UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.
)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
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[X]
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to
Section 240.14a-11(c) or Section 240.14a-2.
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Connecticut Water Service, Inc.
Payment of Filing Fee (Check the appropriate box):
[X] | No fee required. |
[ ] | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12. |
(1) | Title of each class of securities to which transaction applies: |
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(2) | Aggregate number of securities to which transaction applies: |
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(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): |
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[ ] | Fee paid previously with preliminary materials. | |
[ ] | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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March 31, 2005
Dear Shareholder:
You are cordially invited to the Annual Meeting of Shareholders of Connecticut Water Service, Inc., scheduled to be held on May 11, 2005, at the Hilton Southbury, 1284 Strongtown Road, Southbury, Connecticut, beginning at 2:00 PM. If you plan to attend, please call 1-800-428-3985, Extension 3012, and leave your name, address, and telephone number. Directions to the Hilton Southbury are printed on the back of the proxy statement. Your Board of Directors and executive officers look forward to personally meeting you.
At the meeting, you will be asked to elect four directors and ratify the appointment of independent auditors for the calendar year ending December 31, 2005.
In addition to the specific matters to be voted on, there will be a report on the progress of the Company and an opportunity for you to ask questions of general interest to shareholders. Important information is contained in the accompanying proxy statement which you are urged to carefully read.
It is important that your shares are represented and voted at the meeting, regardless of the number you own or whether you attend. Accordingly, please vote by mail, telephone, or internet. It is also very helpful to us if you would call and let us know if you plan to attend.
Your interest and participation in the affairs of the Company are appreciated.
Sincerely,
Table of Contents
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(back cover)
CONNECTICUT WATER SERVICE, INC.
Notice of Annual Meeting of Shareholders
Hilton Southbury, 1284 Strongtown Road, Southbury, Connecticut
Notice is hereby given that the Annual Meeting of Shareholders of Connecticut
Water Service, Inc. (the Company) will be held on
May 11, 2005, at 2:00 PM, at the Hilton
Southbury, 1284 Strongtown Road, Southbury, Connecticut, for the following purposes:
Only holders of the Companys Common Stock and its Cumulative Preferred StockSeries A of
record at the close of business on March 16, 2005 are entitled to notice of and to vote at this
meeting.
Shareholders are welcome to attend the meeting in person.
March 31, 2005
i
1.
to elect four (4) directors;
2.
to ratify the appointment of PricewaterhouseCoopers LLP, independent public
accountants, as independent auditors for the Company for the calendar
year
ending December 31, 2005;
3.
to transact such other business as may properly come before the meeting.
By order of the Board of Directors,
Michele G. DiAcri, Secretary
Connecticut Water Service, Inc.
Proxy Statement
Annual Meeting of Shareholders
May 11, 2005
General Information
The accompanying proxy is solicited by the Board of Directors of the Company for use at the Annual Meeting of Shareholders to be held at the Hilton Southbury, 1284 Strongtown Road, Southbury, Connecticut, at 2:00 PM.
Voting of Shares
Only holders of the Companys Common Stock and its Cumulative Preferred StockSeries A of record at the close of business on March 16, 2005 are entitled to notice of and to vote at the meeting. On March 16, 2005, the Company had outstanding 8,000,241 shares of Common Stock, 15,000 shares of Cumulative Preferred StockSeries A, $20 par value, and 29,499 shares of $.90 Cumulative Preferred Stock, $16 par value. Each share of Common Stock is entitled to three votes and each share of Cumulative Preferred StockSeries A is entitled to one vote on all matters coming before the meeting. The holders of shares of $.90 Cumulative Preferred Stock, $16 par value, have no general voting rights.
Whether or not you plan to attend the meeting, please use one of three voting options:
| Mail - You may submit your proxy by signing your proxy card and mailing it in the enclosed, postage prepaid and addressed envelope. For shares you hold in street name, you may sign the voting instruction card included by your broker or nominees and mail it in the envelope provided. |
| Telephone - If you live in the U.S. or Canada, you may submit your proxy by following the Vote by Telephone instructions on the proxy card. |
| Internet - If you have internet access, you may submit your proxy from any location in the world by following the Vote by Internet instructions on the proxy card. |
You may change your proxy instructions at any time prior to the vote at the Annual Meeting. For shares held directly in your name, you may do this by granting a later-dated proxy, submitting a later vote by telephone or computer, or by attending the annual meeting and voting in person. Attendance at the meeting will not cause your previously-granted proxy to be revoked, unless you specifically request it. You may change your proxy instructions for beneficially held shares by submitting new voting instructions to your broker or nominee.
Under Connecticut law, adoption of Proposal (1), the election of directors, requires a plurality of the votes cast by the holders of shares present in person or by proxy and voting at the meeting. Adoption of Proposal (2), ratification of the Companys independent auditor, requires the affirmative vote of a majority of the shares present in person or by proxy and voting at the meeting.
Votes withheld and broker non-votes will not be counted as votes cast for or against any of the Proposals, but the withheld and broker non-votes will be counted for purposes of determining whether a quorum is present at the meeting. If your shares are held by a broker or other nominee, your broker or nominee can vote on your behalf of Proposals 1 and 2.
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Proxy solicitation costs will be paid by the Company. In addition to this solicitation by mail being made initially on or about March 31, 2005, officers and regular employees of the Company may make solicitations by telephone, mail, or personal interviews, and arrangements may be made with banks, brokerage firms, and others to forward proxy material to their principals. The Company has retained Morrow & Company, Inc. to assist in the solicitation of proxies at an estimated cost of $4,500, plus expenses, which will be paid by the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16 of the Securities Exchange Act of 1934, directors, officers and certain beneficial owners of the Companys equity securities are required to file reports of their transactions in the Companys equity securities with the Securities and Exchange Commission on specified due dates. In 2004, reports of transactions by all directors, officers and such beneficial holders were timely filed, except a late filed Form 4 for Thomas R. Marston on October 21, 2004. In making this statement, the Company has relied on the written representations of its directors, officers, and five percent shareholders and copies of the reports that they have filed with the Securities and Exchange Commission.
CORPORATE GOVERNANCE
Board Independence
The Board has determined that Mesdames Hanley, Hincks, Thibdaue, and Wallace and Messrs. Kachur, Lengyel, Lentini, Neal, Reeds, and Wilbur are independent directors under the listing standards of the Nasdaq Stock Market, Inc. Mr. Chiaraluce, an employee of the Company, and Mr. Engle, who has a consulting contract with the Company, are not considered independent directors.
Code of Conduct
Annually, employees are sent the Companys Code of Conduct. Thereafter, each employee acknowledges their understanding and compliance with the code, including the establishment of a Company hotline for reporting Code of Conduct violations. To date, the Company hotline has received no reports of conduct violations. In addition to the Code of Conduct, the Board has adopted an additional Code of Conduct as a result of the Sarbanes-Oxley Act of 2002.
The Board promotes honest and ethical conduct, including the ethical handling of actual and apparent conflicts of interest between personal and professional relationships; full, fair, accurate, timely and understandable disclosure in the periodic reports required to be filed by the Company; and compliance with applicable governmental laws and regulations and the Companys own governing documents.
The public can access the Companys Code of Conduct on the Companys Internet website (www.ctwater.com) or by contacting the Company at the address appearing on Page 25.
Committee Charters
The Audit, Compensation, and Corporate Governance Committees of the Board have adopted written charters. The Audit Charter was most recently revised on March 11, 2005, and is included as Appendix A hereto. Shareholders and the public can obtain copies of charters of the Compensation and Corporate Governance Committees at the Companys website or by contacting the Company at the address appearing on Page 25.
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Board and Committee Membership and Attendance
The Companys Board of Directors met five times during 2004 and conducts regular executive sessions
of outside directors without management present. In addition, the Company has a number of
committees; their composition and functions in 2004 follows. In 2004, each director attended at
least 90% of the aggregate number of meetings of the Board and Committees on which they served.
All directors attended the 2004 Annual Meeting of Shareholders. Directors are expected, but not
required, to attend the 2005 Annual Meeting of Shareholders.
Committees
Committee Meetings and Functions
Marcia L. Hincks (Chairman)
Ronald D. Lengyel
Arthur C. Reeds
Lisa J. Thibdaue
Carol P. Wallace
Meetings: 4, plus 5 conference calls
Oversees the activities, procedures, and
recommendations of the independent auditors of
the Company and The Connecticut Water Company,
and annually appoints independent auditors for
the upcoming year.
Marcia L. Hincks
David A. Lentini
Robert F. Neal (Chairman)
Donald B. Wilbur
Meetings: 1
Determines officer compensation and the
promotion and hiring of officers, reviews
Company fringe benefit plans other than
retirement plans, and administers the
Companys Performance Stock Programs.
Mary Ann Hanley
Ronald D. Lengyel
Arthur C. Reeds
Donald B. Wilbur (Chairman)
Meetings: 1
Reviews the qualifications and independence
standards of director nominees and makes
recommendation to the Board, and reviews the
overall effectiveness of the Board.
Marcia L. Hincks
Robert F. Neal
Arthur C. Reeds
Donald B. Wilbur
Meetings: 2
Acts on behalf of the Board whenever the Board
is not in session and recommends chief
executive officer succession.
