CONNECTICUT WATER SERVICE INC / CT (Form: 8-K, Received: 01/03/2012 16:11:30)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): January 3, 2012 (December 30, 2011)

Commission File Number 0-8084

Connecticut Water Service, Inc.

(Exact name of registrant as specified in its charter)

Connecticut (State or other jurisdiction of incorporation)	06-0739839 (I.R.S. Employer Identification No.)

93 West Main Street, Clinton, CT (Address of principal executive offices)	06413 (Zip Code)

(860) 669-8636

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

Amendment of CoBank Agreement; New Term Loans

As previously reported, on June 29, 2009 Connecticut Water Service, Inc., a Connecticut corporation (the “Company”) entered into a Master Loan Agreement (the “CoBank Agreement”) with CoBank, ACB, a federally chartered instrumentality of the United States (“CoBank”). The Company also delivered to CoBank an initial Promissory Note and Supplement, dated June 29, 2009 (the “Promissory Note”). On the terms and subject to the conditions set forth in the initial Promissory Note issued under the terms of the CoBank Agreement, CoBank originally agreed to make loans (each a “Loan,” and collectively the “Loans”) to the Company from time to time, in an aggregate principal amount not to exceed, at any one time outstanding $15,000,000 (the “Loan Commitment”).

The CoBank Agreement was amended by the parties in May 2010 and July 2011, and currently is scheduled to mature on June 25, 2013 (the “Maturity Date”). Subject to the payment of a surcharge described in the CoBank Agreement for Loans bearing interest at fixed rates, the Company may prepay the Loans in whole or in part at any time prior to the Maturity Date. As of September 30, 2011, the Company had borrowed the entire $15,000,000 available under the initial Promissory Note from CoBank under the CoBank Agreement to finance the capital expenditures and general corporate needs of the Company and its subsidiaries.

On January 1, 2012, the Company and CoBank entered into an amendment to the CoBank Agreement (the “Amendment”) and two additional Promissory Note and Single Advance Term Loan Supplements providing for two additional Term Loans to the Company (the “Term Loan Notes and Supplements”). Under the terms of the Amendment and the Term Loan Notes and Supplements, on January 3, 2012 the Company borrowed from CoBank, in the aggregate, an additional forty million dollars ($40,000,000) to be applied to the Company’s acquisition of the issued and outstanding capital stock of Aqua Maine, Inc. from Aqua America, Inc., as more fully described in Item 8.01 below. The description of the material terms of the CoBank Agreement contained in Company’s current report on Form 8-K filed on July 2, 2009 is, except as specifically updated below, hereby incorporated by reference. Set forth below is a summary of the material terms of the CoBank Agreement, the Amendment and the two Term Loan Notes and Supplements.

Under the CoBank Agreement, as amended, the Company is required to maintain together with its consolidated subsidiaries at all times a ratio of Total Debt to Capitalization (as defined in the Agreement) of not more than .65 to 1.00. In addition to the foregoing, the two regulated water subsidiaries, The Connecticut Water Company (“CWC”) and Aqua Maine, Inc. (the name of which will be changed to “The Maine Water Company” following the closing of the acquisition) are each required to maintain at all times a ratio of Total Debt to Capitalization of not more than .60 to 1.00.

Under one Term Loan Note and Supplement, CoBank loaned the Company twenty million dollars ($20,000,000), which Term Loan shall be repaid by the Company in 60 equal quarterly installments of principal and interest over a 15-year amortizing term, with the first installment due on April 20, 2012 and the last installment due on January 20, 2027. Under the other Term Loan Note and Supplement, CoBank loaned the Company twenty million dollars ($20,000,000), which Term Loan shall be repaid by the Company in quarterly interest payments and repayment of the principal balance in full on the earlier of July 30, 2013 or upon the Company raising equity capital, in the aggregate, up to the outstanding amount owed under the second Term Note and Supplement.

Under the initial Promissory Note and each of the Term Loan Notes and Supplements, the Company will pay interest on any Loans made by CoBank in accordance with one of more of the following interest rate options, as selected periodically by the Company: (1) at a weekly quoted variable rate, a rate per annum equal to the rate of interest established by CoBank on the first business day of each week; (2) at a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance for periods of 180 days or more; or (3) at a fixed rate per annum equal to LIBOR plus 1.75% for 1, 2, 3, 6, 9 or 12 month interest periods. Interest shall be calculated on the actual number of days each Loan is outstanding on the basis of a year consisting of 360 days.

The above summary of the material terms of the CoBank Agreement, the Amendment and the new Term Loan Notes and Supplements is qualified in its entirety by reference to the complete copy of the CoBank Agreement, filed as Exhibit 10.1 to the Company’s current report on Form 8-K filed on July 2, 2009, and complete copies of the Amendment and the Term Loan Notes and Supplements, which are attached hereto as Exhibit 10.1 , Exhibit 10.2 and Exhibit 10.3 , respectively, and are hereby incorporated herein by reference.

Water Facilities Revenue Bonds – Series 2011A

As previously disclosed in a current report on Form 8-K filed on December 21, 2011 (the “Original Form 8-K”), on December 20, 2011 The Connecticut Water Company (“CWC”), the main operating subsidiary of the Company, completed the issuance of $22,050,000 aggregate principal amount of 5.00% fixed rate Water Facilities Revenue Bonds – Series 2011A with a maturity date of December 1, 2021 (the “Bonds”).

The disclosure in the Original Form 8-K is hereby amended to make clear that while the Bonds are tax exempt notes issued by the Connecticut Development Authority, the Bonds are not “non-AMT” bonds. Interest on the Bonds is an “item of tax preference” for purposes of the alternative minimum tax imposed on individuals and corporations.

