the authorized amount of, any additional class
of stock ranking prior to any class of Preferred Stock as to payment of
dividends or payment in case of liquidation, dissolution or winding-up of the
Company, or authorize or create, or increase the authorized amount of, any class
of stock or obligations convertible to or evidencing the right to purchase any
class of stock ranking prior to any class of Preferred Stock as to payment of
dividends or payment in case of liquidation, dissolution or winding-up of the
Company; or
(b) make any changes in the preferences, voting
powers, restrictions and qualifications relating to any class of Preferred
Stock, or change the par value thereof, except that no reduction of the dividend
rate, redemption prices or amount to be paid in case of liquidation, dissolution
or winding-up of the Company in respect to any share of Preferred stock may be
made without the consent of the holder thereof.
7. No Preemptive Right. No holder of Preferred Stock shall
have any right, whether preferential, preemptive or otherwise, to subscribe for
any issue of stock of any class of the Company, whether or not now authorized,
or for any issue of bonds, notes, obligations or other securities which the
Company may at any time issue and whether or not the same be convertible into
stock of the Company of any class.
8. Nonconvertibility of Preferred Stock. The Preferred Stock
is not convertible into shares of any other class of stock of the Company.
C. Voting Rights of $20 Par Preferred. The holders of the Cumulative
Preferred Stock of the par value of $20 per share, in addition to the voting
rights otherwise provided in this Article Fourth and as provided by law, shall
each be entitled to one (1) vote per share, voting with holders of the Common
Stock.
D. Terms of Cumulative Preferred Stock - Series A
Pursuant to the general preferences, voting powers, restrictions and
qualifications of the cumulative preferred stock of the Company authorized by
the stockholders at their annual meeting held on April 17, 1957, a series of
such preferred stock shall be designated "Cumulative Preferred Stock - Series A"
and in addition to said general preferences, voting powers, restrictions and
qualifications, the dividend rate, the redemption prices, and the amounts
payable on liquidation shall be as follows:
1. Dividends on said Cumulative Preferred Stock - Series A
shall be at the rate of $.80 per share per annum, and no more, and shall be
cumulative from July 15, 1957. Said dividends, when declared, shall be payable
on the fifteenth (15th) days of January, April, July and October in each year.
<PAGE> 7
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2. Redemption prices of said Cumulative Preferred Stock -
Series A shall be $22.50 per share if redeemed on or before July 15, 1967 and
$21.00 per share if redeemed after July 15, 1967, plus in all cases that portion
of the quarterly dividend accrued thereon to the redemption date and all unpaid
dividends thereon, if any.
3. Amount payable on liquidation to each holder of said
Cumulative Preferred Stock - Series A upon any voluntary liquidation,
dissolution or winding-up of the Company shall be the then current redemption
price thereof, and, if such action is involuntary, $20.00 per share; plus in
each case, all dividends accrued and unpaid to the date of such payment.
E. Terms of Cumulative Preferred Stock - $.90 Series
Pursuant to the general preferences, voting powers, restrictions and
qualifications of the Company's cumulative preferred stock of the par value of
$16 per share as set forth in the Company's Amended and Restated Certificate of
Incorporation as amended by Amendment Resolution adopted by the stockholders and
the Board of Directors at their special meetings held August 15, 1962, a series
of such Preferred Stock of the par value of $16 per share shall be designated
"Cumulative Preferred Stock - $.90 Series" and, in addition to said general
preferences, voting powers, restrictions and qualifications, the dividend rate,
the redemption prices and the amount payable on liquidation of said series of
Preferred Stock shall be as follows:
1. Dividends on said Cumulative Preferred Stock - $.90 Series
shall be at the rate of $.90 per share per annum and no more and shall be
cumulative from the date of its original issue. Said dividends, when declared,
shall be payable on the first (1st) days of February, May, August and November
in each year.
2. Redemption Prices of said Cumulative Preferred Stock - $.90
Series shall be $17.00 per share if redeemed on or before July 31, 1966 and
$16.00 per share if redeemed after July 31, 1966, plus in all cases that portion
of the quarterly dividend accrued thereon to the redemption date and all unpaid
dividends thereon, if any.
3. Amounts payable on liquidation to each holder of said
Cumulative Preferred Stock - $.90 Series upon any voluntary liquidation,
dissolution or winding-up of the Company shall be the then current redemption
price thereof, and, if such action is involuntary, shall be $16.00 per share,
plus in each case all dividends accrued and unpaid to the date of such payment.
F. Terms of Preference Stock. The Preference Stock shall rank after,
and be junior to, the Preferred Stock with respect to payment of dividends, the
amount payable upon shares in
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event of involuntary liquidation and the amount payable upon shares in event of
voluntary liquidation. To the extent this Amended and Restated Certificate of
Incorporation has not fixed or determined the terms, limitations and relative
rights and preferences of the Preference Stock, including without limitation,
the voting rights thereof (including a determination of the number of votes per
share of such Preference Stock), or has not established series and fixed and
determined the variations as among series, the Board of Directors shall have the
authority to do so from time to time. No holder of Preference Stock shall be
entitled as such as a matter of right to subscribe for or purchase any part of
any stock of any class of the Company or securities convertible into such stock
now or hereafter authorized, except as may otherwise be specifically provided in
the resolution or resolutions adopted by the Board of Directors at the time
shares of Preference Stock are first issued.
FIFTH: (a)(i) The Board of Directors shall consist of not less than
nine or more than fifteen persons (exclusive of directors, if any, elected by
the holders of one or more series of Preference Stock, which may at any time be
outstanding, voting separately as a class or series pursuant to the provisions
of this Amended and Restated Certificate of Incorporation applicable thereto),
the exact number to be fixed from time to time within the foregoing limits
exclusively by the Board of Directors pursuant to a resolution adopted by the
Board of Directors. The number of positions on the Board of Directors, as fixed
in accordance with the foregoing, is referred to herein as the "number of
directorships."
The directors (exclusive of directors, if any, elected by the holders
of one or more series of Preference Stock voting separately as a class or
series) shall be classified, with respect to the time for which they severally
hold office, into three classes, as nearly equal in number as possible, one
class to hold office initially for a term expiring at the annual meeting of
stockholders to be held in 1989, another class to hold office initially for a
term expiring at the annual meeting of stockholders, to be held in 1990, and
another class to hold office initially for a term expiring at the annual meeting
of stockholders to be held in 1991, with the members of each class to hold
office until their successors are elected and qualified. At each annual meeting
of the stockholders of the Company, the successors to the class of directors
whose term expires at that meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election. The election of directors need not be by written
ballot.
(ii) Subject to the rights of holders of any one or more
series of Preference Stock then outstanding with respect to directors elected by
the holders of such Preference Stock, advance notice of nominations for the
election of directors and advance notice of business or proposals to be brought
before stockholder meetings by a stockholder, other than nominations or
proposals brought by or at the direction of the Board of Directors, shall be
given in the manner provided in the Bylaws.
<PAGE> 9
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(iii) Except as otherwise provided pursuant to the provisions
of Section 5 of Paragraph B of Article Fourth of this Amended and Restated
Certificate of Incorporation and subject to the rights, if any, of holders of
any one or more series of Preference Stock then outstanding with respect to
directors elected by the holders of such Preference Stock, newly created
directorships resulting from any increase in the number of directorships shall
be filled by the concurring vote of the directors holding a majority of the
directorships, which number of directorships shall be the number prior to the
vote of the increase. Vacancies resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall be filled by the
concurring vote of the remaining directors then in office, though less than a
quorum of the Board of Directors. Any director elected in accordance with the
two preceding sentences shall hold office for the remainder of the full term of
the class of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected and
qualified. No decrease in the number of directorships constituting the entire
Board of Directors shall shorten the term of any incumbent director.
(iv) Any director of the Company may resign at any time by
giving written notice thereof to the Company. Such resignation shall take effect
at the time specified therefor, and unless otherwise specified with respect
thereto, the acceptance of such resignation shall not be necessary to make it
effective. Except as otherwise provided pursuant to the provisions of Section 5
of Paragraph B of Article Fourth of this Amended and Restated Certificate of
Incorporation and subject to the rights of holders of any one or more series of
Preference Stock then outstanding with respect to directors elected by the
holders of such Preference Stock, any director may be removed from office at any
time, but only for cause as defined below and only by the affirmative vote of
the holders of at least a majority of the combined voting power of all of the
then-outstanding shares of all classes and series of the Company's capital stock
entitled to vote generally in the election of directors (the "Voting Stock"),
voting together as a single class, it being understood that for all purposes of
this Article Fifth, each share of the Voting Stock shall have the number of
votes granted to it pursuant to Article Fourth of this Amended and Restated
Certificate of Incorporation. For purposes of this Article Fifth, the term cause
is defined as conviction of a felony or gross negligence or willful misconduct
in the performance of a duty to the Company, as determined by the Board of
Directors.
(v) Notwithstanding the foregoing, whenever the holders of any
one or more series of Preference Stock shall have the right, voting separately
as a class or series, to elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of this Amended
and Restated Certificate of Incorporation and the resolution or resolutions
applicable thereto adopted by the Board of Directors pursuant to Article Fourth
hereof. Directors so elected shall not be divided into classes unless expressly
provided by such terms, and, during the prescribed terms of office of such
directors, the Board of Directors shall consist of such directors
<PAGE> 10
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in addition to the number of directors determined as provided in Section (a)(i)
of this Article Fifth.
(b) The Board of Directors and the stockholders shall have the power to
make, alter, amend and repeal the Bylaws of the Company as provided in the
Bylaws; provided, however, that, notwithstanding any other provisions of this
Amended and Restated Certificate of Incorporation or the Bylaws or any provision
of law which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class or series of the
Voting Stock required by law, the Bylaws or this Amended and Restated
Certificate of Incorporation, the affirmative vote of the holders of at least 80
percent of the combined voting power of all the then-outstanding shares of the
Voting Stock, voting together as a single class, shall be required to alter,
amend or repeal any provision of the Bylaws which is to the same effect as or
which is referred to in any provision of this Article Fifth.
(c) Except as otherwise provided pursuant to the provisions of Section
5 of Paragraph B of Article Fourth of this Amended and Restated Certificate of
Incorporation, special meetings of stockholders of the Company may be called
only by the Board of Directors pursuant to a resolution adopted by the
concurrent vote of the directors holding a majority of the total number of
directorships. The general purpose or purposes for which a special meeting is
called shall be stated in the notice thereof, and no other business shall be
transacted at such meeting.
(d) The Board of Directors of the Company, when evaluating any offer of
another party (1) to make a tender or exchange offer for any equity security of
the Company, (2) to merge or consolidate the Company with or into another
corporation, or (3) to purchase or otherwise acquire all or a substantial part
of the properties and assets of the Company or any of its subsidiaries, may, in
connection with the exercise of its judgment in determining what it reasonably
believes is in the best interests of the Company as a whole, give consideration
to all such factors as the Board of Directors determines to be relevant,
including, without limitation:
(i) interests of the Company's stockholders, long-term as well
as short-term, including the possibility that those interests may be best served
by the continued independence of the Company;
(ii) the interests of the customers of The Connecticut Water
Company;
(iii) whether the proposed transaction might violate federal
or state law;
(iv) the form and amount of consideration being offered in the
proposed transaction not only in relation to the then-current market price for
the outstanding capital stock of the Company, but also in relation to the market
price for the capital stock of the Company
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over a period of years, the estimated price that might be achieved in a
negotiated sale of the Company or The Connecticut Water Company as a whole or in
part to either public or private entities or through orderly liquidation, the
estimated further value of the Company, the premiums over market price paid for
the securities of other corporations in similar transactions, current political,
economic and other factors bearing on securities prices, and the Company's
financial condition and future prospects; and
(v) the social, legal and economic effects upon employees,
customers, suppliers and others having similar relationships with the Company or
The Connecticut Water Company, and the communities in which the Company and The
Connecticut Water Company conduct business, including, without limitations, the
public interest obligations imposed on The Connecticut Water Company as an
operating public utility and the effect or impact of any such transaction on the
ability of the Company, any subsidiaries or any successor entity to provide
prudent, adequate and effective water supply service to the areas served by The
Connecticut Water Company.
In connection with such evaluation, the Board of Directors may conduct
such investigations and engage in such legal proceedings as the Board of
Directors may determine.
(e) Notwithstanding any other provision of this Amended and Restated
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of the Voting Stock required by law or
this Restated Certificate of Incorporation, the affirmative vote of the holders
of at least 80 percent of the combined voting power of all of the
then-outstanding shares of the Voting Stock, voting together as a single class,
shall be required to alter, amend or repeal this Article Fifth.
SIXTH: The personal liability of any person who is or was a director of
the Company to the Company or its stockholders for monetary damages for breach
of duty as a director is hereby limited to the amount of the compensation
received by the director for serving the Company during the year or years in
which the violation occurred so long as such breach did not (i) involve a
knowing and culpable violation of law by the director, (ii) enable the director
or an associate, as defined in Section 33-840 of the Connecticut General
Statutes, to receive an improper personal economic gain, (iii) show a lack of
good faith and a conscious disregard for the duty of the director to the Company
under circumstances in which the director was aware that his or her conduct or
omission created an unjustifiable risk of serious injury to the Company, (iv)
constitute a sustained and unexcused pattern of inattention that amounted to an
abdication of the director's duty to the Company, or (v) create liability under
Section 33-757 of the Connecticut General Statutes. Any lawful repeal or
modification of this provision of the Amended and Restated Certificate of
Incorporation of the Company by the stockholders and the Board of
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Directors of the Company shall not adversely affect any right or protection of a
person who is or was a director of the Company existing at or prior to the time
of such repeal or modification.
SEVENTH: (a) The Company shall, to the fullest extent permitted by law,
indemnify its directors from and against any and all of the liabilities,
expenses and other matters referred to in or covered by the Connecticut Business
Corporation Act. In furtherance and not in limitation thereof, the Company shall
indemnify each director for liability, as defined in subsection (5) of Section
33-770 of the Connecticut General Statutes, to any person for any action taken,
or any failure to take any action, as a director, except liability that (i)
involved a knowing and culpable violation of law by the director, (ii) enabled
the director or an associate, as defined in Section 33-840 of the Connecticut
General Statutes, to receive an improper personal economic gain, (iii) showed a
lack of good faith and a conscious disregard for the duty of the director to the
Company under circumstances in which the director was aware that his or her
conduct or omission created an unjustifiable risk of serious injury to the
Company, (iv) constituted a sustained and unexcused pattern of inattention that
amounted to an abdication of the director's duty to the Company, or (v) created
liability under Section 33-757 of the Connecticut General Statutes; provided
that nothing in this sentence shall affect the indemnification of or advance of
expenses to a director for any liability stemming from acts or omissions
occurring prior to the effective date of this Article SEVENTH.
The Company shall indemnify each officer of the Company who is not a
director, or who is a director but is made a party to a proceeding in his or her
capacity solely as an officer, to the same extent as the Company is permitted to
provide the same to a director, and may indemnify such persons to the extent
permitted by Section 33-776 of the Connecticut General Statutes.
The indemnification provided for herein shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(b) Expenses incurred by a director or officer of the Company in
defending a civil or criminal action, suit or proceeding shall be paid for or
reimbursed by the Company to the fullest extent permitted by law in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall be ultimately determined that such director or officer is not entitled
to be indemnified by the Company.
(c) The Company may indemnify and pay for or reimburse the expenses of
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employees and agents not otherwise entitled to indemnification pursuant to this
Article Seventh on such terms and conditions as may be established by the Board
of Directors.
(d) No amendment to or repeal of this Article Seventh shall apply to or
have any effect on the indemnification of any director, officer, employee or
agent of the Company for or with respect to any acts or omissions of such
director, officer, employee or agent occurring prior to such amendment or
repeal, nor shall any such amendment or repeal apply to or have any effect on
the obligations of the Company to pay for or reimburse in advance expenses
incurred by a director, officer, employee or agent of the Company in defending
any action, suit or proceeding arising out of or with respect to any acts or
omissions occurring prior to such amendment or repeal.
EIGHTH: Reference in this Amended and Restated Certificate of
Incorporation to a provision of the General Statutes of Connecticut or any
provision of Connecticut law set forth in such Statutes is to such provision of
the General Statutes of Connecticut, Revision of 1958, as amended, or the
corresponding provision(s) of any subsequent Connecticut law. Reference in this
Amended and Restated Certificate of Incorporation to a provision of the
Connecticut Business Corporation Act is to such provision of the codification in
the Connecticut General Statutes of the Connecticut Business Corporation Act, as
amended, or the corresponding provision(s) of any subsequent Connecticut law.
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
of
CONNECTICUT WATER SERVICE, INC.
ARTICLE I
GENERAL
These Bylaws are intended to supplement and implement applicable
provisions of law and of the Certificate of Incorporation of Connecticut Water
Service, Inc. (the "Corporation") with respect to the regulation of the affairs
of the Corporation.
ARTICLE II
MEETING OF STOCKHOLDERS
SECTION 1. Place of Meeting: Stockholders' meetings shall be held at
the principal office of the Corporation or at such other place, either within or
without the State of Connecticut, as shall be designated in the notice of
meeting.
SECTION 2. Annual Meeting; Business at Annual Meeting: The annual
meeting of the stockholders shall be held in each year at the place, on the date
and at the hour designated in the call therefor. At such meeting the
stockholders shall elect the Board of Directors and shall transact such other
business as shall properly be brought before them. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the
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Board of Directors, (b) otherwise properly brought before the meeting by or at
the direction of the Board of Directors or (c) otherwise properly brought before
the meeting by a stockholder.
For business to be properly brought before a annual meeting by a
stockholder, the business must be an appropriate matter to be acted on by the
stockholders at an annual meeting and the stockholder must have given proper and
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received by
the Secretary of the Corporation at the principal executive offices of the
Corporation not later than the close of business on a day which is not less that
120 days prior to the anniversary date of the immediately preceding annual
meeting. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder and (d) any material interest of the
stockholder in such business. The presiding officer of an annual meeting shall
determine whether such proposal is or is not an appropriate matter to be acted
on by the stockholders at such annual meeting, and, if the facts warrant that a
matter of business was not properly brought before the meeting in accordance
with the provisions of this Section 2, and if he should so determine, he shall
so declare to the meeting and any such business not properly brought before the
meeting shall not be acted on at the meeting.
SECTION 3. Special Meetings: Subject to Article Fourth, Section 5 of
the Corporation's Certificate of Incorporation, special meetings of stockholders
of the Corporation may be called only by the Board of Directors pursuant to a
resolution adopted by the concurring vote of Directors holding a majority of the
total number of directorships. The general purpose or purposes for which a
special meeting is called shall be stated in the notice thereof, and no other
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business shall be transacted at such meeting. No proposal may be brought before
a special meeting unless it is directly related to the business specified in the
notice of such meeting and it is properly brought before such meeting. To be
properly brought before a special meeting, a proposal must be (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (b) otherwise brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder.
For a proposal to be properly brought by a stockholder before a special
meeting (other than nominations for election of Directors, which shall be
governed by Article II, Section 7 of these Bylaws), the stockholder must have
given proper and timely notice thereof in writing to the Secretary of the
Corporation. To be a timely stockholder's notice must be delivered to or mailed
and received by the Secretary of the Corporation at the principal executive
offices of the Corporation not later than the close of business on the tenth day
following the date on which notice of such meeting is first mailed to
stockholders. A stockholder's notice to the Secretary shall set forth as to such
proposal the stockholder proposes to bring before a special meeting: (a) a brief
description of the matter desired to be brought before the special meeting and
the reasons why such proposal is directly related to the business contained in
the notice of meeting; (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such matter; (c) the class and
number of shares of the Corporation which are beneficially owned by the
stockholder; and (d) any material interest of the stockholder in the proposal.
The presiding officer of a special meeting shall determine whether such proposal
is or is not directly related to the business of the meeting as stated in the
notice thereof, and, if the facts warrant that such proposal was not properly
brought before the meeting in accordance with the provisions of this Section 3,
and if he should so determine, he shall so declare to the meeting and any such
proposal not properly brought before the meeting shall not be acted on at the
meeting.
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SECTION 4. Notice of Meeting: Written notice of the date, time and
place of each annual meeting and any special meeting, and in case of a special
meeting, the general purpose or purposes for such meeting, shall be mailed or
delivered, at least ten (10) but not more than sixty (60) days prior to the date
of such meeting, to each stockholder entitled to vote at such a meeting at his
residence or usual place of business, as shown on the records of the
Corporation, provided that any one or more of such stockholders, as to himself
or themselves, may waive such notice in writing or by attendance without protest
at such meeting.
SECTION 5. Quorum: The holders of a majority of the shares of the
issued and outstanding stock entitled to vote at a meeting, present either in
person or by proxy, shall constitute a quorum for the transaction of business at
such meeting of the stockholders. If a quorum be not present at such meeting,
the stockholders present in person or by proxy may adjourn to such future time
as shall be agreed upon by them, and notice of such adjournment shall be given
to the stockholders not present or represented at the meeting.
SECTION 6. Stockholders' Action Without Meeting: Any action which,
under any provision of the Connecticut Business Corporation Act, may be taken at
a meeting of stockholders may be taken without such a meeting if a consent in
writing, setting forth the action so taken or to be taken, is signed severally
or collectively by all of the persons who would be entitled to vote upon such
action at a meeting or by their duly authorized attorneys. The Secretary of the
Corporation shall file such consent or consents with the minutes of the
stockholders' meetings.
SECTION 7. Advance Notice of Nominations: No person shall be eligible
for election as a director at any annual or special meeting of stockholders
unless such person was nominated by or at the direction of the Board of
Directors or by any stockholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the following procedures.
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A nomination by a stockholder shall be made only if such stockholder had given
proper and timely notice in writing of such stockholder's intent to make such
nomination to the Secretary of the Corporation. To be timely a stockholder's
notice must be delivered to or mailed and received by the Secretary of the
Corporation at the principal executive offices of the Corporation not later than
(i) with respect to an election to be held at an annual meeting of stockholders,
the close of business on a day which is not less that 120 days prior to the
anniversary date of the immediately preceding annual meeting, and (ii) with
respect to an election to be held at a special meeting of stockholders called
for the election of directors, the close of business on the tenth day following
the date on which notice of such meeting is first mailed to stockholders. Each
such notice shall set forth: (a) the name and address of the person or persons
to be nominated; (b) the name and address, as they appear on the Corporation's
books, of the stockholder making such nomination; (c) the class and number of
shares of the Corporation which are beneficially owned by the stockholder; (d) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in persons or
by proxy at the meeting to nominate the person or persons specified in the
notice; (e) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (f) such other information regarding each nominee proposed by
the stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission; and (g)
the consent of each nominee to serve as a director of the Corporation if so
elected. The presiding officer of the meeting shall determine, if the facts
warrant that such nomination was not made in accordance with the provision of
this Section 7, and if he should so determine, he shall so declare to the
meeting and any nominations not properly made shall be disregarded.
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ARTICLE III
SHARES
Share certificates shall be in a form adopted by the Board of Directors
and shall be signed by the President and by the Secretary. Such certificates
shall bear the seal of the Corporation. The name of the persons to whom issued,
the number of such shares which such certificate represents, the consideration
for which the shares were issued and the date of issue shall be entered on the
Corporation's books.
ARTICLE IV
DIRECTORS
SECTION 1. Number. Election and Term of Office: The Board of Directors
shall consist of no fewer than nine or more than fifteen persons (exclusive of
directors, if any, elected by the holders of one or more series of Preference
Stock, which may at any time be outstanding, voting separately as a class
pursuant to the provisions of the Corporation's Certificate of Incorporation
applicable thereto), the exact number to be fixed from time to time within the
foregoing limits exclusively by the Board of Directors pursuant to a resolution
adopted by the Board of Directors. The number of positions of the Board of
Directors, as fixed in accordance with the foregoing, is referred to herein as
the "number of directorships." The directors shall be classified (exclusive of
directors, if any, elected by the holders of one or more series of Preference
Stock voting separately as a class) as provided in Article Fifth of the
Corporation's Certificate of Incorporation, and the term of office of each
director shall be as provided therein. No director shall be eligible for
re-election as a director of the Corporation after such director shall have
attained the age of 70; and no officer of the Corporation, other than a person
who has served as Chief Executive Officer of the Corporation, shall be eligible
for re-election as a
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director of the Corporation after such person shall no longer be an officer of
the Corporation or shall have attained the age of 65.
SECTION 2. Resignation and Removal of Directors: Any director of the
Corporation may resign and any director may be removed from office, but only in
accordance with the provisions of Article Fifth of the Corporation's Certificate
of Incorporation.
SECTION 3. Vacancies: Newly created directorships resulting from any
increase in the authorized number of directorships and vacancies on the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause shall be filled by the Board of Directors in
accordance with the provisions of Article Fifth of the Corporation's Certificate
of Incorporation, and any director elected to fill any newly created
directorship or vacancy shall hold office for such term as is specified therein.
SECTION 4. Powers: The property, business and affairs of the
Corporation shall be managed by the directors who may exercise all power and do
all the things that may be done by the Corporation subject to provisions of law,
the statutes of the State of Connecticut, the Certificate of Incorporation,
these Bylaws and any vote of the stockholders.
SECTION 5. Committees: The Board of Directors, by the affirmative vote
of directors holding a majority of the number of directorships, may appoint from
the directors an executive committee and/or such other committees as it may deem
appropriate and may, to the extent permitted by law, delegate to such committees
any of the powers of the Board of Directors. A majority of the committee shall
have the power to act. All committees shall keep full records of their
proceedings and shall report the same to the Board of Directors.
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SECTION 6. Compensation: The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as directors, or both. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 7. Directors Emeritus: There shall be a class of Directors
Emeritus, eligibility for which shall be limited to those directors who have
served for thirty (30) or more consecutive years on the Board of Directors of
the Corporation or its predecessor companies and who, by reason of attaining the
age of seventy (70), have become ineligible for further election to the Board of
Directors of the Corporation. Election to the position of Director Emeritus
shall be for life, unless such a person earlier resigns, and shall be effective
upon the affirmative vote of a majority of directors present at a duly
constituted meeting of the Corporation's Board of Directors. The position of
Director Emeritus shall be in recognition of past contributions to the
Corporation, and any person so elected shall have no duties or responsibilities
to the Corporation. No Director Emeritus shall be entitled to vote on any matter
presented to the Board, nor shall any Director Emeritus be counted for the
purposes of determining a quorum. The Board of Directors by annual resolution
may invite one or more Directors Emeritus to attend Board meetings for the
succeeding twelve (12) months, in which event such person or persons shall be
compensated at the same rate paid to each director for attendance at such
meetings.
ARTICLE V
MEETINGS OF DIRECTORS
SECTION 1. Annual Meetings: A regular meeting of the Board of Directors
shall be held without notice immediately after the annual meeting of
stockholders, or as soon thereafter as
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convenient. At such meeting, the Board of Directors shall choose and appoint the
officers of the Corporation who shall hold their offices, subject to prior
removal by the Board of Directors, until the next annual meeting or until their
successors are chosen and qualify.
SECTION 2. Regular Meetings: All other regular meetings of the Board of
Directors may be held without notice at such date, time and place as the Board
of Directors may determine and fix by resolutions.
SECTION 3. Special Meetings: Special meetings of the Board of Directors
may be held upon call of the President, or upon call of any one (1) or more
directors.
SECTION 4. Notice: Written or oral notice of the date, time and place
of all special meetings of the Board of Directors shall be given to each
director personally or mailed to his/her residence or usual place of business at
least two (2) days prior to the date of the meeting, provided that any one or
more directors, as to himself or themselves, may waive such notice in writing
before or after a meeting or by attendance without protest at such meeting.
SECTION 5. Quorum: Directors holding a majority of the number of
directorships shall constitute a quorum. Except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws, all questions shall be decided
by vote of a majority of the directors present at any meeting of the Board of
Directors at which a quorum is present.
SECTION 6. Director Participation in Meeting By Telephone: A director
may participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment enabling all directors
participating in the meeting to hear one another, and participation in a meeting
pursuant to this Article V, Section 6 shall constitute presence in person at
such meeting.
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SECTION 7. Directors' Action Without Meeting: If all the directors
severally or collectively consent in writing to any action taken or to be taken
by the Corporation, such action shall be as valid as though it has been
authorized at a meeting of the Board of Directors. The Secretary of the
Corporation shall file such consent or consents with the minutes of the meeting
of the Board of Directors.
ARTICLE VI
OFFICERS
SECTION 1. Title, Election and Duties: The Board of Directors shall
appoint a President, one or more Vice Presidents, a Secretary, a Treasurer and
such other officers as the Board of Directors may from time to time deem
appropriate. The duties of the officers of the Corporation shall be such as are
specified below and such as usually pertain to such offices, as well as such as
may be prescribed from time to time by the Board of Directors.
SECTION 2. President: The President shall preside at all meetings of
the Board of Directors and stockholders, shall have general charge and direction
of the business of the Corporation and shall perform such other duties as are
properly required of him by the Board of Directors.
SECTION 3. Vice President: A Vice President shall act in the place of
the President in the event of the absence or incapacity of the President and
shall have such other duties as may from time to time be prescribed by the Board
of Directors.
SECTION 4. Secretary: The Secretary shall keep the minutes of the
meetings of stockholders and the Board of Directors and shall give notice of all
such meetings as required in these Bylaws. He shall have custody of such
minutes, the seal of the Corporation and the stock
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certificate records of the Corporation, except to the extent some other person
is authorized to have custody and possession thereof by a resolution by the
Board of Directors.
SECTION 5. Treasurer: The Treasurer shall keep the fiscal accounts of
the Corporation including an account of all moneys received or disbursed.
ARTICLE VII
SEAL
The corporate seal shall consist of a circular disc with the name of
the Corporation and the words "Connecticut" and "Seal" thereon.
ARTICLE VIII
[RESERVED]
ARTICLE IX
AMENDMENTS
These Bylaws may be amended, added to, rescinded or repealed by the
affirmative vote of directors holding a majority of the authorized directorships
or by the affirmative vote of a majority of the voting power of the shares
entitled to vote thereon, provided notice of the proposed change was given in
the notice of the meeting, or, in the case of a meeting of the Board of
Directors, in a notice given not less than two (2) days prior to the meeting;
provided, however, that, notwithstanding any other provisions of these Bylaws or
any provisions of law or the Corporation's Certificate of Incorporation which
might otherwise permit a less vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of the Voting
Stock (as that term is defined in Article Fifth of the Corporation's Certificate
of
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Incorporation) required by law, the Corporation's Certificate of Incorporation
or these Bylaws, the affirmative vote of the holders of at least 80 percent of
the combined voting power of all the then-outstanding shares of the Voting
Stock, voting together as a single class, shall be required to alter, amend or
repeal Sections 2, 3, or 7 of ARTICLE II of these Bylaws, Section 1, 2 or 3 of
ARTICLE IV of these Bylaws or this proviso in this ARTICLE IX.
ARTICLE IX
REFERENCES
Reference in these Bylaws to a provision of the General Statutes of
Connecticut or any provision of Connecticut law set forth in such Statutes is to
such provision of the General Statutes of Connecticut, Revision of 1958, as
amended, or the corresponding provision(s) of any subsequent Connecticut law.
Reference in these Bylaws to a provision of the Connecticut Business Corporation
Act is to such provision of the codification in the Connecticut General Statutes
of the Connecticut Business Corporation Act, as amended, or the corresponding
provision(s) of any subsequent Connecticut law.
<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
of
THE CONNECTICUT WATER COMPANY
FIRST: The name of the corporation is THE CONNECTICUT WATER COMPANY
(the "Corporation").
SECOND: The Corporation is to be located in the Town of Clinton, County
of Middlesex and State of Connecticut.
THIRD: The nature of the business to be transacted by the Corporation
shall be that of a water company and any other business permitted to be
transacted by a corporation formed under the Connecticut Business Corporation
Act, and the Corporation may engage in any lawful act or activity for which
corporations may be formed under the Connecticut Business Corporation Act. The
Corporation shall have all of the powers granted to business corporations under
the Connecticut Business Corporation Act. In addition, the Corporation shall
have all of the powers, rights and franchises granted to Connecticut public
service companies or water companies generally, or specially granted to the
Corporation or any company from which the Corporation has acquired such powers,
rights and franchises through merger, acquisition or otherwise (such companies
hereinafter referred to as "constituent companies"), by the provisions of the
Connecticut General Statutes or Connecticut Special Acts, including, without
limitation, the powers, rights and franchises, whether of a public or private
nature, and the special rights, privileges and immunities, to engage in any
business and to carry on its business in any area granted to the Corporation or
its constituent companies by the provisions of the Connecticut Special Acts
listed in Exhibit A to this Certificate of Incorporation, any other Connecticut
Special Acts now or hereafter granted to or acquired by the Corporation or any
companies which may now or hereafter be constituent companies of the
Corporation, and any supplements or amendments to any of said Connecticut
Special Acts, and the Corporation shall continue to be entitled to such
franchises and special rights, privileges and immunities without reciting such
provisions in this Certificate of Incorporation.
FOURTH: The Board of Directors of the Corporation, when evaluating any
offer of another party (i) to make a tender or exchange offer for any equity
security of the Corporation, (ii) to merge or consolidate the Corporation with
or into another corporation, or (iii) to purchase or otherwise acquire all or a
substantial part of the properties and assets of the Corporation or any
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of its subsidiaries, may, in connection with the exercise of its judgment in
determining what it reasonably believes is in the best interests of the
Corporation as a whole, give consideration to all such factors as the Board of
Directors determines to be relevant, including, without limitation:
1. interests of the Corporation's stockholders, long-term as
well as short- term, including the possibility that those interests may be best
served by the continued independence of the Corporation;
2. the interests of the customers of the Corporation;
3. whether the proposed transaction might violate federal or
state law;
4. the form and amount of consideration being offered in the
proposed transaction not only in relation to the then-current market price for
the outstanding capital stock of the Corporation, but also in relation to the
market price for the capital stock of the Corporation over a period of years,
the estimated price that might be achieved in a negotiated sale of the
Corporation or Connecticut Water Service, Inc. as a whole or in part to either
public or private entities or through orderly liquidation, the estimated further
value of the Corporation, the premiums over market price paid for the securities
of other corporations in similar transactions, current political, economic and
other factors bearing on securities prices, and the Corporation's financial
condition and future prospects; and
5. the social, legal and economic effects upon employees,
customers, suppliers and others having similar relationships with the
Corporation or Connecticut Water Service, Inc., and the communities in which the
Corporation and Connecticut Water Service, Inc. conduct business, including,
without limitation, the public interest obligations imposed on the Corporation
as an operating public utility and the effect or impact of any such transaction
on the ability of the Corporation, any subsidiaries or any successor entity to
provide prudent, adequate and effective water supply service to the areas served
by the Corporation.
In connection with such evaluation, the Board of Directors may conduct
such investigations and engage in such legal proceedings as the Board of
Directors may determine.
FIFTH: The personal liability of any person who is or was a Director of
the Corporation to the Corporation or its stockholders for monetary damages for
breach of duty as a Director is hereby limited to the amount of the compensation
received by the Director for serving the Corporation during the year or years in
which the violation occurred so long as such breach did not (i) involve a
knowing and culpable violation of law by the Director, (ii) enable the Director
or an associate, as defined in Section 33-840 of the Connecticut General
Statutes, to receive an improper personal economic gain, (iii) show a lack of
good faith and a conscious
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disregard for the duty of the Director to the Corporation under circumstances in
which the Director was aware that his or her conduct or omission created an
unjustifiable risk of serious injury to the Corporation, (iv) constitute a
sustained and unexcused pattern of inattention that amounted to an abdication of
the Director's duty to the Corporation, or (v) create liability under Section
33-757 of the Connecticut General Statutes. Any lawful repeal or modification of
this provision of the Certificate of Incorporation of the Corporation by the
stockholders and the Board of Directors of the Corporation shall not adversely
affect any right or protection of a person who is or was a Director of the
Corporation existing at or prior to the time of such repeal or modification.
SIXTH: A. The Corporation shall, to the fullest extent permitted by
law, indemnify its Directors from and against any and all of the liabilities,
expenses and other matters referred to in or covered by the Connecticut Business
Corporation Act. In furtherance and not in limitation thereof, the Corporation
shall indemnify each Director for liability, as defined in subsection (5) of
Section 33-770 of the Connecticut General Statutes, to any person for any action
taken, or any failure to take any action, as a Director, except liability that
(i) involved a knowing and culpable violation of law by the Director, (ii)
enabled the Director or an associate, as defined in Section 33-840 of the
Connecticut General Statutes, to receive an improper personal economic gain,
(iii) showed a lack of good faith and a conscious disregard for the duty of the
Director to the Corporation under circumstances in which the Director was aware
that his or her conduct or omission created an unjustifiable risk of serious
injury to the Corporation, (iv) constituted a sustained and unexcused pattern of
inattention that amounted to an abdication of the Director's duty to the
Corporation, or (v) created liability under Section 33-757 of the Connecticut
General Statutes; provided that nothing in this sentence shall affect the
indemnification of or advance of expenses to a Director for any liability
stemming from acts or omissions occurring prior to the effective date of this
Article SIXTH.
The Corporation shall indemnify each officer of the Corporation who is
not a Director, or who is a Director but is made a party to a proceeding in his
or her capacity solely as an officer, to the same extent as the Corporation is
permitted to provide the same to a Director, and may indemnify such persons to
the extent permitted by Section 33-776 of the Connecticut General Statutes.
The indemnification provided for herein shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested Directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a Director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person.
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B. Expenses incurred by a Director or officer of the Corporation in
defending a civil or criminal action, suit or proceeding shall be paid for or
reimbursed by the Corporation to the fullest extent permitted by law in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Director or officer to repay such amount if
it shall be ultimately determined that such Director or officer is not entitled
to be indemnified by the Corporation.
C. The Corporation may indemnify and pay for or reimburse the expenses
of employees and agents not otherwise entitled to indemnification pursuant to
this Article SIXTH on such terms and conditions as may be established by the
Board of Directors.
D. No amendment to or repeal of this Article SIXTH shall apply to or
have any effect on the indemnification of any Director, officer, employee or
agent of the Corporation for or with respect to any acts or omissions of such
Director, officer, employee or agent occurring prior to such amendment or
repeal, nor shall any such amendment or repeal apply to or have any effect on
the obligations of the Corporation to pay for or reimburse in advance expenses
incurred by a Director, officer, employee or agent of the Corporation in
defending any action, suit or proceeding arising out of or with respect to any
acts or omissions occurring prior to such amendment or repeal.
SEVENTH: The amount of the capital stock of the Corporation hereby
authorized is (a) $5,000,000, divided into 50,000 shares of Cumulative Preferred
Stock of the par value of $100 each, and (b) 1,000,000 shares of Common Stock
without par value.
A. The voting powers, restrictions and qualifications of the Common
Stock shall be as follows:
1. The holders of the Common Stock shall each be entitled to
one (1) vote per share.
2. No holder of Common Stock shall be entitled as such as a
matter of right to subscribe for or purchase any part of any stock of any class
of the Corporation or securities convertible into such stock now or hereafter
authorized or issued.
B. The general preferences, voting powers, restrictions and
qualifications of the Cumulative Preferred Stock of the par value of $100 per
share (hereinafter called the "Preferred Stock") shall be as follows:
1. Authorized Amount of Preferred Stock. The authorized amount
of Preferred Stock subject to this Article SEVENTH, unless increased in
accordance with the
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provisions of this Certificate of Incorporation, shall be $5,000,000, consisting
of 50,000 shares of the par value of $100 per share. Said shares may, subject to
the provisions of this Article SEVENTH, be issued from time to time in one or
more series in such amounts, on such terms and for such considerations as may be
determined and authorized by the requisite vote of the stockholders or of the
Board of Directors. The series designation, dividend rate, redemption prices,
and other special rights, if any, of each series of the Preferred Stock shall be
as determined and authorized by the requisite vote of the stockholders or of the
Board of Directors.
All shares of Preferred Stock shall be of equal rank with each other,
regardless of series, and all shares thereof shall be identical except as to the
above referenced special rights, and in respect to any or all of which there may
be variation between different series as fixed and determined by the requisite
vote of the stockholders of the Board of Directors. All shares of Preferred
Stock of any one series shall be identical with each other in all respects.
2. Dividends. The holders of any series of the Preferred Stock
shall receive, when declared by the Board of Directors, preferential dividends
at the rate provided for such series and payable quarterly on such dividend
payment dates in each year as the stockholders or said Board may determine, such
dividends to be payable to Preferred Stockholders of record on such dates as may
be fixed by vote of the stockholders or of the Board of Directors, but not more
than forty-five (45) days before each dividend payment date.
Dividends on each share of the Preferred Stock shall be cumulative from
the date of issue thereof or from such date as the stockholders or Board of
Directors may determine.
Unless full cumulative dividends to the last preceding dividend payment
date shall have been paid or set apart for payment on all outstanding shares of
Preferred Stock, no dividend (other than a dividend in shares of junior stock)
shall be paid on any junior stock. The term "junior stock" as used herein means
Common Stock or any other stock of the Corporation subordinate to the Preferred
Stock in respect of dividends or payments in liquidation.
So long as any shares of the Preferred Stock shall be outstanding, the
Corporation will not apply any sum to the redemption, retirement or purchase of
any share of any junior stock nor to the payment of any dividend or other
disbursement thereon (exclusive of dividends payable in its junior stock), if,
after such application shall have been made, the aggregate of such sum and all
sums so applied since December 31, 1974, would exceed the aggregate of its net
income since said date (treated as one accounting period), plus $500,000;
provided, however, that nothing herein contained shall be construed so as to
prevent the Corporation from retiring any shares of its junior stock in exchange
for the issue of additional shares of its junior stock, or from redeeming,
retiring or from purchasing shares of its junior stock to the extent of the cash
proceeds received from the sale of any such additional shares.
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So long as any shares of the Preferred Stock shall be outstanding the
Corporation will not limit or restrict the payment of dividends on, or the
making of any sinking fund payments on account of, any series of the Preferred
Stock unless an amount equal to the total of the dividend requirement and
sinking fund requirement on all outstanding shares of Preferred Stock for a
period of one (1) year is excluded from such limitation or restriction on the
payment of dividends or the making of sinking fund payments.
3. Redemption or Purchase of Preferred Stock. Except as may be
otherwise provided with respect to any particular series of the Preferred Stock,
all or any part of any series of the Preferred Stock at any time outstanding may
be redeemed by vote of the Board of Directors at any time or by the operation of
a sinking fund, if any, at the then current redemption price provided for such
series and in the manner hereinbelow provided and without redeeming any part or
all of any other series of the Preferred Stock. If less than all of any series
of the Preferred Stock is to be redeemed, the transfer agent shall determine by
lot or in some other proper manner approved by the Board of Directors the shares
of such series of Preferred Stock to be redeemed.
Except for redemption effected by the operation of a sinking fund, no
redemption of less than all of the Preferred Stock outstanding shall be made
without setting aside an amount equal to the dividends accumulated to the
dividend payment date next following the redemption date fixed in such call on
all of the Preferred Stock then outstanding and not called, or to such
redemption date, if such date is a dividend payment date.
The sums payable in respect of any Preferred Stock to be redeemed shall
be payable at the office of a Connecticut incorporated bank or trust company in
good standing having a capital and surplus of not less than $1,000,000. Notice
of the redemption, stating the redemption date and the place where the
redemption price of the stock to be redeemed is payable, shall be mailed not
less than thirty (30) days before the redemption date to each holder of stock so
to be redeemed at his address as it appears upon the books of the Corporation.
The Corporation shall, before the redemption date, deposit with said
bank or trust company all sums payable with respect to the Preferred Stock so
called. After such mailing and deposit the holders of the Preferred Stock to be
redeemed shall cease to have any right to future dividends or other rights or
privileges as stockholders in respect of such stock and shall be entitled to
look for payment on and after the redemption date only to the sums so deposited
with said bank or trust company for their respective accounts. Stock so redeemed
may be reissued but only subject to the limitations imposed by this Article
SEVENTH upon the issue of Preferred Stock.
Except as may be otherwise provided with respect to any particular
series of the Preferred
<PAGE> 7
-7-
\
Stock at any time when there is no default in the payment of any dividend on the
Preferred Stock and there is no event of default within the meaning of
Subparagraph 5 of Paragraph B of this Article SEVENTH, the Corporation may
purchase all or any of the then outstanding shares of the Preferred Stock of any
series upon the best terms reasonably obtainable, but not exceeding the then
current redemption price of such shares.
4. Amounts Payable on Liquidation. The holders of any series
of the Preferred Stock shall receive upon any voluntary liquidation, dissolution
or winding-up of the Corporation the then current redemption price (other than
any sinking fund redemption price) of the series in question and if such action
is involuntary, $100 per share, plus in each case all dividends accrued and
unpaid to the date of such payment, before any payment in liquidation is made on
any junior stock.
If the net assets of the Corporation available for distribution on
liquidation to the holders of the Preferred Stock shall be insufficient to pay
said amount in full, then such net assets shall be distributed pro rata among
the holders of the Preferred Stock to the extent available.
5. Voting Powers. Except as provided in this Article SEVENTH
and as provided by law, the holders of the Preferred Stock shall have no voting
power or right to notice of any meeting.
Whenever dividends on any share of the Preferred Stock shall be in
arrears in an amount equal to or exceeding four (4) quarterly dividend payments,
or whenever the Corporation shall fail to meet fully any sinking fund obligation
of any series of the Preferred Stock, or whenever there shall have occurred some
default in the observance of any of the provisions of this Article SEVENTH, or
some default on which action has been taken by debenture holders, bondholders or
the trustee of any deed of trust or indenture of mortgage of the Corporation, or
whenever the Corporation shall have been declared bankrupt or a receiver of its
property shall have been appointed (any of said conditions being herein called
an "event of default"), then the holders of the Preferred Stock shall be given
notice of all stockholders' meetings and shall have the right, voting together
as a class, to elect the largest number of Directors constituting a minority of
the members of the Board of Directors of the Corporation, but in not event less
than two (2). After all arrears of dividends shall have been paid and all
sinking fund obligations shall have been fully met, and any event of default
shall have terminated, all the rights and powers of the holders of the Preferred
Stock to receive notice and to so vote shall continue for one (1) year
thereafter but shall at the end of such one (1) year period, cease, subject to
being again revived on any subsequent event of default.
When the holders of the Preferred Stock shall have acquired the right
to elect a minority of the Board of Directors, or such right shall cease, the
Corporation shall, promptly after the first
<PAGE> 8
-8-
delivery to the Corporation of a written request therefor by any stockholder,
cause a meeting of the stockholders to be held not less than forty-five (45)
days nor more than ninety (90) days after the delivery of such request for the
purpose of electing a new Board of Directors. Forthwith, upon the election and
qualification of the new Board of Directors, the terms of office of the existing
Directors shall terminate.
6. Action Requiring Consent of Preferred Stockholders. The
dividend rate or the amounts payable upon redemption or liquidation with respect
to any share of the Preferred Stock outstanding shall not be reduced without the
consent of the holder of such share.
Without the consent of the holders of two-thirds (2/3) of the total
number of shares of the Preferred Stock outstanding, the Corporation shall not:
(a) Change the general preferences, voting powers,
restrictions and qualifications of the Preferred Stock, but no other consent
shall be required for such a change.
(b) Issue any additional shares, or reissue any
reacquired shares, of Preferred Stock or of any other stock ranking on a parity
with the Preferred Stock as to dividends or assets, for any purpose other than
to refinance Preferred Stock or stock ranking on a parity with Preferred Stock
as to dividends or assets at the time outstanding to an amount not exceeding the
aggregate amount payable thereon upon involuntary liquidation, unless:
(i) the gross income of the Corporation
(computed in accordance with the Uniform Systems of Accounts prescribed by the
Department of Public Utility Control of the State of Connecticut or any
regulatory body which may succeed to the jurisdiction of said Department of
Public Utility Control) for twelve (12) consecutive calendar months ending not
more than ninety (90) days before the date of such issuance is equal to at least
one and one-half (1 1/2) times the aggregate of the annual interest charges on
all outstanding long-term indebtedness of the Corporation (excluding interest
charges on such indebtedness to be retired by the application of the proceeds
from the issuance of such shares) and the annual dividend requirements on all
Preferred Stock (including dividend requirements on any class of stock ranking
on a parity with the outstanding Preferred Stock, as to dividends or assets),
which will be outstanding immediately after the issuance of such shares; and
(ii) immediately after the issuance of such
shares the aggregate of (A) the par value of the Corporation's Preferred Stock
and (B) the principal amount of all long-term indebtedness, is not more than
seventy percent (70%) of the aggregate of (x) the principal amount of all
long-term indebtedness, (y) the par value of, or stated capital represented by
the Corporation's outstanding Preferred Stock and junior stock, and (z) the
amount of the Corporation's surplus (both capital and earned ) as stated on the
Corporation's books.
<PAGE> 9
-9-
7. Merger, Consolidation or Sale of All Assets. With the
approval of the holders of that number of shares of the Preferred Stock as may
be required by law, the Corporation may merge or consolidate with or be merged
into any other corporation, or sell or mortgage substantially all of its assets
subject to the provisions, if any, of any indenture of mortgage or deed of trust
or charter of the Corporation, or of any applicable law, provided that no such
merger or consolidation may be effected if as a result thereof any shares of
stock ranking prior to the Preferred Stock as to dividends or assets would be
and remain outstanding.
8. No Preemptive Right. The holders of the Preferred Stock
shall have no preemptive right to subscribe to any future issue of additional
shares of the Preferred Stock or of any other preferred stock or of Common Stock
or of any other class of stock now or hereafter authorized, or to any future
issue of bonds, debentures, notes or other evidences of indebtedness, whether or
not convertible into stock.
9. Immunity of Directors, Officers and Agents. No Director,
officer or agent of the Corporation shall be held personally responsible for any
action taken in good faith though subsequently adjudged to be in violation of
this Article SEVENTH.
10. Transfer Agent. The Corporation shall always have at least
one (1) transfer agent for the Preferred Stock, which may be the Corporation or
a Connecticut incorporated bank or trust company of good standing having a
capital and surplus of not less than $1,000,000.
EIGHTH: Reference in this Certificate of Incorporation to a provision
of the General Statutes of Connecticut or any provision of Connecticut law set
forth in such Statutes is to such provision of the General Statutes of
Connecticut, Revision of 1958, as amended, or the corresponding provision(s) of
any subsequent Connecticut law. Reference in this Certificate of Incorporation
to a provision of the Connecticut Business Corporation Act is to such provision
of the codification in the Connecticut General Statutes of the Connecticut
Business Corporation Act, as amended, or the corresponding provision(s) of any
subsequent Connecticut law. Reference in this Certificate of Incorporation to a
provision of the Internal Revenue Code is to such provision of the Internal
Revenue Code of 1986, as amended, or the corresponding provision(s) of any
subsequent federal income tax law.
<PAGE> 10
Exhibit A to the Amended and Restated
Certificate of Incorporation of
The Connecticut Water Company
TABLE OF CONNECTICUT SPECIAL ACTS
GRANTING RIGHTS, POWERS AND FRANCHISES TO
THE CONNECTICUT WATER COMPANY
AND ITS CONSTITUENT COMPANIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TITLE DATE OF VOLUME OF THE PAGE
APPROVAL COMPILED
SPECIAL LAWS
OF
CONNECTICUT
OR
CONNECTICUT
SPECIAL ACTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. THE CONNECTICUT WATER COMPANY, FORMERLY THE CONNECTICUT WATER AND GAS COMPANY
- -----------------------------------------------------------------------------------------------------------
An Act Incorporating The 07/23/1945 Vol. XXIV P. 741
Connecticut Water and Gas
Company
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 05/22/1957 Vol. XXVIII P. 404
of The Connecticut Water
Company
- -----------------------------------------------------------------------------------------------------------
2. THE MADISON WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
Incorporating The Madison 04/19/1893 Vol. XI P. 253
Water Company
- -----------------------------------------------------------------------------------------------------------
Amending the Charter of the 03/29/1895 Vol. XII P. 115
Guilford Water Company
- -----------------------------------------------------------------------------------------------------------
3. THE CHESTER WATER SUPPLY COMPANY
- -----------------------------------------------------------------------------------------------------------
Incorporating The Chester 07/06/1895 Vol. XII P. 607
Water Supply Company
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 11
-2-
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TITLE DATE OF VOLUME OF THE PAGE
APPROVAL COMPILED
SPECIAL LAWS
OF
CONNECTICUT
OR
CONNECTICUT
SPECIAL ACTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amending the Charters of the 05/03/1901 Vol. XIII P. 758
Deep River Water Supply
Company and The Chester
Water Supply Company
- -----------------------------------------------------------------------------------------------------------
4. DEEP RIVER WATER SUPPLY COMPANY
- -----------------------------------------------------------------------------------------------------------
Incorporating the Deep River 07/04/1895 Vol. XII P. 601
Water Supply Company
- -----------------------------------------------------------------------------------------------------------
Amending the Charters of the 05/03/1901 Vol. XIII P. 758
Deep River Water Supply
Company and The Chester
Water Supply Company
- -----------------------------------------------------------------------------------------------------------
5. CLINTON WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
Incorporating the Clinton 04/14/1893 Vol. XI P. 241
Water Company
- -----------------------------------------------------------------------------------------------------------
Amending the Charter of the 03/29/1895 Vol. XII P. 115
Guilford Water Company
- -----------------------------------------------------------------------------------------------------------
6. THE CHESTER WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
Amending the Charters of the 07/11/1907 Vol. XV P. 354
Guilford Water Company and
The Chester Water Company
- -----------------------------------------------------------------------------------------------------------
7. GUILFORD WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
Incorporating the Guilford 03/16/1893 Vol. XI P. 58
Water Company
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
-3-
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TITLE DATE OF VOLUME OF THE PAGE
APPROVAL COMPILED
SPECIAL LAWS
OF
CONNECTICUT
OR
CONNECTICUT
SPECIAL ACTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amending the Charter of the 03/29/1895 Vol. XII P. 115
Guilford Water Company
- -----------------------------------------------------------------------------------------------------------
Amending the Charters of the 07/11/1907 Vol. XV P. 354
Guilford Water Company and
The Chester Water Company
- -----------------------------------------------------------------------------------------------------------
8. GUILFORD-CHESTER WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
An Act Authorizing the 05/24/1923 Vol. XIX P. 257
Guilford-Chester Water
Company to Issue Bonds
- -----------------------------------------------------------------------------------------------------------
An Act Concerning Increase of 06/22/1927 Vol. XX P. 360
Capital Stock of the Guilford-
Chester Water Company
- -----------------------------------------------------------------------------------------------------------
An Act Authorizing the 06/12/1929 Vol. XX P. 865
Guilford-Chester Water
Company to Increase its
Capital Stock
- -----------------------------------------------------------------------------------------------------------
An Act Authorizing the 06/17/1935 Vol. XXII P. 314
Guilford-Chester Water
Company to Increase its
Capital Stock
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 06/02/1955 Vol. XXVII P. 206
of Guilford-Chester Water
Company, Concerning
Issuance of Stock and Bonds
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
-4-
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TITLE DATE OF VOLUME OF THE PAGE
APPROVAL COMPILED
SPECIAL LAWS
OF
CONNECTICUT
OR
CONNECTICUT
SPECIAL ACTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
9. THE NAUGATUCK WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
Incorporating The Naugatuck 05/19/1887 Vol. X P. 751
Water Company
- -----------------------------------------------------------------------------------------------------------
Authorizing The Naugatuck 05/25/1893 Vol. XI P. 385
Water Company to Increase its
Capital Stock
- -----------------------------------------------------------------------------------------------------------
Amending the Charter of The 07/06/1895 Vol. XII P. 622
Naugatuck Water Company
- -----------------------------------------------------------------------------------------------------------
Increasing the Capital Stock of 03/28/1901 Vol. XIII P. 640
The Naugatuck Water
Company
- -----------------------------------------------------------------------------------------------------------
Authorizing an Increase in the 03/13/1909 Vol. XV P. 719
Capital Stock of The
Naugatuck Water Company
- -----------------------------------------------------------------------------------------------------------
An Act Authorizing The 06/16/1937 Vol. XXII P. 868
Naugatuck Water Company to
Increase its Capital Stock and
Validating Previous Stock
Issues
- -----------------------------------------------------------------------------------------------------------
An Act Authorizing The 09/24/1953 Vol. XXVI P. 876
Naugatuck Water Company to
Increase its Capital Stock
- -----------------------------------------------------------------------------------------------------------
An Act Concerning the Charter 12/20/1955 Vol. XXVII P. 764
of The Naugatuck Water
Company, Concerning the
Borrowing of Money
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
-5-
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TITLE DATE OF VOLUME OF THE PAGE
APPROVAL COMPILED
SPECIAL LAWS
OF
CONNECTICUT
OR
CONNECTICUT
SPECIAL ACTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10. BROAD BROOK WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
An Act Concerning Creation of 06/16/1959 Vol. XXIX P. 351
the Broad Brook Water
Company
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 04/25/1961 Vol. XXX P. 21
of the Broad Brook Water
Company
- -----------------------------------------------------------------------------------------------------------
11. THE COLLINSVILLE WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
Incorporating The Collinsville 06/17/1901 Vol. XIII P. 1213
Water Company
- -----------------------------------------------------------------------------------------------------------
Extending the Time for 04/29/1903 Vol. XIV P. 121
Organizing The Collinsville
Water Company
- -----------------------------------------------------------------------------------------------------------
Amending the Charter of The 03/30/1909 Vol. XV P. 639
Collinsville Water Company
- -----------------------------------------------------------------------------------------------------------
12. THE ROCKVILLE WATER AND AQUEDUCT COMPANY
- -----------------------------------------------------------------------------------------------------------
Incorporating The Rockville 03/01/1893 Vol. XI P. 27
Water and Aqueduct Company
- -----------------------------------------------------------------------------------------------------------
Authorizing The Rockville 05/05/1893 Vol. XI P. 422
Water and Aqueduct Company
to Issue Bonds
- -----------------------------------------------------------------------------------------------------------
Amending the Charter of The 05/18/1893 Vol. XI P. 511
Rockville Water and Aqueduct
Company
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 15
-6-
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TITLE DATE OF VOLUME OF THE PAGE
APPROVAL COMPILED
SPECIAL LAWS
OF
CONNECTICUT
OR
CONNECTICUT
SPECIAL ACTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amending the Charter of The 04/17/1901 Vol. XIII P. 705
Rockville Water and Aqueduct
Company
- -----------------------------------------------------------------------------------------------------------
Amending A Resolution 05/18/1905 Vol. XIV P. 677
Authorizing The Rockville
Water and Aqueduct Company
to Issue Bonds
- -----------------------------------------------------------------------------------------------------------
An Act Authorizing the 04/19/1923 Vol. XIX P. 138
Rockville Water and Aqueduct
Company to Issue Bonds
- -----------------------------------------------------------------------------------------------------------
An Act Authorizing the 05/05/1955 Vol. XXVII P. 138
Military Department to Enter
into an Agreement with The
Rockville Water and Aqueduct
Company Concerning the
Installation and Maintenance of
a Water Main
- -----------------------------------------------------------------------------------------------------------
An Act Authorizing the City of 06/17/1957 Vol. XXVIII P. 891
Rockville to Purchase the
Rockville Water and Aqueduct
Company
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 06/29/1959 Vol. XXIX P. 484
of The Rockville Water and
Aqueduct Company
- -----------------------------------------------------------------------------------------------------------
13. TERRYVILLE WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
Incorporating the Terryville 05/25/1893 Vol. XI P. 568
Water Company
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 16
-7-
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TITLE DATE OF VOLUME OF THE PAGE
APPROVAL COMPILED
SPECIAL LAWS
OF
CONNECTICUT
OR
CONNECTICUT
SPECIAL ACTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Extending the Time for the 02/25/1897 Vol. XII P. 664
Organization of the Terryville
Water Company
- -----------------------------------------------------------------------------------------------------------
Authorizing the Terryville 04/14/1909 Vol. XV P. 648
Water Company to Increase its
Capital Stock
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 04/13/1917 Vol. XVII P. 864
of the Terryville Water
Company
- -----------------------------------------------------------------------------------------------------------
An Act Making Operative and 03/24/1921 Vol. XVIII P. 365
Validating the Charter of the
Terryville Water Company
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 03/24/1921 Vol. XVIII P. 366
of the Terryville Water
Company
- -----------------------------------------------------------------------------------------------------------
An Act Authorizing the 05/13/1953 Vol. XXVI P. 852
Terryville Water Company to
Increase its Capital Stock
- -----------------------------------------------------------------------------------------------------------
An Act Extending the Time for 06/02/1955 Vol. XXVII P. 203
Accepting an Amendment to
the Charter of the Terryville
Water Company
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 06/29/1959 Vol. XXIX P. 548
of the Terryville Water
Company
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 17
-8-
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TITLE DATE OF VOLUME OF THE PAGE
APPROVAL COMPILED
SPECIAL LAWS
OF
CONNECTICUT
OR
CONNECTICUT
SPECIAL ACTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
14. THE THOMASTON WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
Incorporating The Thomaston 03/25/1879 Vol. VIII P. 269
Water Company
- -----------------------------------------------------------------------------------------------------------
An Act Authorizing The 04/13/1921 Vol. XVIII P. 411
Thomaston Water Company to
Increase its Capital Stock
- -----------------------------------------------------------------------------------------------------------
An Act Extending the Time 03/18/1927 Vol. XX P. 34
within which The Thomaston
Water Company May Accept
an Amendment to its Charter
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 04/09/1937 Vol. XXII P. 613
of The Thomaston Water
Company
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 06/29/1959 Vol. XXIX P. 549
of The Thomaston Water
Company
- -----------------------------------------------------------------------------------------------------------
15. THE PINE KNOB WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
An Act Incorporating The Pine 06/03/1963 Vol. XXXI P. 71
Knob Water Company
- -----------------------------------------------------------------------------------------------------------
16. VERNON WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
An Act Concerning the 06/16/1959 Vol. XXIX P. 470
Creation of the Vernon Water
Company
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 18
-9-
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TITLE DATE OF VOLUME OF THE PAGE
APPROVAL COMPILED
SPECIAL LAWS
OF
CONNECTICUT
OR
CONNECTICUT
SPECIAL ACTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
17. THE UNIONVILLE WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
Incorporating the Unionville 5/25/1860 Vol. V p. 343
Water Company
- -----------------------------------------------------------------------------------------------------------
Incorporating The Unionville 03/10/1893 Vol. XI P. 35
Water Company
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 4/28/53 Vol. XXVI P. 747
of the Unionville Water
Company
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 12/20/1955 Vol. XXVII P. 738
of The Unionville Water
Company, Providing for an
Increase of its Capital Stock
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 05/21/1971 Vol. XXXV P. 50
of The Unionville Water
Company Regarding the
Issuance of Bonds
- -----------------------------------------------------------------------------------------------------------
18. THE VILLAGE WATER COMPANY OF SIMSBURY
- -----------------------------------------------------------------------------------------------------------
Incorporating the Village 5/15/03 Vol. XIV P. 196
Water Company of Simsbury
- -----------------------------------------------------------------------------------------------------------
An Act Amending the Charter 5/1/23 Vol. XIX P. 154
of the Village Water Company
- -----------------------------------------------------------------------------------------------------------
An Act Extending the Time 4/2/25 Vol. XIX P. 654
Within Which the Village
Water Company of Simsbury
May Accept an Amendment to
its Charter.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 19
-10-
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TITLE DATE OF VOLUME OF THE PAGE
APPROVAL COMPILED
SPECIAL LAWS
OF
CONNECTICUT
OR
CONNECTICUT
SPECIAL ACTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
19. THE ELLINGTON WATER COMPANY
- -----------------------------------------------------------------------------------------------------------
An Act Incorporating the 4/1/15 Vol. XVII P. 90
Ellington Water Company
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 4.8
================================================================================
Connecticut Development Authority
and
The Connecticut Water Company
--------------
LOAN AGREEMENT
--------------
Dated as of March 1, 1998
Connecticut Development Authority
$10,000,000 Water Facilities Revenue Refunding Bonds
(The Connecticut Water Company Project - 1998 Series A)
Connecticut Development Authority
$8,000,000 Water Facilities Revenue Bonds
(The Connecticut Water Company Project - 1998 Series B)(AMT)
================================================================================
<PAGE> 2
Connecticut Development Authority
The Connecticut Water Company
LOAN AGREEMENT
THIS LOAN AGREEMENT, made and dated as of March 1, 1998 by and between
the Connecticut Development Authority, a body corporate and politic constituting
a public instrumentality and political subdivision of the State of Connecticut,
and The Connecticut Water Company, a corporation organized and existing under
the laws of the State of Connecticut,
WITNESSETH THAT:
WHEREAS, the State Commerce Act, constituting Connecticut General
Statutes, Sections 32-1a through 32-23xx, as amended (the "Act"), declares that
there is a continuing need in the State (1) for industrial development and
activity to provide and maintain employment and tax revenues and to control,
abate and prevent pollution to protect the public health and safety, and (2) for
the development of recreation facilities to promote tourism, provide and
maintain employment and tax revenues, and promote the public welfare, (3) for
the development of commercial and retail sales and service facilities in urban
areas to provide and maintain construction and permanent employment and tax
revenues, to improve conditions of deteriorated physical development, slow
economic growth and eroded financial health of the public and private sectors in
urban areas and to revitalize the economy of urban areas, and (4) for assistance
to public service businesses providing transportation and utility services in
the State, and that the availability of financial assistance and suitable
facilities are important inducements to industrial and commercial enterprises to
remain or locate in the State and to provide industrial, recreation, urban and
public service projects; and
WHEREAS, the Act provides that (1) the term "project" as used therein
means any facility, plant, works, system, building, structure, utility, fixture
or other real property improvement located in the State, and the land on
<PAGE> 3
which it is located or which is reasonably necessary in connection therewith,
which is of a nature or which is to be used or occupied by any person for
purposes which would constitute it as an industrial project, recreation project,
urban project, public service project or health care project, and any real
property improvement reasonably related thereto, and (2) that a project may also
include or consist exclusively of machinery, equipment or fixtures; and
WHEREAS, the Act defines economic development project to include "any
project which is to be used or occupied by any person for . . . (2) controlling,
abating, preventing or disposing of land, water, air or other environmental
pollution . . . or (3) the conservation of energy or the utilization of
cogeneration technology or solar, wind, hydro, biomass or other renewable
sources to produce energy for any industrial or commercial application."; and
WHEREAS, the Act provides that the Authority shall have power (1) to
determine the location and character of any project to be financed under the
provisions of the Act; (2) to purchase, receive by gift or otherwise, lease,
exchange, or otherwise acquire, and construct, reconstruct, improve, maintain,
equip and furnish one or more projects, including all real and personal property
which the Authority may deem necessary therewith, and to enter into a contract
with a person therefor upon such terms and conditions as the Authority shall
determine to be reasonable, including but not limited to reimbursement for the
planning, designing, financing, construction, reconstruction, improvement,
equipping, furnishing, operation and maintenance of reserve and insurance funds
with respect to the financing of the project; (3) to extend credit or make loans
to any person for the planning, designing, financing, acquiring, constructing,
reconstructing, improving, equipping and furnishing of a project and for the
refinancing of existing indebtedness with respect to any facility or part
thereof which would qualify as a project in order to facilitate substantial
improvements thereto, which credits or loans may be secured by loan agreements,
mortgages, contracts and all other instruments or fees and charges, upon such
terms and conditions as the Authority shall determine to be reasonable in
connection with such loans, including provision for the establishment and
maintenance of reserve and insurance funds and in the exercise
-2-
<PAGE> 4
of powers granted in the Act in connection with a project for such person, to
require the inclusion in any contract, loan agreement or other instrument, such
provisions for the construction, use, operation and maintenance and financing of
a project as the Authority may deem necessary or desirable; (4) to issue its
bonds for such purposes, subject to the approval of the Treasurer of the State;
and, (5) as security for the payment of the principal or redemption price, if
any, of and interest on any such bonds, to pledge or assign such a loan, lease
or sale agreement and the revenues and receipts derived by the Authority from
such a project; and
WHEREAS, the Authority has heretofore issued and sold $10,000,000
aggregate principal amount of the Authority's Water Facilities Revenue Bonds
(The Connecticut Water Company Project - 1991 Series) (the "Prior Obligations")
the proceeds of which were used to refund the tax-exempt debt previously issued
by the Authority in 1985 (the "1985 Obligations"), which 1985 Obligations were
used for the refunding of 1981 Bonds and certain bond anticipation notes
previously issued by the Authority and loaned to the Borrower, all of which 1981
Bonds and bond anticipation notes were used for the acquisition, construction
and installation of certain additions to the water system of the Borrower (the
"Prior Project"); and
WHEREAS, the Borrower currently owns certain existing facilities within
certain municipalities in the State and, by resolution adopted in furtherance of
the purposes of the Act, the Authority has accepted the application of the
Borrower for assistance in the design, acquisition, installation and
construction of additions to the Water System. The Project also involves the
design, acquisition, construction and installation of certain other facilities
consisting of various main valves, computer equipment, services, standpipes and
other improvements and additions to the distribution system and water treatment
facilities located in several towns and municipalities throughout the Borrower's
service area (the Prior Project and the facilities financed with the 1998 Series
B Bonds are herein collectively called the "Project"); and
WHEREAS, the Authority has by a further resolution adopted February 18,
1998, authorized the issuance of
-3-
<PAGE> 5
$10,000,000 principal amount of its 5.05% Water Facilities Revenue Refunding
Bonds (The Connecticut Water Company Project - 1998 Series A) for the purpose of
providing funds for the refunding in full of the Prior Obligations and
$8,000,000 principal amount of its 5.125% Water Facilities Revenue Bonds (The
Connecticut Water Company Project - 1998 Series B) (AMT) (collectively, the
"Bonds") for the purposes of providing funds for the Project; and
WHEREAS, pursuant to such resolution the Bonds are to be secured by an
Indenture of Trust of even date herewith, by and between the Authority and State
Street Bank and Trust Company of Connecticut, N.A., as Trustee; and
WHEREAS, the Bonds shall be special obligations of the Authority,
payable solely from the revenues or other receipts, funds or moneys to be
derived by the Authority under this Agreement and the Note or the Indenture and
from any amounts otherwise available under the Indenture for the payment of the
Bonds; and
WHEREAS, the Authority proposes with the proceeds of the Bonds to make
a loan to the Borrower and the Borrower proposes to borrow such proceeds from
the Authority for the purpose of refunding the Prior Obligations and to finance
and refinance a portion of the cost of undertaking and completing the Project;
and
WHEREAS, the Borrower acknowledges that the Authority is providing
financing for the Project in furtherance of the Authority's corporate purposes
under the Act, that the accomplishment of these purposes is dependent upon the
compliance of the Borrower with its covenants contained in this Agreement that
the Authority has a resulting beneficial interest in the Project, and that the
Borrower's use of and interest in the Project as provided hereby are in
furtherance of the discharge of a public purpose; and
WHEREAS, the Connecticut Department of Public Utility Control (the
"DPUC") has approved the issuance of the Note;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, covenants and agreements herein
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set forth, the Authority and the Borrower, each binding itself, its successors
and assigns, do mutually promise, covenant and agree as follows (provided that
in the performance of the agreements of the Authority herein contained, any
obligation it may incur for the payment of money shall not be an obligation,
debt or liability of the State or any municipality thereof and neither the State
nor any municipality thereof shall be liable on any obligation so incurred, but
any such obligation shall be payable solely out of the revenues or other
receipts, funds or moneys to be derived by the Authority under this Agreement or
the Indenture and from any amounts otherwise available under the Indenture for
the payment of the Bonds):
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ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. For the purposes of this Agreement, the
following words and terms shall have the respective meanings set forth as
follows, and any capitalized word or term used but not defined herein is used as
defined in the Indenture:
"DPUC" means the State Department of Public Utilities Control.