Mark G. Kachur
David A. Lentini
Robert F. Neal
Arthur C. Reeds (Chairman)
Carol P. Wallace
Meetings: 4
Reviews the Pension Trust Fund of The
Connecticut Water Company Employee Retirement
Fund, the employee Savings Plan (401(k)), the
VEBA Trust Fund for retiree medical benefits,
and the Supplemental Executive Retirement
Program, reviews and determines actuarial
policies and investment guidelines, selects
the investment managers, and makes
recommendations to and advises the Board of
Directors on financial policy issues and the
issuance of securities.
Roger Engle
Mary Ann Hanley
Marcia L. Hincks
Mark G. Kachur
Robert F. Neal
Lisa J. Thibdaue
Donald B. Wilbur
Meetings: 1
Oversees the preparation and implementation of
the Companys Strategic Plan.
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Director Compensation
Since the Boards of Directors of the Company and The Connecticut Water Company are identical,
regular meetings of each are generally held on the same day. Following is the current listing of
fees paid to Board members.
Mr. Chiaraluce, Chairman, President, and Chief Executive Officer, receives the same retainer
and meeting fees as other directors; he does not receive a fee for committee meetings. Mr.
Chiaraluces retainer and meeting fees are included in the
Summary Compensation Table on Page 15.
Directors who are not officers are not entitled to retirement benefits from the Company.
Pursuant to a Directors Deferred Compensation Plan, the Directors of the Company and The
Connecticut Water Company may elect to defer receipt of all or a specified portion of the
compensation payable to them for services as Directors until after retiring as Directors. Any
amounts so deferred are credited to accounts maintained for each participating Director, and
interest at an annual rate of 10.74% is currently credited on a monthly basis to all deferred
amounts. Distribution of amounts deferred and accumulated interest may be made, at the election of
each participating Director, in a lump sum or in annual installments over a period of years
specified by the Director, such distribution to commence in the year following the year in which
the individual ceases to be a Director. In 2004, one Director has elected to participate in the
Plan. Four of the Companys retired directors are currently receiving payments under the Plan.
Mandatory Retirement
According to the Companys Bylaws, no director shall be eligible for re-election as a director of
the Company after such director has attained the age of 70.
Minimum Stock Ownership
Each Board member is required to own at least 200 shares of Connecticut Water Service, Inc. common
stock.
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The Board Nomination Process
The Corporate Governance Committee identifies director nominees based primarily on
recommendations from management, Board members, shareholders, and other sources, such as water
industry and state industry associations. All candidates submitted by a shareholder or shareholder
group are reviewed and considered in the same manner as all other candidates. The Committee
recommends to the Board nominees that are independent and possess qualities such as personal and
professional integrity, sound business judgment, and utility, financial, or political expertise.
The Committee also considers age and diversity (broadly construed to mean a variety of opinions,
perspectives, personal, and professional experiences and backgrounds, such as gender, race, and
ethnicity differences, as well as other differentiating characteristics) in making its
recommendations for nominees to the full Board. In addition, the Committee considers whether
potential director nominees live in The Connecticut Water Companys service regions in sufficient
numbers to satisfy the representation requirements of Connecticut Statute 16-62a, and also
evaluates other factors that it may deem are in the best interests of the Company and its
shareholders. The Committee may, under its charter, retain at the Companys expense one or more
search firms to identify potential board candidates. The Committee does not currently employ an
executive search firm, or pay a fee to any other third party, to locate qualified candidates for
director positions.
Shareholder Recommendations
Shareholders recommending director nominees may submit the name and biographical information
of any person to the Corporate Secretary at the address listed on
Page 25. The Corporate Secretary will pass such shareholder recommendations onto the Chairman of the Corporate
Governance Committee for consideration. The shareholder will be informed of the status of his/her
recommendation after it is considered by the Corporate Governance Committee.
Pursuant to the Companys Bylaws, nominations for directors may be made by any shareholder
entitled to vote for the election of directors at the meeting who complies with the following
procedures. A nomination by a shareholder shall be made only if a shareholder has given proper and
timely notice in writing to the Secretary of the Company of a shareholders intent to make such
nomination. To be timely, a shareholders notice must be delivered to or mailed and received by
the Secretary of the Company at the General Offices of the Company not later than (i) with respect
to an election to be held at an annual meeting of shareholders, the close of business on a day
which is not less than 120 days prior to the anniversary date of the immediately preceding annual
meeting, and (ii) with respect to an election to be held at a special meeting of shareholders
called for the election of directors, the close of business on the tenth day following the date on
which notice of such meeting is first mailed to shareholders. Each notice must set forth: (a) the
name and address of the person or persons to be nominated; (b) the name and address, as they appear
on the Companys books, of the shareholder making such nomination; (c) the class and number of
shares of the Company which are beneficially owned by the shareholder; (d) a representation that
the shareholder is a holder of record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (e) a description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (f) such other information regarding
each nominee proposed by the shareholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission; and (g) the consent of
each nominee to serve as a director of the Company if so elected. Any notice of nominations for
consideration at the 2006 Annual Meeting must be received by the Companys Secretary by the close
of business on January 2, 2006. The presiding officer at the meeting shall determine if the facts
warrant a determination that such nomination was not made in accordance with the provisions of the
Companys Bylaws, and if the officer should so determine, he shall so declare to the meeting and
any nominations not properly made shall be disregarded.
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The 2004 Nomination Process
The Corporate Governance Committee met on October 6, 2004 to consider the renomination of
directors Hanley, Kachur, Lengyel, and Lentini whose terms expire at the 2005 Annual Meeting of
Shareholders. The Committee reviewed the attendance, performance, and independence of these
directors, but determined to withhold the Committees recommendation of these directors as director
nominees to the Board in order to allow interested shareholders to make either (i) recommendations
to the Committee for director nominees to be considered by the Board for inclusion on the Companys
proxy card, or (ii) formal director nominations, which, pursuant to the Companys Bylaws procedures
(described above) were due by December 24, 2004. The Committee received a formal shareholder
self-nomination for director candidate in accordance with the Bylaw procedures. The Corporate
Governance Committee reviewed the self-nominees qualifications.
Thereafter, the Chairman of the Committee and the Chairman of the
Board met with the self-nominee.
After consideration of all candidates, the Committee recommended to the Board, and the Board
approved, that the number of Board members should remain at 12 and that Ms. Hanley and Messrs.
Kachur, Lengyel, and Lentini be submitted to shareholders as the Companys director nominees.
Communications with Directors
Any shareholder wishing to communicate with a director may do so by contacting the Companys
Corporate Secretary, at the address and telephone number listed on
Page 25, who will pass to the
director a written, e-mail, or phone communication. The Corporate Secretary has been authorized by the
Board to screen frivolous or unlawful communications or commercial advertisements.
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Fee for each regular
Annual
meeting of the Board and
retainer for
Annual retainer
each regular and special
Fee for each special
each Board
for committee
Company
committee meeting
meeting of the Board
Member
chairs
$
250
$
300
None
None
$
450
$
500
$
6,000
$
1,000
Table of Contents
Table of Contents
Table of Contents
Certain Relationships and Related Transactions
Mr. Engle retired as President of Crystal Water Utilities Corporation/The Crystal Water Company of Danielson on December 31, 1999, having served in that position since 1978. As part of the arrangements relating to the Companys acquisition of Crystal Water Utilities Corporation/The Crystal Water Company of Danielson on September 29, 1999, the Company entered into an employment/ consulting agreement with Mr. Engle which covered his employment for the three-month period prior to his retirement and which provides that, beginning January 1, 2000, Mr. Engle will receive a $16,000 annual consulting fee from The Crystal Water Company of Danielson. This consulting agreement will terminate on the earlier of December 31, 2009 or Mr. Engles death or resignation. Upon completion of the consulting agreement, Mr. Engle will receive a $16,000 annual supplemental retirement benefit until his death. In addition, Mr. Engle receives health insurance benefits of approximately $9,271 under an employment/consulting agreement which amount is paid by the Company.
CUNO, Inc., a filter manufacturer for which Mr. Kachur serves as President and Chief Executive Officer, made payments of $334,479 to the Company during 2004 for water services provided to CUNO during the year. CUNO paid the Companys prevailing rates for water services. In addition, during 2004 the Company paid $1,704,859 to Northeast Utilities, for which Ms. Thibdaue serves as a Vice President, for electric utility services. The Company paid Northeast Utilities prevailing rates for electric utility services.
Security Ownership of Certain Beneficial Owners and Management
The following table lists, to the Companys knowledge, the ownership of the Companys Common Stock and the nature of such ownership for each Director and nominee for Director, for each executive officer named in the Summary Compensation Table, for all executive officers and Directors of the Company as group, and for each person who beneficially owns in excess of 5 percent of the outstanding shares of any class of the Companys voting securities. Unless otherwise noted, each holder has sole voting and dispositive power with respect to the shares listed. All information is given as of March 16, 2005 and assumes that shares which the named person has a contractual right to acquire within 60 days have been acquired and are outstanding.
