<PAGE> 1
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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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 0-8084
CONNECTICUT WATER SERVICE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
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)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (860) 669-8636
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
NONE NOT APPLICABLE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229,405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
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, 2000 is
$142,428,000.
4,828,075
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING, MARCH 1, 2000
(EXCLUDING 15,748 COMMON STOCK EQUIVALENT SHARES)
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
PART OF FORM 10-K INTO WHICH
DOCUMENT DOCUMENT IS INCORPORATED
-------- ----------------------------
<S> <C>
Definitive Proxy Statement, dated March 18, Part III
2000, for Annual Meeting of Shareholders to be
held on April 28, 2000.
</TABLE>
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<PAGE> 2
PART I
ITEM 1. BUSINESS
a. GENERAL DEVELOPMENT OF BUSINESS
The Registrant, Connecticut Water Service, Inc. (the Company), is the
parent company of three regulated water companies, which generate over 95% of
the Company's consolidated net earnings. Our water companies supply water for
residential, commercial, industrial and municipal purposes in 39 towns
throughout the State of Connecticut. The Company and its subsidiaries represent
the second largest investor-owned water system in Connecticut measured by of
operating revenue and utility plant investment.
The Company was organized in 1956 under the General Statutes of Connecticut
as Suburban Water Service, Inc. and has been engaged in the business of
acquiring and operating water companies through controlling stock ownership. In
1975, the Company changed its name to Connecticut Water Service, Inc. after
acquiring all of the outstanding common stock of The Connecticut Water Company.
The Company is a non-operating company whose income is derived from the earnings
of its subsidiary companies. In addition to our core regulated water business,
we offer related services on a contract basis to other water utilities,
communities, businesses and homeowner associations through our unregulated
subsidiary companies and through a joint venture we formed in 1999 with a pump
service provider. These services range from one-time contracts for a particular
service to long-term assignments for system operation and management. We are
also engaged in selling off our limited excess real estate holdings.
The Company's six wholly owned subsidiary companies are:
The Connecticut Water Company (Connecticut Water)
The Gallup Water Service, Incorporated (Gallup)
The Crystal Water Company of Danielson (Crystal)
Crystal Water Utilities Corporation
Chester Realty, Inc.
Connecticut Water Utility Services, Inc.
Gallup and Crystal Water Utilities (along with its subsidiary Crystal) were
acquired in 1999. Both of these acquisitions were treated as "pooling of
interests" so all of the Company's financial statements have been restated from
what was reported in the past to include the results of the acquired companies
for all periods presented. The Company's consolidated financial statements now
encompass all six of the Company's subsidiaries.
In 1999 we formed a joint venture with Hungerfords, Inc., a pump service
provider, which has been in business in Connecticut for over 75 years.
Hungerfords installs and maintains potable water and wastewater systems for
commercial, industrial and residential customers in the state. Our three year
joint venture, named Hungerfords/Connecticut Water, will engage in a marketing
and management strategy designed to boost our two companies' presence by
collectively offering a full range of services to water users in the state. If
specific financial targets are met, our Company will purchase Hungerfords in
2002.
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b. GENERAL DESCRIPTION OF BUSINESS
The Company, a Connecticut corporation, owns all of the outstanding stock
of Connecticut Water, Gallup, Crystal Water Utilities Corporation, Chester
Realty and Connecticut Water Utility Services. The Crystal Water Utilities
Corporation owns all of the outstanding stock of the Crystal Water Company.
Substantially all of the Company's revenues and operating income are
attributable to the sale and distribution of water. In 1999 $.04 a share or
approximately 2.6% of the Company's consolidated net income came from real
estate sales and non-water sales earnings. See "Business -- Consolidated
Operating Statistics".
Connecticut Water, Crystal and Gallup are specially chartered by the
General Assembly of the State of Connecticut as public service companies. As
public service companies, their rates and operations are regulated by the
Connecticut Department of Public Utility Control (DPUC). See "Business -- Rates"
and "Business -- Regulation".
Chester Realty was organized in 1969 to assist Connecticut Water in the
acquisition of real estate. The assets and operations of this company are not
significant. In 1999 the ownership of this company was transferred directly to
the Company from Connecticut Water.
In 1999, Connecticut Water Utilities Services was established to handle our
unregulated business activities. By forming a separate company to handle these
transactions we were able to move these transactions off the books of
Connecticut Water. By removing these transactions from the oversight of the
regulated arena, this new structure should give us more flexibility in the way
we respond to changing market conditions and needs.
Crystal Water Utilities is a holding company, owning 100% of the
outstanding common stock of Crystal. In addition, it owns some rental
properties. The assets and operations of this company other than its ownership
of Crystal is not significant.
Our three water companies supply water and, in most instances, provide fire
protection in all or portions of 39 towns in Connecticut. The service areas have
an estimated total population of approximately 243,000 based on DPUC population
estimates of 3.5 people per average household. During the twelve months ended
December 31, 1999, 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 our water companies serve a separate franchise area. Rates are
different for each company. The systems of the three water companies are not
physically interconnected.
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The following table sets forth the percentage of the Company's net utility
plant for each of its water companies as of December 31, 1999:
<TABLE>
<CAPTION>
UTILITY PLANT
COMPANY DOLLARS PERCENT
- ------- ------------ -------
<S> <C> <C>
Connecticut Water $172,094,000 95%
Crystal 7,779,000 4%
Gallup 1,469,000 1%
------------ ---
$181,342,000 100%
============ ===
</TABLE>
At December 31, 1999, our three water companies served a total of 69,474
customers. At that date, all customers were metered except fire protection
customers, 402 customers of Connecticut Water's Sound View Water System,
acquired in 1995; and 379 customers of its Point O'Woods Water System, acquired
in 1997. The water companies require 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.
Our business 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.
The profitability of the operations of the water utility industry generally
and of our three water companies (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 we have little or no control, such as the quantity of rainfall and
temperature in a given period of time, and compliance with environmental and
water quality regulations. In addition, inflation and other factors beyond our
control impact the cost of construction, materials and employee costs. See
"Business -- Financing", "Business -- Rates", and "Business -- Regulation".
Water Supply
The estimated minimum dependable yields of sources of water supply for each
of our transmission and distribution systems, as set forth under
"Business -- Production Facilities as of December 31, 1999" are in excess of
present average daily consumption. Except for requests for voluntary
conservation in the summers of 1988, 1995 and 1999, 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 1999, approximately 1% of
our water was supplied through our interconnections with other companies. Of the
water supplied by our
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sources, surface sources provided approximately 50% of the supply, and well
supplies provided 50%. Studies are made periodically to determine the supply and
distribution needs. Major studies, covering a fifty-year planning period
required of all water companies supplying 1,000 or more persons, were completed
by our three water companies 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 our water systems
have been prepared and approved by the DPH. We will continue to explore and
develop additional ground water supplies and study further development of
surface water sources in anticipation of meeting future water requirements.
See "Business -- Construction Program", "Business -- Rates" and
"Business -- Regulation".
Information on our water systems, broken down by company, and for
Connecticut Water into its three operating regions is as follows:
CONNECTICUT WATER'S NORTHERN REGION
Connecticut Water's Northern Region is composed of eight separate systems,
as listed below:
<TABLE>
<CAPTION>
NUMBER OF
CUSTOMERS
SYSTEM TOWNS (OR PORTIONS THEREOF) SERVED AT 12/31/99
- ------ ---------------------------------- -----------
<S> <C> <C>
Western (including the former Tolland Suffield, Windsor Locks, East 29,878
Aquaduct System) Granby, Enfield, East Windsor,
South Windsor, Vernon, Ellington,
Tolland
Somers Somers 420
Crescent Lake Enfield 161
Stafford Springs Stafford 1,016
Lakewood/Lakeview Coventry 177
Nathan Hale Coventry 40
Llynwood Bolton, Vernon 75
Reservoir Heights Vernon 21
------
31,788
======
</TABLE>
The territory served is primarily residential and commercial with some
industry.
Connecticut Water has entered into an agreement with the State of
Connecticut, Department of Transportation, pursuant to which Connecticut Water
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 interconnections with the
water system of the Metropolitan District Commission (MDC) (a public water and
sewer authority presently serving the City of Hartford and portions of
surrounding towns), one in
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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 Connecticut
Water's operations in South Windsor.
CONNECTICUT WATER'S SHORELINE REGION
Connecticut Water's Shoreline Region is composed of eight separate systems,
as listed below:
<TABLE>
<CAPTION>
NUMBER OF
CUSTOMERS
SYSTEM TOWNS (OR PORTIONS THEREOF) SERVED AT 12/31/99
- ------ ---------------------------------- -----------
<S> <C> <C>
Guilford Guilford, Old Saybrook, Westbrook, 16,002
Clinton, Madison
Chester Chester, Deep River, Essex 2,326
Chester Village West Chester 11
Sound View Old Lyme 402
Point O'Woods Old Lyme 379
Bay Mountain Griswold 106
SDC Voluntown 54
Mason's Island Stonington 177
------
19,457
======
</TABLE>
The territory served is primarily residential with some commercial and
industry. In 1998 Connecticut Water 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%.
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CONNECTICUT WATER'S NAUGATUCK REGION
Connecticut Water's Naugatuck Region is composed of four separate systems,
as listed below:
<TABLE>
<CAPTION>
NUMBER OF
CUSTOMERS
SYSTEM TOWNS (OR PORTIONS THEREOF) SERVED AT 12/31/99
- ------ ---------------------------------- -----------
<S> <C> <C>
Central Naugatuck, City of Waterbury, 8,885
Beacon Falls, Bethany, Prospect
Terryville Plymouth, Thomaston 2,048
Thomaston Thomaston 1,276
Collinsville Canton, Avon, Burlington 1,328
------
13,537
======
</TABLE>
The territory served is residential and industrial including a municipality
which represented approximately 7.0% of the region's 1999 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.
CRYSTAL
Crystal Water Company is comprised of four separate systems, as listed
below:
<TABLE>
<CAPTION>
NUMBER OF
CUSTOMERS
SYSTEM TOWNS (OR PORTIONS THEREOF) SERVED AT 12/31/99
- ------ ---------------------------------- -----------
<S> <C> <C>
Crystal Brooklyn, Killingly 2,294
Plainfield Plainfield 592
Thompson Thompson 474
P&A Killingly 96
-----
3,456
=====
</TABLE>
Crystal's territory served is primarily residential and commercial with
some industry. Crystal's largest customer, a municipality, accounts for
approximately 7.5% of its operating revenue.
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GALLUP
Gallup is composed of three separate systems, as listed below:
<TABLE>
<CAPTION>
NUMBER OF
CUSTOMERS
SYSTEM TOWNS (OR PORTIONS THEREOF) SERVED AT 12/31/99
- ------ ---------------------------------- -----------
<S> <C> <C>
Gallup Plainfield 1,056
Country Mobile Griswold 79
Lillibridge Plainfield 43
-----
1,178
=====
</TABLE>
Gallup's territory served is primarily residential and commercial with some
industry. Gallup's largest customer, a municipality, accounted for approximately
11.5% of its operating revenue.
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CONSOLIDATED OPERATING STATISTICS*
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Customers (Average)
Residential Metered 61,608 60,745 59,834 59,503 58,749
Commercial Metered 4,323 4,301 4,316 4,277 4,224
Industrial Metered 350 377 406 411 406
Public Authorities Metered 476 495 545 543 545
Fire Protection and Other 2,188 1,937 1,686 1,138 1,108
------- ------- ------- ------- -------
Total 68,945 67,855 66,787 65,872 65,032
======= ======= ======= ======= =======
Production (Millions of
Gallons)
Residential Metered Sales 4,602 4,334 4,291 4,179 4,302
Commercial Metered Sales 1,054 983 990 973 1,008
Industrial Metered Sales 475 444 490 485 485
Public Authorities Metered
Sales 299 286 278 270 280
------- ------- ------- ------- -------
Total Metered
Consumption 6,430 6,047 6,049 5,907 6,075
Fire Protection, Company Use
and Unaccounted For 921 798 811 682 877
------- ------- ------- ------- -------
Total 7,351 6,845 6,860 6,589 6,952
======= ======= ======= ======= =======
Operating Revenues (Thousands
of Dollars)
Residential Metered $27,077 $25,495 $25,816 $25,888 $26,463
Commercial Metered 5,160 4,820 4,890 4,931 5,109
Industrial Metered 1,850 1,747 1,962 1,960 1,967
Public Authorities Metered 1,374 1,208 1,218 1,216 1,247
Fire Protection and Other
Non-Metered 7,163 7,033 7,031 7,019 6,901
------- ------- ------- ------- -------
Total $42,624 $40,303 $40,917 $41,013 $41,687
======= ======= ======= ======= =======
Average Revenue per 1,000
Gallons
Residential Metered $ 5.88 $ 5.88 $ 6.02 $ 6.19 $ 6.15
Commercial Metered $ 4.90 $ 4.90 $ 4.94 $ 5.07 $ 5.07
Industrial Metered $ 3.89 $ 3.93 $ 4.00 $ 4.04 $ 4.05
Public Authorities Metered $ 4.60 $ 4.22 $ 4.38 $ 4.50 $ 4.45
Miles of Distribution Mains
(End of Period) 1,109 1,094 1,079 1,062 1,058
</TABLE>
- ---------------
* The numbers for years 1995 - 1998 have been restated to include the operations
of Gallup and Crystal, which were acquired in 1999.
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CONSTRUCTION PROGRAM
We annually project our capital expenditures for the upcoming three year
period. These projections 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 current estimate of the total cost of our construction program for
2000-2002, excluding plant financed by customer advances and contributions in
aid of construction, aggregates approximately $22,500,000. Of this amount,
routine improvements to water systems and equipment total approximately
$10,500,000, while the remaining $12,000,000 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 any of our non-utility
subsidiaries during this period.
The $22,500,000 estimate includes approximately $2,000,000 for all known
costs of studies and construction of facilities to comply with existing Safe
Drinking Water Act (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 may be required due to changes to the
SDWA, are excluded.
FINANCING
The Company expects to finance a significant portion of the anticipated
$22,500,000 construction expenditures through 2002 with net funds generated from
operations (net cash provided by operating activities less dividends paid). Net
funds generated from operations were $8,447,000, $6,762,000, and $9,231,000, for
the years 1999, 1998 and 1997, 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 or secured debt and/or the
sale of Common Stock when financial market conditions are considered favorable.
The Company's subsidiaries are expected to receive the proceeds of any such
financing by the Company in the form of advances or capital contributions.
We currently have lines of credit aggregating $9,000,000, consisting of
conventional lines of credit with three banks. We consider this amount adequate
at this time. As of December 31, 1999, we had $2,411,000 of borrowings
outstanding under these lines of credit plus $245,000 allocated to secure a
Letter of Credit for one of our real estate development projects.
RATES
The rates of our three water companies are established under the
jurisdiction of, and approved by, the DPUC. It is the Company's policy to seek
rate relief as necessary to enable us to achieve an adequate rate of return.
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<PAGE> 11
The last general rate increase of Connecticut Water, our largest water
company, was requested in 1990 and became effective March 25, 1991 based upon an
allowed rate of return of 12.7% on common stock equity and 10.74% on rate base.
During 1997 this rate decision was reopened for the limited purpose of flowing
through to customers cost savings related to a reduction in state taxes and to
allow the water company to collect FAS 106 (Postretirement Benefits other than
Pension) costs in rates. Overall the water company's rates were reduced
approximately 4 1/2% in 1997 due to these limited reopened rate proceedings.
Crystal Water Company's last general rate increase was effective March 31,
1995 and was based upon an allowed rate of return of 12.35% on common stock
equity and 10.16% on rate base. During 1997, this rate decision was also
reopened for the limited purpose of flowing through to customers cost savings
from a reduction in state taxes. Crystal's rates were reduced 5%, effective July
1, 1997 due to this reopener.
Gallup's last general rate increase was effective January 1, 1994. Gallup's
rates were not based on rate of return or rate base methodology, but rather
based on its net income requirement. Similar to those for our other two water
companies, Gallup's rates were reduced 5%, effective July 1, 1997 to flow
through a reduction in state taxes to customers.
We do not expect to file for a general rate increase for any of our water
companies in 2000.
The DPUC allows 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. We have, in the past, been allowed to collect these
surcharges from our customers. We expect to apply for the application of similar
surcharges with respect to any major future construction projects which may be
required by the SDWA. There is no assurance that any future surcharges will be
permitted.
Under certain circumstances the DPUC, in consultation with the 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. If appropriate, we will apply
for the application of such a surcharge with respect to any mandated water
system acquisition. Although there is no assurance that such a surcharge will be
permitted, such a surcharge was permitted in 1995 when the DPUC and DPH ordered
Connecticut Water 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. We will apply
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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
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. We believe that, in light of the tax and other advantages
of governmentally-owned entities which are not available to Connecticut Water
and our two other water companies, their rates are not excessive and we would
vigorously oppose any such attempt to revoke their franchises.
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 within and/or adjacent to towns in Connecticut
Water's Northern Region. MDC's water rates are substantially lower than those of
Connecticut Water, primarily because MDC is a tax-exempt entity, generally
serving a denser population with fewer sources of supply and treatment
facilities. Legislation has been proposed at various times in the past 25 years
that would have the effect of permitting MDC to purchase the water company
operations of Connecticut Water in South Windsor, a town which is presently
served by both MDC and Connecticut Water. The Company has opposed and will
continue to oppose such legislation vigorously each time and to date no such
legislative proposals have passed in the General Assembly. It is not clear, at
this time, whether similar legislation will be introduced or adopted by the
General Assembly. It is also possible that any legislation in this area could be
written in a manner which would permit a similar acquisition of Connecticut
Water's water operations in towns other than South Windsor.
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 our three water companies 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,
1999, Connecticut Water's Northern Region, which includes customers in the towns
mentioned above, represented approximately 50% of Connecticut Water's utility
plant. Further, if such legislation were introduced, the amount of compensation
to be received by Connecticut Water for its assets cannot be determined at this
time.
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<PAGE> 13
The issues relating to water rates and service areas for customers served
by privately-owned or publicly-owned water utilities have been studied more than
once by legislatively established task forces as well as by the Legislature's
Program Review and Investigations Committee. These studies have generally
concluded that there are reasons for the differences in rates between public and
privately owned water utilities and to date the legislature has not intervened
regarding Connecticut Water's service area.
In common with most water companies in Connecticut, our three water
companies derive their 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 our
water companies in their respective 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 their charters, our
three water companies have, with minor exceptions, valid franchises free from
burdensome restrictions and unlimited as to time, and are authorized to sell
potable water in the towns (or parts thereof) in which water is now being
supplied.
In addition to the right to sell water as set forth above, the franchises
of our three water companies 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, our three water companies, 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 the affected company to supply
potable water for public or domestic use in its franchise areas.
Our water companies face competition, presently not material, from a few
private water systems operated within, or adjacent to, their franchise areas and
from municipal and public authority systems whose service areas in some cases
overlap portions of Connecticut Water'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 our water companies in the areas
now served, although within certain areas there are wells owned by individuals
or private industries.
See also "Business -- Regulation" for a description of the so-called
Connecticut Plan which is intended, among other things, to eliminate competition
among water systems.
REGULATION
DEPARTMENT OF PUBLIC UTILITY CONTROL (DPUC)
Our three water companies are subject to regulation by the Connecticut
DPUC, which has jurisdiction over rates, standards of service, accounting
procedures, issuance of
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<PAGE> 14
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 ours. Such audits might result in the DPUC
ordering implementation of new management practices or procedures. The DPUC has
not conducted any such audit of any of our companies.
Connecticut Water Service, the parent holding company, is not an operating
utility company. It 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, our water companies are 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. We have 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 us in the future would require compliance with a lengthy permit
application process and approval by the Commissioner. Our water companies have
several potential well sites which are subject to this legislation and the DEP
regulations thereunder. Such legislation requires the registration with the
Commissioner of all diversions of water maintained prior to July 1, 1982. All of
Connecticut Water and Crystal diversions have been registered, and the Gallup
diversions have a permit application pending at DEP. 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 our water companies and their operations, but
13
<PAGE> 15
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. Our water companies have 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. We are in
compliance with the new program.
All of Connecticut Water's dams were registered with the Connecticut DEP as
required by state statute.
Crystal has two dams registered with the Connecticut DEP and one small
structure that was acquired in the 1998 acquisition of the Powdrell and
Alexander Memorial Water Association, Inc. in Killingly that was not registered
by the previous owner. The DEP has issued a maintenance request for minor work
at one of the registered dams, which Crystal will complete in year 2000. Expect
for this item, there are no outstanding orders on either of the registered dams
and Crystal is taking the initial steps to register the third structure.
Gallup does not have any dams.
While we recognize that a certain degree of risk is attached to ownership
of dams in connection with our water companies' water collection systems, we
believe that all of our dams are well maintained and are structurally stable.
The DEP has promulgated regulations requiring that certain minimum flows be
maintained in various waterways within the State of Connecticut. Pursuant to
said regulations, our water companies are exempt from compliance at certain of
our 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 certain of our sources. The cost to restore the lost safe yield is not
now determinable but could be substantial.
DEPARTMENT OF PUBLIC HEALTH (DPH)
Our water companies are 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
14
<PAGE> 16
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 our water companies, which cover many areas of the state, fall
within five of the seven management areas. We are actively involved with the
planning process in three of these management areas at this time. The remaining
two areas of our 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.
SAFE DRINKING WATER ACT (SDWA)
Our water companies are 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, so 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. Our water companies were in
compliance with each of these rules from the time they became effective and
continue to be in compliance.
15
<PAGE> 17
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
replaced 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 promulaged with the
LTESWTR.
Standards for radionuclides, including radon, are expected to be finalized
in 2000, as is the Ground Water Disinfection Rule. A standard for 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, 1999, the Company has expended approximately
$49,275,000 in constructing facilities and conducting aquifer mapping necessary
to comply with the requirements of the SDWA of which $11,775,000 was expended
during the last 5 years. We believe that our three water companies are 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 the wellfields of its water companies is not
known at this time. The Company anticipates spending an additional $2,700,000 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 us, the primary impact on our water
companies is expected to be in the area of increased monitoring and reporting,
although it is possible that such regulations may require us to make
modifications to existing filtration facilities. Construction of new facilities
may be required for certain groundwater sources. It is possible that costs of
compliance could be substantial.
DISPOSITION OF PROPERTY
Although our water companies have established a program of selling various,
relatively small, discrete parcels of land over the next several years, the
total of which is less than
16
<PAGE> 18
700 acres (350 owned by Connecticut Water and 350 owned by Crystal), we have no
other significant amounts of excess land which we expect 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 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. Our capital gains on sales
of property before income taxes totaled $161,000 in 1999, $475,000 in 1998 and
$184,000 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 water customers and its stockholders.
There has been significant interest in recent years from environmental
groups, the communities where our excess lands are located, and certain
legislators to attempt to maintain these lands as protected open space. Thus
far, measures have focused primarily on ensuring the land sale process,
established through the DPUC and DPH regulations provides adequate notice and
opportunities for the state, municipalities and non-profit land holding
organizations to purchase the properties before they are sold for development.
Additionally, legislative initiatives have been proposed to provide tax
incentives to encourage water utilities to donate or sell these parcels at a
discount to such organizations.
Concerns have been raised recently regarding whether the sale of a large
private water company in the state with significant land holdings to an
international organization will result in accelerated disposition of their lands
and limited opportunities for acquisition for public open space. As the
attention is focused on this matter, it is possible that there may be
initiatives in this session of the General Assembly to restrict or prohibit the
sale of utility lands for a period of time until the state may further study the
issue and/or generate additional funding mechanisms to allow for purchase by the
state, towns or non-profit land holding organizations. Connecticut Water will
work vigorously to see that any such
17
<PAGE> 19
legislation includes measures that would effectively avoid or minimize the
impact on any immediately pending land sales. The likelihood that such measures
will be passed by the General Assembly or the impact that such legislation would
have on the Company is not clear, at this time. The impact could be significant,
however, if it had the effect of a total moratorium on water company land sales,
without exceptions that would allow for pending land sales to proceed.
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 effect of existing and potential regulations and
legislation upon any of the existing and proposed facilities and operations of
our water companies. 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 us to replace or modify all or
portions of our various water supplies, to develop replacement supplies and/or
to implement new treatment techniques. In addition, we anticipate that
environmental concerns including threatened and actual contamination of our
water sources will become an increasing problem in the future. We have expended
and will in the future be required to expend substantial amounts to prevent or
remove contamination or to develop alternative water supplies. Any of the
aforesaid developments may significantly increase our operating costs and
capital requirements. Since the DPUC's rate setting methodology permits
utilities to recover through rates prudently incurred expenses and investments
in plant, based upon past DPUC practice, we expect that these expenditures and
costs will ultimately be recovered through rates for water service.
EMPLOYEES
The Company has no employees and no subsidiaries have employees except for
our water companies. The following table lists the number of employees of our
water companies as of December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF
COMPANY EMPLOYEES
- ------- ---------
<S> <C>
Connecticut Water 157
Crystal 7
Gallup 4
---
Total 168
===
</TABLE>
The Company's officers are also officers of Connecticut Water and their
compensation is paid by Connecticut Water. All full-time employees of
Connecticut Water and Crystal who meet specified age and length of service
requirements participate in their respective Employee's Retirement Plans which
are non-contributory trusteed pension plans providing
18
<PAGE> 20
for a monthly income for employees at retirement. None of the Company's
employees are covered by a collective bargaining agreement. We believe that our
relationship with our employees is satisfactory.
ITEM 2. PROPERTIES
The properties of our water companies 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. Our water companies own their
principal properties in fee, except that Connecticut Water's Collinsville
System's principal source of water supply is a water supply contract with the
MDC. (See below for description of this contract.) We believe that our
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 we own
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 our easements
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 our
business. Substantially all of Connecticut Water's property is subject to the
lien of its Mortgage Indenture securing its First Mortgage Bonds.
Connecticut Water owns twelve water filtration facilities which are listed
below. Gallup and Crystal do not have, nor require, water filtration facilities.
<TABLE>
<CAPTION>
YEAR TREATMENT CAPACITY
FILTRATION PLACED IN (IN MILLION
FACILITIES OPERATION REGION GALLONS PER DAY)
- ---------- --------- --------- ------------------
<S> <C> <C> <C>
Connecticut Water
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>
Connecticut Water has an agreement with the MDC, which provides, among
other things, for the operation and maintenance by MDC of a filtration plant
(completed in
19
<PAGE> 21
1990) to supply treated water for substantially all of Connecticut Water's
Collinsville System, with a capacity of 650,000 gallons per day, and the
provision by MDC to the Collinsville System of up to 650,000 gallons per day of
water from this plant meeting all applicable Federal and State requirements.
Connecticut Water paid 40% of the cost to construct this plant and pays MDC an
appropriate rate for water used in excess of 400,000 gallons per day.
As of December 31, 1999, the transmission and distribution systems of our
three water companies consisted of approximately 1,109 miles of main, of which
approximately 76 miles have been laid or acquired in the past five years. On
that date, approximately 75% of our 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 107 miles of our pipelines are
asbestos cement.
From January 1, 1995 through December 31, 1999, our water companies have
expended $53,793,000 on gross plant additions (including plant financed by
customer advances and contributions in aid of construction, allowance for funds
used during construction and expenditures reimbursed by any other sources), and
have retired or sold property having a book value of $2,474,000, resulting in
net additions during the period of $51,319,000.
20
<PAGE> 22
PRODUCTION FACILITIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
TOTAL DEPENDABLE GREATEST 1999
STORAGE YIELD(1) AVG. DAILY AVG. DAILY
CAPACITY (THOUSANDS DELIVERY DELIVERY
(THOUSANDS OF GALLONS (THOUSANDS (THOUSANDS
CONNECTICUT WATER 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 9,167(18) 9,167
------ ----- -----
Somers System Wells 390 135(18) 135
------ ----- -----
Crescent Lake System(4) -- 37(18) 37
------ ----- -----
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) 529
------ ----- -----
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) 3,505
------ ----- -----
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) 650
------ ----- -----
</TABLE>
21
<PAGE> 23
<TABLE>
<CAPTION>
TOTAL DEPENDABLE GREATEST 1999
STORAGE YIELD(1) AVG. DAILY AVG. DAILY
CAPACITY (THOUSANDS DELIVERY DELIVERY
(THOUSANDS OF GALLONS (THOUSANDS (THOUSANDS
CONNECTICUT WATER OF GALLONS) PER DAY) OF GALLONS) OF GALLONS)
- ----------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Chester Village West Wells 30 13(17) 10
------ ----- -----
Sound View System Wells 182 42(17) 29
------ ----- -----
Point O'Woods 114 43(19) 21
------ ----- -----
Bay Mountain 56 21(19) 20
------ ----- -----
SDC 94 8(19) 8
------ ----- -----
Masons Island(20) -- 56(18) 56
------ ----- -----
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) 2,865
------ ----- -----
Terryville System
Harwinton Ave. Reservoir(11) 14,800 50
Wells 910
------
960 498(2) 480
------ ----- -----
Thomaston System
Thomaston Reservoir(11) 93,000 310
Wells 1,080
Waterbury Interconnection(12) 864
------
2,254 852(14) 391
------ ----- -----
Collinsville System
Water Acquired by Contract(15) 650
Reservoir (distribution) 100
------
650 403(18) 403
------ ----- -----
CRYSTAL
Crystal System 3,650 997(21) 997
------ ----- -----
Plainfield System 990 237(21) 237
------ ----- -----
Thompson System 290 177(21) 177
------ ----- -----
P&A System
Reservoir 1,500 0
Wells 86
------
86 32(21) 32
------ ----- -----
</TABLE>
22
<PAGE> 24
<TABLE>
<CAPTION>
TOTAL DEPENDABLE GREATEST 1999
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>
GALLUP
Gallup System 800 309(21) 309
------ ----- -----
Country Mobile System 67 8(21) 8
------ ----- -----
Lillibridge System N/A 16(21) 16
------ ----- -----
</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.
(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 1999.
(19) Occurred in 1998.
(20) Supplied by water purchased from Connecticut-American Water Company, Mystic
Division.
(21) Historical data before 1999 is not available.
23
<PAGE> 25
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal matters, other than ordinary, routine litigation
incidental to the business to which the Company or any of its subsidiaries is a
party or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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 Connecticut Water in 1975, the Company has paid quarterly cash
dividends on its Common Stock.
<TABLE>
<CAPTION>
PRICE
------------------ DIVIDENDS
PERIOD HIGH LOW PAID*
- ------ ------- ------- ---------
<S> <C> <C> <C>
1999:
First Quarter $27.750 $23.750 $.29333
Second Quarter 29.250 19.000 .29333
Third Quarter 37.000 28.500 .29666
Fourth Quarter 37.000 27.875 .29666
1998:
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
</TABLE>
* Excluding effect of the 1999 Gallup and Crystal mergers.
As of March 1, 2000 there were approximately 5,200 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 its subsidiaries, the financial condition of the Company and its
subsidiaries, the ability of its subsidiaries to pay
24
<PAGE> 26
dividends to the Company, the ability of the Company and the subsidiaries to
sell their securities, the requirements of the construction programs of our
water company subsidiaries 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.
The Company has a Dividend Reinvestment and Common Stock Purchase Plan.
Under the plan, customers and employees of Connecticut Water 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,
1999. 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 shares of
Common Stock of the Company to be issued as awards of restricted stock to
eligible employees of Connecticut Water, conditioned on the attainment of
performance goals established by the Compensation Committee. Under the plan
54,104 shares, 6,088 of which are restricted, and 13,357 of which are common
stock equivalent shares had been issued by the Company as of December 31, 1999.
In 1999 the Company's shareholders approved an amendment to our Performance
Stock Program allowing the Company to issue stock options to officers and key
employees. The total number of shares authorized for both the Performance Stock
Program and the Stock Option Plan was set at 300,000 shares. In 1999, options
for 127,723 shares were granted. These options were granted at the market price
when granted which was $22.25 for 75,150 of the shares, and $33.50 for the other
52,573 shares. None of these shares were exercisable in 1999. One fifth of these
shares, or 25,544 become exercisable each year over the next five years,
starting in 2000.
The Company has an Employee Savings 401-K Match Plan for Connecticut Water
employees. Under the Plan approximately 20,550 shares of Common Stock had been
issued by the Company as of December 31, 1999.
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.
25
<PAGE> 27
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.
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.
ITEM 6. SELECTED FINANCIAL DATA
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
(1998 - 1995 RESTATED)
SUPPLEMENTAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Years Ended December 31,
SELECTED FINANCIAL DATA 1999 1998 1997 1996 1995
- ----------------------- ---------- ---------- ---------- ---------- ----------
(Thousands of dollars except where indicated)
<S> <C> <C> <C> <C> <C>
INCOME
Operating Revenues $ 42,624 $ 40,303 $ 40,917 $ 41,013 $ 41,687
Operating Expenses $ 31,397 $ 29,543 $ 30,060 $ 30,274 $ 31,070
Operating Income $ 11,227 $ 10,760 $ 10,857 $ 10,739 $ 10,616
Interest and Debt Expense $ 4,526 $ 4,606 $ 4,602 $ 4,286 $ 4,305
Net Income Applicable to Common
Stock $ 7,456 $ 7,136 $ 7,027 $ 6,884 $ 6,608
Weighted Average Common Shares
Outstanding 4,836,951 4,827,484 4,816,753 4,788,340 4,669,960
Basic Earnings Per Average Common
Share $ 1.54 $ 1.48 $ 1.46 $ 1.44 $ 1.42
Number of Shares Outstanding at
Year End 4,838,794 4,828,619 4,819,970 4,810,459 4,742,470
ROE on Year End Common Equity 11.9% 11.8% 12.0% 12.2% 12.3%
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
Years Ended December 31,
SELECTED FINANCIAL DATA 1999 1998 1997 1996 1995
- ----------------------- ---------- ---------- ---------- ---------- ----------
(Thousands of dollars except where indicated)
<S> <C> <C> <C> <C> <C>
Cash Dividends Paid Per Common
Share $ 1.145 $ 1.119 $ 1.105 $ 1.082 $ 1.061
Dividend Payout Ratio 74% 76% 76% 75% 75%
BALANCE SHEET
Common Stockholders' Equity $ 62,495 $ 60,326 $ 58,346 $ 56,520 $ 53,695
Long-Term Debt $ 65,399 $ 65,611 $ 58,056 $ 58,034 $ 58,072
Preferred Stock (Consolidated,
Excluding Current Maturities) $ 772 $ 772 $ 772 $ 772 $ 772
---------- ---------- ---------- ---------- ----------
Total Capitalization $ 128,666 $ 126,709 $ 117,174 $ 115,326 $ 112,539
Stockholders' Equity (Includes
Preferred Stock) 49% 48% 50% 50% 48%
Long-Term Debt 51% 52% 50% 50% 52%
Net Utility Plant $ 181,342 $ 175,723 $ 172,081 $ 162,186 $ 154,430
Book Value -- Per Common Share $ 12.91 $ 12.49 $ 12.11 $ 11.75 $ 11.32
</TABLE>
<TABLE>
<CAPTION>
OPERATING DATA 1999 1998 1997 1996 1995
- -------------- ------- ------- ------- ------- -------
(Thousands of dollars except where indicated)
<S> <C> <C> <C> <C> <C>
REVENUE CLASS
Residential $27,077 $25,495 $25,816 $25,888 $26,463
Commercial 5,160 4,820 4,890 4,931 5,109
Industrial 1,850 1,747 1,962 1,960 1,967
Public Authority 1,374 1,208 1,218 1,215 1,247
Fire Protection 6,788 6,660 6,698 6,720 6,586
Other (including non-metered accounts) 375 373 333 299 315
------- ------- ------- ------- -------
Total Operating Revenues $42,624 $40,303 $40,917 $41,013 $41,687
======= ======= ======= ======= =======
Number of Customers (Average) 68,945 67,855 66,787 65,872 65,032
Billed Consumption (Millions of
Gallons) 6,430 6,047 6,049 5,907 6,075
Number of Employees 168 175 176 178 179
</TABLE>
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 from the earnings of its six wholly owned
subsidiary companies. Approximately 97% of the Company's earnings are
attributable to The Connecticut Water Company, the Company's largest water
utility subsidiary with approximately an additional 2% derived from the
Company's two other regulated water utility companies, The Gallup Water Service,
Incorporated and The Crystal Water Company of Danielson. These three companies
supply water to 69,416 customers in 39 towns throughout the State of
Connecticut. Each of these companies is subject to regulation by the Connecticut
Department of Public Utility Control regarding financial issues, rates, and
operating issues
27
<PAGE> 29
and to various other state and federal regulatory agencies concerning water
quality and environmental standards. In addition to its regulated utilities, the
Company owns three unregulated companies; Chester Realty, Inc. a real estate
company, Connecticut Water Utility Services, Inc. which provides contract water
and sewer operations and other water related services and Crystal Water
Utilities Corporation, a holding company which owns The Crystal Water Company of
Danielson and 3 small rental properties. These unregulated companies currently
generate 1% of the Company's total earnings.
1999 was the Company's 9th consecutive year of increased earnings and its
30th year of increased dividend payments.
Regulatory Matters and Inflation
The Connecticut Water Company is the Company's largest subsidiary serving
64,782 of the Company's 69,416 utility customers. Connecticut Water Company's
revenues are based on regulated rates that are determined in a regulatory rate
proceeding. Connecticut Water's last general rate proceeding was in 1991. The
resulting rate decision granted Connecticut Water 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
Connecticut Water and allowing Connecticut Water to collect certain costs
related to postretirement benefits other than pension. Connecticut Water's rates
were reduced approximately 4.5% due to the limited reopened rate proceeding.
Connecticut Water'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 flows. The ability of the Company's water utility subsidiaries to
recover this increased investment in facilities is primarily dependent upon
future rate increases, which are subject to approval by the Connecticut
Department of Public Utility Control.
We do not presently plan to petition the DPUC for an increase in permanent
rates in 2000. Future economic and financial market conditions, coupled with
governmental regulations and fiscal policy, plus other factors which are
unpredictable and often beyond our control, will influence when we request
revisions to rates charged to our 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.
We are continuing our expansion through acquisitions into 2000. In 1999 we
signed an agreement to purchase the White Sand Beach water system in Old Lyme,
Connecticut
28
<PAGE> 30
which services 148 customers. A decision by the Department of Public Utility
Control on our application to acquire White Sand is expected in March, 2000.