"Event of Default" means an Event of Default as defined in subsection
7.1 hereof.
"Net Proceeds" when used with respect to any insurance or condemnation
award, means the gross proceeds from such award less all expenses (including
attorney's fees and expenses and any extraordinary expenses) incurred by the
Trustee in the collection thereof.
"Note" means the promissory note of the Borrower to the Authority,
dated the date of initial delivery of the Bonds in the form attached as an
Appendix to this Agreement, and any amendments and supplements made in
conformity with this Agreement and the Indenture.
"Participating Underwriter" shall have the meaning ascribed thereto in
the Continuing Disclosure Agreement.
"Permitted Encumbrances" mean, as of any particular date, (i) the lien
of the Mortgage, (ii) liens and encumbrances permitted by the Mortgage, (iii)
liens for taxes not yet due and payable, (iv) any lien created by this Agreement
and the Indenture, (v) utility, access and other easements and rights-of-way,
that will not interfere with or impair the value or use of the Project as herein
provided, (vi) any mechanic's, laborer's, materialman's, supplier's or vendor's
lien or right in respect thereof if payment is not yet due and payable and for
which statutory lien rights exist, (vii) such minor defects, irregularities,
easements, and rights-of-way (including agreements with any railroad the purpose
of which
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is to service the railroad siding) as normally exist with respect to property
similar in character to the Project and which do not materially impair the value
or use of the property affected thereby for the purpose for which it was
acquired hereunder and (viii) any mortgage, lien, security interest or other
encumbrance to which the Authority and the Bond Insurer may consent as provided
in Section 4.9 hereof.
"Related Person" means a person which is a related person (as defined
in Section 144(a)(3) of the Code, and by reference to Sections 267, 707(b) and
1563(a) of the Code, except that 50% is to be substituted for 80% in Section
1563(a)).
"Substantial User" means any substantial user of the Project within the
meaning of Section 147(a) of the Code.
Section 1.2. Interpretation. In this Agreement:
(1) The terms "hereby", "hereof", "hereto", "herein", "hereunder" and
any similar terms, as used in this Agreement, refer to this Agreement, and
the term "hereafter" means after, and the term "heretofore" means before,
the date of this Agreement.
(2) Words of the masculine gender mean and include correlative words of
the feminine and neuter genders and words importing the singular number
mean and include the plural number and vice versa.
(3) Words importing persons include firms, associations, partnerships
(including limited partnerships), trusts, corporations and other legal
entities, including public bodies, as well as natural persons.
(4) Any headings preceding the texts of the several Articles and
Sections of this Agreement, and any table of contents appended to copies
hereof, shall be solely for convenience of reference and shall not
constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
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(5) Nothing contained in this Agreement shall be construed to cause the
Borrower to become the agent for the Authority or the Trustee for any
purpose whatsoever, nor shall the Authority or the Trustee be responsible
for any shortage, discrepancy, damage, loss or destruction of any part of
the Project wherever located or for whatever cause.
(6) All approvals, consents and acceptances required to be given or
made by any person or party hereunder shall be at the sole discretion of
the party whose approval, consent or acceptance is required.
(7) All notices to be given hereunder shall be given in writing within
a reasonable time unless otherwise specifically provided.
(8) This Agreement shall be governed by and construed in accordance
with the applicable laws of the State.
(9) If any provision of this Agreement shall be ruled invalid by any
court of competent jurisdiction, the invalidity of such provision shall not
affect any of the remaining provisions hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations by the Authority. The Authority represents
and warrants that:
(1) It is a body corporate and politic constituting a public
instrumentality and political subdivision of the State, duly organized and
existing under the laws of the State including the Act. The Authority is
authorized to issue the Bonds in accordance with the Act and to use the
proceeds thereof to finance the Project.
(2) The Authority has complied with the provisions of the Act and has
full power and authority pursuant to the Act to consummate all transactions
contemplated by the Bonds, the Indenture and the Financing Documents.
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(3) By resolution duly adopted by the Authority and still in full force
and effect, the Authority has authorized the execution, delivery and due
performance of the Bonds, the Indenture and the Financing Documents, and
the taking of any and all action as may be required on the part of the
Authority to carry out, give effect to and consummate the transactions
contemplated by this Agreement and the Indenture, and all approvals
necessary in connection with the foregoing have been received.
(4) The Bonds have been duly authorized, executed, authenticated,
issued and delivered, constitute valid and binding special obligations of
the Authority payable solely from revenues or other receipts, funds or
monies pledged therefor under the Indenture and from any amounts otherwise
available under the Indenture, and are entitled to the benefit of the
Indenture. Neither the State nor any municipality thereof is obligated to
pay the Bonds or the interest thereon. Neither the faith and credit nor the
taxing power of the State nor any municipality thereof is pledged for the
payment of the principal, and premium, if any, of and interest on the
Bonds.
(5) The execution and delivery of the Bonds, the Indenture and the
Financing Documents and compliance with the provisions thereof, will not
conflict with or constitute on the part of the Authority a violation of,
breach of or default under its by-laws or any statute, indenture, mortgage,
deed of trust, note agreement or other agreement or instrument to which the
Authority is a party or by which the Authority is bound, or, to the
knowledge of the Authority, any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Authority or any
of its activities or properties, and all consents, approvals,
authorizations and orders of governmental or regulatory authorities which
are required for the consummation by the Authority of the transactions
contemplated thereby have been obtained.
(6) Subject to the provisions of this Agreement and the Indenture, the
Authority will apply the proceeds of the Bonds to the purposes specified in
the Indenture and the Financing Documents.
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(7) There is no action, suit, proceeding or investigation at law or in
equity before or by any court, public board or body pending or threatened
against or affecting the Authority, or to the best knowledge of the
Authority, any basis therefor, wherein an unfavorable decision, ruling or
finding would adversely affect the transactions contemplated hereby or by
the Indenture, or which, in any way, would adversely affect the validity of
the Bonds, or the validity of or enforceability of the Indenture or the
Financing Documents, or any agreement or instrument to which the Authority
is a party and which is used or contemplated for use in consummation of the
transactions contemplated hereby and by the Indenture.
(8) It has not made any commitment or taken any action which will
result in a valid claim for any finders or similar fees or commitments in
respect of the transactions contemplated by this Agreement.
(9) The representations of the Authority set forth in the Tax
Regulatory Agreement are by this reference incorporated in this Agreement
as though fully set forth herein.
Section 2.2. Representations by the Borrower. The Borrower represents
and warrants that:
(1) The Borrower has been duly incorporated and validly exists as a
corporation in good standing under the laws of the State of Connecticut, is
not in violation of any provision of its certificate of incorporation or
its by-laws, has corporate power to enter into and per form its obligations
under the Financing Documents, and by proper corporate action has duly
authorized the execution and delivery of the Financing Documents.
(2) The Financing Documents constitute valid and legally binding
obligations of the Borrower, enforceable in accordance with their
respective terms, except to the extent that such enforceability may be
limited by bankruptcy or insolvency or other laws affecting creditors'
rights generally or by general principles of equity.
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(3) Neither the execution and delivery of the Financing
Documents, the consummation of the transactions contemplated thereby,
nor the fulfillment by the Borrower of or compliance by the Borrower
with the terms and conditions thereof is prevented or limited by or
conflicts with or results in a breach of, or default under the terms,
conditions or provisions of any contractual or other restriction of the
Borrower, evidence of its in debtedness or agreement or instrument of
whatever nature to which the Borrower is now a party or by which it is
bound, or constitutes a default under any of the fore going. No event
has occurred and no condition exists which, upon the execution and
delivery of any Financing Documents, constitutes an Event of Default
hereunder or an event of default thereunder or, but for the lapse of
time or the giving of notice, would constitute an Event of Default
hereunder or an event of default thereunder.
(4) There is no action or proceeding pending or, to the
knowledge of the Borrower, threatened against the Borrower before any
court, administrative agency or arbitration board that may materially
and adversely affect the ability of the Borrower to perform its
obligations under the Financing Documents and all authorizations,
consents and approvals of governmental bodies or agencies required in
connection with the execution and delivery of the Financing Documents
and in connection with the performance of the Borrower's obligations
hereunder or thereunder have been obtained.
(5) The execution, delivery and performance of the Financing
Documents and any other instrument delivered by the Borrower pursuant
to the terms hereof or thereof are within the corporate powers of the
Borrower and have been duly authorized and approved by the board of
directors of the Borrower and are not in contravention of law or of the
Borrower's certificate of incorporation or by-laws, as amended to date,
or of any undertaking or agreement to which the Borrower is a party or
by which it is bound.
(6) The Borrower represents that it has not made any
commitment or taken any action which will result in a valid claim for
any finders' or similar fees or commitments in respect of the
transactions described in this
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Agreement other than the fees to various parties to the transactions
contemplated hereby which have been hereto fore paid or provided.
(7) The Project is included within the definition of a
"project" in the Act, and its estimated cost is equal to or in excess
of $8,000,000. The Borrower intends the Project to be and continue to
be an authorized project under the Act during the Term of this
Agreement.
(8) All amounts shown in Schedule D of the Tax Regulatory
Agreement are eligible costs of a project financed by bonds issued by
the Authority under the Act, and may be financed by amounts in the
Project Fund under the Indenture. None of the proceeds of the Bonds
will be used directly or indirectly as working capital or to finance
inventory.
(9) The Project is in material compliance with all applicable
federal, State and local laws and ordinances (including rules and
regulations) relating to zoning, building, safety and environmental
quality the non-compliance with which would materially adversely affect
the performance by the Borrower of any of its obligations hereunder.
(10) The Borrower has obtained, or will obtain, all necessary
material approvals from any and all governmental agencies requisite to
the Project, and has also obtained all material occupancy permits and
authorizations from appropriate authorities authorizing the occupancy
and use of the Project for the purposes contemplated hereby. The
Borrower further represents and warrants that it has completed the
Project in accordance with all material federal, State and local laws,
ordinances and regulations applicable thereto.
(11) The Borrower does not presently intend to lease the
Project.
(12) The Borrower will not take or omit to take any action
which action or omission will in any way cause the proceeds of the
Bonds to be applied in a manner contrary
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to that provided in the Indenture and the Financing Documents as in
force from time to time.
(13) The Borrower has not taken and will not take any action
and knows of no action that any other person, firm or corporation has
taken or intends to take, which would cause interest on the Bonds to be
includable in the gross income of the recipients thereof for federal
income tax purposes. The representations, certifications and statements
of reasonable expectation made by the Borrower in the Tax Regulatory
Agreement and relating to Project description, composite issues, bond
maturity and average asset economic life, use of Bond proceeds,
arbitrage and related matters are hereby incorporated by this reference
as though fully set forth herein.
(14) The Borrower has good and marketable title to the Project
subject only to Permitted Encumbrances and to irregularities or defects
in title which may exist which do not materially impair the use of such
properties in the Borrower's business.
(15) As of the date of execution hereof, except for the
Mortgage, neither the Borrower, nor to its knowledge anyone acting on
behalf of the Borrower, has entered into negotiations with any person
for the purpose of undertaking any borrowing concurrently with or
subsequent to the issuance of the Bonds and to be secured wholly or
partially by a lien or encumbrance on the Project or any part thereof,
and the Borrower has no present intention of undertaking any such
borrowing.
(16) The Borrower will use all of the proceeds of the 1998
Series A Bonds to refund the Prior Obligations and all of the proceeds
of the 1998 Series B Bonds to finance the Project Costs.
(17) The Borrower will pay at Closing the costs of issuance
attributable to the 1998 Series A Bonds from its own funds.
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ARTICLE III
THE LOAN
Section 3.1. Loan Clauses. (A) Subject to the conditions and in
accordance with the terms of this Agreement, the Authority agrees to make a loan
to the Borrower from the proceeds of the Bonds in the amount of $18,000,000 and
the Borrower agrees to borrow such amount from the Authority.
(B) The loan shall be made at the time of delivery of the Bonds and
receipt of payment therefor by the Authority against receipt by the Authority of
the Note duly executed and delivered to evidence the pecuniary indebtedness of
the Borrower hereunder. As and for the loan the Authority shall apply the
proceeds of the Bonds as provided in the Indenture on the terms and conditions
therein prescribed.
(C) On or before 11:00 a.m. of each due date for the payment of the
principal of or interest on the Bonds, until the principal or Redemption Price,
if any, of and interest on the Bonds shall have been fully paid or provision for
the payment thereof shall have been made in accordance with the Indenture, the
Borrower shall make loan payments to the Trustee for the account of the
Authority in an amount which, when added to any moneys then on deposit in the
Debt Service Fund and available therefor, shall be equal to the amount payable
on such due date with respect to the Bonds as provided in Section 5.3 of the
Indenture, including amounts due for the payment of the principal of and
interest on the Bonds. In addition, the Borrower shall pay to the Trustee, as
and when the same shall become due, all other amounts due under the Agreement,
the Note and the Tax Regulatory Agreement, together with interest thereon at the
then applicable rate as set forth herein in Section 6.2(G). The Borrower shall
have the option to prepay its loan obligation in whole or in part at the times
and in the manner provided in Article VIII hereof.
(D) Anything herein to the contrary notwithstanding any amount at any
time held in the Debt Service Fund by the Trustee pursuant to this Section shall
be credited against the next succeeding loan payment obligation of the Borrower
as provided in subsection 3.1(C) hereof. If, on any due date for
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payments with respect to the Bonds, the balance in the Debt Service Fund is
insufficient to make such payments, the Borrower agrees forthwith to pay to the
Trustee no later than 11:00 a.m. the amount of the deficiency. If at any time
the amount held by the Trustee in the Debt Service Fund shall be sufficient to
pay or provide for the payment of the Bonds in accordance with Section 12.1 of
the Indenture, the Borrower shall not be obligated to make any further payments
under the foregoing provisions.
Section 3.2. Other Amounts Payable. (A) The Borrower hereby further
expressly agrees to pay to the Trustee as and when the same shall become due,
(i) an amount equal to the initial and annual fees of the Trustee for the
ordinary services of the Trustee rendered and its ordinary expenses incurred
under the Indenture, including fees and expenses as Paying Agent and the fees
and expenses of Trustee's counsel, including fees and expenses as registrar and
in connection with preparation and delivery of new Bonds upon exchanges or
transfers, (ii) the reasonable fees and expenses of the Trustee and any Paying
Agents on the Bonds for acting as paying agents as provided in the Indenture,
including fees and expenses of Paying Agent as registrar and in connection with
the preparation of new Bonds upon exchanges, transfers or redemptions, (iii) the
reasonable fees and charges of the Trustee for extraordinary services rendered
by it and extraordinary expenses incurred by it under the Indenture, including
reasonable counsel fees and expenses, and (iv) fees and expenses of Bond Counsel
and the Authority for any future action requested of either.
(B) The Borrower also agrees to pay all amounts payable by it under the
Agreement, Note and Tax Regulatory Agreement at the time and in the manner
therein provided.
(C) The Borrower agrees to pay all Rebate Amounts (and penalties, if
any) due to the United States of America pursuant to Section 148(f) of the Code.
(D) The Borrower also agrees to pay directly to the Authority on the
date of issuance of the Bonds, a fee equal to 1/2 of 1% of the principal amount
of the Bonds, such fee to be payable, without notice, demand or invoice of any
kind at the Authority's address as set forth herein or at such other
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address and to the attention of such other person, or to such account as the
Authority may stipulate by written notice to the Borrower.
Section 3.3. Manner of Payment. The payments provided for in Section
3.1 hereof shall be made by any reasonable method providing immediately
available funds at the time and place of payment directly to the Trustee for the
account of the Authority and shall be deposited in the Debt Service Fund. The
additional payments provided for in Section 3.2 shall be made in the same manner
directly to the entitled party or to the Trustee for its own use or disbursement
to the Paying Agents, as the case may be.
Section 3.4. Obligation Unconditional. The obligations of the Borrower
under the Financing Documents shall be absolute and unconditional, irrespective
of any defense or any rights of setoff, recoupment or counterclaim it might
otherwise have against the Authority or the Trustee. The Borrower will not
suspend or discontinue any such payment or terminate this Agreement (other than
in the manner provided for hereunder) for any cause, including, without limiting
the generality of the foregoing, any acts or circumstances that may constitute
failure of consideration, failure of title, or commercial frustration of
purpose, or any damage to or destruction of the Project, or the taking by
eminent domain of title to or the right of temporary use of all or any part of
the Project, or any change in the tax or other laws of the United States, the
State or any political subdivision of either thereof, or any failure of the
Authority or the Trustee to perform and observe any agreement or covenant,
whether expressed or implied, or any duty, liability or obligation arising out
of or connected with the Financing Documents.
Section 3.5. Securities Clauses. The Authority hereby notifies the
Borrower and the Borrower acknowledges that, among other things, the Borrower's
loan payments and all of the Authority's right, title and interest under the
Financing Documents to which it is a party (except its rights under Section 6.2
hereof) are being concurrently with the execution and delivery hereof endorsed,
pledged and assigned without recourse by the Authority to the Trustee as
security for the Bonds as provided in the Indenture.
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Section 3.6. Issuance of Bonds. The Authority has concurrently with the
execution and delivery hereof sold and delivered the Bonds under and pursuant to
a resolution adopted by the Authority on February 18, 1998, authorizing their
issuance under and pursuant to the Indenture. The proceeds of sale of the Bonds
shall be applied as provided in Articles IV and V of the Indenture.
Section 3.7. Effective Date and Term. (A) This Agreement shall become
effective upon its execution and delivery by the parties hereto, shall remain in
full force from such date and, subject to the provisions hereof (including
particularly Articles VII and VIII), shall expire on such date as the Indenture
shall be discharged and satisfied in accordance with the provisions of
subsection 12.1(A) thereof. The Borrower's obligations under Sections 6.2 and
6.3 hereof, however, shall survive the expiration of this Agreement in
accordance with the provisions of such Sections.
(B) Within 60 days of such expiration the Authority shall deliver to
the Borrower any documents and take or cause the Trustee, at the Borrower's
expense, to take any such reasonable actions as may be necessary to effect the
cancellation, release and satisfaction of the Indenture and the Financing
Documents.
Section 3.8. No Additional Bonds. No additional Bonds on a parity with
the Bonds may be issued under the Indenture.
ARTICLE IV
THE PROJECT
Section 4.1. Completion of the Project. (A) The Borrower affirms that
it has undertaken and completed or caused to be undertaken and completed the
Project for the purposes and in the manner intended hereby and by the Borrower's
application for assistance to the Authority.
(B) The Borrower affirms that it shall bear all of the costs and
expenses in connection with the preparation of the Financing Documents and the
Indenture, the preparation and
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delivery of any legal instruments and documents necessary in connection
therewith and their filing and recording, if required, and all taxes and charges
payable in connection with any of the foregoing. Such costs and all other costs
of the Project shall be paid by the Borrower in the manner and to the extent
provided in the Indenture.
(C) The Borrower has obtained all required permits and authorizations
from appropriate authorities, if any be required, authorizing the operation and
uses of the Project for the purposes contemplated hereby, where failure to
obtain such approvals, permits and authorizations would have a material adverse
effect on the transactions contemplated hereby.
(D) The Borrower has good and marketable title in fee simple to the
Project Realty, subject only to Permitted Encumbrances, sufficient for the
purposes of this Agreement.
Section 4.2. RESERVED.
Section 4.3. No Warranty Regarding Condition, Suitability or Cost of
Project. Neither the Authority, nor the Trustee, nor any Bondholder makes any
warranty, either expressed or implied, as to the Project or its condition or
that it is suitable for the Borrower's purposes or needs, or that the insurance
required hereunder will be adequate to protect the Borrower's business or
interest, or that the proceeds of the Bonds will be sufficient to complete the
Project.
Section 4.4. Taxes. (A) The Borrower will pay when due all material (1)
taxes, assessments, water rates and sewer use or rental charges, (2) payments in
lieu thereof which may be required by law, and (3) governmental charges and
impositions of any kind whatsoever which may now or hereafter be lawfully
assessed or levied upon the Project or any part thereof, or upon the rents,
issues, or profits thereof, whether directly or indirectly. With respect to
special assessments or other governmental charges that may lawfully be paid in
installments over a period of years, the Borrower shall be obligated to pay only
such installments as are required to be paid during the Term.
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(B) The Borrower may, at its expense and in its own name, in good faith
contest any such taxes, assessments and other charges and payments in lieu of
taxes including assessments and, in the event of such contest, may permit the
taxes, assessments or other charges or payments in lieu of taxes, including
assessments so contested to remain unpaid, provided such contest is conducted in
full compliance with Connecticut General Statutes Section 12-53a(d) unless, by
nonpayment of such taxes, assessments or other charges or payments, the Project
or any part thereof will be subject to loss or forfeiture, and as a result
thereof a lien or charge will be placed upon any payment pursuant to this
Agreement or the value or operation of the Project will be materially impaired,
in which event such taxes, assessments or other charges or payments shall be
paid forthwith. Nothing herein shall preclude the Borrower, at its expense and
in its own name and behalf, from applying for any tax exemption allowed by the
federal government, the State or any political or taxing subdivision thereof
under any existing or future provision of law which grants or may grant such tax
exemption.
Section 4.5. Insurance. (A) The Borrower shall insure the Project
against loss or damage by fire, flood, lightning, windstorm, vandalism and
malicious mischief and other hazards, casualties, contingencies and extended
coverage risks in such amounts and in such manner as is required by the Mortgage
while the Mortgage is in effect and thereafter as is customary with companies in
the same or similar business, and shall pay when due the premiums thereon. In
the event of loss or damage to the Project Realty or Project Equipment the Net
Proceeds of any insurance provided under this subsection shall be deposited with
the Mortgage Trustee as required by the Mortgage while the Mortgage is in effect
and thereafter shall be applied in the manner set forth in Article V hereof. Any
excess proceeds of insurance remaining after application as required by this
Section shall be paid to the Borrower, but only if the Borrower is not in
default under this Agreement. At least ten days prior to the expiration of any
policy required under this Section the Borrower shall furnish evidence
satisfactory to the Authority and the Trustee that such policy has been renewed
or replaced.
(B) The Borrower further agrees that it will to the extent required by
the Mortgage, while the Mortgage is in
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effect, at all times carry public liability insurance with insurance companies
licensed to do business in the State. In the event of a public liability
occurrence, the Net Proceeds of the insurance provided under this subsection
shall be applied to satisfy or extinguish the liability, subject to the
Mortgage.
(C) As an alternative to the hazard insurance and public liability
insurance requirements of subsections (A) or (B) above the Borrower may
self-insure against hazard or public liability risks if (1) self-insurance is
the Borrower's customary method of insurance against such risks in similar
circumstances, and (2) the Borrower maintains self-insurance reserves adequate
and available to meet such risks, subject to the terms of the Mortgage while the
Mortgage is in effect. Amounts available under any such self-insurance
arrangement upon the occurrence of an insured event shall be applied in the same
manner as the Net Proceeds of any insurance maintained pursuant to such
subsections would have been applied.
(D) The insurance coverage required by this Section may be effected
under overall blanket or excess coverage policies of the Borrower or any
affiliate and may be carried with any insurer other than an unauthorized insurer
under the Connecticut Unauthorized Insurers Act. The Borrower shall furnish
evidence satisfactory to the Authority or the Trustee, promptly upon the request
of either, that the required insurance coverage is valid and in force.
Section 4.6. Compliance with Law. The Borrower will observe and comply
with all material laws, regulations, ordinances, rules, and orders (including
without limitation those relating to zoning, land use, environmental protection,
air, water and land pollution, wetlands, health, equal opportunity, minimum
wages, worker's compensation and employment practices) of any federal, state,
municipal or other governmental authority relating to the Project except during
any period during which the Borrower at its expense and in its name shall be in
good faith contesting its obligation to comply therewith.
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Section 4.7. Maintenance and Repair. At its own expense, the Borrower
will keep and maintain or cause the Project to be kept and maintained in
accordance with sound utility operating practice and in good condition, working
order and repair, will not commit or suffer any waste thereon, and will make all
material repairs and replacements thereto which may be required in connection
therewith. Nothing in this Section 4.7 shall (1) apply to any portion of the
Project beyond its useful or economic life or (2) apply to the use and
disposition by the Borrower of any part of the Project in the ordinary course of
its business.
Section 4.8. Disposition of Project by Borrower. (A) The Borrower shall
not sell, assign, encumber (other than Permitted Encumbrances), convey or
otherwise dispose of its interest in the Project Realty or any part thereof
during the Term without the prior written consent of the Authority, except as
permitted hereby or by the Mortgage while the Mortgage is in effect.
(B) The Borrower may, however, grant such rights of way or easements
over, across, or under, the Project Realty as shall be necessary or convenient
for the operation or use of the Project Realty, including but not limited to
easements or rights-of-way for utility, roadway, railroad or similar purposes in
connection with the Project Realty, or for the use of the real property adjacent
to or near the Project and owned by or leased to the Borrower, but only if such
rights-of-way or easements shall not materially or adversely affect the value
and operation of the Project Realty.
(C) In the event the Authority consents to any disposition of the
Borrower's interest in the Project Realty, the proceeds of the disposition shall
be deposited with the Mortgage Trustee while the Mortgage is in effect and
thereafter in the Redemption Account of the Debt Service Fund for the redemption
of the Bonds used to finance or refinance the portion of the Project then being
disposed of under the Indenture. No conveyance or release effected under the
provisions of this Section shall entitle the Borrower to any abatement or
diminution of the amounts payable hereunder or under the Note, or relieve the
Borrower of the obligation to perform all of its covenants and agreements under
the Financing Documents.
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Section 4.9. Leasing of the Project Realty and the Project Equipment.
The Borrower may not lease the Project Realty or the Project Equipment to any
person during the Term of this Agreement without the prior written consent of
the Authority, except as may be permitted by the Mortgage while the Mortgage is
in effect. No lease shall relieve the Borrower from primary liability for any of
its obligations hereunder, and in the event of any such lease the Borrower shall
continue to remain primarily liable for payment of the applicable amounts
specified in Article III hereof and for performance and observance of the other
agreements on its part herein provided to be performed and observed by it to the
same extent as though no lease had been made.
Section 4.10. Project Equipment. (A) The Borrower shall have the right
to install, operate, use, remove and dispose of the Project Equipment in the
normal and ordinary course of its business operations, and shall not be required
to replace any item of Project Equipment which is discarded or sold for scrap.
The Borrower shall not, however, either in one transaction or a series of
transactions sell, convey, transfer, remove or otherwise dispose of more than
20% by value of the Project Equipment without prior notice to and the consent of
the Authority, unless such Project Equipment is replaced by property of similar
value and utility, provided that such dispositions may be made as permitted by
the Mortgage while the Mortgage is in effect.
(B) The Borrower shall maintain with the Trustee separate and
reasonably detailed descriptions of each item of property constituting the
Project Equipment. Without limiting the foregoing, the Project Equipment list
appended hereto at the date of execution and delivery of this Agreement shall be
modified to the extent required by this Section in connection with any
disbursement for Project Equipment from the Project Fund and any replacement of
material items of Project Equipment under this Section or under Section 5.2
hereof.
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ARTICLE V
CONDEMNATION,
DAMAGE AND DESTRUCTION
Section 5.1. No Abatement of Payments Hereunder. If the Project Realty
or Project Equipment shall be damaged or either partially or totally destroyed,
or if title to or the temporary use of the whole or any part thereof shall be
taken or condemned by a competent authority for any public use or purpose, there
shall be no abatement or reduction in the amounts payable by the Borrower
hereunder and the Borrower shall continue to be obligated to make such payments.
In any such case the Borrower shall promptly give written notice thereof to the
Authority and the Trustee.
Section 5.2. Project Disposition Upon Condemnation, Damage or
Destruction. In the event of any such condemnation, damage or destruction the
Borrower, except as otherwise permitted by the Mortgage while the Mortgage is in
effect shall:
(1) At its own cost, repair, restore or reconstruct the Project Realty
and Project Equipment to substantially its condition immediately prior to
such event or to a condition of at least equivalent value, regardless of
whether or not the proceeds of any and all policies of insurance covering
such damage or destruction, or the amount of the award or compensation or
damages recovered on account of such taking or condemnation, shall be
available or sufficient to pay the cost thereof; comply with the applicable
provisions of the Mortgage concerning the repair, reconstruction or
restoration of the Project or give notice to Authority of its decision not
to so comply;
(2) At its own cost, replace or relocate the Project Realty and Project
Equipment at its site in such fashion as to render the replacement or
relocated structures, improvements and items, machinery, equipment or other
property of equivalent value to the Project Realty and Project Equipment
immediately prior to such event; or
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(3) If and as permitted by Section 8.1 hereof, exercise its option to
prepay its loan obligation in full.
Section 5.3. Application of Net Proceeds of Insurance or Condemnation.
(A) The Net Proceeds from any insurance or condemnation award with respect to
the Project Realty or Project Equipment shall be deposited with the Mortgage
Trustee while the Mortgage is in effect and thereafter shall be deposited either
(1) in the Renewal Fund and applied to pay for the cost of making such repairs,
restorations, reconstructions, replacements or relocations, or to reimburse the
Borrower, the Authority or the Trustee for payment therefor from time to time as
provided in the Indenture or (2) if prepayment of the loan is then permitted and
the Borrower exercises its option to prepay the loan, in the Debt Service Fund
and applied to the payment of the Note and redemption of the Bonds.
(B) Notwithstanding the provisions of subsection (A) of this Section,
any insurance or condemnation proceeds attributable to improvements, machinery,
equipment and other property installed in or about the Project Realty and the
Project Equipment, but which do not constitute a portion of the Project Realty
and the Project Equipment, shall be paid directly to the Borrower. The Trustee
and the Authority agree to execute such documents as may be reasonably necessary
to accomplish the purposes of this subsection.
(C) The Borrower, the Authority and the Trustee shall cooperate and
consult with each other in all matters pertaining to the settlement or
adjustment of any and all claims and demands for damages on account of any
taking or condemnation of the Project Realty or the Project Equipment or
pertaining to the settlement, compromising or arbitration of any claim on
account of any damage or destruction thereof.
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ARTICLE VI
COVENANTS
Section 6.1. The Borrower to Maintain its Corporate Existence;
Conditions under which Exceptions Permitted. (A) The Borrower covenants and
agrees that, during the Term of this Agreement it will maintain its corporate
existence, will continue to be a corporation either organized under the laws of
or duly qualified to do business as a foreign corporation in the State and in
all jurisdictions necessary in the operation of its business, will not dissolve
or otherwise dispose of all or substantially all of its assets and will not
consolidate with or merge into another corporation or permit one or more other
corporations to consolidate with or merge into it, except as permitted by the
Mortgage while the Mortgage is in effect.
(B) The Borrower may, however, without violating the agreements
contained in this Section, consolidate with or merge into another corporation or
permit one or more other corporations to consolidate with or merge into it, or
sell or otherwise transfer to another corporation all or substantially all of
its assets as an entity and thereafter liquidate or dissolve, if (a) the
Borrower is the surviving, resulting or transferee corporation, as the case may
be, or (b) in the event the Borrower is not the surviving, resulting or
transferee corporation, as the case may be, such corporation (i) is a solvent
corporation either organized under the laws of or duly qualified to do business
as a foreign corporation subject to service of process in the State and (ii)
assumes in writing all of the obligations of the Borrower herein, and under the
Note.
Section 6.2. Indemnification, Payment of Expenses, and Advances. (A)
The Borrower agrees to protect, defend and hold harmless the Authority, the
State, agencies of the State and their members, servants, agents, directors,
officers, attorneys and employees (the "Authority Indemnified Parties"), and the
Paying Agent, the Trustee and their officers, directors and employees (the
"Indemnified Parties") from any claim, demand, suit, action or other proceeding
whether threatened or made and any liabilities, costs, and expenses whatsoever
by any person or entity whatsoever, arising or
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purportedly arising from or in connection with the Financing Documents, the
Indenture, the Bonds, or the transactions contemplated thereby or actions taken
thereunder by any person (including without limitation the filing of any
information, form or statement with the Internal Revenue Service), except for
any wilful and material misrepresentation, wilful misconduct or gross negligence
on the part of the Authority Indemnified Parties or the Indemnified Parties and
except for any bad faith on the part of any Indemnified Party other than an
Authority Indemnified Party.
The Borrower agrees to indemnify and hold harmless any Indemnified
Party against any and all claims, demands, suits, actions or other proceedings
and all liabilities, costs and expenses whatsoever caused by any untrue
statement or misleading statement or alleged untrue statement or alleged
misleading statement of a material fact contained in the written information
provided by the Borrower in connection with the issuance of the Bonds or
incorporated by reference therein or caused by any omission or alleged omission
from such information of any material fact required to be stated therein or
necessary in order to make the statements made therein in the light of the
circumstances under which they were made, not misleading.
(B) The Authority and the Trustee shall not be liable for any damage or
injury to the persons or property of the Borrower or its members, directors,
officers, agents, servants or employees, or any other person who may be about
the Project Realty and the Project Equipment due to any act or omission of any
person other than the Authority or the Trustee or their respective members,
directors, officers, agents, servants and employees.
(C) The Borrower releases each Indemnified Party from, agrees that no
Indemnified Party shall be liable for, and agrees to hold each Indemnified Party
harmless against, any attorney fees and expenses, expenses or damages incurred
because of any investigation, review or lawsuit commenced by the Trustee or the
Authority in good faith with respect to the Financing Documents, the Indenture,
the Bonds and the Project Realty and the Project Equipment, and the Authority or
the Trustee shall promptly give written notice to the Borrower with respect
thereto.
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(D) All covenants, stipulations, promises, agreements and obligations
of the Authority and the Trustee contained herein shall be deemed to be the
covenants, stipulations, promises, agreements and obligations of the Authority
and the Trustee and not of any member, director, officer, agent, attorney or
employee of the Authority or the Trustee in its individual capacity, and no
recourse shall be had for the payment of the Bonds or for any claim based
thereon or hereunder against any member, director, officer, agent, attorney or
employee of the Authority or the Trustee or any natural person executing the
Bonds.
(E) In case any action shall be brought against one or more of the
Indemnified Parties based upon any of the above and in respect of which
indemnity may be sought against the Borrower, such Indemnified Party shall
promptly notify the Borrower in writing, enclosing a copy of all papers served
or information in connection with any threatened action, but the omission so to
notify the Borrower of any such action shall not relieve it of any liability
which it may have to any Indemnified Party otherwise than under this Section
6.2. In case any such action shall be brought against any Indemnified Party and
it shall notify the Borrower of the commencement thereof, the Borrower shall be
entitled to participate in and, to the extent that it shall wish, to assume the
defense thereof with counsel satisfactory to such Indemnified Party, and after
notice from the Borrower to such Indemnified Party of the Borrower's election so
to assume the defense thereof, the Borrower shall not be liable to such
Indemnified Party for any subsequent legal or other expenses attributable to
such defense, except as set forth below, other than reasonable costs of
investigation subsequently incurred by such Indemnified Party in connection with
the defense thereof. The Indemnified Party shall have the right to employ its
own counsel in any such action, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Party unless (i) the employment of counsel
by such Indemnified Party has been authorized by the Borrower; (ii) the
Indemnified Party shall have reasonably concluded that there may be a conflict
of interest between the Borrower and the Indemnified Party in the conduct of the
defense of such action (in which case the Borrower shall not have the right to
direct the defense of such action on behalf of the Indemnified Party); or (iii)
the Borrower shall not in fact have employed counsel
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reasonably satisfactory to the Indemnified Party to assume defense of such
action; provided, however, that the Borrower shall not be responsible for the
fees and expenses of more than one such law firm unless an Indemnified Party
shall have reasonably concluded that there may be a conflict of interest between
such Indemnified Party and any other Indemnified Party requiring the use of
separate counsel, or the Borrower has not employed counsel which is satisfactory
to each Indemnified Party. The Borrower shall not be liable for any settlement
of any action or claim effected without its consent.
(F) The Borrower also agrees to pay all reasonable or necessary
out-of-pocket expenses of the Authority in connection with the issuance of the
Bonds, the administration of the Financing Documents and the enforcement of its
rights thereunder.
(G) In the event the Borrower fails to pay any amount or perform any
act under the Financing Documents, the Trustee or the Authority may pay the
amount or perform the act, in which event the costs, disbursements, expenses and
reasonable counsel fees and expenses thereof, together with interest thereon
from the date the expense is paid or incurred at the prime interest rate
generally prevailing among banks in the State on the date of the advance plus 1%
shall be an additional obligation hereunder payable upon demand by the Authority
or the Trustee.
(H) Any obligation of the Borrower to the Authority under this Section
shall be separate from and independent of the other obligations of the Borrower
hereunder, and may be enforced directly by the Authority against the Borrower
irrespective of any action taken by or on behalf of the owners of the Bonds.
(I) The obligations of the Borrower under this section, notwithstanding
any other provisions contained in the Financing Documents, shall survive the
termination of this Agreement and shall be recourse to the Borrower, and for the
enforcement thereof any Indemnified Party shall have recourse to the general
credit of the Borrower.
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Section 6.3. Incorporation of Tax Regulatory Agreement: Payments Upon
Taxability. (A) For purpose of this Section, the term owner means the Beneficial
Owner of the Bonds so long as the Book-Entry System is in effect.
(B) The representations, warranties, covenants and statements of
expectation of the Borrower set forth in the Tax Regulatory Agreement are by
this reference incorporated in this Agreement as though fully set forth herein.
(C) If any owner of the Bonds receives from the Internal Revenue
Service a notice of assessment and demand for payment with respect to interest
on any Bond (except a notice and demand based upon the assertion that the owner
of the Bonds is a Substantial User or Related Person), an appeal may be taken by
the owner of the Bonds at the option of the Borrower. Without limiting the
generality of the foregoing, the Borrower shall have the right to direct the
Trustee to direct the owner of the Bonds to take such appeal or not to take such
appeal. In that case all expenses of the appeal including reasonable counsel
fees and expenses shall be paid by the Borrower, and the owner of the Bonds and
the Borrower shall cooperate and consult with each other in all matters
pertaining to any such appeal, except that no owner of the Bonds shall be
required to disclose or furnish any non-publicly disclosed information,
including, without limitation, financial information and tax returns.
(D) If any Bonds are paid at maturity, redeemed after the date of a
Determination of Taxability, or redeemed or sold during the taxability period,
the former owners of such Bonds, upon establishing the ownership of such Bonds
and upon establishing their tax liability in connection with the interest
payable on such Bonds, shall be entitled to receive such amount equal to such
liability.
(E) Not later than 180 days following a Determination of Taxability,
the Borrower shall pay to the Trustee an amount sufficient, when added to the
amount then in the Debt Service Fund and available for such purpose, to retire
and redeem all Bonds then Outstanding, in accordance with Section 2.4 of the
Indenture.
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(F) The obligation of the Borrower to make the payments provided for in
this Section shall be absolute and unconditional, and the failure of the
Authority or the Trustee to execute or deliver or cause to be executed or
delivered any documents or to take any action required under this Agreement or
otherwise shall not relieve the Borrower of its obligation under this Section.
Notwithstanding any other provision of this Agreement or the Indenture, the
Borrower's obligations under this Section shall survive the termination of this
Agreement and the Indenture.
(G) The occurrence of a Determination of Taxability shall not be an
Event of Default hereunder but shall require only the performance of the
obligations of the Borrower stated in this Section, the breach of which shall
constitute an Event of Default as provided in Section 7.1 hereof.
(H) At any time after the issuance of the Bonds, the Authority shall,
upon (1) the release of a published Revenue Ruling by the Internal Revenue
Service and the receipt by the Authority of an opinion of Bond Counsel to the
effect that such ruling may adversely affect the exclusion of interest on the
Bonds from gross income for federal income tax purposes, and (2) receipt from
the Borrower, within 30 days after the Authority has mailed copies of such
ruling and such opinion to the Borrower, of a written request to proceed in
accordance with this Section, proceed to apply for and use its best efforts to
obtain a ruling from the Internal Revenue Service, pursuant to Revenue Procedure
88-33 or any other procedures subsequently established by the Internal Revenue
Service, as to the qualification or continued qualification of interest on the
Bonds for exclusion from gross income for federal income tax purposes. The
Authority and the Borrower shall cooperate and consult with each other in all
matters pertaining to such ruling request. All expenses of the Authority in
connection with such application including reasonable counsel fees shall be paid
by the Borrower.
Section 6.4. Further Assurances and Corrective Instruments. The
Authority and the Borrower agree that they will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such supplements hereto and such further instruments as may reasonably be
required for correcting any inadequate or
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incorrect description of the Project Realty or Project Equipment or for carrying
out the intention of or facilitating the performance of this Agreement.
Section 6.5. Covenant by Borrower as to Compliance with Indenture. The
Borrower covenants and agrees that it will comply with the provisions of the
Indenture with respect to the Borrower and that the Trustee and the Bondholders
shall have the power and authority provided in the Indenture. The Borrower
further agrees to aid in the furnishing to the Authority or the Trustee of
opinions that may be required under the Indenture. The Borrower covenants and
agrees that the Trustee shall be entitled to and shall have all the rights,
including the right to enforce against the Borrower the provisions of the
Financing Documents, pertaining to the Trustee notwithstanding the fact that the
Trustee is not a party to the Financing Documents.
Section 6.6. Assignment of Agreement or Note. (A) The Borrower may not
assign its rights, interests or obligations hereunder or under the Note except
as may be permitted pursuant to Section 6.1(B) hereof.
(B) The Authority agrees that it will not assign or transfer any of the
Financing Documents or the revenues and other receipts, funds and monies to be
received thereunder during the Term except to the Trustee as provided in this
Agreement and the Indenture.
Section 6.7. Inspection. The Authority, the Trustee and their duly
authorized agents shall have (1) the right at all reasonable times to enter upon
and to examine and inspect the Project Realty and the Project Equipment and (2)
such rights of access thereto as may be reasonably necessary for the proper
maintenance and repair thereof in the event of failure by the Borrower to
perform its obligations under this Agreement. The Authority and the Trustee
shall also be permitted, at all reasonable times, to examine the books and
records of the Borrower with respect to the Project Realty and the Project
Equipment.
Section 6.8. Default Notification. Upon becoming aware of any condition
or event which constitutes, or with the giving of notice or the passage of time
would constitute, an
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Event of Default, the Borrower shall deliver to the Authority and the Trustee a
notice stating the existence and nature thereof and specifying the corrective
steps, if any, the Borrower is taking with respect thereto.
Section 6.9. Covenant Against Discrimination. (A) The Borrower in the
performance of this Agreement will not discriminate or permit discrimination
against any person or group of persons on the grounds of race, color, religion,
national origin, age, sex, sexual orientation, marital status, physical or
learning disability, political beliefs, mental retardation or history of mental
disorder in any manner prohibited by the laws of the United States or of the
State.
(B) The Borrower will comply with the provisions of the resolution
adopted by the Authority on June 14, 1977, as amended, and the policy of the
Authority implemented pursuant thereto concerning the promotion of equal
employment opportunity through affirmative action plans. The resolution requires
that all borrowers receiving financial assistance from the Authority adopt and
implement an affirmative action plan prior to the closing of the loan. The plan
shall be updated annually as long as the Bonds remain Outstanding.
Section 6.10. Authority Costs and Expenses. The Authority agrees that
it shall in all instances act in good faith in incurring costs, expenses and
legal fees in connection with the transactions contemplated by this Agreement
and the Indenture.
Section 6.11. Continuing Disclosure. The Borrower hereby covenants and
agrees that it will comply with and carry out all of the provisions of the
Continuing Disclosure Agreement. Notwithstanding any other provision of this
Loan Agreement, failure of the Borrower to comply with the Continuing Disclosure
Agreement shall not be considered an Event of Default hereunder; however, the
Trustee may (and, at the request of any Participating Underwriter (as defined in
the Continuing Disclosure Agreement) or the Holders of at least 51% aggregate
principal amount in Outstanding Bonds, shall) or any Bondholder or Beneficial
Owner may take such actions as may be necessary and appropriate, including
seeking specific performance by court order, to cause the Borrower to comply
with its obligations under this Section 6.11. For
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purposes of this Section, "Beneficial Owner" means any person which (a) has the
power, directly or indirectly, to vote or consent with respect to, or to dispose
of ownership of, any Bonds (including persons holding Bonds through nominees,
depositories or other intermediaries), or (b) is treated as the owner of any
Bonds for federal income tax purposes.
Section 6.12. Covenant Against Issuing Additional Debt Secured by the
Mortgage. The Borrower will not issue any additional debt secured by the
Mortgage unless the Bonds are equally and ratably secured by the Mortgage.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
(1) Any material representation or warranty made by the Borrower in the
Financing Documents or any certificate, statement, data or information
furnished in writing to the Authority or the Trustee by the Borrower in
connection with the closing of the initial issue of the Bonds or included
by the Borrower in its application to the Authority for assistance proves
at any time to have been incorrect when made in any material respect.
(2) Failure by the Borrower to pay (i) any interest, principal or
premium, if any, when due and payable with respect to the Bonds and the
continuance of such failure for more than five Business Days, (ii) amounts
due and payable (excluding amounts due and payable under (i) above)
pursuant to the Agreement, the Note and the Tax Regulatory Agreement (other
than as described in (iii) below) and continuance of such failure for more
than thirty Business Days, or (iii) rebate amounts due under section 148(f)
of the Code when due and payable under the Tax Regulatory Agreement.
(3) Failure by the Borrower to comply with the default notification
provisions of Section 6.8 hereof.
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(4) The occurrence of an "Event of Default" under Section 8.1(A) of the
Indenture.
(5) Failure by the Borrower to observe or perform any covenant,
condition or agreement hereunder or under the Financing Documents (except
those referred to above) and (a) continuance of such failure for a period
of sixty days after receipt by the Borrower of written notice specifying
the nature of such failure, or (b) if by reason of the nature of such
failure the same cannot be remedied within the sixty day period, the
Borrower fails to proceed with reasonable diligence after receipt of the
notice to cure the failure.
(6) The Borrower shall (a) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian or the like of itself or of its
property, (b) admit in writing its inability to pay its debts generally as
they become due, (c) make a general assignment for the benefit of
creditors, (d) be adjudicated a bankrupt or insolvent, or (e) commence a
voluntary case under the Federal bankruptcy laws of the United States of
America or file a voluntary petition or answer seeking reorganization, an
arrangement with creditors or an order for relief or seeking to take
advantage of any insolvency law or file an answer admitting the material
allegations of a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding; or corporate action shall be taken
by it for the purpose of effecting any of the foregoing; or if without the
application, approval or consent of the Borrower, a proceeding shall be
instituted in any court of competent jurisdiction, seeking in respect of
the Borrower an adjudication in bankruptcy, reorganization, dissolution,
winding up, liquidation, a composition or arrangement with creditors, a
readjustment of debts, the appointment of a trustee, receiver, liquidator
or custodian or the like of the Borrower or of all or any substantial part
of its assets, or other like relief in respect thereof under any bankruptcy
or insolvency law, and, if such proceeding is being contested by the
Borrower in good faith, the same shall continue undismissed, or pending and
unstayed, for any period of 90 consecutive days.
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Section 7.2. Remedies on Default. (A) Whenever any Event of Default
shall have occurred, the Trustee, or the Authority where so provided herein, may
take any one or more of the following actions:
(1) The Trustee, as and to the extent provided in Article VIII of the
Indenture, may cause all amounts payable under the Agreement, Note and Tax
Regulatory Agreement to be immediately due and payable without notice or
demand of any kind, whereupon the same shall become immediately due and
payable.
(2) The Authority, without the consent of the Trustee or any
Bondholder, may proceed to enforce the obligations of the Borrower to the
Authority under this Agreement.
(3) The Trustee may take whatever action at law or in equity it may
have to collect the amounts then due and thereafter to become due, or to
enforce the performance or observance of the obligations, agreements, and
covenants of the Borrower under the Financing Documents.
(4) The Trustee may exercise any and all rights it may have under the
Financing Documents.
(B) In the event that any Event of Default or any proceeding taken by
the Authority (or by the Trustee on behalf of the Authority) thereon shall be
waived or determined adversely to the Authority, then the Event of Default shall
be annulled and the Authority and the Borrower shall be restored to their former
rights hereunder, but no such waiver or determination shall extend to any
subsequent or other default or impair any right consequent thereon.
Section 7.3. No Duty to Mitigate Damages. Unless otherwise required by
law, neither the Authority, the Trustee nor any Bondholder shall be obligated to
do any act whatsoever or exercise any diligence whatsoever to mitigate the
damages to the Borrower if an Event of Default shall occur.
Section 7.4. Remedies Cumulative. No remedy herein conferred upon or
reserved to the Authority or the Trustee is intended to be exclusive of any
other available remedy or
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remedies but each and every such remedy shall be cumulative and shall be in
addition to every remedy given under this Agreement or now or hereafter existing
at law or in equity or by statute. Delay or omission to exercise any right or
power accruing upon any default or failure by the Authority or the Trustee to
insist upon the strict performance of any of the covenants and agreements herein
set forth or to exercise any rights or remedies upon default by the Borrower
hereunder shall not impair any such right or power or be considered or taken as
a waiver or relinquishment for the future of the right to insist upon and to
enforce, by injunction or other appropriate legal or equitable remedy, strict
compliance by the Borrower with all of the covenants and conditions hereof, or
of the right to exercise any such rights or remedies, if such default by the
Borrower be continued or repeated.
ARTICLE VIII
PREPAYMENT PROVISIONS
Section 8.1. Optional Prepayment. (A) The Borrower shall have, and is
hereby granted, the option to prepay its loan obligation and to cause the
corresponding optional redemption of the Bonds pursuant to Section 2.4(A) of the
Indenture at such times, in such amounts, and with such premium, if any, for
such optional redemption as set forth in the form of the Bond, by delivering a
written notice to the Trustee in accordance with Section 8.2 hereof, with a copy
to the Authority, setting forth the amount to be prepaid, the amount of Bonds
requested to be redeemed with the proceeds of such prepayment, and the date on
which such Bonds are to be redeemed. Such prepayment must be sufficient to
provide monies for the payment of interest and Redemption Price in accordance
with the terms of the Bonds requested to be redeemed with such prepayment and
all other amounts then due under the Agreement, Note and Tax Regulatory
Agreement. In the event of any complete prepayment of its loan obligation, the
Borrower shall, at the time of such prepayment, also pay or provide for the
payment of all reasonable or necessary fees and expenses of the Authority, the
Trustee and the Paying Agent accrued and to accrue through the final payment of
all the Bonds. Any such prepayments shall be applied to the redemption of Bonds
in the manner provided in Section 6.5 of
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<PAGE> 38
the Indenture, and credited against payments due hereunder in the same manner.
(B) The Borrower shall have, and is hereby granted, the option to
prepay its loan obligation in full at any time without premium if any of the
following events shall have occurred, as evidenced in each case by the filing
with the Trustee of a certificate of an Authorized Representative of the
Borrower to the effect that one of such events has occurred and is continuing,
and describing the same:
(1) The Project shall have been damaged or destroyed to such extent
that (a) the Project cannot be reasonably restored within a period of six
months from the date of such damage or destruction to the condition thereof
immediately preceding such damage or destruction, or (b) the Borrower is
thereby prevented or likely to be prevented from carrying on its normal
operation of the Project for a period of six months from the date of such
damage or destruction.
(2) Title to or the temporary use of all or substantially all of the
Project shall have been taken or condemned by a competent authority, which
taking or condemnation results or is likely to result in the Borrower being
thereby prevented or likely to be prevented from carrying on its normal
operation of the Project for a period of six months.
(3) A change in the Constitution of the State or of the United States
of America or legislative or executive action (whether local, state, or
federal) or a final decree, judgment or order of any court or
administrative body (whether local, state, or federal) that causes this
Agreement to become void or unenforceable or impossible of performance in
accordance with the intent and purpose of the parties as expressed herein
or, imposes unreasonable burdens or excessive liabilities upon the Borrower
with respect to the Project or the operation thereof.
(4) The operation of any of the Project shall have been enjoined or
shall otherwise have been prohibited by any order, decree, rule or
regulation of any court or of
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<PAGE> 39
any local, state, or federal regulatory body, administrative agency or
other governmental body for a period of not less than six months.
(5) Changes in the economic availability of raw materials, operating
supplies or facilities necessary for the operation of the Project or
technological or other changes shall have occurred which the Borrower
cannot reasonably overcome or control and which in the Borrower's
reasonable judgment renders the Project unsuitable or uneconomic for the
purposes herein specified or any tax shall be levied upon payments due
under the Note in an amount which the Borrower in its reasonable judgment
believes imposes an unreasonable burden upon the Borrower.
In any such case, the final loan payment shall be a sum sufficient, together
with other funds deposited with the Trustee and available for such purpose, to
redeem all Bonds then outstanding under the Indenture at the redemption price of
100% of the principal amount thereof plus accrued interest to the redemption
date or dates and all other amounts then due under the Agreement, Note and Tax
Regulatory Agreement, and the Borrower shall also pay or provide for all
reasonable or necessary fees and expenses of the Authority, the Trustee and
Paying Agent accrued and to accrue through final payment for the Bonds. The
Borrower shall deliver a written notice to the Trustee, with a copy to the
Authority, requesting the redemption of the Bonds under the Indenture, which
notice shall have attached thereto the applicable certificate of the Authorized
Representative of the Borrower.
(C) Notwithstanding the foregoing redemption provisions, the Borrower
shall have, and is hereby granted the right, upon and after the sale by the
Borrower of any of its property other than the Project for an amount equal to or
greater than $5,000,000, to prepay at any time and from time to time its loan
obligation without premium in an amount equal to or greater than $5,000,000, but
not exceeding the amount of the proceeds received upon such sale. The Borrower
shall deliver a written notice to the Trustee, with a copy to the Authority,
requesting the redemption of the Bonds under the Indenture, which notice shall
have attached thereto a certificate of the Authorized Representative of the
Borrower
-38-
<PAGE> 40
describing the sale of property upon which the prepayment is based and the
amounts received therefor.
Section 8.2. Notices and Sources of Prepayment. To exercise any options
granted in this Article, or to consummate the acceleration of the loan payments
as set forth in this Article, the written notice to the Trustee shall be signed
by an Authorized Representative of the Borrower to the Trustee, the Authority
and the Paying Agent and shall specify therein the date of prepayment, which
date shall be not less than thirty days nor more than ninety days from the date
the notice is mailed. A duplicate copy of any written notice hereunder shall
also be filed with the Authority.
Section 8.3. Mandatory Prepayment on Taxability. The Borrower shall pay
or cause the prepayment of its loan obligation following a Determination of
Taxability in the manner provided in Section 6.3 of this Agreement.
Section 8.4. Mandatory Prepayment for Deceased Bondholder Redemption.
The Borrower is unconditionally obligated, upon its receipt of notice from the
Trustee pursuant to Section 2.4(D) of the Indenture, to prepay its loan
obligation in amounts sufficient to permit redemption of Bonds eligible for
redemption as specified in Section 2.4(D) of the Indenture. Any such prepayments
shall be made not later than the date of such redemption and applied to the
redemption of Bonds in the manner provided in Section 2.4(G)(4) of the
Indenture, and credited against payments due hereunder.
ARTICLE IX
GENERAL
Section 9.1. Indenture. (A) Monies received from the sale of the Bonds
and all loan payments made by the Borrower and all other monies received by the
Authority or the Trustee under the Financing Documents shall be applied solely
and exclusively in the manner and for the purposes expressed and specified in
the Indenture and in the Bonds and as provided in this Agreement.
(B) The Borrower shall have and may exercise all the rights, powers and
authority given the Borrower in the
-39-
<PAGE> 41
Indenture and in the Bonds, and the Indenture and the Bonds shall not be
modified, altered or amended in any manner which adversely affects such rights,
powers and authority or otherwise adversely affects the Borrower without the
prior written consent of the Borrower.
Section 9.2. Benefit of and Enforcement by Bondholders. The Authority
and the Borrower agree that this Agreement is executed in part to induce the
purchase by others of the Bonds and for the further securing of the Bonds, and
accordingly that all covenants and agreements on the part of the Authority and
the Borrower as to the amounts payable with respect to the Bonds hereunder are
hereby declared to be for the benefit of the holders from time to time of the
Bonds and the Bond Insurer and may be enforced as provided in the Indenture on
behalf of the Bondholders or the Bond Insurer by the Trustee.
Section 9.3. Force Majeure. In case by reason of force majeure either
party hereto shall be rendered unable wholly or in part to carry out its
obligations under this Agreement, then except as otherwise expressly provided in
this Agreement, if such party shall give notice and full particulars of such
force majeure in writing to the other party within a reasonable time after
occurrence of the event or cause relied on, the obligations of the party giving
such notice, other than the obligation of the Borrower to make the payments
required under the terms hereof or of the Note, so far as they are affected by
such force majeure, shall be suspended during the continuance of the inability
then claimed which shall include a reasonable time for the removal of the effect
thereof, but for no longer period, and such parties shall endeavor to remove or
overcome such inability with all reasonable dispatch. The term "force majeure",
as employed herein, means acts of God, strikes, lockouts or other industrial
disturbances, acts of the public enemy, orders of any kind of the Government of
the United States, of the State or any civil or military authority,
insurrections, riots, epidemics, landslides, lightning, earthquakes, volcanoes,
fires, hurricanes, tornadoes, storms, floods, washouts, droughts, arrests,
restraining of government and people, civil disturbances, explosions, partial or
entire failure of utilities, shortages of labor, material, supplies or
transportation, or any other similar or different cause not
-40-
<PAGE> 42
reasonably within the control of the party claiming such inability. It is
understood and agreed that the settlement of existing or impending strikes,
lockouts or other industrial disturbances shall be entirely within the
discretion of the party having the difficulty and that the above requirements
that any force majeure shall be reasonably beyond the control of the party and
shall be remedied with all reasonable dispatch shall be deemed to be fulfilled
even though such existing or impending strikes, lockouts and other industrial
disturbances may not be settled and could have been settled by acceding to the
demands of the opposing person or persons.
Section 9.4. Amendments. This Agreement may be amended only with the
concurring written consent of the Trustee and, if required by the Indenture, of
the owners of the Bonds given in accordance with the provisions of the
Indenture.
Section 9.5. Notices. All notices, certificates or other communications
hereunder shall be sufficiently given and shall be deemed given when delivered
or when mailed by registered or certified mail, postage prepaid, addressed as
follows: if to the Authority, at 999 West Street, Rocky Hill, Connecticut 06067,
Attention: Program Manager - Loan Administration; if to the Borrower, 93 West
Main Street, Clinton, Connecticut 06413, Attention: Vice President--Finance; if
to the Bond Insurer, at One State Street Plaza, New York, New York 10004,
Attention: Surveillance; and if to the Trustee, at Goodwin Square, 225 Asylum
Street, Hartford, Connecticut 06103, Attention: Corporate Trust Division. A
duplicate copy of each notice, certificate or other communication given
hereunder by either the Authority or the Borrower to the other shall also be
given to the Trustee. The Authority, the Borrower, and the Trustee may, by
notice given hereunder, designate any further or different addresses to which
subsequent notices, certificates or other communications shall be sent.
Section 9.6. Prior Agreements Superseded. This Agreement, together with
all agreements executed by the parties concurrently herewith or in conjunction
with the sale of the Bonds, shall completely and fully supersede all other prior
understandings or agreements, both written and oral, between the Authority and
the Borrower relating to the lending
-41-
<PAGE> 43
of money and the Project, including those contained in any commitment letter
executed in anticipation of the issuance of the Bonds but excluding agreements
entered into in connection with the financing of the Project with other bonds
previously issued by the Authority.
Section 9.7. Execution of Counterparts. This Agreement may be executed
simultaneously in several counterparts each of which shall be an original and
all of which shall constitute but one and the same instrument.
Section 9.8. Time. All references to times of day in this Agreement are
references to New York City time.
Section 9.9. Separability of Invalid Provisions. In case any one or
more of the provisions contained in this Loan Agreement or in the Note shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein.
-42-
<PAGE> 44
IN WITNESS WHEREOF, the Authority has caused this Agreement to be
executed in its corporate name by a duly Authorized Representative, and the
Borrower has caused this Agreement to be executed in its corporate name by its
duly authorized officer all as of the date first above written.
Connecticut Development Authority
By_________________________________
Authorized Representative
The Connecticut Water Company
By_________________________________
Authorized Representative
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<PAGE> 45
APPENDIX A
The Connecticut Water Company
FORM OF
PROMISSORY NOTE
No. 1 $18,000,000
The Connecticut Water Company, a corporation organized and existing
under the laws of the State of Connecticut (the "Borrower"), for value received,
hereby promises to pay to the order of the Connecticut Development Authority
(the "Authority"), the principal sum of $18,000,000.00 together with interest on
the unpaid principal balance thereof from the date hereof until fully and
finally paid, on the applicable Interest Payment Dates together with all taxes
levied or assessed on this Note or the debt evidenced hereby against the holder
hereof. This Note shall bear interest at the rates of interest borne by and
principal, premium and interest shall be payable at the times and in the amounts
specified in each of the respective Series of Bonds referred to below, but only
to the extent that said Series of Bonds is issued and outstanding. The interest
on the Bonds referred to below shall be computed on the basis of a 360-day year
of twelve 30-day months. In no event shall the interest rate hereon exceed the
maximum rate permitted by law.
This Note has been executed under and pursuant to a Loan Agreement
dated as of March 1, 1998 between the Authority and the Borrower (the
"Agreement"). This Note is issued to evidence the obligation of the Borrower
under the Agreement to repay the loan made by the Authority from the proceeds of
its $10,000,000 5.05% Water Facilities Revenue Refunding Bonds (The Connecticut
Water Company Project - 1998 Series A) and its $8,000,000 5.125% Water
Facilities Revenue Bonds (The Connecticut Water Company Project - 1998 Series B)
(AMT) (collectively, the "Bonds"), together with interest thereon and all other
amounts, fees, penalties, premiums, adjustments, expenses, counsel fees and
other payments of any kind required to be paid by the Borrower under the
Agreement. The Agreement includes provision for mandatory and optional
prepayment of
A-1
<PAGE> 46
this Note as a whole or in part. Advances made pursuant to Section 6.2 of the
Agreement shall bear interest at the rate specified in accordance therewith.
The Agreement and this Note (hereinafter, together with the Tax
Regulatory Agreement, collectively referred to as the "Financing Documents")
have been assigned to State Street Bank and Trust Company of Connecticut, N.A.
(the "Trustee") acting pursuant to an Indenture of Trust dated as of March 1,
1998 (the "Indenture") between the Authority and the Trustee. Such assignment is
made as security for the payment of the Bonds issued by the Authority pursuant
to the Indenture.
As provided in the Agreement and subject to the provisions thereof,
payments hereon are to be made at the principal office of the Trustee in
Hartford, Connecticut, or at the office designated for such payment by any
successor trustee in an amount which, together with other moneys available
therefor pursuant to the Indenture, will equal the amount payable as principal
or Redemption Price, if any, of and interest on the Bonds outstanding under the
Indenture on each such due date.
The Borrower shall make payments on this Note on the dates and in the
amounts specified herein and in the Agreement and in addition shall make such
other payments as are required pursuant to the Financing Documents, the
Indenture and the Bonds. Upon the occurrence of an Event of Default, as defined
in any of the Financing Documents, the principal of and interest on this Note
may be declared immediately due and payable as provided in the Agreement. Upon
any such declaration the Borrower shall pay all costs, disbursements, expenses
and reasonable counsel fees of the Authority and the Trustee in seeking to
enforce their rights under any of the Financing Documents.
THE BORROWER ACKNOWLEDGES THAT THE LOAN EVIDENCED BY THIS NOTE IS A
COMMERCIAL TRANSACTION AND WAIVES ITS RIGHTS TO NOTICE AND HEARING UNDER CHAPTER
903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE
OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE HOLDER HEREOF
MAY DESIRE TO USE. The Borrower further (1) waives diligence, demand,
presentment for payment, notice of nonpayment, protest and notice of protest,
notice of any
A-2
<PAGE> 47
renewals or extension of this Note, and all rights under any statute of
limitations, (2) agrees that the time for payment of this Note may be extended
at the sole discretion of the Trustee without impairing its liability hereon,
and (3) consents to the release of all or any part of the security for the
payment thereof at the discretion of the Trustee or the release of any party
liable for this obligation without affecting the liability of the other parties
hereto. Any delay on the part of the Authority or the Trustee in exercising any
right hereunder shall not operate as a waiver of any such right, and any waiver
granted with respect to one default shall not operate as a waiver in the event
of any subsequent default.