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Directors and Executive Officers Stock Ownership
Name of Beneficial Owners | Total Amount | Percent of | ||||||||||
(* denotes non-employee Director) | Beneficially Owned | Class | ||||||||||
David C. Benoit (1)
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33,988 | * | * | |||||||||
Marshall T. Chiaraluce (2)
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124,336 | * | * | |||||||||
Roger Engle*
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11,571 | * | * | |||||||||
Mary Ann Hanley*
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1,350 | * | * | |||||||||
Marcia L. Hincks*
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1,561 | * | * | |||||||||
Mark G. Kachur*
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200 | * | * | |||||||||
David A. Lentini*
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2,000 | * | * | |||||||||
Ronald D. Lengyel*
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1,125 | * | * | |||||||||
Thomas R. Marston (3)
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14,028 | |||||||||||
James R. McQueen (4)
Retired 12/31/04
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25,756 | * | * | |||||||||
Robert F. Neal*
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1,500 | * | * | |||||||||
Terrance P. ONeill (5)
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23,414 | * | * | |||||||||
Arthur C. Reeds*
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1,500 | * | * | |||||||||
Lisa J. Thibdaue*
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700 | * | * | |||||||||
Carol P. Wallace*
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200 | * | * | |||||||||
Maureen P. Westbrook (6)
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35,219 | * | * | |||||||||
Donald B. Wilbur (7)
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4,076 | * | * | |||||||||
Directors and Officers as a Group
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282,524 | * | * | |||||||||
The above ownership individually or as a group is less than 5% of the outstanding shares of Connecticut Water Service, Inc. |
** | indicates ownership of less than 1% of the class of securities. | |
(1) | Includes 5,289 unrestricted performance share units, 439 restricted performance share units, 26,085 exercisable stock options under the Companys Performance Stock Program, and 2,175 directly-owned shares. | |
(2) | Includes 32,247 unrestricted performance share units, 5,448 restricted performance share units, 73,979 exercisable stock options under the Companys Performance Stock Program, 10,207 directly-owned shares, and 2,455 shares in the Companys 401(k) plan. | |
(3) | Includes 388 shares of restricted stock and 11,758 exercisable stock options under the Companys Performance Stock Program, 994 directly-owned shares, and 888 shares in the Companys 401(k) plan. | |
(4) | Includes 8,662 unrestricted performance share units and 17,134 exercisable stock options under the Companys Performance Stock Program. | |
(5) | Includes 962 unrestricted performance share units, 484 restricted performance share units, and 20,708 exercisable stock options, and 1,260 directly-owned shares. | |
(6) | Includes 2,443 unrestricted performance share units, 775 restricted performance share units, and 29,358 exercisable stock options under the Companys Performance Stock Program, 2,643 directly-owned shares, and 810 shares in the Companys 401(k) plan. | |
(7) | Mr. Wilburs spouse owns 4,076 shares. |
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Other Security Holders
The Company knows of no person who has or shares voting and/or investment power with respect to more than 5 percent of the shares of Connecticut Water Service Common Stock or Connecticut Water Service Preferred A Stock.
PROPOSAL (1) ELECTION OF DIRECTORS
The Companys Amended and Restated Certificate of Incorporation provides for a Board of no less than nine or more than fifteen directors, the exact number of directorships to be determined from time to time by resolution adopted by affirmative vote of a majority of the Board. The directors are divided into three classes, I, II and III, as nearly equal in number as practicable, with members to hold office until successors are elected and qualified. Each class is to be elected for a three-year term at successive annual meetings.
The Corporate Governance Committee recommended, and the Board of Directors selected, the four nominees listed below for election; all are regularly-elected Class II nominees. Of the remaining directors, the Class I terms of Directors Chiaraluce, Hincks, Neal, and Reeds will expire in 2007. The Class III terms of Directors Engle, Thibdaue, Wallace, and Wilbur will expire in 2006. The Board of Directors has determined to fix the number of directorships for the ensuing year at twelve. Proxies cannot be voted for a greater number of persons than the number of nominees named.
Unless otherwise directed, it is intended that the enclosed proxy will be voted
for the election of Mary Ann Hanley, Mark G. Kachur, Ronald D. Lengyel, and David A. Lentini.
If any nominee is unable or declines to serve, the persons named in the proxy may vote for some
other person(s).
Class I Directors Continuing in Office Whose Terms Expire in 2007.
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Marshall T. Chiaraluce, age 62, has been a director since 1992. He is Chairman of the Board of Directors, President and Chief Executive Officer of the Company. | |||
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Marcia L. Hincks, age 69, presently serves on the Audit (Chairman), Compensation, Executive, and Strategic Planning Committees and has been a director since 1983. She retired as Vice President and Senior Counsel of Aetna Life & Casualty in December 1993. | |||
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Robert F. Neal, age 70, presently serves on the Compensation (Chairman), Executive, Pension Trust and Finance, and Strategic Planning Committees and has been a director since 1990. He retired as Senior Vice President-Network Services of Southern New England Telecommunications Corporation in June 1994. | |||
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Class II Nominees for Election at this Meeting for Terms Expiring in 2008.
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Mary Ann Hanley, age 47, presently serves on the Corporate Governance and Strategic Planning Committees and has been a director since 1999. She is Assistant to the President of St. Francis Hospital & Medical Center and Director of The Valencia Society, the endowment fund for the hospital. From January 1995 to February 1998, she was legal counsel to the Governors Office, State of Connecticut. | |||
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Mark G. Kachur, age 61, presently serves on the Pension Trust and Finance and Strategic Planning Committees. He has been Chairman, President and Chief Executive Officer of CUNO, Inc. (filter manufacturer) since 1997. | |||
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Ronald D. Lengyel, age 66, presently serves on the Audit and Corporate Governance Committees and has been a director since 1999. He is Chairman of the Board and Director of Naugatuck Valley Savings & Loan, SB. | |||
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David A. Lentini, age 58, presently serves on the Compensation and Pension Trust and Finance Committees and has been a director since 2001. He currently is Chairman, President and Chief Executive Officer of The Connecticut Bank and Trust Company. He retired in December 2001 as Senior Vice President of Webster Bank where he had served since December 1999. From May 1993 to November 1999, he was President, Chief Executive Officer and Chairman of New England Community Bancorp, Inc., a multi-bank holding company. | |||
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Class III Directors Continuing in Office Whose Terms Expire in 2006.
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Roger Engle, age 66, serves on the Strategic Planning Committee and has been a director since 2000. He retired as President of Crystal Water Utilities Corporation/The Crystal Water Company of Danielson in January 2000. He also is a Director of the Savings Institute of Willimantic, Connecticut, a mutual savings bank. | |||
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Lisa J. Thibdaue, age 52, serves on the Audit and Strategic Planning Committees and has been a director since 2000. She has been the Vice President, Regulatory and Government Affairs, at Northeast Utilities Service Company since January 2005. From January 1, 1998 to December 31, 2004, she was Vice President, Rates, Regulatory Affairs and Compliance at Northeast Utilities Service Company. | |||
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Carol P. Wallace, age 50, presently serves on the Audit and Pension Trust and Finance Committees. She has been President and Chief Executive Officer of Cooper-Atkins Corporation, a manufacturer of temperature acquisition instruments, since 1994. She is also a Director of Liberty Bank and a Commissioner of the Connecticut State Ethics Commission. | |||
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Donald B. Wilbur, age 63, presently serves on the Compensation, Corporate Governance (Chairman), Executive, and Strategic Planning Committees and has been a director since 1993. He retired as the Plant Manager of Unilever HPC, USA, a personal products manufacturer, on December 31, 2002. He is a Director of Middlesex Hospital and a Director of Liberty Bank. | |||
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With the exception of Mr. Reeds, who retired from The Hartford Foundation for Public Giving in January 2003, and Mr. Lentini, who was formerly President/CEO and Chairman of New England Community Bancorp, Inc. from May 1993 to November 1999, each director listed above has had the same employment for more than the past five years either in the position indicated or in other similar or executive capacities with the same company or a predecessor.
AUDIT COMMITTEE REPORT
On March 11, 2005, the Board of Directors revised its written charter for the Audit Committee of the Company. (See Appendix A.) The Board has determined that each member of the Audit Committee qualifies as an independent director for purposes of the Nasdaqs Listing Standards and also has determined that Carol P. Wallace is a financial expert as defined under rules of the Securities and Exchange Commission. In connection with the preparation and filing of the Companys audited financial statements for the fiscal year ended December 31, 2004 (the audited financial statements), the Audit Committee performed the following functions:
11
| The Audit Committee reviewed and discussed with senior management and PricewaterhouseCoopers LLP, the Companys independent auditors, the audited financial statements, managements report on the effectiveness of the Companys internal control over financial reporting and PricewaterhouseCoopers LLPs evaluation of the Companys internal control over financial reporting. | |||
| The Audit Committee also met with Grant Thornton LLP and BlumShapiro LLP accounting firms retained by the Company to assist in its compliance with Section 404 of the Sarbanes Oxley Act of 2002, including the Public Accounting Oversight Boards (PCAOB) Auditing Standard No. 2 regarding PricewaterhouseCoopers LLPs audit of internal control over financial reporting. | |||
| The Audit Committee also discussed with PricewaterhouseCoopers LLP the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as currently in effect. | |||
| The Audit Committee received the written disclosures and the letter from PricewaterhouseCoopers LLP required by Independence Standards Board Standard No. 1 (Independence Discussions With Audit Committees), and discussed with PricewaterhouseCoopers LLP its independence from the Company, including whether the provision of non-audit services by PricewaterhouseCoopers LLP to the Company is consistent with maintaining the auditors independence. |
Based upon functions performed, the Audit Committee recommended to the Board of Directors, and the Board approved, that the audited financial statements be included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2004 for filing with the U.S. Securities and Exchange Commission.