Other than as indicated above, the information contained under Item 1.01 of the Original Form 8-K remains unchanged.

Item 1.02 Termination of a Material Definitive Agreement

On December 30, 2011, the Company, as borrower, repaid all amounts due to Bank of America, N.A. (“Bank of America”), as lender, under the Loan Agreement dated August 12, 2009 by and between the Company and Bank of America, as subsequently amended on August 28, 2009 (as amended, the “BofA Loan Agreement”). The BofA Loan Agreement consisted of a $10 million revolving line of credit to the Company and was terminated as evidenced by a payoff letter issued by Bank of America and received by the Company.

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Deferred Compensation Agreement

On December 30, 2011, CWC entered into a deferred compensation agreement with Eric W. Thornburg, which agreement replaces a similar agreement entered into with Mr. Thornburg when he joined the Company as its President and CEO in early 2006.

Under his Deferred Compensation Agreement, Mr. Thornburg may elect to defer, prior to the beginning of each calendar year, an amount up to 12% of his annual cash salary, which deferral amounts are credited to a deferred compensation account maintained by the Company on behalf of Mr. Thornburg. Such salary deferral amounts are credited to a deferred compensation account maintained by the Company. Amounts deferred to the account are credited with interest on a semi-annual basis at an Interest Equivalent equal to 50% of the product of (i) the AAA Corporate Bond Yield Averages published by Moody’s Bond Survey for the Friday ending on or immediately preceding the applicable January 1 and July 1 plus 4 percentage points (the “Interest Factor”), and (ii) the balance of Mr. Thornburg’s Deferred Compensation Account, including the amount of Interest Equivalent previously credited to his account, as of the preceding day (i.e., December 31 or June 30). Compensation deferred under the Deferred Compensation Agreement, plus all accrued interest, shall be paid to Mr. Thornburg or his designated beneficiary upon termination of employment by the Company.

The above summary of Mr. Thornburg’s deferred compensation agreement is qualified in its entirety by reference to the complete copy of Mr. Thornburg’s Deferred Compensation Agreement, which is filed herewith as Exhibit 10.4 and is hereby incorporated herein by reference.

Item 8.01 Other Events

Completion of Acquisition of Aqua Maine, Inc.

As previously reported, on July 27, 2011, the Company announced that it had entered into an agreement on July 26, 2011 with Aqua America, Inc. (“AA”) to purchase all of the outstanding shares of Aqua Maine, Inc. (“Aqua Maine”), a wholly-owned subsidiary of AA, for approximately $35.8 million (subject to certain adjustments at closing), including approximately $17.7 million of long-term debt as of December 31, 2010, reflecting a total enterprise value of approximately $53.5 million. Aqua Maine is a public water utility regulated by the Maine Public Utilities Commission (“MPUC”) that serves approximately 16,000 customers in 11 water systems in the State of Maine.

On October 27, 2011, the Company entered into a stipulation agreement with Aqua Maine and the Office of the Maine Public Advocate related to the acquisition, which was submitted to the MPUC for its review and consideration. On November 22, 2011, the MPUC approved the stipulation agreement in a decision that gives regulatory approval for the acquisition by the Company. In its decision, the MPUC concluded that the acquisition is in the best interests of customers. The decision also required that Aqua Maine will not seek a rate increase for any of its divisions in 2012, and that there will be no short or long-term rate or service impacts as a result of the acquisition.

Effective January 1, 2012, the Company completed the acquisition of Aqua Maine from AA, using the proceeds borrowed from CoBank under the new Term Loan Notes and Supplements to the CoBank Agreement. The total cash purchase price, as adjusted at the closing, was approximately $35.8 million. Subsequent to the closing, the name of Aqua Maine will be changed to “The Maine Water Company.”

News Release

On January 3, 2012, the Company issued a press release describing the completion of the Company’s acquisition of Aqua Maine, Inc. A copy of the Company’s press release dated January 3, 2012 is filed herewith as Exhibit 99.1 and is hereby incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

The following documents are filed herewith as exhibits hereto:

(d) Exhibits

10.1	Amendment to the Master Loan Agreement between Connecticut Water Service, Inc. and CoBank, ACB, dated January 1, 2012, is filed herewith.
10.2	Promissory Note and Single Advance Term Loan Supplement (Loan 1) between Connecticut Water Service, Inc. and CoBank, ACB, dated January 1, 2012, is filed herewith.
10.3	Promissory Note and Single Advance Term Loan Supplement (Loan 2) between Connecticut Water Service, Inc. and CoBank, ACB, dated January 1, 2012, is filed herewith.
10.4	Deferred Compensation Agreement between The Connecticut Water Company and Eric W. Thornburg, dated December 30, 2011, is filed herewith.
99.1	Company press release regarding the completion of the Company’s acquisition of Aqua Maine, Inc., dated January 3, 2012, is filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

	Connecticut Water Service, Inc. (Registrant)
Date: January 3, 2012	By: /s/ David C. Benoit David C. Benoit Vice President – Finance and Chief Financial Officer

EXHIBIT 10.1

Amendment No. RI0785A

AMENDMENT

TO THE

MASTER LOAN AGREEMENT

THIS AMENDMENT is entered into as of January 1, 2012, between CoBANK, ACB (“CoBank”) and CONNECTICUT WATER SERVICE, INC. , Clinton , Connecticut , a Connecticut corporation (the “Company”).

