UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
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Annual Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
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for the fiscal year ended December 31, 2005
or
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o
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Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
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for the transition period from to
Commission File Number 0-8084
Connecticut Water Service, Inc.
(Exact name of registrant as specified in its charter)
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Connecticut
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06-0739839
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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93 West Main Street, Clinton, CT
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06413
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(Address of principal executive office)
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(Zip Code)
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Registrants telephone number, including area code
(860) 669-8636
Registrants website: www.ctwater.com
Securities registered pursuant to Section 12 (b) of the Act:
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Title of each Class
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Name of each exchange on which registered
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None
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Not applicable
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Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, without par value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
Yes
o
No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Exchange Act.
Yes
o
No
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding twelve (12)
months (or for such shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes
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No
o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K, (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
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Non-accelerated filer
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As of
June 30, 2005, the aggregate market value of the registrants voting Common Stock held
by non-affiliates of the registrant was $200,641,536 based on the closing sale price as reported on
the NASDAQ.
Number
of shares of Common Stock, no par value, outstanding as of March 1, 2006 was 8,127,276,
excluding 55,536 common stock equivalent shares.
DOCUMENTS INCORPORATED BY REFERENCE
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Part of Form 10-K Into Which
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Document
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Document is Incorporated
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Definitive Proxy Statement, dated
on or about April 7, 2006, for
Annual Meeting of Shareholders to be held on May 11, 2006.
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Part III
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INDEX TO ANNUAL REPORT ON FORM 10-K
Year Ended December 31, 2005
3
This Form 10-K contains forward-looking statements as defined by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements should be read in conjunction with the
risk factors described in Item 1A below and the cautionary statements included in this Form 10-K in
Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations under
the heading Forward Looking Information.
PART I
ITEM 1. BUSINESS
The Company
The Registrant, Connecticut Water Service, Inc. (referred to as the Company, we or our) was
organized in 1956. Connecticut Water Service, Inc. is a non-operating holding company, whose income
is derived from the earnings of its ten wholly-owned subsidiary companies. In 2005, approximately
88% of the Companys earnings from continuing operations were attributable to water activities
carried out within its three Connecticut regulated water companies: The Connecticut Water Company
(Connecticut Water), The Crystal Water Company of Danielson (Crystal), and The Unionville Water
Company (Unionville). These three companies supply water to 81,763 customers in 41 towns
throughout Connecticut. Each of these companies is subject to state regulation regarding financial
issues, rates, and operating issues, and to various other state and federal regulatory agencies
concerning water quality and environmental standards. In addition to its regulated utilities, the
Company owns seven unregulated companies: Chester Realty, Inc., a real estate company in
Connecticut; New England Water Utility Services, Inc., which provides contract water and sewer
operations and other water related services; Connecticut Water Emergency Services, Inc., a provider
of drinking water by tanker truck; Crystal Water Utilities Corporation, a holding company which
owns Crystal Water and three small rental properties; BARLACO Inc. (BARLACO), a real estate company
in Massachusetts; The Barnstable Holding Company, a holding company which owns Barnstable Water and
BARLACO and The Barnstable Water Company (Barnstable Water), a company that was a public service
company until its assets were sold to the Town of Barnstable in 2005. As a result of the sale of
the assets of Barnstable Water, results of its operations have been classified as discontinued
operations. In 2005, these unregulated companies, in conjunction with the regulated water
companies, contributed the remaining 12% of the Companys earnings from continuing operations
through real estate transactions as well as services and rentals.
Our mission is to provide high quality water service to our customers at a fair return to our
stockholders while maintaining a work environment that attracts, retains and motivates our
employees to achieve a high level of performance.
Our corporate headquarters are located at 93 West Main Street, Clinton, Connecticut 06413. Our
telephone number is 860.669.8636, and our Internet address is www.ctwater.com.
At this time, the Company has applied in February 2006 (Docket 06-02-02) to the Connecticut
Department of Public Utility Control (DPUC), to merge all of its Connecticut-based, regulated
utilities with and into Connecticut Water. On March 20, 2006, the DPUC issued a Draft Decision
which would approve this merger. If, and when, these combinations are completed, the resulting
entity, Connecticut Water, would consist of the current subsidiaries Crystal, Unionville, and
Connecticut Water. It is expected that future rate relief applications would propose rate
4
equalization steps, which, if approved would result, over time, in equalized rates for the
Companys customers in Connecticut. The Company believes it is likely that it will apply for a
rate increase for Connecticut Water, after the completion of the merger, during the summer of 2006.
The Companys annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, proxy statements and all amendments to these documents will be made available free of charge
through the INVESTOR INFO (SEC Filings) section of the Companys Internet website
(http://www.ctwater.com) as soon as practicable after such material is electronically filed with,
or furnished to, the Securities and Exchange Commission (the SEC). The following documents are also
available through the CORPORATE GOVERNANCE section of our website:
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Code of Conduct Board of Directors
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Code of Conduct Employees
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Audit Committee Charter
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Compensation Committee Charter
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Corporate Governance Committee Charter
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Copies of each of the Companys SEC filings (without exhibits) and corporate governance documents
mentioned above will also be mailed to investors, upon request by contacting the Companys
Corporate Secretary at Connecticut Water, 93 West Main Street, Clinton, CT 06413.
Our Regulated Business
Our business is subject to seasonal fluctuations and weather variations. The demand for water is
generally greater during the warmer months than the cooler months due to customers high water
consumption related to cooling systems and various outdoor uses such as private and public swimming
pools and lawn sprinklers. Demand will vary with rainfall and temperature levels from year to year
and season to season, particularly during the warmer months.
In general, the profitability of the water utility industry is largely dependent on the timeliness
and adequacy of rates allowed by utility regulatory commissions. In addition, profitability is
affected by numerous factors over which we have little or no control, such as costs to comply with
security, environmental, and water quality regulations. Inflation and other factors also impact
costs for construction, materials and personnel related expenses.