A-3
<PAGE> 48
IN WITNESS WHEREOF, The Connecticut Water Company has caused this Note
to be executed in its corporate name by its duly authorized officer, dated March
1, 1998.
The Connecticut Water Company
By:___________________________
Authorized Representative
A-4
<PAGE> 49
AUTHORITY ENDORSEMENT
Pay to the order of State Street Bank and Trust Company of Connecticut,
N.A., as Trustee, without recourse.
Connecticut Development Authority
By:______________________________
Authorized Representative
A-5
<PAGE> 50
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PREAMBLE............................................................................................ 1
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions........................................................................... 6
Section 1.2. Interpretation........................................................................ 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations by the Authority...................................................... 8
Section 2.2. Representations by the Borrower....................................................... 10
ARTICLE III
THE LOAN
Section 3.1. Loan Clauses.......................................................................... 14
Section 3.2. Other Amounts Payable................................................................. 15
Section 3.3. Manner of Payment..................................................................... 16
Section 3.4. Obligation Unconditional.............................................................. 16
Section 3.5. Securities Clauses.................................................................... 16
Section 3.6. Issuance of Bonds..................................................................... 17
Section 3.7. Effective Date and Term............................................................... 17
Section 3.8. No Additional Bonds................................................................... 17
ARTICLE IV
THE PROJECT
Section 4.1. Completion of the Project............................................................. 17
Section 4.2. RESERVED.............................................................................. 18
Section 4.3. No Warranty Regarding Condition, Suitability
or Cost of Project.................................................................... 18
Section 4.4. Taxes................................................................................. 18
Section 4.5. Insurance............................................................................. 19
</TABLE>
i
<PAGE> 51
<TABLE>
<S> <C>
Section 4.6. Compliance with Law................................................................... 20
Section 4.7. Maintenance and Repair................................................................ 21
Section 4.8. Disposition of Project by Borrower.................................................... 21
Section 4.9. Leasing of the Project Realty and the
Project Equipment..................................................................... 22
Section 4.10. Project Equipment..................................................................... 22
ARTICLE V
CONDEMNATION,
DAMAGE AND DESTRUCTION
Section 5.1. No Abatement of Payments Hereunder.................................................... 23
Section 5.2. Project Disposition Upon Condemnation, Damage
or Destruction........................................................................ 23
Section 5.3. Application of Net Proceeds of Insurance
or Condemnation....................................................................... 24
ARTICLE VI
COVENANTS
Section 6.1. The Borrower to Maintain its Corporate
Existence; Conditions under which
Exceptions Permitted.................................................................. 25
Section 6.2. Indemnification, Payment of Expenses,
and Advances.......................................................................... 25
Section 6.3. Incorporation of Tax Regulatory Agreement:
Payments Upon Taxability.............................................................. 29
Section 6.4. Further Assurances and Corrective
Instruments........................................................................... 30
Section 6.5. Covenant by Borrower as to Compliance
with Indenture........................................................................ 31
Section 6.6. Assignment of Agreement or Note....................................................... 31
Section 6.7. Inspection............................................................................ 31
Section 6.8. Default Notification.................................................................. 31
Section 6.9. Covenant Against Discrimination....................................................... 32
Section 6.10. Authority Costs and Expenses.......................................................... 32
Section 6.11. Continuing Disclosure................................................................. 32
Section 6.12. Covenant Against Issuing Additional
Debt Secured by the Mortgage.......................................................... 33
</TABLE>
ii
<PAGE> 52
<TABLE>
<S> <C>
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default..................................................................... 33
Section 7.2. Remedies on Default................................................................... 35
Section 7.3. No Duty to Mitigate Damages........................................................... 35
Section 7.4. Remedies Cumulative................................................................... 35
ARTICLE VIII
PREPAYMENT PROVISIONS
Section 8.1. Optional Prepayment................................................................... 36
Section 8.2. Notices and Sources of Prepayment..................................................... 39
Section 8.3. Mandatory Prepayment on Taxability.................................................... 39
Section 8.4. Mandatory Prepayment for Deceased
Bondholder Redemption................................................................. 39
ARTICLE IX
GENERAL
Section 9.1. Indenture............................................................................. 39
Section 9.2. Benefit of and Enforcement by Bondholders............................................. 40
Section 9.3. Force Majeure......................................................................... 40
Section 9.4. Amendments............................................................................ 41
Section 9.5. Notices............................................................................... 41
Section 9.6. Prior Agreements Superseded........................................................... 41
Section 9.7. Execution of Counterparts............................................................. 43
Section 9.8. Time.................................................................................. 43
Section 9.9. Separability of Invalid Provisions.................................................... 43
</TABLE>
APPENDICES
Appendix A - Form of Promissory Note
iii
<PAGE> 1
Exhibit 10.9
CONNECTICUT WATER COMPANY EMPLOYMENT AGREEMENTS
<PAGE> 2
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
BETWEEN
THE CONNECTICUT WATER COMPANY
CONNECTICUT WATER SERVICE, INC.
AND
Marshall T. Chiaraluce
-----------------------------
<PAGE> 3
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of December 15, 1998, is made by and between
The Connecticut Water Company, a Connecticut corporation having its principal
place of business in Clinton, Connecticut, ("Company"), Connecticut Water
Service, Inc., a Connecticut corporation and holder of all of the outstanding
capital stock of Company ("Parent") and Marshall T. Chiaraluce, a resident of
Connecticut ("Executive").
W I T N E S S E T H :
WHEREAS, Executive has been and continues to be employed by Company and
Parent in an executive capacity and has entered into an Employment Agreement
between Executive and Company and Parent dated as of the 15th day of December,
1998 which becomes effective upon a "Change-in-Control," as defined herein, of
Company or Parent; and
WHEREAS, the Boards of Directors of Company and Parent have determined
that it is in the best interest of Company and Parent to continue such
Employment Agreement on the terms herein set forth so as to assure that Company
and Parent will have the dedication of Executive, notwithstanding the
possibility, threat, or occurrence of a Change-in-Control of Company or Parent
by providing Executive with compensation arrangements upon a Change-in-Control
which are competitive with those of other corporations; and
WHEREAS, Executive, Company and Parent are willing to enter into this
Amended and Restated Employment Agreement ("Agreement") on the terms herein set
forth;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Cause" shall mean Executive's serious, willful misconduct
in respect of Executive's duties under this Agreement, including conviction for
a felony or perpetration by Executive of a common law fraud upon Company or
Parent which has resulted or is likely to result in material economic damage to
Company or Parent, as determined by a vote of at least seventy-five percent
(75%) of all of the Directors (excluding Executive) of each of Company's and
Parent's Board of Directors;
<PAGE> 4
(b) "Change-in-Control" shall be deemed to have occurred if
after the date hereof (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 Securities Exchange Act of 1934 (the "Act") disclosing
that any Person (as defined below), other than Company or Parent or any employee
benefit plan sponsored by Company or Parent, is the beneficial owner (as the
term is defined in Rule 13d-3 under the Act) directly or indirectly, of twenty
percent (20%) or more of the total voting power represented by Company's or
Parent's then outstanding voting common stock (calculated as provided in
paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire
voting common stock); or (ii) any Person, other than Company or Parent or any
employee benefit plan sponsored by Company or Parent, shall purchase shares
pursuant to a tender offer or exchange offer to acquire any voting common stock
of Company or Parent (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 question is the beneficial owner
directly or indirectly, of twenty percent (20%) or more of the total voting
power represented by Company's or Parent's then outstanding voting common stock
(all as calculated under clause (i)); or (iii) the stockholders of Company or
Parent shall approve (A) any consolidation or merger of Company or Parent in
which Company or Parent is not the continuing or surviving corporation (other
than a merger of Company or Parent in which holders of the outstanding capital
stock of Company or Parent 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 Parent 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 Parent; or (iv) there shall have been
a change in the composition of the Board of Directors of Company or Parent 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 Parent, by a vote of a majority of all the
Directors (excluding Executive) adopts a resolution to the effect that a
"Change-in-Control" has occurred for purposes of this Agreement.
(c) "Disability" shall mean the incapacity of Executive by
illness or any other cause as determined under the long-term disability
insurance plan of Company in effect at the time in question, or if no such plan
is in effect, then such incapacity of Executive as prevents Executive from
performing the essential functions of Executive's position with or without
reasonable accommodation for a period in excess of two hundred forty (240) days
(whether or not consecutive), or one hundred eighty (180) days consecutively, as
the case may be, during any twelve (12) month period.
(d) "Effective Date" shall be the date on which a
Change-in-Control occurs. Anything in this Agreement to the contrary
notwithstanding, if Executive's employment is terminated prior to the date on
which a Change-in-Control occurs, and it is reasonably demonstrated that such
termination (i) was at the request of a third party who has taken steps
<PAGE> 5
reasonably calculated to effect a Change-in-Control or (ii) otherwise arose in
connection with or anticipation of a Change-in-Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination.
(e) "Good Reason" shall mean the occurrence of any action
which (i) removes or changes Executive's title or reduces Executive's job
responsibilities or base salary; (ii) results in a significant worsening of
Executive's work conditions; or (iii) moves Executive's place of employment to a
location that increases Executive's commute by more than thirty (30) miles over
the length of Executive's commute from Executive's place of principal residence
at the time the move is requested. For purposes of this subparagraph (e), any
good faith determination by Executive that any such action has occurred shall be
conclusive.
(f) "Person" shall mean any individual, corporation,
partnership, company or other entity, and shall include a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934.
2. EMPLOYMENT.
(a) As of the Effective Date, Company hereby agrees to
continue to employ Executive and Executive agrees to remain in the employ of
Company for the Term of this Agreement upon the terms and conditions hereinafter
set forth. Subject to the provisions of subparagraph (b) of this Paragraph 2,
and to the provisions of Paragraph 6 below, "Term" shall mean a continuously
renewing period of three (3) years commencing on the Effective Date.
(b) At any time during the Term, the Board of Directors of
Company and Parent may, by written notice to Executive, advise Executive of
their desire to modify or amend any of the terms or provisions of this Agreement
or to delete or add any terms or provisions. Any such notice ("Notice") shall
describe the proposed modifications in reasonable detail. In the event a Notice
shall be given to Executive, then Company, Parent and Executive agree to discuss
the proposed modification(s) and to attempt in good faith to reach agreement
with respect thereto and to reduce such agreement to writing in an amendment to
be executed by all the parties ("Amendment"). If a Notice is given hereunder and
an Amendment shall not have been executed on or before the sixtieth (60th) day
following the date on which Notice is given, then the Term shall thereupon be
automatically converted to a fixed period ending three (3) years after the
expiration of such sixty (60) days.
3. DUTIES OF EMPLOYMENT.
(a) During the Term, Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the ninety (90)-day period immediately preceding the Effective Date and
Executive's services shall be performed at such location as Executive shall
determine.
<PAGE> 6
(b) During the Term, Executive will serve Company faithfully,
diligently and competently and will devote full-time to Executive's employment
and will hold, in addition to the offices held on the Effective Date, such other
executive offices of Company or Parent, or their respective subsidiaries and
affiliates, to which Executive may be elected, appointed or assigned by the
Boards of Directors of Company or Parent from time to time and will discharge
such executive duties in connection therewith. Nothing in this Agreement shall
preclude Executive, with the prior approval of the Board of Directors of
Company, from devoting reasonable periods of time required for (i) serving as a
director or member of a committee of any organization involving no conflict of
interest with Company or Parent, or (ii) engaging in charitable, religious and
community activities, provided, that such directorships, memberships or
activities do not materially interfere with the performance of Executive's
duties hereunder.
4. COMPENSATION. During the Term, Company shall pay to Executive
as compensation for the services to be rendered by Executive hereunder the
following:
(a) A base salary at a rate equal to the highest base salary
paid or payable to Executive by Company during the twelve (12)-month period
immediately preceding the month in which the Effective Date occurs, or such
larger sum as the Board of Directors of Company may from time to time determine
in connection with regular periodic performance reviews pursuant to Company's
policies and practices. Such compensation shall be payable in accordance with
the normal payroll practices of Company. Executive shall receive an annual
increase in base salary at each normal pay adjustment date during the Term, but
no later than one (1) year after the date of Executive's last increase and
annually thereafter during the Term, of not less than the percentage increase in
the cost-of-living since Executive's last pay adjustment, as measured by the
Consumer Price Index-All Urban Consumers of the U.S. Bureau of Labor Statistics.
(b) In addition, Company shall pay to Executive an annual
bonus, payable in cash or other form of compensation, in accordance with the
Company's practice or plan for annual bonuses for peer executives which is at
least equal to the average bonus, if any, payable to Executive from Company in
respect of the three (3) fiscal years immediately preceding the fiscal year in
which the Effective Date occurs.
5. BENEFITS. During the Term, Executive shall be entitled to the
following benefits:
(a) Incentive, Savings and Retirement Plans. In addition to
base salary and bonus payable as hereinabove provided, Executive shall be
entitled to participate during the Term in all incentive, savings and retirement
plans, practices, policies and programs applicable to executive employees of
Company as may be in effect from time to time. Such plans, practices, policies
and programs, in the aggregate, shall provide Executive with compensation,
benefits and reward opportunities at least as favorable as the most favorable of
such compensation, benefits and reward opportunities provided by Company for
Executive under such plans, practices, policies and programs as in effect at any
time during the ninety (90)-day period immediately preceding the Effective Date
or, if more favorable to Executive, as provided at any time thereafter with
respect to other key employees of Company or Parent.
<PAGE> 7
(b) Welfare Benefit Plans. During the Term, Executive and/or
Executive's family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices, policies
and programs applicable to executive employees of Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) at least as favorable as the most favorable of such plans,
practices, policies and programs in effect at any time during the ninety
(90)-day period immediately preceding the Effective Date or, if more favorable
to Executive and/or Executive's family, as in effect at any time thereafter with
respect to other key employees of Company or Parent.
(c) Expenses. During the Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by Executive
in accordance with the most favorable policies, practices and procedures of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(d) Fringe Benefits. During the Term, Executive shall be
entitled to fringe benefits, including use of an automobile and payment of
related expenses or payment of an allowance for automobile related expenses, in
accordance with the most favorable plans, practices, programs and policies of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(e) Office and Support Staff. During the Term, Executive shall
be entitled to an office or offices of a size and with furnishings and other
appointments, and to secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to Executive by Company at any time
during the ninety (90)-day period immediately preceding the Effective Date or,
if more favorable to Executive, as provided at any time thereafter with respect
to other key employees of Company or Parent.
(f) Vacation. During the Term, Executive shall be entitled to
paid vacation in accordance with the most favorable plans, policies, programs
and practices of Company as in effect at any time during the ninety (90)-day
period immediately preceding the Effective Date or, if more favorable to
Executive, as in effect at any time thereafter with respect to other key
employees of Company or Parent.
6. END OF TERM AND NOTICE OF TERMINATION.
(a) End of Term. The Term shall end upon the occurrence of any
of the following events:
(i) Termination of Executive's employment by Company for
Cause.
(ii) The voluntary termination of Executive's employment
by Executive other than for Good Reason.
<PAGE> 8
(iii)The death of Executive.
(iv) Executive's attainment of age sixty-five (65).
(v) Full compliance by Company with the provisions of
Paragraph 7(e) below, if Executive's employment shall have been terminated by
Company during the Term for any reason other than Cause, or if Executive's
employment shall have been terminated by reason of Executive's Disability, or if
Executive shall have voluntarily terminated Executive's employment during the
Term for Good Reason.
(b) Notice of Termination. Any termination by Company for
Cause or by Executive for Good Reason or on account of Executive's Disability
shall be communicated by notice to the other party hereto given in accordance
with Section 16 of this Agreement. For purposes of this Agreement, a "notice"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) if the date of termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice).
(c) Date of Termination. The date of termination means the
date of receipt of the notice of termination or any later date specified
therein, as the case may be; provided, however, that (i) if Executive's
employment is terminated by Company other than for Cause or on account of
Executive's Disability, the date of termination shall be the date on which
Company notifies Executive of such termination and (ii) if Executive's
employment is terminated by reason of death, the date of termination shall be
the date of death of Executive.
7. PAYMENT UPON TERMINATION.
(a) If Executive's employment is terminated by Company for
Cause, as defined in Paragraph 1(a), the obligations of Company under this
Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only compensation or
benefits accrued or earned and vested (if applicable) by Executive as of the
date of termination, including base salary through the date of termination,
benefits payable under the terms of any qualified or nonqualified retirement
plans or deferred compensation plans maintained by Company, any accrued vacation
pay as of the date of termination not yet paid by Company and any benefits
required to be paid by law such as continued health care coverage pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
(collectively, the "Accrued Obligations").
(b) If Executive shall voluntarily terminate Executive's
employment during the Term other than for Good Reason, as defined in Paragraph
1(e), the obligations of Company under this Agreement shall cease and Executive
shall forfeit all right to receive any compensation or other benefits under this
Agreement except only the Accrued Obligations.
<PAGE> 9
(c) In the event of the death of Executive during the Term,
then, in addition to the Accrued Obligations and any other benefits which may be
payable by Company in respect of the death of Executive, the base salary then
payable hereunder shall continue to be paid at the then current rate for a
period of six (6) months after such death to such beneficiary as shall have been
designated in writing by Executive, or if no effective designation exists, then
to the estate of Executive.
(d) If Executive's employment is terminated by reason of
Executive's attainment of age sixty-five (65), the obligations of Company under
this Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only the Accrued
Obligations.
(e) If Executive's employment is terminated by Company during
the Term for any reason other than for Cause, or Executive's death, or
Executive's attainment of age sixty-five (65), or if Executive's employment is
terminated during the Term by reason of Executive's Disability, or if Executive
shall voluntarily terminate Executive's employment during the Term for Good
Reason, Executive shall be entitled to receive, and Company shall be obligated
to pay and provide Executive, the following amounts:
(i) An amount in consideration of the covenants by
Executive set forth in Paragraphs 8 and 9 below to be determined by an
independent certified public accounting firm selected by Executive and retained
by Company to be the reasonable value of said covenants as of the date of
termination of Executive's employment. Said amount shall be paid in cash in a
lump sum in the month next following Executive's date of termination of
employment and shall be treated as a supplemental wage payment under applicable
Treasury Regulations subject to federal tax withholding at the flat percentage
rate applicable thereto.
(ii) An amount equal to three (3) times the base salary of
Executive, at the rate in effect immediately prior to the date of termination,
plus an amount equal to three (3) times the bonus paid or payable with respect
to the fiscal year immediately preceding the date of termination or, if higher,
three (3) times the average bonus payable to Executive in respect of the three
(3) full fiscal years immediately preceding the Effective Date. There shall be
subtracted from the aggregate amount determined in accordance with the
immediately preceding sentence the amount payable to Executive pursuant to
subparagraph (e)(i) above in respect of the covenants by Executive set forth in
Paragraphs 8 and 9 below and the amount, if any, payable to Executive under any
then effective severance pay plan of Company. Such resulting amount shall be
payable in equal installments over the three (3)-year period commencing on the
date of termination of employment in accordance with the normal payroll
practices of Company or, at Company's option, the entire amount (determined
without any discount) shall be paid in cash in a lump sum in the month next
following Executive's date of termination of employment and shall be treated as
a supplemental wage payment under applicable Treasury Regulations subject to
federal tax withholding at the flat percentage rate applicable thereto.
<PAGE> 10
(iii) An amount equal to the aggregate amounts that
Company would have contributed on behalf of Executive under Company's qualified
defined contribution retirement plan(s), if any such plan(s) shall be in effect
(other than amounts attributable to Executive's before-tax contributions to such
plan(s)) plus estimated earnings thereon had Executive continued in the employ
of Company for the three (3)-year period commencing on the date of termination
and made contributions under said plan(s) at a rate, as a percentage of salary,
equal to the rate at which Executive had made contributions to said plan(s) in
the plan year immediately preceding Executive's termination, to be payable in a
lump sum to Executive within thirty (30) days after the expiration of the
non-competition period specified in Paragraph 9(a) of this Agreement, provided
that Executive shall not have breached said non-competition provisions.
(iv) An amount equal to the difference between: (A)
benefits which would have been payable to Executive under any deferred
compensation agreement between Company and Executive, if any such agreement
shall be in effect, had Executive continued in the employ of Company for the
three (3)-year period commencing on the date of termination, received
compensation at least equal to that specified in Paragraph 4 of this Agreement
during such time, and deferred pursuant to said deferred compensation agreement
the amount of compensation specified therein; and (B) the benefits actually
payable to Executive under such deferred compensation agreement; such amount to
be payable in a lump sum to Executive within thirty (30) days after the
expiration of the non-competition period specified in Paragraph 9(a) of this
Agreement, provided that Executive shall not have breached said non-competition
provisions.
(v) Additional retirement benefits equal to the difference
between: (A) the annual pension benefits that would have been payable to
Executive under Company's qualified defined benefit retirement plan (the "Plan")
and under any nonqualified supplemental executive retirement plan covering
Executive (the "Supplemental Plan"), if any such Plan or Supplemental Plan shall
be in effect, if Executive had been continued in the employ of Company for the
three (3)-year period commencing on the date of termination and had received
compensation at least equal to that specified in Paragraph 4(a) of this
Agreement during such time and had been fully vested in the benefits payable
under any such Plan and Supplemental Plan; and (B) the annual benefits actually
payable to Executive under any such Plan and Supplemental Plan. The discounted
present value of such additional benefits, shall be payable to Executive in a
lump sum, as calculated by the independent actuary for the Plan using the
assumptions specified in the Plan, within thirty (30) days after the expiration
of the non-competition period specified in Paragraph 9(a) of this Agreement,
provided that Executive shall not have breached said non-competition provisions.
(vi) At the date of termination of Executive's employment,
Executive shall be fully vested in any form of compensation previously granted
to Executive (other than benefits payable under a qualified retirement plan),
such as, by way of example only, restricted stock, stock options, and
performance share awards.
<PAGE> 11
(vii) If Executive's employment is terminated by reason of
Executive's Disability, Executive shall be entitled to receive, in addition to
the other benefits provided under this Paragraph 7(e), disability benefits at
least equal to the most favorable of those provided by Company or Parent to
disabled employees in accordance with the most favorable plans, programs,
practices and policies of Company or Parent in effect at any time during the
ninety (90)-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect on the date of Executive's Disability with
respect to other key employees of Company or Parent.
(viii) During the three (3)-year period commencing on the
date of termination, or such longer period as any plan, program, practice or
policy may provide, Executive shall continue to participate in all life, health,
disability and similar welfare benefit plans and programs of Company to the
extent that such continued participation is possible under the general terms and
provisions of such plans and programs, and Executive shall be credited with
additional service attributable to the three (3)-year period commencing on the
date of termination for purposes of determining eligibility to participate in
any such plans or programs maintained by Company for retirees, with Company and
Executive paying the same portion of the cost of each such plan or program as
existed at the time of Executive's termination. In the event that Executive's
continued participation (or commencement of participation for plans or programs
for retirees) is not permitted, then in lieu thereof, Company shall acquire,
with the same cost sharing, individual insurance policies providing comparable
coverage for Executive; provided, however, that Company shall not be obligated
to pay more than three (3) times Company's current cost for comparable group
coverage. If any such individual coverage is unavailable, then Company shall pay
to Executive annually for the three (3)-year period commencing on the date of
termination an amount equal to the sum of the average annual contributions,
payments, credits, or allocations made by Company for such coverage on
Executive's behalf (or the average such contributions, payments, credits, or
allocations for retirees, in the case of retiree coverage) over the three (3)
calendar years preceding the date of termination of Executive's employment.
(ix) During the three (3)-year period commencing on the
date of termination, Executive shall continue to receive such perquisites, other
than those specified in the preceding subparagraphs above, as Executive was
receiving at the date of termination of employment with, to the extent
applicable, the same cost sharing with Company as was in effect immediately
prior to Executive's termination of employment.
(x) Company shall reimburse Executive for the amount of
any reasonable legal or accounting fees and expenses incurred by Executive to
obtain or enforce any right or benefit provided to Executive by Company
hereunder or as confirmed or acknowledged hereunder.
<PAGE> 12
8. CONFIDENTIAL INFORMATION. Executive understands that in the
course of Executive's employment by Company, Executive will receive or have
access to confidential information concerning the business or purposes of
Company and Parent, and which Company and Parent desire to protect. Such
confidential information shall be deemed to include, but not be limited to,
Company's customer lists and information, and employee lists, including, if
known, personnel information and data. Executive agrees that Executive will not,
at any time during the period ending two (2) years after the date of termination
of Executive's employment, reveal to anyone outside Company or Parent or use for
Executive's own benefit any such information without specific written
authorization by Company or Parent. Executive further agrees not to use any such
confidential information or trade secrets in competing with Company or Parent at
any time during or in the two (2) year period immediately following the date of
termination of Executive's employment with Company.
9. COVENANTS BY EXECUTIVE NOT TO COMPETE WITH COMPANY OR PARENT.
(a) Upon the date of termination of Executive's employment
with Company for any reason, Executive covenants and agrees that Executive will
not at any time during the period of two (2) years from and after such date of
termination directly or indirectly in any manner or under any circumstances or
conditions whatsoever be or become interested, as an individual, partner,
principal, agent, clerk, employee, stockholder, officer, director, trustee, or
in any other capacity whatsoever, except as a nominal owner of stock of a public
corporation, in any other business which, at the date of Executive's
termination, is a Competitor (as defined herein), either directly or indirectly,
with Company or Parent, or engage or participate in, directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of an
equity or debt investment, lender or in any other manner or capacity), or lend
Executive's name (or any part or variant thereof) to, any business which, at the
date of Executive's termination, is a Competitor, either directly or indirectly,
with Company or Parent, or as a result of Executive's engagement or
participation would become, a Competitor, either directly or indirectly, with
any aspect of the business of Company or Parent as it exists at the time of
Executive's termination, or solicit any officer, director, employee or agent of
Company or Parent or any subsidiary or affiliate of Company or Parent to become
an officer, director, employee or agent of Executive, Executive's respective
affiliates or anyone else. Ownership, in the aggregate, of less than one percent
(1 %) of the outstanding shares of capital stock of any corporation with one or
more classes of its capital stock listed on a national securities exchange or
publicly traded in the over-the-counter market shall not constitute a violation
of the foregoing provision. For the purposes of this Agreement, a Competitor is
any business which is similar to the business of Company or Parent or in any way
in competition with the business of Company or Parent within any of the
then-existing water utility service areas of Company.
(b) Executive hereby acknowledges that Executive's services
are unique and extraordinary, and are not readily replaceable, and hereby
expressly agrees that Company and Parent, in enforcing the covenants contained
in Paragraphs 8 and 9 herein, in addition to any other remedies provided for
herein or otherwise available at law, shall be entitled in any court of equity
having jurisdiction to an injunction restraining Executive in the event of a
breach, actual or threatened, of the agreements and covenants contained in these
Paragraphs.
<PAGE> 13
(c) The parties hereto believe that the restrictive covenants
of these Paragraphs are reasonable. However, if at any time it shall be
determined by any court of competent jurisdiction that these Paragraphs or any
portion of them as written, are unenforceable because the restrictions are
unreasonable, the parties hereto agree that such portions as shall have been
determined to be unreasonably restrictive shall thereupon be deemed so amended
as to make such restrictions reasonable in the determination of such court, and
the said covenants, as so modified, shall be enforceable between the parties to
the same extent as if such amendments had been made prior to the date of any
alleged breach of said covenants.
(d) The provisions of this Paragraph 9 shall not apply if
Company and Parent shall be prohibited under Paragraph 15 below from making any
payments to Executive pursuant to Paragraph 7 above.
10. NO OBLIGATION TO MITIGATE. So long as Executive shall not be
in breach of any provision of Paragraph 8 or 9, Executive shall have no duty to
mitigate damages in the event of a termination and if Executive voluntarily
obtains other employment (including self-employment), any compensation or
profits received or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Company and Parent to
make payments hereunder.
11. RESIGNATION. In the event that Executive's services hereunder
are terminated under any of the provisions of this Agreement (except by death),
Executive agrees that Executive will deliver Executive's written resignation as
an officer of Company or Parent, or their subsidiaries and affiliates, to the
Board of Directors, such resignation to become effective immediately, or, at the
option of the Board of Directors, on a later date as specified by the Board.
12. INSURANCE. Company shall have the right at its own cost and
expense to apply for and to secure in its own name, or otherwise, life, health
or accident insurance or any or all of them covering Executive, and Executive
agrees to submit to the usual and customary medical examination and otherwise to
cooperate with Company in connection with the procurement of any such insurance,
and any claims thereunder.
13. RELEASE. As a condition of receiving payments or benefits
provided for in this Agreement, at the request of Company or Parent, Executive
shall execute and deliver for the benefit of Company and Parent, and any
subsidiary or affiliate of Company or Parent, a general release in the form set
forth in Attachment A, and such release shall become effective in accordance
with its terms. The failure or refusal of Executive to sign such a release or
the revocation of such a release shall cause the termination of any and all
obligations of Company and Parent to make payments or provide benefits
hereunder, and the forfeiture of the right of Executive to receive any such
payments and benefits. Executive acknowledges that Company and Parent have
advised Executive to consult with an attorney prior to signing this Agreement
and that Executive has had an opportunity to do so.
<PAGE> 14
14. BENEFITS LIMITATION. Notwithstanding any other provision of this
Agreement, in the event that any payment or benefit received or to be received
by Executive under this Agreement (a "Payment") would be subject to the excise
tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any successor to such Section, as determined
by a nationally recognized independent certified public accounting firm selected
by Executive (the "Tax Advisor"), then such Payment shall be reduced to the
extent necessary to avoid the application of the Excise Tax, but only if such
reduction would result in Executive's receipt of a greater Payment on an
after-tax basis than would be receivable by Executive had such Excise Tax been
paid. For purposes of this limitation, (a) no portion of any payment, whether
pursuant to this Agreement or any other plan or agreement, the receipt of which
Executive, in the determination of the Tax Advisor, shall have effectively
waived prior to the date which is fifteen (15) days following the date of
termination of Executive's employment and prior to the earlier of the date of
constructive receipt and the date of payment thereof shall be taken into
account; and (b) any reduction in the Payment made pursuant to this Paragraph
shall be made from the payments and benefits to be made pursuant to clauses (i)
through (x) of Paragraph 7(e), in such order as may be determined by Executive,
except to the extent that such payments and benefits, in the determination of
the Tax Advisor, are reasonable compensation within the meaning of Section 280G
of the Code. The determination of the Tax Advisor as provided herein shall be
completed not later than forty-five (45) days following Executive's date of
termination of employment, and such determination shall be communicated in
writing to Company, with a copy to Executive, within said forty-five (45) day
period. The determination of the Tax Advisor as provided herein shall be deemed
conclusive and binding on Company and Executive. Company shall pay the fees and
other costs of the Tax Advisor hereunder.
15. REGULATORY LIMITATION. Notwithstanding any other provision of this
Agreement, Company shall not be obligated to make, and Executive shall have no
right to receive, any payment, benefit or amount under this Agreement which
would violate any law, regulation or regulatory order applicable to Company or
Parent at the time such payment, benefit or amount is due ("Prohibited
Payment"). If and to the extent Company shall at a later date be relieved of the
restriction on its ability to make any Prohibited Payment, then at such time
Company or Parent shall promptly make payment of any such amounts to Executive.
16. NOTICES. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person to Executive or to the
Secretary of Company and Parent, or if mailed, postage prepaid, registered or
certified mail, addressed, in the case of Executive, to Executive's last known
address as carried on the personnel records of Company, and, in the case of
Company and Parent, to the corporate headquarters, attention of the Secretary,
or to such other address as the party to be notified may specify by notice to
the other party.
<PAGE> 15
17. SUCCESSORS AND BINDING AGREEMENT.
(a) Company and Parent will require any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of Company and/or Parent, as the
case may be, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that Company and Parent are required to perform
it. Failure of Company and Parent to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Executive to compensation and benefits from Company and Parent
in the same amount and on the same terms as Executive would be entitled
hereunder if Executive had terminated employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date on which Executive's
employment with Company was terminated. As used in this Agreement, "Company" and
"Parent" shall include any successor to Company's and/or Parent's, as the case
may be, business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of, and be
enforceable by, Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive dies while any amount is still payable hereunder, all such amounts
shall be paid in accordance with the terms of this Agreement to Executive's
devisee, legatee or other designee or, if there is no such designee, to
Executive's estate.
18. ARBITRATION. Any dispute which may arise between the parties
hereto may, if both parties agree, be submitted to binding arbitration in the
State of Connecticut in accordance with the Rules of the American Arbitration
Association; provided that any such dispute shall first be submitted to
Company's Board of Directors in an effort to resolve such dispute without resort
to arbitration.
19. SEVERABILITY. If any of the terms or conditions of this
Agreement shall be declared void or unenforceable by any court or administrative
body of competent jurisdiction, such term or condition shall be deemed severable
from the remainder of this Agreement, and the other terms and conditions of this
Agreement shall continue to be valid and enforceable.
20. AMENDMENT. This Agreement may be modified or amended only by
an instrument in writing executed by the parties hereto.
21. CONSTRUCTION. This Agreement shall supersede and replace all
prior agreements and understandings between the parties hereto on the subject
matter covered hereby. This Agreement shall be governed and construed under the
laws of the State of Connecticut. Words of the masculine gender mean and include
correlative words of the feminine gender. Paragraph headings are for convenience
only and shall not be considered a part of the terms and provisions of the
Agreement.
<PAGE> 16
IN WITNESS WHEREOF, Company and Parent have caused this Agreement to be
executed by a duly authorized officer, and Executive has hereunto set
Executive's hand, this 15th day of December, 1998.
The Connecticut Water Company
By /s/ Michael F. Halloran
----------------------------------------
Michael F. Halloran, Assistant Secretary
Connecticut Water Service, Inc.
By /s/ Michele G. DiAcri
----------------------------------------
Michele G. DiAcri
/s/ Marshall T. Chiaraluce
----------------------------------------
Marshall T. Chiaraluce
Executive
<PAGE> 17
ATTACHMENT A
RELEASE
We advise you to consult an attorney before you sign this Release. You
have until the date which is seven (7) days after the Release is signed and
returned to ____________________ ("Company") to change your mind and revoke your
Release. Your Release shall not become effective or enforceable until after that
date.
In consideration for the benefits provided under your Employment
Agreement dated ___________________ with Company and _________________
("Parent"), and more specifically enumerated in Exhibit 1 hereto, by your
signature below you agree to accept such benefits and not to make any claims of
any kind against Company, its past and present and future parent corporations,
subsidiaries, divisions, subdivisions, affiliates and related companies or their
successors and assigns, including without limitation Parent, or any and all
past, present and future Directors, officers, fiduciaries or employees of any of
the foregoing (all parties referred to in the foregoing are hereinafter referred
to as the "Releasees") before any agency, court or other forum, and you agree to
release the Releasees from all claims, known or unknown, arising in any way from
any actions taken by the Releasees up to the date of this Release, including,
without limiting the foregoing, any claim for wrongful discharge or breach of
contract or any claims arising under the Age Discrimination in Employment Act of
1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act of 1990, the Employee Retirement Income Security Act of 1974, Connecticut's
Fair Employment Practices Act or any other federal, state or local statute or
regulation and any claim for attorneys' fees, expenses or costs of litigation.
THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL
HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM
AGAINST THE RELEASEES BASED ON ANY ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE
OF THIS RELEASE.
By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully understand its
terms;
2. You have had at least twenty-one (21) days to consider the
terms of the Release;
3. You have seven (7) days from the date you sign this Release to
revoke it by written notification to Company. After this seven (7) day period,
this Release is final and binding and may not be revoked;
4. You have been advised to seek legal counsel and have had an
opportunity to do so;
<PAGE> 18
5. You would not otherwise be entitled to the benefits provided
under your Employment Agreement with Company and Parent had you not agreed to
waive any right you have to bring a lawsuit or legal claim against the
Releasees; and
6. Your agreement to the terms set forth above is voluntary.
Name:_________________________________
Signature: ___________________________ Date:___________________
Received by:__________________________ Date:___________________
<PAGE> 19
EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL
BENEFITS AND PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.
Acknowledged and Agreed:
THE CONNECTICUT WATER COMPANY EXECUTIVE
By _______________________________ ______________________
Its
CONNECTICUT WATER SERVICE, INC.
By _______________________________
Its
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AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
BETWEEN
THE CONNECTICUT WATER COMPANY
CONNECTICUT WATER SERVICE, INC.
AND
Michele G. DiAcri
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AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of December 15, 1998, is made by and between
The Connecticut Water Company, a Connecticut corporation having its principal
place of business in Clinton, Connecticut, ("Company"), Connecticut Water
Service, Inc., a Connecticut corporation and holder of all of the outstanding
capital stock of Company ("Parent") and Michele G. DiAcri, a resident of
Connecticut ("Executive").
W I T N E S S E T H :
WHEREAS, Executive has been and continues to be employed by Company and
Parent in an executive capacity and has entered into an Employment Agreement
between Executive and Company and Parent dated as of the 15th day of December,
1998 which becomes effective upon a "Change-in-Control," as defined herein, of
Company or Parent; and
WHEREAS, the Boards of Directors of Company and Parent have determined
that it is in the best interest of Company and Parent to continue such
Employment Agreement on the terms herein set forth so as to assure that Company
and Parent will have the dedication of Executive, notwithstanding the
possibility, threat, or occurrence of a Change-in-Control of Company or Parent
by providing Executive with compensation arrangements upon a Change-in-Control
which are competitive with those of other corporations; and
WHEREAS, Executive, Company and Parent are willing to enter into this
Amended and Restated Employment Agreement ("Agreement") on the terms herein set
forth;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Cause" shall mean Executive's serious, willful misconduct
in respect of Executive's duties under this Agreement, including conviction for
a felony or perpetration by Executive of a common law fraud upon Company or
Parent which has resulted or is likely to result in material economic damage to
Company or Parent, as determined by a vote of at least seventy-five percent
(75%) of all of the Directors (excluding Executive) of each of Company's and
Parent's Board of Directors;
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(b) "Change-in-Control" shall be deemed to have occurred if
after the date hereof (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 Securities Exchange Act of 1934 (the "Act") disclosing
that any Person (as defined below), other than Company or Parent or any employee
benefit plan sponsored by Company or Parent, is the beneficial owner (as the
term is defined in Rule 13d-3 under the Act) directly or indirectly, of twenty
percent (20%) or more of the total voting power represented by Company's or
Parent's then outstanding voting common stock (calculated as provided in
paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire
voting common stock); or (ii) any Person, other than Company or Parent or any
employee benefit plan sponsored by Company or Parent, shall purchase shares
pursuant to a tender offer or exchange offer to acquire any voting common stock
of Company or Parent (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 question is the beneficial owner
directly or indirectly, of twenty percent (20%) or more of the total voting
power represented by Company's or Parent's then outstanding voting common stock
(all as calculated under clause (i)); or (iii) the stockholders of Company or
Parent shall approve (A) any consolidation or merger of Company or Parent in
which Company or Parent is not the continuing or surviving corporation (other
than a merger of Company or Parent in which holders of the outstanding capital
stock of Company or Parent 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 Parent 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 Parent; or (iv) there shall have been
a change in the composition of the Board of Directors of Company or Parent 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 Parent, by a vote of a majority of all the
Directors (excluding Executive) adopts a resolution to the effect that a
"Change-in-Control" has occurred for purposes of this Agreement.
(c) "Disability" shall mean the incapacity of Executive by
illness or any other cause as determined under the long-term disability
insurance plan of Company in effect at the time in question, or if no such plan
is in effect, then such incapacity of Executive as prevents Executive from
performing the essential functions of Executive's position with or without
reasonable accommodation for a period in excess of two hundred forty (240) days
(whether or not consecutive), or one hundred eighty (180) days consecutively, as
the case may be, during any twelve (12) month period.
(d) "Effective Date" shall be the date on which a
Change-in-Control occurs. Anything in this Agreement to the contrary
notwithstanding, if Executive's employment is terminated prior to the date on
which a Change-in-Control occurs, and it is reasonably demonstrated that such
termination (i) was at the request of a third party who has taken steps
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reasonably calculated to effect a Change-in-Control or (ii) otherwise arose in
connection with or anticipation of a Change-in-Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination.
(e) "Good Reason" shall mean the occurrence of any action
which (i) removes or changes Executive's title or reduces Executive's job
responsibilities or base salary; (ii) results in a significant worsening of
Executive's work conditions; or (iii) moves Executive's place of employment to a
location that increases Executive's commute by more than thirty (30) miles over
the length of Executive's commute from Executive's place of principal residence
at the time the move is requested. For purposes of this subparagraph (e), any
good faith determination by Executive that any such action has occurred shall be
conclusive.
(f) "Person" shall mean any individual, corporation,
partnership, company or other entity, and shall include a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934.
2. EMPLOYMENT.
(a) As of the Effective Date, Company hereby agrees to
continue to employ Executive and Executive agrees to remain in the employ of
Company for the Term of this Agreement upon the terms and conditions hereinafter
set forth. Subject to the provisions of subparagraph (b) of this Paragraph 2,
and to the provisions of Paragraph 6 below, "Term" shall mean a continuously
renewing period of three (3) years commencing on the Effective Date.
(b) At any time during the Term, the Board of Directors of
Company and Parent may, by written notice to Executive, advise Executive of
their desire to modify or amend any of the terms or provisions of this Agreement
or to delete or add any terms or provisions. Any such notice ("Notice") shall
describe the proposed modifications in reasonable detail. In the event a Notice
shall be given to Executive, then Company, Parent and Executive agree to discuss
the proposed modification(s) and to attempt in good faith to reach agreement
with respect thereto and to reduce such agreement to writing in an amendment to
be executed by all the parties ("Amendment"). If a Notice is given hereunder and
an Amendment shall not have been executed on or before the sixtieth (60th) day
following the date on which Notice is given, then the Term shall thereupon be
automatically converted to a fixed period ending three (3) years after the
expiration of such sixty (60) days.
3. DUTIES OF EMPLOYMENT.
(a) During the Term, Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the ninety (90)-day period immediately preceding the Effective Date and
Executive's services shall be performed at such location as Executive shall
determine.
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(b) During the Term, Executive will serve Company faithfully,
diligently and competently and will devote full-time to Executive's employment
and will hold, in addition to the offices held on the Effective Date, such other
executive offices of Company or Parent, or their respective subsidiaries and
affiliates, to which Executive may be elected, appointed or assigned by the
Boards of Directors of Company or Parent from time to time and will discharge
such executive duties in connection therewith. Nothing in this Agreement shall
preclude Executive, with the prior approval of the Board of Directors of
Company, from devoting reasonable periods of time required for (i) serving as a
director or member of a committee of any organization involving no conflict of
interest with Company or Parent, or (ii) engaging in charitable, religious and
community activities, provided, that such directorships, memberships or
activities do not materially interfere with the performance of Executive's
duties hereunder.
4. COMPENSATION. During the Term, Company shall pay to Executive
as compensation for the services to be rendered by Executive hereunder the
following:
(a) A base salary at a rate equal to the highest base salary
paid or payable to Executive by Company during the twelve (12)-month period
immediately preceding the month in which the Effective Date occurs, or such
larger sum as the Board of Directors of Company may from time to time determine
in connection with regular periodic performance reviews pursuant to Company's
policies and practices. Such compensation shall be payable in accordance with
the normal payroll practices of Company. Executive shall receive an annual
increase in base salary at each normal pay adjustment date during the Term, but
no later than one (1) year after the date of Executive's last increase and
annually thereafter during the Term, of not less than the percentage increase in
the cost-of-living since Executive's last pay adjustment, as measured by the
Consumer Price Index-All Urban Consumers of the U.S. Bureau of Labor Statistics.
(b) In addition, Company shall pay to Executive an annual
bonus, payable in cash or other form of compensation, in accordance with the
Company's practice or plan for annual bonuses for peer executives which is at
least equal to the average bonus, if any, payable to Executive from Company in
respect of the three (3) fiscal years immediately preceding the fiscal year in
which the Effective Date occurs.
5. BENEFITS. During the Term, Executive shall be entitled to the
following benefits:
(a) Incentive, Savings and Retirement Plans. In addition to
base salary and bonus payable as hereinabove provided, Executive shall be
entitled to participate during the Term in all incentive, savings and retirement
plans, practices, policies and programs applicable to executive employees of
Company as may be in effect from time to time. Such plans, practices, policies
and programs, in the aggregate, shall provide Executive with compensation,
benefits and reward opportunities at least as favorable as the most favorable of
such compensation, benefits and reward opportunities provided by Company for
Executive under such plans, practices, policies and programs as in effect at any
time during the ninety (90)-day period immediately preceding the Effective Date
or, if more favorable to Executive, as provided at any time thereafter with
respect to other key employees of Company or Parent.
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(b) Welfare Benefit Plans. During the Term, Executive and/or
Executive's family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices, policies
and programs applicable to executive employees of Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) at least as favorable as the most favorable of such plans,
practices, policies and programs in effect at any time during the ninety
(90)-day period immediately preceding the Effective Date or, if more favorable
to Executive and/or Executive's family, as in effect at any time thereafter with
respect to other key employees of Company or Parent.
(c) Expenses. During the Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by Executive
in accordance with the most favorable policies, practices and procedures of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(d) Fringe Benefits. During the Term, Executive shall be
entitled to fringe benefits, including use of an automobile and payment of
related expenses or payment of an allowance for automobile related expenses, in
accordance with the most favorable plans, practices, programs and policies of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(e) Office and Support Staff. During the Term, Executive shall
be entitled to an office or offices of a size and with furnishings and other
appointments, and to secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to Executive by Company at any time
during the ninety (90)-day period immediately preceding the Effective Date or,
if more favorable to Executive, as provided at any time thereafter with respect
to other key employees of Company or Parent.
(f) Vacation. During the Term, Executive shall be entitled to
paid vacation in accordance with the most favorable plans, policies, programs
and practices of Company as in effect at any time during the ninety (90)-day
period immediately preceding the Effective Date or, if more favorable to
Executive, as in effect at any time thereafter with respect to other key
employees of Company or Parent.
6. END OF TERM AND NOTICE OF TERMINATION.
(a) End of Term. The Term shall end upon the occurrence of any
of the following events:
(i) Termination of Executive's employment by Company for
Cause.
(ii) The voluntary termination of Executive's employment
by Executive other than for Good Reason.
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(iii)The death of Executive.
(iv) Executive's attainment of age sixty-five (65).
(v) Full compliance by Company with the provisions of
Paragraph 7(e) below, if Executive's employment shall have been terminated by
Company during the Term for any reason other than Cause, or if Executive's
employment shall have been terminated by reason of Executive's Disability, or if
Executive shall have voluntarily terminated Executive's employment during the
Term for Good Reason.
(b) Notice of Termination. Any termination by Company for
Cause or by Executive for Good Reason or on account of Executive's Disability
shall be communicated by notice to the other party hereto given in accordance
with Section 16 of this Agreement. For purposes of this Agreement, a "notice"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) if the date of termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice).
(c) Date of Termination. The date of termination means the
date of receipt of the notice of termination or any later date specified
therein, as the case may be; provided, however, that (i) if Executive's
employment is terminated by Company other than for Cause or on account of
Executive's Disability, the date of termination shall be the date on which
Company notifies Executive of such termination and (ii) if Executive's
employment is terminated by reason of death, the date of termination shall be
the date of death of Executive.
7. PAYMENT UPON TERMINATION.
(a) If Executive's employment is terminated by Company for
Cause, as defined in Paragraph 1(a), the obligations of Company under this
Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only compensation or
benefits accrued or earned and vested (if applicable) by Executive as of the
date of termination, including base salary through the date of termination,
benefits payable under the terms of any qualified or nonqualified retirement
plans or deferred compensation plans maintained by Company, any accrued vacation
pay as of the date of termination not yet paid by Company and any benefits
required to be paid by law such as continued health care coverage pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
(collectively, the "Accrued Obligations").
(b) If Executive shall voluntarily terminate Executive's
employment during the Term other than for Good Reason, as defined in Paragraph
1(e), the obligations of Company under this Agreement shall cease and Executive
shall forfeit all right to receive any compensation or other benefits under this
Agreement except only the Accrued Obligations.
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(c) In the event of the death of Executive during the Term,
then, in addition to the Accrued Obligations and any other benefits which may be
payable by Company in respect of the death of Executive, the base salary then
payable hereunder shall continue to be paid at the then current rate for a
period of six (6) months after such death to such beneficiary as shall have been
designated in writing by Executive, or if no effective designation exists, then
to the estate of Executive.
(d) If Executive's employment is terminated by reason of
Executive's attainment of age sixty-five (65), the obligations of Company under
this Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only the Accrued
Obligations.
(e) If Executive's employment is terminated by Company during
the Term for any reason other than for Cause, or Executive's death, or
Executive's attainment of age sixty-five (65), or if Executive's employment is
terminated during the Term by reason of Executive's Disability, or if Executive
shall voluntarily terminate Executive's employment during the Term for Good
Reason, Executive shall be entitled to receive, and Company shall be obligated
to pay and provide Executive, the following amounts:
(i) An amount in consideration of the covenants by
Executive set forth in Paragraphs 8 and 9 below to be determined by an
independent certified public accounting firm selected by Executive and retained
by Company to be the reasonable value of said covenants as of the date of
termination of Executive's employment. Said amount shall be paid in cash in a
lump sum in the month next following Executive's date of termination of
employment and shall be treated as a supplemental wage payment under applicable
Treasury Regulations subject to federal tax withholding at the flat percentage
rate applicable thereto.
(ii) An amount equal to three (3) times the base salary of
Executive, at the rate in effect immediately prior to the date of termination,
plus an amount equal to three (3) times the bonus paid or payable with respect
to the fiscal year immediately preceding the date of termination or, if higher,
three (3) times the average bonus payable to Executive in respect of the three
(3) full fiscal years immediately preceding the Effective Date. There shall be
subtracted from the aggregate amount determined in accordance with the
immediately preceding sentence the amount payable to Executive pursuant to
subparagraph (e)(i) above in respect of the covenants by Executive set forth in
Paragraphs 8 and 9 below and the amount, if any, payable to Executive under any
then effective severance pay plan of Company. Such resulting amount shall be
payable in equal installments over the three (3)-year period commencing on the
date of termination of employment in accordance with the normal payroll
practices of Company or, at Company's option, the entire amount (determined
without any discount) shall be paid in cash in a lump sum in the month next
following Executive's date of termination of employment and shall be treated as
a supplemental wage payment under applicable Treasury Regulations subject to
federal tax withholding at the flat percentage rate applicable thereto.
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(iii) An amount equal to the aggregate amounts that
Company would have contributed on behalf of Executive under Company's qualified
defined contribution retirement plan(s), if any such plan(s) shall be in effect
(other than amounts attributable to Executive's before-tax contributions to such
plan(s)) plus estimated earnings thereon had Executive continued in the employ
of Company for the three (3)-year period commencing on the date of termination
and made contributions under said plan(s) at a rate, as a percentage of salary,
equal to the rate at which Executive had made contributions to said plan(s) in
the plan year immediately preceding Executive's termination, to be payable in a
lump sum to Executive within thirty (30) days after the expiration of the
non-competition period specified in Paragraph 9(a) of this Agreement, provided
that Executive shall not have breached said non-competition provisions.
(iv) An amount equal to the difference between: (A)
benefits which would have been payable to Executive under any deferred
compensation agreement between Company and Executive, if any such agreement
shall be in effect, had Executive continued in the employ of Company for the
three (3)-year period commencing on the date of termination, received
compensation at least equal to that specified in Paragraph 4 of this Agreement
during such time, and deferred pursuant to said deferred compensation agreement
the amount of compensation specified therein; and (B) the benefits actually
payable to Executive under such deferred compensation agreement; such amount to
be payable in a lump sum to Executive within thirty (30) days after the
expiration of the non-competition period specified in Paragraph 9(a) of this
Agreement, provided that Executive shall not have breached said non-competition
provisions.
(v) Additional retirement benefits equal to the difference
between: (A) the annual pension benefits that would have been payable to
Executive under Company's qualified defined benefit retirement plan (the "Plan")
and under any nonqualified supplemental executive retirement plan covering
Executive (the "Supplemental Plan"), if any such Plan or Supplemental Plan shall
be in effect, if Executive had been continued in the employ of Company for the
three (3)-year period commencing on the date of termination and had received
compensation at least equal to that specified in Paragraph 4(a) of this
Agreement during such time and had been fully vested in the benefits payable
under any such Plan and Supplemental Plan; and (B) the annual benefits actually
payable to Executive under any such Plan and Supplemental Plan. The discounted
present value of such additional benefits, shall be payable to Executive in a
lump sum, as calculated by the independent actuary for the Plan using the
assumptions specified in the Plan, within thirty (30) days after the expiration
of the non-competition period specified in Paragraph 9(a) of this Agreement,
provided that Executive shall not have breached said non-competition provisions.
(vi) At the date of termination of Executive's employment,
Executive shall be fully vested in any form of compensation previously granted
to Executive (other than benefits payable under a qualified retirement plan),
such as, by way of example only, restricted stock, stock options, and
performance share awards.
<PAGE> 29
(vii) If Executive's employment is terminated by reason of
Executive's Disability, Executive shall be entitled to receive, in addition to
the other benefits provided under this Paragraph 7(e), disability benefits at
least equal to the most favorable of those provided by Company or Parent to
disabled employees in accordance with the most favorable plans, programs,
practices and policies of Company or Parent in effect at any time during the
ninety (90)-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect on the date of Executive's Disability with
respect to other key employees of Company or Parent.
(viii) During the three (3)-year period commencing on the
date of termination, or such longer period as any plan, program, practice or
policy may provide, Executive shall continue to participate in all life, health,
disability and similar welfare benefit plans and programs of Company to the
extent that such continued participation is possible under the general terms and
provisions of such plans and programs, and Executive shall be credited with
additional service attributable to the three (3)-year period commencing on the
date of termination for purposes of determining eligibility to participate in
any such plans or programs maintained by Company for retirees, with Company and
Executive paying the same portion of the cost of each such plan or program as
existed at the time of Executive's termination. In the event that Executive's
continued participation (or commencement of participation for plans or programs
for retirees) is not permitted, then in lieu thereof, Company shall acquire,
with the same cost sharing, individual insurance policies providing comparable
coverage for Executive; provided, however, that Company shall not be obligated
to pay more than three (3) times Company's current cost for comparable group
coverage. If any such individual coverage is unavailable, then Company shall pay
to Executive annually for the three (3)-year period commencing on the date of
termination an amount equal to the sum of the average annual contributions,
payments, credits, or allocations made by Company for such coverage on
Executive's behalf (or the average such contributions, payments, credits, or
allocations for retirees, in the case of retiree coverage) over the three (3)
calendar years preceding the date of termination of Executive's employment.
(ix) During the three (3)-year period commencing on the
date of termination, Executive shall continue to receive such perquisites, other
than those specified in the preceding subparagraphs above, as Executive was
receiving at the date of termination of employment with, to the extent
applicable, the same cost sharing with Company as was in effect immediately
prior to Executive's termination of employment.
(x) Company shall reimburse Executive for the amount of
any reasonable legal or accounting fees and expenses incurred by Executive to
obtain or enforce any right or benefit provided to Executive by Company
hereunder or as confirmed or acknowledged hereunder.
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8. CONFIDENTIAL INFORMATION. Executive understands that in the
course of Executive's employment by Company, Executive will receive or have
access to confidential information concerning the business or purposes of
Company and Parent, and which Company and Parent desire to protect. Such
confidential information shall be deemed to include, but not be limited to,
Company's customer lists and information, and employee lists, including, if
known, personnel information and data. Executive agrees that Executive will not,
at any time during the period ending two (2) years after the date of termination
of Executive's employment, reveal to anyone outside Company or Parent or use for
Executive's own benefit any such information without specific written
authorization by Company or Parent. Executive further agrees not to use any such
confidential information or trade secrets in competing with Company or Parent at
any time during or in the two (2) year period immediately following the date of
termination of Executive's employment with Company.
9. COVENANTS BY EXECUTIVE NOT TO COMPETE WITH COMPANY OR PARENT.
(a) Upon the date of termination of Executive's employment
with Company for any reason, Executive covenants and agrees that Executive will
not at any time during the period of two (2) years from and after such date of
termination directly or indirectly in any manner or under any circumstances or
conditions whatsoever be or become interested, as an individual, partner,
principal, agent, clerk, employee, stockholder, officer, director, trustee, or
in any other capacity whatsoever, except as a nominal owner of stock of a public
corporation, in any other business which, at the date of Executive's
termination, is a Competitor (as defined herein), either directly or indirectly,
with Company or Parent, or engage or participate in, directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of an
equity or debt investment, lender or in any other manner or capacity), or lend
Executive's name (or any part or variant thereof) to, any business which, at the
date of Executive's termination, is a Competitor, either directly or indirectly,
with Company or Parent, or as a result of Executive's engagement or
participation would become, a Competitor, either directly or indirectly, with
any aspect of the business of Company or Parent as it exists at the time of
Executive's termination, or solicit any officer, director, employee or agent of
Company or Parent or any subsidiary or affiliate of Company or Parent to become
an officer, director, employee or agent of Executive, Executive's respective
affiliates or anyone else. Ownership, in the aggregate, of less than one percent
(1 %) of the outstanding shares of capital stock of any corporation with one or
more classes of its capital stock listed on a national securities exchange or
publicly traded in the over-the-counter market shall not constitute a violation
of the foregoing provision. For the purposes of this Agreement, a Competitor is
any business which is similar to the business of Company or Parent or in any way
in competition with the business of Company or Parent within any of the
then-existing water utility service areas of Company.
(b) Executive hereby acknowledges that Executive's services
are unique and extraordinary, and are not readily replaceable, and hereby
expressly agrees that Company and Parent, in enforcing the covenants contained
in Paragraphs 8 and 9 herein, in addition to any other remedies provided for
herein or otherwise available at law, shall be entitled in any court of equity
having jurisdiction to an injunction restraining Executive in the event of a
breach, actual or threatened, of the agreements and covenants contained in these
Paragraphs.
<PAGE> 31
(c) The parties hereto believe that the restrictive covenants
of these Paragraphs are reasonable. However, if at any time it shall be
determined by any court of competent jurisdiction that these Paragraphs or any
portion of them as written, are unenforceable because the restrictions are
unreasonable, the parties hereto agree that such portions as shall have been
determined to be unreasonably restrictive shall thereupon be deemed so amended
as to make such restrictions reasonable in the determination of such court, and
the said covenants, as so modified, shall be enforceable between the parties to
the same extent as if such amendments had been made prior to the date of any
alleged breach of said covenants.
(d) The provisions of this Paragraph 9 shall not apply if
Company and Parent shall be prohibited under Paragraph 15 below from making any
payments to Executive pursuant to Paragraph 7 above.
10. NO OBLIGATION TO MITIGATE. So long as Executive shall not be
in breach of any provision of Paragraph 8 or 9, Executive shall have no duty to
mitigate damages in the event of a termination and if Executive voluntarily
obtains other employment (including self-employment), any compensation or
profits received or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Company and Parent to
make payments hereunder.
11. RESIGNATION. In the event that Executive's services hereunder
are terminated under any of the provisions of this Agreement (except by death),
Executive agrees that Executive will deliver Executive's written resignation as
an officer of Company or Parent, or their subsidiaries and affiliates, to the
Board of Directors, such resignation to become effective immediately, or, at the
option of the Board of Directors, on a later date as specified by the Board.
12. INSURANCE. Company shall have the right at its own cost and
expense to apply for and to secure in its own name, or otherwise, life, health
or accident insurance or any or all of them covering Executive, and Executive
agrees to submit to the usual and customary medical examination and otherwise to
cooperate with Company in connection with the procurement of any such insurance,
and any claims thereunder.
13. RELEASE. As a condition of receiving payments or benefits
provided for in this Agreement, at the request of Company or Parent, Executive
shall execute and deliver for the benefit of Company and Parent, and any
subsidiary or affiliate of Company or Parent, a general release in the form set
forth in Attachment A, and such release shall become effective in accordance
with its terms. The failure or refusal of Executive to sign such a release or
the revocation of such a release shall cause the termination of any and all
obligations of Company and Parent to make payments or provide benefits
hereunder, and the forfeiture of the right of Executive to receive any such
payments and benefits. Executive acknowledges that Company and Parent have
advised Executive to consult with an attorney prior to signing this Agreement
and that Executive has had an opportunity to do so.
<PAGE> 32
14. BENEFITS LIMITATION. Notwithstanding any other provision of this
Agreement, in the event that any payment or benefit received or to be received
by Executive under this Agreement (a "Payment") would be subject to the excise
tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any successor to such Section, as determined
by a nationally recognized independent certified public accounting firm selected
by Executive (the "Tax Advisor"), then such Payment shall be reduced to the
extent necessary to avoid the application of the Excise Tax, but only if such
reduction would result in Executive's receipt of a greater Payment on an
after-tax basis than would be receivable by Executive had such Excise Tax been
paid. For purposes of this limitation, (a) no portion of any payment, whether
pursuant to this Agreement or any other plan or agreement, the receipt of which
Executive, in the determination of the Tax Advisor, shall have effectively
waived prior to the date which is fifteen (15) days following the date of
termination of Executive's employment and prior to the earlier of the date of
constructive receipt and the date of payment thereof shall be taken into
account; and (b) any reduction in the Payment made pursuant to this Paragraph
shall be made from the payments and benefits to be made pursuant to clauses (i)
through (x) of Paragraph 7(e), in such order as may be determined by Executive,
except to the extent that such payments and benefits, in the determination of
the Tax Advisor, are reasonable compensation within the meaning of Section 280G
of the Code. The determination of the Tax Advisor as provided herein shall be
completed not later than forty-five (45) days following Executive's date of
termination of employment, and such determination shall be communicated in
writing to Company, with a copy to Executive, within said forty-five (45) day
period. The determination of the Tax Advisor as provided herein shall be deemed
conclusive and binding on Company and Executive. Company shall pay the fees and
other costs of the Tax Advisor hereunder.
15. REGULATORY LIMITATION. Notwithstanding any other provision of this
Agreement, Company shall not be obligated to make, and Executive shall have no
right to receive, any payment, benefit or amount under this Agreement which
would violate any law, regulation or regulatory order applicable to Company or
Parent at the time such payment, benefit or amount is due ("Prohibited
Payment"). If and to the extent Company shall at a later date be relieved of the
restriction on its ability to make any Prohibited Payment, then at such time
Company or Parent shall promptly make payment of any such amounts to Executive.
16. NOTICES. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person to Executive or to the
Secretary of Company and Parent, or if mailed, postage prepaid, registered or
certified mail, addressed, in the case of Executive, to Executive's last known
address as carried on the personnel records of Company, and, in the case of
Company and Parent, to the corporate headquarters, attention of the Secretary,
or to such other address as the party to be notified may specify by notice to
the other party.
<PAGE> 33
17. SUCCESSORS AND BINDING AGREEMENT.
(a) Company and Parent will require any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of Company and/or Parent, as the
case may be, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that Company and Parent are required to perform
it. Failure of Company and Parent to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Executive to compensation and benefits from Company and Parent
in the same amount and on the same terms as Executive would be entitled
hereunder if Executive had terminated employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date on which Executive's
employment with Company was terminated. As used in this Agreement, "Company" and
"Parent" shall include any successor to Company's and/or Parent's, as the case
may be, business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of, and be
enforceable by, Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive dies while any amount is still payable hereunder, all such amounts
shall be paid in accordance with the terms of this Agreement to Executive's
devisee, legatee or other designee or, if there is no such designee, to
Executive's estate.
18. ARBITRATION. Any dispute which may arise between the parties
hereto may, if both parties agree, be submitted to binding arbitration in the
State of Connecticut in accordance with the Rules of the American Arbitration
Association; provided that any such dispute shall first be submitted to
Company's Board of Directors in an effort to resolve such dispute without resort
to arbitration.
19. SEVERABILITY. If any of the terms or conditions of this
Agreement shall be declared void or unenforceable by any court or administrative
body of competent jurisdiction, such term or condition shall be deemed severable
from the remainder of this Agreement, and the other terms and conditions of this
Agreement shall continue to be valid and enforceable.
20. AMENDMENT. This Agreement may be modified or amended only by
an instrument in writing executed by the parties hereto.
21. CONSTRUCTION. This Agreement shall supersede and replace all
prior agreements and understandings between the parties hereto on the subject
matter covered hereby. This Agreement shall be governed and construed under the
laws of the State of Connecticut. Words of the masculine gender mean and include
correlative words of the feminine gender. Paragraph headings are for convenience
only and shall not be considered a part of the terms and provisions of the
Agreement.
<PAGE> 34
IN WITNESS WHEREOF, Company and Parent have caused this Agreement to be
executed by a duly authorized officer, and Executive has hereunto set
Executive's hand, this 15th day of December, 1998.
The Connecticut Water Company
By /s/ Marshall T. Chiaraluce
-----------------------------
Marshall T. Chiaraluce
Connecticut Water Service, Inc.
By /s/ Michael F. Halloran
-----------------------------
Michael F. Halloran
By /s/ Michele G. DiAcri
-----------------------------
Michele G. DiAcri
Executive
<PAGE> 35
ATTACHMENT A
RELEASE
We advise you to consult an attorney before you sign this Release. You
have until the date which is seven (7) days after the Release is signed and
returned to ____________________ ("Company") to change your mind and revoke your
Release. Your Release shall not become effective or enforceable until after that
date.
In consideration for the benefits provided under your Employment
Agreement dated ___________________ with Company and _________________
("Parent"), and more specifically enumerated in Exhibit 1 hereto, by your
signature below you agree to accept such benefits and not to make any claims of
any kind against Company, its past and present and future parent corporations,
subsidiaries, divisions, subdivisions, affiliates and related companies or their
successors and assigns, including without limitation Parent, or any and all
past, present and future Directors, officers, fiduciaries or employees of any of
the foregoing (all parties referred to in the foregoing are hereinafter referred
to as the "Releasees") before any agency, court or other forum, and you agree to
release the Releasees from all claims, known or unknown, arising in any way from
any actions taken by the Releasees up to the date of this Release, including,
without limiting the foregoing, any claim for wrongful discharge or breach of
contract or any claims arising under the Age Discrimination in Employment Act of
1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act of 1990, the Employee Retirement Income Security Act of 1974, Connecticut's
Fair Employment Practices Act or any other federal, state or local statute or
regulation and any claim for attorneys' fees, expenses or costs of litigation.
THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL
HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM
AGAINST THE RELEASEES BASED ON ANY ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE
OF THIS RELEASE.
By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully understand its
terms;
2. You have had at least twenty-one (21) days to consider the
terms of the Release;
3. You have seven (7) days from the date you sign this Release to
revoke it by written notification to Company. After this seven (7) day period,
this Release is final and binding and may not be revoked;
4. You have been advised to seek legal counsel and have had an
opportunity to do so;
<PAGE> 36
5. You would not otherwise be entitled to the benefits provided
under your Employment Agreement with Company and Parent had you not agreed to
waive any right you have to bring a lawsuit or legal claim against the
Releasees; and
6. Your agreement to the terms set forth above is voluntary.
Name:_________________________________
Signature: ___________________________ Date:___________________
Received by:__________________________ Date:___________________
<PAGE> 37
EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL
BENEFITS AND PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.
Acknowledged and Agreed:
THE CONNECTICUT WATER COMPANY EXECUTIVE
By _______________________________ ______________________
Its
CONNECTICUT WATER SERVICE, INC.
By _______________________________
Its
<PAGE> 38
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
BETWEEN
THE CONNECTICUT WATER COMPANY
CONNECTICUT WATER SERVICE, INC.
AND
James R. McQueen
<PAGE> 39
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of December 15, 1998, is made by and between
The Connecticut Water Company, a Connecticut corporation having its principal
place of business in Clinton, Connecticut, ("Company"), Connecticut Water
Service, Inc., a Connecticut corporation and holder of all of the outstanding
capital stock of Company ("Parent") and James R. McQueen, a resident of
Connecticut ("Executive").