AUDIT COMMITTEE
Marcia L. Hincks (Chairman)
Ronald D. Lengyel
Lisa J. Thibdaue
Carol P. Wallace
Arthur C. Reeds
PROPOSAL (2) RATIFICATION OF APPOINTMENT OF AUDITORS
Principal Accountants Fees and Services
During fiscal year 2004, the Company retained its principal auditor, PricewaterhouseCoopers LLP, to provide services in the following categories and amounts. During fiscal year 2004, the Company also retained Grant Thornton LLP and BlumShapiro LLP to assist in its compliance with Section 404 of the Sarbanes-Oxley Act of 2002, and paid these firms fees of $85,455 and $366,197, respectively.
Audit Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for professional services rendered for the audit of the Companys annual consolidated financial statements for the fiscal years ended December 31, 2003 and December 31, 2004, and for the reviews of the financial statements included in the Companys Quarterly Reports on Form 10-Q and Annual Report on Form 10-K for those fiscal years were $103,400 and $348,505, respectively. Included in the 2004 amount are $245,211 in fees related to
12
Sarbanes Oxley Act Section 404 requirements for auditor certification of managements report on the
effectiveness of the Companys internal controls over financial reporting.
Audit Related Fees
PricewaterhouseCoopers LLP performed audit related professional services as follows:
All Other Fees
In addition to the services
and fees stated above, PricewaterhouseCoopers LLP billed the Company
for the following.
2004
2003
$
18,000
$
18,000
6,820
6,500
1,650
-0-
-0-
4,000
4,035
-0-
$
30,505
$
28,500
2004
2003
Tax Services Fee
$
5,250
$
5,000
Out-of-Pocket Expenses
$
13,900
$
6,600
In accordance with its charter, the Audit Committee pre-approved all audit and non-audit fees for 2004 and 2003 listed above.
Representatives of PricewaterhouseCoopers LLP will attend the Annual Meeting of Shareholders, will have the opportunity to make a statement, if they desire to do so, and are expected to be available to respond to appropriate questions.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL (2).
13
EXECUTIVE COMPENSATION
Equity Compensation Plan Information
The following table provides information about the Companys Common Stock that may be issued upon
the exercise of options and awards under all of the Companys existing equity compensation plans as
of December 31, 2004. The table also includes information about the Companys other equity
compensation plans previously adopted without shareholder approval.
Management Compensation
The following tabulation sets forth the total compensation paid by the Company and The
Connecticut Water Company during 2004, 2003, and 2002 to each of the executive officers,
including the Chief Executive Officer of the Company, receiving more than $100,000 aggregate
compensation in 2003. The Company has no employees. All officers are employees of The
Connecticut Water Company and all of their compensation is paid by The Connecticut Water
Company.
14
Summary Compensation Table
15
Option Grants in Last Fiscal Year
There were no stock options granted under the Companys Performance Stock Program to the
individuals named in the Summary Compensation Table during the fiscal year ended December 31, 2004.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table sets forth certain information with respect to the individuals named in
the Summary Compensation Table regarding options held as of December 31, 2004.
16
Retirement Plans
All employees and officers of The Connecticut Water Company are entitled to participate in The
Connecticut Water Company Employees Retirement Plan (the Retirement Plan), a non-contributory,
qualified defined benefit plan. Retirement benefits are based on years of credited service and
average annual earnings, which is defined to mean the highest average regular basic compensation
received by an individual from the Company and The Connecticut Water Company during any 60
consecutive months. Retirement benefits under the Retirement Plan are not reduced by employees
Social Security benefits. Contributions, which are actuarially determined, are made to the
Retirement Plan by The Connecticut Water Company for the benefit of all employees covered by the
Retirement Plan.
The Internal Revenue Code of 1986, as amended (the IRC), imposes limits upon the amount of
compensation that may be used in calculating retirement benefits and the maximum annual benefit
that can be paid to a participant from a tax-qualified benefit plan. These limits affect the
benefit calculation for certain individuals and effectively reduce their benefits under the
Retirement Plan. In order to supplement Retirement Plan benefits, The Connecticut Water Company
has entered into individual supplemental executive retirement agreements with certain executives,
including all of the current and former executive officers named in the Summary Compensation Table.
If the executive meets the age and any applicable service requirements under such an agreement,
the annual retirement benefit payable will be equal to 60% of average annual earnings, as defined
under the Retirement Plan but without the IRC compensation limit, offset by his or her benefit
payable under the Retirement Plan. As of December 31, 2004, the estimated years of credited
service under the Retirement Plan for Messrs. Chiaraluce, Benoit, and ONeill were 13, 9, and 24,
respectively, and for Ms. Westbrook 16 years.
In the case of each of Mr. Chiaraluce and Mr. Benoit, the annual benefit amounts are reduced
by benefits payable under the retirement plan of a prior employer. Mr. Chiaraluces supplemental
executive retirement agreement provides an early retirement benefit if Mr. Chiaraluce retires from
service to the Company at any age between 55 and 65. As of December 31, 2004, Mr. Chiaraluce was
62 years of age and thus had satisfied the age requirement necessary to entitle him to the payment
of this benefit upon his retirement. If he had retired as of such date, Mr. Chiaraluce would have
been entitled to a benefit of approximately $144,800 under his agreement.
In December 2003, the Supplemental Executive Retirement Agreements of Messrs. Benoit,
Chiaraluce, McQueen, ONeill and Ms. Westbrook were amended to include in the definition of
Average Earnings, for individuals retiring on or after age 62, the value of Performance Share
Units, Performance Cash Units, and Restricted Stock awarded to such Executives under the Companys
Performance Stock Program. Also, the agreements between the Company and Mr. Benoit and Ms.
Westbrook have been further amended to permit early retirement upon or after attainment of age 55
and prior to attainment of age 65, to align their agreements with those for Messrs. Chiaraluce,
McQueen, and ONeill.
Mr. McQueen retired as the Companys Senior Vice President, effective December 31, 2004.
Under the Companys Retirement Plan, Mr. McQueen will receive annual retirement benefits of $80,619
per year. Under his supplemental executive retirement agreement with the Company, Mr. McQueen will
receive an additional $10,402 in annual benefits.
Examples of the annual benefit payable under the Retirement Plan and the supplemental
executive retirement agreements, based on a straight life annuity, are presented in the table
below.
17
Employment Contracts, Change-in-Control, and Termination Arrangements
During May 2001, the Company and The Connecticut Water Company entered into Amended and
Restated Employment agreements with Messrs. Chiaraluce, Benoit, and ONeill and Ms. Westbrook. In
December 2004, the Company and The Connecticut Water Company entered into an employment agreement
with Mr. Marston. The intent of the agreements is to ensure continuity in the management of the
Company in the event of a change in control of the Company. The agreements do not become effective
until a change in control occurs (the Effective Date). A Change in Control is deemed to occur
when (i) any person, other than the Company, The Connecticut Water Company or any employee benefit
plan sponsored by the Company or The Connecticut Water Company, becomes the beneficial owner,
directly or indirectly, of twenty (20%) percent or more of the common stock of the Company or The
Connecticut Water Company; (ii) the stockholders of the Company or The Connecticut Water Company
approve (A) any consolidation or merger of the Company or The Connecticut Water Company in which
the Company or The Connecticut Water Company is not the continuing or surviving corporation (other
than a consolidation or merger of the Company or The Connecticut Water Company in which holders of
the common stock of the Company or The Connecticut Water Company have the same proportionate
ownership of common stock of the surviving corporation) or pursuant to which the common stock of
the Company or The Connecticut Water Company would be converted into cash, securities or other
property, or (B) any sale, lease, exchange or other transfer of all or substantially all the assets
of the Company or The Connecticut Water Company; (iii) there is a change in the majority of the
Board of Directors of the Company or The Connecticut Water Company during a 24-month period, or
(iv) the Board adopts a resolution to the effect that a change in control has occurred.
As of the Effective Date, The Connecticut Water Company agrees to employ the executives for a
continuously renewing three-year period commencing on the Effective Date. Compensation under the
agreements is paid by The Connecticut Water Company and consists of (i) base salary, (ii) annual
bonus, (iii) participation in incentive, savings and retirement plans and welfare plans applicable
to executive employees, (iv) fringe benefits, (v) an office and support staff, and (vi) if the
executive is employed on the date the Board approves a consolidation, merger, transfer of assets or
other transaction described in clause (ii) of the definition of Change in Control above, a stay-on
bonus equal to the executives then-current base salary, plus an amount equal to the target bonus
under the Officers Incentive Program for the year in which such date occurs, payable in a lump
sum, provided the executive is employed on the fifth day following the closing of such transaction.
The stay-on bonus is also payable if the executives employment is terminated following such
approval but prior to the fifth day following the closing of such transaction by the employer for
any reason other than for cause, death or attainment of age 65, or if employment is terminated
because of the executives disability or if the executive voluntarily terminates employment prior
to such date for good reason.
18
If the executives employment is terminated for cause or by reason of the executives death or
attainment of age 65 or voluntarily by the executive other than for good reason, the obligations of
The Connecticut Water Company under the agreements cease and the executive forfeits all rights to
receive any compensation or other benefits under the agreement except compensation or benefits
accrued or earned and vested by the executive as of the date of termination, including base salary
through the date of termination and benefits payable under the terms of any qualified or
nonqualified retirement or deferred compensation plans maintained by The Connecticut Water Company;
provided, that if the executives employment is terminated by reason of the executives death, in
addition to the preceding and any other death benefits which may become payable, base salary
continues to be paid at the then current rate for a period of six months to the executives
beneficiary or estate.