RESULTS OF OPERATIONS
1999 Compared with 1998
During 1999 the Company acquired Gallup Water Service, Inc. and Crystal
Water Utilities Corporation and accounted for these acquisitions as "pooling of
interests". Financial statements have been restated to include the results of
the acquired companies for all periods presented.
Net income applicable to common stock for 1999 increased from that of 1998
by $320,000, or $.06 per average common share, on an increased number of common
shares outstanding due primarily to the following:
- Operating revenues increased $2,321,000:
-- Metered revenues increased $2,191,000 or 6.6% due to customer
growth which increased metered revenues approximately $530,000 or
1.6% and an extremely hot, dry 1999 summer which significantly
increased our customers' water consumption.
-- Non-metered revenues increased $130,000 or 1.8% primarily due to
increased Public Fire Protection revenues related to our
infrastructure additions upon which the revenues are based.
- Operating expenses increased $1,854,000 primarily due to the following:
-- Increase in Operations and Maintenance Expense primarily due to an
increase in labor and benefit costs
-- Increase in Depreciation Expense due to higher investment in
utility plant
-- Increase in Income Tax Expense primarily due to higher taxable
income
-- Increase in Property Tax Expense due to our higher investment in
utility plant
- Other income (Deductions) decreased $227,000 primarily due to lower gains
on land sales and non-water sales earnings.
- Interest and debt expense decreased $80,000 primarily from lower average
balances of interim bank loans payable outstanding throughout 1999.
1998 Compared with 1997
Net income applicable to common stock for 1998 increased from that of 1997
by $109,000, or $.02 per average common share, on an increased number of common
shares outstanding due primarily to the following:
- Other income increased $210,000, or 26%, primarily due to increased
profits from land sales
29
<PAGE> 31
partially offset by
- An increase in interest and debt expense of $4,000 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; and
- A decrease in operating income of $97,000. The elimination of the
Connecticut Gross Earnings Tax for 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 $835,000 in 1998 as compared to 1997. (Reduction in Gross
Earnings Tax of $990,000 less an increase of $155,000 in FAS 106 costs).
-- Operating revenues decreased 1.5% primarily due to:
X 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
X Increase in metered revenues due to expansion of the customer
base achieved through the Company's ongoing growth strategy;
and
X Higher unmetered revenues due to an increasing fire protection
charges related to the expansion of the water systems
-- Operating expenses decreased 1.7% primarily due to:
X The elimination of the Connecticut Gross Earnings Tax; and
X The 1997 Early Retirement Program; and
X Reduced income tax expense due to lower taxable income, a
decline in the State Corporate tax rate and utilization of new
State Corporate Tax Credits
partially offset by
X Increased operation and maintenance expense; and
X Increased depreciation expense
LIQUIDITY AND CAPITAL RESOURCES
Interim bank loans payable at year end 1999 were $2,411,000, $516,000
higher than at the end of 1998. The Company elected not to fund any of the 1999
construction expenditures with equity funding through its Dividend Reinvestment
Program (DRIP) by issuing new shares of common stock, but instead provided DRIP
shares through open market purchases and negotiated transactions.
We consider 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 2000. Interest expense charged on interim bank loans will
fluctuate based on financial market conditions experienced during 2000.
30
<PAGE> 32
The Board of Directors has approved a construction budget for 2000 of
$7,445,000, 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 Company's future construction program.
Y2K DISCLOSURE
By the end of 1999, the Company had completed all the changes it considered
necessary for its systems to handle Year 2000 issues. As of February 11, 2000,
the Company is not aware of any Year 2000-related problems associated with our
internal systems or software or with the software and systems of our vendors,
distributors or suppliers. It is possible, however, that Year 2000-related
problems could arise at a later date. There are no plans at this time to perform
additional work, nor do we expect to experience any material adverse effects on
our business, financial condition or results of operations from any vendor,
distributor or supplier who may experience Year 2000 problems.
However, because the Company's continued Year 2000 compliance in calendar
2000 is in part dependent on the continued Year 2000 compliance of third
parties, there can be no assurance that the Company's efforts alone have
resolved all Year 2000 issues or that key third parties will not experience Year
2000 compliance failures as calendar year 2000 progresses.
The Company's costs associated with Year 2000 were approximately $300,000
in 1999. This cost was anticipated well in advance and was funded along with the
other costs in our 1999 Construction Program with internally generated funds.
FORWARD LOOKING INFORMATION
This report contains statements which, to the extent they are not
recitations of historical fact, constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve risks and uncertainties. Actual results may
differ materially from such forward-looking statements for reasons including,
but not limited to, changes to and development in the legislative and regulatory
environments or in environmental or water quality regulations affecting the
Company's business, the impact of competitive services on our non-regulated
operations, weather conditions, and changes in the water utility industry, as
well as such other factors as set forth in this report and in the Company's
other filings with the Securities and Exchange Commission.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Connecticut Water Service, Inc.
and the Notes to Consolidated Financial Statements, together with the reports of
the Company's management and of Arthur Andersen LLP are included herein on page
F-1 through F-26.
31
<PAGE> 33
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. 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 57 President, Chief Held position of 2000 Annual Meeting
Executive President since
Officer and January, 1992 and
Chairman of the position of Chief
Board Executive Officer
since July, 1992
D. C. Benoit 42 Vice Held current 2000 Annual Meeting
President -- position or other
Finance, Chief executive position
Financial with the Company
Officer and since April, 1996
Treasurer
J. R. McQueen 57 Vice Held current 2000 Annual Meeting
President -- position or other
Engineering and management or
Planning engineering
position with the
Company since
October, 1965
T. P. O'Neill 46 Vice Held current 2000 Annual Meeting
President -- position or other
Operations engineering
position with the
Company since
February, 1980
M. P. Westbrook 40 Vice Held current 2000 Annual Meeting
President -- position or other
Administration management position
and Government with the Company
Affairs since September,
1988
P. J. Bancroft 50 Assistant Held current 2000 Annual Meeting
Treasurer and position or other
Controller accounting position
with the Company
since October, 1979
M. G. DiAcri 54 Corporate Held administrative 2000 Annual Meeting
Secretary position with the
Company since
February, 1990
</TABLE>
32
<PAGE> 34
There are no family relationships between any of the Directors and
Executive Officers of the Company.
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, 2000. Information
concerning the executive officers of the Company is included as Item 4.1 of this
report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
The report of the Company's management, the report of independent
public accountants and the Company's Consolidated Financial Statements
listed in the Index to Consolidated Financial Statements on page F-1 hereof
are filed as part of this report, commencing on page F-2.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Index to Consolidated Financial Statements F-1
Report of Independent Public Accountants F-2
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997 F-3
Consolidated Balance Sheets at December 31, 1999 and 1998 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
2. Financial Statement Schedules:
The following schedules of the Company are included on the attached
pages as indicated:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants on Schedule S-1
Schedule II Valuation and Qualifying Accounts and Reserves
for the years ended December 31, 1999, 1998 and 1997 S-2
</TABLE>
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
33
<PAGE> 35
because the required information is set forth in the financial statements
or notes thereto.
3. Exhibits:
<TABLE>
<S> <C>
Exhibits for Connecticut Water Service, Inc are in the Index
to Exhibits E-1
</TABLE>
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.
(b) Reports on Form 8-K:
On October 7, 1999, the Company filed a Form 8-K
dated September 29, 1999, reporting in Item 5, Other
Events, that the Company had completed the pending
merger with Crystal Water Utilities Corporation.
34
<PAGE> 36
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Index to Consolidated Financial Statements F-1
Report of Independent Public Accountants F-2
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997 F-3
Consolidated Balance Sheets at December 31, 1999 and 1998 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-1
<PAGE> 37
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 Subsidiaries as of December
31, 1999 and 1998, and the related consolidated statements of income and cash
flows for each of the three years in the period ended December 31, 1999. 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 Subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with generally accepted
accounting principles.
Hartford, Connecticut
February 11, 2000
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-2
<PAGE> 38
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Years Ended December 31,
(Restated) (Restated)
1999 1998 1997
------- ---------- ----------
(In thousands except per share
amounts)
<S> <C> <C> <C>
Operating Revenues $42,624 $40,303 $40,917
------- ------- -------
Operating Expenses
Operation and Maintenance 17,812 17,241 16,272
Depreciation 4,390 4,133 3,774
Income Taxes 5,008 4,089 4,706
Taxes Other Than Income Taxes 4,187 4,080 4,884
Organizational Charges -- -- 424
------- ------- -------
Total Operating Expenses 31,397 29,543 30,060
======= ======= =======
Utility Operating Income 11,227 10,760 10,857
------- ------- -------
Other Income (Deductions)
Interest 135 152 136
Allowance for Funds Used During
Construction 454 476 575
Gain on Sale of Property 161 475 184
Non-Water Sales Earnings 170 247 215
Miscellaneous Income (Deductions) (70) (42) (69)
Taxes on Other Income (57) (288) (231)
------- ------- -------
Total Other Income (Deductions) 793 1,020 810
======= ======= =======
Interest and Debt Expenses
Interest on Long-Term Debt 3,943 3,918 3,751
Other Interest Charges 337 472 656
Amortization of Debt Expense 246 216 195
------- ------- -------
Total Interest and Debt
Expenses 4,526 4,606 4,602
======= ======= =======
Net Income Before Preferred Dividends 7,494 7,174 7,065
Preferred Stock Dividend Requirement 38 38 38
------- ------- -------
Net Income Applicable to Common Stock $ 7,456 $ 7,136 $ 7,027
------- ------- -------
Weighted Average Common Shares Outstanding:
Basic 4,837 4,827 4,816
Diluted 4,848 4,827 4,816
------- ------- -------
Earnings Per Common Share:
Basic $ 1.54 $ 1.48 $ 1.46
Diluted $ 1.54 $ 1.48 $ 1.46
------- ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-3
<PAGE> 39
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
(Restated)
1999 1998
-------- ----------
(Thousands of dollars)
<S> <C> <C>
ASSETS
Utility Plant $240,122 $232,120
Construction Work in Progress 5,804 4,458
Utility Plant Acquisition Adjustments (1,273) (1,273)
-------- --------
244,653 235,305
Accumulated Provision for Depreciation (63,311) (59,582)
-------- --------
Net Utility Plant 181,342 175,723
-------- --------
Other Property and Investments 2,747 2,628
-------- --------
Cash 1,013 372
Accounts Receivable (Less Allowance, 1999 -- $455;
1998 -- $315) 5,301 5,247
Accrued Unbilled Revenues 2,805 2,894
Materials and Supplies, at Average Cost 761 729
Prepayments and Other Current Assets 237 245
-------- --------
Total Current Assets 10,117 9,487
======== ========
Unamortized Debt Issuance Expense 5,722 5,968
Unrecovered Income Taxes 8,843 9,859
Postretirement Benefits Other Than Pension 1,083 1,150
Other Costs 1,031 1,140
-------- --------
Total Deferred Charges and Regulatory Assets 16,679 18,117
-------- --------
Total Assets $210,885 $205,955
======== ========
CAPITALIZATION AND LIABILITIES
Common Stockholders' Equity:
Common Stock without Par Value:
Authorized -- 7,500,000 Shares -- Issued and
Outstanding: 1999 -- 4,838,794; 1998 -- 4,828,619 $ 44,654 $ 44,403
Retained Earnings 17,841 15,923
Preferred Stock 772 772
Long-Term Debt 65,399 65,611
-------- --------
Total Capitalization 128,666 126,709
======== ========
Interim Bank Loans Payable 2,411 1,895
Current Portion Long Term Debt 194 424
Accrued Pension Benefits 1,816 1,767
Accounts Payable 5,124 4,287
Accrued Taxes 815 770
Accrued Interest 650 1,216
Other Current Liabilities 2,864 2,538
-------- --------
Total Current Liabilities 13,874 12,897
======== ========
Advances for Construction 15,994 15,273
-------- --------
Contributions in Aid of Construction 24,165 22,944
-------- --------
Deferred Federal Income Taxes 16,743 15,601
-------- --------
Unfunded Future Income Taxes 8,349 9,309
-------- --------
Unfunded Postretirement Benefits Other Than Pensions 1,083 1,150
-------- --------
Unamortized Investment Tax Credits 2,011 2,072
-------- --------
Commitments and Contingencies -- --
-------- --------
Total Capitalization and Liabilities $210,885 $205,955
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-4
<PAGE> 40
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
(Restated) (Restated)
1999 1998 1997
-------- ---------- ----------
(Thousands of dollars)
<S> <C> <C> <C>
Operating Activities:
Net Income Before Preferred Dividends $ 7,494 $ 7,174 $ 7,065
-------- -------- --------
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation (including $124 in 1999, $127 in 1998, and
$119 in 1997 charged to other accounts) 4,514 4,260 3,893
Change in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable and
Accrued Unbilled Revenues 35 (298) (730)
(Increase) Decrease in Other Current Assets (24) (161) 3
(Increase) Decrease in Other Non-Current Items 292 (73) 682
Increase (Decrease) in Accounts Payable, Accrued
Expenses and Other Current Liabilities 691 233 562
Increase in Deferred Income Taxes and Investment Tax
Credits, Net 1,081 1,068 775
Recoverable Cleanup Costs (net) -- -- 2,343
-------- -------- --------
Total Adjustments 6,589 5,029 7,528
======== ======== ========
Net Cash Provided by Operating Activities 14,083 12,203 14,593
======== ======== ========
Investing Activities:
Gross Additions to Utility Plant (including Allowance For
Funds Used During Construction of $454 in 1999, $476 in
1998 and $575 in 1997) (10,289) (7,964) (14,034)
-------- -------- --------
Financing Activities:
Proceeds from Interim Bank Loans 2,411 1,895 8,811
Repayment of Interim Bank Loans (1,895) (8,811) (5,795)
Proceeds from Issuance of Long-Term Debt -- 18,018 272
Reduction of Long-Term Debt Including Current Portion (442) (10,249) (200)
Proceeds from Issuance of Common Stock 251 280 256
Advances, Contributions and Funds from Others for
Construction, Net 2,098 761 1,835
Costs Incurred to Issue Long-Term Debt, Preferred Stock,
and Common Stock -- (1,091) (133)
Cash Dividends Paid (5,576) (5,438) (5,362)
-------- -------- --------
Net Cash Provided by (Used in) Financing Activities (3,153) (4,635) (316)
======== ======== ========
Net Increase (Decrease) in Cash 641 (408) 243
Cash at Beginning of Year 372 780 537
-------- -------- --------
Cash at End of Year $ 1,013 $ 372 $ 780
-------- -------- --------
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (Net of Amounts Capitalized) $ 4,488 $ 3,382 $ 4,633
State and Federal Income Taxes $ 3,650 $ 3,397 $ 3,537
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-5
<PAGE> 41
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The consolidated financial statements include the
accounts of Connecticut Water Service, Inc. an investor-owned holding company
(the Company) and its six wholly owned subsidiaries, listed below:
The Connecticut Water Company
The Gallup Water Service, Incorporated
Crystal Water Utilities Corporation
The Crystal Water Company of Danielson
Chester Realty, Inc.
Connecticut Water Utility Services, Inc.
During 1999 the Company acquired Gallup Water Service, Inc and Crystal
Water Utilities Corporation and accounted for these acquisitions as "pooling of
interests". Accordingly, the Company's financial statements have been restated
to include the results of the acquired companies for all periods presented.
Connecticut Water, Gallup, and Crystal (our "water companies") are public
water utility companies serving more than 69,400 customers in 39 towns
throughout Connecticut.
Crystal Water Utilities Corporation is a holding company, owning the stock
of Crystal Water Company of Danielson and three small rental properties.
Chester Realty, Inc. is a real estate company whose pretax profits from
land sales are included in the "Gain on Sale of Property", category in the
"Other Income (Deductions)" section of the Consolidated Statements of Income.
Chester's pretax profits from rental of property are included in the "Other
Income (Deductions)" section of the Income Statement in the "Non-Water Sales
Earnings" category.
Connecticut Water Utility Services, Inc. is engaged in water related
services and contract operations. Its earnings are included in the "Non-Water
Sales Earnings" category in the "Other Income (Deductions)" section of the
Consolidated Statements of Income.
Intercompany accounts and transactions have been eliminated, except those
allocating costs for regulatory purposes between our regulated and non-regulated
companies.
PUBLIC UTILITY REGULATION -- Our three water companies are subject to
regulation for rates and other matters by the Connecticut Department of Public
Utility Control (DPUC) and follow 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 cost-based, rate-regulated
enterprises such as our water companies to reflect the impact of regulatory
decisions in their 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
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-6
<PAGE> 42
by an unregulated enterprise. The balance sheets include regulatory assets and
liabilities as appropriate, primarily related to income taxes and postretirement
benefits costs. The Company believes, based on current regulatory circumstances,
that the regulatory assets recorded are probable of recovery and 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.
REVENUES -- Generally, water customers are billed quarterly, except larger
commercial and industrial customers, and public fire protection customers, who
are billed monthly. Most customers, except fire protection customers, are
metered. Revenues from metered customers are based on their usage times approved
regulated rates. 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. Our water companies accrue an estimate for the amount of revenues relating
to sales unbilled at the end of each quarter.
UTILITY PLANT -- Utility plant is stated at the original cost of such
property when first devoted to public service. The difference between the
original cost and the cost to our water companies 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) is the cost of funds used to finance the
construction of our water companies' utility plant. Generally, utility plant
under construction is not recognized as part of rate base for ratemaking
purposes until facilities are placed into service, and accordingly, AFUDC is
charged 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 water system acquisitions made in and after 1995 not
to degrade earnings, The Connecticut Water Company has received DPUC approval to
record AFUDC on certain of its investments in these systems. Through December
31, 1999 The Connecticut Water Company has capitalized $406,000 relating to
financing these acquisitions.
The allowed rate of return on rate base is used to calculate AFUDC.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-7
<PAGE> 43
DEPRECIATION -- Virtually all of the Company's depreciable plant is owned
by its three water companies. Depreciation is computed on a straight line basis
at various rates as approved by the DPUC on a company by company basis.
Depreciation allows the utility to recover the investment in utility plant over
its useful life. The overall consolidated company depreciation rates, based on
the average balances of depreciable property, were 2.1% for 1999, 2.0% for 1998
and 1.9% for 1997.
CUSTOMERS' ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF
CONSTRUCTION -- Under the terms of construction contracts with real estate
developers and others, our water companies receive 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 $500,000 of the December 31, 1999 and $900,000 of
the 1998 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.
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.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-8
<PAGE> 44
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 -- The following is a reconciliation of the numerators
and denominators of the basic and diluted earnings per share for the twelve
months ended December 31, 1999, 1998, and 1997.
<TABLE>
<CAPTION>
Twelve Months Ended
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Basic earnings per share $ 1.54 $ 1.48 $ 1.46
Dilutive effect of unexercised stock options -- -- --
------ ------ ------
Diluted earnings per share $ 1.54 $ 1.48 $ 1.46
====== ====== ======
<CAPTION>
NUMERATOR (IN THOUSANDS): 1999 1998 1997
- ------------------------- ------ ------ ------
<S> <C> <C> <C>
Basic net income $7,456 $7,136 $7,027
Diluted net income $7,456 $7,136 $7,027
====== ====== ======
<CAPTION>
DENOMINATOR (IN THOUSANDS): 1999 1998 1997
- --------------------------- ------ ------ ------
<S> <C> <C> <C>
Basic weighted average shares outstanding 4,837 4,827 4,816
Dilutive effect of unexercised stock options 11 N/A N/A
------ ------ ------
Diluted weighted average shares outstanding 4,848 4,827 4,816
====== ====== ======
</TABLE>
RECLASSIFICATION -- Certain reclassifications have been made to conform
previously reported data to the current presentation.
NOTE 2: 1999 POOLING OF INTEREST ACQUISITIONS
On April 16, 1999 Gallup was acquired by the Company through the issuance
of 47,826 shares of common stock of the Company which were exchanged for all of
the outstanding common stock of Gallup.
On September 29, 1999 Crystal was acquired by the Company through the
issuance of 244,508 common stock shares of the Company which were exchanged for
all of the outstanding stock of Crystal.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-9
<PAGE> 45
The combined and separate results of Connecticut Water Service, Gallup and
Crystal during the period preceding and after the merger were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(Thousands of dollars)
<S> <C> <C> <C>
OPERATING REVENUES
Connecticut Water Service $40,087 $37,924 $38,501
Gallup 638 583 592
Crystal 1,899 1,796 1,824
------- ------- -------
Combined Operating Revenues $42,624 $40,303 $40,917
======= ======= =======
NET INCOME (LOSS) APPLICABLE TO COMMON
STOCK
Connecticut Water Service $ 7,373 $ 6,927 $ 6,766
Gallup (74) 69 32
Crystal 157 140 229
------- ------- -------
Combined Net Income $ 7,456 $ 7,136 $ 7,027
======= ======= =======
</TABLE>
NOTE 3: INCOME TAX EXPENSE
Income Tax Expense is comprised of the following:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
(Thousands of dollars)
<S> <C> <C> <C>
Federal Classified as Operating Expense $4,322 $3,472 $3,842
Federal Classified as Other Income 32 216 157
------ ------ ------
Total Federal Income Tax
Expense 4,354 3,688 3,999
------ ------ ------
State Classified as Operating Expense 686 617 864
State Classified as Other Income 25 72 65
------ ------ ------
Total State Income Tax
Expense 711 689 929
------ ------ ------
Total Income Tax
Expense $5,065 $4,377 $4,928
====== ====== ======
</TABLE>
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-10
<PAGE> 46
The components of the Federal and State income tax provisions are:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Current:
Federal $3,273 $2,620 $2,715
------ ------ ------
State 711 689 929
------ ------ ------
Total Current 3,984 3,309 3,644
------ ------ ------
Deferred Income Taxes, Net:
Federal
Investment Tax Credit (61) (61) (62)
Capitalized Interest 36 32 47
Depreciation 1,106 1,097 1,299
------ ------ ------
Total Deferred Income Taxes,
Net 1,081 1,068 1,284
------ ------ ------
Total $5,065 $4,377 $4,928
====== ====== ======
</TABLE>
Deferred income tax liabilities are categorized as following on the
Consolidated Balance Sheet:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C> <C>
Deferred Federal Income Taxes $16,743 $15,601
Unfunded Future Income Taxes 8,349 9,309
------- -------
$25,092 $24,910
</TABLE>
Deferred income tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C> <C>
Depreciation $23,710 $23,166
Other 1,382 1,744
------- -------
Net deferred income tax liability $25,092 $24,910
======= =======
</TABLE>
The calculation of Pre-Tax Income is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Pre-Tax Income
Net Income Before Preferred Dividends $ 7,494 $ 7,174 $ 7,065
Income Taxes 5,065 4,377 4,928
------- ------- -------
Total Pre-Tax Income $12,559 $11,551 $11,993
======= ======= =======
</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
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-11
<PAGE> 47
differences between the effective income tax rate recorded by the Company and
the statutory Federal tax rate are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<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 3.7% 3.9% 5.1%
Depreciation 1.2% 1.5% 1.4%
Pension Costs .2% .4% .5%
Debt Refinancing Costs .2% (2.6)% .2%
Non-deductible Merger Costs .4% 0% 0%
Other .6% .7% (.1)%
---- ---- ----
Effective Income Tax Rate 40.3% 37.9% 41.1%
==== ==== ====
</TABLE>
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,
1997 through December 31, 1999, appears below:
<TABLE>
<CAPTION>
ISSUANCE
SHARES AMOUNT EXPENSE TOTAL
--------- -------- ------- -------
(Thousands of dollars except share
amounts)
<S> <C> <C> <C> <C>
Balance, January 1, 1997 4,810,459 $45,252 $(1,216) $44,036
--------- ------- ------- -------
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
(restated) 4,819,970 45,508 (1,349) 44,159
Stock Split -- fractional
shares (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 69 -- 69
--------- ------- ------- -------
Balance, December 31, 1998
(restated) 4,828,619 45,788 (1,385) 44,403
</TABLE>
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-12
<PAGE> 48
<TABLE>
<CAPTION>
ISSUANCE
SHARES AMOUNT EXPENSE TOTAL
--------- -------- ------- -------
(Thousands of dollars except share
amounts)
<S> <C> <C> <C> <C>
Stock and equivalents issued
through Performance Stock
Program 10,175 251 -- 251
--------- ------- ------- -------
Balance, December 31, 1999(1) 4,838,794 $46,039 $(1,385) $44,654
========= ======= ======= =======
</TABLE>
(1) Includes 6,088 restricted and 13,357 common stock equivalent shares issued
through the Performance Stock Program.
On August 12, 1998 the Board and Directors authorized a new Shareholder
Rights Plan. 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.
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
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-13
<PAGE> 49
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,
1997 through December 31, 1999, appears below:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(Thousands of dollars)
<S> <C> <C> <C>
Balance at Beginning of Year (restated) $15,923 $14,187 $12,484
Income Before Preferred Dividends 7,494 7,174 7,065
------- ------- -------
23,417 21,361 19,549
======= ======= =======
Dividends Declared:
Cumulative Preferred, Series A, $.80 Per Share 12 12 12
Cumulative Preferred, Series $.90, $.90 Per
Share 26 26 26
Common Stock:
1999 $1.15 Per Share 5,538 -- --
1998 $1.12 Per Share -- 5,400 --
1997 $1.11 Per Share -- -- 5,324
------- ------- -------
5,576 5,438 5,362
------- ------- -------
Balance at End of Year $17,841 $15,923 $14,187
======= ======= =======
</TABLE>
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, 1999 and 1998, the estimated fair value of the Company's long-term debt was
$57,324,000 and $69,350,000, respectively, as compared to the carrying amounts
of $65,399,000 and $65,611,000, 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.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-14
<PAGE> 50
NOTE 7: LONG-TERM DEBT
Long-Term Debt at December 31, consisted of the following:
<TABLE>
<CAPTION>
1999 1998
------- -------
(Thousands of
dollars)
<S> <C> <C>
The Connecticut Water Company
First Mortgage Bonds:
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 44,400
------- -------
Unsecured Water Facilities Revenue Refinancing Bonds
5.05% 1998 Series A, Due 2028 10,000 10,000
5.125% 1998 Series B, Due 2028 8,000 8,000
------- -------
18,000 18,000
------- -------
Other
5.5% Unsecured Promissory Note, Due 2002 103 132
------- -------
Total Connecticut Water Company 62,503 62,532
------- -------
Crystal Water Utilities Corporation
8.0% New London Trust, Due 2017 $ 133 $ 137
------- -------
Crystal Water Company of Danielson
6.25% Farmer's Home Administration, Due 2015 -- 18
7.82% Connecticut Development Authority, Due 2020 518 528
8.0% New London Trust, Due 2011 2,298 2,416
------- -------
Total Crystal 2,816 2,962
------- -------
Gallup Water Service
9.58% Citizens Bank, Due 1999 $ -- $ 255
------- -------
Chester Realty
6% Note Payable, Due 2006 $ 141 $ 149
------- -------
Total Connecticut Water Service, Inc. 65,593 66,035
------- -------
Less Current Portion (194) (424)
------- -------
Total Long-Term Debt $65,399 $65,611
======= =======
</TABLE>
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-15
<PAGE> 51
Principal payments required for years 2000 - 2004 are as follows:
<TABLE>
<S> <C> <C>
2000 -- $194,000
2001 -- $209,000
2002 -- $225,000
2003 -- $204,000
2004 -- $220,000
</TABLE>
Substantially all utility plant is pledged as collateral for long-term
debt.
There are no mandatory sinking fund payments required on Connecticut Water
Company's outstanding First Mortgage Bonds or the Unsecured Water Facilities
Revenue Refinancing Bonds. 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 price becomes 100%. Series R bonds are callable for
redemption at 102% from September 1, 1999 through August 31, 2000, then at
101.5% from September 1, 2000 through August 31, 2001.
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.
In 1998 Connecticut Water Company's Series Q, First Mortgage Bonds were
refinanced with 5.05% 1998 Series A Unsecured, Tax-Exempt Water Facilities
Revenue Refinancing Bonds. Also Connecticut Water Company's $8,000,000 interim
bank loans were refinanced with 5.125% tax exempt, 1998 Series B Unsecured Water
Facilities Revenue Refinancing Bonds.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-16
<PAGE> 52
NOTE 8: PREFERRED STOCK
The Company's Preferred Stock at December 31, consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
(Thousands
of dollars)
<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>
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
The Company has a total of $9,000,000 in lines of credit provided by three
banks. The available lines of credit as of December 31, 1999 was $6,335,000. In
addition to the $2,411,000 of interim borrowing against these lines of credit,
an additional $254,000 has been allocated to secure a Letter of Credit for one
of the Company's real estate development projects. Bank commitment fees were
approximately $25,000, $19,000, and $20,000 in 1999, 1998, and 1997,
respectively, on the lines of credit.
At December 31, 1999 and 1998, the weighted average interest rates on
short-term borrowings outstanding were 6.81% and 5.82%, respectively.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-17
<PAGE> 53
NOTE 10: UTILITY PLANT AND CONSTRUCTION PROGRAM
The components of utility plant and equipment at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(Thousands of
dollars)
<S> <C> <C>
Source of Supply $ 20,805 $ 20,028
Pumping 16,922 16,041
Water Treatment 42,864 42,194
Transmission and Distribution 144,417 139,022
General (including intangible) 14,505 14,226
Held for Future Use 609 609
-------- --------
Total $240,122 $232,120
======== ========
</TABLE>
The amounts of depreciable plant at December 31, 1999 and 1998 included in
total plant were $219,530,000 and $213,897,000, respectively.
Our water companies are engaged in continuous construction programs.
Estimated annual capital expenditures, net of amounts financed by customer
advances and contributions in aid of construction, are expected to be $7,445,000
during 2000, $8,204,000 during 2001, and $7,203,000 in 2002. During the period
2003 to 2004, 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>
1999 1998 1997
------ ------ ------
(Thousands of dollars)
<S> <C> <C> <C>
Municipal Property Taxes $3,644 $3,525 $3,338
Payroll Taxes 543 555 555
Connecticut Gross Earnings Tax(A) -- -- 991
------ ------ ------
Total $4,187 $4,080 $4,884
====== ====== ======
</TABLE>
(A) The Connecticut Gross Earnings Tax was legislatively eliminated for water
companies effective July 1, 1997. The rates of our three water companies
were correspondingly reduced at the same time.
NOTE 12: PENSION AND OTHER POST-RETIREMENT EMPLOYEE BENEFITS
GENERAL -- As of December 31, 1999 Connecticut Water had 157 employees,
Gallup 4, and Crystal 7 for a total of 168 employees. The Company's officers are
employees of Connecticut Water Company. Employee expenses are charged between
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-18
<PAGE> 54
companies as appropriate. Connecticut Water Company has a post-retirement
benefit plan including pension and post-retirement medical, dental, and life
insurance. Crystal has a pension plan, whereas Gallup does not have any
post-retirement benefits plans.
Connecticut Water:
PENSION -- Connecticut Water Company 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. Connecticut Water's policy is to fund accrued pension costs as
permitted by Federal income tax regulations. No funding was made for 1999.
Funding of $159,000 was made for 1998.
POST-RETIREMENT BENEFITS OTHER THAN PENSION (PBOP) -- In addition to
providing pension benefits, Connecticut Water provides certain medical, dental
and life insurance benefits to retired employees partially funded by a 501(c)(9)
Voluntary Employee Beneficiary Association Trust that has been approved by the
DPUC. Substantially all of Connecticut Water's employees may become eligible for
these benefits if they retire on or after age 55 with 10 years of service. The
contributions for calendar years 1999, 1998, and 1997 were $473,000, $473,000,
and $317,000, respectively.
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 Connecticut Water requested and received approval
from the DPUC to include FAS 106 costs in customer rates. The DPUC's 1997
limited reopener of Connecticut Water's general rate proceeding allowed it to
increase customer rates $208,000 annually for FAS 106 costs. Connecticut Water's
current rates now allow for recovery of $473,000 annually for post-retirement
benefits costs other than pension.
Connecticut Water 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.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-19
<PAGE> 55
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
CONNECTICUT WATER: 1999 1998 1999 1998
- ------------------ ------- ------- ------- -------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation, beginning of year $12,557 $11,472 $ 3,866 $ 3,907
Service Cost 504 392 173 152
Interest Cost 908 872 268 262
Actuarial loss/(gain) (624) 541 (154) (321)
Benefits paid (729) (720) (290) (134)
------- ------- ------- -------
BENEFIT OBLIGATION, END OF YEAR $12,616 $12,557 $ 3,863 $ 3,866
======= ======= ======= =======
CHANGE IN PLAN ASSETS
Fair Value, beginning of year $16,915 $14,851 $ 2,057 $ 1,558
Actual return on plan assets 2,417 2,625 181 130
Employer contribution -- 159 473 473
Participant's contributions N/A N/A 38 30
Benefits paid (729) (720) (290) (134)
------- ------- ------- -------
FAIR VALUE, END OF YEAR $18,603 $16,915 $ 2,459 $ 2,057
======= ======= ======= =======
Funded Status $ 5,987 $ 4,358 $(1,404) $(1,809)
Unrecognized net actuarial (gain) (7,917) (6,090) (1,823) (1,650)
Unrecognized transition obligation (65) (97) 2,144 2,309
Unrecognized prior service cost 186 218 N/A N/A
------- ------- ------- -------
ACCRUED BENEFIT (COST) $(1,809) $(1,611) $(1,083) $(1,150)
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted-average assumptions as of
December 31
Discount rate 7.5% 7.0% 7.5% 7.0%
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>
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-20
<PAGE> 56
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
1999 1998 1997 1999 1998 1997
------- ----- ----- ----- ----- -----
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC
BENEFIT COSTS
Service cost $ 504 $ 393 $ 392 $ 173 $ 152 $ 164
Interest cost 908 872 740 268 262 272
Expected return on plan assets (1,093) (928) (835) (94) (63) (54)
Amortization of:
Unrecognized Net Transition
Asset (32) (32) (32) 165 165 165
Unrecognized net (Gain) Loss (121) (118) (190) (106) (113) (127)
Unrecognized Prior Service
Cost 32 32 32 -- -- --
FAS 88 Early Retirement Costs -- -- 366 -- -- 81
------- ----- ----- ----- ----- -----
Net Periodic Pension Costs $ 198 $ 219 $ 473 $ 406 $ 403 $ 501
======= ===== ===== ===== ===== =====
</TABLE>
In determining the 1998 accumulated post-retirement benefit obligation,
health care cost trends of 6% were assumed for 1998, grading down to 5.5% in
1999 and after. For the 1999 accumulated post-retirement benefit obligation, the
rate of 5.5% was assumed for all years.
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
INCREASE DECREASE
------------------ ------------------
(Thousands of Dollars)
<S> <C> <C>
Effect on total of service and
interest cost components $ 67 $ (63)
Effect on postretirement
benefit obligation $475 $(442)
</TABLE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN -- Connecticut Water provides
additional pension benefits to senior management through a supplemental
executive retirement plan. At December 31, 1999 the actuarial present value of
the projected benefit obligation was $503,000. Expense associated with this plan
was $76,000 for 1999, $99,000 for 1998 and 1997.
SAVINGS PLAN -- The Connecticut Water Company maintains an employee savings
plan which allows participants to contribute from 1% to 15% of pre-tax
compensation. The Company matches 50 cents for each dollar contributed by the
employee up to 4% of the employees' compensation. The contribution charged to
expense in 1999, 1998 and 1997 was $127,000, $85,000 and $78,000, respectively.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-21
<PAGE> 57
Effective for 1999 the Plan was modified to create the possibility for an
"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. In
1999 the goal was not met and therefore no incentive contribution was made.
Crystal Water:
PENSION -- Crystal has a defined benefit pension plan covering employees
who have completed six months of service and who have attained the age of
20 1/2. Accrued pension costs and required contributions to the plan are
actuarially calculated annually taking into account the employees' service to
date and their expected future earnings. The following tables set forth the
plan's funded status as of December 31, 1999 and 1998 and the net pension cost
for 1999, 1998 and 1997 of ($150,000), $14,000 and $27,000 respectively.
<TABLE>
<CAPTION>
1999 1998
----- -------
(Thousands of
Dollars)
<S> <C> <C>
Actuarial present value of benefit obligations $ 576 $ 1,008
Projected benefit obligation for salary increase 313 367
Projected benefit obligation 889 1,375
Plan assets at fair value 764 1,503
Unfunded (overfunding) projected benefits 125 (128)
Unrecognized gains/(loss) 243 663
Unrecognized prior service cost (334) (350)
Unrecognized transition obligation (27) (29)
----- -------
Accrued pension costs $ 7 $ 156
----- -------
</TABLE>
<TABLE>
<CAPTION>
1999 1998
----- -------
<S> <C> <C>
Weighted-average assumptions as of December 31
Discount rate 7.5% 8.0%
Expected return on plan assets 8.0% 8.0%
Rate of compensation increase 4.5% 5.0%
</TABLE>
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-22
<PAGE> 58
Crystal Water:
<TABLE>
<CAPTION>
1999 1998 1997
------ ----- -----
(Thousands of Dollars)
<S> <C> <C> <C>
Service costs $ 48 $ 49 $ 44
Interest cost of benefit obligation 110 73 63
Return on assets (117) (96) (73)
Amortization of unrecognized gain/loss (23) (15) (9)
Amortization of prior service cost 15 1 --
Amortization of transition asset 2 2 2
Settlement (gain)/loss (185) -- --
----- ---- ----
Net pension (gain) cost $(150) $ 14 $ 27
</TABLE>
NOTE 13: STOCK BASED COMPENSATION PLANS
INCENTIVE OPTIONS --
In 1999 the Company's shareholders approved an amendment to its Performance
Stock Program to permit the issuance of stock options to officers and key
employees. The Company accounts for the plan under APB Opinion No. 25, under
which no compensation cost has been recognized in the Consolidated Statements of
Income. On a pro forma basis, the Company's net income and earnings per share
would have been the following amounts had compensation cost for the plan been
determined consistent with SFAS No. 123, "Accounting for Stock Based
Compensation." Under SFAS No. 123, the Company would have been required to value
such options and record such amounts in the financial statements as compensation
expense.