Costs to comply
with environmental and water quality regulations are substantial. Since the 1974
enactment of the Safe Drinking Water Act, we have spent approximately
$55,823,000 in constructing
facilities and conducting aquifer mapping necessary to comply with the requirements of the Safe
Drinking Water Act, and other federal and state regulations, of which $6,109,000 was expended in
the last five years. We are presently in compliance with current regulations, but the regulations
are subject to change at any time. The costs to comply with future changes in state or federal
regulations, which could require us to modify existing filtration facilities and/or construct new
ones, or to replace any reduction of the safe yield from any of our current sources of supply,
could be substantial.
5
Our water companies derive their rights and franchises to operate from special state acts that are
subject to alteration, amendment or repeal and do not grant us exclusive rights to our service
areas. Our franchises are free from burdensome restrictions, are unlimited as to time, and
authorize us to sell potable water in all the towns we now serve. There is the possibility that
the State of Connecticut could attempt to revoke our franchises and allow a governmental entity to
take over some or all of our systems. While we would vigorously oppose any such attempts, from
time to time such legislation is contemplated.
The rates we charge our water customers are established under the jurisdiction of and are approved
by a state regulatory agency. It is our policy to seek rate relief as necessary to enable us to
achieve an adequate rate of return. The following table shows information related to each of our
water companies most recent general rate filing.
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Year of Last
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Allowed
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Allowed
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Rate
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Return on
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Return on
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Decision
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Equity
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Rate Base
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Connecticut Water
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1991
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12.7
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%
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10.74
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%
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Crystal
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2005
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10.0
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%
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7.55
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%
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Unionville
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1999
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**
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12.35
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%
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N/A
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*
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*
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Unionvilles rates were based on a return on equity methodology, not a rate base
methodology.
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**
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Beginning mid-2003, Unionville began imposing a 30% surcharge on its customers water bills to
recover financing and operating costs related to the construction and use of a water
interconnection with a neighboring water supplier. Annually the surcharge is subject to a
retroactive refund to ratepayers if total revenue for Unionville exceeds certain stipulated
amounts. To date, we have not been required to provide any such refunds.
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Our Water Systems
Our water infrastructure consists of 28 noncontiguous water systems in the State of Connecticut.
Our system, in total, consists of approximately 1,300 miles of water main and reservoir storage
capacity of 7.0 billion gallons. The safe, dependable yield from our 119 active wells and 18
reservoirs is approximately 49 million gallons per day. Water sources vary among the individual
systems, but overall approximately 35% of the total dependable yield
comes from reservoirs and 65%
from wells.
We supply water, and in most cases, fire protection to all or portions of 41 towns in Connecticut.
The following table lists the customer count, operating revenues and customer water consumption for
each of our water companies as of December 31, 2005.
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Number
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Water
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Customer Water
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of
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Revenues
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Consumption
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Water Company
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customers
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($000s)
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(millions of gallons)
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Connecticut Water
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70,714
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$
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41,537
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6,042
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Crystal
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5,050
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2,778
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542
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Unionville
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5,999
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3,138
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692
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Total
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81,763
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$
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47,453
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7,276
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6
The following table breaks down the above total figures by customer class:
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Water
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Customer Water
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Number of
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Revenues
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Consumption
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Customer Class
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customers
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($000s)
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(millions of gallons)
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Residential
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72,968
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$
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29,980
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5,260
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Commercial
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5,333
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5,619
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1,188
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Industrial
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428
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1,538
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423
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Public Authority
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580
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1,625
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405
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Fire Protection
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1,526
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8,267
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0
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Other (including
non-metered accounts)
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928
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424
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0
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Total
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81,763
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$
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47,453
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7,276
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Our water companies own various small, discrete parcels of land that are no longer required for
water supply purposes. At December 31, 2005, this land totaled approximately 370 acres. Over the
past years we have been slowly disposing of such excess land. The largest transaction to date has
been the donation of land by Crystal to the Town of Killingly, CT for protected open space purposes
over a three-year period, 2002 2004. In January 2004, the final parcel of land was transferred to
the Town. Over the three-year period the following acreage was donated to the Town under this
agreement:
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Year
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Acres
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After-tax Profit
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2002
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54
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$
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293,000
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2003
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178
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$
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942,000
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2004
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133
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$
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707,000
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During 2005, the Company lowered the after-tax profit shown above by $353,000. This was due to an
ongoing audit by the Internal Revenue Service, which is examining the fair market value of the
property reflected on the Companys 2002, 2003 and 2004 tax returns. The Company continues to
believe the valuations used in those tax years filings are correct.
During 2005, the Company had one significant land transaction. Connecticut Water sold 74 acres of
land in Bristol, Connecticut for $475,000 resulting in a net profit of $256,000.
In December 2004,
Connecticut Water made a donation of approximately 60 acres of land to the Town of Plymouth, CT
for a new school. As a result of legislation passed in 2004, this donation was eligible for the
Connecticut corporate tax credit in the same manner as a donation for open space purposes. The
after tax profit from this transaction was $498,000. In 2005, this amount was increased by $37,000
primarily due to a higher valuation reflected on the Companys tax return as a result of an updated
appraisal.
7
We also have a limited amount of land held by our unregulated companies. Included in this category
at December 31, 2005 was approximately 109 acres of land held by BARLACO, which we acquired in
February 2001 in conjunction with the Companys acquisition of The Barnstable Holding Company. In
February 2006, this land was sold to the Town of Barnstable for $1.0 million.
Additional information on Land Dispositions can be found in Item 7 Managements Discussion and
Analysis of Financial Conditions and Results of Operation Commitments and Contingencies.
Competition
Our water companies face competition, presently not material, from a few private water systems
operating within, or adjacent to, their franchise areas and from municipal and public authority
systems whose service areas in some cases overlap portions of our water companies franchise areas.
Employees
As of December 31, 2005, we employed a total of 191 persons. Our employees are not covered by
collective bargaining agreements.