BACKGROUND

CoBank and the Company are parties to Master Loan Agreement No. RX0785 dated as of June 29, 2009 (such agreement is hereinafter referred to as the “MLA”). CoBank and the Company now desire to amend the MLA. For that reason, and for valuable consideration (the receipt and sufficiency of which are hereby acknowledged), CoBank and the Company agree as follows:

1. Sections 4.03 and 4.18 of the MLA are hereby amended and restated to read as follows:

SECTION 4.03. Operation of Business. The Company and each Subsidiary possesses all licenses, certificate, permits, authorizations, approvals, franchises, patents, copyrights, trademarks, trade names, rights thereto, or the like which are material to the operation of its business or required by Law, and neither the Company nor any Subsidiary is in violation of the rights of others with respect thereto. Without limiting the foregoing, CWC has all certificates of convenience and necessity and other governmental authorizations required by the Connecticut Public Utilities Regulatory Authority (the "PURA"), other applicable governmental authorities, and Law in order for it to operate its business as presently operated and as proposed to be operated.

SECTION 4.18. Rate Matters. (A) CWC's rates for water are regulated by, and have been approved by, the PURA; and (B) there is no pending and to the Company’s knowledge, threatened action or proceeding before the PURA, any court, or any other governmental authority, the objective or result of which is or could be to: (1) reduce or otherwise adversely change any of CWC's rates for the provision of water and/or wastewater services, except as contemplates pursuant to PURA Docket No. 06-07-08RE01, Application of The Connecticut Water Company to Amend Rate Schedules - Temporary Rate Reduction; (2) limit or revoke any of the CWC's permits or other authorizations to conduct business; or (3) otherwise have a Material Adverse Effect.

2. Section 7.01 of the MLA is hereby amended and restated to read as follows:

SECTION 7.01. Total Debt to Capitalization Ratio. The Company and its consolidated Subsidiaries shall have at all times a ratio of Total Debt to Capitalization of not more than 0.65 to 1.00. In addition to the forgoing, the Company's regulated Subsidiaries, CWC and Aqua Maine, Inc. (or Aqua Maine, Inc.'s successor in name and/or interest), shall each have at all times a ratio of Total Debt to Capitalization of not more than 0.60 to 1.00

3. Section 1.01 of Exhibit A to MLA is hereby amended by deleting the definition of CPUC and adding the following definition:

PURA shall have the meaning set forth in Section 4.03 hereof.

4. Except as set forth in this amendment, the MLA, including all amendments thereto, shall continue in full force and effect as written.

IN WITNESS WHEREOF, the parties have caused this amendment to be executed by their duly authorized officers as of the date shown above.

CoBANK, ACB		CONNECTICUT WATER SERVICE, INC.

By:	/s/ Shannon Davoren	By:	/s/ David C. Benoit

Title:	Assistant Corporate Secretary	Title:	Vice President – Finance and Chief Financial Officer

EXHIBIT 10.2

Loan No. RI0785T01

PROMISSORY NOTE AND

SINGLE ADVANCE TERM LOAN SUPPLEMENT

THIS PROMISSORY NOTE AND SUPPLEMENT (this “Promissory Note and Supplement”) to the Master Loan Agreement dated as of June 29, 2009 , as amended (the “MLA”) is entered into as of January 1, 2012 between CONNECTICUT WATER SERVICE, INC. , Clinton, Connecticut , a Connecticut corporation (the “Company”) and CoBANK, ACB , a federally chartered instrumentality of the United States (“CoBank”).

SECTION 1. The Term Loan. On the terms and conditions set forth in the MLA and this Promissory Note and Supplement, CoBank agrees to make a loan to the Company in an amount not to exceed $ 20,000,000.00 (the “Commitment”). The Commitment shall expire at 12:00 noon (Company’s local time) on January 30, 2012, or on such later date as CoBank may, in its sole discretion, authorize in writing.

SECTION 2. Purpose. The purpose of the Commitment is to provide funding for the acquisition of the stock of Aqua Maine, Inc. (“ Aqua Maine”) and related closing costs.

SECTION 3. Availability. Notwithstanding Section 2 of the MLA and provided that each of the conditions precedent set forth herein and in the MLA have been satisfied, the loan will be made available to the Company on a date to be agreed upon by the parties.

SECTION 4. Interest. The Company agrees to pay interest on the unpaid balance of the loan(s) in accordance with one or more of the following interest rate options, as selected by the Company:

( A ) Weekly Quoted Variable Rate. At a rate per annum equal at all times to the rate of interest established by CoBank on the first Business Day of each week. The rate established by CoBank shall be effective until the first Business Day of the next week. Each change in the rate shall be applicable to all balances subject to this option and information about the then current rate shall be made available upon telephonic request.

( B ) Quoted Rate Option. At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to CoBank in its sole discretion in each instance, provided that: (1) the minimum fixed period shall be 180 days; (2) amounts may be fixed in increments of $100,000.00 or multiples thereof; and (3) the maximum number of fixes in place at any one time shall be five .