If the executives employment is terminated for any reason other than cause, death or
attainment of age 65, or if the executives employment is terminated by reason of the executives
disability, or if the executive voluntarily terminates employment for good reason, the obligations
of The Connecticut Water Company are, in addition to the stay-on bonus described above, payment or
provision of: (i) a lump-sum payment in consideration of the executives covenants regarding
confidential information and non-competition (the Covenants), in an amount determined by an
independent expert to be the reasonable value of such Covenants as the termination date (the
Covenant Value), but in no event greater than the aggregate value of the benefits provided in
subparagraphs (ii) (ix) below (the Termination Benefits); such Termination Benefits are to be
offset by the Covenant Value, provided, however, that the executive may elect to receive any
Termination Benefit that would be so offset, but in such event the Covenant Value will be reduced
by the value of such Termination Benefit; (ii) an amount equal to three times the base salary of
the executive plus three times the target bonus for the executive under the Officers Incentive
Program for the year in which termination occurs, reduced by any amount payable under any
applicable severance plan, payable over the three years following termination; (iii) the value of
the aggregate amounts that would have been contributed on behalf of the executive under any
qualified defined contribution retirement plan(s) then in effect, plus estimated earnings thereon
had the executive continued to participate in such plan(s) for an additional three years; (iv) an
amount equal to the difference between benefits which would have been payable to the executive
under any deferred compensation agreement had the executive continued in the employ of The
Connecticut Water Company for an additional three years and the benefits actually payable; (v)
additional retirement benefits equal to the present value of the difference between the annual
pension benefits that would have been payable to the executive under The Connecticut Water
Companys qualified defined benefit retirement plan and under any nonqualified supplemental
executive retirement plan covering the executive had the executive continued to participate in such
plan(s) for an additional three years and the benefits actually payable; (vi) if the executives
employment is terminated by reason of disability, disability benefits at least equal to the most
favorable of those provided by The Connecticut Water Company or the Company; (vii) all life,
health, disability and similar welfare benefit plans and programs of The Connecticut Water Company
for a period of three years, plus three additional years of credit for purposes of determining
eligibility to participate in any such plan for retirees; (viii) three additional years of all
other perquisites as the executive was receiving at the date of termination; and (ix) outplacement
services for one year.
In addition to the above, the executive will become fully vested in any form of non-cash
compensation previously granted, such as previously-granted stock options, awards of shares of
restricted stock, and performance share awards.
In the event that any payment or benefit received or to be received by the executive under the
agreement would be an excess parachute payment, as defined in IRC Section 280G, and subject to
the federal excise tax imposed by IRC Section 4999, then a gross-up payment will be made to the
executive in the event that the benefits payable to the Executive under the Agreement are subject
to the excise tax on excess parachute payments. The gross-up payment would compensate the
executive for the initial
19
twenty percent (20%) excise tax payable on their excess parachute payments plus the income and
excise taxes then becoming payable on the gross-up payment. As a result of the gross-up payment,
the executive will receive an after-tax amount equal to the amount the executive would have
received under the agreement had no excise tax been payable.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the Compensation Committee) is
responsible for determining executive compensation and administering the Companys 1994 and 2004
Performance Stock Programs.
Executive Compensation Principles
The Companys executive compensation plan is designed to align executive compensation with the
Companys and/or The Connecticut Water Companys strategic business planning, which includes
management initiatives and business financial performance. Through this process the Compensation
Committee has established a program to:
Executive Compensation Program
The Companys Compensation Program in 2004 consisted of two components: base salary and
annual incentive compensation. Stock options are part of the 2004 Performance Stock Program;
however, no stock options were granted in 2004. The annual compensation consists of a base salary
and incentive compensation consists of any Common Stock performance shares, restricted shares, and
cash units previously awarded through the 1994 Amended and Restated Performance Stock Program (the
1994 Program) and currently awarded through the 2004 Performance Stock Program (the 2004
Program). The Compensation Committee recommends a salary range and a level of salary for
executive officers. The Compensation Committee determines the salary or salary range, incentive
compensation and stock options based upon competitive norms from periodic studies of a peer group
of other water companies. Actual salary changes are based upon such norms and upon performance.
Incentive compensation was historically provided through the Companys 1994 Program. (See footnote
1.) The Companys current incentive compensation is provided through the 2004 Program, which is
described in footnote 2.) The Compensation Committee also reviews and approves the participation
of executive officers of The Connecticut Water Company under the 1994 and 2004 Programs and the
granting of stock options under the 2004 Program. The Compensation Committee awards for 2004,
based on the 2004 Strategic Plan and the 1994 Program, were made in December 2003 and vested on
March 11, 2005. The Compensation Committee awards for 2005, based on the 2005 Strategic Plan and
the 2004 Program, were made in
20
December 2004 and will vest in March 2006. The Compensation Committee also approves the award
value of Performance Stock each year as a percentage of base salary and the basis for judging
performance over the following year.
Each year, the Committee determines the maximum incentive award for each participant, which is
generally based on a percentage of the salary range midpoint for the participant. The Committee
also establishes corporate and individual performance measures for the chief executive officer and
other executive officers based upon strategic priorities for the purpose of determining the
percentage of maximum incentive award a participant is entitled to receive. The Committee may also
determine the relative weights to be given to corporate and individual goals.
Performance awards for the years 1999 through 2004 were based on The Connecticut Water
Companys customer value rating and water quality measures, the Companys return on equity, other
service and financial measures, and other objective corporate goals. In 2004, the Company received
a 90% rating on an independent customer service survey; total shareholder return was greater than
comparable indices; water quality complaints per customer were 1.7 for every 1,000 customers; there
were only 6 emergency main breaks per 100 miles of water main; 508 customers are serviced per
equivalent employeea key indicator of productivity; and a record revenue increase in the Companys
services and rentals segment. In addition to these indicators of performance, the executive team
had ten shared strategic goals. Two of the goals could not be achieved within the 2004 year;
however, eight other strategic goals were achieved.
21
Awards granted as annual incentive compensation are payable in restricted shares of the
Companys Common Stock or, at the election of a participant, deferred performance shares or
performance cash units. Any shares awarded are subject to certain transfer restrictions imposed
by the Committee. Each executive has a threshold, target, and maximum incentive amount expressed
as a percentage of the salary range midpoint. In 2004, these amounts were 15 percent, 30 percent,
and 45 percent, respectively, of the salary midpoint for the chief executive officer, and 10
percent, 20 percent and 30 percent, respectively, for the other executive officers. The plan is
intended to pay fully competitive annual cash compensation when performance against goals matches
the target level.
Based on a December 31, 2004 closing price for the Companys Common Stock, the Committee
awarded $79,670 to Mr. Chiaraluce; $34,002 to Mr. Benoit; $29,184 to Mr. McQueen; $29,853 to Mr.
ONeill, and $29,441 to Ms. Westbrook. Mr. Chiaraluce elected to receive his award in performance
stock only; Mr. Benoit, Mr. McQueen, and Mr. ONeill elected to receive their awards split between
cash and performance stock; and Ms. Westbrook elected to receive her award in cash, restricted
stock, and performance stock.
At the end of each fiscal year, the Committee reviews a management report on results versus
goals and meets with the chief executive officer to evaluate the performance of the other executive
officers. The Committee also meets in the absence of the chief executive officer to evaluate his
performance. This performance, expressed as a percentage with
threshold
(80%),
expected
(100%),
and
maximum probable
(120%), is used in the determination of annual restricted stock amounts. The
Committee has the authority to modify the mathematical results of applying the terms of the Program
when the Committee, exercising sound business judgment, deems it prudent to do so.
Also under the Companys 2004 Program, the Committee has the authority to award incentive
stock options and/or non-qualified stock options to executive officers and other key employees.
The ability to grant a variety of awards enables the Committee to respond to changing strategic,
competitive, regulatory, tax, and accounting forces in an efficient manner. Over time and through
the use of the grant of awards, the Committee intends to grant options based on competitive norms
and achieve the objective of having the executive officers and other senior management become
significant shareholders of the Company so that their interests are aligned with the interests of
the Companys other shareholders.
Executive officers may also participate in the Savings Plan (401(k)) of The Connecticut Water
Company, as amended in August 2004, and other benefit plans generally available to all levels of
salaried employees. Also, executive officers may elect to defer compensation under a non-qualified
salary deferral plan.
Certain executive officers may elect to defer compensation under non-qualified deferred
compensation agreements entered into by the Company with each of Mr. Chiaraluce, Mr. Benoit, and
Mr. McQueen and Ms. Westbrook (each, a Deferred Compensation Agreement). Each Deferred
Compensation agreement permits the officer to elect to defer, prior to the beginning of each
calendar year, an amount up to 12% of their annual cash salary. Such salary deferral amounts are
credited to a deferred compensation account maintained by the Company on behalf of the officer.
Amounts deferred to the account are credited with interest paid by the Company on a semi-annual
basis at an interest rate equal to Moodys AAA Corporate Bond Yield Average rate, plus an
additional 1 1/2%- 3%. Compensation deferred under the Deferred Compensation Agreement, plus all
accrued interest, shall be paid to each
22
officer (or to the officers designated beneficiary) upon termination of employment by the
Company either in the form of an annual annuity payment, or a lump sum payment if determined by the
Committee. If the officer is terminated for cause as defined in the Deferred Compensation
Agreement, the officer shall be entitled only to a return of amount deferred without payment of
accrued interest.