On April 8, 2005, the Company was notified by the National Labor Relations Board, (NLRB) that the
International Union of Operating Engineers, Local 478 (Union) had petitioned the NLRB to organize
a vote by the Companys employees to authorize the Union to represent a portion of the Companys
employees for purposes of collective bargaining with the Company. A representation hearing was
conducted before the NLRB on April 18, 2005 in Hartford, CT. A vote concerning representation by
the Union of the Companys 99 employees eligible to be in the proposed bargaining unit was held on
May 19, 2005. A majority of the ballots cast were against the labor organization; therefore no
collective bargaining representative was selected.
Segments of Our Business
For management and financial reporting purposes we divide our business into three Business
segments: Water Activities, Real Estate Transactions, and Services and Rentals.
The Water Activities segment is comprised of our core regulated water activities to supply public
drinking water to our customers. This segment encompasses all transactions of all our regulated
companies with the exception of real estate transactions and services and rental activities.
Our Real Estate Transactions segment involves the sale or donation for income tax benefits of our
limited excess real estate holdings. These transactions can be effected by either our regulated or
unregulated companies. A breakdown of the net income of this segment between our regulated and
unregulated companies for the past three years is as follows:
8
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Gain (Loss) from Real Estate Transactions
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Net
of Taxes from Continuing Operations
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Regulated
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Unregulated
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Total
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2003
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$
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942,000
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$
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87,000
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$
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1,029,000
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2004
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$
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1,206,000
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$
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$
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1,206,000
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2005
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$
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(69,000
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)
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$
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8,000
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$
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(61,000
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Our Services and Rentals segment provides contracted services to water and wastewater utilities and
other clients and also leases certain of our properties to third parties. Both our regulated and
unregulated companies offer these transactions. The types of services provided include contract
operations of water and wastewater facilities;
Linebacker
®
, our service line protection
plan for public drinking water customers; and providing bulk deliveries of emergency drinking water
to businesses and residences via tanker truck. Our lease and rental income comes primarily from
telecommunication antennas placed on our water storage tanks by telecommunication companies, as
well as from the renting of residential and commercial property.
Some of the services listed above, including the service line protection plan and antenna leases,
have little or no competition. But there can be considerable competition for contract operations
of large water and wastewater facilities and systems. However, we have sought to develop a niche
market by seeking to serve smaller facilities and systems in our service areas where there is less
competition. The services and rentals segment, while relatively new and a small portion of our
overall business, has grown significantly over the past five years and now provides nearly 10
percent of our overall net income. The table below describes the net income generated by this
segment of our business from our regulated and unregulated companies for the past three years:
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Income from Services and Rentals from
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Continuing Operations
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Regulated
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Unregulated
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Total
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2003
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$
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370,000
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$
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322,000
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$
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692,000
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2004
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$
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436,000
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$
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393,000
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$
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829,000
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2005
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$
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490,000
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$
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455,000
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$
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945,000
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ITEM 1A. RISK FACTORS
Because we incur annually significant capital expenditures, we depend on the rates we charge our
customers.
The water utility business is capital intensive. On an annual basis, we spend significant sums for
additions to or replacement of property, plant and equipment. Our ability to maintain and meet our
financial objectives is dependent upon the rates we charge our customers. These rates are subject
to approval by the Connecticut Department of Public Utility Control (DPUC). The Company is entitled
to file rate increase requests, from time to time, to recover our investments in utility plant and
expenses. Once a rate increase petition is filed with the DPUC, the ensuing administrative and
hearing process may be lengthy and costly. The timing of our rate increase requests are therefore
partially dependent upon the estimated cost of the administrative process
9
in relation to the
investments and expenses that we hope to recover through the rate increase to the extent approved.
We can provide no assurances that any future rate increase request will be approved by the DPUC;
and, if approved, we cannot guarantee that these rate increases will be granted in a timely or
sufficient manner to cover the investments and expenses for which we initially sought the rate
increase. Additionally, the DPUC may rule that a company must reduce its rates.
Our operating costs could be significantly increased because of state and federal environmental and
health and safety laws and regulations.
Our water and wastewater services are governed by various federal and state environmental
protection and health and safety laws and regulations, including the federal Safe Drinking Water
Act, the Clean Water Act and similar state laws, and federal and state regulations issued under
these laws by the U.S. Environmental Protection Agency and state environmental regulatory agencies.
These laws and regulations establish, among other things, criteria and standards for drinking water
and for discharges into the waters of the United States and/or Connecticut. Pursuant to these laws,
we are required to obtain various environmental permits from environmental regulatory agencies for
our operations. We cannot assure that we have been or will be at all times in total compliance
with these laws, regulations and permits. If we violate or fail to comply with these laws,
regulations or permits, we could be fined or otherwise sanctioned by regulators. Environmental laws
and regulations are complex and change frequently. These laws, and the enforcement thereof, have
tended to become more stringent over time. While we have budgeted for future capital and operating
expenditures to maintain compliance with these laws and our permits, it is possible that new or
stricter standards could be imposed that will raise our operating costs. Although these costs may
be recovered in the form of higher rates, there can be no assurance that the DPUC would approve
rate increases to enable us to recover such costs. In summary, we cannot be assured that our costs
of complying with, or discharging liabilities under, current and future environmental and health
and safety laws will not adversely affect our business, results of operations or financial
condition.
Our business is subject to seasonal fluctuations which could affect demand for our water services
and our revenues.
Demand for our water during the warmer months is generally greater than during cooler months due
primarily to additional requirements for water in connection with irrigation systems, swimming
pools, cooling systems and other outside water use. Throughout the year, and particularly during
typically warmer months, demand will vary with temperature and rainfall levels. In the event that
temperatures during the typically warmer months are cooler than normal, or if there is more
rainfall than normal, the demand for our water may decrease and adversely affect our revenues.
Potential drought conditions may impact our ability to serve our current and future customers uses
of water and our financial results.
We depend on an adequate water supply to meet the present and future demands of our customers.
Drought conditions could interfere with our sources of water supply and could adversely affect our
ability to supply water in sufficient quantities to our existing and future customers. An
interruption in our water supply could have a material adverse effect on our financial condition
and results of operations. Moreover, governmental restrictions on water usage
10
during drought
conditions may result in a decreased demand for our water, even if our water reserves are
sufficient to serve our customers during these drought conditions, which may adversely affect our
revenues and earnings.