W I T N E S S E T H :
WHEREAS, Executive has been and continues to be employed by Company and
Parent in an executive capacity and has entered into an Employment Agreement
between Executive and Company and Parent dated as of the 15th day of December,
1998 which becomes effective upon a "Change-in-Control," as defined herein, of
Company or Parent; and
WHEREAS, the Boards of Directors of Company and Parent have determined
that it is in the best interest of Company and Parent to continue such
Employment Agreement on the terms herein set forth so as to assure that Company
and Parent will have the dedication of Executive, notwithstanding the
possibility, threat, or occurrence of a Change-in-Control of Company or Parent
by providing Executive with compensation arrangements upon a Change-in-Control
which are competitive with those of other corporations; and
WHEREAS, Executive, Company and Parent are willing to enter into this
Amended and Restated Employment Agreement ("Agreement") on the terms herein set
forth;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Cause" shall mean Executive's serious, willful misconduct
in respect of Executive's duties under this Agreement, including conviction for
a felony or perpetration by Executive of a common law fraud upon Company or
Parent which has resulted or is likely to result in material economic damage to
Company or Parent, as determined by a vote of at least seventy-five percent
(75%) of all of the Directors (excluding Executive) of each of Company's and
Parent's Board of Directors;
<PAGE> 40
(b) "Change-in-Control" shall be deemed to have occurred if
after the date hereof (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 Securities Exchange Act of 1934 (the "Act") disclosing
that any Person (as defined below), other than Company or Parent or any employee
benefit plan sponsored by Company or Parent, is the beneficial owner (as the
term is defined in Rule 13d-3 under the Act) directly or indirectly, of twenty
percent (20%) or more of the total voting power represented by Company's or
Parent's then outstanding voting common stock (calculated as provided in
paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire
voting common stock); or (ii) any Person, other than Company or Parent or any
employee benefit plan sponsored by Company or Parent, shall purchase shares
pursuant to a tender offer or exchange offer to acquire any voting common stock
of Company or Parent (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 question is the beneficial owner
directly or indirectly, of twenty percent (20%) or more of the total voting
power represented by Company's or Parent's then outstanding voting common stock
(all as calculated under clause (i)); or (iii) the stockholders of Company or
Parent shall approve (A) any consolidation or merger of Company or Parent in
which Company or Parent is not the continuing or surviving corporation (other
than a merger of Company or Parent in which holders of the outstanding capital
stock of Company or Parent 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 Parent 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 Parent; or (iv) there shall have been
a change in the composition of the Board of Directors of Company or Parent 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 Parent, by a vote of a majority of all the
Directors (excluding Executive) adopts a resolution to the effect that a
"Change-in-Control" has occurred for purposes of this Agreement.
(c) "Disability" shall mean the incapacity of Executive by
illness or any other cause as determined under the long-term disability
insurance plan of Company in effect at the time in question, or if no such plan
is in effect, then such incapacity of Executive as prevents Executive from
performing the essential functions of Executive's position with or without
reasonable accommodation for a period in excess of two hundred forty (240) days
(whether or not consecutive), or one hundred eighty (180) days consecutively, as
the case may be, during any twelve (12) month period.
(d) "Effective Date" shall be the date on which a
Change-in-Control occurs. Anything in this Agreement to the contrary
notwithstanding, if Executive's employment is terminated prior to the date on
which a Change-in-Control occurs, and it is reasonably demonstrated that such
termination (i) was at the request of a third party who has taken steps
<PAGE> 41
reasonably calculated to effect a Change-in-Control or (ii) otherwise arose in
connection with or anticipation of a Change-in-Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination.
(e) "Good Reason" shall mean the occurrence of any action
which (i) removes or changes Executive's title or reduces Executive's job
responsibilities or base salary; (ii) results in a significant worsening of
Executive's work conditions; or (iii) moves Executive's place of employment to a
location that increases Executive's commute by more than thirty (30) miles over
the length of Executive's commute from Executive's place of principal residence
at the time the move is requested. For purposes of this subparagraph (e), any
good faith determination by Executive that any such action has occurred shall be
conclusive.
(f) "Person" shall mean any individual, corporation,
partnership, company or other entity, and shall include a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934.
2. EMPLOYMENT.
(a) As of the Effective Date, Company hereby agrees to
continue to employ Executive and Executive agrees to remain in the employ of
Company for the Term of this Agreement upon the terms and conditions hereinafter
set forth. Subject to the provisions of subparagraph (b) of this Paragraph 2,
and to the provisions of Paragraph 6 below, "Term" shall mean a continuously
renewing period of three (3) years commencing on the Effective Date.
(b) At any time during the Term, the Board of Directors of
Company and Parent may, by written notice to Executive, advise Executive of
their desire to modify or amend any of the terms or provisions of this Agreement
or to delete or add any terms or provisions. Any such notice ("Notice") shall
describe the proposed modifications in reasonable detail. In the event a Notice
shall be given to Executive, then Company, Parent and Executive agree to discuss
the proposed modification(s) and to attempt in good faith to reach agreement
with respect thereto and to reduce such agreement to writing in an amendment to
be executed by all the parties ("Amendment"). If a Notice is given hereunder and
an Amendment shall not have been executed on or before the sixtieth (60th) day
following the date on which Notice is given, then the Term shall thereupon be
automatically converted to a fixed period ending three (3) years after the
expiration of such sixty (60) days.
3. DUTIES OF EMPLOYMENT.
(a) During the Term, Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the ninety (90)-day period immediately preceding the Effective Date and
Executive's services shall be performed at such location as Executive shall
determine.
<PAGE> 42
(b) During the Term, Executive will serve Company faithfully,
diligently and competently and will devote full-time to Executive's employment
and will hold, in addition to the offices held on the Effective Date, such other
executive offices of Company or Parent, or their respective subsidiaries and
affiliates, to which Executive may be elected, appointed or assigned by the
Boards of Directors of Company or Parent from time to time and will discharge
such executive duties in connection therewith. Nothing in this Agreement shall
preclude Executive, with the prior approval of the Board of Directors of
Company, from devoting reasonable periods of time required for (i) serving as a
director or member of a committee of any organization involving no conflict of
interest with Company or Parent, or (ii) engaging in charitable, religious and
community activities, provided, that such directorships, memberships or
activities do not materially interfere with the performance of Executive's
duties hereunder.
4. COMPENSATION. During the Term, Company shall pay to Executive
as compensation for the services to be rendered by Executive hereunder the
following:
(a) A base salary at a rate equal to the highest base salary
paid or payable to Executive by Company during the twelve (12)-month period
immediately preceding the month in which the Effective Date occurs, or such
larger sum as the Board of Directors of Company may from time to time determine
in connection with regular periodic performance reviews pursuant to Company's
policies and practices. Such compensation shall be payable in accordance with
the normal payroll practices of Company. Executive shall receive an annual
increase in base salary at each normal pay adjustment date during the Term, but
no later than one (1) year after the date of Executive's last increase and
annually thereafter during the Term, of not less than the percentage increase in
the cost-of-living since Executive's last pay adjustment, as measured by the
Consumer Price Index-All Urban Consumers of the U.S. Bureau of Labor Statistics.
(b) In addition, Company shall pay to Executive an annual
bonus, payable in cash or other form of compensation, in accordance with the
Company's practice or plan for annual bonuses for peer executives which is at
least equal to the average bonus, if any, payable to Executive from Company in
respect of the three (3) fiscal years immediately preceding the fiscal year in
which the Effective Date occurs.
5. BENEFITS. During the Term, Executive shall be entitled to the
following benefits:
(a) Incentive, Savings and Retirement Plans. In addition to
base salary and bonus payable as hereinabove provided, Executive shall be
entitled to participate during the Term in all incentive, savings and retirement
plans, practices, policies and programs applicable to executive employees of
Company as may be in effect from time to time. Such plans, practices, policies
and programs, in the aggregate, shall provide Executive with compensation,
benefits and reward opportunities at least as favorable as the most favorable of
such compensation, benefits and reward opportunities provided by Company for
Executive under such plans, practices, policies and programs as in effect at any
time during the ninety (90)-day period immediately preceding the Effective Date
or, if more favorable to Executive, as provided at any time thereafter with
respect to other key employees of Company or Parent.
<PAGE> 43
(b) Welfare Benefit Plans. During the Term, Executive and/or
Executive's family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices, policies
and programs applicable to executive employees of Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) at least as favorable as the most favorable of such plans,
practices, policies and programs in effect at any time during the ninety
(90)-day period immediately preceding the Effective Date or, if more favorable
to Executive and/or Executive's family, as in effect at any time thereafter with
respect to other key employees of Company or Parent.
(c) Expenses. During the Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by Executive
in accordance with the most favorable policies, practices and procedures of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(d) Fringe Benefits. During the Term, Executive shall be
entitled to fringe benefits, including use of an automobile and payment of
related expenses or payment of an allowance for automobile related expenses, in
accordance with the most favorable plans, practices, programs and policies of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(e) Office and Support Staff. During the Term, Executive shall
be entitled to an office or offices of a size and with furnishings and other
appointments, and to secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to Executive by Company at any time
during the ninety (90)-day period immediately preceding the Effective Date or,
if more favorable to Executive, as provided at any time thereafter with respect
to other key employees of Company or Parent.
(f) Vacation. During the Term, Executive shall be entitled to
paid vacation in accordance with the most favorable plans, policies, programs
and practices of Company as in effect at any time during the ninety (90)-day
period immediately preceding the Effective Date or, if more favorable to
Executive, as in effect at any time thereafter with respect to other key
employees of Company or Parent.
6. END OF TERM AND NOTICE OF TERMINATION.
(a) End of Term. The Term shall end upon the occurrence of any
of the following events:
(i) Termination of Executive's employment by Company for
Cause.
(ii) The voluntary termination of Executive's employment
by Executive other than for Good Reason.
<PAGE> 44
(iii)The death of Executive.
(iv) Executive's attainment of age sixty-five (65).
(v) Full compliance by Company with the provisions of
Paragraph 7(e) below, if Executive's employment shall have been terminated by
Company during the Term for any reason other than Cause, or if Executive's
employment shall have been terminated by reason of Executive's Disability, or if
Executive shall have voluntarily terminated Executive's employment during the
Term for Good Reason.
(b) Notice of Termination. Any termination by Company for
Cause or by Executive for Good Reason or on account of Executive's Disability
shall be communicated by notice to the other party hereto given in accordance
with Section 16 of this Agreement. For purposes of this Agreement, a "notice"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) if the date of termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice).
(c) Date of Termination. The date of termination means the
date of receipt of the notice of termination or any later date specified
therein, as the case may be; provided, however, that (i) if Executive's
employment is terminated by Company other than for Cause or on account of
Executive's Disability, the date of termination shall be the date on which
Company notifies Executive of such termination and (ii) if Executive's
employment is terminated by reason of death, the date of termination shall be
the date of death of Executive.
7. PAYMENT UPON TERMINATION.
(a) If Executive's employment is terminated by Company for
Cause, as defined in Paragraph 1(a), the obligations of Company under this
Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only compensation or
benefits accrued or earned and vested (if applicable) by Executive as of the
date of termination, including base salary through the date of termination,
benefits payable under the terms of any qualified or nonqualified retirement
plans or deferred compensation plans maintained by Company, any accrued vacation
pay as of the date of termination not yet paid by Company and any benefits
required to be paid by law such as continued health care coverage pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
(collectively, the "Accrued Obligations").
(b) If Executive shall voluntarily terminate Executive's
employment during the Term other than for Good Reason, as defined in Paragraph
1(e), the obligations of Company under this Agreement shall cease and Executive
shall forfeit all right to receive any compensation or other benefits under this
Agreement except only the Accrued Obligations.
<PAGE> 45
(c) In the event of the death of Executive during the Term,
then, in addition to the Accrued Obligations and any other benefits which may be
payable by Company in respect of the death of Executive, the base salary then
payable hereunder shall continue to be paid at the then current rate for a
period of six (6) months after such death to such beneficiary as shall have been
designated in writing by Executive, or if no effective designation exists, then
to the estate of Executive.
(d) If Executive's employment is terminated by reason of
Executive's attainment of age sixty-five (65), the obligations of Company under
this Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only the Accrued
Obligations.
(e) If Executive's employment is terminated by Company during
the Term for any reason other than for Cause, or Executive's death, or
Executive's attainment of age sixty- five (65), or if Executive's employment is
terminated during the Term by reason of Executive's Disability, or if Executive
shall voluntarily terminate Executive's employment during the Term for Good
Reason, Executive shall be entitled to receive, and Company shall be obligated
to pay and provide Executive, the following amounts:
(i) An amount in consideration of the covenants by
Executive set forth in Paragraphs 8 and 9 below to be determined by an
independent certified public accounting firm selected by Executive and retained
by Company to be the reasonable value of said covenants as of the date of
termination of Executive's employment. Said amount shall be paid in cash in a
lump sum in the month next following Executive's date of termination of
employment and shall be treated as a supplemental wage payment under applicable
Treasury Regulations subject to federal tax withholding at the flat percentage
rate applicable thereto.
(ii) An amount equal to three (3) times the base salary of
Executive, at the rate in effect immediately prior to the date of termination,
plus an amount equal to three (3) times the bonus paid or payable with respect
to the fiscal year immediately preceding the date of termination or, if higher,
three (3) times the average bonus payable to Executive in respect of the three
(3) full fiscal years immediately preceding the Effective Date. There shall be
subtracted from the aggregate amount determined in accordance with the
immediately preceding sentence the amount payable to Executive pursuant to
subparagraph (e)(i) above in respect of the covenants by Executive set forth in
Paragraphs 8 and 9 below and the amount, if any, payable to Executive under any
then effective severance pay plan of Company. Such resulting amount shall be
payable in equal installments over the three (3)-year period commencing on the
date of termination of employment in accordance with the normal payroll
practices of Company or, at Company's option, the entire amount (determined
without any discount) shall be paid in cash in a lump sum in the month next
following Executive's date of termination of employment and shall be treated as
a supplemental wage payment under applicable Treasury Regulations subject to
federal tax withholding at the flat percentage rate applicable thereto.
<PAGE> 46
(iii) An amount equal to the aggregate amounts that
Company would have contributed on behalf of Executive under Company's qualified
defined contribution retirement plan(s), if any such plan(s) shall be in effect
(other than amounts attributable to Executive's before-tax contributions to such
plan(s)) plus estimated earnings thereon had Executive continued in the employ
of Company for the three (3)-year period commencing on the date of termination
and made contributions under said plan(s) at a rate, as a percentage of salary,
equal to the rate at which Executive had made contributions to said plan(s) in
the plan year immediately preceding Executive's termination, to be payable in a
lump sum to Executive within thirty (30) days after the expiration of the
non-competition period specified in Paragraph 9(a) of this Agreement, provided
that Executive shall not have breached said non-competition provisions.
(iv) An amount equal to the difference between: (A)
benefits which would have been payable to Executive under any deferred
compensation agreement between Company and Executive, if any such agreement
shall be in effect, had Executive continued in the employ of Company for the
three (3)-year period commencing on the date of termination, received
compensation at least equal to that specified in Paragraph 4 of this Agreement
during such time, and deferred pursuant to said deferred compensation agreement
the amount of compensation specified therein; and (B) the benefits actually
payable to Executive under such deferred compensation agreement; such amount to
be payable in a lump sum to Executive within thirty (30) days after the
expiration of the non-competition period specified in Paragraph 9(a) of this
Agreement, provided that Executive shall not have breached said non-competition
provisions.
(v) Additional retirement benefits equal to the difference
between: (A) the annual pension benefits that would have been payable to
Executive under Company's qualified defined benefit retirement plan (the "Plan")
and under any nonqualified supplemental executive retirement plan covering
Executive (the "Supplemental Plan"), if any such Plan or Supplemental Plan shall
be in effect, if Executive had been continued in the employ of Company for the
three (3)-year period commencing on the date of termination and had received
compensation at least equal to that specified in Paragraph 4(a) of this
Agreement during such time and had been fully vested in the benefits payable
under any such Plan and Supplemental Plan; and (B) the annual benefits actually
payable to Executive under any such Plan and Supplemental Plan. The discounted
present value of such additional benefits, shall be payable to Executive in a
lump sum, as calculated by the independent actuary for the Plan using the
assumptions specified in the Plan, within thirty (30) days after the expiration
of the non-competition period specified in Paragraph 9(a) of this Agreement,
provided that Executive shall not have breached said non-competition provisions.
(vi) At the date of termination of Executive's employment,
Executive shall be fully vested in any form of compensation previously granted
to Executive (other than benefits payable under a qualified retirement plan),
such as, by way of example only, restricted stock, stock options, and
performance share awards.
<PAGE> 47
(vii) If Executive's employment is terminated by reason of
Executive's Disability, Executive shall be entitled to receive, in addition to
the other benefits provided under this Paragraph 7(e), disability benefits at
least equal to the most favorable of those provided by Company or Parent to
disabled employees in accordance with the most favorable plans, programs,
practices and policies of Company or Parent in effect at any time during the
ninety (90)-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect on the date of Executive's Disability with
respect to other key employees of Company or Parent.
(viii) During the three (3)-year period commencing on the
date of termination, or such longer period as any plan, program, practice or
policy may provide, Executive shall continue to participate in all life, health,
disability and similar welfare benefit plans and programs of Company to the
extent that such continued participation is possible under the general terms and
provisions of such plans and programs, and Executive shall be credited with
additional service attributable to the three (3)-year period commencing on the
date of termination for purposes of determining eligibility to participate in
any such plans or programs maintained by Company for retirees, with Company and
Executive paying the same portion of the cost of each such plan or program as
existed at the time of Executive's termination. In the event that Executive's
continued participation (or commencement of participation for plans or programs
for retirees) is not permitted, then in lieu thereof, Company shall acquire,
with the same cost sharing, individual insurance policies providing comparable
coverage for Executive; provided, however, that Company shall not be obligated
to pay more than three (3) times Company's current cost for comparable group
coverage. If any such individual coverage is unavailable, then Company shall pay
to Executive annually for the three (3)-year period commencing on the date of
termination an amount equal to the sum of the average annual contributions,
payments, credits, or allocations made by Company for such coverage on
Executive's behalf (or the average such contributions, payments, credits, or
allocations for retirees, in the case of retiree coverage) over the three (3)
calendar years preceding the date of termination of Executive's employment.
(ix) During the three (3)-year period commencing on the
date of termination, Executive shall continue to receive such perquisites, other
than those specified in the preceding subparagraphs above, as Executive was
receiving at the date of termination of employment with, to the extent
applicable, the same cost sharing with Company as was in effect immediately
prior to Executive's termination of employment.
(x) Company shall reimburse Executive for the amount of
any reasonable legal or accounting fees and expenses incurred by Executive to
obtain or enforce any right or benefit provided to Executive by Company
hereunder or as confirmed or acknowledged hereunder.
<PAGE> 48
8. CONFIDENTIAL INFORMATION. Executive understands that in the
course of Executive's employment by Company, Executive will receive or have
access to confidential information concerning the business or purposes of
Company and Parent, and which Company and Parent desire to protect. Such
confidential information shall be deemed to include, but not be limited to,
Company's customer lists and information, and employee lists, including, if
known, personnel information and data. Executive agrees that Executive will not,
at any time during the period ending two (2) years after the date of termination
of Executive's employment, reveal to anyone outside Company or Parent or use for
Executive's own benefit any such information without specific written
authorization by Company or Parent. Executive further agrees not to use any such
confidential information or trade secrets in competing with Company or Parent at
any time during or in the two (2) year period immediately following the date of
termination of Executive's employment with Company.
9. COVENANTS BY EXECUTIVE NOT TO COMPETE WITH COMPANY OR PARENT.
(a) Upon the date of termination of Executive's employment
with Company for any reason, Executive covenants and agrees that Executive will
not at any time during the period of two (2) years from and after such date of
termination directly or indirectly in any manner or under any circumstances or
conditions whatsoever be or become interested, as an individual, partner,
principal, agent, clerk, employee, stockholder, officer, director, trustee, or
in any other capacity whatsoever, except as a nominal owner of stock of a public
corporation, in any other business which, at the date of Executive's
termination, is a Competitor (as defined herein), either directly or indirectly,
with Company or Parent, or engage or participate in, directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of an
equity or debt investment, lender or in any other manner or capacity), or lend
Executive's name (or any part or variant thereof) to, any business which, at the
date of Executive's termination, is a Competitor, either directly or indirectly,
with Company or Parent, or as a result of Executive's engagement or
participation would become, a Competitor, either directly or indirectly, with
any aspect of the business of Company or Parent as it exists at the time of
Executive's termination, or solicit any officer, director, employee or agent of
Company or Parent or any subsidiary or affiliate of Company or Parent to become
an officer, director, employee or agent of Executive, Executive's respective
affiliates or anyone else. Ownership, in the aggregate, of less than one percent
(1 %) of the outstanding shares of capital stock of any corporation with one or
more classes of its capital stock listed on a national securities exchange or
publicly traded in the over-the-counter market shall not constitute a violation
of the foregoing provision. For the purposes of this Agreement, a Competitor is
any business which is similar to the business of Company or Parent or in any way
in competition with the business of Company or Parent within any of the
then-existing water utility service areas of Company.
(b) Executive hereby acknowledges that Executive's services
are unique and extraordinary, and are not readily replaceable, and hereby
expressly agrees that Company and Parent, in enforcing the covenants contained
in Paragraphs 8 and 9 herein, in addition to any other remedies provided for
herein or otherwise available at law, shall be entitled in any court of equity
having jurisdiction to an injunction restraining Executive in the event of a
breach, actual or threatened, of the agreements and covenants contained in these
Paragraphs.
<PAGE> 49
(c) The parties hereto believe that the restrictive covenants
of these Paragraphs are reasonable. However, if at any time it shall be
determined by any court of competent jurisdiction that these Paragraphs or any
portion of them as written, are unenforceable because the restrictions are
unreasonable, the parties hereto agree that such portions as shall have been
determined to be unreasonably restrictive shall thereupon be deemed so amended
as to make such restrictions reasonable in the determination of such court, and
the said covenants, as so modified, shall be enforceable between the parties to
the same extent as if such amendments had been made prior to the date of any
alleged breach of said covenants.
(d) The provisions of this Paragraph 9 shall not apply if
Company and Parent shall be prohibited under Paragraph 15 below from making any
payments to Executive pursuant to Paragraph 7 above.
10. NO OBLIGATION TO MITIGATE. So long as Executive shall not be
in breach of any provision of Paragraph 8 or 9, Executive shall have no duty to
mitigate damages in the event of a termination and if Executive voluntarily
obtains other employment (including self-employment), any compensation or
profits received or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Company and Parent to
make payments hereunder.
11. RESIGNATION. In the event that Executive's services hereunder
are terminated under any of the provisions of this Agreement (except by death),
Executive agrees that Executive will deliver Executive's written resignation as
an officer of Company or Parent, or their subsidiaries and affiliates, to the
Board of Directors, such resignation to become effective immediately, or, at the
option of the Board of Directors, on a later date as specified by the Board.
12. INSURANCE. Company shall have the right at its own cost and
expense to apply for and to secure in its own name, or otherwise, life, health
or accident insurance or any or all of them covering Executive, and Executive
agrees to submit to the usual and customary medical examination and otherwise to
cooperate with Company in connection with the procurement of any such insurance,
and any claims thereunder.
13. RELEASE. As a condition of receiving payments or benefits
provided for in this Agreement, at the request of Company or Parent, Executive
shall execute and deliver for the benefit of Company and Parent, and any
subsidiary or affiliate of Company or Parent, a general release in the form set
forth in Attachment A, and such release shall become effective in accordance
with its terms. The failure or refusal of Executive to sign such a release or
the revocation of such a release shall cause the termination of any and all
obligations of Company and Parent to make payments or provide benefits
hereunder, and the forfeiture of the right of Executive to receive any such
payments and benefits. Executive acknowledges that Company and Parent have
advised Executive to consult with an attorney prior to signing this Agreement
and that Executive has had an opportunity to do so.
<PAGE> 50
14. BENEFITS LIMITATION. Notwithstanding any other provision of this
Agreement, in the event that any payment or benefit received or to be received
by Executive under this Agreement (a "Payment") would be subject to the excise
tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any successor to such Section, as determined
by a nationally recognized independent certified public accounting firm selected
by Executive (the "Tax Advisor"), then such Payment shall be reduced to the
extent necessary to avoid the application of the Excise Tax, but only if such
reduction would result in Executive's receipt of a greater Payment on an
after-tax basis than would be receivable by Executive had such Excise Tax been
paid. For purposes of this limitation, (a) no portion of any payment, whether
pursuant to this Agreement or any other plan or agreement, the receipt of which
Executive, in the determination of the Tax Advisor, shall have effectively
waived prior to the date which is fifteen (15) days following the date of
termination of Executive's employment and prior to the earlier of the date of
constructive receipt and the date of payment thereof shall be taken into
account; and (b) any reduction in the Payment made pursuant to this Paragraph
shall be made from the payments and benefits to be made pursuant to clauses (i)
through (x) of Paragraph 7(e), in such order as may be determined by Executive,
except to the extent that such payments and benefits, in the determination of
the Tax Advisor, are reasonable compensation within the meaning of Section 280G
of the Code. The determination of the Tax Advisor as provided herein shall be
completed not later than forty-five (45) days following Executive's date of
termination of employment, and such determination shall be communicated in
writing to Company, with a copy to Executive, within said forty-five (45) day
period. The determination of the Tax Advisor as provided herein shall be deemed
conclusive and binding on Company and Executive. Company shall pay the fees and
other costs of the Tax Advisor hereunder.
15. REGULATORY LIMITATION. Notwithstanding any other provision of this
Agreement, Company shall not be obligated to make, and Executive shall have no
right to receive, any payment, benefit or amount under this Agreement which
would violate any law, regulation or regulatory order applicable to Company or
Parent at the time such payment, benefit or amount is due ("Prohibited
Payment"). If and to the extent Company shall at a later date be relieved of the
restriction on its ability to make any Prohibited Payment, then at such time
Company or Parent shall promptly make payment of any such amounts to Executive.
16. NOTICES. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person to Executive or to the
Secretary of Company and Parent, or if mailed, postage prepaid, registered or
certified mail, addressed, in the case of Executive, to Executive's last known
address as carried on the personnel records of Company, and, in the case of
Company and Parent, to the corporate headquarters, attention of the Secretary,
or to such other address as the party to be notified may specify by notice to
the other party.
<PAGE> 51
17. SUCCESSORS AND BINDING AGREEMENT.
(a) Company and Parent will require any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of Company and/or Parent, as the
case may be, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that Company and Parent are required to perform
it. Failure of Company and Parent to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Executive to compensation and benefits from Company and Parent
in the same amount and on the same terms as Executive would be entitled
hereunder if Executive had terminated employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date on which Executive's
employment with Company was terminated. As used in this Agreement, "Company" and
"Parent" shall include any successor to Company's and/or Parent's, as the case
may be, business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of, and be
enforceable by, Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive dies while any amount is still payable hereunder, all such amounts
shall be paid in accordance with the terms of this Agreement to Executive's
devisee, legatee or other designee or, if there is no such designee, to
Executive's estate.
18. ARBITRATION. Any dispute which may arise between the parties
hereto may, if both parties agree, be submitted to binding arbitration in the
State of Connecticut in accordance with the Rules of the American Arbitration
Association; provided that any such dispute shall first be submitted to
Company's Board of Directors in an effort to resolve such dispute without resort
to arbitration.
19. SEVERABILITY. If any of the terms or conditions of this
Agreement shall be declared void or unenforceable by any court or administrative
body of competent jurisdiction, such term or condition shall be deemed severable
from the remainder of this Agreement, and the other terms and conditions of this
Agreement shall continue to be valid and enforceable.
20. AMENDMENT. This Agreement may be modified or amended only by
an instrument in writing executed by the parties hereto.
21. CONSTRUCTION. This Agreement shall supersede and replace all
prior agreements and understandings between the parties hereto on the subject
matter covered hereby. This Agreement shall be governed and construed under the
laws of the State of Connecticut. Words of the masculine gender mean and include
correlative words of the feminine gender. Paragraph headings are for convenience
only and shall not be considered a part of the terms and provisions of the
Agreement.
<PAGE> 52
IN WITNESS WHEREOF, Company and Parent have caused this Agreement to be
executed by a duly authorized officer, and Executive has hereunto set
Executive's hand, this 15th day of December, 1998.
The Connecticut Water Company
By /s/ Marshall T. Chiaraluce
-----------------------------
Marshall T. Chiaraluce
Connecticut Water Service, Inc.
By /s/ Michele G. DiAcri
-----------------------------
Michele G. DiAcri
/s/ James R. McQueen
-----------------------------
James R. McQueen
Executive
<PAGE> 53
ATTACHMENT A
RELEASE
We advise you to consult an attorney before you sign this Release. You
have until the date which is seven (7) days after the Release is signed and
returned to ____________________ ("Company") to change your mind and revoke your
Release. Your Release shall not become effective or enforceable until after that
date.
In consideration for the benefits provided under your Employment
Agreement dated ___________________ with Company and _________________
("Parent"), and more specifically enumerated in Exhibit 1 hereto, by your
signature below you agree to accept such benefits and not to make any claims of
any kind against Company, its past and present and future parent corporations,
subsidiaries, divisions, subdivisions, affiliates and related companies or their
successors and assigns, including without limitation Parent, or any and all
past, present and future Directors, officers, fiduciaries or employees of any of
the foregoing (all parties referred to in the foregoing are hereinafter referred
to as the "Releasees") before any agency, court or other forum, and you agree to
release the Releasees from all claims, known or unknown, arising in any way from
any actions taken by the Releasees up to the date of this Release, including,
without limiting the foregoing, any claim for wrongful discharge or breach of
contract or any claims arising under the Age Discrimination in Employment Act of
1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act of 1990, the Employee Retirement Income Security Act of 1974, Connecticut's
Fair Employment Practices Act or any other federal, state or local statute or
regulation and any claim for attorneys' fees, expenses or costs of litigation.
THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL
HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM
AGAINST THE RELEASEES BASED ON ANY ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE
OF THIS RELEASE.
By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully understand its
terms;
2. You have had at least twenty-one (21) days to consider the
terms of the Release;
3. You have seven (7) days from the date you sign this Release to
revoke it by written notification to Company. After this seven (7) day period,
this Release is final and binding and may not be revoked;
4. You have been advised to seek legal counsel and have had an
opportunity to do so;
<PAGE> 54
5. You would not otherwise be entitled to the benefits provided
under your Employment Agreement with Company and Parent had you not agreed to
waive any right you have to bring a lawsuit or legal claim against the
Releasees; and
6. Your agreement to the terms set forth above is voluntary.
Name:_________________________________
Signature: ___________________________ Date:___________________
Received by:__________________________ Date:___________________
<PAGE> 55
EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL
BENEFITS AND PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.
Acknowledged and Agreed:
THE CONNECTICUT WATER COMPANY EXECUTIVE
By _______________________________ ______________________
Its
CONNECTICUT WATER SERVICE, INC.
By _______________________________
Its
<PAGE> 56
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
BETWEEN
THE CONNECTICUT WATER COMPANY
CONNECTICUT WATER SERVICE, INC.
AND
-----------------------------
DAVID C. BENOIT
<PAGE> 57
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of December 15, 1998, is made by and between
The Connecticut Water Company, a Connecticut corporation having its principal
place of business in Clinton, Connecticut, ("Company"), Connecticut Water
Service, Inc., a Connecticut corporation and holder of all of the outstanding
capital stock of Company ("Parent") and David C. Benoit, a resident of
Connecticut ("Executive").
W I T N E S S E T H :
WHEREAS, Executive has been and continues to be employed by Company and
Parent in an executive capacity and has entered into an Employment Agreement
between Executive and Company and Parent dated as of the 15th day of December,
1998 which becomes effective upon a "Change-in-Control," as defined herein, of
Company or Parent; and
WHEREAS, the Boards of Directors of Company and Parent have determined
that it is in the best interest of Company and Parent to continue such
Employment Agreement on the terms herein set forth so as to assure that Company
and Parent will have the dedication of Executive, notwithstanding the
possibility, threat, or occurrence of a Change-in-Control of Company or Parent
by providing Executive with compensation arrangements upon a Change-in-Control
which are competitive with those of other corporations; and
WHEREAS, Executive, Company and Parent are willing to enter into this
Amended and Restated Employment Agreement ("Agreement") on the terms herein set
forth;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Cause" shall mean Executive's serious, willful misconduct
in respect of Executive's duties under this Agreement, including conviction for
a felony or perpetration by Executive of a common law fraud upon Company or
Parent which has resulted or is likely to result in material economic damage to
Company or Parent, as determined by a vote of at least seventy-five percent
(75%) of all of the Directors (excluding Executive) of each of Company's and
Parent's Board of Directors;
<PAGE> 58
(b) "Change-in-Control" shall be deemed to have occurred if
after the date hereof (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 Securities Exchange Act of 1934 (the "Act") disclosing
that any Person (as defined below), other than Company or Parent or any employee
benefit plan sponsored by Company or Parent, is the beneficial owner (as the
term is defined in Rule 13d-3 under the Act) directly or indirectly, of twenty
percent (20%) or more of the total voting power represented by Company's or
Parent's then outstanding voting common stock (calculated as provided in
paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire
voting common stock); or (ii) any Person, other than Company or Parent or any
employee benefit plan sponsored by Company or Parent, shall purchase shares
pursuant to a tender offer or exchange offer to acquire any voting common stock
of Company or Parent (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 question is the beneficial owner
directly or indirectly, of twenty percent (20%) or more of the total voting
power represented by Company's or Parent's then outstanding voting common stock
(all as calculated under clause (i)); or (iii) the stockholders of Company or
Parent shall approve (A) any consolidation or merger of Company or Parent in
which Company or Parent is not the continuing or surviving corporation (other
than a merger of Company or Parent in which holders of the outstanding capital
stock of Company or Parent 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 Parent 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 Parent; or (iv) there shall have been
a change in the composition of the Board of Directors of Company or Parent 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 Parent, by a vote of a majority of all the
Directors (excluding Executive) adopts a resolution to the effect that a
"Change-in-Control" has occurred for purposes of this Agreement.
(c) "Disability" shall mean the incapacity of Executive by
illness or any other cause as determined under the long-term disability
insurance plan of Company in effect at the time in question, or if no such plan
is in effect, then such incapacity of Executive as prevents Executive from
performing the essential functions of Executive's position with or without
reasonable accommodation for a period in excess of two hundred forty (240) days
(whether or not consecutive), or one hundred eighty (180) days consecutively, as
the case may be, during any twelve (12) month period.
(d) "Effective Date" shall be the date on which a
Change-in-Control occurs. Anything in this Agreement to the contrary
notwithstanding, if Executive's employment is terminated prior to the date on
which a Change-in-Control occurs, and it is reasonably demonstrated that such
termination (i) was at the request of a third party who has taken steps
<PAGE> 59
reasonably calculated to effect a Change-in-Control or (ii) otherwise arose in
connection with or anticipation of a Change-in-Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination.
(e) "Good Reason" shall mean the occurrence of any action
which (i) removes or changes Executive's title or reduces Executive's job
responsibilities or base salary; (ii) results in a significant worsening of
Executive's work conditions; or (iii) moves Executive's place of employment to a
location that increases Executive's commute by more than thirty (30) miles over
the length of Executive's commute from Executive's place of principal residence
at the time the move is requested. For purposes of this subparagraph (e), any
good faith determination by Executive that any such action has occurred shall be
conclusive.
(f) "Person" shall mean any individual, corporation,
partnership, company or other entity, and shall include a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934.
2. EMPLOYMENT.
(a) As of the Effective Date, Company hereby agrees to
continue to employ Executive and Executive agrees to remain in the employ of
Company for the Term of this Agreement upon the terms and conditions hereinafter
set forth. Subject to the provisions of subparagraph (b) of this Paragraph 2,
and to the provisions of Paragraph 6 below, "Term" shall mean a continuously
renewing period of three (3) years commencing on the Effective Date.
(b) At any time during the Term, the Board of Directors of
Company and Parent may, by written notice to Executive, advise Executive of
their desire to modify or amend any of the terms or provisions of this Agreement
or to delete or add any terms or provisions. Any such notice ("Notice") shall
describe the proposed modifications in reasonable detail. In the event a Notice
shall be given to Executive, then Company, Parent and Executive agree to discuss
the proposed modification(s) and to attempt in good faith to reach agreement
with respect thereto and to reduce such agreement to writing in an amendment to
be executed by all the parties ("Amendment"). If a Notice is given hereunder and
an Amendment shall not have been executed on or before the sixtieth (60th) day
following the date on which Notice is given, then the Term shall thereupon be
automatically converted to a fixed period ending three (3) years after the
expiration of such sixty (60) days.
3. DUTIES OF EMPLOYMENT.
(a) During the Term, Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the ninety (90)-day period immediately preceding the Effective Date and
Executive's services shall be performed at such location as Executive shall
determine.
<PAGE> 60
(b) During the Term, Executive will serve Company faithfully,
diligently and competently and will devote full-time to Executive's employment
and will hold, in addition to the offices held on the Effective Date, such other
executive offices of Company or Parent, or their respective subsidiaries and
affiliates, to which Executive may be elected, appointed or assigned by the
Boards of Directors of Company or Parent from time to time and will discharge
such executive duties in connection therewith. Nothing in this Agreement shall
preclude Executive, with the prior approval of the Board of Directors of
Company, from devoting reasonable periods of time required for (i) serving as a
director or member of a committee of any organization involving no conflict of
interest with Company or Parent, or (ii) engaging in charitable, religious and
community activities, provided, that such directorships, memberships or
activities do not materially interfere with the performance of Executive's
duties hereunder.
4. COMPENSATION. During the Term, Company shall pay to Executive
as compensation for the services to be rendered by Executive hereunder the
following:
(a) A base salary at a rate equal to the highest base salary
paid or payable to Executive by Company during the twelve (12)-month period
immediately preceding the month in which the Effective Date occurs, or such
larger sum as the Board of Directors of Company may from time to time determine
in connection with regular periodic performance reviews pursuant to Company's
policies and practices. Such compensation shall be payable in accordance with
the normal payroll practices of Company. Executive shall receive an annual
increase in base salary at each normal pay adjustment date during the Term, but
no later than one (1) year after the date of Executive's last increase and
annually thereafter during the Term, of not less than the percentage increase in
the cost-of-living since Executive's last pay adjustment, as measured by the
Consumer Price Index-All Urban Consumers of the U.S. Bureau of Labor Statistics.
(b) In addition, Company shall pay to Executive an annual
bonus, payable in cash or other form of compensation, in accordance with the
Company's practice or plan for annual bonuses for peer executives which is at
least equal to the average bonus, if any, payable to Executive from Company in
respect of the three (3) fiscal years immediately preceding the fiscal year in
which the Effective Date occurs.
5. BENEFITS. During the Term, Executive shall be entitled to the
following benefits:
(a) Incentive, Savings and Retirement Plans. In addition to
base salary and bonus payable as hereinabove provided, Executive shall be
entitled to participate during the Term in all incentive, savings and retirement
plans, practices, policies and programs applicable to executive employees of
Company as may be in effect from time to time. Such plans, practices, policies
and programs, in the aggregate, shall provide Executive with compensation,
benefits and reward opportunities at least as favorable as the most favorable of
such compensation, benefits and reward opportunities provided by Company for
Executive under such plans, practices, policies and programs as in effect at any
time during the ninety (90)-day period immediately preceding the Effective Date
or, if more favorable to Executive, as provided at any time thereafter with
respect to other key employees of Company or Parent.
<PAGE> 61
(b) Welfare Benefit Plans. During the Term, Executive and/or
Executive's family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices, policies
and programs applicable to executive employees of Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) at least as favorable as the most favorable of such plans,
practices, policies and programs in effect at any time during the ninety
(90)-day period immediately preceding the Effective Date or, if more favorable
to Executive and/or Executive's family, as in effect at any time thereafter with
respect to other key employees of Company or Parent.
(c) Expenses. During the Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by Executive
in accordance with the most favorable policies, practices and procedures of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(d) Fringe Benefits. During the Term, Executive shall be
entitled to fringe benefits, including use of an automobile and payment of
related expenses or payment of an allowance for automobile related expenses, in
accordance with the most favorable plans, practices, programs and policies of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(e) Office and Support Staff. During the Term, Executive shall
be entitled to an office or offices of a size and with furnishings and other
appointments, and to secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to Executive by Company at any time
during the ninety (90)-day period immediately preceding the Effective Date or,
if more favorable to Executive, as provided at any time thereafter with respect
to other key employees of Company or Parent.
(f) Vacation. During the Term, Executive shall be entitled to
paid vacation in accordance with the most favorable plans, policies, programs
and practices of Company as in effect at any time during the ninety (90)-day
period immediately preceding the Effective Date or, if more favorable to
Executive, as in effect at any time thereafter with respect to other key
employees of Company or Parent.
6. END OF TERM AND NOTICE OF TERMINATION.
(a) End of Term. The Term shall end upon the occurrence of any
of the following events:
(i) Termination of Executive's employment by Company for
Cause.
(ii) The voluntary termination of Executive's employment
by Executive other than for Good Reason.
<PAGE> 62
(iii) The death of Executive.
(iv) Executive's attainment of age sixty-five (65).
(v) Full compliance by Company with the provisions of
Paragraph 7(e) below, if Executive's employment shall have been terminated by
Company during the Term for any reason other than Cause, or if Executive's
employment shall have been terminated by reason of Executive's Disability, or if
Executive shall have voluntarily terminated Executive's employment during the
Term for Good Reason.
(b) Notice of Termination. Any termination by Company for
Cause or by Executive for Good Reason or on account of Executive's Disability
shall be communicated by notice to the other party hereto given in accordance
with Section 16 of this Agreement. For purposes of this Agreement, a "notice"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) if the date of termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice).
(c) Date of Termination. The date of termination means the
date of receipt of the notice of termination or any later date specified
therein, as the case may be; provided, however, that (i) if Executive's
employment is terminated by Company other than for Cause or on account of
Executive's Disability, the date of termination shall be the date on which
Company notifies Executive of such termination and (ii) if Executive's
employment is terminated by reason of death, the date of termination shall be
the date of death of Executive.
7. PAYMENT UPON TERMINATION.
(a) If Executive's employment is terminated by Company for
Cause, as defined in Paragraph 1(a), the obligations of Company under this
Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only compensation or
benefits accrued or earned and vested (if applicable) by Executive as of the
date of termination, including base salary through the date of termination,
benefits payable under the terms of any qualified or nonqualified retirement
plans or deferred compensation plans maintained by Company, any accrued vacation
pay as of the date of termination not yet paid by Company and any benefits
required to be paid by law such as continued health care coverage pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
(collectively, the "Accrued Obligations").
(b) If Executive shall voluntarily terminate Executive's
employment during the Term other than for Good Reason, as defined in Paragraph
1(e), the obligations of Company under this Agreement shall cease and Executive
shall forfeit all right to receive any compensation or other benefits under this
Agreement except only the Accrued Obligations.
<PAGE> 63
(c) In the event of the death of Executive during the Term,
then, in addition to the Accrued Obligations and any other benefits which may be
payable by Company in respect of the death of Executive, the base salary then
payable hereunder shall continue to be paid at the then current rate for a
period of six (6) months after such death to such beneficiary as shall have been
designated in writing by Executive, or if no effective designation exists, then
to the estate of Executive.
(d) If Executive's employment is terminated by reason of
Executive's attainment of age sixty-five (65), the obligations of Company under
this Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only the Accrued
Obligations.
(e) If Executive's employment is terminated by Company during
the Term for any reason other than for Cause, or Executive's death, or
Executive's attainment of age sixty-five (65), or if Executive's employment is
terminated during the Term by reason of Executive's Disability, or if Executive
shall voluntarily terminate Executive's employment during the Term for Good
Reason, Executive shall be entitled to receive, and Company shall be obligated
to pay and provide Executive, the following amounts:
(i) An amount in consideration of the covenants by
Executive set forth in Paragraphs 8 and 9 below to be determined by an
independent certified public accounting firm selected by Executive and retained
by Company to be the reasonable value of said covenants as of the date of
termination of Executive's employment. Said amount shall be paid in cash in a
lump sum in the month next following Executive's date of termination of
employment and shall be treated as a supplemental wage payment under applicable
Treasury Regulations subject to federal tax withholding at the flat percentage
rate applicable thereto.
(ii) An amount equal to three (3) times the base salary of
Executive, at the rate in effect immediately prior to the date of termination,
plus an amount equal to three (3) times the bonus paid or payable with respect
to the fiscal year immediately preceding the date of termination or, if higher,
three (3) times the average bonus payable to Executive in respect of the three
(3) full fiscal years immediately preceding the Effective Date. There shall be
subtracted from the aggregate amount determined in accordance with the
immediately preceding sentence the amount payable to Executive pursuant to
subparagraph (e)(i) above in respect of the covenants by Executive set forth in
Paragraphs 8 and 9 below and the amount, if any, payable to Executive under any
then effective severance pay plan of Company. Such resulting amount shall be
payable in equal installments over the three (3)-year period commencing on the
date of termination of employment in accordance with the normal payroll
practices of Company or, at Company's option, the entire amount (determined
without any discount) shall be paid in cash in a lump sum in the month next
following Executive's date of termination of employment and shall be treated as
a supplemental wage payment under applicable Treasury Regulations subject to
federal tax withholding at the flat percentage rate applicable thereto.
<PAGE> 64
(iii) An amount equal to the aggregate amounts that
Company would have contributed on behalf of Executive under Company's qualified
defined contribution retirement plan(s), if any such plan(s) shall be in effect
(other than amounts attributable to Executive's before-tax contributions to such
plan(s)) plus estimated earnings thereon had Executive continued in the employ
of Company for the three (3)-year period commencing on the date of termination
and made contributions under said plan(s) at a rate, as a percentage of salary,
equal to the rate at which Executive had made contributions to said plan(s) in
the plan year immediately preceding Executive's termination, to be payable in a
lump sum to Executive within thirty (30) days after the expiration of the
non-competition period specified in Paragraph 9(a) of this Agreement, provided
that Executive shall not have breached said non-competition provisions.
(iv) An amount equal to the difference between: (A)
benefits which would have been payable to Executive under any deferred
compensation agreement between Company and Executive, if any such agreement
shall be in effect, had Executive continued in the employ of Company for the
three (3)-year period commencing on the date of termination, received
compensation at least equal to that specified in Paragraph 4 of this Agreement
during such time, and deferred pursuant to said deferred compensation agreement
the amount of compensation specified therein; and (B) the benefits actually
payable to Executive under such deferred compensation agreement; such amount to
be payable in a lump sum to Executive within thirty (30) days after the
expiration of the non-competition period specified in Paragraph 9(a) of this
Agreement, provided that Executive shall not have breached said non-competition
provisions.
(v) Additional retirement benefits equal to the difference
between: (A) the annual pension benefits that would have been payable to
Executive under Company's qualified defined benefit retirement plan (the "Plan")
and under any nonqualified supplemental executive retirement plan covering
Executive (the "Supplemental Plan"), if any such Plan or Supplemental Plan shall
be in effect, if Executive had been continued in the employ of Company for the
three (3)-year period commencing on the date of termination and had received
compensation at least equal to that specified in Paragraph 4(a) of this
Agreement during such time and had been fully vested in the benefits payable
under any such Plan and Supplemental Plan; and (B) the annual benefits actually
payable to Executive under any such Plan and Supplemental Plan. The discounted
present value of such additional benefits, shall be payable to Executive in a
lump sum, as calculated by the independent actuary for the Plan using the
assumptions specified in the Plan, within thirty (30) days after the expiration
of the non-competition period specified in Paragraph 9(a) of this Agreement,
provided that Executive shall not have breached said non-competition provisions.
(vi) At the date of termination of Executive's employment,
Executive shall be fully vested in any form of compensation previously granted
to Executive (other than benefits payable under a qualified retirement plan),
such as, by way of example only, restricted stock, stock options, and
performance share awards.
<PAGE> 65
(vii) If Executive's employment is terminated by reason of
Executive's Disability, Executive shall be entitled to receive, in addition to
the other benefits provided under this Paragraph 7(e), disability benefits at
least equal to the most favorable of those provided by Company or Parent to
disabled employees in accordance with the most favorable plans, programs,
practices and policies of Company or Parent in effect at any time during the
ninety (90)-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect on the date of Executive's Disability with
respect to other key employees of Company or Parent.
(viii) During the three (3)-year period commencing on the
date of termination, or such longer period as any plan, program, practice or
policy may provide, Executive shall continue to participate in all life, health,
disability and similar welfare benefit plans and programs of Company to the
extent that such continued participation is possible under the general terms and
provisions of such plans and programs, and Executive shall be credited with
additional service attributable to the three (3)-year period commencing on the
date of termination for purposes of determining eligibility to participate in
any such plans or programs maintained by Company for retirees, with Company and
Executive paying the same portion of the cost of each such plan or program as
existed at the time of Executive's termination. In the event that Executive's
continued participation (or commencement of participation for plans or programs
for retirees) is not permitted, then in lieu thereof, Company shall acquire,
with the same cost sharing, individual insurance policies providing comparable
coverage for Executive; provided, however, that Company shall not be obligated
to pay more than three (3) times Company's current cost for comparable group
coverage. If any such individual coverage is unavailable, then Company shall pay
to Executive annually for the three (3)-year period commencing on the date of
termination an amount equal to the sum of the average annual contributions,
payments, credits, or allocations made by Company for such coverage on
Executive's behalf (or the average such contributions, payments, credits, or
allocations for retirees, in the case of retiree coverage) over the three (3)
calendar years preceding the date of termination of Executive's employment.
(ix) During the three (3)-year period commencing on the
date of termination, Executive shall continue to receive such perquisites, other
than those specified in the preceding subparagraphs above, as Executive was
receiving at the date of termination of employment with, to the extent
applicable, the same cost sharing with Company as was in effect immediately
prior to Executive's termination of employment.
(x) Company shall reimburse Executive for the amount of
any reasonable legal or accounting fees and expenses incurred by Executive to
obtain or enforce any right or benefit provided to Executive by Company
hereunder or as confirmed or acknowledged hereunder.
<PAGE> 66
8. CONFIDENTIAL INFORMATION. Executive understands that in the
course of Executive's employment by Company, Executive will receive or have
access to confidential information concerning the business or purposes of
Company and Parent, and which Company and Parent desire to protect. Such
confidential information shall be deemed to include, but not be limited to,
Company's customer lists and information, and employee lists, including, if
known, personnel information and data. Executive agrees that Executive will not,
at any time during the period ending two (2) years after the date of termination
of Executive's employment, reveal to anyone outside Company or Parent or use for
Executive's own benefit any such information without specific written
authorization by Company or Parent. Executive further agrees not to use any such
confidential information or trade secrets in competing with Company or Parent at
any time during or in the two (2) year period immediately following the date of
termination of Executive's employment with Company.
9. COVENANTS BY EXECUTIVE NOT TO COMPETE WITH COMPANY OR PARENT.
(a) Upon the date of termination of Executive's employment
with Company for any reason, Executive covenants and agrees that Executive will
not at any time during the period of two (2) years from and after such date of
termination directly or indirectly in any manner or under any circumstances or
conditions whatsoever be or become interested, as an individual, partner,
principal, agent, clerk, employee, stockholder, officer, director, trustee, or
in any other capacity whatsoever, except as a nominal owner of stock of a public
corporation, in any other business which, at the date of Executive's
termination, is a Competitor (as defined herein), either directly or indirectly,
with Company or Parent, or engage or participate in, directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of an
equity or debt investment, lender or in any other manner or capacity), or lend
Executive's name (or any part or variant thereof) to, any business which, at the
date of Executive's termination, is a Competitor, either directly or indirectly,
with Company or Parent, or as a result of Executive's engagement or
participation would become, a Competitor, either directly or indirectly, with
any aspect of the business of Company or Parent as it exists at the time of
Executive's termination, or solicit any officer, director, employee or agent of
Company or Parent or any subsidiary or affiliate of Company or Parent to become
an officer, director, employee or agent of Executive, Executive's respective
affiliates or anyone else. Ownership, in the aggregate, of less than one percent
(1 %) of the outstanding shares of capital stock of any corporation with one or
more classes of its capital stock listed on a national securities exchange or
publicly traded in the over-the-counter market shall not constitute a violation
of the foregoing provision. For the purposes of this Agreement, a Competitor is
any business which is similar to the business of Company or Parent or in any way
in competition with the business of Company or Parent within any of the
then-existing water utility service areas of Company.
(b) Executive hereby acknowledges that Executive's services
are unique and extraordinary, and are not readily replaceable, and hereby
expressly agrees that Company and Parent, in enforcing the covenants contained
in Paragraphs 8 and 9 herein, in addition to any other remedies provided for
herein or otherwise available at law, shall be entitled in any court of equity
having jurisdiction to an injunction restraining Executive in the event of a
breach, actual or threatened, of the agreements and covenants contained in these
Paragraphs.
<PAGE> 67
(c) The parties hereto believe that the restrictive covenants
of these Paragraphs are reasonable. However, if at any time it shall be
determined by any court of competent jurisdiction that these Paragraphs or any
portion of them as written, are unenforceable because the restrictions are
unreasonable, the parties hereto agree that such portions as shall have been
determined to be unreasonably restrictive shall thereupon be deemed so amended
as to make such restrictions reasonable in the determination of such court, and
the said covenants, as so modified, shall be enforceable between the parties to
the same extent as if such amendments had been made prior to the date of any
alleged breach of said covenants.
(d) The provisions of this Paragraph 9 shall not apply if
Company and Parent shall be prohibited under Paragraph 15 below from making any
payments to Executive pursuant to Paragraph 7 above.
10. NO OBLIGATION TO MITIGATE. So long as Executive shall not be
in breach of any provision of Paragraph 8 or 9, Executive shall have no duty to
mitigate damages in the event of a termination and if Executive voluntarily
obtains other employment (including self-employment), any compensation or
profits received or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Company and Parent to
make payments hereunder.
11. RESIGNATION. In the event that Executive's services hereunder
are terminated under any of the provisions of this Agreement (except by death),
Executive agrees that Executive will deliver Executive's written resignation as
an officer of Company or Parent, or their subsidiaries and affiliates, to the
Board of Directors, such resignation to become effective immediately, or, at the
option of the Board of Directors, on a later date as specified by the Board.
12. INSURANCE. Company shall have the right at its own cost and
expense to apply for and to secure in its own name, or otherwise, life, health
or accident insurance or any or all of them covering Executive, and Executive
agrees to submit to the usual and customary medical examination and otherwise to
cooperate with Company in connection with the procurement of any such insurance,
and any claims thereunder.
13. RELEASE. As a condition of receiving payments or benefits
provided for in this Agreement, at the request of Company or Parent, Executive
shall execute and deliver for the benefit of Company and Parent, and any
subsidiary or affiliate of Company or Parent, a general release in the form set
forth in Attachment A, and such release shall become effective in accordance
with its terms. The failure or refusal of Executive to sign such a release or
the revocation of such a release shall cause the termination of any and all
obligations of Company and Parent to make payments or provide benefits
hereunder, and the forfeiture of the right of Executive to receive any such
payments and benefits. Executive acknowledges that Company and Parent have
advised Executive to consult with an attorney prior to signing this Agreement
and that Executive has had an opportunity to do so.
<PAGE> 68
14. BENEFITS LIMITATION. Notwithstanding any other provision of this
Agreement, in the event that any payment or benefit received or to be received
by Executive under this Agreement (a "Payment") would be subject to the excise
tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any successor to such Section, as determined
by a nationally recognized independent certified public accounting firm selected
by Executive (the "Tax Advisor"), then such Payment shall be reduced to the
extent necessary to avoid the application of the Excise Tax, but only if such
reduction would result in Executive's receipt of a greater Payment on an
after-tax basis than would be receivable by Executive had such Excise Tax been
paid. For purposes of this limitation, (a) no portion of any payment, whether
pursuant to this Agreement or any other plan or agreement, the receipt of which
Executive, in the determination of the Tax Advisor, shall have effectively
waived prior to the date which is fifteen (15) days following the date of
termination of Executive's employment and prior to the earlier of the date of
constructive receipt and the date of payment thereof shall be taken into
account; and (b) any reduction in the Payment made pursuant to this Paragraph
shall be made from the payments and benefits to be made pursuant to clauses (i)
through (x) of Paragraph 7(e), in such order as may be determined by Executive,
except to the extent that such payments and benefits, in the determination of
the Tax Advisor, are reasonable compensation within the meaning of Section 280G
of the Code. The determination of the Tax Advisor as provided herein shall be
completed not later than forty-five (45) days following Executive's date of
termination of employment, and such determination shall be communicated in
writing to Company, with a copy to Executive, within said forty-five (45) day
period. The determination of the Tax Advisor as provided herein shall be deemed
conclusive and binding on Company and Executive. Company shall pay the fees and
other costs of the Tax Advisor hereunder.
15. REGULATORY LIMITATION. Notwithstanding any other provision of this
Agreement, Company shall not be obligated to make, and Executive shall have no
right to receive, any payment, benefit or amount under this Agreement which
would violate any law, regulation or regulatory order applicable to Company or
Parent at the time such payment, benefit or amount is due ("Prohibited
Payment"). If and to the extent Company shall at a later date be relieved of the
restriction on its ability to make any Prohibited Payment, then at such time
Company or Parent shall promptly make payment of any such amounts to Executive.
16. NOTICES. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person to Executive or to the
Secretary of Company and Parent, or if mailed, postage prepaid, registered or
certified mail, addressed, in the case of Executive, to Executive's last known
address as carried on the personnel records of Company, and, in the case of
Company and Parent, to the corporate headquarters, attention of the Secretary,
or to such other address as the party to be notified may specify by notice to
the other party.
<PAGE> 69
17. SUCCESSORS AND BINDING AGREEMENT.
(a) Company and Parent will require any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of Company and/or Parent, as the
case may be, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that Company and Parent are required to perform
it. Failure of Company and Parent to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Executive to compensation and benefits from Company and Parent
in the same amount and on the same terms as Executive would be entitled
hereunder if Executive had terminated employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date on which Executive's
employment with Company was terminated. As used in this Agreement, "Company" and
"Parent" shall include any successor to Company's and/or Parent's, as the case
may be, business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of, and be
enforceable by, Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive dies while any amount is still payable hereunder, all such amounts
shall be paid in accordance with the terms of this Agreement to Executive's
devisee, legatee or other designee or, if there is no such designee, to
Executive's estate.
18. ARBITRATION. Any dispute which may arise between the parties
hereto may, if both parties agree, be submitted to binding arbitration in the
State of Connecticut in accordance with the Rules of the American Arbitration
Association; provided that any such dispute shall first be submitted to
Company's Board of Directors in an effort to resolve such dispute without resort
to arbitration.
19. SEVERABILITY. If any of the terms or conditions of this
Agreement shall be declared void or unenforceable by any court or administrative
body of competent jurisdiction, such term or condition shall be deemed severable
from the remainder of this Agreement, and the other terms and conditions of this
Agreement shall continue to be valid and enforceable.
20. AMENDMENT. This Agreement may be modified or amended only by
an instrument in writing executed by the parties hereto.
21. CONSTRUCTION. This Agreement shall supersede and replace all
prior agreements and understandings between the parties hereto on the subject
matter covered hereby. This Agreement shall be governed and construed under the
laws of the State of Connecticut. Words of the masculine gender mean and include
correlative words of the feminine gender. Paragraph headings are for convenience
only and shall not be considered a part of the terms and provisions of the
Agreement.
<PAGE> 70
IN WITNESS WHEREOF, Company and Parent have caused this Agreement to be
executed by a duly authorized officer, and Executive has hereunto set
Executive's hand, this 15th day of December, 1998.
The Connecticut Water Company
By /s/ Marshall T. Chiaraluce
-----------------------------
Marshall T. Chiaraluce
Connecticut Water Service, Inc.
By /s/ Michele G. DiAcri
-----------------------------
Michele G. DiAcri
By /s/ David C. Benoit
-----------------------------
David C. Benoit
Executive
<PAGE> 71
ATTACHMENT A
RELEASE
We advise you to consult an attorney before you sign this Release. You
have until the date which is seven (7) days after the Release is signed and
returned to ____________________ ("Company") to change your mind and revoke your
Release. Your Release shall not become effective or enforceable until after that
date.
In consideration for the benefits provided under your Employment
Agreement dated ___________________ with Company and _________________
("Parent"), and more specifically enumerated in Exhibit 1 hereto, by your
signature below you agree to accept such benefits and not to make any claims of
any kind against Company, its past and present and future parent corporations,
subsidiaries, divisions, subdivisions, affiliates and related companies or their
successors and assigns, including without limitation Parent, or any and all
past, present and future Directors, officers, fiduciaries or employees of any of
the foregoing (all parties referred to in the foregoing are hereinafter referred
to as the "Releasees") before any agency, court or other forum, and you agree to
release the Releasees from all claims, known or unknown, arising in any way from
any actions taken by the Releasees up to the date of this Release, including,
without limiting the foregoing, any claim for wrongful discharge or breach of
contract or any claims arising under the Age Discrimination in Employment Act of
1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act of 1990, the Employee Retirement Income Security Act of 1974, Connecticut's
Fair Employment Practices Act or any other federal, state or local statute or
regulation and any claim for attorneys' fees, expenses or costs of litigation.
THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL
HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM
AGAINST THE RELEASEES BASED ON ANY ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE
OF THIS RELEASE.
By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully understand its
terms;
2. You have had at least twenty-one (21) days to consider the
terms of the Release;
3. You have seven (7) days from the date you sign this Release to
revoke it by written notification to Company. After this seven (7) day period,
this Release is final and binding and may not be revoked;
4. You have been advised to seek legal counsel and have had an
opportunity to do so;
<PAGE> 72
5. You would not otherwise be entitled to the benefits provided
under your Employment Agreement with Company and Parent had you not agreed to
waive any right you have to bring a lawsuit or legal claim against the
Releasees; and
6. Your agreement to the terms set forth above is voluntary.
Name:_________________________________
Signature: ___________________________ Date:___________________
Received by:__________________________ Date:___________________
<PAGE> 73
EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL
BENEFITS AND PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.
Acknowledged and Agreed:
THE CONNECTICUT WATER COMPANY EXECUTIVE
By _______________________________ ______________________
Its
CONNECTICUT WATER SERVICE, INC.
By _______________________________
Its
<PAGE> 74
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
BETWEEN
THE CONNECTICUT WATER COMPANY
CONNECTICUT WATER SERVICE, INC.
AND
PETER J. BANCROFT
<PAGE> 75
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of December 15, 1998, is made by and between
The Connecticut Water Company, a Connecticut corporation having its principal
place of business in Clinton, Connecticut, ("Company"), Connecticut Water
Service, Inc., a Connecticut corporation and holder of all of the outstanding
capital stock of Company ("Parent") and Peter J. Bancroft, a resident of
Connecticut ("Executive").
W I T N E S S E T H :
WHEREAS, Executive has been and continues to be employed by Company and
Parent in an executive capacity and has entered into an Employment Agreement
between Executive and Company and Parent dated as of the 15th day of December,
1998 which becomes effective upon a "Change-in-Control," as defined herein, of
Company or Parent; and
WHEREAS, the Boards of Directors of Company and Parent have determined
that it is in the best interest of Company and Parent to continue such
Employment Agreement on the terms herein set forth so as to assure that Company
and Parent will have the dedication of Executive, notwithstanding the
possibility, threat, or occurrence of a Change-in-Control of Company or Parent
by providing Executive with compensation arrangements upon a Change-in-Control
which are competitive with those of other corporations; and
WHEREAS, Executive, Company and Parent are willing to enter into this
Amended and Restated Employment Agreement ("Agreement") on the terms herein set
forth;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Cause" shall mean Executive's serious, willful misconduct
in respect of Executive's duties under this Agreement, including conviction for
a felony or perpetration by Executive of a common law fraud upon Company or
Parent which has resulted or is likely to result in material economic damage to
Company or Parent, as determined by a vote of at least seventy-five percent
(75%) of all of the Directors (excluding Executive) of each of Company's and
Parent's Board of Directors;
<PAGE> 76
(b) "Change-in-Control" shall be deemed to have occurred if
after the date hereof (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 Securities Exchange Act of 1934 (the "Act") disclosing
that any Person (as defined below), other than Company or Parent or any employee
benefit plan sponsored by Company or Parent, is the beneficial owner (as the
term is defined in Rule 13d-3 under the Act) directly or indirectly, of twenty
percent (20%) or more of the total voting power represented by Company's or
Parent's then outstanding voting common stock (calculated as provided in
paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire
voting common stock); or (ii) any Person, other than Company or Parent or any
employee benefit plan sponsored by Company or Parent, shall purchase shares
pursuant to a tender offer or exchange offer to acquire any voting common stock
of Company or Parent (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 question is the beneficial owner
directly or indirectly, of twenty percent (20%) or more of the total voting
power represented by Company's or Parent's then outstanding voting common stock
(all as calculated under clause (i)); or (iii) the stockholders of Company or
Parent shall approve (A) any consolidation or merger of Company or Parent in
which Company or Parent is not the continuing or surviving corporation (other
than a merger of Company or Parent in which holders of the outstanding capital
stock of Company or Parent 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 Parent 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 Parent; or (iv) there shall have been
a change in the composition of the Board of Directors of Company or Parent 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 Parent, by a vote of a majority of all the
Directors (excluding Executive) adopts a resolution to the effect that a
"Change-in-Control" has occurred for purposes of this Agreement.
(c) "Disability" shall mean the incapacity of Executive by
illness or any other cause as determined under the long-term disability
insurance plan of Company in effect at the time in question, or if no such plan
is in effect, then such incapacity of Executive as prevents Executive from
performing the essential functions of Executive's position with or without
reasonable accommodation for a period in excess of two hundred forty (240) days
(whether or not consecutive), or one hundred eighty (180) days consecutively, as
the case may be, during any twelve (12) month period.
(d) "Effective Date" shall be the date on which a
Change-in-Control occurs. Anything in this Agreement to the contrary
notwithstanding, if Executive's employment is terminated prior to the date on
which a Change-in-Control occurs, and it is reasonably demonstrated that such
termination (i) was at the request of a third party who has taken steps
<PAGE> 77
reasonably calculated to effect a Change-in-Control or (ii) otherwise arose in
connection with or anticipation of a Change-in-Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination.
(e) "Good Reason" shall mean the occurrence of any action
which (i) removes or changes Executive's title or reduces Executive's job
responsibilities or base salary; (ii) results in a significant worsening of
Executive's work conditions; or (iii) moves Executive's place of employment to a
location that increases Executive's commute by more than thirty (30) miles over
the length of Executive's commute from Executive's place of principal residence
at the time the move is requested. For purposes of this subparagraph (e), any
good faith determination by Executive that any such action has occurred shall be
conclusive.
(f) "Person" shall mean any individual, corporation,
partnership, company or other entity, and shall include a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934.
2. EMPLOYMENT.
(a) As of the Effective Date, Company hereby agrees to
continue to employ Executive and Executive agrees to remain in the employ of
Company for the Term of this Agreement upon the terms and conditions hereinafter
set forth. Subject to the provisions of subparagraph (b) of this Paragraph 2,
and to the provisions of Paragraph 6 below, "Term" shall mean a continuously
renewing period of three (3) years commencing on the Effective Date.
(b) At any time during the Term, the Board of Directors of
Company and Parent may, by written notice to Executive, advise Executive of
their desire to modify or amend any of the terms or provisions of this Agreement
or to delete or add any terms or provisions. Any such notice ("Notice") shall
describe the proposed modifications in reasonable detail. In the event a Notice
shall be given to Executive, then Company, Parent and Executive agree to discuss
the proposed modification(s) and to attempt in good faith to reach agreement
with respect thereto and to reduce such agreement to writing in an amendment to
be executed by all the parties ("Amendment"). If a Notice is given hereunder and
an Amendment shall not have been executed on or before the sixtieth (60th) day
following the date on which Notice is given, then the Term shall thereupon be
automatically converted to a fixed period ending three (3) years after the
expiration of such sixty (60) days.
3. DUTIES OF EMPLOYMENT.
(a) During the Term, Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the ninety (90)-day period immediately preceding the Effective Date and
Executive's services shall be performed at such location as Executive shall
determine.
