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, 1995 .
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( ) 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 1-8060.
AQUARION COMPANY
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(Exact name of registrant as specified in its charter)
DELAWARE 06-0852232
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
835 Main Street, Bridgeport, Connecticut 06601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 335-2333
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, New York Stock Exchange
no par value
Series A Junior New York Stock Exchange
Participating Preferred
Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
None
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(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 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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K 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 IV of this Form
10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant: $168,908,747. (Computed by reference to the closing
price of the Registrant's Common Stock on March 5, 1996, as reported on
the New York Stock Exchange-Composite Tape.)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 5, 1996
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Common Stock, no par value 6,884,334
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The following documents have been incorporated by reference:
1. Annual Report to Shareholders for the year ended December 31,
1995--PART I, Item 1; PART II, Item 5, Item 6, Item 7 and
Item 8; PART IV.
2. Definitive Proxy Statement, dated March 21, 1996, for the
Annual Meeting of Shareholders to be held on April 23, 1996--
PART III.
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PART I
ITEM 1. BUSINESS
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General
Aquarion Company ("Aquarion") is a holding company whose
subsidiaries are engaged both in the regulated utility business of
public water supply and in various nonutility businesses.
Aquarion's utility subsidiary, Bridgeport Hydraulic Company (BHC),
and its subsidiaries, Stamford Water Company (SWC), New Canaan Water
Company (NCWC) and Ridgefield Water Supply Company (RWSC) (collectively
with BHC, the Utilities) collect, treat and distribute water to
residential, commercial and industrial customers, to other utilities for
resale and for private and municipal fire protection. The Utilities
provide water to customers in 24 communities with a population of
approximately 500,000 people in Fairfield, New Haven and Litchfield
Counties in Connecticut. These communities include those served by
other utilities to which water is made available by the Company's
Utilities on a wholesale basis for back-up supply or peak demand
purposes through the Southwest Regional Pipeline. BHC is the largest
investor-owned water company in Connecticut and, with its SWC, NCWC and
RWSC subsidiaries, is among the 10 largest investor-owned water
companies in the nation. The Utilities are regulated by several
Connecticut agencies, including the Connecticut Department of Public
Utility Control (the DPUC).
Aquarion is also engaged in various nonutility activities. The
Company conducts an environmental testing laboratory business through
its Industrial and Environmental Analysts group of subsidiaries
(collectively, IEA). IEA performs testing to determine the nature and
quantity of contamination in sampled materials, including hazardous
wastes, soil, air and water. IEA provides a range of environmental
analytical testing capabilities, including routine and customized
analysis of organic and inorganic contaminants. IEA's testing services
are conducted at five regional environmental testing laboratories in
Connecticut, Illinois, Massachusetts, New Jersey and North Carolina.
IEA's laboratories are subject to governmental regulation at both state
and federal levels. Its clients include engineering consulting firms,
industrial and commercial corporations and government entities. The
laboratories located in North Carolina, New Jersey and Connecticut
participate in the U.S. Environmental Protection Agency's Contract
Laboratory Program.
Aquarion owns Timco, Inc. (Timco), a timber processing company
based in New Hampshire. At Timco's sawmill complex, lumber is cut and
packaged for sale to wholesalers and retailers. Aquarion is also
engaged in several utility management service businesses through its
Hydrocorp, Inc. (Hydrocorp) and Aquarion Management Services, Inc. (AMS)
subsidiaries and owns Main Street South Corporation (MSSC), a small real
estate subsidiary formed in 1969 to assist the Utilities in marketing
surplus land.
The Company was incorporated in Delaware as The Hydraulic Company
in 1969 to become the parent company to BHC, a Connecticut corporation
founded in 1857. The corporate name was changed to Aquarion Company in
1991. The Company's executive offices are located at 835 Main Street,
Bridgeport, Connecticut 06601-2353, and its telephone number is
(203) 335-2333.
Recent Developments
Rates. On January 26, 1996, BHC notified the DPUC of its intent
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to increase its water services rates and charges by 12 percent or
$7,100,000. BHC will file a formal application with the DPUC on or
before March 26, 1996, but no sooner than February 26, 1996.
As part of the application, BHC will request an opportunity to re-
open the application in 1997 to include the cost of the $50,000,000
Hemlocks Filtration Plant. If approved, water service rates at that
time will increase by an additional 10 percent approximately, plus a
cumulative CWIP rate surcharge, which is estimated to be 11 percent at
that time.
On October 13, 1995, SWC, NCWC and RWSC, collectively, filed a rate
application with the DPUC for a 9 percent water service rate increase
designed to provide a $1,373,000 increase in annual water service
revenues. As part of that application, these companies propose to
equalize the meter rates and service charges of all three companies, and
to consolidate the operations of all three companies at the SWC
headquarters.
On October 20, 1994, BHC filed with the DPUC an application to
implement a Construction-Work-in-Progress (CWIP) water rate surcharge in
order to recover 90 percent of the carrying costs of capital used in the
construction of a filtration plant at its Hemlocks Reservoir in
Fairfield, Connecticut. This plant, mandated by the Federal Safe
Drinking Water Act of 1974 (the SDWA), as amended, is estimated to cost
approximately $50,000,000. BHC will file applications with the DPUC
quarterly to increase this surcharge as construction continues through
1997, at which time the filtration facilities are expected to be
operational and subject to general ratemaking regulations. On December
6, 1995, a 4.27 percent CWIP rate surcharge was approved that will
increase BHC's revenues by $2,585,000 on an annual basis. During 1995,
revenues from the CWIP rate surcharge were $1,245,000. On January 19,
1996, BHC filed an application to increase this surcharge to
5.52 percent, which would increase BHC's revenues by an additional
$756,000 to $3,341,000 on an annual basis.
There is no certainty that any given rate increase will produce the
intended level of revenues or the allowed return on equity. See "Public
Water Supply--Rates and Regulations."
Utility Acquisition. On October 12, 1995 Aquarion completed the
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acquisition of The New Canaan Water Company (NCWC) and Ridgefield Water
Supply Company (RWSC) for 123,053 shares of Aquarion common stock with a
market value of $2,828,692 and the repayment of certain indebtedness of
The New Canaan Company (NCC) in an amount of $100,000. Immediately
after the acquisition closed, the parties completed a property exchange
whereby the Monroe Environmental Leasing Partnership (MELP) transferred
to NCWC a commercial building and the property on which it is situated,
NCWC transferred a reservoir and related property to the Second Taxing
District of Norwalk (STD) and STD in turn paid $2,200,000 to MELP, which
also received $214,157 from Aquarion. The property exchange resulted in
net income to Aquarion of approximately $1,100,000 or $.16 per share.
This acquisition was accounted for as a pooling of interests and the
Company's financial statements have not been restated for previous years
due to the limited impact on consolidated operating results for 1995.
Consolidated annual revenues from NCWC and RWSC were approximately
$3,300,000 and $2,900,000 for the year-ended December 31, 1995 and 1994,
respectively.
Management Succession. On October 1, 1995, the Company implemented
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a management succession plan under which Jack E. McGregor became
chairman of the board, succeeding William S. Warner, who was elected
vice chairman. Succeeding McGregor as president and chief executive
officer of Aquarion was Richard K. Schmidt, who was president and chief
executive officer of IEA. Janet M. Hansen was named an executive vice
president, retaining her title as chief financial officer and treasurer,
and David C. Houle, senior vice president and chief operating officer of
IEA, became president of IEA.
Subsequent Event. On February 29, 1996, the Company signed a stock
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purchase agreement to purchase all of the outstanding shares of the
common stock of Sea Cliff Water Company (SCWC), a subsidiary of Emcor
Group, Inc., for approximately $2,600,000 in cash, which is subject to
adjustment at the closing. SCWC, which has approximately 4,300
customers, serves a portion of Nassau County in Long Island, New York,
and has approximate annual revenues of $2,000,000. The proposed
acquisition requires the approval of the New York Public Service
Commission.
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Utility Construction Program
The Utilities are engaged in a continuing construction program
mandated by legislative and regulatory requirements, as well as for
infrastructure replacements. The Utilities expended $38,100,000,
$17,739,000 and $16,300,000 in 1995, 1994 and 1993, respectively, for
plant additions and modifications of existing plant facilities,
excluding an allowance for funds used during construction (AFUDC). The
1995 expenditures were made primarily for construction of water
treatment plants at the Hemlocks, Lakeville and Norfolk reservoirs and
installation of water mains, service connections and meters.
Utility capital expenditures for 1995 aggregated $38,100,000 and
budgeted expenditures for 1996, most of which management believes should
not be postponed, are approximately $40,400,000. Approximately
53 percent of these expenditures will be devoted to compliance with the
SDWA, which requires filtration or alternative water treatment measures
for BHC's major unfiltered surface water supplies. The total capital
cost of water filtration or alternative treatment measures for such
supplies at Hemlocks, Lakeville and Norfolk Reservoirs through
December 31, 1995 was approximately $26,100,000. Management estimates
that the total of such costs for 1996 and 1997 will approximate
$32,100,000, without adjustment for inflation, including $21,300,000
expected to be incurred in 1996. Approximately $27,400,000 of the
projected 1996 and 1997 water treatment costs will be incurred in
construction of the filtration facility for the Hemlocks reservoir. The
remaining $4,700,000 of estimated filtration expenditures over the next
two years is budgeted for filtration facilities for BHC's Lakeville and
Norfolk Reservoirs. Part of the cost associated with the Hemlocks
facility is expected to be offset by CWIP rate surcharges which, at the
DPUC's discretion, permit the recovery of 90 percent of the carrying
cost of capital used in construction of SDWA-mandated water treatment
facilities. Management cannot predict whether future federal, state or
local regulation will require additional capital expenditures.
The Company's ability to finance its future construction programs
depends in part on future rate relief and the level of CWIP rate
surcharges. In light of the Company's substantial funding requirements,
the Company will need additional debt and equity capital to finance
future utility construction. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Capital
Resources and Liquidity" and "Business--Public Water Supply--Rates and
Regulation."
Industry Segment Information
The Company's operations are grouped into four industry segments:
public water supply; environmental laboratories and utility management
services; timber processing; and, real estate. The consolidated
operating revenues of the Company for the year ended December 31, 1995
were derived from the following sources: 66 percent from public water
supply, 21 percent from environmental laboratories and utility
management services, 8 percent from timber processing, and 5 percent
from real estate, including both MSSC and surplus utility land sales.
For additional information concerning each segment for each of the years
ended December 31, 1995, 1994, and 1993, see "Note 10" of "Notes to
Consolidated Financial Statements" and "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Public Water Supply
Service Area. The Utilities are engaged in the collection,
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treatment and distribution of water for public and private use to
residential, commercial, and industrial users, and for municipal and
private fire protection services in 24 communities in parts of
Fairfield, Litchfield and New Haven counties in Connecticut. The
Utilities also sell, as requested, water for redistribution to customers
of the First and Second Taxing Districts' Water Departments of the City
of Norwalk, Connecticut, and Connecticut-American Water Company through
the Southwest Regional Pipeline in Fairfield County.
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The communities served by the Utilities as of December 31, 1995
have a population of approximately 500,000, and the total number of
customer accounts as of that date was approximately 131,000. The
Utilities' service areas, primarily residential in nature, have
experienced an average growth in accounts of approximately 1 percent per
year over the last 10 years. Industrial use has declined significantly
in that time period, and the residential characteristics of the area
have changed, indicating an increase in the percentage of apartment
dwellings and condominium units. Management does not anticipate any
significant growth in residential consumption in the foreseeable future,
and expects continued decline in industrial use and little or no
commercial growth.
The operating revenues of the Utilities for the 12 months ended
December 31, 1995 were derived from the following sources: 60 percent
from residential customers, 16 percent from commercial customers, 4
percent from industrial customers, 14 percent from fire protection
customers, and 6 percent from other sources.
Seasonality. The business of the Utilities is subject to seasonal
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fluctuations and weather variations. The demand for water during the
warmer months is generally greater than during the cooler months,
primarily due to additional water requirements of industrial, commercial
and residential cooling systems, and various private and public outdoor
uses such as lawn and golf course sprinkling. From year to year and
season to season, demand will vary with rainfall and temperature levels.
Water Supply. Water is available from both surface and subsurface
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sources. During 1995, approximately 90 percent of the water supplied by
the Utilities was provided by impounding reservoirs, 9 percent by
producing wells and 1 percent by purchased water. As of December 31,
1995, the Utilities' reservoirs, well fields and interconnections with
other water utilities had an aggregate safe daily yield of 113.0 million
gallons. Safe yield is an estimate of the supply capability during an
extended drought. The average daily demand for water from the Utilities
in 1995 was 70.5 million gallons per day (MGD). The reservoirs of the
Utilities have an aggregate storage capacity of 30.3 billion gallons.
All of the Utilities' reservoirs and active wells are located on
property owned by the Utilities. Management believes it has an adequate
water supply to satisfy the current and projected needs of its customers
within its territorial service area through at least the year 2040.
During historical drought periods in the northeastern United States, the
Utilities have been able to accommodate the needs of their own customers
and to offer relief to supplement the supplies to neighboring
communities by water sales to utilities with which it has pipeline
interconnections. Supply and distribution needs of the Utilities undergo
constant review, and the Utilities continue to explore and develop
additional ground water-supplies and study alternative surface water
sources to meet anticipated future water requirements.
The Connecticut Water Diversion Policy Act, enacted in 1982,
prohibits any future diversions of surface or ground water without a
permit from the state Department of Environmental Protection (DEP).
Although this law "grandfathers" existing surface and ground-water
supplies that existed when it was enacted, any subsequent water
diversion that might be effected by the Utilities is subject to a
lengthy permit application process and approval by the DEP. Diversion
permits granted pursuant to this law are subject to renewal when their
terms, which typically run from five to 10 years, expire.
Rates and Regulation. The Utilities are incorporated under and
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operate as public water utilities by virtue of authority granted by
Special Acts adopted by the Connecticut legislature (the "Acts"). These
Acts have granted a non-exclusive franchise, unlimited in duration, to
provide public water supply to private and public customers in
designated municipalities and adjacent areas. The Acts also authorize
the Utilities to lay their mains and conduits in any public street,
highway, or public ground; to use the water of certain rivers, streams,
or other waters in Fairfield, Litchfield and New Haven counties and from
certain locations along and in the Housatonic River and its tributaries,
subject to such consents and approvals as may be
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required by law; and to exercise the power of eminent domain in connection
with lands, springs, streams or ponds and any rights or interests therein
that are expedient to or necessary for furnishing public water supply. In
the event of the exercise of such condemnation powers, the Utilities must
pay appropriate compensation to those injuriously affected by such taking.
The Utilities are subject to regulation by the DPUC, which has
jurisdiction with respect to rates, service, accounting procedures,
issuance of securities, dispositions of utility property and other
related matters.
Rates charged by BHC, SWC, NCWC and RWSC are subject to approval by
the DPUC. The Utilities continually review the need for increases of
water rates, and historically have sought rate relief in a timely manner
in light of increases in investment in utility plant, operating costs
and related financing costs, as well as other factors.
The following table sets forth information as to rate requests by
BHC, SWC, NCWC and RWSC and increases granted by the DPUC within the
last three years.
<TABLE>
<CAPTION>
% Total Allowed Return Allowed
Date of Amount Increase Effective Increase % Increase On Utility Return on
Company Application Requested Requested Date Granted Granted Common Equity Rate Base
- -------- ----------- --------- --------- ------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BHC 2/5/93 $16,100,000 35.00% 8/1/93 $10,400,000 21.0% 11.6% 9.62%
RWSC 1/12/94 338,000 42.93% 7/19/94 273,000 33.1% - 9.06%
</TABLE>
The DPUC may allow a surcharge to be applied to rates in order to
provide a current cash return to water utilities on the major portions
of CWIP applicable to facilities, including filtration plants, required
for compliance with the SDWA. See "Environmental Regulations." The
surcharge is adjusted quarterly, subject to DPUC approval, to reflect
increased CWIP expenditures for SDWA facilities. In connection with
BHC's construction of filtration facilities at its Hemlocks Reservoir,
the DPUC granted BHC an initial 0.82 percent CWIP rate surcharge in
December 1994. BHC will file applications with the DPUC quarterly to
increase this surcharge as construction continues through 1997, at which
time the filtration facilities are expected to be operational and
subject to general ratemaking regulations. See "Recent Developments."
Aquarion is neither an operating utility company nor a "public
service company" within the meaning of the Connecticut General Statutes
and is not currently subject to general regulation by the DPUC. DPUC
approval is necessary, however, before Aquarion may acquire or exercise
control over any Connecticut public service company. DPUC approval is
also required before any other entity can acquire or exercise, or
attempt to exercise, control over Aquarion.
Connecticut regulations govern the sale of water company land and
treatment of land sale proceeds. See "Item 2. Properties."
Environmental Regulations. The Utilities are subject to regulation
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by the Connecticut Department of Public Health (DPH) with respect to
water quality matters, use of water from surface and subsurface sources,
the location, construction and operation of water supply facilities and
the sale of certain utility property. Plans for new water supply
systems or expansion of existing water supply systems also must be
submitted to the DPH for approval. The DEP is authorized to regulate
the operations of the Utilities with respect to water pollution
abatement, diversion of water from surface and subsurface sources, and
the location, construction and alteration of dams and other water
obstructions.
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The Federal Clean Water Act (the Clean Water Act) of 1972, as
amended, regulates discharges of effluents into navigable 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.
The Utilities are subject to regulation of water quality under the
SDWA, which provides for the establishment of uniform minimum national
quality standards by the Environmental Protection Agency (the EPA), as
well as governmental authority to specify the type of treatment process
to be used for public drinking water. EPA regulations issued pursuant
to the SDWA set limits for, among other things, certain organic and
inorganic chemical contaminants, odor, turbidity, microbiological
contaminants and radioactivity. The SDWA provides that the states have
the primary enforcement responsibility for public drinking water
systems, as long as the states' regulations are no less stringent than
those adopted pursuant to SDWA. For certain of these water quality
standards the DPH has adopted regulations that in some instances impose
standards more stringent than those imposed under the federal
regulations.
EPA regulations pursuant to SDWA include the Surface Water
Treatment Rule (SWTR), the Total Coliform Rule (TCR) and the Lead and
Copper Rule (LCR). The water treatment requirements of SWTR mandate the
construction of filtration plants at BHC's Hemlocks, Lakeville and
Norfolk Reservoirs. BHC has entered into consent agreements with DPH
establishing timetables for construction of filtration facilities at the
Hemlocks, Lakeville and Norfolk reservoirs and penalties if the
facilities are not completed within such timetables. The Hemlocks plant
must be completed by June 29, 1998 or a $250,000 penalty will be
imposed. Lesser penalties apply to the smaller facilities for Lakeville
and Norfolk, if not completed by June 29, 1997 and June 29, 1996,
respectively. The Company anticipates that it will be able to meet the
construction timetables. The TCR affects the Utilities by the
imposition of requirements for additional biological sampling and
monitoring. The stringent requirements of the TCR may also result in
increased public notification relating to water quality. The LCR
establishes corrosion control techniques and requires monitoring to
determine compliance with prescribed lead and copper levels in drinking
water. If such levels are exceeded, a multi-year program involving
additional monitoring, public notification, state-supervised corrosion
control and treatment and replacement of lead service lines could
result. After the first two required testing periods, the Utilities
were found to be in compliance with the LCR. In 1994, the DPH
determined that the utilities were in compliance with Synthetic Organic
Chemical requirements and with Ground Water Under the Direct Influence
of Surface Water requirements, thereby avoiding additional potentially
significant treatment process construction costs. Further SDWA-related
regulations are anticipated for such water quality parameters as
organics, inorganics and disinfection by-products and for enhanced
surface water treatment. It is impossible to determine at this time the
ultimate impact these regulations will have on the Utilities.
The Company currently estimates that future capital costs of
SWTR-mandated filtration facilities will approximate $32,100,000 for the
period 1996 through 1997, without adjustment for inflation. At December
31, 1995, the Company had expended $26,100,000 for filtration facilities
currently under construction, of which $22,600,000 has been expended on
the Hemlocks Reservoir filtration facility and the remaining $3,500,000
at the Lakeville and Norfolk Reservoirs filtration facilities.
Water quality tests are made continuously at all of the Utilities'
water supply sources, and the Utilities believe they are in substantial
compliance with regulations promulgated in connection with the organic
chemical, inorganic chemical, physical, and bacteriological standards
for drinking water. BHC has been voluntarily monitoring for Giardia and
cryptosporidium, water quality concerns addressed by the SWTR. While
evidence of Giardia and cryptosporidium have been detected in some
surface water reservoir samples, none has been found in treated water
samples.
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Connecticut has established seven public water supply management
areas to coordinate the comprehensive planning of public water systems
and provide for the centralized regulation by the DPH of water resources
for water supply and other public purposes. Each area has a water
utility coordinating committee (WUCC) comprised of representatives of
the various public water systems and regional planning agencies in the
area. BHC operations fall under four of the state's seven WUCCs, and
SWC operations fall under two WUCCs. Each WUCC is required to establish
exclusive service areas for each public water system in the area. The
DPH is authorized to resolve any disagreements among members of the
respective committees. It is not possible at this time to predict the
full impact on the Utilities of the WUCC system and the associated
regulations and proceedings.
Aquifer protection legislation in Connecticut requires each water
utility to conduct extensive groundwater data collection and groundwater
mapping of critical wellfield areas. The DEP is also proposing land-use
regulations within these critical areas. The proposed legislation
mandates that each municipality designate an aquifer protection agency
to regulate land use in these areas. Finally, the DEP, in consultation
with the DPH and DPUC, is preparing guidelines for acquisition of lands
for proposed public water supply wellfields. Regulations are still
being prepared for this program and the effect of this legislation and
related regulations cannot be determined at this time. If BHC were
required to purchase additional land around its wellfields, the cost
could be substantial.
Developments with respect to the identification and measurement of
various elements in water supplies and concern about the effect of such
elements on public health, together with possible contamination of water
sources, may in the future require the Utilities to modify all or
portions of their various water supplies, to develop replacement
supplies or to implement new treatment techniques. Any such
developments would significantly increase the Utilities' operating costs
and capital requirements. The Company expects that all such
expenditures and costs should ultimately be recoverable through rates
for water service, but there can be no assurance that this will be the
case.
Certain dams owned by the Utilities are subject to inspection under
the National Dam Inspection Act as well as the Connecticut Dam
Registration Act, and dams owned by SWC in New York are subject to
inspection by the New York State Department of Environmental
Conservation. The Utilities own 29 dams, 16 of which are subject to
federal inspection. Although certain modifications and further studies
have been required, no material problems with respect to these dams have
been reported to the Company.
The Utilities are required to obtain permits from the DEP for the
location, construction or alteration of any dam or reservoir, and to
secure the approval of the DEP for the diversion and use of water from
any surface or ground source for public use. The Utilities have taken
all compliance actions required to date.
SWC may be subject to health, safety and environmental regulation
by various state and local authorities in New York State with respect to
its properties located in New York. SWC does not provide water to any
customers in New York. The leasing or sale of land around reservoirs,
wellfields and some streams may be restricted by various Connecticut
statutes and regulations. See "Item 2. Properties."
Environmental Laboratories
Laboratories. The Company conducts an environmental testing
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laboratory business through IEA, which operates five laboratories in
Connecticut, Illinois, Massachusetts, New Jersey and North Carolina
through five corporate subsidiaries. In September 1995, the Florida
facility was merged into the North Carolina laboratory. IEA believes
that it is among the 20 largest environmental testing laboratory
businesses in the country. IEA is headquartered at its Cary, North
Carolina, facility.
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Environmental laboratories provide data to customers concerning the
nature and quantity of contaminants or hazardous substances present in
samples. IEA offers a range of environmental analytical services,
including routine and customized testing of hazardous wastes, soil, air
and water. Additionally, IEA offers mixed waste/radiological testing at
its North Carolina laboratory. IEA also provides asbestos testing and
sample collection services.
Quality Control. The ability to deliver accurate and precise test
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results consistently is essential to a successful laboratory, and
testing samples must meet rigorous chain-of-custody requirements and
testing protocols to enable the test results to be used as evidence in
legal or regulatory proceedings. IEA performs internal quality
assurance reviews to monitor consistent performance. IEA is certified
in over 20 state-operated certification programs and, through its
laboratories in North Carolina, New Jersey and Connecticut, is an active
participant in the EPA's Contract Laboratory Program (CLP). To qualify
for the CLP, the laboratories must satisfy stringent quality control
standards, and are subject to quarterly performance evaluations.
Technology. IEA has invested in sophisticated analytical testing
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equipment needed to process a large volume of tests with accurate
results. IEA laboratories are equipped with Gas Chromatography/Mass
Spectrometry instruments, which identify specified organic and inorganic
chemical compounds within a sample by means of electron beam
"fingerprinting." IEA owns chromatograph instruments, which are used
extensively to perform organics testing. IEA laboratories contain
inductively coupled plasma instruments and atomic absorption units for
inorganics analysis. IEA laboratories perform wet-chemistry tests for
general chemistry parameters and also offer a range of microscopy
services including asbestos analysis.
Laboratory Employees. Experienced personnel qualified in the use
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of the instruments and related computer systems used by IEA are critical
to its operations. IEA has a staff of 276, which includes 183
scientists and technicians. IEA's laboratory services are marketed by a
field and in-house sales staff, which is supported by IEA's Client
Service Department as well as by IEA's scientific and technical staff.
Customers. During 1995, IEA serviced approximately 1,500
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customers. No single customer represented 10 percent or more of IEA's
revenues during that period. IEA's broad client base includes
consulting and engineering firms, public and private water companies,
large and small industrial and high-tech companies, federal government
agencies including the EPA, and various state and local government
bodies, including state environmental departments, municipalities and
waste treatment facilities.
Competition. The environmental testing business is highly
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competitive. Its participants compete primarily on the basis of price
and service. Many customers view environmental testing as a commodity
and for them, price is the most important factor in purchasing
decisions. Following a period of rapid growth, the environmental
testing business is now characterized by significant overcapacity. As a
result of these factors, operating margins tend to be low.
Estimates of the number of commercial laboratory companies range
between 1,000 and 1,500, although IEA believes that the 30 largest
companies account for approximately 50 percent of industry revenues.
Most laboratory companies are single-laboratory operations serving a
local market. As the environmental services market has matured over the
past 20 years, the trend has been toward consolidation and larger
laboratory companies that operate several laboratories. This trend has
been driven, in part, by the increasing sophistication and expense of
laboratory equipment. In addition, larger laboratory companies can
offer a wider variety of services and equipment. Some customers,
particularly larger companies with operations in multiple locations,
prefer to deal with larger laboratory companies. Further, some
environmental service businesses operate in-house laboratories that
exclusively service their own environmental testing needs. IEA's
competitors include larger companies that possess greater financial
-8-
<PAGE>
<PAGE>
resources than the Company. The three IEA laboratories that participate
in the CLP compete with approximately 50 other laboratory companies that
bid for such EPA work.
Regulatory Background. Federal and state environmental laws and
---------------------
regulations have been the primary force driving the environmental
testing laboratory market. The proliferation of environmental
regulations over the past two decades has required increasingly
sophisticated analysis and remediation of a growing range of
environmental hazards. The environmental services industry has grown
rapidly in response to regulatory demands for tests that reveal the
nature and quantity of any contamination caused during the handling, use
and transportation of hazardous substances, the treatment, storage and
disposal of wastes, and the remediation of contaminated sites. As
advances in technology have continued to make more sophisticated testing
possible, regulations have often been revised to require those more
sophisticated tests. The impact, if any, on the environmental testing
laboratory industry of proposed re-authorization of key environmental
legislation, now under consideration by Congress, cannot be determined
at this time.
Environmental Regulation. IEA receives and uses various small
------------------------
quantities of hazardous chemicals in its operations, and is a licensed
hazardous waste handler. IEA operates under federal and, as applicable
to the states in which various IEA laboratories operate, various state
environmental laws and regulations that subject parties handling
hazardous wastes to potential liabilities for non-compliance, in
addition to possible civil and criminal penalties.
Contract Terms. IEA's client contracts generally contain
--------------
provisions which may impose financial penalties for inaccurate or late
test results. Contracts with governmental and private sector clients
regularly contain liquidated damage or penalty provisions which reduce
the amount paid if a test is delivered late.
Seasonality. IEA's business is affected by seasonality, with the
-----------
busiest period during the late spring, summer and early fall, when
sampling and construction activity are at their peak. Sampling, and
therefore the related testing, fall off for large parts of IEA's service
area during the winter months because of frozen ground and water and
accumulations of snow in some parts of the country.
Utility Management Services
The Company, through Hydrocorp and its AMS subsidiary, provides
clients with an integrated range of utility management services,
including contract management and operations, information services,
water and wastewater billing and collections and various engineering,
operations and management consulting services. AMS clients are private
and municipal water and wastewater utilities, including municipal
systems engaged in privatization initiatives. The utility management
services businesses are highly competitive.
Hydrocorp also has minority interests in small businesses that
provide security consulting services and automated mapping and
facilities management services to utilities, industry, municipalities
and government agencies.
Timber Processing
The Company is engaged in the timber processing business through
Timco, which has operations in New Hampshire consisting of a sawmill
complex and formerly, a wood waste electricity cogeneration plant. The
sawmill complex processes and markets kiln-dried, finished eastern white
pine and other lumber. Timco also provides custom kiln drying services
for pine mills in Maine and southern New Hampshire. The product is used
in the remodeling and do-it-yourself markets and, to a lesser extent, in
the construction of new homes. It is marketed in the Northeast and
Mid-Atlantic regions through lumber wholesalers, distributors and, in
some instances, directly to retailers. Wholesalers and distributors, in
turn, sell the
-9-
<PAGE>
<PAGE>
product to the construction trade and to retail outlets.
Timco obtains the timber used in its products from independent loggers
and from purchased timber rights. A four megawatt electricity
cogeneration plant, which no longer is used to produce electricity, is
located at the sawmill complex. The former cogeneration plant is used
to produce low-cost steam for drying lumber and heating some of the
sawmill buildings.
Traditionally, the demand for Timco's lumber is lower in the winter
months and inventories are built up in anticipation of the busier spring
and summer season. The lumber products industry is very competitive, on
the basis of quality and price. Timco faces competition on the basis of
both quality and price from domestic and foreign forest product
companies, many of which have greater resources than the Company.
Real Estate
The Company treats real estate as a separate business segment in
order to distinguish the earnings impact from sales of surplus utility
land from the results of utility operations. For a discussion of the
surplus off-watershed land which the Utilities intend to market as
appropriate, see "Item 2. Properties."
Employees
As of December 31, 1995, the Company employed approximately 666
persons on a full-time basis, including 282 in the Public Water Supply
business, 277 in the Environmental Laboratories and Utility Management
Services business and 107 in the Timber Processing business. None of
the Company's employees is covered by collective bargaining
arrangements, and the Company believes its relations with its employees
are satisfactory.
ITEM 2. PROPERTIES
- -------------------
BHC owns a 20,000-square-foot headquarters building and a 44,370-
square-foot Operations Center in Bridgeport, and leases an additional
22,000-square feet of office, laboratory and garage space in Bridgeport
for utility operations. BHC's subsidiary, NCWC, owns a 28,000-square-
foot office building in Monroe, Connecticut, that is currently occupied
by IEA's Connecticut laboratory.
At December 31, 1995, BHC owned in the aggregate 11 active
reservoirs and approximately 1,674 miles of water mains, of which
approximately 51 miles have been laid in the past five years. In
addition, SWC owned five active reservoirs at year-end and approximately
276 miles of water mains, of which approximately 14 miles have been laid
in the past five years. The rights to locate and maintain water
transmission and distribution mains are secured by charter, easement and
permit and are generally perpetual. Water is delivered to the
distribution system from three major reservoir systems, comprised of
several smaller reservoirs and 42 producing wells. Aquarion owns
nonutility land totaling approximately 99 acres in Easton and
Litchfield, Connecticut. RWSC owns the rights to one active reservoir
and five producing wells and NCWC owns the rights to five producing
wells.
BHC owns two dual-media filtration plants for treatment of its Trap
Falls and Easton Lake reservoir systems, which plants have capacities of
25 and 20 MGD, respectively. SWC owns a 24 MGD rapid-sand and
activated-carbon filtration plant for treatment of its entire reservoir
system. SWC's headquarters and operations facility are being
consolidated into this treatment facility.
BHC owns approximately 19,000 acres of real property, most of which
consists of reservoirs and surrounding watershed, located in Fairfield,
New Haven, and Litchfield counties in Connecticut. All but
-10-
<PAGE>
<PAGE>
1,360 specified acres of such property are subject to the first lien arising
under the BHC Indenture securing its First Mortgage Bonds. SWC owns
approximately 2,400 acres of real property, which consists almost
exclusively of reservoirs and surrounding watershed, pumps, standpipes
and building facilities, located in Stamford and New Canaan,
Connecticut, and in Pound Ridge and Lewisboro, New York.
The DPH regulates public water company lands according to a
three-tiered classification system. Class I lands cannot be sold,
leased or transferred. The DPH may authorize a transfer or change in
use of Class II lands only upon a finding that there will be no adverse
impact upon the public water supply and that any use restrictions
required as a condition of transfer are enforceable against subsequent
owners and occupants of the lands. Class III lands, which are
off-watershed, are not currently subject to regulation by the DPH. BHC
has identified approximately 2,600 acres of land it believes are surplus
to its water supply needs, and therefore would qualify as Class III
land. All of this Class III land, which includes approximately 570
acres that have never been in rate base, is available for sale, although
all of it may not be marketable. Up to 530 additional acres could become
available if the DPH approves the abandonment of a former reservoir
system in New Haven County and reclassifies that existing watershed
property as Class III land, as requested by the Company. NCWC owns
40 acres of Class II and III land that is currently scheduled to be sold
in 1996.
Real property may not be sold or transferred by a water utility
without the prior approval of the DPUC and compliance with other
restrictions imposed by Connecticut law. State laws and regulations
govern, among other things, to whom certain water company lands may be
transferred, with preference given to other water companies, the
municipality in which the property is located and the State of
Connecticut, in that order. Additionally, the disposition of the
proceeds of any permissible sale is subject to state law.
Until changed by statute in 1988, it had been the practice of the
DPUC to apply gains from the sale of surplus water company land that had
ever been in the rate base to ratepayers. In effect, these gains served
as an offset against operating expenses, thereby substituting profits
from the sale of such land for revenues that would otherwise be provided
through rates. Legislation enacted in 1988, the Equitable Sharing
Statute, required the DPUC to use an accounting treatment to "equitably
allocate" the economic benefits of the net proceeds from the sales of
Class III land that was previously in the utility's rate base between
the Company's ratepayers and its shareholders. Ratepayers do not share
in gains from the sale of land that has never been in rate base.
The Equitable Sharing Statute was clarified by a 1990 amendment
which provides that the economic benefits from the sale of
former-rate-base, Class III land shall be allocated "substantially in
favor" of shareholders when 25 percent or more of the land sold is to be
used for open space or recreational purposes.
The Company leases its laboratory facilities in Illinois, New
Jersey and North Carolina and owns the facilities in Massachusetts and
Connecticut. The smallest of IEA's laboratories occupies approximately
8,000 square feet. The largest, located in Cary, North Carolina,
occupies approximately 30,000 square feet. The Company believes that
the laboratory facilities owned or leased are adequate for its current
and anticipated future needs and that the amounts paid for all the
leases into which it has entered are reasonable.
ITEM 3. LEGAL PROCEEDINGS
- ---------------------------
The registrant has nothing to report for this item.
-11-
<PAGE>
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
The registrant has nothing to report for this item.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- -----------------------------------------------------------------------
MATTERS
-------
Page 43 of the Company's Annual Report to Shareholders for the year
ended December 31, 1995 is incorporated by reference herein pursuant to
Rule 12b-23 of the Securities and Exchange Act of 1934 (the Act) and to
Instruction G(2) to Form 10-K.
Aquarion has declared and paid quarterly dividends on its common
stock without interruption since its organization in 1969 and, prior
thereto, BHC paid dividends annually on its common stock without
interruption since 1890. Dividends, when declared, are normally paid on
the 30th day of January, April, July and October.
The earnings of Aquarion are derived from its investments in its
subsidiaries, particularly BHC. Aquarion's future ability to pay
dividends to holders of its Common Stock is dependent upon the continued
payment by BHC of dividends to Aquarion. BHC's ability to pay dividends
will depend upon timely and adequate rate relief, compliance with
restrictions under certain of the BHC debt instruments and other
factors.
Dividends on Aquarion common stock can be paid only from its net
profits and surplus. Aquarion's ability to pay dividends is further
restricted by the terms of Aquarion's 5.95 percent unsecured Senior Note
due January 1999 and 7.8 percent unsecured Senior Notes due June 1997
(the "Aquarion Notes"). As of December 31, 1995, the applicable
restrictions would have permitted payment of additional dividends on
Aquarion's common stock of up to $32,000,000.
While Aquarion's Board of Directors intends to continue the
practice of declaring cash dividends on a quarterly basis, no assurance
can be given as to future dividends or dividend rates since they will be
determined in light of a number of factors, including earnings, cash
flow, and Aquarion and BHC's financial requirements. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operations--Capital Resources and Liquidity."
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------------
See Page 1 ("Selected Financial Data") and Pages 42 - 43
("Supplemental Financial Data") of the Company's Annual Report to
Shareholders for the year ended December 31, 1995, which is incorporated
by reference herein pursuant to Rule 12b-23 of the Act and Instruction
G(2) to Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ---------------------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
See Page 1 ("Selected Financial Data") and Pages 17 - 22 of the
Company's Annual Report to Shareholders for the year ended December 31,
1995, which is incorporated by reference herein pursuant to Rule 12b-23
of the Act and Instruction G(2) to Form 10-K.
-12-
<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------------
The consolidated financial statements, together with the report
thereon of Price Waterhouse, LLP, dated February 2, 1996, appearing on
Pages 23 - 40 and Page 1 ("Selected Financial Data") and Pages 42 - 43
("Supplemental Financial Data") of the accompanying 1995 Annual Report
to Shareholders of Aquarion Company are incorporated by reference herein
pursuant to Rule 12b-23 of the Act and Instruction G(2) to Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ---------------------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
The registrant has nothing to report for this item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The information as to directors required by Item 10 is set forth at
Pages 2 - 9 of the Company's Definitive Proxy Statement, dated March 21,
1996 relating to the proposed Annual Meeting of Shareholders to be held
on April 23, 1996, filed with the Commission pursuant to Regulation
14a under the Act, and is incorporated by reference herein pursuant to
Rule 12b-23 of the Act and Instruction G(3) to Form 10-K.
Executive Officers
The executive officers of the registrant are listed below. These
officers were elected to the offices indicated on April 25, 1995, except
as otherwise noted, for a term expiring with the 1995 annual meeting of
directors. Except as indicated, all have been with registrant and its
predecessors in an executive capacity for more than five years. There
are no family relationships among members of the executive officers.
There were no arrangements or undertakings between any of the officers
listed below and any other person pursuant to which he or she was
selected as an officer.
Served as
Office, Business Experience Officer
Executive Officer Age During Past Five Years Since
- ----------------- --- ---------------------------- ---------
Richard K. Schmidt 51 President and Chief Executive 1992
Officer (since October
1995), formerly Senior
Vice President (1993-
1995) of the Company;
President (1992-1995)
and Chief Executive
Officer (since 1992)
of IEA; formerly
President and Chief
Operating Officer
(1984-1992) of
Mechanical Technology,
Inc.
-13-
<PAGE>
<PAGE>
Served as
Office, Buseinss Experience Officer
Executive Officer Age During Past Five years Since
- ------------------ --- ----------------------------- --------
James S. McInerney 58 Senior Vice President 1989
(since April 1992) of
the Company; President
(since April 1991),
Chief Executive
Officer (since April
1995) and Chief
Operating Officer
(January 1990 to April
1995) of BHC, and
Chairman and Chief
Executive Officer
(since January 1990)
of Stamford Water
Company. Executive
Vice President (1990
to April 1991) of BHC.
Mr. McInerney is a
Director, President or
Vice President of
certain of the
Company's other
subsidiaries.
Janet M. Hansen 53 Executive Vice President 1983
(since October 1995),
Chief Financial
Officer (since April
1992), Treasurer
(since 1988) and
Senior Vice President
(1993-1995) of the
Company and Vice
President
(since 1989), Chief
Financial Officer
(since April 1991) and
Treasurer (since 1985)
of BHC; Mrs. Hansen is
Vice President and
Treasurer (since April
1991) of IEA and
Chairman of the Board
and Chief Executive
Officer (since April
1992) of Timco. Mrs.
Hansen is also
Director, Vice
President, Chief
Financial Officer and
Treasurer of certain
of the Company's other
subsidiaries.
Larry L. Bingaman 46 Vice President, Corporate 1990
Relations and
Secretary (since April
1993); Vice President,
Marketing and
Communications (1990-
1993) of the Company.
Mr. Bingaman is also
Director, Vice
President and
Secretary of certain
of the Company's other
subsidiaries.
ITEM 11. EXECUTIVE COMPENSATION
- ------------------------------------------
Pages 8 - 15 of the Company's Definitive Proxy Statement, dated
March 21, 1996, relating to the proposed Annual Meeting of Shareholders
to be held on April 23, 1996, filed with the Commission pursuant to
Regulation 14a under the Act are incorporated by reference herein
pursuant to Rule 12b-23 of the Act and Instruction G(3) to Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
Pages 4 - 5 of the Company's Definitive Proxy Statement, dated
March 21, 1996, relating to the proposed Annual Meeting of Shareholders
to be held on April 23, 1996, filed with the Commission pursuant to
Regulation 14a under the Act, are incorporated by reference herein
pursuant to Rule 12b-23 of the Act and Instruction G(3) to Form 10-K.
-14-
<PAGE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The registrant has nothing to report for this item.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
a) The following documents are filed as part of this report:
Page in
Annual Report*
--------------
(1) Consolidated Statements of 23
Income for the three years
ended December 31, 1995
Consolidated Balance Sheets at 24-25
December 31, 1995 and 1994
Consolidated Statements of Cash 26
Flows for the three years
ended December 31, 1995
Consolidated Statements of 27
Shareholders' Equity for the
three years ended
December 31, 1995
Notes to Consolidated Financial 28-29
Statements
Report of Independent 40
Accountants
Selected Financial Data 1
Supplemental Financial 42-43
Information
* Incorporated by reference from the indicated
pages of the 1995 Annual Report to Shareholders.
______________________
(b) Reports on Form 8-K.
The Company did not file a report on Form 8-K for the
fourth quarter of the year ended December 31, 1995.
(c) Exhibits:
Each document referred to below is incorporated by
reference to the files of the Commission, unless the
reference is preceded by an asterisk (*). Each
management contract, compensatory plan or arrangement
required to be filed as an exhibit hereto is preceded
by a double asterisk (**).
3(a) Restated Certificate of Incorporation of
Aquarion, as amended.(1)
3(b) By-laws of Aquarion, as amended. (4)
4(a) Rights Agreement between Aquarion and The
Chase Manhattan Bank, N.A. setting forth
description of Preferred Stock Purchase
Rights distributed to holders of Aquarion
Common Stock.(4)
10(a) First Mortgage Indenture of BHC dated June 1, 1924.(2)
10(b) Seventeenth Supplemental Mortgage of BHC
dated as September 1, 1960.(2)
-15-
<PAGE>
<PAGE>
10(c) Twentieth Supplemental Mortgage of BHC dated
as of November 1, 1968.(1)
10(d) Loan and Trust Agreement of Timco as of
November 1, 1984.(1)
* 10(e) Note Agreement of BHC dated January 24, 1991.
10(f) Note Agreement of Aquarion dated as of May 19, 1992.(5)
**10(g) Aquarion Long-Term Incentive Plan.(1)
10(h) Joint Venture Agreement between John J.
Brennan, Jr., William A. Brennan and Main
Street South Corporation dated February 23, 1979.(3)
* 10(i) Joint Venture Agreement amendment between
John J. Brennan, Jr., William A. Brennan and
Main Street South Corporation dated
January 1, 1994.
**10(j) Employment Agreement between Aquarion and
James S. McInerney, dated June 1, 1990.(4)
**10(k) Employment Agreement between Aquarion and
Janet M. Hansen dated November 1, 1992.(5)
**10(l) Agreement between Aquarion and
William S. Warner dated October 15, 1989.(9)
* **10(m) Employment Agreement between Aquarion and
Jack E. McGregor dated October 1, 1995.
**10(n) Form of Stock Option Award Agreement for
options granted pursuant to Long-Term
Incentive Plan.(9)
* **10(o) Employment Agreement between Aquarion and
Larry L. Bingaman dated June 11, 1990.
10(p) Amendment dated September 12, 1991 to the
Stock Purchase Agreement dated as of
December 7, 1990.(1)
10(q) Purchase and Sale Agreement dated
September 12, 1991, by and among YWC
Technologies, Inc., Bird Corporation, YWC,
Inc., Interim Dewatering Services, Inc.,
Ad+Soil, Inc. and Aquarion.(1)
10(r) Agreement for Construction Management
Services dated April 18, 1991 between BHC
and Gilbane Building Company.(1)
* **10(s) Employment Agreement between Aquarion and
Richard K. Schmidt dated October 1, 1995.
* **10(t) Employment Agreement between Industrial and
Environmental Analysts, Inc. and David C.
Houle dated October 1, 1995.
10(u) Loan Agreement of BHC dated as of June 1, 1990.(4)
10(v) First Mortgage Bonds, Series C and Preferred
Stock, 1968 Series, Purchase Agreement of
SWC dated July 1968.(5)
10(w) Revolving Credit Agreement of Aquarion dated
May 14, 1993.(6)
-16-
<PAGE>
<PAGE>
10(x) Revolving Credit Agreement amendment dated May 12, 1994.(9)
10(y) Loan Agreement of BHC dated as of June 1, 1993. (6)
10(z) Loan Agreement of SWC dated September 1, 1993.(7)
10(aa) Loan Agreement of BHC dated December 1, 1993.(8)
10(bb) Note Agreement of Aquarion dated January 4, 1994.(8)
**10(cc) Aquarion Stock Incentive Plan.(8)
*10(dd) Loan Agreement of BHC dated April 1, 1995
*10(ee) Agreement between Aquarion and SRK, Inc. dated January 31, 1996.
*13(a) Annual Report to Shareholders for the year ended December 31, 1995.
*21(a) Subsidiaries of Aquarion
*23(a) Consent of Independent Accountants
*27(a) Financial Data Schedule
____________________
(1) Filed as part of Aquarion's Form 8 Amendment to its
Form 10-Q for the quarter ended September 30, 1991, filed
February 19, 1992.
(2) Filed as an Exhibit to BHC's Registration Statement on
Form S-1, File Number 2-23434, dated April 26, 1965.
(3) Filed as part of the Amendment No. 1 to the Company's Registration
Statement as Form S-7, File No. 2-74305, dated November 5, 1981.
(4) Filed as part of the Company's Annual Report on
Form 10-K for the year ended December 31, 1991.
(5) Filed as part of the Company's Annual Report on
Form 10-K for the year ended December 31, 1992.
(6) Filed as part of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993.
(7) Filed as part of the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993.
(8) Filed as part of the Company's Annual Report on
Form 10-K for the year ended December 31, 1993.
(9) Filed as part of the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
-17-
<PAGE>
<PAGE>
SIGNATURES
-----------
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Aquarion Company
- -----------------
(Registrant)
By /s/JANET M. HANSEN March 25, 1996
--------------------------------
Janet M. Hansen
Executive Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
By /S/JACK E. MCGREGOR March 25, 1996
--------------------------------
Jack E. McGregor
Chairman of the Board of Directors
and Director
By /S/WILLIAM S. WARNER March 25, 1996
--------------------------------
William S. Warner
Vice Chairman of the Board of Directors
and Director
By /S/RICHARD K. SCHMIDT March 25, 1996
--------------------------------
Richard K. Schmidt
President, Chief Executive Officer
and Director
By /S/GEORGE W. EDWARDS, JR. March 25, 1996
--------------------------------
George W. Edwards, Jr.
Director
By /S/GEOFFREY EHTERINGTON March 25, 1996
--------------------------------
Geoffrey Etherington
Director
-18-
<PAGE>
<PAGE>
By March 25, 1996
--------------------------------
Janet D. Greenwood
Director
By /S/DONALD M. HALSTED, JR. March 25, 1996
--------------------------------
Donald M. Halsted, Jr.
Director
By /S/EDGAR G. HOTARD March 25, 1996
--------------------------------
Edgar G. Hotard
Director
By /S/EUGENE D. JONES March 25, 1996
--------------------------------
Eugene D. Jones
Director
By /S/LARRY L. PFLIEGER March 25, 1996
--------------------------------
Larry L. Pflieger
Director
By /S/G. JACKSON RATCLIFFE March 25, 1996
--------------------------------
G. Jackson Ratcliffe
Director
By /S/JOHN A. URQUHART March 25, 1996
--------------------------------
John A. Urquhart
Director
-19-
<PAGE>
<PAGE>
EXHIBIT 21(a)
--------------
Subsidiaries of the Registrant
------------------------------
- - Bridgeport Hydraulic Company, incorporated in the State of Connecticut
- - Stamford Water Company, incorporated in the State of Connecticut
- - New Canaan Water Company, incorporated in the State of Connecticut
- - Ridgefield Water Supply Company, incorporated in the State of Connecticut
- - Main Street South Corporation, incorporated in the State of Connecticut
- - Timco, Inc., incorporated in the State of Connecticut
- - Hydrocorp, Inc., incorporated in the State of Delaware
- - Industrial and Environmental Analysts, Inc., incorporated in the State
of Vermont
- - Industrial and Environmental Analysts, Inc., Massachusetts,
incorporated in the State of Massachusetts
- - Industrial and Environmental Analysts, Inc., New Jersey, incorporated
in the State of Delaware
- - Industrial and Environmental Analysts, Inc., Illinois, incorporated in
the State of Delaware
- - Industrial and Environmental Analysts, Inc., Florida, incorporated in
the State of Florida
- - SRK Holding, Inc., incorporated in the State of Connecticut
- - THC Acquisition Corp., incorporated in the State of Delaware
- - YWC, Inc., incorporated in the State of Connecticut
- - Aquarion Management Services, Inc., incorporated in the State of
Delaware
-20-
<PAGE>
<PAGE>
EXHIBIT 23(a)
-------------
Consent of Independent Accountants
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-52973)
and in the Registration Statement on Form S-8 (No. 33-53473)
of our report dated February 2, 1996, except as to Note 16, which
is as of February 29, 1996, which appears on Page 40 of the 1995
Annual Report to Shareholders of Aquarion Company, which is incorporated
by reference in Aquarion Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
Price Waterhouse LLP
Stamford, Connecticut
March 25, 1996
-21-
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of Financial Condition and Results
of Operations
The terms "Aquarion Company," "Aquarion," and "the Company" are used in
this section for convenience and reading ease. These terms do not in
all cases describe exact intercompany relationships among Aquarion and
its subsidiaries.