Any future acquisitions we may undertake may involve risks and uncertainties.
An important element of our growth strategy is the acquisition and integration of water systems in
order to move into new service areas and to broaden our current service areas. We will not be able
to acquire other businesses if we cannot identify suitable acquisition opportunities or reach
mutually agreeable terms with acquisition candidates. It is our intent, when practical, to
integrate any businesses we acquire with our existing operations. The negotiation of potential
acquisitions as well as the integration of acquired businesses could require us to incur
significant costs and cause diversion of our managements time and resources. Future acquisitions
by us could result in:
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dilutive issuances of our equity securities;
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incurrence of debt and contingent liabilities;
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failure to have effective internal control over financial reporting;
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fluctuations in quarterly results; and
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other acquisition-related expenses.
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Some or all of these items could have a material adverse effect on our business as well as our
ability to finance our business and comply with regulatory requirements. The businesses we acquire
in the future may not achieve sales and profitability that would justify our investment and any
difficulties we encounter in the integration process, including in the integration of controls
necessary for internal control and financial reporting, could interfere with our operations, reduce
our operating margins and adversely affect our internal controls. In addition, as consolidation
becomes more prevalent in the water and wastewater industries, the prices for suitable acquisition
candidates may increase to unacceptable levels and limit our ability to grow through acquisitions.
Water supply contamination may adversely affect our business.
Our water supplies are subject to contamination, including contamination from the development of
naturally-occurring compounds, chemicals in groundwater systems, pollution resulting from man-made
sources, such as MTBE, and possible terrorist attacks. In the event that our water supply is
contaminated, we may have to interrupt the use of that water supply until we are able to substitute
the flow of water from an uncontaminated water source or provide additional treatment. We may
incur significant costs in order to treat the contaminated source through expansion of our current
treatment facilities, or development of new treatment methods. If we are unable to substitute water
supply from an uncontaminated water source, or to adequately treat the contaminated water source in
a cost-effective manner, there may be an adverse effect on our revenues, operating results and
financial condition. The costs we incur to decontaminate a water source or an underground water
system could be significant and could adversely affect our business, operating results and
financial condition and may not be recoverable in rates. We could also be held liable for
consequences arising out of human exposure to hazardous substances in our water supplies or other
environmental damage. For example, private plaintiffs have the right to bring personal injury or
other toxic tort claims arising from the presence of hazardous
11
substances in our drinking water
supplies. Our insurance policies may not be sufficient to cover the costs of these claims.
The need to increase security may continue to increase our operating costs.
In addition to the potential pollution of our water supply as described above, in the wake of the
September 11, 2001 terrorist attacks and the ensuing threats to the nations health and security,
we have taken steps to increase security measures at our facilities and heighten employee awareness
of threats to our water supply. We have also tightened our security measures regarding the delivery
and handling of certain chemicals used in our business. We have and will continue to bear increased
costs for security precautions to protect our facilities, operations and supplies. These costs may
be significant. We are currently not aware of any specific threats to our facilities, operations or
supplies; however, it is possible that we would not be in a position to control the outcome of
terrorist events should they occur.
Key employee turnover may adversely affect our operating results.
Our success depends significantly on the continued individual and collective contributions of our
management team. The loss of the services of any member of our management team or the inability to
hire and retain experienced management personnel could harm our operating results.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES
The properties of our water companies consist of land, easements, rights (including water rights),
buildings, reservoirs, standpipes, dams, wells, supply lines, treatment plants, pumping plants,
transmission and distribution mains and conduits, mains and other facilities and equipment used for
the collection, purification, storage and distribution of water. Although our regulated water
companies own their principal properties in fee, substantially all of the properties owned by our
Unionville subsidiary is subject to liens as security for outstanding debt. In addition, in certain
cases, our water companies are parties to limited contractual arrangements for the provision of
water supply from neighboring utilities. We believe that our properties are in good operating
condition. Water mains are located, for the most part, in public streets and, in a few instances,
are located on land that we own in fee simple and/or land utilized pursuant to easement right, most
of which are perpetual and adequate for the purpose for which they are held.
The net utility plant balances of the water companies at December 31, 2005 were as follows:
|
|
|
|
|
|
|
Net Utility Plant
|
|
Connecticut Water
|
|
$
|
209,670,000
|
|
Crystal
|
|
|
19,078,000
|
|
Unionville
|
|
|
18,955,000
|
|
|
|
|
|
Total
|
|
$
|
247,703,000
|
|
|
|
|
|
12
Sources of water supply owned, maintained, and operated by our regulated water companies include
eighteen reservoirs and fifty-one well fields. In addition, Connecticut Water has an agreement
with the Metropolitan District Commission (MDC) (a public water and sewer authority presently
serving the City of Hartford and portions of surrounding towns), which provides, among other
things, for the operation and maintenance by MDC of a filtration plant to supply up to 650,000
gallons of treated water per day for Connecticut Waters Collinsville System. Collectively, these
sources have the capacity to deliver approximately forty-seven million gallons of potable water
daily to the fifteen major operating systems in the following table. In addition to the principal
systems identified, our regulated water companies own, maintain, and operate thirteen small,
non-interconnected satellite and consecutive water systems that, combined have the ability to
deliver about one million gallons of additional water per day to their respective systems. For some
small consecutive water systems, purchased water may comprise substantially all of the total
available supply of the system.
Our regulated water companies own and operate fifteen water filtration facilities, having a
combined treatment capacity of approximately 26.33 million gallons per day. Of these facilities,
twelve are owned by Connecticut Water, two by Unionville, and one by Crystal.