<TABLE>
<CAPTION>
1999
------
<S> <C>
Net income (in thousands of dollars):
As reported $7,456
Pro forma $6,589
Earnings Per Share:
As reported $ 1.54
Pro forma $ 1.36
</TABLE>
For purposes of this calculation, the Company arrived at the fair value of
each stock grant at the date of grant by using the Black Scholes Option Pricing
model with the following weighted average assumptions used for grants for the
year ended December 31, 1999; risk-free interest rate of 5.5%; estimated period
to exercise of 8 years; expected volatility of 25.89 percent and a dividend
yield of 3.7 percent.
At December 31, 1999, options which have been granted are not exercisable.
The options begin to become exercisable in 2000, one year from the dates of the
grants.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-23
<PAGE> 59
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
OPTIONS OPTIONS
EXERCISABLE GRANTED
AS OF AS OF PRICE PER
12/31/99 12/31/99 SHARE
----------- --------- -------------
<S> <C> <C> <C>
Balance at January 1, 1999 -- -- N/A
Granted April 23, 1999 -- 75,150 $ 22.25
Granted December 8, 1999 -- 52,573 $ 33.50
-- -------
Balance at December 31, 1999 -- 127,723 $22.25-$33.50
== =======
</TABLE>
Weighted average fair values of options granted in 1999 was $6.78.
PERFORMANCE STOCK PROGRAM -- Under the Company's Performance Stock Program,
restricted shares of Common Stock may be awarded annually to officers and key
employees. To the extent that 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 $216,000, $170,000, and $173,000
for 1999, 1998 and 1997, respectively.
NOTE 14: SEGMENT REPORTING
Our Company operates principally in three segments: water activities, real
estate sales and services/rentals. The water segment is comprised of our core
regulated water activities to supply water to our customers. Our real estate
sales segment involves the selling off our limited excess real estate holdings.
Our services and rentals segment is comprised of providing services on a
contract basis and leasing certain of our properties to others. The accounting
policies of each reportable segment are the same as those described in the
summary of significant accounting policies. Financial data for reportable
segments is as follows:
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-24
<PAGE> 60
<TABLE>
<CAPTION>
INTEREST
EXPENSE
AND
PREFERRED
OTHER OTHER DIVIDEND
OPERATING INCOME (NET OF INCOME NET
REVENUES DEPRECIATION EXPENSES (DEDUCTIONS) AFUDC) TAXES INCOME
-------- ------------ --------- ------------ --------- ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December
31, 1999
Water Activities $42,624 $4,390 $21,999 $ 65 $4,084 $4,943 $7,273
Real Estate Sales 447 286 0 0 64 97
Services/Rentals 1,410 16 1,224 0 26 58 86
------- ------ ------- ---- ------ ------ ------
Total $44,481 $4,390 $23,509 $ 65 $4,110 $5,065 $7,456
======= ====== ======= ==== ====== ====== ======
Year ended December
31, 1998
Water Activities $40,303 $4,133 $21,321 $110 $4,168 $4,089 $6,702
Real Estate Sales 710 235 0 0 190 285
Services/Rentals 1,073 21 805 0 0 98 149
------- ------ ------- ---- ------ ------ ------
Total $42,086 $4,154 $22,361 $110 $4,168 $4,377 $7,136
======= ====== ======= ==== ====== ====== ======
Year ended December
31, 1997
Water Activities $40,917 $3,774 $21,580 $ 58 $4,065 $4,768 $6,788
Real Estate Sales 349 165 0 0 74 110
Services/Rentals 1,091 18 858 0 0 86 129
------- ------ ------- ---- ------ ------ ------
Total $42,357 $3,792 $22,603 $ 58 $4,065 $4,928 $7,027
======= ====== ======= ==== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Total Plant and Other Investments $183,310 $177,550
Water 779 801
-------- --------
Non-water 184,089 178,351
======== ========
Other Assets 26,246 27,465
Water 550 139
-------- --------
Non-water 26,796 27,604
-------- --------
Total Assets $210,885 $205,955
======== ========
</TABLE>
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-25
<PAGE> 61
NOTE 15: QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the years ended December 31, 1999 and
1998 appears below:
<TABLE>
<CAPTION>
BASIC
EARNINGS PER
NET INCOME AVERAGE
OPERATING UTILITY APPLICABLE TO COMMON
REVENUES OPERATING INCOME COMMON STOCK SHARE
----------------- ----------------- --------------- -------------
1999 1998 1999 1998 1999 1998 1999 1998
------- ------- ------- ------- ------ ------ ----- -----
(Thousands of dollars except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter $ 9,450 $ 9,240 $ 2,414 $ 2,404 $1,510 $1,419 $0.31 $0.30
Second Quarter 10,233 9,383 2,765 2,363 1,811 1,529 0.37 0.32
Third Quarter 12,892 12,020 3,763 3,639 2,716 2,658 0.56 0.55
Fourth Quarter 10,049 9,660 2,285 2,354 1,419 1,530 0.30 0.31
------- ------- ------- ------- ------ ------ ----- -----
Year $42,624 $40,303 $11,227 $10,760 $7,456 $7,136 $1.54 $1.48
======= ======= ======= ======= ====== ====== ===== =====
</TABLE>
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-26
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
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 August 12, 1999.
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 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)
</TABLE>
E-1
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
(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.
4.9* Loan Agreement dated as of April 19, 1990 between the Connecticut
Development Authority and The Crystal Water Company of Danielson.
4.10* Loan Agreement dated as of February 9, 1996 between New London Trust,
F.S.B. and The Crystal Water Company of Danielson.
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 Amended and Restated Deferred
Compensation Agreement dated May 14, 1999
</TABLE>
E-2
<PAGE> 64
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
a) Marshall T. Chiaraluce
b) David C. Benoit
c) James R. McQueen
d) Kenneth W. Kells
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)
10.7.1 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)
10.7.2* The Connecticut Water Company Amended Supplemental Executive
Retirement Agreement with Marshall T. Chiaraluce dated August 1,
1999.
10.8.1 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)
10.8.2* The Connecticut Water Company Amended Supplemental Executive
Retirement Agreement -- standard form for other officers, dated
August 1, 1999.
10.9* The Connecticut Water Company Employment Agreements with Officers,
amended and restated as of November 18, 1999
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* Employment and Consulting Agreement between Richard L. Mercier and
Gallup Water Service, Inc. dated April 15, 1999.
10.11* Employment and Consulting Agreement between Roger Engle and Crystal
Water Company of Danielson dated September 29, 1999.
10.12 Savings Plan of The Connecticut Water Company, amended and restated
effective as of January 1, 1999.
10.13 The Connecticut Water Company Employees' Retirement Plan as amended
and restated as of January 1, 1997.
10.14 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)
10.15 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)
</TABLE>
E-3
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
10.16 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)
10.17 Agreement dated August 13, 1986 between The Connecticut Water Company
and the Metropolitan District. (Exhibit 10.14 to Form 10-K for the
year ended December 31, 1986)
10.18 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)
10.19 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)
10.20 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)
10.21 Dividend Reinvestment and Common Stock Purchase Plan as amended.
(Registration Statement No. 33-53211 as amended)
10.22 Contract for Supplying Bradley International Airport. (Exhibit 10.21
to Form 10-K for the year ended December 31, 1984)
10.23 Report of South Windsor Task Force. (Exhibit 10.23 to Form 10-K for
the year ended December 31, 1987)
10.24 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)
10.25 Performance Stock Program, as amended and restated as of April 23,
1999. (Exhibit A to CTWS Proxy Statement dated March 17, 1999)
24.1* Consent of Arthur Andersen LLP
27.0* Financial Data Schedule
</TABLE>
- ---------------
Note: Exhibits 10.1 through 10.13, 10.24 and 10.25 set forth each management
contract or compensatory plan or arrangement required to be filed as an
exhibit to this Form-10K.
E-4
<PAGE> 66
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, Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of Connecticut Water
Service, Inc. in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ MARSHALL T. CHIARALUCE Director, President Chairman of the February 28, 2000
- ------------------------------------- Board, and Chief Executive Officer
Marshall T. Chiaraluce
(Principal Executive Officer)
/s/ DAVID C. BENOIT Vice President -- Finance, Chief February 25, 2000
- ------------------------------------- Financial Officer and Treasurer
David C. Benoit
(Principal Financial and
Accounting Officer)
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ FRANCIS E. BAKER, JR. Director February 25, 2000
- -------------------------------------
Francis E. Baker, Jr.
/s/ HAROLD E. BIGLER, JR. Director February 28, 2000
- -------------------------------------
Harold E. Bigler, Jr.
/s/ MARY ANN HANLEY Director February 25, 2000
- -------------------------------------
Mary Ann Hanley
/s/ MARCIA L. HINCKS Director February 25, 2000
- -------------------------------------
Marcia L. Hincks
/s/ RONALD D. LENGYEL Director February 25, 2000
- -------------------------------------
Ronald D. Lengyel
/s/ RUDOLPH E. LUGINBUHL Director February 25, 2000
- -------------------------------------
Rudolph E. Luginbuhl
/s/ HARVEY G. MOGER Director February 25, 2000
- -------------------------------------
Harvey G. Moger
/s/ ROBERT F. NEAL Director February 25, 2000
- -------------------------------------
Robert F. Neal
/s/ WARREN C. PACKARD Director February 24, 2000
- -------------------------------------
Warren C. Packard
/s/ ARTHUR C. REEDS Director February 24, 2000
- -------------------------------------
Arthur C. Reeds
/s/ DONALD B. WILBUR Director February 25, 2000
- -------------------------------------
Donald B. Wilbur
</TABLE>
<PAGE> 68
SCHEDULES
<PAGE> 69
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, 2000. 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, 2000
S-1
<PAGE> 70
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
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, 1999 $315 $171 $ 31 $455
==== ==== ==== ====
Year Ended December 31,
1998(2) $147 $162 $ (6) $315
==== ==== ==== ====
Year Ended December 31,
1997(2) $162 $134 $149 $147
==== ==== ==== ====
</TABLE>
- ---------------
(1) Amounts charged off as uncollectible after deducting recoveries
(2) Restated
S-2
<PAGE> 71
EXHIBITS
TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR
ENDED DECEMBER 31, 1999
24.1 Consent of Arthur Andersen LLP
27.0 Financial Data Schedule
<PAGE> 72
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 Nos. 33-53211 and 33-394525.
/s/ ARTHUR ANDERSEN LLP
---------------------------------------
Hartford, Connecticut
March 07, 2000
<PAGE> 1
EXHIBIT 3.2
AUGUST 12, 1999 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
1
<PAGE> 2
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 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 properly brought before an 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 than
one hundred twenty (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 a 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 Article II,
2
<PAGE> 3
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 Subparagraph 5 of Paragraph B
of Article SEVENTH of the Corporation's Certificate of Incorporation, special
meetings of stockholders of the Corporation may be called 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 (as defined in Article
IV, Section 1 of these Bylaws) and shall be called upon the written request of
the stockholders who hold at least thirty-five percent (35%) of all the votes
entitled to be cast on any issue proposed to be considered at such special
meeting. The general purpose or purposes for which a special meeting is called
shall be stated in the notice thereof, and no other business shall be transacted
at such meeting. No proposal may be brought before a special meeting unless it
is directly related to the business specified in the notice of such meeting and
it is properly brought before such meeting. To be properly brought before a
special meeting, a proposal must be (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of Directors,
(b) otherwise 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 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 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
3
<PAGE> 4
Corporation not later than the close of business on the tenth (10th) 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 meting in accordance with the provisions of this Article II,
Section 3, and if he should so determine, he shall so declare to the meeting and
any such proposal not properly brought before the meeting shall not be acted on
at the meeting.
Section 4. Notice of Meeting: Written notice of the date, time and
place of each annual meeting and any special meeting, and in case of a special
meeting, the general purpose or purposes for such meeting, shall be mailed or
delivered, at least 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.
4
<PAGE> 5
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.
A nomination by a stockholder shall be made only if such stockholder has given
proper and timely notice in writing of such stockholder's intent to make such
nomination to the Secretary of the 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
5
<PAGE> 6
than (i) with respect to an election to be held at an annual meeting, and (ii)
with respect to an election to be held at a special meeting of stockholders
called for election of Directors, the close of business on the tenth (10th) 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 person or by proxy at the meeting to nominate the person or persons
specified in the notice; (e) a description of all arrangements or understandings
between the stockholders 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
provisions of this Article II, Section 7, and if he should so determine, he
shall so declare to the meeting and any nominations not properly made shall be
disregarded.
ARTICLE III
SHARES
Share certificates shall be in a form adopted by the Board of Directors
and shall be signed by the President and by the Secretary. Such certificates
shall bear the seal of the Corporation.
6
<PAGE> 7
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 (9) nor more than fifteen (15) 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 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 (exclusively 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 FOURTH 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 seventy
(70) and no officer of the Corporation, other than a person who has served as
Chief Executive Officer of the Corporation, shall be eligible for re-election as
a Director of the Corporation after such person shall no longer be an officer of
the Corporation or shall have attained the age of sixty-five (65).
7
<PAGE> 8
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 FOURTH 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 FOURTH 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 or under the direction of 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 statues of the State of Connecticut, the
Certificate of Incorporation, these Bylaws and any vote of the stockholders.
Section 5. Committees: The Board of Directors, by the affirmative vote
of Directors holding a majority of the number of directorships, may appoint from
the Directors an executive committee and such other 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.
8
<PAGE> 9
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.
9
<PAGE> 10
ARTICLE V
MEETINGS OF DIRECTORS
Section 1. Annual Meetings: A regular meeting of the Board of Directors
shall be held without notice immediately after the annual meeting of
stockholders, or as soon thereafter as convenient. At such meeting, the Board of
Directors shall choose and appoint the officers of the Corporation who shall
hold their offices, subject to prior removal by the Board of Directors, until
the next annual meeting or until their successors are chosen and qualify.
Section 2. Regular Meetings: All other regular meetings of the Board of
Directors may be held without notice at such date, time and place as the Board
of Directors may determine and fix by resolutions.
Section 3. Special Meetings: Special meetings of the Board of Directors
may be held upon call of the President, or upon call of any one (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
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<PAGE> 11
these Bylaws, all questions shall be decided by vote of 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.
Section 7. Directors' Action Without Meeting: If all 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, including a Chairman of the Board, 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.
11
<PAGE> 12
Section 2. Chairman of the Board: The Chairman shall preside at all
meetings of the stockholders and the Board of Directors and shall perform such
other duties as are properly required of him by the Board of Directors. If
provided by the Board of Directors, the Chairman shall be the chief executive
officer of the Corporation, and as such, the Chairman shall have general and
active management of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
Section 3. President: Unless otherwise provided by the Board of
Directors, the President shall be the chief executive officer of the
Corporation. In the absence of the Chairman or in the event of the Chairman's
liability or refusal to act, the President shall preside at all meetings of the
stockholders and the Board of Directors. If the President is the chief executive
officer of the Corporation, he shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. The President shall also perform
such other duties as are properly required of him by the Board of Directors.
Section 4. 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 5. 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
12
<PAGE> 13
these Bylaws. He shall have custody of such minutes, the seal of the Corporation
and the stock certificate records of the Corporation, except to the extent some
other person is authorized to have custody and possession thereof by a
resolution by the Board of Directors.
Section 6. 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
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 Fourth of the Corporation's
Certificate of
13
<PAGE> 14
Incorporation) required by law, the Corporation's Certificate of Incorporation
or these Bylaws, the affirmative vote of the holders of at least eighty percent
(80%) 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 Section 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 VIII.
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.
14
<PAGE> 1
Exhibit 4.9
LOAN AGREEMENT
among the
CONNECTICUT DEVELOPMENT AUTHORITY
THE CRYSTAL WATER COMPANY OF DANIELSON
and
CRYSTAL WATER UTILITIES CORPORATION
Dated as of April 19, 1990
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties 1
Background 2
SECTION 1 - DEFINITIONS AND INTERPRETATION
1.1 - Definitions 3
1.2 - Interpretation 5
SECTION 2 - THE LOAN
2.1 - Loan 7
2.2 - The Closing 7
2.3 - Term 7
2.4 - Interest and Payments 7
2.5 - Late Charges 7
2.6 - Note 8
2.7 - Security 8
2.8 - Guaranty 8
2.9 - Prepayment 8
2.10 - Interest After Judgement 8
2.11 - Application of Payments 8
2.12 - Failure to Meet Conditions 9
SECTION 3 - CONDITIONS OF CLOSING
3.1 - Warranties and Representations True; No Prohibited Action 10
3.2 - Compliance with This Agreement 10
3.3 - Officers' Certificates 10
3.4 - Execution and Delivery of Financing Documents 10
3.5 - Perfection and Priority of Mortgage, Guaranty Mortgage
and Stock Pledge 10
3.6 - Opinion of Counsel 11
3.7 - Certification of Costs 11
3.8 - Department of Health Services Certification 12
3.9 - Completion of Project 12
3.10 - DPUC Approvals 12
3.11 - Site Plan and Zoning Compliance 12
3.12 - Insurance 12
3.13 - Good Standing Certificates; Tax Clearances 13
3.14 - Affirmative Action Plan 13
</TABLE>
<PAGE> 3
SECTION 3 - CONDITIONS OF CLOSING (continued)
<TABLE>
<S> <C>
3.15 - Commitment Fee 13
3.16 - Compliance with Loan Authorization 13
3.17 - Proceedings Satisfactory 14
SECTION 4 - WARRANTIES AND REPRESENTATIONS OF THE
COMPANY AND GUARANTOR
4.1 - Corporate Existence and Authority 15
4.2 - Enforceability of Financing Documents; No
Prohibition or Consent 15
4.3 - DPUC Approvals 16
4.4 - Eligibility of the Company 16
4.5 - Use of Proceeds 17
4.6 - Real Estate 17
4.7 - Transmission Rights 17
4.8 - Property 17
4.9 - Perfection and Priority of Mortgage 17
4.10 - Compliance with Laws 18
4.11 - No Litigation 18
4.12 - Burdensome Contracts 18
4.13 - Taxes 18
4.14 - Financial Statements; No Adverse Change 18
SECTION 5 - COVENANTS OF THE COMPANY AND THE GUARANTOR
5.1 - Payment of Loan 19
5.2 - Expenses and Additional Indebtedness 19
5.3 - Indemnification 20
5.4 - Corporate Existence and Authority 20
5.5 - DPUC and Department of Health Services Compliance 20
5.6 - Taxes 20
5.7 - Maintenance of Property and Insurance 21
5.8 - Liens 21
5.9 - Compliance with Laws 21
5.10 - Financial Statements 22
5.11 - Protection of Mortgage and the Guaranty Mortgage 23
5.12 - Default Notification 23
</TABLE>
3
<PAGE> 4
SECTION 6 - DEFAULT AND REMEDIES
<TABLE>
<S> <C>
6.1 - Events of Default 24
6.2 - Remedies upon Event of Default 25
6.3 - Reinstatement 26
6.4 - Marshalling 26
6.5 - Partial Release 26
6.6 - No Waiver 26
6.7 - Remedies Cumulative 27
6.8 - Waiver of Rights 27
SECTION 7 - MISCELLANEOUS
7.1 - Governing Laws 28
7.2 - Notices 28
7.3 - Amendment and Waiver 28
7.4 - Duplicate Originals 29
7.5 - Severability 29
7.6 - Binding Effect 29
7.7 - Term of this Agreement 29
</TABLE>
4
<PAGE> 5
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and dated as of April 19, 1990 among the
CONNECTICUT DEVELOPMENT AUTHORITY, with its principal office at 217 Washington
Street, Hartford, Connecticut, 06106 (the "Authority"), THE CRYSTAL WATER
COMPANY OF DANIELSON (the "Company") and CRYSTAL WATER UTILITIES CORPORATION
(the "Guarantor"), both with their principal office at 321 Main Street,
Danielson, Connecticut 06239.
<PAGE> 6
BACKGROUND
A. Pursuant to Title 32, Chapter 579, of the Connecticut General
Statutes, as amended (the "Act"), the Bond Commission of the State of
Connecticut has been granted the power, from time to time, to authorize the
issuance of bonds of the State of Connecticut to provide funds for low-interest
loans to investor-owned water companies which supply water to at least
twenty-five but fewer than ten thousand customers for the planning, design,
modification or construction of drinking water facilities of such companies made
necessary by the requirements of the Safe Drinking Water Act of 1974 (the "Safe
Drinking Water Act"), or by an order of the Department of Health Services of the
State of Connecticut deeming the water supplied by such companies to be
inadequate, which facilities include, but need not be limited to, collection
facilities, treatment facilities, wells, tanks, mains, pumps, transmission
facilities and any other machinery and equipment necessary to meet the
requirements of the Safe Drinking Water Act.
B. The Act provides that each loan made pursuant thereto shall be
authorized by the Authority or, if the Authority so determines, by a committee
of the Authority, one of whose members may be its Executive Director.
C. On May 4, 1988, the Company first applied to the Authority for a
loan under the Act to finance certain improvements to its drinking water
facilities made necessary by the requirements of the Safe Drinking Water Act or
an order of the Department of Health Services of the State of Connecticut.
D. By a Loan Authorization dated March 7, 1989 (the "Loan
Authorization") the Authority authorized a loan to the Company in an amount not
to exceed $587,000 on the terms and conditions therein set forth.
E. The Loan Authorization requires that the Guarantor guarantee the
loan.
F. The Authority, in reliance on the representations and warranties of
the Company and the Guarantor in the loan application and herein, is willing to
make the loan to the Company authorized in the Loan Authorization, all on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
2
<PAGE> 7
SECTION 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions
For purposes of this Agreement, the following words and terms shall
have the respective meanings set forth below or in the Section of this Agreement
referenced below:
"Act" is defined in the recitals of this Agreement.
"Agreement" means this Loan Agreement and any amendments or supplements
thereto.
"Authority" is defined in the recitals to this Agreement.
"Closing" is defined in Section 2.2.
"Closing Date" is defined in Section 2.2.
"Company" is defined in the first paragraph of this Agreement.
"Default" means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default.
"Department of Health Services" means the Department of Health Services
of the State of Connecticut.
"DPUC" means the Department of Public Utility Control of the State of
Connecticut.
"Equipment" means tangible Property which is not Real Estate.
"Event of Default" is defined in Section 6.1.
"Financing Documents" means this Agreement, the Note, the Mortgage, the
Guaranty, the Guaranty Mortgage, the Stock Pledge, and all other documents or
agreements executed and/or delivered in connection with the Loan.
"General Statutes" means the General Statutes of Connecticut, revision
of 1958, as amended.
"Guarantor" is defined in the first paragraph of this Agreement.
"Guaranty" is defined in Section 2.8.
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"Guaranty Mortgage" is defined in Section 2.8.
"Indebtedness" means the Note, any amounts due from the Company and the
Guarantor to the Authority under Sections 2.5, 5.2 and 5.3, and all other
indebtedness, obligations and liabilities of the Company and the Guarantor to
the Authority, whether arising under the Note, this Agreement, any of the other
Financing Documents, or otherwise.
"Lien" means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting Property. For the
purpose of this Agreement, the Company and the Guarantor each shall be deemed to
be the owner of any Property which it has acquired or holds subject to a
conditional sale agreement, financing lease or other arrangement pursuant to
which title to the Property has been retained by or vested in some other Person
for security purposes, and such retention or vesting shall constitute a Lien.
"Loan" means the loan in the original principal amount of $587,000 made
by the Authority to the Company pursuant to this Agreement.
"Loan Application" means the initial loan application of the Company to
the Authority dated May 4, 1988 together with all amendments, supplements and
modifications thereto thereafter submitted by the Company to the Authority, and
including all correspondence, exhibits, schedules, financial statements, cost
estimates and other documents furnished by or on behalf of the Company or the
Guarantor with respect thereto.
"Loan Authorization" means the Loan Authorization from the Authority to
the Company dated March 7, 1989 and any amendments or supplements thereto.
"Mortgage" is defined in Section 2.7.
"Note" is defined in Section 2.6.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, government, government agency or governmental
subdivision.
"Project" means the improvements to the Company's drinking water
facilities more particularly described in Exhibit A to this Agreement.
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"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible, and whether now owned
or hereafter acquired, and includes, without limitation, the Project, Real
Estate, Equipment, and Transmission Rights.
"Real Estate" means realty and other interests in real property,
including buildings and improvements thereon and fixtures related thereto,
whether owned, leased or subject to other right of use or occupancy, but does
not otherwise include Transmission Rights.
"Safe Drinking Water Act" means the Federal Safe Drinking Water Act of
1974, 42 U.S.C. Sections 300f et seq.
"Stock Pledge" is defined in Section 2.8.
"Transmission Rights" means easements, rights-of-way, and other rights
or interests in or through Real Estate of others for purposes of laying and
maintaining water mains, pipes, pumping stations or other water transmission
facilities, whether arising by contract or otherwise and whether recorded or
unrecorded.
1.2 Interpretation
(a) References to a "Section" or "Sections" herein refer to this
Agreement unless otherwise stated.
(b) 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.
(c) Any headings preceding the texts of the several Sections of this
Agreement, and any table of contents or list of exhibits 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.
(d) All approvals, consents and acceptances required to be given or
made by any party hereunder shall be at the sole discretion of the party whose
approval, consent, or acceptance is required.
(e) All notices to be given hereunder shall be given in writing within
a reasonable time unless otherwise specifically provided.
(f) If a reference to a provision of the General Statutes appears in a
Section intended to have effect after the date of this Agreement, such reference
shall be deemed to include successor statutes of similar import.
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(g) Where any provision of this Agreement refers to action to be taken
by any Person, or which any Person is prohibited from taking, such provision
shall be applicable whether such action is taken directly or indirectly by such
Person.
(h) Each Exhibit referred to in this Agreement shall be considered a
part of this Agreement as if fully set forth herein.
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SECTION 2
THE LOAN
2.1 Loan
The Authority agrees to lend to the Company, and the Company agrees to
borrow from the Authority on the Closing Date, in accordance with and subject to
the terms and conditions of this Agreement, the sum of Five Hundred Eighty-Seven
Thousand Dollars ($587,000).
2.2 The Closing
The closing (the "Closing") of the Loan shall be conducted by the
Authority's special counsel, Shipman & Goodwin. The Closing shall be held on
such date as shall be mutually agreed to by the Company and the Authority (the
"Closing Date"), at 10 a.m. local time at the offices of Shipman & Goodwin, 799
Main Street, Hartford, Connecticut, or such other place as the parties hereto
shall mutually agree. At the Closing the Company will deliver to the Authority
the Note, dated the Closing Date, in the stated principal amount of $587,000,
against payment by the Authority to the Company of such amount.
2.3 Term
The Loan will mature and be finally due and payable on July 1, 2020.
2.4 Interest and Payments
The Loan will bear interest on the unpaid principal balance thereof
from (and including) the Closing Date at an annual rate of seven and eighty-two
hundredths percent (7.82%). Interest on the unpaid principal balance from (and
including) the Closing Date through June 30, 1990 shall be paid at the Closing.
Thereafter, the Loan shall be repaid over a term of 30 years in equal quarterly
payments of principal and interest, beginning October 1, 1990, all as more fully
set forth in the Note.
2.5 Late Charges
The Authority may assess a late charge not to exceed an amount equal to
five percent (5%) of any scheduled quarterly payment of principal and interest
on the Note which is not paid within ten (10) days of the day on which such
payment is due in order to cover the extra expenses involved in handling such
delinquent payment.
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2.6 Note
The Loan will be evidenced by the Company's 7.82% Secured Promissory
Note due July 1, 2020 (the "Note") substantially in the form set forth as
Exhibit B to this Agreement.
2.7 Security
The Loan will be Secured by a first security interest in all
of the Company's Property under a Mortgage and Security Agreement (the
"Mortgage") substantially in the form set forth in Exhibit C to this Agreement.
2.8 Guaranty
The Loan will be guaranteed by agreement of the Guarantor (the
"Guaranty"), substantially in the form set forth in Exhibit D to this Agreement.
The Guaranty will be secured by a Guaranty Mortgage and Security Agreement (the
"Guaranty Mortgage") and a Stock Pledge Agreement (the "Stock Pledge"), from the
Guarantor, substantially in the forms set forth in Exhibits E and F to this
Agreement, respectively.
2.9 Prepayment
The principal balance of the Loan may be prepaid in whole or in part
without premium or penalty as of the due date of any scheduled quarterly payment
of principal and interest. The Authority may require that any partial prepayment
be in the amount of $10,000 or a multiple thereof.
2.10 Interest After Judgment
If the Authority should obtain a judgment against the Company
with respect to the Indebtedness, interest shall accrue on such judgment at the
interest rate provided for in the Note or as provided by statute, whichever is
greater at the time.
2.11 Application of Payments
(a) So long as no Default has occurred and is continuing:
i) regularly scheduled quarterly payments on the Note shall
be applied first to accrued interest and then to principal as set forth in the
Note;
ii) partial prepayments of principal on the Note, including
the proceeds of insurance on the Company's Property paid to and retained by the
Authority, shall be applied to the then outstanding principal balance on the
Note, but will not delay the due date or change the amount of any scheduled
quarterly payment required under the Note, except to the extent that the
Authority agrees to such delay or change in writing; and
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iii) amounts paid to the Authority pursuant to Sections 5.2
or 5.3 or late charges assessed under Section 2.5 shall be applied consistent
with the invoice, statement or demand made for such payment.
(b) While a Default exists, all payments and other amounts received by
the Authority with respect to the Indebtedness, whether regular payment,
prepayment or otherwise, including the proceeds of the sale or other disposition
of any of the Company's or the Guarantor's Property, or of insurance with
respect thereto, paid to and retained by the Authority, may be applied by the
Authority to pay the Indebtedness in such manner, order and amount as the
Authority in its sole discretion may determine, notwithstanding any
characterization thereof by the Company or the Guarantor or any entry with
respect thereto on the books and records of the Company or the Guarantor.
2.12 Failure to Meet Conditions
If at the Closing the Company fails to deliver the Note to the
Authority, or if any of the conditions specified in Section 3 have not been
fulfilled, the Authority may thereupon elect to be relieved of all further
obligations under this Agreement.
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SECTION 3
CONDITIONS OF CLOSING
The Authority's obligation to make the Loan at the Closing on
the Closing Date is subject to the following conditions precedent:
3.1 Warranties and Representations True; No Prohibited Action
(a) The warranties and representations of the Company and the
Guarantor contained in Section 4 shall be true in all respects on the Closing
Date with the same effect as though made on and as of that date.
(b) The Company and the Guarantor shall not have taken any
action or permitted any condition to exist which would have been prohibited by
Sections 5.4 to 5.9, inclusive, had such Sections been binding and effective at
all times during the period from the date of the Company's Loan Application to
and including the Closing Date.
3.2 Compliance with this Agreement
The Company and the Guarantor shall have performed and
complied with all agreements and conditions contained herein which are required
to be performed or complied with before or at the Closing.
3.3 Officers' Certificates
The Authority shall have received certificates dated the
Closing Date and signed, respectively, by the Secretary of the Company and the
Secretary of the Guarantor, substantially in the forms of Exhibits G and H, to
this Agreement, respectively, with respect to certain corporate matters.
3.4 Execution and Delivery of Financing Documents
The Company and the Guarantor each shall have duly executed
and delivered to the Authority the Financing Documents to which they are a
party.
3.5 Perfection and Priority of Mortgage, Guaranty Mortgage and Stock Pledge
(a) On or before the Closing Date, the Company shall cause an
original counterpart of the Mortgage to be filed with the town clerks of all
towns in which the Company owns Real Estate and the Guarantor shall cause an
original counterpart of the Guaranty Mortgage to be filed with the town clerks
of all towns in which the Guarantor owns Real Estate.
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(b) The Company shall furnish to the Authority at the Closing, at the
company's expense, a policy of title insurance, in a form and issued by a title
insurance company acceptable to the Authority, insuring that the Mortgage is a
valid lien with respect to the Company's Real Estate, subject to no Lien except
as may be approved by the Authority. The Guarantor shall furnish to the
Authority at the Closing, at the Guarantor's expense, a policy of title
insurance in a form and issued by a title insurance Company acceptable to the
Authority, insuring that the Guaranty Mortgage is a valid lien with respect to
the Guarantor's Real Estate, subject to no lien except as may be approved by the
Authority.
(c) The Company and the Guarantor shall each furnish to the
Authority a current search on Form UCC-11 of the records of the Uniform
Commercial Code Division of the office of the Secretary of the State of
Connecticut showing no Liens on the Company's Property and Guarantor's Property,
respectively, except as may be approved by the Authority.
(d) The Guarantor shall deliver to the Authority, pursuant to
the Stock Pledge, any shares of stock of the Borrower held by the Guarantor.
(e) The Authority agrees that the Mortgage shall be subject to
two prior mortgages to the State of Connecticut and the Guaranty Mortgage shall
be subject to a prior mortgage to The Brooklyn Savings Bank. The priority of the
Mortgage, Guaranty Mortgage and Stock Pledge with respect to certain liens
granted to The Citizens National Bank ("Citizens Bank") to secure the Citizens
Bank Loan (as hereafter defined) shall be determined pursuant to a Subordination
and Intercreditor Agreement between the Authority and Citizens Bank of even date
herewith.
(f) The Company and the Guarantor, each shall execute and
deliver to the Authority at the Closing such other financing statements,
certificates and other documents as the Authority may reasonably request in
order to give effect to and perfect its security interest under the Mortgage and
the Guaranty Mortgage.
3.6 Opinion of Counsel
The Authority shall have received from counsel to the Company
and the Guarantor a closing opinion dated the Closing Date and in a form
prescribed by the Authority.
3.7 Certification of Costs
The Authority shall have received a certificate dated the
Closing Date and signed by the President of the Company as to the actual cost of
the Project, substantially in the form prescribed by the Authority, together
with copies of appropriate bills of sale, construction contracts, invoices,
receipts and other evidence of such costs if the Authority so requests, and an
opinion of the Company's independent public accountant with respect thereto
substantially in the form prescribed by the Authority.
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3.8 Department of Health Services Certification
The Authority shall have received a certification from the
Department of Health Services, substantially in the form prescribed by the
Authority, with respect to the completion of the Project and its compliance with
the Safe Drinking Water Act, and certain other matters.
3.9 Completion of Project
The Authority shall be satisfied that the Project has been
completed substantially in accordance with the Loan Application and the Loan
Authorization.
3.10 DPUC Approvals
The Company shall have obtained favorable final decisions from
the DPUC with respect to the Company's application to the DPUC to undertake the
Loan and concurrent financing in the amount of $1,250,000.00 (the "Citizens Bank
Loan"), and the Company's application to the DPUC to amend its rates. Each such
final decision shall be satisfactory in form and substance to the Authority and
shall include no burdensome conditions or restrictions. A certified copy of each
such final decision shall be furnished by the Company to the Authority at the
Closing. The Company shall also have furnished to the Authority certification
from the DPUC that the costs of the Project are reasonable.
3.11 Site Plan and Zoning Compliance
If required by the Authority, the Company shall have furnished
the Authority with a site plan locating the Project in place, together with a
certificate from the zoning enforcement officer of the town in which the Project
is located to the effect that the Project is in compliance with the state
building code and all local land use regulations, including those relating to
zoning, subdivisions and inland wetlands.
3.12 Insurance
The Company and the Guarantor each shall have furnished the
Authority with a lender's certificate of insurance and copies of the policies of
insurance referred to therein, establishing to the satisfaction of the Authority
that the Company and the Guarantor each has obtained property and liability
insurance in such amounts and with such coverages as is customary and reasonable
for similarly situated, investor-owned water companies from such insurers as
shall be reasonably satisfactory to the Authority. The Authority shall be named
under standard, non-contributory mortgagee and loss payee clauses with respect
to the Company's Property and the Guarantor's Property.
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3.13 Good Standing Certificates; Tax Clearances
The Company shall furnish the Authority with:
(a) reasonably current long-form certificates of the Secretary of the
State of Connecticut with respect to the corporate existence and good standing
of the Company and the Guarantor;
(b) a reasonably current certificate of the DPUC to the effect that the
Company is a public service company subject to DPUC jurisdiction and has filed
all required annual reports and is in good standing with the DPUC;
(c) a letter from the tax collector of each town in which Property of
the Company and the Guarantor is located confirming that the Company and the
Guarantor are current in the payment of all municipal real and personal property
taxes assessed against them there; and
(d) a letter from the Department of Revenue Services of the State of
Connecticut confirming that the Company and the Guarantor has filed all
corporation business tax returns and gross earnings tax returns required to the
date thereof and has paid the taxes shown as due thereon.
3.14 Affirmative Action Plan
The Company shall have filed with the Authority and the Authority shall
have approved an appropriate Affirmative Action Plan for the Company.
3.15 Commitment Fee
Any balance owing with respect to the commitment fee due to the
Authority from the company pursuant to the terms of the Loan Authorization shall
have been paid.
3.16 Compliance with Loan Authorization
Except to the extent expressly modified by this Agreement, the Company
and the Guarantor each shall have performed and complied with all agreements and
conditions contained in the Loan Authorization which are required to be
performed or complied with before or at the Closing.
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3.17 Proceedings Satisfactory
All proceedings taken in connection with the transactions contemplated
by this Agreement and all documents relating to the transactions contemplated by
this Agreement shall be satisfactory to the Authority and its special counsel.
The Authority shall have received such additional documents not inconsistent
with the terms of this Agreement as the Authority or its special counsel may
reasonably request.
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SECTION 4
WARRANTIES AND REPRESENTATIONS
OF THE COMPANY AND GUARANTOR
The Company and Guarantor each hereby represents and warrants as follows:
4.1 Corporate Existence and Authority
(a) The Company and the Guarantor each is a validly organized and
existing corporation in good standing under the laws of the State of Connecticut
and is not in violation of any provisions of its, charter, certificate of
incorporation or bylaws.
(b) The execution, delivery and performance of the Financing Documents
are within the corporate powers of the Company and the Guarantor, have been duly
authorized and approved by the boards of directors of the Company and the
Guarantor, and require no stockholder approval or other corporate authorization.
(c) The Company is a "public service company" and a "water company"
within the meaning of Section 16-1 of the General Statutes, subject to the
jurisdiction of the DPUC. The Company is current in filing all required reports
and financial statements and is in good standing with the DPUC.