( C ) LIBOR Option. At a fixed rate per annum equal to "LIBOR" (as hereinafter defined) plus 1.75%. Under this option: (1) rates may be fixed for "Interest Periods" (as hereinafter defined) of 1, 2, 3, 6, 9 or 12 months, as selected by the Company; (2) amounts may be fixed in increments of $100,000.00 or multiples thereof; (3) the maximum number of fixes in place at any one time shall be five; and (4) rates may only be fixed on a "Banking Day" (as hereinafter defined) on 3 Banking Days’ prior written notice. For purposes hereof: (a) "LIBOR" shall mean the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on “Eurocurrency Liabilities” (as hereinafter defined) for banks subject to “FRB Regulation D” (as hereinafter defined) or required by any other federal law or regulation) quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time 2 Banking Days before the commencement of the Interest Period for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company, as published by Bloomberg or another major information vendor listed on BBA’s official website; (b) "Banking Day" shall mean a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; (c) "Interest Period" shall mean a period commencing on the date this option is to take effect and ending on the numerically corresponding day in the next calendar month or the month that is 2, 3, 6, 9 or 12 months thereafter, as the case may be; provided, however, that: (i) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (ii) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month; (d) “Eurocurrency Liabilities” shall have meaning as set forth in FRB Regulation D; and (e) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, rates may not be fixed for periods expiring after the maturity date of the loans and rates may not be fixed in such a manner as to cause the Company to have to break any fixed rate balance in order to pay any installment of principal. All elections provided for herein shall be made electronically (if applicable), telephonically or in writing and must be received by CoBank not later than 12:00 Noon Company’s local time in order to be considered to have been received on that day; provided, however, that in the case of LIBOR rate loans, all such elections must be confirmed in writing upon CoBank’s request. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable quarterly in arrears by the 20th day of each January, April, July, and October or on such other day in such month as CoBank shall require in a written notice to the Company; provided, however, in the event the Company elects to fix all or a portion of the indebtedness outstanding under the LIBOR interest rate option above, at CoBank’s option upon written notice to the Company, interest shall be payable at the maturity of the Interest Period and if the LIBOR interest rate fix is for a period longer than three months, interest on that portion of the indebtedness outstanding shall be payable quarterly in arrears on each three-month anniversary of the commencement date of such Interest Period, and at maturity.

SECTION 5. Loan Origination Fee. In consideration of the Commitment, the Company agrees to pay to CoBank on the date loan proceeds are advanced hereunder, a loan origination fee in an amount equal to 0.50% of the loan proceeds advanced hereunder.

SECTION 6. Promissory Note. The Company promises to repay the unpaid principal balance of the loan in 60 consecutive, quarterly installments, payable on the 20th day of each month, with the first installment due on April 20, 2012, and the last installment due on January 20, 2027. The amount of each installment shall be the same principal amount that would be required to be repaid if the loan(s) were scheduled to be repaid in level payments of principal and interest and such schedule was calculated utilizing the interest rate effective on the date loan proceeds are advanced hereunder. In addition to the above, the Company promises to pay interest on the unpaid principal balance of the loan at the times and in accordance with the provisions set forth above. If any date on which principal or interest is due is not a Business Day, then such payment shall be due and payable on the next Business Day and, in the case of principal, interest shall continue to accrue on the amount thereof.

SECTION 7. Prepayment. Subject to the broken funding surcharge provision of the MLA, the Company may prepay all or any portion of the loan(s). Unless otherwise agreed, all prepayments will be applied to principal installments in the inverse order of their maturity and to such balances, fixed or variable, as CoBank shall specify.

SECTION 8. Security. Notwithstanding the provisions of the Security, Guarantee(s) and Title Insurance Section of the MLA to the contrary, except for CoBank’s statutory first lien on all equity that the Company may now own or hereafter acquire or be allocated in CoBank, the Company’s obligations hereunder shall be unsecured.

SECTION 9. Additional Conditions Precedent. In addition to the conditions precedent set forth in the MLA, CoBank’s obligation to extend credit hereunder shall be conditioned upon the receipt by CoBank, in form and content acceptable to CoBank, evidence that the Company has acquired or will acquire upon the advancement of loan proceeds hereunder the stock of Aqua Maine.

IN WITNESS WHEREOF , the parties have caused this Promissory Note and Supplement to the MLA to be executed by their duly authorized officers as of the date shown above.

CoBANK, ACB		CONNECTICUT WATER SERVICE, INC.

By:	/s/ Shannon Davoren	By:	/s/ David C. Benoit

Title:	Assistant Corporate Secretary	Title:	Vice President – Finance and Chief Financial Officer

EXHIBIT 10.3

Loan No. RI0785T02

PROMISSORY NOTE AND

SINGLE ADVANCE TERM LOAN SUPPLEMENT

THIS PROMISSORY NOTE AND SUPPLEMENT (this “Promissory Note and Supplement”) to the Master Loan Agreement dated as of June 29, 2009, as amended (the “MLA”) is entered into as of January 1, 2012 between CONNECTICUT WATER SERVICE, INC. , Clinton, Connecticut , a Connecticut corporation (the “Company”) and CoBANK, ACB , a federally chartered instrumentality of the United States (“CoBank”).

SECTION 1. The Term Loan. On the terms and conditions set forth in the MLA and this Promissory Note and Supplement, CoBank agrees to make a loan to the Company in an amount not to exceed $20,000,000.00 (the “Commitment”). The Commitment shall expire at 12:00 noon (Company’s local time) on January 30, 2012, or on such later date as CoBank may, in its sole discretion, authorize in writing.

SECTION 2. Purpose. The purpose of the Commitment is to provide funding for the acquisition of the stock of Aqua Maine, Inc. (“Aqua Maine”) and related closing costs.

SECTION 4. Interest. The Company agrees to pay interest on the unpaid balance of the loan(s) in accordance with one or more of the following interest rate options, as selected by the Company:

(A) Weekly Quoted Variable Rate. At a rate per annum equal at all times to the rate of interest established by CoBank on the first Business Day of each week. The rate established by CoBank shall be effective until the first Business Day of the next week. Each change in the rate shall be applicable to all balances subject to this option and information about the then current rate shall be made available upon telephonic request.

(B) Quoted Rate Option. At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to CoBank in its sole discretion in each instance, provided that: (1) the minimum fixed period shall be 180 days; (2) amounts may be fixed in increments of $100,000.00 or multiples thereof; and (3) the maximum number of fixes in place at any one time shall be five.