Chief Executive Officer Compensation
The Compensation Committee determined the compensation for 2004 of Mr. Chiaraluce, the Chief
Executive Officer (CEO), based upon a number of factors and criteria, including a review of the
total compensation package of chief executive officers from a peer group of publicly-traded water
utilities. On a regular basis, the Committee hires an outside consultant to prepare comparisons of
executive compensation at companies with similar market value to the Companys. The Compensation
Committee reviews the CEOs performance in December, following the Boards Strategic Planning
Committees review of the results of the current years strategic initiatives. The Committee
noted the continued significant and steady increases in overall Company performance, such as total
shareholder return and customer satisfaction, during 2004 and Mr. Chiaraluces 14 years of
successful leadership as the Companys President.
In addition to overall Company performance, Mr. Chiaraluce, along with his executive team,
satisfied 8 out of 10 strategic goals for 2004 related to cost reduction, growth of the contract
business, and ensuring future water supplies. Two of the goals were not achieved as planned within
the 2004 timeframe. As a result, Mr. Chiaraluce was awarded 60% of the Common Stock allocated to
him under the 1994 Performance Stock Program in 2004, or 2,954 of 4,935 shares, originally
allocated based upon his actual performance as measured against pre-established objectives
identified by the Committee. Mr. Chiaraluce did not receive stock option grants in 2004.
COMPENSATION COMMITTEE
Robert F. Neal, Chairman
23
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder return for each of the
years 1999 2004 on the Companys Common Stock, based on the market price of the Common Stock and
assuming reinvestment of dividends, with the cumulative total shareholder return of companies in
the Standard & Poors 500 Index and the Standard & Poors 500 Utilities Index.
(Source: Standard & Poors Institutional Market Service)
Other Matters
The Board of Directors knows of no other matters which may be presented for consideration at
the meeting. However, if any other matters properly come before the meeting, the persons named in
the enclosed proxy will vote in their discretion on such matters.
REQUIREMENTS AND DEADLINES FOR PROXY PROPOSALS, NOMINATION OF DIRECTORS, AND OTHER BUSINESS OF
SHAREHOLDERS
For business to be properly brought before an annual meeting by a shareholder, the business
must be an appropriate matter to be voted by the shareholders at an annual meeting and the
shareholder must have given proper and timely notice in writing to the Secretary of the Company.
To be timely, a shareholders notice must be delivered to or mailed and received by the Secretary
of the Company at the Main Offices of the Company, 93 West Main Street, Clinton, CT 06413, no
later than the close of business on a day which is not less than 120 days prior to the anniversary
date of the immediately preceding annual meeting, which date for purposes of the 2006 Annual
Meeting of Shareholders is
24
January 11, 2006. A shareholders notice to the Secretary must set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) a brief description of the business
desired to be brought before the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the Companys books, of the shareholder
proposing such business, (c) the class and number of shares of the Company which are beneficially
owned by the shareholder and (d) any material interest of the shareholder in such business.
In addition, shareholder proposals intended to be presented at the Annual Meeting of
Shareholders in 2006 must be received by the Company no later than November 24, 2005 in order to be
considered for inclusion in the Companys proxy statement and form of proxy relating to the 2006
Annual Meeting of Shareholders.
March 31, 2005
The Company is subject to the informational requirements of the Securities Exchange Act of 1934 and
files an Annual Report on Form 10-K with the Securities and Exchange Commission. Additional copies
of the 2004 Annual Report on Form 10-K to be filed by the Company, including the financial
statements and schedules, but without exhibits, will be mailed to any shareholder upon written
request without charge. The exhibits are obtainable from the Company upon payment of the
reasonable cost of copying such exhibits. Shareholders can request this information by phone at
1-800-428-3985, ext. 3015, by e-mail @mdiacri@ctwater.com, or by mail to Michele G. DiAcri,
Corporate Secretary, Connecticut Water Service, Inc., 93 West Main Street, Clinton, Connecticut
06413.
25
Appendix A
CONNECTICUT WATER SERVICE, INC.
Charter of the Audit Committee of the Board of Directors
I. Policy of Audit Committee
The primary function of the Audit Committee is to assist the Connecticut Water Service, Inc.
(the Company) Board of Directors in fulfilling its oversight responsibilities to the shareholders,
the investment community, and other constituencies by reviewing the financial reports and other
financial information provided by the Company to the public; the Companys system of internal
controls regarding finance, accounting, legal compliance and ethics that management and the Board
of Directors have established; and the Companys accounting and financial reporting processes,
generally. Consistent with this function, the Audit Committee should encourage continuous
improvement of, and should foster adherence to, the Companys policies, procedures and practices at
all levels. The Audit Committees primary duties and responsibilities are to:
The Committee has the authority to act on any matter, including reports of Company audit
misconduct, brought to its attention with full access to all books, records, facilities, and
personnel of the Company. (See Exhibit A, excerpt from Company Code of Conduct.)
The Committee has the authority to retain outside counsel or other experts in the exercise of
its responsibilities. The Company grants to the Committee the appropriate funding, as determined
by the Committee, for compensating such advisors as well as the independent auditing firm for its
audit services.
II. Composition of the Committee
The Audit Committee shall be comprised of three or more directors as determined by the
Board, each of whom shall (a) satisfy the independence requirements of the Nasdaq Stock Market,
Inc., the Securities Exchange Act of 1934, and the rules and regulations of the Securities and
Exchange Commission, and (b) be free from any relationship which, in the opinion of the Board of
Directors, would interfere with the exercise of his or her independent judgment as a member of the
Committee. All members of the Committee must be able to read and understand fundamental financial
statements at the time of their appointment to the Committee. To the extent reasonably feasible,
at least one member
A-1
of the Audit Committee shall qualify as a financial expert as defined by the
SEC, as determined by the Board of Directors. If the Committee does not have such a financial
expert, the Company must disclose in its periodic reports the reason why not.
The members of the Audit Committee shall be elected by the Board of Directors at the annual
organizational meeting of the Board and shall serve until the next annual organizational meeting or
until their successors shall be duly elected and qualified. Unless a Chair is elected by the full
Board, the members of the Committee may designate a Chair by majority vote of the full Committee
membership.
III. Meetings
The Audit Committee shall meet at least two times annually, and shall also meet not less than
two days prior to the date on which the Company proposes to issue a press release with its
quarterly or annual earnings information. As part of its responsibilities to foster open
communication, the Committee should meet at least annually with management and with the independent
auditors in separate executive sessions to discuss any matters that the Committee or each of these
groups believe should be discussed privately.
IV. Responsibilities and Duties
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
2. Issue an Audit Committee report in the annual proxy statement indicating:
A-2
Independent Auditors
A-3
Financial Reporting Processes
Process Improvement
Ethical and Legal Compliance
A-4
Limitation of Audit Committees Role
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not
the duty of the Audit Committee to plan or conduct audits or to determine that the Companys
financial statements and disclosures are complete and accurate and are in accordance with generally
accepted accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
Exhibit A
Excerpt from the Companys Code of Conduct
Code of Conduct
Violations and Company Audit Misconduct
Each employee has a responsibility to report any activity which appears to violate laws,
regulations (including misconduct related to the preparation, issuance, and disclosure of financial
information), policies, and this Code of Conduct.
If you report a violation, please provide the time, location, names of people involved, and other
details so that either the Human Resources Department or the Chair of the Audit Committee can
investigate. You can report anonymouslyyou are not required to provide your name. You may call
or send a confidential note to
A-5
DIRECTIONS
IF YOU PLAN TO ATTEND THE MEETING,
From HARTFORD:
Take 1-84 West to Exit 16. Take a Right at the end of the ramp. The Hotel will
be on the right just past the Mobil Station.
From NEW HAVEN:
Route 34 to Route 8 North. Proceed to Exit 21. Take a left onto Route 67 to
Route 188 North. Follow Route 188 for 3 Miles. The Hotel will be on the right just past the
Mobil Station. OR Take Route 63 to Route 67 through Oxford into Southbury. Take a Right onto
Route 188. Follow for 3 Miles. The Hotel will be on the right just past the Mobil Station.
From
CLINTON AND SHORELINE AREA:
Take Route 9 North to 691 West
to I-84 West to Exit 16. Take a right at the end
of the ramp. The Hotel will be on the right just past the Mobil Station.
From BOSTON:
Take the Massachusetts Turnpike to 1-84 West through Hartford to Exit 16. Take a
right at the end of the ramp. The Hotel will be on the right just past the Mobil Station.
From STAMFORD AND GREENWICH:
Take Merritt Parkway East to Route 7. Proceed North on Route 7 to
1-84 East to Exit 16. Take a right at the end of the ramp. The Hotel will be on the right just past
the Mobil Station. OR Take 1-95 North to Route 8 to 1-84 West to Exit 16. Take a right at the end
of the Ramp. The Hotel will be on the right just past the Mobil Station.
From THE WESTCHESTER AREA:
Take 1-684 North to 1-84 East to Exit 16. Take a right at the end of
the ramp. The Hotel will be on the right just past the Mobil Station.
Hilton Southbury
* * *
IF YOU WISH TO PROVIDE YOUR
INSTRUCTIONS TO VOTE BY TELEPHONE OR INTERNET, PLEASE READ THE INSTRUCTIONS
BELOW
* * *
é
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VOTING BY MAIL
é
PROXY VOTING INSTRUCTIONS
Stockholders of record have three ways to
vote:
Please note that the last vote received,
whether by telephone, Internet or by mail, will be the vote counted.