(d) The Company is legally authorized to own and operate its
properties, to lay and maintain its mains and to supply water for public and
domestic use in the town(s) of Killingly, Brooklyn, Thompson and Plainfield, and
the Company is the sole company supplying water for such use in said town(s).
(e) The Company has valid and sufficient franchises to engage in the
taking, collection, distribution and sale of water in the area served by it, the
right to install and maintain pipes and conduits in public highways and grounds,
and the power of eminent domain, which franchises, right and power are free from
burdensome restrictions and unlimited as to time.
4.2 Enforceability of Financing Documents; No Prohibition or Consent
(a) The Financing Documents constitute valid and legally binding
agreements of the Company and the Guarantor, enforceable in accordance with
their respective terms.
(b) Neither the execution and delivery of the Financing Documents, the
consummation of the transactions contemplated thereby, nor the fulfillment by
the Company and the Guarantor of or compliance by the Company and the Guarantor
with the terms and conditions thereof is in contravention of the Company's or
the Guarantor's certificate of incorporation, charter or bylaws or any
applicable law, regulation, order or
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judgment, or is prevented or limited by or conflicts with or will result in a
breach of or default under the terms, conditions or provisions of any
contractual or other restriction on the Company or the Guarantor, evidence of
its indebtedness or agreement or instrument of whatever nature to which the
Company or the Guarantor is a party or by which it or any of its Property is
bound. No event has occurred and no condition exists which, upon the execution
and delivery of any of the Financing Documents, would constitute a Default.
(c) There is no action or proceeding pending or, to the knowledge of
the Company or the Guarantor, threatened against or affecting the Company or the
Guarantor before any court, administrative agency or arbitration board that
would materially and adversely affect the ability of the Company or the
Guarantor to perform its obligations under the Financing Documents. All
authorizations, approvals and consents of governmental bodies or agencies
required in connection with the execution, delivery and performance of the
Financing Documents have been obtained, and no authorization, approval or
consent of any other Person is required therefor.
4.3 DPUC Approvals
(a) The DPUC, by final decision dated November 20, 1989 approved an
amended schedule of rates for the Company allowing the costs of the Project to
be included in the Company's rate base and designed to produce increases in the
Company's annual revenues of approximately $238,973.
(b) The DPUC, by final decision dated November 20, 1989, approved the
Loan, including the grant by the Company to the Authority of a security interest
in its Property as contemplated by the Mortgage, and approved the Citizens Bank
Loan.
4.4 Eligibility of the Company
(a) The Company is a "water facility" as defined in Section 32-23x of
the General Statutes. All of the outstanding capital stock of the Company is
owned by the Guarantor.
(b) The Company provides water service on a daily basis to at least
twenty-five but fewer than ten thousand customers.
(c) The Company is subject to the provisions of the Safe Drinking Water
Act. The Project was necessary in order that the Company might comply with the
provisions of the Safe Drinking Water Act and of an order of the Department of
Health Services deeming the water supplied by the Company to be inadequate. The
Project has been satisfactorily completed, and by virtue thereof the Company now
is in compliance with the provisions of the Safe Drinking Water Act and such
order.
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4.5 Use of Proceeds
All of the proceeds of the Loan will be used by the Company to pay the
costs of planning, design, modification or construction of eligible drinking
water facilities within the meaning of the Act.
4.6 Real Estate
Except as set forth in Exhibit I to this Agreement, none of the
Company's or the Guarantor's Real Estate is subject to any Lien which either (a)
secures an obligation with respect to borrowed money or (b) is of a nature or
character which materially impairs the value of the Real Estate or interferes
with the use of the Real Estate in the Company's or the Guarantor's operations.
4.7 Transmission Rights
The Company has Transmission Rights sufficient to permit it adequately
to serve the town(s) of Killingly, Brooklyn, Thompson and Plainfield. The
Company's Transmission Rights are free from burdensome restrictions and are
unlimited as to time.
4.8 Property
The Company and the Guarantor each owns all Property which it purports
to own and which is used by it in the conduct of its business. None of its
Property is subject to any Lien, except as set forth in Exhibit J to this
Agreement.
4.9 Perfection and Priority of Mortgage
The Mortgage has been duly recorded with the Town Clerk of the town(s)
of Killingly, Brooklyn, Thompson and Plainfield, and the Guaranty Mortgage has
been duly recorded with the Town Clerk of the town of Killingly. Financing
Statements naming the Company as debtor and the Authority as secured party, and
describing the Company's Property as collateral, have been filed with the office
of the Secretary of the State of Connecticut and the Town Clerk of the towns of
Killingly, Brooklyn, Thompson and Plainfield. Financing Statements naming the
Guarantor as debtor and the Authority as secured party, and describing the
Guarantor's Property as collateral, have been filed with the Office of the
Secretary of the State of Connecticut and the Town Clerk of the town of
Killingly. No further action is necessary to perfect or make effective the
security interest in the Property of the Company and the Guarantor intended to
be created by the Mortgage and the Guaranty Mortgage, and the Mortgage and
Guaranty Mortgage create valid and direct liens on all of the Property of the
Company and the Guarantor, respectively, subject only to those Liens
contemplated by this Agreement or described in an Exhibit attached hereto.
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4.10 Compliance with Laws
The Company and Guarantor each is in compliance with all applicable
federal, state and local laws and regulations affecting it, its Property and its
business, including those relating to land use, including zoning, subdivision
and inland wetlands; health; occupational safety; and environmental quality.
4.11 No Litigation
There is no action or proceeding pending or, to the knowledge of the
Company or the Guarantor, threatened against or affecting the Company or the
Guarantor before any court, administrative agency or arbitration board.
4.12 Burdensome Contracts
Neither the Company nor the Guarantor is a party to any burdensome
contract or agreement which could or might materially and adversely affect its
business operations or financial condition.
4.13 Taxes
All tax returns required to be filed by the Company and the Guarantor
in any jurisdiction have in fact been filed, and all taxes, assessments, fees
and other governmental charges upon the Company and the Guarantor, or upon any
of their Property, income or franchises which are due and payable have been
paid. Each of the Company and the Guarantor knows of no proposed additional tax
assessment against it, and each has adequately provided or reserved on its books
for taxes for all open years and for its current fiscal year.
4.14 Financial Statements; No Adverse Change
(a) The financial statements of the Company and the Guarantor furnished
to the Authority as part of the Loan Application or thereafter in connection
with the Loan have been prepared in accordance with generally accepted
accounting principles and present in a complete and fair manner the financial
position of the Company and the Guarantor, respectively, and the results of
their operations for the fiscal periods covered thereby.
(b) Since the end of the last fiscal period for which financial
statements have been furnished to the Authority, there has been no material and
adverse change in the Company's and the Guarantor's business, Property or
financial condition.
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SECTION 5
COVENANTS OF THE COMPANY AND THE GUARANTOR
The Company and Guarantor each covenants that on and after the Closing
Date, and for so long as any part of the Indebtedness shall remain outstanding:
5.1 Payment of Loan
The Company will pay the Note according to its terms and the Company
and Guarantor each will comply with each provision of this Agreement and each
provision of the other Financing Documents binding upon it.
5.2 Expenses and Additional Indebtedness
(a) The Company and the Guarantor (promptly, and in any event within
thirty (30) days of receiving any invoice, statement or demand therefor) will
pay all of the out-of-pocket expenses of the Authority, including the reasonable
fees and disbursements of special counsel to the Authority, relating to:
i) this Agreement and the transactions contemplated hereby,
including the Closing;
ii) perfecting, sustaining or defending the security interest
of the Authority in the Company's and the Guarantor's Property;
iii) protecting, maintaining and preserving the Company's and
the Guarantor's Property following an Event of Default, including the payment by
the Authority as deemed necessary by it in its sole discretion of insurance
premiums, taxes, expenses of maintenance and repair, and the fees and
disbursements of custodians, receivers, appraisers, liquidators and others
retained with respect to the Property; and
iv) collection of the Note and enforcement of the rights of
the Authority under the Financing Documents following an Event of Default,
including foreclosure of the Mortgage or the Guaranty Mortgage.
(b) The Company and the Guarantor shall pay the reasonable fees and
expenses of special counsel to the Authority in connection with the preparation
of the Financing Documents whether or not the Loan is made.
(c) Amounts due to the Authority under this Section 5.2 remaining
unpaid thirty (30) days after the Company has received an invoice, statement or
demand therefor shall bear interest at the rate provided for in the Note and
shall be considered an addition to the principal balance on the Note, secured by
and entitled to the benefit of the Mortgage.
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5.3 Indemnification
The Company and Guarantor each, jointly and severally, agrees to
protect, defend and hold harmless the Authority and the members, officers and
employees thereof from any claim, demand, suit, action or other proceeding
whatsoever by any Person, arising or purportedly arising from or in connection
with the Financing Documents, the transactions contemplated thereby or actions
taken thereunder (except for any willful misconduct or gross negligence of any
such indemnified party), or the construction, use or operation of the Project.
5.4 Corporate Existence and Authority
(a) The Company will maintain its corporate existence in Connecticut
and its status as a "public service company" and a "water company" within the
meaning of Section 16-1 of the General Statutes and as a "water facility" within
the meaning of the Act, and will preserve and keep in existence all of its
rights and franchises. The Guarantor will maintain its corporate existence in
Connecticut.
(b) Without the prior written consent of the Authority, neither the
Company nor the Guarantor will consolidate with, merge with or into or sell or
transfer all or a significant part of their Property to any other Person, or
issue any additional shares of their capital stock.
5.5 DPUC and Department of Health Services Compliance
(a) The Company will file with the DPUC in a timely fashion all
required reports and financial statements and will comply with all laws and
regulations relating to its status as a public service company and all DPUC
decisions, rulings, and orders applicable to the Company.
(b) The Company will comply with all laws and regulations administered
by the Department of Health Services and applicable to the Company, and all
applicable orders of the Department of Health Services.
5.6 Taxes
The Company and the Guarantor each will file in a timely fashion all
tax returns required of it in any jurisdiction and will pay, before they become
delinquent, all taxes, assessments, fees and other governmental charges upon it,
or upon any of its Property, income or franchises; provided that such items need
not be paid while being contested by it in good faith and by appropriate legal
proceedings so long as adequate book reserves have been established with respect
thereto and its title to, and its right to use, its Property is not materially
and adversely affected thereby.
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5.7 Maintenance of Property and Insurance
(a) The Company and the Guarantor each will maintain its Property in
good condition and make all necessary renewals, replacements, additions,
betterments and improvements thereto, and the Company will maintain Transmission
Rights sufficient adequately to provide water to its service area.
(b) The Company and the Guarantor will maintain, with such insurers as
shall be reasonably satisfactory to the Authority, casualty and liability
insurance in such amounts and with such coverages as is customary and reasonable
for similarly situated companies. Without limiting the foregoing, the Company
shall maintain casualty insurance with respect to its Property in an aggregate
amount not less than the outstanding principal balance of the Loan, and public
liability insurance with an aggregate limit not less than $1,000,000.
5.8 Liens
The Company and the Guarantor each will not agree to, cause, or permit
any of its Property to be subject to any Lien, except:
(a) Liens contemplated by this Agreement or described in an Exhibit
attached hereto;
(b) Liens securing taxes, assessments, fees or governmental charges,
provided the payment thereof is not required by Section 5.6;
(c) attachments, judgments and other similar Liens arising in
connection with court proceedings, provided the execution or other enforcement
of such Liens is effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings; and
(d) reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other similar title exceptions
or encumbrances affecting Real Estate, provided they neither (i) secure an
obligation with respect to borrowed money, nor (ii) are of a nature or character
which materially impairs the value of the Real Estate or interferes with the use
of the Real Estate in the Company's or the Guarantor's operations.
5.9 Compliance with Laws
The Company and the Guarantor each will comply with all applicable
federal, state and local laws and regulations affecting it, its Property and its
business, including those relating to land use, including zoning, subdivision
and inland wetlands; health; occupational safety; and environmental quality.
21
<PAGE> 26
5.10 Financial Statements
(a) The Company and the Guarantor each will at all times keep accurate
and complete records and books of account with respect to all of the its
business activities, in accordance with sound accounting practices and generally
accepted accounting principles, such records and accounts to be maintained at
the address set forth on the first page of this Agreement.
(b) The Company and Guarantor each shall furnish to the Authority (i)
within 90 days after the end of each fiscal year, its balance sheet as of the
end of such fiscal year, and the related statements of earnings and retained
earnings and changes in financial position for the year then ended, setting
forth in each case in comparative form the corresponding figures for the
preceding fiscal year in reasonable detail, including all supporting schedules
and comments, all of which shall be prepared in accordance with generally
accepted accounting principles consistently maintained, and certified by
independent public accountants of recognized standing, satisfactory to the
Authority; (ii) within 90 days after the end of each fiscal year, a statement
from its independent public accountants indicating that, in the preparation of
such statements, said accountants have obtained no knowledge of any default in
any obligation to the Authority, or disclosing all defaults of which the
accountants have obtained knowledge; (iii) such quarterly financial statements
as the Authority may from time to time request; and (iv) such other financial
information and statements relating to the Company or the Guarantor as the
Authority reasonably may request.
(c) The Authority, or any Person designated by it, shall have the right
(to be exercised in a reasonable manner), from time to time, to call at the
Company's and Guarantor's place or places of business during reasonable business
hours, and, without hindrance or delay, to inspect, audit, check and make
extracts from the books, records, journals, orders, receipts and any
correspondence and other data relating to the Company's or the Guarantor's
business or to any transactions between the parties hereto, and shall have the
right to make such verification concerning the Company's and the Guarantor's
Property as the Authority may consider reasonable under the circumstances, all
at the Company's expense.
(d) The Company shall deliver to the Authority copies of all financial
statements, reports, rate requests, applications or other filings with the DPUC
within 15 days of such filing and, within 15 days of receipt, copies of all DPUC
rulings and orders with respect to the Company.
(e) The Company and the Guarantor each shall deliver to the Authority
copies of all reports or other communications to its shareholders within 15 days
of the mailing thereof.
22
<PAGE> 27
5.11 Protection of Mortgage and the Guaranty Mortgage
The Company and the Guarantor each from time to time as the Authority
may request will execute such additional financing statements, certificates and
other documents as the Authority reasonably may require in order to continue in
effect, perfect, preserve, and maintain the priority of the security interest
intended to be afforded by the Mortgage and the Guaranty Mortgage.
5.12 Default Notification
Upon becoming aware of the existence or occurrence of a Default under
this Agreement, the Company or the Guarantor immediately shall provide to the
Authority written notice identifying the Default and specifying the corrective
action it is taking with respect thereto.
23
<PAGE> 28
SECTION 6
DEFAULT AND REMEDIES
6.1 Events of Default
Each of the following is an Event of Default under this Agreement:
(a) the failure of the Company to make payment of any installment of
principal and/or interest due under the Note within ten (10) days of its due
date;
(b) the failure of the Company or the Guarantor to pay any amount due
the Authority pursuant to Section 2.5, Section 5.2 or Section 5.3 or any other
Indebtedness within the time prescribed by this Agreement, and if no time is
prescribed, within thirty (30) days of demand therefor made by the Authority;
(c) the failure of the Company or the Guarantor to keep in force any
insurance required by this Agreement or any of the other Financing Documents;
(d) the actual or threatened waste, removal or demolition of, or
material alteration to any significant part of the Company's or the Guarantor's
Property;
(e) the inaccuracy in any material respect of any representation made
by or on behalf of the Company or the Guarantor in the Loan Application, this
Agreement Or any of the other Financing Documents;
(f) the material breach by the Company or the Guarantor of any its
warranties in Section 4 of this Agreement;
(g) the failure, for thirty (30) days after notice thereof from the
Authority, of the Company or the Guarantor to observe or perform any other
covenant or agreement in this Agreement, including but not limited to Section 5,
or in any of the other Financing Documents;
(h) without the prior written consent of the Authority, a change in the
stock ownership or control of the Company or the Guarantor;
(i) any default or event of default under any note, mortgage, security
agreement or other instrument evidencing, securing or guarantying the Citizens
Bank Loan or any modification, supplement or refinancing thereof;
(j) the failure, for thirty (30) days after notice thereof from the
Authority, of the Company or the Guarantor to observe and perform any of its
covenants or agreements under any other note, mortgage, security agreement or
other instrument evidencing, securing or guaranteeing a debt of the Company or
the Guarantor, other than the Loan
24
<PAGE> 29
(including, without limitation, the Citizens Bank Loan) to any Person, or the
acceleration after default in the payment of any indebtedness due thereunder;
(k) the failure of the Company or the Guarantor generally to pay its
debts as such debts become due;
(1) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Company or the Guarantor in an involuntary case
under the federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, or the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or the Guarantor or for any
substantial part of the its property, or the issuance of an order for the
winding-up or liquidation of the affairs of the Company or the Guarantor and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; or upon the commencement by the Company or the Guarantor of
a voluntary case under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency or
other similar law, or the consent by the Company or the Guarantor to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of the Company or
the Guarantor or for any substantial part of the property of the Company or the
Guarantor or the making by the Company or the Guarantor of any assignment for
the benefit of creditors, or the taking of corporate action by the Company or
the Guarantor in furtherance of any of the foregoing;
(m) the revocation under Section 16-10a of the General Statutes of all
or any part of the Company's franchise to operate as a public service company;
(n) without the prior written consent of the Authority, the filing by
the Company with the DPUC pursuant to Section 16-43 or Section 16-46 of the
General Statutes of any application to merge or consolidate, sell, lease,
assign, mortgage or dispose of an essential part of its franchise or Property,
or dissolve or terminate its corporate existence; and
(o) an Event of Default under any other Financing Document.
6.2 Remedies upon Event of Default
In addition to, and not in limitation of, any other term of this
Agreement or any other right or remedy hereunder or in accordance with law, upon
the occurrence of any Event of Default:
(a) the whole of the principal sum and accrued interest on the Note,
and all other Indebtedness, at the option of the Authority and without notice,
demand or legal process of any kind, shall become immediately due and payable;
25
<PAGE> 30
(b) the Authority may proceed to enforce the performance or observance
of any obligations, agreements, or covenants of the Company or the Guarantor in
this Agreement or any of the other Financing Documents, to collect the amounts
then due and thereafter to become due, and to foreclose the Mortgage or the
Guaranty Mortgage, or the Stock Pledge, or otherwise enforce and realize upon
its security interest in the Company's or the Guarantor's Property; and
(c) in connection with any of the foregoing, the Authority may from
time to time exercise any rights and remedies and take any action available to
it at law or in equity, including the Uniform Commercial Code, in addition to
and not in lieu of, any rights and remedies provided for in this Agreement or in
any of the other Financing Documents.
6.3 Reinstatement
In the event that any Event of Default is waived in writing by the
Authority, then such Event of Default shall be annulled and the parties hereto
shall be restored to their former rights hereunder, but no such waiver shall
extend to any subsequent or other Event of Default or impair any other right of
the Authority.
6.4 Marshalling
The Authority shall not be compelled to release, or be prevented from
foreclosing or enforcing the Mortgage upon all or any part of the Company's
Property or the Guaranty Mortgage upon all or any part of the Guarantor's
Property unless the entire Indebtedness shall be paid, and shall not be required
to accept any part of the Company's or the Guarantor's Property, as
distinguished from the whole, as payment of or upon the Indebtedness or to allow
any apportionment of the Indebtedness to or among any separate parts of the
Company's or the Guarantor's Property.
6.5 Partial Release
The Authority, without notice, and without regard to the consideration,
if any, paid therefor, and notwithstanding the existence at that time of any
inferior liens thereon, may release any part of the Company's or Guarantor's
Property from its security interests or any Person primarily or contingently
liable for the Indebtedness, or may agree to extend the time for payment
thereof, without in any way affecting the existence or priority of its security
interest or the liability of any Person not expressly released.
6.6 No Waiver
No delay or failure on the part of the Authority in the exercise of any
right or remedy under this Agreement or any of the other Financing Documents
shall operate as a waiver thereof, and no single or partial exercise by the
Authority of any such right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy.
26
<PAGE> 31
6.7 Remedies Cumulative
The rights and remedies provided in this Agreement and the other
Financing Documents are cumulative and the Authority may recover judgment
thereon, issue execution therefor, and resort to every other right or remedy
available at law or in equity, without first exhausting and without impairing or
affecting the security of or any right or remedy afforded by this Agreement or
any of the other Financing Documents, and no enumerated or special rights or
powers herein shall be construed to limit any grant of general rights or powers
or take away or limit any rights of the Authority under applicable law.
6.8 Waiver of Rights
THE COMPANY AND THE GUARANTOR EACH ACKNOWLEDGES THAT THE TRANSACTION
CONTEMPLATED BY THIS AGREEMENT IS A COMMERCIAL TRANSACTION, AND VOLUNTARILY AND
KNOWINGLY WAIVES ANY RIGHT IT MAY HAVE TO NOTICE AND HEARING UNDER CHAPTER 903A
OF THE GENERAL STATUTES OR AS OTHERWISE ALLOWED BY LAW WITH RESPECT TO ANY
PREJUDGMENT REMEDY.
27
<PAGE> 32
SECTION 7
MISCELLANEOUS
7.1 Governing Laws
This Agreement and each of the other Financing Documents shall be
governed and construed in accordance with the laws of the State of Connecticut.
7.2 Notices
Notices and other communications under this Agreement or any of the
other Financing Documents shall be deemed sufficiently given when personally
delivered or when mailed by registered or certified mail, postage prepaid,
addressed as follows:
(a) if to the Authority:
Connecticut Development Authority
217 Washington Street
Hartford, CT 06106
Attention: Water Company Loans
or to such other address as the Authority shall have furnished
in writing to the Company, or
(b) if to the Company or Guarantor at:
321 Main Street
P.O. Box 648
Danielson, CT 06239
or to such other address as the Company or the Guarantor shall
have furnished in writing to the Authority.
7.3 Amendment and Waiver
(a) This Agreement and any of the other Financing Documents may be
amended, and the observance of any provision hereof or thereof may be waived,
but only by an appropriate instrument in writing signed, in the case of an
amendment, by all of the parties hereto, and in the case of a waiver, by the
party against whom the waiver is to operate.
28
<PAGE> 33
(b) No such amendment or waiver shall extend to or affect any provision
of this Agreement or any of the other Financing Documents, or any Default or
Event of Default, not expressly amended or waived.
7.4 Duplicate Originals
This Agreement and each of the other Financing Documents may be signed
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
7.5 Severability
If any provision of this Agreement or any of the other Financing
Documents or the application thereof to any Person or circumstance, shall to any
extent be invalid or unenforceable, the remainder of this Agreement or such
Financing Document, or the application of such provision to other Persons or
circumstances, shall not be affected thereby, and each provision shall be valid
and enforceable to the fullest extent permitted by law.
7.6 Binding Effect
This Agreement and each of the other Financing Documents shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
7.7 Term of this Agreement
This Agreement and the other Financing Documents shall continue in full
force and effect as long as any Indebtedness remains outstanding.
29
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
ATTEST [SEAL] THE CRYSTAL WATER COMPANY
OF DANIELSON
By: /s/ Randolph Kempain By: /s/ Roger Engle
---------------------- -----------------
Randolph Kempain Roger Engle
Its Secretary Its President
ATTEST [SEAL] CRYSTAL WATER UTILITIES
CORPORATION
By: /s/ Randolph Kempain By: /s/ Roger Engle
---------------------- -----------------
Randolph Kempain Roger Engle
Its Secretary Its President
CONNECTICUT DEVELOPMENT
AUTHORITY
By: /s/ Brian Day
---------------
Its Loan Officer
30
<PAGE> 1
Exhibit 4.10
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT made this 9th day of February, 1996, between THE CRYSTAL
WATER COMPANY OF DANIELSON, a public service company specially chartered by the
General Assembly of the State of Connecticut whose principal place of business
is P.O. Box 648, 321 Main Street, Danielson, Connecticut (the "Debtor"), and NEW
LONDON TRUST, F.S.B., a federal savings bank organized and existing under the
laws of the United States of America and having an office at 203 Main Street,
Danielson, Connecticut 06239 (the "Secured Party").
WITNESSETH:
In consideration of the mutual covenants and agreements contained herein
and for other good and valuable consideration, receipt of which is hereby
acknowledged, Debtor and Secured Party agree as follows:
1. COMMERCIAL MORTGAGE LOAN. Subject to the terms and conditions
contained in this Agreement, Secured Party agrees to make a commercial mortgage
loan (the "Loan") to Debtor in the principal amount of TWO MILLION SEVEN HUNDRED
THOUSAND DOLLARS ($2,700,000). In addition to this Agreement, the Loan shall be
evidenced by the Mortgage Note (the "Note"), a copy of which is attached hereto
as Exhibit A. The Loan will be payable in principal installments as set forth in
the Note.
2. INTEREST RATE. The Loan shall bear interest at the rates set forth
and described in the Note.
3. USE OF LOAN PROCEEDS. Loan proceeds shall be used to refinance
existing indebtedness with Citizens National Bank and The Connecticut
Development Authority ("CDA").
4. SECURITY INTEREST. To secure payment and performance of each and all
of the Obligations, Debtor hereby assigns and grants to Secured Party a
continuing security interest in all tangible and intangible personal property of
Debtor, including, without limitation, Accounts, Chattel Paper, Equipment,
General Intangibles, Instruments, and Inventory, together, in each instance,
with the renewals, substitutions, replacements, additions, accessories, rental
payments, products and proceeds (including, without limitation, insurance
proceeds) thereof, (hereinafter, collectively called the "Collateral").
5. DEFINITIONS.
(a) The term "Accounts" shall mean, any right to payment held
by Debtor, whether in the form of accounts receivable, notes, drafts,
acceptances or other forms of obligations and receivables now or hereafter
received by or belonging to Debtor for Inventory sold or leased by it or for
services rendered by it whether or not earned by performance, together with all
guarantees and security therefor and all proceeds thereof, whether cash proceeds
or otherwise, including, without limitation, all right, title and interest of
Debtor in the Inventory which gave rise to any such Accounts, including, without
limitation, the right of stoppage in transit and all returned, rejected,
rerouted or repossessed Inventory;
(b) The term "Chattel Paper" shall mean a writing or writings
which evidence both a monetary obligation and a security interest in or a lease
of specific goods, whether now or hereafter held by Debtor;
(c) The term "Equipment" shall mean all the machinery,
equipment, furniture, tools, goods and other tangible personal property,
excluding Motor Vehicles and Inventory, now owned or hereafter acquired by
Debtor;
<PAGE> 2
(d) The term "Financing Agreements" shall mean all agreements,
notes, instruments, mortgages, security agreements and documents evidencing,
securing or relating in any way to any and all loans, overdrafts, indebtedness,
obligations, guaranties and liabilities of Debtor or any guarantor of the Loan
to Secured Party of every kind and description, direct or indirect, absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising, including without limitation, this Agreement and the Note;
(e) The term "General Intangibles" shall mean any intangible
personal property (including, without limitation, things in action) now or
hereafter held by Debtor, other than Accounts, Chattel Paper and Instruments;
(f) The term "Guarantor" shall mean Crystal Water Utilities
Corporation.
(g) The term "Instruments" shall mean a negotiable instrument
or a certificated security, as defined in the Uniform Commercial Code of
Connecticut, or any other writing which evidences a right to the payment of
money and is not itself a security agreement or lease and is of a type which, in
the ordinary course of business, is transferred by delivery with any necessary
endorsement or assignment, whether now or hereafter held by Debtor;
(h) The term "Inventory" shall mean all goods, merchandise,
raw materials, work in process, finished goods and products and other tangible
personal property now owned or hereafter acquired by Debtor and held for sale or
lease, or furnished or to be furnished under contracts of service or used or
consumed in Debtor's business;
(i) The term "Loan Account" shall mean the account on the
books of Secured Party in which will be recorded the Loan made by Secured Party
to Debtor pursuant to this Agreement, payments made on the Loan, and other
debits and credits as provided by this Agreement;
(j) The term "Obligations" shall mean any and all loans,
overdrafts, indebtedness, obligations, guaranties and liabilities of Debtor to
Secured Party of every kind and description, direct or indirect, absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising, regardless of how they arise or by what agreement or
instrument they may be evidenced or whether evidenced by any agreement or
instrument, including, but not limited to, the Loan, and all costs, expenses,
fees, charges and attorneys' and other professional fees incurred by Secured
Party in connection with any of the foregoing, or in any way connected with or
related to the preservation, realization, enforcement, protection or defense of
the Collateral, this Agreement, the Note, and the other Financing Agreements,
and the rights and remedies hereunder or thereunder;
(k) The term "Subordinated Debt" shall mean such of the
liabilities of Debtor with respect to which payment has been subordinated to the
payment of the Obligations pursuant to a subordination agreement in form and
substance satisfactory to the Secured Party.
6. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to
Secured Party that:
(a) Financial Statements. The financial statements, as of
December 31, 1994 and prepared by David R. Daggett, previously furnished to
Secured Party, present fairly in all material respects the financial position at
such date and the results of operations of Debtor as of and for the periods then
ending, in conformity with generally accepted accounting principles, there has
been no material adverse change in the financial condition of Debtor since the
date thereof, and there are no liabilities, fixed or contingent, not disclosed
in such statements, except as incurred in the ordinary course of business since
the date thereof.
<PAGE> 3
(b) Business/Annual Report. Debtor's regular annual report and
its audited financial report to the Department of Public Utility Control of the
State of Connecticut ("DPUC") for its fiscal year ended December 31, 1994,
correctly describes the business, financial condition and properties of Debtor,
and the financial statements contained therein have been prepared in accordance
with generally accepted accounting principles, except to the extent such
principles are modified in accordance with the Uniform System of Accounts for
Class A Utilities duly adopted by the DPUC and then in effect.
(c) Ownership of Assets. Debtor has good and marketable title
to its assets, free from any liens, mortgages, security interests, pledges or
encumbrances, except: (i) as permitted in Section 8(a) hereof, and (ii) as shown
on Exhibit B attached hereto. Except as shown on Exhibit B, no financing
statements covering all or any part of Debtor's assets are on file in the office
of the Secretary of the State of Connecticut or in any other federal, state or
local governmental office, whether or not properly filed under applicable law.
(d) Corporate Organization. Debtor is, and will continue to
be, a corporation duly organized, validly existing and in good standing as a
public service company under the laws of the State of Connecticut, and is, and
will continue to be, duly qualified as a foreign corporation in good standing in
every jurisdiction in which such qualification is necessary. Debtor has
corporate power to enter into the Financing Agreements and to borrow hereunder,
and has all requisite authorizations and permits to own and operate Debtor's
properties and assets and to carry on Debtor's business as now being conducted.
(e) Litigation: Taxes. There are no actions, suits,
proceedings, or investigations pending, or judgments or orders outstanding, or,
to the knowledge of Debtor, threatened against Debtor, which, if adversely
decided against Debtor, could have a material adverse effect on the condition,
operations or prospects (financial or otherwise) of Debtor, and Debtor has filed
all required federal, state and local tax returns, and has paid all taxes as
shown on such returns, and has provided adequate reserves for payment of any tax
which is being contested.
(f) Authority. The execution, delivery and performance of this
Agreement, the Note, and each and every other agreement, instrument and document
required to be executed or delivered to Secured Party by Debtor in connection
with the Loan have been duly authorized by all necessary corporate action; the
execution, delivery and performance of said agreements, instruments and
documents, the consummation of the transactions therein contemplated, and the
fulfillment of or compliance with the terms and provisions therein, are within
Debtor's powers and are not in contravention of any provisions of Debtor's
Certificate of Incorporation/Charter or By-Laws. The execution, delivery and
performance of said agreements, instruments and documents will not result in a
violation of any laws, or a breach of, or constitute a default under, or result
in the creation of any lien, charge or encumbrance upon any of Debtor's assets
(other than the security interest granted to Secured Party hereunder) pursuant
to any of the terms, conditions or provisions of any agreement, instrument or
other undertaking to which Debtor is a party or by which Debtor is bound. No
consent, approval, authorization or other order of, or registration or filing
with any governmental body is required in connection with the execution,
delivery and performance of said agreements, instruments and documents.
(g) Defaults. Debtor is not in default under any agreement,
indenture, mortgage, deed of trust, or any other agreement or any court order or
other order issued by any governmental body to which Debtor is a party or by
which Debtor may be bound.
(h) Environmental, Health, Safety Laws. Debtor has not
received any notice, order, petition or similar document in connection with or
arising out of any violation of any environmental, health or safety law,
regulation, rule or order, and Debtor knows of no basis for any claim of such a
violation or of any threat thereof.
(i) Other Laws. Debtor is not in violation of any law,
regulation, rule or order including, but not limited to, the laws, regulations,
rules and orders described in subparagraph (g) above, which violation materially
and adversely affects the financial condition of Debtor or the ability of Debtor
to perform hereunder.
<PAGE> 4
(j) Business Location. The Collateral, the books and records
relating thereto, and the principal place of business of Debtor are all at the
address of Debtor first written above.
(k) Business Name. The name of Debtor has not changed for at
least the past ten (10) years and during such period, Debtor has conducted, and
currently conducts, its business solely in its own name without the use of a
tradename or the intervention of or through any entity of any kind, except as
shown on Exhibit B.
(l) Water Company, Franchise Area. Debtor is a water company
within the meaning of Section 16-1 (10), and conducts its business as such only
in the Connecticut Towns of Killingly, Plainfield, Thompson and Brooklyn.
(m) Permissible CDA Indebtedness. Secured Party has agreed to
accept liens on the Collateral, as well as liens on certain real estate and
properties located in the Towns of Killingly, Brooklyn and Thompson,
respectively, owned by Debtor and property located at 321 Main Street,
Danielson, Connecticut owned by Guarantor (collectively, the "Real Estate
Collateral") reportedly subordinate to liens of the CDA only (the "CDA Liens").
Debtor hereby represents that the CDA Liens secure the repayment of indebtedness
in favor of the CDA in the present amount of $562,157.00 (the balance as of
fiscal year end December 31, 1994 and hereinafter referred to as the "Current
CDA Debt"). Debtor hereby acknowledges that Secured Party has agreed to
subordinate its liens and security interests to the CDA Liens only (that secure
the Current CDA Debt) and to no other liens whatsoever.
7. AFFIRMATIVE COVENANTS. Debtor covenants and agrees that, from the
date hereof until payment in full of the Loan and payment and performance of all
the Obligations, unless Secured Party otherwise agrees in writing, Debtor and
Guarantor (where indicated) shall:
(a) Financial Reports. Furnish to Secured Party:
(i) Within one hundred twenty (120) days after the
end of each fiscal year of Debtor and Guarantor, their respective audited
financial statements in form and substance acceptable to Secured Party, which
shall be prepared in conformity with generally accepted accounting principles,
and certified by the President or Treasurer of Debtor, as presenting fairly in
all material respects the financial position of Debtor and Guarantor, as the
case may be, as of the date of the period then ended and the results of
operations of Debtor and Guarantor, as the case may be, as of and for the
periods then ending, together with a statement that no Event of Default then
exists under this Agreement, the Note or Guarantor's guaranty.
(ii) Within thirty (30) days after the end of each
six-month period, Debtor-prepared financial statements in form and substance
satisfactory to Secured Party.
(iii) Copies of all income tax returns of the Debtor
and Guarantor, and any requests for extensions of filing deadlines, within ten
(10) days of the filing of such returns or requests for extensions.
(iv) Within fifteen (15) days of each filing date,
all reports and applications filed with the DPUC, including, without limitation,
Debtor's annual report and also any DPUC decisions concerning Debtor within
fifteen (15) days of the draft of final decision.
(v) Promptly upon Secured Party's written request,
such other information about the financial condition, operations, and business
of Debtor, or Guarantor, as Secured Party may, from time to time, request.
(b) Taxes and Other Liens. File all required federal, state
and local tax returns and pay when due all taxes, assessments and other charges
of every nature which may be levied or assessed against Debtor or its assets,
including without limitation, claims for labor, supplies and rent, except those
liabilities being contested in good faith and for which Debtor maintains
reserves in amount and form satisfactory to Secured Party.
<PAGE> 5
(c) Casualty Insurance. Keep its properties insured against
fire and other hazards (so-called "All Risk" coverage) in amounts and with
insurers satisfactory to Secured Party, which insurance shall by the terms of
the policy be payable to Secured Party as its interest may appear pursuant to a
loss payee/mortgagee clause satisfactory to Secured Party. Secured Party shall
have the right to apply the proceeds of any such insurance in reduction of the
Obligations, whether or not then due and payable, in such manner as Secured
Party in its sole discretion may determine. Without limiting the generality of
the foregoing, such insurance must provide that it may not be canceled without
30 days prior written notice to Secured Party. Debtor hereby appoints Secured
Party its attorney-in-fact, coupled with an interest, to settle, adjust and
compromise any insurance losses, to collect and receive payments of insurance,
and to endorse Debtor's name on all documents, checks and drafts in connection
therewith.
(d) Maintain Collateral. Maintain and preserve the Collateral
in good repair, working order and condition, and make all needed and proper
repairs, renewals, replacements, additions or improvements thereto, and
immediately notify Secured Party of any event causing material loss or
depreciation in the value of the Collateral and the amount of such loss or
depreciation.
(e) Inspection. Allow Secured Party by or through any of its
officers, agents, attorneys, or accountants designated by it, to enter the
offices and plants of Debtor to examine, inspect and make copies of the books
and records of Debtor and to inspect the Collateral, all at such times and as
often as Secured Party may reasonably request.
(f) Liability Insurance. Maintain general public liability
insurance against claims for personal injury, death or property damage in
respect to the Real Estate Collateral in an aggregate amount of no less than
$1,000,000, with companies satisfactory to Secured Party and in forms
satisfactory to Secured Party, and workmen's compensation insurance, employment
or similar insurance, as required by applicable law.
(g) Defend Collateral. Defend the Collateral against all
liens, claims and demands of all persons, and allow Secured Party, at the
expense of Debtor, to contest or defend any such liens, claims and demands in
Debtor's name. Cause the security interest of Secured Party to be properly noted
on all certificates of title issued or outstanding with respect to any of the
Collateral, and deposit same with Secured Party.