(C) LIBOR Option. At a fixed rate per annum equal to "LIBOR" (as hereinafter defined) plus 1.75%. Under this option: (1) rates may be fixed for "Interest Periods" (as hereinafter defined) of 1, 2, 3, 6, 9 or 12 months, as selected by the Company; (2) amounts may be fixed in increments of $100,000.00 or multiples thereof; (3) the maximum number of fixes in place at any one time shall be five; and (4) rates may only be fixed on a "Banking Day" (as hereinafter defined) on 3 Banking Days’ prior written notice. For purposes hereof: (a) "LIBOR" shall mean the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on “Eurocurrency Liabilities” (as hereinafter defined) for banks subject to “FRB Regulation D” (as hereinafter defined) or required by any other federal law or regulation) quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time 2 Banking Days before the commencement of the Interest Period for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company, as published by Bloomberg or another major information vendor listed on BBA’s official website; (b) "Banking Day" shall mean a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; (c) "Interest Period" shall mean a period commencing on the date this option is to take effect and ending on the numerically corresponding day in the next calendar month or the month that is 2, 3, 6, 9 or 12 months thereafter, as the case may be; provided, however, that: (i) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (ii) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month; (d) “Eurocurrency Liabilities” shall have meaning as set forth in FRB Regulation D; and (e) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

SECTION 6. Promissory Note. The Company promises to repay the unpaid principal balance of the loan on the earlier of: July 30, 2013 or the date upon which the Company raises equity capital, in the aggregate, up to the outstanding amount of the Commitment, or on such later date as CoBank may, in its sole discretion, authorize in writing. In addition to the above, the Company promises to pay interest on the unpaid principal balance of the loan at the times and in accordance with the provisions set forth above. If any date on which principal or interest is due is not a Business Day, then such payment shall be due and payable on the next Business Day and, in the case of principal, interest shall continue to accrue on the amount thereof.

IN WITNESS WHEREOF , the parties have caused this Promissory Note and Supplement to the MLA to be executed by their duly authorized officers as of the date shown above.

CoBANK, ACB		CONNECTICUT WATER SERVICE, INC.

By:	/s/ Shannon Davoren	By:	/s/ David C. Benoit

Title:	Assistant Corporate Secretary	Title:	Vice President – Finance and Chief Financial Officer

EXHIBIT 10.4

DEFERRED COMPENSATION AGREEMENT

THIS DEFERRED COMPENSATION AGREEMENT (the “Deferred Compensation Agreement”) is made this 30 th day of December, 2011 and between The Connecticut Water Company, a Connecticut corporation (together with any affiliated companies hereinafter collectively referred to as the "Employer") and Eric W. Thornburg, a resident of Madison, Connecticut (hereinafter referred to as the "Employee").

WITNESSETH:

WHEREAS, the Company has determined that Employee is among a select group of management or highly compensated employees of the Employer; and

WHEREAS, the Employer and the Employee are willing to enter into this Agreement on the terms herein set forth, effective as of the date hereof;

NOW, THEREFORE, in consideration of the premises and the mutual and dependent promises herein, the parties hereto agree as follows:

1. DEFERRED COMPENSATION . The Employee may file a written election with the Employer in the form attached to this Agreement or such other form as may be approved by the Employer to defer up to 12 percent (12%) of the Employee's salary. Such amount shall be credited to a Deferred Compensation Account as provided in Section 2 hereof. This election to defer the receipt of salary must be made before the beginning of the calendar year for which the salary is earned and shall remain in effect, unless terminated or changed, or until the date the Employee ceases to be an employee of the Employer. Any election termination or change of a deferral election must be made on a form provided by the Employer for such purpose and may only be made with respect to salary which will be earned on and after the January 1 following the Employer's receipt of such form provided that such form is received not later than the December 31 st prior to the applicable January 1.

2. DEFERRED COMPENSATION ACCOUNT . The Employer shall maintain on its books and records a Deferred Compensation Account to record its liability for future payments of deferred compensation and interest thereon required to be paid to the Employee or his beneficiary pursuant to this Agreement. However, the Employer shall not be required to segregate or earmark any of its assets for the benefit of the Employee or his beneficiary. The amount reflected in said Deferred Compensation Account shall be available for the Employer's general corporate purposes and shall be available to the Employer's general creditors. The amount reflected in said Deferred Compensation Account shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Employee or his beneficiary, and any attempt to anticipate, alienate, transfer, assign or attach the same shall be void. Neither the Employee nor his beneficiary may assert any right or claim against any specific assets of the Employer. The Employee or his beneficiary shall have only a contractual right against the Employer for the amount reflected in said Deferred Compensation Account and shall have the status of general unsecured creditors. Notwithstanding the foregoing, in order to pay amounts which may become due under this Agreement, the Employer may establish a grantor trust (hereinafter the "Trust") within the meaning of Section 671 of the Internal Revenue Code of 1986, as amended. The assets in such Trust shall at all times be subject to the claims of the general creditors of the Employer in the event of the Employer's bankruptcy or insolvency, and neither the Employee nor any beneficiary shall have any preferred claim or right, or any beneficial ownership interest in, any such assets of the Trust prior to the time such assets are paid to the Employee or beneficiary pursuant to this Agreement.

The Employer shall credit to said Deferred Compensation Account the amount of any salary to which the Employee becomes entitled and which is deferred pursuant to Section 1 hereof, such amount to be credited as of the first business day of each month. The Employer shall also credit to said Deferred Compensation Account an Interest Equivalent in the amount and manner set forth in Section 3 hereof.