CAPITAL RESOURCES AND LIQUIDITY
Capital expenditures. The Company invested $41,600,000 in property,
- --------------------
plant and equipment in 1995, compared with $19,800,000 in 1994 and
$17,900,000 in 1993. Aquarion's utility subsidiary, Bridgeport
Hydraulic Company (BHC), and BHC's subsidiaries, Stamford Water Company
(SWC), New Canaan Water Company (NCWC) and Ridgefield Water Supply
Company (RWSC)(collectively, the Utilities) accounted for approximately
91 percent of plant additions during the three-year period, with the
balance being invested primarily in the Company's environmental testing
laboratories (Laboratories or IEA) and timber processing operation
(Timber Processing or Timco). Nonutility capital expenditures totaled
approximately $3,500,000 in 1995. Management estimates that capital
expenditures will total $42,200,000 in 1996, of which approximately
$40,400,000 will be for water utility construction programs. Nonutility
capital expenditures will approximate $1,800,000 in 1996.
Federal Safe Drinking Water Act (SDWA) regulations require water
filtration or alternate water treatment measures for BHC's major
unfiltered water supplies. In accordance with SDWA regulations,
engineering for the construction of filtration facilities at BHC's
Hemlocks Reservoir commenced during 1992, and construction began in
October 1994. The total expected cost of construction through
completion in 1997 will approximate $50,000,000, without adjustment for
inflation. Expenditures totaling $22,600,000 have been made for the
Hemlocks filtration project through December 31, 1995 and future costs
of construction will be approximately $27,400,000. Management estimates
that the future costs of construction on BHC's Litchfield Division's
unfiltered surface water supplies, expected to be completed by 1996,
will approximate $4,700,000 without adjustment for inflation.
Expenditures totaling $3,500,000 have been made for the Lakeville and
Norfolk Reservoirs' filtration programs through December 31, 1995.
Management cannot predict whether future federal, state or local
regulations will require additional capital expenditures.
Financing activities. Due to the magnitude of the Company's construc-
- --------------------
tion programs and the capital-intensive nature of the public water sup-
ply business, financing has been provided by both internal and external
sources. Historically, the Company's ability to finance its capital
expenditures has depended substantially on rate relief.
Connecticut Department of Public Utility Control (DPUC) regulations
allow water utilities to implement a Construction-Work-in-Progress
(CWIP) water rate surcharge to water bills in order to recover
90 percent of the carrying costs of capital used in mandated SDWA
projects, until such time as these projects are completed and placed
into rate base. On December 6, 1995, the DPUC approved a 4.27 percent
CWIP rate surcharge in connection with the construction of the Hemlocks
Reservoir filtration facilities. In January 1996, BHC filed an
application to increase this surcharge to 5.52 percent. BHC will file
these applications quarterly as construction continues through 1997, at
which time the facility is expected to be operational and subject to
general ratemaking regulations.
On January 26, 1996, BHC notified the DPUC of its intent to
increase its water services rates and charges by 12 percent or
$7,100,000. BHC will file a formal application with the DPUC on or
before March 26, 1996, but no sooner than February 26, 1996.
As part of the application, BHC will request an opportunity to re-
open the application in 1997 to include the cost of the Hemlocks
filtration plant. If approved, water service rates at that time will
increase by approximately an additional 10 percent, plus a cumulative
CWIP rate surcharge, which is estimated to be 11 percent at that time.
On October 12, 1995, the Company completed the acquisition of NCWC
and RWSC and the related property-exchange agreement (Note 4). At that
time, SWC, NCWC and RWSC collectively filed a rate application with the
DPUC for a 9 percent water service rate increase designed to provide a
$1,373,000 increase in annual water service revenues. As part of that
application, these companies propose to equalize the meter rates and
service charges of all three companies and to consolidate the operations
of all three companies at the SWC headquarters.
The percentage of capital expenditures financed by net cash from
operating activities was 54 percent, 100 percent and 100 percent for the
years ended
-17-
<PAGE>
<PAGE>
December 31, 1995, 1994, and 1993, respectively. (See
"Consolidated Financial Statements-Consolidated Statements of Cash
Flows.") The remainder has been provided from external financing
sources.
Funds from external sources historically have been borrowed on a
short-term basis and periodically refinanced through long-term debt or
equity issues. In May 1995, Aquarion renewed unsecured revolving credit
agreements with five banks. These agreements, which are renewed
annually, provide $50,000,000 of short-term credit availability on a
committed basis. At December 31, 1995, $11,600,000 of short-term
borrowings under the agreements was outstanding at a weighted average
annual interest rate of 5.96 percent (Note 7).
The Company obtained funds of $2,696,000 from issuances of Common
Stock under its Dividend Reinvestment and Common Stock purchase plan
(the Plan) in 1995 versus $2,902,000 and $1,841,000 in 1994 and 1993,
respectively. The Utilities also received $3,054,000 from advances and
contributions in aid of construction from developers and customers in
1995.
- -----------------------------------------
INTEREST EXPENSE
Millions
1993 $9.2
1994 $8.4
1995 $9.3
- -----------------------------------------
- -----------------------------------------
TOTAL DEBT
Millions
1993 $121.2
1994 $115.5
1995 $143.7
- -----------------------------------------
On May 11, 1995, BHC issued a $30,000,000 unsecured note in
consideration for a loan of the proceeds from the issuance by the
Connecticut Development Authority (CDA) of an equal amount of tax-exempt
Water Facilities Revenue Bonds. The tax-exempt CDA bonds have a 40-year
maturity and initially bear interest at a weekly rate. This rate in
1995 ranged between 2.5 percent and 4.8 percent.
The proceeds of this bond issuance are to be used to finance costs
incurred in the construction of the Hemlocks Reservoir filtration
project and the filtration facilities at BHC's Lakeville and Norfolk
Reservoirs. Under the terms of the CDA bonds, proceeds are to be
requisitioned from a construction fund held by a trustee for planned
capital improvements and, at least initially, used to reduce short-term
borrowings incurred to finance the cost of construction. At December
31, 1995, the Company had requisitioned approximately $21,200,000 for
the filtration projects (Note 6).
The Utilities' financing activities are targeted over the long term
to maintain an approximate capitalization structure of 50 percent equity
and 50 percent long-term debt. At December 31, 1995, the Utilities'
combined capitalization structure approximated 55.3 percent equity and
44.7 percent debt, while the Company's consolidated capitalization
structure approximated 52 percent equity and 48 percent debt.
The Company has a target dividend payout ratio, over the long term,
of 75 to 80 percent. The dividend payout as a percentage of net income
was 85 percent and 87 percent in 1995 and 1994, respectively, and 48
percent and 31 percent as a percentage of net cash provided by operating
activities in 1995 and 1994, respectively.
- ----------------------------------------
DIVIDEND PAYOUT RATIO
1992 98.2%
1993 92.0%
1994 86.7%
1995 85.3%
- -----------------------------------------
Future financing requirements. As in the past, the Company's ability to
- -----------------------------
finance future capital expenditures depends substantially on rate
relief. Rate relief has an impact on cash flow from operating
activities and consequently affects the Company's ability to obtain
external financing, since sufficient operating cash flows are necessary
to maintain debt coverage ratios to allow for the issuance of additional
debt securities. Additionally, rate relief has an impact on the
Company's ability to generate sufficient cash flows to provide a
reasonable return in the form of dividends to Aquarion's shareholders.
In light of its substantial need for additional funds,
-18-
<PAGE>
<PAGE>
the Company will need additional debt and equity capital to finance future
utility construction. The type, amount and timing of new financings
will be based on the Company's general financial policies regarding
capitalization, as well as on market conditions and other economic factors.
The Company's ability to obtain funding from external sources will
be affected by the terms of certain of its existing obligations. Under
BHC's First Mortgage Indenture (BHC Indenture), approximately $5,000,000
of First Mortgage Bonds were outstanding at December 31, 1995. No
additional bonds have been issued under the BHC Indenture since 1980.
Substantially all of BHC's properties are subject to the lien of the BHC
Indenture.
Additional long-term debt may be issued by the Company under the
terms of the Aquarion Senior Notes as long as consolidated long-term
debt (including capitalized lease obligations) does not exceed 66 2/3
percent of its consolidated total capitalization, as defined. BHC may
issue additional long-term debt under its Senior Notes if it meets a
similar 66 2/3 percent long-term debt to total capitalization test.
The Company's need for future external financing may also be
affected by future net proceeds from its land-disposition program. BHC
has identified approximately 2,600 acres of off-watershed land, most of
which was previously in its rate base, as surplus to utility operations.
Under Connecticut law, net proceeds from the sale of land which has ever
been in a utility's rate base must be reinvested in the utility plant,
and profits from such transactions are allocated by the DPUC between the
utility's customers and shareholders pursuant to legislative and
regulatory criteria. The after tax gain from the sales of BHC's
surplus, off-watershed land amounted to approximately $1,160,000, or
17 cents per share, in 1995 (Note 3).
OTHER.
Inflation. Inflation, as measured by the Consumer Price Index, increased
- ---------
2.5 percent, 2.7 percent and 2.7 percent in 1995, 1994, and 1993,
respectively, and primarily affects the Utilities. The DPUC allows the
recovery of depreciation through revenues solely on the basis of the
historical cost of plant. The replacement cost of utility plant would
be significantly higher than the historical cost. While the DPUC gives
no recognition in its ratemaking process to the current cost of
replacing utility plant, the Company believes that, based on past
practices, the Utilities will continue to be allowed to earn a return on
the increased cost of their net investment when prudent replacement of
facilities actually occurs.
RESULTS OF OPERATIONS
1995 compared with 1994
- -----------------------
Overview. The Company's consolidated net income for 1995 was
- --------
$12,886,000 compared with net income of $12,221,000 in 1994. Net income
per share was $1.90 in 1995 on a weighted average of 6,794,400 common
shares outstanding, compared with $1.87 in 1994 on a weighted average of
6,532,627 common shares outstanding. Operating results in 1995 reflect
an after-tax gain of approximately $1,100,000, or 16 cents per share, as
a result of the property-exchange agreement in connection with the
acquisition of NCWC and RWSC on October 12, 1995. This acquisition was
accounted for as a pooling of interests and the Company's financial
statements have not been restated for previous years due to the limited
impact on consolidated operating results in 1995. In connection with
the acquisition, the Company incurred expenses of approximately
$573,000, of which approximately $300,000 were assumed liabilities of
the New Canaan Company (NCC), that are reflected in General and
Administrative expenses (Note 4).
In 1994 two nonrecurring transactions occurred. On November 8,
1994, Timco agreed to terminate its long-term rate order with Public
Service Company of New Hampshire (PSNH) under which Timco sold PSNH
electricity produced at its cogeneration plant. Under the agreement,
PSNH paid Timco $8,195,105 in exchange for the assignment of the rate
order to PSNH and a release of PSNH's obligations to buy power from
Timco. The net after-tax gain on this transaction, after providing for
unrecoverable costs and expenses, was $1,902,000, which approximates the
present value of the income stream Timco would have received over the
remaining life of the contract. As a result, Timco will not have these
revenues in the future. Revenues from electricity cogeneration were
$3,000,000 in 1994 and $3,500,000 in 1993.
-19-
<PAGE>
<PAGE>
Aquarion also recorded a charge of $1,900,000 related to the
Company's investment in a rehabilitation housing unit in New Hampshire
(the "Partnership"). Aquarion has been informed that the Partnership
may require additional capital from each of the five limited partners
beyond the amounts originally agreed upon. At present, it is not known
whether the limited partners will make the necessary capital
contributions to sustain the operation of the Partnership. Based upon
the risk of continued funding and the project's poor performance, the
Company no longer believes that the value of its Partnership investment
is recoverable. The after-tax effect of these two transactions had no
impact on Aquarion's earnings in 1994.
Operating revenues. Consolidated operating revenues of $118,206,000 in
- ------------------
1995 were $3,767,000 lower than 1994. Timber Processing experienced
decreased revenues during 1995 of $11,986,000 primarily due to the
termination of the rate order with PSNH and corresponding loss of
cogeneration revenues. Revenues from the Laboratories decreased
$645,000 in 1995, reflecting lower sampling receipts and the transfer of
the Florida lab to the North Carolina facility in 1995. Revenues from
the Utilities increased $5,428,000, principally due to the addition of
NCWC and RWSC's revenues, the CWIP rate surcharge and increased
consumption due to a hot, dry summer in 1995. Revenues from property
sales increased $3,480,000 due to the sale of NCWC's reservoir and the
Company's continued commitment to sell surplus land. The Utility
Management Services businesses account for the remainder of this
variance.
Operating income. Operating income for 1995 decreased $926,000 over
- ----------------
1994 levels. This decrease was primarily the result of higher utility
operating income and the sale of NCWC's reservoir, offset by the
termination of the rate order with PSNH and corresponding loss of the
cogeneration revenues.
Operating expenses. Operating expenses for 1995 were $41,947,000, a
- ------------------
decrease of $5,469,000 over 1994. Timber Processing had lower operating
expenses of $7,549,000 compared with 1994 primarily due to the costs
associated with the termination of the rate order in 1994. Operating
expenses from property sales increased by $1,205,000 due to the
increased activity in the land sales program. The Utilities experienced
an increase in operating expenses of $1,216,000 principally due to the
additional expenses associated with NCWC and RWSC and higher expenses
associated with purchased water, fuel purchases and maintenance. The
Laboratories and Utility Management Services businesses account for the
remainder of the costs associated with this variance.
General & administrative expenses. General and administrative expenses
- ---------------------------------
totaled $20,404,000, a $195,000 increase over 1994. This variance is
primarily the result of increased expenses of $2,321,000 for the
Utilities due to the acquisition of NCWC and RWSC, partially offset by a
$1,900,000 charge in 1994 related to the investment in the Partnership.
The Laboratories, Timber Processing, Real Estate, Corporate and Utility
Management Services businesses account for the remainder of the
variance.
- ---------------------------------------------------
EXPENDITURES PER REVENUE DOLLAR
1995
CENTS
-----
Operating expenses 35.4
General & administrative 17.3
Depreciation 10.2
Interest expense * 7.1
Other taxes 10.7
Income taxes 8.4
Net income 10.9
* Net of AFUDC
- ---------------------------------------------------
- ---------------------------------------------------
EXPENDITURES PER REVENUE DOLLAR
1994
CENTS
-----
Operating expenses 38.9
General & administrative 16.6
Depreciation 9.5
Interest expense * 6.4
Other taxes 10.2
Income taxes 8.4
Net income 10.0
* Net of AFUDC
- ---------------------------------------------------
Depreciation expense. Depreciation expense in 1995 was $375,000 higher
- --------------------
than 1994. This increase is attributable to the additional depreciation
from NCWC and RWSC partially offset by the retirement of the
cogeneration plant at the Timco facility in 1994.
Interest expense. Interest expense for 1995 was $892,000 higher then
- ----------------
1994 due to the interest expense associated with the 1995 debt issuance
by BHC of $30,000,000 and higher short-term borrowing rates.
Taxes other than income taxes. Taxes other than income taxes were
- -----------------------------
$248,000 higher than 1994. Increased payroll and gross earnings taxes
of $473,000 offset by lower property taxes of $225,000 in 1995 account
for this variance.
-20-
<PAGE>
<PAGE>
The following table sets forth information about Aquarion's
operations by industry segment for the years ended December 31, as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------
(In thousands, except Amount % Amount % Amount %
percentages)
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Public water supply $78,488 66.4% $ 73,060 59.9% $71,280 66.4%
Environmental
laboratories and
utility management
services 24,236 20.5 24,925 20.4 23,132 21.5
Timber processing 9,324 7.9 21,310 17.5 12,298 11.5
Real estate 6,158 5.2 2,678 2.2 645 0.6
-------- ------ -------- ------ -------- ------
Total operating revenues $118,206 100.0% $121,973 100.0% $107,355 100.0%
======== ====== ======== ====== ======== ======
(1) Operating income
Public water supply $ 26,895 $ 25,862 $ 26,475
Environmental
laboratories and
utility management
services 711 933 (705)
Timber processing 945 5,015 1,496
Real estate 3,938 1,605 40
-------- -------- --------
Total operating income 32,489 33,415 27,306
Unallocated interest, AFUDC
and other expenses, net(2) (9,702) (10,923) (9,651)
-------- -------- --------
Income before income
taxes $ 22,787 $ 22,492 $ 17,655
======== ======== ========
<FN>
(1) Operating income is defined as operating revenues less total costs and
expenses, other than interest expense, income taxes, allowance for funds
used during construction (AFUDC), subsidiary preferred dividends and
other expenses, net.
(2) Includes goodwill amortization of $402,000 in 1995, 1994 and 1993,
acquisition costs of $573,000 in 1995, and a Partnership charge
of $1,900,000 in 1994.
</TABLE>
Income taxes. Income taxes for 1995 were $370,000 lower than 1994
- ------------
primarily due to the non-recurring charge recorded in 1994 related to
the Partnership.
Significant changes in balance sheet accounts. Net property, plant and
- ----------------------------------------------
equipment increased by $40,212,000 due primarily to construction at the
filter plants and the acquisition of NCWC and RWSC.
The increase in inventories was largely the result of the Timber
Processing division's build-up of inventory to reach a level appropriate
with seasonality and the current market conditions.
Long-term debt increased by $20,525,000 which was primarily the
result of BHC's $30,000,000 debt issue in 1995.
Accounts payable and accrued liabilities incurred an increase of
$3,464,000 which was principally the result of higher general accounts
payable at December 31, 1995, accrued insurance, accrued retirement
benefits and the accrual of the final settlement payment for the
acquisition of SRK Holding, Inc. (SRK). The final settlement of this
transaction and the liquidation of the remaining SRK nonlaboratory
assets in 1995 did not have a material effect on the Company's results.
The final settlement results in a payment of $600,000 to the former SRK
shareholders.
The decrease of $2,366,000 in income taxes payable is the result of
higher taxable income related to the sale of the rate order, at December
31, 1994, that was paid in the first quarter of 1995.
-21-
<PAGE>
<PAGE>
Accrued postretirement benefit cost increased by $834,000 due to
the Company implementing Financial Accounting Standards Board (FASB)
Statement No. 106 "Employers' Accounting for Postretirement Benefits
other than Pensions," in 1993, whereby the Company recognizes a net
postretirement liability representing the cumulative difference between
each year's charges against operating results for net periodic
postretirement benefit cost, and each year's cash payments for retiree
health care and life insurance benefits (Note 11).
1994 COMPARED WITH 1993
Operating revenues. Consolidated operating revenues of $121,973,000 in
- ------------------
1994 were $14,618,000 higher than 1993. Timber Processing experienced
increased revenues during 1994 of $9,012,000 principally due to the
termination of the rate order with PSNH, and to a lesser extent,
increased volume and sales prices for lumber. Revenues from property
sales increased $2,033,000 due to the Company's continued commitment to
sell surplus land. Revenues from the Laboratories increased $1,793,000
in 1994, reflecting higher sampling receipts in 1994, partially offset
by the sale of the Air Services Division in the fourth quarter of 1993.
Revenues from the Utilities increased $1,780,000, principally due to a
21 percent water service rate increase for BHC which became effective
August 1, 1993, partially offset by CWIP rate surcharge revenues
recorded during the first seven months of 1993.
Operating income. Operating income for 1994 increased $6,109,000 over
- ----------------
1993 levels. The increase was primarily the result of Timber
Processing's termination of the rate order with PSNH, increased property
sales in 1994 and higher operating revenues at the Utilities and
Laboratories.
Operating expenses. Operating expenses for 1994 were $47,416,000, an
- ------------------
increase of $7,140,000 over 1993. Timber Processing had higher
operating expenses of $5,459,000 compared with 1993 primarily due to the
costs associated with the termination of the cogeneration operation and
higher production costs associated with an increased sales volume.
Operating expenses from property sales increased by $791,000 due to the
increased activity in the land sales program. The Utilities experienced
an increase in operating expenses of $726,000 principally due to higher
costs associated with BHC's Easton Lake Reservoir Water Treatment Plant,
which was placed in service in June 1993, and higher maintenance costs
in 1994. Additional costs associated with the Laboratories and Utility
Management Services businesses account for the remainder of this
variance.
General & administrative expenses. General and administrative expenses
- ---------------------------------
totaled $20,209,000, a $2,004,000 increase over 1993. This variance is
primarily the result of a $1,900,000 charge related to the investment in
the Partnership. Increased expenses associated with BHC's adoption of
FASB No. 106 in 1993, partially offset by lower costs associated with
worker's compensation insurance, outside services and miscellaneous
expenses at the Utilities, account for $203,000 of this variance. The
Laboratories, Timber Processing, Real Estate, Corporate and Utility
Management Services businesses account for the remainder of the
variance.
Depreciation expense. Depreciation expense in 1994 was $1,013,000
- --------------------
higher than 1993. This increase is attributable to the addition of
BHC's Easton Lake Reservoir Water Treatment Plant, which was placed in
service in June 1993; a higher composite annual depreciation rate for
BHC effective August 1, 1993; and, routine plant additions by the
Utilities, Laboratories and Timber Processing.
Interest expense. Interest expense for 1994 decreased $874,000
- ----------------
primarily due to lower average total debt outstanding coupled with lower
long-term borrowing rates due to the debt refinancing in 1993.
Taxes other than income taxes. Taxes other than income taxes were
- -----------------------------
$444,000 higher than 1993. Increased payroll and gross earnings taxes
of $271,000 as well as higher property taxes of $173,000 attributable to
a higher property base in 1994, account for the variance.
Income taxes. Income taxes for 1994 were $3,606,000 higher than 1993
- ------------
primarily due to higher taxable income and increased state taxes on the
termination of the cogeneration operation.
Seasonality. The Company's operating results are subject to weather
- -----------
variations and seasonal fluctuations due to an increased demand for
water and for environmental testing procedures in the warmer months.
(See Supplemental Financial Information to Consolidated Financial
Statements for selected quarterly data for 1995 and 1994.)
-22-
<PAGE>
<PAGE>
Aquarion Company and Subsidiaries
Consolidated Statements of Income
<TABLE>
In thousands, except share data
Year ended December 31 1995 1994 1993
- -------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Operating revenues $ 118,206 $ 121,973 $ 107,355
--------- --------- ---------
Costs and expenses:
Operating 41,947 47,416 40,276
General and administrative 20,404 20,209 18,205
Depreciation 12,011 11,636 10,623
Interest expense 9,260 8,368 9,242
Taxes other than income 12,669 12,421 11,977
--------- --------- ---------
Total costs and expenses 96,291 100,050 90,323
--------- --------- ---------
21,915 21,923 17,032
Allowance for funds used during
construction 872 569 623
--------- --------- ---------
Income before income taxes 22,787 22,492 17,655
Income taxes 9,901 10,271 6,665
--------- --------- ---------
Net income $ 12,886 $ 12,221 $ 10,990
--------- --------- ---------
Per share $ 1.90 $ 1.87 $ 1.76
========= ========= =========
Weighted average common shares
outstanding 6,794,400 6,532,627 6,237,875
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-23-
<PAGE>
<PAGE>
Aquarion Company and Subsidiaries
Consolidated Balance Sheets
<TABLE>
Assets
In thousands December 31, 1995 1994
- ------------------------------------ ---- ----
<S> <C> <C>
Property, plant and equipment $432,480 $378,708
Less: accumulated depreciation 136,726 123,166
-------- --------
Net property, plant and equipment 295,754 255,542
Current assets:
Cash and cash equivalents 635 1,335
-------- --------
Accounts receivable:
Customers 15,859 15,946
Miscellaneous 1,263 1,158
-------- --------
17,122 17,104
Less: allowance for doubtful accounts 2,916 2,762
-------- --------
14,206 14,342
Accrued revenues 9,108 9,596
Inventories 4,105 3,077
Prepaid expenses 7,737 6,931
-------- --------
Total current assets 35,791 35,281
-------- --------
Goodwill 10,270 10,283
Recoverable income taxes 44,922 47,099
Other assets 27,243 22,665
-------- --------
$413,980 $370,870
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-24-
<PAGE>
<PAGE>
Aquarion Company and Subsidiaries
Consolidated Balance Sheets
<TABLE>
Liabilities and Shareholders' Equity
In thousands, except share data
December 31, 1995 1994
- ------------------------------------ ---- ----
<S> <C> <C>
Shareholders' equity:
Preferred stock, no par value, authorized
2,500,000 shares not to exceed aggregate value
of $25,000,000, issuable in shares--none issued $ - $ -
Common stock, stated value: $1
Authorized--16,000,000 shares
Issued 6,936,574 shares in 1995 and 6,690,013
shares in 1994 6,937 6,690
Capital in excess of stated value 98,213 94,152
Retained earnings 18,583 16,628
-------- --------
123,733 117,470
Less: treasury stock, at cost 2,231 2,338
-------- --------
Total shareholders' equity 121,502 115,132
-------- --------
Redeemable preferred stock of subsidiaries 285 330
-------- --------
Long-term debt and other obligations 131,991 111,466
-------- --------
Current liabilities:
Short-term borrowings, unsecured 11,600 -
Current maturities of long-term debt 62 4,077
Accounts payable and accrued liabilities 15,221 11,757
Dividends payable 2,776 2,675
Accrued interest 2,023 2,035
Taxes other than income taxes 1,713 1,532
Income taxes 1,805 4,171
-------- --------
Total current liabilities 35,200 26,247
-------- --------
Advances for construction 26,264 23,407
Contributions in aid of construction 23,959 21,589
Deferred land sale gains 620 427
Accrued postretirement benefit cost 3,065 2,231
Recoverable income taxes 5,944 6,005
Deferred income taxes 65,150 64,036
Commitments & contingencies (Note 9) - -
-------- --------
$413,980 $370,870
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-25-
<PAGE>
<PAGE>
Aquarion Company and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
In thousands,
Year ended December 31 1995 1994 1993
- ------------------------------ ---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $12,886 $12,221 $10,990
Adjustments reconciling net income to net
cash provided by operating activities
Depreciation and amortization 12,979 12,542 11,588
Provision for losses on accounts
receivable 842 1,067 1,707
Deferred tax provision 1,261 662 1,610
Proceeds from sale of surplus land, net of
gains 2,798 1,372 333
Gain on disposition of property (2,033) - -
Allowance for funds used during
construction (872) (569) (623)
Change in assets and liabilities (Note 15) (5,524) 6,431 (422)
------- ------- -------
Net cash provided by operating
activities 22,337 33,726 25,183
------- ------- -------
Cash flows from investing activities:
Capital additions, excluding an allowance
for funds used during construction (41,646) (19,766) (17,898)
Advances and contributions in aid of
construction 3,054 1,985 1,398
Refunds on advances for construction (288) (465) (417)
Other investing activities (25) (178) (605)
------- ------- -------
Net cash used in investing activities (38,905) (18,424) (17,522)
------- ------- -------
Cash flows from financing activities:
Proceeds from the issuance of long-term
debt 20,588 - 10,000
Proceeds from the issuance of common
stock, net 2,644 2,836 12,845
Net borrowings (repayments) of short-term
debt 11,600 (5,500) (12,100)
Common dividends paid (10,830) (10,554) (10,091)
Principal and premium payments on
long-term debt (7,682) (68) (5,241)
Debt issuance costs (407) (726) (2,174)
Purchase of treasury stock - - (1,084)
Payments for redemption of preferred stock (45) (45) (45)
------- ------- -------
Net cash provided by (used in) financing
activities 15,868 (14,057) (7,890)
------- ------- -------
Net (decrease) increase in cash and cash
equivalents (700) 1,245 (229)
Cash and cash equivalents, beginning of
year 1,335 90 319
------- ------- -------
Cash and cash equivalents, end of year $ 635 $ 1,335 $ 90
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-26-
<PAGE>
<PAGE>
Aquarion Company and Subsidiaries
Consolidated Statements of Shareholders' Equity
<TABLE>
Common Stock Capital Treasury Stock Total
---------------- in excess ------------------- share-
Number of Stated of stated Retained Number of holders'
In thousands, except share data shares value value earnings shares Amount equity
- ------------------------------- --------- ------ ----- --------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Balance, December 31, 1992 6,032,109 $6,032 $79,129 $14,327 81,434 $(2,323) $97,165
Net income - - - 10,990 - - 10,990
Proceeds from the issuance of
common stock, net 460,000 460 10,741 - - - 11,201
Dividends on common stock - - - (10,302) - - (10,302)
Dividend reinvestment plan 72,424 73 1,571 - - - 1,644
Treasury stock transactions - - - - 10,857 (217) (217)
--------- ------ ------- ------- ------ ------- --------
Balance, December 31, 1993 6,564,533 $6,565 $91,441 $15,015 92,291 $(2,540) $110,481
--------- ------ ------- ------- ------ ------- --------
Year ended December 31, 1994
Net income - - - 12,221 - - 12,221
Dividends on common stock - - - (10,608) - - (10,608)
Dividend reinvestment plan 125,480 125 2,711 - - - 2,836
Treasury stock transactions - - - - (7,299) 202 202
--------- ------ ------- ------- ------ ------- --------
Balance, December 31, 1994 6,690,013 $6,690 $94,152 $16,628 84,992 $(2,338) $115,132
--------- ------ ------- ------- ------ ------- --------
Year ended December 31, 1995
Net income - - - 12,886 - - 12,886
Shares issued for Acquisition
of NCWC & RWSC 123,053 123 1,540 - - - 1,663
Dividends on common stock - - - (10,931) - - (10,931)
Dividend reinvestment plan 123,508 124 2,521 - - - 2,645
Treasury stock transactions - - - - (3,701) 107 107
--------- ------ ------- ------- ------ ------- --------
Balance, December 31, 1995 6,936,574 $6,937 $98,213 $18,583 81,291 $(2,231) $121,502
========= ====== ======= ======= ====== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-27-
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Aquarion Company (Aquarion) is a holding company whose subsidiaries
are engaged both in the regulated utility business of public water
supply and in various nonutility businesses. Aquarion's utility
subsidiary, Bridgeport Hydraulic Company (BHC) and BHC's subsidiaries,
Stamford Water Company (SWC), New Canaan Water Company (NCWC) and
Ridgefield Water Supply Company (RWSC)(collectively, the Utilities)
collect, treat and distribute water to residential, commercial and
industrial customers, to other utilities for resale, and for private and
municipal fire protection. The Utilities provide water to customers in
24 communities in Fairfield, New Haven, and Litchfield Counties in
Connecticut, including communities served by other utilities to which
water is available on a wholesale basis for back-up supply and peak
demand purposes through BHC's Southwest Regional Pipeline. BHC is the
largest investor-owned water company in Connecticut and, with its
subsidiaries, is among the 10 largest investor-owned water companies in
the nation. The Utilities are regulated by several Connecticut
agencies, including the Department of Public Utility Control (DPUC).
Aquarion and its subsidiaries (collectively, the Company) are also
engaged in nonutility activities. The Company conducts an environmental
testing laboratory business through its Industrial and Environmental
Analysts, Inc. (IEA) family of five laboratories which analyze
contaminants in hazardous waste, soil, air and water. Additionally, the
Company is engaged in various utility management service businesses
through Hydrocorp, Inc. (Hydrocorp) and Aquarion Management Services,
Inc. (AMS), owns a Timber Processing business through Timco, Inc.
(Timco) and owns a small real estate subsidiary, Main Street South
Corporation (MSSC).
The Company's accounting policies conform to generally accepted
accounting principles and, as applied in the case of rate-regulated
public utilities, comply with the Uniform System of Accounts and
ratemaking practices prescribed by the DPUC. A description of
Aquarion's principal accounting policies follows.
Principles of consolidation. The consolidated financial statements
- ---------------------------
include the accounts of the Company and its majority-owned subsidiaries.
Investments in entities in which the Company owns more than 20 percent
but 50 percent or less are accounted for by the equity method and
investments in entities in which the Company owns less than 20 percent
are accounted for at cost. All non-majority-owned investments are
included within the caption "Other assets" in the Consolidated Balance
Sheets.
All significant intercompany accounts and transactions have been
eliminated.
Property, plant and equipment. Property, plant and equipment is stated
- -----------------------------
at cost. The costs of additions to and replacements of retired units of
property are capitalized. Costs include charges for direct material,
labor and services, and indirect charges related to construction, such
as engineering, supervision, payroll taxes and employee benefits. The
Utilities also capitalize an allowance for funds used during
construction (AFUDC) equivalent to the cost of funds devoted to plant
under construction, except for the portion of federal Safe Drinking
Water Act (SDWA) projects for which it may receive a construction work
in progress water service rate surcharge (CWIP rate surcharge).
Modifications and improvements to units of property are
capitalized. Expenditures for repairs and maintenance are charged to
expense as incurred.
At the time depreciable utility property is retired or disposed of,
the book cost together with the related costs of removal, less salvage,
is charged to the reserve for depreciation in accordance with the
Uniform System of Accounts prescribed by the DPUC. Upon disposal or
retirement of depreciable nonutility property, the appropriate plant
accounts and accumulated depreciation are reduced by the related costs.
Any resulting gain or loss is recognized in the Consolidated Statements
of Income.
For financial reporting purposes, depreciation is provided for
principally by use of the straight-line method over the estimated
service lives of the respective assets. Depreciation is computed based
on estimated useful lives of 8 to 75 years for utility plant
-28-
<PAGE>
<PAGE>
and equipment and 3 to 20 years for nonutility plant and equipment. For
income tax depreciation purposes, the Company uses various accelerated
tax lives and rates as allowed under the Internal Revenue Code.
Statement of cash flows. For purposes of reporting cash flows, the
- -----------------------
Company considers all highly liquid investments that have a maturity of
three months or less when purchased to be cash equivalents.
Earnings per share. Earnings per share is based on the annual weighted
- ------------------
average number of shares outstanding and common share equivalents.
Common share equivalents consist of outstanding employee stock options,
which do not have a significant impact on the calculation.
Allowance for funds used during construction. AFUDC is recognized by
- --------------------------------------------
the Utilities by applying the last allowed rate of return on rate base
approved by the DPUC (9.62 percent for BHC and 10.69 percent for SWC at
December 31, 1995) to construction projects exceeding $10,000 and
requiring more than one month to complete. AFUDC represents the net
cost of borrowed funds used for construction purposes for the period of
construction and a reasonable rate of return on other funds when so
used. AFUDC represents a noncash credit to income.
Utility plant under construction is not recognized as part of the
Utilities' rate base for ratemaking purposes until such facilities are
placed in service. Accordingly, the Utilities capitalize AFUDC as a
portion of the construction cost of utility plant until it is completed.
Capitalized AFUDC is recovered through water service rates over the
service lives of the facilities.
Construction-work-in-progress surcharge. DPUC regulations allow water
- ---------------------------------------
utilities to implement a CWIP rate surcharge to customer water bills in
order to recover 90 percent of the carrying costs of capital used in
SDWA-mandated projects, until such time as these projects are completed.
The CWIP rate surcharge is in lieu of AFUDC and is included in water
service revenues. In October 1994, BHC filed with the DPUC an
application to implement a CWIP rate surcharge in connection with the
construction of its Hemlocks Reservoir filtration facilities in
Fairfield, Connecticut. BHC will continue to file applications quarterly
to increase this surcharge as construction continues through 1997, at
which time the filtration facilities are expected to be operational and
subject to general ratemaking regulations (Note 2).
Revenue recognition. The Utilities accrue revenue for the estimated
- -------------------
amount of water sold but not billed at the end of each period. Timber
Processing revenues are recognized as the related timber products are
shipped. Revenues from sales of real estate are recognized when the
transaction is consummated and title has passed.
Inventories. Inventories are valued at the lower of cost or market,
- -----------
with cost being determined on the basis of the "first-in, first-out"
(FIFO) method. Materials and supplies are valued at average cost.
Other assets. Other assets consist primarily of prepaid taxes,
- ------------
financing charges, rate case and other expenses, as well as certain
items amortized, subject to DPUC approval, over their anticipated period
of recovery.
Deferred rate case expenses are amortized over periods allowed by
the DPUC, generally one to three years. Deferred financing charges are
amortized over the lives of the related debt issues.
Goodwill. The excess of the cost of investments in subsidiaries over
- --------
the fair value of the net assets acquired at December 31, 1995 and 1994
was $10,270,000 and $10,283,000 respectively, net of accumulated
amortization of $3,765,000 and $3,339,000. Amortization is computed on
a straight-line basis over periods ranging from 10 to 30 years.
Amortization expense totaled $426,000, $426,000 and $474,000 for the
years ended December 31, 1995, 1994, and 1993, respectively. The
Company evaluates the realizability of goodwill based upon estimated
undiscounted cash flows for each subsidiary having a significant
goodwill balance. Based upon its most recent analysis, the Company
believes that no impairment of goodwill exists at December 31, 1995.
-29-
<PAGE>
<PAGE>
Fair value of financial instruments. The carrying amount of cash and
- -----------------------------------
cash equivalents, trade accounts receivable, and short-term borrowings
approximate their fair values due to their short-term nature. The fair
value of long-term debt based on the quoted market prices for the same
or similar issues or on the current rates offered to the Company for
debt of the same remaining maturities at December 31 was as follows:
<TABLE>
(In thousands) 1995 1994
<S> <C> <C> <C>
----------------------------------------
Fair Value $122,212 $ 90,278
Carrying Value 131,991 111,466
</TABLE>
Advances for construction/contributions in aid of construction. The
- --------------------------------------------------------------
Utilities receive cash advances from developers and customers to finance
construction of new water main extensions. These advances are partially
refunded over a 10-year contract period as water revenues are earned
from those new customers. Any remaining unrefunded balances are
reclassified to "Contributions in aid of construction" in the
Consolidated Balance Sheets and are no longer refundable.
Income taxes. In accordance with FASB Statement No. 109, "Accounting
- ------------
for Income Taxes," the Company provides deferred taxes for all temporary
book-tax differences using the liability method. The liability method
requires that deferred tax balances be adjusted to reflect enacted
future tax rates that are anticipated to be in effect when the temporary
differences reverse. In accordance with generally accepted accounting
principles for regulated industries, the Company reflects as income tax
expense the amount of tax currently payable, except for accelerated
depreciation since 1981 and the tax effect of post-1986 contributions in
aid of construction, for which deferred income taxes have been provided
on an annual basis. This method, known as the flow-through method of
accounting, is consistent with ratemaking policies of the DPUC.
Management believes that these deferred taxes will be recovered through
the rate-making process. Accordingly, the Company has recorded an off-
setting regulatory asset included in the accompanying Consolidated
Balance Sheets as "Recoverable income taxes." Deferred investment tax
credits are amortized ratably based upon the book life of the property
(Note 5).
Accounting for Long-Lived Assets. The Company has elected to defer
- --------------------------------
adoption of FASB Statement No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" until
1996. The effect of the adoption of this standard is not anticipated to
have a material impact on the Company's financial statements.
Accounting for Stock-Based Compensation. In accordance with FASB
- ---------------------------------------
Statement No. 123 "Accounting for Stock-Based Compensation," the Company
will elect in 1996 to adopt the disclosure method of accounting for
stock-based compensation.
Estimates. The accompanying consolidated financial statements reflect
- ---------
judgements and estimates made in the application of the above accounting
policies.
Reclassification. Certain prior-year amounts have been reclassified to
- ----------------
conform with current year presentation.
NOTE 2 - REGULATORY MATTERS
Rates. On January 26, 1996, BHC notified the DPUC of its intent to
- -----
increase its water services rates and charges by 12 percent or
$7,100,000. BHC will file a formal application with the DPUC on or
before March 26, 1996, but no sooner than February 26, 1996.
As part of the application, BHC will request an opportunity to re-
open the application in 1997 to include the cost of the Hemlocks
filtration plant. If approved, water service rates at that time will
increase by approximately an additional 10 percent, plus a cumulative
CWIP rate surcharge, which is estimated to be 11 percent at that time.
On October 13, 1995, SWC, NCWC and RWSC collectively, filed a rate
application with the DPUC for a 9 percent water service rate increase
designed to provide a $1,373,000 increase in annual water service
revenues. As part of that application, these companies propose to
equalize the meter rates and service charges of all three companies, and
to consolidate the operations of all three companies at the SWC
headquarters.
-30-
<PAGE>
<PAGE>
On October 20, 1994, BHC filed with the DPUC an application to
implement a CWIP rate surcharge in order to recover 90 percent of the
carrying costs of capital used in the construction of a federally
mandated filtration plant at its Hemlocks Reservoir in Fairfield,
Connecticut, which is estimated to cost approximately $50,000,000. BHC
will file applications with the DPUC quarterly to increase this
surcharge as construction continues through 1997, at which time the
filtration facilities are expected to be operational and subject to
general ratemaking regulations. On December 6, 1995, a 4.27 percent
CWIP rate surcharge was approved that will increase BHC's revenues by
$2,585,000 on an annual basis. In January 1996, BHC filed an
application to increase this surcharge to 5.52 percent, which would
increase BHC's revenues by an additional $756,000 to $3,341,000 on an
annual basis.
NOTE 3 - SALE OF SURPLUS LAND
Proceeds from the sale of land are recorded as revenue at the time
of closing, and portions of pretax gains required to be deferred by the
DPUC are amortized as a reduction in the Utilities' operating expenses
over various time periods as stipulated by the DPUC.
In 1995, the Company sold approximately 90 acres of surplus land
located in Easton, Monroe, Shelton and Weston, Connecticut. The
proceeds from these sales totaled $3,957,500. Total gains, including
recognition of deferred gains from prior land sales of $80,000,
approximated $1,160,000, or 17 cents per share. In addition, on October
12, 1995, BHC completed the acquisition of NCWC and RWSC. As the result
of the related property-exchange agreement, Aquarion recorded an after-
tax gain of approximately $1,100,000, or 16 cents per share, in the
fourth quarter of 1995.
In 1994, the Company sold approximately 43 acres of surplus land
located in Shelton and Weston, Connecticut. The proceeds from these
sales totaled $2,185,000. Total gains, including recognition of
deferred gains from prior land sales of $10,000, approximated $813,000
or 13 cents per share. In addition, the Company recognized a gain of
$283,000 or 4 cents per share for the sale of a 50 percent ownership
interest, through a joint venture, in a commercial building located in
Cary, North Carolina.
In 1993, the Company sold approximately nine acres of surplus land
in three separate transactions totaling $645,000. Total gains,
including recognition of deferred gains from prior land sales of
$19,000, approximated $312,000, or 5 cents per share.
NOTE 4 - ACQUISITIONS
On October 12, 1995 the Company completed the acquisition of NCWC
and RWSC for 123,053 shares of Aquarion common stock with a market value
of $2,828,692 and the repayment of certain indebtedness of The New
Canaan Company (NCC) in the amount of $100,000. Immediately after the
acquisition closed, the parties completed a property exchange whereby
the Monroe Environmental Leasing Partnership (MELP) transferred to NCWC
a commercial building and the property on which it is situated, NCWC
transferred a reservoir and related property to the Second Taxing
District of Norwalk (STD) and STD in turn paid $2,200,000 to MELP, which
also received $214,157 from Aquarion. The property exchange resulted in
net income to Aquarion of approximately $1,100,000, or 16 cents per
share in 1995.
Consolidated annual revenues from NCWC and RWSC were approximately
$3,300,000 and $2,900,000 for the years ended December 31, 1995 and
1994. The acquisition was accounted for as a pooling of interests, and
the Company did not restate the previous year's financial statements due
to the limited impact on consolidated operating results in 1995.
On June 1, 1995, the Company completed the previously announced
acquisition of all of the operating assets of Kent Water Company, a
privately held water company serving 315 customers in Kent, Connecticut,
for $60,000 in cash, the assumption of liabilities of $120,000 and the
assumption of debt of $1,220,000. Kent Water Company has annual
revenues of approximately $200,000.
-31-
<PAGE>
<PAGE>
On July 11, 1995, the Company filed an application with the DPUC to
acquire all of the operating assets of Lakeside Water Company for
$100,000 in cash and the assumption of Lakeside's CDA loan of
approximately $101,000. Lakeside, which has 160 customers, serves
Southbury, Connecticut, and has approximate annual revenues of $48,000.
Regulatory approval is pending.
On July 25, 1995, the Company filed an application with the DPUC to
acquire all of the operating assets of Timber Trails Community Service
Corporation's Water Division for $15,000 in cash, with the option to
purchase two additional parcels of land for future improvements to serve
existing customers. A final decision is pending subject to the
Department of Public Health approval. The Company has been directed by
the DPUC to operate the Timber Trails water system in the interim.
Timber Trails, which has 114 customers, serves Sherman and New
Fairfield, Connecticut, and has approximate annual revenues of $50,000.
NOTE 5 - INCOME TAXES
Income tax expense for the three years ended December 31, consisted
of the following:
<TABLE>
(In thousands) 1995 1994 1993
- --------------------------- ---- ---- ----
<S> <C> <C> <C>
Current:
Federal $6,297 $ 7,006 $3,441
State 2,343 2,603 1,614
------ ------- ------
Total current 8,640 9,609 5,055
Deferred:
Federal 1,542 981 1,833
State (281) (319) (223)
------ ------- ------
Total deferred 1,261 662 1,610
------ ------- ------
Total income tax expense $9,901 $10,271 $6,665
====== ======= ======
</TABLE>
A reconciliation of income tax expense at the statutory federal
income tax rate to the actual income tax expense for the years ended
December 31, is as follows:
<TABLE>
(In thousands) 1995 1994 1993
- ------------------------------------------------ ---- ---- ----
<S> <C> <C> <C>
Tax at statutory rate $7,975 $ 7,874 $6,181
Increases (reductions) in taxes resulting from:
State taxes, net of federal income taxes 1,340 1,485 904
Contribution deduction-sale of surplus land - (105) (131)
Excess depreciation and basis amortization 683 662 630
Partnership investment - 665 -
Bond premium costs 18 (455) (423)
Investment tax credit (162) (152) (152)
Amortization and write-down of goodwill 141 146 163
Other items, net (94) 151 (507)
------ ------- ------
Actual income tax expense $9,901 $10,271 $6,665
====== ======= =======
</TABLE>
Deferred tax liabilities (assets) at December 31, were comprised of the
following:
<TABLE>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Utility temporary differences $43,770 $46,703 $45,981
Depreciation 18,944 15,398 14,712
Investment tax credits 1,233 990 1,023
Other 1,203 945 1,543
------- ------- -------
Gross referenced tax liabilities 65,150 64,036 63,259
------- ------- -------
Contributions in aid of construction (6,503) (6,229) (5,654)
Alternative minimum tax - - (1,279)
Other (3,168) (2,813) (2,215)
------- ------- -------
Gross deferred tax assets (9,671) (9,042) (9,148)
------- ------- -------
$55,479 $54,994 $54,111
======= ======= =======
</TABLE>
NOTE 6 - LONG-TERM DEBT
Long-term debt at December 31, consisted of the following:
<TABLE>
(In thousands) 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C>
First mortgage bonds
Series Q, 4.625%, due August 1, 1995 $ - $4,000
Series R, 6.875%, due November 1, 1998 5,000 5,000
Notes payable - unsecured
7.8% senior notes due June 1, 1997 15,000 15,000
-32-
<PAGE>
<PAGE>
(in thousands) 1995 1994
- ---------------------------------------- ---- ----
<S> <C> <C>
5.95% senior note due January 4, 1999 10,000 10,000
9.55% senior notes due February 1, 2021 20,000 20,000
7.25% note due June 1, 2020 (a) 7,000 7,000
5.5% note due June 1, 2028 (b) 12,000 12,000
5.6% note due June 1, 2028 (b) 10,000 10,000
5.8% note due March 1, 2029 (b) 7,700 7,700
6.05% note due March 1, 2029 (b) 10,000 10,000
Adjustable rate note due April 1, 2035 30,000 -
5.3% note due September 1, 2028 8,980 8,980
4.4% note due November 1, 2004 (c) 5,700 5,700
7.4%-14.1% capital lease obligations 84 163
-------- --------
141,464 115,543
Less: Amounts due within one year 62 4,077
Balance of adjustable rate note proceeds
held by trustee 9,411 -
-------- --------
$131,991 $111,466
======== ========
<FN>
(a) BHC has the option to redeem these bonds at redemption prices
ranging from 102 percent on June 1, 2000 to 100 percent on June 1, 2002
and thereafter.
(b) These BHC financings are insured as to the payment of principal
and interest by the Municipal Bond Investors Assurance Corporation.
(c) This Timco financing bears interest at a rate adjusted each
November 1 until such time as Timco elects to convert to a fixed rate. On
November 1, 1995, the interest rate was adjusted from 4.75 percent to 4.40
percent. Bondholders may elect to have their bonds redeemed at a price
equal to 100 percent of the principal amount on each November 1 until
conversion of the interest rate on the bonds to a fixed rate.
</TABLE>
On May 11, 1995, BHC issued a $30,000,000 unsecured note in
consideration for a loan of the proceeds from the issuance by the
Connecticut Development Authority (CDA) of an equal amount of tax-exempt
Water Facilities Revenue Bonds. The tax-exempt CDA bonds have a 40-year
maturity and initially bear interest at a weekly rate. This rate in 1995
ranged between 2.5 percent and 4.8 percent. At the option of the Company,
the bonds may be converted or reconverted from time to time to or from a
daily, weekly or flexible rate mode and with the consent of the CDA to a
multiannual (fixed for periods of one year or multiples thereof) rate
mode. In addition, the bonds, with the consent of the CDA, may be
converted for their remaining term to bear interest at a fixed rate.