<PAGE> 78
(b) During the Term, Executive will serve Company faithfully,
diligently and competently and will devote full-time to Executive's employment
and will hold, in addition to the offices held on the Effective Date, such other
executive offices of Company or Parent, or their respective subsidiaries and
affiliates, to which Executive may be elected, appointed or assigned by the
Boards of Directors of Company or Parent from time to time and will discharge
such executive duties in connection therewith. Nothing in this Agreement shall
preclude Executive, with the prior approval of the Board of Directors of
Company, from devoting reasonable periods of time required for (i) serving as a
director or member of a committee of any organization involving no conflict of
interest with Company or Parent, or (ii) engaging in charitable, religious and
community activities, provided, that such directorships, memberships or
activities do not materially interfere with the performance of Executive's
duties hereunder.
4. COMPENSATION. During the Term, Company shall pay to Executive
as compensation for the services to be rendered by Executive hereunder the
following:
(a) A base salary at a rate equal to the highest base salary
paid or payable to Executive by Company during the twelve (12)-month period
immediately preceding the month in which the Effective Date occurs, or such
larger sum as the Board of Directors of Company may from time to time determine
in connection with regular periodic performance reviews pursuant to Company's
policies and practices. Such compensation shall be payable in accordance with
the normal payroll practices of Company. Executive shall receive an annual
increase in base salary at each normal pay adjustment date during the Term, but
no later than one (1) year after the date of Executive's last increase and
annually thereafter during the Term, of not less than the percentage increase in
the cost-of-living since Executive's last pay adjustment, as measured by the
Consumer Price Index-All Urban Consumers of the U.S. Bureau of Labor Statistics.
(b) In addition, Company shall pay to Executive an annual
bonus, payable in cash or other form of compensation, in accordance with the
Company's practice or plan for annual bonuses for peer executives which is at
least equal to the average bonus, if any, payable to Executive from Company in
respect of the three (3) fiscal years immediately preceding the fiscal year in
which the Effective Date occurs.
5. BENEFITS. During the Term, Executive shall be entitled to the
following benefits:
(a) Incentive, Savings and Retirement Plans. In addition to
base salary and bonus payable as hereinabove provided, Executive shall be
entitled to participate during the Term in all incentive, savings and retirement
plans, practices, policies and programs applicable to executive employees of
Company as may be in effect from time to time. Such plans, practices, policies
and programs, in the aggregate, shall provide Executive with compensation,
benefits and reward opportunities at least as favorable as the most favorable of
such compensation, benefits and reward opportunities provided by Company for
Executive under such plans, practices, policies and programs as in effect at any
time during the ninety (90)-day period immediately preceding the Effective Date
or, if more favorable to Executive, as provided at any time thereafter with
respect to other key employees of Company or Parent.
<PAGE> 79
(b) Welfare Benefit Plans. During the Term, Executive and/or
Executive's family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices, policies
and programs applicable to executive employees of Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) at least as favorable as the most favorable of such plans,
practices, policies and programs in effect at any time during the ninety
(90)-day period immediately preceding the Effective Date or, if more favorable
to Executive and/or Executive's family, as in effect at any time thereafter with
respect to other key employees of Company or Parent.
(c) Expenses. During the Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by Executive
in accordance with the most favorable policies, practices and procedures of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(d) Fringe Benefits. During the Term, Executive shall be
entitled to fringe benefits, including use of an automobile and payment of
related expenses or payment of an allowance for automobile related expenses, in
accordance with the most favorable plans, practices, programs and policies of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(e) Office and Support Staff. During the Term, Executive shall
be entitled to an office or offices of a size and with furnishings and other
appointments, and to secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to Executive by Company at any time
during the ninety (90)-day period immediately preceding the Effective Date or,
if more favorable to Executive, as provided at any time thereafter with respect
to other key employees of Company or Parent.
(f) Vacation. During the Term, Executive shall be entitled to
paid vacation in accordance with the most favorable plans, policies, programs
and practices of Company as in effect at any time during the ninety (90)-day
period immediately preceding the Effective Date or, if more favorable to
Executive, as in effect at any time thereafter with respect to other key
employees of Company or Parent.
6. END OF TERM AND NOTICE OF TERMINATION.
(a) End of Term. The Term shall end upon the occurrence of any
of the following events:
(i) Termination of Executive's employment by Company for
Cause.
(ii) The voluntary termination of Executive's employment
by Executive other than for Good Reason.
<PAGE> 80
(iii)The death of Executive.
(iv) Executive's attainment of age sixty-five (65).
(v) Full compliance by Company with the provisions of
Paragraph 7(e) below, if Executive's employment shall have been terminated by
Company during the Term for any reason other than Cause, or if Executive's
employment shall have been terminated by reason of Executive's Disability, or if
Executive shall have voluntarily terminated Executive's employment during the
Term for Good Reason.
(b) Notice of Termination. Any termination by Company for
Cause or by Executive for Good Reason or on account of Executive's Disability
shall be communicated by notice to the other party hereto given in accordance
with Section 16 of this Agreement. For purposes of this Agreement, a "notice"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) if the date of termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice).
(c) Date of Termination. The date of termination means the
date of receipt of the notice of termination or any later date specified
therein, as the case may be; provided, however, that (i) if Executive's
employment is terminated by Company other than for Cause or on account of
Executive's Disability, the date of termination shall be the date on which
Company notifies Executive of such termination and (ii) if Executive's
employment is terminated by reason of death, the date of termination shall be
the date of death of Executive.
7. PAYMENT UPON TERMINATION.
(a) If Executive's employment is terminated by Company for
Cause, as defined in Paragraph 1(a), the obligations of Company under this
Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only compensation or
benefits accrued or earned and vested (if applicable) by Executive as of the
date of termination, including base salary through the date of termination,
benefits payable under the terms of any qualified or nonqualified retirement
plans or deferred compensation plans maintained by Company, any accrued vacation
pay as of the date of termination not yet paid by Company and any benefits
required to be paid by law such as continued health care coverage pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
(collectively, the "Accrued Obligations").
(b) If Executive shall voluntarily terminate Executive's
employment during the Term other than for Good Reason, as defined in Paragraph
1(e), the obligations of Company under this Agreement shall cease and Executive
shall forfeit all right to receive any compensation or other benefits under this
Agreement except only the Accrued Obligations.
<PAGE> 81
(c) In the event of the death of Executive during the Term,
then, in addition to the Accrued Obligations and any other benefits which may be
payable by Company in respect of the death of Executive, the base salary then
payable hereunder shall continue to be paid at the then current rate for a
period of six (6) months after such death to such beneficiary as shall have been
designated in writing by Executive, or if no effective designation exists, then
to the estate of Executive.
(d) If Executive's employment is terminated by reason of
Executive's attainment of age sixty-five (65), the obligations of Company under
this Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only the Accrued
Obligations.
(e) If Executive's employment is terminated by Company during
the Term for any reason other than for Cause, or Executive's death, or
Executive's attainment of age sixty- five (65), or if Executive's employment is
terminated during the Term by reason of Executive's Disability, or if Executive
shall voluntarily terminate Executive's employment during the Term for Good
Reason, Executive shall be entitled to receive, and Company shall be obligated
to pay and provide Executive, the following amounts:
(i) An amount in consideration of the covenants by
Executive set forth in Paragraphs 8 and 9 below to be determined by an
independent certified public accounting firm selected by Executive and retained
by Company to be the reasonable value of said covenants as of the date of
termination of Executive's employment. Said amount shall be paid in cash in a
lump sum in the month next following Executive's date of termination of
employment and shall be treated as a supplemental wage payment under applicable
Treasury Regulations subject to federal tax withholding at the flat percentage
rate applicable thereto.
(ii) An amount equal to three (3) times the base salary of
Executive, at the rate in effect immediately prior to the date of termination,
plus an amount equal to three (3) times the bonus paid or payable with respect
to the fiscal year immediately preceding the date of termination or, if higher,
three (3) times the average bonus payable to Executive in respect of the three
(3) full fiscal years immediately preceding the Effective Date. There shall be
subtracted from the aggregate amount determined in accordance with the
immediately preceding sentence the amount payable to Executive pursuant to
subparagraph (e)(i) above in respect of the covenants by Executive set forth in
Paragraphs 8 and 9 below and the amount, if any, payable to Executive under any
then effective severance pay plan of Company. Such resulting amount shall be
payable in equal installments over the three (3)-year period commencing on the
date of termination of employment in accordance with the normal payroll
practices of Company or, at Company's option, the entire amount (determined
without any discount) shall be paid in cash in a lump sum in the month next
following Executive's date of termination of employment and shall be treated as
a supplemental wage payment under applicable Treasury Regulations subject to
federal tax withholding at the flat percentage rate applicable thereto.
<PAGE> 82
(iii) An amount equal to the aggregate amounts that
Company would have contributed on behalf of Executive under Company's qualified
defined contribution retirement plan(s), if any such plan(s) shall be in effect
(other than amounts attributable to Executive's before-tax contributions to such
plan(s)) plus estimated earnings thereon had Executive continued in the employ
of Company for the three (3)-year period commencing on the date of termination
and made contributions under said plan(s) at a rate, as a percentage of salary,
equal to the rate at which Executive had made contributions to said plan(s) in
the plan year immediately preceding Executive's termination, to be payable in a
lump sum to Executive within thirty (30) days after the expiration of the
non-competition period specified in Paragraph 9(a) of this Agreement, provided
that Executive shall not have breached said non-competition provisions.
(iv) An amount equal to the difference between: (A)
benefits which would have been payable to Executive under any deferred
compensation agreement between Company and Executive, if any such agreement
shall be in effect, had Executive continued in the employ of Company for the
three (3)-year period commencing on the date of termination, received
compensation at least equal to that specified in Paragraph 4 of this Agreement
during such time, and deferred pursuant to said deferred compensation agreement
the amount of compensation specified therein; and (B) the benefits actually
payable to Executive under such deferred compensation agreement; such amount to
be payable in a lump sum to Executive within thirty (30) days after the
expiration of the non-competition period specified in Paragraph 9(a) of this
Agreement, provided that Executive shall not have breached said non-competition
provisions.
(v) Additional retirement benefits equal to the difference
between: (A) the annual pension benefits that would have been payable to
Executive under Company's qualified defined benefit retirement plan (the "Plan")
and under any nonqualified supplemental executive retirement plan covering
Executive (the "Supplemental Plan"), if any such Plan or Supplemental Plan shall
be in effect, if Executive had been continued in the employ of Company for the
three (3)-year period commencing on the date of termination and had received
compensation at least equal to that specified in Paragraph 4(a) of this
Agreement during such time and had been fully vested in the benefits payable
under any such Plan and Supplemental Plan; and (B) the annual benefits actually
payable to Executive under any such Plan and Supplemental Plan. The discounted
present value of such additional benefits, shall be payable to Executive in a
lump sum, as calculated by the independent actuary for the Plan using the
assumptions specified in the Plan, within thirty (30) days after the expiration
of the non-competition period specified in Paragraph 9(a) of this Agreement,
provided that Executive shall not have breached said non-competition provisions.
(vi) At the date of termination of Executive's employment,
Executive shall be fully vested in any form of compensation previously granted
to Executive (other than benefits payable under a qualified retirement plan),
such as, by way of example only, restricted stock, stock options, and
performance share awards.
<PAGE> 83
(vii) If Executive's employment is terminated by reason of
Executive's Disability, Executive shall be entitled to receive, in addition to
the other benefits provided under this Paragraph 7(e), disability benefits at
least equal to the most favorable of those provided by Company or Parent to
disabled employees in accordance with the most favorable plans, programs,
practices and policies of Company or Parent in effect at any time during the
ninety (90)-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect on the date of Executive's Disability with
respect to other key employees of Company or Parent.
(viii) During the three (3)-year period commencing on the
date of termination, or such longer period as any plan, program, practice or
policy may provide, Executive shall continue to participate in all life, health,
disability and similar welfare benefit plans and programs of Company to the
extent that such continued participation is possible under the general terms and
provisions of such plans and programs, and Executive shall be credited with
additional service attributable to the three (3)-year period commencing on the
date of termination for purposes of determining eligibility to participate in
any such plans or programs maintained by Company for retirees, with Company and
Executive paying the same portion of the cost of each such plan or program as
existed at the time of Executive's termination. In the event that Executive's
continued participation (or commencement of participation for plans or programs
for retirees) is not permitted, then in lieu thereof, Company shall acquire,
with the same cost sharing, individual insurance policies providing comparable
coverage for Executive; provided, however, that Company shall not be obligated
to pay more than three (3) times Company's current cost for comparable group
coverage. If any such individual coverage is unavailable, then Company shall pay
to Executive annually for the three (3)-year period commencing on the date of
termination an amount equal to the sum of the average annual contributions,
payments, credits, or allocations made by Company for such coverage on
Executive's behalf (or the average such contributions, payments, credits, or
allocations for retirees, in the case of retiree coverage) over the three (3)
calendar years preceding the date of termination of Executive's employment.
(ix) During the three (3)-year period commencing on the
date of termination, Executive shall continue to receive such perquisites, other
than those specified in the preceding subparagraphs above, as Executive was
receiving at the date of termination of employment with, to the extent
applicable, the same cost sharing with Company as was in effect immediately
prior to Executive's termination of employment.
(x) Company shall reimburse Executive for the amount of
any reasonable legal or accounting fees and expenses incurred by Executive to
obtain or enforce any right or benefit provided to Executive by Company
hereunder or as confirmed or acknowledged hereunder.
<PAGE> 84
8. CONFIDENTIAL INFORMATION. Executive understands that in the
course of Executive's employment by Company, Executive will receive or have
access to confidential information concerning the business or purposes of
Company and Parent, and which Company and Parent desire to protect. Such
confidential information shall be deemed to include, but not be limited to,
Company's customer lists and information, and employee lists, including, if
known, personnel information and data. Executive agrees that Executive will not,
at any time during the period ending two (2) years after the date of termination
of Executive's employment, reveal to anyone outside Company or Parent or use for
Executive's own benefit any such information without specific written
authorization by Company or Parent. Executive further agrees not to use any such
confidential information or trade secrets in competing with Company or Parent at
any time during or in the two (2) year period immediately following the date of
termination of Executive's employment with Company.
9. COVENANTS BY EXECUTIVE NOT TO COMPETE WITH COMPANY OR PARENT.
(a) Upon the date of termination of Executive's employment
with Company for any reason, Executive covenants and agrees that Executive will
not at any time during the period of two (2) years from and after such date of
termination directly or indirectly in any manner or under any circumstances or
conditions whatsoever be or become interested, as an individual, partner,
principal, agent, clerk, employee, stockholder, officer, director, trustee, or
in any other capacity whatsoever, except as a nominal owner of stock of a public
corporation, in any other business which, at the date of Executive's
termination, is a Competitor (as defined herein), either directly or indirectly,
with Company or Parent, or engage or participate in, directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of an
equity or debt investment, lender or in any other manner or capacity), or lend
Executive's name (or any part or variant thereof) to, any business which, at the
date of Executive's termination, is a Competitor, either directly or indirectly,
with Company or Parent, or as a result of Executive's engagement or
participation would become, a Competitor, either directly or indirectly, with
any aspect of the business of Company or Parent as it exists at the time of
Executive's termination, or solicit any officer, director, employee or agent of
Company or Parent or any subsidiary or affiliate of Company or Parent to become
an officer, director, employee or agent of Executive, Executive's respective
affiliates or anyone else. Ownership, in the aggregate, of less than one percent
(1 %) of the outstanding shares of capital stock of any corporation with one or
more classes of its capital stock listed on a national securities exchange or
publicly traded in the over-the-counter market shall not constitute a violation
of the foregoing provision. For the purposes of this Agreement, a Competitor is
any business which is similar to the business of Company or Parent or in any way
in competition with the business of Company or Parent within any of the
then-existing water utility service areas of Company.
(b) Executive hereby acknowledges that Executive's services
are unique and extraordinary, and are not readily replaceable, and hereby
expressly agrees that Company and Parent, in enforcing the covenants contained
in Paragraphs 8 and 9 herein, in addition to any other remedies provided for
herein or otherwise available at law, shall be entitled in any court of equity
having jurisdiction to an injunction restraining Executive in the event of a
breach, actual or threatened, of the agreements and covenants contained in these
Paragraphs.
<PAGE> 85
(c) The parties hereto believe that the restrictive covenants
of these Paragraphs are reasonable. However, if at any time it shall be
determined by any court of competent jurisdiction that these Paragraphs or any
portion of them as written, are unenforceable because the restrictions are
unreasonable, the parties hereto agree that such portions as shall have been
determined to be unreasonably restrictive shall thereupon be deemed so amended
as to make such restrictions reasonable in the determination of such court, and
the said covenants, as so modified, shall be enforceable between the parties to
the same extent as if such amendments had been made prior to the date of any
alleged breach of said covenants.
(d) The provisions of this Paragraph 9 shall not apply if
Company and Parent shall be prohibited under Paragraph 15 below from making any
payments to Executive pursuant to Paragraph 7 above.
10. NO OBLIGATION TO MITIGATE. So long as Executive shall not be
in breach of any provision of Paragraph 8 or 9, Executive shall have no duty to
mitigate damages in the event of a termination and if Executive voluntarily
obtains other employment (including self-employment), any compensation or
profits received or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Company and Parent to
make payments hereunder.
11. RESIGNATION. In the event that Executive's services hereunder
are terminated under any of the provisions of this Agreement (except by death),
Executive agrees that Executive will deliver Executive's written resignation as
an officer of Company or Parent, or their subsidiaries and affiliates, to the
Board of Directors, such resignation to become effective immediately, or, at the
option of the Board of Directors, on a later date as specified by the Board.
12. INSURANCE. Company shall have the right at its own cost and
expense to apply for and to secure in its own name, or otherwise, life, health
or accident insurance or any or all of them covering Executive, and Executive
agrees to submit to the usual and customary medical examination and otherwise to
cooperate with Company in connection with the procurement of any such insurance,
and any claims thereunder.
13. RELEASE. As a condition of receiving payments or benefits
provided for in this Agreement, at the request of Company or Parent, Executive
shall execute and deliver for the benefit of Company and Parent, and any
subsidiary or affiliate of Company or Parent, a general release in the form set
forth in Attachment A, and such release shall become effective in accordance
with its terms. The failure or refusal of Executive to sign such a release or
the revocation of such a release shall cause the termination of any and all
obligations of Company and Parent to make payments or provide benefits
hereunder, and the forfeiture of the right of Executive to receive any such
payments and benefits. Executive acknowledges that Company and Parent have
advised Executive to consult with an attorney prior to signing this Agreement
and that Executive has had an opportunity to do so.
<PAGE> 86
14. BENEFITS LIMITATION. Notwithstanding any other provision of this
Agreement, in the event that any payment or benefit received or to be received
by Executive under this Agreement (a "Payment") would be subject to the excise
tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any successor to such Section, as determined
by a nationally recognized independent certified public accounting firm selected
by Executive (the "Tax Advisor"), then such Payment shall be reduced to the
extent necessary to avoid the application of the Excise Tax, but only if such
reduction would result in Executive's receipt of a greater Payment on an
after-tax basis than would be receivable by Executive had such Excise Tax been
paid. For purposes of this limitation, (a) no portion of any payment, whether
pursuant to this Agreement or any other plan or agreement, the receipt of which
Executive, in the determination of the Tax Advisor, shall have effectively
waived prior to the date which is fifteen (15) days following the date of
termination of Executive's employment and prior to the earlier of the date of
constructive receipt and the date of payment thereof shall be taken into
account; and (b) any reduction in the Payment made pursuant to this Paragraph
shall be made from the payments and benefits to be made pursuant to clauses (i)
through (x) of Paragraph 7(e), in such order as may be determined by Executive,
except to the extent that such payments and benefits, in the determination of
the Tax Advisor, are reasonable compensation within the meaning of Section 280G
of the Code. The determination of the Tax Advisor as provided herein shall be
completed not later than forty-five (45) days following Executive's date of
termination of employment, and such determination shall be communicated in
writing to Company, with a copy to Executive, within said forty-five (45) day
period. The determination of the Tax Advisor as provided herein shall be deemed
conclusive and binding on Company and Executive. Company shall pay the fees and
other costs of the Tax Advisor hereunder.
15. REGULATORY LIMITATION. Notwithstanding any other provision of this
Agreement, Company shall not be obligated to make, and Executive shall have no
right to receive, any payment, benefit or amount under this Agreement which
would violate any law, regulation or regulatory order applicable to Company or
Parent at the time such payment, benefit or amount is due ("Prohibited
Payment"). If and to the extent Company shall at a later date be relieved of the
restriction on its ability to make any Prohibited Payment, then at such time
Company or Parent shall promptly make payment of any such amounts to Executive.
16. NOTICES. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person to Executive or to the
Secretary of Company and Parent, or if mailed, postage prepaid, registered or
certified mail, addressed, in the case of Executive, to Executive's last known
address as carried on the personnel records of Company, and, in the case of
Company and Parent, to the corporate headquarters, attention of the Secretary,
or to such other address as the party to be notified may specify by notice to
the other party.
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17. SUCCESSORS AND BINDING AGREEMENT.
(a) Company and Parent will require any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of Company and/or Parent, as the
case may be, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that Company and Parent are required to perform
it. Failure of Company and Parent to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Executive to compensation and benefits from Company and Parent
in the same amount and on the same terms as Executive would be entitled
hereunder if Executive had terminated employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date on which Executive's
employment with Company was terminated. As used in this Agreement, "Company" and
"Parent" shall include any successor to Company's and/or Parent's, as the case
may be, business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of, and be
enforceable by, Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive dies while any amount is still payable hereunder, all such amounts
shall be paid in accordance with the terms of this Agreement to Executive's
devisee, legatee or other designee or, if there is no such designee, to
Executive's estate.
18. ARBITRATION. Any dispute which may arise between the parties
hereto may, if both parties agree, be submitted to binding arbitration in the
State of Connecticut in accordance with the Rules of the American Arbitration
Association; provided that any such dispute shall first be submitted to
Company's Board of Directors in an effort to resolve such dispute without resort
to arbitration.
19. SEVERABILITY. If any of the terms or conditions of this
Agreement shall be declared void or unenforceable by any court or administrative
body of competent jurisdiction, such term or condition shall be deemed severable
from the remainder of this Agreement, and the other terms and conditions of this
Agreement shall continue to be valid and enforceable.
20. AMENDMENT. This Agreement may be modified or amended only by
an instrument in writing executed by the parties hereto.
21. CONSTRUCTION. This Agreement shall supersede and replace all
prior agreements and understandings between the parties hereto on the subject
matter covered hereby. This Agreement shall be governed and construed under the
laws of the State of Connecticut. Words of the masculine gender mean and include
correlative words of the feminine gender. Paragraph headings are for convenience
only and shall not be considered a part of the terms and provisions of the
Agreement.
<PAGE> 88
IN WITNESS WHEREOF, Company and Parent have caused this Agreement to be
executed by a duly authorized officer, and Executive has hereunto set
Executive's hand, this 15th day of December, 1998.
The Connecticut Water Company
By /s/ Marshall T. Chiaraluce
-----------------------------
Marshall T. Chiaraluce
Connecticut Water Service, Inc.
By /s/ Michele G. DiAcri
-----------------------------
Michele G. DiAcri
By /s/ Peter J. Bancroft
-----------------------------
Peter J. Bancroft
Executive
<PAGE> 89
ATTACHMENT A
RELEASE
We advise you to consult an attorney before you sign this Release. You
have until the date which is seven (7) days after the Release is signed and
returned to ____________________ ("Company") to change your mind and revoke your
Release. Your Release shall not become effective or enforceable until after that
date.
In consideration for the benefits provided under your Employment
Agreement dated ___________________ with Company and _________________
("Parent"), and more specifically enumerated in Exhibit 1 hereto, by your
signature below you agree to accept such benefits and not to make any claims of
any kind against Company, its past and present and future parent corporations,
subsidiaries, divisions, subdivisions, affiliates and related companies or their
successors and assigns, including without limitation Parent, or any and all
past, present and future Directors, officers, fiduciaries or employees of any of
the foregoing (all parties referred to in the foregoing are hereinafter referred
to as the "Releasees") before any agency, court or other forum, and you agree to
release the Releasees from all claims, known or unknown, arising in any way from
any actions taken by the Releasees up to the date of this Release, including,
without limiting the foregoing, any claim for wrongful discharge or breach of
contract or any claims arising under the Age Discrimination in Employment Act of
1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act of 1990, the Employee Retirement Income Security Act of 1974, Connecticut's
Fair Employment Practices Act or any other federal, state or local statute or
regulation and any claim for attorneys' fees, expenses or costs of litigation.
THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL
HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM
AGAINST THE RELEASEES BASED ON ANY ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE
OF THIS RELEASE.
By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully understand its
terms;
2. You have had at least twenty-one (21) days to consider the
terms of the Release;
3. You have seven (7) days from the date you sign this Release to
revoke it by written notification to Company. After this seven (7) day period,
this Release is final and binding and may not be revoked;
4. You have been advised to seek legal counsel and have had an
opportunity to do so;
<PAGE> 90
5. You would not otherwise be entitled to the benefits provided
under your Employment Agreement with Company and Parent had you not agreed to
waive any right you have to bring a lawsuit or legal claim against the
Releasees; and
6. Your agreement to the terms set forth above is voluntary.
Name:_________________________________
Signature: ___________________________ Date:___________________
Received by:__________________________ Date:___________________
<PAGE> 91
EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL
BENEFITS AND PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.
Acknowledged and Agreed:
THE CONNECTICUT WATER COMPANY EXECUTIVE
By _______________________________ ______________________
Its
CONNECTICUT WATER SERVICE, INC.
By _______________________________
Its
<PAGE> 92
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
BETWEEN
THE CONNECTICUT WATER COMPANY
CONNECTICUT WATER SERVICE, INC.
AND
Maureen P. Westbrook
<PAGE> 93
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of December 15, 1998, is made by and between
The Connecticut Water Company, a Connecticut corporation having its principal
place of business in Clinton, Connecticut, ("Company"), Connecticut Water
Service, Inc., a Connecticut corporation and holder of all of the outstanding
capital stock of Company ("Parent") and Maureen P. Westbrook, a resident of
Connecticut ("Executive").
W I T N E S S E T H :
WHEREAS, Executive has been and continues to be employed by Company and
Parent in an executive capacity and has entered into an Employment Agreement
between Executive and Company and Parent dated as of the 15th day of December,
1998 which becomes effective upon a "Change-in-Control," as defined herein, of
Company or Parent; and
WHEREAS, the Boards of Directors of Company and Parent have determined
that it is in the best interest of Company and Parent to continue such
Employment Agreement on the terms herein set forth so as to assure that Company
and Parent will have the dedication of Executive, notwithstanding the
possibility, threat, or occurrence of a Change-in-Control of Company or Parent
by providing Executive with compensation arrangements upon a Change-in-Control
which are competitive with those of other corporations; and
WHEREAS, Executive, Company and Parent are willing to enter into this
Amended and Restated Employment Agreement ("Agreement") on the terms herein set
forth;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Cause" shall mean Executive's serious, willful misconduct
in respect of Executive's duties under this Agreement, including conviction for
a felony or perpetration by Executive of a common law fraud upon Company or
Parent which has resulted or is likely to result in material economic damage to
Company or Parent, as determined by a vote of at least seventy-five percent
(75%) of all of the Directors (excluding Executive) of each of Company's and
Parent's Board of Directors;
<PAGE> 94
(b) "Change-in-Control" shall be deemed to have occurred if
after the date hereof (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 Securities Exchange Act of 1934 (the "Act") disclosing
that any Person (as defined below), other than Company or Parent or any employee
benefit plan sponsored by Company or Parent, is the beneficial owner (as the
term is defined in Rule 13d-3 under the Act) directly or indirectly, of twenty
percent (20%) or more of the total voting power represented by Company's or
Parent's then outstanding voting common stock (calculated as provided in
paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire
voting common stock); or (ii) any Person, other than Company or Parent or any
employee benefit plan sponsored by Company or Parent, shall purchase shares
pursuant to a tender offer or exchange offer to acquire any voting common stock
of Company or Parent (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 question is the beneficial owner
directly or indirectly, of twenty percent (20%) or more of the total voting
power represented by Company's or Parent's then outstanding voting common stock
(all as calculated under clause (i)); or (iii) the stockholders of Company or
Parent shall approve (A) any consolidation or merger of Company or Parent in
which Company or Parent is not the continuing or surviving corporation (other
than a merger of Company or Parent in which holders of the outstanding capital
stock of Company or Parent 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 Parent 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 Parent; or (iv) there shall have been
a change in the composition of the Board of Directors of Company or Parent 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 Parent, by a vote of a majority of all the
Directors (excluding Executive) adopts a resolution to the effect that a
"Change-in-Control" has occurred for purposes of this Agreement.
(c) "Disability" shall mean the incapacity of Executive by
illness or any other cause as determined under the long-term disability
insurance plan of Company in effect at the time in question, or if no such plan
is in effect, then such incapacity of Executive as prevents Executive from
performing the essential functions of Executive's position with or without
reasonable accommodation for a period in excess of two hundred forty (240) days
(whether or not consecutive), or one hundred eighty (180) days consecutively, as
the case may be, during any twelve (12) month period.
(d) "Effective Date" shall be the date on which a
Change-in-Control occurs. Anything in this Agreement to the contrary
notwithstanding, if Executive's employment is terminated prior to the date on
which a Change-in-Control occurs, and it is reasonably demonstrated that such
termination (i) was at the request of a third party who has taken steps
<PAGE> 95
reasonably calculated to effect a Change-in-Control or (ii) otherwise arose in
connection with or anticipation of a Change-in-Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination.
(e) "Good Reason" shall mean the occurrence of any action
which (i) removes or changes Executive's title or reduces Executive's job
responsibilities or base salary; (ii) results in a significant worsening of
Executive's work conditions; or (iii) moves Executive's place of employment to a
location that increases Executive's commute by more than thirty (30) miles over
the length of Executive's commute from Executive's place of principal residence
at the time the move is requested. For purposes of this subparagraph (e), any
good faith determination by Executive that any such action has occurred shall be
conclusive.
(f) "Person" shall mean any individual, corporation,
partnership, company or other entity, and shall include a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934.
2. EMPLOYMENT.
(a) As of the Effective Date, Company hereby agrees to
continue to employ Executive and Executive agrees to remain in the employ of
Company for the Term of this Agreement upon the terms and conditions hereinafter
set forth. Subject to the provisions of subparagraph (b) of this Paragraph 2,
and to the provisions of Paragraph 6 below, "Term" shall mean a continuously
renewing period of three (3) years commencing on the Effective Date.
(b) At any time during the Term, the Board of Directors of
Company and Parent may, by written notice to Executive, advise Executive of
their desire to modify or amend any of the terms or provisions of this Agreement
or to delete or add any terms or provisions. Any such notice ("Notice") shall
describe the proposed modifications in reasonable detail. In the event a Notice
shall be given to Executive, then Company, Parent and Executive agree to discuss
the proposed modification(s) and to attempt in good faith to reach agreement
with respect thereto and to reduce such agreement to writing in an amendment to
be executed by all the parties ("Amendment"). If a Notice is given hereunder and
an Amendment shall not have been executed on or before the sixtieth (60th) day
following the date on which Notice is given, then the Term shall thereupon be
automatically converted to a fixed period ending three (3) years after the
expiration of such sixty (60) days.
3. DUTIES OF EMPLOYMENT.
(a) During the Term, Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the ninety (90)-day period immediately preceding the Effective Date and
Executive's services shall be performed at such location as Executive shall
determine.
<PAGE> 96
(b) During the Term, Executive will serve Company faithfully,
diligently and competently and will devote full-time to Executive's employment
and will hold, in addition to the offices held on the Effective Date, such other
executive offices of Company or Parent, or their respective subsidiaries and
affiliates, to which Executive may be elected, appointed or assigned by the
Boards of Directors of Company or Parent from time to time and will discharge
such executive duties in connection therewith. Nothing in this Agreement shall
preclude Executive, with the prior approval of the Board of Directors of
Company, from devoting reasonable periods of time required for (i) serving as a
director or member of a committee of any organization involving no conflict of
interest with Company or Parent, or (ii) engaging in charitable, religious and
community activities, provided, that such directorships, memberships or
activities do not materially interfere with the performance of Executive's
duties hereunder.
4. COMPENSATION. During the Term, Company shall pay to Executive
as compensation for the services to be rendered by Executive hereunder the
following:
(a) A base salary at a rate equal to the highest base salary
paid or payable to Executive by Company during the twelve (12)-month period
immediately preceding the month in which the Effective Date occurs, or such
larger sum as the Board of Directors of Company may from time to time determine
in connection with regular periodic performance reviews pursuant to Company's
policies and practices. Such compensation shall be payable in accordance with
the normal payroll practices of Company. Executive shall receive an annual
increase in base salary at each normal pay adjustment date during the Term, but
no later than one (1) year after the date of Executive's last increase and
annually thereafter during the Term, of not less than the percentage increase in
the cost-of-living since Executive's last pay adjustment, as measured by the
Consumer Price Index-All Urban Consumers of the U.S. Bureau of Labor Statistics.
(b) In addition, Company shall pay to Executive an annual
bonus, payable in cash or other form of compensation, in accordance with the
Company's practice or plan for annual bonuses for peer executives which is at
least equal to the average bonus, if any, payable to Executive from Company in
respect of the three (3) fiscal years immediately preceding the fiscal year in
which the Effective Date occurs.
5. BENEFITS. During the Term, Executive shall be entitled to the
following benefits:
(a) Incentive, Savings and Retirement Plans. In addition to
base salary and bonus payable as hereinabove provided, Executive shall be
entitled to participate during the Term in all incentive, savings and retirement
plans, practices, policies and programs applicable to executive employees of
Company as may be in effect from time to time. Such plans, practices, policies
and programs, in the aggregate, shall provide Executive with compensation,
benefits and reward opportunities at least as favorable as the most favorable of
such compensation, benefits and reward opportunities provided by Company for
Executive under such plans, practices, policies and programs as in effect at any
time during the ninety (90)-day period immediately preceding the Effective Date
or, if more favorable to Executive, as provided at any time thereafter with
respect to other key employees of Company or Parent.
<PAGE> 97
(b) Welfare Benefit Plans. During the Term, Executive and/or
Executive's family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices, policies
and programs applicable to executive employees of Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) at least as favorable as the most favorable of such plans,
practices, policies and programs in effect at any time during the ninety
(90)-day period immediately preceding the Effective Date or, if more favorable
to Executive and/or Executive's family, as in effect at any time thereafter with
respect to other key employees of Company or Parent.
(c) Expenses. During the Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by Executive
in accordance with the most favorable policies, practices and procedures of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(d) Fringe Benefits. During the Term, Executive shall be
entitled to fringe benefits, including use of an automobile and payment of
related expenses or payment of an allowance for automobile related expenses, in
accordance with the most favorable plans, practices, programs and policies of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(e) Office and Support Staff. During the Term, Executive shall
be entitled to an office or offices of a size and with furnishings and other
appointments, and to secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to Executive by Company at any time
during the ninety (90)-day period immediately preceding the Effective Date or,
if more favorable to Executive, as provided at any time thereafter with respect
to other key employees of Company or Parent.
(f) Vacation. During the Term, Executive shall be entitled to
paid vacation in accordance with the most favorable plans, policies, programs
and practices of Company as in effect at any time during the ninety (90)-day
period immediately preceding the Effective Date or, if more favorable to
Executive, as in effect at any time thereafter with respect to other key
employees of Company or Parent.
6. END OF TERM AND NOTICE OF TERMINATION.
(a) End of Term. The Term shall end upon the occurrence of any
of the following events:
(i) Termination of Executive's employment by Company for
Cause.
(ii) The voluntary termination of Executive's employment
by Executive other than for Good Reason.
<PAGE> 98
(iii)The death of Executive.
(iv) Executive's attainment of age sixty-five (65).
(v) Full compliance by Company with the provisions of
Paragraph 7(e) below, if Executive's employment shall have been terminated by
Company during the Term for any reason other than Cause, or if Executive's
employment shall have been terminated by reason of Executive's Disability, or if
Executive shall have voluntarily terminated Executive's employment during the
Term for Good Reason.
(b) Notice of Termination. Any termination by Company for
Cause or by Executive for Good Reason or on account of Executive's Disability
shall be communicated by notice to the other party hereto given in accordance
with Section 16 of this Agreement. For purposes of this Agreement, a "notice"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) if the date of termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice).
(c) Date of Termination. The date of termination means the
date of receipt of the notice of termination or any later date specified
therein, as the case may be; provided, however, that (i) if Executive's
employment is terminated by Company other than for Cause or on account of
Executive's Disability, the date of termination shall be the date on which
Company notifies Executive of such termination and (ii) if Executive's
employment is terminated by reason of death, the date of termination shall be
the date of death of Executive.
7. PAYMENT UPON TERMINATION.
(a) If Executive's employment is terminated by Company for
Cause, as defined in Paragraph 1(a), the obligations of Company under this
Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only compensation or
benefits accrued or earned and vested (if applicable) by Executive as of the
date of termination, including base salary through the date of termination,
benefits payable under the terms of any qualified or nonqualified retirement
plans or deferred compensation plans maintained by Company, any accrued vacation
pay as of the date of termination not yet paid by Company and any benefits
required to be paid by law such as continued health care coverage pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
(collectively, the "Accrued Obligations").
(b) If Executive shall voluntarily terminate Executive's
employment during the Term other than for Good Reason, as defined in Paragraph
1(e), the obligations of Company under this Agreement shall cease and Executive
shall forfeit all right to receive any compensation or other benefits under this
Agreement except only the Accrued Obligations.
<PAGE> 99
(c) In the event of the death of Executive during the Term,
then, in addition to the Accrued Obligations and any other benefits which may be
payable by Company in respect of the death of Executive, the base salary then
payable hereunder shall continue to be paid at the then current rate for a
period of six (6) months after such death to such beneficiary as shall have been
designated in writing by Executive, or if no effective designation exists, then
to the estate of Executive.
(d) If Executive's employment is terminated by reason of
Executive's attainment of age sixty-five (65), the obligations of Company under
this Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only the Accrued
Obligations.
(e) If Executive's employment is terminated by Company during
the Term for any reason other than for Cause, or Executive's death, or
Executive's attainment of age sixty-five (65), or if Executive's employment is
terminated during the Term by reason of Executive's Disability, or if Executive
shall voluntarily terminate Executive's employment during the Term for Good
Reason, Executive shall be entitled to receive, and Company shall be obligated
to pay and provide Executive, the following amounts:
(i) An amount in consideration of the covenants by
Executive set forth in Paragraphs 8 and 9 below to be determined by an
independent certified public accounting firm selected by Executive and retained
by Company to be the reasonable value of said covenants as of the date of
termination of Executive's employment. Said amount shall be paid in cash in a
lump sum in the month next following Executive's date of termination of
employment and shall be treated as a supplemental wage payment under applicable
Treasury Regulations subject to federal tax withholding at the flat percentage
rate applicable thereto.
(ii) An amount equal to three (3) times the base salary of
Executive, at the rate in effect immediately prior to the date of termination,
plus an amount equal to three (3) times the bonus paid or payable with respect
to the fiscal year immediately preceding the date of termination or, if higher,
three (3) times the average bonus payable to Executive in respect of the three
(3) full fiscal years immediately preceding the Effective Date. There shall be
subtracted from the aggregate amount determined in accordance with the
immediately preceding sentence the amount payable to Executive pursuant to
subparagraph (e)(i) above in respect of the covenants by Executive set forth in
Paragraphs 8 and 9 below and the amount, if any, payable to Executive under any
then effective severance pay plan of Company. Such resulting amount shall be
payable in equal installments over the three (3)-year period commencing on the
date of termination of employment in accordance with the normal payroll
practices of Company or, at Company's option, the entire amount (determined
without any discount) shall be paid in cash in a lump sum in the month next
following Executive's date of termination of employment and shall be treated as
a supplemental wage payment under applicable Treasury Regulations subject to
federal tax withholding at the flat percentage rate applicable thereto.
<PAGE> 100
(iii) An amount equal to the aggregate amounts that
Company would have contributed on behalf of Executive under Company's qualified
defined contribution retirement plan(s), if any such plan(s) shall be in effect
(other than amounts attributable to Executive's before-tax contributions to such
plan(s)) plus estimated earnings thereon had Executive continued in the employ
of Company for the three (3)-year period commencing on the date of termination
and made contributions under said plan(s) at a rate, as a percentage of salary,
equal to the rate at which Executive had made contributions to said plan(s) in
the plan year immediately preceding Executive's termination, to be payable in a
lump sum to Executive within thirty (30) days after the expiration of the
non-competition period specified in Paragraph 9(a) of this Agreement, provided
that Executive shall not have breached said non-competition provisions.
(iv) An amount equal to the difference between: (A)
benefits which would have been payable to Executive under any deferred
compensation agreement between Company and Executive, if any such agreement
shall be in effect, had Executive continued in the employ of Company for the
three (3)-year period commencing on the date of termination, received
compensation at least equal to that specified in Paragraph 4 of this Agreement
during such time, and deferred pursuant to said deferred compensation agreement
the amount of compensation specified therein; and (B) the benefits actually
payable to Executive under such deferred compensation agreement; such amount to
be payable in a lump sum to Executive within thirty (30) days after the
expiration of the non-competition period specified in Paragraph 9(a) of this
Agreement, provided that Executive shall not have breached said non-competition
provisions.
(v) Additional retirement benefits equal to the difference
between: (A) the annual pension benefits that would have been payable to
Executive under Company's qualified defined benefit retirement plan (the "Plan")
and under any nonqualified supplemental executive retirement plan covering
Executive (the "Supplemental Plan"), if any such Plan or Supplemental Plan shall
be in effect, if Executive had been continued in the employ of Company for the
three (3)-year period commencing on the date of termination and had received
compensation at least equal to that specified in Paragraph 4(a) of this
Agreement during such time and had been fully vested in the benefits payable
under any such Plan and Supplemental Plan; and (B) the annual benefits actually
payable to Executive under any such Plan and Supplemental Plan. The discounted
present value of such additional benefits, shall be payable to Executive in a
lump sum, as calculated by the independent actuary for the Plan using the
assumptions specified in the Plan, within thirty (30) days after the expiration
of the non-competition period specified in Paragraph 9(a) of this Agreement,
provided that Executive shall not have breached said non-competition provisions.
(vi) At the date of termination of Executive's employment,
Executive shall be fully vested in any form of compensation previously granted
to Executive (other than benefits payable under a qualified retirement plan),
such as, by way of example only, restricted stock, stock options, and
performance share awards.
<PAGE> 101
(vii) If Executive's employment is terminated by reason of
Executive's Disability, Executive shall be entitled to receive, in addition to
the other benefits provided under this Paragraph 7(e), disability benefits at
least equal to the most favorable of those provided by Company or Parent to
disabled employees in accordance with the most favorable plans, programs,
practices and policies of Company or Parent in effect at any time during the
ninety (90)-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect on the date of Executive's Disability with
respect to other key employees of Company or Parent.
(viii) During the three (3)-year period commencing on the
date of termination, or such longer period as any plan, program, practice or
policy may provide, Executive shall continue to participate in all life, health,
disability and similar welfare benefit plans and programs of Company to the
extent that such continued participation is possible under the general terms and
provisions of such plans and programs, and Executive shall be credited with
additional service attributable to the three (3)-year period commencing on the
date of termination for purposes of determining eligibility to participate in
any such plans or programs maintained by Company for retirees, with Company and
Executive paying the same portion of the cost of each such plan or program as
existed at the time of Executive's termination. In the event that Executive's
continued participation (or commencement of participation for plans or programs
for retirees) is not permitted, then in lieu thereof, Company shall acquire,
with the same cost sharing, individual insurance policies providing comparable
coverage for Executive; provided, however, that Company shall not be obligated
to pay more than three (3) times Company's current cost for comparable group
coverage. If any such individual coverage is unavailable, then Company shall pay
to Executive annually for the three (3)-year period commencing on the date of
termination an amount equal to the sum of the average annual contributions,
payments, credits, or allocations made by Company for such coverage on
Executive's behalf (or the average such contributions, payments, credits, or
allocations for retirees, in the case of retiree coverage) over the three (3)
calendar years preceding the date of termination of Executive's employment.
(ix) During the three (3)-year period commencing on the
date of termination, Executive shall continue to receive such perquisites, other
than those specified in the preceding subparagraphs above, as Executive was
receiving at the date of termination of employment with, to the extent
applicable, the same cost sharing with Company as was in effect immediately
prior to Executive's termination of employment.
(x) Company shall reimburse Executive for the amount of
any reasonable legal or accounting fees and expenses incurred by Executive to
obtain or enforce any right or benefit provided to Executive by Company
hereunder or as confirmed or acknowledged hereunder.
<PAGE> 102
8. CONFIDENTIAL INFORMATION. Executive understands that in the
course of Executive's employment by Company, Executive will receive or have
access to confidential information concerning the business or purposes of
Company and Parent, and which Company and Parent desire to protect. Such
confidential information shall be deemed to include, but not be limited to,
Company's customer lists and information, and employee lists, including, if
known, personnel information and data. Executive agrees that Executive will not,
at any time during the period ending two (2) years after the date of termination
of Executive's employment, reveal to anyone outside Company or Parent or use for
Executive's own benefit any such information without specific written
authorization by Company or Parent. Executive further agrees not to use any such
confidential information or trade secrets in competing with Company or Parent at
any time during or in the two (2) year period immediately following the date of
termination of Executive's employment with Company.
9. COVENANTS BY EXECUTIVE NOT TO COMPETE WITH COMPANY OR PARENT.
(a) Upon the date of termination of Executive's employment
with Company for any reason, Executive covenants and agrees that Executive will
not at any time during the period of two (2) years from and after such date of
termination directly or indirectly in any manner or under any circumstances or
conditions whatsoever be or become interested, as an individual, partner,
principal, agent, clerk, employee, stockholder, officer, director, trustee, or
in any other capacity whatsoever, except as a nominal owner of stock of a public
corporation, in any other business which, at the date of Executive's
termination, is a Competitor (as defined herein), either directly or indirectly,
with Company or Parent, or engage or participate in, directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of an
equity or debt investment, lender or in any other manner or capacity), or lend
Executive's name (or any part or variant thereof) to, any business which, at the
date of Executive's termination, is a Competitor, either directly or indirectly,
with Company or Parent, or as a result of Executive's engagement or
participation would become, a Competitor, either directly or indirectly, with
any aspect of the business of Company or Parent as it exists at the time of
Executive's termination, or solicit any officer, director, employee or agent of
Company or Parent or any subsidiary or affiliate of Company or Parent to become
an officer, director, employee or agent of Executive, Executive's respective
affiliates or anyone else. Ownership, in the aggregate, of less than one percent
(1 %) of the outstanding shares of capital stock of any corporation with one or
more classes of its capital stock listed on a national securities exchange or
publicly traded in the over-the-counter market shall not constitute a violation
of the foregoing provision. For the purposes of this Agreement, a Competitor is
any business which is similar to the business of Company or Parent or in any way
in competition with the business of Company or Parent within any of the
then-existing water utility service areas of Company.
(b) Executive hereby acknowledges that Executive's services
are unique and extraordinary, and are not readily replaceable, and hereby
expressly agrees that Company and Parent, in enforcing the covenants contained
in Paragraphs 8 and 9 herein, in addition to any other remedies provided for
herein or otherwise available at law, shall be entitled in any court of equity
having jurisdiction to an injunction restraining Executive in the event of a
breach, actual or threatened, of the agreements and covenants contained in these
Paragraphs.
<PAGE> 103
(c) The parties hereto believe that the restrictive covenants
of these Paragraphs are reasonable. However, if at any time it shall be
determined by any court of competent jurisdiction that these Paragraphs or any
portion of them as written, are unenforceable because the restrictions are
unreasonable, the parties hereto agree that such portions as shall have been
determined to be unreasonably restrictive shall thereupon be deemed so amended
as to make such restrictions reasonable in the determination of such court, and
the said covenants, as so modified, shall be enforceable between the parties to
the same extent as if such amendments had been made prior to the date of any
alleged breach of said covenants.
(d) The provisions of this Paragraph 9 shall not apply if
Company and Parent shall be prohibited under Paragraph 15 below from making any
payments to Executive pursuant to Paragraph 7 above.
10. NO OBLIGATION TO MITIGATE. So long as Executive shall not be
in breach of any provision of Paragraph 8 or 9, Executive shall have no duty to
mitigate damages in the event of a termination and if Executive voluntarily
obtains other employment (including self-employment), any compensation or
profits received or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Company and Parent to
make payments hereunder.
11. RESIGNATION. In the event that Executive's services hereunder
are terminated under any of the provisions of this Agreement (except by death),
Executive agrees that Executive will deliver Executive's written resignation as
an officer of Company or Parent, or their subsidiaries and affiliates, to the
Board of Directors, such resignation to become effective immediately, or, at the
option of the Board of Directors, on a later date as specified by the Board.
12. INSURANCE. Company shall have the right at its own cost and
expense to apply for and to secure in its own name, or otherwise, life, health
or accident insurance or any or all of them covering Executive, and Executive
agrees to submit to the usual and customary medical examination and otherwise to
cooperate with Company in connection with the procurement of any such insurance,
and any claims thereunder.
13. RELEASE. As a condition of receiving payments or benefits
provided for in this Agreement, at the request of Company or Parent, Executive
shall execute and deliver for the benefit of Company and Parent, and any
subsidiary or affiliate of Company or Parent, a general release in the form set
forth in Attachment A, and such release shall become effective in accordance
with its terms. The failure or refusal of Executive to sign such a release or
the revocation of such a release shall cause the termination of any and all
obligations of Company and Parent to make payments or provide benefits
hereunder, and the forfeiture of the right of Executive to receive any such
payments and benefits. Executive acknowledges that Company and Parent have
advised Executive to consult with an attorney prior to signing this Agreement
and that Executive has had an opportunity to do so.
<PAGE> 104
14. BENEFITS LIMITATION. Notwithstanding any other provision of this
Agreement, in the event that any payment or benefit received or to be received
by Executive under this Agreement (a "Payment") would be subject to the excise
tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any successor to such Section, as determined
by a nationally recognized independent certified public accounting firm selected
by Executive (the "Tax Advisor"), then such Payment shall be reduced to the
extent necessary to avoid the application of the Excise Tax, but only if such
reduction would result in Executive's receipt of a greater Payment on an
after-tax basis than would be receivable by Executive had such Excise Tax been
paid. For purposes of this limitation, (a) no portion of any payment, whether
pursuant to this Agreement or any other plan or agreement, the receipt of which
Executive, in the determination of the Tax Advisor, shall have effectively
waived prior to the date which is fifteen (15) days following the date of
termination of Executive's employment and prior to the earlier of the date of
constructive receipt and the date of payment thereof shall be taken into
account; and (b) any reduction in the Payment made pursuant to this Paragraph
shall be made from the payments and benefits to be made pursuant to clauses (i)
through (x) of Paragraph 7(e), in such order as may be determined by Executive,
except to the extent that such payments and benefits, in the determination of
the Tax Advisor, are reasonable compensation within the meaning of Section 280G
of the Code. The determination of the Tax Advisor as provided herein shall be
completed not later than forty-five (45) days following Executive's date of
termination of employment, and such determination shall be communicated in
writing to Company, with a copy to Executive, within said forty-five (45) day
period. The determination of the Tax Advisor as provided herein shall be deemed
conclusive and binding on Company and Executive. Company shall pay the fees and
other costs of the Tax Advisor hereunder.
15. REGULATORY LIMITATION. Notwithstanding any other provision of this
Agreement, Company shall not be obligated to make, and Executive shall have no
right to receive, any payment, benefit or amount under this Agreement which
would violate any law, regulation or regulatory order applicable to Company or
Parent at the time such payment, benefit or amount is due ("Prohibited
Payment"). If and to the extent Company shall at a later date be relieved of the
restriction on its ability to make any Prohibited Payment, then at such time
Company or Parent shall promptly make payment of any such amounts to Executive.
16. NOTICES. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person to Executive or to the
Secretary of Company and Parent, or if mailed, postage prepaid, registered or
certified mail, addressed, in the case of Executive, to Executive's last known
address as carried on the personnel records of Company, and, in the case of
Company and Parent, to the corporate headquarters, attention of the Secretary,
or to such other address as the party to be notified may specify by notice to
the other party.
<PAGE> 105
17. SUCCESSORS AND BINDING AGREEMENT.
(a) Company and Parent will require any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of Company and/or Parent, as the
case may be, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that Company and Parent are required to perform
it. Failure of Company and Parent to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Executive to compensation and benefits from Company and Parent
in the same amount and on the same terms as Executive would be entitled
hereunder if Executive had terminated employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date on which Executive's
employment with Company was terminated. As used in this Agreement, "Company" and
"Parent" shall include any successor to Company's and/or Parent's, as the case
may be, business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of, and be
enforceable by, Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive dies while any amount is still payable hereunder, all such amounts
shall be paid in accordance with the terms of this Agreement to Executive's
devisee, legatee or other designee or, if there is no such designee, to
Executive's estate.
18. ARBITRATION. Any dispute which may arise between the parties
hereto may, if both parties agree, be submitted to binding arbitration in the
State of Connecticut in accordance with the Rules of the American Arbitration
Association; provided that any such dispute shall first be submitted to
Company's Board of Directors in an effort to resolve such dispute without resort
to arbitration.
19. SEVERABILITY. If any of the terms or conditions of this
Agreement shall be declared void or unenforceable by any court or administrative
body of competent jurisdiction, such term or condition shall be deemed severable
from the remainder of this Agreement, and the other terms and conditions of this
Agreement shall continue to be valid and enforceable.
20. AMENDMENT. This Agreement may be modified or amended only by
an instrument in writing executed by the parties hereto.
21. CONSTRUCTION. This Agreement shall supersede and replace all
prior agreements and understandings between the parties hereto on the subject
matter covered hereby. This Agreement shall be governed and construed under the
laws of the State of Connecticut. Words of the masculine gender mean and include
correlative words of the feminine gender. Paragraph headings are for convenience
only and shall not be considered a part of the terms and provisions of the
Agreement.
<PAGE> 106
IN WITNESS WHEREOF, Company and Parent have caused this Agreement to be
executed by a duly authorized officer, and Executive has hereunto set
Executive's hand, this 15th day of December, 1998.
The Connecticut Water Company
By /s/ Marshall T. Chiaraluce
-----------------------------
Marshall T. Chiaraluce
Connecticut Water Service, Inc.
By /s/ Michele G. DiAcri
-----------------------------
Michele G. DiAcri
/s/ Maureen P. Westbrook
-------------------------------
Maureen P. Westbrook
Executive
<PAGE> 107
ATTACHMENT A
RELEASE
We advise you to consult an attorney before you sign this Release. You
have until the date which is seven (7) days after the Release is signed and
returned to ____________________ ("Company") to change your mind and revoke your
Release. Your Release shall not become effective or enforceable until after that
date.
In consideration for the benefits provided under your Employment
Agreement dated ___________________ with Company and _________________
("Parent"), and more specifically enumerated in Exhibit 1 hereto, by your
signature below you agree to accept such benefits and not to make any claims of
any kind against Company, its past and present and future parent corporations,
subsidiaries, divisions, subdivisions, affiliates and related companies or their
successors and assigns, including without limitation Parent, or any and all
past, present and future Directors, officers, fiduciaries or employees of any of
the foregoing (all parties referred to in the foregoing are hereinafter referred
to as the "Releasees") before any agency, court or other forum, and you agree to
release the Releasees from all claims, known or unknown, arising in any way from
any actions taken by the Releasees up to the date of this Release, including,
without limiting the foregoing, any claim for wrongful discharge or breach of
contract or any claims arising under the Age Discrimination in Employment Act of
1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act of 1990, the Employee Retirement Income Security Act of 1974, Connecticut's
Fair Employment Practices Act or any other federal, state or local statute or
regulation and any claim for attorneys' fees, expenses or costs of litigation.
THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL
HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM
AGAINST THE RELEASEES BASED ON ANY ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE
OF THIS RELEASE.
By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully understand its
terms;
2. You have had at least twenty-one (21) days to consider the
terms of the Release;
3. You have seven (7) days from the date you sign this Release to
revoke it by written notification to Company. After this seven (7) day period,
this Release is final and binding and may not be revoked;
4. You have been advised to seek legal counsel and have had an
opportunity to do so;
<PAGE> 108
5. You would not otherwise be entitled to the benefits provided
under your Employment Agreement with Company and Parent had you not agreed to
waive any right you have to bring a lawsuit or legal claim against the
Releasees; and
6. Your agreement to the terms set forth above is voluntary.
Name:_________________________________
Signature: ___________________________ Date:___________________
Received by:__________________________ Date:___________________
<PAGE> 109
EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL
BENEFITS AND PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.
Acknowledged and Agreed:
THE CONNECTICUT WATER COMPANY EXECUTIVE
By _______________________________ ______________________
Its
CONNECTICUT WATER SERVICE, INC.
By _______________________________
Its
<PAGE> 110
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
BETWEEN
THE CONNECTICUT WATER COMPANY
CONNECTICUT WATER SERVICE, INC.
AND
Terrance P. O'Neill
<PAGE> 111
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of December 15, 1998 is made by and between
The Connecticut Water Company, a Connecticut corporation having its principal
place of business in Clinton, Connecticut, ("Company"), Connecticut Water
Service, Inc., a Connecticut corporation and holder of all of the outstanding
capital stock of Company ("Parent") and Terrance P. O'Neill, a resident of
Connecticut ("Executive").
W I T N E S S E T H :
WHEREAS, Executive has been and continues to be employed by Company and
Parent in an executive capacity and has entered into an Employment Agreement
between Executive and Company and Parent dated as of the 15th day of December,
1998 which becomes effective upon a "Change-in-Control," as defined herein, of
Company or Parent; and
WHEREAS, the Boards of Directors of Company and Parent have determined
that it is in the best interest of Company and Parent to continue such
Employment Agreement on the terms herein set forth so as to assure that Company
and Parent will have the dedication of Executive, notwithstanding the
possibility, threat, or occurrence of a Change-in-Control of Company or Parent
by providing Executive with compensation arrangements upon a Change-in-Control
which are competitive with those of other corporations; and
WHEREAS, Executive, Company and Parent are willing to enter into this
Amended and Restated Employment Agreement ("Agreement") on the terms herein set
forth;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Cause" shall mean Executive's serious, willful misconduct
in respect of Executive's duties under this Agreement, including conviction for
a felony or perpetration by Executive of a common law fraud upon Company or
Parent which has resulted or is likely to result in material economic damage to
Company or Parent, as determined by a vote of at least seventy-five percent
(75%) of all of the Directors (excluding Executive) of each of Company's and
Parent's Board of Directors;
<PAGE> 112
(b) "Change-in-Control" shall be deemed to have occurred if
after the date hereof (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 Securities Exchange Act of 1934 (the "Act") disclosing
that any Person (as defined below), other than Company or Parent or any employee
benefit plan sponsored by Company or Parent, is the beneficial owner (as the
term is defined in Rule 13d-3 under the Act) directly or indirectly, of twenty
percent (20%) or more of the total voting power represented by Company's or
Parent's then outstanding voting common stock (calculated as provided in
paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire
voting common stock); or (ii) any Person, other than Company or Parent or any
employee benefit plan sponsored by Company or Parent, shall purchase shares
pursuant to a tender offer or exchange offer to acquire any voting common stock
of Company or Parent (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 question is the beneficial owner
directly or indirectly, of twenty percent (20%) or more of the total voting
power represented by Company's or Parent's then outstanding voting common stock
(all as calculated under clause (i)); or (iii) the stockholders of Company or
Parent shall approve (A) any consolidation or merger of Company or Parent in
which Company or Parent is not the continuing or surviving corporation (other
than a merger of Company or Parent in which holders of the outstanding capital
stock of Company or Parent 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 Parent 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 Parent; or (iv) there shall have been
a change in the composition of the Board of Directors of Company or Parent 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 Parent, by a vote of a majority of all the
Directors (excluding Executive) adopts a resolution to the effect that a
"Change-in-Control" has occurred for purposes of this Agreement.
(c) "Disability" shall mean the incapacity of Executive by
illness or any other cause as determined under the long-term disability
insurance plan of Company in effect at the time in question, or if no such plan
is in effect, then such incapacity of Executive as prevents Executive from
performing the essential functions of Executive's position with or without
reasonable accommodation for a period in excess of two hundred forty (240) days
(whether or not consecutive), or one hundred eighty (180) days consecutively, as
the case may be, during any twelve (12) month period.
(d) "Effective Date" shall be the date on which a
Change-in-Control occurs. Anything in this Agreement to the contrary
notwithstanding, if Executive's employment is terminated prior to the date on
which a Change-in-Control occurs, and it is reasonably demonstrated that such
termination (i) was at the request of a third party who has taken steps
<PAGE> 113
reasonably calculated to effect a Change-in-Control or (ii) otherwise arose in
connection with or anticipation of a Change-in-Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination.
(e) "Good Reason" shall mean the occurrence of any action
which (i) removes or changes Executive's title or reduces Executive's job
responsibilities or base salary; (ii) results in a significant worsening of
Executive's work conditions; or (iii) moves Executive's place of employment to a
location that increases Executive's commute by more than thirty (30) miles over
the length of Executive's commute from Executive's place of principal residence
at the time the move is requested. For purposes of this subparagraph (e), any
good faith determination by Executive that any such action has occurred shall be
conclusive.
(f) "Person" shall mean any individual, corporation,
partnership, company or other entity, and shall include a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934.
2. EMPLOYMENT.
(a) As of the Effective Date, Company hereby agrees to
continue to employ Executive and Executive agrees to remain in the employ of
Company for the Term of this Agreement upon the terms and conditions hereinafter
set forth. Subject to the provisions of subparagraph (b) of this Paragraph 2,
and to the provisions of Paragraph 6 below, "Term" shall mean a continuously
renewing period of three (3) years commencing on the Effective Date.
(b) At any time during the Term, the Board of Directors of
Company and Parent may, by written notice to Executive, advise Executive of
their desire to modify or amend any of the terms or provisions of this Agreement
or to delete or add any terms or provisions. Any such notice ("Notice") shall
describe the proposed modifications in reasonable detail. In the event a Notice
shall be given to Executive, then Company, Parent and Executive agree to discuss
the proposed modification(s) and to attempt in good faith to reach agreement
with respect thereto and to reduce such agreement to writing in an amendment to
be executed by all the parties ("Amendment"). If a Notice is given hereunder and
an Amendment shall not have been executed on or before the sixtieth (60th) day
following the date on which Notice is given, then the Term shall thereupon be
automatically converted to a fixed period ending three (3) years after the
expiration of such sixty (60) days.
3. DUTIES OF EMPLOYMENT.
(a) During the Term, Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the ninety (90)-day period immediately preceding the Effective Date and
Executive's services shall be performed at such location as Executive shall
determine.
<PAGE> 114
(b) During the Term, Executive will serve Company faithfully,
diligently and competently and will devote full-time to Executive's employment
and will hold, in addition to the offices held on the Effective Date, such other
executive offices of Company or Parent, or their respective subsidiaries and
affiliates, to which Executive may be elected, appointed or assigned by the
Boards of Directors of Company or Parent from time to time and will discharge
such executive duties in connection therewith. Nothing in this Agreement shall
preclude Executive, with the prior approval of the Board of Directors of
Company, from devoting reasonable periods of time required for (i) serving as a
director or member of a committee of any organization involving no conflict of
interest with Company or Parent, or (ii) engaging in charitable, religious and
community activities, provided, that such directorships, memberships or
activities do not materially interfere with the performance of Executive's
duties hereunder.
4. COMPENSATION. During the Term, Company shall pay to Executive as
compensation for the services to be rendered by Executive hereunder the
following:
(a) A base salary at a rate equal to the highest base salary
paid or payable to Executive by Company during the twelve (12)-month period
immediately preceding the month in which the Effective Date occurs, or such
larger sum as the Board of Directors of Company may from time to time determine
in connection with regular periodic performance reviews pursuant to Company's
policies and practices. Such compensation shall be payable in accordance with
the normal payroll practices of Company. Executive shall receive an annual
increase in base salary at each normal pay adjustment date during the Term, but
no later than one (1) year after the date of Executive's last increase and
annually thereafter during the Term, of not less than the percentage increase in
the cost-of-living since Executive's last pay adjustment, as measured by the
Consumer Price Index-All Urban Consumers of the U.S. Bureau of Labor Statistics.
(b) In addition, Company shall pay to Executive an annual
bonus, payable in cash or other form of compensation, in accordance with the
Company's practice or plan for annual bonuses for peer executives which is at
least equal to the average bonus, if any, payable to Executive from Company in
respect of the three (3) fiscal years immediately preceding the fiscal year in
which the Effective Date occurs.
5. BENEFITS. During the Term, Executive shall be entitled to the
following benefits:
(a) Incentive, Savings and Retirement Plans. In addition to
base salary and bonus payable as hereinabove provided, Executive shall be
entitled to participate during the Term in all incentive, savings and retirement
plans, practices, policies and programs applicable to executive employees of
Company as may be in effect from time to time. Such plans, practices, policies
and programs, in the aggregate, shall provide Executive with compensation,
benefits and reward opportunities at least as favorable as the most favorable of
such compensation, benefits and reward opportunities provided by Company for
Executive under such plans, practices, policies and programs as in effect at any
time during the ninety (90)-day period immediately preceding the Effective Date
or, if more favorable to Executive, as provided at any time thereafter with
respect to other key employees of Company or Parent.
<PAGE> 115
(b) Welfare Benefit Plans. During the Term, Executive and/or
Executive's family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices, policies
and programs applicable to executive employees of Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) at least as favorable as the most favorable of such plans,
practices, policies and programs in effect at any time during the ninety
(90)-day period immediately preceding the Effective Date or, if more favorable
to Executive and/or Executive's family, as in effect at any time thereafter with
respect to other key employees of Company or Parent.
(c) Expenses. During the Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by Executive
in accordance with the most favorable policies, practices and procedures of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(d) Fringe Benefits. During the Term, Executive shall be
entitled to fringe benefits, including use of an automobile and payment of
related expenses or payment of an allowance for automobile related expenses, in
accordance with the most favorable plans, practices, programs and policies of
Company in effect at any time during the ninety (90)-day period immediately
preceding the Effective Date or, if more favorable to Executive, as in effect at
any time thereafter with respect to other key employees of Company or Parent.
(e) Office and Support Staff. During the Term, Executive shall
be entitled to an office or offices of a size and with furnishings and other
appointments, and to secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to Executive by Company at any time
during the ninety (90)-day period immediately preceding the Effective Date or,
if more favorable to Executive, as provided at any time thereafter with respect
to other key employees of Company or Parent.
(f) Vacation. During the Term, Executive shall be entitled to
paid vacation in accordance with the most favorable plans, policies, programs
and practices of Company as in effect at any time during the ninety (90)-day
period immediately preceding the Effective Date or, if more favorable to
Executive, as in effect at any time thereafter with respect to other key
employees of Company or Parent.
6. END OF TERM AND NOTICE OF TERMINATION.
(a) End of Term. The Term shall end upon the occurrence of any
of the following events:
(i) Termination of Executive's employment by Company
for Cause.
(ii) The voluntary termination of Executive's
employment by Executive other than for Good Reason.
<PAGE> 116
(iii) The death of Executive.
(iv) Executive's attainment of age sixty-five (65).
(v) Full compliance by Company with the provisions of
Paragraph 7(e) below, if Executive's employment shall have been terminated by
Company during the Term for any reason other than Cause, or if Executive's
employment shall have been terminated by reason of Executive's Disability, or if
Executive shall have voluntarily terminated Executive's employment during the
Term for Good Reason.
(b) Notice of Termination. Any termination by Company for
Cause or by Executive for Good Reason or on account of Executive's Disability
shall be communicated by notice to the other party hereto given in accordance
with Section 16 of this Agreement. For purposes of this Agreement, a "notice"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) if the date of termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice).