(h) Financing Statements. From time to time, at the request of
Secured Party, execute, deliver and file one or more financing statements,
assignments, and other agreements, instruments or documents, and amendments and
renewals thereof, and do all other acts as Secured Party deems necessary or
desirable to create and maintain a valid and enforceable second priority
security interest in the Collateral, and pay, upon demand, Secured Party's
costs, charges and expenses, including without limitation, attorneys' fees
incurred by Secured Party in connection therewith. Debtor hereby irrevocably
appoints Secured Party as Debtor's attorney-in-fact, coupled with an interest,
to execute and file one or more financing statements, amendments and renewals
thereof on Debtor's behalf.
(i) Books and Records. Maintain complete and accurate books
and records relating to its financial affairs at all times in accordance with
generally accepted accounting principles, the Collateral, the Obligations, and
Debtor's covenants hereunder.
(j) Compliance with Laws. Comply with all laws, orders, rules
and regulations applicable to Debtor of any governmental body or agency,
including without limitation, environmental and health and safety laws, orders,
rules and regulations.
(k) Notification of Default. Give prompt written notice to
Secured Party upon the occurrence of an Event of Default, or of any state of
facts which would constitute an Event of Default hereunder or, which, but for
the giving of notice or passage of time, or both, would constitute an Event of
Default.
<PAGE> 6
(l) Notification of Litigation. Give prompt written notice to
Secured Party of the commencement or threat of litigation, including arbitration
proceedings, and any proceedings before any governmental agency, or the
occurrence of any other event, which, if decided adversely to Debtor, could have
an adverse effect upon the condition, operations or prospects (financial or
otherwise) of Debtor.
(m) ERISA; Labor Disputes. Give prompt written notice to
Secured Party of: (i) any event which causes Debtor to become subject to the
Employee Retirement Income Security Act of 1974 ("ERISA") and, upon becoming
subject thereto, comply in all respects with ERISA; and (ii) any labor dispute
or controversy resulting or likely to result in a strike or work stoppage
against Debtor.
8. FINANCIAL AND OTHER COVENANTS. Debtor covenants and agrees that,
from the date hereof until payment in full of the Loan and payment and
performance of all the Obligations, unless Secured Party otherwise agrees in
writing, Debtor shall:
(a) Encumbrances. Not create or permit to exist any lien,
mortgage, encumbrance or security interest against any of its assets, whether
now owned or hereafter acquired, except for (i) security interests in favor of
Secured Party, (ii) liens for taxes not yet due and payable, (iii) pledges or
deposits in connection with or to secure worker's compensation, unemployment or
liability insurance, and (iv) the CDA Liens.
(b) Limitation on Indebtedness. Not create or assume any
liability for borrowed money from any person or entity other than Secured Party
(excluding the Current CDA Debt).
(c) Name; Collateral. Not change Debtor's name, adopt any
trade names or conduct Debtor's business under any trade name or style other
than as shown on Exhibit B, or change Debtor's place of business or the present
location of the Collateral, or any records relating to the Collateral.
(d) Margin Stock. Not use any part of the proceeds of the
Loan, directly or indirectly, for the purpose of purchasing or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System, or to extend credit to any entity or person for the
purpose of purchasing or carrying any such margin stock.
(e) Depository Accounts. Establish and maintain all of its
depository accounts with the Secured Party.
(f) Net Worth. Maintain a net worth (i.e., total assets less
total liabilities) of $500,000 or greater on an annual basis.
(g) Debt Service Coverage Ratio. Not permit its debt service
coverage ratio to fall below 1.2 at any time (debt service coverage ratio is
defined as annual net income plus depreciation, interest and deferred federal
income taxes divided by the annual debt service payment).
(h) Total Assets. Not permit its total assets to fall below
$5,000,000 at any time during the term of the Loan.
9. PAYMENTS BY SECURED PARTY. At its option, but without any liability
for failing to do so, Secured Party may pay for insurance on the Collateral and
taxes, assessments or other charges which Debtor fails to pay in accordance with
the provisions hereof, or of the other Financing Agreements, and may discharge
any security interest in or lien upon the Collateral. No such payment or
discharge of any such security interest or lien shall be deemed to constitute a
waiver by Secured Party of the violation of any covenant hereunder by Debtor as
a result of Debtor's failure to make any such payment or Debtor's suffering of
any such security interest or lien. Any payment made, or expense incurred by
Secured Party, pursuant to this or any other Section of this Agreement shall be
added to and become a part of the Obligations, shall bear interest at the
Default Rate, and shall be charged to the Loan Account.
<PAGE> 7
10. EVENTS OF DEFAULT. Secured Party shall have the right at its option
to terminate the Loan and/or declare any or all of the Obligations to be
immediately due and payable without notice upon the occurrence of any one of the
following events (each being an "Event of Default"):
(a) The failure by Debtor to pay any of the Obligations when
due, or such failure by Guarantor of any of the Obligations;
(b) The failure by Debtor or such Guarantor to observe,
perform or comply with any condition or covenant in this Agreement or any of the
other Financing Agreements;
(c) The existence of an event of default under any of the
other Financing Agreements;
(d) If any representation or warranty made by Debtor or
Guarantor in this Agreement or in any of the other Financing Agreements, or any
statement, certificate or other data furnished by Debtor or Guarantor in
connection with any of the Obligations proves to be incorrect or untrue in any
material respect when made;
(e) The entry of a judgment for the payment of money against
Debtor which remains unsatisfied and in effect for any period of thirty (30)
consecutive days without a stay of execution, or appeal;
(f) The insolvency of Debtor or Guarantor (the term
"insolvency" shall mean either a negative tangible net worth or an inability to
pay Debtor's or Guarantor's debts as they mature);
(g) The filing by or against Debtor or Guarantor of any
petition seeking an arrangement, reorganization or the like, the commencement of
any proceedings under any bankruptcy or insolvency law by or against either of
them, the adjudication of any of them as a bankrupt, the appointment of a
receiver for all or any part of their respective assets, or the making of an
assignment for the benefit of creditors, or the calling of a meeting of
creditors, or the appointment of a committee of creditors or liquidating agents,
by, for, or of either of them;
(h) The death, dissolution, liquidation, insolvency, or
termination of legal existence of Debtor or Guarantor, or merger or
consolidation of Debtor or Guarantor with or into any other person or entity;
(i) The failure by Debtor or Guarantor to pay any other
indebtedness or obligations owed to others for borrowed money (including,
without limitation, the Current CDA Debt) or if any such other indebtedness or
obligation shall be accelerated; or
(j) If, at any time, Secured Party believes in good faith that
the prospect of payment or performance of any of the Obligations is impaired, or
there is a change in the condition or affairs (financial, operating or
otherwise) of Debtor or any such guarantor which Secured Party believes, in good
faith, impairs its security or increases its risk,
11. REMEDIES OF SECURED PARTY: NOTICES. When the Obligations, or any of
them, become immediately due and payable, whether by reason of passage of time,
acceleration, or otherwise, Secured Party may, in addition to and not in
limitation of Secured Party's rights set forth in Section 14 of this Agreement,
pursue any legal remedy available to it to collect the Obligations outstanding
at said time, to enforce its rights under the Financing Agreements, and to
enforce any and all other rights or remedies available to it both under the
Uniform Commercial Code of Connecticut (the "Code"), and otherwise, including,
without limitation, the right to take possession of the Collateral and dispose
of the same on Debtor's premises, all without judicial process, Debtor hereby
waiving any right Debtor might otherwise have to require Secured Party to resort
to judicial process and further waiving Debtor's right to notice and hearing
under the Constitution of the United States or any state or under any Federal or
state law, and no such action shall operate as a waiver of any other right or
remedy of Secured Party under the terms of any of the Financing Agreements, or
the law, all rights and remedies of Secured Party being cumulative and not
<PAGE> 8
alternative. In addition, Secured Party may require Debtor to assemble the
Collateral and make it available to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to both parties.
The net cash proceeds resulting from the collection, liquidation, sale,
lease or other disposition of the Collateral shall be applied first to the
expenses (including all attorneys' fees) of retaking, holding, storing,
processing and preparing for sale, selling, collecting, liquidating and the
like, and then to the satisfaction of all Obligations, application as to
particular Obligations or against principal or interest to be in Secured Party's
sole discretion. Any notice which Secured Party is required to give Debtor under
the Code shall be deemed to constitute reasonable notice if such notice is
mailed, return receipt requested, at least seven (7) days prior to such action.
Debtor shall be liable to Secured Party and shall pay to Secured Party on demand
any deficiency which may remain after such sale, lease, disposition, collection
or liquidation of the Collateral. Debtor agrees that the powers granted
hereunder, being coupled with an interest, shall be irrevocable so long as any
of the Obligations remain outstanding.
12. SET-OFF. Debtor hereby grants to Secured Party a lien and right of
set-off for all Obligations upon or against all moneys, deposits, property,
collateral and securities and the proceeds thereof, now or hereafter held or
received by, or in transit to, Secured Party from or for Debtor, whether for
safekeeping, pledge, custody, transmission, collection or otherwise. Secured
Party may at any time apply the same, or any part thereof, to the Obligations,
or any part thereof, whether or not matured or demanded at the time of such
application.
13. RIGHTS OF SECURED PARTY. With respect both to the Obligations and
the Collateral, Debtor hereby consents to any extension or postponement of the
time of payment or any other indulgence, to any substitution, exchange or
release of the Collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial payments thereon
and the settlement, compromising or adjusting of any claims thereof, all in such
manner and at such time or times as Secured Party may deem advisable. Secured
Party shall have no duty as to the collection or protection of the Collateral or
any income thereon, nor as to the preservation of any rights against prior
parties, nor as to the preservation of any rights pertaining thereto beyond the
safe custody thereof. Secured Party may exercise its rights with respect to the
Collateral without resorting or regard to other collateral or sources of
reimbursement for the Obligations. Secured Party shall not be deemed to have
waived any of its rights under the Financing Agreements or upon or under the
Obligations or the Collateral unless such waiver is in writing and signed by
Secured Party. No delay or omission on the part of Secured Party in exercising
any right shall operate as a waiver of such right or any other right. A waiver
on any one occasion shall not be construed as a bar to or waiver of any right on
any future occasion. Secured Party may revoke any permission or waiver
previously granted to Debtor, and such revocation shall be effective whether
given orally or in writing. All rights and remedies of Secured Party with
respect to the Obligations or the Collateral, whether evidenced hereby or by any
other document, shall be cumulative and may be exercised singularly or
concurrently.
14. GENERAL PROVISIONS.
(a) Expenses. Debtor shall pay on demand all expenses of
Secured Party arising out of this transaction or in connection with the
negotiation, preparation, administration, collection, defense, protection,
preservation or enforcement of, or realization on, this Agreement, the other
Financing Agreements, the Obligations, or any of the Collateral, or any waiver,
modification or amendment of any provision of any of the foregoing, including,
without limitation, attorneys' fees of outside counsel, and other professionals'
fees, and the allocation costs of in-house legal counsel, and including, without
limitation, any fees or expenses associated with any travel or other costs
relating to any appraisals, examinations, administration of this Agreement, the
other Financing Agreements or any of the Collateral, and the amounts of all such
expenses shall, until paid, be Obligations secured by the Collateral.
(b) Survival. This Agreement and the security interest granted
to Secured Party by Debtor and every representation, warranty, covenant and
other term contained herein shall survive until the Obligations have been paid
in full.
<PAGE> 9
(c) Notices. Any notice required to be given hereunder shall
be effective when delivered to an overnight mail or messenger service or
deposited in the mails, first class, postage prepaid, registered or certified
mail, return receipt requested, to Debtor or Secured Party, as the case may be,
at its address set forth above. Either of the parties hereto may notify the
other that any such notice shall be given to such other address as such party
may so instruct by written notice similarly given.
(d) Entire Agreement. This Agreement is the entire agreement
between the parties hereto and cannot be amended or modified except by a writing
signed by Debtor and Secured Party.
(e) Governing Law. This Agreement and the other Financing
Agreements shall be construed in accordance with and governed by the laws of the
State of Connecticut. Debtor hereby consents to service of process, and to be
sued, in the State of Connecticut and consents to the jurisdiction of the courts
of the State of Connecticut and the United States District Court for the
District of Connecticut, for the purpose of any suit, action, or other
proceeding arising hereunder, and expressly waives any and all objections it may
have to venue in any such courts.
(f) Headings. Sections and subsection headings have been
inserted herein for convenience only and form no part of this Agreement and
shall not be deemed to affect the meaning or construction of any of the
covenants, agreements, conditions or terms hereof.
(g) Severability. If any term or provision of this Agreement
shall be invalid, illegal or unenforceable for any reason whatsoever, such term
or provision shall be severable from the remainder of this Agreement and the
validity, legality and enforceability of the remaining terms and provisions
shall not in any way be affected or impaired thereby.
(h) Binding. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns provided, however, that Debtor may not
assign its rights hereunder without the prior written consent of Secured Party
in its sole discretion, and any such attempted assignment without such consent
shall be null and void. If Debtor consists of more than one person or entity,
they shall be jointly and severally liable for all obligations herein contained.
(i) Interpretation. As used herein, plural or singular include
each other, and pronouns of any gender are to be construed as masculine,
feminine or neuter, as context requires.
16. PREJUDGMENT REMEDY WAIVER; WAIVERS. DEBTOR AND GUARANTOR
ACKNOWLEDGE THAT THE LOAN EVIDENCED AND SECURED BY THIS AGREEMENT IS A
COMMERCIAL TRANSACTION AND DEBTOR AND GUARANTOR HEREBY WAIVE THEIR 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 SECURED PARTY MAY DESIRE TO USE, and further, Debtor and Guarantor
waive diligence, demand, presentment for payment, notice of nonpayment, protest
and notice of protest, and notice of any renewals or extensions of the Note or
Guarantor's guaranty, and all rights under any statute of limitations.
17. WAIVER OF JURY TRIAL. DEBTOR AND GUARANTOR HEREBY WAIVE TRIAL BY
JURY IN ANY COURT AND IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN
CONNECTION WITH OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH
THIS AGREEMENT IS A PART AND/OR THE ENFORCEMENT OF ANY OF SECURED PARTY'S RIGHTS
AND REMEDIES. DEBTOR AND GUARANTOR ACKNOWLEDGE THAT THEY MAKE THIS WAIVER
KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE
RAMIFICATIONS OF THIS WAIVER WITH THEIR ATTORNEYS. NO PARTY TO THIS AGREEMENT
HAS AGREED WITH OR REPRESENTED TO ANY OTHER PARTY HERETO THAT THE PROVISIONS OF
THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
BORROWER:
THE CRYSTAL WATER COMPANY OF DANIELSON
By:
Roger Engle
Its President
GUARANTOR:
CRYSTAL WATER UTILITIES CORPORATION
By:
Roger Engle
Its President
NEW LONDON TRUST, F.S.B.
By:
Brian P. McNamara
Its Vice President
<PAGE> 11
EXHIBIT A
ATTACH COPY OF MORTGAGE NOTE
<PAGE> 12
MORTGAGE NOTE
$2,700,00.00 Danielson, Connecticut
February 9, 1996
FOR VALUE RECEIVED, the undersigned THE CRYSTAL WATER COMPANY OF
DANIELSON, a public service company specially chartered by the General Assembly
of the State of Connecticut ("Maker"), promises to pay to the order of NEW
LONDON TRUST, F.S.B., a federal savings bank organized under the laws of the
United States of America having its principal place of business in Danielson,
Connecticut ("Payee"), or any subsequent holder hereof (Payee or any subsequent
holder hereof sometimes being hereinafter referred to as "Holder"), at the
office of Payee at 203 Main Street, Danielson, Connecticut 06293, or at such
other place as Holder may designate from time to time in writing, the principal
sum of TWO MILLION SEVEN HUNDRED THOUSAND DOLLARS ($2,700,000.00), together
with: (i) interest at the rate and in the manner hereinafter provided; (ii) all
amounts which may be or become due under the Mortgage (as hereinafter defined)
or under any other document securing the indebtedness evidenced by this Note;
(iii) all costs and expenses, including reasonable attorneys' and appraisers'
fees, incurred in collecting or attempting to collect the indebtedness evidenced
by this Note, or in foreclosing or otherwise enforcing the Mortgage or
protecting or sustaining the lien of the Mortgage or in any litigation or
controversy arising from or connected with this Note or the Mortgage; and (iv)
all taxes and duties assessed upon the indebtedness evidenced by this Note or by
the Mortgage or upon the Property (as hereinafter defined). Refer to paragraph
17 for defined terms.
1. This Note shall bear interest on the unpaid balance at a rate to be
determined as follows:
(a) Until the first Adjustment Date, the interest rate shall
be eight percent (8%) per annum.
(b) The interest rate during each Adjustment Period shall be a
fixed rate per annum equal to the Index Rate less one quarter
of one percentage point (.25%) as determined on the Adjustment
Date which is the first day of such Adjustment Period;
provided, however, the interest rate for any Adjustment Period
shall not exceed 11.25% per annum for that particular
Adjustment Period.
2. Principal and interest shall be due and payable, with interest
payable in arrears, in monthly installments as follows:
(a) Payments in the amount of $25,802.61 shall be due and
payable on the first (1st) day of the month immediately
following the date of this Note and on the first day of each
and every month thereafter through and including the first
Adjustment Date; provided, however, that if this Note is dated
after the first day of a month, the interest that would accrue
through the end of such month shall be payable in advance on
the date of this Note, and, in that event, the monthly
installments referred to above shall commence on the first day
of the second month following the date of this Note through
and including the first Adjustment Date.
(b) Beginning with the first monthly payment due and payable
after each Adjustment Date, monthly payments hereunder shall
be adjusted to the amount that would fully amortize the
then-outstanding principal balance at the adjusted interest
rate then in effect in equal payments over a period of fifteen
years from the date of the first payment due hereunder.
Payments of such amounts shall be due and payable on the first
day of the month immediately following the first Adjustment
Date and on the first day of each and every month thereafter
until the entire principal balance of the indebtedness
evidenced by this Note and all interest and other amounts from
time to time payable hereunder shall have been paid in full;
(c) Provided, however, that, if not sooner paid, all amounts
owing under this Note shall be due and payable in full on
April 1, 2011.
<PAGE> 13
3. Maker may prepay the indebtedness evidenced by this Note, in full,
at any time, subject to the concurrent payment to Holder of an amount equal to
the Prepayment Premium; provided, however, that any prepayment in full of the
then outstanding principal balance of this Note after the Reference Date shall
not be subject to payment of the Prepayment Premium. Amounts so prepaid shall be
applied to interest and other charges accrued under this Note to the date
prepayment shall have been received by Holder and then to principal, in the
inverse order of the installments of principal payable under this Note. If the
maturity of this Note shall be accelerated for any reason, then a tender of
payment by Maker, or by anyone on behalf of Maker, of the amount necessary to
satisfy all sums due hereunder shall constitute an evasion of the payment terms
hereof and shall be deemed to be a voluntary prepayment under this Note, and any
such prepayment, to the extent permitted by law, shall require the concurrent
payment to Holder of the aforesaid Prepayment Premium.
4. All amounts owing under this Note shall be payable in legal tender
of the United States of America. Interest shall be calculated on the daily
unpaid principal balance of the indebtedness evidenced by this Note on the basis
of a three hundred sixty (360) day year, provided that interest shall be due for
the actual number of days elapsed during the period for which interest is being
charged. Each payment hereunder shall be applied first to the payment of late
charges, if any, then to interest and the balance to principal.
5. Any payment under this Note which is stated to be due on a day other
than a "Business Day" (a day on which banks are open for business in
Connecticut) shall be made on the next succeeding Business Day, and any such
extension of time shall be included in the computation of the amount of interest
to be paid; provided, however, that, if any such extension would cause any
payment to be payable in the next following calendar month, such payment shall
be made on the next preceding Business Day.
6. It shall be an Event of Default hereunder if Maker shall fail to
make any payment hereunder when due or if any "Event of Default" (as defined in
the Mortgage) shall occur. If an Event of Default or any other cause for
acceleration of the indebtedness evidenced by this Note shall occur, then, at
the option of Holder, all amounts remaining unpaid under this Note shall
immediately become due and payable. The failure to exercise any such option or
any other rights hereunder or any delay in such exercise, shall not constitute a
waiver of the right to exercise such option or such other right at a later time
so long as such Event of Default shall remain uncured, and shall not constitute
a waiver of the right to exercise such option or other right in the event of any
other Event of Default. The acceptance by Holder of payment of any sum payable
hereunder after the due date of such payment shall not be a waiver of Holder's
right either to require prompt payment when due of all other sums payable
hereunder or to declare a default for failure to make prompt payment in full.
7. Upon the occurrence of any Event of Default, or upon maturity hereof
(by acceleration or otherwise), the outstanding principal balance of the
indebtedness evidenced by this Note shall, at the option of Holder, bear
interest from the date of occurrence of such Event of Default or such maturity
until collection (including any period of time occurring after judgment), at the
lower of (a) the highest rate allowed by applicable law, or (b) four percent
(4%) in excess of the interest rate that otherwise would have been in effect
under this Note. If Holder shall not receive the full amount of any payment due
under the terms of this Note or the Mortgage within ten (10) days after the due
date of such payment, then Maker shall pay to Holder, upon demand, a late charge
equal to five percent (5%) of the total amount of such payment, to cover the
additional expenses involved in handling such overdue payment. Such charge shall
be in addition to, and not in lieu of, any other remedy Holder may have and
shall be in addition to, and not in lieu of, Maker's obligation to pay any
reasonable fees and charges of any agents or attorneys employed by Holder in the
event of any default hereunder.
8. Maker and each endorser, guarantor and surety of this Note, and each
other person liable or who shall become liable for all or any part of the
indebtedness evidenced by this Note (a) waive demand, presentment, protest,
notice of protest, notice of dishonor, diligence in collection, notice of
nonpayment and all notices of a like nature, and (b) consent to (i) all
renewals, extensions or modifications of this Note or the Mortgage (including
any affecting the time of payment), (ii) all advances under this Note or the
Mortgage, (iii) the release, surrender, exchange or substitution of all or any
part of the security for the
<PAGE> 14
indebtedness evidenced by this Note, or the taking of any additional security,
(iv) the release of any or all other persons from liability, whether primary or
contingent, for the indebtedness evidenced by this Note or for any related
obligations, and (v) the granting of any other indulgences to any such person.
Any such renewal, extension, modification, advance, release, surrender,
exchange, substitution, taking or indulgence may take place without notice to
any such person, and, whether or not any such notice is given, shall not affect
the liability of any such person.
9. Maker and each endorser, guarantor and surety of this Note, and each
other person liable or who shall become liable for all or any part of the
indebtedness evidenced by this Note, hereby give Holder a lien and right of
setoff for all of their respective liabilities in respect of such indebtedness
upon and against all of their respective deposits, credits and property (other
than the Property), now or hereafter in the possession or control of Holder or
in transit to it. Holder may at any time apply the same, or any part thereof, to
any liability of Maker or any such other person, whether matured or unmatured.
10. Maker and each endorser, guarantor and surety of this Note, and
each other person liable or who shall become liable for all or any part of the
indebtedness evidenced by this Note, hereby acknowledge that the transaction of
which this Note is a part is a commercial transaction, and to the extent allowed
under Connecticut General Statutes Sections 52-278a to 52-278n, inclusive, or
by other applicable law, hereby waive their right to notice and hearing with
respect to any prejudgment remedy which holder or its successors or assigns may
desire to use.
11. If any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, in whole or in part, or
in any respect, or if any one or more of the provisions of this Note shall
operate, or would prospectively operate, to invalidate this Note, then such
provision or provisions only shall be deemed to be null and void and of no force
or effect and shall not affect any other provision of this Note, and the
remaining provisions of this Note shall remain operative and in full force and
effect, shall be valid, legal and enforceable, and shall in no way be affected,
prejudiced or disturbed thereby.
12. This Note may not be modified or terminated orally, but only by a
written instrument signed by the party against whom enforcement of any such
modification or termination is sought. Time is and shall be of the essence in
the performance of all obligations under this Note. This Note shall be governed
by and construed in accordance with the laws of the State of Connecticut.
13. As used in this Note, words of any gender shall be deemed to apply
equally to any other gender, the plural shall include the singular and the
singular shall include the plural (as the context shall require), and the word
"person" shall refer to individuals, entities, authorities and other natural and
juridical persons of every type.
14. If this Note is now, or hereafter shall be, signed by more than one
person, it shall be the joint and several obligation of all such persons
(including, without limitation, all makers, endorsers, guarantors and sureties,
if any) and shall be binding on all such persons and their respective heirs,
executors, administrators, legal representatives, successors and assigns. This
Note and all covenants, agreements and provisions set forth in this Note shall
inure to the benefit of Holder and its successors and assigns.
15. Each adjustment in the interest rate on this Note pursuant to
paragraph 1 (b) hereof shall take effect automatically on the applicable
Adjustment Date. Holder shall use reasonable efforts to mail to Maker, within
ten (10) days after each Adjustment Date, written notice (the "Adjustment
Notice") specifying the interest rate at which this Note will bear interest from
and after the applicable Adjustment Date and specifying the amount of each
monthly installment that will be payable from and after such Adjustment Date.
Notwithstanding the foregoing, Maker shall not be relieved of any obligations
under the terms of this Note in the event of any failure of Holder to mail an
Adjustment Notice, or any failure of Holder to mail an Adjustment Notice in a
timely or proper manner, or any failure of Maker to receive an Adjustment
Notice, or the presence of any error or errors in an Adjustment Notice.
<PAGE> 15
16. The indebtedness evidenced by this Note is secured by, among other
things, a blanket mortgage of even date herewith (the "Mortgage"), delivered to
Holder encumbering certain real estate and properties located in the Towns of
Killingly, Brooklyn, Plainfield and Thompson, respectively, (collectively, the
"Property"), more particularly described in the Mortgage. The Mortgage is
incorporated herein by reference and shall be deemed a part of this Note as if
set forth in full herein.
17. As used in this Note, the following terms shall have the following
meanings:
(a) "Index Rate" on any Adjustment Date shall mean the prime rate as
published in the "Money Rates" table of the Wall Street Journal. If
more than one prime rate is published in the "Money Rates" table, the
highest of those rates will be the Prime Rate for purposes of this
Note. If the Wall Street Journal ceases to publish a "Money Rates"
table, or if a prime rate is no longer included in the rates published
therein, Holder will designate a comparable index. The selection of a
comparable index shall be made in Holder's sole discretion. If interest
hereunder is computed in relation to the Prime Rate, then as said Prime
Rate changes from time to time, the interest rate hereunder shall
change correspondingly on the date of each Prime Rate change, without
notice or demand of any kind.
(b) "Reference Date" shall mean April 1, 2003.
(c) "Adjustment Date" shall mean the date each year, following the
Reference Date, which is the anniversary of the Reference Date.
(d) "Adjustment Period" shall mean the one-year period commencing on
each Adjustment Date.
(e) "Prepayment Premium" shall mean the payment by Maker of an amount
equal to (1) 5% of the then outstanding balance hereof, if paid during
the first year of the loan evidenced by this Note (the "Loan"), (2) 4%
of the then outstanding balance hereof, if paid during the second year
of the Loan, (3) 3% of the then outstanding balance hereof, if paid
during the third year of the Loan, (4) 2% of the then outstanding
balance hereof, if paid during the fourth year of the Loan, and (5) 1%
of the then outstanding balance hereof, if paid during the fifth year
through and including the seventh year of the Loan.
THE CRYSTAL WATER COMPANY OF DANIELSON
By:
Roger Engle
Its President
<PAGE> 16
EXHIBIT B
Description of Financing Statements, Liens, Mortgages and other Encumbrances
(See Section 6(c)):
Previously furnished to and disclosed to the Secured Party.
Tradenames (See Sections 6(j) and 8(h)):
None
<PAGE> 1
-1-
Exhibit 10.5
AMENDED AND RESTATED
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made as of the ____ day of __________, 1999 by and
between The Connecticut Water Company (together with any affiliated companies
hereinafter collectively referred to as the "Employer") and Marshall T.
Chiaraluce (hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee is among a select group of management or highly
compensated employees of the Employer who entered into a Deferred Compensation
Agreement with the Employer made as of the first day of January, 1992 (the
"Deferred Compensation Agreement"); and
WHEREAS, the Employer and the Employee desire to amend and restate the
Deferred Compensation Agreement on the terms herein set forth; and
WHEREAS, the Employer and the Employee are willing to enter into this
Amended and Restated Deferred Compensation Agreement (the "Agreement") on the
terms herein set forth.
NOW, THEREFORE, in consideration of the premises and the mutual and
dependent promises herein, the parties hereto agree as follows:
<PAGE> 2
-2-
1. DEFERRED COMPENSATION. The Employee may file a written election with
the Employer in the form attached to this Agreement or such other form as may be
approved by the Employer to defer up to 12 percent (12%) of the Employee's
salary. Such amount shall be credited to a Deferred Compensation Account as
provided in Section 2 hereof. This election to defer the receipt of salary must
be made before the beginning of the calendar year for which the salary is
payable and shall remain in effect, unless terminated or changed, or until the
date the Employee ceases to be an employee of the Employer. Any termination or
change of a deferral election must be made on a form provided by the Employer
for such purpose and may only be made with respect to salary which will be
earned on and after the January 1 following the Employer's receipt of such form
provided that such form is received at least seven (7) days prior to the
applicable January 1.
2. DEFERRED COMPENSATION ACCOUNT. The Employer shall maintain on its
books and records a Deferred Compensation Account to record its liability for
future payments of deferred compensation and interest thereon required to be
paid to the Employee or his beneficiary pursuant to this Agreement. However, the
Employer shall not be required to segregate or earmark any of its assets for the
benefit of the Employee or his beneficiary. The amount reflected in said
Deferred Compensation Account shall be available for the Employer's general
corporate purposes and shall be available to the Employer's general creditors.
The amount reflected in said Deferred Compensation Account shall not be subject
in any manner to anticipation, alienation, transfer or assignment by the
Employee or his beneficiary, and any attempt to anticipate, alienate, transfer
or assign the same shall be void. Neither the Employee
<PAGE> 3
-3-
nor his beneficiary may assert any right or claim against any specific assets of
the Employer. The Employee or his beneficiary shall have only a contractual
right against the Employer for the amount reflected in said Deferred
Compensation Account. Notwithstanding the foregoing, in order to pay amounts
which may become due under this Agreement, the Employer may establish a grantor
trust (hereinafter the "Trust") within the meaning of Section 671 of the
Internal Revenue Code of 1986, as amended. The assets in such Trust shall at all
times be subject to the claims of the general creditors of the Employer in the
event of the Employer's bankruptcy or insolvency, and neither the Employee nor
any beneficiary shall have any preferred claim or right, or any beneficial
ownership interest in, any such assets of the Trust prior to the time such
assets are paid to an Employee or beneficiary pursuant to this Agreement.
The Employer shall credit to said Deferred Compensation Account the
amount of any salary to which the Employee becomes entitled and which is
deferred pursuant to Section 1 hereof, such amount to be credited as of the
first business day of each month. The Employer shall also credit to said
Deferred Compensation Account an Interest Equivalent in the amount and manner
set forth in Section 3 hereof.
3. PAYMENT OF DEFERRED COMPENSATION
(a) Termination of Employment On or After Attainment of Age 65. If the
Employee's employment should terminate on or after his attainment of age
sixty-five (65) for any reason other than death or on account of "Cause" as
defined in subsection (d) below, he shall be entitled to receive payment of the
entire amount of his Deferred Compensation Account
<PAGE> 4
-4-
including an Interest Equivalent, as described below, in the form of an
actuarially equivalent life annuity providing for equal annual payments for the
life of the Employee with a guarantee that fifteen (15) annual payments will be
made. Such actuarially equivalent life annuity shall be computed on the basis of
a mortality table that assumes a life expectancy of age eighty (80) and uses the
Interest Factor described below.
There shall be credited to the Employee's Deferred Compensation Account
as of each January 1 and July 1, commencing with January 1, 1992 until payment
of such account is made or begins, as additional deferred compensation, an
Interest Equivalent equal to fifty percent (50%) of the product of (i) the AAA
Corporate Bond Yield Averages published by Moody's Bond Survey for the Friday
ending on or immediately preceding the applicable January 1 and July 1 plus two
(2) percentage points (the "Interest Factor"), multiplied by (ii) the balance of
the Employee's Deferred Compensation Account, including the amount of Interest
Equivalent previously credited to such Employee's account, as of the preceding
day (i.e., December 31 or June 30). The Interest Factor used to compute the
annuity payable upon the Employee's termination of employment on or after his
attainment of age sixty-five (65) shall be calculated based upon the Interest
Factor as of the January 1 or July 1 immediately preceding the date of the
Employee's termination of employment, whichever shall fall nearer to the date of
the Employee's termination of employment. The first annuity payment under this
subsection shall be paid within sixty (60) days after the commencement of the
calendar year following the Employee's termination of employment.
<PAGE> 5
-5-
Notwithstanding the foregoing, if provided by the Board of Directors of
the Employer, in its sole discretion, the Employee shall instead receive payment
in a lump sum of the entire amount of his Deferred Compensation Account,
including an Interest Equivalent, as described above. The lump sum shall be paid
within sixty (60) days after the Employee's termination of employment or, at the
discretion of the Board of Directors of the Employer, within sixty (60) days
after the commencement of the calendar year following the Employee's termination
of employment.
(b) Termination of Employment After Attainment of Age 55 and Prior to
Attainment of Age 65. If the Employee's employment should terminate after his
attainment of age fifty-five (55) and prior to his attainment of age sixty-five
(65) for any reason other than death or on account of "Cause" as defined in
subsection (d) below, he shall be entitled to receive payment of the entire
amount of his Deferred Compensation Account including an Interest Equivalent, as
described below, in the form of equal annual installments over a period equal to
the Employee's remaining life, assuming a life expectancy of age eighty (80).
There shall be credited to the Employee's Deferred Compensation Account as of
each January 1 and July 1, commencing with January 1, 1992 until payment of said
annual installments are completed, as additional deferred compensation, an
Interest Equivalent as described in subsection (a) above. The first installment
payment under this subsection shall be paid within sixty (60) days after the
commencement of the calendar year following the Employee's termination of
employment.
<PAGE> 6
-6-
Notwithstanding the foregoing, if provided by the Board of Directors of
the Employer, in its sole discretion, the Employee shall instead receive payment
in a lump sum of the entire amount of his Deferred Compensation Account,
including an Interest Equivalent, as described in subsection (a) above. The lump
sum shall be paid within sixty (60) days after the Employee's termination of
employment or, at the discretion of the Board of Directors of the Employer,
within sixty (60) days after the commencement of the calendar year following the
Employee's termination of employment.
(c) Termination of Employment Prior to Attainment of Age 55. If the
Employee's employment should terminate prior to his attainment of age fifty-five
(55) for any reason other than death or on account of "Cause" as defined in
subsection (d) below, the Employee shall be entitled to receive payment in a
lump sum of the entire amount of his Deferred Compensation Account, including
the same Interest Equivalent as described in subsection (a) above. Payment under
this subsection shall be made within sixty (60) days after the Employee's
termination of employment or, at the option of the Board of Directors of the
Employer, in its sole discretion, within sixty (60) days after the commencement
of the calendar year following the Employee's termination of employment.
(d) Termination of Employment for Cause. If the employment of the
Employee is terminated by the Employer for Cause, the Employee shall be entitled
only to a return of amounts deferred pursuant to Section 1 hereof, and this
Agreement and all payments provided for in this Agreement, including any
obligation to pay interest on deferred compensation, shall terminate.
<PAGE> 7
-7-
Said deferred amounts shall be paid in a lump sum within sixty (60) days after
the commencement of the calendar year following the Employee's termination of
employment. As used in this Agreement, the term "Cause" shall mean:
(i) the Employee's rendering, while employed by the
Employer, of any services, assistance or advice,
either directly or indirectly, to any person, firm or
organization competing with, or in opposition to, the
Employer;
(ii) the Employee's allowing, while employed by the
Employer, any use of his name by any person, firm or
organization competing with, or in opposition to, the
Employer; or
(iii) willful misconduct by the Employee, including, but
not limited to, the commission by the Employee of a
felony or the perpetration by the Employee of a
common law fraud upon the Employer.
(e) Death While Employed. Notwithstanding anything to the contrary
contained in the foregoing, if the Employee should die while employed by the
Employer, his beneficiary, designated pursuant to Section 4 hereof, shall
receive in a lump sum, in lieu of the amount(s) otherwise payable to the
Employee under this Agreement, a death benefit equal to the greater of (i) the
Hypothetical Death Benefit, as defined in subsection (g) hereof, and (ii) the
entire amount of his Deferred Compensation Account at the date of his death,
assuming that an Interest
<PAGE> 8
-8-
Equivalent were credited to such account as of each January 1 and July 1,
commencing with January 1, 1992, until the date of death at the rate set forth
in subsection (a) hereof. Such beneficiary shall be entitled to receive such
death benefit within ninety (90) days after the Employer has been notified in
writing of the death of the Employee and has been provided with any additional
information, forms or other documents it may reasonably request.
(f) Death After Termination of Employment. If the Employee should die
after the termination of his employment with the Employer and prior to the date
on which payment of his Deferred Compensation Account has commenced in the form
of an annuity as provided in subsection (a), or has been made in the form of a
lump sum as provided in subsections (a), (b), (c) or (d), or has been fully
distributed in the event of payment in the form of installments as provided in
subsection (b), his beneficiary, designated pursuant to Section 4 hereof, shall
receive in a lump sum, in lieu of the amount(s) otherwise payable to the
Employee under this Agreement, a death benefit equal to the entire amount of the
Employee's Deferred Compensation Account at the date of his death (or the entire
remaining amount of the Employee's Deferred Compensation Account at the date of
his death in the event that payment has commenced in the form of installments as
provided in subsection (b)) and, provided that the Employee's employment shall
not have terminated on account of "Cause" as provided in subsection (d) hereof,
an Interest Equivalent credited to such account as of each January 1 and July 1,
commencing with January 1, 1992, until the date of death at the rate set forth
in subsection (a) hereof. No Interest Equivalent shall be credited to the
Employee's Deferred Compensation Account in the event of the Employee's death
after his termination on account of "Cause" as
<PAGE> 9
-9-
provided in subsection (d) hereof. The Employee's beneficiary shall be entitled
to receive such death benefit within ninety (90) days after the Employer has
been notified in writing of the death of the Employee and has been provided with
any additional information, forms or other documents it may reasonably request.