While the bonds are in the daily, weekly or flexible rate modes, a letter
of credit facility or substitute credit facility will be maintained. The
proceeds of this bond issuance are to be used to finance costs incurred in
the construction of the Hemlocks Reservoir filtration project and the
filtration facilities at BHC's Lakeville and Norfolk Reservoirs. Under
the terms of the CDA bonds, proceeds are to be requisitioned from a
construction fund held by a trustee for planned capital improvements and,
at least initially, used to reduce short-term borrowings incurred to
finance the cost of construction. At December 31, 1995, the Company had
requisitioned approximately $21,200,000 for the filtration projects.
In August 1994, BHC issued a $10,000,000 unsecured note at 6.05
percent due on March 1, 2029. BHC has the option to redeem these bonds at
a redemption price ranging from 102 percent on August 1, 2004 to
100 percent on August 1, 2006 and thereafter. On October 17, 1994, BHC's
$10,000,000, 10.75 percent unsecured note was redeemed at 103 percent.
On January 4, 1994, Aquarion issued a $10,000,000, 5.95 percent
unsecured Senior Note maturing January 4, 1999. The proceeds from this
transaction were used to refund its $10,000,000, 8.5 percent unsecured
Senior Note due January 1, 1994.
Substantially all of BHC's utility plant is subject to the lien of
its first mortgage indenture. The Aquarion
-33-
<PAGE>
<PAGE>
and subsidiaries mortgage bond and note-purchase agreements contain certain
covenants typical of such agreements, the most restrictive of which are
under the 9.55 percent unsecured Senior Notes (BHC Notes) and the 7.8 percent
and 5.95 percent unsecured Senior Notes (Aquarion Notes) and require the
maintenance of total funded debt to total capital, as defined, of no more
than 66 2/3 percent. Additionally, payment of dividends on Aquarion's
common stock is restricted under the Aquarion notes. At December 31, 1995,
approximately $32,000,000 was available to pay dividends as defined under
the Aquarion notes. The aggregate maturities and sinking fund requirements
on long-term debt, exclusive of capital lease obligations (Note 9), for
each of the five years succeeding December 31, 1995 are as follows:
1996-$0; 1997-$15,000,000; 1998-$5,000,000; 1999-$10,000,000; 2000-$0.
NOTE 7 - SHORT-TERM BORROWINGS
In May 1995, the Company renewed unsecured revolving credit
agreements with five banks totaling $50,000,000. The agreements provide
that the Company may select among a variety of interest rates, including a
negotiated rate. The Company pays a commitment fee of .125 of 1 percent
on the average daily unused portion of the commitment for each day during
which any unused portion exists. The lines of credit provide for
automatic renewal on an annual basis, but may be terminated at the option
of the banks or the Company upon 90 days notice by either party prior to
the annual anniversary of the agreements.
Short-term borrowings for the years ended December 31, were as
follows:
<TABLE>
1995 1994 1993
- --------------------------------------- ---- ---- ----
(in thousands)
<S> <C> <C> <C>
Borrowings outstanding at December 31 $11,600 - $5,500
Weighted average interest rate at December 31 5.96% N/A 3.49%
Maximum outstanding during the year $12,500 $15,100 $22,300
Average outstanding during the year $7,383 $5,725 $11,983
Weighted average interest rate during the year 5.41% 4.84% 4.06%
</TABLE>
NOTE 8 - REDEEMABLE PREFERRED STOCK AND RIGHTS
SWC is authorized to issue 60,000 shares of preferred stock. SWC had
outstanding 5,700 and 6,600 shares at December 31, 1995 and 1994,
respectively, of $50 par value preferred stock. Dividends are cumulative
and are limited to the fixed annual rate of 7.125 percent. SWC is
required to make annual sinking fund payments of $45,000 and has the
option of doubling sinking fund payments in any one year, at par value, in
addition to the right to redeem the entire issue at $50.50 per share.
SWC is also authorized to issue 400,000 shares of no par value
preference stock, of which none is outstanding.
The Company has reserved 80,000 shares of Preferred Stock for
issuance under its Preferred Stock Purchase Rights Plan. Each share of
common stock is entitled to one right to buy, under certain circumstances,
1/150th of a share of Series A Junior Participating Preferred Stock, no
par value (Series A Preferred Stock), at $83.33 per 1/150th of a share.
Each share of Series A Preferred Stock, if issued, would have
dividend, voting and liquidation rights which are at least 150 times the
equivalent rights of one share of the common stock. The rights would
become exercisable only if a person or group acquires 20 percent or more
of the outstanding common stock, or if a person or group announces or
commences a tender or exchange offer for 30 percent or more of the common
stock. If the Company were to be acquired in a merger or other business
combination transaction, each right would entitle its holder to receive,
upon payment of the exercise price, that number of shares of the acquiring
company having a market value equal to twice the exercise price. If,
under certain circumstances, a 20 percent or greater shareholder acquires
the Company through a transaction in which the Company and its common
stock survive or such shareholder engages in certain self-dealing
transactions with the Company, each right holder (other than a 20 percent
-34-
<PAGE>
<PAGE>
or greater shareholder) would be entitled to receive, upon payment of the
exercise price, the greater of (a) the number of shares of Series A
Preferred Stock for which such right was exercisable immediately prior to
such self-dealing transactions, or (b) that number of shares of Series A
Preferred Stock having a market value equal to twice the exercise price.
The Company may redeem the rights at $.033 per right at any time
until the tenth day after a 20 percent position has been acquired or a 30
percent tender offer has been commenced. The redemption period is subject
to extension by the Company's Board of Directors. Until such time as
these rights become exercisable, they will have no dilutive effect on the
Company's earnings.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Future minimum rental payments under operating leases for leaseholds
and equipment aggregated $4,508,000 at December 31, 1995. Certain
facility leases contain renewal options. Annual payments for future
minimum rentals are: 1996 - $972,000; 1997 - $766,000; 1998 - $721,000;
1999 - $396,000; 2000 - $361,000; thereafter - $1,292,000.
Future minimum lease payments under capital leases approximated
$93,000 at December 31, 1995.
NOTE 10 - INDUSTRY SEGMENT INFORMATION
The Company's operations are grouped into four industry segments as
follows:
Public water supply--collection, purification and distribution of
---------------------
water for domestic commercial and industrial use, and for fire protection
service;
Environmental laboratories and utility management services--
------------------------------------------------------------
environmental testing laboratories and other nonregulated water-related
services;
Timber processing--processing, marketing and distribution of lumber
-------------------
products, and prior to November 1994, the generation and sale of
cogenerated electricity;
Real estate--ownership and sale of real property.
-------------
The following table sets forth information about the Company's
operations by industry segment for the years ended December 31:
<TABLE>
(In thousands) 1995 1994 1993
- ---------------------------------- ---- ---- ----
<S> <C> <C> <C>
Operating Revenues:
Public Water Supply $ 78,488 $ 73,060 $ 71,280
Environmental laboratories
and utility management
services 24,236 24,925 23,132
Timber processing 9,324 21,310 12,298
Real Estate 6,158 2,678 645
-------- -------- -------
Total operating revenues $118,206 $121,973 $107,355
======== ======== ========
Operating income:
Public water supply $ 26,895 $ 25,862 $26,475
Environmental laboratories
and utility management
services 711 933 (705)
Timber processing 945 5,015 1,496
Real estate 3,938 1,605 40
-------- -------- -------
Industry segment operating
income 32,489 33,415 27,306
Other expenses, net (1) (1,291) (3,097) (1,002)
Interest expense (9,260) (8,368) (9,242)
Allowance for funds used
during construction 872 569 623
Subsidiary preferred dividends (23) (27) (30)
-------- -------- -------
Income before income taxes $22,787 $22,492 $17,655
======= ======= =======
(1) Includes goodwill amortization $402,000 in 1995, 1994 and 1993,
acquisition costs of $573,000 in 1995, and a Partnership charge of
$1,900,000 in 1994.
</TABLE>
Operating revenues are comprised of sales to unaffiliated customers.
The Company's operations all take place in North America and no single
customer accounts for 10 percent or more of total operating revenues.
Operating income (loss) is defined as operating revenues less total
costs and expenses, other than interest expense, other (expenses) income,
income taxes, AFUDC and subsidiary preferred dividends.
-35-
<PAGE>
<PAGE>
<TABLE>
(In thousands) 1995 1994 1993
- ----------------------------------- ---- ---- ----
<S> <C> <C> <C>
Identifiable assets:
Public water supply $372,244 $331,423 $321,431
Environmental laboratories and
utility management services 21,505 26,751 25,941
Timber processing 6,585 4,469 7,718
Real estate 4,509 4,587 5,678
Corporate 9,137 3,640 2,104
-------- -------- --------
Total identifiable assets $413,980 $370,870 $362,872
======== ======== ========
Capital expenditures:
Public water supply $ 38,600 $ 17,739 $ 16,300
Environmental laboratories and
utility management services 1,719 1,525 1,072
Timber processing 1,327 502 526
Real estate - 123 169
-------- -------- --------
Total capital expenditures $ 41,646 $ 19,889 $ 18,067
======== ======== ========
Depreciation expense:
Public water supply $ 9,757 $ 9,139 $ 8,054
Environmental laboratories and
utility management services 1,902 1,815 1,895
Timber processing 341 671 663
Real estate 11 11 11
-------- -------- --------
Total depreciation expense $ 12,011 $ 11,636 $ 10,623
======== ======== ========
</TABLE>
Identifiable assets by industry segment are assets used in the
Company's operations in each industry segment. Corporate assets are
principally cash, prepaid expenses, receivables and deferred charges not
identifiable with a specific industry segment.
NOTE 11 - EMPLOYEE BENEFIT PLAN
Retirement plans - The Company and certain of its subsidiaries have a
- ----------------
noncontributory defined benefit pension plan covering qualified employees.
In general, Aquarion's policy is to fund pension costs accrued. The
Company also has a supplemental executive retirement plan (SERP) and a
directors' retirement plan. In addition, certain subsidiaries have
established defined contribution salary deferral plans under Section
401(k) of the Internal Revenue Code.
The following table sets forth the funded status of Aquarion's
Retirement Plan For Employees (the Plan) at December 31, the Plan's latest
valuation date:
<TABLE>
(In thousands) 1995 1994
- ------------------------------------ ---- ----
<S> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits of
$19,385 in 1995 and $15,415 in 1994 $ 20,463 $ 16,250
======== ========
Projected benefit obligation $(24,375) $(20,126)
Plan assets at fair value 37,973 31,664
-------- --------
Plan assets in excess of projected
benefit obligation 13,598 11,538
Unrecognized prior service cost 646 711
Unrecognized net asset existing at
January 1, 1986 (2,587) (3,045)
Unrecognized net (gain) from past
experience (4,993) (3,481)
-------- --------
Prepaid pension cost $ 6,664 $ 5,723
======== ========
</TABLE>
The Company's SERP and directors' retirement plan are unfunded
defined benefit plans. The actuarial present value of benefit obligations
and accrued pension costs related to the two plans totaled $1,935,000 and
$347,000 at December 31, 1995 and 1994, respectively. This additional
pension liability is offset by an intangible asset, not to exceed prior
service costs of the two plans, of $650,000 at December 31, 1995.
Net pension credit for all pension plans for the years ended
December 31, included the following components:
<TABLE>
(In thousands) 1995 1994 1993
- ------------------------------------ ---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned during
the period $ 640 $ 804 $ 763
Interest cost on projected benefit
obligation 1,703 1,574 1,510
Actual return on plan assets (7,601) 675 (2,331)
Net amortization and deferral 4,588 (3,966) (807)
Non-recurring charge for Ad Hoc
benefit increase 554 - -
------ ------ ------
Net pension credit $ (116) $ (913) $ (865)
====== ====== ======
</TABLE>
-36-
<PAGE>
<PAGE>
The weighted average discount rate was 7.00, 8.25 and 7.25 percent
for 1995, 1994 and 1993, respectively. The expected long-term rate of
return on assets was 8.7 percent for 1995 and 1994 and 8.5 percent for
1993. The weighted average rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligation was 5.0 percent in 1995 and 5.9 percent in 1994 and 1993. The
Plan invests in publicly traded stocks and bonds.
Postretirement health care benefits. In 1993, the Company adopted FASB
- -----------------------------------
No. 106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions." This standard requires that employers recognize these benefits
on an accrual basis rather than on a cash basis. As allowed by FASB 106,
the Company has elected to recognize the transition obligation of
$10,471,000 over 20 years.
Aquarion and the Utilities provide health benefits for substantially
all retired employees and life insurance for a small group of retired
individuals. Only those employees who remain until retirement age are
eligible. Effective October 1, 1995, the Company entered into an
agreement with a new health care provider to administer a preferred
provider organization (PPO) plan. Prior to that time, several health care
plans were offered with the largest plan paying a stated percentage of
covered expenses after a deductible was met. Both active and retired
employees contribute a portion of the cost of medical benefits. The
Company is funding its postretirement health care benefits through
contributions to a Voluntary Employee Beneficiary Association Trust
(VEBA). The Company's tax deductible contribution was $462,000 and
$356,000 for 1995 and 1994, respectively.
The net periodic postretirement benefit cost for the years ended
December 31, was as follows:
<TABLE>
(In thousands) 1995 1994 1993
--------------------------- ---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned
during the period $ 365 $ 420 $ 344
Interest cost on benefit
obligation 932 890 820
Actual return on plan assets (19) - -
Net amortization and
deferral 531 524 524
------ ------ ------
Net periodic postretirement
benefit cost $1,809 $1,834 $1,688
====== ====== ======
</TABLE>
Expense recognized for the 12 months ended December 31, 1995, 1994
and 1993 amounted to $1,679,000, $1,743,000 and $650,000, respectively.
The remaining cost has been recorded as a regulatory asset. BHC received
approval for recovery of these costs from the DPUC in the rate decision
effective August 1, 1993. SWC expects recovery of these costs in its
current rate proceeding.
The combined funded status and the related accrual for postretirement
benefits other than pensions as of December 31, 1995 and 1994, were as
follows:
<TABLE>
(In thousands) 1995 1994
---------------------------------------- ---- ----
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $ 6,526 $ 5,576
Active plan participants eligible for
retirement 2,836 2,226
Other active participants 5,628 3,852
------- -------
Net obligations 14,990 11,654
Plan assets at fair value 836 356
------- -------
Accumulated excess post-retirement
obligation over plan assets (14,154) (11,298)
Unrecognized net obligation existing at
January 1, 1993 8,900 9,423
Unrecognized net (gain) or loss from past
experience 1,943 (356)
Unrecognized prior service cost 246 -
------- -------
Accrued postretirement benefit cost $(3,065) $(2,231)
======= =======
</TABLE>
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation at December 31, 1995, 1994
and 1993 was 7.0 percent, 8.25 percent and 7.5 percent, respectively.
For measurement purposes, a 9.6 percent annual increase in the per
capita cost of covered health care benefits is assumed for 1995 (10.2
percent and 10.8 percent for 1994 and 1993, respectively). This rate was
assumed to decrease gradually to 6 percent for 2001 and remain at that
level thereafter. If the health care cost trend rate were increased 1
percent, the accumulated postretirement benefit obligation as of
December 31, 1995 would increase by 16 percent and the aggregate of the
service and interest cost components of net periodic postretirement benefit
cost for the 12 months ended December 31, 1995 would increase by 21 percent.
-37-
<PAGE>
<PAGE>
Postemployment benefits. In January 1994, the Company adopted FASB No.
- -----------------------
112 " Employers' Accounting for Postemployment Benefits," which requires
the Company to accrue the cost of providing benefits to former or inactive
employees after employment but before retirement. These benefits are to
be recognized over the employees' years of service or at the date of the
event giving rise to such benefits. The impact of this standard had no
material effect on the Company's financial condition or results of
operation for 1995 and 1994.
NOTE 12 - INCENTIVE STOCK PLANS: DIVIDEND REINVESTMENT AND COMMON STOCK
PURCHASE PLAN
In 1985, shareholders adopted a long-term incentive plan (Stock Plan)
that provided for the granting of incentive stock options, nonqualified
stock options, stock appreciation rights, restricted stock and performance
units to key executives. As amended by shareholders in 1990, an aggregate
of 525,000 shares of the Company's common stock could be awarded under the
Stock Plan, which expired in January 1995.
In 1994, shareholders adopted the Aquarion Company Stock Incentive
Plan ("Incentive Plan") that provides for the granting of non-qualified
stock options, stock appreciation rights, restricted stock, unrestricted
stock and performance units (collectively, "Awards"), but no more than an
aggregate of 525,000 shares of stock may be awarded under the Incentive
Plan or purchased upon the exercise of stock options. No Awards will be
granted after April 25, 1999.
Stock options available under the Stock Plan and Incentive Plan are
exercisable at a price equal to the market value, unless otherwise
indicated, at the date of the grant and remain exercisable for 10 years,
conditional on continued employment, from the date of the grant. The
following options have been awarded to key executives:
<TABLE>
Number Option Price
of Shares per Share
-------------------------------- --------- -------------
<S> <C> <C>
Outstanding at December 31, 1992 226,350 $20.63-$28.28
Granted in 1993 (a) 66,550 $25.00-$26.63
Expired in 1993 (1,850) $24.63-$25.00
Exercised in 1993 (29,900) $20.63-$24.63
--------
Outstanding at December 31, 1993 261,150 $20.63-$28.28
Granted in 1994 (b) 271,100 $21.75-$27.13
Expired in 1994 (11,800) $24.63-$27.13
Exercised in 1994 (6,300) $20.63-$25.00
--------
Outstanding at December 31, 1994 514,150 $20.63-$28.28
Granted in 1995 (b) 178,100 $23.25-$23.50
Expired in 1995 (3,772) $21.75-$27.13
--------
Outstanding at December 31, 1995 688,478 $20.63-$28.28
=======
<FN>
(a) These options became exercisable on January 22, 1994.
(b) These options were granted on February 2, 1994, March 29, 1994,
December 5, 1994, September 1, 1995 and December 5, 1995. One third of
the options granted become exercisable on each of the first three
anniversaries of the grant date.
</TABLE>
As of December 31, 1995, 378,926 shares were exercisable under the
Stock Plan. In addition, 334 shares of restricted stock were outstanding
as of December 31, 1995.
The Company maintains a Dividend Reinvestment and Common Stock
Purchase Plan (Reinvestment Plan) which provides holders of its common
stock with a method of purchasing additional shares without payment of any
brokerage or service charges. In April 1994, the Company amended its
Reinvestment Plan to allow shareholders to make optional cash payments at
a 5 percent discount from the market price and to include an additional
750,000 shares in the plan. The total number of shares reserved for
purchase under the Reinvestment Plan was 1,650,000, of which 1,029,223
shares were issued at December 31, 1995.
-38-
<PAGE>
<PAGE>
NOTE 13 - PROPERTY, PLANT AND EQUIPMENT
Net property, plant and equipment at December 31, consisted of the
following components:
<TABLE>
(In thousands) 1995 1994
---------------------------------- ---- ----
<S> <C> <C>
Organization $ 185 $ 185
Source of supply 29,048 27,446
Pumping 16,126 14,296
Water treatment 54,126 53,371
Transmission and distribution 235,608 214,687
General 32,809 30,249
Construction work in progress 32,978 11,766
Utility plant held for future use 466 471
Nonutility 31,134 26,237
-------- --------
432,480 378,708
Less: accumulated depreciation 136,726 123,166
-------- --------
$295,754 $255,542
======== ========
</TABLE>
NOTE 14 - INVENTORIES
Inventories at December 31, were comprised of the following:
<TABLE>
(In thousands) 1995 1994
--------------------- ---- ----
<S> <C> <C>
Lumber and logs $2,180 $1,333
Materials and supplies 1,925 1,744
------ ------
$4,105 $3,077
====== ======
</TABLE>
NOTE 15 - STATEMENT OF CASH FLOWS
Changes in assets and liabilities for the years ended December 31,
net of effects of acquisitions, are set forth below:
<TABLE>
(In thousands) 1995 1994 1993
- ------------------------------- ---- ---- ----
<S> <C> <C> <C>
Decrease (increase) in accounts
receivable $ 405 $(2,703) $ 339
(Increase) decrease in inventory (919) (192) 228
Increase in prepayments (744) (1,455) (1,181)
Increase in accounts payable and
accrued liabilities 2,883 4,420 692
(Decrease) increase in interest
and taxes payable (2,383) 3,168 (241)
Net changes in other noncurrent
balance sheet items (4,766) 3,193 (259)
------- ------ ------
$(5,524) $6,431 $ (422)
======= ====== ======
Supplemental cash flow information:
Cash paid for:
Interest $8,749 $8,733 $9,810
Income taxes $10,694 $6,306 $5,066
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
- ----------------------------------------------------------------------
In October 1995, the Company exchanged a reservoir, located in New
Canaan, Connecticut, for a building, located in Monroe, Connecticut, in a
non-cash transaction. The fair value of the building received was
approximately $2,500,000 and the net book value of the land exchanged was
approximately $170,000.
NOTE 16 - SUBSEQUENT EVENT
On February 29, 1996, the Company signed a stock purchase agreement
to purchase all of the outstanding shares of the common stock of Sea Cliff
Water Company (SCWC), a subsidiary of Emcor Group, Inc., for approximately
$2,600,000 in cash, which is subject to adjustment at the closing. SCWC,
which has approximately 4,300 customers, serves a portion of Nassau County
in Long Island, New York, and has approximate annual revenues of
$2,000,000. The proposed acquisition requires the approval of the New
York Public Service Commission.
-39-
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Aquarion Company
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of shareholders' equity
and of cash flows present fairly, in all material respects, the
financial position of Aquarion Company and its subsidiaries at
December 31, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting
principles. 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 of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit
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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Stamford, Connecticut
February 2, 1996, except as to the subsequent event, Note 16, which is as
of February 29, 1996
-40-
<PAGE>
<PAGE>
MANAGEMENT'S STATEMENT ON RESPONSIBILITY
Management's Statement on Responsibility for Financial Information
The management of the Company is responsible for the fairness,
integrity and objectivity of the Company's consolidated financial
statements, including all related information presented in the annual
report. These statements have been prepared in accordance with
generally accepted accounting principles and include amounts based on
management's best estimates and judgments.
Management maintains and relies on a system of internal
controls, which provides reasonable assurance that assets are
safeguarded and financial records are adequate and can be relied upon
to produce accurate financial statements. The system includes the
hiring and training of qualified personnel, written accounting and
control policies and procedures, clearly drawn lines of
accountability and delegations of authority. In addition, the
Company has an internal audit function that evaluates existing
controls and recommends changes and improvements deemed necessary.
The Board of Directors' Audit Committee, which is comprised of
five nonmanagement directors, meets periodically with the Company's
senior officers, independent accountants and the internal auditor.
The Audit Committee reviews internal audits, financial reporting and
internal control matters, as well as the nature and extent of the
audit effort.
Management believes that the Company's policies and procedures,
as well as its internal control system and activities of the internal
auditor and independent accountants and the Audit Committee, provide
you, the shareholder, with reasonable assurance as to the integrity
of the Company's consolidated financial statements.
Richard K. Schmidt
President & Chief Executive Officer
Janet M. Hansen
Executive Vice President,
Chief Financial Officer
& Treasurer
February 2, 1996
-41-
<PAGE>
<PAGE>
SUPPLEMENTAL FINANCIAL INFORMATION
<TABLE>
- --------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Book value per share $17.72 $17.43 $17.07 $16.33 $15.53
Payout ratio (per share) 85.3% 86.6% 92.0% 98.2% N/A
Price/earnings ratio (1) 13.42 12.63 16.19 15.2 N/A
Capitalization:
Long-term debt 52.0% 49.1% 51.0% 51.9% 55.1%
Preferred stock of subsidiaries .1 .2 .2 .2 1.2
Common equity 47.9 50.7 48.8 47.9 43.7
----- ----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
<FN>
(1) Computed at December 31.
</TABLE>
<TABLE>
Quarterly financial data
(Unaudited)
Income Per
Operating before income Net share
revenues taxes income (1)(2)
-----------------------------------------------------------------------------
(In thousands, except share data)
1995
<S> <C> <C> <C> <C>
First quarter $ 25,602 $ 4,236 $ 2,391 $.35
Second quarter 28,414 5,491 3,107 .46
Third quarter 29,999 5,736 3,242 .48
Fourth quarter 34,191 7,324 4,146 .61
-------- ------- ------
Total $118,206 $22,787 $12,886
======== ======= =======
1994
First quarter $ 25,850 $ 4,173 $ 2,574 $.40
Second quarter 29,619 5,943 3,572 .55
Third quarter 29,649 5,626 3,419 .52
Fourth quarter 36,855 6,750 2,656 .40
-------- ------- ------
Total $121,973 $22,492 $12,221
======== ======= =======
<FN>
(1) Based on a weighted average of common shares outstanding during
each quarter.
(2) 1995 quarterly earnings per share have been restated to reflect the
pooling of interests.
</TABLE>
-42-
<PAGE>
<PAGE>
Market and dividend information
The following table sets forth the high and low closing sale prices
of the Company common stock as traded on the New York Stock Exchange (NYSE)
and as reported on the NYSE composite tape, along with dividends paid per
share on a quarterly basis. At December 31, 1995, there were 7,262
shareholders of record.
<TABLE>
--------------------------------------------------------------
Period Closing sales prices Dividends paid
--------------------------------------------------------------
High Low
--------------------------------------------------------------
<S> <C> <C> <C>
1995
First quarter $24 1/4 $22 $.405
Second quarter 23 1/2 22 .405
Third quarter 24 1/4 22 .405
Fourth quarter 25 7/8 22 5/8 .405
1994
First quarter $27 3/4 $24 3/4 $.405
Second quarter 26 7/8 23 .405
Third quarter 26 23 1/2 .405
Fourth quarter 26 1/8 21 5/8 .405
</TABLE>
<PAGE>
GRAPHICS APPENDIX LIST
----------------------
Page in 1995 Annual Report
to Shareholders where
graphic appears Description of Graphic
- --------------------------- ----------------------
Page 18 Interest Expense
Page 18 Total Debt
Page 18 Dividend Payout Ratio
Page 20 Expenditures per Revenue Dollar - 1995
Page 20 Expenditures per Revenue Dollar - 1994
<PAGE>
EXHIBIT 10(e)
BRIDGEPORT HYDRAULIC COMPANY
---------------
Note Agreement
---------------
Dated as of January 24, 1991
$20,000,000
9.55% Senior Notes due February 1, 2021
<PAGE>
<PAGE>
TABLE OF CONTENTS
SECTION 1. PURCHASE AND SALE OF NOTES . . . . . . . . . . . .1
1.1 Issue of Notes. . . . . . . . . . . . . . . .1
1.2 The Closing. . . . . . . . . . . . . . . . .1
1.3 Representations and Closing Conditions. . . .1
SECTION 2. PAYMENTS . . . . . . . . . . . . . . . . . . . . .2
2.1 Required Payments. . . . . . . . . . . . . .2
2.2 Optional Prepayments. . . . . . . . . . . . .2
2.3 Partial Payment Pro Rata. . . . . . . . . . .4
SECTION 3. INFORMATION AS TO COMPANY . . . . . . . . . . . .4
3.1 Financial and Business Information. . . . . .4
3.2 Officer's Certificates . . . . . . . . . . .6
3.3 Inspection. . . . . . . . . . . . . . . . . .6
SECTION 4. COMPANY BUSINESS COVENANTS . . . . . . . . . . . .6
4.1 Funded Debt. . . . . . . . . . . . . . . . .7
4.2 Liens and Encumbrances. . . . . . . . . . . .7
4.3 Distributions and Restricted Investments. . .9
4.4 Sale of Property and Subsidiary Stock. . . .9
4.5 Merger and Consolidation . . . . . . . . . .11
4.6 Transactions with Affiliates; Restricted
Subsidiaries. . . . . . . . . . . . . . . .11
4.7 Nature of Business. . . . . . . . . . . . . .12
4.8 Insurance. . . . . . . . . . . . . . . . . .12
4.9 Maintenance, Etc. . . . . . . . . . . . . . .12
4.10 Records. . . . . . . . . . . . . . . . . . .12
4.11 Incorporation. . . . . . . . . . . . . . . .12
4.12 Compliance with Laws. . . . . . . . . . . . .12
4.13 Payment of Expenses; Indemnification, Etc.. .13
4.14 Taxes. . . . . . . . . . . . . . . . . . . .14
4.15 ERISA. . . . . . . . . . . . . . . . . . . .14
4.16 Sale and Leaseback of Property. . . . . . . .15
4.17 First Mortgage Bonds. . . . . . . . . . . . .16
4.18 DPUC Approval. . . . . . . . . . . . . . . .16
-i-
<PAGE>
<PAGE>
SECTION 5. DEFAULT . . . . . . . . . . . . . . . . . . . . .16
5.1 Nature of Default. . . . . . . . . . . . . .16
5.2 Default Remedies. . . . . . . . . . . . . . .17
SECTION 6. INTERPRETATION OF THIS AGREEMENT. . . . . . . . .18
6.1 Terms Defined. . . . . . . . . . . . . . . .18
6.2 Accounting Principles. . . . . . . . . . . .27
6.3 Directly or Indirectly. . . . . . . . . . . .27
6.4 Governing Law. . . . . . . . . . . . . . . .27
6.5 Rank. . . . . . . . . . . . . . . . . . . . .27
6.6 Section Headings and Table of Contents. . . .27
SECTION 7. PURCHASER'S SPECIAL RIGHTS . . . . . . . . . . . .27
7.1 Direct Payment. . . . . . . . . . . . . . . .27
7.2 Issue Taxes. . . . . . . . . . . . . . . . .28
7.3 Note Register. . . . . . . . . . . . . . . .28
7.4 Exchange of Notes. . . . . . . . . . . . . .28
7.5 Replacement of Notes. . . . . . . . . . . . .28
SECTION 8. MISCELLANEOUS . . . . . . . . . . . . . . . . . .29
8.1 Notices. . . . . . . . . . . . . . . . . . .29
8.2 Reproduction of Documents. . . . . . . . . .29
8.3 Purchase for Investment; ERISA. . . . . . . .30
8.4 Successors and Assigns. . . . . . . . . . . .30
8.5 Amendment and Waiver; Acquisition of Notes. .30
8.6 Duplicate Originals. . . . . . . . . . . . .31
8.7 Payments Due on Holidays. . . . . . . . . . .31
Attachment A - Payment and Communications
Attachment B - 9.55% Senior Notes Due February 1, 2021
Attachment C - Warranties and Representations
Attachment D - Closing Conditions
Attachment E - Description of Company Counsel's Closing Opinion
Attachment F - Description of Special Counsel's Closing Opinion
Attachment G - Designated Real Property
Attachment H - Restricted Subsidiaries
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BRIDGEPORT HYDRAULIC COMPANY
835 Main Street
Bridgeport, Connecticut 06601-2353
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NOTE AGREEMENT
$20,000,000
9.55% Senior Notes due February 1, 2021
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January 24, 1991
To each of the institutions listed
on Attachment A:
Dear Purchaser:
BRIDGEPORT HYDRAULIC COMPANY, a Connecticut corporation (the
"Company"), hereby agrees with you as follows:
SECTION 1. PURCHASE AND SALE OF NOTES
1.1 Issue of Notes.
The Company will authorize the issue of $20,000,000 principal
amount of its 9.55% Senior Notes due February 1, 2021 (the "Notes").
The Notes will be in the form of the Notes set out in Attachment B.
1.2 The Closing.
The Company agrees to sell to you and you agree to purchase from
the Company, in accordance with the provisions of this Agreement, the
principal amount of the Notes shown opposite your name on Attachment
A, at par. The closing of your purchase will be held at 10:00 a.m. on
January 24, 1991 or such other date as shall have been agreed to by
you and the Company (the "Closing Date") at the offices of Whitman &
Ransom, Greenwich, Connecticut. On the Closing Date, the Company will
deliver to you a Note or Notes, as applicable, in the principal amount
or amounts of your purchase or purchases, dated the Closing Date and
payable to you, against payment in immediately available funds.
1.3 Representations and Closing Conditions.
To induce you to enter into this Agreement and to purchase the
Notes, the Company makes the warranties and representations set
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forth in Attachment C, effective as of the date of the Company's
execution of this Agreement. Your obligation to purchase the Notes at the
closing is subject to the satisfaction of all of the conditions
precedent listed in Attachment D.
SECTION 2. PAYMENTS
2.1 Required Payments.
Until the Notes are paid in full, the Company will pay interest
on the unpaid principal amount of the Notes from the date of the Note
at the rate of 9.55% per annum, payable semi-annually on the first day
of August and of February in each year, commencing August 1, 1991.
The entire outstanding principal amount and interest shall be due and
payable on the maturity date of the Notes.
2.2 Optional Prepayments.
(a) The Company shall have the option, at any time on or after
February 1, 2001 and from time to time, of prepaying the Notes, either
in whole or in part, by payment of the designated principal amount to
be prepaid with interest accrued to the date of prepayment, together
with the Make Whole Premium Amount attributable to the amount of such
prepayment.
(b) In case:
(i) at any time, the Company shall have requested in
writing the consent of each holder of the Notes for the
Company or any Subsidiary to take any action otherwise
prohibited or restricted by Sections 4.1 through 4.7 or 4.16
hereof, solely in order to permit the Company or such
Subsidiary to take such action and not in whole or in part,
directly or indirectly, for the purpose of prepaying the
Notes or any part thereof, and shall have furnished to the
holders of the Notes at the time outstanding such
information with respect to such action as any such holder
may reasonably request; and
(ii) within 45 days after the mailing of such request, the
Company shall not have received the written consent to such
action of the holders of at least 66-2/3% in aggregate
principal amount of all Notes at the time outstanding
(excluding Notes owned by the Company and its Affiliates),
and if such action is a sale by the Company of its
properties as an entirety or substantially as an entirety,
or a consolidation or merger to which the Company is to be a
party, then, in any such event, at the time of giving notice
of prepayment as provided in Section 2.2(d), the Company
shall have on hand a bona fide proposal for such sale,
consolidated or merger;
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Then, notwithstanding Sections 4.1 through 4.7 or 4.16, the
Company may take any such action within 195 days of such request if
the Company gives the notice provided in Section 2.2(d) and,
concurrently with the consummation of such action, prepays in full the
Notes held by all holders who shall not have so given their consent,
such prepayment to be made at the principal amount of the Notes so
prepaid, together with interest accrued to the date of prepayment and
the Make Whole Premium Amount attributable to such prepayment;
provided that if such action is not consummated within 195 days after
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the request, such prepayment may not be made by the Company and the
principal amount of the Notes specified for such prepayment in the
notice thereof shall not, by reason of such notice, mature and become
due and payable on the date fixed for such prepayment. If such action
involves a merger or consolidation in which the Company is not the
surviving corporation, or is a sale by the Company of its properties
as an entirety or substantially as an entirety, then for the purposes
of subdivision (ii) of this Section 2.2(b), the consent of any holder
of the Notes shall be conditioned upon the effective assumption by the
purchasing or surviving Person, as the case may be, of all of the
Company's obligations under this Agreement and the Notes in accordance
with the terms hereof and thereof.
(c) In case the Company shall elect to rely on the last
paragraph of Section 4.4 in the event of a sale, lease, transfer or
other disposition of any Property, then (unless the Consolidated
Funded Debt to be prepaid pursuant to such clause had been directly
secured by the sold, leased, transferred or disposed of assets and
such security interest was not incurred by the Company in anticipation
of such sale, lease, transfer or disposition) the Company shall mail a
notice of such election at least 45 days prior to the date the Company
intends to use the proceeds of such sale, lease, transfer or other
disposition in accordance with Section 4.4 to reduce outstanding
Consolidated Funded Debt. In such case each holder of Notes shall
have the option, exercisable by written notice to the Company within
30 days of the mailing of the Company's notice, to require prepayment
of the Notes held by such holder at the principal amount of the Notes
to be prepaid, without premium, together with interest accruing to the
date of prepayment, on a pro rata basis with the Consolidated Funded
Debt being paid.
(d) The Company will give notice of any optional prepayment of
the Notes to each holder of Notes at least 5 days before the date
fixed for prepayment, specifying (1) such date, (2) the principal
amount of the Notes and of such holder's Notes to be prepaid on such
date, and (3) the Make Whole Premium Amount, if any, and accrued
interest applicable to the prepayment.
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2.3 Partial Payment Pro Rata.
If there is more than one Note outstanding, the principal amount
of each optional partial payment of the Notes (except a prepayment of
some, but not all, of the Notes under Section 2.2(b) or 2.2(c)) will
be allocated among the Notes at the time outstanding in proportion, as
nearly as practicable, to the respective outstanding principal amounts
of the Notes.
SECTION 3. INFORMATION AS TO COMPANY
3.1 Financial and Business Information.
The Company will deliver to you, if at the time you or your
nominee holds any Notes (or if you are obligated to purchase any
Notes), and to each other holder of outstanding Notes:
(a) Quarterly Statements - within 45 days after the end of each
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of the first three quarterly fiscal periods in each fiscal year of the
Company, two copies of
(i) balance sheets of the Company and of each Restricted
Subsidiary as at the end of such quarter; and
(ii) statements of income, shareholder's equity, and cash
flows (or changes in financial position if applicable) of the
Company and of each Restricted Subsidiary for the portion of the
fiscal year ending with such quarter
accompanied by a certificate signed by the principal financial officer
of the Company stating that such financial statements present fairly
the financial condition of the companies being reported upon and have
been prepared in accordance with generally accepted accounting
principles or the Company's standard accounting principles, in either
case consistently applied, except as set forth in such certificate;
(b) Annual Statements - within '90 days after the end of each
-----------------
fiscal year of the Company, four copies of:
(i) a balance sheet of the Company and of each Restricted
Subsidiary as at the end of that year, and
(ii) statements of income, shareholder's equity, and cash
flows (or changes in financial position if applicable) of
the Company and of each Restricted Subsidiary for that year,
setting forth in each case in comparative form the figures for the
previous fiscal year and accompanied by an opinion of a firm of
independent certified public accountants of recognized national
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standing stating that such financial statements present fairly the
financial condition of the companies being reported upon and have been
prepared in accordance with generally accepted accounting principles
or the accounting requirements of the DPUC, in either case
consistently applied (except for changes in application in which such
accountants concur);
(c) SEC and Other Reports - promptly upon their becoming
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available, one copy, if any, of each periodic report (including Form
8-K, 10-K and 10-Q), proxy statement and registration statement or
prospectus relating to Securities of THC filed with or delivered to
any securities exchange, the Securities and Exchange Commission or any
successor agencies;
(d) Notice of Event of Default - immediately upon becoming aware
--------------------------
of the existence of any Event of Default, a written notice describing
its nature;
(e) Notice of Claimed Default - immediately upon becoming aware
-------------------------
(i) that the holder of any Note or of any bank debt or other Security
of the Company or any Restricted Subsidiary has given notice (or taken
any other action) with respect to a claimed default, breach, Event of
Default, or (ii) of any claim, action, or administrative proceeding
pending or to the knowledge of the Company or any Restricted
Subsidiary, threatened against or affecting the Company or any
Restricted Subsidiary in any court or before any governmental
authority or arbitration board or tribunal which would, if adversely
determined, materially and adversely affect the Properties, business,
franchises, prospects, or financial condition of the Company and any
Restricted Subsidiaries, taken as a whole, the rates to be charged by
the Company or any Utility Subsidiary or the valuation of the
Company's or such Utility Subsidiary's Properties for rate-making
purposes, or the ability of the Company to perform this Agreement or
the Notes, a notice describing the notice given (or action taken) and
the nature of the claimed default, breach, or Event of Default or the
claim, action or administrative proceeding pending or threatened; and
(f) Notice of Regulatory Action - promptly upon receipt thereof,
---------------------------
copies of any notices received from Federal or state regulatory
agencies relating to an order, ruling, statute, other law or
information which would materially and adversely affect the
Properties, business, franchises, prospects, or financial condition of
the Company and any Restricted Subsidiaries, taken as a whole, the
rates to be charged by the Company or any Utility Subsidiary or the
valuation of the Company's or such or Utility Subsidiary's Properties
for rate-making purposes, or the ability of the Company to perform
this Agreement or the Notes;
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(g) Accounting Reports - promptly after receipt, copies of any
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report as to material inadequacies in accounting controls submitted by
independent accountants in connection with any audit of the Company or
any Restricted Subsidiary; and
(h) Requested Information - with reasonable promptness, any
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other data and information which may be reasonably requested from time
to time.
3.2 Officer's Certificates.
With each set of financial statements delivered pursuant to
Section 3.1(a) or 3.1(b), the Company will deliver a certificate
signed by its principal financial officer or its Treasurer and setting
forth:
(a) Covenant Compliance - the information required in order to
-------------------
establish compliance with Section 4 during the period covered by the
income statements then being furnished; and
(b) Event of Default - that the signer has reviewed the relevant
----------------
terms of this Agreement and has made, or caused to be made, under the
signer's supervision, a good faith review of the transactions and
conditions of the Company and its Subsidiaries during the period
covered by the income statements then being furnished and that the
review has not disclosed the existence of any Event of Default or, if
an Event of Default exists, describing its nature.
3.3 Inspection.
The Company will permit your representatives, while you or your
nominee holds any Note, or the representatives of any other holder of
the Notes, at your or such holder's expense, to visit and inspect any
of the Properties of the Company or any Restricted Subsidiary, to
examine and make copies and extracts of all their books of account,
records, reports and other papers, and to discuss their respective
affairs, finances and accounts with their respective officers,
employees with management duties and independent public accountants,
all at reasonable times and as often as may be reasonably requested to
the extent you or such holder may deem necessary to familiarize
yourself or themselves, as the case may be, with the financial
condition of the Company.
SECTION 4. COMPANY BUSINESS COVENANTS
The Company covenants that on and after the date of this
Agreement until the Notes are paid in full:
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4.1 Funded Debt.
Neither the Company nor any Restricted Subsidiary will become
liable for or permit any of its Property to become subject to any
Funded Debt or Guaranty of Funded Debt (other than Funded Debt and
Guaranties of Funded Debt to the Company or any Restricted Subsidiary,
the Notes and existing Funded Debt or Guaranties of Funded Debt as of
the Closing Date or any renewals, extensions and refinancings of
Funded Debt or Guaranties of Funded Debt), if immediately after giving
effect thereto, Consolidated Funded Debt would exceed 66-2/3% of
Consolidated Total Capitalization.
4.2 Liens and Encumbrances.
Neither the Company nor any Restricted Subsidiary will (a) cause
or permit or (b) agree or consent to cause or permit in the future
(upon the happening of a contingency or otherwise), any of its
Property (other than Designated Real Property), whether now owned or
subsequently acquired, to be subject to Lien unless the Notes will be
secured equally and ratably with all other obligations secured
thereby, except:
(1) Liens securing the payment of taxes, assessments or
governmental charges or levies or the demands of suppliers,
mechanics, carriers, warehousers, landlords and other like
Persons, provided that all claims which the Liens secure are
not yet due or are being actively contested in good faith
and by appropriate proceedings;
(2) Liens incurred or deposits made (A) in the ordinary
course of business (including leases, zoning restrictions,
easements and similar title exceptions or encumbrances) that
are not incurred in connection with the borrowing of money,
provided such Liens do not materially interfere with the
conduct of the business of the Company and its Subsidiaries
taken as a whole, (B) in connection with worker's
compensation, unemployment insurance, social security and
other like laws which are not currently dischargeable, or
(C) to secure the performance of letters of credit, bids,
tenders, sales contracts, leases, statutory obligations,
surety, appeal and performance bonds and other similar
obligations or transactions;
(3) attachment, judgment and other similar Liens arising in
connection with court or administrative proceedings,
provided that the Company or the Restricted Subsidiary (A)
attempts in good faith to stay the execution and
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enforcement of such Liens and (B) all claims which the Liens secure
are being actively contested in good faith and by appropriate
proceedings;
(4) Liens on Property of the Company or a Restricted
Subsidiary, provided that they secure only obligations to
the Company or a Subsidiary;
(5) existing Liens at the Closing Date, including the Lien
of the Mortgage;
(6) (i) any Lien on Property or on rights relating thereto
acquired, constructed or improved by the Company or a
Restricted Subsidiary after the date of this Agreement
to secure any rights granted with respect to such
Property in connection with the provision of all or a
part of the purchase price or the cost of acquisition,
construction or improvement of such Property, which
Lien is created contemporaneously with, or within
18 months after, such acquisition or the completion of
such construction or improvement, or
(ii) any Lien on Property existing on such Property at
the time of acquisition thereof by the Company or a
Restricted Subsidiary, or
(iii) any Lien existing on the Property of a Person
at the time such Person becomes a Restricted
Subsidiary, or
(iv) any Lien on Property or the capital stock of a
Subsidiary created at the time of its acquisition by
the Company or a Restricted Subsidiary to secure all or
a part of the purchase price;
(7) Inchoate Liens arising under ERISA;
(8) Liens incurred in connection with industrial revenue
bonds, pollution control bonds, water facility bonds or
similar financings;
(9) Liens securing pledges, deposits, performance bonds or
similar security interests not incurred in connection with
the borrowing of money;
(10) Liens securing any Debt of any Utility Subsidiary; or
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(11) Liens granted in connection with a refinancing
permitted hereunder, if the Property subject to such Lien
was subject to a permitted Lien immediately prior to such
refinancing and the new Lien does not secure a higher amount
of debt than did the prior Lien.
If any Property is subjected to a Lien in violation of this
Section, the Notes shall have the benefit, to the full extent that,
and with such priority as, the holders may be entitled thereto under
applicable law, of an equitable Lien on such Property securing the
Notes, except where the effect thereof would in any way limit a
Noteholder's rights under this Agreement. Such violation of this
Section shall constitute, on the terms set forth in Section 5.1, an
Event of Default hereunder, whether or not any such provision is made
pursuant to this Section.
4.3 Distributions and Restricted Investments.
Neither the Company nor any Restricted Subsidiary will declare,
make or incur any liability to make any Distribution or acquire any
Restricted Investment if, immediately after giving effect thereto, the
sum of such Distributions and Restricted Investments would exceed the
amount obtained by adding (a) Consolidated Net Income accumulated
after September 30, 1990, plus (b) $16,000,000, plus (c) the net cash
proceeds received by the Company after September 30, 1990 from the
issuance of additional shares of capital stock, or other Securities
subsequently converted into capital stock, plus (d) the net cash
received by the Company after September 30, 1990 as a capital
contribution from THC, plus (e) repayments to the Company or its
Restricted Subsidiaries of any loans, advances, or investments which
constituted Restricted Investments.
4.4 Sale of Property and Subsidiary Stock.
Except as permitted by Section 4.5, neither the Company nor any
Restricted Subsidiary will (a) sell, lease or otherwise transfer all
or a substantial part of its Property (by merger, consolidation or
otherwise); or (b) permit any Restricted Subsidiary to issue or
transfer any shares of its stock or any other Securities exchangeable
or convertible into its stock (such stock and other Securities being
called "Subsidiary Stock" below), if the effect would be to reduce the
direct or indirect proportionate interest of the Company in the
outstanding Subsidiary Stock of the Restricted Subsidiary whose shares
are the subject of the transaction; provided that these restrictions
do not apply to:
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(1) the sale, lease, transfer or other disposition of Property
(other than Subsidiary Stock) in the ordinary course of business;
(2) any such transaction if the following conditions are met:
(a) the aggregate net book value of such Property and all
other Property disposed of by the Company and its Restricted
Subsidiaries (other than as permitted by any other provision of
this Section 4.4) during any fiscal year does not exceed 15% of
Consolidated Total Assets at the time of such disposition (in
computing the net book value of Property disposed of during any
fiscal year, any sale, lease, transfer or other disposition by
the Company or a Restricted Subsidiary of Property shall be
excluded to the extent that the net proceeds of such disposition
are used to acquire, construct or improve other Property); and
(b) if the Property to be sold, leased, transferred, or
otherwise disposed of is an interest in a Restricted Subsidiary,
such disposition may be made only if the Restricted Subsidiary
proposed to be sold, leased, transferred or otherwise disposed of
has no continuing investment in any other Restricted Subsidiary
not being simultaneously disposed of, or in the Company;
(3) the sale, lease, transfer or other disposition of any
such assets by the Company or a Restricted Subsidiary to the
Company or any other Restricted Subsidiary;
(4) the sale, lease, transfer or other disposition by the
Company or a Restricted Subsidiary of Property as a result of
condemnation or the exercise of the right of eminent domain or in
anticipation or threat of such action;
(5) the sale, lease, transfer or other disposition of all
or any portion of Designated Real Property; or
(6) the issue of directors' qualifying shares.
Notwithstanding any other provision herein to the contrary, the
Company or any Restricted Subsidiary may sell, lease, transfer or
otherwise dispose of any of such assets if it offers to apply the net
proceeds of such sale, lease, transfer or other disposition to reduce
outstanding Consolidated Funded Debt at par; provided, however, that
if the Company proposes to use the
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proceeds of such sales, leases, or transfers to reduce
any outstanding Consolidated Funded Debt other
than the Notes, then each holder of the Notes shall have the option
pursuant to Section 2.2(c) to require prepayment of the Notes held by
such holder, without premium, on a pro rata basis with the
Consolidated Funded Debt being paid, unless and to the extent such
Consolidated Funded Debt had been directly secured by the sold,
leased, transferred or disposed of assets and such security interest
was not incurred by the Company or such Restricted Subsidiary in
anticipation of such sale, lease transfer, or disposition.
4.5 Merger and Consolidation.
Neither the Company nor any Restricted Subsidiary will be a party
to any merger or consolidation or sell, lease or otherwise transfer
all or substantially all of its Property (other than a merger or
consolidation with or sale to the Company or a Restricted Subsidiary),
provided that (i) the Company may merge or consolidate with another
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Person and may sell, lease or otherwise transfer all or substantially
all of its Property as an entirety to another Person if the surviving
or acquiring Person: (A) is organized under the laws of the United
States or a jurisdiction thereof , (B) expressly assumes the covenants
and obligations in the Notes and this Agreement, (C) could,
immediately after giving effect to the transaction, incur at least
$1.00 of additional Funded Debt pursuant to Section 4.1, and (D) would
not, immediately after giving effect to the transaction, be in default
of any covenants under this Agreement, and (ii) a Restricted
Subsidiary may be a party to a merger or consolidation or sell, lease
or otherwise transfer all or substantially all of its Property as an
entirety, provided that, immediately after giving effect to the
transaction, (A) the surviving or acquiring Person would be a
Restricted Subsidiary and (B) the Company would not be in default of
any covenant under this Agreement.