3. PAYMENT OF DEFERRED COMPENSATION

(a) Separation from Service On or After Attainment of Age 55 . If the Employee should separate from service on or after his attainment of age fifty-five (55) for any reason other than death or an account of “Cause” as defined in subsection (c) below, he shall be entitled to receive payment of the entire amount of his Deferred Compensation Account including an Interest Equivalent, as described below, in the form of an actuarially equivalent life annuity providing for equal annual payments for the life of the Employee. Such actuarially equivalent life annuity shall be computed on the basis of a mortality table that assumes a life expectancy of age eighty (80) and uses the Interest Factor described below (payment shall continue for the life of the Employee, even if the Employee continues to live past eighty (80)). If the Employee is a “specified employee” as that term is defined under Section 409A of the Internal Revenue Code of 1986 as amended, and regulations issued thereunder (collectively “Section 409A”) at the time of separation from service, the first annual annuity payment under this subsection shall be paid on the first day of the seventh month following the date of the Employee’s separation from service, and subsequent payments shall be made on anniversaries of that date. If the Employee is not a “specified employee” at the time of separation from service, the first annual payment under this subsection shall be paid on the first day of the month following the date of the Employee’s separation from service, and subsequent payments shall be made on anniversaries of that date.

There shall be credited to the Employee's Deferred Compensation Account as of each January 1 and July 1, commencing with January 1, 2012 until payment of such account begins, as additional deferred compensation, an Interest Equivalent equal to fifty percent (50%) of the product of (i) the AAA Corporate Bond Yield Averages published by Moody's Bond Survey for the Friday ending on or immediately preceding the applicable January 1 and July 1 plus four (4) percentage points (the "Interest Factor"), multiplied by (ii) the balance of the Employee's Deferred Compensation Account, including the amount of Interest Equivalent previously credited to such Employee's account, as of the preceding day (i.e., December 31 or June 30). The Interest Factor used to compute the annuity payable upon the Employee's separation from service on or after his attainment of age fifty-five (55) shall be calculated based upon the Interest Factor as of the January 1 or July 1 immediately preceding the date of the Employee's separation from service, whichever shall fall nearer to the date of the Employee ' s separation from service.

(b) Separation from Service Prior to Attainment of Age 55 . If the Employee should separate from service prior to his attainment of age fifty-five (55) for any reason other than death or on account of "Cause" as defined in subsection (c) below, the Employee shall be entitled to receive payment in a lump sum of the entire amount of his Deferred Compensation Account, including the same Interest Equivalent as described in subsection (a) above. If the Employee is a “specified employee” as that term is defined under Section 409A at the time of separation from service, payment under this subsection shall be made on the date which is six (6) months following the date payment would otherwise be made pursuant to the following sentence. If the Employee is not a “specified employee” at the time of separation from service, payment under this subsection shall be made on the third (3 rd ) day following separation from service.

(i) If the employment of the Employee is terminated by the Employer for Cause, the Employee shall be entitled only to a return of amounts deferred pursuant to Section 1 hereof.

(ii) If the Employee is so terminated on or after age 55, payment shall be made in accordance with the terms of Section 3(a) above. However, the Employee shall not be entitled to the Interest Equivalent for any years prior to such termination, and such Interest Equivalent shall not be included in determining Employee’s benefit hereunder. An Interest Factor shall be utilized in calculating the amount of the annuity payable in accordance with the last sentence of subsection (a) above.

(iii) If the Employee is so terminated prior to attainment of age 55, payment of the return of amounts deferred (excluding any Interest Equivalent) shall be made in a lump sum. If the Employee is a “specified employee” as that term is defined under Section 409A at the time of separation from service, payment under this subsection shall be made on the date which is six (6) months following the date payment would otherwise be made pursuant to the following sentence. If the Employee is not a “specified employee” at the time of separation from service, payment under this subsection shall be made on the third (3 rd ) day following separation from service.

(iv) As used in this Agreement, the term "Cause" shall mean:

(A)

the Employee's rendering, while employed by the Employer, of any services, assistance or advice, either directly or indirectly, to any person, firm or organization competing with, or in opposition to, the Employer;

(B)

the Employee's allowing, while employed by the Employer, any use of his name by any person, firm or organization competing with, or in opposition to, the Employer; or

(C)

willful misconduct by the Employee, including, but not limited to, the commission by the Employee of a felony or the perpetration by the Employee of a common law fraud upon the Employer.

(d) Death While Employed . Notwithstanding anything to the contrary contained in the foregoing, if the Employee should die while employed by the Employer, his beneficiary, designated pursuant to Section 4 hereof, shall receive in a lump sum, in lieu of the amount(s) otherwise payable to the Employee under this Agreement, a death benefit equal to the greater of (i) the Hypothetical Death Benefit, as defined in subsection (f) hereof, and (ii) the entire amount of his Deferred Compensation Account at the date of his death, assuming that an Interest Equivalent were credited to such account as of each January 1 and July 1, occurring after the first deferral hereunder until the date of death at the rate set forth in subsection (a) hereof. Such beneficiary shall receive such death benefit on the thirtieth (30 th ) day following the death of the Employee.

(e) Death After Separation from Service .

(i) If the Employee should die after his separation from service, whether prior to or on or after attainment of age 55, and prior to the date on which payment of his Deferred Compensation Account has commenced in the form of an annuity in accordance with subsection (a) or has been paid in the form of a lump sum as provided in subsection (b), his beneficiary, designated pursuant to Section 4 hereof, shall receive in a lump sum, in lieu of the amount(s) otherwise payable to the Employee under this Agreement, a death benefit equal to the entire amount of the Employee's Deferred Compensation Account, including the same Interest Equivalent as described in subsection (a) above, at the date of his death, provided that the Employee's employment shall not have terminated on account of "Cause" as defined in subsection (c) hereof. In the event that the Employee should die after the termination of his employment for “Cause,” whether prior to or on or after attainment of age 55, and in either case prior to the date upon which payment of his Deferred Compensation Account has been made or has commenced, his beneficiary, designated pursuant to Section 4 hereof, shall receive a return of the amounts deferred (excluding any Interest Equivalent). No Interest Equivalent shall be credited to the Employee ' s Deferred Compensation Account in the event of the Employee's death after his termination on account of "Cause" as provided in subsection (c) hereof. In either case, the Employee's beneficiary shall receive such death benefit on the thirtieth (30 th ) day following the death of the Employee.