If the Employee should die after the termination of his employment with
the Employer and after the date on which payment of his Deferred Compensation
Account and the Interest Equivalent set forth in subsection (a) hereof has
commenced in the form of an annuity as provided in subsection (a), no additional
benefits shall be payable under this Agreement after the Employee's death except
to the extent that the Employee did not receive prior to his death the
guaranteed fifteen (15) annual payments provided in subsection (a), in which
case the unpaid guaranteed payments shall be paid to the Employee's beneficiary,
designated pursuant to Section 4, in annual payments for the remainder of said
guaranteed fifteen (15)-year term.
If the Employee should die after the termination of his employment with
the Employer and after the date on which payment of his Deferred Compensation
Account and, with respect to payments made in accordance with subsections (a),
(b) or (c) hereof, the Interest Equivalent set forth in subsection (a) hereof,
has been paid in the form of a lump sum as provided in subsections (a), (b), (c)
or (d) or has been fully distributed in the form of installments as provided in
subsection (b), no additional benefits shall be payable upon the Employee's
death.
<PAGE> 10
-10-
(g) Hypothetical Death Benefit. For purposes of this Agreement, the
term "Hypothetical Death Benefit" shall mean a lump sum benefit equal to the
proceeds of any policy of key-man life insurance on the life of the Employee, of
which the Employer is owner and beneficiary, and which policy is designated by
the Employer as subject to the provisions hereof, reduced by (i) the amount of
any tax imposed on the Employer with respect to such proceeds and (ii) the cost
to the Employer of any tax deductions postponed as a result of salary deferrals
pursuant to Section 1 hereof and increased by (iii) the tax deduction to the
Employer which would result from payment of the Hypothetical Death Benefit to a
beneficiary of the Employee. For purposes of (ii) above, an opportunity cost
factor of six (6) percent pre-tax interest will be applied during the period of
postponed deductions under (ii). The calculation of the Hypothetical Death
Benefit shall be done by the Employer, whose calculation shall be final and
binding on the Employee and his beneficiary. Anything herein to the contrary
notwithstanding, the Employer shall not be required to purchase a policy of
key-man life insurance on the life of any Employee, and any such policy
purchased by the Employer, and all proceeds thereof, shall remain at all times
available to the Employer's general creditors.
4. BENEFICIARY. The Employee has notified or will in the future notify
the Employer of the person or persons entitled to receive payments on the death
of the Employee. For the purposes of this Agreement, such person or persons are
herein referred to collectively as the "beneficiary." The person whom an
Employee designates as his beneficiary for this purpose must be one of the
following: the Employee's spouse, father, mother, sister, brother, son or
daughter. The beneficiary may also be a legal ward living with and dependent on
the Employee
<PAGE> 11
-11-
at the time of his death. If the Employee dies and has not designated a
beneficiary, his beneficiary shall be his spouse, if living; otherwise, his
beneficiary shall be deemed to be his estate. An Employee's beneficiary
designation may be changed at any time by the Employee giving written notice to
the Employer of such change. The rights of any beneficiary presently or
hereafter designated are subject to any changes made in this Agreement by the
Employee and the Employer.
5. WITHHOLDING. The Employer shall be permitted to withhold from any
payment to the Employee or his beneficiary hereunder all federal, state or other
taxes which may be required with respect to such payment.
6. ARBITRATION. In the event that a dispute shall arise with respect to
any of the provisions of this Agreement, either the Employer or the Employee or
his beneficiary, as the case may be, may give written notice to the other
stating the claims that said party desires to arbitrate, and naming an
arbitrator. Within ten (10) days after the receipt of such notice, the party
receiving same shall appoint a second arbitrator by written notice to be sent to
the party who requested arbitration. Within ten (10) days after receipt of such
notice of appointment of the second arbitrator, the two (2) arbitrators so
appointed shall meet to select a third arbitrator and shall give written notice
of such selection to the Employer and the Employee or his beneficiary. The
decision of a majority of the arbitrators shall be conclusive and binding upon
the Employer and the Employee or his beneficiary. All notices hereunder shall be
by registered mail addressed to the last known address of the party entitled to
receive notice. The Employer and the Employee
<PAGE> 12
-12-
shall each pay their own costs incurred in the arbitration proceeding; provided,
however, that the arbitrators may require that the losing party reimburse the
prevailing party for its costs if it shall be determined that the claim which
gave rise to the dispute was without substantial foundation.
7. MISCELLANEOUS.
(a) This Agreement shall be binding upon the parties hereto, their
heirs, executors, administrators, successors and assigns. The Employer agrees
that it will not be a party to any merger, consolidation or reorganization
unless and until its obligations hereunder shall be expressly assumed by its
successor or successors.
(b) This Agreement may be amended at any time by mutual written
agreement of the parties hereto, but no amendment shall operate to give the
Employee, or any beneficiary designated by him, either directly or indirectly,
any interest whatsoever in any funds or assets of the Employer, except the right
to receive the payments herein provided.
(c) This Agreement may be terminated by the Employer at any time that
tax or other laws are enacted or interpreted which result or will result in
costs to the Employer significantly in excess of those contemplated at the time
of the execution hereof. In the event of such termination, the Employer's sole
obligation shall be to pay to the Employee in a lump sum the amount of his
Deferred Compensation Account, including an Interest Equivalent as determined by
Section 3(a), as if the effective date of termination of this Agreement were
considered to be
<PAGE> 13
-13-
the date of termination of the Employee's employment. Such payment shall be made
to the Employee within ninety (90) days after the effective date of termination
of this Agreement.
(d) This Agreement shall not supersede any contract of employment,
whether oral or written, between the Employer and the Employee, nor shall it
affect or impair the rights and obligations of the Employer and the Employee,
respectively, thereunder. Nothing contained herein shall impose any obligation
on the Employer to continue the employment of the Employee.
(e) If Moody's Bond Survey shall cease to publish the Corporate Bond
Yield Averages referred to in Section 3 hereof, a similar average selected by
the Board of Directors of the Employer, in its sole discretion, shall be used.
(f) This Agreement shall be executed in duplicate, and each executed
copy of this Agreement shall be deemed an original.
(g) This Agreement shall be construed in all respects under the laws of
the State of Connecticut.
<PAGE> 14
-14-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
THE CONNECTICUT WATER COMPANY
___________________________ By__________________________________
Marshall T. Chiaraluce Its
<PAGE> 15
-15-
Notice of Election to Defer Compensation
Pursuant to the terms of the Deferred Compensation Agreement (the
"Agreement") by and between The Connecticut Water Company (the "Company") and
Marshall T. Chiaraluce, made as of the first day of January, 1992 and amended
and restated as of the ____ day of ____________, 1999, I hereby elect to defer,
pursuant to Section 1 thereof, ____% of my salary payable in connection with the
performance of my services as an employee of the Company beginning __________,
____. This election shall be effective for calendar years beginning after the
date hereof until the calendar year next beginning after the date on which I
notify the Company to change or terminate future deferrals pursuant to the terms
of Section 1 of the Agreement on a form provided by the Company.
I understand that this election to defer shall be continued as to the
salary which is earned for each calendar year for which this election to defer
is effective until distribution of such deferred compensation to me upon my
termination of services as an employee, or to my beneficiary in the event of my
death, as provided in the Agreement. I also understand that I may change the
amount deferred (including terminating deferrals) with respect to salary earned
for calendar years commencing after my delivery to the Company of a written
notice of change, provided such written notice is delivered to the Company on a
form approved by the Company at least seven (7) days before the commencement of
such calendar year. Further, I understand that if I terminate deferrals I may
make a new election to again defer my salary pursuant to the Agreement and that
any new election to defer payment of my salary must be made and delivered to the
Company at least seven (7) days before the beginning of the calendar year for
which the salary is payable.
In the event of my death, any payment to which I am entitled under the
terms of the Agreement which has not been made to me at the date of my death
shall be distributed to:
Primary Beneficiary(ies):
Name:______________________________
Address:___________________________
Relationship:______________________
Percentage Share:__________________
Contingent Beneficiary(ies):
Name:______________________________
Address:___________________________
Relationship:______________________
Percentage Share:__________________
in accordance with the provisions of Section 3 of the Agreement.
<PAGE> 16
-16-
Notwithstanding the foregoing to the contrary, in the event of payment
of the "Hypothetical Death Benefit" pursuant to Section 3(g) of the Agreement,
any beneficiary designation made by me in connection with a key-man life
insurance policy on my life shall supersede the beneficiary designation made
hereinabove.
- ------------------------- ------------------------------
Date Marshall T. Chiaraluce
<PAGE> 17
-1-
Exhibit 10.5
AMENDED AND RESTATED
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made as of the ____ day of ________, 1999 by and
between The Connecticut Water Company (together with any affiliated companies
hereinafter collectively referred to as the "Employer") and David C.
Benoit (hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee is among a select group of management or highly
compensated employees of the Employer who entered into a Deferred Compensation
Agreement with the Employer made as of the first day of July, 1996 (the
"Deferred Compensation Agreement"); and
WHEREAS, the Employer and the Employee desire to amend and restate the
Deferred Compensation Agreement on the terms herein set forth; and
WHEREAS, the Employer and the Employee are willing to enter into this
Amended and Restated Deferred Compensation Agreement (the "Agreement") on the
terms herein set forth.
NOW, THEREFORE, in consideration of the premises and the mutual and
dependent promises herein, the parties hereto agree as follows:
<PAGE> 18
-2-
1. DEFERRED COMPENSATION. The Employee may file a written election with
the Employer in the form attached to this Agreement or such other form as may be
approved by the Employer to defer up to 12 percent (12%) of the Employee's
salary. Such amount shall be credited to a Deferred Compensation Account as
provided in Section 2 hereof. This election to defer the receipt of salary must
be made before the beginning of the calendar year for which the salary is
payable and shall remain in effect, unless terminated or changed, or until the
date the Employee ceases to be an employee of the Employer. Any termination or
change of a deferral election must be made on a form provided by the Employer
for such purpose and may only be made with respect to salary which will be
earned on and after the January 1 following the Employer's receipt of such form
provided that such form is received at least seven (7) days prior to the
applicable January 1.
2. DEFERRED COMPENSATION ACCOUNT. The Employer shall maintain on its
books and records a Deferred Compensation Account to record its liability for
future payments of deferred compensation and interest thereon required to be
paid to the Employee or his beneficiary pursuant to this Agreement. However, the
Employer shall not be required to segregate or earmark any of its assets for the
benefit of the Employee or his beneficiary. The amount reflected in said
Deferred Compensation Account shall be available for the Employer's general
corporate purposes and shall be available to the Employer's general creditors.
The amount reflected in said Deferred Compensation Account shall not be subject
in any manner to anticipation, alienation, transfer or assignment by the
Employee or his beneficiary, and any
<PAGE> 19
-3-
attempt to anticipate, alienate, transfer or assign the same shall be void.
Neither the Employee nor his beneficiary may assert any right or claim against
any specific assets of the Employer. The Employee or his beneficiary shall have
only a contractual right against the Employer for the amount reflected in said
Deferred Compensation Account. Notwithstanding the foregoing, in order to pay
amounts which may become due under this Agreement, the Employer may establish a
grantor trust (hereinafter the "Trust") within the meaning of Section 671 of the
Internal Revenue Code of 1986, as amended. The assets in such Trust shall at all
times be subject to the claims of the general creditors of the Employer in the
event of the Employer's bankruptcy or insolvency, and neither the Employee nor
any beneficiary shall have any preferred claim or right, or any beneficial
ownership interest in, any such assets of the Trust prior to the time such
assets are paid to an Employee or beneficiary pursuant to this Agreement.
The Employer shall credit to said Deferred Compensation Account the
amount of any salary to which the Employee becomes entitled and which is
deferred pursuant to Section 1 hereof, such amount to be credited as of the
first business day of each month. The Employer shall also credit to said
Deferred Compensation Account an Interest Equivalent in the amount and manner
set forth in Section 3 hereof.
3. PAYMENT OF DEFERRED COMPENSATION
(a) Termination of Employment On or After Attainment of Age 65. If the
Employee's employment should terminate on or after his attainment of age
sixty-five (65) for any reason other than death or on account of "Cause" as
defined in subsection (d) below, he shall be
<PAGE> 20
-4-
entitled to receive payment of the entire amount of his Deferred Compensation
Account including an Interest Equivalent, as described below, in the form of an
actuarially equivalent life annuity providing for equal annual payments for the
life of the Employee with a guarantee that fifteen (15) annual payments will be
made. Such actuarially equivalent life annuity shall be computed on the basis of
a mortality table that assumes a life expectancy of age eighty (80) and uses the
Interest Factor described below.
There shall be credited to the Employee's Deferred Compensation Account
as of each January 1 and July 1, commencing with July 1, 1996 until payment of
such account is made or begins, as additional deferred compensation, an Interest
Equivalent equal to fifty percent (50%) of the product of (i) the AAA Corporate
Bond Yield Averages published by Moody's Bond Survey for the Friday ending on or
immediately preceding the applicable January 1 and July 1 plus three (3)
percentage points (the "Interest Factor"), multiplied by (ii) the balance of the
Employee's Deferred Compensation Account, including the amount of Interest
Equivalent previously credited to such Employee's account, as of the preceding
day (i.e., December 31 or June 30). The Interest Factor used to compute the
annuity payable upon the Employee's termination of employment on or after his
attainment of age sixty-five (65) shall be calculated based upon the Interest
Factor as of the January 1 or July 1 immediately preceding the date of the
Employee's termination of employment, whichever shall fall nearer to the date of
the Employee's termination of employment. The first annuity payment under this
subsection shall be paid within sixty (60) days after the commencement of the
calendar year following the Employee's termination of employment.
<PAGE> 21
-5-
Notwithstanding the foregoing, if provided by the Board of Directors of
the Employer, in its sole discretion, the Employee shall instead receive payment
in a lump sum of the entire amount of his Deferred Compensation Account,
including an Interest Equivalent, as described above. The lump sum shall be paid
within sixty (60) days after the Employee's termination of employment or, at the
discretion of the Board of Directors of the Employer, within sixty (60) days
after the commencement of the calendar year following the Employee's termination
of employment.
(b) Termination of Employment After Attainment of Age 55 and Prior to
Attainment of Age 65. If the Employee's employment should terminate after his
attainment of age fifty-five (55) and prior to his attainment of age sixty-five
(65) for any reason other than death or on account of "Cause" as defined in
subsection (d) below, he shall be entitled to receive payment of the entire
amount of his Deferred Compensation Account including an Interest Equivalent, as
described below, in the form of equal annual installments over a period equal to
the Employee's remaining life, assuming a life expectancy of age eighty (80).
There shall be credited to the Employee's Deferred Compensation Account as of
each January 1 and July 1, commencing with July 1, 1996 until payment of said
annual installments are completed, as additional deferred compensation, an
Interest Equivalent as described in subsection (a) above. The first installment
payment under this subsection shall be paid within sixty (60) days after the
commencement of the calendar year following the Employee's termination of
employment.
<PAGE> 22
-6-
Notwithstanding the foregoing, if provided by the Board of Directors of
the Employer, in its sole discretion, the Employee shall instead receive payment
in a lump sum of the entire amount of his Deferred Compensation Account,
including an Interest Equivalent, as described in subsection (a) above. The lump
sum shall be paid within sixty (60) days after the Employee's termination of
employment or, at the discretion of the Board of Directors of the Employer,
within sixty (60) days after the commencement of the calendar year following the
Employee's termination of employment.
(c) Termination of Employment Prior to Attainment of Age 55. If the
Employee's employment should terminate prior to his attainment of age fifty-five
(55) for any reason other than death or on account of "Cause" as defined in
subsection (d) below, the Employee shall be entitled to receive payment in a
lump sum of the entire amount of his Deferred Compensation Account, including
the same Interest Equivalent as described in subsection (a) above. Payment under
this subsection shall be made within sixty (60) days after the Employee's
termination of employment or, at the option of the Board of Directors of the
Employer, in its sole discretion, within sixty (60) days after the commencement
of the calendar year following the Employee's termination of employment.
(d) Termination of Employment for Cause. If the employment of the
Employee is terminated by the Employer for Cause, the Employee shall be entitled
only to a return of amounts deferred pursuant to Section 1 hereof, and this
Agreement and all payments provided for in this Agreement, including any
obligation to pay interest on deferred compensation, shall terminate.
<PAGE> 23
-7-
Said deferred amounts shall be paid in a lump sum within sixty (60) days after
the commencement of the calendar year following the Employee's termination of
employment. As used in this Agreement, the term "Cause" shall mean:
(i) the Employee's rendering, while employed by the
Employer, of any services, assistance or advice,
either directly or indirectly, to any person, firm or
organization competing with, or in opposition to, the
Employer;
(ii) the Employee's allowing, while employed by the
Employer, any use of his name by any person, firm or
organization competing with, or in opposition to, the
Employer; or
(iii) willful misconduct by the Employee, including, but
not limited to, the commission by the Employee of a
felony or the perpetration by the Employee of a
common law fraud upon the Employer.
(e) Death While Employed. Notwithstanding anything to the contrary
contained in the foregoing, if the Employee should die while employed by the
Employer, his beneficiary, designated pursuant to Section 4 hereof, shall
receive in a lump sum, in lieu of the amount(s) otherwise payable to the
Employee under this Agreement, a death benefit equal to the greater of (i) the
Hypothetical Death Benefit, as defined in subsection (g) hereof, and (ii) the
entire amount of his Deferred Compensation Account at the date of his death,
assuming that an Interest
<PAGE> 24
-8-
Equivalent were credited to such account as of each January 1 and July 1,
commencing with July 1, 1996, until the date of death at the rate set forth in
subsection (a) hereof. Such beneficiary shall be entitled to receive such death
benefit within ninety (90) days after the Employer has been notified in writing
of the death of the Employee and has been provided with any additional
information, forms or other documents it may reasonably request.
(f) Death After Termination of Employment. If the Employee should die
after the termination of his employment with the Employer and prior to the date
on which payment of his Deferred Compensation Account has commenced in the form
of an annuity as provided in subsection (a), or has been made in the form of a
lump sum as provided in subsections (a), (b), (c) or (d), or has been fully
distributed in the event of payment in the form of installments as provided in
subsection (b), his beneficiary, designated pursuant to Section 4 hereof, shall
receive in a lump sum, in lieu of the amount(s) otherwise payable to the
Employee under this Agreement, a death benefit equal to the entire amount of the
Employee's Deferred Compensation Account at the date of his death (or the entire
remaining amount of the Employee's Deferred Compensation Account at the date of
his death in the event that payment has commenced in the form of installments as
provided in subsection (b)) and, provided that the Employee's employment shall
not have terminated on account of "Cause" as defined in subsection (d) hereof,
an Interest Equivalent credited to such account as of each January 1 and July 1,
commencing with July 1, 1996, until the date of death at the rate set forth in
subsection (a) hereof. No Interest Equivalent shall be credited to the
Employee's Deferred Compensation Account in the event of the Employee's death
after his termination on account of "Cause" as provided in subsection (d)
<PAGE> 25
-9-
hereof. The Employee's beneficiary shall be entitled to receive such death
benefit within ninety (90) days after the Employer has been notified in writing
of the death of the Employee and has been provided with any additional
information, forms or other documents it may reasonably request.
If the Employee should die after the termination of his employment with
the Employer and after the date on which payment of his Deferred Compensation
Account and the Interest Equivalent set forth in subsection (a) hereof has
commenced in the form of an annuity as provided in subsection (a), no additional
benefits shall be payable under this Agreement after the Employee's death except
to the extent that the Employee did not receive prior to his death the
guaranteed fifteen (15) annual payments provided in subsection (a), in which
case the unpaid guaranteed payments shall be paid to the Employee's beneficiary,
designated pursuant to Section 4, in annual payments for the remainder of said
guaranteed fifteen (15)-year term.
If the Employee should die after the termination of his employment with
the Employer and after the date on which payment of his Deferred Compensation
Account and, with respect to payments made in accordance with subsections (a),
(b) or (c) hereof, the Interest Equivalent set forth in subsection (a) hereof,
has been paid in the form of a lump sum as provided in subsections (a), (b), (c)
or (d) or has been fully distributed in the form of installments as provided in
subsection (b), no additional benefits shall be payable upon the Employee's
death.
<PAGE> 26
-10-
(g) Hypothetical Death Benefit. For purposes of this Agreement, the
term "Hypothetical Death Benefit" shall mean a lump sum benefit equal to the
proceeds of any policy of key-man life insurance on the life of the Employee, of
which the Employer is owner and beneficiary, and which policy is designated by
the Employer as subject to the provisions hereof, reduced by (i) the amount of
any tax imposed on the Employer with respect to such proceeds and (ii) the cost
to the Employer of any tax deductions postponed as a result of salary deferrals
pursuant to Section 1 hereof and increased by (iii) the tax deduction to the
Employer which would result from payment of the Hypothetical Death Benefit to a
beneficiary of the Employee. For purposes of (ii) above, an opportunity cost
factor of six (6) percent pre-tax interest will be applied during the period of
postponed deductions under (ii). The calculation of the Hypothetical Death
Benefit shall be done by the Employer, whose calculation shall be final and
binding on the Employee and his beneficiary. Anything herein to the contrary
notwithstanding, the Employer shall not be required to purchase a policy of
key-man life insurance on the life of any Employee, and any such policy
purchased by the Employer, and all proceeds thereof, shall remain at all times
available to the Employer's general creditors.
4. BENEFICIARY. The Employee has notified or will in the future notify
the Employer of the person or persons entitled to receive payments on the death
of the Employee. For the purposes of this Agreement, such person or persons are
herein referred to collectively as the "beneficiary." The person whom an
Employee designates as his beneficiary for this purpose must be one of the
following: the Employee's spouse, father, mother, sister, brother, son or
daughter. The beneficiary may also be a legal ward living with and dependent on
the Employee
<PAGE> 27
-11-
at the time of his death. If the Employee dies and has not designated a
beneficiary, his beneficiary shall be his spouse, if living; otherwise, his
beneficiary shall be deemed to be his estate. An Employee's beneficiary
designation may be changed at any time by the Employee giving written notice to
the Employer of such change. The rights of any beneficiary presently or
hereafter designated are subject to any changes made in this Agreement by the
Employee and the Employer.
5. WITHHOLDING. The Employer shall be permitted to withhold from any
payment to the Employee or his beneficiary hereunder all federal, state or other
taxes which may be required with respect to such payment.
6. ARBITRATION. In the event that a dispute shall arise with respect to
any of the provisions of this Agreement, either the Employer or the Employee or
his beneficiary, as the case may be, may give written notice to the other
stating the claims that said party desires to arbitrate, and naming an
arbitrator. Within ten (10) days after the receipt of such notice, the party
receiving same shall appoint a second arbitrator by written notice to be sent to
the party who requested arbitration. Within ten (10) days after receipt of such
notice of appointment of the second arbitrator, the two (2) arbitrators so
appointed shall meet to select a third arbitrator and shall give written notice
of such selection to the Employer and the Employee or his beneficiary. The
decision of a majority of the arbitrators shall be conclusive and binding upon
the Employer and the Employee or his beneficiary. All notices hereunder shall be
by registered mail addressed to the last known address of the party entitled to
receive notice. The Employer and the Employee
<PAGE> 28
-12-
shall each pay their own costs incurred in the arbitration proceeding; provided,
however, that the arbitrators may require that the losing party reimburse the
prevailing party for its costs if it shall be determined that the claim which
gave rise to the dispute was without substantial foundation.
7. MISCELLANEOUS.
(a) This Agreement shall be binding upon the parties hereto, their
heirs, executors, administrators, successors and assigns. The Employer agrees
that it will not be a party to any merger, consolidation or reorganization
unless and until its obligations hereunder shall be expressly assumed by its
successor or successors.
(b) This Agreement may be amended at any time by mutual written
agreement of the parties hereto, but no amendment shall operate to give the
Employee, or any beneficiary designated by him, either directly or indirectly,
any interest whatsoever in any funds or assets of the Employer, except the right
to receive the payments herein provided.
(c) This Agreement may be terminated by the Employer at any time that
tax or other laws are enacted or interpreted which result or will result in
costs to the Employer significantly in excess of those contemplated at the time
of the execution hereof. In the event of such termination, the Employer's sole
obligation shall be to pay to the Employee in a lump sum the amount of his
Deferred Compensation Account, including an Interest Equivalent as determined by
Section 3(a), as if the effective date of termination of this Agreement were
considered to be
<PAGE> 29
-13-
the date of termination of the Employee's employment. Such payment shall be made
to the Employee within ninety (90) days after the effective date of termination
of this Agreement.
(d) This Agreement shall not supersede any contract of employment,
whether oral or written, between the Employer and the Employee, nor shall it
affect or impair the rights and obligations of the Employer and the Employee,
respectively, thereunder. Nothing contained herein shall impose any obligation
on the Employer to continue the employment of the Employee.
(e) If Moody's Bond Survey shall cease to publish the Corporate Bond
Yield Averages referred to in Section 3 hereof, a similar average selected by
the Board of Directors of the Employer, in its sole discretion, shall be used.
(f) This Agreement shall be executed in duplicate, and each executed
copy of this Agreement shall be deemed an original.
(g) This Agreement shall be construed in all respects under the laws of
the State of Connecticut.
<PAGE> 30
-14-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
THE CONNECTICUT WATER COMPANY
____________________________ By__________________________________
David C. Benoit Its
<PAGE> 31
-15-
Notice of Election to Defer Compensation
Pursuant to the terms of the Deferred Compensation Agreement (the
"Agreement") by and between The Connecticut Water Company (the "Company") and
David C. Benoit, made as of the first day of July, 1996 and amended and restated
as of the ____ day of ____________, 1999, I hereby elect to defer, pursuant to
Section 1 thereof, ____% of my salary payable in connection with the performance
of my services as an employee of the Company beginning __________, ____. This
election shall be effective for calendar years beginning after the date hereof
until the calendar year next beginning after the date on which I notify the
Company to change or terminate future deferrals pursuant to the terms of Section
1 of the Agreement on a form provided by the Company.
I understand that this election to defer shall be continued as to the
salary which is earned for each calendar year for which this election to defer
is effective until distribution of such deferred compensation to me upon my
termination of services as an employee, or to my beneficiary in the event of my
death, as provided in the Agreement. I also understand that I may change the
amount deferred (including terminating deferrals) with respect to salary earned
for calendar years commencing after my delivery to the Company of a written
notice of change, provided such written notice is delivered to the Company on a
form approved by the Company at least seven (7) days before the commencement of
such calendar year. Further, I understand that if I terminate deferrals I may
make a new election to again defer my salary pursuant to the Agreement and that
any new election to defer payment of my salary must be made and delivered to the
Company at least seven (7) days before the beginning of the calendar year for
which the salary is payable.
In the event of my death, any payment to which I am entitled under the
terms of the Agreement which has not been made to me at the date of my death
shall be distributed to:
Primary Beneficiary(ies):
Name:______________________________
Address:___________________________
Relationship:______________________
Percentage Share:__________________
Contingent Beneficiary(ies):
Name:______________________________
Address:___________________________
Relationship:______________________
Percentage Share:__________________
in accordance with the provisions of Section 3 of the Agreement.
<PAGE> 32
-16-
Notwithstanding the foregoing to the contrary, in the event of payment
of the "Hypothetical Death Benefit" pursuant to Section 3(g) of the Agreement,
any beneficiary designation made by me in connection with a key-man life
insurance policy on my life shall supersede the beneficiary designation made
hereinabove.
- ------------------------- ------------------------------
Date David C. Benoit
<PAGE> 33
-1-
Exhibit 10.5
AMENDED AND RESTATED
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made as of the ____ day of ___________, 1999 by and
between The Connecticut Water Company (together with any affiliated companies
hereinafter collectively referred to as the "Employer") and James R. McQueen
(hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee is among a select group of management or highly
compensated employees of the Employer who entered into a Deferred Compensation
Agreement with the Employer made as of the first day of January, 1989 (the
"Deferred Compensation Agreement"); and
WHEREAS, the Employer and the Employee desire to amend and restate the
Deferred Compensation Agreement on the terms herein set forth; and
WHEREAS, the Employer and the Employee are willing to enter into this
Amended and Restated Deferred Compensation Agreement (the "Agreement") on the
terms herein set forth.
NOW, THEREFORE, in consideration of the premises and the mutual and
dependent promises herein, the parties hereto agree as follows:
<PAGE> 34
-2-
1. DEFERRED COMPENSATION. The Employee may file a written election with
the Employer in the form attached to this Agreement or such other form as may be
approved by the Employer to defer up to 12 percent (12%) of the Employee's
salary. Such amount shall be credited to a Deferred Compensation Account as
provided in Section 2 hereof. This election to defer the receipt of salary must
be made before the beginning of the calendar year for which the salary is
payable and shall remain in effect, unless terminated or changed, or until the
date the Employee ceases to be an employee of the Employer. Any termination or
change of a deferral election must be made on a form provided by the Employer
for such purpose and may only be made with respect to salary which will be
earned on and after the January 1 following the Employer's receipt of such form
provided that such form is received at least seven (7) days prior to the
applicable January 1.
2. DEFERRED COMPENSATION ACCOUNT. The Employer shall maintain on its
books and records a Deferred Compensation Account to record its liability for
future payments of deferred compensation and interest thereon required to be
paid to the Employee or his beneficiary pursuant to this Agreement. However, the
Employer shall not be required to segregate or earmark any of its assets for the
benefit of the Employee or his beneficiary. The amount reflected in said
Deferred Compensation Account shall be available for the Employer's general
corporate purposes and shall be available to the Employer's general creditors.
The amount reflected in said Deferred Compensation Account shall not be subject
in any manner to anticipation, alienation, transfer or assignment by the
Employee or his beneficiary, and any attempt to anticipate, alienate, transfer
or assign the same shall be void. Neither the Employee
<PAGE> 35
-3-
nor his beneficiary may assert any right or claim against any specific assets of
the Employer. The Employee or his beneficiary shall have only a contractual
right against the Employer for the amount reflected in said Deferred
Compensation Account. Notwithstanding the foregoing, in order to pay amounts
which may become due under this Agreement, the Employer may establish a grantor
trust (hereinafter the "Trust") within the meaning of Section 671 of the
Internal Revenue Code of 1986, as amended. The assets in such Trust shall at all
times be subject to the claims of the general creditors of the Employer in the
event of the Employer's bankruptcy or insolvency, and neither the Employee nor
any beneficiary shall have any preferred claim or right, or any beneficial
ownership interest in, any such assets of the Trust prior to the time such
assets are paid to an Employee or beneficiary pursuant to this Agreement.
The Employer shall credit to said Deferred Compensation Account the
amount of any salary to which the Employee becomes entitled and which is
deferred pursuant to Section 1 hereof, such amount to be credited as of the
first business day of each month. The Employer shall also credit to said
Deferred Compensation Account an Interest Equivalent in the amount and manner
set forth in Section 3 hereof.
3. PAYMENT OF DEFERRED COMPENSATION
(a) Termination of Employment On or After Attainment of Age 65. If the
Employee's employment should terminate on or after his attainment of age
sixty-five (65) for any reason other than death or on account of "Cause" as
defined in subsection (d) below, he shall be entitled to receive payment of the
entire amount of his Deferred Compensation Account
<PAGE> 36
-4-
including an Interest Equivalent, as described below, in the form of an
actuarially equivalent life annuity providing for equal annual payments for the
life of the Employee with a guarantee that fifteen (15) annual payments will be
made. Such actuarially equivalent life annuity shall be computed on the basis of
a mortality table that assumes a life expectancy of age eighty (80) and uses the
Interest Factor described below.
There shall be credited to the Employee's Deferred Compensation Account
as of each January 1 and July 1, commencing with January 1, 1989, until payment
of such account is made or begins, as additional deferred compensation, an
Interest Equivalent equal to fifty percent (50%) of the product of (i) the AAA
Corporate Bond Yield Averages published by Moody's Bond Survey for the Friday
ending on or immediately preceding the applicable January 1 and July 1 plus one
and one-half (1 1/2) percentage points (the "Interest Factor"), multiplied by
(ii) the balance of the Employee's Deferred Compensation Account, including the
amount of Interest Equivalent previously credited to such Employee's account, as
of the preceding day (i.e., December 31 or June 30). The Interest Factor used to
compute the annuity payable upon the Employee's termination of employment on or
after his attainment of age sixty-five (65) shall be calculated based upon the
Interest Factor as of the January 1 or July 1 immediately preceding the date of
the Employee's termination of employment, whichever shall fall nearer to the
date of the Employee's termination of employment. The first annuity payment
under this subsection shall be paid within sixty (60) days after the
commencement of the calendar year following the Employee's termination of
employment.
<PAGE> 37
-5-
Notwithstanding the foregoing, if provided by the Board of Directors of
the Employer, in its sole discretion, the Employee shall instead receive payment
in a lump sum of the entire amount of his Deferred Compensation Account,
including an Interest Equivalent, as described above. The lump sum shall be paid
within sixty (60) days after the Employee's termination of employment or, at the
discretion of the Board of Directors of the Employer, within sixty (60) days
after the commencement of the calendar year following the Employee's termination
of employment.
(b) Termination of Employment After Attainment of Age 55 and Prior to
Attainment of Age 65. If the Employee's employment should terminate after his
attainment of age fifty-five (55) and prior to his attainment of age sixty-five
(65) for any reason other than death or on account of "Cause" as defined in
subsection (d) below, he shall be entitled to receive payment of the entire
amount of his Deferred Compensation Account including an Interest Equivalent, as
described below, in the form of equal annual installments over a period equal to
the Employee's remaining life, assuming a life expectancy of age eighty (80).
There shall be credited to the Employee's Deferred Compensation Account as of
each January 1 and July 1, commencing with January 1, 1989 until payment of said
annual installments are completed, as additional deferred compensation, an
Interest Equivalent as described in subsection (a) above. The first installment
payment under this subsection shall be paid within sixty (60) days after the
commencement of the calendar year following the Employee's termination of
employment.
<PAGE> 38
-6-
Notwithstanding the foregoing, if provided by the Board of Directors of
the Employer, in its sole discretion, the Employee shall instead receive payment
in a lump sum of the entire amount of his Deferred Compensation Account,
including an Interest Equivalent, as described in subsection (a) above. The lump
sum shall be paid within sixty (60) days after the Employee's termination of
employment or, at the discretion of the Board of Directors of the Employer,
within sixty (60) days after the commencement of the calendar year following the
Employee's termination of employment.
(c) Termination of Employment Prior to Attainment of Age 55. If the
Employee's employment should terminate prior to his attainment of age fifty-five
(55) for any reason other than death or on account of "Cause" as defined in
subsection (d) below, the Employee shall be entitled to receive payment in a
lump sum of the entire amount of his Deferred Compensation Account, including
the same Interest Equivalent as described in subsection (a) above. Payment under
this subsection shall be made within sixty (60) days after the Employee's
termination of employment or, at the option of the Board of Directors of the
Employer, in its sole discretion, within sixty (60) days after the commencement
of the calendar year following the Employee's termination of employment.
(d) Termination of Employment for Cause. If the employment of the
Employee is terminated by the Employer for Cause, the Employee shall be entitled
only to a return of amounts deferred pursuant to Section 1 hereof, and this
Agreement and all payments provided for in this Agreement, including any
obligation to pay interest on deferred compensation, shall terminate.
<PAGE> 39
-7-
Said deferred amounts shall be paid in a lump sum within sixty (60) days after
the commencement of the calendar year following the Employee's termination of
employment. As used in this Agreement, the term "Cause" shall mean:
(i) the Employee's rendering, while employed by the Employer, of
any services, assistance or advice, either directly or
indirectly, to any person, firm or organization competing
with, or in opposition to, the Employer;
(ii) the Employee's allowing, while employed by the Employer, any
use of his name by any person, firm or organization
competing with, or in opposition to, the Employer; or
(iii) willful misconduct by the Employee, including, but not
limited to, the commission by the Employee of a felony or
the perpetration by the Employee of a common law fraud upon
the Employer.
(e) Death While Employed. Notwithstanding anything to the contrary
contained in the foregoing, if the Employee should die while employed by the
Employer, his beneficiary, designated pursuant to Section 4 hereof, shall
receive in a lump sum, in lieu of the amount(s) otherwise payable to the
Employee under this Agreement, a death benefit equal to the greater of (i) the
Hypothetical Death Benefit, as defined in subsection (g) hereof, and (ii) the
entire amount of his Deferred Compensation Account at the date of his death,
assuming that an Interest
<PAGE> 40
-8-
Equivalent were credited to such account as of each January 1 and July 1,
commencing with January 1, 1989, until the date of death at the rate set forth
in subsection (a) hereof. Such beneficiary shall be entitled to receive such
death benefit within ninety (90) days after the Employer has been notified in
writing of the death of the Employee and has been provided with any additional
information, forms or other documents it may reasonably request.
(f) Death After Termination of Employment. If the Employee should die
after the termination of his employment with the Employer and prior to the date
on which payment of his Deferred Compensation Account has commenced in the form
of an annuity as provided in subsection (a) or has been made in the form of a
lump sum as provided in subsections (a), (b), (c) or (d) or has been fully
distributed in the event of payment in the form of installments as provided in
subsection (b), his beneficiary, designated pursuant to Section 4 hereof, shall
receive in a lump sum, in lieu of the amount(s) otherwise payable to the
Employee under this Agreement, a death benefit equal to the entire amount of the
Employee's Deferred Compensation Account at the date of his death (or the entire
remaining amount of the Employee's Deferred Compensation Account at the date of
his death in the event that payment has commenced in the form of installments as
provided in subsection (b)) and, provided that the Employee's employment shall
not have terminated on account of "Cause" as provided in subsection (d) hereof,
an Interest Equivalent credited to such account as of each January 1 and July 1,
commencing with January 1, 1989, until the date of death at the rate set forth
in subsection (a) hereof. No Interest Equivalent shall be credited to the
Employee's Deferred Compensation Account in the event of the Employee's death
after his termination on account of "Cause" as
<PAGE> 41
-9-
provided in subsection (d) hereof. The Employee's beneficiary shall be entitled
to receive such death benefit within ninety (90) days after the Employer has
been notified in writing of the death of the Employee and has been provided with
any additional information, forms or other documents it may reasonably request.