The companies estimated available water supply, not including water purchases or non-principal
systems, is as follows:
|
|
|
|
|
|
|
ESTIMATED
|
|
|
|
AVAILABLE SUPPLY
|
|
|
|
(MILLION GALLONS PER
|
|
|
|
DAY)
|
|
Connecticut Water
|
|
|
|
|
Guilford System
|
|
|
9.31
|
|
Chester System
|
|
|
1.69
|
|
Naugatuck System
|
|
|
6.91
|
|
Terryville System
|
|
|
0.94
|
|
Thomaston System
|
|
|
0.73
|
|
Collinsville System
|
|
|
0.65
|
|
Northern Western System
|
|
|
15.99
|
|
Somers System
|
|
|
0.28
|
|
Stafford System
|
|
|
1.00
|
|
Crystal
|
|
|
|
|
Danielson System
|
|
|
3.69
|
|
Plainfield System
|
|
|
1.01
|
|
Thompson System
|
|
|
0.29
|
|
KIP System
|
|
|
0.50
|
|
Gallup System
|
|
|
0.60
|
|
Unionville
|
|
|
3.88
|
|
|
|
|
|
Total
|
|
|
47.47
|
|
|
|
|
|
As of December 31, 2005, the transmission and distribution systems of our three water
companies consisted of approximately 1,300 miles of main. On that date, approximately 75 percent
of our mains were eight-inch diameter or larger. Substantially all new main installations are
cement-lined ductile iron pipe of eight-inch diameter or larger.
13
The size of each companys system(s) in terms of miles of mains is as follows:
|
|
|
|
|
|
|
Miles of
|
|
|
|
Transmission and
|
|
|
|
Distribution Water
|
|
|
|
Mains
|
|
Connecticut Water
|
|
|
1,100
|
|
Crystal
|
|
|
90
|
|
Unionville
|
|
|
110
|
|
|
|
|
|
Total
|
|
|
1,300
|
|
|
|
|
|
We believe that our properties are maintained in good condition and in accordance with current
regulations and standards of good waterworks industry practice.
ITEM 3. LEGAL PROCEEDINGS
We are involved in various legal proceedings from time to time. Although the results of legal
proceedings cannot be predicted with certainty, there are no pending legal proceedings to which we,
or any of our subsidiaries are a party, or to which any of our properties is subject, that presents
a reasonable likelihood of a material adverse impact on the Companys financial condition, results
of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
14
PART II
ITEM 5. MARKET FOR THE COMPANYS COMMON STOCK, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES
OF EQUITY SECURITIES
Our Common Stock is traded on the NASDAQ exchange under the symbol CTWS. Our quarterly high and
low stock prices as reported by NASDAQ and the cash dividends we paid during 2005 and 2004 are
listed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price
|
|
Dividends
|
Period
|
|
High
|
|
Low
|
|
Paid
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
27.53
|
|
|
$
|
24.75
|
|
|
$
|
.2100
|
|
Second Quarter
|
|
|
25.87
|
|
|
|
21.91
|
|
|
$
|
.2100
|
|
Third Quarter
|
|
|
28.17
|
|
|
|
24.27
|
|
|
$
|
.2125
|
|
Fourth Quarter
|
|
|
26.32
|
|
|
|
22.69
|
|
|
$
|
.2125
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
29.76
|
|
|
$
|
27.57
|
|
|
$
|
.2075
|
|
Second Quarter
|
|
|
29.00
|
|
|
|
24.29
|
|
|
$
|
.2075
|
|
Third Quarter
|
|
|
27.55
|
|
|
|
23.83
|
|
|
$
|
.2100
|
|
Fourth Quarter
|
|
|
28.98
|
|
|
|
24.17
|
|
|
$
|
.2100
|
|
As of March 1, 2006, there were approximately 4,500 holders of record of our common stock.
We presently have paid or intend to pay quarterly cash dividends in 2006 on March 15, June 15,
September 15 and December 15 subject to our earnings and financial condition, regulatory
requirements and other factors our Board of Directors may deem relevant.
Purchases of Equity
Securities by the Company
In May 2005, the Company adopted a common stock
repurchase program (Share Repurchase Program). The Share Repurchase Program allows the Company to
repurchase up to 10% of its outstanding common stock, or
approximately 812,000 shares, at a price or prices that are deemed
appropriate. As of December 31, 2005, no shares have been repurchased.
15
ITEM 6. SELECTED FINANCIAL DATA
SUPPLEMENTAL INFORMATION (Unaudited)
SELECTED FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, (thousands of dollars except per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amounts and where otherwise indicated)
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenues
|
|
$
|
47,453
|
|
|
$
|
46,008
|
|
|
$
|
44,598
|
|
|
$
|
43,278
|
|
|
$
|
42,885
|
|
Operating Expenses
|
|
$
|
37,961
|
|
|
$
|
35,679
|
|
|
$
|
33,503
|
|
|
$
|
32,011
|
|
|
$
|
31,737
|
|
Operating Income
|
|
$
|
9,492
|
|
|
$
|
10,329
|
|
|
$
|
11,095
|
|
|
$
|
11,267
|
|
|
$
|
11,148
|
|
Interest and Debt Expense
|
|
$
|
4,017
|
|
|
$
|
3,742
|
|
|
$
|
4,482
|
|
|
$
|
4,348
|
|
|
$
|
4,422
|
|
Income from Continuing Operations
|
|
$
|
7,166
|
|
|
$
|
9,163
|
|
|
$
|
8,890
|
|
|
$
|
8,318
|
|
|
$
|
8,637
|
|
Cash Common Stock Dividends Paid
|
|
$
|
6,773
|
|
|
$
|
6,641
|
|
|
$
|
6,529
|
|
|
$
|
6,277
|
|
|
$
|
6,105
|
|
Dividend Payout Ratio from Continuing Operations
|
|
|
95
|
%
|
|
|
72
|
%
|
|
|
73
|
%
|
|
|
75
|
%
|
|
|
71
|
%
|
Weighted Average Common Shares Outstanding
|
|
|
8,094,346
|
|
|
|
7,999,318
|
|
|
|
7,956,426
|
|
|
|
7,717,608
|
|
|
|
7,619,031
|
|
Basic Earnings Per Common Share from Continuing Operations
|
|
$
|
0.89
|
|
|
$
|
1.15
|
|
|
$
|
1.11
|
|
|
$
|
1.08
|
|
|
$
|
1.13
|
|