(ii) If the Employee should die after his separation from service with the Employer on or after attainment of age 55 (not on account of “Cause”) and after the date on which payment of his Deferred Compensation Account and the Interest Equivalent set forth in subsection (a) hereof has commenced in the form of an annuity as provided in subsection (a), no additional benefits shall be payable under this Agreement after the Employee's death except to the extent that the Employee did not receive prior to his death benefits in an amount equal to or greater than the Employee’s Deferred Compensation Account plus any Interest Equivalent credited thereto, as of the date of the Employee’s death. If the Employee dies prior to receiving benefits equal to or greater than the Employee’s Deferred Compensation Account plus any Interest Equivalent credited thereto as of the date of the Employee’s death, his beneficiary shall be entitled to a lump sum payment, thirty (30) days following Employee’s death, equal to the difference between benefits paid to the Employee hereunder and the Employee’s Deferred Compensation account, plus any Interest Equivalent credited thereto, as of the date of the Employee’s death.

(iii) If the Employee should die after his separation from service with the Employer on or after attainment of age 55 on account of “Cause” and after the date payments have commenced to his in the form of an annuity as provided in subsection (c), no additional benefits shall be payable under this Agreement after the Employee’s death except to the extent the Employee did not receive prior to his death benefits in an amount equal to or greater than the amounts deferred (excluding any Interest Equivalent earned while employed). In such event, his beneficiary shall be entitled to a lump sum payment, thirty (30) days following Employee’s death, equal to the difference between benefits paid to the Employee hereunder and the amounts deferred (excluding any Interest Equivalent earned while employed).

(iv) If the Employee should die after his separation from service with the Employer and after the date on which payment has been paid to him in the form of a lump sum pursuant to subsection (b) or (c), no additional benefits shall be payable upon the Employee's death.

(f) Hypothetical Death Benefit . For purposes of this Agreement, the term "Hypothetical Death Benefit” shall mean a lump sum benefit equal to the proceeds of any policy of key-man life insurance on the life of the Employee, of which the Employer is owner and beneficiary, and which policy is designated by the Employer as subject to the provisions hereof, reduced by (i) the amount of any tax imposed on the Employer with respect to such proceeds and (ii) the cost to the Employer of any tax deductions postponed as a result of salary deferrals pursuant to Section 1 hereof and increased by (iii) the tax deduction to the Employer which would result from payment of the Hypothetical Death Benefit to a beneficiary of the Employee. For purposes of (ii) above, an opportunity cost factor of six (6) percent pre-tax interest will be applied during the period of postponed deductions under (ii). The calculation of the Hypothetical Death Benefit shall be done by the Employer, whose calculation shall be final and binding on the Employee and his beneficiary. Anything herein to the contrary notwithstanding, the Employer shall not be required to purchase a policy of key-man life insurance on the life of any Employee, and any such policy purchased by the Employer, and all proceeds thereof, shall remain at all times available to the Employer's general creditors.

(g) Termination of Employment . In order for the Employee to be considered to have terminated employment with the Employer, the Employee must have incurred a separation from service from the Employer (and all related companies) within the meaning of Section 409A, and the term termination of employment shall be construed and interpreted in a manner consistent with the term separation from service.

4. BENEFICIARY . The Employee has notified or will in the future notify the Employer of the person or persons entitled to receive payments on the death of the Employee. For the purposes of this Agreement, such person or persons are herein referred to collectively as the "beneficiary." The person whom an Employee designates as his beneficiary for this purpose must be one of the following: the Employee ' s spouse; father, mother, sister, brother, son or daughter. The beneficiary may also be a legal ward living with and dependent on the Employee at the time of his death. If the Employee dies and has not designated a beneficiary, his beneficiary shall be his spouse, if living; otherwise, his beneficiary shall be deemed to be his estate. An Employee's beneficiary designation may be changed at any time by the Employee giving written notice to the Employer of such change. The rights of any beneficiary presently or hereafter designated are subject to any changes made in this Agreement by the Employee and the Employer.

5. WITHHOLDING . The Employer shall be permitted to withhold from any payment to the Employee or his beneficiary hereunder all federal, state or other taxes which may be required with respect to such payment.

6. ARBITRATION . In the event that a dispute shall arise with respect to any of the provisions of this Agreement, either the Employer or the Employee or his beneficiary, as the case may be, may give written notice to the other stating the claims that said party desires to arbitrate, and naming an arbitrator. Within ten (10) days after the receipt of such notice, the party receiving same shall appoint a second arbitrator by written notice to be sent to the party who requested arbitration. Within ten (10) days after receipt of such notice of appointment of the second arbitrator, the two (2) arbitrators so appointed shall meet to select a third arbitrator and shall give written notice of such selection to the Employer and the Employee or his beneficiary. The decision of a majority of the arbitrators shall be conclusive and binding upon the Employer and the Employee or his beneficiary. All notices hereunder shall be by registered mail addressed to the last known address of the party entitled to receive notice. The Employer and the Employee shall each pay their own costs incurred in the arbitration proceeding.