If the Employee should die after the termination of his employment with
the Employer and after the date on which payment of his Deferred Compensation
Account and the Interest Equivalent set forth in subsection (a) hereof has
commenced in the form of an annuity as provided in subsection (a), no additional
benefits shall be payable under this Agreement after the Employee's death except
to the extent that the Employee did not receive prior to his death the
guaranteed fifteen (15) annual payments provided in subsection (a), in which
case the unpaid guaranteed payments shall be paid to the Employee's beneficiary,
designated pursuant to Section 4, in annual payments for the remainder of said
guaranteed fifteen (15)-year term.
If the Employee should die after the termination of his employment with
the Employer and after the date on which payment of his Deferred Compensation
Account and, with respect to payments made in accordance with subsections (a),
(b) or (c) hereof, the Interest Equivalent set forth in subsection (a) hereof,
has been paid in the form of a lump sum as provided in subsections (a), (b), (c)
or (d) or has been fully distributed in the form of installments as provided in
subsection (b), no additional benefits shall be payable upon the Employee's
death.
<PAGE> 42
-10-
(g) Hypothetical Death Benefit. For purposes of this Agreement, the
term "Hypothetical Death Benefit" shall mean a lump sum benefit equal to the
proceeds of any policy of key-man life insurance on the life of the Employee, of
which the Employer is owner and beneficiary, and which policy is designated by
the Employer as subject to the provisions hereof, reduced by (i) the amount of
any tax imposed on the Employer with respect to such proceeds and (ii) the cost
to the Employer of any tax deductions postponed as a result of salary deferrals
pursuant to Section 1 hereof and increased by (iii) the tax deduction to the
Employer which would result from payment of the Hypothetical Death Benefit to a
beneficiary of the Employee. For purposes of (ii) above, an opportunity cost
factor of six (6) percent pre-tax interest will be applied during the period of
postponed deductions under (ii). The calculation of the Hypothetical Death
Benefit shall be done by the Employer, whose calculation shall be final and
binding on the Employee and his beneficiary. Anything herein to the contrary
notwithstanding, the Employer shall not be required to purchase a policy of
key-man life insurance on the life of any Employee, and any such policy
purchased by the Employer, and all proceeds thereof, shall remain at all times
available to the Employer's general creditors.
4. BENEFICIARY. The Employee has notified or will in the future notify
the Employer of the person or persons entitled to receive payments on the death
of the Employee. For the purposes of this Agreement, such person or persons are
herein referred to collectively as the "beneficiary." The person whom an
Employee designates as his beneficiary for this purpose must be one of the
following: the Employee's spouse, father, mother, sister, brother, son or
daughter. The beneficiary may also be a legal ward living with and dependent on
the Employee
<PAGE> 43
-11-
at the time of his death. If the Employee dies and has not designated a
beneficiary, his beneficiary shall be his spouse, if living; otherwise, his
beneficiary shall be deemed to be his estate. An Employee's beneficiary
designation may be changed at any time by the Employee giving written notice to
the Employer of such change. The rights of any beneficiary presently or
hereafter designated are subject to any changes made in this Agreement by the
Employee and the Employer.
5. WITHHOLDING. The Employer shall be permitted to withhold from any
payment to the Employee or his beneficiary hereunder all federal, state or other
taxes which may be required with respect to such payment.
6. ARBITRATION. In the event that a dispute shall arise with respect to
any of the provisions of this Agreement, either the Employer or the Employee or
his beneficiary, as the case may be, may give written notice to the other
stating the claims that said party desires to arbitrate, and naming an
arbitrator. Within ten (10) days after the receipt of such notice, the party
receiving same shall appoint a second arbitrator by written notice to be sent to
the party who requested arbitration. Within ten (10) days after receipt of such
notice of appointment of the second arbitrator, the two (2) arbitrators so
appointed shall meet to select a third arbitrator and shall give written notice
of such selection to the Employer and the Employee or his beneficiary. The
decision of a majority of the arbitrators shall be conclusive and binding upon
the Employer and the Employee or his beneficiary. All notices hereunder shall be
by registered mail addressed to the last known address of the party entitled to
receive notice. The Employer and the Employee
<PAGE> 44
-12-
shall each pay their own costs incurred in the arbitration proceeding; provided,
however, that the arbitrators may require that the losing party reimburse the
prevailing party for its costs if it shall be determined that the claim which
gave rise to the dispute was without substantial foundation.
7. MISCELLANEOUS.
(a) This Agreement shall be binding upon the parties hereto, their
heirs, executors, administrators, successors and assigns. The Employer agrees
that it will not be a party to any merger, consolidation or reorganization
unless and until its obligations hereunder shall be expressly assumed by its
successor or successors.
(b) This Agreement may be amended at any time by mutual written
agreement of the parties hereto, but no amendment shall operate to give the
Employee, or any beneficiary designated by him, either directly or indirectly,
any interest whatsoever in any funds or assets of the Employer, except the right
to receive the payments herein provided.
(c) This Agreement may be terminated by the Employer at any time that
tax or other laws are enacted or interpreted which result or will result in
costs to the Employer significantly in excess of those contemplated at the time
of the execution hereof. In the event of such termination, the Employer's sole
obligation shall be to pay to the Employee in a lump sum the amount of his
Deferred Compensation Account, including an Interest Equivalent as determined by
Section 3(a), as if the effective date of termination of this Agreement were
considered to be
<PAGE> 45
-13-
the date of termination of the Employee's employment. Such payment shall be made
to the Employee within ninety (90) days after the effective date of termination
of this Agreement.
(d) This Agreement shall not supersede any contract of employment,
whether oral or written, between the Employer and the Employee, nor shall it
affect or impair the rights and obligations of the Employer and the Employee,
respectively, thereunder. Nothing contained herein shall impose any obligation
on the Employer to continue the employment of the Employee.
(e) If Moody's Bond Survey shall cease to publish the Corporate Bond
Yield Averages referred to in Section 3 hereof, a similar average selected by
the Board of Directors of the Employer, in its sole discretion, shall be used.
(f) This Agreement shall be executed in duplicate, and each executed
copy of this Agreement shall be deemed an original.
(g) This Agreement shall be construed in all respects under the laws of
the State of Connecticut.
<PAGE> 46
-14-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
THE CONNECTICUT WATER COMPANY
___________________________ By__________________________________
James R. McQueen Its
<PAGE> 47
-15-
Notice of Election to Defer Compensation
Pursuant to the terms of the Deferred Compensation Agreement (the
"Agreement") by and between The Connecticut Water Company (the "Company") and
James R. McQueen, made as of the first day of January, 1989 and amended and
restated as of the ____ day of ____________, 1999, I hereby elect to defer,
pursuant to Section 1 thereof, ____% of my salary payable in connection with the
performance of my services as an employee of the Company beginning __________,
____. This election shall be effective for calendar years beginning after the
date hereof until the calendar year next beginning after the date on which I
notify the Company to change or terminate future deferrals pursuant to the terms
of Section 1 of the Agreement on a form provided by the Company.
I understand that this election to defer shall be continued as to the
salary which is earned for each calendar year for which this election to defer
is effective until distribution of such deferred compensation to me upon my
termination of services as an employee, or to my beneficiary in the event of my
death, as provided in the Agreement. I also understand that I may change the
amount deferred (including terminating deferrals) with respect to salary earned
for calendar years commencing after my delivery to the Company of a written
notice of change, provided such written notice is delivered to the Company on a
form approved by the Company at least seven (7) days before the commencement of
such calendar year. Further, I understand that if I terminate deferrals I may
make a new election to again defer my salary pursuant to the Agreement and that
any new election to defer payment of my salary must be made and delivered to the
Company at least seven (7) days before the beginning of the calendar year for
which the salary is payable.
In the event of my death, any payment to which I am entitled under the
terms of the Agreement which has not been made to me at the date of my death
shall be distributed to:
Primary Beneficiary(ies):
Name:_________________________________
Address:______________________________
Relationship:_________________________
Percentage Share:_____________________
Contingent Beneficiary(ies):
Name:_________________________________
Address:______________________________
Relationship:_________________________
Percentage Share:_____________________
in accordance with the provisions of Section 3 of the Agreement.
<PAGE> 48
-16-
Notwithstanding the foregoing to the contrary, in the event of payment
of the "Hypothetical Death Benefit" pursuant to Section 3(g) of the Agreement,
any beneficiary designation made by me in connection with a key-man life
insurance policy on my life shall supersede the beneficiary designation made
hereinabove.
- ------------------------- ------------------------------
Date James R. McQueen
<PAGE> 49
-1-
Exhibit 10.5
AMENDED AND RESTATED
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made as of the ____ day of _____________, 1999 by and
between The Connecticut Water Company (together with any affiliated companies
hereinafter collectively referred to as the "Employer") and Kenneth W. Kells
(hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee is among a select group of management or highly
compensated employees of the Employer who entered into a Deferred Compensation
Agreement with the Employer made as of the first day of January, 1989 (the
"Deferred Compensation Agreement"); and
WHEREAS, the Employer and the Employee desire to amend and restate the
Deferred Compensation Agreement on the terms herein set forth; and
WHEREAS, the Employer and the Employee are willing to enter into this
Amended and Restated Deferred Compensation Agreement (the "Agreement") on the
terms herein set forth.
NOW, THEREFORE, in consideration of the premises and the mutual and
dependent promises herein, the parties hereto agree as follows:
<PAGE> 50
-2-
1. DEFERRED COMPENSATION. The Employee may file a written election with
the Employer in the form attached to this Agreement or such other form as may be
approved by the Employer to defer up to 12 percent (12%) of the Employee's
salary. Such amount shall be credited to a Deferred Compensation Account as
provided in Section 2 hereof. This election to defer the receipt of salary must
be made before the beginning of the calendar year for which the salary is
payable and shall remain in effect, unless terminated or changed, or until the
date the Employee ceases to be an employee of the Employer. Any termination or
change of a deferral election must be made on a form provided by the Employer
for such purpose and may only be made with respect to salary which will be
earned on and after the January 1 following the Employer's receipt of such form
provided that such form is received at least seven (7) days prior to the
applicable January 1.
2. DEFERRED COMPENSATION ACCOUNT. The Employer shall maintain on its
books and records a Deferred Compensation Account to record its liability for
future payments of deferred compensation and interest thereon required to be
paid to the Employee or his beneficiary pursuant to this Agreement. However, the
Employer shall not be required to segregate or earmark any of its assets for the
benefit of the Employee or his beneficiary. The amount reflected in said
Deferred Compensation Account shall be available for the Employer's general
corporate purposes and shall be available to the Employer's general creditors.
The amount reflected in said Deferred Compensation Account shall not be subject
in any manner to anticipation, alienation, transfer or assignment by the
Employee or his beneficiary, and any attempt to anticipate, alienate, transfer
or assign the same shall be void. Neither the Employee
<PAGE> 51
-3-
nor his beneficiary may assert any right or claim against any specific assets of
the Employer. The Employee or his beneficiary shall have only a contractual
right against the Employer for the amount reflected in said Deferred
Compensation Account. Notwithstanding the foregoing, in order to pay amounts
which may become due under this Agreement, the Employer may establish a grantor
trust (hereinafter the "Trust") within the meaning of Section 671 of the
Internal Revenue Code of 1986, as amended. The assets in such Trust shall at all
times be subject to the claims of the general creditors of the Employer in the
event of the Employer's bankruptcy or insolvency, and neither the Employee nor
any beneficiary shall have any preferred claim or right, or any beneficial
ownership interest in, any such assets of the Trust prior to the time such
assets are paid to an Employee or beneficiary pursuant to this Agreement.
The Employer shall credit to said Deferred Compensation Account the
amount of any salary to which the Employee becomes entitled and which is
deferred pursuant to Section 1 hereof, such amount to be credited as of the
first business day of each month. The Employer shall also credit to said
Deferred Compensation Account an Interest Equivalent in the amount and manner
set forth in Section 3 hereof.
3. PAYMENT OF DEFERRED COMPENSATION
(a) Termination of Employment On or After Attainment of Age 65. If the
Employee's employment should terminate on or after his attainment of age
sixty-five (65) for any reason other than death or on account of "Cause" as
defined in subsection (d) below, he shall be entitled to receive payment of the
entire amount of his Deferred Compensation Account
<PAGE> 52
-4-
including an Interest Equivalent, as described below, in the form of an
actuarially equivalent life annuity providing for equal annual payments for the
life of the Employee with a guarantee that fifteen (15) annual payments will be
made. Such actuarially equivalent life annuity shall be computed on the basis of
a mortality table that assumes a life expectancy of age eighty (80) and uses the
Interest Factor described below.
There shall be credited to the Employee's Deferred Compensation Account
as of each January 1 and July 1, commencing with January 1, 1989, until payment
of such account is made or begins, as additional deferred compensation, an
Interest Equivalent equal to fifty percent (50%) of the product of (i) the AAA
Corporate Bond Yield Averages published by Moody's Bond Survey for the Friday
ending on or immediately preceding the applicable January 1 and July 1 plus two
(2) percentage points (the "Interest Factor"), multiplied by (ii) the balance of
the Employee's Deferred Compensation Account, including the amount of Interest
Equivalent previously credited to such Employee's account, as of the preceding
day (i.e., December 31 or June 30). The Interest Factor used to compute the
annuity payable upon the Employee's termination of employment on or after his
attainment of age sixty-five (65) shall be calculated based upon the Interest
Factor as of the January 1 or July 1 immediately preceding the date of the
Employee's termination of employment, whichever shall fall nearer to the date of
the Employee's termination of employment. The first annuity payment under this
subsection shall be paid within sixty (60) days after the commencement of the
calendar year following the Employee's termination of employment.
<PAGE> 53
-5-
Notwithstanding the foregoing, if provided by the Board of Directors of
the Employer, in its sole discretion, the Employee shall instead receive payment
in a lump sum of the entire amount of his Deferred Compensation Account,
including an Interest Equivalent, as described above. The lump sum shall be paid
within sixty (60) days after the Employee's termination of employment or, at the
discretion of the Board of Directors of the Employer, within sixty (60) days
after the commencement of the calendar year following the Employee's termination
of employment.
(b) Termination of Employment After Attainment of Age 55 and Prior to
Attainment of Age 65. If the Employee's employment should terminate after his
attainment of age fifty-five (55) and prior to his attainment of age sixty-five
(65) for any reason other than death or on account of "Cause" as defined in
subsection (d) below, he shall be entitled to receive payment of the entire
amount of his Deferred Compensation Account including an Interest Equivalent, as
described below, in the form of equal annual installments over a period equal to
the Employee's remaining life, assuming a life expectancy of age eighty (80).
There shall be credited to the Employee's Deferred Compensation Account as of
each January 1 and July 1, commencing with January 1, 1989 until payment of said
annual installments are completed, as additional deferred compensation, an
Interest Equivalent as described in subsection (a) above. The first installment
payment under this subsection shall be paid within sixty (60) days after the
commencement of the calendar year following the Employee's termination of
employment.
<PAGE> 54
-6-
Notwithstanding the foregoing, if provided by the Board of Directors of
the Employer, in its sole discretion, the Employee shall instead receive payment
in a lump sum of the entire amount of his Deferred Compensation Account,
including an Interest Equivalent, as described in subsection (a) above. The lump
sum shall be paid within sixty (60) days after the Employee's termination of
employment or, at the discretion of the Board of Directors of the Employer,
within sixty (60) days after the commencement of the calendar year following the
Employee's termination of employment.
(c) Termination of Employment Prior to Attainment of Age 55. If the
Employee's employment should terminate prior to his attainment of age fifty-five
(55) for any reason other than death or on account of "Cause" as defined in
subsection (d) below, the Employee shall be entitled to receive payment in a
lump sum of the entire amount of his Deferred Compensation Account, including
the same Interest Equivalent as described in subsection (a) above. Payment under
this subsection shall be made within sixty (60) days after the Employee's
termination of employment or, at the option of the Board of Directors of the
Employer, in its sole discretion, within sixty (60) days after the commencement
of the calendar year following the Employee's termination of employment.
(d) Termination of Employment for Cause. If the employment of the
Employee is terminated by the Employer for Cause, the Employee shall be entitled
only to a return of amounts deferred pursuant to Section 1 hereof, and this
Agreement and all payments provided for in this Agreement, including any
obligation to pay interest on deferred compensation, shall terminate.
<PAGE> 55
-7-
Said deferred amounts shall be paid in a lump sum within sixty (60) days after
the commencement of the calendar year following the Employee's termination of
employment. As used in this Agreement, the term "Cause" shall mean:
(i) the Employee's rendering, while employed by the Employer, of
any services, assistance or advice, either directly or
indirectly, to any person, firm or organization competing
with, or in opposition to, the Employer;
(ii) the Employee's allowing, while employed by the Employer, any
use of his name by any person, firm or organization
competing with, or in opposition to, the Employer; or
(iii) willful misconduct by the Employee, including, but not
limited to, the commission by the Employee of a felony or
the perpetration by the Employee of a common law fraud upon
the Employer.
(e) Death While Employed. Notwithstanding anything to the contrary
contained in the foregoing, if the Employee should die while employed by the
Employer, his beneficiary, designated pursuant to Section 4 hereof, shall
receive in a lump sum, in lieu of the amount(s) otherwise payable to the
Employee under this Agreement, a death benefit equal to the greater of (i) the
Hypothetical Death Benefit, as defined in subsection (g) hereof, and (ii) the
entire amount of his Deferred Compensation Account at the date of his death,
assuming that an Interest
<PAGE> 56
-8-
Equivalent were credited to such account as of each January 1 and July 1,
commencing with January 1, 1989, until the date of death at the rate set forth
in subsection (a) hereof. Such beneficiary shall be entitled to receive such
death benefit within ninety (90) days after the Employer has been notified in
writing of the death of the Employee and has been provided with any additional
information, forms or other documents it may reasonably request.
(f) Death After Termination of Employment. If the Employee should die
after the termination of his employment with the Employer and prior to the date
on which payment of his Deferred Compensation Account has commenced in the form
of an annuity as provided in subsection (a), or has been made in the form of a
lump sum as provided in subsections (a), (b), (c) or (d) or has been fully
distributed in the event of payment in the form of installments as provided in
subsection (b), his beneficiary, designated pursuant to Section 4 hereof, shall
receive in a lump sum, in lieu of the amount(s) otherwise payable to the
Employee under this Agreement, a death benefit equal to the entire amount of the
Employee's Deferred Compensation Account at the date of his death (or the entire
remaining amount of the Employee's Deferred Compensation Account at the date of
his death in the event that payment has commenced in the form of installments as
provided in subsection (b)) and, provided that the Employee's employment shall
not have terminated on account of "Cause" as provided in subsection (d) hereof,
an Interest Equivalent credited to such account as of each January 1 and July 1,
commencing with January 1, 1989, until the date of death at the rate set forth
in subsection (a) hereof. No Interest Equivalent shall be credited to the
Employee's Deferred Compensation Account in the event of the Employee's death
after his termination on account of "Cause" as
<PAGE> 57
-9-
provided in subsection (d) hereof. The Employee's beneficiary shall be entitled
to receive such death benefit within ninety (90) days after the Employer has
been notified in writing of the death of the Employee and has been provided with
any additional information, forms or other documents it may reasonably request.
If the Employee should die after the termination of his employment with
the Employer and after the date on which payment of his Deferred Compensation
Account and the Interest Equivalent set forth in subsection (a) hereof has
commenced in the form of an annuity as provided in subsection (a), no additional
benefits shall be payable under this Agreement after the Employee's death except
to the extent that the Employee did not receive prior to his death the
guaranteed fifteen (15) annual payments provided in subsection (a), in which
case the unpaid guaranteed payments shall be paid to the Employee's beneficiary,
designated pursuant to Section 4, in annual payments for the remainder of said
guaranteed fifteen (15)-year term.
If the Employee should die after the termination of his employment with
the Employer and after the date on which payment of his Deferred Compensation
Account and, with respect to payments made in accordance with subsections
(a),(b) or (c) hereof, the Interest Equivalent set forth in subsection (a)
hereof, has been paid in the form of a lump sum as provided in subsections (a),
(b), (c) or (d) or has been fully distributed in the form of installments as
provided in subsection (b), no additional benefits shall be payable upon the
Employee's death.
<PAGE> 58
-10-
(g) Hypothetical Death Benefit. For purposes of this Agreement, the
term "Hypothetical Death Benefit" shall mean a lump sum benefit equal to the
proceeds of any policy of key-man life insurance on the life of the Employee, of
which the Employer is owner and beneficiary, and which policy is designated by
the Employer as subject to the provisions hereof, reduced by (i) the amount of
any tax imposed on the Employer with respect to such proceeds and (ii) the cost
to the Employer of any tax deductions postponed as a result of salary deferrals
pursuant to Section 1 hereof and increased by (iii) the tax deduction to the
Employer which would result from payment of the Hypothetical Death Benefit to a
beneficiary of the Employee. For purposes of (ii) above, an opportunity cost
factor of six (6) percent pre-tax interest will be applied during the period of
postponed deductions under (ii). The calculation of the Hypothetical Death
Benefit shall be done by the Employer, whose calculation shall be final and
binding on the Employee and his beneficiary. Anything herein to the contrary
notwithstanding, the Employer shall not be required to purchase a policy of
key-man life insurance on the life of any Employee, and any such policy
purchased by the Employer, and all proceeds thereof, shall remain at all times
available to the Employer's general creditors.
4. BENEFICIARY. The Employee has notified or will in the future notify
the Employer of the person or persons entitled to receive payments on the death
of the Employee. For the purposes of this Agreement, such person or persons are
herein referred to collectively as the "beneficiary." The person whom an
Employee designates as his beneficiary for this purpose must be one of the
following: the Employee's spouse, father, mother, sister, brother, son or
daughter. The beneficiary may also be a legal ward living with and dependent on
the Employee
<PAGE> 59
-11-
at the time of his death. If the Employee dies and has not designated a
beneficiary, his beneficiary shall be his spouse, if living; otherwise, his
beneficiary shall be deemed to be his estate. An Employee's beneficiary
designation may be changed at any time by the Employee giving written notice to
the Employer of such change. The rights of any beneficiary presently or
hereafter designated are subject to any changes made in this Agreement by the
Employee and the Employer.
5. WITHHOLDING. The Employer shall be permitted to withhold from any
payment to the Employee or his beneficiary hereunder all federal, state or other
taxes which may be required with respect to such payment.
6. ARBITRATION. In the event that a dispute shall arise with respect to
any of the provisions of this Agreement, either the Employer or the Employee or
his beneficiary, as the case may be, may give written notice to the other
stating the claims that said party desires to arbitrate, and naming an
arbitrator. Within ten (10) days after the receipt of such notice, the party
receiving same shall appoint a second arbitrator by written notice to be sent to
the party who requested arbitration. Within ten (10) days after receipt of such
notice of appointment of the second arbitrator, the two (2) arbitrators so
appointed shall meet to select a third arbitrator and shall give written notice
of such selection to the Employer and the Employee or his beneficiary. The
decision of a majority of the arbitrators shall be conclusive and binding upon
the Employer and the Employee or his beneficiary. All notices hereunder shall be
by registered mail addressed to the last known address of the party entitled to
receive notice. The Employer and the Employee
<PAGE> 60
-12-
shall each pay their own costs incurred in the arbitration proceeding; provided,
however, that the arbitrators may require that the losing party reimburse the
prevailing party for its costs if it shall be determined that the claim which
gave rise to the dispute was without substantial foundation.
7. MISCELLANEOUS.
(a) This Agreement shall be binding upon the parties hereto, their
heirs, executors, administrators, successors and assigns. The Employer agrees
that it will not be a party to any merger, consolidation or reorganization
unless and until its obligations hereunder shall be expressly assumed by its
successor or successors.
(b) This Agreement may be amended at any time by mutual written
agreement of the parties hereto, but no amendment shall operate to give the
Employee, or any beneficiary designated by him, either directly or indirectly,
any interest whatsoever in any funds or assets of the Employer, except the right
to receive the payments herein provided.
(c) This Agreement may be terminated by the Employer at any time that
tax or other laws are enacted or interpreted which result or will result in
costs to the Employer significantly in excess of those contemplated at the time
of the execution hereof. In the event of such termination, the Employer's sole
obligation shall be to pay to the Employee in a lump sum the amount of his
Deferred Compensation Account, including an Interest Equivalent as determined by
Section 3(a), as if the effective date of termination of this Agreement were
considered to be
<PAGE> 61
-13-
the date of termination of the Employee's employment. Such payment shall be made
to the Employee within ninety (90) days after the effective date of termination
of this Agreement.
(d) This Agreement shall not supersede any contract of employment,
whether oral or written, between the Employer and the Employee, nor shall it
affect or impair the rights and obligations of the Employer and the Employee,
respectively, thereunder. Nothing contained herein shall impose any obligation
on the Employer to continue the employment of the Employee.
(e) If Moody's Bond Survey shall cease to publish the Corporate Bond
Yield Averages referred to in Section 3 hereof, a similar average selected by
the Board of Directors of the Employer, in its sole discretion, shall be used.
(f) This Agreement shall be executed in duplicate, and each executed
copy of this Agreement shall be deemed an original.
(g) This Agreement shall be construed in all respects under the laws of
the State of Connecticut.
<PAGE> 62
-14-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
THE CONNECTICUT WATER COMPANY
___________________________ By__________________________________
Kenneth W. Kells Its
<PAGE> 63
-15-
Notice of Election to Defer Compensation
Pursuant to the terms of the Deferred Compensation Agreement (the
"Agreement") by and between The Connecticut Water Company (the "Company") and
Kenneth W. Kells, made as of the first day of January, 1989 and amended and
restated as of the ____ day of ____________, 1999, I hereby elect to defer,
pursuant to Section 1 thereof, ____% of my salary payable in connection with the
performance of my services as an employee of the Company beginning __________,
____. This election shall be effective for calendar years beginning after the
date hereof until the calendar year next beginning after the date on which I
notify the Company to change or terminate future deferrals pursuant to the terms
of Section 1 of the Agreement on a form provided by the Company.
I understand that this election to defer shall be continued as to the
salary which is earned for each calendar year for which this election to defer
is effective until distribution of such deferred compensation to me upon my
termination of services as an employee, or to my beneficiary in the event of my
death, as provided in the Agreement. I also understand that I may change the
amount deferred (including terminating deferrals) with respect to salary earned
for calendar years commencing after my delivery to the Company of a written
notice of change, provided such written notice is delivered to the Company on a
form approved by the Company at least seven (7) days before the commencement of
such calendar year. Further, I understand that if I terminate deferrals I may
make a new election to again defer my salary pursuant to the Agreement and that
any new election to defer payment of my salary must be made and delivered to the
Company at least seven (7) days before the beginning of the calendar year for
which the salary is payable.
In the event of my death, any payment to which I am entitled under the
terms of the Agreement which has not been made to me at the date of my death
shall be distributed to:
Primary Beneficiary(ies):
Name:_________________________________
Address:______________________________
Relationship:_________________________
Percentage Share:_____________________
Contingent Beneficiary(ies):
Name:_________________________________
Address:______________________________
Relationship:_________________________
Percentage Share:_____________________
in accordance with the provisions of Section 3 of the Agreement.
<PAGE> 64
-16-
Notwithstanding the foregoing to the contrary, in the event of payment
of the "Hypothetical Death Benefit" pursuant to Section 3(g) of the Agreement,
any beneficiary designation made by me in connection with a key-man life
insurance policy on my life shall supersede the beneficiary designation made
hereinabove.
- ------------------------- ------------------------------
Date Kenneth W. Kells
<PAGE> 1
EXHIBIT 10.7.2
FIRST AMENDMENT TO
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
Effective as of August 1, 1999
WHEREAS, the Connecticut Water Company (hereinafter referred to as the
"Employer") and Marshall T. Chiaraluce (hereinafter referred to as the
"Employee") entered into a Supplemental Executive Retirement Agreement dated as
of December 16,1991 (hereinafter referred to as the "Agreement"); and
WHEREAS, the parties wish to amend the Agreement in accordance with the
provisions of Section 5(a) thereof;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Agreement is hereby amended
effective as of the date first above written as follows:
1. The second paragraph of Section l(a) of the Agreement is amended to read in
its entirety as follows:
"For purposes of the foregoing, "Average Earnings" shall have the meaning set
forth in the Retirement Plan, except that in determining Average Earnings,
Annual Earnings (as defined in the Retirement Plan) shall not be limited to the
OBRA '93 annual compensation limit."
/s/ Marshall T. Chiaraluce Connecticut Water Service, Inc.
- --------------------------------
Marshall T. Chiaraluce
By: /s/ Michele G. DiAcri
--------------------------
August 13, 1999 Michele G. DiAcri
Corporate Secretary
August 13, 1999
<PAGE> 1
Exhibit 10.8.2
FIRST AMENDMENT TO
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
Effective as of__________, 1999
WHERESAS, the Connecticut Water Company (hereinafter referred to as the
"Employer") and ____________________ (hereinafter referred to as the "Employee")
entered into a Supplemental Executive Retirement Agreement dated as of
___________, 199_ (hereinafter referred to as the "Agreement"); and
WHEREAS, the parties wish to amend the Agreement in accordance with the
provisions of Section 5(a) thereof;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Agreement is hereby amended
effective as of the date first above written as follows:
1. The second paragraph of Section 1(a) of the Agreement is amended to
read in its entirety as follows:
"For purposes of the foregoing, "Average Earnings" shall have the
meaning set forth in the Retirement Plan, except that in determining
Average Earnings, Annual Earnings (as defined in the Retirement Plan)
shall not be limited to the OBRA '93 annual compensation limit."
<PAGE> 1
EXHIBIT 10.9
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
BETWEEN
THE CONNECTICUT WATER COMPANY
CONNECTICUT WATER SERVICE, INC.
AND
-----------------------------
<PAGE> 2
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of __________________, 199_, 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
___________________, a resident of ________________ ("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 ____ day of
_____________, 19__ which becomes effective upon a "Change-in-Control," as
defined herein, of Company or Parent; and
WHEREAS, should Company or Parent receive a proposal from or engage in
discussions with a third person concerning a possible combination with Company
or Parent or the acquisition of substantial portion of voting securities of
Company or Parent, the Boards of Directors of Company and Parent have deemed it
imperative that they and Company and Parent be able to rely on Executive to
continue to serve in Executive's position and that the Boards of Directors and
Company and Parent be able to rely upon Executive's advice as being in the best
interests of Company and Parent and their shareholders without concern that
Executive might be distracted by the personal uncertainties and risks that such
a proposal or discussions might otherwise create; and
WHEREAS, Company and Parent desire to reward Executive for Executive's
valuable, dedicated service to Company and Parent should Executive's service be
terminated under circumstances hereinafter described: 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, to assure Company and Parent of Executive's continued
dedication and the availability of Executive's advice and counsel in the event
of any such proposal, to induce Executive to remain in the employ of Company and
Parent and to reward Executive for Executive's valuable dedicated service to
Company and Parent should Executive's service be terminated under circumstances
hereinafter described, and for other good and valuable consideration, the
receipt and adequacy of which each party acknowledges, Company, Parent and
Executive agrees as follows:
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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;
(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
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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
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. Notwithstanding the foregoing, at any time during the period
commencing on the Effective Date and ending on the 30th day after the first
anniversary of the Effective Date, except for purposes of Paragraph 5(g), "Good
Reason" shall mean any reason or no reason.
(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
<PAGE> 5
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.
(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 target percentage of the midpoint of Executive's salary grade
under the Company's Officers Incentive Program for the year preceding the fiscal
year in which the Effective Date occurs.
5. BENEFITS. During the Term, Executive shall be entitled to the
following benefits:
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(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.
(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,
<PAGE> 7
if more favorable to Executive, as in effect at any time thereafter with respect
to other key employees of Company or Parent.
(g) Stay-on Bonus. If Executive is employed on a date on which
the Board of Directors of Company or Parent approves a transaction described in
clause (iii) of Paragraph 1(b), and the shareholders of Company or Parent, as
applicable, subsequently approve such transaction, Executive shall receive a
lump sum equal to the base salary of Executive, at the rate in effect
immediately prior to such date, plus an amount equal to the target percentage of
the midpoint of Executive's salary grade under the Company's Officers Incentive
Program for the year in which such date occurs; provided Executive is employed
on the fifth day following the closing of such transaction. If Executive's
employment is terminated by Company following such approval by the applicable
Board of Directors and prior to the fifth day following the closing of such
transaction 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 such period by reason of Executive's Disability, or if
Executive shall voluntarily terminated Executive's employment during such period
for Good Reason, then, in addition to the amounts payable to Executive pursuant
to Section 7, Executive shall be paid a lump sum equal to the base salary of
Executive, at the rate in effect immediately prior to the date of termination,
plus an amount equal to the target percentage of the midpoint of Executive's
salary grade under the Company's Officers Incentive Program for the year in
which termination occurs.
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.
(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
<PAGE> 8
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.
(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-
<PAGE> 9
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 a nationally
recognized independent certified public accounting firm selected and retained by
Company to be the reasonable value of said covenants as of the date of
termination of Executive's employment, but in no event shall such amount be
greater than the aggregate value of the benefits provided in subparagraphs
(e)(ii),(iii),(iv),(v),(vii),(viii),(ix) and (xi) hereinbelow. The benefits
otherwise payable to Executive pursuant to said subparagraphs shall be offset by
the amount, if any, payable to Executive in respect of the covenants by
Executive set forth in Paragraph 8 and 9 below. Notwithstanding the foregoing,
if any benefit otherwise payable to Executive pursuant to said subparagraphs
would offset by the amount payable to Executive in respect of the covenants set
forth in Paragraph 8 and 9 below, Executive may elect to receive such benefit,
but the amount payable to Executive in respect of the covenants by Executive set
forth in Paragraph 8 and 9 below shall be reduced by the value of such benefit.
Said amount paid in consideration of the covenants by Executive set forth in
Paragraphs 8 and 9 below 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 target percentage of
the midpoint of Executive's salary grade under the Company's Officers Incentive
Program for the year in which termination occurs. There shall be subtracted from
the aggregate amount determined in accordance with the immediately preceding
sentence 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.
(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
<PAGE> 10
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.
(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.
<PAGE> 11
(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.
(xi) Company shall provide Executive with
outplacement services from a firm selected by the Company for a period of one
(1) year commencing on date of termination, or until Executive accepts other
employment, if earlier. Such outplacement services shall be reasonable and
appropriate for an employee in Executive's position.
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,
<PAGE> 12
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.
(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
<PAGE> 13
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.
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 Company (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
<PAGE> 14
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),(ii),(iii),(iv),(v),(vii),(viii),
(ix) and (xi) 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. If any
Payment is made before the Tax Advisor determines that such Payment is subject
to the Excise Tax, such Payment, to the extent it exceeds the "Reduced Amount,"
as defined herein, shall be treated for all purposes as a loan to Executive
which Executive shall repay to Company together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code; provided, however,
that such loan shall be deemed to have been made and such amount shall be
payable by Executive to Company only if the treatment of such Payment as a loan
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.
Furthermore, no such loan shall be deemed to have been made if such deemed loan
would not either eliminate the amount on which Executive is subject to Excise
Tax or generate a refund of such Excise Tax. For purposes of this Paragraph 14,
"Reduced Amount" shall mean an amount expressed in present value, as determined
in accordance with Section 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code, that
maximizes the aggregate present value of the Payments without causing any
Payment to be non-deductible by Company because of Section 280G of the Code.
Executive and Company agree that they shall reasonably cooperate with each other
in connection with any administrative or judicial proceedings concerning the
existence or liability for Excise Tax with respect to the Payments. Company
agrees to indemnify Executive and hold Executive harmless for any penalties,
interest or expenses Executive may be required to pay in the event it is
determined that Excise Tax is owed. Executive agrees that Executive will not
take any position on Executive's income tax return or otherwise that is
inconsistent with the positions of Company with respect to the treatment of any
Payment, which may be contended is a "parachute" payment under Section 280G of
the Code. 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
<PAGE> 15
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.
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.
<PAGE> 16
20. AMENDMENT. This Agreement may be modified or amended only by an
instrument in writing executed by the parties hereto; provided, however, that
the Board of Directors of Company and Parent may amend this Agreement without
the consent of Executive upon receipt of a written opinion of Company's
accounting firm that a provision or provisions of this Agreement would prevent
"pooling" accounting treatment in connection with any Change-in-Control and such
"pooling" accounting treatment would otherwise be available in connection with
such Change-in-Control, to the extent necessary to permit "pooling" accounting
treatment in connection with such a Change-in-Control, provided that such
amendment may not adversely affect any benefit to which Executive was entitled
under the terms of this Agreement prior to this amendment and restatement, and
must preserve the benefits to Executive under this Agreement to the maximum
extent possible consistent with obtaining such accounting treatment.
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.
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 ____ day of _________________, 19__.
Connecticut Water Service, Inc.
The Connecticut Water Company
By
(Title)
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 "Releases") before any agency, court or other forum, and you agree to
release the Releases from all claims, known or unknown, arising in any way from
any actions taken by the Releases 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 Releases; 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
<PAGE> 1
Exhibit 10.10
Richard L. Mercier
EMPLOYMENT AND CONSULTING AGREEMENT
AGREEMENT by and between Connecticut Water Company, a Connecticut corporation
with its principal office and place of business in Clinton, Connecticut (the
"Company"), Connecticut Water Service, Inc., a Connecticut corporation and
holder of all of the outstanding capital stock of Company (the "Parent") and
Richard L. Mercier, a resident of Plainfield, CT (the "Employee"), dated April
15, 1999.
WHEREAS, the Company and the Parent have determined that it is in the best
interests of the Company and the Parent to employ the Employee as President of
Gallup Water Service, Incorporated and the Employee desires to serve in that
capacity.
WHEREAS, the Company and the Parent have determined that it is in the best
interests of the Company and the Parent to engage Richard L. Mercier as a
Consultant after the employment period and Mercier desires to serve in that
capacity.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. a) Employment Period. The Company shall employ the Employee, and the
Employee shall serve the Company, on the trams and conditions set forth
in this Agreement, for the period commencing on or before [date of
closing] and ending on the fourth anniversary of such commencement date
(the "Employment Period").
b) Consulting Period. After the Employment Period the Parent shall
engage the Employee as a Consultant and not as an Employee. Said
Consulting period shall continue until Richard L. Mercier obtains the
age of 70. The employee must complete the employment period described
in Section (1)(a) to be engaged as a Consultant.