(c) Date of Termination. The date of termination means the
date of receipt of the notice of termination or any later date specified
therein, as the case may be; provided, however, that (i) if Executive's
employment is terminated by Company other than for Cause or on account of
Executive's Disability, the date of termination shall be the date on which
Company notifies Executive of such termination and (ii) if Executive's
employment is terminated by reason of death, the date of termination shall be
the date of death of Executive.
7. PAYMENT UPON TERMINATION.
(a) If Executive's employment is terminated by Company for
Cause, as defined in Paragraph 1(a), the obligations of Company under this
Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only compensation or
benefits accrued or earned and vested (if applicable) by Executive as of the
date of termination, including base salary through the date of termination,
benefits payable under the terms of any qualified or nonqualified retirement
plans or deferred compensation plans maintained by Company, any accrued vacation
pay as of the date of termination not yet paid by Company and any benefits
required to be paid by law such as continued health care coverage pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
(collectively, the "Accrued Obligations").
(b) If Executive shall voluntarily terminate Executive's
employment during the Term other than for Good Reason, as defined in Paragraph
1(e), the obligations of Company under this Agreement shall cease and Executive
shall forfeit all right to receive any compensation or other benefits under this
Agreement except only the Accrued Obligations.
<PAGE> 117
(c) In the event of the death of Executive during the Term,
then, in addition to the Accrued Obligations and any other benefits which may be
payable by Company in respect of the death of Executive, the base salary then
payable hereunder shall continue to be paid at the then current rate for a
period of six (6) months after such death to such beneficiary as shall have been
designated in writing by Executive, or if no effective designation exists, then
to the estate of Executive.
(d) If Executive's employment is terminated by reason of
Executive's attainment of age sixty-five (65), the obligations of Company under
this Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only the Accrued
Obligations.
(e) If Executive's employment is terminated by Company during
the Term for any reason other than for Cause, or Executive's death, or
Executive's attainment of age sixty- five (65), or if Executive's employment is
terminated during the Term by reason of Executive's Disability, or if Executive
shall voluntarily terminate Executive's employment during the Term for Good
Reason, Executive shall be entitled to receive, and Company shall be obligated
to pay and provide Executive, the following amounts:
(i) An amount in consideration of the covenants by
Executive set forth in Paragraphs 8 and 9 below to be determined by an
independent certified public accounting firm selected by Executive and retained
by Company to be the reasonable value of said covenants as of the date of
termination of Executive's employment. Said amount shall be paid in cash in a
lump sum in the month next following Executive's date of termination of
employment and shall be treated as a supplemental wage payment under applicable
Treasury Regulations subject to federal tax withholding at the flat percentage
rate applicable thereto.
(ii) An amount equal to three (3) times the base
salary of Executive, at the rate in effect immediately prior to the date of
termination, plus an amount equal to three (3) times the bonus paid or payable
with respect to the fiscal year immediately preceding the date of termination
or, if higher, three (3) times the average bonus payable to Executive in respect
of the three (3) full fiscal years immediately preceding the Effective Date.
There shall be subtracted from the aggregate amount determined in accordance
with the immediately preceding sentence the amount payable to Executive pursuant
to subparagraph (e)(i) above in respect of the covenants by Executive set forth
in Paragraphs 8 and 9 below and the amount, if any, payable to Executive under
any then effective severance pay plan of Company. Such resulting amount shall be
payable in equal installments over the three (3)-year period commencing on the
date of termination of employment in accordance with the normal payroll
practices of Company or, at Company's option, the entire amount (determined
without any discount) shall be paid in cash in a lump sum in the month next
following Executive's date of termination of employment and shall be treated as
a supplemental wage payment under applicable Treasury Regulations subject to
federal tax withholding at the flat percentage rate applicable thereto.
<PAGE> 118
(iii) An amount equal to the aggregate amounts that
Company would have contributed on behalf of Executive under Company's qualified
defined contribution retirement plan(s), if any such plan(s) shall be in effect
(other than amounts attributable to Executive's before-tax contributions to such
plan(s)) plus estimated earnings thereon had Executive continued in the employ
of Company for the three (3)-year period commencing on the date of termination
and made contributions under said plan(s) at a rate, as a percentage of salary,
equal to the rate at which Executive had made contributions to said plan(s) in
the plan year immediately preceding Executive's termination, to be payable in a
lump sum to Executive within thirty (30) days after the expiration of the
non-competition period specified in Paragraph 9(a) of this Agreement, provided
that Executive shall not have breached said non-competition provisions.
(iv) An amount equal to the difference between: (A)
benefits which would have been payable to Executive under any deferred
compensation agreement between Company and Executive, if any such agreement
shall be in effect, had Executive continued in the employ of Company for the
three (3)-year period commencing on the date of termination, received
compensation at least equal to that specified in Paragraph 4 of this Agreement
during such time, and deferred pursuant to said deferred compensation agreement
the amount of compensation specified therein; and (B) the benefits actually
payable to Executive under such deferred compensation agreement; such amount to
be payable in a lump sum to Executive within thirty (30) days after the
expiration of the non-competition period specified in Paragraph 9(a) of this
Agreement, provided that Executive shall not have breached said non-competition
provisions.
(v) Additional retirement benefits equal to the
difference between: (A) the annual pension benefits that would have been payable
to Executive under Company's qualified defined benefit retirement plan (the
"Plan") and under any nonqualified supplemental executive retirement plan
covering Executive (the "Supplemental Plan"), if any such Plan or Supplemental
Plan shall be in effect, if Executive had been continued in the employ of
Company for the three (3)-year period commencing on the date of termination and
had received compensation at least equal to that specified in Paragraph 4(a) of
this Agreement during such time and had been fully vested in the benefits
payable under any such Plan and Supplemental Plan; and (B) the annual benefits
actually payable to Executive under any such Plan and Supplemental Plan. The
discounted present value of such additional benefits, shall be payable to
Executive in a lump sum, as calculated by the independent actuary for the Plan
using the assumptions specified in the Plan, within thirty (30) days after the
expiration of the non-competition period specified in Paragraph 9(a) of this
Agreement, provided that Executive shall not have breached said non-competition
provisions.
(vi) At the date of termination of Executive's
employment, Executive shall be fully vested in any form of compensation
previously granted to Executive (other than benefits payable under a qualified
retirement plan), such as, by way of example only, restricted stock, stock
options, and performance share awards.
<PAGE> 119
(vii) If Executive's employment is terminated by
reason of Executive's Disability, Executive shall be entitled to receive, in
addition to the other benefits provided under this Paragraph 7(e), disability
benefits at least equal to the most favorable of those provided by Company or
Parent to disabled employees in accordance with the most favorable plans,
programs, practices and policies of Company or Parent in effect at any time
during the ninety (90)-day period immediately preceding the Effective Date or,
if more favorable to Executive, as in effect on the date of Executive's
Disability with respect to other key employees of Company or Parent.
(viii) During the three (3)-year period commencing on
the date of termination, or such longer period as any plan, program, practice or
policy may provide, Executive shall continue to participate in all life, health,
disability and similar welfare benefit plans and programs of Company to the
extent that such continued participation is possible under the general terms and
provisions of such plans and programs, and Executive shall be credited with
additional service attributable to the three (3)-year period commencing on the
date of termination for purposes of determining eligibility to participate in
any such plans or programs maintained by Company for retirees, with Company and
Executive paying the same portion of the cost of each such plan or program as
existed at the time of Executive's termination. In the event that Executive's
continued participation (or commencement of participation for plans or programs
for retirees) is not permitted, then in lieu thereof, Company shall acquire,
with the same cost sharing, individual insurance policies providing comparable
coverage for Executive; provided, however, that Company shall not be obligated
to pay more than three (3) times Company's current cost for comparable group
coverage. If any such individual coverage is unavailable, then Company shall pay
to Executive annually for the three (3)-year period commencing on the date of
termination an amount equal to the sum of the average annual contributions,
payments, credits, or allocations made by Company for such coverage on
Executive's behalf (or the average such contributions, payments, credits, or
allocations for retirees, in the case of retiree coverage) over the three (3)
calendar years preceding the date of termination of Executive's employment.
(ix) During the three (3)-year period commencing on
the date of termination, Executive shall continue to receive such perquisites,
other than those specified in the preceding subparagraphs above, as Executive
was receiving at the date of termination of employment with, to the extent
applicable, the same cost sharing with Company as was in effect immediately
prior to Executive's termination of employment.
(x) Company shall reimburse Executive for the amount
of any reasonable legal or accounting fees and expenses incurred by Executive to
obtain or enforce any right or benefit provided to Executive by Company
hereunder or as confirmed or acknowledged hereunder.
<PAGE> 120
8. CONFIDENTIAL INFORMATION. Executive understands that in the course
of Executive's employment by Company, Executive will receive or have access to
confidential information concerning the business or purposes of Company and
Parent, and which Company and Parent desire to protect. Such confidential
information shall be deemed to include, but not be limited to, Company's
customer lists and information, and employee lists, including, if known,
personnel information and data. Executive agrees that Executive will not, at any
time during the period ending two (2) years after the date of termination of
Executive's employment, reveal to anyone outside Company or Parent or use for
Executive's own benefit any such information without specific written
authorization by Company or Parent. Executive further agrees not to use any such
confidential information or trade secrets in competing with Company or Parent at
any time during or in the two (2) year period immediately following the date of
termination of Executive's employment with Company.
9. COVENANTS BY EXECUTIVE NOT TO COMPETE WITH COMPANY OR PARENT.
(a) Upon the date of termination of Executive's employment
with Company for any reason, Executive covenants and agrees that Executive will
not at any time during the period of two (2) years from and after such date of
termination directly or indirectly in any manner or under any circumstances or
conditions whatsoever be or become interested, as an individual, partner,
principal, agent, clerk, employee, stockholder, officer, director, trustee, or
in any other capacity whatsoever, except as a nominal owner of stock of a public
corporation, in any other business which, at the date of Executive's
termination, is a Competitor (as defined herein), either directly or indirectly,
with Company or Parent, or engage or participate in, directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of an
equity or debt investment, lender or in any other manner or capacity), or lend
Executive's name (or any part or variant thereof) to, any business which, at the
date of Executive's termination, is a Competitor, either directly or indirectly,
with Company or Parent, or as a result of Executive's engagement or
participation would become, a Competitor, either directly or indirectly, with
any aspect of the business of Company or Parent as it exists at the time of
Executive's termination, or solicit any officer, director, employee or agent of
Company or Parent or any subsidiary or affiliate of Company or Parent to become
an officer, director, employee or agent of Executive, Executive's respective
affiliates or anyone else. Ownership, in the aggregate, of less than one percent
(1 %) of the outstanding shares of capital stock of any corporation with one or
more classes of its capital stock listed on a national securities exchange or
publicly traded in the over-the-counter market shall not constitute a violation
of the foregoing provision. For the purposes of this Agreement, a Competitor is
any business which is similar to the business of Company or Parent or in any way
in competition with the business of Company or Parent within any of the
then-existing water utility service areas of Company.
(b) Executive hereby acknowledges that Executive's services
are unique and extraordinary, and are not readily replaceable, and hereby
expressly agrees that Company and Parent, in enforcing the covenants contained
in Paragraphs 8 and 9 herein, in addition to any other remedies provided for
herein or otherwise available at law, shall be entitled in any court of equity
having jurisdiction to an injunction restraining Executive in the event of a
breach, actual or threatened, of the agreements and covenants contained in these
Paragraphs.
<PAGE> 121
(c) The parties hereto believe that the restrictive covenants
of these Paragraphs are reasonable. However, if at any time it shall be
determined by any court of competent jurisdiction that these Paragraphs or any
portion of them as written, are unenforceable because the restrictions are
unreasonable, the parties hereto agree that such portions as shall have been
determined to be unreasonably restrictive shall thereupon be deemed so amended
as to make such restrictions reasonable in the determination of such court, and
the said covenants, as so modified, shall be enforceable between the parties to
the same extent as if such amendments had been made prior to the date of any
alleged breach of said covenants.
(d) The provisions of this Paragraph 9 shall not apply if
Company and Parent shall be prohibited under Paragraph 15 below from making any
payments to Executive pursuant to Paragraph 7 above.
10. NO OBLIGATION TO MITIGATE. So long as Executive shall not be in
breach of any provision of Paragraph 8 or 9, Executive shall have no duty to
mitigate damages in the event of a termination and if Executive voluntarily
obtains other employment (including self-employment), any compensation or
profits received or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Company and Parent to
make payments hereunder.
11. RESIGNATION. In the event that Executive's services hereunder are
terminated under any of the provisions of this Agreement (except by death),
Executive agrees that Executive will deliver Executive's written resignation as
an officer of Company or Parent, or their subsidiaries and affiliates, to the
Board of Directors, such resignation to become effective immediately, or, at the
option of the Board of Directors, on a later date as specified by the Board.
12. INSURANCE. Company shall have the right at its own cost and expense
to apply for and to secure in its own name, or otherwise, life, health or
accident insurance or any or all of them covering Executive, and Executive
agrees to submit to the usual and customary medical examination and otherwise to
cooperate with Company in connection with the procurement of any such insurance,
and any claims thereunder.
13. RELEASE. As a condition of receiving payments or benefits provided
for in this Agreement, at the request of Company or Parent, Executive shall
execute and deliver for the benefit of Company and Parent, and any subsidiary or
affiliate of Company or Parent, a general release in the form set forth in
Attachment A, and such release shall become effective in accordance with its
terms. The failure or refusal of Executive to sign such a release or the
revocation of such a release shall cause the termination of any and all
obligations of Company and Parent to make payments or provide benefits
hereunder, and the forfeiture of the right of Executive to receive any such
payments and benefits. Executive acknowledges that Company and Parent have
advised Executive to consult with an attorney prior to signing this Agreement
and that Executive has had an opportunity to do so.
<PAGE> 122
14. BENEFITS LIMITATION. Notwithstanding any other provision of this
Agreement, in the event that any payment or benefit received or to be received
by Executive under this Agreement (a "Payment") would be subject to the excise
tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any successor to such Section, as determined
by a nationally recognized independent certified public accounting firm selected
by Executive (the "Tax Advisor"), then such Payment shall be reduced to the
extent necessary to avoid the application of the Excise Tax, but only if such
reduction would result in Executive's receipt of a greater Payment on an
after-tax basis than would be receivable by Executive had such Excise Tax been
paid. For purposes of this limitation, (a) no portion of any payment, whether
pursuant to this Agreement or any other plan or agreement, the receipt of which
Executive, in the determination of the Tax Advisor, shall have effectively
waived prior to the date which is fifteen (15) days following the date of
termination of Executive's employment and prior to the earlier of the date of
constructive receipt and the date of payment thereof shall be taken into
account; and (b) any reduction in the Payment made pursuant to this Paragraph
shall be made from the payments and benefits to be made pursuant to clauses (i)
through (x) of Paragraph 7(e), in such order as may be determined by Executive,
except to the extent that such payments and benefits, in the determination of
the Tax Advisor, are reasonable compensation within the meaning of Section 280G
of the Code. The determination of the Tax Advisor as provided herein shall be
completed not later than forty-five (45) days following Executive's date of
termination of employment, and such determination shall be communicated in
writing to Company, with a copy to Executive, within said forty-five (45) day
period. The determination of the Tax Advisor as provided herein shall be deemed
conclusive and binding on Company and Executive. Company shall pay the fees and
other costs of the Tax Advisor hereunder.
15. REGULATORY LIMITATION. Notwithstanding any other provision of this
Agreement, Company shall not be obligated to make, and Executive shall have no
right to receive, any payment, benefit or amount under this Agreement which
would violate any law, regulation or regulatory order applicable to Company or
Parent at the time such payment, benefit or amount is due ("Prohibited
Payment"). If and to the extent Company shall at a later date be relieved of the
restriction on its ability to make any Prohibited Payment, then at such time
Company or Parent shall promptly make payment of any such amounts to Executive.
16. NOTICES. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person to Executive or to the
Secretary of Company and Parent, or if mailed, postage prepaid, registered or
certified mail, addressed, in the case of Executive, to Executive's last known
address as carried on the personnel records of Company, and, in the case of
Company and Parent, to the corporate headquarters, attention of the Secretary,
or to such other address as the party to be notified may specify by notice to
the other party.
<PAGE> 123
17. SUCCESSORS AND BINDING AGREEMENT.
(a) Company and Parent will require any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of Company and/or Parent, as the
case may be, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that Company and Parent are required to perform
it. Failure of Company and Parent to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Executive to compensation and benefits from Company and Parent
in the same amount and on the same terms as Executive would be entitled
hereunder if Executive had terminated employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date on which Executive's
employment with Company was terminated. As used in this Agreement, "Company" and
"Parent" shall include any successor to Company's and/or Parent's, as the case
may be, business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of, and be
enforceable by, Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive dies while any amount is still payable hereunder, all such amounts
shall be paid in accordance with the terms of this Agreement to Executive's
devisee, legatee or other designee or, if there is no such designee, to
Executive's estate.
18. ARBITRATION. Any dispute which may arise between the parties hereto
may, if both parties agree, be submitted to binding arbitration in the State of
Connecticut in accordance with the Rules of the American Arbitration
Association; provided that any such dispute shall first be submitted to
Company's Board of Directors in an effort to resolve such dispute without resort
to arbitration.
19. SEVERABILITY. If any of the terms or conditions of this Agreement
shall be declared void or unenforceable by any court or administrative body of
competent jurisdiction, such term or condition shall be deemed severable from
the remainder of this Agreement, and the other terms and conditions of this
Agreement shall continue to be valid and enforceable.
20. AMENDMENT. This Agreement may be modified or amended only by an
instrument in writing executed by the parties hereto.
21. CONSTRUCTION. This Agreement shall supersede and replace all prior
agreements and understandings between the parties hereto on the subject matter
covered hereby. This Agreement shall be governed and construed under the laws of
the State of Connecticut. Words of the masculine gender mean and include
correlative words of the feminine gender. Paragraph headings are for convenience
only and shall not be considered a part of the terms and provisions of the
Agreement.
<PAGE> 124
IN WITNESS WHEREOF, Company and Parent have caused this Agreement to be
executed by a duly authorized officer, and Executive has hereunto set
Executive's hand, this 15th day of December, 1998.
The Connecticut Water Company
By /s/ Marshall T. Chiaraluce
-----------------------------
Marshall T. Chiaraluce
Connecticut Water Service, Inc.
By /s/ Michele G. DiAcri
-----------------------------
Michele G. DiAcri
/s/ Terrance P. O'Neill
-----------------------------
Terrance P. O'Neill
Executive
<PAGE> 125
ATTACHMENT A
RELEASE
We advise you to consult an attorney before you sign this Release. You
have until the date which is seven (7) days after the Release is signed and
returned to ____________________ ("Company") to change your mind and revoke your
Release. Your Release shall not become effective or enforceable until after that
date.
In consideration for the benefits provided under your Employment
Agreement dated _________________________ with Company and _____________________
("Parent"), and more specifically enumerated in Exhibit 1 hereto, by your
signature below you agree to accept such benefits and not to make any claims of
any kind against Company, its past and present and future parent corporations,
subsidiaries, divisions, subdivisions, affiliates and related companies or their
successors and assigns, including without limitation Parent, or any and all
past, present and future Directors, officers, fiduciaries or employees of any of
the foregoing (all parties referred to in the foregoing are hereinafter referred
to as the "Releasees") before any agency, court or other forum, and you agree to
release the Releasees from all claims, known or unknown, arising in any way from
any actions taken by the Releasees up to the date of this Release, including,
without limiting the foregoing, any claim for wrongful discharge or breach of
contract or any claims arising under the Age Discrimination in Employment Act of
1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act of 1990, the Employee Retirement Income Security Act of 1974, Connecticut's
Fair Employment Practices Act or any other federal, state or local statute or
regulation and any claim for attorneys' fees, expenses or costs of litigation.
THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL
HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM
AGAINST THE RELEASEES BASED ON ANY ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE
OF THIS RELEASE.
By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully understand its terms;
2. You have had at least twenty-one (21) days to consider the terms of
the Release;
3. You have seven (7) days from the date you sign this Release to
revoke it by written notification to Company. After this seven (7) day period,
this Release is final and binding and may not be revoked;
4. You have been advised to seek legal counsel and have had an
opportunity to do so;
<PAGE> 126
5. You would not otherwise be entitled to the benefits provided under
your Employment Agreement with Company and Parent had you not agreed to waive
any right you have to bring a lawsuit or legal claim against the Releasees; and
6. Your agreement to the terms set forth above is voluntary.
Name:
---------------------------------------------
Signature: Date:
---------------------------------------- ---------------
Received by: Date:
-------------------------------------- ---------------
<PAGE> 127
EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL
BENEFITS AND PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.
Acknowledged and Agreed:
THE CONNECTICUT WATER COMPANY EXECUTIVE
By
-------------------------------------- -------------------------
Its
CONNECTICUT WATER SERVICE, INC.
By
--------------------------------------
Its
<PAGE> 1
EXHIBIT 10.10
SAVINGS PLAN OF
THE CONNECTICUT WATER COMPANY
Amended and Restated as of
January 1, 1999
(except as otherwise indicated herein)
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I NAME OF PLAN
ARTICLE II DEFINITIONS
ARTICLE III ADMINISTRATION
ARTICLE IV PARTICIPATION
ARTICLE V CONTRIBUTIONS BY EMPLOYEES
ARTICLE VI CONTRIBUTIONS BY THE EMPLOYER
ARTICLE VII INVESTMENT OF CONTRIBUTIONS
ARTICLE VIII ALLOCATION OF CONTRIBUTIONS
ARTICLE IX VESTING
ARTICLE X PAYMENT OF BENEFITS
ARTICLE XI WITHDRAWALS FROM ACCOUNTS
ARTICLE XII LOANS TO PARTICIPANTS
ARTICLE XIII TERMINATION OF PLAN
ARTICLE XIV AMENDMENT OF PLAN
ARTICLE XV CLAIMS PROCEDURE
ARTICLE XVI THE TRUSTEE
ARTICLE XVII MISCELLANEOUS PROVISIONS
ARTICLE XVIII TOP-HEAVY PLAN PROVISIONS
<PAGE> 3
SAVINGS PLAN OF THE CONNECTICUT WATER COMPANY
WHEREAS, The Connecticut Water Company heretofore established a savings
plan for its employees effective January 1, 1985;
WHEREAS; under the terms of the Plan, the Employer has the ability to
amend the Plan;
WHEREAS, the Plan, which has been amended from time to time, was
restated in its entirety effective as of January 1, 1989, October 1, 1995 and
January 1, 1996;
NOW, THEREFORE, the following plan is hereby adopted by The Connecticut
Water Company to be effective January 1, 1999, except as otherwise indicated
herein:
<PAGE> 4
ARTICLE I
NAME OF PLAN
1.1 The name of this Savings Plan, as amended from time to time, shall
be the "Savings Plan of The Connecticut Water Company" (hereinafter the "Plan").
<PAGE> 5
ARTICLE II
DEFINITIONS
When used herein, each of the following terms shall have the
corresponding meaning set forth below unless a different meaning is plainly
required by the context in which a term is used:
2.1 "Account" shall mean collectively the Participant's Employee Salary
Deferral Contribution Account, Rollover Account, Additional Employee
Contribution Account, and Employer Contribution Account, whether or not such
accounts have actually been combined into one account.
2.2 "Accrued Balance" shall mean the balance of a Participant's
Account.
2.3 "Act" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and all regulations issued pursuant thereto.
2.4 "Additional Employee Contribution" shall mean any contribution by
an Employee to the Trust Fund as provided for in Section 5.2 hereof.
2.5 "Additional Employee Contribution Account" shall mean the account
of a Participant as provided for in Section 8.2 hereof.
II-1
<PAGE> 6
2.6 "Administrator" shall mean the person or persons designated by the
Committee, pursuant to Section 3.5 hereof, as the Administrator of the Plan,
within the meaning of Section 3(16)(A) of the Act.
2.7 "Affiliated Company" shall mean any company which is included
within a "controlled group of corporations" within which the Company is also
included, as determined under Section 1563 of the Code without regard to
subsections (a)(4) and (e)(3)(c) of said Section 1563. Notwithstanding the
foregoing, with respect to the benefit limitations set forth in Paragraphs 8.5
and 8.6 of this Plan, such determination under Section 1563 shall be made
assuming the phrase "more than 50 percent" were substituted for the phrase "at
least 80 percent" each place it appears in Section 1563(a)(1).
2.8 "Beneficiary" shall mean a Participant's surviving spouse, if any,
or any other person designated by a Participant who is entitled to receive any
benefits payable hereunder upon the Participant's death pursuant to Section 10.5
hereof, or the executor or administrator of the Participant's estate if there is
no surviving spouse and if no other Beneficiary shall have been effectively
designated by the Participant.
2.9 "Board" shall mean the Board of Directors of the Company.
2.10 "Calendar Quarter" shall mean each calendar quarter beginning on
the first day of January, April, July or October in each calendar year.
II-2
<PAGE> 7
2.11 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and all regulations issued pursuant thereto.
2.12 "Code Section 415 Compensation" shall mean with respect to any
Participant such Participant's wages as defined in Code Section 3401(a) and all
other payments of compensation by the Employer (in the course of the Employer's
trade or business) for a Plan Year for which the Employer is required to furnish
the Participant a written statement under Code Sections 6041(d), 6051(a)(3) and
6052, without regard to any rules under Code Section 3401(a) that limit the
remuneration included in wages based on the nature or location of the employment
or the services performed.
For Plan Years beginning after December 31, 1997, for purposes of this
Section, the determination of "Code Section 415 Compensation" shall be made by
including amounts which are contributed by the Employer pursuant to a salary
reduction agreement and which are not includible in the gross income of the
Participant under Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b).
2.13 "Committee" shall mean the Committee appointed to manage and
administer the Plan in accordance with Section 3.1 hereof.
II-3
<PAGE> 8
2.14 "Company" shall mean The Connecticut Water Company, any
corporation or business that is merged with the Company, or any successor
corporation or business organization that assumes the obligations of the Plan
with respect to its Employees.
2.15 "Company Stock" shall mean common stock of Connecticut Water
Service, Inc.
2.16 "Company Stock Fund" shall mean that portion of the Trust Fund
invested exclusively in Company Stock, as provided for in Article VII hereof;
provided, however, that (i) short term cash investments shall be permitted to
the extent that whole shares of Company Stock cannot be purchased, (ii) cash
dividends received shall be reinvested in Company Stock and (iii) any other
rights or non-cash distributions (other than dividends in the form of Company
Stock) shall be sold and the proceeds invested in Company Stock.
2.17 "Compensation" shall mean all compensation paid by the Employer to
or for the benefit of an Employee during a Plan Year, excluding, under rules
uniformly applicable to all Employees similarly situated, bonuses, pay for
overtime, special pay, reimbursements or other expense allowances, fringe
benefits (cash and noncash), moving expenses and the Employer's cost for any
public or private employee benefit plan, including the Plan; provided, however,
that, unless otherwise specifically stated herein, Compensation shall include
amounts deferred under any salary deferral agreement pursuant to Section 5.1
hereof, or any cafeteria plan pursuant to Section 125 of the Code, or any
nonqualified retirement plan or arrangement maintained by the Employer.
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<PAGE> 9
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, the annual
Compensation of each Employee taken into account under the Plan shall not exceed
the OBRA '93 annual Compensation limit. The OBRA '93 annual Compensation limit
is $150,000, as adjusted by the Commissioner for increases in the cost of living
in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12. Any reference in this Plan to the limitation
under Section 401(a)(17) of the Code shall mean the OBRA '93 annual Compensation
limit set forth in this provision.
2.18 "Early Retirement Date" shall mean the date on which a Participant
retires prior to his Normal Retirement Date and after his attainment of age
fifty-five (55).
2.19 "Employee" shall mean any person who is regularly engaged in
rendering personal services to the Employer other than as an independent
contractor.
2.20 "Employee Loan Fund" shall mean that portion of the Trust Fund
invested exclusively in personal notes executed by Participants as provided for
in Section 7.4 hereof.
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<PAGE> 10
2.21 "Employee Salary Deferral Contributions" shall mean the
contributions made by the Employer to the Trust Fund as provided for in Sections
5.1, 6.1, and 6.2(c) hereof.
2.22 "Employee Salary Deferral Contribution Account" shall mean the
account of a Participant as provided for in Section 8.2 hereof.
2.23 "Employer" shall mean the Company and any Participating Company.
2.24 "Employer Contributions" shall mean the contributions, if any,
made by the Employer to the Trust Fund as provided for in Sections 6.2(a) and
(b) hereof.
2.25 "Employer Contribution Account" shall mean the account of a
Participant as provided for in Section 8.2 hereof.
2.26 "Entry Date" shall mean the January 1, April 1, July 1 and October
1 of each Plan Year.
2.27 "Fiduciary" shall mean any person (1) who exercises any
discretionary authority or control respecting management of the Plan or any
authority or discretionary control respecting management or disposition of
assets held under the Plan; (2) who renders investment advice for a fee or other
compensation, direct or indirect, as to assets held under the Plan or has any
authority or responsibility to do so; or (3) who has any discretionary authority
or discretionary
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<PAGE> 11
responsibility in the administration of the Plan, within the meaning of Section
4975(e) (3) of the Code.
2.28 "414(s) Compensation" shall mean with respect to any Employee his
wages as defined in Code Section 3401(a) and all other payments of compensation
by the Employer (in the course of the Employer's trade or business) for a Plan
Year for which the Employer is required to furnish the Employee a written
statement under Code Sections 6041(d), 6051(a)(3) and 6052, without regard to
any rules under Code Section 3401(a) that limit the remuneration included in
wages based on the nature or location of the employment or the services
performed plus amounts which are contributed by the Employer pursuant to a
salary reduction agreement and which are not includible in the gross income of
the Employee under Code Sections 125, 402(e)(3), 401(h)(1)(B), 403(b) or 457(b).
Effective January 1, 1998, 414(s) Compensation in excess of $160,000
shall be disregarded. Such amount shall be adjusted as permitted under Code
Section 401(a)(17).
2.29 "Highly Compensated Employee" means, effective as of January 1,
1997, an Employee who performed services for the Employer during the
determination year and is in one or more of the following groups:
(a) Employees who at any time during the determination year or
look-back year were five percent owners of the Employer. Five
percent owner means any person who
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owns (or is considered as owning within the meaning of Code
Section 318) more than five percent of the outstanding stock
of the Employer or stock possessing more than five percent of
the total combined voting power of all stock of the Employer.
In determining percentage ownership hereunder, employers that
would otherwise be aggregated under Code Sections 414(b), (c),
(m) and (o) shall be treated as separate employers.
(b) Employees who received Code Section 414(s) Compensation during
the look-back year from the Employer in excess of $80,000.
This amount shall be adjusted at such time and in such manner
as is provided in Treasury Regulations.
The "determination year" shall be the Plan Year for which testing is
being performed, and the "look-back year" shall be the immediately preceding
twelve-month period.
In determining who is a Highly Compensated Employee, all Affiliated
Companies shall be taken into account as a single employer and leased employees
within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered
Employees unless such leased employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any qualified plan maintained by the
Employer. The exclusion of leased employees for this purpose shall be applied on
a uniform and consistent basis for all of the Employer's retirement plans. In
addition, highly compensated former employees shall be treated as Highly
Compensated Employees without regard to whether they performed services during
the determination year.
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<PAGE> 13
2.30 "Highly Compensated Participant" shall mean any Highly Compensated
Employee who is eligible to participate in the Plan.
2.31 "Hour of Service" shall mean (1) each hour for which an Employee
is directly or indirectly paid, or entitled to payment, by the Employer for the
performance of duties (to be credited to the Employee as of the time that the
duties were performed); (2) each hour for which an Employee is directly or
indirectly paid, or entitled to payment, by the Employer for reasons other than
the performance of duties, such as vacation or holidays (to be credited in
accordance with Labor Department Regulation Section 2530.200b-2(c) or any
successor regulation); (3) each hour for which back pay, irrespective of
mitigation of damages, has been either awarded or agreed to by the Employer (to
be credited to the Employee as of the time to which the award or agreement
pertains rather than the time that the award, agreement or payment is made). The
same hour shall not be credited under more than one of the above clauses. In
determining Hours of Service for the purpose of clause (2) above, the provisions
of Labor Department Regulation Section 2530.200b-2(b) or any successor
regulation shall be applicable. Hours of Service shall also include each hour,
based on the Employee's standard work week and work day as in effect from time
to time, during which an Employee is absent from work:
(a) temporarily, on account of illness or with the consent of the
Employer for a period not to exceed six months. In the event
of any absence approved by the Employer and exceeding six
months, the Committee shall establish uniform rules
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<PAGE> 14
for the inclusion or exclusion of any hour as an Hour of
Service on account of such absence in excess of six months; or
(b) effective as of December 12, 1994, on account of qualified
military service, as determined in accordance with USERRA and
Code Section 414(u).
2.32 "Investment Fund" shall mean a fund selected by the Committee in
which all or a portion of the Trust Fund may be invested, as provided in Article
VII hereof.
2.33 "Non-Highly Compensated Participant" shall mean any Participant
who is not a Highly Compensated Employee.
2.34 "Normal Retirement Date" shall mean the first day of the month
coinciding with or next following the date on which the Participant attains age
sixty-five (65).
2.35 "1-Year Break in Service" shall mean a Period of Severance of at
least 12 consecutive months.
2.36 "Participant" shall mean an Employee who is eligible to
participate in the Plan under the terms of Article IV hereof and who has taken
all the steps required by said Article IV to participate in the Plan.
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2.37 "Participating Company" shall mean any Affiliated Company which is
designated by the Board as a Participating Company under the Plan and whose
designation as such has become effective and has continued in effect. The
designation shall become effective only when it shall have been accepted by the
Board of Directors of the Participating Company. A Participating Company may
revoke its acceptance of such designation at any time, but until such acceptance
has been revoked all of the provisions of the Plan and amendments thereto shall
apply to the Employees (and their Beneficiaries) of the Participating Company.
In the event the designation of a Participating Company as such is revoked by
the Board of Directors of the Participating Company, the Plan will be deemed
terminated only as to such Participating Company in accordance with Article
XIII.
2.38 "Period of Service" shall mean the aggregate of all periods
commencing with the Employee's first day of employment or reemployment with the
Employer and ending on the date a Period of Severance begins. The first day of
employment or reemployment is the first day the Employee performs an Hour of
Service. An Employee will also receive partial credit for any Period of
Severance of less than 12 consecutive months. Fractional periods of a year will
be expressed in terms of days.
2.39 "Period of Severance" shall mean a continuous period of time
during which the Employee is not employed by the Employer. Such period begins on
the date the Employee retires, quits or is discharged, or if earlier, the
12-month anniversary of the date on which the Employee was otherwise first
absent from service.
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<PAGE> 16
In the case of an individual who is absent from work for maternity or
paternity reasons, the 12-consecutive month period beginning on the first
anniversary of the first day of such absence shall not constitute a 1-Year Break
in Service. For purposes of this paragraph, an absence from work for maternity
or paternity reasons means an absence (a) by reason of the pregnancy of the
individual, (b) by reason of the birth of a child of the individual, (c) by
reason of the placement of a child with the individual in connection with the
adoption of such child by such individual, or (d) for purposes of caring for
such child for a period beginning immediately following such birth or placement.
2.40 "Plan" shall mean this plan: the Savings Plan of The Connecticut
Water Company.
2.41 "Plan Year" shall mean each calendar year ending on December 31.
2.42 "Retirement Plan" shall mean The Connecticut Water Company
Employees' Retirement Plan, as amended from time to time.
2.43 "Rollover Account" shall mean the account of a Participant as
provided for in Section 8.2 hereof.
2.44 "Termination Date" shall mean the date on which the Participant
ceases to be an Employee.
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<PAGE> 17
2.45 "Total Disability" shall mean that disability which qualifies an
Employee to be considered a totally and permanently disabled Employee for
purposes of the Employer's long-term disability insurance benefits, as amended
from time to time.
2.46 "Trust" shall mean the trust created by the trust agreement, as
amended from time to time, entered into by the Employer and the Trustee for the
purpose of holding the Trust Fund.
2.47 "Trustee" shall mean the person or persons who may at any time be
acting as trustee or trustees of the Trust.
2.48 "Trust Fund" shall mean all funds received by the Trustee from the
Employer or any Participant, pursuant to the terms hereof, together with all
income, profits and increments thereon, and less any expenses, losses and
payments therefrom.
2.49 "USERRA" shall mean the Uniformed Services Employment and
Reemployment Rights Act of 1994. Notwithstanding any provision of this Plan to
the contrary, effective as of December 12, 1994, contributions and service
credit with respect to qualified military service will be provided in accordance
with Code Section 414(u).
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<PAGE> 18
2.50 "Valuation Date" shall mean the last day of each Calendar Quarter
and/or such other date(s) as may be prescribed by the Committee with respect to
the Investment Funds, the Company Stock Fund, and the Employee Loan Fund.
Neither the gender nor the number (singular or plural) of any word
shall be construed to exclude another gender or number when a different gender
or number would be appropriate.
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<PAGE> 19
ARTICLE III
ADMINISTRATION
3.1 Committee. The Committee established pursuant to Article XI of the
Retirement Plan shall also act as the Committee hereunder. The Board shall
certify to the Trustee the names and specimen signatures of the members of the
Committee.
3.2 Named Fiduciary. The Committee is hereby designated the Named
Fiduciary of the Plan, within the meaning of Section 402(a) of ERISA, and
subject to the provisions hereof, shall have the authority to control and manage
the operation and administration of the Plan.
3.3 Powers of Committee. The Committee shall have all powers necessary
to determine in its sole discretion all questions concerning the administration
of the Plan, including without limitation questions of eligibility of Employees,
funding policy, and the amount of any benefits payable hereunder. In addition,
the Committee shall have full authority to interpret and apply the provisions
hereof, including without limitation authority to correct any defects or
omissions or reconcile any inconsistencies herein, in such a manner and to such
an extent as it shall deem necessary or desirable to effectuate the Plan. The
Committee may make such rules and regulations for the administration of the Plan
and the interpretation and application of the provisions hereof, as it deems
necessary or desirable. Subject to the provisions of Article XV hereof, any
determination by the Committee within the scope of its authority and any action
taken thereon in good faith shall be conclusive and binding on all persons.
Although the
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investment and management of assets of the Plan shall be the responsibility of
the Trustee, subject to investment elections of Participants pursuant to Article
VII hereof, the Committee shall be responsible for the selection of Investment
Funds.
3.4 Delegation of Duties. The Committee shall have authority in its
sole discretion to designate or appoint, from time to time (1) persons to render
advice to it with regard to any responsibility it has under the Plan, (2)
persons to carry out specified fiduciary responsibilities for the operation and
administration of the Plan, other than any responsibility to manage or control
the assets of the Plan provided for in the trust agreement creating the Trust
Fund, and (3) persons to act as investment managers to manage (including the
power to acquire and dispose of) any assets of the Plan. Any such person shall
serve at the pleasure of the Committee and may resign by delivering written
notice to the Committee. The Committee may delegate any of its powers and duties
to any person referred to in clause (2) above, subject to the limitation
contained therein. Any appointment under clause (3) above shall be made and
acknowledged in writing.
3.5 Administrator. The Committee shall designate an Administrator of
the Plan. In addition to carrying out any duties required of the Administrator
by applicable provisions of ERISA, the Administrator shall prepare and file, or
cause to be prepared and filed, such reports, descriptions, summaries, and
financial and other statements with respect to the Plan as may be necessary or
desirable, within the time prescribed therefor, and furnish such reports,
descriptions, summaries, and statements to Participants and Beneficiaries as may
be necessary or
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desirable, within the time specified therefor. Any delegation of duties to the
Administrator by the Committee shall be made and acknowledged in writing. The
Administrator shall serve at the pleasure of the Committee and may resign by
delivering written notice to the Committee. If at any time there shall be a
vacancy in the position of Administrator, the Committee shall serve as
Administrator until said position has been filled as herein provided.
3.6 Agent for Service. The Administrator shall be the agent for service
of legal process in connection with any claim or proceeding relating to the
Plan.
3.7 Action by Majority. Any action which the Committee is authorized or
required to take may be taken by a majority of the members of the Committee then
holding office. The action of such majority of the members of the Committee,
expressed by a vote at a meeting, or in writing without a meeting, shall
constitute the action of the Committee, and shall have the same effect for all
purposes as if assented to by all the members of the Committee then holding
office.
3.8 Action by Single Member. The Committee may from time to time
authorize any one or more of its members to execute any document on behalf of
the Committee. The Committee shall certify to the Trustee the name of any such
member authorized to act for it in its relationship with the Trustee and the
extent and duration of such authorization.
3.9 Member's Own Participation. A member of the Committee who is also a
Participant shall not vote on the exercise of any rights or options or on any
other matter with
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respect to his rights as a Participant; provided, however, that this prohibition
shall not be construed as preventing such member from voting on matters which
affect all Participants.
3.10 Records. The Committee shall keep such records of its proceedings
and acts as may in its discretion be necessary or desirable for the proper
administration of the Plan. The Committee shall make available to each
Participant or Beneficiary, for examination at its principal office or in such
other place as the Committee may in its sole discretion decide is necessary or
desirable to make available all pertinent records to such Participant or
Beneficiary, such of its records as may pertain to such Participant or
Beneficiary, and such Participant or Beneficiary shall have the right to examine
the same during normal business hours. The Employer may at any time inspect the
records of the Committee or have the same inspected by any agent or Employee and
may at any time demand an accounting from the Committee.
3.11 Compensation; Agents. The members of the Committee shall serve
without compensation for services as such, but any member of the Committee who
does not receive a salary from the Employer shall be paid such reasonable
compensation for attending meetings of the Committee as may be voted by the
Board, in its sole discretion. All expenses properly attributable to the
operation and administration of the Plan, including fees paid to agents,
advisors, counsel, investment managers, and other persons designated or
appointed by the Committee to assist it, shall be paid as provided in Section
3.14 hereof.
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3.12 Bonding; Liability of Committee. The Committee, or the
Administrator, if so directed by the Committee, shall ensure that each Fiduciary
of the Plan, including each member of the Committee, is bonded in accordance
with applicable laws, rules, and regulations, including without limitation
Section 412 of ERISA. The Employer shall indemnify and hold harmless each member
of the Committee, the Administrator and any other Fiduciary with respect to the
Plan, if he is, or was at the time of the acts or failure to act in question, a
director, officer or Employee of the Employer, from any liability, claim,
demand, suit or action of any type, including without limitation reasonable
attorneys' fees arising from any action or failure to act, provided that such
person acted in good faith, in a manner he reasonably believed to be in the best
interests of the Employer or of the Participants and Beneficiaries of the Plan
and consistent with the provisions of the Plan and, with respect to any criminal
action or proceeding, that he had no reasonable cause to believe his conduct was
unlawful.
3.13 Fiduciary Responsibility. Any Fiduciary with respect to the Plan
shall discharge his duties solely in the interest of the Participants and
Beneficiaries for the exclusive purpose of providing benefits to Participants
and Beneficiaries and defraying reasonable expenses of administering the Plan.
In addition, any Fiduciary with respect to the Plan shall discharge his duties
with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like character and with
like aims.
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3.14 Expenses. The Employer shall pay all the administrative expenses
of the Plan and all fees and retainers of the Plan's Trustee, auditors, and
counsel so long as the Plan remains in effect, except that any expenses directly
relating to the investments of the Trust Fund, such as taxes, brokerage
commissions and registration charges, shall be paid by the Employer unless the
Administrator shall direct the Trustee to pay such expenses from the Trust Fund.
In the event of the failure of the Employer to pay such fees and retainers, the
Trustee shall have the right to charge such amounts against the Trust Fund.
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ARTICLE IV
PARTICIPATION
4.1 Eligibility Requirement. Every Employee of the Employer shall be
eligible to participate in the Plan as of the Entry Date coinciding with or next
following his completion of a six (6) month Period of Service.
4.2 Entry. The Committee shall notify each Employee of his eligibility
to participate in the Plan upon meeting the requirements of Section 4.1 or 4.3
hereof, and shall provide him an opportunity to become a Participant. An
Employee who desires to become a Participant shall file with the Committee an
election to participate, shall execute a salary deferral agreement, as provided
for in Section 5.1 hereof, which shall authorize payroll deductions of his
Employee Salary Deferral Contributions, and shall make an election of Investment
Funds as provided for in Section 7.2 hereof. An election to participate
hereunder filed with the Committee shall be effective as of the Entry Date on
which the Employee first becomes eligible to participate hereunder; provided,
however, that any such election filed less than 15 days prior to such Entry Date
shall be effective on the next following Entry Date. Notwithstanding the
foregoing, for purposes of an Employee's eligibility to share in Employer
Contributions pursuant to Section 6.2(b) hereof, the Employee shall become a
Participant in the Plan as of the applicable Entry Date under Section 4.1
hereof, and no election to participate shall be required.
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4.3 Termination of Participation; Reentry. If an Employee who is a
Participant or is eligible to participate in the Plan shall terminate his
employment or incur one or more 1-Year Breaks in Service, he shall cease to be a
Participant or be eligible to participate in the Plan. Any such person shall
again become a Participant or be eligible to participate in the Plan as of his
date of re-employment in the case of an Employee who terminated his employment
or as of the first day of the next Plan Year in which he does not incur a 1-Year
Break in Service in the case of an Employee who did not terminate his
employment. In addition, if an Employee who is a Participant in the Plan
withdraws the entire Accrued Balance in his Account pursuant to Section 11.1
hereof, he shall thereupon cease to be a Participant in the Plan. Such an
Employee may again become a Participant in the Plan on the next Entry Date by
filing a new election to participate with the Committee at least 15 days prior
to such Entry Date; provided, however, that the restrictions on deferrals of
salary provided in Section 11.1 shall, where appropriate, apply.
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<PAGE> 27
ARTICLE V
CONTRIBUTIONS BY EMPLOYEES
5.1 Salary Deferral Agreements. Each Participant may elect, in any Plan
Year, to enter into a written salary deferral agreement with the Employer which
shall be applicable to all payroll periods within such Plan Year. The terms of
any such salary deferral agreement shall provide that the Participant agrees to
defer a portion of his salary from the Employer in an amount equal to any
percentage or specified dollar amount not less than one-half percent (.5%) of
his Compensation nor more than (i) fifteen percent (15%) of his Compensation,
for Non-Highly Compensated Participants, or (ii) ten percent (10%) of his
Compensation, for Highly Compensated Participants. Effective January 1, 1998,
the total Employee Salary Deferral Contributions made under this Plan, and any
other plans the Employer may have, shall not exceed $10,000 for the calendar
year. This dollar limitation shall be adjusted annually pursuant to the method
provided in Code Section 415(d) in accordance with Treasury Regulations. In
consideration of such agreement, the Employer shall make an Employee Salary
Deferral Contribution to the Participant's Employee Salary Deferral Contribution
Account on behalf of the Participant for such Plan Year in an amount equal to
the total amount of the Participant's Compensation from the Employer which was
deferred during the Plan Year pursuant to the salary deferral agreement.
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<PAGE> 28
All Employee Salary Deferral Contributions shall be 100% vested and
non-forfeitable at all times. If a Participant enters into a salary deferral
agreement with the Employer for a given Plan Year, his Compensation for such
Plan Year for all purposes under this Plan, except as otherwise expressly
provided herein, shall be equal to his Compensation before application of the
salary deferral agreement. For purposes of any other plan or benefits
arrangement of the Employer, including the Retirement Plan, his Compensation
shall be equal to his Compensation before application of the salary deferral
agreement.
Salary deferral agreements shall be governed by the following rules:
(a) A salary deferral agreement shall apply to each payroll period
during which an effective salary deferral agreement is on file
with the Employer.
(b) A salary deferral agreement may be amended by a Participant
only once during any Calendar Quarter unless the Committee,
pursuant to uniform and nondiscriminatory rules applicable to
all Participants, determines that good cause exists to permit
a Participant to amend such agreement more frequently.
(c) Salary deferral agreements and amendments to salary deferral
agreements shall be effective as of, and shall not apply to
any payroll period preceding, the payroll period next
following the 15th day after the salary deferral agreement or
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<PAGE> 29
amendment to the salary deferral agreement is executed by the
Participant and the Employer.
(d) Notwithstanding the foregoing, the Employer may reduce the
amount subject to its salary deferral agreement with any
Participant at any time if the Employer determines that
reduction is necessary to ensure that annual additions for any
Plan Year will not exceed the limitations of Section 8.5 and
8.6 hereof or to ensure that the anti-discrimination
requirements of Section 401(k) of the Code, and all applicable
regulations thereunder, are met for such Plan Year. At any
time that the Employer makes such reduction, the Participant
shall have the option of electing to have the excess
percentage contributed to the Plan as his Additional Employee
Contributions.
(e) Except as provided above, a salary deferral agreement
applicable to any given Plan Year, once made, may not be
revoked or amended by the Participant or the Employer.
(f) If a Participant's Employee Salary Deferral Contributions
under this Plan, together with any salary deferrals under
another qualified cash or deferred arrangement (as defined in
Code Section 401(k)), a simplified employee pension (as
defined in Code Section 408(k)), a salary reduction agreement
(within the meaning of Code Section 3121(a)(5)(D)), or a trust
described in Code Section
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<PAGE> 30
501(c)(18), cumulatively exceed the limitation imposed by Code
Section 402(g) (as adjusted annually in accordance with the
method provided in Code Section 415(d)) for such Participant's
taxable year, the Participant may, not later than March 1
following the close of his taxable year, notify the Committee
in writing of such excess and request that his Employee Salary
Deferral Contribution under this Plan be reduced by an amount
specified by the Participant. In such event, the Committee may
direct the Trustee to distribute such excess amount (and any
income allocable to such excess amount) to the Participant not
later than the first April 15th following the close of the
Participant's taxable year. Any distribution of less than the
entire amount of the excess Employee Salary Deferral
Contribution and income shall be treated as a pro rata
distribution of excess Employee Salary Deferral Contribution
and income. The amount distributed shall not exceed the
Employee Salary Deferral Contribution under the Plan for the
taxable year. Any distribution on or before the last day of
the Participant's taxable year must satisfy each of the
following conditions:
(1) the Participant must designate the distribution as an
excess Employee Salary Deferral Contribution;
(2) the distribution must be made after the date on which
the Plan received the excess Employee Salary Deferral
Contribution; and
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<PAGE> 31
(3) the Plan must designate the distribution as a
distribution of an excess Employee Salary Deferral
Contribution.
(g) Notwithstanding Section 5.1(f) above, a Participant's Employee
Salary Deferral Contributions shall be reduced, but not below
zero, by any distribution and/or recharacterization of excess
contributions pursuant to Section 8.8(a) for the Plan Year
beginning with or within the taxable year of the Participant.
5.2 Additional Employee Contributions. Subject to the provisions of
Sections 8.9 and 8.10, a Participant may from time to time, in addition to the
amount contributed pursuant to Section 5.1 hereof, contribute to the Plan as his
Additional Employee Contributions such amount as he may determine to be
desirable. Such Additional Employee Contributions shall be made by deductions
from the payroll of the Participant in semi-monthly installments which may be
rounded to the nearest whole dollar and which shall be paid by the Employer to
the Trustee as soon as practicable. If permitted by the Committee, Additional
Employee Contributions may also be made in a single sum payment by the
Participant directly to the Plan or by a combination of payroll deductions and
single sum payments. Additional Employee Contributions shall not be eligible for
matching Employer Contributions by the Employer, if any, as provided for in
Section 6.2(a) hereof. An amount equal to a Participant's Additional Employee
Contributions shall be allocated to his Account.
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5.3 Rollovers. A Participant may, with the consent of the Committee,
which shall be granted or withheld in a uniform and nondiscriminatory manner,
rollover to the Trust Fund in cash or in kind, within sixty (60) days of his
receipt thereof, all or any portion of the amount distributed to him within one
taxable year of the Participant as a rollover amount, as defined in Section
402(a)(5), 403(a)(4), or 408(d)(3) of the Code, to the extent permitted by the
Code; provided, however, that no such rollover amount may include any amounts
representing the Participant's contributions. The Committee may require such
information or documentation with respect to any such rollover contribution
hereunder as it deems necessary or desirable.
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ARTICLE VI
CONTRIBUTIONS BY THE EMPLOYER
6.1 Employee Salary Deferral Contributions. For each Plan Year, the
Employer, in addition to any amount it may contribute pursuant to Section 6.2
hereof, shall contribute an amount equal to the total amount of contributions
agreed to be made by it pursuant to salary deferral agreements under Section 5.1
hereof entered into between the Employer and Participants for such Plan Year.
Contributions made by the Employer for a given Plan Year pursuant to salary
deferral agreements under Section 5.1 hereof shall be placed in the Trust Fund
as of the earliest date on which such contributions can reasonably be segregated
from the Employer's general assets, but in any event not later than fifteen (15)
business days following the end of the month in which the Participant's
contribution was received or withheld from the Participant's pay. The provisions
of Department of Labor regulations 2510.3-102 are incorporated herein by
reference.
6.2 Other Types of Contributions by the Employer.
(a) The Employer shall contribute to the Trust Fund with respect
to a Plan Year, as an Employer Contribution, an amount equal
to fifty percent (50%) of each Participant's Employee Salary
Deferral Contribution made pursuant to Section 5.1 hereof not
exceeding four percent (4%) of Compensation. A Participant may
elect that such Employer Contributions shall be paid to the
Trustee in the form of
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cash or shares of Company Stock and cash in lieu of fractional
shares. Such election shall be made, or may be changed, at
such time, in such manner and in such form as the Committee
may prescribe through uniform and nondiscriminatory rules. In
the absence of such an election, Employer Contributions shall
be paid in the form of shares of Company Stock and cash in
lieu of fractional shares. Employer Contributions shall be
paid to the Trustee at the same time as the payment of the
Employee Salary Deferral Contributions with respect to which
such Employer Contributions are made and such Employer
Contributions shall be allocated to each Participant's
Employer Contribution Account. Employer Contributions made in
the form of Company Stock shall be based on the average of bid
and asked prices per share as of the close of business on the
date on which such Employer Contributions are paid to the
Trustee.
(b) In addition to the contribution provided under subsection (a)
hereof, the Employer may, but shall not be obligated to,
contribute to the Trust Fund, within the time prescribed by
law for filing of the income tax return for the Company's
fiscal year, including any extensions thereof, such amount as
the Board shall determine by resolution adopted before the end
of such time, provided, however, that the Employer
Contribution hereunder on behalf of each eligible Employee, as
described herein below, shall not be less than one percent
(1%) of each such eligible Employee's Compensation earned
while an eligible Employee in the Plan Year with respect to
which such Employer contribution is made. Such Employer
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Contribution shall be allocated to the Employer Contribution
Account of each Employee who was an eligible Employee for all
or a part of the Plan Year with respect to which such
contribution is made on the basis of the percentage that each
such eligible Employee's Compensation earned while an eligible
Employee in such Plan Year is to the total aggregate
Compensation of all such eligible Employees earned while
eligible Employees in such Plan Year. For purposes of this
subsection (b), an Employee shall be eligible to share in the
allocation of the Employer contribution made with respect to a
Plan Year pursuant to this subsection (b) only if such
Employee has satisfied the eligibility requirement of Section
4.1 of this Plan, has completed one thousand (1,000) or more
Hours of Service in such Plan Year, and is not a participant
in the Connecticut Water Service, Inc. Performance Stock
Program with respect to the Plan Year for which such Employer
Contribution is made.
6.3 Earnings Limitation. The Employer's contributions pursuant to
Sections 6.1 and 6.2 hereof shall be made out of the Employer's current or
accumulated earnings (as shown by its books and accounts for general corporate
purposes in accordance with accepted accounting practices), and may only be made
if and to the extent such current or accumulated earnings are adequate for such
purposes.
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ARTICLE VII
INVESTMENT OF CONTRIBUTIONS
7.1 Investment Funds. The trust agreement creating the Trust shall
provide for the establishment of one or more separate Investment Funds in which
the assets of the Trust, excluding amounts described in Section 7.4 (Company
Stock Fund) and 7.5 (Employee Loan Fund), shall be invested.
7.2 Allocation of Contributions to Investment Funds. A Participant may
elect how contributions to his Account, excluding Employer Contributions made in
shares of Company Stock and cash in lieu of fractional shares in accordance with
Section 6.2(a) hereof, shall be allocated among the available Investment Funds.
Allocations to Investment Funds shall be in 5% increments. Such elections shall
be made at such time, in such manner and in such form as the Committee may
prescribe through uniform and nondiscriminatory rules. In the absence of an
investment election by a Participant, contributions shall be invested in that
Investment Fund which invests in short-term, fixed income investments such as
bank certificates of deposit, commercial paper, and treasury bills.
7.3 Transfers of Investments. A Participant may elect to transfer
amounts among the available Investment Funds. Such elections shall be made at
such time, in such manner and in such form as the Committee may prescribe
through uniform and nondiscriminatory rules. The minimum amount transferable out
of any one Investment Fund shall be five percent (5%) of the
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total value of the Participant's Account, or, if less, the entire amount
invested in such Investment Fund.
In no event shall amounts invested in the Company Stock Fund be
available for transfer to any Investment Fund pursuant to this Section, except
in the case of the cash proceeds of a tender offer for Company Stock, nor shall
amounts invested in any Investment Fund be available for transfer to the Company
Stock Fund.
7.4 Company Stock Fund. All Employer Contributions made in shares of
Company Stock and cash in lieu of fractional shares in accordance with Section
6.2(a) hereof, together with earnings thereon, shall at all times be invested in
the Company Stock Fund.
7.5 Employee Loan Fund. The trust agreement creating the Trust shall
provide for the establishment of an Employee Loan Fund which shall be invested
exclusively in personal notes executed by Participants pursuant to Section 12.1
hereof.
7.6 Valuations. As of each Valuation Date, the Trust Fund, each of the
Investment Funds and the Company Stock Fund shall be valued on the basis of
current market value in accordance with the provisions of the Trust Agreement.
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ARTICLE VIII
ALLOCATION OF CONTRIBUTIONS
8.1 Notice to Committee. As of each Entry Date, the Employer shall
deliver to the Committee a list of all Employees who entered the Plan after the
last preceding Entry Date together with the Entry Date for each such Employee, a
statement of the amount of Compensation paid to each such Employee, and the
amount of contributions by or on behalf of each such Employee. As of such Entry
Date, the Employer shall also notify the Committee in writing of all changes in
the list of Participants, and shall notify said Committee of the amount of
Compensation paid to, and the amount of contributions by or on behalf of, each
Participant.
8.2 Accounts. The Committee shall open the following accounts on behalf
of each Participant:
(a) Employee Salary Deferral Contribution Account. The Committee
shall credit to each Participant's Employee Salary Deferral
Contribution Account all Employee Salary Deferral
Contributions pursuant to Sections 5.1, 6.1, and 8.8 hereof,
including accruals thereon pursuant to Section 8.3 hereof,
made on behalf of the Participant.
(b) Employer Contribution Account. The Committee shall credit to
each Participant's Employer Contribution Account all Employer
Contributions, if any, pursuant to
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Sections 6.2(a) and (b) and 8.10 hereof, including accruals
thereon pursuant to Section 8.3 hereof, made on behalf of the
Participant.
(c) Additional Employee Contribution Account. The Committee shall
credit to each Participant's Additional Employee Contribution
Account his contributions to the Trust Fund pursuant to
Section 5.2 hereof, including accruals thereon pursuant to
Section 8.3 hereof.
(d) Rollover Account. The Committee shall credit to each
Participant's Rollover Account his contributions to the Trust
Fund pursuant to Section 5.3 hereof, including accruals
thereon pursuant to Section 8.3 hereof.
For the purposes of allocating earnings and losses, all contributions
shall be treated as being paid in the manner and at the time described in
Section 7.6 hereof.
8.3 Allocation of Accruals. As of each Valuation Date, as provided in
Section 7.6 hereof, the Trustee shall determine the values of each of the
Investment Funds and of the Company Stock Fund and the amount of the accruals to
each such fund since the preceding Valuation Date, which accruals shall consist
of any earnings therefrom, any increase in market value thereof, and other
accretions thereon, less losses, decreases in market value, expenses, and other
proper deductions. The Trustee shall also determine the value of each
Participant's interest in the Employee Loan Fund and the amount of accruals to
such interest since the preceding
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Valuation Date, which accruals shall consist of any earnings therefrom, any
increase in market value thereof, and other accretions thereon, less losses,
decreases in market value, expenses, and other proper deductions. The Trustee
shall notify the Committee of the foregoing amounts within a reasonable time
after their determination. The Committee shall allocate net accruals in each of
the Investment Funds and in the Company Stock Fund to each Participant's
Account, as of the Valuation Date, on the basis of the percentage that the
amount of each Participant's Account invested in each Investment Fund and in the
Company Stock Fund on the Valuation Date, prior to the allocation of any
contributions made since the last preceding Valuation Date, is of the total
amount of all Participants' Accounts invested in each Investment Fund and in the
Company Stock Fund on the Valuation Date, prior to the allocation of any
contributions made since the last preceding Valuation Date. For purposes of
determining the value of a Participant's interest in the Employee Loan Fund,
only notes executed by the Participant shall be taken into account.
8.4 Notice to Participants. Within a reasonable time after the end of
each Plan Year, the Committee shall notify each Participant of (1) the amount
credited to his Account under Section 8.2 hereof since the last Plan Year; (2)
the amount credited to his Account under Section 8.3 hereof since the last Plan
Year; and (3) the total amount credited to his Account since the last Plan Year.
8.5 Limitation. Anything herein to the contrary notwithstanding, in no
event shall the sum of annual additions to a Participant's Account in any Plan
Year, when combined with the
VIII-3
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annual additions to such Participant's Account under any other defined
contribution plan maintained by the Employer, attributable to (1) contributions
of the Employer (including Employer Contributions and Employee Salary Deferral
Contributions), (2) forfeitures, and (3) Additional Employee Contributions, be
greater than the lesser of (1) $30,000 (as adjusted under Section 415(d) of the
Code), or (2) twenty-five percent (25%) of all the Participant's Code Section
415 Compensation from the Employer. Any excess amount hereunder (i) to the
extent of Additional Employee Contributions in such Plan Year shall be returned
to the Participant; (ii) to the extent of Employee Salary Deferral Contributions
pursuant to Sections 5.1 and 6.1 hereof shall be treated as provided in the
preceding clause (i); and (iii) to the extent of matching Employer Contributions
pursuant to Section 6.2(a) hereof, Employer Contributions pursuant to Section
6.2(b) hereof and Employee Salary Deferral Contributions pursuant to Section
6.2(c) hereof shall be treated as Employer Contributions and shall reduce the
amount that the Employer would otherwise contribute to the Trust Fund as
matching Employer Contributions pursuant to Section 6.2(a) hereof, Employer
Contributions pursuant to Section 6.2(b) hereof and Employee Salary Deferral
Contributions pursuant to Section 6.2(c) hereof, respectively.
8.6 Additional Limitation - Members of Retirement Plan. In the case of
any Participant who is entitled to benefits due to Employer contributions under
the Retirement Plan, in addition to the limitations imposed by Section 8.5
hereof, the sum of the defined benefit plan fraction and the defined
contribution plan fraction for any year may not exceed 1.0. The defined benefit
plan fraction for any year is a fraction (a) the numerator of which is the
projected annual benefit of the Participant under the Retirement Plan
(determined as of the close of the Plan
VIII-4
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Year), and (b) the denominator of which is the lesser of: (1) the product of
1.25 multiplied by the maximum dollar limitation in effect under Section
415(b)(1)(A) of the Code for such year, or (2) the product of 1.4 multiplied by
the amount which may be taken into account under Section 415(b)(l)(B) of the
Code for such Participant for such year. The defined contribution plan fraction
for any year is a fraction (a) the numerator of which is the sum of the annual
additions to the Participant's Account as of the close of the Plan Year and (b)
the denominator of which is the sum of the lesser of the following amounts
determined for such year and each prior year of service with the Employer: (1)
the product of 1.25 multiplied by the dollar limitation in effect under Section
415(c)(1)(A) of the Code for such year (determined without regard to Section
415(c)(6) of the Code), or (2) the product of 1.4 multiplied by the amount which
may be taken into account under Section 415(c)(l)(B) of the Code for such
Participant for such year.
In the event that said annual additions to a Participant's Account
should exceed the aforesaid limitation, the Committee shall have the right to
accomplish the aforementioned compliance by reducing or limiting benefits under
this Plan or under the Retirement Plan, and may vary the extent to which the
reduction or limitation will be applied to either, provided that any such
reduction or limitation shall be made in a nondiscriminatory manner.
Effective for Plan Years beginning after December 31, 1999, this
Section 8.6 shall not apply.
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8.7 Actual Deferral Percentage Tests. The following Section 8.7 shall
be effective for periods beginning on or after January 1, 1997.
(a) The annual allocation derived from Employee Salary Deferral
Contributions to Employee Salary Deferral Contribution
Accounts shall satisfy one of the following tests:
(1) The "Actual Deferral Percentage" for the Highly
Compensated Participant group shall not be more than
the "Actual Deferral Percentage" of the Non-Highly
Compensated Participant group for the preceding Plan
Year, multiplied by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for
the Highly Compensated Participant group over the
"Actual Deferral Percentage" for the Non-Highly
Compensated Participant group for the preceding Plan
Year shall not be more than two percentage points.
Additionally, the "Actual Deferral Percentage" for
the Highly Compensated Participant group shall not
exceed the "Actual Deferral Percentage" for the
Non-Highly Compensated Participant group for the
preceding Plan Year multiplied by 2. The provisions
of Code Section 401(k)(3) and Treasury Regulations
Section 1.401(k)-1(b) are incorporated herein by
reference. However, in order to prevent the multiple
use of the alternative method described in this
paragraph in Code Section 401(m)(9)(A), any Highly
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Compensated Participant eligible to make elective
deferrals pursuant to Section 5.1 and to make
Employee contributions or to receive matching
contributions under this Plan or under any other plan
maintained by the Employer or an Affiliated Company
shall have his actual contribution ratio reduced
pursuant to Treasury Regulations Section 1.401(m)-2,
the provisions of which are incorporated herein by
reference.
(b) For the purposes of this Section "Actual Deferral Percentage"
means, with respect to the Highly Compensated Participant
group for a Plan Year and the Non-Highly Compensated
Participant group for the preceding Plan Year, the average of
the ratios, calculated separately for each Participant in such
group, of the amount of Employee Salary Deferral Contributions
allocated to each Employee Salary Deferral Contribution
Account for such Plan Year (and contributed to the Plan within
12 months following the end of the Plan Year) to such
Participant's 414(s) Compensation for such Plan Year. The
actual deferral ratio for each Participant and the "Actual
Deferral Percentage" for each group shall be calculated to the
nearest one-hundredth of one percent. Employee Salary Deferral
Contributions allocated to each Non-Highly Compensated
Employee Salary Deferral Contribution Account shall be reduced
by excess Employee Salary Deferral Contributions to the extent
such excess amounts are made under this Plan or any other plan
maintained by the Employer.
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(c) The "Actual Deferral Percentage" for the Non-Highly
Compensated Participant group is determined without regard to
changes in the group of Non-Highly Compensated Participants
who are eligible under the Plan in the testing year. However,
if the Plan results from, or is otherwise affected by, a "Plan
Coverage Change" that becomes effective during the testing
year, then the "Actual Deferral Percentage" for the Non-Highly
Compensated Participant group for the prior year is the
"Weighted Average of the Actual Deferral Percentages For The
Prior Year Subgroups." Notwithstanding the above, if ninety
(90) percent or more of the total number of Non-Highly
Compensated Participants from all "Prior Year Subgroups" are
from a single "Prior Year Subgroup," then in determining the
"Actual Deferral Percentage" for the Non-Highly Compensated
Participants for the prior year, the Employer may elect to use
the "Actual Deferral Percentage" for Non-Highly Compensated
Participants for the prior year under which that single "Prior
Year Subgroup" was eligible, in lieu of using the weighted
averages. For purposes of this Section the following
definitions shall apply:
(1) "Plan Coverage Change" means a change in the group or
groups of eligible Participants on account of (i) the
establishment or amendment of a plan, (ii) a plan
merger, consolidation, or spinoff under Code Section
414(l), (iii) a change in the way plans within the
meaning of Code Section
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414(l) are combined or separated for purposes of
Regulation 1.401(k)- 1(g)(11), or (iv) a combination
of any of the foregoing.