4.6 Transactions with Affiliates; Restricted Subsidiaries.
Neither the Company nor any Restricted Subsidiary will enter into
any transaction (including the purchase, sale or exchange of Property
or the rendering of any service) with any Affiliate, except in the
ordinary course of business and upon fair and reasonable terms which,
taken as a whole, are fair to THC and its Subsidiaries, provided, that
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any such transaction would not materially and adversely affect the
properties, business, franchises, prospects or financial condition of
the Company and any Restricted Subsidiaries, taken as a whole. Each
Restricted Subsidiary will be maintained as a Restricted Subsidiary
unless otherwise permitted by Section 4.4 or 4.5 or in the definition
of "Restricted Subsidiary."
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4.7 Nature of Business.
The Company shall not, and shall not permit any Restricted
Subsidiary which is a Restricted Subsidiary on the date hereof, to
engage in any business if, as a result, the Company and such
Restricted Subsidiaries, taken as a whole, would not be engaged
primarily in substantially the same lines of business as are engaged
in by the Company and its Restricted Subsidiaries on the date hereof.
4.8 Insurance.
The Company shall and shall cause each Restricted Subsidiary to
maintain insurance with responsible insurance companies in such amount
and against such risks as is customarily and reasonably carried by
owners of similar business and property, and the Company will furnish
you and any other holder of outstanding Notes, upon request, with full
information as to the insurance carried.
4.9 Maintenance, Etc.
The Company will maintain, preserve and keep, and will cause each
Restricted Subsidiary to maintain, preserve and keep, its Properties
which are used or useful in the conduct of its business (whether owned
in fee or a leasehold interest) in good repair and working order and
from time to time will make all necessary repairs, replacements,
renewals and additions so that at all times the efficiency thereof
shall be maintained, except as may otherwise be permitted under
Section 4.4 or 4.5.
4.10 Records.
The Company shall and shall cause each Subsidiary to keep and
maintain full and accurate accounts and records of its operations to
enable the Company to prepare financial statements in accordance with
generally accepted accounting principles.
4.11 Incorporation.
The Company shall and shall cause each of its Restricted
Subsidiaries to do all things necessary to remain duly incorporated,
validly existing and in good standing as a domestic corporation in its
jurisdiction of incorporation, except as may otherwise be permitted
under Section 4.4 or 4.5.
4.12 Compliance with Laws.
The Company shall and shall cause each of its Restricted
Subsidiaries to comply with all laws, rules, regulations, orders,
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writs, judgments, injunctions, decrees or awards to which it may be
subject and the failure to comply with which would materially and
adversely affect the Properties, business, franchises, prospects, or
financial condition of the Company and its Restricted Subsidiaries,
taken as a whole, the rates to be charged by the Company or any
Utility Subsidiary or the valuation of the Company's or such Utility
Subsidiary's Properties for rate-making purposes, or the ability of
the Company to perform this Agreement or the Notes.
4.13 Payment of Expenses; Indemnification, Etc.
Whether or not the Notes are sold, the Company shall:
(1) pay the reasonable fees and disbursements of your
special counsel, Whitman & Ransom, unless your failure to
purchase the Notes constitutes a breach of this Agreement;
(2) pay, and hold you and any other holder of outstanding
Notes harmless from and against any and all present and future
stamp and other similar taxes with respect to the foregoing
matters and save you and any other holder of outstanding Notes
harmless from and against any and all liabilities with respect to
or resulting from any delay or omission to pay such taxes;
(3) pay all costs related to modifications or consents
initiated by or requested by the Company relating to this
Agreement; and
(4) pay all expenses, costs, outlays and reasonable
attorneys' fees (including the allocated costs and expenses of
your in-house counsel) of any kind and character relating to
(i) the exchange of Notes or amendments, waivers or consents
pursuant to, or the enforcement and protection of your rights
under, the provisions of this Agreement or the Notes, or (ii) the
enforcement of any provisions of, or the collection of amounts
due you under, the Notes or this Agreement, or (iii) the
preparation for, negotiations regarding, consultations concerning
or the defense of legal proceedings involving any claim or claims
made or threatened against you arising out of this Agreement or
the Notes; provided, however, that the Company shall not be
required to reimburse you for any such expenses, costs, outlays
or fees incurred in connection with any action or proceeding to
enforce any of the provisions of this Agreement or the Notes
which a court of competent jurisdiction determines has not been
undertaken by you in good faith.
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The Company's obligations under this Section 4.13 shall survive
the termination of this Agreement and the payment of the Notes.
4.14 Taxes.
The Company shall and shall cause each Restricted Subsidiary to
pay when due all taxes, assessments and governmental charges and
levies upon the Company or its Restricted Subsidiaries or the
Company's or its Restricted Subsidiaries' income, profits or
Properties, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves
have been set aside.
4.15 ERISA.
The Company shall and shall cause each of its Common Control
Entities to comply in all material respects with ERISA, the Code and
all other applicable laws and regulations and:
(1) deliver a copy to you and any other holder of outstanding
Notes within 30 days of the receipt by, or the requisite
filing or notification date for, the Company or any Common
Control Entity, of a:
(i) notice of a reportable event for a Plan to the PBGC;
(ii) notice of an intent to terminate a Plan to the PBGC;
(iii) notice from the PBGC relating to the failure of
the Company or any Common Control Entity to timely pay premiums
to the PBGC, its intent to terminate any Plan, the appointment of
a trustee to a Plan or the imposition of employer liability on
the Company or any Common Control Entity;
(iv) notice and demand for payment of withdrawal liability
by the Company or any Common Control Entity from a multi-employer
plan;
(v) notice of any claim made against the Company or any
Common Control Entity for unpaid contributions with respect to a
Plan;
(vi) notice by the Department of Labor of any penalty,
audit, investigation or any purported violation of ERISA with
respect to a Plan;
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(vii) notice by the Internal Revenue Service or the
Treasury Department of any income tax delinquency, excise tax,
penalty, audit or investigation with respect to a Plan; or
(viii) any complaint filed in court, judgment, award or
settlement agreement with respect to a Plan that may result in a
liability to the Company or any Common Control Entity or may
result in a material adverse effect on the operations, properties
or condition (financial or otherwise) of the Company or any
Common Control Entity.
4.16 Sale and Leaseback of Property.
Neither the Company nor any Restricted Subsidiary will enter into
any sale and leaseback transaction involving Property of the Company
or a Restricted Subsidiary unless:
(a) the term of the lease, including any renewals thereof,
does not exceed five years;
(b) the Company offers to apply the net proceeds of such sale to
reduce outstanding Consolidated Funded Debt at par on a pro rata
basis or to purchase, construct or improve other Property of at
least equivalent value to such net proceeds;
(c) immediately prior to such transaction, the Property could
have been subjected to a Lien to secure Debt in a principal
amount equal to the proceeds of such sale without violation of
the restrictions contained in Section 4.2 of this Agreement;
(d) any such transaction relating to Property acquired or
constructed after the date of this Agreement occurs within 18
months of the date of acquisition or completion of construction;
(e) such transaction represents a sale by a Restricted
Subsidiary to the Company or any other Restricted Subsidiary or
by the Company to a Restricted Subsidiary; or
(f) the net proceeds of such sale are treated as Funded Debt and
would be permitted under the restrictions contained in Section
4.1 of this Agreement.
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4.17 First Mortgage Bonds.
The Company will not issue any additional First Mortgate Bonds,
unless the Notes are equally and ratably secured by the Mortgage.
4.18 DPUC Approval.
The Company agrees to comply in all material respects with all
orders of the DPUC set forth in the December 19, 1990 Decision of the
DPUC (Docket No. 90-12-02) approving the issuance and sale of the
Notes.
SECTION 5. DEFAULT
5.1 Nature of Default.
An "Event of Default" shall exist if any of the following occurs
and is continuing:
(a) Principal, Premium or Interest Payments - failure to
---------------------------------------
pay principal on any Note on or before the date such principal
payment is due, or failure to pay any premium or interest on any
Note on or before the date the payment is due and payable and
continuance of such failure to pay any premium or interest on any
Note for ten Business Days, provided that any payment made after
its due date shall also include interest on the overdue amount
(to the extent permitted by applicable law) at the rate of 10.55%
per annum;
(b) Breach of Company Business Covenants - failure to
------------------------------------
comply with any covenant contained in Sections 3 or 4.1 through
4.6, 4.8, 4.11, 4.12, and 4.14 through 4.16, which failure
continues for more than 30 days after it first becomes known to
any officer of the Company;
(c) Other Breaches - failure to comply with any other
--------------
provision of this Agreement, which continues for more than 45
days after notice has been given to the Company by any holder of
the Notes;
(d) Default on Indebtedness or Other Security - any event
-----------------------------------------
shall occur (other than the mere passage of time) or any
condition shall exist in respect of any Funded Debt or under any
agreement securing or relating to Funded Debt, the effect of
which event or condition is to cause (or permit one or more
Persons to cause) more than $5,000,000 in aggregate principal
amount of Funded Debt or other Securities of the Company, THC or
any Restricted Subsidiary to become due before its (or their)
stated maturity or before its (or their) regularly scheduled
dates of payment;
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(e) Involuntary Bankruptcv Proceedings. Etc. - a
-----------------------------------------
custodian, receiver, liquidator or trustee of the Company or any
Restricted Subsidiary, or of any of the Property of either, is
appointed or takes possession and such appointment or possession
remains in effect for more than 90 days; or the Company or any
Restricted Subsidiary generally fails to pay its debts as they
become due; or the Company or any Restricted Subsidiary is
adjudicated bankrupt or insolvent; or an order for relief is
entered under the Federal Bankruptcy Code against the Company or
any Restricted Subsidiary; or any Property of either is
sequestered by court order and the order remains in effect for
more than 90 days; or a petition is filed against the Company or
any Restricted Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or subsequently
in effect, and is not dismissed within 90 days after filing;
(f) Voluntary Bankruptcy Proceeding, Etc. - the Company or
------------------------------------
any Restricted Subsidiary files petition in voluntary bankruptcy
or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency , readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now
or subsequently in effect; or consents to the filing of any
petition against it under any such law; or consents to the
appointment of or taking possession by a custodian, receiver,
trustee or liquidator of the Company, or any Restricted
Subsidiary, or of all or any part of the Property of either; or
makes an assignment for the benefit of its creditors; or admits
in writing its general inability to pay its debts as they become
due;
(g) Representations or Warranties - any of the
------------------------------
representations, warranties, certifications or statements of the
Company made herein or in any certificate, financial statement or
other notice delivered pursuant hereto shall prove to be untrue
or misleading as of the Closing Date in any material respect; or
(h) Judgments - the Company or a Restricted Subsidiary
---------
suffers one or more outstanding 'final judgments against it
aggregating more than $5,000,000 not covered by insurance and
such judgment or judgments shall continue unsatisfied and not
appealed, stayed, bonded, vacated or suspended by agreement with
the beneficiary thereof, for a period of 90 days.
5.2 Default Remedies.
(a) Acceleration - If an Event of Default described in
------------
Section 5.1.(a) exists, any holder of Notes may, at its option,
exercise any right, power or remedy permitted by law, including
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the right, by notice to the Company, to declare the Notes held by
such holder to be immediately due and payable. If any other
Event of Default exists, the holder or holders of at least 35% in
outstanding principal amount of the Notes (exclusive of Notes
owned by the Company, Restricted Subsidiaries and Affiliates)
may, at its or their option, exercise any right, power or remedy
permitted by law, including the right, by notice to the Company,
to declare all the outstanding Notes to be immediately due and
payable. Upon each declaration, the principal of the Notes
declared due shall become immediately due and payable, together
with all accrued interest and together with, to the extent
permitted by applicable law, the Make Whole Premium Amount, and
the Company will immediately make payment, without any
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived. No course of dealing or delay
or failure to exercise any right on the part of any holder of the
Notes shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers or remedies. Upon an
Event of Default, the Company will pay or reimburse the holders
of the Notes for all costs and expenses (including reasonable
attorneys, fees) incurred by them in collecting any sums due on
the Notes or in otherwise enforcing any of their rights.
(b) Annulment of Acceleration - In the event of each
-------------------------
declaration pursuant to Section 5.2(a), other than a declaration
of acceleration pursuant to an Event of Default described in
Section 5.1.(a), the holder or holders of at least 66-2/3% of the
outstanding principal amount of the Notes (exclusive of Notes
owned by the Company, Restricted Subsidiaries and Affiliates) may
annul such declaration and its consequences if no judgment or
decree has been entered for the payment of any amount due
pursuant to such declaration and if all sums payable under the
Notes and under this Agreement (except any principal or interest
on the Notes or the premium amount in Section 2.2(a) which has
become payable solely by reason of such declaration) shall have
been duly paid.
SECTION 6. INTERPRETATION OF THIS AGREEMENT.
6.1 Terms Defined.
As used in this Agreement (including Attachments) accounting
terms shall be defined in accordance with generally accepted
accounting principles, except the following terms, which have the
respective meanings set forth below or in the Section indicated:
Accrued Benefit - shall have the meaning assigned to that term in
----------------
Section 3(23) of ERISA.
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Accumulated Funding Deficiency - shall have the meaning assigned
------------------------------
to that term in Section 302(a)(2) of ERISA and Section 412(a) of the
Code.
Affiliate - means a Person (other than a Restricted Subsidiary)
---------
which directly or indirectly controls, or is controlled by, or is
under common control with, the Company. The term "control" means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
Agreement - means this Note Agreement dated as of January 24,
---------
1991 between the Company and you (including Attachments), as amended
or modified from time to time.
Business Day - means a day other than a Saturday, a Sunday, or in
------------
the case of any Note with respect to which the provisions of Section
7.1 hereof are applicable, a day on which the bank designated (by the
holder of such Note) to receive (for such holder's account) payments
on such Note is, or banks located in the State of Connecticut are,
required or authorized by law to be closed.
Capital Lease - means any lease the obligation for rentals with
-------------
respect to which is required to be capitalized on a balance sheet of
the lessee in accordance with generally accepted accounting
principles.
Closing Date - Section 1.2
------------
Code - means the Internal Revenue Code of 1986, as now in effect
----
or as hereafter amended. All citations to sections of the Code are
to such sections as they may from time to time be amended or
renumbered.
Common Control Entity - means any corporation or other trade or
---------------------
business under common control with the Company as determined under
Sections 414(b) or (c) of the Code.
Consolidated Funded Debt - at any date means the aggregate amount
------------------------
of Funded Debt of the Company and all Restricted Subsidiaries at such
date, determined on a consolidated basis, but excluding indebtedness
if owed or guaranteed by a Restricted Subsidiary to the Company or any
other Restricted Subsidiary or by the Company to a Restricted
Subsidiary.
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<PAGE>
Consolidated Net Income - means net earnings after income taxes
-----------------------
of the Company and each Restricted Subsidiary (only for the period
during which it is a Restricted Subsidiary), including any earnings of
any Unrestricted Subsidiary actually remitted to the Company or any
Restricted Subsidiary, determined on a consolidated basis, excluding:
(1) any extraordinary items, including, without
limitation, any gain arising from any write-up of assets and
loss from any write-down of assets; and
(2) net earnings of any Person prior to becoming a
Restricted Subsidiary.
Consolidated Net Worth - means the sum of the consolidated
----------------------
capital, surplus and retained earnings accounts of the Company and its
Restricted Subsidiaries as determined in accordance with the
accounting requirements of the DPUC.
Consolidated Total Capitalization - Consolidated Funded Debt and
---------------------------------
Consolidated means the sum of the Net Worth.
Consolidated Total Assets - at any date means the aggregate
-------------------------
amount of assets of the Company and Restricted Subsidiaries,
determined on a consolidated basis in accordance with the accounting
requirements of the DPUC.
Current Debt - with respect to any Person, means:
------------
(A) all liabilities for borrowed money, including,
without limitation
(i) all obligations under Capital Leases, and
(ii) all liabilities secured by any Lien
existing on Property owned by that Person (whether
or not those liabilities have been assumed)
which, in either case, are payable on demand or
within one year from their creation, or are
(without duplication) liabilities constituting
principal payments due within one year from the
date of determination on indebtedness for borrowed
money expressed to mature more than one year from
the date of its creation, except any liabilities which
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<PAGE>
are renewable or extendible at the option of
are renewable or extendible at the option of the
debtor to a date more than one year from the date
of creation thereof; and
(B) the aggregate amount of Guaranties by such Person
of all such liabilities of other Persons.
Debt - means as of the date of any determination thereof the
----
aggregate of Current Debt plus Funded Debt.
Designated Real Property - means that property, consisting of
------------------------
approximately 2,900 acres of unimproved real property, designated in
Attachment G hereto and determined by the Company not to be needed for
utility operations.
Distribution - means:
------------
(1) dividends or other distributions in respect of
capital stock of the Company (except distributions in such
stock); and
(2) the redemption or acquisition of such stock or of
warrants, rights or other options to purchase such stock
(except (a) when solely in exchange for such stock, (b)
mandatory sinking fund redemptions of the preferred stock of
the Company, and (c) optional "double-up" redemptions of
Series A Preferred Stock described in paragraph numbered
24(d) of the certificate amending the Company's certificate
of incorporation filed with the Secretary of the State of
the State of Connecticut on December 14, 1970);
in the case of (1) or (2) above valued at the fair market
value of the Property being dividend, distributed, or
otherwise transferred as a Distribution.
DPUC - shall mean the Connecticut Department of Public Utility
----
Control.
Employee Pension Benefit Plan - shall have the meaning assigned
-----------------------------
to that term in Section 3(2) of ERISA.
Employer Liability - means the liability computed under Sections
------------------
4062, 4063 and 4064 of ERISA.
ERISA - means the Employee Retirement Income Security Act of
-----
1974, as now in effect or as hereafter amended. All citations to
sections of ERISA are to such sections as they may from time to time
be amended or renumbered.
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Event of Default - Section 5.1.
----------------
First Mortgage Bonds - shall mean bonds issuable pursuant to and
--------------------
secured by the Mortgage,
Funded Debt - with respect to any Person, means without
-----------
duplication:
(1) its liabilities for borrowed money, other than
Current Debt; and
(2) any Capital Lease obligation, other than Current Debt.
Guaranty - with respect to any Person, means all guaranties of,
--------
and all other obligations which in effect guaranty, any Funded Debt of
any other Person (the "primary obligor") in any manner (except those
which, in effect, guarantee any indebtedness or the obligation of the
Company or any Restricted Subsidiary), including obligations incurred
through an agreement, contingent or otherwise, by such Person:
(1) to purchase such Funded Debt or any Property
constituting security therefor;
(2) to advance or supply funds for the purchase or
payment of such Funded Debt; or
(3) to lease Property, or to purchase Securities or
other Property or services, primarily for the purpose of
assuring the owner of such Funded Debt of the ability of the
primary obligor to make payment of the Funded Debt;
but excluding endorsements in the ordinary course of
business of negotiable instruments for deposit or
collection.
The amount of any Guaranty shall be deemed to be the outstanding
principal amount of such Funded Debt.
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 the interest is based on common law, statute or contract
(including 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
not include minor reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions and other minor
title exceptions affecting Property,
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<PAGE>
provided that they do not constitute security for a
- --------
monetary obligation, and shall not include
negative pledge or other agreements restricting Liens. For the
purposes of this Agreement, the Company or a Restricted Subsidiary
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 be deemed to be a Lien.
Make Whole Premium Amount -
-------------------------
(a) with respect to Notes or portions thereof being prepaid
prior to February 1, 2001, means a premium equal to the excess, if
any, of the Present Value of the Outstanding Dollar Years of the
amount being so prepaid over such amount as of the date of prepayment.
The Make Whole Premium Amount shall in no event be less than zero.
(b) with respect to Notes or portions thereof being prepaid on
or after February 1, 2001, means the product of (i) the principal
amount then to be prepaid times (ii) the applicable percentage set out
below:
If Prepaid During the
12-month Period Beginning Applicable Percentage
------------------------- ---------------------
February 1, 2001 4.775 %
February 1, 2002 4.2975 %
February 1, 2003 3.82 %
February 1, 2004 3.3425 %
February 1, 2005 2.865 %
February 1, 2006 2.3875 %
February 1, 2007 1.91 %
February 1, 2008 1.4325 %
February 1, 2009 0.955 %
February 1, 2010 0.4775 %
Thereafter 0 %
Anything in the foregoing to the contrary notwithstanding, the Company
shall not be permitted to prepay the Notes except as provided in
Section 2.2.
Mortgage - shall mean the First Mortgage, dated June 1, 1924,
--------
between the Company and CityTrust (as successor to The Bridgeport
Trust Company), as Trustee, as supplemented and amended from time to
time.
Notes - Section 1.1.
-----
PBGC - shall mean the Pension Benefit Guaranty Corp.
----
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Plan - means any "employee benefit plan," (as that term is
----
defined in Section 3(3) of ERISA) as well as any other written or
formal plan, arrangement or contract involving direct or indirect
compensation, under which the Company or any Subsidiary has any
present or future obligations or liability on behalf of its employees
or former employees or their dependents or beneficiaries, including
but not limited to, each retirement, pension, profit-sharing, thrift,
savings, target benefit, employee stock ownership, cash or deferred,
multiple employer, multi-employer or other similar plan or program,
each other deferred or incentive compensation, bonus, stock option,
employee stock purchase, "phantom stock" or stock appreciation right
plan, each other program providing payment or reimbursement for or of
medical, surgical, hospital, drug rehabilitation, dental or visual
care, psychiatric counselling, or vacation, sick, disability or
severance pay and each other "fringe benefit" plan or arrangement.
Person - means an individual, partnership, corporation, trust or
------
unincorporated organization, and a government or a governmental agency
or political subdivision.
Present Value of the Outstanding Dollar Years - at any time with
---------------------------------------------
respect to Notes or portions thereof being prepaid prior to maturity
means, the amount calculated by discounting all remaining scheduled
payments of principal and interest thereon from the scheduled due date
to the date of prepayment, in accordance with accepted financial
practice and at a discount factor (applied on a semiannual basis)
equal to the sum of (i) the Treasury Constant Yield with respect to
such remaining scheduled payments of principal, plus (ii) 50 basis
points.
Property - means any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
Reportable Event - means any of the events enumerated in Section
----------------
4043(b) of ERISA or the regulations issued thereunder except such
events for which the 30-day notice has been waived under PBGC
Regulation 2615.
Restricted Investments - means all Property, including all
----------------------
investments in any Person whether by acquisition of stock,
indebtedness, other obligation or Security, or by loan, advance,
capital contribution, or otherwise, except:
(1) investments in the Company or one or more Restricted
Subsidiaries or any Person who immediately after such
investment becomes a Restricted Subsidiary;
(2) direct obligations of the United States of America, or
any of its agencies or obligations fully guaranteed by the
United States of America, provided that such obligations
--------
mature within one year from the date acquired;
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(3) certificates of deposit or repurchase agreements
maturing within one year from the date acquired and issued
by banks or trust companies organized under the laws of the
United States or any of its states having combined capital
and surplus greater than $250 million;
(4) commercial paper and taxable or tax-exempt instruments
having either of the two highest ratings by Moody's
Investors Service, Inc. or Standard & Poor's Corporation and
maturing within one year from the date acquired;
(5) instruments maturing after one year from the date
acquired and having either of the two highest ratings by
Moody's Investors Service, Inc. or Standard & Poor's
Corporation, provided such instruments have either a "put"
or rate reset feature recurring not less often then
annually;
(6) investments in the debt obligations of or loans to any
Affiliate company;
(7) acquisition or ownership of stock or Securities
received in settlement of Debt or other obligations owing to
the Company or any Restricted Subsidiary;
(8) Property to be used by the Company or its Restricted
Subsidiaries in the ordinary course of business; and
(9) current assets arising from the sale of goods and
services by the Company or its Restricted Subsidiaries in
the ordinary course of business.
The amount of any Restricted Investment shall be valued at its
net book value.
Restricted Subsidiary - means any Subsidiary,
---------------------
(i) organized under the laws of the United States, Puerto
Rico, or Canada, or a jurisdiction thereof;
(ii) which conducts substantially all of its business and
has substantially all of its Property within the United States
and Canada;
(iii) a majority of each class of common stock of which
is legally and beneficially owned by the Company and its
Restricted Subsidiaries; and
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(iv) designated as a Restricted Subsidiary on Attachment H
hereto.
A Subsidiary may be subsequently designated as a Restricted
Subsidiary by the Company if no Event of Default would occur as a
result of such designation. A Restricted Subsidiary may subsequently
be designated by the Company as an Unrestricted Subsidiary if (a) no
Event of Default would occur as a result of such designation, and (b)
at least $1.00 of additional Funded Debt could be incurred by the
Company and its remaining Restricted Subsidiaries immediately
thereafter pursuant to Section 4.1.
Security - shall have the same meaning as in Section 2(l) of the
--------
Securities Act of 1933, as amended.
Subsidiary - means a corporation in which the Company owns,
----------
directly or indirectly 50% or more of the voting Stock which enables
it ordinarily, in the absence of contingencies, to elect a majority of
the corporate directors (or Persons performing similar functions).
THC - means The Hydraulic Company.
---
Treasury Constant Yield - means the yield to maturity implied by
-----------------------
the Treasury Constant Maturity Series yields reported (for the latest
day for which such yields shall have been so reported as to the
Business Day next preceding the date of payment with respect to any
Notes or portions thereof being paid prior to maturity) in Federal
Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded United States Treasury securities
having a constant maturity equal to the remaining weighted average
life to final maturity (calculated in accordance with accepted
financial practice) of the Notes or portions thereof being prepaid as
of such date. Such implied yield shall be determined (i) by
calculating the remaining average life to final maturity of the Notes
or portions thereof being prepaid rounded to the nearest one-twelfth
year and (ii) if necessary, by interpolating linearly between Treasury
Constant Maturity Series yields.
Unrestricted Subsidiary - means any Subsidiary which is not at
-----------------------
the time a Restricted Subsidiary.
Utility Subsidiary - means any Restricted Subsidiary that is a
------------------
utility company, the rates of which are regulated by state or federal
regulatory agencies.
Voting Stock - means Securities, the holders of which are
------------
ordinarily, in the absence of contingencies, entitled to elect the
corporate directors (or persons performing similar functions)
irrespective of whether or not, at the time, stock of any other
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class or classes shall have or might have special voting powers or rights
by reason of the happening of any contingency.
Withdrawal Liability - means the liability described in Section
--------------------
4201 of ERISA.
6.2 Accounting Principles.
The character or amount of any asset or liability or item of
income or expense required to be determined under this Agreement and
each consolidated or other accounting computation required to be made
under this Agreement shall be determined or made in accordance with
generally accepted accounting principles at the time in effect, to the
extent applicable, except where such principles are inconsistent with
the requirements of this Agreement.
6.3 Directly or Indirectly.
Where any provision in this Agreement refers to any action which
any Person is prohibited from taking, the provision shall be
applicable whether the action is taken directly or indirectly by such
Person, including actions taken by, or on behalf of, any partnership
in which such Person is general partner, and all liabilities of such
partnerships shall be considered liabilities of such Person under this
Agreement.
6.4 Governing Law.
This Agreement and the Notes shall be governed by and construed
in accordance with the local law of the State of Connecticut.
6.5 Rank.
The Notes shall rank pari passu with any and all of the Company's
---- -----
unsecured obligations to any financial institutions outstanding as of
the Closing Date that are not specifically made subordinate to the Notes.
6.6 Section Headings and Table of Contents.
The title of the Sections and the Table of Contents appear as a
matter of convenience only, do not constitute a part of this Agreement
and shall not affect the construction hereof.
SECTION 7. PURCHASER'S SPECIAL RIGHTS
7.1 Direct Payment.
The Company agrees that, notwithstanding any provision in this
Agreement or the Notes to the contrary, it will pay all sums
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becoming due to any institutional holder of Notes in the manner provided
in Attachment A or in any other commercially reasonable manner consistent
with the terms of this Agreement as such holder may designate to the
Company in writing (without presentment of or notation on the Notes).
Any holder of Notes which elects the benefit of this Section agrees
that in the event of a transfer of its Notes (a) a notation will be
made thereon prior to such transfer of all principal, if any, paid on
its Notes, and the date to which interest has been paid, and (b)
notice will be given to the Company of the name and address of the
transferee of the transferred Notes.
7.2 Issue Taxes.
The Company will pay all taxes, if any, in connection with the
issuance and sale of the Notes and in connection with any
modification of the Notes and will save you harmless against any
and all liabilities relating to such taxes.
7.3 Note Register.
The Company will cause to be kept a register for the registration
and transfer of Notes. The names and addresses of the holders of
Notes, and all transfers of and the names and addresses of the
transferees of Notes, will be registered in the register. The Person
in whose name any Registered Note is registered shall be deemed and
treated as the owner and holder thereof for all purposes of this
Agreement, and the Company shall not be affected by any notice or
knowledge to the contrary.
7.4 Exchange of Notes.
Upon surrender of any Note to the Company, the Company, upon
request, will execute and deliver at its expense (except as provided
below) new Notes, in denominations of at least $50,000 (except as may
be necessary to reflect any principal amount not evenly divisible by
$50,000), in an aggregate principal amount equal to the outstanding
principal amount of the surrendered Note. Each new Note shall be
payable to any holder as the surrendering holder may request and shall
be a Registered Note. Each new Note shall be dated and bear interest
from the date to which interest has been paid on the surrendered Note
or dated the date of the surrendered Note if no interest has been paid
thereon. The Company may require payment of a sum sufficient to cover
any stamp tax or governmental charge imposed in respect of any
transfer.
7.5 Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or
mutilation of any Note, and
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(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of the
Note is an institutional holder, its own agreement of indemnity
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation of the Note,
the Company at its expense will execute and deliver a new Note, dated
and bearing interest from the date to which interest has been paid on
the lost, stolen, destroyed or mutilated Note or dated the date of the
lost, stolen, destroyed or mutilated Note if no interest has been paid
thereon.
SECTION 8. MISCELLANEOUS
8.1 Notices.
(a) All notices and other communications under this Agreement or
under the Notes will be in writing and will be mailed by first class
mail, postage prepaid:
(1) if to you, in the manner provided in Attachment A or in any
other manner as you may have most recently advised the Company in
writing, or
(2) if to the Company, at its address shown at the beginning of
this Agreement, or at any other address as it may have most recently
furnished in writing to you and to all other holders of the Notes.
(b) Any notice so addressed and mailed by registered or
certified mail shall be deemed to be given when so mailed. Any notice
so addressed and otherwise sent or delivered shall be deemed to be
given when actually received by the addressee.
8.2 Reproduction of Documents.
This Agreement and all related documents, including (a) consents,
waivers and modifications which may subsequently be executed, (b)
documents received by you at the closing of your purchase of the Notes
(except the Notes themselves), and (c) financial statements,
certificates and other information previously or subsequently
furnished to you, may be reproduced by you by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other
similar process.
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The Company agrees and stipulates that any such
reproduction shall, to the extent permitted by applicable law, be
admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence
and whether or not the reproduction was made by you in the regular
course of business) and that any enlargement, facsimile or further
reproduction of the reproduction shall likewise be admissible in
evidence.
8.3 Purchase for Investment; ERISA.
(a) You represent to the Company that you are purchasing the
Notes for your own account for investment and with no present
intention of distributing or reselling any of the Notes, but without
prejudice to your right at all times to sell or otherwise dispose of
all or part of the Notes under an effective registration statement
under the Securities Act of 1933 and any applicable securities laws of
the several states, as amended, or under a registration exemption
available under the Act or those laws, provided however, that nothing
contained herein shall be construed as creating an obligation upon the
Company to register any of the Notes under the Act or such laws.
(b) You further represent that either: (1) no part of the funds
to be used by you to purchase the Notes constitutes assets allocated
to any separate account maintained by you; or (2) no part of the funds
to be used by you to purchase the Notes constitutes assets allocated
to any separate account maintained by you such that the application of
such funds constitutes a prohibited transaction under Section 406 of
ERISA.
8.4 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties, including without
limitation the holder of any Note, except that your obligation to
purchase the Notes (as provided in Section 1.2) shall be a right which
is personal to the Company and such right shall not be transferable or
assignable by the Company to any other Person (including successors at
law) whether voluntarily or involuntarily. The provisions of this
Agreement are intended to be for the benefit of all holders, from time
to time, of the Notes, and shall be enforceable by any holder, whether
or not an express assignment of rights under this Agreement has been
made by you or your successor or assign.
8.5 Amendment and Waiver; Acquisition of Notes.
(a) Amendment and Waiver. This Agreement may be amended, and
--------------------
the observance of any term of this Agreement may be waived, with (and
only with) the written consent of the Company and the holders
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<PAGE>
<PAGE>
of at least 66 2/3% of the outstanding principal amount of the Notes
(exclusive of Notes then owned by the Company, Restricted Subsidiaries
and Affiliates), provided that no amendment or waiver of any of the
provisions of Sections 1, 7 and Attachments C and D shall be effective
as to any holder of the Notes unless consented to by such holder in
writing, and provided further, that no amendment or waiver shall,
without the written consent of the holders of all the outstanding
Notes, (1) subject to Section 5.2(b), change the amount or time of any
prepayment, payment of principal or premium or the rate or time of
payment of interest, (2) amend Section 5, or (3) amend this Section
8.5(a). Executed or complete and correct copies of any amendment or
waiver effected pursuant to the provisions of this Section 8.5(a)
shall be delivered by the Company to each holder of outstanding Notes
promptly following the date on which the same shall become effective.
(b) Acquisition of Notes. Neither the Company nor any
--------------------
Restricted Subsidiary nor any Affiliate will, directly or indirectly,
acquire or make any offer to acquire any Notes unless the Company or
such Restricted Subsidiary or Affiliate shall contemporaneously offer
to acquire Notes, pro rata, from all holders of the Notes and upon the
same terms.
8.6 Duplicate Originals.
Two or more duplicate originals of this Agreement may be signed
by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument.
8.7 Payments Due on Holidays.
If any payment due on, or with respect to, any Note shall fall
due on a day other than a Business Day, then such payment shall be
made on the first Business Day following the day on which such payment
shall have so fallen due, without the payment of any additional
interest or penalty.
If this Agreement is satisfactory to you, please so indicate by
signing the acceptance at the foot of a counterpart of this Agreement
and return a counterpart to the Company, whereupon this Agreement will
become binding between us in accordance with its terms.
Very truly yours,
BRIDGEPORT HYDRAULIC COMPANY
By /s/WILLIAM EMSWILER
--------------------------------------
Title: Senior Vice President
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<PAGE>
<PAGE>
Accepted:
FIRST COLONY LIFE INSURANCE COMPANY
By /S/J. ALDEN BUTLER
------------------------------
J. Alden Butler,
Senior Vice President
ATTACHMENT A
Principal
Amount Manner of
Institution of Note Payment
----------- ------- -------
First Colony Life $20,000,000 By bank wire transfer of
Insurance Company Federal or other
700 Main Street immediately available funds
Lynchburg, VA 24504 (identifying each payment
Attn: Mr. J. Alden as "Bridgeport Hydraulic
Butler Company 9.55% Notes due
(Federal Tax I.D. February 1, 2021, principal
No.:#540596414 or interest") to:
Crestar/Richmond ABA
#05-10-0002-0 for credit
to First Colony Life
Insurance Company Acct.
#10765400 Attn: Barbara
Crossman
-33-
<PAGE>
<PAGE>
ATTACHMENT B
THIS NOTE HAS BEEN ISSUED IN RELIANCE UPON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 (THE "ACT")
AND APPLICABLE STATE LAWS AND MAY NOT BE TRANSFERRED UNLESS SUCH
TRANSFER IS REGISTERED UNDER SUCH ACT AND SUCH STATE LAWS, OR UNLESS
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE UNDER THE ACT AND
SUCH STATE LAWS.
BRIDGEPORT HYDRAULIC COMPANY
9.55% Senior Note due February 1, 2021
No. Greenwich, Connecticut
---------------
$ January 24, 1991
--------------
Bridgeport Hydraulic Company, a Connecticut corporation (the
"Company"), for value received, hereby promises to pay
_________________ or registered assigns the principal sum of
________________ Dollars ($______________) on February 1, 2021 and to
pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the unpaid principal balance hereof from the date of this
Note at the rate of 9.55% per annum, semi-annually on the lst day of
February and the lst day of August each year, commencing on August 1,
1991, until the principal amount hereof shall become due and payable;
and to pay on demand interest on any overdue principal (including any
overdue prepayment of principal) and premium, if any, and (to the
extent permitted by applicable law) on any overdue payment of
interest, at the rate of 10.55% per annum; and to pay any Make Whole
Premium Amount required as specified in the Agreement (as defined
below).
Payments of principal, premium, if any, and interest shall be
made in such coin or currency of the United States of America as at
the time of payment is legal tender for the payment of public and
private debts by check mailed and addressed to the registered holder
hereof at the address shown in the register maintained by the Company
for such purpose, or, at the option of the holder hereof, in such
manner and at such other place in the United States of America as the
holder hereof shall have designated to the Company in writing in
accordance with the terms of the Agreement.
This Note is one of an issue of Notes of the Company issued in an
aggregate principal amount limited to $20,000,000 pursuant to the
Company's Note Agreement with First Colony Life Insurance Company,
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<PAGE>
<PAGE>
dated as of January 24, 1991 (the "Agreement") , and is entitled to
the benefits thereof and is subject to the resale restrictions
contained therein. As provided in such Agreement, this Note is
subject to prepayment at certain times and in certain circumstances,
in whole or in part, with or without a premium, all as specified in
said Agreement. The Company agrees to make required payments on
account of said Notes in accordance with the provisions of said
Agreement.
The Notes are issuable as registered Notes and are transferable
only by surrender thereof at the principal office of the Company in
Bridgeport, Connecticut, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of this
Note or his attorney duly authorized in writing.
Under certain circumstances, as specified in said Agreement, the
principal of this Note may be declared due and payable in the manner
and with the effect provided in said Agreement.
THE MAKER ACKNOWLEDGES THAT THE DEBT EVIDENCED BY THIS NOTE ARISES OUT
OF A COMMERCIAL TRANSACTION AND WAIVES THE RIGHTS TO NOTICE AND
HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS
OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY
PREJUDGMENT REMEDY WHICH THE HOLDER MAY DESIRE TO USE AND SPECIFICALLY
AUTHORIZES THE ATTORNEY FOR THE HOLDER HEREOF TO ISSUE A WRIT FOR A
PREJUDGMENT REMEDY WITHOUT A COURT ORDER.
This Note and said Agreement are governed by and construed in
accordance with the local law of the State of Connecticut.
BRIDGEPORT HYDRAULIC COMPANY
(Corporate Seal) By
--------------------------------
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<PAGE>
<PAGE>
EXHIBIT 10(i)
January 1, 1994
Mr. John J. Brennan, Jr.
Mr. William A. Brennan
70 Platt Road
Shelton, CT
Gentlemen:
This letter will set forth the terms of the modification of a
letter agreement dated February 23, 1979 among Main Street South Corporation,
a Connecticut corporation ("MSSC"), John J. Brennan, Jr., and William A.
Brennan (John J. Brennan, Jr., and William A. Brennan are collectively
referred to as the "Brennans" for purposes of this agreement) to organize and
operate a joint venture relating to certain property acquired from Grand
Street Metal Products Company. MSSC has acquired from the Brennans as of the
date of this letter a one-sixth (1/6) undivided interest in the remaining
property of the joint venture, being that parcel, together with improvements
thereon, described on Schedule A hereto, so that MSSC now owns a two-thirds
(2/3) undivided interest in said property and the Brennans now own a
one-third (1/3) undivided interest therein.
The letter agreement is hereby modified and amended as follows:
1. The last sentence of paragraph 3 is deleted and the
following sentence is substituted therefor effective as of the date of this
letter:
Additional capital contributions shall be made two-thirds
(2/3) by MSSC and one-third (1/3) by the Brennans, at such times
and upon such terms and conditions as shall be agreed upon by MSSC
and the Brennans.
2. Paragraph 4 is deleted effective as of the date of this
letter and the following is substituted therefor:
MSSC shall be entitled to receive sixty-six and two third
percent (66 2/3%) of the profits, losses and capital distributions
of the joint venture and the Brennans collectively shall be
entitled to receive thirty-three and one-third percent (33 1/3%)
of the profits, losses and capital distributions of the joint
venture.
3. Paragraph 5 is deleted effective as of the date of this
letter and the following is substituted therefor:
All decisions relating to activities and operations of the
joint venture shall be determined by MSSC after consultation with
the Brennans.
<PAGE>
<PAGE>
Mr. John J. Brennan, Jr. January 1, 1994
Mr. William A. Brennan Page Two
4. The letter agreement shall remain in full force and effect
as herein modified and amended, this amendment being binding upon the parties
hereto, their heirs, executors, administrators, successors and assigns.
If the foregoing properly reflects our understanding regarding
the amendment of our joint venture agreement, please sign both copies of this
letter and return one executed copy to the undersigned.
Very truly yours,
MAIN STREET SOUTH CORPORATION
By _____________________________
Its
Agreed to and accepted this ______ day of ______________________, 1994.
/s/John J. Brennan, Jr.
________________________________
John J. Brennan, Jr.
/s/William A. Brennan
________________________________
William A. Brennan
<PAGE>
<PAGE>
Schedule A
-----------
All that certain piece or parcel of land situated in the City of
Shelton, County of Fairfield, and State of Connecticut, bounded and described
as follows:
Commencing at a point on the easterly streetline of Canal Street, said
point being also the intersection of the easterly streetline of said Canal
Street and the northerly streetline of Wharf Street; thence,
N74" 30' 00"E, 171.19 feet along said Wharf Street to
a point along land now or formerly of the
Connecticut Department of Transportation (CDOT),
said point being also the intersection of the
northerly streetline of said Wharf Street and the
easterly streetline of Riverdale Avenue; thence,
N38 degrees 30' 31"W, 34.33 feet;
N61 degrees 37' 51"E, 164.95 feet to a point along the west
bank of the Housatonic River; said last two
bearings and distances being along land of said
CDOT; thence,
N23 degrees 53' 20"W, 118.04 feet;
N24 degrees 04' 59"W, 87.86 feet;
N14 degrees 08' 33"W, 99.59 feet;
N18 degrees 33' 28"W, 104.78 feet;
N11 degrees 51' 34"W, 80.33 feet;
N06 degrees 13' 38"W, 143.32 feet;
N19 degrees 30' 20"W, 36.54 feet;
N35 degrees 41' 13"W, 25.79 feet;
N17 degrees 54' 53"W, 69.03 feet;
N32 degrees 48' 16"W, 21.07 feet; thence, 16.22 feet along
a curve to the left having a radius of 15.00 feet;
thence,
S85 degrees 13' 31"W, 9.77 feet to a point on a bulkhead
retaining wall along the west bank of the
Housatonic River; said last twelve bearings and
distance being along the mean high water line of
said Housatonic River; thence,
N15 degrees 27' 21"W, 257.17 feet;
N34 degrees 22' 56"W, 15.65 feet to a point; said last two
bearings and distances being along said bulkhead
retaining wall; thence,
N26 degrees 23' 22"E, 16.26 feet to a point along the
southerly streetline of Cornell Street; thence,
S74 degrees 31" 26"W, 278.47 feet to a point along the
easterly streetline of Canal Street; said point
being also the intersection of the southerly
streetline of said Cornell Street and the easterly
streetline of said Canal Street; thence,
S15 degrees 05"E, 1,143.83 feet along the easterly
streetline of said Canal Street to the point or
place of beginning.
Said parcel contains 7.51 acres.
<PAGE>
EXHIBIT 10(m)
MANAGEMENT SUCCESSION AND CONSULTING AGREEMENT
----------------------------------------------
This MANAGEMENT SUCCESSION AND CONSULTING AGREEMENT (the
"Agreement") is made as of October 1, 1995, by and between Aquarion
Company ("Aquarion"), a Delaware corporation having its principal
office in Bridgeport, Connecticut, and Jack E. McGregor, a resident of
Easton, Connecticut ('Executive").
W I T N E S S E T H:
--------------------
WHEREAS, Executive is the President and Chief Executive Officer
of Aquarion;
WHEREAS, Executive has determined to retire as President and
Chief Executive Officer of Aquarion, while continuing to play an
active role in supporting its management, in order to devote a major
part of his time to development activities in the greater Bridgeport
region and to the rebuilding of the City of Bridgeport;
WHEREAS, Aquarion has identified or will soon identify the
successor to Executive as its President and Chief Executive Officer;
WHEREAS, Aquarion and Executive each desire to ensure the
continuity of Aquarion's management and to establish an orderly
transition procedure with respect to the positions of President and
Chief Executive Officer;
WHEREAS, as part of such transition procedure, Aquarion desires
to retain Executive as a consultant following the termination of his
employment;
<PAGE>
<PAGE>
- 2 -
WHEREAS, Executive desires to cooperate with his successor as
Aquarion's President and Chief Executive Officer, and is willing to
serve as a consultant to Aquarion following the termination of his
employment; and
WHEREAS, Aquarion desires to ensure Executive's cooperation in
connection with such transition and to compensate Executive for
certain reductions in Executive's employee benefits as a result of the
termination of his employment and such transition.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, Aquarion and Executive, intending to be
legally bound, do hereby agree as follows:
1. Certain Defined Terms: In addition to terms defined
----------------------
elsewhere herein, the following terms shall have the following
meanings when used in this Agreement with initial capital letters:
(a) "Board" means the Board of Directors of Aquarion.
(b) "Cause" means that Executive, in the reasonable
determination of the Board, shall have:
i) committed an intentional act of fraud,
embezzlement, or theft in connection with Executive's
duties or in the course of either his employment with
Aquarion or his service as a consultant to Aquarion;
<PAGE>
<PAGE>
- 3 -
ii) caused intentional wrongful and material damage
to property of Aquarion or any of its subsidiaries;
iii) intentionally and wrongfully disclosed
confidential information of Aquarion or any of its
subsidiaries;
iv) engaged in any gross negligence or gross
misconduct in the course of either his employment with
Aquarion or his service as a consultant to Aquarion;
v) been convicted of a felony; or
vi) materially breached his obligations under this
Agreement and shall have not remedied such breach
within thirty (30) days after receiving notice from the
Board specifying the details thereof.
For purposes of this Agreement, an act or omission on the part of
Executive shall be deemed "intentional" if it was not due primarily to
an error in judgment or negligence and was done by Executive not in
good faith and without reasonable belief that the act or omission was
in the best interests of Aquarion.
(c) "Consulting Period" means the period commencing the day
following the date of Termination of Executive as an employee of
Aquarion and ending on the earlier of (i) the date of Termination of
the consulting relationship between Aquarion and Executive pursuant to
Section 2(b) or Section 4 hereof and (ii) the fifth anniversary of the
commencement of such period (or such later date as the Compensation
Committee of the
<PAGE>
<PAGE>
- 4 -
Board, in its sole discretion, shall determine and the Executive may
agree to); provided that, subject to earlier Termination as aforesaid,
the Consulting Period shall consist of the "First Consulting Period"
commencing the day following the date of Executive's Termination of
employment with Aquarion and ending on the first anniversary of such
day and the "Second Consulting Period" comprising the remainder of the
Consulting Period. Notwithstanding the foregoing, the Second
Consulting Period shall not commence, and Executive shall be
Terminated, as of the last day of the First Consulting Period, if the
Compensation Committee of the Board, in its sole discretion, shall so
determine.
(d) 'Employment Agreement" means the employment agreement
dated as of January 1, 1990 between Aquarion (then "The Hydraulic
Company") and Executive.
(e) "Half-time" means the equivalent of approximately 115
working days per calendar year.
(f) "One-fifth time" means the equivalent of
approximately 46 working days per calendar year.
(g) "Permanent and Total Disability" means a disability
that renders (or would render if it occurred at an earlier age) the
Executive eligible to receive disability benefits under Title 11 of
the Social Security Act, as amended from time to time.
(h) "Retirement Plan" means the Amended and Restated
Retirement Plan for Employees of Aquarion Company, as such plan may be
amended from time to time, and any successor to such plan.
<PAGE>
<PAGE>
- 5 -
(i) "Supplemental Plan" means the Supplemental Savings and
Retirement Plan of Aquarion Company, as such plan may be amended from
time to time, and any successor to such plan.
(j) "Terminate," "Termination" and correlative terms mean
the termination of Executive's employment or consulting with Aquarion,
including voluntary termination by Executive.
2. Employment and Consulting:
-------------------------
(a) Executive shall voluntarily resign from the position of
President and Chief Executive Officer of Aquarion and Terminate,
effective as of October 1, 1995, but not prior to such date unless
requested by Executive and consented to by the Board. Between the
date hereof and such Termination, Executive shall perform all duties
pertaining to his office and in accordance with the Employment
Agreement and shall work in cooperation with the Board and his
designated successor (or successors) to the foregoing position to
effect the orderly transition of responsibilities to such successor
(or successors) on such schedule as shall be determined by mutual
agreement. The terms of the Employment Agreement are modified only to
the extent expressly inconsistent with this Agreement, but nothing
contained in this Agreement shall confer upon Executive any additional
right to be retained as President or Chief Executive Officer of
Aquarion or to be retained as an employee of Aquarion in any other
capacity; and from and after October 1, 1995 Executive shall be deemed
to have retired at age 62 for purposes of subsections 4(d)(i)(B) and
4(d)(iv) of the Employment Agreement.
<PAGE>
<PAGE>
- 6 -
(b) Upon his Termination as an employee of Aquarion,
Executive shall be retained by Aquarion on a consulting basis for the
Consulting Period. During the Consulting Period, Executive shall be
available to assist Aquarion on a part-time basis (i.e., on a
half-time basis during the First Consulting Period and on a one-fifth
time basis during the Second Consulting Period) with the transition of
responsibilities to his designated successor (or successors) and with
special projects designated by the Board, including, but not limited
to, real estate, acquisitions, industry consolidation efforts,
community relations, economic development activities, legislative and
regulatory relations, and privatization contract management. During
the First Consulting Period, Employer shall pay to Executive
a consulting fee at a rate of $175,000 per year, and during the Second
Consulting Period, Employer shall pay to Executive a consulting fee at
a rate of $75,000 per year; such consulting fees shall be paid in
monthly installments in arrears and shall be subject to reduction on
account of all applicable tax withholding requirements. Retention of
Executive during the Second Consulting Period shall be on a year-to-
year basis, such that the Compensation Committee of the Board, in its
sole discretion and for any reason whatsoever, or Executive, in his
sole discretion and for any reason whatsoever, may determine to
terminate Executive's services as a consultant on any anniversary of
the commencement of the Second Consulting Period. Executive's
consulting services shall also terminate, and payment of the foregoing
consulting fees also shall cease in the event of Executive's death or
his Permanent and Total Disability and are subject to Section 13
hereof.