Number of Shares Outstanding at Year End
|
|
|
8,169,627
|
|
|
|
8,035,199
|
|
|
|
7,967,379
|
|
|
|
7,939,713
|
|
|
|
7,649,362
|
|
ROE on Year End Common Equity
|
|
|
7.6
|
%
|
|
|
10.4
|
%
|
|
|
10.7
|
%
|
|
|
10.4
|
%
|
|
|
12.2
|
%
|
Declared Common Dividends Per Share
|
|
$
|
0.845
|
|
|
$
|
0.835
|
|
|
$
|
0.825
|
|
|
$
|
0.814
|
|
|
$
|
0.804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stockholders Equity
|
|
$
|
94,076
|
|
|
$
|
87,865
|
|
|
$
|
83,315
|
|
|
$
|
79,975
|
|
|
$
|
70,783
|
|
Long-Term Debt
|
|
$
|
77,404
|
|
|
$
|
66,399
|
|
|
$
|
64,754
|
|
|
$
|
64,734
|
|
|
$
|
63,953
|
|
Preferred Stock (Consolidated, Excluding Current Maturities)
|
|
$
|
847
|
|
|
$
|
847
|
|
|
$
|
847
|
|
|
$
|
847
|
|
|
$
|
847
|
|
|
Total Capitalization
|
|
$
|
172,327
|
|
|
$
|
155,111
|
|
|
$
|
148,916
|
|
|
$
|
145,556
|
|
|
$
|
135,583
|
|
Stockholders Equity (Includes Preferred Stock)
|
|
|
55
|
%
|
|
|
57
|
%
|
|
|
57
|
%
|
|
|
56
|
%
|
|
|
53
|
%
|
Long-Term Debt
|
|
|
45
|
%
|
|
|
43
|
%
|
|
|
43
|
%
|
|
|
44
|
%
|
|
|
47
|
%
|
Net Utility Plant
|
|
$
|
247,703
|
|
|
$
|
241,776
|
|
|
$
|
235,098
|
|
|
$
|
229,097
|
|
|
$
|
202,330
|
|
Total Assets
|
|
$
|
306,035
|
|
|
$
|
290,940
|
|
|
$
|
281,345
|
|
|
$
|
264,799
|
|
|
$
|
231,714
|
|
Book Value Per Common Share
|
|
$
|
11.52
|
|
|
$
|
10.94
|
|
|
$
|
10.46
|
|
|
$
|
10.07
|
|
|
$
|
9.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING REVENUES BY
REVENUE CLASS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
29,980
|
|
|
$
|
28,951
|
|
|
$
|
27,831
|
|
|
$
|
27,310
|
|
|
$
|
27,318
|
|
Commercial
|
|
|
5,619
|
|
|
|
5,444
|
|
|
|
5,327
|
|
|
|
5,141
|
|
|
|
5,024
|
|
Industrial
|
|
|
1,538
|
|
|
|
1,633
|
|
|
|
1,616
|
|
|
|
1,709
|
|
|
|
1,687
|
|
Public Authority
|
|
|
1,625
|
|
|
|
1,236
|
|
|
|
1,302
|
|
|
|
1,245
|
|
|
|
1,272
|
|
Fire Protection
|
|
|
8,267
|
|
|
|
8,231
|
|
|
|
8,026
|
|
|
|
7,355
|
|
|
|
7,110
|
|
Other (including non-metered accounts)
|
|
|
424
|
|
|
|
513
|
|
|
|
496
|
|
|
|
518
|
|
|
|
474
|
|
|
Total Operating Revenues
|
|
$
|
47,453
|
|
|
$
|
46,008
|
|
|
$
|
44,598
|
|
|
$
|
43,278
|
|
|
$
|
42,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Customers (Average)
|
|
|
81,763
|
|
|
|
87,259
|
|
|
|
86,145
|
|
|
|
82,119
|
|
|
|
78,156
|
|
Billed Consumption (Millions of Gallons)
|
|
|
7,276
|
|
|
|
7,801
|
|
|
|
7,640
|
|
|
|
7,418
|
|
|
|
7,259
|
|
Number of Employees
|
|
|
191
|
|
|
|
193
|
|
|
|
195
|
|
|
|
191
|
|
|
|
181
|
|
16
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Overview
The Company is a non-operating holding company, whose income is derived from the earnings of its
ten wholly-owned subsidiary companies. In 2005, approximately 88% of the Companys earnings from
continuing operations were attributable to water activities carried out within its three regulated
water companies: Connecticut Water, Crystal, and Unionville. The rates charged for service by
these regulated water companies are subject to regulation by the Connecticut DPUC. In 2005,
virtually all water activity income came from Connecticut Water, our largest subsidiary and water
company. Connecticut Water has not had an increase in its rates since 1991. Primarily due to the
construction of six major water treatment plants during the late 1970s and throughout the 1980s,
our overall investment in gross utility plant increased by $122,881,000, or 270%, from 1978 to
1991, which resulted in our water rates being amongst the highest in Connecticut. In 1991, we began
developing opportunities to increase revenues and earnings without raising regulated water rates.
Through these efforts we have successfully:
|
-
|
|
until 2005, increased our consolidated earnings each year since 1991 without
increasing water rates, and;
|
|
|
-
|
|
continued increasing our common dividend payments per share during this period.
|
For the first time since 1991, a regulated subsidiary of the Company increased its rates, effective
December 28, 2005. During the year, Gallup Water Service, Inc. (Gallup) was merged with and into
Crystal prior to the filing of an application for rate increase for the newly merged company. In
December 2005, Crystal was granted an across the board rate increase of 21.35%. We expect to seek
regulatory approval to increase rates charged in all of our Connecticut regulated water companies
in the summer of 2006. The material factors that have driven our decision to file for a rate
increase in 2006 are:
|
-
|
|
Increases in infrastructure investment necessary to insure a safe, reliable
water system remains in place,
|
|
|
-
|
|
Modest historical and projected annual growth in regulated water sales of
approximately 1.5%, and;
|
|
|
-
|
|
Increases in operating costs such as utilities, wage, pension, medical, audit
and insurance costs.
|
On a year-to-year basis our earnings are primarily influenced by weather patterns that affect our
customers water usage and thereby our revenues. Our revenues may fluctuate by as much as $1.5
million (or 3.0%) above or below a normal year because customers use more water in hot, dry years
and less water in cool, rainy years.