(2) "Prior Year Subgroup" means all Non-Highly
Compensated Participants for the prior year who, in
the prior year, were eligible Participants under a
specific Code Section 401(k) plan maintained by the
Employer and who would have been eligible
Participants in the prior year under the plan tested
if the plan coverage change had first been effective
as of the first day of the prior year instead of
first being effective during the testing year.
(3) "Weighted Average of the Actual Deferral Percentages
For The Prior Year Subgroups" means the sum, for all
prior year subgroups, of the "Adjusted Actual
Deferral Percentages."
(4) "Adjusted Actual Deferral Percentage" with respect to
a prior year subgroup means the Actual Deferral
Percentage for Non-Highly Compensated Participants
for the prior year of the specific plan under which
the members of the prior year subgroup were eligible
Participants, multiplied by a fraction, the numerator
of which is the number of Non-Highly Compensated
Participants in the prior year subgroup and the
VIII-9
<PAGE> 47
denominator of which is the total number of
Non-Highly Compensated Participants in all prior year
subgroups.
(d) For the purposes of Sections 8.7(a) and 8.8, a Highly
Compensated Participant and a Non-Highly Compensated
Participant shall include any Employee eligible to make a
deferral election pursuant to Section 5.1, whether or not such
deferral election was made or amended pursuant to Section 5.1.
(e) For the purposes of this Section, if two or more plans (other
than an employee stock ownership plan as defined in Code
Section 4975(e)(7)) which include cash or deferred
arrangements are considered one plan for the purposes of Code
Section 401(a)(4) or 410(b) (other than the average benefits
test under Code Section 410(b)(2)(A)(ii)), the cash or
deferred arrangements included in such plans shall be treated
as one arrangement.
(f) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two (2) or more cash or
deferred arrangements of the Employer or an Affiliated
Company, all such cash or deferred arrangements shall be
treated as one (1) cash or deferred arrangement for the
purpose of determining the deferral percentage with respect to
such Highly Compensated Participant. However, if the cash or
deferred arrangements have different Plan Years, this
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<PAGE> 48
paragraph shall be applied by treating all cash or deferred
arrangements ending with or within the same calendar year as a
single arrangement.
8.8 Adjustment to Actual Deferral Percentage Tests. The following
Section 8.8 shall be effective for periods beginning on or after January 1,
1997.
In the event that the initial allocations of the Employee Salary
Deferral Contributions do not satisfy one of the tests set forth in Section
8.7(a), the Committee shall adjust excess contributions pursuant to the options
set forth below:
(a) On or before the fifteenth day of the third month following
the end of each Plan Year, the Highly Compensated Participant
having the largest amount of Employee Salary Deferral
Contributions shall have his portion of excess contributions
distributed to him and/or at his election recharacterized as
an Additional Employee Contribution pursuant to Section 5.2,
until the total amount of excess contributions has been
distributed, or until the amount of his Employee Salary
Deferral Contributions equals the Employee Salary Deferral
Contributions of the Highly Compensated Participant having the
second largest amount of Employee Salary Deferral
Contributions. This process shall continue until the total
amount of excess contributions has been distributed. For each
Highly Compensated Participant, the amount of excess
contributions is equal to the Employee Salary Deferral
Contributions on behalf of such Highly Compensated
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Participant (determined prior to the application of this
paragraph) minus the amount determined by multiplying the
Highly Compensated Participant's actual deferral ratio
(determined after application of this paragraph) by his 414(s)
Compensation. For purposes of this Section, Employee Salary
Deferral Contributions shall exclude any such amounts
distributed as excess "annual additions" pursuant to Section
8.5. In determining the amount of excess contributions to be
distributed and/or recharacterized with respect to an affected
Highly Compensated Participant as determined herein, such
amount shall be reduced by any excess Employee Salary Deferral
Contribution previously distributed to such affected Highly
Compensated Participant for his taxable year ending with or
within such Plan Year.
(1) With respect to the distribution of excess
contributions pursuant to (a) above, such
distribution:
(i) may be postponed but not later than the
close of the succeeding Plan Year;
(ii) shall be made first from unmatched Employee
Salary Deferral Contributions and,
thereafter, simultaneously from Employee
Salary Deferral Contributions which are
matched and matching
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Employer Contributions which relate to such
Employee Salary Deferral Contributions;
(iii) shall be adjusted for income; and
(iv) shall be designated by the Employer as a
distribution of excess contributions (and
income).
(2) With respect to the recharacterization of excess
contributions pursuant to (a) above, such
recharacterized amounts:
(i) shall be deemed to have occurred on the date
on which the last of those Highly
Compensated Participants with excess
contributions to be recharacterized is
notified of the recharacterization and the
tax consequences of such recharacterization;
(ii) shall not exceed the amount of Employee
Salary Deferral Contributions on behalf of
any Highly Compensated Participant for any
Plan Year;
(iii) shall be treated as Additional Employee
Contributions for purposes of Code Section
401(a)(4) and Treasury Regulations Section
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<PAGE> 51
1.401(k)-1(b). However, for purposes of
Sections 18.3 and 18.11(a) recharacterized
excess contributions continue to be treated
as Employer contributions that are Employee
Salary Deferral Contributions. Excess
contributions recharacterized as Additional
Employee Contributions shall continue to be
nonforfeitable and subject to the rules of
Section 11.1(d);
(iv) are not permitted if the amount
recharacterized plus Additional Employee
Contributions actually made by such Highly
Compensated Participant exceed the maximum
amount of Additional Employee Contributions
(determined prior to application of Section
8.9) that such Highly Compensated
Participant is permitted to make under the
Plan in the absence of recharacterization;
(v) shall be treated as Employer contributions
for purposes of Section 8.5; and
(vi) shall be adjusted for income.
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<PAGE> 52
(3) Any distribution and/or recharacterization of less
than the entire amount of excess contributions shall
be treated as a pro rata distribution and/or
recharacterization of excess contributions and
income.
(4) Matching Employer Contributions made pursuant to
Section 6.2(c) which relate to excess contributions
shall be forfeited unless the related matching
Employer Contribution is distributed as an excess
aggregate contribution pursuant to Section 8.10.
(b) Within twelve (12) months after the end of the Plan Year, the
Employer may make a special qualified non-elective
contribution on behalf of Non-Highly Compensated Participants
electing salary reductions pursuant to Section 5.1 in an
amount sufficient to satisfy (or to prevent an anticipated
failure of) one of the tests set forth in Section 8.7(a). Such
contribution shall be allocated in the prior Plan Year to the
Participant's Employee Salary Deferral Account on behalf of
each Non-Highly Compensated Participant who was employed by
the Employer on the last day of the prior Plan Year in the
same proportion that each such Non- Highly Compensated
Participant's Employee Salary Deferral Contributions for the
prior Plan Year bears to the total Employee Salary Deferral
Contributions of all such Non-Highly Compensated Participants
for the prior Plan Year. Such contribution shall be made by
the Employer prior to the end of the current Plan Year.
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<PAGE> 53
(c) If during a Plan Year the projected aggregate amount of
Employee Salary Deferral Contributions to be allocated to all
Highly Compensated Participants under this Plan would, by
virtue of the tests set forth in Section 8.7(a), cause the
Plan to fail such tests, then the Committee may automatically
reduce proportionately or in the order provided in Section
8.8(a) each affected Highly Compensated Participant's deferral
election made pursuant to Section 5.1 by an amount necessary
to satisfy one of the tests set forth in Section 8.7(a).
8.9 Actual Contribution Percentage Tests. The following Section 8.9
shall be effective for periods beginning on or after January 1, 1997.
(a) The "Actual Contribution Percentage" for the Highly
Compensated Participant group shall not exceed the greater of:
(1) 125 percent of such percentage for the Non-Highly
Compensated Participant group for the preceding Plan
Year; or
(2) the lesser of 200 percent of such percentage for the
Non-Highly Compensated Participant group for the
preceding Plan Year, or such percentage for the
Non-Highly Compensated Participant group for the
preceding Plan Year plus 2 percentage points.
However, to prevent the multiple use of the
alternative method described in this paragraph and in
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<PAGE> 54
Code Section 401(m)(9)(A), any Highly Compensated
Participant eligible to make salary deferrals
pursuant to Section 5.1 or any other cash or deferred
arrangement maintained by the Employer or an
Affiliated Company and to make Additional Employee
Contributions or to receive matching contributions
under this Plan or under any other plan maintained by
the Employer or an Affiliated Company shall have his
actual contribution ratio reduced pursuant to
Treasury Regulations Section 1.401(m)-2. The
provisions of Code Section 401(m) and Treasury
Regulations Section 1.401(m)-1(b) and 1.401(m)-2 are
incorporated herein by reference.
(b) For the purposes of this Section and Section 8.10, "Actual
Contribution Percentage" means, with respect to the Highly
Compensated Participant group for a Plan Year and the
Non-Highly Compensated Participant group for the preceding
Plan Year, the average of the ratios (calculated separately
for each Participant in each group) of:
(1) the sum of Additional Employee Contributions made
pursuant to Section 5.2; matching Employer
Contributions made pursuant to Section 6.2(a) and
excess contributions recharacterized as Additional
Employee Contributions pursuant to Section 8.8(a) on
behalf of each such Participant for such Plan Year;
to
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(2) the Participant's 414(s) Compensation for such Plan
Year.
The actual contribution ratio must be rounded to the nearest
one-hundredth of one percent.
(c) For purposes of determining the "Actual Contribution
Percentage" and the amount of Excess Aggregate Contributions
pursuant to Section 8.10(d), only matching Employer
Contributions contributed to the Plan prior to the end of the
succeeding Plan Year shall be considered. In addition, the
Administrator may elect to take into account with respect to
Employees eligible to have matching Employer Contributions
pursuant to Section 6.2 and Additional Employee Contributions
pursuant to Section 5.2 allocated to their accounts, elective
deferrals (as defined in Regulation 1.402(g)-1(b)) and
qualified non-elective contributions (as defined in Code
Section 401(m)(4)(C)) contributed to any plan maintained by
the Employer. Such elective deferrals and qualified
non-elective contributions shall be treated as matching
Employer Contributions subject to Regulation 1.401(m)-1(b)(2)
which is incorporated herein by reference. However, the Plan
Year must be the same as the plan year of the plan to which
the elective deferrals and the qualified non-elective
contributions are made.
(d) For purpose of this Section, if two or more plans of the
Employer to which Additional Employee Contributions, matching
Employer Contributions, or
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elective deferrals are made are treated as one plan for
purpose of Code Sections 401(a)(4) or 410(b) (other than the
average benefits test under Code Section 410(b)(2)(A)(ii)),
such plans shall be treated as one plan for purposes of this
Section 8.9. In addition, two or more plans of the Employer to
which Additional Employee Contributions, matching Employer
Contributions, or Employee Salary Deferral Contributions are
made may be considered as a single plan for purposes of this
Section. In such a case, the aggregated plans must satisfy
Code Sections 401(a)(4) and 410(b) as though such aggregated
plans were a single plan. Plans may be aggregated under this
paragraph only if they have the same plan year.
Notwithstanding the above, if two or more plans are
permissively aggregated under Regulation Section
1.410(b)-7(d), all plans permissively aggregated must use
either the current year testing method or the prior year
testing method for the testing year. Contributions to an
employee stock ownership plan as defined in Code Section
4975(e)(7) shall not be aggregated with this Plan.
(e) If a Highly Compensated Participant participates in two or
more plans which are maintained by the Employer or an
Affiliated Company to which Additional Employee Contributions,
matching Employer Contributions, or Employee Salary Deferral
Contributions are made, all such contributions on behalf of
such Highly Compensated Participant shall be aggregated for
purposes of this Section 8.9. However, if the plans have
different plan years, this paragraph shall be applied by
treating all plans ending with or within the same calendar
year as a single plan.
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(f) For purposes of Section 8.9(a) and 8.10, a Highly Compensated
Participant and Non-Highly Compensated Participant shall
include any Employee eligible to have matching Employer
Contributions pursuant to Section 6.2 (whether or not a
deferral election was made or suspended pursuant to Section
5.1) and Additional Employee Contributions pursuant to Section
5.2 (whether or not Additional Employee Contributions are
made) allocated to his account for the Plan Year.
(g) The "Actual Contribution Percentage" for the Non-Highly
Compensated Participant group is determined without regard to
changes in the group of Non- Highly Compensated Participants
who are eligible under the Plan in the testing year. However,
if the Plan results from, or is otherwise affected by, a "Plan
Coverage Change" that becomes effective during the testing
year, then the "Actual Contribution Percentage" for the
Non-Highly Compensated Participant group for the prior year is
the "Weighted Average of the Actual Contribution Percentages
For The Prior Year Subgroups." Notwithstanding the above, if
ninety (90) percent or more of the total number of Non-Highly
Compensated Participants from all "Prior Year Subgroups" are
from a single "Prior Year Subgroup," then in determining the
"Actual Contribution Percentage" for the Non-Highly
Compensated Participants for the prior year, the Employer may
elect to use the "Actual Contribution Percentage" for
Non-Highly Compensated Participants for the prior year under
which that single "Prior Year Subgroup" was
VIII-20
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eligible, in lieu of using the weighted averages. For purposes
of this Section the following definitions shall apply:
(1) "Plan Coverage Change" means a change in the group or
groups of eligible Participants on account of (i) the
establishment or amendment of a plan, (ii) a plan
merger, consolidation, or spinoff under Code Section
414(l), (iii) a change in the way plans within the
meaning of Code Section 414(l) are combined or
separated for purposes of Regulation 1.401(k)-
1(g)(11), or (iv) a combination of any of the
foregoing.
(2) "Prior Year Subgroup" means all Non-Highly
Compensated Participants for the prior year who, in
the prior year, were eligible Participants under a
specific Code Section 401(m) plan maintained by the
Employer and who would have been eligible
Participants in the prior year under the plan tested
if the plan coverage change had first been effective
as of the first day of the prior year instead of
first being effective during the testing year.
(3) "Weighted Average of the Actual Contribution
Percentages For The Prior Year Subgroups" means the
sum, for all prior year subgroups, of the "Adjusted
Actual Contribution Percentages."
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(4) "Adjusted Actual Contribution Percentage" with
respect to a prior year subgroup means the Actual
Contribution Percentage for Non-Highly Compensated
Participants for the prior year of the specific plan
under which the members of the prior year subgroup
were eligible Participants, multiplied by a fraction,
the numerator of which is the number of Non-Highly
Compensated Participants in the prior year subgroup
and the denominator of which is the total number of
Non-Highly Compensated Participants in all prior year
subgroups.
8.10 Adjustment to Actual Contribution Percentage Tests. The following
Section 8.10 shall be effective for periods beginning on or after January 1,
1997.
(a) In the event that the "Actual Contribution Percentage" for the
Highly Compensated Participant group exceeds the "Actual
Contribution Percentage" for the Non-Highly Compensated
Participant group pursuant to Section 8.9(a), the Committee
(on or before the fifteenth day of the third month following
the end of the Plan Year, but in no event later than the close
of the following Plan Year) shall direct the Trustee to
distribute to the Highly Compensated Participant having the
largest amount of contributions determined pursuant to Section
8.9(b)(1), such excess aggregate contributions (and income
allocable to such contributions) until the total amount of
excess aggregate contributions has been distributed, or until
his remaining amount equals the amount of contributions
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determined pursuant to Section 8.9(b)(1) of the Highly
Compensated Participant having the second largest amount of
contributions. This process shall continue until the total
amount of excess aggregate contributions has been distributed.
The distribution of excess aggregate contributions shall be
made in the following order:
(1) Matching Employer Contributions distributed pursuant
to Section 8.8(a)(1);
(2) Additional Employee Contributions including excess
contributions recharacterized as Additional Employee
Contributions pursuant to Section 8.8(a)(2);
(3) Remaining matching Employer Contributions.
(b) Any distribution of less than the entire amount of excess
aggregate contributions (and income) shall be treated as a pro
rata distribution of excess aggregate contributions and
income. Distribution of excess aggregate contributions shall
be designated by the Employer as a distribution of excess
aggregate contributions (and income).
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(c) Excess aggregate contributions attributable to amounts other
than Additional Employee Contributions shall be treated as
Employer contributions for purposes of Code Sections 404 and
415 even if distributed from the Plan.
(d) For each Highly Compensated Participant, the amount of excess
aggregate contributions is equal to the total Additional
Employee Contributions made pursuant to Section 5.2, matching
Employer Contributions made pursuant to Section 6.2, excess
contributions recharacterized as Additional Employee
Contributions pursuant to Section 8.8(a) and any qualified
non- elective contributions or elective deferrals taken into
account pursuant to Section 8.9(c) on behalf of the Highly
Compensated Participant (determined prior to the application
of this paragraph) minus the amount determined by multiplying
the Highly Compensated Participant's actual contribution ratio
(determined after application of this paragraph) by his 414(s)
Compensation. In no case shall the amount of excess aggregate
contribution with respect to any Highly Compensated
Participant exceed the amount of Additional Employee
Contributions made pursuant to Section 5.2, matching Employer
Contributions made pursuant to Section 6.2, Excess Aggregate
Contributions recharacterized as Additional Employee
Contributions pursuant to Section 8.8(a) and any qualified
non-elective contributions or elective deferrals taken into
account pursuant to Section 8.9(c) on behalf of such Highly
Compensated Participant for such Plan Year.
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(e) The determination of the amount of excess aggregate
contributions with respect to any Plan Year shall be made
after first determining the excess contributions, if any, to
be treated as Additional Employee Contributions due to
recharacterization for the plan year of any other qualified
cash or deferred arrangement (as defined in Code Section
401(k)) maintained by the Employer that ends with or within
the Plan Year or which are treated as Additional Employee
Contributions due to recharacterization pursuant to Section
8.8(a).
(f) Notwithstanding the above, within twelve (12) months after the
end of the Plan Year, the Employer may make a special
qualified non-elective contribution on behalf of Non-Highly
Compensated Participants in an amount sufficient to satisfy
one of the tests set forth in Section 8.9(a). Such
contribution shall be allocated in the prior Plan Year to the
Account of each Non-Highly Compensated Participant who was
employed by the Employer on the last day of the prior Plan
Year in the same proportion that each such Non-Highly
Compensated Participant's Compensation for the prior Plan Year
bears to the total Compensation of all Non- Highly Compensated
Participants for the prior Plan Year. Such contribution shall
be made by the Employer prior to the end of the current Plan
Year. A separate accounting of any special qualified
non-election contributions shall be maintained in the
Participant's Account.
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ARTICLE IX
VESTING
9.1 Vesting Schedule. A Participant shall at all times be fully vested
in the Accrued Balance in his Account.
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ARTICLE X
PAYMENT OF BENEFITS
10.1 Distribution on Account of Termination of Employment. If a
Participant terminates his employment other than by reason of death, retirement
or Total Disability, the Accrued Balance in such Participant's Account
(calculated as of the Valuation Date next preceding the date of the
distribution) hereof shall be paid to the Participant in a lump sum. Such lump
sum shall consist of cash, except that the Participant's interest in the Company
Stock Fund may be paid, at the Participant's election, in the form of whole
shares of Company Stock, the number of such whole shares to be determined as of
the Valuation Date next preceding the date of distribution, with any amounts
representing fractional shares of Company Stock to be paid in cash. The lump sum
distribution shall be made no later than the close of the second Plan Year
following the Plan Year in which termination of employment occurs, except as
provided in the following sentence. Effective January 1, 1998, if the amount of
the distribution derived from the Participant's Employer Contribution Account
exceeds, or has ever exceeded, $5,000 (or such larger amount that may be
established by Treasury Regulations under Section 411(a)(7)(B) of the Code), the
payment of the distribution shall be delayed until the Participant's Normal
Retirement Date, unless the Participant requests an earlier payment of benefits.
10.2 Distribution at Retirement. Any Participant shall be eligible to
terminate his employment by retiring at any time on or after the first day of
the month coinciding with or next following his Early Retirement Date, if
applicable, or his Normal Retirement Date. In the event
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of such retirement of any Participant, the Accrued Balance credited to such
Participant's Account (calculated as of the Valuation Date next preceding the
date of the distribution) shall be paid to such former Participant in a lump
sum.
10.3 Deferred Retirement. A Participant may remain in the service of
the Employer after reaching his Early Retirement Date or Normal Retirement Date
and shall continue to be eligible to defer salary pursuant to Section 5.1
hereof, to make Additional Employee Contributions pursuant to Section 5.2
hereof, to share in Employer Contributions, if any, pursuant to Section 6.2
hereof, and to share in allocations pursuant to Section 8.3 hereof.
10.4 Distribution Upon Death. In the event of the termination of
employment of a Participant through the death of the Participant prior to his
retirement, the Accrued Balance credited to his Account (calculated as of the
Valuation Date next preceding the date of the distribution) shall be paid to his
Beneficiary in a lump sum.
10.5 Designation of Beneficiary. In the event of the death of a
Participant or former Participant, any benefits payable hereunder shall be paid
to the Participant's surviving spouse, if any, or to any other Beneficiary or
alternate Beneficiary who may be designated by the Participant as hereinafter
provided if such surviving spouse consents thereto or if there is no surviving
spouse. For purposes of entitlement to receive benefits pursuant to the
foregoing sentence, surviving spouse shall mean the spouse to whom a Participant
shall be married on the date payment of his benefits commences or to whom a
Participant shall be married at the time of
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his death if he shall die while employed by the Employer, unless otherwise
specifically provided by a qualified domestic relations order pursuant to
Section 414(p) (5) of the Code.
The consent of a surviving spouse to the designation of any other
Beneficiary shall be made in writing on a form provided by the Committee, which
form shall contain the surviving spouse's acknowledgment of the effect of such
consent and shall be witnessed by the Administrator or his representative, or a
notary public. Notwithstanding the foregoing, such written consent shall not be
required if it is established to the satisfaction of the Administrator or his
representative that such consent may not be obtained because there is no spouse,
because the spouse cannot be located, or because of such other circumstances as
the Secretary of the Treasury may by regulations prescribe.
Subject to the foregoing paragraphs of this Section 10.5, each
Participant and former Participant shall have the unrestricted right at any time
to designate a primary and an alternate Beneficiary to receive any benefits
payable hereunder on the death of the Participant, and from time to time to
change any such designation. Each such designation shall be evidenced by a
written instrument filed with the Committee, signed by the Participant. Such
designation or change shall take effect as of the date of execution of such
written instrument, whether or not the Participant is living at the time of such
filing, but without prejudice to the Trust Fund on account of any payments made
before receipt of such written instrument by the Committee.
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10.6 Distribution Upon Total Disability. In the event of a
Participant's Total Disability, the Accrued Balance in his Account (calculated
as of the Valuation Date next preceding the date of the distribution) shall be
paid to such former Participant in a lump sum.
10.7 Commencement of Benefit Payments. A Participant who terminates
service by reason of retirement shall have the right to elect to delay the
benefit commencement date until the expiration of one year after his date of
termination of service if payment would otherwise be made within that year.
Notwithstanding the foregoing, unless a Participant elects a later date
by submitting a signed election form to the Administrator setting forth the date
on which the payment of benefits shall be made, the payment of benefits under
the Plan shall be made not later than the sixtieth (60th) day after the close of
the Plan Year in which the later of the following events occurs: (1) the
Participant attains age 65; or (2) the Participant terminates his service with
the Employer. Effective for Participants who attain age 70-1/2 in 1996 or later,
in no case shall distributions of benefits under the Plan be made later than
April 1 of the calendar year following the later of (i) the calendar year in
which the Participant attains age 70-1/2; or (ii) the calendar year in which the
Participant retires, provided, however, that this clause (ii) shall not apply in
the case of a Participant who is a "five (5) percent owner" at any time during
the five (5) Plan Year period ending in the calendar year in which he attains
age 70-1/2 or, in the case of a Participant who becomes a "five (5) percent
owner" during any subsequent Plan Year, clause (ii) shall no longer apply and
the required beginning date shall be the April 1st of the calendar year
following the
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calendar year in which such subsequent Plan Year ends. Such distributions shall
be equal to or greater than any required distribution. .
10.8 Direct Rollover.
(a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this
Section, a distributee may elect, at the time and in the
manner prescribed by the Plan Administrator, to have any
portion of an eligible rollover distribution paid directly to
an eligible retirement plan specified by the distributee in a
direct rollover.
(b) Definitions.
(1) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any
portion of the balance to the credit of the
distributee, except that an eligible rollover
distribution does not include: any distribution that
is one of a series of substantially equal periodic
payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or
the joint lives (or joint life expectancies) of the
distributee and the distributee's designated
beneficiary, or for a specified period of ten years
or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of
the Code; and the portion of any distribution that is
not includible in gross income (determined without
regard to the exclusion for net unrealized
appreciation with respect to Employer securities).
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(2) Eligible retirement plan: An eligible retirement plan
is an individual retirement account described in
Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code,
or a qualified trust described in Section 401(a) of
the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an
eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(3) Distributee: A distributee includes an Employee or
former Employee. In addition, the Employee's or
former Employee's surviving spouse and the Employee's
or former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the
Code, are distributees with regard to the interest of
the spouse or former spouse.
(4) Direct rollover: A direct rollover is a payment by
the Plan to the eligible retirement plan specified by
the distributee.
10.9 USERRA Compliance. Notwithstanding any provisions of the Plan to
the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in compliance with Code Section
414(u).
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ARTICLE XI
WITHDRAWALS FROM ACCOUNTS
11.1 Withdrawals. A Participant may at any time, but not more than
twice in any Plan Year nor more than once in any Calendar Quarter, on the
appropriate form filed with the Committee at least fifteen (15) days before the
last day of a Calendar Quarter, elect to withdraw from one or more Investment
Funds, subject to the limitations herein, all or any part of his Account,
excluding his Rollover Account and the amount of any loan to the Participant
under Section 12.1 which is outstanding, as adjusted for investment income, gain
or loss. If the Participant's Account is invested in one or more Investment
Funds pursuant to Section 7.1, the Participant shall be entitled to elect on the
form provided by the Committee, in dollar amounts, the extent to which the
withdrawal shall be made from any such Fund. The effective date of the
withdrawal shall be the last day of the Calendar Quarter in which the
Participant's election is received by the Committee.
All amounts distributed pursuant to this Section shall be paid from the
following sources, in the following order:
(a) from that part of his Account equal to the aggregate amount of
his Additional Employee Contributions;
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(b) from that part of his Account equal to the earnings on the
amounts described in (a); and
(c) from that part of his Account equal to the aggregate amount of
his Employee Salary Deferral Contributions, including pre-1989
earnings thereon; provided, however, that no withdrawal of
such amount shall be permitted unless the Participant has
attained age 59-1/2, has suffered a Total Disability, or is
able to demonstrate hardship pursuant to Section 11.2 hereof.
11.2 Hardship.
(a) The Committee shall authorize a distribution for hardship only
if the distribution is on account of:
(1) Medical expenses described in Code Section 213(d)
incurred by the Participant, his spouse, or any of
his dependents (as defined in Code Section 152);
(2) The purchase (excluding mortgage payments) of a
principal residence for the Participant;
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(3) Payment of tuition, related educational fees and room
and board expenses for the next twelve (12) months of
post-secondary education for the Participant, his
spouse, children, or dependents; or
(4) The need to prevent the eviction of the Participant
from his principal residence or foreclosure on the
mortgage of the Participant's principal residence.
(b) No distribution shall be made on account of hardship unless
the Committee, based upon the Participant's representation and
such other facts as are known to the Committee, determines
that all of the following conditions are satisfied:
(1) The distribution is not in excess of the amount of
the immediate and heavy financial need of the
Participant; and
(2) The Participant has obtained all distributions, other
than hardship distributions, and all nontaxable loans
currently available under all plans maintained by the
Employer.
11.3 Suspension of Contributions. If a Participant receives a hardship
distribution pursuant to Section 11.2, such Participant's Employee Salary
Deferral Contributions and Additional Employee Contributions will be suspended
for twelve (12) months after receipt of the
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hardship distribution. In addition, the Participant may not make Employee Salary
Deferral Contributions for his taxable year immediately following the taxable
year of the hardship distribution in excess of the applicable limit under Code
Section 402(g) for such next taxable year less the amount of such Participant's
Employee Salary Deferral Contributions for the taxable year of the hardship
distribution.
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ARTICLE XII
LOANS TO PARTICIPANTS
12.1 Procedures. The Committee may, upon the application of any
Participant but in the Committee's sole discretion, direct the Trustee to make a
loan to a Participant under the following circumstances: (a) loans shall not be
made available to Highly Compensated Employees, officers, or shareholders in an
amount greater than the amount made available to other Participants; (b) loans
shall bear a reasonable rate of interest; (c) loans shall be adequately secured;
and (d) loans shall provide for periodic repayment over a period of up to five
(5) years, provided, however, that a loan shall not be granted to any
Participant that provides for a repayment period extending beyond such
Participant's Normal Retirement Date. Notwithstanding the foregoing clause (d),
a loan for a term of up to ten (10) years shall be permitted if the proceeds of
such loan are used for the purpose of a Participant's purchase of his principal
residence; provided, however, that in no event shall the term of such loan
extend beyond a Participant's Normal Retirement Date. In addition to any other
security that may be required, every loan to a Participant shall be secured by a
pledge of fifty percent (50%) of the Participant's interest in the Trust Fund
(excluding the Participant's interest in the Company Stock Fund).
A Participant may specify from which Investment Fund the loan funds are
to be taken, and in the absence of any such designation the Committee shall so
specify.
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A loan to a Participant shall be considered an earmarked investment of
such Participant's Account. Loan funds shall be taken first from the Additional
Employee Contribution Account and then, to the extent necessary, from the
Rollover Account and the Employee Salary Deferral Contribution Account, in that
order. Loan funds shall not be taken from the Employer Contribution Account.
Repayments of loans shall reduce the amount of the loan investment in the
Employee Loan Fund and shall be invested in one or more of the Investment Funds
in accordance with the Participant's then current investment election.
Loans made pursuant to this Section from a Participant's Account shall
be limited in amount to the lesser of:
(i) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan, or any
other qualified plan maintained by the Employer, to
the Participant during the one year period ending on
the day before the date on which such loan is made,
over the outstanding balance of loans from the Plan
to the Participant on the date on which such loan was
made, or
(ii) one-half (1/2) of the present value of the
Participant's vested Accrued Balance.
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Any loans granted or renewed shall be made pursuant to a Participant
loan program. Such loan program shall be established in writing and must
include, but need not be limited to, the following:
(1) the identity of the person or positions authorized to
administer the Participant loan program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or denied;
(4) limitations, if any, on the types and amounts of loans
offered;
(5) the procedure under the program for determining a reasonable
rate of interest;
(6) the types of collateral which may secure a Participant loan;
and
(7) the events constituting default and the steps that will be
taken to preserve Plan assets.
Such Participant loan program shall be contained in a separate written
document which, when properly executed, is hereby incorporated by reference and
made a part of the Plan.
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Furthermore, such Participant loan program may be modified or amended in writing
from time to time without the necessity of amending this Section.
12.2 USERRA Compliance. Effective December 12, 1994, loan repayments
will be suspended under this Plan, as permitted under Code Section 414(u).
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ARTICLE XIII
TERMINATION OF PLAN
13.1 Termination. The Employer hopes to continue the Plan and its
contributions to the Trust Fund indefinitely. Nevertheless, each Employer
maintains the right to suspend, terminate, or completely discontinue
contributions under the Plan with respect to its Employees. Upon any full or
partial termination of the Plan or complete discontinuance of contributions by
an Employer hereunder, all affected Participants who are Employees of such
Employer shall become vested in the Accrued Balances in their Accounts.
13.2 Distribution. Upon (1) the termination of the Plan, (2) the
complete discontinuance of contributions by an Employer to the Trust Fund, or
(3) the termination of the liability of an Employer, as provided for in Section
13.1 hereof, the Committee shall make a final allocation of Employer
Contributions, if any, and net earnings or losses in the manner prescribed
herein to the Accounts of Participants who are Employees of such Employer.
Thereafter, the funds in the Account of each such Participant shall be paid and
distributed to such person in a lump sum upon the earliest of (1) a date that is
not more than 60 days following the later of termination of the Plan or the
receipt of a favorable determination letter (if requested) from the Internal
Revenue Service following such termination, but only if another defined
contribution plan (other than an employee stock ownership plan) has not been
established or is not maintained by the Employer, (2) the Participant's
attainment of age 59 1/2,
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(3) the Participant's termination of employment with the Employer, (4) the
Participant's Total Disability, or (5) the Participant's death.
13.3 Final Expenses. Notwithstanding anything to the contrary herein,
all expenses of administration of the Trust Fund, and other expenses incident to
the termination and distribution of the Trust Fund, incurred after the
termination of the Plan shall be paid from the Trust Fund as directed by the
Committee.
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ARTICLE XIV
AMENDMENT OF PLAN
14.1 Amendment. The Company shall have the right, by action of the
Pension Trust Committee of the Board, to modify or amend this Plan, in whole or
in part, at any time and from time to time; provided, however, that no such
action shall adversely affect Participants to the extent of their vested
benefits, nor shall such action decrease a Participant's accrued benefit or
eliminate an optional form of distribution. Any such modification or amendment
may be made retroactively.
If the Plan should at any time become a transferee of a plan which is
subject to the requirements of Section 401(a)(11)(A) of the Code, the Plan shall
be amended to meet said requirements.
14.2 Change in Vesting. If an amendment or a change in the top-heavy
status of the Plan changes the vesting schedule of the Plan, as set forth in
Section 9.1 hereof, any Participant having three (3) or more Years of
Eligibility Service on the date which is sixty (60) days after such amendment or
change is adopted or becomes effective (or, if later, sixty (60) days after
written notice of the amendment or change is given) may, within a reasonable
time after the effective date of the amendment or change, elect to remain
subject to the vesting schedule in effect prior to such amendment or change.
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14.3 Trustee. The Committee shall deliver a copy of each amendment to
the Plan, and the Board resolution adopting the same, to the Trustee promptly
after its adoption. No amendment shall be made that would adversely affect the
Trustee or impose additional duties on it without the Trustee's written consent
thereto.
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ARTICLE XV
CLAIMS PROCEDURE
15.1 Claims. Each Participant and Beneficiary of the Plan shall submit
all claims for benefits, claims relating to the amount or manner of any
distribution, and any other request relating to any Account, in writing, to the
Administrator of the Plan. The Administrator shall within a reasonable period of
time, but not later than 60 days after receipt thereof, either approve or deny
such claim or request either wholly or in part, and notify the claimant in
writing of the action taken.
15.2 Notice of Denial. If such claim or request is wholly or partially
denied, the written notice of the Administrator shall set forth in a manner
calculated to be understood by the claimant:
(a) specific reasons for the denial;
(b) specific references to the pertinent Plan provisions on which
the denial is based;
(c) specific references to any additional material or information
necessary for the claimant to perfect review of the claim and
an explanation of why such material or information is
necessary; and
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(d) an explanation of the Plan's claims review procedure.
If the notice of the denial is not furnished to the Participant in
accordance with this section within a reasonable period of time, such
participant's claim shall be deemed denied.
15.3 Review. Upon denial of such a claim or request, the claimant shall
be entitled within 60 days after the receipt of written notice of denial by the
Administrator:
(a) to request, in writing, a review by the Committee of the
denial;
(b) to review pertinent documents; and
(c) to submit issues and comments in writing.
The Committee shall render a decision on its review of the denial
promptly, but not later than 60 days after the receipt of the request for
review, unless special circumstances require an extension of time, in which case
a decision shall be rendered not later than 120 days after the receipt of a
request for review. If the Committee's decision on review is not furnished to
the Participant within the time limitations described herein, the claim shall be
deemed denied upon review.
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The decision of the Committee shall be in writing and shall set forth
reasons therefor stated in a manner calculated to be understood by the claimant,
including specific references to the pertinent Plan provisions. Determinations,
decisions and other actions of the Committee, taken in accordance with the
provisions hereof shall be made in a uniform, non-discriminatory manner and
shall be final, conclusive and binding on all parties.
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ARTICLE XVI
THE TRUSTEE
16.1 All contributions hereunder to the Trust Fund shall be held, in
trust, by such Trustee as may be selected by the Committee, from time to time,
under a trust agreement approved by the Board, with such powers in the Trustee
as to investment, reinvestment, control and disbursement of all or part of the
Trust Fund as shall be in accordance with the provisions hereof.
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ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1 The Plan and the Trust provided for hereunder are created for the
exclusive benefit of the Participants and their Beneficiaries. Under no
circumstances whatsoever shall any assets of the Trust Fund ever revert to, or
be used or enjoyed by, the Employer, or any successor thereto, nor shall any
such assets ever be used other than for the exclusive benefit of the
Participants or their Beneficiaries.
17.2 No Participant or Beneficiary shall have any legal or equitable
right or interest in the Trust Fund established hereunder, or in any annuity
contract purchased hereunder, except as expressly provided for herein, and no
Employee shall be deemed to possess a right to share in any moneys allocated by
the Committee as hereinabove set forth, except as herein provided.
17.3 Participation in the Plan shall not give any Participant the right
to be retained in the service of the Employer or any right or claim to a
retirement pension unless the right to such retirement pension is provided for
herein.
17.4 Whenever an Employer is permitted or required under the terms of
this Plan to take any action, it shall be done by its Board of Directors and
shall be evidenced by proper resolutions certified by the Secretary thereof.
XVII-1
<PAGE> 87
17.5 The Plan shall not be automatically terminated by the Company's
acquisition by, or merger into, any other company. The Plan shall be continued
after such merger if the successor company agrees to continue the Plan. All
rights to amend or terminate the Plan shall be transferred to the successor
company, effective as of the date of the merger.
The merger or consolidation with, or transfer of assets and liabilities
to, any other qualified retirement plan shall be permitted only if the benefit
each Participant would receive if the Plan were terminated immediately after
such merger or consolidation, or transfer of assets and liabilities, would be at
least as great as the benefit he would have received had the Plan been
terminated immediately before any such transaction.
17.6 To the extent permitted by law and with the exception of payments
pursuant to a qualified domestic relations order within the meaning of Section
414(p) of the Code, no benefit payable hereunder shall be subject in any manner
to anticipation, assignment, garnishment, or pledge. Any attempt to anticipate,
assign, garnish or pledge the same will be of no effect. No such benefits will
be in any manner liable for or subject to the debts, liabilities, or torts of
any Participant, and if any Participant is adjudicated bankrupt or attempts to
anticipate, assign, or pledge any such benefits, then such benefits will, in the
discretion of the Committee, cease. In such event, the Committee will have the
authority to cause the same or any part thereof to be held or applied to or for
the benefit of such Participant, his spouse, his children or other dependents,
or any of them, in such manner and in such proportion as the Committee may in
its discretion deem proper.
XVII-2
<PAGE> 88
Notwithstanding any provision of this Section to the contrary, an
offset to a Participant's Account against an amount that the Participant is
ordered or required to pay the Plan with respect to a judgment, order, or decree
issued, or a settlement entered into, on or after August 5, 1997, shall be
permitted in accordance with Code Sections 401(a)(13)(C) and (D).
17.7 A Participant shall not, with or without cause, be divested of any
portion of his Accrued Balance that is vested under the terms of the Plan.
17.8 Notwithstanding any other provisions of the Plan, a former
Participant shall not be entitled to payment of duplicate benefits upon again
becoming a Participant.
17.9 The headings of the Sections herein are for reference only. In the
event of a conflict between such a heading and the content of a Section, the
content of the Section shall control.
17.10 If any person to whom a benefit is payable hereunder is an
infant, or if the Committee determines that any person to whom a benefit is
payable is incapable by reason of physical or mental disability of taking care
of his own affairs, the Committee shall have power to cause the payments
becoming due to such person to be made to another for his benefit without
responsibility of the Committee or the Trustee to see to the application of such
payments. Payments made pursuant to such power shall operate as a complete
discharge of the obligation of the Employer, the Trust Fund, the Trustee and the
Committee to make such payments.
XVII-3
<PAGE> 89
17.11 The interpretation of the provisions hereof and the
administration of the Plan shall be governed, to the extent applicable, by the
Act and, to the extent the Act is not applicable, by the laws of Connecticut.
XVII-4
<PAGE> 90
ARTICLE XVIII
TOP-HEAVY PLAN PROVISIONS
(Sections 18.1-18.10 provide definitions for Article XVIII.)
18.1 Compensation. Compensation of an Employee which is reportable on
Form W-2 for the calendar year ending with or within the Plan Year.
18.2 Key Employee. Any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the Determination Period
was an officer of the Employer with Compensation greater than 150 percent of the
dollar limitation under Section 415(c)(1)(A) of the Code, an owner (or
considered an owner under Section 318 of the Code) of one of the ten largest
interests in the Employer if such individual's Compensation exceeds the dollar
limitation under Section 415(c)(1)(A) of the Code and such individual's
ownership interest exceeds 1/2 percent, a 5-percent owner of the Employer, or a
1-percent owner of the Employer who has Compensation of more than $150,000. The
determination of who is a Key Employee will be made in accordance with Section
416(i)(1) of the Code.
18.3 Top-Heavy Plan. For any Plan Year, this Plan is top-heavy if any
of the following conditions exist:
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<PAGE> 91
(a) If the Top-Heavy Ratio for this Plan exceeds 60 percent and
this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group of plans.
(b) If this Plan is a part of a Required Aggregation Group of
plans (but not part of a Permissive Aggregation Group) and the
Top-Heavy Ratio for the Required Aggregation Group of plans
exceeds 60 percent.
(c) If this Plan is a part of a Required Aggregation Group of
plans and part of a Permissive Aggregation Group of plans and
the Top-Heavy Ratio for the Permissive Aggregation Group
exceeds 60 percent.
18.4 Top-Heavy Ratio.
(a) The Top-Heavy Ratio for any Required or Permissive Aggregation
Group, as appropriate, is a fraction, the numerator of which
is the sum of the account balances under the aggregated
defined contribution plan or plans for all Key Employees as of
the Determination Date(s) (including any part of any account
balance distributed in the Determination Period(s)), and the
Present Value of accrued benefits under the aggregated defined
benefit plan or plans for all Key Employees as of the
Determination Date(s), and the denominator of which is the sum
of all account balances (including any part of any account
balance distributed in the Determination Period(s)) under the
aggregated defined contribution plan or
XVIII-2
<PAGE> 92
plans for all Participants and the Present Value of accrued
benefits under the defined benefit plan or plans for all
Participants as of the Determination Date(s), all determined
in accordance with Section 416 of the Code. The accrued
benefits under a defined benefit plan in both the numerator
and denominator of the Top-Heavy Ratio are adjusted for any
distribution of an accrued benefit made in the Determination
Period.
(b) For purposes of (a) above, the value of account balances and
the Present Value of accrued benefits shall be determined as
of the most recent Valuation Date that falls within or ends
with the 12-month period ending on the Determination Date,
except as provided in Section 416 of the Code and the
Regulations thereunder for the first and second plan years of
a defined benefit plan. The account balances and accrued
benefits of a Participant (1) who is not a Key Employee but
who was a Key Employee in a prior year, or (2) who has not
performed any services for any Employer maintaining the Plan
at any time during the Determination Period shall be
disregarded. The calculation of the Top-Heavy Ratio, and the
extent to which distributions, rollovers, and transfers are
taken into account shall be made in accordance with Section
416 of the Code and the Regulations thereunder. Deductible
employee contributions shall not be taken into account for
purposes of computing the Top-Heavy Ratio. When aggregating
plans, the value of account balances and accrued benefits
shall be calculated with reference to the Determination
Date(s) that falls within the same calendar year.
XVIII-3
<PAGE> 93
18.5 Permissive Aggregation Group - The Required Aggregation Group of
plans plus any other plan or plans of the Employer which, when considered as a
group with the Required Aggregation Group, would continue to satisfy the
requirements of Sections 401(a)(4) and 410 of the Code.
18.6 Required Aggregation Group - (1) Each qualified plan of the
Employer in which at least one Key Employee participated during the
Determination Period, and (2) any other qualified plan of the Employer which
enabled a plan described in (1) to meet the requirements of Sections 401(a)(4)
and 410 of the Code during the Determination Period.
18.7 Determination Date - For any Plan Year subsequent to the first
Plan Year, the last day of the preceding Plan Year. For the first Plan Year of
the Plan, the last day of that year.
18.8 Determination Period - The Plan Year containing the Determination
Date and the four (4) preceding Plan Years.
18.9 Valuation Date - For purposes of computing the Top-Heavy Ratio,
the Valuation Date shall be the normal annual valuation date for the Plan.
18.10 Present Value - For purposes of computing the Top-Heavy Ratio,
any benefit shall be discounted only for mortality and interest as follows:
XVIII-4
<PAGE> 94
Interest Rate: 5%
Mortality Table: 1971 TPF&C Forecast Mortality Table
18.11 If the Plan is or becomes a Top-Heavy Plan in any Plan Year, the
following provisions shall supersede any conflicting provision in the Plan:
(a) Minimum Allocations.
(i) Except as otherwise provided in (ii) and (iii) below,
for any Plan Year in which this Plan is a Top-Heavy
Plan, the Employer Contributions allocated on behalf
of any Participant who is not a Key Employee shall
not be less than the lesser of three percent (3%) of
such Participant's Compensation or in the case where
the Employer has no defined benefit plan which
designates this Plan to satisfy Section 401 of the
Code, the largest percentage of Employer
Contributions allocated on behalf of any Key Employee
for that year. The minimum allocation is determined
without regard to any Social Security contribution.
This minimum allocation shall be made even though,
under other Plan provisions, the Participant would
not otherwise be entitled to receive an allocation,
or would have received a lesser allocation for the
year because of (i) the Participant's failure to
complete 1,000 Hours of Service (or any equivalent
provided in the Plan).
XVIII-5
<PAGE> 95
(ii) The provision in (i) above shall not apply to any Participant
who was not employed by the Employer on the last day of the
Plan Year.
(iii) The provision in (i) above shall not apply to any Participant
to the extent the Participant is a Participant in The
Connecticut Water Company Employees' Retirement Plan which
shall provide the minimum allocation or benefit applicable to
Top-Heavy Plans.
(b) Additional Limitation. With respect to any Plan Year for which
the Plan is determined to be a Top-Heavy Plan, paragraph
(2)(B) and (3)(B) of Section 415(e) of the Code, as
incorporated in Section 8.6 hereof, shall be applied by
substituting "1.0" for "1.25 percent" in the calculation of
the defined benefit and defined contribution fractions unless
the requirements of Section 416(h)(2) of the Code are met.
XVIII-6
<PAGE> 1
EXHIBIT 10.11
THE CONNECTICUT WATER COMPANY
EMPLOYEES' RETIREMENT PLAN
Amended and Restated as of
January 1, 1997
(except as otherwise indicated herein)
<PAGE> 2
AMENDMENT AND RESTATEMENT OF
THE CONNECTICUT WATER COMPANY
EMPLOYEES' RETIREMENT PLAN
THE CONNECTICUT WATER COMPANY, a corporation organized and existing under the
laws of the State of Connecticut, with its principal place of business at
Clinton, Connecticut, pursuant to ARTICLE XI, Section A of The Connecticut Water
Company Employees' Retirement Plan and Trust, dated October 23, 1957, as
amended, does hereby further amend and restate said Plan in its entirety,
effective as of January 1, 1997, except as otherwise indicated herein, as
follows:
<PAGE> 3
TABLE OF CONTENTS
ARTICLE I INTRODUCTION
ARTICLE II DEFINITIONS
ARTICLE III PARTICIPATION
ARTICLE IV NORMAL RETIREMENT
ARTICLE V EARLY RETIREMENT
ARTICLE VI POSTPONED RETIREMENT
ARTICLE VII TERMINATION OF EMPLOYMENT
AND VESTED RIGHTS
ARTICLE VIII DISABILITY
ARTICLE IX PRE-RETIREMENT DEATH
BENEFIT
ARTICLE X NORMAL AND OPTIONAL FORMS
OF RETIREMENT INCOME
ARTICLE XI FIDUCIARIES-ADMINISTRATION OF THE PLAN
ARTICLE XII METHOD OF FINANCING
ARTICLE XIII AMENDMENT OR TERMINATION
ARTICLE XIV GENERAL PROVISIONS
ARTICLE XV TOP-HEAVY PLAN PROVISIONS
EXHIBIT I
APPENDIX A SPECIAL EARLY RETIREMENT BENEFIT
APPENDIX B SPECIAL EARLY RETIREMENT BENEFIT
<PAGE> 4
CONNECTICUT WATER COMPANY
EMPLOYEES' RETIREMENT PLAN
ARTICLE I
INTRODUCTION
1.1 This Plan shall be known as The Connecticut Water Company Employees'
Retirement Plan.
1.2 The purpose of this Plan is to provide eligible Employees with
retirement income benefits which will provide periodic income during
the Employees' retirement years, and support their beneficiaries upon
the death of such Employees.
1.3 It is the intention of the Company that The Connecticut Water Company
Employees' Retirement Trust, which is a part of this Plan, shall meet
the requirements of the Employee Retirement Income Security Act of 1974
(ERISA) and shall be qualified and exempt under Sections 401(a) and
501(a) of the Internal Revenue Code of 1986, as amended from time to
time.
I-1
<PAGE> 5
ARTICLE II
DEFINITIONS
Unless otherwise required by the context, the terms used herein shall have the
meanings set forth in the remaining paragraphs of this Article II.
2.1 Actuarial Equivalent shall mean a benefit of equivalent current value
to the benefit which would otherwise have been provided to the
Participant, determined as described in Exhibit I attached to and made
part of this Plan.
2.2 Actuary shall mean an actuary selected by the Committee who has been
"enrolled" in accordance with ERISA.
2.3 Administrator shall mean the person or persons designated by the
Committee in accordance with Article XI as the Administrator of the
Plan within the meaning of Section 3(16) of ERISA.
2.4 Affiliated Company shall mean any company which is included within a
"controlled group of corporations" within which the Company is also
included, as determined under Section 1563 of the Code without regard
to Subsections (a)(4) and (e)(3)(C) of said Section 1563.
Notwithstanding the foregoing, with respect
II-1
<PAGE> 6
to the benefit limitation set forth in Section 4.4 of this Plan, such
determination under Section 1563 shall be made assuming the phrase
"more than 50 percent" were substituted for the phrase "at least 80
percent" each place it appears in Section 1563(a)(1).
2.5 Anniversary Date shall mean January 1 of each year commencing on or
after January 1, 1958.
2.6 Annual Earnings shall mean the regular basic earnings paid to a
Participant by his Employer during a Plan Year, excluding any other
items of compensation such as overtime earnings, bonuses, or
contributions made by the Employer to or under any form of employee
benefit program expressed on an annual basis. For hourly Employees,
Annual Earnings shall mean the average hourly straight time rate,
determined by dividing total straight time earnings by actual hours
worked, times 2080 hours. Notwithstanding the foregoing, Annual
Earnings shall include any amounts which would otherwise be Annual
Earnings and which are deferred by a Participant pursuant to a cash or
deferred arrangement qualified under Section 401(k) of the Code, or a
cafeteria plan pursuant to Section 125 of the Code, or a nonqualified
retirement plan or arrangement maintained by the Employer.
II-2
<PAGE> 7
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the Annual Earnings of
each Employee taken into account under the Plan shall not exceed the
OBRA '93 annual compensation limit. The OBRA '93 annual compensation
limit is $150,000, as adjusted by the Commissioner of Internal Revenue
for increases in the cost of living in accordance with Section
401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for
a calendar year applies to any period, not exceeding 12 months, over
which compensation is determined (determination period) beginning in
such calendar year. If a determination period consists of fewer than 12
months, the OBRA' 93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Section 401(a)(17) of the Code shall
mean the OBRA '93 annual compensation limit set forth in this
provision.
If Annual Earnings for any prior determination period is taken into
account in determining an employee's benefits accruing in the current
Plan Year, the Annual Earnings for that prior determination period is
subject to the OBRA '93 annual
II-3
<PAGE> 8
compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day
of the first Plan Year beginning on or after January 1, 1994, the OBRA
'93 annual compensation limit is $150,000.
2.7 Average Earnings shall mean the average Annual Earnings earned during
the sixty consecutive months of highest Annual Earnings of a
Participant (or during his total Employment if less than 60 months).
2.8 Beneficiary shall mean any person entitled to receive benefits under
the Plan which are payable upon the death of a Participant.
2.9 Board shall mean the Board of Directors of the Company.
2.10 Code shall mean the Internal Revenue Code of 1986, as amended from time
to time.
2.11 Committee shall mean the Committee as provided for in Article XI.
2.12 Company shall mean The Connecticut Water Company, a Connecticut
corporation, or any successor thereto.
II-4
<PAGE> 9
2.13 Contingent Annuitant shall mean any person designated by a Participant
and entitled to receive benefits pursuant to the Contingent Annuitant
Option described in Section 10.3(b).
2.14 Covered Compensation shall mean for each Participant the average of the
contribution and benefit bases in effect under Section 230 of the
Social Security Act for each year in the thirty-five (35) year period
ending with the year in which the Participant attains the Social
Security Retirement Age. The determination for any Plan Year preceding
the year in which the Participant attains the Social Security
Retirement Age shall be made by assuming that there is no increase in
the bases described herein after the beginning of the Plan Year and
before the Participant attains the Social Security Retirement Age.
2.15 Credited Service shall mean the number of years of service as an
Employee, in completed twelfths of a year commencing with the
Employee's earliest date of hire and ending on the earlier of his
Termination Date or Retirement Date, subject to adjustment as follows:
(a) a full year of Credited Service shall be granted for each Plan
Year for which an Employee completes at least 1,000 Hours of
service;
II-5
<PAGE> 10
(b) no credit shall be granted for any Plan Year in which an
Employee has less than 1,000 Hours of service; except that (i)
for each Employee, pro rata credit shall be granted for the
Plan Year in which the Employee was hired if he is a
Participant and is credited with at least 2,000 Hours of
service in the next succeeding Plan Year and (ii) for each
Employee, pro rata credit shall be granted for the Plan Year
in which the earlier of the Employee's Termination Date or
Retirement Date occurs if he was a Participant and was
credited with at least 2,000 Hours of service in the
immediately preceding Plan Year; and
(c) no credit shall be granted for any period of employment during
which an Employee waived his right to participate in the Plan
pursuant to Section 3.3.
For purposes of this Section 2.15, pro rata credit shall be granted in
completed twelfths of a year, based upon a full year of 1,000 Hours of
service, but no more than one full year of Credited Service shall be
granted with respect to any Plan Year.
Effective September 1, 1996, Credited Service shall be determined by
crediting an Employee with two months of Credited Service for each
completed full
II-6
<PAGE> 11
calendar month of service. Notwithstanding any provision of this Plan
to the contrary, for the period prior to September 1, 1996, an
Employee's Credited Service shall equal the greater of Credited Service
calculated based on actual Hours of service and Credited Service
calculated as described in the preceding sentence.
2.16 Effective Date shall mean November 1, 1957.
2.17 Employee shall mean any person who is engaged in rendering personal
services to the Employer other than as an independent contractor.
2.18 Employer shall mean the Company and any Participating Company.
2.19 Employment shall mean the service of an Employee with an Employer or a
Predecessor Company.
2.20 ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any regulations issued pursuant
thereto.
2.21 Fiduciary shall mean any person who exercises discretionary authority
or control over the management of the Plan, assets held under the Plan
or disposition of Plan
II-7
<PAGE> 12
assets; who renders investment advice for direct or indirect
compensation as to assets held under the Plan or has any authority or
responsibility to do so; or who has any discretionary authority or
responsibility in the administration of the Plan; but only to the
extent required by ERISA.
2.22 Hour shall mean:
(a) each hour for which the Employee is directly or indirectly
paid, or entitled to payment, by the Employer for the
performance of duties (to be credited as of the time when the
duties are performed);
(b) each hour for which the Employee is directly or indirectly
paid, or entitled to payment, by the Employer for reasons
other than the performance of duties, such as vacation or
holidays (to be credited in accordance with Labor Department
Regulation 2530.200b-2(c) or any successor regulation); and
(c) each hour for which back pay, irrespective of mitigation of
damages, has been either awarded or agreed to by the Employer
(to be credited as of the time to which the award or agreement
pertains). The same hour shall not be credited under more than
one of the above clauses. In determining
II-8
<PAGE> 13
Hours of service for the purposes of clause (b) above, the
provisions of Labor Department Regulation 2530.200b-2(b) or
any successor regulation shall be applicable. Hours of service
shall also include each hour, based on the Employee's standard
work week and work day as in effect from time to time, during
which an Employee is absent from work:
(i) temporarily, on account of illness or with the
consent of the Employer for a period not to exceed
six months. In the event of any absence approved by
the Employer and exceeding six months the Committee
shall establish uniform rules for the inclusion or
exclusion of any hour as an Hour of service on
account of such absence in excess of six months; or
(ii) effective as of December 12, 1994, on account of
qualified military service, as determined in
accordance with USERRA and Section 414(u) of the
Code.
2.23 Participant shall mean any Employee who is or becomes eligible to
participate in the Plan pursuant to Article III and who has taken all
the steps required by said Article III to participate in the Plan.
II-9
<PAGE> 14
2.24 Participating Company shall mean any Affiliated Company which is
designated by the Board as a Participating Company under the Plan and
whose designation as such has become effective and has continued in
effect. The designation shall become effective only when it shall have
been accepted by the Board of Directors of the Participating Company. A
Participating Company may revoke its acceptance of such designation at
any time, but until such acceptance has been revoked, all of the
provisions of the Plan and amendments thereto shall apply to the
Employees (and their Beneficiaries) of the Participating Company. In
the event the designation of a Participating Company as such is revoked
by the Board of Directors of the Participating Company, the Plan will
be deemed terminated only as to such Participating Company in
accordance with Article XIII.
2.25 Plan shall mean The Connecticut Water Company Employees' Retirement
Plan set forth in its entirety in this document and the Trust
Agreement, as this document and such Agreement may be amended from time
to time.
2.26 Plan Year shall mean each calendar year.
2.27 Predecessor Company shall mean any organization which was acquired by
the Employer or an Affiliated Company.
II-10
<PAGE> 15
2.28 Retirement Date shall mean a Participant's Normal, Early or Postponed
Retirement Date as defined in Articles IV through VI, whichever is
applicable.
2.29 Retirement Income shall mean a Participant's monthly benefit payable
beginning on his Retirement Date.
2.30 Social Security Retirement Age shall mean the age used as the
retirement age under Section 216(1) of the Social Security Act, except
that such Section shall be applied without regard to the age increase
factor and as if the early retirement age under Section 216(1)(2) of
the Social Security Act were 62.
2.31 Spouse shall mean the spouse to whom a Participant shall be married on
the date payment of his benefits commences or to whom a Participant
shall be married at the time of his death.
2.32 Termination Date shall mean the date on which the Participant ceases to
be an Employee other than by reason of retirement.
2.33 Trust Agreement shall mean The Connecticut Water Company Employees'
Retirement Trust entered into between the Company and the Trustee to
carry out
II-11
<PAGE> 16
the purposes of the Plan, as set forth herein, which Trust Agreement
shall form a part of the Plan.
2.34 Trustee shall mean the Trustee selected by the Company in accordance
with Article XII.
2.35 Trust Fund or Fund shall mean the cash and other properties held and
administered by the Trustee in accordance with the provisions of the
Trust Agreement and the Plan.
2.36 USERRA shall mean the Uniformed Services Employment and Reemployment
Rights Act of 1994. Notwithstanding any provision of this Plan to the
contrary, effective as of December 12, 1994, contributions, benefits
and service credit with respect to qualified military service will be
provided in accordance with Code Section 414(u).
2.37 Vesting Service shall mean the number of years of service as an
Employee, in completed twelfths of a year, commencing with the
Employee's earliest date of hire and ending on the earlier of his
Termination Date or Retirement Date, subject to adjustment as follows:
II-12
<PAGE> 17
(a) a full year of Vesting Service shall be granted for each Plan
Year in which an Employee completes at least 1,000 Hours of
service;
(b) no Vesting Service shall be granted for any Plan Year in which
an Employee has less than 1,000 Hours of service; except that
(i) for each Employee, pro rata vesting credit shall be
granted for the Plan Year in which the Employee was hired if
he is a Participant and is credited with at least 2,000 Hours
of service in the next succeeding Plan Year, and (ii) for each
Employee, pro rata vesting credit shall be granted for the
Plan Year in which the earlier of the Employee's Termination
Date or Retirement Date occurs if he was a Participant and was
credited with at least 2,000 Hours of service in the
immediately preceding Plan Year.
(c) no Vesting Service shall be granted for any period of
employment during which an Employee waived his right to
participate in the Plan pursuant to Section 3.3.
For purposes of this Section 2.37, pro rata vesting credit shall be
granted in completed twelfths of a year, based upon a full year of
2,000 Hours of service, but no more than one full year of Vesting
Service shall be granted with respect to any Plan Year.
II-13
<PAGE> 18
Effective September 1, 1996, Vesting Service shall be determined by
crediting an Employee with two months of Vesting Service for each
completed full calendar month of service. Notwithstanding any provision
of this Plan to the contrary, for the period prior to September 1,
1996, an Employee's Vesting Service shall equal the greater of Vesting
Service calculated based on actual Hours of service and Vesting Service
calculated as described in the preceding sentence.
Masculine pronouns used herein shall refer to men or women or both and nouns and
pronouns when stated in the singular shall include the plural and when stated in
the plural shall include the singular, wherever appropriate.
II-14
<PAGE> 19
ARTICLE III
PARTICIPATION
3.1 Former Employees. Any person who either retired or terminated
Employment prior to the effective dates of the provisions of this
amendment and restatement of the Plan shall be entitled to benefits in
accordance with the provisions of the Plan as in effect on his
Retirement Date or Termination Date, whichever is applicable.
3.2 Current and Future Employees. Except as provided for in Section 3.3,
each Employee shall participate in the Plan, as described herein,
provided that he has completed 1,000 Hours of service within the
consecutive 12-month period beginning on his date of hire. Any Employee
who had at least one Hour of service on or after January 1, 1988, who
fulfilled the 1,000 Hours of service requirement as of January 1, 1988,
but who had been excluded from participation in the Plan because of the
prior provisions of the Plan which excluded Employees hired at or after
age 60, shall retroactively participate in the Plan as of January 1,
1988. Employees affected by this rule of retroactive Plan participation
shall have their years of service commencing January 1, 1988 counted
toward their Credited Service. In the event an Employee failed to
complete 1,000 Hours of service as described above, he shall
participate in the Plan after completing 1,000 Hours of service in any
Plan Year beginning after his date of hire. If a Participant
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<PAGE> 20
terminates his employment but is rehired by the Employer, he shall
again be eligible to participate in the Plan as of his date of rehire.
3.3 Waiver of Participation. Any Employee may waive his right to become a
Participant under this Plan by electing such waiver in writing on a
form supplied by the Administrator. Such Employee may, also in writing,
withdraw such waiver and, subject to Section 3.2, be eligible to
participate in this Plan.
III-2
<PAGE> 21
ARTICLE IV
NORMAL RETIREMENT
4.1 Normal Retirement Date. The Normal Retirement Date of a Participant
shall be the first day of the month coinciding with or next following
his 65th birthday, or the fifth anniversary of his entry into the Plan,
if later, but in no event later than the first day of the month
coinciding with or next following his 70th birthday.
4.2 Basic Retirement Income. The monthly Basic Retirement Income with
payments commencing at Normal Retirement Date under this Plan is equal
to 1/12 of the sum of (a) plus (b) where:
(a) equals the sum of 1.2% of Average Earnings up to Covered
Compensation and 1.5% of Average Earnings in excess of Covered
Compensation multiplied times years of Credited Service prior
to January 1, 1981, and
(b) equals the sum of 1.45% of Average Earnings up to Covered
Compensation and 1.75% of Average Earnings in excess of
Covered Compensation times years of Credited Service after
December 31, 1980.
IV-1
<PAGE> 22
Notwithstanding the foregoing, the minimum Basic Retirement Income with
payments commencing at Normal Retirement Date under this Plan is equal
to 1/12 of $1,000, except that for an Employee who has less than 10
years of Credited Service, the $1,000 shall be reduced by the ratio of
Credited Service to 10 years.
Unless otherwise provided under the Plan, the accrued benefit of each "section
401(a)(17) employee" under this Plan will be the greater of the accrued benefit
determined for the employee under 1 or 2 below:
(1) the employee's accrued benefit determined with respect to the
benefit formula applicable for the Plan Year beginning on or
after January 1, 1994, as applied to the employee's total
years of Service taken into account under the Plan for the
purposes of benefit accruals, or
(2) the sum of:
(a) the employee's accrued benefit as of the last day of
the last Plan Year beginning before January 1, 1994,
frozen in
IV-2
<PAGE> 23
accordance with Section 1.401(a)(4)-13 of the
Treasury Regulations, and
(b) the employee's accrued benefit determined under the
benefit formula applicable for the Plan Year
beginning on or after January 1, 1994, as applied to
the employee's Years of Service credited to the
employee for Plan Years beginning on or after January
1, 1994, for purposes of benefit accruals.
A "section 401(a)(17) employee" means an Employee whose current accrued
benefit as of a date on or after the first day of the first Plan Year
beginning on or after January 1, 1994, is based on Annual Earnings for
a year beginning prior to the first day of the first Plan Year
beginning on or after January 1, 1994, that exceeded $150,000.
4.3 Normal Retirement Income. The Retirement Income of a Participant who
retires on his Normal Retirement Date shall be determined as follows:
(a) If the Participant does not have a Spouse and has made no
election as to the form of payment of pension benefits, then
his Retirement Income shall
IV-3
<PAGE> 24
be equal to his Basic Retirement Income as determined under
Section 4.2 and shall be paid in the form of a Straight Life
Annuity.
(b) If the Participant has a Spouse and has not made a qualified
waiver of the 50% Contingent Annuitant Option described in
Subsection 10.3(b) with his Spouse as Contingent Annuitant,
his Retirement Income payable as of the date payment of his
Retirement Income commences shall equal the product of (i) and
(ii) where:
(i) equals the Basic Retirement Income as determined
under Section 4.2, and
(ii) equals the Actuarial Equivalent factor for such
Contingent Annuitant Option, and shall be paid in the
manner described under such optional form.
(c) If the Participant elects an optional form of payment under
Article X, his Retirement Income payable as of the date
payment of his Retirement Income commences shall equal the
product of (i) and (ii) where:
IV-4
<PAGE> 25
(i) equals his Basic Retirement Income as determined
under Section 4.2, and
(ii) equals the Actuarial Equivalent factor for the
particular optional form elected as of the date
payment of his Retirement Income commences, and shall
be paid in the manner described under such optional
form.
4.4 Maximum Benefit. Except as set forth below, in no event shall the Basic
Retirement Income of a Participant under the Plan exceed one twelfth of
the lesser of (i) $90,000, or (ii) 100% of the Participant's average
compensation for the three (3) consecutive Plan Years during which the
Employee was an active Participant and received the greatest
compensation from the Employer.
For the purposes of this Section, compensation with respect to any
Participant means (A) such Participant's wages, salaries, fees for
professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the Employer
maintaining the Plan to the extent that the amounts are includible in
gross income (including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits,
commissions on
IV-5
<PAGE> 26
insurance premiums, tips, bonuses, fringe benefits, and reimbursements
or other expense allowances under a nonaccountable plan (as described
in Treasury Regulations Section 1.62-2(c))) for a Plan Year; and (B)
effective for Plan Years beginning after December 31, 1997, amounts
which are contributed by the Employer pursuant to a salary reduction
agreement and which are not includible in the gross income of the
Participant under Code Sections 125, 402(e)(3), 401(h)(1)(B), 403(b) or
457(b).