2.) Position and Duties.
a) During the Employment Period, the Employee shall have the title of
President of Gallup Water Service, Incorporated and shall report
directly to the CEO of the Company. The Employee's authority, duties
and responsibilities shall be those which are described in "Schedule A"
attached hereto.
<PAGE> 2
b) During the Consulting Period, Richard L. Mercier shall have the
title of Consultant and shall report directly to the CEO of the Parent.
The Consultant's authority, duties and responsibilities shall be those
which are described in "Schedule B" attached hereto.
c) During the Consulting Period, Richard L. Mercier shall be
responsible for the payment of his own social security taxes, federal
and state income taxes, pension payments if any, and any similar items.
Richard L. Mercier shall not be entitled to workers compensation
benefits and shall not be entitled to unemployment compensation
benefits.
If the nature of the responsibilities required during the employment or
consulting period change from those duties outlined in Attachments A and B, the
Company shall make an immediate payment of the amounts due to Richard L. Mercier
under the terms of this agreement.
3.) Compensation.
a.) Base Salary. During the Employment Period, the Employee shall
receive an annual base salary ("Annual Base Salary") equal to $72,825,
to be earned and paid at a biweekly rate of $2,800.96. During any
period after the end of the Employment Period when the Employee is
employed by the Company, the Annual Base Salary shall be as agreed upon
by the Employee and the Company.
During the Consulting Period, Richard L. Mercier shall receive annual
fees equal to $18,000.00 to be paid on a quarterly basis of $4,500.00
per quarter.
b.) Other Benefits. During the Employment Period and any subsequent
period when the Employee is employed by the Company or any of its other
Affiliated Companies: (i) the Employee shall be entitled to participate
in all qualified deferred compensation, savings and retirement plans,
practices, policies and programs of the Company in accordance with the
plans, practices, programs and policies of The Connecticut Water
Company ("CWC") set forth, from time to time, in such plans or any CWC
employee manual; and (ii) the Employee and/or the Employee's family, as
the case may be, shall be eligible for participation in, and shall
receive all benefits under, all welfare benefit plans, practices,
policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary
continuance, employee life insurance, group
<PAGE> 3
life insurance, and accidental death and travel accident insurance
plans and programs) in accordance with the plans, practices, programs
and policies of CWC set forth, from time to time, in such plans or any
CWC employee manual. Richard L. Mercier will also have use of a company
vehicle during his employment and may purchase that vehicle, at its
then book value, at the time he ceases to be an employee. If the
Employee terminates employment with the Company or any of its other
Affiliated Companies at or after having attained age 70, the Employee
shall also be entitled to receive from the Company an annual
supplemental executive retirement benefit having a value equal to the
excess, if any, of (i) or (ii), where:
(i) it an annual benefit of $18,000.00 payable to the Employee
as a life annuity as of the date of the Employee's retirement,
and
(ii) is the annual benefit, if any, payable to the Employee
under The Connecticut Water Company's qualified deferred
benefit retirement plan and any non-qualified retirement plan
covering the Employee, as a life annuity as of the date of the
Employee's retirement, calculated in accordance with the terms
of such plans.
Such supplemental executive retirement benefit shall cease as of the
date of the Employee's death and shall be an unfunded obligation of the
Company.
For the purpose of determining the eligibility of the Employee to
participate in such retiree medical and dental and retiree life
insurance benefit plans as the Company may maintain for the benefit of
employees of the Company, the Employee shall receive credit for six (6)
years of service, provided he has completed the Employment period as
defined in Section (1)(a), and shall participate in any such plans in
accordance with the terms and conditions thereof.
c.) Expenses. During the Employment and Consulting Periods and any
subsequent period when the Employee/Consultant is employed by the
Company, the Employee/Consultant shall be entitled to receive prompt
reimbursement for all reasonable authorized travel and other authorized
expenses incurred by the Employee/Consultant in carrying out the
Employee's/Consultant's duties under this Agreement in accordance with
the policies and procedures established by the Company.
d.) Fringe Benefits. During the Employment Period and any subsequent
period when the Employee is employed by the Company, the Employee shall
be entitled to Fringe benefits including sick time and holidays in
accordance with the plans, practices, programs and policies of CWC set
forth, from time to time, in such plans or any CWC employee manual.
<PAGE> 4
e.) Vacation. During the Employment Period and any subsequent period
when the Employee is employed by the Company, the Employee shall be
entitled to two weeks' paid vacation annually in accordance with the
plans, policies, programs and practices of CWC as set forth, from time
to time, in such plans or any CWC employee manual.
4.) Termination of Employment.
a.) Death or Disability. The Employee's employment shall terminate
automatically upon the Employee's death. The Company shall be entitled
to terminate the Employee because of the Employee's Disability during
the Employment Period. "Disability" means that the Employee has been
unable, with or without accommodation, for a period of 180 consecutive
business days, to perform the Employees' duties under this Agreement,
as a result of physical or mental illness or injury. A termination of
the Employee's employment by the Company for Disability shall be
communicated to the Employee by written notice, and shall be effective
on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), unless the Employee returns to full-time
performance of the Employee's duties before the Disability Effective
Date. In the event that the Company terminates the Employee due to
Disability, the Employee shall be considered to have completed the
Employment Period as defined in Section (1)(a) and shall receive
disability benefits as provided in paragraph 6 hereof. The Employee
shall have no disability benefits other than those set forth in
paragraph 6 hereof.
b.) By the Company. The Company may terminate the Employee's employment
for Cause. "Cause" means: the Employee's commission of a felony under
the laws of the United States or any state thereof (in connection with
his employment) as determined by a Court of Competent Jurisdiction.
c.) A termination of the Employee's employment by the Employee shall be
effected by giving the Company written notice of the termination.
d.) Date of Termination. The "Date of Termination" means the date of
the Employee's death, the date on which the termination of the
Employee's employment by the Company for Cause is effective, or the
date that is 60 days after the date on which the Employee gives the
Company notice of a termination of employment, as the case may be.
<PAGE> 5
5. Termination of Consulting.
a) The Consulting services of Richard L. Mercier shall be initiated
upon completion of the employment period described in Section (1)(a)
and shall terminate only upon his death or upon his attaining the age
of 70 and not upon his disability. Richard L. Mercier's retirement
benefits in existence since age 55 shall continue until Richard L.
Mercier's death.
6. Obligations of the Company upon Termination.
a.) Cause; Other than Death. If the Employee's employment is terminated
by the Company other than for cause or death during the Employment
Period, or if the employee becomes disabled during the Employment
Period, the Company shall pay the amounts described in subparagraph (i)
below to the Employee in a lump sum in cash within 30 days after the
Date of Termination OR AT THE EMPLOYEE'S OPTION IN A MANNER DESCRIBED
IN PARAGRAPH 3(a), REDUCED BY ANY PAYMENT TO EMPLOYEE DUE TO DISABILITY
COVERAGE PROVIDED IN 3 (b), THROUGH THE REMAINDER OF THE INITIAL
EMPLOYMENT PERIOD. The payments provided pursuant to this subparagraph
(a) of Paragraph 5 are intended as either or both severance pay or
liquidated damages for a termination of the Employee's employment by
the Company other than for Cause or death and shall be the sole and
exclusive remedy therefor.
1) The amounts to be paid in a lump sum as described above are:
A. The Employee's accrued but unpaid cash compensation (the
"Accrued Obligations"), which shall equal the sum of (1) any
portion of the Employee's Annual Base Salary through the Date
of Termination that has not yet been paid; (2) any
compensation previously deferred by the Employee (together
with any accrued interest or earnings thereon) that has not
yet been paid; and (3) any accrued but unpaid vacation pay.
B. Severance pay ill an amount equal to the Employee's annual
Base Salary for the period, if any, from the Date of
Termination to the end of the initial four year Employment
Period set forth in Section 1 hereof.
<PAGE> 6
C. The aggregate Company matching contributions and Company
profit sharing contributions, if any, that would have been
made by the Company under the Savings Plan of the Company or
any successor program of the Company in effect on the date on
which termination shall have occurred, if the Employee had
continued to be employed, and to participate on a fully vested
basis in the Savings Plan or such successor program to the
same extent as the Employee participated for the last month
during which the Employee was permitted to participate, for
the period, if any, from the Date of Termination to the end of
the initial four year Employment Period set forth in Section 1
hereof at an annual rate of compensation equal to the
Employee's Annual Base Salary. The discounted present value of
such contributions shall be payable to the Employee in a lump
sum, as calculated by the independent actuary for the
Employees' Pension Plan using the assumptions specified in the
Employees' Pension Plan.
(2) For the period, if any, from the Date of Termination to the
end of the initial four year Employment Period set forth in
Section 1 hereof, the Employee shall continue to be entitled
to participate in such employee welfare benefit plans, within
the meaning of Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended, maintained by the Company in
which the Employee shall be a participant on the Date of
Termination, subject to the terms and conditions of such
employee welfare benefit plans as may be in effect from time
to time during such period under this Agreement, with benefits
based upon compensation equal to the Employee's Annual Base
Salary. The extent that such benefits shall not be payable or
provided under any such employee welfare benefit plan, the
Company shall pay or provide such benefits on an individual
basis. The medical, dental, health and other employee welfare
benefits provided for hereunder shall be secondary to any
comparable benefits provided by another employer.
b.) By Reason of Death. If the Employee's employment or the
Consultant's services are terminated by reason of death at any
time, this Agreement shall terminate without further
obligations to Mr. Mercier's legal representatives under this
Agreement, other than for payment of the Accrued Obligations
and life insurance as provided in Section (3)(b) as may be
applicable.
<PAGE> 7
7.) Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Employee's future participation in any plan, program, policy
or practice provided by the Company or any of the other Affiliated
Companies for which the Employee may qualify, nor shall anything in
this Agreement limit or otherwise affect such rights as the Employee
may have under any contract or agreement with the Company or any of the
other Affiliated Companies. Vested benefits and other amounts that the
Employee is otherwise entitled to receive under any plan, policy,
practice or program of, or any contract or agreement with, the Company
or any of the other Affiliated Companies on or after the Date of
Termination shall be payable in accordance with such plan, policy,
practice, program, contract or agreement, as the case may be, except as
otherwise explicitly modified by this Agreement.
8.) Full Settlement. In no event shall the Employee be obligated to seek
other employment or take any other action by way of mitigation of the
amounts payable to the Employee under any of the provisions of this
Agreement, but if the Employee secures other employment, any employee
welfare benefits the Company is required to provide to the Employee
following termination of the Employee's employment shall be secondary
to those provided by another employer (if any).
9.) Confidential Information. The Employee understands that in the course
of the Employee's employment by the Company, the Employee will receive
or have access to confidential information concerning the business or
proposes of the Company and any of the other Affiliated Companies and
which the Company or any of the other Affiliated Companies desire to
protect. Such confidential information shall be deemed to include, but
not be limited to, the Company's customer lists and information, and
employee lists, including, if known, personnel information and data.
The Employee agrees that the Employee will not, at any time during the
period of his employment, or at any time during the period ending two
(2) years after the date of termination, reveal to anyone outside the
Company or any of the other Affiliated Companies or use for the
Employee's own benefit any such information without specific written
authorization by the Company or the Parent.
10.) Covenants by the Employee Not to Compete with the Company or the Parent
a) Upon file Date of Termination of the Employee's employment with the
Company for any reason, the Employee covenants and agrees that the
Employee will not at any time during the period of two 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 the Employee's
<PAGE> 8
termination, is a Competitor (as defined herein), with directly or
indirectly, with the Company or any of the other Affiliated Companies,
or engage or participate in, directly or indirectly (whether as an
officer, director, employee, partner, consultant, holder of any equity
or debt investment, lender or in any other manner or capacity), or lend
the Employee's name (or any part or variant thereof) to, any business
which, at the date of the Employee's termination, is a Competitor,
either directly or indirectly, with the Company or any of the other
Affiliated Companies, or as a result of the Employee's engagement or
participation would become, a Competitor, either directly or
indirectly, with any aspect of the business of the Company or any of
the other Affiliated Companies, as it exists at the time of the
Employee's termination, or solicit any officer, director, employee or
agent of the Company or any of the other Affiliated Companies or any
subsidiary or affiliate of the Company or any of the other Affiliated
Companies to become an officer, director, employee or agent of the
Employee, the Employee's respective affiliates or anyone else.
Ownership, in the aggregate, of less than (1%) of the outstanding
shares of capital stock of any corporation with one or more classes of
its capital stock lists 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 the
Company or any of the other Affiliated Companies or in any way in
competition with the business of the Company or any of the other
Affiliated Companies within any of the then-existing service areas of
the Company or any of the other Affiliated Companies.
b) The Employee hereby acknowledges that the Employee's services are
unique and extraordinary, and are not readily replaceable, and hereby
expressly agrees that the Company and the Parent, in enforcing the
covenants contained in Paragraphs 8 and 9 herein, in addition to any
the remedies provided for herein or otherwise available at law, shall
be entitled in any court of equity having jurisdiction to an injunction
restraining the Employee in the event of a breach, actual or
threatened, of the agreements and covenants contained in this Section
9.
c) The parties hereto believe that the restrictive covenants of this
Section 9 are reasonable. However, if at any time is shall be
determined by any court of competent jurisdiction that this Section 9
or any portion of it 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 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.
<PAGE> 9
11.) Insurance. The 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 the Employee, and
the Employee agrees to submit to the usual and customary medical
examination and otherwise to cooperate with the Company in connection
with the procurement of any such insurance, and any claims thereunder.
12.) Notices. All notices under this Agreement shall be in writing and shall
be deemed effective when delivered in person to the Employee or to the
Secretary of the Company and the Parent, or if mailed, postage prepaid,
registered or certified mail, addressed, in the case of the Employee,
to the Employee's last known address as carried on the personnel
records of the Company, and, in the case of the Company and the 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.
13.) Successors and Assigns.
a.) Assignment by Employee. This Agreement is personal to the Employee
and shall not be assignable by the Employee.
b.) Assignment by the Company. This Agreement shall inure to the
benefit of and by binding upon the Company and the other Affiliated
Companies and their respective successors and assigns. As used in this
Agreement, the "Company" and the other Affiliated Companies shall mean
both the Company and the other Affiliated Companies, respectively, and
any such successor that assumes and agrees to perform this Agreement,
by operation of law or otherwise.
14.) Release. Prior to receiving severance payments or benefits provided for
in Paragraph 6(a) of this Agreement, at the request of the Company or
the Parent, the Employee shall execute and deliver for the benefit of
the Company and the Parent, and any of the Affiliated Companies, a
general release in the form set forth in Attachment C, and such release
shall, become effective in accordance with its terms. The failure or
refusal of the Employee to sign such a release or the revocation of
such a release shall cause the termination of any and all obligations
of the Company and the Parent to make payment or provide benefits
hereunder and the forfeiture of the right of the Employee to receive
any such payments and benefits. The Employee acknowledges that the
Company and the Parent have advised the Employee to consult with an
attorney prior to signing this Agreement and that the Employee has had
an opportunity to do so.
<PAGE> 10
15.) Arbitration. Any dispute which may arise between the parties hereto
shall, be submitted to binding arbitration in the State of Connecticut
in accordance with the Rules of the American Arbitration Association.
16.) 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.
17.) Amendment. This Agreement may be modified or amended only by an
instrument in writing executed by the parties hereto.
18.) Construction. This Agreement is intended to include all prior
agreements and understandings between the parties as have been
set-forth in various letters including without limitation a certain
letter from Connecticut Water Service, Inc. to Richard L. Mercier dated
February 10, 1999. 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.
IN WITNESS WHEREOF, the Company and the Parent have caused this Agreement to be
executed by a duly authorized officer, and the Employee and the Consultant have
hereunto set the Employee and the Consultant's hand, this 13th day of April,
1999.
CONNECTICUT WATER SERVICE, INC.
/s/ David C. Benoit
- -------------------------------------------
David C. Benoit
Vice President of Finance and Treasurer
<PAGE> 11
CONNECTICUT WATER COMPANY
/s/ David C. Benoit
- -------------------------------------------
David C. Benoit
Vice President of Finance and Treasurer
/s/ Richard L. Mercier
- -------------------------------------------
Richard L. Mercier
Employee
/s/ Richard L. Mercier
- -------------------------------------------
Richard L. Mercier
Consultant
<PAGE> 12
SCHEDULE A
POSITION DESCRIPTION
PRESIDENT - GALLUP WATER SERVICE, INCORPORATED
1. Serves as a primary spokesman for the company in developing its public
image and represents the company in its relationships with major
customers, suppliers, the financial community, industry groups,
government bodies, as well as directing participation in appropriate
outside meetings. Develops and maintains appropriate working
relationships with government officials.
2. Works with external agencies to address opportunities for expanding
service territories, as well as to expand the economic development of
the operating regions.
3. Recommends programs aimed at achieving growth, diversification, and
profitability.
4. Works with CEO to ensure that future planning is carried out.
5. At specified intervals, reviews with the CEO operating and capital
budgets, performance toward objectives and changes.
6. Develops, grows and manages a profitable business. Preserves the
strength of the company to best preserve its independence and the
interests of the stockholders and customers.
7. Ensures that corporate policies are uniformly understood and properly
interpreted and administered by subordinates.
8. Works with the CEO to develop the basic objectives, policies and
operating plans of the business, both tactical and strategic. Ensures
that regulatory history and trends are recognized for their impact.
9. Maintains a strong management team, assuring the availability of
qualified people to support and strengthen the resources of the
business in meeting its objectives.
<PAGE> 13
SCHEDULE B
POSITION DESCRIPTION
CONSULTANT
A. Develops and maintains appropriate working relationships with
government officials.
B. Works with external agencies to address opportunities for expanding
service territories, as well as expand the economic development of the
operating regions.
C. Recommends programs aimed at achieving growth, diversification, and
profitability.
D. Works with the CEO to develop the basic objectives, policies, and
operating plans of the business, both tactical and strategic. Ensures
that regulatory history and trends are recognized for their impact.
<PAGE> 14
ATTACHMENT C
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 the [ ] Water Company ("the 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 severance benefits and payments provided under your
Employment Agreement dated ___________ with the Company and Connecticut Water
Service, Inc. ("the 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 the Company, its past and present and future
Parent corporations, subsidiaries, divisions, subdivisions, affiliates and
related companies or their successors and assigns, including without limitation
the 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 the 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> 15
5.) You would not otherwise be entitled to the severance benefits provided
under your Employment Agreement with the Company and the 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> 1
Exhibit 10.11
Roger Engle
EMPLOYMENT AND CONSULTING AGREEMENT
AGREEMENT by and between Crystal Water Company, a Connecticut corporation with
its principal office and place of business in Danielson, Connecticut (the
"Company"), Connecticut Water Service, Inc., a Connecticut corporation and
holder of all of the outstanding capital stock of Company (the "Parent") and
Roger Engle, a resident of Brookly, CT (Mr. Engle or the "Employee"), dated as
of September 29, 1999.
WHEREAS, the Company and the Parent have determined that it is in the best
interests of the Company and the Parent to employ Roger Engle as President of
the Company and Mr. Engle desires to serve in that capacity;
WHEREAS, the Company and the Parent have determined that it is in the best
interests of the Company and the Parent to engage Roger Engle as a Consultant
after the employment period and Mr. Engle desires to serve in that capacity.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment Period. The Company shall employ the Employee, and the
Employee shall serve the Company, on the trams and conditions set forth
in this Agreement, for the period commencing on or before September 29,
1999 and ending on December 30, 1999 (the "Employment Period").
2. Consultant Period. After the Employment Period the Parent shall engage
Mr. Engle as a Consultant and not as an Employee. Said Consulting
period shall continue for a period of 10 years, terminating on December
31, 2009 (the "Consulting Period"). If the Employee resigns prior to
the completion of the Employment Period described in Section (1) the
Company shall not be required to engage Mr. Engle as a Consultant.
3. Position, Duties and Location.
a) During the Employment Period, the Employee shall have the title of
President of the Company and shall report directly to the CEO of the
Parent. The Employee's authority, duties and responsibilities shall be
those described in "Schedule A" attached hereto.
<PAGE> 2
b) During the Consulting Period, Mr. Engle shall have the title of
Consultant and shall report directly to the CEO of the Parent. The
Consultant's authority, duties and responsibilities shall be those
described in "Schedule B" attached hereto.
c) During the Consulting Period, Mr. Engle shall not be an Employee of
the Parent or any of the other Affiliated Companies (as hereinafter
defined) and as an independent contractor shall be responsible for
the payment of his own social security taxes, federal and state
income taxes, pension contributions if any, and any similar items.
Mr. Engle shall not be entitled to unemployment compensation or
disability benefits during the Consultant Period.
d) During the Employment Period and excluding any periods of vacation
and sick leave to which the Employee is entitled, the Employee shall
devote reasonable attention and time during normal business hours to
the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities assigned to the Employee under
this Agreement, use the Employee's reasonable best efforts to carry
out such responsibilities faithfully and efficiently. It shall not
be considered a violation of the foregoing for the Employee to serve
on corporate, civic or charitable boards or committees so long as
such activities do not involve a conflict of interest with the
Company or the Parent or other "Affiliated Companies" (as
hereinafter defined) or interfere with the performance of the
Employee's responsibilities as an employee of the Company in
accordance with this Agreement. For purposes of this Agreement,
"Affiliated Companies" means the Parent and all companies controlled
by, controlling or under common control with the Parent.
e) During the Employment Period, the Employee shall be entitled to
maintain his office at the Company's present office location in
Danielson, CT. During the Consultant Period, the Company shall
provide such office space and secretarial assistance as may be
necessary for the fulfillment of duties consistent with Schedule B
attached hereto.
4.) Compensation.
a.) Base Salary. The Employee shall be paid at a biweekly rate of
$4615.38 for the duration of the Employment Period. The total Annual
Base Salary due Mr. Engle for the period from January 1, 1999 up to and
including the Employment Period shall not exceed $120,551 including any
holiday or other leave for which he has been paid.
b.) Consultant Fees. During the Consultant Period, Mr. Engle shall
receive fees equal to $16,000 on an annual basis to be paid on a
quarterly basis of $4,000 per quarter on the first day of the first
month of each quarter.
<PAGE> 3
c.) Other Benefits. (1) During the Employment Period: (i) the Employee
shall be entitled to participate in all qualified deferred
compensation, savings and retirement plans, practices, policies and
programs of the Company in accordance with the plans, practices,
programs and policies available to Officers of the Company set forth,
from time to time, in such plans or any Company employee manual; and
(ii) the Employee and/or the Employee's family, as the case may be,
shall be eligible for participation in, and shall receive all benefits
under, all welfare benefit plans, practices, policies and programs
provided by the Company for Officers of the Company in accordance with
the plans, practices, programs and policies of the Company set forth,
from time to time, in such plans or Company employee manual. (2) Upon
completion of the Consulting Period, the employee will thereafter
receive a supplemental executive retirement benefit designed to pay him
$16,000 per year, regardless of any payments then due him under any
pension plan of the Company. (3) The Employee will have use of his
current company vehicle during his employment and shall be given that
vehicle, at the end of the Employment Period, provided he assumes
responsibility for all taxes, insurance and maintenance of said vehicle
after his retirement. (4) Upon completion of the Employment Period, the
Employee shall receive benefits available to Company retirees including
the option to take payment of retirement benefits in a lump sum payout
in accordance with the terms of the Crystal Water Company Defined
Benefit Pension Plan as amended effective January 1, 1998. (5) The
Company shall maintain a life insurance policy for Mr. Engle which will
provide a lump sum payment of $150,000 to his spouse should his death
occur during the Consulting Period.
d.) Expenses. During the Employment and Consulting Periods, the
Employee/Consultant shall be entitled to receive prompt reimbursement
for all reasonable authorized travel and other authorized expenses
incurred by the Employee/Consultant in carrying out the
Employee's/Consultant's duties under this Agreement in accordance with
the policies and procedures established by the Company or the Parent,
as applicable.
e.) Fringe Benefits. During the Employment Period, the Employee shall
be entitled to Fringe benefits in accordance with the plans, practices,
programs and policies of the Company set forth, from time to time, in
such plans or any Company employee manual.
f.) Vacation. During the Employment Period, the Employee shall be
entitled to four weeks' paid vacation annually in accordance with the
plans, policies, programs and practices of the Company as set forth,
from time to time, in such plans or any Company employee manual.
<PAGE> 4
g.) Consideration for Board of Directors. Upon completion of the
Employment Period and subsequent retirement, Mr. Engle shall be
recommended by the CEO of the Parent to the Connecticut Water Company
Committee on Directors for consideration as a candidate for nomination
to the Board of Directors of Connecticut Water Company for election at
the Year 2000 Meeting of Shareholders.
5.) Termination of Employment.
a.) Death or Disability. The Employee's employment shall terminate
automatically upon the Employee's death. The Company shall be entitled
to terminate the Employee's employment because of the Employee's
Disability during the Employment Period. "Disability" means that the
Employee has been unable, with or without accommodation, for a period
of 180 consecutive business days, to perform the Employees' duties
under this Agreement, as a result of physical or mental illness or
injury. A termination of the Employee's employment by the Company for
Disability shall be communicated to the Employee by written notice, and
shall be effective on the 30th day after receipt of such notice by the
Employee (the "Disability Effective Date"), unless the Employee returns
to full-time performance of the Employee's duties before the Disability
Effective Date. In the event that the Company terminates the Employee
due to Disability, the Employee shall be considered to have completed
the Employment Period as defined in Paragraph (1) and the Employee
shall not be entitled to any disability benefits other than
specifically set forth in this Agreement.
b.) By the Company. The Company may terminate the Employee's employment
for Cause. "Cause" means: (i) the Employee's failure to perform the
duties of his employment in any material respect after notice from the
Company and failure to cure within ten business days after delivery of
such notice, (ii) malfeasance or gross negligence in the performance of
the Employee's duties of employment, (iii) the Employee's commission of
a felony under the laws of the United States or any state thereof
(whether or not in connection with his employment), (iv) the commission
by the Employee of a fraud upon the Company or any of the other
Affiliated Companies, (b) willful misconduct on the part of the
Employee, (vi) the Employee's breach of any of the provisions of
Paragraph 10 or 11 of this Agreement, or (vii) any other act or
omission by the employee (other than an act or omission resulting from
the exercise by the Employee of good faith business judgment) which is
materially injurious to the financial condition or the business
reputation of the Company or any of the Affiliated Companies provided,
however, that the Employee may, within ten (10) days of receipt of such
notice, request in writing a hearing by the Board of the Parent. Upon
such request, the Employee shall be entitled to be heard by the Board
of Directors of the Parent, which shall determine whether or not the
Employee shall be terminated and shall provide its reasons for any
termination to the Employee in writing.
<PAGE> 5
c.) By the Employee. A termination of the Employee's employment by the
Employee shall be effected by giving the Company written notice of the
termination.
d.) No Waiver. The failure to set forth any fact or circumstance in a
Notice of Termination for Cause shall not constitute a waiver of the
right to assert, and shall not preclude the party giving notice from
asserting, such fact or circumstance in an attempt to enforce any right
under or provision of this Agreement.
e.) Date of Termination. The "Date of Termination" means the date of
the Employee's death, the Disability Effective Date, the date on which
the termination of the Employee's employment by the Company for Cause
is effective, or the date that is 60 days after the date on which the
Employee gives the Company notice of a termination of employment, as
the case may be.
6. Termination of Consulting. The Consulting services of Roger Engle shall
commence on January 1, 2000 upon completion of the Employment Period
and, unless terminated by the Parent, which may be done by the Parent
for any of the reasons specified in clauses (iii), (iv), (vi), or
(viii) of the definition of "cause," shall terminate only upon his
death or upon his completing the 10 year Consulting Period.
7. Obligations of the Company upon Termination.
a.) Other Than for Cause or Death. If, during the Employment Period,
the Company terminates the Employee's employment, other than for Cause
or death, the Company shall continue to pay Employee all amounts
contemplated by this Agreement as a result of his being an Employee of
the Company, including the $16,000.00 per year annual benefits payable
to the Employee under Paragraph 4(c)(2) hereof.
b.) For Cause or Death. If the Employee's employment is terminated due
to death or by the Company for Cause during the Employment Period or if
the Employee voluntarily terminates employment, the Company shall pay
the Employee the Annual Base Salary through the Date of Termination and
the amount of any compensation previously deferred by the Employee
(together with any accrued interest or earning thereon), and any
benefits due in accordance with the Crystal Water Company Defined
Benefit Plan as amended effective January 1, 1998, in each case to the
extent not yet paid, and neither the Company nor any Affiliated Company
shall have any further obligations under this Agreement.
<PAGE> 6
8.) Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Employee's future participation in any plan, program, policy
or practice provided by the Company or any of the other Affiliated
Companies for which the Employee may qualify, nor shall anything in
this Agreement limit or otherwise affect such rights as the Employee
may have under any contract or agreement with the Company or any of the
other Affiliated Companies. Vested benefits and other amounts that the
Employee is otherwise entitled to receive under any plan, policy,
practice or program of, or any contract or agreement with, the Company
or any of the other Affiliated Companies on or after the Date of
Termination shall be payable in accordance with such plan, policy,
practice, program, contract or agreement, as the case may be, except as
otherwise explicitly modified by this Agreement.
9.) Full Settlement. In no event shall the Employee be obligated to seek
other employment or take any other action by way of mitigation of the
amounts payable to the Employee under any of the provisions of this
Agreement, but if the Employee secures other employment, any employee
welfare benefits the Company is required to provide to the Employee
following termination of the Employee's employment shall be secondary
to those provided by another employer (if any).
10.) Confidential Information. Mr. Engle understands that in the course of
his Employment/Consultant period by the Company, he will receive or
have access to confidential information concerning the business or
proposes of the Company and any of the other Affiliated Companies and
which the Company or any of the other Affiliated Companies desire to
protect. Such confidential information shall be deemed to include, but
not be limited to, the Company's customer lists and information, and
employee lists, including, if known, personnel information and data.
Mr. Engle agrees that he will not, at any time during the period ending
earlier of (i) two years after the Date of Termination or (ii) two
years after completion of the Consulting Period reveal to anyone
outside the Company or any of the other Affiliated Companies or use for
his own benefit any such information without specific written
authorization by the Company or the Parent. Mr. Engle further agrees
not to use any such confidential information or trade secrets in
competing with the Company or any of the other Affiliated Companies at
any time during or in the period ending the earlier of (i) the two-year
period immediately following the Date of Termination, or (ii) two years
after completion of the Consulting Period.
<PAGE> 7
11.) Covenants by the Employee Not to Compete with the Company or the Parent
(a) Mr. Engle covenants and agrees that he will not at any time during
the period ending the earlier of (i) two years from and after such Date
of Termination or (ii) two years after completion of the Consulting
Period 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 any such date, is a Competitor (as defined herein), either
directly or indirectly, with the Company or any of the other Affiliated
Companies, 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 the Employee's name (or any part or variant thereof) to, any
business which, at any such date, is a Competitor, either directly or
indirectly, with the Company or any of the other Affiliated Companies,
or as a result of the Employee's engagement or participation would
become, a Competitor, either directly or indirectly, with any aspect of
the business of the Company or any of the other Affiliated Companies,
as it exists at any such date, or solicit any officer, director,
employee or agent of the Company or any of the other Affiliated
Companies or any subsidiary or affiliate of the Company or any of the
other Affiliated Companies to become an officer, director, employee or
agent of the Employee, the Employee's respective affiliates or anyone
else. Ownership, in the aggregate, of less than five percent (5%) 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 service areas then being
served by the Company or any of the other Affiliated Companies which is
similar to the business of the Company or any of the other Affiliated
Companies or in any way in competition with the business of the Company
or any of the other Affiliated Companies.
(b) The Employee hereby acknowledges that the Employee's services are
unique and extraordinary, and are not readily replaceable, and hereby
agrees that the Company and the Parent, in enforcing the covenants
contained in Paragraphs 10 and 11 herein, in addition to any the
remedies provided for herein or otherwise available at law, shall be
entitled in any court of equity having jurisdiction to an injunction
restraining the Employee in the event of a breach, actual or
threatened, of the agreements and covenants contained in Paragraphs 10
or 11.
<PAGE> 8
c) The parties hereto believe that the restrictive covenants of this
Paragraph 11 are reasonable. However, if at any time is shall be
determined by any court of competent jurisdiction that this Paragraph
11 or any portion of it 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 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.
12.) Insurance. The 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 the Employee, and
the Employee agrees to submit to the usual and customary medical
examination and otherwise to cooperate with the Company in connection
with the procurement of any such insurance, and any claims thereunder.
13.) Release. As a condition of eligibility for severance payments or
benefits provided for in Paragraph 7(a) of this Agreement, at the
request of the Company or the Parent, the Employee shall execute and
deliver for the benefit of the Company and the Parent, and any of the
Affiliated Companies, a general release in the form set forth in
Schedule C, and such release shall become effective in accordance with
its terms provided that neither the Company nor the Parent is in breach
of its obligations under that Agreement at the time such request is
made. The failure or refusal of the Employee to sign such a release or
the revocation of such a release shall cause the termination of any and
all obligations of the Company and the Parent to make payments or
provide benefits hereunder, and the forfeiture of the right of the
Employee to receive any such payments and benefits. The Employee
acknowledges that the Company and the Parent have advised the Employee
to consult with an attorney prior to signing this Agreement and that
the Employee has had an opportunity to do so.
14.) Regulatory Limitation. Notwithstanding any other provision of this
Agreement, the Company shall not be obligated to make, and the Employee
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 the Company, or any of the other Affiliated
Companies at the time such payment, benefit or amount is due
("Prohibited Payment"). If and to the extent the Company shall at a
later date be relieved of the restriction on its ability to make any
Prohibited Payment, then at such time the Company, or the Parent shall
promptly make payment of any such amounts to the Employee. The parties
hereto acknowledge that as of the date of this Agreement, no payment,
benefit, or amount payable under this Agreement would be a Prohibited
Payment.
<PAGE> 9
15.) Notices. All notices under this Agreement shall be in writing and shall
be deemed effective when delivered in person to the Employee or to the
Secretary of the Company and the Parent, or if mailed, postage prepaid,
registered or certified mail, addressed, in the case of the Employee,
to the Employee's last known address as carried on the personnel
records of the Company, and, in the case of the Company and the Parent,
to the corporate headquarters, attention of the CEO, or to such other
address as the party to be notified may specify by notice to the other
party.
16.) Successors and Assigns.
a.) Assignment by Employee. This Agreement is personal to the Employee
and shall not be assignable by the Employee.
b.) Assignment by the Company. This Agreement shall inure to the
benefit of and by binding upon the Company and the other Affiliated
Companies and their respective successors and assigns. As used in this
Agreement, the "Company" and the other Affiliated Companies shall mean
both the Company and the other Affiliated Companies, respectively, and
any such successor that assumes and agrees to perform this Agreement,
by operation of law or otherwise.
17.) 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 the Company's Board of Directors in an effort to resolve
such dispute without resort to arbitration.
18.) 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.
19.) Amendment. This Agreement may be modified or amended only by an
instrument in writing executed by the parties hereto.
20.) Construction. This Agreement 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.
21.) Guarantee. The Parent hereby guarantees the obligations of the Company
hereunder.
<PAGE> 10
IN WITNESS WHEREOF, the Company and the Parent have caused this Agreement to be
executed by a duly authorized officer, and the Employee has hereunto set the
Employee's hand, this ____ day of _____ 19__.
CONNECTICUT WATER SERVICE, INC.
/s/ Marshall T. Chiaraluce
- ---------------------------------------------
Marshall T. Chiaraluce
President & CEO
CRYSTAL WATER COMPANY
- ---------------------------------------------
/s/ Randolph Kempain
[Someone other than Engle]
/s/ Roger Engle
- ---------------------------------------------
Roger Engle
<PAGE> 11
SCHEDULE A
POSITION DESCRIPTION
PRESIDENT - CRYSTAL WATER COMPANY
1. Serves as a primary spokesman for the company in developing its public
image and represents the company in its relationships with major
customers, suppliers, the financial community, industry groups,
government bodies, as well as directing participation in appropriate
outside meetings. Develops and maintains appropriate working
relationships with government officials.
2. Works with external agencies to address opportunities for expanding
service territories, as well as to expand the economic development of
the operating regions.
3. Recommends programs aimed at achieving growth, diversification, and
profitability.
4. Works with CEO to ensure that future planning is carried out.
5. At specified intervals, reviews with the CEO operating and capital
budgets, performance toward objectives and changes.
6. Develops, grows and manages a profitable business. Preserves the
strength of the company to best preserve its independence and the
interests of the stockholders and customers.
7. Ensures that corporate policies are uniformly understood and properly
interpreted and administered by subordinates.
8. Works with the CEO to develop the basic objectives, policies and
operating plans of the business, both tactical and strategic. Ensures
that regulatory history and trends are recognized for their impact.
9. Maintains a strong management team, assuring the availability of
qualified people to support and strengthen the resources of the
business in meeting its objectives.
<PAGE> 12
SCHEDULE B
POSITION DESCRIPTION
CONSULTANT
A. Develops and maintains appropriate working relationships with
government officials.
B. Works with external agencies to address opportunities for expanding
service territories, as well as expand the economic development of the
operating regions.
C. Recommends programs aimed at achieving growth, diversification, and
profitability.
D. Works with the CEO to develop the basic objectives, policies, and
operating plans of the business, both tactical and strategic. Ensures
that regulatory history and trends are recognized for their impact.
<PAGE> 13
ATTACHMENT C
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 the Crystal Water Company ("the 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 severance benefits and payments provided under your
Employment Agreement dated ___________ with the Company and Connecticut Water
Service, Inc. ("the 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 the Company, its past and present and future
Parent corporations, subsidiaries, divisions, subdivisions, affiliates and
related companies or their successors and assigns, including without limitation
the 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 the 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> 14
5.) You would not otherwise be entitled to the severance benefits provided
under your Employment Agreement with the Company and the 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.
By signing this Release, you do not agree to release the Company from future
performance of its obligation to pay or provide severance benefits in accordance
with your Employment Agreement, and any failure to pay or provide such benefit
will void this release.
Name: _____________________________
Signature: _____________________________
Date: _____________________________
Received by: _____________________________
Date: _____________________________
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