17
Regulatory Matters and Inflation
The Company, like all other businesses, is affected by inflation, most notably by the continually
increasing costs required to maintain, improve, and expand its service capabilities. The
cumulative effect of inflation over time results in significantly higher operating costs and
facility replacement costs, which must be recovered from future cash flows.
Our water companies are also subject to environmental and water quality regulations. Costs to
comply with environmental and water quality regulations are substantial. We are currently in
compliance with current regulations, but the regulations are subject to change at any time. The
costs to comply with future changes in state or federal regulations, which could require us to
modify current filtration facilities and/or construct new ones, or to replace any reduction of the
safe yield from any of our current sources of supply, could be substantial.
Our water companies ability to recover their increased expenses and/or investment in utility plant
is dependent on the regulatory rates they charge their customers. Changes to these rates must be
approved by the appropriate regulatory authority through formal rate proceedings. The rates of our
three Connecticut based water companies are regulated by the Connecticut DPUC. Due to the
subjectivity of certain items involved in the process of establishing rates such as future customer
growth, inflation, and allowed return on investment, we have no assurance that our water companies
will be able to raise their rates to a level we consider appropriate, or to raise their rates at
all, through any future rate proceeding.
The Company currently plans to merge all of its Connecticut subsidiaries into one company,
Connecticut Water. Further, the Company expects to apply for a rate increase in the summer of
2006.
Critical Accounting Policies and Estimates
The Companys consolidated financial statements are prepared in conformity with Generally Accepted
Accounting Principles in the United States of America (GAAP) and as directed by the regulatory
commissions to which the Companys subsidiaries are subject. (See Note 1 to the Consolidated
Financial Statements for a discussion of our significant accounting policies.) The Company
believes the following policies and estimates are critical to the presentation of its consolidated
financial statements.
Public Utility Regulation
- Statement of Financial Accounting Standards Financial Accounting
Standards No. 71, Accounting for the Effects of Certain Types of Regulation (FAS 71), requires
cost based, rate-regulated enterprises such as the Companys water companies to reflect the impact
of regulatory decisions in their financial statements. The state regulators, through the rate
regulation process, can create regulatory assets that result when costs are allowed for ratemaking
purposes in a period after the period in which costs would be charged to expense by an unregulated
enterprise. The balance sheet includes regulatory assets and liabilities as appropriate, primarily
related to income taxes and post-retirement benefit costs. The Company believes, based on current
regulatory circumstances, that the regulatory assets recorded are likely to be recovered and that
its use of regulatory accounting is appropriate and in accordance with the provisions of FAS 71.
Material regulatory assets are earning a return.
18
Revenue Recognition
Revenue from metered customers includes billings to customers based on
quarterly or monthly meter readings plus an estimate of water used between the customers last
meter reading and the end of the accounting period. The unbilled revenue amount is listed as a
current asset on the balance sheet. The amount recorded as unbilled revenue is generally higher
during the summer months when water sales are higher. Based upon historical experience,
management believes the Companys estimate of unbilled revenues is reasonable.
Pension Plan Accounting
Management evaluates the appropriateness of the discount rate through the
modeling of a bond portfolio which approximates the Plan liabilities. Management further considers
rates of high quality corporate bonds of approximate maturities as published by nationally
recognized rating agencies consistent with the duration of the Companys Plans.
The discount rate assumption we use to value our pension benefit obligations has a material impact
on the amount of pension expense we record in a given period. Our 2005 and 2004 pension expense was
calculated using assumed discount rates of 5.75% and 6.25%, respectively. In 2006, our pension
expense will be calculated with an assumed discount rate of 5.50%. The following table shows how
much a one percent change in our assumed discount rate would have changed our reported 2005 pension
expense:
|
|
|
|
|
|
|
Increase
|
|
|
(Decrease)
|
|
|
in expense
|
A 1% increase in the discount rate
|
|
|
($316,000
|
)
|
A 1% decrease in the discount rate
|
|
|
$ 328,000
|
|
Outlook
The Companys earnings and profitability are primarily dependent upon the sale and distribution of
water, the amount of which is dependent on seasonal weather fluctuations, particularly during the
summer months when water demand will vary with rainfall and temperature levels. The Companys
earnings and profitability in future years will also depend upon a number of other factors, such as
the ability to maintain our operating costs at lower levels, customer growth in the Companys core
regulated water utility business, growth in revenues attributable to non-water sales operations,
and the timing and adequacy of rate relief if and when requested, from time to time, by our
regulated water companies.
The Company believes that the factors described above and those described in detail below under the
heading Commitments and Contingencies may have significant impact, either alone or in the
aggregate, on the Companys earnings and profitability in fiscal years 2006 and beyond. Please
also review carefully the risks and uncertainties described in Item 1A Risk Factors and described
below under the heading Forward Looking Information.
Based on the Companys current projections, the Company believes that its Net Income from
Continuing Operations for the year 2006, excluding the gain from the sale of BARLACO assets in
February 2006, will be materially reduced from the levels reported for the years 2003, 2004 and
2005. Any such reductions would likely be primarily attributable to lower net income (in the form
of reduced tax benefits) related to the Companys land disposition program, excluding the BARLACO
land sale. Since the sale of the assets of Barnstable, the results of operations for
19
Barnstable are included in discontinued operations, including any income earned under the
management contract. In addition, the regulated water company subsidiaries increased operating
costs, including depreciation on their investments in utility plant, will require the Companys
primary subsidiary, The Connecticut Water Company, to seek rate relief in 2006. Based upon
appropriate recovery of these costs in a timely manner based upon a rate increase application
expected to be filed in the summer of 2006, and taking into account the other factors discussed
impacting profitability and earnings, the Company believes that its net income should return to
levels achieved in recent years. However, there can be no assurance that the Company will be
able to recover costs in an appropriate and timely manner in 2006. During 2006 and subsequent
years, the ability of the Company to maintain and increase its net income comparable to historical
levels will principally depend upon the effect on the Company of the factors described above in
this Outlook section, those factors described in the section entitled Commitments and
Contingencies and the risks and uncertainties described in Forward Looking Information,
including the Companys plan to file for rate relief during 2006.