INSTRUCTION CARD
The
undersigned shareholder of Connecticut Water Service, Inc. hereby appoints
Marshall T. Chiaraluce, David C. Benoit, Michele G. DiAcri, and Thomas R.
Marston, or any one of them, attorneys or proxies for the undersigned, with
power of substitution, to act, and to vote, as designated herein, with the same
force and effect as the undersigned, all shares of the Companys Common Stock and Preferred A
Stock standing in the name of the undersigned at the Annual Meeting of Shareholders of
Connecticut Water Service, Inc. to be held at the Hilton Southbury, 1284 Strongtown Road,
Southbury, Connecticut, May 11, 2005, 2:00 PM, and at any adjournment thereof.
PLEASE COMPLETE, DATE, SIGN, AND MAIL
THIS INSTRUCTION CARD PROMPTLY IN THE
(Continued, and to be marked, dated and signed, on the
other side)
ê
FOLD AND DETACH HERE
ê
YOUR INSTRUCTIONS TO VOTE ARE
IMPORTANT!
Proxy Materials are available on-line
at:
You can provide your instructions to
vote in one of three ways:
or
PLEASE SEE REVERSE SIDE FOR VOTING
INSTRUCTIONS
* * *
IF YOU WISH TO PROVIDE YOUR
INSTRUCTIONS TO VOTE BY TELEPHONE OR INTERNET, PLEASE READ THE INSTRUCTIONS
BELOW
* * *
é
FOLD AND DETACH HERE IF YOU ARE
VOTING BY MAIL
é
PROXY VOTING INSTRUCTIONS
Stockholders of record have three ways to
vote:
Please note that the last vote received,
whether by telephone, Internet or by mail, will be the vote counted.
ON-LINE PROXY MATERIALS :
Access at
https://www.proxyvotenow.com/ctw
Proxy for Annual Meeting of
Shareholders
SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The
undersigned shareholder of Connecticut Water Service, Inc. hereby appoints
Marshall T. Chiaraluce, David C. Benoit, Michele G. DiAcri, and Thomas R.
Marston, or any one of them, attorneys or proxies for the undersigned, with
power of substitution, to act, and to vote, as designated herein, with the same
force and effect as the undersigned, all shares of the Companys Common Stock
and Preferred A Stock standing in the name of the undersigned at the Annual Meeting of Shareholders of
Connecticut Water Service, Inc. to be held at the Hilton Southbury,
1284 Strongtown Road, Southbury, Connecticut,
May 11, 2005, at 2:00 pm, and at any adjournment thereof.
é
Detach above card, sign, date and
mail in postage paid envelope provided.
é
CONNECTICUT WATER SERVICE, INC.
PLEASE ACT PROMPTLY
IF YOUR ADDRESS HAS CHANGED, PLEASE
CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE
PROXY IN THE ENVELOPE PROVIDED.
Number of securities
remaining available for
Number of securities to
Weighted average
issuance under equity
be issued upon exercise
exercise price of
compensation plans
of outstanding options,
outstanding options,
(excluding securities
Plan category
warrants and rights
warrants, and rights
reflected in column (a))
310,664
(2)
$
22.85
692,333
-0-
N/A
652,713
310,664
$
22.85
1,345,046
(4)
(1)
Includes the Companys 1994 Performance Stock Program, amended and restated as of April
26, 2002 and the 2004 Performance Stock Program, approved by shareholders on April 23,
2004.
(2)
Includes 7,279 performance shares which are excluded from the weighted average exercise
price calculation.
(3)
Includes the Dividend Reinvestment and Common Stock Purchase Plan (DRIP), amended and
restated as of November 15, 2001. Under the plan, customers and employees of the
Company and holders of Common Stock who elect to participate may automatically reinvest all
or specified percentages of their dividends in additional shares of Common Stock and may
also make optional cash payments of up to $1,000 per month to purchase additional shares of
Common Stock. The Company may issue shares directly to the Plans agent in order to meet
the requirements of the plan, or may direct the agent administering the Plan on the
Companys behalf to buy the shares on the open market at its discretion. 1,500,00 shares
have been registered with the Securities and Exchange Commission for that purpose. Under
the Plan, 847,287 shares have been issued by the Company as of December 31, 2004. From late
1996 to January 31, 2004, the Plans agent purchased shares on the open market. Since
February 2004, the Plans agent credits Plan participants with shares issued by the Company
from the DRIP reserve.
(4)
Revised to reflect all shares previously reserved by the Companys Board of Directors
and shares resulting from the Companys 2001 3-for-2 stock split.
Table of Contents
Annual Compensation
Long-Term Compensation
Other
Restricted
All
Annual
Perform-
Securities
Cash
Other
Compen-
ance Share
Underlying
Units
Comp-
Name & Principal
Bonus
sation
Awards ($)
Options
($)
ensation
Position
Year
Salary ($)
($)
($) (1)
(2)
(#)(3)
(2)
(4)
2004
331,100
(5)
-0-
4,100
76,423
-0-
-0-
5,836
2003
323,000
(5)
-0-
4,000
88,736
10,763
-0-
4,168
2002
296,550
(5)
-0-
4,000
123,493
11,718
-0-
5,255
2004
174,200
-0-
3,484
10,105
-0-
23,268
6,065
2003
170,000
-0-
3,400
11,938
5,209
43,859
4,374
2002
168,000
-0-
3,360
14,148
5,671
21,500
4,411
2004
127,147
-0-
2543
3,046
-0-
12,750
-0-
2003
114,075
-0-
2,282
3,595
-0-
12,302
-0-
2002
109,700
-0-
2,194
4,264
-0-
17,269
-0-
2004
167,100
(6)
-0-
3,342
27,796
-0-
5,504
6,521
2003
163,000
-0-
3,260
26,320
4,593
24,172
4,810
2002
156,500
-0-
3,130
31,219
5,001
4,993
5,977
2004
166,600
-0-
3,332
11,146
-0-
18,013
-0-
2003
162,500
-0-
2,625
13,146
4,593
36,258
-0-
2002
157,000
-0-
3,140
15,588
5,001
16,616
-0-
2004
174,200
-0-
3,484
17,823
-0-
10,508
1,681
2003
170,000
-0-
3,400
32,218
4,593
14,503
1,079
2002
159,000
-0-
3,180
18,708
5,001
9,628
777
(1)
Employer matching contributions under The Savings Plan of the Connecticut
Water Company (401(k)).
(2)
The values shown in the table above are based on shares actually earned in the
given year, valued at the closing market price of the Companys common stock on the date
vested: shares earned in 2004 vested on March 11, 2005, shares earned in 2003 vested on
February 11, 2004; and shares earned in 2002 vested on February 12, 2003. The value of the
full number of shares of restricted stock, performance shares, and cash units initially
allocated, but unearned, to Messrs. Chiaraluce, Benoit, Marston, McQueen, and ONeill and
Ms. Westbrook was $140,695, $56,742, $28,609, $50,036, $50,036, and $50,036 in 2004;
$135,937, $54,824, $27,641, $48,344, $48,344, and $48,344 respectively in 2003; $115,853,
$52,970, $26,708 $46,709, $46,709, and $46,709 respectively in 2002. Pursuant to the
Companys Amended and Restated Performance Stock Program, Messrs. Chiaraluce, Benoit, and
McQueen, and ONeill, and Ms. Westbrook elected to defer 100%, 20%, 50%, 25% and 50%
respectively for 2004, 2003,
and 2002 awards. At December 31, 2004 and prior to partial vesting (due to meeting some but
Table of Contents
not all performance goals) on March 11, 2005, Mr. Chiaraluce owned 4,935 shares of
restricted performance stock with an aggregate value of $133,097; Mr. Benoit owned 398
shares of restricted performance stock with an aggregate value of $10,734; Mr. Marston owned
120 shares of restricted performance stock with an aggregate value of $3,236; Mr. McQueen
owned 878 shares of restricted performance stock with an aggregate value of $23,680; Mr.
ONeill owned 439 shares of restricted performance stock with an aggregate value of $11,840;
and Ms. Westbrook owned 527 shares of performance stock and 175 shares of restricted stock
with an aggregate value of $18,933. Dividends are paid on restricted stock.
(3)
The amounts shown represent stock options granted in each listed year. No stock
options were
granted to any of the Companys named executive officers in 2004.
(4)
The amounts shown in the table represent the above-market portion of the interest
accrued on the balances of the deferred compensation accounts maintained by the Company for
each of Messrs. Chiaraluce, Benoit, and McQueen and Ms. Westbrook pursuant to the
non-qualified salary deferral agreements entered into by the Company and each of such
officers.
(5)
This amount includes Mr. Chiaraluces fees as a director of the Company.
(6)
This amount includes Mr. McQueens 2005 $8,000 consulting fee paid on 12/31/04.
Mr. McQueen retired on 12/31/04.
Value of
Number of Securities
Unexercised In-
Underlying
The Money Options At
Shares
Unexercised Options
Fiscal Year-End
Acquired
Value
at Fiscal Year End (#)
($) (1)
on
Realized
Exercisable/
Exercisable/
Name
Exercise
($)
Unexercisable
Unexercisable
-0-
-0-
73,979 / 16,234
459,421 / 4,394
-0-
-0-
26,085 / 8,005
133,371 / 2,126
-0-
-0-
11,758 / 4,844
49,995/1,286
-0-
-0-
17,134 / 7,059
72,816/1,875
-0-
-0-
20,708 / 7,059
90,770/1,875
-0-
-0-
29,358 / 7,059
152,484 / 1,875
(1)
Based on the average of the high and low fair market value of the Companys Common Stock as
of December 31, 2004 ($26.53), less the exercise price of the option.