3. Additional Retirement Benefit: Commencing as of October 1,
------------------------------
1995, and continuing until the death of Executive, Aquarion shall pay
to Executive as an additional retirement benefit an annual amount
equal to $25,900. Such additional retirement benefit shall be paid in
equal monthly installments on the first day of each month, shall be
subject to reduction on account of all applicable tax withholding
requirements of federal, state or
<PAGE>
<PAGE>
- 7 -
municipal laws, shall cease upon the death of Executive, and shall be
subject to Section 13 hereof.
4. Termination for Cause: Aquarion may Terminate Executive's
----------------------
employment or consulting at any time for Cause. Upon any such
Termination, the consulting fees provided for in Section 2(b) hereof
shall not continue or commence to be paid.
5. Non-Competition: Confidential Information:
-----------------------------------------
(a) Executive agrees that for the entire Consulting Period, and
for a period of six months thereafter (one year thereafter if
Executive's consulting with Aquarion is voluntarily terminated by
Executive), Executive shall not, without the written consent of the
Board in each instance, directly or indirectly be or become interested
as a partner, principal, agent, employee, stockholder, officer,
director, trustee, consultant, or in any other capacity whatsoever
(except as a less than 10% owner of stock of a public corporation) in
any water company operating within the State of Connecticut, other
than a company that is owned by or affiliated with Aquarion, nor shall
Executive, directly or indirectly, assist or lend his name to any such
water company, except as such water company may be benefited by
Executive's compensated or uncompensated representation of, or efforts
or advocacy on behalf of, the water supply industry on a local,
regional or national basis; and provided, however, that Executive may,
during the Consulting Period and thereafter, practice law, either
individually or as a member of a law firm, and neither Executive nor
any such law firm shall be proscribed from representing any other
water company in a professional capacity as an attorney-at-law or as a
"lobbyist" (as defined in the Connecticut General Statutes), subject
to the applicable Rules of Professional Conduct for attorneys.
<PAGE>
<PAGE>
- 8 -
(b) Executive shall not at any time after the date of
Termination reveal to anyone other than authorized representatives of
Aquarion, or use for his own benefit, any trade secrets, customer
information or other information that has been designated as
confidential by Aquarion or is understood by Executive to be
confidential without the written authorization of the Board in each
instance, unless such information is or becomes available to the
public or is otherwise public knowledge or in the public domain for
reasons other than Executive's acts or omissions.
(c) If Executive breaches any of his obligations under this
Section 5, and such breach constitutes Cause or would constitute Cause
if it occurred prior to the end of the Consulting Period, Aquarion
shall thereafter have no obligation to pay the consulting fees
pursuant to Section 2(b) of this Agreement, but shall remain obligated
for compensation and benefits as provided in any other plans, policies
or practices, including, without limitation, the Retirement Plan, the
Supplemental Plan, and the additional retirement benefit pursuant to
Section 3 of this Agreement, then applicable to Executive in
accordance with the terms thereof. Executive hereby acknowledges that
Aquarion's remedies at law for any breach of his obligations under
this Section 5 would be inadequate. Executive and Aquarion agree
that, in addition to any other remedies provided for herein or
otherwise available at law, temporary and permanent injunctive relief
may be granted in any proceeding which may be properly brought by
Aquarion to enforce the provisions of this Section 5 without the
necessity of proof of actual damages.
6. Taxes: Aquarion may withhold from any amounts payable under
-----
this Agreement all federal, state, city, or other taxes as Employer is
required to withhold pursuant to any law or government regulation or
ruling. Executive shall bear all expense
<PAGE>
<PAGE>
- 9 -
of, and be solely responsible for, all federal, state, local or
foreign taxes due with respect to any payment received hereunder.
7. Successors and Binding Agreement:
---------------------------------
(a) This Agreement shall be binding upon and inure to the
benefit of Aquarion and any successor to Aquarion, including, without
limitation, any persons acquiring directly or indirectly all or
substantially all of the business and/or assets of Aquarion whether by
purchase, merger, consolidation, reorganization, or otherwise (and
such successor shall thereafter be deemed "Aquarion" for the purposes
of this Agreement), but will not otherwise be assignable,
transferable, or delegable by Aquarion. Aquarion shall require any
successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization, or otherwise) to all or substantially
all of the business and/or assets of Aquarion, by agreement in form
and substance satisfactory to Executive, expressly to assume and agree
to perform this agreement in the same manner and to the same extent
Employer would be required to perform if no such succession had taken
place.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, and/or
legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign,
transfer, or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 7(a) and 7(b)
hereof. Without limiting the generality or effect of the foregoing,
Executive's rights hereunder shall not be assignable, transferable, or
delegable, whether by pledge, creation of
<PAGE>
<PAGE>
- 10 -
a security interest, or otherwise, and any attempted assignment or
transfer contrary to this Section 7(c) shall be null and void.
8. Notices: All communications, including, without limitation,
--------
notices, consents, requests, or approvals, required or permitted to be
given under this Agreement shall be in writing.
9. Absence of Funding: Additional retirement benefits payable
-------------------
to Executive under this Agreement shall be 'unfunded," as that term
is used in Sections 201(2), 301(a)(3), 401(a)(1) and 4021(a)(6) of the
Employee Retirement Income Security Act of 1974, as amended, with
respect to unfunded plans maintained primarily for the purpose of
providing deferred compensation to a select group of management or
highly compensated employees, and Aquarion shall administer this
Agreement in a manner that will ensure that Executive will not be
considered to have received a taxable economic benefit prior to the
time at which such benefits are actually payable. The provisions of
this Agreement for additional retirement benefits constitute a mere
promise of Aquarion to provide such benefits, and Executive's right to
such benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of the Executive or the
Executive's spouse. Accordingly, Aquarion shall not be required to
segregate or earmark any of its assets for the benefit of Executive.
10. Governing Law: The validity, interpretation, construction,
--------------
and performance of this Agreement shall be governed by and construed
in accordance with the substantive laws of the State of Connecticut,
without giving effect to the principles of conflict of laws of such
State, to the extent not preempted by applicable federal law.
<PAGE>
<PAGE>
- 11 -
11. Validity: If any provision of this Agreement or the
---------
application of any provision hereof to any person or circumstances is
held invalid, unenforceable, or otherwise illegal, the remainder of
this Agreement and the application of such provision to any other
person or circumstances shall not be affected, and the provision so
held to be invalid, unenforceable, or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid, or legal.
12. Non-Exclusivity of: Nothing in this Agreement shall prevent
------------------
or limit Executive's present or future participation in any benefit,
bonus, incentive, or other plan or program provided by Aquarion for
which Executive has qualified or may qualify, nor shall this Agreement
in any manner limit or otherwise affect such rights as Executive may
have under any stock option or other agreements with Aquarion, and
Executive shall be deemed to have retired at age 62 on the date of
Termination as an employee of Aquarion for purposes of any stock
options and restricted stock and for purposes of eligibility for
benefits, but not for purposes of calculating the amount of benefits
under the Supplemental Plan. Amounts or benefits which are vested or
which Executive is otherwise entitled to receive under any such
agreement or any plan or program of Aquarion at or subsequent to the
date of Termination as an employee of Aquarion, including, without
limitation, the Retirement Plan, the Supplemental Plan and the
additional retirement benefit pursuant to Section 3 of this Agreement,
shall be payable in accordance with such agreements, plan or program
provided, however, that any compensation and benefits received by
Executive pursuant to this Agreement shall be in lieu of (but, if
necessary to give effect to this provision, shall be reduced by) all
compensation and benefits that Executive is entitled to receive or may
become entitled to receive under any reduction-in-force or severance
pay plan or practice that Aquarion now has in effect or may hereafter
put into effect and shall
<PAGE>
<PAGE>
- 12 -
be applied toward satisfying any severance pay and benefits required
under federal or state law to be paid or provided to Executive.
13. Release: Retention of Executive as a consultant pursuant to
--------
Section 2(b) hereof and the payment of additional retirement benefits
pursuant to Section 3 hereof are expressly conditioned upon, and will
not occur in the absence of, the Executive's execution of a release,
in the form attached hereto as Exhibit A, and such release becoming
effective prior to the first day of the Consulting Period.
14. Arbitration: Any dispute arising out of or in any way
------------
relating to this Agreement or Executive's employment with Aquarion,
including, without limitation, any claims Executive may assert under
the Age Discrimination in Employment Act of 1967, as amended, shall be
resolved by arbitration in Connecticut through the Hartford,
Connecticut office of the American Arbitration Association in
accordance with the Model Employment Arbitration Procedures of the
American Arbitration Association except to the extent such provisions
are modified as hereinafter provided. The arbitration proceeding
shall be conducted by three (3) arbitrators. Executive and Aquarion
shall each designate one (1) arbitrator, each of whom shall be an
attorney admitted to practice in one or more states who has ten (10)
or more years of experience in employment matters, and the arbitrators
so selected shall thereafter designate a third arbitrator (who shall
be a member of the National Academy of Arbitrators) by mutual
agreement. The arbitrators shall have no authority to modify any
provision of this Agreement or to award a remedy for a dispute
involving this Agreement other than a benefit specifically provided
under or by virtue of this Agreement. The decision of the arbitrators
shall be final and binding on Aquarion and Executive. Employer and
Executive shall each pay their own legal fees associated with arbitration
<PAGE>
<PAGE>
- 13 -
proceedings hereunder, but the fees of the arbitrators and any other
costs associated with such arbitration proceedings shall be shared
equally by Aquarion and Executive.
15. Miscellaneous: No provision of this Agreement may be
--------------
modified, waived, or discharged unless such waiver, modification, or
discharge is agreed to in a writing signed by Executive and Aquarion.
No waiver by either party hereto at any time of any breach by the
other party hereto or compliance with any condition or provision of
this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations,
oral or otherwise, expressed or implied with respect to the subject
matter hereof have been made by either party which are not set forth
expressly in this Agreement. References to Sections are references to
Sections of this Agreement. Headings are included in this Agreement
for convenience only and are not substantive provisions of this Agreement.
16. Modifications During 120-Day Period: Aquarion and Executive
------------------------------------
agree that, during the, 120-day period beginning on the date hereof,
they shall consider the advisability of providing some or all of the
consideration under this Agreement through split dollar life
insurance, and any mutual decision to use split dollar life insurance
for such purpose shall be reflected in a modification of this Agreement.
<PAGE>
<PAGE>
- 14 -
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the date first above written.
AQUARION COMPANY
Date: Sept. 15, 1995 By: /S/CHARLES V. FIRLOTTE
___________________________ ___________________________
Its Vice President Administration
& Human Resources
___________________________
Date: 9/27/95 /S/JACK E. MCGREGOR
___________________________ ___________________________
Jack E. McGregor
<PAGE>
<PAGE>
EXHIBIT A
RELEASE
--------
(a) In consideration of the benefits under the Agreement to which
this Release is an exhibit, Executive releases, waives, and
forever discharges Aquarion, any related companies, and the
employees, officers, representatives, agents and directors of any
of them from all claims, demands, actions, suits, covenants,
contracts, agreements, promises and liabilities of any kind
whatsoever, known or unknown, which Executive, Executive's heirs,
executors or assigns may have had, now have or could in the
future have including, without limitation, those based on
Executive's employment with the Company, or the termination of
that employment. This includes, for example, a release of any
rights or claims Executive may have under the Age Discrimination
in Employment Act, which prohibits age discrimination in
employment; Title VII of the Civil Rights Act of 1964, which
prohibits discrimination in employment based on race, color,
national origin, religion or sex; the Equal Pay Act, which
prohibits paying men and women unequal pay for equal work; or any
other federal, state or local laws or regulations prohibiting
employment discrimination. This also includes a release by
Executive of any claims for wrongful discharge or breach of
employment agreement. This release covers both claims that
Executive knows about and those he may not know about.
(b) This Release does not include, however, a release of Executive's
right, if any, to benefits under Aquarion's pension and profit
sharing plans, whether qualified or non-qualified for federal
income tax purposes, a release of any claim made by Executive
under any welfare benefit plan prior to the signing of said
Agreement, or a release of any rights or claims that Executive
may have under the Age Discrimination in Employment Act which
arise after the date Executive signs this Release. Furthermore,
this Release does not include a release of any rights of
Executive or Executive's heirs, executors, or assigns relating to
enforcement of obligations of Aquarion (i) under the Agreement to
which this Release is an exhibit, or (ii) pertaining to
indemnification of Executive as an officer, director, or employee
of Aquarion.
(c) Executive further promises never to file or join in a lawsuit or
other proceeding asserting any claims that are released in
Section (a) hereof.
(d) By signing this Release, Executive agrees: (i) that Executive has
been advised to consult with an attorney prior to signing this
Release; (ii) that Aquarion's entering into the Agreement to
which this Release is an exhibit constitutes consideration for
this Release, in that such Agreement, in accordance with its
terms, will confer payments and benefits to which Executive would
not have been entitled had Executive not signed this Release;
(iii) that Executive has been given a period of 21 days within
which to consider this Release but that he may sign it in less
than 21 days; and (iv) that this Release is not effective or
enforceable for 7 days after Executive signs it, and Executive
may revoke it during that period.
/S/JACK E. MCGREGOR
___________________________
Executive
Date: 9/27/95
___________________________
<PAGE>
<PAGE>
<PAGE>
EXHIBIT NO. 10(o)
EMPLOYMENT AGREEMENT
BETWEEN
THE HYDRAULIC COMPANY
and
LARRY L. BINGAMAN
dated as of June 11, 1990
<PAGE>
<PAGE>
THIS AGREEMENT, made effective June 11, 1990 by and between THE
HYDRAULIC COMPANY (the "Company"), a Delaware corporation, and
LARRY L. BINGAMAN of Eight Colonial Road, New Fairfield, Connecticut
06812 (the "Executive"),
WITNESSETH THAT:
WHEREAS:
1. The Executive is a principal officer of the Company and an
integral part of its senior management who participates in the
decision-making process relative to short and long-term planning and
policy for the Company; and
2. The Board of Directors of the Company, at its meeting on
May 22, 1990 determined that it would be in the best interests of the
Company and its shareholders to enter into an employment agreement to
retain the services of the Executive; and,
3. The Executive is willing to serve the Company as a member of
its management on the terms and conditions set forth herein;
NOW, THEREFORE, it is hereby agreed by and between the parties
hereto as follows:
1. Employment. The Company agrees to continue the Executive in
----------
its employ, and the Executive agrees to remain in the employ of the
Company, for the period stated in Paragraph 3 hereof and upon the
other terms and conditions herein provided.
2. Position and Responsibilities. During the period of
-----------------------------
employment hereunder, the Executive agrees to serve the Company as
Vice President, Marketing and Communications, reporting directly to
the Chief Executive Officer of the Company, with such duties and
responsibilities, consistent with such position, as the Board of
Directors or the Chief Executive Officer may from time to time
determine. During said period, the Executive also agrees to serve, if
elected, as an officer and director of any other subsidiary or
affiliate of the Company.
<PAGE>
<PAGE>
3. Term and Duties.
---------------
(a) Term of Employment. The term of the Executive's
------------------
employment under this Agreement shall be deemed to have commenced as
of the date first above written and shall continue until May 31, 1992,
subject to extension as hereinafter provided. On the first day of
each month following the date first above written, the term of the
Executive's employment under this Agreement shall be automatically
extended unless prior thereto the Company shall deliver to the
Executive or the Executive shall deliver to the Company written notice
that such term of employment shall not be extended, in which case such
term shall end at the expiration of the then existing term of
employment under this Agreement, including any previous extensions,
and shall not be further extended except by agreement of the Company
and the Executive. Any such automatic extension shall be for one
additional full calendar month (for a total term upon such extension
of twenty-four full calendar months), unless the Executive will attain
age 65 prior to completion of twenty-four full calendar months
following the extension date, in which case the term of the
Executive's employment under this Agreement shall terminate on the
last day of the month in which the Executive attains age 65.
(b) Duties. During the period of employment hereunder and
------
except for illness or incapacity and reasonable vacation period (which
shall not be less than 15 days in any calendar year), the Executive's
business time, attention, skill and efforts shall be exclusively
devoted to the business and affairs of the Company and its
subsidiaries; provided, however, that nothing in this Agreement shall
preclude the Executive from devoting time during reasonable periods
required for
(i) serving as an officer, director or member of a
committee of any company or organization involving no
conflict of interest with the company or any of its
subsidiaries or affiliates,
(ii) delivering lectures and fulfilling speaking
engagements, and
(iii) engaging in charitable and community activities,
-2-
<PAGE>
<PAGE>
provided that such activities do not materially affect
or interfere with the performance of the Executive's
obligations to the Company.
4. Compensation.
------------
(a) For all services rendered by the Executive in any
capacity during employment under this Agreement, including services as
an executive officer, director, or member of any committee of the
Company or any subsidiary or affiliate thereof, the Company shall pay
the Executive a base salary at the rate of not less than $100,000 per
year, subject to such periodic increases as the Board of Directors of
the Company, or a committee designated by said Board, shall deem
appropriate in accordance with the Company's customary procedures and
practices regarding the salaries of Company officers with, however,
consideration of a preliminary salary review by December 31, 1990. In
no event shall the Executive's initial annual salary review be later
than June, 1991. Such salary shall be payable in accordance with the
customary payroll practices of the Company, but in no event less
frequently than monthly. Such periodic increases in salary, once
granted, shall not be subject to revocation.
(b) Executive shall be entitled to participate in any Company
incentive or bonus plan covering some or all of its executive officers
that is in effect during the period of his employment hereunder and to
receive benefits thereunder on a basis consistent with the overall
administration and intent of any such plan and with past practice, if
any, under such plan.
(c) Nothing in this Agreement shall preclude or affect any
rights or benefits that may now or hereafter be provided for the
Executive or for which the Executive may be or become eligible under
any other form of compensation or employee benefit plan now existing
or that may hereafter be adopted or awarded by the Company,
Specifically, the Executive shall:
(i) participate in the Company's Retirement Plan for
Employees of The Hydraulic Company as well as any
related program under any "excess benefit plan" that
may be adopted during the period of the Executive's
-3-
<PAGE>
<PAGE>
employment hereunder and in which the Executive is
designated by the Company's Board of Directors to
participate (hereinafter referred to collectively as
the "Retirement Program");
(ii) participate to the permitted extent the Executive
wishes in The Employee Savings and Investment Plan of
the Company and the related program under any excess
benefit plan (hereinafter referred to collectively as
the "Thrift and Savings Program");
(iii) participate in the salary continuation program in the
event of death in accordance with Board policy for
Company officers;
(iv) participate in the Company's death and disability
benefit plans and its medical, dental and health and
welfare plans; and
(vi) participate in equivalent successor plans of the
Company for which senior management employees are
eligible;
provided, however, that, subject to Paragraph 7(c)(iv), nothing in
this Agreement shall preclude the Company from amending or terminating
any such plan or program, on the condition that such amendment or
termination is applicable to all of the Company's senior management
employees generally.
5. Business Expenses. The Company shall pay or reimburse the
-----------------
Executive for all reasonable travel and other expenses incurred in
connection with the performance of the Executive's duties under this
Agreement in accordance with such procedures as the Company may from
time to time establish. The Company further agrees to furnish the
Executive with a private office and a private secretary and such other
assistance and accommodations, including an automobile and appropriate
club membership, as shall be suitable to the character of the
Executive's position with the Company and adequate for the performance
of the Executive's duties under this Agreement.
- 4 -
<PAGE>
<PAGE>
6. Additional Benefits. Nothing in this Agreement shall affect
-------------------
the Executive's eligibility to participate in all group health,
dental, hospitalization, life, travel or accident or other insurance
plans or programs and all other perquisites, fringe benefits or
retirement plans or additional compensation, including termination pay
programs, which the Company may hereafter, in its sole and absolute
discretion, elect to make available to its senior management employees
generally, and the Executive shall be eligible to receive, during the
period of employment under this Agreement, all benefits and emoluments
for which key employees are eligible under every such plan, program,
perquisite or arrangement to the extent permissible under the general
terms and provisions thereof.
7. Relocation Expenses. The Company shall pay the reasonable
-------------------
moving expenses, up to a limit of $12,500, incurred by the Executive
in relocating his family residence into the service area of Bridgeport
Hydraulic Company if such relocation occurs prior to December 31,
1993. As used herein, "moving expenses" shall include the actual
costs of packing and transporting the Executive's family and household
goods and effects but shall not include costs associated with the sale
or purchase of any residence. Nothing herein shall be construed as an
obligation on the part of the Executive to relocate into the service
area of Bridgeport Hydraulic Company.
8. Termination of Employment. Notwithstanding any other
-------------------------
provision of this Agreement, the Executive's employment under this
Agreement may be terminated:
(a) by the Company, in the event of the Executive's
serious, willful misconduct in respect of the Executive's duties under
this Agreement, including conviction for a felony or perpetration of a
common law fraud which has resulted or is likely to result in material
economic damage to the Company or any of its subsidiaries, by written
notice to the Executive, specifying the event relied upon for such
termination;
(b) by either the Company or the Executive, if the
Executive accepts employment or a consulting position with another
company; or
-5-
<PAGE>
<PAGE>
(c) by the Executive, in the event of any (i) material
change by the Company of the Executive's functions,, duties or
responsibilities which change would cause his position with the
Company to become of less dignity, responsibility, importance or scope
from the position and attributes thereof described in Paragraph 2
above, (ii) assignment or reassignment by the Company or by one of its
subsidiaries of the Executive to another place of employment outside
of Fairfield County, Connecticut, (iii) liquidation, dissolution,
consolidation, or acquisition or merger of the Company, or transfer of
all or substantially all of its assets other than a transaction in
which a successor corporation with a net worth at least equal to that
of the Company assumes this Agreement and all obligations and
undertakings of the Company hereunder, or (iv) reduction in the
Executive's total compensation and benefits, as specified in Paragraph
4 above and as currently provided, or other material breach of this
Agreement by the Company or any of its subsidiaries, by thirty
(30) days written notice to the Company, specifying the event relied
upon for such termination and given within 180 days after such event.
9. Payments Upon Termination of Employment. In the event of
---------------------------------------
any termination by the Executive pursuant to Paragraph 8(c) above, or
in the event the Executive's employment under this Agreement is
terminated by the Company for any reason other than one of those
specified in Paragraphs 8(a) or 8(b) above, the Company shall, as
liquidated damages or severance pay, or both, promptly pay to the
Executive and provide the Executive and the dependents, beneficiaries
and estate of the Executive as follows:
(a) The Company shall pay the Executive, at his option,
either as a lump sum or in equal monthly installments over the
unexpired portion of the term of employment provided for in Paragraph
3(a) above, a cash amount equal to the present value of the excess of
(i) the salary provided in Paragraph 4(a) above, as in effect at the
time of termination, for a period of 12 months (commencing with the
month in which termination shall have occurred) less the amounts, if
any, the Executive would have paid in cash in respect of employee
benefits provided for in Paragraph 4(c)(iv) above if the Executive
-6-
<PAGE>
<PAGE>
were still employed, over (ii) the amounts, if any, paid to the
Executive pursuant to any severance or termination pay program or
arrangement of the Company or any of its subsidiaries.
(b) The Company shall also pay the Executive a lump sum
cash amount equal to the present value of the excess of (i) the
aggregate benefit that would have been paid under the Retirement
Program described in Paragraph 4(c)(i) above as in effect on the date
first above written, if the Executive had continued to be employed and
to be entitled to service credit for eligibility and benefit purposes
during the unexpired portion of the term of employment provided for in
Paragraph 3(a) above, at an annual rate of compensation equal to that
used to calculate the payments provided by Paragraph 9(a) above,
calculated on the basis of the higher of the Executive's salary for
the 12 months immediately preceding the month in which termination
shall have occurred or the compensation amount used in the benefit
formula under said Retirement Program, and assuming that the Executive
is fully vested in such benefit, or (ii) the aggregate benefit
actually payable under the Retirement Program and any successor
retirement program of the Company consisting of a tax-qualified
pension plan and a related excess benefit plan. In clarification of
the immediately preceding sentence, the aggregate benefit that would
have been paid under the Retirement Program shall be calculated as of
the normal or early retirement date for which the Executive would have
qualified, assuming the Executive were still employed on that date and
were fully vested in such benefit, and which would produce the highest
present value.
(c) The Company shall also pay the Executive a lump sum
cash amount equal to the present value of the aggregate contributions
or payments, if any, that would have been made by the Company or any
of its subsidiaries under the Thrift and Savings Program described in
Paragraph 4(c)(ii) above, or any successor program of the Company in
effect on the date on which termination shall have occurred, if the
Executive had continued to be employed, and to participate in the
Thrift and Savings Program or such successor program to the same
extent as the Executive participated for the last month during which
the Executive was permitted to participate, during the unexpired
-7-
<PAGE>
<PAGE>
portion of the term of employment provided for in Paragraph 3(a) above,
at an annual rate of compensation equal to that used to calculate the
payments provided by Paragraph 9(a) above.
(d) For purposes of calculating the lump sum cash payments
provided by Paragraphs 9(a), (b) and (c) above, present value shall be
determined by using a discount factor equal to one percentage point
below the prime rate as published in The Wall Street Journal as of the
date on which termination shall have occurred.
(e) For a period of 24 months (commencing with the month in
which termination shall have occurred), the Executive shall continue
to be entitled to all employee benefits provided for in Paragraph
4(c)(iv) above, as if the Executive were still employed during such
period under this Agreement, with benefits based upon the compensation
used to calculate the payments provided by Paragraph 9(a) above, and
if and to the extent that such benefits shall not be payable or
provided under any such plan, the Company shall pay or provide such
benefits on an individual basis. The medical, dental health and
welfare benefits provided for in Paragraph 4(c)(iv) above, in
accordance with this Paragraph 9(e) shall be secondary to any
comparable benefits provided by another employer provided that an
appropriate refund is made of any reduction in the amount paid
pursuant to Paragraph 9(a)(i) which had assumed that such benefits
would be primary.
10. Source of Payments; Interest. All payments provided for in
-----------------------------
Paragraphs 4, 5, 6 and 9 above shall be paid in cash from the general
funds of the Company. Any payments not made within thirty (30) days
after termination or such time as they may otherwise be due hereunder
shall bear interest at the interest rate used to establish the
discount factor provided for in Paragraph 9(d). The Company shall not
be required to establish a special or separate fund or other
segregation of assets to assure such payments.
-8-
<PAGE>
<PAGE>
11. Litigation Expenses.
-------------------
(a) In the event of any litigation or other proceeding
between the Company and the Executive with respect to the subject
matter of this Agreement and the enforcement of rights hereunder, the
Company shall reimburse the Executive for all reasonable costs and
expenses relating to such litigation or other proceeding, including
reasonable attorneys' fees and expenses, provided that such litigation
or proceeding results in any
(i) settlement requiring the Company to make a payment to
the Executive, or
(ii) judgment or order in favor of the Executive enforcing
any provision of this Agreement or awarding any payment
or other consideration to the Executive, regardless of
whether such judgment or order is subsequently reversed
on appeal or in a collateral proceeding.
In no event shall the Executive be required to reimburse the Company
for any of the costs and expenses relating to such litigation or other
proceeding. The obligation of the Company under this Paragraph 10
shall survive the termination for any reason of this Agreement
(whether such termination is by the Company, by the Executive, upon
the expiration of this Agreement or otherwise).
12. Income Tax Withholding. The Company may withhold from any
----------------------
payments made under this Agreement all Federal, State, City or other
taxes as shall be required pursuant to any law or governmental
regulation or ruling.
13. Entire Understanding. This Agreement contains the entire
--------------------
understanding between the Company and the Executive with respect to
the subject matter hereof and supersedes any prior employment
agreement between the Company and the Executive, except that this
Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Executive of a kind elsewhere provided and
not expressly provided in this Agreement.
14. Severability. If, for any reason, any one or more of the
------------
provisions or part of a provision contained in this Agreement shall be
-9-
<PAGE>
<PAGE>
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision or part of a provision of this Agreerment not held so
invalid, illegal or unenforceable, and each other provision or part of
a provision shall to the full extent consistent with law continue in
full force and effect. If this Agreement is held invalid or cannot be
enforced, then to the full extent permitted by law any prior agreement
between the Company and the Executive shall be deemed reinstated as if
this Agreement had not been executed.
15. Consolidation, Merger, or Sale of Assets. Nothing in this
----------------------------------------
Agreement shall preclude the Company from consolidating or merging
into or with, or transferring all or substantially all of its assets
to, another corporation or acquiring entity which assumes this
Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation, merger or transfer of assets
and assumption, the term, "the Company," as used
herein shall mean such other corporation or acquiring entity and this
Agreement shall continue in full force and effect.
16. Notices. All notices, requests, demands and other
-------
communications required or permitted hereunder shall be given in
writing and shall be deemed to have been duly given if delivered or
mailed, postage prepaid, first class as follows:
(a) to the Company:
The Hydraulic Company
835 Main Street
Bridgeport, Connecticut 06601
Attention: Secretary
(b) to the Executive:
Larry L. Bingaman
Eight Colonial Road
New Fairfield, Connecticut 06812
or to such other address as either party shall have previously
specified in writing to the other.
-10-
<PAGE>
<PAGE>
17. No Attachment. Except as required by law, no right to
-------------
receive payments under this Agreement shall be subject to anticipation
commutation, alienation, sale, assignment, encumbrances, charge,
pledge, or hypothecation or to execution, attachment, levy, or similar
process or assignment by operation of law, or any attempt, voluntary
or involuntary, to effect any such action shall be null, void and of
no effect.
18. Binding Agreement. This Agreement shall be binding upon,
-----------------
and shall inure to the benefit of, the Executive and the Company and
their respective permitted successors and assigns.
19. Modification and Waiver. This Agreement may not be modified
-----------------------
or amended except by an instrument in writing signed by the parties
hereto. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement except by written
instrument signed by the party charged with such waiver or estoppel.
No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only
as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any act other
than that specifically waived.
20. Headings of No Effect. The paragraph headings contained in
---------------------
this Agreement are included solely for convenience of reference and
shall not in any way affect the meaning or interpretation of any of
the provisions of this Agreement.
21. Governing Law. This Agreement and its validity,
-------------
interpretation, performance, and enforcement shall be governed by the
laws of the State of Connecticut.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers thereunto
duly authorized, and the Executive has signed this Agreement, all as
of the date first above written.
-11-
<PAGE>
<PAGE>
ATTEST: THE HYDRAULIC COMPANY
/s/ANTHONY M. MACLEOD By /s/JACK E. MCGREGOR
- ------------------------- -----------------------------------
Secretary Jack E. McGregor
Chief Executive Officer
/S/LARRY L. BINGAMAN
-------------------------------------
Larry L. Bingaman
-12-
<PAGE>
<PAGE>
EXHIBIT 10(s)
EMPLOYMENT AGREEMENT
between
AQUARION COMPANY
and
RICHARD K. SCHMIDT
dated as of October 1, 1995
<PAGE>
<PAGE>
THIS AGREEMENT, made effective as of October 1, 1995 by and
between AQUARION COMPANY (the "Company"), a Delaware corporation, and
RICHARD K. SCHMIDT, of 113 Lochinvar Court, Cary, North Carolina (the
"Executive"),
W I T N E S S E T H T H A T :
WHEREAS:
i. The Executive is a principal officer of the Company and an
integral part of its senior management who participates in the
decision making process relative to short and long term planning and
policy for the Company;
ii. The Board of Directors of the Company, at its meeting
on September 1, 1995, determined that it would be in the best
interests of the Company and its shareholders to assure continuity in
the management of the Company's administration and operations by
entering into an employment agreement to retain the services of the
Executive on an extended basis; and
iii. The Executive is willing to continue to serve the
Company as a member of its senior management on the terms and
conditions set forth herein;
NOW, THEREFORE, it is hereby agreed by and between the parties
hereto as follows:
1. Employment. The Company agrees to continue the Executive in its
----------
employ, and the Executive agrees to remain in the employ of the
Company, for the period stated in Paragraph 3 hereof and upon the
other terms and conditions herein provided.
<PAGE>
<PAGE>
-2-
2. Positon and Responsibilities. During the period of his
----------------------------
employment hereunder, the Executive agrees to serve as President of
the Company for the period for which he is and shall from time to time
be elected, and as its Chief Executive Officer, and to be responsible
for the general management of the affairs of the Company, reporting
directly to the Board of Directors of the Company. During said period
the Executive agrees to perform such services not inconsistent with
his position as shall from time to time be requested of him by the
Board of Directors including service, if elected, as an officer and
director of any subsidiary or affiliate of the Company.
3. Term and Duties.
---------------
(a) Term of Employment. The term of the Executive's
------------------
employment under this Agreement shall be deemed to have commenced as
of the date first above written and shall continue for a period of
thirty-six full calendar months thereafter.
(b) Duties. During the period of employment hereunder and
------
except for illness or incapacity and reasonable vacation periods
(which shall not be less than 20 days in any calendar year), the
Executive's business time, attention, skill and efforts shall be
exclusively devoted to the business and affairs of the Company and its
subsidiaries; provided, however, that nothing in this Agreement shall
preclude the Executive from devoting time during reasonable periods
<PAGE>
<PAGE>
-3-
required for:
(i) serving as an officer, director or member of a committee of
any company or organization involving no conflict of
interest with the Company or any of its subsidiaries or
affiliates,
(ii) delivering lectures and fulfilling speaking engagements, and
(iii) engaging in charitable and community activities, provided
that such activities do not materially affect or interfere
with the performance of the Executive's obligations to the
Company.
4. Compensation.
------------
(a) For all services rendered by the Executive in any
capacity during employment under this Agreement, including services as
an executive, officer, director, or member of any committee of the
Company or any subsidiary or affiliate thereof, the Company shall pay
the Executive a base salary at the rate of not less than $215,000 per
year, subject to such periodic increases as the Board shall deem
appropriate in accordance with the Company's customary procedures and
practices regarding the salaries of senior management employees. Such
salary shall be payable in accordance with the customary payroll
practices of the Company, but in no event less frequently than
monthly. Such periodic increases in salary, once granted, shall not
be subject to revocation.
(b) Executive shall be entitled to participate in any
Company incentive or bonus plan covering some or all of its executive
<PAGE>
<PAGE>
-4-
officers that is in effect during the period of his employment
hereunder and to receive benefits thereunder on a basis consistent
with the overall administration and intent of any such plan and with
past practice, if any, under such plan. In addition, the Executive
shall continue to be eligible to receive incentive pay based on the
performance of Industrial and Environmental Analysts, Inc. through
December 31, 1996 pursuant to the terms of his prior employment
agreement dated as of April 1, 1994, and Executive shall be granted
options for 50,000 shares of the Company's stock pursuant to the
Company's Stock Option Plan, subject to a three year vesting schedule,
as of the date of this Agreement at an exercise price of $23.25 per
share.
(c) Nothing in this Agreement shall preclude or affect any
rights or benefits that may now or hereafter be provided for the
Executive or for which the Executive may be or become eligible under
any other form of compensation or employee benefit plan now existing
or that may hereafter be adopted or awarded by the Company or mandated
by law. Specifically, the Executive shall:
(i) participate in the Company's Retirement Plan as well as any
related program under any "excess benefit plan" that may be
adopted during the period of the Executive's employment
hereunder and in which the Executive is designated by the
Company's Board of Directors to participate (hereinafter
referred to collectively as the "Retirement Program");
(ii) participate to the permitted extent the Executive wishes in
The Employee Savings and Investment Plan of the Company and
<PAGE>
<PAGE>
-5-
related program under any excess benefit plan (hereinafter
referred to collectively as the "Thrift and Savings
Program");
(iii) participate in any Employee Stock Ownership Plan that may
subsequently be adopted by the Company;
(iv) participate in the salary continuation program in the event
of death in accordance with Board policy for Company
officers;
(v) participate in the Company's death and disability benefit
plans and its medical, dental and health and welfare plans;
and
(vi) participate in equivalent successor plans of the Company for
which senior management employees are eligible;
provided, however, that, subject to Paragraph 7(c)(iv), nothing in
this Agreement shall preclude the Company from amending or terminating
any such plan or program, on the condition that such amendment or
termination is applicable to all of the Company's senior management
employees generally.
(d) The Executive shall be paid a lump sum amount by the
Company sufficient to fully reimburse the Executive, on an after-tax
basis for any reasonable moving expenses incurred by the Executive for
a move made at the request of the Company (after consideration of any
tax deduction to which the Executive is entitled by reason of the
incurrence of such expenses).
(e) The Executive shall be paid three annual installments,
commencing on the date of closing for a new residence of the Executive
<PAGE>
<PAGE>
-6-
due to a move requested by the Company, each equal to the product of
the excess, if any, of the annual interest rate on the mortgage on the
new residence over the annual interest rate on the mortgage on the
Executive's prior residence, times the lesser of the principal amount
of the mortgage on the new residence or the principal amount of the
mortgage on the old residence.
5. Business Expenses. The Company shall pay or reimburse the
-----------------
Executive for all reasonable travel and other expenses incurred in
connection with the performance of the Executive's duties under this
Agreement in accordance with such procedures as the Company may from
time to time establish. The Company further agrees to furnish the
Executive with a private office and a private secretary and such other
assistance and accommodations, including an automobile and appropriate
club memberships in Connecticut and North Carolina, as shall be
suitable to the character of the Executive's position with the Company
and adequate for the performance of the Executive's duties under this
Agreement.
6. Additional Benefits. Nothing in this Agreement shall affect
-------------------
the Executive's eligibility to participate in all group health,
dental, hospitalization, life, travel or accident or other insurance
plans or programs and all other perquisites, fringe benefits or
retirement plans or additional compensation, including termination pay
programs, which the Company may now or hereafter, in its sole and
absolute discretion, make available to its senior management employees
<PAGE>
<PAGE>
-7-
generally, and the Executive shall be eligible to receive, during the
period of employment under this Agreement, all benefits and emoluments
for which key employees are eligible under every such plan, program,
perquisite or arrangement to the extent permissible under the general
terms and provisions thereof.
7. Termination of Employment. Notwithstanding any other
-------------------------
provision of this Agreement, the Executive's employment under this
Agreement may be terminated:
(a) by the Company, in the event of the Executive's
serious, willful misconduct in respect of the Executive's duties under
this Agreement, including conviction for a felony or perpetration of a
common law fraud which has resulted or is likely to result in material
economic damage to the Company or any of its subsidiaries, by written
notice to the Executive, specifying the event relied upon for such
termination;
(b) by either the Company or the Executive, if the
executive accepts employment or a consulting position with another
company; or
(c) by the Executive, in the event of any (i) failure to
elect or reelect or to appoint or reappoint the Executive to the
offices of President and Chief Executive Officer of the Company or
other material change by the Company of the Executive's functions,
duties or responsibilities which change would cause the Executive's
position with the Company to become of less dignity, responsibility,
importance or scope from the position and attributes thereof described
<PAGE>
<PAGE>
-8-
in Paragraph 2 above, (ii) assignment or reassignment by the Company
or by one of its subsidiaries of the Executive to another place of
employment outside of Fairfield County, Connecticut, (iii)
liquidation, dissolution, consolidation, or acquisition or merger of
the Company, or transfer of all or substantially all of its assets
other than a transaction in which a successor corporation with a net
worth at least equal to that of the Company assumes this Agreement and
all obligations and undertakings of the Company hereunder, or (iv)
reduction in the Executive's total compensation and benefits, as
specified in Paragraph 4 above and as currently provided, or other
material breach of this Agreement by the Company or any of its
subsidiaries, by thirty (30) days written notice to the Company,
specifying the event relied upon for such termination and given within
180 days after such event.
8. Payments Upon Termination of Employment. In the event of
---------------------------------------
any termination by the Executive pursuant to Paragraph 7(c) above, or
in the event the Executive's employment under this Agreement is
terminated by the Company for any reason other than one of those
specified in Paragraphs 7(a) or 7(b) above, the Company shall, as
liquidated damages or severance pay, or both, promptly pay to the
Executive and provide the Executive and the dependents, beneficiaries
and estate of the Executive as follows:
(a) The Company shall pay the Executive, at his option,
either as a lump sum or in equal monthly installments over the
unexpired portion of the term of employment provided for in Paragraph
<PAGE>
<PAGE>
-9-
3(a) above, a cash amount equal to the present value of the excess of
(i) the salary provided in Paragraph 4(a) above, including the
increases therein provided, for the unexpired portion of the term of
employment provided for in Paragraph 3(a) above (commencing with the
month in which termination shall have occurred) less the amounts, if
any, the Executive would have paid in cash in respect of employee
benefits provided for in Paragraph 4(c)(v) above if the Executive were
still employed, over (ii) the amounts, if any, paid to the Executive
pursuant to any severance or termination pay program or arrangement of
the Company or any of its subsidiaries, provided, however, that in the
event such termination occurs following a Change in Control (as
defined in Paragraph 14(a)), then the amount paid hereunder shall
instead equal 2 times the Executive's annual salary.
(b) The Company shall also pay the Executive a lump sum
cash amount equal to the present value of the excess of (i) the
aggregate benefit that would have been paid under the Retirement
Program described in Paragraph 4(c)(i) above as in effect on the date
first above written, if the Executive had continued to be employed at
an annual rate of compensation equal to that used to calculate the
payments provided by Paragraph 8(a) above, and to be entitled to
service credit for eligibility and benefit purposes during the
unexpired portion of the term of employment provided for in Paragraph
3(a) above, over (ii) the aggregate benefit actually payable under the
Retirement Program and any successor retirement program of the Company
consisting of a tax qualified pension plan and a related excess
benefit plan. In clarification of the immediately preceding sentence,
<PAGE>
<PAGE>
-10-
the aggregate benefit that would have been paid under the Retirement
Program shall be calculated as of the normal or early retirement date
for which the Executive would have qualified, assuming the Executive
were still employed on that date and were fully vested in such
benefit, and which would produce the highest present value.
(c) The Company shall also pay the Executive a lump sum
cash amount equal to the present value of the aggregate contributions
or payments, if any, that would have been made by the Company or any
of its subsidiaries under the Thrift and Savings Program and Employee
Stock Ownership Plan described in Paragraph 4(c)(ii) and (iii) above
or any successor program of the Company in effect on the date on which
termination shall have occurred, if the Executive had continued to be
employed, and to participate in the Thrift and Savings Program and
Employee Stock Ownership Plan or such successor programs to the same
extent as the Executive participated for the last month during which
the Executive was permitted to participate, during the unexpired
portion of the term of employment provided for in Paragraph 3(a) above
at an annual rate of compensation equal to that used to calculate the
payments provided by Paragraph 8(a) above.
(d) For purposes of calculating the lump sum cash payments
provided by Paragraphs 8(a), (b) and (c) above, present value shall be
determined by using a discount factor equal to one percentage point
below the prime rate as published in The Wall Street Journal as of the
date on which termination shall have occurred.
(e) For a period of 24 months (commencing with the month in
which termination shall have occurred), the Executive shall continue
<PAGE>
<PAGE>
-11-
to be entitled to all employee benefits provided for in Paragraph
4(c)(v) above as may be in effect on the date of termination, as if
the Executive were still employed during such period under this
Agreement, with benefits based upon the compensation used to calculate
the payments provided by Paragraph 8(a) above, and if and to the
extent that such benefits shall not be payable or provided under any
such plan, the Company shall pay or provide such benefits on an
individual basis. The medical, dental, health and welfare benefits
provided for in Paragraph 4(c)(v) above, in accordance with this
Paragraph 8(e) shall be secondary to any comparable benefits provided
by another employer provided that an appropriate refund is made of any
reduction in the amount paid pursuant to Paragraph 8(a)(i) which had
assumed that such benefits would be primary.
(f) All stock options granted to the Executive pursuant to the
Company's stock option plan shall become immediately vested and
exercisable, to the extent permitted by said plan.
9. Source of Payments; Interest. All payments provided for in
----------------------------
Paragraphs 4, 5, 6 and 8 above shall be paid in cash from the general
funds of the Company. Any payments not made within thirty (30) days
after termination or such time as they may otherwise be due hereunder
shall bear interest at the interest rate used to establish the
discount factor provided for in Paragraph 8(d). The Company shall not
be required to establish a special or separate fund or other
segregation of assets to assure such payments.
<PAGE>
<PAGE>
-12-
10. Litigation Expenses.
-------------------
(a) In the event of any litigation or other proceeding
between the Company and the Executive with respect to the subject
matter of this Agreement and the enforcement of rights hereunder, the
Company shall reimburse the Executive for all reasonable costs and
expenses relating to such litigation or other proceeding, including
reasonable attorneys' fees and expenses, provided that such litigation
or proceeding results in any:
(i) settlement requiring the Company to make a payment to the
Executive, or
(ii) judgement or order in favor of the Executive enforcing any
provision of this Agreement or awarding any payment or other
consideration to the Executive, regardless of whether such
judgement or order is subsequently reversed on appeal or in
a collateral proceeding.
In no event shall the Executive be required to reimburse the Company
for any of the costs and expenses relating to such litigation or other
proceeding. The obligation of the Company under this Paragraph 10
shall survive the termination for any reason of this Agreement
(whether such termination is by the Company, by the Executive, upon
the expiration of this Agreement or otherwise).
11. Income Tax Withholding. The Company may withhold from any
----------------------
payments made under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or governmental
regulation or ruling.
<PAGE>
<PAGE>
-13-
12. Non-Disclosure of Proprietary Information. The Executive
-----------------------------------------
will gain, with respect to the Company and its affiliates, detailed
knowledge of all affairs, trade secrets, discoveries, plans,
development work in process, cost information, outstanding bid and bid
proposal information, customer requirements, contractual provisions,
employee capabilities and proposed marketing initiatives, other
confidential information and the like (the "Proprietary Information")
in the course of the Executive's employment hereunder and under any
prior employment agreement with the Company or an affiliate, and the
Executive will necessarily continue to have the fullest knowledge of
such matters. Disclosure to or utilization of such knowledge and
Proprietary Information to any person, firm, business, organization,
corporation, agency or other entity, whether or not engaged in any
line of business competing in any respect with the business of the
Company as now constituted, or as the same may be developed will cause
irreparable injury and damage to the business of the Company. The
Executive covenants and agrees that he will not at any time, during
and after the period of his employment hereunder, except as may be
required by law, disclose any of the Proprietary Information to, or
utilize such information on behalf of, any person, firm, business,
organization, corporation, agency or other entity (other than an
employee or agent of the Company entitled to receive the same). The
Executive's obligations under this Paragraph 12 shall not apply to
information which is or becomes part of the public domain through no
fault of the Executive. Further, upon termination of his employment
<PAGE>
<PAGE>
-14-
hereunder, the Executive agrees that he will deliver to the Company,
or any affiliated company designated by the Company, any and all
records, files, lists or other documents containing information within
the scope of the foregoing description, including, without limitation,
the Executive's records of contracts with customers and potential
customers, and all copies of the same, and shall not retain any copies
of Proprietary Information.
13. Entire Understanding. This Agreement contains the entire
--------------------
understanding between the Company and the Executive with respect to
the subject matter hereof and supersedes any prior employment
agreement between the Company and the Executive, including the
employment agreement dated as of April 1, 1994, except that this
Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Executive of a kind elsewhere provided and
not expressly provided in this Agreement.
14. Severability. If, for any reason, any one or more of the
------------
provisions or part of a provision contained in this Agreement shall be
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision or part of a provision of this Agreement not held so
invalid, illegal or unenforceable, and each other provision or part of
a provision shall to the full extent consistent with law continue in
full force and effect. If this Agreement is held invalid or cannot be
enforced, then to the full extent permitted by law any prior agreement
<PAGE>
<PAGE>
-15-
between the Company and the Executive shall be deemed reinstated as if
this Agreement had not been executed.
15. Consolidation, Merger, or Sale of Assets. Nothing in this
----------------------------------------
Agreement shall preclude the Company from consolidating or merging
into or with, or transferring all or substantially all of its assets
to, another corporation or acquiring entity which assumes this
Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation, merger or transfer of assets
and assumption, the term, "the Company", as used herein shall mean
such other corporation or acquiring entity and this Agreement shall
continue in full force and effect.
16. Notices. All notices, requests, demands and other
-------
communications required or permitted hereunder shall be given in
writing and shall be deemed to have been duly given if delivered or
mailed, postage prepaid, first class as follows:
(a) to the company:
Aquarion Company
835 Main Street
Bridgeport, Connecticut 06601
Attention: Secretary
(b) to the Executive:
Richard K. Schmidt
113 Lochinvar Court
Cary, North Carolina 27511
or to such other address as either party shall have previously
specified in writing to the other.
<PAGE>
<PAGE>
-16-
17. No Attachment. Except as required by law, no right to
-------------
receive payments under this Agreement shall be subject to
anticipation, commutation, alienation, sale, assignment, encumbrances,
charge, pledge, or hypothecation or to execution, attachment, levy, or
similar process or assignment by operation of law, and any attempt,
voluntary or involuntary, to effect any such action shall be null,
void and of no effect.
18. Binding Agreement. This Agreement shall be binding upon,
-----------------
and shall inure to the benefit of, the Executive and the Company and
their respective permitted successors and assigns.
19. Modification and Waiver. This Agreement may not be modified
-----------------------
or amended except by an instrument in writing signed by the parties
hereto. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement except by written
instrument signed by the party charged with such waiver or estoppel.
No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only
as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any act other
than that specifically waived.
20. Headings of No Effect. The paragraph headings contained in
---------------------
this Agreement are included solely for convenience of reference and
<PAGE>
<PAGE>
-17-
shall not in any way affect the meaning or interpretation of any of
the provisions of this Agreement.
21. Governing Law. This Agreement and its validity,
-------------
interpretation, performance, and enforcement shall be governed by the
laws of the State of Connecticut.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers thereunto
duly authorized, and the Executive has signed this Agreement, all as
of the date first above written.