Compensation shall exclude: (1) contributions made by the Employer to a
plan of deferred compensation other than contributions described in (B)
hereinabove, to the extent that the contributions are not includible in
the gross income of the Participant for the taxable year in which
contributed; (2) Employer contributions made on behalf of an Employee
to a simplified employee pension plan described in Code Section 408(k)
to the extent such contributions are excludable from the Employee's
gross income; (3) any distributions from a plan of deferred
compensation; (4) amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by an
Employee either becomes freely transferable or is no longer subject to
a substantial risk of forfeiture; (5) amounts realized from the sale,
exchange or other disposition of stock acquired under a qualified stock
option; and (6) other amounts which
IV-6
<PAGE> 27
receive special tax benefits, other than contributions described in (B)
hereinabove.
The foregoing maximum benefit shall be subject to adjustment as
follows:
(a) The $90,000 amount referred to in (i) shall be subject to an
annual cost of living adjustment as provided by Treasury
Regulations in effect from time to time under Section 415 of
the Code and shall be increased to the extent necessary to
equal the Participant's current accrued benefit (as defined in
Section 235(g)(4) of the Tax Equity and Fiscal Responsibility
Act of 1982) as of September 30, 1983;
(b) In the case of a Participant who has less than ten (10) years
of Plan participation, the maximum benefit shall be reduced by
multiplying the maximum benefit stated above by a fraction the
numerator of which is the number of years of Plan
participation (or parts thereof) with the Employer and the
denominator of which is 10;
(c) In the event that the Participant's retirement benefits
commence on or after the Participant has attained age 62 but
prior to his Social Security Retirement Age, the maximum
dollar limitation referred to in (i) shall be reduced in such
manner as the Secretary of the Treasury shall prescribe
IV-7
<PAGE> 28
which is consistent with the reduction for old-age insurance
benefits commencing before the Social Security Retirement Age
under the Social Security Act. In the event that the
Participant's retirement benefits commence prior to age 62,
the maximum dollar limitation is the lesser of the equivalent
amount computed using the interest rate and mortality table in
effect for lump sum distributions made on or after September
1, 1996, as specified in the definition of Actuarial
Equivalent and the amount computed using an interest rate of
five percent (5%) and the mortality table prescribed by the
Secretary of the Treasury pursuant to Section
417(e)(3)(A)(ii)(I) of the Code;
(d) If the Participant's retirement benefits commence subsequent
to his Social Security Retirement Age, the maximum dollar
limitation referred to in (i) shall be increased so that it is
the lesser of the Actuarial Equivalent of the maximum dollar
limitation referred to above and the amount computed using an
interest rate of five percent (5%) and the mortality table
prescribed by the Secretary of the Treasury pursuant to
Section 417(e)(3)(A)(ii)(I) of the Code;
(e) Any benefit payable in a form other than a straight life
annuity must be adjusted to an actuarially equivalent straight
life annuity before applying
IV-8
<PAGE> 29
the limitations of this Section 4.4. Such equivalent annual
benefit shall be the greater of the equivalent annual benefit
computed using the interest rate and mortality table in effect
for lump sum distributions made on or after September 1, 1996,
as specified in the definition of Actuarial Equivalent or an
interest rate of five percent (5%) and the mortality table
prescribed by the Secretary of the Treasury pursuant to
Section 417(e)(3)(A)(ii)(I) of the Code. The annual benefit
does not include any benefits attributable to employee
contributions or rollover contributions, or the assets
transferred from a qualified plan that was not maintained by
the Employer. No actuarial adjustment to the benefit is
required for (1) the value of a qualified joint and survivor
annuity, (2) the value of benefits that are not directly
related to retirement benefits (such as qualified disability
benefits, pre-retirement death benefits, and post-retirement
medical benefits), and (3) the value of post-retirement
cost-of-living increases made in accordance with the Federal
Income Tax Regulations.
Notwithstanding the foregoing, the interest rate and mortality
table used to determine actuarial equivalence of lump sum
distributions for purposes of Section 415 of the Code shall be
the interest rate and mortality table in
IV-9
<PAGE> 30
effect for lump sum distributions made on or after September
1, 1996, as specified in the definition of Actuarial
Equivalent.
(f) Notwithstanding anything in this Article to the contrary, the
maximum benefit for any individual who is a Participant as of
January 1, 1987 shall not be less than the Participant's
accrued benefit under the Plan expressed as an annual benefit
within the meaning of Code Section 415(b)(2) and determined as
if the Participant had separated from service as of December
31, 1986. For purposes of this clause, in determining the
amount of such Participant's accrued benefit, the following
shall be disregarded: (1) any change in the terms and
conditions of the Plan after May 5, 1986; and (2) any cost of
living adjustment occurring after May 5, 1986.
Notwithstanding the foregoing, so long as the Employer does not
maintain a defined contribution plan in which the Participant
participates, the maximum benefit limitation stated above shall not be
deemed to be exceeded if the retirement benefits payable with respect
to a Participant hereunder (and under any other defined benefit plan
which the Employer may establish) do not exceed $10,000 for the Plan
Year or for any prior Plan Year; provided that in the case of
IV-10
<PAGE> 31
a Participant who has less than ten (10) years of Plan participation,
the $10,000 figure shall be adjusted in the manner provided in (b)
above.
4.5 Additional Limitation-Members of Defined Contribution Plan. In the case
of any Participant who is entitled to benefits due to Employer
contributions under any defined contribution plan maintained by the
Employer, in addition to the limitations under Section 4.4 hereof, the
sum of the defined benefit plan fraction and the defined contribution
plan fraction for any Plan Year may not exceed 1.0. The "defined
benefit plan fraction" for any Plan Year is a fraction (a) the
numerator of which is the projected annual benefit of the Participant
under this Plan (determined as of the close of the Plan Year), and (b)
the denominator of which is the lesser of: (1) the product of 1.25
multiplied by the maximum dollar limitation in effect under Section
415(b)(1)(A) of the Code for such Plan Year, or (2) the product of 1.4
multiplied by the amount which may be taken into account under Section
415(b)(1)(B) of the Code for such Participant for such Plan Year. The
"defined contribution plan fraction" for any Plan Year is a fraction
(a) the numerator of which is the sum of the annual additions to the
Participant's account as of the close of the Plan Year, and (b) the
denominator of which is the sum of the lesser of the following amounts
determined for such year and for each prior year of service with the
Employer: (1) the product of 1.25 multiplied by the maximum dollar
limitation in effect under Section 415(c)(1)(A) of the Code for
IV-11
<PAGE> 32
such Plan Year (determined without regard to Section 415(c)(6) of the
Code), or (2) the product of 1.4 multiplied by the amount which may be
taken into account under section 415(c)(1)(B) of the Code for such
Participant for such Plan Year; provided, however, that the foregoing
denominator may instead, at the election of the Administrator, be
determined in accordance with the special transition rule set forth in
Section 415(e)(6) of the Code, and further provided that the defined
contribution plan fraction may be reduced in accordance with Section
235(g)(3) of the Tax Equity and Fiscal Responsibility Act of 1982. In
the event that the said projected annual benefit of a Participant under
this Plan should cause the aforesaid limitation to be exceeded, the
Administrator shall have the right to accomplish the aforementioned
compliance by reducing or limiting either benefits under this Plan in
the manner set forth above or annual additions under any defined
contribution plan in the manner set forth in such defined contribution
plan, and may vary the extent to which the reduction or limitation will
be applied to either, provided that any such reduction or limitation
shall be made in a nondiscriminatory manner.
Effective for Plan Years beginning after December 31, 1999, this
Section 4.5 shall not apply.
IV-12
<PAGE> 33
ARTICLE V
EARLY RETIREMENT
5.1 Early Retirement Date. A Participant may retire on the first of any
month between his 55th and 65th birthdays, provided he has then
completed at least 10 years of Credited Service, any such date being
his Early Retirement Date. Any such Participant may elect to receive
his Retirement Income commencing on his Early Retirement Date in a
reduced amount as set forth in Section 5.2 or to receive his Retirement
Income commencing on his Normal Retirement Date as determined under
Section 4.3 based on his Average Earnings and Credited Service as of
his Early Retirement Date.
5.2 Early Commencement. A Participant who retires in accordance with the
provisions of Section 5.1 and elects to have payment of his Retirement
Income commence on his Early Retirement Date shall be entitled to
receive a reduced Annual Retirement Income in the form stated in
Section 4.3. The amount of such reduced Retirement Income shall equal
(a) times (b) where:
(a) equals such Participant's Normal Retirement Income as
determined under Section 4.3 based on his Average Earnings and
his Credited Service as of his Early Retirement Date and with
the Actuarial Equivalent factors
V-1
<PAGE> 34
described in Subsections 4.3(b) and 4.3(c) being determined as
of his Early Retirement Date; and
(b) equals the appropriate percentage factor from the following
table:
<TABLE>
<CAPTION>
Complete Years by Which
Early Retirement Date Early Retirement
Precedes Age 65 Percentage Factors
--------------- ------------------
<S> <C>
10 .72
9 .76
8 .80
7 .84
6 .88
5 .92
4 .96
3 1.00
2 1.00
1 1.00
0 1.00
</TABLE>
5.3 Delayed Commencement of Pension. A Participant who retires in
accordance with the provisions of Section 5.1 but elects to have
payment of his Retirement Income commence at a later date, may defer
such commencement of payment to the first of any subsequent month which
is not later than his Normal Retirement Date. Notice of the selected
payment commencement date must be given to the Administrator at least
30 days prior to such date. The amount of pension payable to the
Participant shall be determined in accordance with Section 5.2, except
that
V-2
<PAGE> 35
the selected payment commencement date shall be considered the
Participant's Early Retirement Date for purposes of this benefit
determination.
5.4 Special Early Retirement Benefit. The Retirement Income payable to any
Participant eligible for the Special Early Retirement Benefit described
in Appendix A or B attached to and made a part of this Plan shall be
determined as provided in such Appendix.
V-3
<PAGE> 36
ARTICLE VI
POSTPONED RETIREMENT
6.1 Delayed Retirement. Subject to the provisions of Article XIV, Section
14.1, any Employee may remain in the Company's employment after his
Normal Retirement Date.
6.2 Commencement of Pension. A Participant whose retirement is postponed
beyond his Normal Retirement Date shall begin receiving his monthly
Retirement Income on the first day of the month coinciding with or next
following his actual retirement. The amount and form of the
Participant's Retirement Income payable monthly commencing on his
Postponed Retirement Date shall be the same as the Participant's
Retirement Income that would have been had he retired on his Normal
Retirement Date except the Basic Retirement Income shall be determined
based on Credited Service and Average Earnings of the Participant as of
his Postponed Retirement Date. The Retirement Income shall be offset by
the Actuarial Equivalent of the total benefit distributions made to the
Participant by the close of the Plan Year pursuant to Section 14.9. If
the Participant should die
VI-1
<PAGE> 37
after Normal Retirement Date, but before his actual retirement date, it
shall be presumed that the Participant had retired as of the first day
of the month coinciding with or next preceding his date of death.
VI-2
<PAGE> 38
ARTICLE VII
TERMINATION OF EMPLOYMENT AND VESTED RIGHTS
7.1 Vesting Requirements. A Participant whose Employment is terminated
other than by retirement, disability or death, and prior to having
completed 5 years of Vesting Service shall not be entitled to any
benefit under this Plan. A Participant whose Employment is terminated
after having completed at least 5 years of Vesting Service shall be
entitled to receive a Retirement Income equal to his Vested Benefit
determined as of his Termination Date as set forth in Section 7.2.
A participant who terminates Employment with the Employer and has no
Vested Benefit under this Plan shall be deemed to have received the
full value of his Vested Benefit ($0) upon such termination of
Employment.
7.2 Vested Benefit. A Participant's Vested Benefit shall be the Retirement
Income payable at Normal Retirement Date in the form and amount as set
forth in Section 4.3 based on his Average Earnings and Credited Service
as of his Termination Date, multiplied by the applicable percentage
specified below:
VII-1
<PAGE> 39
<TABLE>
<CAPTION>
If Years of Vesting Then Vested
Service Are Percentage Is
----------- -------------
<S> <C>
Less than 5 0%
5 or more 100%
</TABLE>
Notwithstanding the foregoing, a Participant shall be 100% vested upon
the later of his 65th birthday or the fifth anniversary of his entry
into the Plan.
7.3 Commencement of Payments. Retirement Income payments in the form stated
in Section 4.3 shall commence at the terminated Participant's Normal
Retirement Date unless the Participant elects in writing on a form
supplied by the Administrator to have reduced payments commence at an
earlier date provided that such earlier date shall not be prior to the
first day of the calendar month coinciding with or next following the
terminated Participant's attainment of age 55. Such written election
must be received by the Administrator at least six months prior to the
commencement of benefits.
If a terminated Participant elects to have payments commence prior to
his Normal Retirement Date, the terminated Participant's Retirement
Income shall be reduced by .5% for each complete month by which the
date payments commence precedes his Normal Retirement Date.
VII-2
<PAGE> 40
ARTICLE VIII
DISABILITY
8.1 Eligibility and Disability Determination. If a medical examiner
selected by the Employer certifies that an Employee who has completed 5
years of Credited Service is mentally or physically disabled for
further performance of duty and that such disability is likely to be
permanent, such that the Employee is considered eligible for full
disability benefits under the provisions of the Social Security Act,
this Employee shall be eligible for the monthly benefit described
below.
8.2 Disability Benefit. The monthly income of an Employee who becomes
eligible for a monthly benefit in accordance with Section 8.1 shall
equal the Basic Retirement Income as determined in Section 4.2 based on
his Average Earnings and his Credited Service as of his Termination
Date reduced by the Early Retirement Percentage Factor from Subsection
5.2(b) applicable to the number of complete years by which the
commencement of payment of his Retirement Income precedes his
attainment of age 65, with a Percentage Factor of .72 if the
commencement of payment of his Retirement Income precedes his
attainment of age 65 by more than 9 complete years. Notwithstanding the
foregoing to the contrary, effective January 1, 1998, the monthly
income of an Employee who becomes eligible for a monthly benefit in
accordance with Section 8.1, and with respect to whom the sum of his
age and Credited Service as of his
VIII-1
<PAGE> 41
Termination Date is equal to or greater than 80, shall equal his Basic
Retirement Income as determined in Section 4.2 based on his Average
Earnings and his Credited Service as of his Termination Date unreduced
for commencement prior to his attainment of age 65.
8.3 Form and Commencement of Payments. An Employee who becomes eligible for
a monthly benefit in accordance with Section 8.1 may elect to receive
such benefit commencing on the first day of any month following his
Termination Date; provided, however, that no payments shall be made
under this Article VIII while the Employee is receiving disability
benefits from the Employer's long-term disability plan. Such benefit
shall be paid in the form provided in Section 4.3.
8.4 Reemployment. If a former Employee is reemployed by the Employer after
commencing to receive benefits under this Article VIII, payment of the
Employee's benefits will be suspended and benefits will continue to
accrue under this Plan as described in Article IV when all of the
following have occurred:
(a) The Employee has been rehired by the Employer;
(b) The Employee is credited with 40 or more Hours of Service in a
month; and
(c) The Employee has elected to resume participation in the Plan.
VIII-2
<PAGE> 42
Benefit payments suspended as provided above will recommence as of the
Employee's subsequent retirement and will be determined as provided in Article
IV. The Employee's accrued benefit, however, will be offset by the Actuarial
Equivalent of any amount of the Employee's prior accrued benefit previously
distributed to him. An Employee whose benefits are suspended as provided above
shall receive the notification required by applicable law and regulations on the
suspension of benefits.
VIII-3
<PAGE> 43
ARTICLE IX
PRE-RETIREMENT DEATH BENEFIT
9.1 Death While Employed and Eligible for Early Retirement. If a
Participant dies while he is actively employed and after he has become
eligible for Early Retirement as provided in Section 5.1, his surviving
Spouse (if designated or deemed his Beneficiary in accordance with
Section 9.4), if any, shall receive monthly benefits equal to 50% of
the Retirement Income the Participant would have received under Section
5.2 had he retired early as of the first day of the month coinciding
with or next preceding his date of death and elected the 50% Contingent
Annuitant Option under Subsection 10.3(b) with his Beneficiary as
Contingent Annuitant. Payment shall commence on the first day of the
calendar month following the Participant's death and shall continue
each month thereafter through the month in which the Beneficiary's
death occurs. If a Participant dies while he is actively employed and
after he has become eligible for Early Retirement as provided in
Section 5.1, with no surviving Spouse designated or deemed his
Beneficiary, his Beneficiary (as determined in accordance with Section
9.4), if any, shall receive a death benefit. This death benefit shall
be paid in the form of a lump sum which shall be the Actuarial
Equivalent of the Retirement Income which the Beneficiary would have
received had the
IX-1
<PAGE> 44
Participant retired on the date of his death with the optional form of
benefit under Subsection 10.3(d) (Five Years Certain and Life Option)
in effect.
9.2 Death After Early Retirement But Before Commencement of Pension. If a
Participant retires after he has become eligible for Early Retirement
but dies before payment of his Retirement Income commences, his
surviving Spouse (if designated or deemed his Beneficiary in accordance
with Section 9.4), if any, shall receive monthly benefits equal to 50%
of the Retirement Income the Participant would have received under
Section 5.3 had he elected to have payment of his Retirement Income
commence as of the first day of the month coinciding with or next
preceding his date of death and elected the 50% Contingent Annuitant
Option under Subsection 10.3(b) with his Spouse as Contingent
Annuitant.
If a Participant retires after he has become eligible for Early
Retirement but dies before payment of his Retirement Income commences
with no surviving Spouse designated or deemed his Beneficiary, his
Beneficiary (as determined in accordance with Section 9.4), if any,
shall receive a death benefit. This death benefit shall be paid in the
form of a lump sum which shall be the Actuarial Equivalent of the
Retirement Income which the Beneficiary would have received
IX-2
<PAGE> 45
had the Participant retired on the date of his death with the optional
form of benefit under Subsection 10.3(d) (Five Years Certain and Life
Option) in effect.
9.3 Death Before Retirement.
(a) Unless waived within the Waiver Period pursuant to a qualified
waiver as described in Section 10.2, if a Participant who is
no longer actively employed dies after attaining the Earliest
Retirement Age, the Participant's surviving Spouse (if any)
shall receive the same benefit that would be payable if the
Participant had retired with the 50% Contingent Annuitant
Option as described in Subsection 10.3(b) on the day before
the Participant's date of death.
(b) Unless waived within the Waiver Period pursuant to a qualified
waiver as described in Section 10.2, if a Participant dies
before attaining the Earliest Retirement Age, the
Participant's surviving Spouse (if any) shall receive the same
benefit that would be payable if the Participant had:
(i) separated from service on the date of death, or date
of actual separation from service, if earlier,
IX-3
<PAGE> 46
(ii) survived to the Earliest Retirement Age,
(iii) retired with an immediate 50% Contingent Annuitant
Option as described in Subsection 10.3(b) at the
Earliest Retirement Age, and
(iv) died on the day after the Earliest Retirement Age;
provided, however, that in calculating the benefit of
a surviving Spouse of a Participant who dies while
actively employed, the Retirement Income to which the
Participant would have been entitled at his Normal
Retirement Date shall be reduced in accordance with
the formula described in Section 5.2, rather than
that described in Section 7.3.
(c) For purposes of this Section 9.3, a surviving Spouse shall
begin to receive payments at the later of (i) the date of the
Participant's death, or (ii) the Earliest Retirement Age,
unless such surviving Spouse elects a later date.
(d) For purposes of this Section 9.3, the following definitions
shall apply:
(i) Waiver Period: The period which begins on the date
the Participant separates from service and ends on
the date of the Participant's death.
IX-4
<PAGE> 47
(ii) Earliest Retirement Age: The earliest date on which,
under the Plan, the Participant could have elected to
receive retirement benefits.
(e) For the period during which a Participant who is no longer
actively employed has not waived the pre-retirement survivor
annuity described in this Section 9.3, the Participant's
Retirement Income shall be reduced as follows:
<TABLE>
<CAPTION>
Reduction in Retirement Income
Attained Age for each Month of Coverage
------------ --------------------------
<S> <C>
Under 45 1/120%
45-54 1/60%
55 and over 1/24%
</TABLE>
9.4 Designation of Beneficiary. The Administrator shall provide to each
actively employed Participant at least 90 days before the date on which
he meets the age and service requirements for early retirement, a form
on which he may designate his Beneficiary. The person whom a
Participant designates as his Beneficiary must be his Spouse, unless a
qualified waiver of the qualified pre-retirement survivor annuity has
been made in accordance with Section 10.2. If such a qualified waiver
has been made, the Participant's Beneficiary for this purpose must be
one of the following: the Participant's spouse, father, mother, sister,
IX-5
<PAGE> 48
brother, son or daughter. The beneficiary may also be a legal ward
living with and dependent on the Participant at the time of his death.
If the Participant dies after satisfying the requirements for early
retirement, and has not designated a Beneficiary, his Beneficiary shall
be his Spouse, if living; otherwise, he shall have no Beneficiary and
no payments shall be made pursuant to this Article IX.
IX-6
<PAGE> 49
ARTICLE X
NORMAL AND OPTIONAL FORMS OF RETIREMENT INCOME
10.1 Normal Form of Payments. If a Participant does not make a timely
election of one of the optional forms of payment described below, then
his Retirement Income shall be payable in the form and amount under
Section 4.3, if he retires as of his Normal or Postponed Retirement
Date; under Section 7.3, if he terminates his employment other than by
reason of death, disability or retirement; and under Section 8.3, if he
is disabled.
10.2 Election of Optional Form of Payment. A Participant whose Retirement
Income is otherwise payable under the Normal Form may elect in writing
to the Employer to receive his benefit under one of the optional forms
set forth in Section 10.3. The Administrator shall provide to each
active Participant and each terminated Participant with a vested
interest whose benefits have not yet commenced, by personal delivery or
mail, no less than 30 and no more than 90 days before his Normal
Retirement Date or the date on which he meets the age and service
requirements for early retirement, the following information in written
nontechnical language: (1) a general description of the Normal Form and
optional forms of payment and the availability of the election not to
receive the Normal Form; (2) a general explanation of the relative
financial effect of an election not
X-1
<PAGE> 50
to receive the Normal Form; (3) the right to make, and the effect of, a
revocation of a previous election not to receive the Normal Form; (4)
the rights of a Participant's Spouse; and (5) notification of the
availability upon written request of a written explanation of the
financial effect (in dollars per annuity payment) upon the particular
Participant's annuity of an election not to take the Normal Form.
The payment commencement date for a distribution to a married
Participant in a form other than the Normal Form may be less than 30
days after receipt of the written explanation described above provided:
(a) the Participant has been provided with information that clearly
indicates that the Participant has at least 30 days to consider whether
to waive the Normal Form and elect (with spousal consent) a form of
distribution other than the Normal Form; (b) the Participant is
permitted to revoke any affirmative distribution election at least
until the payment commencement date or, if later, at any time prior to
the expiration of the 7-day period that begins the day after the
explanation of the Normal Form is provided to the Participant; and (c)
the payment commencement date is a date after the date that the written
explanation was provided to the Participant. For distributions on or
after December 31, 1996, the payment commencement date may be a date
prior to the date the written explanation is provided to the
Participant if the distribution does not commence until at least 30
days after such written
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explanation is provided, subject to the waiver of the 30-day period as
provided for above.
The Administrator shall furnish any additional information requested by
a Participant to such Participant by personal delivery or first-class
mail within 30 days from the date of the Participant's written request.
An election of an optional form of payment pursuant to Section 10.3
shall not be effective unless it is filed with the Administrator no
more than 90 days before pension benefit payments are to commence.
Notwithstanding the foregoing, no election of an optional form of
benefit or election to waive the pre-retirement survivor annuity by a
married Participant will be effective without a qualified waiver. Such
waiver must be in writing and may only be made with the written consent
of the Participant's Spouse. The Spouse's consent to a waiver must be
witnessed by the Administrator or his representative or by a notary
public. Notwithstanding the foregoing requirement of spousal consent,
if the Participant establishes to the satisfaction of the Administrator
that such written consent may not be obtained because there is no
Spouse or the Spouse cannot be located, a waiver will be deemed to be a
qualified waiver. Any consent necessary under this provision will be
valid only with respect to the Spouse who signs the consent, or in the
event of a deemed qualified waiver, the
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designated Spouse, if any. Additionally, a revocation of a prior
qualified waiver may be made by a Participant without the consent of
the Spouse at any time before the date payment of benefits commences.
The number of revocations shall not be limited.
10.3 Optional Forms of Payment. The optional forms of benefit payment
available shall be the Actuarial Equivalent of the Retirement Income
otherwise payable to the Participant.
(a) Straight Life Annuity Option - Retirement Income payable
monthly during the Participant's lifetime, with no further
payments on his behalf after his death. If this option is
elected, the Participant's Retirement Income shall equal his
Basic Retirement Income without actuarial adjustment except as
provided for election of early commencement of payments, as
applicable.
(b) Contingent Annuitant Option - Retirement Income payable
monthly during the Participant's lifetime with the provision
that after his death such Retirement Income shall be continued
to the Contingent Annuitant, in the same or a lesser amount,
as specified by the Participant, during the life of such
Contingent Annuitant. The lesser percentage which may be
specified
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by a Participant shall be either 75% or 50% of the
Participant's Retirement Income.
Except as provided for in Article IX, if a Participant shall
elect the Contingent Annuitant Option and he shall die before
the earlier of his Early Retirement Date, or Normal Retirement
Date, whichever is applicable, his Contingent Annuitant shall
not be entitled to any Retirement Income under this Plan.
If a Participant shall elect the Contingent Annuitant Option
and his Contingent Annuitant shall die before the Participant
does, but such death occurs after the retirement of the
Participant, the Participant shall continue to receive the
Retirement Income payable to him prior to the death of his
Contingent Annuitant.
(c) Ten Years Certain and Life Option - Retirement Income payable
monthly during the Participant's lifetime and in the event of
the Participant's death within a period of 10 years after
benefits hereunder have commenced, the Actuarial Equivalent of
the value of the Retirement Income remaining to be paid during
the aforementioned 10-year period shall be paid to the
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Participant's Beneficiary in a lump sum within 5 years of the
date of the Participant's death.
Except as provided for in Article IX, if a Participant shall
elect the Ten Years Certain and Life Option and he shall die
before the earlier of his Early Retirement Date, or Normal
Retirement Date, whichever is applicable, his Beneficiary
shall not be entitled to any Retirement Income under this
Plan.
If a Participant shall elect the Ten Years Certain and Life
Option and his Beneficiary shall die before the Participant
does, but such death occurs after the retirement of the
Participant, the Participant shall continue to receive the
Retirement Income payable to him prior to the death of his
Beneficiary and shall designate a new Beneficiary.
(d) Five Years Certain and Life Option - Retirement Income payable
monthly during the Participant's lifetime and in the event of
the Participant's death within a period of 5 years after
benefits hereunder have commenced, the Actuarial Equivalent of
the value of the Retirement Income remaining to be paid during
the aforementioned 5-year period shall be paid to the
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Participant's Beneficiary in a lump sum within 5 years of the
date of the Participant's death.
Except as provided for in Article IX, if a Participant shall
elect the Five Years Certain and Life Option and he shall die
before the earlier of his Early Retirement Date, or Normal
Retirement Date, whichever is applicable, his Beneficiary
shall not be entitled to any Retirement Income under this
Plan.
If a Participant shall elect the Five Years Certain and Life
Option and his Beneficiary shall die before the Participant
does, but such death occurs after the retirement of the
Participant, the Participant shall continue to receive the
Retirement Income payable to him prior to the death of his
Beneficiary and shall designate a new Beneficiary.
For purposes of the optional forms of payment set forth in Subsections
(b), (c) and (d) hereof, the Participant's Beneficiary shall be
designated on a form provided by the Administrator. Any person may be
designated a Beneficiary for these purposes; provided, however, that if
no other Beneficiary shall have been effectively designated, the
executor or administrator of the Participant's estate shall be deemed
his Beneficiary.
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10.4 General Limitation. Anything in the foregoing to the contrary
notwithstanding, no method of distribution may be made under this
Article which would result in the Actuarial Equivalent of a Contingent
Annuitant's or Beneficiary's interest equaling or exceeding 50% of the
Actuarial Equivalent of the Participant's full retirement benefit, both
equivalents being determined as of the Participant's actual Retirement
Date.
10.5 Lump Sum Distributions. Anything in the Plan to the contrary
notwithstanding, effective as of January 1, 1998, the Committee shall
pay benefits to a Participant who retires or otherwise terminates
Employment with the Employer in a lump sum that is the Actuarial
Equivalent of a Participant's Retirement Income; provided, however,
that the lump sum value of such Retirement Income may not exceed (or
have ever exceeded) $5,000 (or such greater amount as may be permitted
by law or regulation at the time of payment). A Participant who
receives a lump sum distribution pursuant to this Section 10.5 shall
forfeit all Credited Service accrued prior to such distribution, and
such forfeited Credited Service shall be disregarded if such
Participant is subsequently reemployed by the Employer unless the
Participant repays the entire amount of the distribution, plus interest
compounded annually from the date of the distribution at the rate of 5
percent per year, prior to the earlier of (1) the expiration of the
fifth consecutive
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Plan Year in which the Participant completed 500 or fewer Hours of
service or (2) the fifth anniversary of the date of the Participant's
reemployment.
10.6 Direct Rollover.
(a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this
Section, a distributee may elect, at the time and in the
manner prescribed by the Administrator, to have any portion of
an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct
rollover.
(b) Definitions.
(1) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any
portion of the balance to the credit of the
distributee, except that an eligible rollover
distribution does not include: any distribution that
is one of a series of substantially equal periodic
payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or
the joint lives (or joint life expectancies) of the
distributee and the distributee's designated
beneficiary, or for a specified period of ten years
or
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more; any distribution to the extent such
distribution is required under Section 401(a)(9) of
the Code; and the portion of any distribution that is
not includible in gross income (determined without
regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(2) Eligible retirement plan: An eligible retirement plan
is an individual retirement account described in
Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code,
or a qualified trust described in Section 401(a) of
the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an
eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(3) Distributee: A distributee includes an Employee or
former Employee. In addition, the Employee's or
former Employee's surviving Spouse and the Employee's
or former Employee's Spouse or former Spouse who is
the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of
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the Code, are distributees with regard to the
interest of the Spouse or former Spouse.
(4) Direct rollover: A direct rollover is a payment by
the Plan to the eligible retirement plan specified by
the distributee.
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ARTICLE XI
FIDUCIARIES -
ADMINISTRATION OF THE PLAN
11.1 Appointment of Named Fiduciary. The Committee is hereby designated as
the named Fiduciary of the Plan, within the meaning of Section
402(a)(2) of ERISA.
11.2 Authority of Named Fiduciary. Subject to the provisions of Section
11.4, the Committee shall have the authority to control and manage the
operation and administration of the Plan in accordance with the terms
hereof.
11.3 Discharge of Duties - Fiduciaries. Any Fiduciary with respect to the
Plan shall discharge its duties solely in the interest of the
Participants and Beneficiaries for the exclusive purpose of providing
benefits to Participants and Beneficiaries and defraying reasonable
expenses of administering the Plan. In addition any Fiduciary with
respect to the Plan shall discharge its duties with the care, skill,
prudence and vigilance under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with
like aims.
11.4 Delegation of Duties. The Committee shall have authority and discretion
to designate or appoint in writing (i) persons to carry out specified
fiduciary
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responsibilities, other than Trustee responsibilities, to manage and
control the assets of the Plan, and (ii) investment advisors and
managers to manage (including the power to acquire and dispose of) any
assets of the Plan. Any such person shall serve at the pleasure of the
Committee and may resign by delivering a written notice to the
Committee. Any delegation of duties shall be made and acknowledged in
writing and shall clearly state the powers and duties so delegated.
11.5 Appointment of Committee. The Board shall appoint the Committee which
shall consist of not less than three members, who shall serve at the
pleasure of the Board. The members of the Committee shall elect a
chairman and a secretary, the latter of whom may, but need not be, a
member of the Committee.
11.6 Meetings. The Committee shall hold meetings upon such notice, and at
such place or places, and at such intervals as it may from time to time
determine.
11.7 Quorum. A majority of the members of the Committee at any time in
office shall constitute a quorum for the transaction of business. All
resolutions or other actions taken by the Committee shall be by vote of
a majority of those present at a meeting of the Committee; or without a
meeting by instrument in writing signed by a majority of the members of
the Committee.
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11.8 Expenses. The reasonable expenses incident to the operation of the
Plan, including premiums for termination insurance payable to the
Pension Benefit Guaranty Corporation, the compensation of the Trustee,
Actuary, attorney, advisors, Fiduciaries, and such other technical and
clerical assistance as may be required, shall be paid out of the Fund,
but the Employer in its discretion may elect at any time to pay part or
all thereof directly, and any such election shall not bind the Employer
as to its right to elect with respect to the same or other expenses at
any other time to have such compensation paid from the Fund.
11.9 Powers and Duties of the Committee. In addition to any implied powers
and duties which may be needed to carry out the provisions of the Plan,
the Committee, subject to the provisions of Section 11.4, shall have
the following specific powers and duties.
(a) To make and enforce such rules and regulations as it shall
deem necessary or proper for the efficient administration of
the Plan;
(b) To interpret the Plan and to decide any and all matters
arising hereunder; including the right to remedy possible
ambiguities, inconsistencies or omissions; provided, however,
that all such interpretations and decisions
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shall be applied in a uniform and nondiscriminatory manner to
all Employees similarly situated;
(c) To compute the amount of Retirement Income which shall be
payable to any Participant, Spouse or Beneficiary in
accordance with the provisions of the Plan; and
(d) To authorize disbursements from the Fund, any instructions of
the Committee to the Trustee to be evidenced in writing and
signed by a member of the Committee delegated with such
authority by a majority of the Committee.
11.10 Administrator. The Committee may designate an Administrator of the
Plan, and may delegate to the Administrator such duties as the
Committee may decide including the responsibility to prepare and file,
or to cause to be prepared and filed, such reports, descriptions,
summaries financial and other statements as may be required from time
to time under applicable provisions of ERISA, within the time
prescribed for the preparation or filing of such documents, and to
furnish such reports, statements and documents to Participants and
Beneficiaries of the Plan as may be required by ERISA, within the time
specified for furnishing such
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documents. Any such designation and delegation shall be made in the
manner provided in Section 11.4.
11.11 Agent for Service. The Committee, or the Administrator if one shall be
appointed, shall be the agent for service of legal process in
connection with any claim or proceeding relating to the Plan.
11.12 Use of Enrolled Actuary. The Company shall employ or engage an Actuary
to make actuarial valuations of the liabilities under this Plan and to
recommend the amounts of contributions to be made and to perform such
other services deemed necessary or advisable in connection with the
administration of the Plan.
11.13 Bonding; Liability of Committee. The Committee, or its delegee, shall
ensure that each Fiduciary of the Plan, including members of the
Committee, is bonded in accordance with ERISA. The Employer shall
indemnify and hold harmless each member of the Committee, the
Administrator, and any Director or Employee held to be a Fiduciary with
respect to the Plan from any liability, claim, demand, suit or action
of any type arising from any action or failure to act; provided that
such person acted in good faith and in a manner he reasonably believed
to be in the best interests of the Participants and Beneficiaries and
consistent with the
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provisions of the Plan and, with respect to any criminal action or
proceeding, that he had no reasonable cause to believe his conduct was
unlawful.
11.14 Reliance on Reports and Certificates. The Committee, and its delegees,
shall be entitled to rely conclusively upon all tables, valuations,
certificates, opinions and reports which will be furnished by an
Actuary, accountant, controller, counsel or other person who is
employed or engaged for such purposes.
11.15 Member's Own Participation. No member of the Committee may act, vote or
otherwise influence a decision of the Committee specifically relating
to his own participation under the Plan.
11.16 Claims Procedure. Each Participant and Beneficiary of the Plan shall
submit all claims for benefits, claims relating to the amount or manner
of any distribution, and any other request relating to any account, in
writing, to the Administrator of the Plan. The Administrator shall
within a reasonable period of time, but not later than 60 days after
receipt thereof, either approve or deny such claim or request either
wholly or in part, and notify the claimant in writing of the action
taken.
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11.17 Notice of Denial. If such claim or request is wholly or partially
denied, the written notice of the Administrator shall set forth in a
manner calculated to be understood by the claimant:
(a) specific reasons for the denial;
(b) specific references to the pertinent Plan provisions on which
the denial is based;
(c) specific reference to any additional material or information
necessary for the claimant to perfect review of the claim and
an explanation of why such material or information is
necessary; and
(d) an explanation of the Plan's claims review procedure.
If the notice of the denial is not furnished to the Participant in
accordance with this Section within a reasonable period of time, such
Participant's claim shall be deemed denied.
11.18 Review. Upon denial of such a claim or request, the claimant shall be
entitled within 60 days after the receipt of written notice of denial
by the Administrator:
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(a) to request, in writing, a review by the Committee of the
denial;
(b) to review pertinent documents; and
(c) to submit issues and comments in writing.
The Committee shall render a decision on its review of the denial
promptly, but not later than 60 days after the receipt of the request
for review, unless special circumstances require an extension of time,
in which case a decision shall be rendered not later than 120 days
after the receipt of a request for review.
If the Committee's decision on review is not furnished to the
Participant within the time limitations described herein, the claim
shall be deemed denied upon review.
The decision of the Committee shall be in writing and shall set forth
reasons therefor stated in a manner calculated to be understood by the
claimant, including specific references to the pertinent Plan
provisions. Determinations, decisions and other actions of the
Committee, taken in accordance with the provisions hereof shall be
final, conclusive and binding on all parties.
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ARTICLE XII
METHOD OF FINANCING
12.1 Appointment of Trustee. The Trustee under the Plan will be appointed by
the Board, with such powers, as to investments, reinvestment, control
and disbursement of the Fund, as set forth in the Trust Agreement, or
in such Trust Agreement as modified from time to time. The Board may
remove the Trustee at any time on the notice required by the terms of
such Trust Agreement, and upon such removal or upon the resignation of
any such Trustee, such Board will designate a successor Trustee.
12.2 The Employer shall contribute to the Trust Fund such amounts as are
deemed necessary by an Actuary to fund the benefits provided by the
Plan on an acceptable basis in accordance with Title I, Section 302 and
Title II, Section 1013 of ERISA. Any actuarial gains arising from
actual experience under the Plan will be used to reduce future Employer
contributions and will not be used to increase any benefits payable
under the Plan. All contributions made under this Plan are made on the
condition that they are deductible under Section 404 of the Code.
12.3 Except as provided in Section 12.6, all Employer contributions when
made to the Trust Fund and all property of the Trust Fund, including
income from
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investments and all other sources, shall be retained for the exclusive
benefit of Participants, Spouses, or their Beneficiaries and shall be
used to pay benefits provided hereunder or to pay expenses of
administration of the Plan and the Trust Fund to the extent not paid by
the Employer.
12.4 The Employer shall not be required to make, but may make in any
calendar or fiscal year, any contributions to the Trust Fund in any
amount which is greater than the amount specified in Section 12.2. The
timing of all contributions shall be entirely discretionary with the
Employer to the extent permitted by ERISA.
12.5 Participants will not be required or permitted to make contributions to
the Plan.
12.6 Amounts forfeited by any Participant shall be used to reduce Employer
contributions.
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ARTICLE XIII
AMENDMENT OR TERMINATION
13.1 Right to Amend or Terminate. The Employer hopes and expects to continue
the Plan indefinitely. Nevertheless, each Employer maintains the right
to suspend, terminate, or completely discontinue contributions under
the Plan with respect to its Employees and the Board may terminate the
Plan for any reason at any time; subject to the requirement that the
Administrator shall file a notice of intent to terminate with the
Pension Benefit Guaranty Corporation ("PBGC") at least 60 days prior to
the proposed date of termination of the Plan, and shall comply with all
other provisions of ERISA or the PBGC relating to plan terminations. In
addition, the Company, by action of the Pension Trust Committee of the
Board, may amend or modify the Plan from time to time, provided,
however, that no such action shall adversely affect Participants to the
extent of their vested benefits, nor shall such action decrease a
Participant's accrued benefit or eliminate an optional form of
distribution with respect to benefits accrued prior to such amendment.
Notwithstanding the foregoing, however, any modification or amendment
of the Plan may be made retroactively, if necessary or appropriate to
qualify or maintain the Plan as a Plan meeting the requirements of the
Code and ERISA. Upon any termination of the Plan all accrued benefits,
to the extent funded, shall become nonforfeitable on the date of the
termination. In the event
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of partial termination of the Plan, all accrued benefits for
Participants affected by such partial termination, to the extent
funded, shall become nonforfeitable on the date of the termination.
13.2 Change in Vesting. If an amendment or a change in the top-heavy status
of the Plan changes the vesting schedule of the Plan, as set forth in
Section 7.2 hereof, any Participant having three (3) or more years of
service on the date which is sixty (60) days after such amendment or
change is adopted or becomes effective (or, if later, sixty (60) days
after written notice of the amendment is given) may, no later than the
end of the election period, elect to remain subject to the vesting
schedule in effect prior to such amendment or change. For purposes of
the foregoing, the "election period" shall begin on the date the
amendment changing the vesting schedule is adopted or the date on which
the Plan's top-heavy status is changed and shall end no earlier than
the latest of the following dates (provided that in the case of a
change in the Plan's top-heavy status, only clause (b) shall apply):
(a) the date which is 60 days after the day the Plan amendment is
adopted;
(b) the date which is 60 days after the day the Plan
XIII-2
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amendment becomes effective or the top-heavy status of the
Plan changes; or
(c) the date which is 60 days after the day the Participant is
issued written notice of the Plan amendment by the Employer or
Administrator.
13.3 Mergers, Consolidations and Transfers. The Plan shall not be
automatically terminated by the Employer's acquisition by or merger
into any other company, but the Plan shall be continued after such
merger provided the successor company agrees to continue the Plan. All
rights to amend, modify, suspend, or terminate the Plan shall be
transferred to the successor company, effective as of the date of the
merger.
The merger or consolidation with, or transfer of assets and liabilities
to, any other qualified retirement plan shall be permitted only if the
benefit each plan participant would receive if the plan were terminated
immediately after such merger or consolidation, or transfer of assets
and liabilities, would be at least as great as the benefit he would
have received had the Plan been terminated immediately before any such
transaction.
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13.4 Distribution of Funds upon Termination. In the event the Plan shall be
terminated or contributions permanently discontinued, the then present
value of benefits vested in each Participant in accordance with Article
VII shall be determined as of the Plan termination date and the assets
of any Fund then held by the Trustee as reserves for Retirement Income
for Participants under this Plan shall be allocated to the extent that
they shall be sufficient, after providing for expenses of
administration, in the order of precedence set forth below:
(a) There shall first be set aside an amount which will provide
Retirement Income for Participants, Spouses, or Beneficiaries
who were receiving benefits or who were eligible to receive
benefits at least three years prior to termination of the Plan
based on Plan provisions in effect five years prior to the
date of the Plan's termination.
(b) There shall next be set aside an amount which will provide all
other benefits insured by the PBGC.
(c) There shall next be set aside an amount which will provide all
other vested benefits, under the provisions of the Plan on its
termination date, but which are not incurred under ERISA.
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<PAGE> 74
(d) Finally, there shall be set aside an amount which will provide
all other accrued benefits for Participants who were not
vested as of the date of Plan termination.
If the assets of the Fund held by the Trustee as reserves for
Retirement Income for Participants of the Plan, as of the date of the
Plan is terminated, are not sufficient to provide in whole the amounts
required within the classes described above, such assets will be
allocated pro rata within the class in which the amounts first cannot
be provided in full.
Allocation in any of the above listed categories is adjusted for any
allocation already made to the same Participant under a prior category.
Allocation of assets may be modified by the Internal Revenue Service to
meet nondiscrimination requirements. After all liabilities of the Plan
have been satisfied, the Employer shall be entitled to any balance of
the Fund which shall remain.
13.5 Provision of Benefits. The Retirement Income payable in accordance with
Section 13.4 shall be provided through continuance of the existing
Trust Agreement or through a new instrument entered into for that
purpose or through the purchase of nontransferable annuity contract or
contracts from a commercial life insurance company or by a combination
thereof. If the allocations produce
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Retirement Income of less than $120 a year, a lump sum payment which is
the Actuarial Equivalent of such Retirement Income may be paid in lieu
thereof.
13.6 Special Limitations. Subject to the limitations expressed in Sections
4.3, 4.4 and 13.4, if, at any time prior to June 3, 1985 the Plan shall
be terminated or the full current cost of the Plan shall not have been
met, then the amount of the contributions by the Employer, or funds
attributable thereto, that may be applied for the benefit of any
Participant who on June 3, 1975 is one of the 25 highest paid Employees
and whose anticipated annual Normal Retirement Income resulting from
contributions of the Employer is more than $1,500 shall not exceed:
(a) the greater of $20,000 or an amount computed by multiplying
the number of years or parts thereof from June 3, 1975, to the
date of failure to meet the full current costs of the Plan or
the date of termination of the Plan, as the case may be, by
20% of the first $50,000 of the Employee's average Annual
Earnings during the five year period preceding the date of
failure to meet the full current costs of the Plan or the date
of termination of the Plan, or
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(b) such larger amount as may be permissible under relevant laws
and regulations at the time in force.
The provisions of this Section shall not restrict the current payment
of full benefits called for by the Plan to any person while the Plan is
in full effect and its full current costs have been met; nor shall it
restrict payment of any benefit withheld for a prior year (under the
foregoing provisions) after all deficits for all prior years and full
current costs have been met. Notwithstanding the otherwise applicable
restrictions on distributions of benefits incident to early Plan
termination, a Participant's otherwise restricted benefit may be
distributed in full upon such Participant's depositing with an
acceptable depository property having a fair market value equal to 125%
of the amount which would be repayable had the Plan terminated on the
date of the lump sum distribution. If the fair market value of the
property held by the depository falls below 110% of the amount which
would be repayable if the Plan were then to terminate, additional
property necessary to bring the value of the property held by the
depository up to 125% of such amount shall be deposited.
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ARTICLE XIV
GENERAL PROVISIONS
14.1 No Guarantee of Employment. The Plan shall not be deemed to constitute
a contract between an Employer and any Employee or to be a
consideration for, or an inducement for, the employment of any Employee
by an Employer. Nothing contained in the Plan shall be deemed to give
any Employee the right to be retained in the service of any Employer or
to interfere with the right of the Employer to discharge or to
terminate the service of any Employee at any time without regard to the
effect such discharge or termination may have on any rights under the
Plan.
14.2 Payments to Minors and Incompetents. If a Participant, Contingent
Annuitant or Beneficiary entitled to receive any benefits hereunder is
a minor or is deemed by the Committee or is adjudged to be legally
incapable of giving valid receipt and discharge for such benefits, they
will be paid to such persons as the Committee might designate or to the
duly appointed guardian. Such payment shall, to the extent made, be
deemed a complete discharge of any liability for such payment under the
Plan.
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14.3 Nonalienation of Benefits. To the extent permitted by law and with the
exception of payments pursuant to a qualified domestic relations order
within the meaning of Section 414(p) of the Code, no benefit payable
under this Plan will be subject in any manner to anticipation,
alienation, assignment, garnishment, or pledge; and any attempt to
anticipate, alienate, assign, garnishee or pledge the same will be
void; and no such benefits will be in any manner liable for or subject
to the debts, liabilities, engagements, or torts of any Participant;
and if any Participant is adjudicated bankrupt or attempts to
anticipate, alienate, assign, or pledge any benefits, then such
benefits will, in the discretion of the Committee, cease, and in this
event, the Committee will have the authority to cause the same or any
part thereof to be held or applied to or for the benefit of such
Participant, his Spouse, his children or other dependents, or any of
them, in such manner and in such proportion as the Committee may deem
proper.
Notwithstanding any provision of this Section to the contrary, an
offset to a Participant's accrued benefit against an amount that the
Participant is ordered or required to pay the Plan with respect to a
judgment, order, or decree issued, or a settlement entered into, on or
after August 5, 1997, shall be permitted in accordance with Code
Sections 401(a)(13)(C) and (D).
XIV-2
<PAGE> 79
14.4 Purchase of Annuities. If the Committee for any reason deems it
advisable, the Retirement Income benefits payable at retirement date
under the Plan may be provided through the purchase of non-transferable
annuities from such insurance company or companies as may be approved
by the Committee. Payment thereof will be made from the Fund held by
the Trustee.
14.5 Notwithstanding any other provision of the Plan, a former Participant
shall not be entitled to payment of duplicate benefits upon again
becoming a Participant.
14.6 A Participant shall not, with or without cause, be divested of any
annual benefits that are vested under the terms of the Plan.
14.7 Governing Law. The provisions of the Plan will be construed according
to the laws of the State of Connecticut, subject to ERISA.
14.8 Preservation of Prior Methods of Payment. Notwithstanding any of the
methods of payment of benefits provided in Articles IX and X, in the
case of a Participant who has made a designation prior to January 1,
1984 which conforms to the requirements of Section 242(b)(2) of the Tax
Equity and Fiscal Responsibility Act of 1982 and which provides that
one or more of the payment methods contained in the Plan prior to
January 1, 1984 shall apply to such Participant's
XIV-3
<PAGE> 80
benefits, the Participant and any Beneficiary shall be entitled to
receive such benefits in accordance with the payment methods in effect
under the Plan prior to January 1, 1984. The Committee shall be
authorized to disregard any designation, or any portion thereof, which
has been made in accordance with the preceding sentence if it
determines that such action is necessary to preserve the tax
qualification of the Plan.
14.9 Commencement of Benefits. In no case shall distributions of benefits
under the Plan be made or commence later than April 1 of the calendar
year following the calendar year in which a Participant attains age 70
1/2 whether or not he has retired or otherwise terminated his
Employment at that time; provided that, however, if a Participant had
attained age 70 1/2 before January 1, 1988 and was not a five percent
(5%) owner at any time during the Plan Year ending with or within the
calendar year in which the Participant had attained age 66 1/2 or any
subsequent Plan Year, such Participant may elect to delay his
distribution until the calendar year in which the Participant retires,
and, provided further, that if a Participant has made a designation
prior to January 1, 1984 which conforms to the requirements of Section
242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982,
distributions of benefits under the Plan may be made or commence in
accordance with the terms of such designation.
XIV-4
<PAGE> 81
14.10 Notwithstanding any other provision of the Plan, in no event shall a
Participant's benefit payments under the Plan decrease due to any
increase in such Participant's social security benefits.
14.11 Suspension of Benefits.
(a) Except for payments required by Section 14.9 hereof, benefits
under this Plan are payable only after termination of
employment; provided, however, that benefits shall be paid to
a Participant who is otherwise entitled to receive benefits
hereunder even if such Participant has not terminated
Employment, but only if such Participant does not complete at
least 40 Hours of service during a calendar month in Section
203(a)(3)(B) service, within the meaning of Section
203(a)(3)(B) of ERISA and Section 2530.203-3 of the Code of
Federal Regulations. In addition, normal or early retirement
benefits in pay status will be suspended for each calendar
month during which the Participant completes at least 40 Hours
of service in Section 203(a)(3)(B) service. In accordance with
the foregoing, the actuarial value of benefits which commence
later than a Participant's Normal Retirement Date will be
computed without regard to amounts which would have been
suspended under the preceding sentences
XIV-5
<PAGE> 82
as if the Participant had been receiving benefits since Normal
Retirement Date.
(b) If benefit payments have been suspended, payments shall resume
no later than the first day of the third calendar month after
the calendar month in which the Participant ceases to be
employed for at least 40 Hours of service for a calendar month
in Section 203(a)(3)(B) service. The initial payment upon
resumption shall include the payment scheduled to occur in the
calendar month when payments resume and any amounts withheld
during the period between the cessation of such Section
203(a)(3)(B) service and the resumption of payments.
(c) No payment shall be withheld by the Plan pursuant to this
Section unless the Plan notifies the Participant by personal
delivery or first class mail during the first calendar month
or payroll period in which the Plan withholds payments that
his or her benefits are suspended. Such notification shall
contain a description of the specific reasons why benefit
payments are being suspended, a description of the Plan
provision relating to the suspension of payments, a copy of
such provisions, and a statement to the effect that applicable
Department of Labor regulations may be found in Section
2530.203-3 of the Code of Federal Regulations. In
XIV-6
<PAGE> 83
addition, the notice shall inform the Participant of the
Plan's procedures for affording a review of the suspension of
benefits. Requests for such review may be considered in
accordance with the claims procedure adopted by the Plan
pursuant to Section 503 of ERISA and applicable regulations.
(d) The amount suspended shall be an amount equal to the portion
of a monthly benefit payment derived from Company
contributions.
(e) This paragraph does not apply to the minimum benefit to which
the Participant may become entitled under the top-heavy rules
of Article XV.
XIV-7
<PAGE> 84
ARTICLE XV
TOP-HEAVY PLAN PROVISIONS
(Paragraphs 15.1 - 15.10 provide definitions for Article XV.)
15.1 Compensation. Compensation of an Employee which is reportable on Form
W-2 for the calendar year ending with or within the Plan Year.
15.2 Key Employee. Any Employee or former Employee (and the Beneficiaries of
such Employee) who at any time during the Determination Period was an
officer of the Employer with Compensation greater than 150 percent of
the dollar limitation under Section 4l5(c)(1)(A) of the Code, an owner
(or considered an owner under Section 318 of the Code) of one of the
ten largest interests in the Employer if such individual's Compensation
exceeds the dollar limitation under Section 4l5(c)(1)(A) of the Code
and such individual's ownership interest exceeds 1/2 percent, a
5-percent owner of the Employer, or a 1-percent owner of the Employer
who has Compensation of more than $150,000. The determination of who is
a Key Employee shall be made in accordance with Section 416(i)(1) of
the Code.
XV-1
<PAGE> 85
15.3 Top-Heavy Plan. For any Plan Year, this Plan is top-heavy if any of the
following conditions exists:
(a) If the Top-Heavy Ratio for this Plan exceeds 60 percent and
this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group of plans.
(b) If this Plan is a part of a Required Aggregation Group of
plans (but which is not part of a Permissive Aggregation
Group) and the Top-Heavy Ratio for the Required Aggregation
Group of plans exceeds 60 percent.
(c) If this Plan is a part of a Required Aggregation Group of
plans and part of a Permissive Aggregation Group and the
Top-Heavy Ratio for the Permissive Aggregation Group exceeds
60 percent.
15.4 Top-Heavy Ratio.
(a) If the Employer maintains one or more defined benefit plans
and the Employer has not maintained any defined contribution
plan (including any simplified employee pension plan) which
during the Determination Period(s) has or has had account
balances, the Top-Heavy Ratio for this Plan alone or for the
Required or Permissive Aggregation Group as
XV-2
<PAGE> 86
appropriate is a fraction, the numerator of which is the sum
of the Present Values of accrued benefits of all Key Employees
as of the Determination Date(s) (including any part of any
accrued benefit distributed in the Determination Period(s)),
and the denominator of which is the sum of the Present Values
of all accrued benefits (including any part of any accrued
benefit distributed in the Determination Period(s)),
determined in accordance with Section 416 of the Code and the
Regulations thereunder.
(b) If the Employer maintains one or more defined benefit plans
and the Employer maintains or has maintained one or more
defined contribution plans (including any simplified employee
pension plan) which during the Determination Period(s) has or
has had any account balances, the Top-Heavy Ratio for any
Required or Permissive Aggregation Group as appropriate is a
fraction, the numerator of which is the sum of the Present
Values of accrued benefits under the aggregated defined
benefit plan or plans for all Key Employees, determined in
accordance with (a) above, and the sum of account balances
under the aggregated defined contribution plan or plans for
all Key Employees as of the Determination Date(s), and the
denominator of which is the sum of the Present Values of
accrued benefits under the aggregated defined benefit plan or
plans, determined in accordance with (a) above for all
Participants, and the sum of the account balances under the
aggregated defined contribution plan or
XV-3
<PAGE> 87
plans for all Participants as of the Determination Date(s),
all determined in accordance with Section 416 of the Code and
the Regulations thereunder. The account balances under a
defined contribution plan in both the numerator and
denominator of the Top-Heavy Ratio are adjusted for any
distribution of an account balance made in the Determination
Period.
(c) For purposes of (a) and (b) above, the value of account
balances and the Present Value of accrued benefits shall be
determined as of the most recent Valuation Date that falls
within or ends with the 12-month period ending on the
Determination Date, except as provided in Section 416 of the
Code and the Regulations thereunder for the first and second
plan year of a defined benefit plan. The account balances and
accrued benefits of a Participant (1) who is not a Key
Employee but who was a Key Employee in a prior year, or (2)
who has not received any compensation from any Employer
maintaining the plan at any time during the Determination
Period shall be disregarded. The calculation of the Top-Heavy
Ratio, and the extent to which distributions, rollovers, and
transfers are taken into account will be made in accordance
with Section 416 of the Code and the Regulations thereunder.
Deductible Employee contributions shall not be taken into
account for purposes of computing the Top-Heavy Ratio. When
aggregating plans, the value of account balances and accrued
XV-4
<PAGE> 88
benefits shall be calculated with reference to the
Determination Date(s) that falls within the same calendar
year.
15.5 Permissive Aggregation Group. The Required Aggregation Group of plans
plus any other plan or plans of the Employer which, when considered as
a group with the Required Aggregation Group, would continue to satisfy
the requirements of Sections 401(a)(4) and 410 of the Code.
15.6 Required Aggregation Group. (1) Each qualified plan of the Employer in
which at least one Key Employee participated during the Determination
Period, and (2) any other qualified plan of the Company which enables a
plan described in (1) to meet the requirements of Sections 410(a)(4)
and 410 of the Code during the Determination Period.
15.7 Determination Date. For any Plan Year, the last day of the preceding
Plan Year.
15.8 Determination Period. The Plan Year containing the Determination Date
and the four (4) preceding Plan Years.
15.9 Valuation Date. For purposes of computing the Top-Heavy Ratio, the
Valuation Date shall be the normal annual valuation date for the Plan.
XV-5
<PAGE> 89
15.10 A Present Value. For purposes of computing the Top-Heavy Ratio, any
benefit shall be discounted only for mortality and interest as follows:
Interest rate: 5%
Mortality table: 1971 TPF&C Forecast Mortality Table
15.11 If the Plan is or becomes a Top-Heavy Plan in any Plan Year beginning
after December 31, 1983, the following provisions shall supersede any
conflicting provision in the Plan.
(a) Vesting.
Notwithstanding the provisions of Section 7.2, a Participant's
Vested Benefit shall be the Retirement Income payable at
Normal Retirement Date in the form and amount as set forth in
Section 4.3 based on his Average Earnings and Credited Service
as of his Termination Date, multiplied by the applicable
percentage specified below:
<TABLE>
<CAPTION>
If Years of Then Vested
Vesting Service Are Percentage Is
------------------- -------------
<S> <C>
less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
</TABLE>
XV-6
<PAGE> 90
Notwithstanding the foregoing, a Participant shall be 100%
vested upon the later of his 65th birthday or the fifth
anniversary of his entry into the Plan. In the event of a
change in the top-heavy status of the Plan, Section 13.2 of
the Plan shall apply.
(b) Minimum Accrued Benefit.
(i) Notwithstanding any other provision in this Plan
except (iii), (iv) and (v) below, for any Plan Year
in which this Plan is a Top Heavy Plan, each
Participant who is not a Key Employee and has
completed 1,000 Hours of service shall accrue a
benefit (to be provided solely by Employer
contributions and expressed as a life annuity
commencing at normal retirement age) of not less than
two percent of his or her highest average
Compensation for the five consecutive years for which
the Participant had the highest Compensation. The
minimum accrual is determined without regard to any
Social Security contribution. The minimum accrual
applies even though under other Plan provisions the
Participant would not otherwise be entitled to
receive an accrual, or would have received a lesser
accrual for the year because (1) the non-Key Employee
fails to make mandatory contributions to the Plan,
(2)
XV-7
<PAGE> 91
the non-Key Employee's Compensation is less than a
stated amount, (3) the non-Key Employee is not
employed on the last day of the accrual computation
period, or (4) the Plan is integrated with Social
Security.
(ii) No additional benefit accruals shall be provided
pursuant to (i) above to the extent that the total
accruals on behalf of the Participant attributable to
Employer contributions will provide a benefit
expressed as a life annuity commencing at age 65 that
equals or exceeds 20 percent of the Participant's
highest average Compensation for the five consecutive
years for which the Participant had the highest
Compensation.
(iii) The provisions in (i) above shall not apply to any
Participant to the extent that the Participant is
covered under any other plan or plans of the Employer
which provide(s) for the minimum allocation or
benefit applicable to Top-Heavy Plans.
(iv) All accruals of Employer derived benefit, whether or
not attributable to years for which the Plan is a
Top-Heavy Plan, may be used in computing whether the
minimum accrual requirements of Section (ii) above
are satisfied.
XV-8
<PAGE> 92
(c) Additional Limitation - Members of Retirement Plan.
With respect to any Plan Year for which the Plan is
determined to be a Top-Heavy Plan, paragraphs (2)(B)
and (3)(B) of Section 415(e) of the Code, as
incorporated in Section 4.5 hereof, shall be applied
by substituting "1.0" for "1.25" in the calculation
of the defined benefit and defined contribution
fractions unless the requirements of Section
416(h)(2) of the Code are met.
XV-9
<PAGE> 93
THE CONNECTICUT WATER COMPANY
EMPLOYEES' RETIREMENT PLAN
EXHIBIT I
This Exhibit is attached to and made a part of the Plan.
Actuarial Equivalent shall mean a benefit of equivalent current value to the
benefit which would otherwise have been provided to the Participant. The factors
used to determine equivalencies shall be determined as follows:
- 50% Contingent Annuity Option
90% (less)(plus) .5% for each year by which the age of the
Contingent Annuitant (is less than)(exceeds) the age of the
Participant. Such factor not to exceed 1.0.
- 75% Contingent Annuity Option
86% (less)(plus) .6% for each year by which the age of the
Contingent Annuitant (is less than)(exceeds) the age of the
Participant. Such factor not to exceed 1.0.
- 100% Contingent Annuity Option 82% (less)(plus) .7% for each
year by which the age of the Contingent Annuitant (is less
than)(exceeds) the age of the Participant. Such factor not to
exceed 1.0.
<PAGE> 94
- Lump Sum Distribution
Actuarial Equivalent factors shall be determined using the
UP-1984 Mortality Table and, for any Plan Year, the interest
rates promulgated by the Pension Benefit Guaranty Corporation
for the purposes of determining the present value of a lump
sum distribution on plan termination for the month containing
the first day of such Plan Year.
Effective for lump sum distributions made on or after
September 1, 1996, Actuarial Equivalent factors shall be
determined using the mortality table prescribed by the
Secretary of the Treasury pursuant to Section
417(e)(3)(A)(ii)(I) of the Code and the annual rate of
interest on 30-year Treasury securities for the month
containing the first day of the Plan Year in which such
distribution is made.
- Five Years Certain and Life Option: 98%
- Ten Years Certain and Life Option: 93%
- Lump Sum Distribution Under Years Certain and Life Options:
Actuarial Equivalent factors shall be determined using the
mortality table prescribed by the Secretary of the Treasury
pursuant to Section 417(e)(3)(A)(ii)(I) of the Code and the
annual rate of interest on 30-year Treasury
<PAGE> 95
securities for the month containing the first day of the Plan
Year in which such distribution is made.
<PAGE> 96
APPENDIX A
SPECIAL EARLY RETIREMENT BENEFIT
A.1 Eligibility
A special early retirement benefit, as set forth in Section A.2 hereof,
shall be offered to all Eligible Participants; provided, however, that
said special early retirement benefit shall not be available to any
Eligible Participant if fewer than six (6) Eligible Participants elect
to retire and receive such benefit. For purposes of this Appendix A,
the term 'Eligible Participant' shall mean each Participant who as of
September 1, 1991 (a) will have completed ten (10) or more years of
Credited Service, and (b) will have attained the age of fifty-five
(55). Each such Eligible Participant will be offered the special early
retirement benefit described in Section A.2 and may make a written
election during an election period beginning on July 10, 1991 and
ending at 4:30 P.M. on August 9, 1991 to retire on September 1, 1991
and receive such special early retirement benefit commencing as of said
date; provided, however, that such Eligible Participant either electing
or declining to retire and receive the special early retirement benefit
described in Section A.2 may revoke said decision during the period
beginning on August 10, 1991 and ending at 4:30 P.M. on August 16,
1991, after which date such decision shall be irrevocable.
<PAGE> 97
A.2 Special Early Retirement Benefit
Each Eligible Participant who, pursuant to Section A.1, has elected to
retire and receive the special early retirement benefit shall be
credited with an additional five (5) years of Credited Service for
purposes of the calculation of the benefit under Articles IV, V and VI
and, if such retirement occurs prior to attainment of age sixty-two
(62), shall receive an additional benefit of $500 each month ending
with the month in which such Eligible Participant attains age sixty-two
(62).
2
<PAGE> 98
APPENDIX B
SPECIAL EARLY RETIREMENT BENEFIT
B.1 Eligibility
A special early retirement benefit, as set forth in Section B.2 hereof,
shall be offered to all eligible Participants. For purposes of this
Appendix B, the term 'Eligible Participant' shall mean each Participant
who as of July 1, 1997 (a) will have completed ten (10) or more years
of Credited Service, and (b) will have attained the age of fifty-five
(55). Each such Eligible Participant will be offered the special early
retirement benefit described in Section B.2 and may make a written
election during an election period beginning on March 15, 1997 and
ending at 4:30 P.M. on April 30, 1997 to retire between July 1, 1997
through December 31, 1997 and receive such special early retirement
benefit commencing as of said date; provided, however, that such
Eligible Participant either electing or declining to retire and receive
the special early retirement benefit described in Section B.2 may
revoke said decision during the period beginning on May 1, 1997 and
ending at 4:30 P.M. on May 7, 1997, after which date such decision
shall be irrevocable.
<PAGE> 99
B.2 Special Early Retirement Benefit
(a) Each Eligible Participant who, pursuant to Section B.1, has elected
to retire and receive the special early retirement benefit shall be
credited with an additional five (5) years of Credited Service for
purposes of the calculation of the benefit under Articles IV, V and VI.
(b) Each Eligible Participant who, pursuant to Section B.1, has elected
to retire and receive the special early retirement benefit and whose
retirement occurs prior to attainment of age sixty-two (62) shall also
receive an additional benefit of $500 each month ending with the month
in which such Eligible Participant attains age sixty-two (62), or, if
earlier, dies. The benefit described in this subsection (b) shall not
be provided to an Eligible Participant who is age sixty-two (62) or
older as of the date of commencement of his Retirement Income and no
benefits shall be payable to any Contingent Annuitant with respect to
the benefit described in this subsection (b) following an Eligible
Participant's death regardless of the form in which such Eligible
Participant's Retirement Income is being paid.
2
<PAGE> 1
Exhibit 24.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 33-53211.
/s/ Arthur Andersen LLP
Hartford, Connecticut
March 22, 1999
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 167,326
<OTHER-PROPERTY-AND-INVEST> 1,900
<TOTAL-CURRENT-ASSETS> 8,531
<TOTAL-DEFERRED-CHARGES> 16,829
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 194,586
<COMMON> 42,810
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 15,135
<TOTAL-COMMON-STOCKHOLDERS-EQ> 57,945
0
772
<LONG-TERM-DEBT-NET> 62,501
<SHORT-TERM-NOTES> 1,895
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 71,473
<TOT-CAPITALIZATION-AND-LIAB> 194,586
<GROSS-OPERATING-REVENUE> 37,924
<INCOME-TAX-EXPENSE> 3,980
<OTHER-OPERATING-EXPENSES> 23,640
<TOTAL-OPERATING-EXPENSES> 27,620
<OPERATING-INCOME-LOSS> 10,304
<OTHER-INCOME-NET> 977
<INCOME-BEFORE-INTEREST-EXPEN> 11,281
<TOTAL-INTEREST-EXPENSE> 4,316
<NET-INCOME> 6,965
38
<EARNINGS-AVAILABLE-FOR-COMM> 6,927
<COMMON-STOCK-DIVIDENDS> 5,282
<TOTAL-INTEREST-ON-BONDS> 3,636
<CASH-FLOW-OPERATIONS> 11,690
<EPS-PRIMARY> 1.53
<EPS-DILUTED> 1.53
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