Table of Contents
Table of Contents
Highest Average Annual Compensation
During 60 Consecutive Months
Annual Benefit
$60,000
125,000
75,000
160,000
96,000
170,000
102,000
200,000
120,000
225,000
135,000
250,000
150,000
275,000
165,000
300,000
180,000
Table of Contents
Table of Contents
Attract and retain key executives critical to the long-term success of the Company.
Reward executives for the accomplishment of strategic goals which reflect customer service and satisfaction as well as the
enhancement of shareholder value.
Integrate compensation programs with both The Connecticut Water Companys annual performance review and the Companys
and/or The Connecticut Water Companys strategic planning and measuring processes.
Support a performance-oriented environment that rewards performance with respect to overall performance goals and
performance on individual goals for each participant in the plan.
Table of Contents
(1)
The 1994 Performance Stock Program, Amended and Restated as of April 26, 2002, provides for
an aggregate maximum of up to 700,000 shares of Common Stock of the Company to be issued as
either stock option grants or awards of restricted stock to eligible employees. An award of a
share of restricted stock is an award to a participant of a share of the Common Stock of the
Company generally conditioned upon the attainment of performance goals established by the
Compensation Committee for the performance period to which the award relates and the continued
employment of the participant with the Company or any majority-owned subsidiary of the Company
through the end of the performance period. During the performance period, the
participant has all of the rights of a shareholder of the Company, including the right to
receive dividends, except that the participant does not have custody of the shares of Common
Stock nor the right to transfer ownership of the shares during the performance period.
Commencing with 1997 awards, the 1994 Program was amended to permit participants to defer
income taxation of all or a portion of such restricted stock awards by electing instead to
receive performance shares at the end of a chosen deferral period. Until the end of the
deferral period, a participant holding performance shares has no rights as a shareholder of
the Company. However, dividend equivalents are credited to such participant as additional
performance shares. Since April 23, 1999, the 1994 Program authorized the Compensation
Committee to also issue stock options to eligible employees. To date, options covering
345,285 shares have been issued under the 1994 Program. The 1994 Program terminated on April
22, 2004 and no future awards will be made under the 1994 Program.
(2)
The 2004 Performance Stock Program, approved by shareholders on April 23, 2004, provides for
an aggregate maximum of up to 700,000 shares of Common Stock of the Company to be issued as
either stock option grants or awards of restricted stock to eligible employees. An award of a
share of restricted stock is an award to a participant of a share of the Common Stock of the
Company generally conditioned upon the attainment of performance goals established by the
Compensation Committee for the performance period to which the award relates and the continued
employment of the participant with the Company or any majority-owned subsidiary of the Company
through the end of the performance period. During the performance period, the
participant has all of the rights of a shareholder of the Company, including the right to
receive dividends, except that the participant does not have custody of the shares of Common
Stock nor the right to transfer ownership of the shares during the performance period. The
2004 Program permits participants to defer income taxation of all or a portion of such
restricted stock awards by electing instead to receive performance shares at the end of a
Table of Contents
chosen deferral period. Until the end of the deferral period, a participant holding performance
shares has no rights as a shareholder of the Company. However, dividend equivalents are
credited to such participant as additional performance shares. The 2004 Program authorizes the
Compensation Committee to also issue stock options to eligible employees. To date, no stock
options have been issued under the 2004 Program.
Table of Contents
Marcia L. Hincks
David A. Lentini
Donald B. Wilbur
Table of Contents
1999
2000
2001
2002
2003
2004
$
100
99.76
149.28
131.32
148.32
146.58
$
100
90.90
80.09
62.39
80.20
89.03
$
100
157.19
109.34
76.54
96.64
120.11
Table of Contents
Michele G. DiAcri
Corporate Secretary
Table of Contents
§
Serve as an independent and objective party to monitor the Companys
financial reporting process and internal control system;
§
Appoint, compensate, and oversee the work of any registered independent public auditing
firm (the independent auditors) employed by the Company; and
§
Assure that an open avenue of communication among the independent auditors, financial
and senior management, and the Board of Directors exists.
Table of Contents
1.
Review this Charter at least annually
,
reassess the adequacy of this charter as a result of
the adoption of new laws or regulations, and recommend any proposed changes to the Board of
Directors.
a)
that the Committee has reviewed and discussed the financial statements with
management;
b)
that the Committee has discussed the items required by Statement of Auditing
Standards (SAS 61) with the independent auditors;
c)
that the Committee has received the written report from its independent
auditors required by Independent Standards Board (ISB)1 and has discussed the
auditors independence; and
d)
that, based on the items in a.)-c), the Committee recommended to the
Board of Directors of Connecticut Water Service, Inc., that the audited
financial statements be included in the Annual Report or Form 10-K of Connecticut Water Service,
Inc.
3.
Disclose in the annual proxy statement of Connecticut Water Service, Inc. whether
the Committee has a charter and include a copy of the charter at
least once every
three years in the annual proxy statement.
Table of Contents
4.
Disclose in the annual proxy statement of Connecticut Water Service, Inc. the independence of
the members of the Committee.
5.
Discuss the results of the quarterly review and any other matters required to be
communicated to the Committee by the independent auditors under generally
accepted accounting standards. The Chair may represent the Committee for purposes
of this review.
6.
Review the interim financial statements with management and the independent
auditors as part of the certification of the CEO/CFO of such financial statements and
review the filing of each of the Companys quarterly reports on Form 10-Q.
7.
Review with management and the independent auditors the Companys annual financial statements
included in the Annual Report of Connecticut Water
Service, Inc., the Form 10-K, and the proxy statements, including any certification,
report, opinion, or review rendered by the independent auditors. The review includes
the quality and acceptability of the accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the financial statements.
8.
Review with the independent auditors and management (a) the adequacy and effectiveness of
internal controls as required by Section 404 of the Sarbanes Oxley Act (including any
significant deficiencies and significant changes in internal controls reported to the Audit
Committee by the independent auditors or management),
accounting practices, and disclosure controls and procedures (and management reports thereon)
of the Company and its subsidiaries; and (b) current accounting trends and developments, and
take such action as deemed appropriate.
9.
Review the procedures for the receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls, or auditing matters that may be
submitted by any party to the Company.
10.
Review its effectiveness at least annually.
11.
Appoint, compensate, and oversee the work of any independent auditors
employed by the Company (including resolution of disagreements between
management and the auditors regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work. The Companys independent auditors shall report directly
to the Audit Committee. The Audit Committee shall approve in advance any audit services, fees, and
any permissible non-audit service provided by the independent auditors.
12.
Recommend to the Board of Directors the selection of the independent auditors, considering
independence, effectiveness and fees to be paid to the independent auditors. On an annual
basis, the Committee should review and discuss with the independent auditors all significant
relationships the auditors may have with the Company to determine the auditors independence,
and obtain the written report required by ISB 1.
Table of Contents
13.
Review the performance of the independent auditors and approve any proposed
discharge of the independent auditors when circumstances warrant
14.
Review audit partner rotation and concurring partner rotation to ensure that the audit
partner having primary responsibility for the Companys audit rotates his/her position every
five years.
15.
Periodically, and at least annually, consult with the independent auditors, out of the
presence of management, about internal controls and the completeness
and accuracy
of the Companys financial statements.
16.
In consultation with the independent auditors, review the integrity of the Companys
financial reporting processes, both internal and external.
17.
Consider the independent auditors judgments about the quality and appropriateness of the
Companys accounting principles as applied in its financial reporting.
18.
Consider and approve, if appropriate, major changes to the Companys auditing and accounting
principles and practices as suggested by the independent auditors or management.
19.
Establish regular separate systems of reporting to the Audit Committee by each of management,
the independent auditors and consultants (if applicable) regarding any significant judgments
made in managements preparation of the financial statements and the view of each as to
appropriateness of such judgments.
20.
Following completion of the annual audit, review separately with each of management and the
independent auditors any significant difficulties encountered during the course of the audit,
including any restrictions on the scope of work or access to required information.
21.
Review any significant disagreement among management and the independent auditors in
connection with the preparation of the financial statements.
22.
Review with the independent auditors and management the extent to which changes or
improvements in financial or accounting practices, as approved by the Audit Committee, have
been implemented. (This review should be conducted at an appropriate time subsequent to
implementation of changes or improvements, as decided by the Committee.)
23.
Review with the Companys counsel legal matters, including legal compliance, corporate
securities trading policies, or any other matter that could have a significant impact on the
Companys financial statements.
Table of Contents
Michele DiAcri
Ethics and Corporate Compliance Officer
Connecticut Water Service, Inc.
93 West Main Street
Clinton, CT 06413
1-800-428-3985, ext. 3015
Table of Contents
Connecticut Water Service, Inc.
Annual Meeting of Shareholders
Wednesday, May 11, 2005
Meeting at 2:00 PM
§
Doors Open at 1:30 PM
PLEASE CALL 1.800.428.3985, Ext. 3012
1284 Strongtown Road
§
Southbury, Connecticut 06488
§
Tel: 203.598.7600
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CONNECTICUT WATER SERVICE, INC.
Wednesday, May 11, 2005
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