AQUARION COMPANY
ATTEST:
By:
- ------------------------- ---------------------------
Secretary Its Chairman of the Board
-------------------------
RICHARD K. SCHMIDT
<PAGE>
<PAGE>
EXHIBIT 10(t)
EMPLOYMENT AGREEMENT
between
AQUARION COMPANY
and
DAVID C. HOULE
dated as of October 1, 1995
<PAGE>
<PAGE>
THIS AGREEMENT, made effective as of October 1, 1995 by and
between AQUARION COMPANY (the "Company"), a Delaware corporation, and
DAVID C. HOULE, of 4820 Salem Ridge Road, Holly Springs, North
Carolina 27540 (the "Executive"),
W I T N E S S E T H T H A T :
WHEREAS:
i. The Executive is a principal officer of the Company and
an integral part of its senior management who participates in the
decision making process relative to short and long term planning and
policy for the Company;
ii. The Board of Directors of the Company, at its meeting
on September 1, 1995, determined that it would be in the best
interests of the Company and its shareholders to assure continuity in
the management of the Company's administration and operations by
entering into an employment agreement to retain the services of the
Executive on an extended basis; and
iii. The Executive is willing to continue to serve the
Company as a member of its senior management on the terms and
conditions set forth herein;
NOW, THEREFORE, it is hereby agreed by and between the parties
hereto as follows:
1. Employment. The Company agrees to continue the Executive in
----------
its employ, and the Executive agrees to remain in the employ of the
Company, for the period stated in Paragraph 3 hereof and upon the
other terms and conditions herein provided.
<PAGE>
<PAGE>
-2-
2. Position and Responsibilities. During the period of his
-----------------------------
employment hereunder, the Executive agrees to serve as President of
Industrial and Environmental Analysts, Inc. ("IEA") for the period for
which he is and shall from time to time be elected, and to be
responsible for the general management of the affairs of IEA,
reporting directly to the Chief Executive Officer of the Company, with
such duties and responsibilities, consistent with such position as the
Board of Directors or the Chief Executive Officer of the Company may
from time to time determine. During said period, the Executive also
agrees to serve, if elected, as an officer and director of the Company
or any other subsidiary or affiliate of the Company.
3. Term and Duties.
---------------
(a) Term of Employment. The term of the Executive's
------------------
employment under this Agreement shall be deemed to have commenced as
of the date first above written and shall continue for a period of
twenty-four full calendar months thereafter, subject to extension as
hereinafter provided. On the first day of each month following the
date first above written, the term of the Executive's employment under
this Agreement shall be automatically extended unless prior thereto
the Company shall deliver to the Executive or the Executive shall
deliver to the Company written notice that such term of employment
shall not be extended, in which case such term shall end at the
<PAGE>
<PAGE>
-3-
expiration of the then existing term of employment under this
Agreement, including any previous extensions, and shall not be further
extended except by agreement of the Company and the Executive. Any
such automatic extension shall be for one additional full calendar
month (for a total term upon such extension of twenty-four full
calendar months), unless the Executive will attain age 65 prior to
completion of twenty-four full calendar months following the extension
date, in which case the term of the Executive's employment under this
Agreement shall terminate on the last day of the month in which the
Executive attains age 65.
(b) Duties. During the period of employment hereunder and
------
except for illness or incapacity and reasonable vacation periods
(which shall not be less than 22 days in any calendar year), the
Executive's business time, attention, skill and efforts shall be
exclusively devoted to the business and affairs of the Company and its
subsidiaries; provided, however, that nothing in this Agreement shall
preclude the Executive from devoting time during reasonable periods
required for:
(i) serving as an officer, director or member of a committee of
any company or organization involving no conflict of
interest with the Company or any of its subsidiaries or
affiliates,
(ii) delivering lectures and fulfilling speaking engagements, and
(iii) engaging in charitable and community activities, provided
<PAGE>
<PAGE>
-4-
that such activities do not materially affect or interfere
with the performance of the Executive's obligations to the
Company.
4. Compensation.
------------
(a) For all services rendered by the Executive in any
capacity during employment under this Agreement, including services as
an executive, officer, director, or member of any committee of the
Company or any subsidiary or affiliate thereof, the Company shall pay
the Executive a base salary at the rate of not less than $150,000 per
year, subject to such periodic increases as the Board shall deem
appropriate in accordance with the Company's customary procedures and
practices regarding the salaries of senior management employees. Such
salary shall be payable in accordance with the customary payroll
practices of the Company, but in no event less frequently than
monthly. Such periodic increases in salary, once granted, shall not
be subject to revocation.
(b) Executive shall be entitled to participate, at the
discretion of the Board, in any Company or IEA incentive or bonus plan
covering some or all of their executive officers that is in effect
during the period of his employment hereunder and to receive benefits
thereunder on a basis consistent with the overall administration and
intent of any such plan and with past practice, if any, under such
plan.
(c) Nothing in this Agreement shall preclude or affect any
<PAGE>
<PAGE>
-5-
rights or benefits that may now or hereafter be provided for the
Executive or for which the Executive may be or become eligible under
any other form of compensation or employee benefit plan now existing
or that may hereafter be adopted or awarded by IEA or the Company;
provided, however, that, subject to Paragraph 7(c)(iv), nothing in
this Agreement shall preclude the Company or IEA from amending or
terminating any such plan or program, on the condition that such
amendment or termination is applicable to all senior management
employees generally.
5. Business Expenses. The Company shall pay or reimburse the
-----------------
Executive for all reasonable travel and other expenses incurred in
connection with the performance of the Executive's duties under this
Agreement in accordance with such procedures as the Company may from
time to time establish. The Company further agrees to furnish the
Executive with a private office and a private secretary and such other
assistance and accommodations, including an automobile and appropriate
club membership, as shall be suitable to the character of the
Executive's position with the Company and adequate for the performance
of the Executive's duties under this Agreement.
6. Additional Benefits. Nothing in this Agreement shall affect
-------------------
the Executive's eligibility to participate in all group health,
dental, hospitalization, life, travel or accident or other insurance
plans or programs and all other perquisites, fringe benefits or
<PAGE>
<PAGE>
-6-
retirement plans or additional compensation, including termination pay
programs, which the Company may hereafter, in its sole and absolute
discretion, elect to make available to its senior management employees
generally, and the Executive shall be eligible to receive, during the
period of employment under this Agreement, all benefits and emoluments
for which key employees are eligible under every such plan, program,
perquisite or arrangement to the extent permissible under the general
terms and provisions thereof.
7. Termination of Employment. Notwithstanding any other
-------------------------
provision of this Agreement, the Executive's employment under this
Agreement may be terminated:
(a) by the Company, in the event of the Executive's
serious, willful misconduct in respect of the Executive's duties under
this Agreement, including conviction for a felony or perpetration of a
common law fraud which has resulted or is likely to result in material
economic damage to the Company or any of its subsidiaries, by written
notice to the Executive, specifying the event relied upon for such
termination;
(b) by either the Company or the Executive, if the
executive accepts employment or a consulting position with another
company; or
(c) by the Executive, in the event of any (i) material
change by the Company of the Executive's functions, duties or
responsibilities which change would cause the Executive's position
<PAGE>
<PAGE>
-7-
with the Company to become of less dignity, responsibility, importance
or scope from the position and attributes thereof described in
Paragraph 2 above, (ii) assignment or reassignment by the Company or
by one of its subsidiaries of the Executive to another place of
employment outside of 35 miles from Cary, North Carolina, (iii)
liquidation, dissolution, consolidation, or acquisition or merger of
the Company, or transfer of all or substantially all of its assets
other than a transaction in which a successor corporation with a net
worth at least equal to that of the Company assumes this Agreement and
all obligations and undertakings of the Company hereunder, or (iv)
reduction in the Executive's total compensation and benefits, as
specified in Paragraph 4 above and as currently provided, or other
material breach of this Agreement by the Company or any of its
subsidiaries, by thirty (30) days written notice to the Company,
specifying the event relied upon for such termination and given within
180 days after such event.
8. Payments Upon Termination of Employment. In the event of
---------------------------------------
any termination by the Executive pursuant to Paragraph 7(c) above, or
in the event the Executive's employment under this Agreement is
terminated by the Company for any reason other than one of those
specified in Paragraphs 7(a) or 7(b) above, the Company shall, as
liquidated damages or severance pay, or both, promptly pay to the
Executive and provide the Executive and the dependents, beneficiaries
and estate of the Executive as follows:
<PAGE>
<PAGE>
-8-
(a) The Company shall pay the Executive, at his option,
either as a lump sum or in equal monthly installments over the
unexpired portion of the term of employment provided for in Paragraph
3(a) above, a cash amount equal to the present value of the excess of
(i) the salary provided in Paragraph 4(a) above, including the
increases therein provided, for the unexpired portion of the term of
employment provided for in Paragraph 3(a) above (commencing with the
month in which termination shall have occurred) less the amounts, if
any, the Executive would have paid in cash in respect of employee
benefits provided for in Paragraph 4(c) above if the Executive were
still employed, over (ii) the amounts, if any, paid to the Executive
pursuant to any severance or termination pay program or arrangement of
the Company or any of its subsidiaries, provided, however, that in no
event shall the amount paid hereunder exceed 1.5 times the Executive's
annual salary.
(b) For purposes of calculating the lump sum cash payments
provided by Paragraphs 8(a) above, present value shall be determined
by using a discount factor equal to one percentage point below the
prime rate as published in The Wall Street Journal as of the date on
which termination shall have occurred.
(c) For a period of 24 months (commencing with the month in
which termination shall have occurred), the Executive shall continue
to be entitled to all employee benefits provided for in Paragraph 4(c)
above as may be in effect on the date of termination, as if the
Executive were still employed during such period under this Agreement,
<PAGE>
<PAGE>
-9-
with benefits based upon the compensation used to calculate the
payments provided by Paragraph 8(a) above, and if and to the extent
that such benefits shall not be payable or provided under any such
plan, the Company shall pay or provide such benefits on an individual
basis. The medical, dental, health and welfare benefits provided for
in Paragraph 4(c) above, in accordance with this Paragraph 8(c) shall
be secondary to any comparable benefits provided by another employer
provided that an appropriate refund is made of any reduction in the
amount paid pursuant to Paragraph 8(a)(i) which had assumed that such
benefits would be primary.
9. Source of Payments; Interest. All payments provided for in
----------------------------
Paragraphs 4, 5, 6 and 8 above shall be paid in cash from the general
funds of the Company. Any payments not made within thirty (30) days
after termination or such time as they may otherwise be due hereunder
shall bear interest at the interest rate used to establish the
discount factor provided for in Paragraph 8(b). The Company shall not
be required to establish a special or separate fund or other
segregation of assets to assure such payments.
10. Litigation Expenses.
-------------------
(a) In the event of any litigation or other proceeding
between the Company and the Executive with respect to the subject
matter of this Agreement and the enforcement of rights hereunder, the
Company shall reimburse the Executive for all reasonable costs and
<PAGE>
<PAGE>
-10-
expenses relating to such litigation or other proceeding, including
reasonable attorneys' fees and expenses, provided that such litigation
or proceeding results in any:
(i) settlement requiring the Company to make a payment to the
Executive, or
(ii) judgement or order in favor of the Executive enforcing any
provision of this Agreement or awarding any payment or other
consideration to the Executive, regardless of whether such
judgement or order is subsequently reversed on appeal or in
a collateral proceeding.
In no event shall the Executive be required to reimburse the Company
for any of the costs and expenses relating to such litigation or other
proceeding. The obligation of the Company under this Paragraph 10
shall survive the termination for any reason of this Agreement
(whether such termination is by the Company, by the Executive, upon
the expiration of this Agreement or otherwise).
11. Income Tax Withholding. The Company may withhold from any
----------------------
payments made under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or governmental
regulation or ruling.
12. Non-Disclosure of Proprietary Information. The Executive
-----------------------------------------
will gain, with respect to the Company and its affiliates, detailed
knowledge of all affairs, trade secrets, discoveries, plans,
<PAGE>
<PAGE>
-11-
development work in process, cost information, outstanding bid and bid
proposal information, customer requirements, contractual provisions,
employee capabilities and proposed marketing initiatives, other
confidential information and the like (the "Proprietary Information")
in the course of the Executive's employment hereunder and under any
prior employment agreement with the Company or an affiliate, and the
Executive will necessarily continue to have the fullest knowledge of
such matters. Disclosure to or utilization of such knowledge and
Proprietary Information to any person, firm, business, organization,
corporation, agency or other entity, whether or not engaged in any
line of business competing in any respect with the business of the
Company as now constituted, or as the same may be developed will cause
irreparable injury and damage to the business of the Company. The
Executive covenants and agrees that he will not at any time, during
and after the period of his employment hereunder, except as may be
required by law, disclose any of the Proprietary Information to, or
utilize such information on behalf of, any person, firm, business,
organization, corporation, agency or other entity (other than an
employee or agent of the Company entitled to receive the same). The
Executive's obligations under this Paragraph 12 shall not apply to
information which is or becomes part of the public domain through no
fault of the Executive. Further, upon termination of his employment
hereunder, the Executive agrees that he will deliver to the Company,
or any affiliated company designated by the Company, any and all
records, files, lists or other documents containing information within
<PAGE>
<PAGE>
-12-
the scope of the foregoing description, including, without limitation,
the Executive's records of contracts with customers and potential
customers, and all copies of the same, and shall not retain any copies
of Proprietary Information.
13. Executive's Inventions. The Executive will promptly submit
----------------------
to the Company written disclosures of all inventions, improvements and
discoveries relating to the business, whether or not patentable
(hereinafter "Inventions") which are made or conceived by him, along
or jointly with others, while in the Company's or IEA's employ. Title
to all such Inventions that shall be within the existing or
contemplated scope of the Company's or IEA's business at the time such
Inventions are made or conceived or which result from or are suggested
by any work he may do for or on behalf of the Company or IEA, together
with such patent, patents or other legal protections as may be
obtained thereon in the United States of America and all foreign
countries, shall belong to the Company. The Executive will assign
such title to the Company and, upon the request of the Company and
after the Executive's termination for any reason, execute all proper
papers for use in applying for, obtaining, maintaining and enforcing
such patents or other legal protections as the Company may desire and
will execute and deliver all proper assignments thereof, when so
requested, without further remuneration but at the expense of the Company.
<PAGE>
<PAGE>
-13-
14. Non-Competition.
---------------------
(a) The Executive covenants and agrees that, for a period ending
two (2) years from the Effective Date or a period ending one (1) year
after the termination of this Agreement, whichever is later, he will
not engage in any business competitive in any respect with the
business of the Company or IEA, their successors or assigns, as such
business is now constituted or as the same may be developed during the
Executive's employment in the geographic area designated in Section
14(c).
(b) The Executive shall be deemed to be engaged in such business
directly or indirectly if he is a sole proprietor or an employee,
officer, director, trustee, agent or partner of, or a consultant or
advisor to or for, a person, firm, corporation, association, trust or
other entity (other than the Company or IEA) which is engaged in such
business. This restriction shall not apply to the ownership of five
percent (5%) or less of the total outstanding issue of any class of
securities listed in the over-the-counter market or a national
securities exchange.
(c) Except as provided below, the geographic scope of the
Executive's covenant not to compete shall be:
(i) the states of North Carolina, Florida, Connecticut, New
Jersey, Massachusetts, Vermont and Illinois; and
(ii) the following states: Indiana, Ohio, Michigan,
Wisconsin, New York, Pennsylvania, South Carolina, Virginia,
<PAGE>
<PAGE>
-14-
Georgia, Alabama; and
(iii) any state in the United States of America in which
the Executive is rendering services for the Company or IEA at the
time of termination of employment.
(d) For the term set forth in Section 14(a) above, the Executive
covenants and agrees that, he will not, directly or indirectly,
solicit any person who is employed by the Company or any subsidiary at
the time of termination of the Executive's employment or within the
preceding six-month period to leave the employ of the Company or any
subsidiary or to render services to any business which competes with
the business of the Company or any subsidiary.
(e) The Executive agrees that the remedy at law for any breach
of the covenant contained in this Section 14 will be inadequate and
that any breach would cause such immediate and permanent damages as
would be impossible to ascertain, and, therefore, the Executive agrees
and consents that in the event of any breach of any provision of such
covenant by him, in addition to any and all legal and equitable
remedies available to the Company, its successors and assigns for such
breach, including a recovery of damages, the Company, its successors
and assigns shall be entitled to obtain preliminary injunctive relief
without the necessity of proving actual damages by reason of such
breach, and, to the extent permitted by applicable statutes and rules
of procedure, a temporary restraining order (or similar procedural
device) may be granted immediately upon the commencement of such
action.
<PAGE>
<PAGE>
-15-
15. Entire Understanding. This Agreement contains the entire
--------------------
understanding between the Company and the Executive with respect to
the subject matter hereof and supersedes any prior employment
agreement between the Company and the Executive, except that this
Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Executive of a kind elsewhere provided and
not expressly provided in this Agreement.
16. Severability. If, for any reason, any one or more of the
------------
provisions or part of a provision contained in this Agreement shall be
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision or part of a provision of this Agreement not held so
invalid, illegal or unenforceable, and each other provision or part of
a provision shall to the full extent consistent with law continue in
full force and effect. If this Agreement is held invalid or cannot be
enforced, then to the full extent permitted by law any prior agreement
between the Company and the Executive shall be deemed reinstated as if
this Agreement had not been executed.
17. Consolidation, Merger, or Sale of Assets. Nothing in this
----------------------------------------
Agreement shall preclude the Company from consolidating or merging
into or with, or transferring all or substantially all of its assets
to, another corporation or acquiring entity which assumes this
<PAGE>
<PAGE>
-16-
Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation, merger or transfer of assets
and assumption, the term, "the Company", as used herein shall mean
such other corporation or acquiring entity and this Agreement shall
continue in full force and effect.
18. Notices. All notices, requests, demands and other
-------
communications required or permitted hereunder shall be given in
writing and shall be deemed to have been duly given if delivered or
mailed, postage prepaid, first class as follows:
(a) to the company:
Aquarion Company
835 Main Street
Bridgeport, Connecticut 06601
Attention: Secretary
(b) to the Executive:
David C. Houle
4820 Salem Ridge Road
Holly Springs, North Carolina 27540
or to such other address as either party shall have previously
specified in writing to the other.
19. No Attachment. Except as required by law, no right to
-------------
receive payments under this Agreement shall be subject to
anticipation, commutation, alienation, sale, assignment, encumbrances,
charge, pledge, or hypothecation or to execution, attachment, levy, or
similar process or assignment by operation of law, and any attempt,
voluntary or involuntary, to effect any such action shall be null,
void and of no effect.
<PAGE>
<PAGE>
-17-
20. Binding Agreement. This Agreement shall be binding upon,
-----------------
and shall inure to the benefit of, the Executive and the Company and
their respective permitted successors and assigns.
21. Modification and Waiver. This Agreement may not be modified
-----------------------
or amended except by an instrument in writing signed by the parties
hereto. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement except by written
instrument signed by the party charged with such waiver or estoppel.
No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only
as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any act other
than that specifically waived.
22. Headings of No Effect. The paragraph headings contained in
---------------------
this Agreement are included solely for convenience of reference and
shall not in any way affect the meaning or interpretation of any of
the provisions of this Agreement.
23. Governing Law. This Agreement and its validity,
-------------
interpretation, performance, and enforcement shall be governed by the
laws of the State of Connecticut.
<PAGE>
<PAGE>
-18-
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers thereunto
duly authorized, and the Executive has signed this Agreement, all as
of the date first above written.
AQUARION COMPANY
ATTEST:
By:
- ------------------------------- --------------------------
Secretary Richard K. Schmidt
Its Chief Executive Officer
--------------------------------
David C. Houle
<PAGE>
<PAGE>
EXHIBIT 10(dd)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Connecticut Development Authority
and
Bridgeport Hydraulic Company
--------------
LOAN AGREEMENT
--------------
Dated as of April 1, 1995
Connecticut Development Authority
$30,000,000 Water Facilities Revenue Bonds
(Bridgeport Hydraulic Company Project - 1995 Series)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions . . . . . . . . . . . . . . . . . 5
Section 1.2. Interpretation . . . . . . . . . . . . . . .13
ARTICLE II REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations by the Authority . . . . . .15
Section 2.2. Representations by the Borrower . . . . . . .16
ARTICLE III THE LOAN
Section 3.1. Loan Clauses . . . . . . . . . . . . . . . .20
Section 3.2. Other Amounts Payable . . . . . . . . . . . .21
Section 3.3. Manner of Payment . . . . . . . . . . . . . .22
Section 3.4. Obligation Unconditional . . . . . . . . . .22
Section 3.5. Security Clauses . . . . . . . . . . . . . .22
Section 3.6. Issuance of Bonds . . . . . . . . . . . . . .22
Section 3.7. Use of Priority Amounts . . . . . . . . . . .23
Section 3.8. Effect of Drawing Under Letter
of Credit . . . . . . . . . . . . . . . . . .23
Section 3.9. Effective Date and Term . . . . . . . . . . .23
Section 3.10. Borrower's Purchase of Bonds . . . . . . . .23
Section 3.11. Letter of Credit . . . . . . . . . . . . . .24
Section 3.12. Requirements for Delivery of a
Substitute Credit Facility . . . . . . . . .24
Section 3.13. Securities Laws . . . . . . . . . . . . . . .26
Section 3.14. New York Paying Agent . . . . . . . . . . . .26
Section 3.15. No Additional Bonds . . . . . . . . . . . . .26
ARTICLE IV THE PROJECT
Section 4.1. Completion of the Project . . . . . . . . . .27
Section 4.2. Payment of Additional Project
Costs by Borrower . . . . . . . . . . . . . .28
Section 4.3. No Warranty Regarding Condition,
Suitability or Cost of Project . . . . . . .29
Section 4.4. Taxes . . . . . . . . . . . . . . . . . . . .29
Section 4.5. Insurance . . . . . . . . . . . . . . . . . .29
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<PAGE>
Section 4.6. Compliance with Law . . . . . . . . . . . . .31
Section 4.7. Maintenance and Repair . . . . . . . . . . .31
Section 4.8. Disposition of Project Realty
by Borrower . . . . . . . . . . . . . . . . .31
Section 4.9. Leasing of Project Realty and
Project Equipment . . . . . . . . . . . . . .32
Section 4.10. Project Equipment . . . . . . . . . . . . . .32
ARTICLE V CONDEMNATION, DAMAGE AND DESTRUCTION
Section 5.1. No Abatement of Payments Hereunder . . . . .33
Section 5.2. Project Disposition Upon Condemnation,
Damage or Destruction . . . . . . . . . . . .33
Section 5.3. Application of Net Proceeds of
Insurance or Condemnation . . . . . . . . . .33
ARTICLE VI COVENANTS
Section 6.1. The Borrower to Maintain its
Corporate Existence; Conditions under
which Exceptions Permitted . . . . . . . . .35
Section 6.2. Indemnification, Payment of Expenses,
and Advances . . . . . . . . . . . . . . . .35
Section 6.3. Incorporation of Tax Regulatory
Agreement; Payments Upon Taxability . . . . .38
Section 6.4. Further Assurances and Corrective
Instruments . . . . . . . . . . . . . . . . .40
Section 6.5. Covenant by Borrower as to Compliance
with Indenture . . . . . . . . . . . . . . .40
Section 6.6. Assignment of Agreement or Note . . . . . . .40
Section 6.7. Inspection . . . . . . . . . . . . . . . . .40
Section 6.8. Default Notification . . . . . . . . . . . .41
Section 6.9. Covenant Against Discrimination . . . . . . .41
Section 6.10. Authority Costs and Expenses . . . . . . . .41
Section 6.11. Covenant to Provide
Continuing Disclosure . . . . . . . . . . . .41
Section 6.12. Covenant Against Issuing Additional Debt
Secured By The Mortgage . . . . . . . . . . .42
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default . . . . . . . . . . . . . .43
Section 7.2. Remedies on Default . . . . . . . . . . . . .44
Section 7.3. No Duty to Mitigate Damages . . . . . . . . .45
Section 7.4. Remedies Cumulative . . . . . . . . . . . . .45
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<PAGE>
ARTICLE VIII PREPAYMENT PROVISIONS
Section 8.1. Optional Prepayment . . . . . . . . . . . . .46
Section 8.2. Notice by the Borrower of Optional
Prepayment . . . . . . . . . . . . . . . . .48
Section 8.3. Mandatory Prepayment on Taxability . . . . .48
ARTICLE IX GENERAL
Section 9.1. Indenture . . . . . . . . . . . . . . . . . .49
Section 9.2. Benefit of and Enforcement by
Bondholders . . . . . . . . . . . . . . . . .49
Section 9.3. Force Majeure . . . . . . . . . . . . . . . .49
Section 9.4. Amendments . . . . . . . . . . . . . . . . .50
Section 9.5. Notices . . . . . . . . . . . . . . . . . . .50
Section 9.6. Prior Agreements Superseded . . . . . . . . .50
Section 9.7. Execution of Counterparts . . . . . . . . . .51
Section 9.8. Time . . . . . . . . . . . . . . . . . . . .51
Section 9.9 Separability of Provisions . . . . . . . . .51
APPENDICES
Appendix A - Form of Promissory Note
Appendix B - Description of Project Realty
Appendix C - Description of Project Equipment
-iii-
<PAGE>
<PAGE>
Connecticut Development Authority
Bridgeport Hydraulic Company
LOAN AGREEMENT
THIS LOAN AGREEMENT, made and dated as of April 1, 1995 by and
between the Connecticut Development Authority, a body corporate and
politic constituting a public instrumentality and political
subdivision of the State of Connecticut, and Bridgeport Hydraulic
Company, a corporation organized and existing under the laws of the
State of Connecticut,
WITNESSETH THAT:
WHEREAS, the State Commerce Act, constituting Connecticut General
Statutes, Sections 32-la through 32-23xx, as amended (the "Act"),
declares that there is a continuing need in the State (1) for economic
development and activity to provide and maintain employment and tax
revenues and to control, abate and prevent pollution to protect the
public health and safety and (2) for assistance to public service
businesses providing transportation and utility services in the State,
and that the availability of financial assistance and suitable
facilities are important inducements to industrial and commercial
enterprises to remain or locate in the State and to provide
industrial, recreation, urban and public service projects; and
WHEREAS, the Act provides that (1) the term "project" as used
therein means any facility, plant, works, system, building, structure,
utility, fixture or other real property improvement located in the
State, and the land on which it is located or which is reasonably
necessary in connection therewith, which is of a nature or which is to
be used or occupied by any person for purposes which would constitute
it as an economic development project, recreation project, urban
project, public service project or health care project, and any real
property improvement reasonably related thereto, and (2) that a
project may also include or consist exclusively of machinery,
equipment or fixtures; and
WHEREAS, the Act defines economic development project to include
"any project which is to be used or occupied by any person for . . .
(2) controlling, abating, preventing or disposing of land, water, air
or other environmental pollution . . . or (3) the conservation of
energy or the utilization of cogeneration technology or solar, wind,
hydro, biomass or other renewable sources to produce energy for any
industrial or commercial application."
- 2 -
<PAGE>
<PAGE>
WHEREAS, the Act provides that the Authority shall have power (1)
to determine the location and character of any project to be financed
under the provisions of the Act; (2) to purchase, receive by gift or
otherwise, lease, exchange, or otherwise acquire, and construct,
reconstruct, improve, maintain, equip and furnish one or more
projects, including all real and personal property which the Authority
may deem necessary therewith, and to enter into a contract with a
person therefor upon such terms and conditions as the Authority shall
determine to be reasonable, including but not limited to reimbursement
for the planning, designing, financing, construction, reconstruction,
improvement, equipping, furnishing, operation and maintenance of
reserve and insurance funds with respect to the financing of the
project; (3) to extend credit or make loans to any person for the
planning, designing, financing, acquiring, constructing,
reconstructing, improving, equipping and furnishing of a project and
for the refinancing of existing indebtedness with respect to any
facility or part thereof which would qualify as a project in order to
facilitate substantial improvements thereto, which credits or loans
may be secured by loan agreements, mortgages, contracts and all other
instruments or fees and charges, upon such terms and conditions as the
Authority shall determine to be reasonable in connection with such
loans, including provision for the establishment and maintenance of
reserve and insurance funds and in the exercise of powers granted in
the the Act in connection with a project for such person, to require
the inclusion in any contract, loan agreement or other instrument,
such provisions for the construction, use, operation and maintenance
and financing of a project as the Authority may deem necessary or
desirable; (4) to issue its bonds for such purposes, subject to the
approval of the Treasurer of the State; and, (5) as security for the
payment of the principal or redemption price, if any, of and interest
on any such bonds, to pledge or assign such a loan, lease or sale
agreement and the revenues and receipts derived by the Authority from
such a project; and
WHEREAS, by various resolutions, as amended by subsequent
resolutions, in furtherance of the purposes of the Act, the Authority
has accepted the application of Bridgeport Hydraulic Company for
assistance in the financing of various capital projects in the State
of Connecticut; and
WHEREAS, the Borrower currently owns certain existing facilities
within certain municipalities in the State and, by resolution adopted
in furtherance of the purposes of the Act, the Authority has accepted
the application of the Borrower for assistance in the acquisition,
construction and installation of
-3-
<PAGE>
<PAGE>
a water treatment facility in Fairfield, Connecticut and the
acquisition, construction and installation of two water treatment
facilities in Litchfield County, Connecticut (the "Project"); and
WHEREAS, the Authority has by a further resolution adopted
April 19, 1995, authorized the issuance of $30,000,000 principal
amount of its Water Facilities Revenue Bonds (Bridgeport Hydraulic
Company Project - 1995 Series) for the purposes of providing funds for
the Project; and
WHEREAS, pursuant to such resolution the Bonds (as hereinafter
defined) are to be secured by an Indenture of Trust of even date
herewith, by and between the Authority and Shawmut Bank Connecticut,
National Association, as Trustee; and
WHEREAS, in order to further secure the Bonds, the Borrower
concurrently with the execution hereof has arranged the delivery to
the Paying Agent of an irrevocable direct pay Letter of Credit, dated
the date of delivery of the Bonds, issued by Societe Generale, acting
by and through its New York Branch (the "Bank"), for the account of
the Borrower in favor of the Paying Agent as beneficiary on behalf of
the owners of the Bonds while the Bonds are in the Flexible, Daily or
Weekly Mode; and
WHEREAS, the Borrower and the Bank entered into a Reimbursement
Agreement, dated as of April 1, 1995, obligating the Borrower inter
alia to repay all amounts drawn under the Letter of Credit together
with interest, if any, thereon; and
WHEREAS, the Bonds shall be special obligations of the Authority,
payable solely from the revenues or other receipts, funds or monies to
be derived by the Authority under this Agreement or the Indenture and
from any amounts otherwise available under the Indenture for the
payment of the Bonds; and
WHEREAS, the Authority proposes with the proceeds of the Bonds to
make a loan to the Borrower and the Borrower proposes to borrow such
proceeds from the Authority for the purpose of the acquisition,
construction and installation of the Project; and
WHEREAS, the Borrower acknowledges that the Authority is
providing financing for the Project in furtherance of the Authority's
corporate purposes under the Act, that the accomplishment of these
purposes is dependent upon the compliance of the Borrower with its
covenants contained in this Agreement, that the Authority has a
resulting beneficial interest in the Project, and that the Borrower's
use of and interest in the Project as provided hereby are in
furtherance of the discharge of a public purpose; and
- 4 -
<PAGE>
<PAGE>
WHEREAS, the Connecticut Department of Public Utility Control has
approved the issuance of the Note;
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, covenants and agreements herein set forth, the
Authority and the Borrower, each binding itself, its successors and
assigns, do mutually promise, covenant and agree as follows (provided
that in the performance of the agreements of the Authority herein
contained, any obligation it may incur for the payment of money shall
not be an obligation, debt or liability of the State or any
municipality thereof and neither the State nor any municipality
thereof shall be liable on any obligation so incurred, but any such
obligation shall be payable solely out of the revenues or other
receipts, funds or monies to be derived by the Authority under this
Agreement or the Indenture and from any amounts otherwise available
under the Indenture for the payment of the Bonds):
-5-
<PAGE>
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. For the purposes of this Agreement,
the following words and terms shall have the respective meanings set
forth as follows, and any capitalized word or term used but not
defined herein is used as defined in the Indenture:
"Act" means the State Commerce Act, constituting Connecticut
General Statutes, Sections 32-la through 32-23xx, as amended.
"Additional Bonds" means one or more series of additional Bonds,
other than the Bonds, authorized and issued by the Authority pursuant
to the Indenture.
"Agreement" means this Loan Agreement and any amendments and
supplements hereto.
"Authority" means the Connecticut Development Authority, a body
corporate and politic constituting a public instrumentality and
political subdivision of the State of Connecticut, duly organized and
existing under the laws of the State, and any body, board, authority,
agency or other political subdivision or instrumentality of the State
which shall hereafter succeed to the powers, duties and functions
thereof.
"Authorized Representative" means, in the case of the Authority,
the Chairman or Vice Chairman, the President, any Executive Vice
President, Deputy Director or any Senior Vice President or any Vice
President thereof and, in the case of the Borrower, the Chairman, Vice
Chairman, President, any Vice President, Chief Financial Officer,
Treasurer, Assistant Treasurer, Secretary or Assistant Secretary
thereof and, when used with reference to the performance of any act,
the discharge of any duty or the execution of any certificate or other
document, any officer, employee or other person authorized to perform
such act, discharge such duty or execute such certificate or other
document.
"Bank" means Societe Generale, acting by and through its New York
Branch, in its capacity as issuer of the Letter of Credit or any other
issuer of and obligor under a Credit Facility.
"Beneficial Owner" shall have the meaning specified in Section
2.3(F) of the Indenture. If any person claims to the
-6-
<PAGE>
<PAGE>
Trustee to be a Beneficial Owner, for purposes of Section 2.4(C)
of the Indenture, such person shall prove such claim to the satisfaction
of the Trustee with such documentation and signature guaranties as the
Trustee may request.
"Bonds" means the $30,000,000 Water Facilities Revenue Bonds
(Bridgeport Hydraulic Company Project - 1995 Series) authorized and
issued pursuant to Section 2.3 of the Indenture.
"Bond Counsel" means Whitman Breed Abbott & Morgan or such other
nationally recognized bond counsel selected by the Authority and
reasonably satisfactory to the Borrower and the Trustee.
"Borrower" means (i) Bridgeport Hydraulic Company, a corporation
organized and existing under the laws of the State of Connecticut, and
its successors and assigns and (ii) any surviving, resulting or
transferee corporation as provided in Section 6.1 hereof.
"Business Day" means any day (i) that is not a Saturday or
Sunday, (ii) that is a day on which banks located in Hartford,
Connecticut and New York, New York are not required or authorized to
remain closed, (iii) that is a day on which banking institutions in
all of the cities in which the principal offices of the Trustee and
the Paying Agent and, if applicable, the Remarketing Agent and the
Bank are located and are not required or authorized to remain closed
and (iv) that is a day on which the New York Stock Exchange, Inc. is
not closed.
"Code" means the Internal Revenue Code of 1986, as amended and
regulations promulgated thereunder.
"Completion Date" means the date of completion of the project as
specified and established in accordance with Article IV hereof.
"Conversion Date" means the date on which a new Mode becomes
effective with respect to a Bond, and with respect to a Bond in the
Multiannual Mode, the date on which a new Rate Period becomes
effective.
"Credit Facility" means the Letter of Credit and any substitute
irrevocable transferable direct pay letter of credit, municipal bond
insurance policy, other credit facility or any combination thereof,
which provides by its terms payment of the principal and Purchase
Price of, and interest on the Bonds when payable in accordance
herewith and with the Indenture delivered to the Paying Agent pursuant
to the Indenture and this Agreement and then in effect. More than one
Credit Facility may be in effect from time to time.
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"Debt Service Fund" means the special trust fund so designated,
established pursuant to Section 5.1 of the Indenture.
"DTC" or "The Depository Trust Company" shall mean the
limited-purpose trust company organized under the laws of the State of
New York which shall act as securities depository for the Bonds, and
any successor thereto.
"Determination of Taxability" means with respect to the Bonds (1)
a ruling by the Internal Revenue Service, (2) the receipt by the owner
of any of the Bonds from the Internal Revenue Service of a notice of
assessment and demand for payment and (provided the Borrower has been
afforded the opportunity to participate at its own expense in all
appeals and proceedings to which such owner of the Bonds is a party
relating to such assessment and demand for payment) the expiration of
the appeal period provided therein if no appeal is taken or, if an
appeal is taken by such owner as provided in Section 6.3 of this
Agreement within the applicable appeal period which has the effect of
staying the demand for payment, a final unappealable decision by a
court of competent jurisdiction, or (3) the admission in writing by
the Borrower, in any case to the effect that the interest on any Bonds
is includable in the gross income for federal income tax purposes
(other than for purposes of any alternative minimum tax, environmental
tax or foreign branch profits tax) of an owner or former owner
thereof, other than for a period during which such owner or former
owner is or was a "Substantial User" of the Project financed by such
Bonds or a "Related Person" as such terms are defined in the Code.
For purposes of this definition, the term owner means the Beneficial
Owner of the Bonds so long as the Book-Entry System is in effect.
"DPUC" means the State Department of Public Utilities Control.
"Disclosure Agreement" means the agreement by, between and among
the Borrower, Smith Barney Inc. and Advest, Inc., dated the date of
the initial delivery of the Bonds, providing for the provision of
certain information subsequent to the issuance of the Bonds.
"Event of Default" means an Event of Default as defined in
subsection 7.1 hereof.
"Financing Documents" (1) when used with respect to the Borrower,
means all documents and agreements executed and delivered by the
Borrower as security for or in connection
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with the issuance of the Bonds, including this Agreement, the Tax Regulatory
Agreement, the Note, the Disclosure Agreement, the General Certificate of
the Borrower and all other documents and agreements executed and delivered
by the Borrower in connection with any of the foregoing, but shall not
include the Mortgage and (2) when used with respect to the Authority,
means any of the foregoing documents and agreements to which the
Authority is a direct party. The Financing Documents do not include
any documents or agreements to which the Borrower is not a direct
party, including the Bonds or the Indenture.
"Hemlocks Project" means the acquisition, installation and
construction of a water treatment facility at the Hemlocks Reservoir,
to be located at 4975 Black Rock Turnpike, in the Town of Fairfield,
Connecticut.
"Indenture" means the Indenture of Trust, of even date herewith,
by and between the Authority and the Trustee, together with all
indentures supplemental thereto made and entered into in accordance
therewith.
"Interest Payment Date" shall mean each date on which interest is
payable on the Bonds as provided in the forms of the Bonds.
"Letter of Credit" means the $30,443,836 irrevocable, direct pay
letter of credit dated the date of the initial delivery of the Bonds
and issued by Societe Generale, acting by and through its New York
Branch, for the benefit of the Paying Agent.
"Litchfield Projects" means the acquisition, installation and
construction of two water treatment facilities in Litchfield County,
one to be located at Lakeville Reservoirs, 82 Reservoir Road, in the
Town of Salisbury, Connecticut and the other to be located at Lake
Wangum Reservoir, Canaan Mountain Road, in the Town of Canaan,
Connecticut.
"Mortgage" means the Mortgage Trust Indenture dated as of June 1,
1924 as has heretofore been and may be supplemented from time to time
between the Bridgeport Hydraulic Company and The Bridgeport Trust
Company, as trustee therefor.
"Mortgage Trustee" means The Chase Manhattan Bank of Connecticut,
N.A., as successor trustee to The Bridgeport Trust Company.
"Moody's" means Moody's Investors Services, Inc., a corporation
organized and existing under the laws of the State of Delaware, its
successors and their assigns, and if such
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corporation shall be dissolved or liquidated or shall no longer perform
the functions of a securities rating agency, "Moody's" shall be deemed to
refer to any other nationally recognized securities rating agency
designated by the Authority, at the direction of the Borrower, by notice
to the Trustee and the Borrower.
"Net Proceeds" when used with respect to any insurance or
condemnation award, means the gross proceeds from such award less all
expenses (including attorney's fees and expenses and any extraordinary
expenses) incurred by the Trustee in the collection thereof.
"Note" means the promissory note of the Borrower to the
Authority, dated the date of initial delivery of the Bonds in the form
attached as an Appendix to this Agreement, and any amendments or
supplements made in conformity with this Agreement and the Indenture.
"Outstanding", when used with reference to a Bond or Bonds, as of
any particular date, means all Bonds which have been authenticated and
delivered under the Indenture, except:
(1) any Bonds cancelled by the Trustee because of payment
or redemption prior to maturity or surrendered to the Trustee for
cancellation;
(2) any Bond (or portion of a Bond) paid or redeemed or for
the payment or redemption of which there has been separately set
aside and held in the Debt Service Fund either:
(a) monies in an amount sufficient to effect payment
of the principal or applicable Redemption Price thereof,
together with accrued interest on such Bond to the payment
or redemption date, which payment or redemption date shall
be specified in irrevocable instructions given to the
Trustee to apply such monies to such payment on the date so
specified; or
(b) obligations of the kind described in subsection
12.1(A) of the Indenture in such principal amounts, of such
maturities, bearing such interest and otherwise having such
terms and qualifications as shall be necessary to provide
monies in an amount sufficient to effect payment of the
principal or applicable Redemption Price of such Bond,
together with accrued interest on such Bond to the payment
or redemption date, which payment or redemption date shall
be specified in irrevocable instructions given
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to the Trustee to apply such obligations to such payment on
the date so specified; or
(c) any combination of (a) and (b) above;
(3) Bonds deemed tendered for purchase and not delivered to
the Paying Agent on the Purchase Date, provided sufficient funds
for payment of the Purchase Price are on deposit with the Paying
Agent;
(4) Bonds in exchange for or in lieu of which other Bonds
shall have been authenticated and delivered under Article III of
the Indenture; and
(5) any Bond deemed to have been paid as provided in
subsection 12.1 of the Indenture.
"Paying Agent" means any paying agent for the Bonds appointed
pursuant to Section 9.10 of the Indenture (and may include the
Trustee), and its successor or successors and any other corporation
which may at any time be substituted in its place in accordance with
the Indenture.
"Permitted Encumbrances" mean, as of any particular date, (i) the
lien of the Mortgage, (ii) liens and encumbrances permitted by the
Mortgage, (iii) liens for taxes not yet due and payable, (iv) any lien
created by this Agreement and the Indenture, (v) utility, access and
other easements and rights-of-way, that will not interfere with or
impair the value or use of the Project as herein provided, (vi) any
mechanic's, laborer's, materialman's, supplier's or vendor's lien or
right in respect thereof if payment is not yet due and payable and for
which statutory lien rights exist, and (vii) such minor defects,
irregularities, easements, and rights-of-way (including agreements
with any railroad the purpose of which is to service the railroad
siding) as normally exist with respect to property similar in
character to the Project and which do not materially impair the value
or use of the property affected thereby for the purpose for which it
was acquired hereunder.
"Principal User" means any principal user of the Project within
the meaning of Section 144(a)(2)(B) of the Code, including without
limitation any person who is a greater-than-10-percent-owner (or if
none, the person(s) who holds the largest ownership interest in the
Project), lessee or user of more than 10% of the Project measured
either by occupiable space or fair rental value under any formal or
informal agreement or, under the particular facts and circumstances,
anyone who is a principal customer of the Project. The term
"principal customer" means any person, who
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purchases output of the Project under a contract if the percentage of
output taken or to be taken by such person, multiplied by a fraction the
numerator of which is the term of such contract and the denominator of
which is the economic life of the Project, exceeds 10%. In the case of
a person who purchases output of an electric or thermal energy, gas, water
or other similar facility, such person is a principal customer if the
total output purchased by such person during any one-year period
beginning with the date the facility is placed in service is more than
10 percent of the facility's output during each such period.
Co-owners or co-lessees who are shareholders in a corporation or who
are collectively treated as a partnership subject to subchapter K
under section 761(a) of the Code are not treated as Principal Users
merely by reason of their ownership of corporate or partnership
interests.
"Project" means the Borrower's interest in the Project Realty and
other interests in the real property, and in all Project Equipment
wherever located and whether now owned or hereafter acquired or
financed in whole or in part with the proceeds of the Bonds and any
additions and accessions thereto, substitutions therefor and
replacements, improvements, extensions and restorations thereof,
described in the appendices hereto, including the Hemlocks Project and
the Litchfield Projects, as amended from time to time in accordance
with this Agreement.
"Project Costs" mean all costs and expenses of the Project for
which the Trustee is permitted to make payment as provided in
subsection 5.2(B) of the Indenture.
"Project Equipment" means all personal property, goods, leasehold
improvements, machinery, equipment, furnishings, furniture, fixtures,
tools and attachments wherever located and whether now owned or
hereafter acquired, acquired in whole or in part with the proceeds of
the Bonds, and any additions and accessions thereto, substitutions
therefor and replacements thereof, including, without limitation the
Project Equipment described in Appendix C hereto, as amended from time
to time in accordance herewith.
"Project Realty" means the realty and other interests in the real
property upon which the Project is built, or necessary for access to
or operation of the Project, together with all replacements,
improvements, extensions, substitutions, restorations and additions
thereto which are made pursuant hereto, including without limitation,
the Project Realty described in Appendix B, as amended from time to
time in accordance herewith.
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"Redemption Price" means, when used with respect to a Bond or a
portion thereof, the principal amount of such Bond or portion thereof
plus the applicable premium, if any, payable upon redemption thereof
pursuant to the Indenture.
"Reimbursement Agreement" means the Letter of Credit and
Reimbursement Agreement, dated as of April 1, 1995, as may be amended
or supplemented from time to time, between the Borrower and the Bank,
as issuing bank thereunder, and any other agreement between the
Borrower and a Bank under which the Borrower is obligated to reimburse
the Bank for payments made by the Bank under a Credit Facility.
"Related Person" means, with respect to any Principal User, a
person which is a related person (as defined in Section 144(a)(3) of
the Code, and by reference to Sections 267, 707(b) and 1563(a) of the
Code, except that 50% is to be substituted for 80% in Section
1563(a)).
"S&P" means Standard & Poor's Ratings Group, a corporation
organized and existing under the laws of the State of New York, its
successors and their assigns and, if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, "S&P" shall be deemed to refer to any other
nationally recognized securities rating agency designated by the
Trustee at the direction of the Borrower.
"State" means the State of Connecticut.
"Substantial User" means any substantial user of the Project
within the meaning of Section 147(a) of the Code.
"Supplemental Indenture" means any indenture supplemental to the
Indenture or amendatory of the Indenture, adopted by the Authority in
accordance with Article X of the Indenture.
"Tax Incidence Date" means the date as of which interest on the
Bonds becomes or became includable in the gross income of the
recipient thereof (other than the Borrower or another Substantial User
or Related Person) for federal income tax purposes for any cause, as
determined by a Determination of Taxability.
"Tax Regulatory Agreement" means the Tax Regulatory Agreement,
dated as of the date of initial issuance and delivery of the Bonds,
among the Authority, the Borrower and the Trustee, and any amendments
and supplements thereto.
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"Term", when used with reference to this Agreement, means the
term of this Agreement determined as provided in Article III hereof.
"Trustee" means Shawmut Bank Connecticut, National Association,
and its successor or successors hereafter appointed in the manner
provided in the Indenture.
Section 1.2. Interpretation. In this Agreement:
(1) The terms "hereby", "hereof", "hereto", "herein",
"hereunder" and any similar terms, as used in this Agreement,
refer to this Agreement, and the term "hereafter" means after,
and the term "heretofore" means before, the date of this
Agreement.
(2) Words of the masculine gender mean and include
correlative words of the feminine and neuter genders and words
importing the singular number mean and include the plural number
and vice versa.
(3) Words importing persons include firms, associations,
partnerships (including limited partnerships), trusts,
corporations and other legal entities, including public bodies,
as well as natural persons.
(4) Any headings preceding the texts of the several
Articles and Sections of this Agreement, and any table of
contents appended to copies hereof, shall be solely for
convenience of reference and shall not constitute a part of this
Agreement, nor shall they affect its meaning, construction or
effect.
(5) Nothing contained in this Agreement shall be construed
to cause the Borrower to become the agent for the Authority or
the Trustee for any purpose whatsoever, nor shall the Authority
or the Trustee be responsible for any shortage, discrepancy,
damage, loss or destruction of any part of the Project wherever
located or for whatever cause.
(6) All approvals, consents and acceptances required to be
given or made by any person or party hereunder shall be at the
sole discretion of the party whose approval, consent or
acceptance is required.
(7) All notices to be given hereunder shall be given in
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writing within a reasonable time unless otherwise specifically
provided.
(8) This Agreement shall be governed by and construed in
accordance with the applicable laws of the State.
(9) If any provision of this Agreement shall be ruled
invalid by any court of competent jurisdiction, the invalidity of
such provision shall not affect any of the remaining provisions
hereof.
(10) From and after the date upon which there is no Credit
Facility in effect, upon receipt by the Trustee of a certificate
from the Bank stating that all amounts payable to the Bank under
the Reimbursement Agreement have been paid in full, all
references to the Bank, the Reimbursement Agreement or the Credit
Facility in this Agreement, the Note, the Indenture, and the
Bonds shall be ineffective.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations by the Authority. The Authority
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represents and warrants that:
(1) It is a body corporate and politic constituting a
public instrumentality and political subdivision of the State,
duly organized and existing under the laws of the State including
the Act. The Authority is authorized to issue the Bonds in
accordance with the Act and to use the proceeds thereof to
finance the Project.
(2) The Authority has complied with the provisions of the
Act and has full power and authority pursuant to the Act to
consummate all transactions contemplated by the Bonds, the
Indenture and the Financing Documents.
(3) By resolution duly adopted by the Authority and still
in full force and effect, the Authority has authorized the
execution, delivery and due performance of the Bonds, the
Indenture and the Financing Documents, and the taking of any and
all action as may be required on the part of the Authority to
carry out, give effect to and consummate the transactions
contemplated by this Agreement and the Indenture, and all
approvals necessary in connection with the foregoing have been
received.
(4) The Bonds have been duly authorized, executed,
authenticated, issued and delivered, constitute valid and binding
special obligations of the Authority payable solely from revenues
or other receipts, funds or monies pledged therefor under the
Indenture and from any amounts otherwise available under the
Indenture, and are entitled to the benefit of the Indenture.
Neither the State nor any municipality thereof is obligated to
pay the Bonds or the interest thereon. Neither the faith and
credit nor the taxing power of the State nor any municipality
thereof is pledged for the payment of the principal, and premium,
if any, of and interest on the Bonds.