7. MISCELLANEOUS .

(a) This Agreement shall be binding upon the parties hereto, their heirs, executors, administrators, successors and assigns. The Employer agrees that it will not be a party to any merger, consolidation or reorganization unless and until its obligations hereunder shall be expressly assumed by its successor or successors.

(b) This Agreement may be amended at any time by mutual written agreement of the parties hereto, but no amendment shall operate to give the Employee, or any beneficiary designated by him, either directly or indirectly, any interest whatsoever in any funds or assets of the Employer, except the right to receive the payments herein provided.

(c) Deferrals under this Agreement may be suspended by the Employer effective as of any January 1, following the time that tax or other laws are enacted or interpreted which result or will result in costs to the Employer significantly in excess of those contemplated at the time of the execution hereof. In the event of such suspension, the Employer ' s sole obligation shall be to pay to the Employee in accordance with Section 3 above. In no event may deferrals be ceased during a calendar year by action of either the Employer or the Employee, or both.

(d) This Agreement shall not supersede any contract of employment, whether oral or written, between the Employer and the Employee, nor shall it affect or impair the rights and obligations of the Employer and the Employee, respectively, thereunder. Nothing contained herein shall impose any obligation on the Employer to continue the employment of the Employee. This Agreement shall supersede any similar agreement relating to the deferral of Compensation.

(e) If Moody's Bond Survey shall cease to publish the Corporate Bond Yield Averages referred to in Section 3 hereof, a similar average selected by the Board of Directors of the Employer, in its sole discretion, shall be used.

(f) This Agreement shall be executed in duplicate, and each executed copy of this Agreement shall be deemed an original.

(g) This Agreement shall be construed in all respects under the laws of the State of Connecticut, subject to applicable federal law.

(h) This Agreement has been prepared with reference to Section 409A and should be interpreted and administered in a manner consistent with Section 409A.

(i) This Agreement is effective as of January 1, 2012.

* * * * * *

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.

THE CONNECTICUT WATER COMPANY

December 30, 2011 By /s/ Kristen A. Johnson

Date Name: Kristen A. Johnson

Title: Vice President – Human Resources and Corporate Secretary

December 30, 2011 /s/ Eric W. Thornburg

Date Eric W. Thornburg

EXHIBIT 99.1

	NEWS
93 West Main Street, Clinton, CT 06413

Connecticut Water Service, Inc. Completes Acquisition

of Aqua Maine, Inc.

Clinton, Connecticut, January 3, 2012 — Connecticut Water Service, Inc. (NASDAQ: CTWS) (the “Company” or “Connecticut Water”) announced today that it has completed the acquisition of Aqua Maine, Inc., a subsidiary of Aqua America, Inc. (NYSE:WTR). Aqua Maine, which will be renamed The Maine Water Company, serves over 16,000 customers, or a population of 48,000 people in 20 communities in the state of Maine.

“This is an important milestone for Connecticut Water and Maine Water,” stated Eric W. Thornburg, Connecticut Water’s Chairman, President and Chief Executive Officer. He explained, “Connecticut Water has increased its customer base by 18% with this acquisition and will benefit from weather and regulatory diversity. Maine customers now represent a significant part of Connecticut Water, a New England water utility company with a proven track record of serving customers and communities.”

Judy E. Wallingford, president of Maine Water, who had also served as president of Aqua Maine, stated, “ Since all Maine employees are being retained, our customers will continue to be served by the same employees and will continue to call our customer service folks in Maine. With the details of the transaction now concluded, we are looking forward to aligning with Connecticut Water and working with our similar New England cultures to offer the best service possible.”

Ms. Wallingford notes that, as part of the regulatory approval issued by the Maine Public Utilities Commission (MPUC), Maine Water will not seek a rate increase for any of its divisions in 2012, and there will be no short- or long-term rate or service impacts as a result of the acquisition. She added, “Great care has been taken to work through the transition to Maine Water and we are confident that it will be seamless for our customers.”

According to Mr. Thornburg, “The Company now has a platform to grow in New England and along the east coast.” He stated, “Connecticut Water and Maine Water share a common culture that is based on serving customers, communities and employees while honoring commitments to shareholders.” Connecticut Water now serves 106,000 customers, or a population of 350,000, through its regulated water utility subsidiaries: The Connecticut Water Company in Connecticut and The Maine Water Company in Maine.

Mr. Thornburg thanked Nicholas DeBenedictis, Chairman, President and CEO of Aqua America and his team who worked closely with Connecticut Water to complete the transaction a little more than five months after it was announced. Connecticut Water and Aqua America had announced on July 27, 2011, that the companies had reached an agreement for Connecticut Water to purchase Aqua Maine from Aqua America. The MPUC had approved the acquisition by Connecticut Water on November 22, 2011, and the closing was completed on January 1, 2012.

As called for under the previously announced agreement, at the closing Connecticut Water purchased all of the capital stock of Aqua Maine, Inc. for an aggregate cash purchase price of approximately $35.8 million, subject to certain closing adjustments, plus assumption of approximately $17.7 million of long-term debt as of December 31, 2010.

News media contacts:

Judy E. Wallingford, President

Maine Water

PO Box 310

West Rockport, ME 04865

(207) 236-8428

Daniel J. Meaney, APR

Director of Corporate Communications

Connecticut Water Service, Inc.

93 West Main Street, Clinton, CT 06413-1600

(860) 664 -6016

This news release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the Company’s results of operations, financial position and long-term strategy. These forward-looking statements speak only as of the date of this release and are based on current information and expectations. These forward looking statements are also subject to risks and uncertainties, including our ability to successfully integrate Maine Water’s operations, customers and employees and the other risks and uncertainties discussed in our filings with the Securities and Exchange Commission, which could cause the Company’s actual results to differ materially from expected results. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.