(5) The execution and delivery of the Bonds, the Indenture
and the Financing Documents and compliance with the provisions
thereof, will not conflict with or constitute on the part of the
Authority a violation of, breach of or default under its by-laws
or any statute, indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which the Authority
is a party
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or by which the Authority is bound, or, to the knowledge of the
Authority, any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the
Authority or any of its activities or properties, and all
consents, approvals, authorizations and orders of governmental or
regulatory authorities which are required for the consummation by
the Authority of the transactions contemplated thereby have been
obtained.
(6) Subject to the provisions of this Agreement and the
Indenture, the Authority will apply the proceeds of the Bonds to
the purposes specified in the Indenture and the Financing
Documents.
(7) There is no action, suit, proceeding or investigation
at law or in equity before or by any court, public board or body
pending or threatened against or affecting the Authority, or to
the best knowledge of the Authority, any basis therefor, wherein
an unfavorable decision, ruling or finding would adversely affect
the transactions contemplated hereby or by the Indenture, or
which, in any way, would adversely affect the validity of the
Bonds, or the validity of or enforceability of the Indenture or
the Financing Documents, or any agreement or instrument to which
the Authority is a party and which is used or contemplated for
use in consummation of the transactions contemplated hereby and
by the Indenture.
(8) It has not made any commitment or taken any action
which will result in a valid claim for any finders or similar
fees or commitments in respect of the transactions contemplated
by this Agreement.
(9) The representations of the Authority set forth in the
Tax Regulatory Agreement are by this reference incorporated in
this Agreement as though fully set forth herein.
Section 2.2. Representations by the Borrower. The Borrower
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represents and warrants that:
(1) The Borrower has been duly incorporated and validly
exists as a corporation in good standing under the laws of the
State of Connecticut, is not in violation of any provision of its
certificate of incorporation or its by-laws, has corporate power
to enter into and perform the Financing Documents, and by proper
corporate action has duly authorized the execution and delivery
of the Financing Documents.
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(2) The Financing Documents constitute valid and legally
binding obligations of the Borrower, enforceable in accordance
with their respective terms, except to the extent that such
enforceability may be limited by bankruptcy or insolvency or
other laws affecting creditors' rights generally or by general
principles of equity.
(3) Neither the execution and delivery of the Financing
Documents, the consummation of the transactions contemplated
thereby, nor the fulfillment by the Borrower of or compliance by
the Borrower with the terms and conditions thereof is prevented
or limited by or conflicts with or results in a breach of, or
default under the terms, conditions or provisions of any
contractual or other restriction of the Borrower, evidence of its
indebtedness or agreement or instrument of whatever nature to
which the Borrower is now a party or by which it is bound, or
constitutes a default under any of the foregoing. No event has
occurred and no condition exists which, upon the execution and
delivery of any Financing Documents, constitutes an Event of
Default hereunder or an event of default thereunder or, but for
the lapse of time or the giving of notice, would constitute an
Event of Default hereunder or an event of default thereunder.
(4) There is no action or proceeding pending or, to the
knowledge of the Borrower, threatened against the Borrower before
any court, administrative agency or arbitration board that may
materially and adversely affect the ability of the Borrower to
perform its obligations under the Financing Documents and all
authorizations, consents and approvals of governmental bodies or
agencies required in connection with the execution and delivery
of the Financing Documents and in connection with the performance
of the Borrower's obligations hereunder or thereunder have been
obtained.
(5) The execution, delivery and performance of the
Financing Documents and any other instrument delivered by the
Borrower pursuant to the terms hereof or thereof are within the
corporate powers of the Borrower and have been duly authorized
and approved by the board of directors of the Borrower and are
not in contravention of law or of the Borrower's certificate of
incorporation or by-laws, as amended to date, or of any
undertaking or agreement to which the Borrower is a party or by
which it is bound.
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(6) The Borrower represents that it has not made any
commitment or taken any action which will result in a valid claim
for any finders' or similar fees or commitments in respect of the
transactions described in this Agreement other than the fees to
various parties to the transactions contemplated hereby which
have been heretofore paid or provided.
(7) The Project is included within the definition of a
"project" in the Act, and its estimated cost is equal to or in
excess of $30,000,000. The Borrower intends the Project to be
and continue to be an authorized project under the Act during the
Term of this Agreement.
(8) All amounts shown in Schedule D of the Tax Regulatory
Agreement are eligible costs of a project financed by bonds
issued by the Authority under the Act, and may be financed by
amounts in the Refunding Fund under the Indenture. None of the
proceeds of the Bonds will be used directly or indirectly as
working capital or to finance inventory.
(9) The Project is in compliance with all applicable
federal, State and local laws and ordinances (including rules and
regulations) relating to zoning, building, safety and
environmental quality, the non-compliance with which would
materially adversely affect the performance by the Borrower of
any of its obligations hereunder.
(10) The Borrower has obtained, or will obtain, all
necessary material approvals from any and all governmental
agencies requisite to the Project, and has also obtained all
material occupancy permits and authorizations from appropriate
authorities authorizing the occupancy and use of the Project for
the purposes contemplated hereby. The Borrower further
represents and warrants that it will complete the Project in
accordance with all material federal, State and local laws,
ordinances and regulations applicable thereto.
(11) The Borrower does not presently intend to lease the
Project.
(12) The Borrower will not take or omit to take any action
which action or omission will in any way cause the proceeds of
the Bonds to be applied in a manner contrary to that provided in
the Indenture and the Financing Documents as in force from time
to time.
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(13) The Borrower has not taken and will not take any action
and knows of no action that any other person, firm or corporation
has taken or intends to take, which would cause interest on the
Bonds to be includable in the gross income of the recipients
thereof for federal income tax purposes. The representations,
certifications and statements of reasonable expectation made by
the Borrower in the Tax Regulatory Agreement and relating to
Project description, composite issues, bond maturity and average
asset economic life, use of Bond proceeds, arbitrage and related
matters are hereby incorporated by this reference as though fully
set forth herein.
(14) The Borrower has good and marketable title to the
Project subject only to Permitted Encumbrances and to
irregularities or defects in title which may exist which do not
materially impair the use of such properties in the Borrower's
business.
(15) As of the date of execution hereof, except for the
Mortgage, neither the Borrower, nor to its knowledge anyone
acting on behalf of the Borrower, has entered into negotiations
with any person for the purpose of undertaking any borrowing
concurrently with or subsequent to the issuance of the Bonds and
to be secured wholly or partially by a lien or encumbrance on the
Project or any part thereof, and the Borrower has no present
intention of undertaking any such borrowing.
(16) The Borrower will use all of the proceeds of the Bonds
to finance the Project Costs.
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ARTICLE III
THE LOAN
Section 3.1. Loan Clauses. (A) Subject to the conditions and in
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accordance with the terms of this Agreement, the Authority agrees to
make a loan to the Borrower from the proceeds of the Bonds in the
amount of $30,000,000 and the Borrower agrees to borrow such amount
from the Authority.
(B) The loan shall be made at the time of delivery of the
Bonds and receipt of payment therefor by the Authority against receipt
by the Authority of the Note duly executed and delivered to evidence
the pecuniary indebtedness of the Borrower hereunder. As and for the
loan the Authority shall apply the proceeds of the Bonds as provided
in the Indenture on the terms and conditions therein prescribed.
(C) The Borrower shall make payments in immediately
available funds to the Trustee for deposit in the Debt Service Fund no
later than 12:00 Noon on the date on which such payment of principal
(including principal of Bonds called for redemption) and Purchase
Price of, premium, if any, or interest on Bonds shall become due in an
amount equal to the payment then coming due on such Bonds less the
amounts, if any, (i) then held in the Debt Service Fund and available
to pay the same, and (ii) amounts received by the Paying Agent to pay
the same from a draw under a Credit Facility. The Borrower may make
payments to the Debt Service Fund earlier than required by this
section, but such payments shall not affect the accrual of interest.
In addition, the Borrower shall pay to the Trustee, as and when the
same shall become due, all other amounts due under the Financing
Documents, together with interest thereon at the then applicable rate
as set forth herein in Section 6.2(G). The Borrower shall have the
option to prepay its loan obligation in whole or in part at the times
and in the manner provided in Article VIII hereof.
(D) The payments to be made under Section 3.1(C) shall be
appropriately adjusted to reflect the date of issue of Bonds, accrued
interest deposited in the Debt Service Fund, if any, and any purchase
or redemption of Bonds so that there will be available on each payment
date the amount necessary to pay the interest and principal due or
coming due on the Bonds and so that accrued interest will be applied
to the installments of interest to which it is applicable.
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(E) At any time when any principal of the Bonds is overdue,
the Borrower shall also have a continuing obligation to pay to the
Trustee for deposit in the Debt Service Fund an amount equal to
interest on the overdue principal but the installment payments
required under this section shall not otherwise bear interest.
Redemption premiums shall not bear interest.
(F) The payment obligations of the Borrower in this Section
3.1 are subject in all respects to the provisions of Sections 3.7 and
3.8 hereof regarding the use of Priority Amounts and the effect of
drawings under the Credit Facility.
(G) In the event the Borrower should fail to make any of
the payments required under the foregoing provisions of this Section
3.1, the item or installment so in default shall continue as an
obligation of the Borrower until the amount in default shall have been
fully paid, and the Borrower agrees to pay or cause to be paid the
same with interest thereon at the rate determined in accordance with
Article II of the Indenture until paid in accordance herewith and with
the Indenture.
Section 3.2. Other Amounts Payable. (A) The Borrower hereby
---------------------
further expressly agrees to pay to the Trustee as and when the same
shall become due, (i) an amount equal to the initial and annual fees
of the Trustee for the ordinary services of the Trustee rendered and
its ordinary expenses incurred under the Indenture, including fees and
expenses as Paying Agent and the fees and expenses of Trustee's
counsel, including fees and expenses as registrar and in connection
with preparation and delivery of new Bonds upon exchanges or
transfers, (ii) the reasonable fees and expenses of the Trustee and
any Paying Agents on the Bonds for acting as paying agents as provided
in the Indenture, including fees and expenses of the Paying Agent as
registrar and in connection with the preparation of new Bonds upon
exchanges, transfers or redemptions, (iii) the reasonable fees and
expenses of the Bank and the Remarketing Agent for the performance of
their duties as provided in the Indenture, including the reasonable
fees of their counsel and other expenses the Remarketing Agent may
incur in providing for accurate offering documents in connection
therewith, (iv) the reasonable fees and charges of the Trustee for
extraordinary services rendered by it and extraordinary expenses
incurred by it under the Indenture, including reasonable counsel fees
and expenses, and (v) fees and expenses of Bond Counsel and the
Authority for any future action requested of either.
(B) The Borrower also agrees to pay all amounts payable by
it under the Financing Documents at the time and in the manner therein
provided.
(C) The Borrower agrees to pay all Rebate Amounts (and
penalties, if any) due to the United States of America pursuant to
Section 148 (f) of the Code.
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<PAGE>
<PAGE>
Section 3.3. Manner of Payment. The payments provided for in
-----------------
Section 3.1 hereof shall be made by any reasonable method providing
immediately available funds at the time and place of payment directly
to the Trustee for the account of the Authority and shall be deposited
in the Debt Service Fund. The additional payments provided for in
Section 3.2 shall be made in the same manner directly to the entitled
party or to the Trustee for its own use or disbursement to the Paying
Agents, as the case may be.
Section 3.4. Obligation Unconditional. The obligations of the
------------------------
Borrower under the Financing Documents shall be absolute and
unconditional, irrespective of any defense or any rights of setoff,
recoupment or counterclaim it might otherwise have against the
Authority or the Trustee. The Borrower will not suspend or
discontinue any such payment or terminate this Agreement (other than
in the manner provided for hereunder) for any cause, including,
without limiting the generality of the foregoing, any acts or
circumstances that may constitute failure of consideration, failure of
title, or commercial frustration of purpose, or any damage to or
destruction of the Project, or the taking by eminent domain of title
to or the right of temporary use of all or any part of the Project, or
any change in the tax or other laws of the United States, the State or
any political subdivision of either thereof, or any failure of the
Authority or the Trustee to perform and observe any agreement or
covenant, whether expressed or implied, or any duty, liability or
obligation arising out of or connected with the Financing Documents.
Section 3.5. Security Clauses. The Authority hereby notifies
----------------
the Borrower and the Borrower acknowledges that, among other things,
the Borrower's loan payments and all of the Authority's right, title
and interest under the Financing Documents to which it is a party
(except its rights under Section 6.2 hereof) are being concurrently
with the execution and delivery hereof endorsed, pledged and assigned
without recourse by the Authority to the Trustee as security for the
Bonds as provided in the Indenture.
Section 3.6. Issuance of Bonds. The Authority has concurrently
-----------------
with the execution and delivery hereof sold and delivered the Bonds
under and pursuant to a resolution adopted by the Authority on
April 19, 1995, authorizing their issuance under and pursuant to the
Indenture. The proceeds of sale of the Bonds shall be applied as
provided in Articles IV and V of the Indenture.
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<PAGE>
<PAGE>
Section 3.7. Use of Priority Amounts. The Borrower and the
-----------------------
Authority acknowledge their intention to minimize the risk that any
payment made to a Bondowner from amounts provided by or on behalf of
the Borrower may be determined by a bankruptcy court to constitute a
preference. To this end the parties agree that payments to Bondowners
on Bonds supported by a Credit Facility shall be made only from
Priority Amounts, except when and to the extent no Priority Amounts
are available for the purpose as provided in Section 5.9(E) of the
Indenture.
Section 3.8. Effect of Drawings Under Credit Facility. The
----------------------------------------
payment of obligations of the Borrower under this Agreement and the
Note with respect to the Bonds shall be completely satisfied to the
extent of all drawings made under the Credit Facility for the purpose
of satisfying such obligations.
Section 3.9. Effective Date and Term. (A) This Agreement shall
-----------------------
become effective upon its execution and delivery by the parties
hereto, shall remain in full force from such date and, subject to the
provisions hereof (including particularly Articles VII and VIII),
shall expire on such date as the Indenture shall be discharged and
satisfied in accordance with the provisions of subsection 12.1(A)
thereof. The Borrower's obligations under Sections 6.2 and 6.3
hereof, however, shall survive the expiration of this Agreement in
accordance with the provisions of such Sections.
(B) Within 60 days of such expiration the Authority shall
deliver to the Borrower any documents and take or cause the Trustee,
at the Borrower's expense, to take any such reasonable actions as may
be necessary to effect the cancellation, release and satisfaction of
the Indenture and the Financing Documents.
Section 3.10. Borrower's Purchase of Bonds. Pursuant to Section
----------------------------
5.9(F) of the Indenture, if the amount drawn on the Credit Facility
and deposited with the Paying Agent, together with all other amounts
(including remarketing proceeds) received by the Paying Agent for the
purchase of Bonds supported by a Credit Facility and tendered pursuant
to Sections 2.3(G)(1)(b), 2.3(G)(1)(c), 2.3(G)(2)(b), (c) or (d), or
2.3(G)(3)(b), (c) or (d), of the Indenture, is not sufficient to pay
the Purchase Price of such Bonds on the Purchase Date, the Paying
Agent shall before 3:30 P.M. on such Purchase Date, notify the
Borrower, the Remarketing Agent and the Trustee of such deficiency by
telephone promptly confirmed in writing. The Borrower shall pay to
the Paying Agent in immediately available funds by 4:00 P.M. on the
Purchase Date an amount equal to the Purchase Price of such Bonds less
the amount, if any, available to pay the Purchase Price in accordance
with Section 9.18 of the Indenture from the proceeds
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<PAGE>
<PAGE>
of the remarketing of such Bonds or from drawings on the Credit Facility,
as reported by the Paying Agent. Bonds purchased entirely with moneys
furnished by the Borrower shall be Borrower Bonds.
Section 3.11. Letter of Credit. The Borrower has arranged,
----------------
concurrently with the original issuance and authentication of the
Bonds, for the delivery to the Paying Agent of the Letter of Credit,
having a term expiring three years from the date of issuance, and
providing for the Paying Agent to be entitled to draw on or prior to
the Termination Date (as defined therein), an amount that is not less
than the sum of the aggregate principal amount (or that portion of the
purchase price corresponding to principal) of the Outstanding Bonds
and up to forty-five (45) days of interest accrued on such Bonds (or
that portion of the purchase price corresponding to interest) if such
Bonds were issued at the Maximum Interest Rate.
Section 3.12. Requirements for Delivery of a Substitute Credit
------------------------------------------------
Facility. (A) The Borrower may, upon satisfaction of the requirements
- --------
set forth in this Section, at its option (except during the period
between the giving of notice of mandatory tender for purchase on
account of the expiration of the Credit Facility and the Purchase
Date), provide for the delivery to the Paying Agent of a substitute
Credit Facility; provided, however, that (1) the Credit Facility being
-------- -------
replaced shall in no event be terminated or released until the
Borrower has given not less than forty-five (45) days' written notice
to the Authority, the Trustee, the Paying Agent and the Remarketing
Agent, and further the Paying Agent has received the proceeds of all
outstanding drawings on the Credit Facility being replaced, (2) if any
Bonds supported by the Credit Facility being replaced are in the Daily
Mode or the Weekly Mode, the Paying Agent has given not less than (30)
days' written notice of the termination or release of the Credit
Facility to owners of such Bonds in the Daily Mode or the Weekly Mode
and (3) if any of the Bonds supported by the Credit Facility being
replaced are in the Flexible Mode, such Credit Facility shall in no
event be terminated or released earlier than on the second Business
Day after an Effective Date for all such Bonds or such earlier day on
or after such Effective Date on which the full Purchase Price for such
Bonds is received by the Paying Agent. Any notice given pursuant to
clause (1) or (2) above shall specify the expiration date of the
Credit Facility being replaced and the name of the entity providing
the substitute Credit Facility and shall advise that the Credit
Facility being replaced will terminate on the date stated in such
notice.
(B) Each substitute Credit Facility must:
(i) be an irrevocable, unconditional obligation of a
financial institution;
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<PAGE>
<PAGE>
(ii) be on terms no less favorable to the Paying Agent
than the Letter of Credit and entitle the Paying
Agent to draw upon or demand payment and receive
in immediately available funds an amount equal to
the sum of the principal amount of the Bonds
supported by the Credit Facility, any premium
applicable thereto, and forty-five (45) days'
accrued interest at the Maximum Interest Rate on
the principal amount of Bonds then Outstanding in
the Daily Mode, the Weekly Mode or the Flexible
Mode; and
(iii) provide for a term which may not expire in less
than 360 days and which may not expire or be
terminated prior to the fifth Business Day after
the mandatory tender for purchase as provided in
Section 2.3(G)(1)(c), 2.3(G)(2)(d) or 2.3(G)(3)(d)
of the Indenture. The Borrower shall not enter
into any Reimbursement Agreement or agree to any
amendment of a Reimbursement Agreement which in
any way limits the obligation of the Bank to
provide funds under the Credit Facility without
the prior written consent of 100% of the principal
amount of the Bonds Outstanding and entitled to
the benefit thereof.
(C) No substitute Credit Facility may be delivered to the
Trustee for any purpose under this Agreement or the Indenture unless
accompanied by the following documents: (i) an opinion of counsel for
the issuer of the substitute Credit Facility to the effect that it
constitutes a legal, valid and binding obligation of the issuer
enforceable in accordance with its terms; (ii) an opinion of Bond
Counsel to the effect that the issuance of a substitute Credit
Facility will not adversely affect the exclusion of interest on the
Bonds from gross income for federal income tax purposes and that such
Credit Facility is permitted under the Indenture; (iii) an opinion of
counsel to the Borrower satisfactory to the Trustee, stating that the
delivery of such substitute Credit Facility is authorized under this
Agreement and complies with the terms hereof; (iv) a certificate of
the Bank that all amounts due under the Reimbursement Agreement
relating to the outstanding Credit Facility have been paid and that
the Borrower has fulfilled all its obligations arising out of such
agreement; (v) an executed
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<PAGE>
<PAGE>
copy of the Reimbursement Agreement entered
into with respect to the substitute Credit Facility; (vi) copies of
any other documents, agreements or arrangements entered into directly
or indirectly between the Borrower and the entity issuing the
substitute Credit Facility with respect to the transactions
contemplated by the substitute Credit Facility and related
Reimbursement Agreement; and (vii) such other documents and opinions
as the Trustee or the Authority may reasonably request. Notice of the
substitution, replacement, termination or extension of a Credit
Facility shall be sent by the Paying Agent to Moody's and S&P and
shall include the new expiration date of the Credit Facility and the
name of the entity providing the substitute Credit Facility.
The substitute Credit Facility, related Reimbursement
Agreement and other documents, agreements and arrangements entered
into and delivered with respect to the delivery of a substitute Credit
Facility shall not include any provisions less favorable to the owners
of the Bonds than the provisions of the Credit Facility and related
Reimbursement Agreement, documents, agreements and arrangements,
including provisions regarding the acceleration of the Bonds, any
right of setoff of assets of the account party by the entity issuing
the substitute Credit Facility, and any direct or indirect pledge of
collateral which is not pledged on a priority or parity basis to the
owners of the Bonds.
Section 3.13. Securities Laws. In any remarketing of Bonds
---------------
under this Agreement, the Borrower shall at all times comply with
applicable federal and state securities laws.
Section 3.14. New York Paying Agent. The Borrower agrees that
---------------------
if at any time it becomes necessary or desirable to have a Paying
Agent capable of performing in New York, New York, it shall remove
Shawmut Bank Connecticut, National Association as Paying Agent and a
successor shall be appointed pursuant to Section 9.11 of the
Indenture.
Section 3.15. No Additional Bonds. No Additional Bonds on a
-------------------
parity with the Bonds may be issued under the Indenture.
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<PAGE>
<PAGE>
ARTICLE IV
THE PROJECT
Section 4.1. Completion of the Project. (A) The Borrower agrees
-------------------------
that it will undertake and complete or cause to be undertaken and
completed the Project for the purposes and in the manner intended
hereby and by the Borrower's application for assistance to the
Authority and in accordance with the plans and specifications therefor
which have been prepared by or on behalf of the Borrower and placed on
file in the principal office of the Borrower and with the Trustee, and
that it will cause such improvements to be made to the Project as are
necessary for the operation thereof in the manner herein provided.
(B) The Borrower may modify, alter and amend the plans and
specifications for the Project from time to time and at any time,
provided that such modifications, alterations and amendments do not
materially impair the operation of the Project as a water treatment
facility under the Act and provided that no material modifications,
alterations or amendments shall be made unless the Borrower shall have
theretofore delivered to the Trustee an opinion of counsel acceptable
to the Trustee to the effect that such amendment, modification or
alteration and the expenditure of amounts from the Project Fund in
connection therewith will not cause interest on the Bonds to be
subject to federal income taxation, together with any written
representations or certifications of fact made by or on behalf of the
Borrower upon which such counsel has relied in rendering such opinion.
(C) The Borrower affirms that it shall bear all of the
costs and expenses in connection with the preparation of the Financing
Documents and the Indenture, the preparation and delivery of any legal
instruments and documents necessary in connection therewith and their
filing and recording, if required, and all taxes and charges payable
in connection with any of the foregoing. Such costs and all other
costs of the Project shall be paid by the Borrower in the manner and
to the extent provided in the Indenture.
(D) The Borrower hereby agrees that in order to effectuate
the purposes of the Financing Documents, it will make, execute,
acknowledge and deliver any contracts, orders, receipts, writings and
instructions with any other persons, firms, or corporations and in
general do all things which may be requisite or proper, all for the
purpose of carrying out
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<PAGE>
<PAGE>
and completing the Project. The Borrower will
use its best efforts to complete the Project with all reasonable
dispatch. If for any reason the completion of such work does not
occur within this period, there shall be no liability on the part of
the Authority and no diminution in or postponement of the payments
required in Section 3.1 hereof to be paid by the Borrower.
(E) The Borrower has obtained or shall obtain all necessary
approvals from any and all governmental agencies requisite to the
undertaking and completion of the Project and in compliance with all
federal, State and local laws, ordinances and regulations applicable
thereto. Upon completion of the Project, the Borrower shall obtain
all required permits and authorizations from appropriate authorities,
if any be required, authorizing the operation and uses of the Project
for the purposes contemplated hereby, where failure to obtain such
approvals, permits and authorizations would have a material adverse
effect on the transactions contemplated hereby.
(F) The Borrower covenants that it will take such action
and institute such proceedings as shall be necessary to cause and
require all contractors and material suppliers to complete their
contracts diligently in accordance with the terms of the contracts,
including, without limitation, the correcting of any defective work.
(G) Upon the occurrence of a default by any contractor or
subcontractor or supplier under any contract made by it in connection
with the Project, the Borrower will promptly proceed, to the extent it
deems appropriate in the circumstances, either separately or in
conjunction with others, to exhaust the remedies of the Borrower
against each surety for the performance of such contract.
(H) The Borrower will have good and marketable title in fee
simple to the Project Realty, subject only to Permitted Encumbrances,
sufficient for the purposes of this Agreement.
Section 4.2 Payment of Additional Project Costs by Borrower.
-----------------------------------------------
In the event that moneys in the Project Fund are not sufficient to pay
Project Costs in full, the Borrower shall nonetheless complete the
Project and shall pay that portion of the Project Costs as may be in
excess of the moneys available therefor in the Project Fund and shall
not be entitled to any reimbursement therefor from the Authority or
from the Trustee or from the holders of any of the Bonds, nor shall it
be entitled to any diminution of the amounts payable under the
Financing Documents.
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<PAGE>
<PAGE>
Section 4.3. No Warranty Regarding Condition, Suitability or
-----------------------------------------------
Cost of Project. Neither the Authority, nor the Trustee, nor any
- ---------------
Bondholder makes any warranty, either expressed or implied, as to the
Project or its condition or that it will be suitable for the
Borrower's purposes or needs, or that the insurance required hereunder
will be adequate to protect the Borrower's business or interest, or
that the proceeds of the Bonds will be sufficient to complete the
Project.
Section 4.4. Taxes. (A) The Borrower will pay when due all
-----
material (1) taxes, assessments, water rates and sewer use or rental
charges, (2) payments in lieu thereof which may be required by law,
and (3) governmental charges and impositions of any kind whatsoever
which may now or hereafter be lawfully assessed or levied upon the
Project or any part thereof, or upon the rents, issues, or profits
thereof, whether directly or indirectly. With respect to special
assessments or other governmental charges that may lawfully be paid in
installments over a period of years, the Borrower shall be obligated
to pay only such installments as are required to be paid during the
Term.
(B) The Borrower may, at its expense and in its own name,
in good faith contest any such taxes, assessments and other charges
and payments in lieu of taxes including assessments and, in the event
of such contest, may permit the taxes, assessments or other charges or
payments in lieu of taxes, including assessments so contested to
remain unpaid, provided either (i) prior written notice thereof has
been given to the Trustee and reserves to the extent required by the
Reimbursement Agreement are maintained during the period of such
contest and any appeal therefrom, or (2) such contest is conducted in
full compliance with Connecticut General Statutes Section 12-53a(d)
unless, in either case, by nonpayment of such taxes, assessments or
other charges or payments, the Project or any part thereof will be
subject to loss or forfeiture, and as a result thereof a lien or
charge will be placed upon any payment pursuant to this Agreement or
the value or operation of the Project will be materially impaired, in
which event such taxes, assessments or other charges or payments shall
be paid forthwith. Nothing herein shall preclude the Borrower, at its
expense and in its own name and behalf, from applying for any tax
exemption allowed by the federal government, the State or any
political or taxing subdivision thereof under any existing or future
provision of law which grants or may grant such tax exemption.
Section 4.5. Insurance. (A) The Borrower shall insure the
---------
Project against loss or damage by fire, flood, lightning,
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<PAGE>
<PAGE>
windstorm, vandalism and malicious mischief and other hazards, casualties,
contingencies and extended coverage risks in such amounts and in such
manner as is required by the Mortgage while the Mortgage is in effect
and thereafter as is customary with companies in the same or similar
business, and shall pay when due the premiums thereon. In the event
of loss or damage to the Project Realty or Project Equipment the Net
Proceeds of any insurance provided under this subsection shall be
deposited with the Mortgage Trustee as required by the Mortgage while
the Mortgage is in effect and thereafter shall be applied to the
manner set forth in Article V hereof. Any excess proceeds of
insurance remaining after application as required by this Section
shall be paid to the Borrower, but only if the Borrower is not in
default under this Agreement. At least ten days prior to the
expiration of any policy required under this Section the Borrower
shall furnish evidence satisfactory to the Authority and the Trustee
that such policy has been renewed or replaced.
(B) The Borrower further agrees that it will at all times
carry public liability insurance with respect to the Project to the
extent required by the Mortgage while the Mortgage is in effect, and,
thereafter, in a minimum amount of $5,000,000 with provisions for a
deductible amount not in excess of five percent of the amount of
coverage thereunder.
(C) As an alternative to the hazard insurance and public
liability insurance requirements of subsections (A) or (B) above the
Borrower may self-insure against hazard or public liability risks if
(1) self-insurance is the Borrower's customary method of insurance
against such risks in similar circumstances, and (2) the Borrower
maintains self-insurance reserves adequate and available to meet such
risks, subject to the terms of the Mortgage while the Mortgage is in
effect. Amounts available under any such self-insurance arrangement
upon the occurrence of an insured event shall be applied in the same
manner as the Net Proceeds of any insurance maintained pursuant to
such subsections would have been applied.
(D) The insurance coverage required by this Section may be
effected under overall blanket or excess coverage policies of the
Borrower or any affiliate and may be carried with any insurer other
than an unauthorized insurer under the Connecticut Unauthorized
Insurers Act. The Borrower shall furnish evidence satisfactory to the
Authority or the Trustee, promptly upon the request of either, that
the required insurance coverage is valid and in force.
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<PAGE>
<PAGE>
Section 4.6. Compliance with Law. The Borrower will observe
-------------------
and comply with all material laws, regulations, ordinances, rules, and
orders (including without limitation those relating to zoning, land
use, environmental protection, air, water and land pollution,
wetlands, health, equal opportunity, minimum wages, worker's
compensation and employment practices) of any federal, state,
municipal or other governmental authority relating to the Project
except during any period during which the Borrower at its expense and
in its name shall be in good faith contesting its obligation to comply
therewith.
Section 4.7. Maintenance and Repair. At its own expense, the
----------------------
Borrower will keep and maintain or cause the Project to be kept and
maintained in accordance with sound utility operating practice and in
good condition, working order and repair, will not commit or suffer
any waste thereon, and will make all material repairs and replacements
thereto which may be required in connection therewith. Nothing in
this Section 4.7 shall (1) apply to any portion of the Project beyond
its useful or economic life or (2) apply to the use and disposition by
the Borrower of any part of the Project in the ordinary course of its
business.
Section 4.8. Disposition of Project by Borrower. (A) The
----------------------------------
Borrower shall not sell, assign, encumber (other than Permitted
Encumbrances), convey or otherwise dispose of its interest in the
Project or any part thereof during the Term without the prior written
consent of the Authority, except as permitted hereby or by the
Mortgage while the Mortgage is in effect.
(B) The Borrower may, however, grant such rights of way or
easements over, across, or under, the Project Realty as shall be
necessary or convenient for the operation or use of the Project
Realty, including but not limited to easements or rights-of-way for
utility, roadway, railroad or similar purposes in connection with the
Project Realty, or for the use of the real property adjacent to or
near the Project and owned by or leased to the Borrower, but only if
such rights-of-way or easements shall not materially or adversely
affect the value and operation of the Project.
(C) In the event the Authority consents to any disposition
of the Borrower's interest in the Project, the proceeds of the
disposition shall be deposited with the Mortgage Trustee while the
Mortgage is in effect and thereafter in the Redemption Account of the
Debt Service Fund for the redemption of the Bonds used to finance the
portion of the Project then being disposed of under the Indenture. No
conveyance or release effected under the provisions of this
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<PAGE>
<PAGE>
Section shall entitle the Borrower to any abatement or diminution of the
amounts payable hereunder or under the Note, or relieve the Borrower
of the obligation to perform all of its covenants and agreements under
the Financing Documents.
Section 4.9. Leasing of the Project Realty and the Project
---------------------------------------------
Equipment. The Borrower may not lease the Project Realty or the
- ---------
Project Equipment to any person during the Term of this Agreement
without the prior written consent of the Authority, except as may be
permitted by the Mortgage while the Mortgage is in effect. No lease
shall relieve the Borrower from primary liability for any of its
obligations hereunder, and in the event of any such lease the Borrower
shall continue to remain primarily liable for payment of the
applicable amounts specified in Article III hereof and for performance
and observance of the other agreements on its part herein provided to
be performed and observed by it to the same extent as though no lease
had been made.
Section 4.10. Project Equipment. (A) The Borrower shall have
-----------------
the right to install, operate, use, remove and dispose of the Project
Equipment in the normal and ordinary course of its business
operations, and shall not be required to replace any item of Project
Equipment which is discarded or sold for scrap. The Borrower shall
not, however, either in one transaction or a series of transactions
sell, convey, transfer, remove or otherwise dispose of more than 20%
by value of the Project Equipment without prior notice to and the
consent of the Authority, unless such Project Equipment is replaced by
property of similar value and utility, provided that such dispositions
may be made as permitted by the Mortgage while the Mortgage is in
effect.
(B) The Borrower shall maintain with the Trustee
separate and reasonably detailed descriptions of each item of property
constituting the Project Equipment. Without limiting the foregoing,
the Project Equipment list appended hereto at the date of execution
and delivery of this Agreement shall be modified to the extent
required by this Section in connection with any disbursement for
Project Equipment from the Project Fund and any replacement of
material items of Project Equipment under this Section or under
Section 5.2 hereof.
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<PAGE>
<PAGE>
ARTICLE V
CONDEMNATION
DAMAGE AND DESTRUCTION
Section 5.1. No Abatement of Payments Hereunder. If the
----------------------------------
Project shall be damaged or either partially or totally destroyed, or
if title to or the temporary use of the whole or any part thereof
shall be taken or condemned by a competent authority for any public
use or purpose, there shall be no abatement or reduction in the
amounts payable by the Borrower hereunder and the Borrower shall
continue to be obligated to make such payments. In any such case the
Borrower shall promptly give written notice thereof to the Authority
and the Trustee.
Section 5.2. Project Disposition Upon Condemnation, Damage or
-------------------------------------------------
Destruction. In the event of any such condemnation, damage or
- -----------
destruction the Borrower shall:
(1) At its own cost, repair, restore or reconstruct the
Project to substantially its condition immediately prior to such
event or to a condition of at least equivalent value, regardless
of whether or not the proceeds of any and all policies of
insurance covering such damage or destruction, or the amount of
the award or compensation or damages recovered on account of such
taking or condemnation, shall be available or sufficient to pay
the cost thereof; comply with the applicable provisions of the
Mortgage concerning the repair, reconstruction or restoration of
the Project or give notice to the Authority of its decision not
to so comply; and/or
(2) At its own cost, replace or relocate the Project at its
site in such fashion as to render the replacement or relocated
structures, improvements and items, machinery, equipment or other
property of equivalent value to the Project immediately prior to
such event; or
(3) If and as permitted by Section 8.1 hereof, exercise its
option to prepay its loan obligation in full.
Section 5.3. Application of Net Proceeds of Insurance or
-------------------------------------------
Condemnation. The Net Proceeds from any insurance or condemnation
- ------------
award with respect to the Project shall be deposited with the Mortgage
Trustee while the Mortgage is in effect and thereafter shall be
deposited either (1) in the
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<PAGE>
<PAGE>
Renewal Fund and applied to pay for the cost of making such repairs,
restorations, reconstructions, replacements or relocations, or to
reimburse the Borrower, the Authority or the Trustee for payment therefor
from time to time as provided in the Indenture or (2) if prepayment of the
loan is then permitted and the Borrower exercises its option to prepay the
loan, in the Debt Service Fund and applied to the payment of the Note and
redemption of the Bonds.
(B) Notwithstanding the provisions of subsection (A) of
this Section, any insurance or condemnation proceeds attributable to
improvements, machinery, equipment and other property installed in or
about the Project Realty and the Project Equipment, but which do not
constitute a portion of the Project Realty and the Project Equipment,
shall be paid directly to the Borrower. The Trustee and the Authority
agree to execute such documents as may be reasonably necessary to
accomplish the purposes of this subsection.
(C) The Borrower, the Authority and the Trustee shall
cooperate and consult with each other in all matters pertaining to the
settlement or adjustment of any and all claims and demands for damages
on account of any taking or condemnation of the Project Realty or the
Project Equipment or pertaining to the settlement, compromising or
arbitration of any claim on account of any damage or destruction
thereof.
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ARTICLE VI
COVENANTS
Section 6.1. The Borrower to Maintain its Corporate Existence;
-------------------------------------------------
Conditions under which Exceptions Permitted. (A) The Borrower
- -------------------------------------------
covenants and agrees that, during the Term of this Agreement it will
maintain its corporate existence, will continue to be a corporation
either organized under the laws of or duly qualified to do business as
a foreign corporation in the State and in all jurisdictions necessary
in the operation of its business, will not dissolve or otherwise
dispose of all or substantially all of its assets and will not
consolidate with or merge into another corporation or permit one or
more other corporations to consolidate with or merge into it, except
as permitted by the Mortgage while the Mortgage is in effect.
(B) The Borrower may, however, without violating the
agreements contained in this Section, consolidate with or merge into
another corporation or permit one or more other corporations to
consolidate with or merge into it, or sell or otherwise transfer to
another corporation all or substantially all of its assets as an
entity and thereafter liquidate or dissolve, if (a) the Borrower is
the surviving, resulting or transferee corporation, as the case may
be, or (b) in the event the Borrower is not the surviving, resulting
or transferee corporation, as the case may be, such corporation (i) is
a solvent corporation either organized under the laws of or duly
qualified to do business as a foreign corporation subject to service
of process in the State and (ii) assumes in writing all of the
obligations of the Borrower herein, and under the Note.
Section 6.2. Indemnification, Payment of Expenses, and
-----------------------------------------
Advances. (A) The Borrower agrees to protect, defend and hold
- --------
harmless the Authority, the State, agencies of the State and their
members, servants, agents, directors, officers and employees (the
"Authority Indemnified Parties"), and the Paying Agent, the Trustee
and their officers, directors and employees (the "Indemnified
Parties") from any claim, demand, suit, action or other proceeding and
any liabilities, costs, and expenses whatsoever by any person or
entity whatsoever, arising or purportedly arising from or in
connection with the Financing Documents, the Indenture, the Bonds, or
the transactions contemplated thereby or actions taken thereunder by
any person (including without limitation the filing of any
information, form or statement with the Internal Revenue Service),
except for any wilful and material misrepresentation, wilful
misconduct or gross negligence on the part of the Authority
Indemnified Parties or the Indemnified Parties and except for
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<PAGE>
any bad faith on the part of any Indemnified Party other than an Authority
Indemnified Party.
The Borrower agrees to indemnify and hold harmless any
Indemnified Party against any and all claims, demands, suits, actions
or other proceedings and all liabilities, costs and expenses
whatsoever caused by any untrue statement or misleading statement or
alleged untrue statement or alleged misleading statement of a material
fact contained in the written information provided by the Borrower in
connection with the issuance of the Bonds or incorporated by reference
therein or caused by any omission or alleged omission from such
information of any material fact required to be stated therein or
necessary in order to make the statements made therein in the light of
the circumstances under which they were made, not misleading.
(B) The Authority and the Trustee shall not be liable for
any damage or injury to the persons or property of the Borrower or its
members, directors, officers, agents, servants or employees, or any
other person who may be about the Project due to any act or omission
of any person other than the Authority or the Trustee or their
respective members, directors, officers, agents, servants and
employees.
(C) The Borrower releases each Indemnified Party from,
agrees that no Indemnified Party shall be liable for, and agrees to
hold each Indemnified Party harmless against, any attorney fees and
expenses, expenses or damages incurred because of any investigation,
review or lawsuit commenced by the Trustee or the Authority in good
faith with respect to the Financing Documents, the Indenture, the
Bonds and the Project Realty and the Project Equipment, and the
Authority or the Trustee shall promptly give written notice to the
Borrower with respect thereto.
(D) All covenants, stipulations, promises, agreements and
obligations of the Authority and the Trustee contained herein shall be
deemed to be the covenants, stipulations, promises, agreements and
obligations of the Authority and the Trustee and not of any member,
director, officer or employee of the Authority or the Trustee in its
individual capacity, and no recourse shall be had for the payment of
the Bonds or for any claim based thereon or hereunder against any
member, director, officer or employee of the Authority or the Trustee
or any natural person executing the Bonds.
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<PAGE>
(E) In case any action shall be brought against one or more
of the Indemnified Parties based upon any of the above and in respect
of which indemnity may be sought against the Borrower, such
Indemnified Party shall promptly notify the Borrower in writing,
enclosing a copy of all papers served, but the omission so to notify
the Borrower of any such action shall not relieve it of any liability
which it may have to any Indemnified Party otherwise than under this
Section 6.2. In case any such action shall be brought against any
Indemnified Party and it shall notify the Borrower of the commencement
thereof, the Borrower shall be entitled to participate in and, to the
extent that it shall wish, to assume the defense thereof with counsel
satisfactory to such Indemnified Party, and after notice from the
Borrower to such Indemnified Party of the Borrower's election so to
assume the defense thereof, the Borrower shall not be liable to such
Indemnified Party for any subsequent legal or other expenses
attributable to such defense, except as set forth below, other than
reasonable costs of investigation subsequently incurred by such
Indemnified Party in connection with the defense thereof. The
Indemnified Party shall have the right to employ its own counsel in
any such action, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party unless (i) the employment of
counsel by such Indemnified Party has been authorized by the Borrower;
(ii) the Indemnified Party shall have reasonably concluded that there
may be a conflict of interest between the Borrower and the Indemnified
Party in the conduct of the defense of such action (in which case the
Borrower shall not have the right to direct the defense of such action
on behalf of the Indemnified Party); or (iii) the Borrower shall not
in fact have employed counsel reasonably satisfactory to the
Indemnified Party to assume defense of such action; provided, however,
that Borrower shall not be responsible for the fees and expenses of
more than one such law firm unless an Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between
such Indemnified Party and any other Indemnified Party requiring the
use of separate counsel, or Borrower has not employed counsel which is
satisfactory to each Indemnified Party. The Borrower shall not be
liable for any settlement of any action or claim effected without its
consent.
(F) The Borrower also agrees to pay all reasonable or
necessary out-of-pocket expenses of the Authority in connection with
the issuance of the Bonds, the administration of the Financing
Documents and the enforcement of its rights thereunder.
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<PAGE>
(G) In the event the Borrower fails to pay any amount or
perform any act under the Financing Documents, the Trustee or the
Authority may pay the amount or perform the act, in which event the
costs, disbursements, expenses and reasonable counsel fees and
expenses thereof, together with interest thereon from the date the
expense is paid or incurred at the prime interest rate generally
prevailing among banks in the State on the date of the advance plus 1%
shall be an additional obligation hereunder payable upon demand by the
Authority or the Trustee.
(H) Any obligation of the Borrower to the Authority under
this Section shall be separate from and independent of the other
obligations of the Borrower hereunder, and may be enforced directly by
the Authority against the Borrower irrespective of any action taken by
or on behalf of the owners of the Bonds.
(I) The obligations of the Borrower under this section,
notwithstanding any other provisions contained in the Financing
Documents, shall survive the termination of this Agreement and shall
be recourse to the Borrower, and for the enforcement thereof any
Indemnified Party shall have recourse to the general credit of the
Borrower.
Section 6.3. Incorporation of Tax Regulatory Agreement;
------------------------------------------
Payments Upon Taxability. (A) For purpose of this Section, the term
- ------------------------
owner means the Beneficial Owner of the Bonds so long as the
Book-Entry System is in effect.
(B) The representations, warranties, covenants and
statements of expectation of the Borrower set forth in the Tax
Regulatory Agreement are by this reference incorporated in this
Agreement as though fully set forth herein.
(C) If any owner of the Bonds receives from the Internal
Revenue Service a notice of assessment and demand for payment with
respect to interest on any Bond (except a notice and demand based upon
the assertion that the owner of the Bonds is a Substantial User or
Related Person), an appeal may be taken by the owner of the Bonds at
the option of the Borrower. Without limiting the generality of the
foregoing, the Borrower shall have the right to direct the Trustee to
direct the owner of the Bonds to take such appeal or not to take such
appeal. In that case all expenses of the appeal including reasonable
counsel fees and expenses shall be paid by the Borrower, and the owner
of the Bonds and the Borrower shall cooperate and consult with each
other in all matters pertaining to any such appeal, except that no
owner of the Bonds shall be required to
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<PAGE>
disclose or furnish any non-publicly disclosed information, including,
without limitation, financial information and tax returns.
(D) Not later than 180 days following a Determination of
Taxability, the Borrower shall pay to the Trustee an amount
sufficient, when added to the amount then in the Debt Service Fund and
available for such purpose, to retire and redeem all Bonds then
Outstanding, in accordance with Section 2.4 of the Indenture.
(E) The obligation of the Borrower to make the payments
provided for in this Section shall be absolute and unconditional, and
the failure of the Authority or the Trustee to execute or deliver or
cause to be executed or delivered any documents or to take any action
required under this Agreement or otherwise shall not relieve the
Borrower of its obligation under this Section. Notwithstanding any
other provision of this Agreement or the Indenture, the Borrower's
obligations under this Section shall survive the termination of this
Agreement and the Indenture.
(F) The Borrower's payment obligations under this Section
are further subject in all respects to the provisions of Section 3.7
and 3.8 hereof regarding the use of Priority Amounts and the effect of
drawings under the Letter of Credit.
(G) The occurrence of a Determination of Taxability shall
not be an Event of Default hereunder but shall require only the
performance of the obligations of the Borrower stated in this Section,
the breach of which shall constitute an Event of Default as provided
in Section 7.1 hereof.
(H) At any time after the issuance of the Bonds, the
Authority shall, upon (1) the release of a published Revenue Ruling by
the Internal Revenue Service and the receipt by the Authority of an
opinion of Bond Counsel to the effect that such ruling may adversely
affect the exclusion of interest on the Bonds from gross income for
federal income tax purposes, and (2) receipt from the Borrower, within
30 days after the Authority has mailed copies of such ruling and such
opinion to the Borrower, of a written request to proceed in accordance
with this Section, proceed to apply for and use its best efforts to
obtain a ruling from the Internal Revenue Service, pursuant to Revenue
Procedure 88-33 or any other procedures subsequently established by
the Internal Revenue Service, as to the qualification or continued
qualification of interest on the Bonds for exclusion from gross income
for federal income tax purposes. The Authority and the Borrower shall
cooperate and consult with each other in all matters pertaining to such
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<PAGE>
<PAGE>
ruling request. All expenses of the Authority in connection with
such application including reasonable counsel fees shall be paid by
the Borrower.
Section 6.4. Further Assurances and Corrective Instruments.
---------------------------------------------
The Authority and the Borrower agree that they will, from time to
time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements hereto and such further
instruments as may reasonably be required for correcting any
inadequate or incorrect description of the Project Realty or Project
Equipment or for carrying out the intention of or facilitating the
performance of this Agreement.
Section 6.5. Covenant by Borrower as to Compliance with
------------------------------------------
Indenture. The Borrower covenants and agrees that it will comply with
- ---------
the provisions of the Indenture with respect to the Borrower and that
the Trustee and the Bondholders shall have the power and authority
provided in the Indenture. The Borrower further agrees to aid in the
furnishing to the Authority or the Trustee of opinions that may be
required under the Indenture. The Borrower covenants and agrees that
the Trustee shall be entitled to and shall have all the rights,
including the right to enforce against the Borrower the provisions of
the Financing Documents, pertaining to the Trustee notwithstanding the
fact that the Trustee is not a party to the Financing Documents.
Section 6.6. Assignment of Agreement or Note. (A) The Borrower
-------------------------------
may not assign its rights, interests or obligations hereunder or under
the Note except as may be permitted pursuant to Section 6.1(B) hereof.
(B) The Authority agrees that it will not assign or
transfer any of the Financing Documents or the revenues and other
receipts, funds and monies to be received thereunder during the Term
except to the Trustee as provided in this Agreement and the Indenture.
Section 6.7. Inspection. The Authority, the Trustee and their
----------
duly authorized agents shall have (1) the right at all reasonable
times to enter upon and to examine and inspect the Project and (2)
such rights of access thereto as may be reasonably necessary for the
proper maintenance and repair thereof in the event of failure by the
Borrower to perform its obligations under this Agreement, subject, in
each case, to all applicable laws, rules, regulations, orders and
guidelines. The Authority and the Trustee shall also be permitted, at
all reasonable times, to examine the books and records of the Borrower
with respect to the Project.
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<PAGE>
<PAGE>
Section 6.8. Default Notification. Within seven (7) days after
---------------------
becoming aware of any condition or event which constitutes, or with
the giving of notice or the passage of time would constitute, an Event
of Default or an "Event of Default" under Section 8.1 of the
Indenture, the Borrower shall deliver to the Authority, the Bank, if
any, the Remarketing Agent, the Paying Agent and the Trustee a notice
stating the existence and nature thereof and specifying the corrective
steps, if any, the Borrower is taking with respect thereto.
Section 6.9. Covenant Against Discrimination. (A) The Borrower
-------------------------------
in the performance of this Agreement will not discriminate or permit
discrimination against any person or group of persons on the grounds
of race, color, religion, national origin, age, sex, sexual
orientation, marital status, physical or learning disability,
political beliefs, mental retardation or history of mental disorder in
any manner prohibited by the laws of the United States or of the
State.
(B) The Borrower will comply with the provisions of the
resolution adopted by the Authority on June 14, 1977, as amended, and
the policy of the Authority implemented pursuant thereto concerning
the promotion of equal employment opportunity through affirmative
action plans. The resolution requires that all borrowers receiving
financial assistance from the Authority adopt and implement an
affirmative action plan prior to the closing of the loan. The plan
shall be updated annually as long as the Bonds remain Outstanding.
Section 6.10. Authority Costs and Expenses. The Authority
----------------------------
agrees that it shall in all instances act in good faith in incurring
costs, expenses and legal fees in connection with the transactions
contemplated by this Agreement and the Indenture.
Section 6.11. Covenant to Provide Continuing Disclosure. During
-----------------------------------------
any and all times that the Bonds remain outstanding, the Borrower
hereby undertakes to furnish to the Trustee and the Authority, within
ninety (90) days after the close of each fiscal year, audited annual
financial statements of the Borrower and of its subsidiaries,
consisting of:
(i) balance sheet as of the close of the Borrower's last
fiscal year;
(ii) statements of income for each of the last two fiscal years
preceding the date of the balance sheet being filed;
(iii) statements of changes in equity accounts for the periods
covered by the income statements being filed; and
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<PAGE>
(iv) statements of cash flows for the periods covered by the
income statements being filed;
and on an ongoing and timely basis, any other data, reports,
statements and other information of material events, necessary to
comply with Rule 15c2-12(b)(5) of the United States Securities and
Exchange Commission, as amended (the "Rule"). The financial
information to be provided by the Borrower pursuant to this Section
6.11 shall be prepared in accordance with generally accepted
accounting principles, or in accordance with the method of accounting
required by the DPUC, in either case, consistently applied, as the
same generally apply to regulated water utility companies located in
the State. The Borrower acknowledges and agrees that such information
is to be forwarded to any Bondholder by the Trustee upon written
request therefor and shall be disseminated as required by the Rule.
Section 6.12. Covenant Against Issuing Additional Debt Secured
-------------------------------------------------
By The Mortgage. The Borrower will not issue any additional debt
- ---------------
secured by the Mortgage unless the Bonds are equally and ratably
secured by the Mortgage.
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<PAGE>
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default. Any one or more of the
-----------------
following shall constitute an "Event of Default" hereunder:
(1) Any material representation or warranty made by the
Borrower in the Financing Documents or any certificate,
statement, data or information furnished in writing to the
Authority or the Trustee by the Borrower in connection with the
closing of the initial issue of the Bonds or included by the
Borrower in its application to the Authority for assistance
proves at any time to have been incorrect when made in any
material respect.
(2) Failure by the Borrower to pay any amount that has
become due and payable with respect to the Bonds or any other
amount due and payable pursuant to the Financing Documents and
the continuance of such failure for more than five Business Days.
(3) Failure by the Borrower to comply with the default
notification provisions of Section 6.8 hereof.
(4) The occurrence of an "Event of Default" under Section
8.1(A) of the Indenture (other than an occurrence under Section
8.1(A)(2)(a)).
(5) Failure by the Borrower to observe or perform any
covenant, condition or agreement hereunder or under the Financing
Documents (except those referred to above) and (a) continuance of
such failure for a period of sixty days after receipt by the
Borrower of written notice specifying the nature of such failure
or (b) if by reason of the nature of such failure the same cannot
be remedied within the sixty day period, the Borrower fails to
proceed with reasonable diligence after receipt of the notice to
cure the failure.
(6) The Borrower shall (a) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or
the like of itself or of its property, (b) admit in writing its
inability to pay its debts generally as they become due, (c) make
a general assignment for the benefit of creditors, (d) be
adjudicated a bankrupt or insolvent, or (e) commence a voluntary
case under the Federal bankruptcy laws of the United States of
America or file a voluntary petition or answer seeking reorganization,
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<PAGE>
an arrangement with creditors or an order for relief or seeking to
take advantage of any insolvency law or file an answer
admitting the material allegations of a petition filed
against it in any bankruptcy, reorganization or insolvency
proceeding; or corporate action shall be taken by it
for the purpose of effecting any of the foregoing; or if without the
application, approval or consent of the Borrower, a proceeding
shall be instituted in any court of competent jurisdiction,
seeking in respect of the Borrower an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a
composition or arrangement with creditors, a readjustment of
debts, the appointment of a trustee, receiver, liquidator or
custodian or the like of the Borrower or of all or any
substantial part of its assets, or other like relief in respect
thereof under any bankruptcy or insolvency law, and, if such
proceeding is being contested by the Borrower in good faith, the
same shall continue undismissed, or pending and unstayed, for any
period of 90 consecutive days.
Section 7.2. Remedies on Default. (A) Whenever any Event of
-------------------
Default shall have occurred, the Trustee, or the Authority where so
provided herein, may take any one or more of the following actions:
(1) The Trustee, as and to the extent provided in Article
VIII of the Indenture, may cause all amounts payable under the
Financing Documents to be immediately due
and payable without notice or demand of any kind, whereupon the
same shall become immediately due and payable.
(2) The Authority, without the consent of the Trustee or
any Bondholder, may proceed to enforce the obligations of the
Borrower to the Authority under this Agreement.
(3) The Trustee may take whatever action at law or in
equity it may have to collect the amounts then due and thereafter
to become due, or to enforce the performance or observance of the
obligations, agreements, and covenants of the Borrower under the
Financing Documents.
(4) The Trustee may exercise any and all rights it may have
under the Financing Documents.
(B) In the event that any Event of Default or any
proceeding taken by the Authority (or by the Trustee on behalf of the
Authority) thereon shall be waived or determined adversely to the
Authority, then the Event of Default shall be annulled and the
Authority and the Borrower shall be restored to their former rights
hereunder, but no such waiver or
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<PAGE>
determination shall extend to any subsequent or other default or impair
any right consequent thereon.
Section 7.3. No Duty to Mitigate Damages. Unless otherwise
---------------------------
required by law, neither the Authority, the Trustee nor any Bondholder
shall be obligated to do any act whatsoever or exercise any diligence
whatsoever to mitigate the damages to the Borrower if an Event of
Default shall occur.
Section 7.4. Remedies Cumulative. No remedy herein conferred
-------------------
upon or reserved to the Authority or the Trustee is intended to be
exclusive of any other available remedy or remedies but each and every
such remedy shall be cumulative and shall be in addition to every
remedy given under this Agreement or now or hereafter existing at law
or in equity or by statute. Delay or omission to exercise any right
or power accruing upon any default or failure by the Authority or the
Trustee to insist upon the strict performance of any of the covenants
and agreements herein set forth or to exercise any rights or remedies
upon default by the Borrower hereunder shall not impair any such right
or power or be considered or taken as a waiver or relinquishment for
the future of the right to insist upon and to enforce, by injunction
or other appropriate legal or equitable remedy, strict compliance by
the Borrower with all of the covenants and conditions hereof, or of
the right to exercise any such rights or remedies, if such default by
the Borrower be continued or repeated.
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<PAGE>
ARTICLE VIII
PREPAYMENT PROVISIONS
Section 8.1. Optional Prepayment. (A) The Borrower shall have,
-------------------
and is hereby granted, the option to prepay its loan obligation and to
cause the corresponding optional redemption of the Bonds pursuant to
Section 2.4(A) of the Indenture at such times, in such amounts, and
with such premium, if any, for such optional redemption as set forth
in the forms of the Bonds, by delivering a written notice to the
Trustee in accordance with Section 8.2 hereof, with a copy to the
Authority, setting forth the amount to be prepaid, the amount of Bonds
requested to be redeemed with the proceeds of such prepayment, and the
date on which such Bonds are to be redeemed. Such prepayment must be
sufficient to provide monies for the payment of interest and
Redemption Price in accordance with the terms of the Bonds requested
to be redeemed with such prepayment and all other amounts then due
under the Financing Documents. In the event of any complete
prepayment of its loan obligation, the Borrower shall, at the time of
such prepayment, also pay or provide for the payment of all reasonable
or necessary fees and expenses of the Authority, the Trustee, the
Remarketing Agent and the Paying Agent accrued and to accrue through
the final payment of all the Bonds. Any such prepayments shall be
applied to the redemption of Bonds in the manner provided in Section
2.4(A) of the Indenture, and credited against payments due hereunder
in the same manner.
(B) The Borrower shall have, and is hereby granted, the
option to prepay its loan obligation in full at any time without
premium if any of the following events shall have occurred, as
evidenced in each case by the filing with the Trustee of a certificate
of an Authorized Representative of the Borrower to the effect that one
of such events has occurred and is continuing, and describing the
same:
(1) The Project shall have been damaged or destroyed to
such extent that (a) the Project cannot be reasonably restored
within a period of six months from the date of such damage or
destruction to the condition thereof immediately preceding such
damage or destruction, or (b) the Borrower is thereby prevented
or likely to be prevented from carrying on its normal operation
of the Project for a period of six months from the date of such
damage or destruction.
(2) Title to or the temporary use of all or substantially
all of the Project shall have been taken or condemned by a
competent authority, which taking or
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condemnation results or is likely to result in the Borrower being
thereby prevented or likely to be prevented from carrying on its normal
operation of the Project for a period of six months.
(3) A change in the Constitution of the State or of the
United States of America or legislative or executive action
(whether local, state, or federal) or a final decree, judgment or
order of any court or administrative body (whether local, state,
or federal) that causes this Agreement to become void or
unenforceable or impossible of performance in accordance with the
intent and purpose of the parties as expressed herein or, imposes
unreasonable burdens or excessive liabilities upon the Borrower
with respect to the Project or the operation thereof.
(4) The operation of any of the Project shall have been
enjoined or shall otherwise have been prohibited by any order,
decree, rule or regulation of any court or of any local, state,
or federal regulatory body, administrative agency or other
governmental body for a period of not less than six months.
(5) Changes in the economic availability of raw materials,
operating supplies or facilities necessary for the operation of
the Project or technological or other changes shall have occurred
which the Borrower cannot reasonably overcome or control and
which in the Borrower's reasonable judgment renders the Project
unsuitable or uneconomic for the purposes herein specified or any
tax shall be levied upon payments due under the Note in an amount
which the Borrower in its reasonable judgment believes imposes an
unreasonable burden upon the Borrower.
In any such case the final loan payment shall be a sum sufficient,
together with other funds deposited with Trustee and available for
such purpose, to redeem all Bonds then outstanding under the Indenture
at the redemption price of 100% of the principal amount thereof plus
accrued interest to the redemption date or dates and all other amounts
then due under the Financing Documents, and the Borrower shall also
pay or provide for all reasonable or necessary fees and expenses of
the Authority, the Trustee and Paying Agent and the Remarketing Agent
accrued and to accrue through final payment for the Bonds. The
Borrower shall deliver a written notice to the Trustee, with a copy to
the Authority, requesting the redemption of the Bonds under the
Indenture, which notice shall have attached thereto the applicable
certificate of the Authorized Representative of the Borrower.
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<PAGE>
Section 8.2. Notice by the Borrower of Optional Prepayment.
---------------------------------------------
The Borrower shall exercise its option to prepay its loan obligation
pursuant to Section 8.1(A) or (B) by giving written notice signed by
an Authorized Representative of the Borrower to the Trustee, the
Authority, the Paying Agent, and the Remarketing Agent at least five
(5) days before the prepayment date if Bonds to be redeemed with the
amounts to prepaid pursuant to the Indenture are then in the Flexible
Mode, and forty-five (45) days before the prepayment date if Bonds to
be redeemed with the amounts so prepaid pursuant to the Indenture are
then in any other Mode.
Section 8.3. Mandatory Prepayment on Taxability. The Borrower
----------------------------------
shall pay or cause the prepayment of its loan obligation following a
Determination of Taxability in the manner provided in Section 6.3 of
this Agreement.
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<PAGE>
ARTICLE IX
GENERAL
Section 9.1. Indenture. (A) Monies received from the sale of
---------
the Bonds and all loan payments made by the Borrower and all other
monies received by the Authority or the Trustee under the Financing
Documents shall be applied solely and exclusively in the manner and
for the purposes expressed and specified in the Indenture and in the
Bonds and as provided in this Agreement.
(B) The Borrower shall have and may exercise all the
rights, powers and authority given the Borrower in the Indenture and
in the Bonds, and the Indenture and the Bonds shall not be modified,
altered or amended in any manner which adversely affects such rights,
powers and authority or otherwise adversely affects the Borrower
without the prior written consent of the Borrower.
Section 9.2. Benefit of and Enforcement by Bondholders. The
-----------------------------------------
Authority and the Borrower agree that this Agreement is executed in
part to induce the purchase by others of the Bonds and for the further
securing of the Bonds, and accordingly that all covenants and
agreements on the part of the Authority and the Borrower as to the
amounts payable with respect to the Bonds hereunder are hereby
declared to be for the benefit of the holders from time to time of the
Bonds and may be enforced as provided in the Indenture on behalf of
the Bondholders by the Trustee.
Section 9.3. Force Majeure. In case by reason of force majeure
-------------
either party hereto shall be rendered unable wholly or in part to
carry out its obligations under this Agreement, then except as
otherwise expressly provided in this Agreement, if such party shall
give notice and full particulars of such force majeure in writing to
the other party within a reasonable time after occurrence of the event
or cause relied on, the obligations of the party giving such notice,
other than the obligation of the Borrower to make the payments
required under the terms hereof or of the Note, so far as they are
affected by such force majeure, shall be suspended during the
continuance of the inability then claimed which shall include a
reasonable time for the removal of the effect thereof, but for no
longer period, and such parties shall endeavor to remove or overcome
such inability with all reasonable dispatch. The term "force
majeure", as employed herein, means acts of God, strikes, lockouts or
other industrial disturbances, acts of the public enemy, orders of any
kind of the Government of the United States, of the State or any civil
or military authority,
- 50 -
<PAGE>
<PAGE>
insurrections, riots, epidemics, landslides,
lightning, earthquakes, volcanoes, fires, hurricanes, tornadoes,
storms, floods, washouts, droughts, arrests, restraining of government
and people, civil disturbances, explosions, partial or entire failure
of utilities, shortages of labor, material, supplies or
transportation, or any other similar or different cause not reasonably
within the control of the party claiming such inability. It is
understood and agreed that the settlement of existing or impending
strikes, lockouts or other industrial disturbances shall be entirely
within the discretion of the party having the difficulty and that the
above requirements that any force majeure shall be reasonably beyond
the control of the party and shall be remedied with all reasonable
dispatch shall be deemed to be fulfilled even though such existing or
impending strikes, lockouts and other industrial disturbances may not
be settled and could have been settled by acceding to the demands of
the opposing person or persons.
Section 9.4. Amendments. This Agreement may be amended only
----------
with the concurring written consent of the Trustee and, if required by
the Indenture, of the owners of the Bonds given in accordance with the
provisions of the Indenture.
Section 9.5. Notices. All notices, certificates or other
-------
communications hereunder shall be sufficiently given and shall be
deemed given when delivered or when mailed by registered or certified
mail, postage prepaid, addressed as follows: if to the Authority, at
845 Brook Street, Rocky Hill, Connecticut 06067, Attention: Program
Manager - Loan Administration; if to the Borrower, 835 Main Street,
Bridgeport, Connecticut 06601 Attention: Treasurer; if to the
Remarketing Agent, Smith Barney Inc., 388 Greenwich Street, New York,
New York 10013, Attention: Municipal Bond Department; if to the Paying
Agent, Shawmut Bank Connecticut, National Association, 777 Main
Street, Hartford, Connecticut 06115, Attention: Corporate Trust
Department; and if to the Trustee, Shawmut Bank Connecticut, National
Association, 777 Main Street, Hartford, Connecticut 06115, Attention:
Corporate Trust Administration. A duplicate copy of each notice,
certificate or other communication given hereunder by either the
Authority or the Borrower to the other shall also be given to the
Trustee. The Authority, the Borrower, the Remarketing Agent, the
Paying Agent and the Trustee may, by notice given hereunder, designate
any further or different addresses to which subsequent notices,
certificates or other communications shall be sent.
Section 9.6. Prior Agreements Superseded. This Agreement,
---------------------------
together with all agreements executed by the parties concurrently
herewith or in conjunction with the sale of the Bonds, shall
completely and fully supersede all other prior
- 51 -
<PAGE>
<PAGE>
understandings or agreements, both written and oral, between the Authority
and the Borrower relating to the lending of money and the Project, including
those contained in any commitment letter executed in anticipation of
the issuance of the Bonds.
Section 9.7. Execution of Counterparts. This Agreement may be
-------------------------
executed simultaneously in several counterparts each of which shall be
an original and all of which shall constitute but one and the same
instrument.
Section 9.8. Time. All references to times of day in this
----
Agreement are references to New York City time.
Section 9.9. Separability of Invalid Provisions. In case any
----------------------------------
one or more of the provisions contained in this Loan Agreement or in
the Note shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein.
- 52 -
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Authority has caused this Agreement to be
executed in its corporate name by a duly Authorized Representative,
and the Borrower has caused this Agreement to be executed in its
corporate name by its duly authorized officer all as of the date first
above written.
Connecticut Development Authority
By /S/ STANLEY R. KILLINGER
---------------------------
Name: Stanley R. Killinger
Authorized Representative
Bridgeport Hydraulic Company
By /S/LARRY L. BINGAMAN
----------------------------
Name: Larry L. Bingaman
Title: Vice President and Secretary
0724H
- 53 -
<PAGE>
<PAGE>
APPENDIX A
Bridgeport Hydraulic Company
FORM OF
PROMISSORY NOTE
No. 1 $30,000,000
Bridgeport Hydraulic Company, a corporation organized and
existing under the laws of the State of Connecticut (the "Borrower"),
for value received, hereby promises to pay to the order of the
Connecticut Development Authority (the "Authority"), the principal sum
of $30,000,000.00 together with interest on the unpaid principal
balance thereof from the date hereof until fully and finally paid, on
the applicable Interest Payment Dates together with all taxes levied
or assessed on this Note or the debt evidenced hereby against the
holder hereof. This Note shall bear interest at the rate or rates
determined in accordance with Section 2.3 of the Indenture (as
hereinafter defined) and, as long as the Bonds bear interest at the
Flexible, Daily or Weekly Rates, shall be computed on the basis of a
365- or 366-day year, as appropriate for the actual number of days
elapsed and, as long as the Bonds bear interest at the Multiannual
Rate or on and after the Fixed Rate Conversion Date, shall be computed
on the basis of a 360-day year of twelve 30-day months. In no event
shall the interest rate hereon exceed the maximum rate permitted by
law.
This Note has been executed under and pursuant to a Loan
Agreement dated as of April 1, 1995 between the Authority and the
Borrower (the "Agreement"). This Note is issued to evidence the
obligation of the Borrower under the Agreement to repay the loan made
by the Authority from the proceeds of its $30,000,000 Water Facilities
Revenue Bonds (Bridgeport Hydraulic Company Project - 1995 Series)
(the "Bonds"), together with interest thereon and all other amounts,
fees, penalties, premiums, adjustments, expenses, counsel fees and
other payments of any kind required to be paid by the Borrower under
the Agreement. The Agreement includes provision for mandatory and
optional prepayment of this Note as a whole or in part. Advances made
pursuant to Section 6.2 of the Agreement shall bear interest at the
rate specified in accordance therewith.
The Agreement and this Note (hereinafter, together with
the Tax Regulatory Agreement, collectively referred to as the
- 54 -
<PAGE>
<PAGE>
"Financing Documents") have been assigned to Shawmut Bank Connecticut,
National Association (the "Trustee") acting pursuant to an Indenture
of Trust dated as of April 1, 1995 (the "Indenture") between the
Authority and the Trustee. Such assignment is made as security for
the payment of the Bonds issued by the Authority pursuant to the
Indenture.
The Borrower has arranged for the delivery to Shawmut Bank
Connecticut, National Association, as Paying Agent of an irrevocable
Letter of Credit, dated the date of delivery of the Bonds, issued by
Societe Generale, acting by and through its New York Branch for the
account of the Borrower in favor of the Paying Agent. The Agreement
provides that all payment obligations of the Borrower thereunder and
under the Note shall be completely satisfied and discharged to the
extent of a corresponding payment made by the Bank upon a drawing
under the Letter of Credit for the purpose of satisfying such
obligations.
As provided in the Agreement and subject to the provisions
thereof, payments hereon are to be made at the principal office of the
Trustee in Hartford, Connecticut, or at the office designated for such
payment by any successor trustee in an amount which, together with
other moneys available therefor pursuant to the Indenture, will equal
the amount payable as principal or Redemption Price, if any, of and
interest on the Bonds outstanding under the Indenture on each such due
date.
The Borrower shall make payments on this Note on the dates
and in the amounts specified herein and in the Agreement and in
addition shall make such other payments as are required pursuant to
the Financing Documents, the Indenture and the Bonds. Upon the
occurrence of an Event of Default, as defined in any of the Financing
Documents, the principal of and interest on this Note may be declared
immediately due and payable as provided in the Agreement. Upon any
such declaration the Borrower shall pay all cost, disbursements,
expenses and reasonable counsel fees of the Authority and the Trustee
in seeking to enforce their rights under any of the Financing
Documents.
THE BORROWER ACKNOWLEDGES THAT THE LOAN EVIDENCED BY THIS
NOTE IS A COMMERCIAL TRANSACTION AND WAIVES ITS RIGHTS TO NOTICE AND
HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS
OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY
PREJUDGMENT REMEDY WHICH THE HOLDER HEREOF MAY DESIRE TO USE. The
Borrower further (1) waives diligence, demand, presentment for
payment, notice of nonpayment, protest and notice of protest, notice
of any renewals or extension of this Note, and all rights under any
statute of limitations, (2) agrees that the time for payment of this
Note may be changed and extended at the sole discretion of
- 55 -
<PAGE>
<PAGE>
the Trustee without impairing its liability hereon, and (3) consents to
the release of all or any part of the security for the payment thereof at
the discretion of the Trustee or the release of any party liable for
this obligation without affecting the liability of the other parties
hereto. Any delay on the part of the Authority or the Trustee in
exercising any right hereunder shall not operate as a waiver of any
such right, and any waiver granted with respect to one default shall
not operate as a waiver in the event of any subsequent default.
IN WITNESS WHEREOF, Bridgeport Hydraulic Company has
caused this Note to be executed in its corporate name by its duly
authorized officer, dated May , 1995.
Bridgeport Hydraulic Company
By: ___________________________
Name:
Authorized Representative
- 56 -
<PAGE>
<PAGE>
AUTHORITY ENDORSEMENT
Pay to the order of Shawmut Bank Connecticut, National
Association, as Trustee, without recourse.
Connecticut Development Authority
By:_______________________________
Name:
Authorized Representative
- 57 -
<PAGE>
<PAGE>
APPENDIX B
Description of Project Realty
<PAGE>
<PAGE>
APPENDIX C
Description of Project Equipment
<PAGE>
<PAGE>
<PAGE>
EXHIBIT (10(ee)
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT (this "Agreement"), dated as of January 31,
1996 among Aquarion Company, a Delaware corporation (in such capacity,
"Aquarion"), Aquarion Company, as Escrow Agent (in such capacity, the
"Escrow Agent"), certain individuals and entities listed on Schedule 1
attached hereto (each, a "Seller" and together, the "Sellers") Steven R.
Kellogg and Norman A. Aldrich as Representatives of the Sellers pursuant
to the Shareholders' Representative Agreement dated as of December 7,
1990 (the "Representative Agreement") by and among the Shareholders (as
defined therein) and Stephen R. Kellogg and Norman A. Aldrich as
Representatives.
RECITALS
A. Pursuant to an Amended and Restated Stock Purchase Agreement
dated as of December 7, 1990, as amended on September 12, 1991 (the
"Stock Purchase Agreement"), Aquarion purchased from the Sellers the
issued and outstanding capital stock of SRK Holding Inc., a Connecticut
corporation ("SRK"), not then held by Aquarion.
B. Aquarion and the Sellers have agreed to settle all claims and
liabilities among themselves in connection with the Stock Purchase
Agreement and any transactions directly or indirectly related thereto or
any other documents in connection therewith (the "Claims").
C. Pursuant to such settlement, Aquarion has agreed to deposit
into escrow with the Escrow Agent Six Hundred Thousand and 00/100
Dollars ($600,000.00) (the "Initial Escrow Amount") to be payable to the
Sellers in accordance with the provisions of this Agreement, and the
Sellers have agreed to deposit into escrow with the Escrow Agent
releases from as many of the Sellers as can be reasonably found and in
no instance less than 90% of the Sellers, such releases to be in the
forms attached hereto (with a separate form for the Representatives) as
Exhibits A-1 and A-2 (the "Releases"), which Releases release Aquarion
- --------------------
from the Claims.
D. The parties have entered into this Agreement in order to set
forth the conditions upon which, and the manner in which the Escrow
Agent shall disburse funds and the Releases from the Escrow Account (as
defined herein).
NOW, THEREFORE, in consideration of the premises and of the mutual
promises and covenants herein contained, the parties, intending to be
legally bound, agree as follows:
<PAGE>
<PAGE>
1. Escrow Account; Escrow Agent.
----------------------------
(a) Appointment of Escrow Agent. Aquarion and the Sellers hereby
---------------------------
appoint Aquarion as Escrow Agent, and the Escrow Agent hereby accepts
appointment, as escrow agent, under the terms and conditions of this
Agreement.
(b) Establishment of Escrow Account. Contemporaneously with the
-------------------------------
execution of this Agreement and the deposit with the Escrow Agent of
Releases duly executed by at least 90% of the Sellers as described above
(the "Escrow Date"), the Escrow Agent shall establish an escrow account
(the "Escrow Account") at its office located at 835 Main Street,
Bridgeport, CT 06601-2353. All funds accepted by the Escrow Agent
pursuant to this Agreement shall be held for the exclusive benefit of
the Sellers. All such funds shall be held in the Escrow Account until
disbursed or paid in accordance with the terms hereof. The Escrow
Account and the funds held therein held by the Escrow Agent shall be
under the sole dominion and control of the Escrow Agent for the benefit
of the Sellers.
(c) Delivery of Funds and Releases. On the Escrow Date, Aquarion
------------------------------
shall deliver the Initial Escrow Amount to the Escrow Agent for deposit
into the Escrow Account against the Escrow Agent's written
acknowledgment and receipt of the Initial Escrow Amount. Stephen R.
Kellogg and Norman A. Aldrich (the "Representatives") shall deliver the
Releases to the Escrow Agent for deposit into the Escrow Account against
the Escrow Agent's written acknowledgment and receipt of the Releases.
(d) Interest Rate Applicable to Funds in Escrow Account. Funds
---------------------------------------------------
deposited in the Escrow Account shall be deemed to accrue interest at an
annual rate of six percent (6%), (the "Interest Rate"), beginning on
October 1, 1995.
(e) Limitation on Escrow Agent's Responsibilities. The Escrow
---------------------------------------------
Agent's sole responsibilities under this Agreement shall be (1) to
retain possession of any funds in the Escrow Account, (2) to retain
possession of the Releases, and (3) to disburse such funds and release
the Releases in accordance with the provisions of this Agreement.
(f) Escrow Account Statement. On each Payment Date (as defined
------------------------
herein), the Escrow Agent shall deliver to Aquarion and the Sellers a
statement setting forth with reasonable particularity the balance of
funds then in the Escrow Account ("Escrow Account Statement") and the
calculation of the disbursement on such Payment Date.
<PAGE>
<PAGE>
2. Disbursements.
-------------
(a) Disbursements of Available Funds. Without any further action
--------------------------------
required by any party, the Escrow Agent shall make a disbursement to the
Sellers from the Escrow Account on January 2, 1996, April 2, 1996 and
October 1, 1996 (each a "Payment Date" and together, the "Payment
Dates"). The disbursements shall consist of 25% of the Available Funds
(as defined herein) on January 2, 1996; 33% of the Available Funds on
April 1, 1996; and the balance of the Available Funds on October 1,
1996. No disbursement shall be made unless and until all conditions set
forth in Section 1 with respect to the establishment of the Escrow
Account shall have been fulfilled. The Escrow Agent shall make each
disbursement in accordance with the written instructions from the
Representatives, which instructions shall specify in detail the manner
in which any such disbursement will be distributed by the
Representatives; provided, however, that no disbursement shall be made
to the Representatives for or on behalf of any of the Sellers unless and
until said Sellers have duly executed this Escrow Agreement and the
Release and shall have delivered same to the Escrow Agent. In the event
that funds remain in the Escrow Account after January 1, 1997 because of
the failure of one or more Sellers to properly execute this Escrow
Agreement and the Release, all such funds shall thereupon be paid over
to Aquarion, and the Escrow Account and this Escrow Agreement shall
thereupon be terminated.
"Available Funds" on any Payment Date shall mean (1) the sum of (A)
the Initial Escrow Amount and (B) interest accrued to such Payment Date
on the funds in the Escrow Account at the Interest Rate, plus, to the
extent received by the Escrow Agent prior to such Payment Date, (2)(A)
any of the accounts receivable set forth on Schedule 2 hereto that are
actually collected and received by Aquarion, and (B) any funds received
by Aquarion from the Tax Department of the State of Connecticut in
connection with the sales tax audit of Davco, less, to the extent any
new claims are made prior to such Payment Date, (3) any claims, against
SRK or Aquarion directly or indirectly arising out of the transactions
contemplated by the Stock Purchase Agreement, and less (4) the aggregate
disbursements previously made pursuant to this Agreement.
Aquarion and the Sellers agree that (i) (A) Aquarion shall give
notice to the Representatives of the receipt by Aquarion of any funds
which Aquarion believes in good faith should be paid by Aquarion into
the Escrow Account; (B) the Representatives, on behalf of the Sellers,
shall give notice to Aquarion of the amount and character of any funds
which the Representatives in good faith believe should be paid by
Aquarion into the Escrow Account, and (C) Aquarion shall not pay such
amounts into the Escrow Account unless the payment of such funds is
approved by Aquarion, which approval shall not be unreasonably withheld;
and (ii) (A) Aquarion shall give notice to the Representatives of the
amount and character of any claims against the funds in the Escrow
Account which Aquarion in good faith believes should be paid
<PAGE>
<PAGE>
therefrom, and (B) the Escrow Agent shall not make any disbursement in
payment of said claims until said claims are approved by the Representatives
on behalf of the Sellers, which approval shall not be unreasonably
withheld; provided, however, that the Escrow Agent shall not disburse
-----------------
any amounts on any Payment Date (1) which are proposed by its
Representatives to be paid into the Escrow Account but have not then
been approved by Aquarion (and no such amounts shall be considered
Available Funds under this Agreement), or (2) which are proposed by
Aquarion to be paid out of the Escrow Account but have not then been
approved by the Representatives.
(b) Disbursement of Releases. The Escrow Agent shall disburse the
------------------------
Releases to Aquarion from the Escrow Account at the time of final
payment from the Escrow Account to the Sellers.
3. Limitation on Rights and Remedies. Each of the parties hereto
---------------------------------
agrees that this Escrow Agreement sets forth in full the complete terms
of the Settlement among the parties of all matters relating to SRK and
the Stock Purchase Agreement and all transactions resulting therefrom
and contemplated thereby, and that all parties shall hereafter look
solely to, and be limited by, the terms of the Escrow Agreement with
respect to all issues, matters, rights and remedies in any manner
heretofore or hereafter arising with respect to any and all such matters
relating to SRK and the Stock Purchase Agreement.
4. Escrow Agent.
-----------
(a) Limitation of the Escrow Agent's Liability; Responsibilities
------------------------------------------------------------
of the Escrow Agent. The Escrow Agent shall be entitled to rely upon
- -------------------
any judicial order or judgment, upon any written opinion of counsel or
upon any certification, instruction, notice, or other writing delivered
to it by Aquarion or the Representatives in compliance with the
provisions of this Agreement without being required to determine the
authenticity or the correctness of any fact stated therein or the
propriety or validity of service thereof. The Escrow Agent may act in
reliance upon any instrument comporting with the provisions of this
Agreement or signature believed by it to be genuine and may assume that
any person purporting to give notice or receipt or advice or make any
statement or execute any document in connection with the provisions
hereof has been duly authorized to do so.
At any time the Escrow Agent may request in writing an instruction
in writing from Aquarion and the Representatives, on behalf of the
Sellers, and may at its own option include in such request the course of
action it proposes to take and the date on which it proposes to act,
regarding any matter arising in connection with its duties and
obligations hereunder; provided, however, that the Escrow Agent shall
state in such request that it believes in good faith that such proposed
course of action is consistent with another identified provision of this
Agreement.
<PAGE>
<PAGE>
The Escrow Agent may act pursuant to the written advice of counsel
chosen by it with respect to any matter relating to this Agreement and
shall not be liable for any action taken or omitted in accordance with
such advice.
The Escrow Agent shall not be called upon to advise any party as to
taking or refraining from taking any action with respect to, any funds
or the Releases deposited hereunder.
5. Instructions to Escrow Agent. Aquarion and the Sellers hereby
----------------------------
irrevocably instruct the Escrow Agent to, and the Escrow Agent shall (a)
(1) maintain sole dominion and control over funds and the Releases in
the Escrow Account for the benefit of Aquarion and the Sellers to the
extent specifically required herein, and (2) maintain the Escrow Account
free and clear of all liens, security interests, safekeeping or other
charges, demands and claims against the Escrow Agent of any nature now
or hereafter existing in favor of anyone other than the rights of
Aquarion and the Sellers under this Agreement.
6. Termination. This Agreement shall terminate automatically ten
-----------
(10) days following disbursement of the Releases and of all funds
remaining in the Escrow Account unless sooner terminated by agreement of
the parties hereto (in accordance with the terms hereof); provided,
however, that until such tenth day, Aquarion shall cause this Agreement
(or any permitted successor agreement) to remain in effect and shall
cause there to be an escrow agent acting hereunder (or under any such
permitted successor agreement).
7. Consent of the Sellers. Each of the Sellers, by executing
----------------------
this Agreement, authorizes the Representatives to act on behalf of said
Seller in accordance with the provisions of this Agreement and confirms
that the Representatives are authorized under the Representative
Agreement to effect the distributions to the Seller from the Escrow
Account, all in the manner set forth herein and in the Representative
Agreement.
8. Indemnification. The Representatives each represent, warrant
---------------
and agree that (i) he is duly authorized under the Representative
Agreement to act on behalf of each of the Sellers with respect to all
matters directly or indirectly relating to the Stock Purchase Agreement
and the Escrow Agreement, including without limitation all matters
relating to the timing and method of the disbursement and distributions
of funds to Sellers from the Escrow Account, (ii) he will effect
distributions from the Escrow Account only in the manner specified
herein and only in compliance with the requirements of the
Representative Agreement. Each of the Representatives agrees, jointly
and not severally, to indemnify and hold harmless Aquarion from and
against all losses, claims, damages, liabilities and expenses (including
attorney s fees and expenses) to which Aquarion may become subject
insofar as they arise out of or are based upon actions taken by
<PAGE>
<PAGE>
either of the Representatives with respect to this Escrow Agreement,
the Escrow Account or any amounts deposited by Aquarion in the Escrow
Account.
9. Miscellaneous.
-------------
(a) Waiver. Any party hereto may specifically waive any breach of
this Agreement by any other party, but no such waiver shall be deemed to
have been given unless such waiver is in writing, signed by the waiving
party and specifically designating the breach waived, nor shall any such
waiver constitute a continuing waiver of similar or other breaches.
(b) Invalidity. If for any reason whatsoever any one or more of
----------
the provisions of this Agreement shall be held or deemed to be
inoperative, unenforceable or invalid in a particular case or in all
cases, such circumstances shall not have the effect of rendering any of
the other provisions of this Agreement inoperative, unenforceable or
invalid, and the inoperative, unenforceable or invalid provision shall
be construed as if it were written so as to effectuate, to the maximum
extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties hereto,
----------
and the rights and duties of any party hereunder shall not be assignable
except with the prior written consent of the other parties.
Notwithstanding the foregoing, this Agreement shall inure to and be
binding upon the parties and their successors and permitted assigns.
(d) Benefit. The parties hereto and their successors and
-------
permitted assigns, but no others, shall be bound hereby and entitled to
the benefits hereof; provided, however, that the Sellers and their
permitted assigns shall be entitled to the benefits hereof and to
enforce this Agreement.
(e) Entire Agreement; Amendments. This Agreement contains the
----------------------------
entire agreement among the parties with respect to the subject matter
hereof and supersedes any and all prior agreements, understandings and
commitments, whether oral or written including without limitation the
Stock Purchase Agreement. This Agreement may be amended only in a
writing signed by the Representatives and by Aquarion.
(f) Notices. All notices and other communications required or
-------
permitted to be given or made under this Agreement shall be in writing
and shall be deemed to have been duly given and received, regardless of
when and whether received, either: (1) on the day of hand delivery; (2)
three business days following the day sent, when sent by United States
certified mail, postage and certification fee prepaid, return receipt
requested, addressed as set forth below; (3) when transmitted by
telecopy with verbal confirmation of receipt by the telecopy operator to the
<PAGE>
<PAGE>
telecopy number set forth below; or (4) one business day following
the day timely delivered to a next-day air courier addressed as set
forth below:
To Escrow Agent:
Aquarion Company
835 Main Street
Bridgeport, Connecticut 06601-2353
Attn: Executive Vice President - Finance
Telecopy: 203-336-5639
Telephone: 203-336-7632
To Aquarion:
Aquarion Company
835 Main Street
Bridgeport, Connecticut 06601-2353
Attn: Executive Vice President - Finance
Telecopy: 203-336-5639
Telephone: 203-336-7632
To the Representatives on behalf of the Sellers:
Mr. Stephen R. Kellogg
100 Founders Way
Stratford, Connecticut 06497
Telecopy: 203-380-1368
Telephone: 203-380-9449
and to:
Mr. Norman A. Aldrich
110 Butternut Lane
Stratford, Connecticut 06497
<PAGE>
<PAGE>
Telephone: 203-377-5809
or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section.
(h) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience only
--------
and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
(j) Choice of Law. The existence, validity, construction,
-------------
operation and effect of any and all terms and provisions of this
Agreement shall be determined in accordance with and governed by the
laws of the State of Connecticut, without regard to principles of
conflicts of laws. The parties to this Agreement hereby agree that
jurisdiction over such parties and over the subject matter of any action
or proceeding arising under this Agreement may be exercised by a
competent Court of the State of Connecticut, or by a United States
Court, sitting in Connecticut. Aquarion and the Sellers hereby submit
to the personal jurisdiction of such courts, hereby waive personal
service of process upon them and consent that any such service of
process may be made by certified or registered mail, return-receipt
requested, directed to Aquarion or the Representatives, on behalf of the
Sellers, at the address last specified for notices hereunder, and
service so made shall be deemed completed five (5) days after the same
shall have been so mailed, and hereby waive the right to a trial by jury
in any action or proceeding with the Escrow Agent. All actions and
proceedings brought by Aquarion or the Sellers against the Escrow Agent
relating to or arising from, directly or indirectly, this Agreement
shall be litigated only in courts within the State of Connecticut.
(k) Aquarion hereby represents and warrants that this Agreement
has been duly authorized, executed and delivered on its behalf and
constitutes the legal, valid and binding obligation of Aquarion. The
execution, delivery and performance of this Agreement by Aquarion does
not violate any applicable law or regulation to which Aquarion is
subject and does not require the consent of any governmental or other
regulatory body to which Aquarion is subject, except for such consents
and approvals as have been obtained and are in full force and effect.
(l) Each of the Sellers hereby represents and warrants that this
Agreement has been duly authorized, executed and delivered on its behalf
and constitutes its legal, valid and binding obligation.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Escrow Agreement as of the day first above written.
AQUARION COMPANY, as Escrow Agent
By:____________________________
Name:
Title:
AQUARION COMPANY
By:____________________________
Name:
Title:
_______________________________
Stephen R. Kellogg, as
Representative and as a Seller
_______________________________
Norman A. Aldrich
_______________________________
Donald R. Johnson, Jr.
_______________________________
Robert Q. Bradley
<PAGE>
<PAGE>
_______________________________
Brian Armet
_______________________________
John Bath
_______________________________
Marsha Culik
CAMP & ASSOCIATES, INC.
By:____________________________
Name:
Title:
_______________________________
Thomas Czop
_______________________________
Robert Drake
_______________________________
Larry Gaffga
<PAGE>
<PAGE>
_______________________________
Carol Kellogg
_______________________________
Ralph Klass
_______________________________
Ronald Lawson
_______________________________
Robert Meena
_______________________________
William Mumaw
_______________________________
Daniel Ott
_______________________________
Kathleen Rasbach
_______________________________
Kenneth Shackford
<PAGE>
<PAGE>
_______________________________
Wayne Thomas
_______________________________
William Warner
_______________________________
Kenneth Wildman
_______________________________
Keith E. Warner
_______________________________
Peter J. Kaye, Sr.
_______________________________
Dana Aaronson
_______________________________
William W. Camp
_______________________________
Larry S. Imely
<PAGE>
<PAGE>
_______________________________
Stephen Arella
_______________________________
Mark A. Hartwig
_______________________________
James A. Ryan
_______________________________
Michael V. Bonomo
_______________________________
Steven Thrasher
_______________________________
William Todino
_______________________________
Russ Reynolds
<PAGE>
<PAGE>
_______________________________
Jeffrey Raymond
_______________________________
Richard Kellogg
_______________________________
Kurt Mesedahl
_______________________________
Robert Stevens
_______________________________
Les Phillips
_______________________________
Michael Togneri
_______________________________
Thomas F. Barbee
_______________________________
Jeffrey C. Curran
<PAGE>
<PAGE>
_______________________________
Michael S. Levine
_______________________________
Rob Larose
<PAGE>
<PAGE>
SCHEDULE 1
FORMER SHAREHOLDERS OF SRK (OTHER THAN AQUARION)
No. of Shares
-------------
Stephen R. Kellogg 456,714
Kenneth Shackford 20,461
Jeffrey C. Curran 8,956
Daniel Ott 8,956
Carol Kellogg 8,956
Thomas Czop 8,956
Ralph Klass 4,478
Brian Armet 2,686
Kathleen Rasbach 1,791
Marsha Culik 1,344
Dana Aaronson 9,844
Kenneth Wildman 895
Michael V. Bonomo 9,896
Keith E. Warner 34,926
Robert Drake 1,000
Wayne Thomas 2,000
William Mumaw 1,500
John Bath 1,610
Donald P. Johnson, Jr. 131,588
Ronald Lawson 2,675
Camp & Associates, Inc. 2,675
Mark A. Hartwig 13,000
Robert Q. Bradley 27,286
Robert Meena 2,000
Peter J. Kaye, Sr. 30,880
William Warner 536
Larry Gaffga 161
Stephen Thrasher 4,000
Stephen Y. Arella 15,000
William W. Camp 15,000
Michael Togneri 5,000
Thomas F. Barbee 10,000
Norman A. Aldrich 30,000
Larry S. Imely 13,220
James H. Ryan 5,000
<PAGE>
<PAGE>
William Todino 500
Russ Reynolds 500
Jeffrey Raymond 500
Michael S. Levine 10,000
Richard Kellogg 2,000
Kurt Mesedahl 3,000
Robert Stevens 3,050
Les Phillips 500
Rob Larose 4,000
---------
Total 917,040
=======
<PAGE>
<PAGE>
EXHIBIT A-1
FORM OF RELEASE
[for Sellers]
______________________________, having an address of _____________
- -------------------------------- ("Releasor"), for and in consideration
of the receipt of certain funds from, and the execution by
Aquarion Company, a Delaware corporation, having an address
at 835 Main Street, Bridgeport, CT 06601-2353 (in such capacity,
"Releasee") of, a certain Escrow Agreement among Releasor, Releasee, the
Representatives (as defined therein) and Aquarion Company, as Escrow
Agent (in such capacity, the "Escrow Agent") dated as of even date
herewith (the "Escrow Agreement") (all terms not otherwise defined
herein having the meanings as defined in the Escrow Agreement), the
adequacy and sufficiency whereof is hereby acknowledged, has remised,
released, and forever discharged, and by these presents does for himself
and his heirs, executors, administrators, successors and assigns,
remise, release and forever discharge fully, completely, unconditionally
and irrevocably Releasee and its successors and assigns of and from all
of the following:
Any and all claims, actions, suits, proceedings, causes of action,
rights, interests, debts, dues, sums of money, accounts, reckoning,
bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments,
extents, executions, demands and accounts of every kind, known or
unknown, matured or contingent, present, future or otherwise in law
or equity, which against Releasee or their successors and assigns,
Releasor, ever had, now has or which he or his successors, assigns,
heirs, executors or administrators, hereafter can, shall or may
have for, upon or by reason of any matter, cause or thing
whatsoever from the beginning of the world to the day of the date
of these presents, occurring or arising as a result of, or by and
pursuant to a certain Amended and Restated Stock Purchase Agreement
among Aquarion and certain Sellers dated as of December 7, 1990, as
amended on September 12, 1991 (the "Stock Purchase Agreement"), and
any transactions, directly or indirectly, related thereto or any
other documents in connection therewith.
Releasor hereby waives all claims, counterclaims, defenses and
rights of setoff it may have against Releasee or its successors and
assigns by reason of the Stock Purchase Agreement and any transactions,
directly or indirectly, related thereto or any other documents in
connection therewith.
In the event that Releasor or any heir, executor, administrator,
successor or assign of Releasor undertakes at any time through any legal
process to challenge the validity or enforceability of all or any part
of the Escrow Agreement or this Release of Claims, then Releasor shall
be liable to Releasee and its successors and assigns, and shall
indemnify and hold Releasee and its successors and assigns, harmless
against any and all loss, damage, liability, cost or expense, including
without limitation, actual attorneys' fees, incurred by Releasee and its
<PAGE>
<PAGE>
successors and assigns in defending the Escrow Agreement,
or any agreement relating to any of the foregoing, or arising by reason
of the challenge of the Escrow Agreement or this Release of Claims,
whether or not said challenge results in litigation or whether or not said
challenge is successful.
The Release of Claims shall be binding on Releasor and his heirs,
executors, administrators, successors and assigns, and shall inure to
the benefit of Releasee and its successors and assigns.
IN WITNESS WHEREOF, Releasor has set his hand this _____ day of
__________, 1995.
Witnesses:
____________________________
____________________________ _______________________________
STATE OF ___________ )
) ss.:
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this _____ day
of __________, 1995 by ____________________.
_______________________________
Commissioner of Superior Court
Notary Public
My Commission Expires:
<PAGE>
<PAGE>
EXHIBIT A-2
FORM OF REPRESENTATIVES RELEASE
[to be executed separately by each of Kellogg and Aldrich]
______________________________, having an address of _____________
_____________("Representative"), for and in consideration of the receipt
of certain funds from, and the execution by Aquarion Company, a Delaware
corporation, having an address at 835 Main Street, Bridgeport, CT 06601-
2353 (in such capacity, "Releasee") of, a certain Escrow Agreement among
Releasor, Releasee, the Representatives (as defined therein) and
Aquarion Company, as Escrow Agent (in such capacity, the "Escrow Agent")
dated as of even date herewith (the "Escrow Agreement") (all terms not
otherwise defined herein having the meanings as defined in the Escrow
Agreement), the adequacy and sufficiency whereof is hereby acknowledged,
has remised, released, and forever discharged, and by these presents (a)
for himself and his heirs, executors, administrators, successors and
assigns, and (b) as Representatives under the Shareholders
Representative Agreement dated as of December 7, 1990 (the
Representative Agreement ) by and among the Shareholders (as defined
therein) and Stephen R. Kellogg and Norman A. Aldrich as
Representatives, for and on behalf of each of the Shareholders (said
Representatives and all of the Shareholders being herein collectively
referred to as the "Releasors") and their respective heirs, executors,
administrators, successors and assigns, in each case Releasors do
remise, release and forever discharge fully, completely, unconditionally
and irrevocably Releasee and its successors and assigns of and from all
of the following:
Any and all claims, actions, suits, proceedings, causes of action,
rights, interests, debts, dues, sums of money, accounts, reckoning,
bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments,
extents, executions, demands and accounts of every kind, known or
unknown, matured or contingent, present, future or otherwise in law
or equity, which against Releasee or their successors and assigns,
Releasors, ever had, now has or which any of them or any of their
respective successors, assigns, heirs, executors or administrators,
hereafter can, shall or may have for, upon or by reason of any
matter, cause or thing whatsoever from the beginning of the world
to the day of the date of these presents, occurring or arising as a
result of, or by and pursuant to a certain Amended and Restated
Stock Purchase Agreement among Aquarion and certain Sellers dated
as of December 7, 1990, as amended on September 12, 1991 (the
"Stock Purchase Agreement"), and any transactions, directly or
indirectly, related thereto or any other documents in connection
therewith.
Releasors hereby waive all claims, counterclaims, defenses and
rights of setoff any of them may have against Releasee or its successors
and assigns by reason of the Stock Purchase
<PAGE>
<PAGE>
Agreement and any transactions, directly or indirectly, related thereto
or any other documents in connection therewith.
In the event that any of the Releasors or any heir, executor,
administrator, successor or assign of any of the Releasors undertakes at
any time through any legal process to challenge the validity or
enforceability of all or any part of the Escrow Agreement or this
Release of Claims, then Representative shall be liable to Releasee and
its successors and assigns, and shall indemnify and hold Releasee and
its successors and assigns, harmless against any and all loss, damage,
liability, cost or expense, including without limitation, actual
attorneys' fees, incurred by Releasee and its successors and assigns in
defending the Escrow Agreement, or any agreement relating to any of the
foregoing, or arising by reason of the challenge of the Escrow Agreement
or this Release of Claims, whether or not said challenge results in
litigation or whether or not said challenge is successful.
<PAGE>
<PAGE>
The Release of Claims shall be binding on each of the Releasors and
each of their respective heirs, executors, administrators, successors
and assigns, and shall inure to the benefit of Releasee and its
successors and assigns.
IN WITNESS WHEREOF, Representative has set his hand this _____ day
of __________, 1995.
Witnesses:
____________________________
____________________________ _______________________________
STATE OF ___________ )
) ss.:
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this _____ day
of __________, 1995 by ____________________.
_______________________________
Commissioner of Superior Court
Notary Public
My Commission Expires:
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1995, AQUARION COMPANY FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 635
<SECURITIES> 0
<RECEIVABLES> 15859
<ALLOWANCES> 2916
<INVENTORY> 4105
<CURRENT-ASSETS> 35791
<PP&E> 432480
<DEPRECIATION> 136726
<TOTAL-ASSETS> 413980
<CURRENT-LIABILITIES> 35200
<BONDS> 131991
285
0
<COMMON> 6937
<OTHER-SE> 114565
<TOTAL-LIABILITY-AND-EQUITY> 413980
<SALES> 118206
<TOTAL-REVENUES> 118206
<CGS> 0
<TOTAL-COSTS> 87031
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 842
<INTEREST-EXPENSE> 9260
<INCOME-PRETAX> 22787
<INCOME-TAX> 9901
<INCOME-CONTINUING> 12886
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12886
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.90
</TABLE>