FINANCIAL CONDITION
Liquidity and Capital Resources
In recent years, we have financed the majority of investment in Utility Plant through internally
generated funds. In November 2005 two of our regulated subsidiaries, Connecticut Water and Crystal
issued $10 million and $5 million respectively of 35-year long-term debt. The following table
shows the total construction expenditures excluding non-cash contributed utility plant for each of
the last three years and what we expect to invest on construction projects in 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
|
|
Gross
|
|
Funded by
|
|
Construction
|
|
|
Construction
|
|
Developers &
|
|
Funded by
|
|
|
Expenditures
|
|
Others
|
|
Company
|
2003
|
|
$
|
9,747,000
|
|
|
$
|
1,261,000
|
|
|
$
|
8,486,000
|
|
2004
|
|
$
|
11,045,000
|
|
|
$
|
2,665,000
|
|
|
$
|
8,380,000
|
|
2005
|
|
$
|
16,957,000
|
|
|
$
|
2,869,000
|
|
|
$
|
14,088,000
|
|
2006 (Projected)
|
|
$
|
18,387,000
|
|
|
$
|
3,000,000
|
|
|
$
|
15,387,000
|
|
We currently fund our working capital requirements through our lines of credit with four banks,
which provide liquidity to satisfy ongoing cash needs. We consider the current aggregate
$15,500,000 lines of credit to be adequate to finance any expected short-term borrowing
requirements that may arise in 2006. All the lines have one-year lives and will expire on different
dates in 2006. We expect to renew the lines in 2006. The interest rates payable are variable and
fluctuate over time based on financial conditions. The weighted average interest rate on the
$4,750,000 aggregate balance outstanding at December 31, 2005 was 4.62%.
During 2003, interest rates fell to historically low levels. We took advantage of the low rates and
refinanced a portion of our long-term debt in the fourth quarter of 2003. In October 2003,
Connecticut Water borrowed $22.93 million from the issuance of Water Facilities Refunding Revenue
Bonds by the Connecticut Development Authority (the Authority). The bonds were sold in two series
with the following terms:
20
|
|
|
|
|
|
|
2003 A Series: $8,000,000 (Non-AMT)
|
|
4.40% Maturing 12/15/2020
|
|
|
2003 C Series: $14,930,000 (AMT)
|
|
5.00% Maturing 9/1/2022
|
The proceeds of the transaction were used to redeem the Series R and S first mortgage bonds of
Connecticut Water and paid for a portion of the expenses associated with the issuance.
During the first quarter of 2004, Connecticut Water refinanced an additional portion of its
long-term debt through the issuance of $12,500,000 of variable rate, taxable debenture bonds Series
2004 with a maturity date of January 4, 2029. The bonds were secured by an irrevocable direct pay
letter of credit issued by a financial institution, with a five-year term expiring in March 2009.
The proceeds of the sale of the bonds, which are general debt obligations of Connecticut Water,
were used to redeem the $12,050,000 aggregate principal amount of Connecticut Waters First
Mortgage Bonds (Series V) and to pay a portion of the expenses associated with the bonds
refunding.
In connection with the issuance of the bonds, Connecticut Water entered into an interest rate swap
transaction with a counterparty in the notional principal amount of $12,500,000. The interest rate
swap agreement provides that, beginning in April 2004 and thereafter on a monthly basis,
Connecticut Water will pay the counterparty a fixed interest rate of 3.73% on the notional amount
for a period of five years. In exchange, the counterparty began in April 2004 and thereafter on a
monthly basis, paying Connecticut Water a floating interest rate (based on 105% of the U.S. Dollar
one-month LIBOR rate) on the notional amount for a period of five years. The purpose of the
interest rate swap is to manage the Companys exposure to fluctuations in prevailing interest
rates.
In June 2004, Unionville secured $1.6 million through the Drinking Water State Revolving Fund for
costs incurred in developing a water interconnection with a neighboring water supplier. The funds
were used to pay off a portion of the balances outstanding under bank lines of credit. As of
December 31, 2005 the Company intends to prepay this debt in 2006.
On September 1, 2004, Connecticut Water refinanced a portion of its existing bond indebtedness.
Connecticut Water borrowed $9.55 million in sale proceeds from the issuance of Water Facilities
Refunding Revenue Bonds by the Authority. The bonds were sold in two series with the following
terms:
|
|
|
|
|
2004 A Series: $5,000,000 Variable Interest Maturing 7/1/2028
2004 B Series: $4,550,000 Variable Interest Maturing 9/1/2028
|
The proceeds of the transaction were used to redeem prior obligations to the Authority that were
secured by the Series T and Series U first mortgage bonds of Connecticut Water.
In November 2005, Connecticut Water borrowed $10 million through the issuance of Water Facilities
Revenue Bonds by the Connecticut Development Authority sold in one series with an interest rate of
five percent maturing on October 1, 2040. The proceeds from the sale of the bonds were used to
finance construction and installation of various capital improvements to the Companys existing
water systems.
In November 2005, Crystal borrowed $5 million through the issuance of Water Facilities Revenue
Bonds by the Connecticut Development Authority sold in a single series with an
21
interest rate of five percent maturing on October 1, 2040. The proceeds from the sale of the bonds
are being used to finance the construction of a water treatment plant in the Town of Killingly, CT
and to facilitate the interconnection of two systems in the Town of Killingly.
Barnstable Water Companys note payable was paid off in 2005 in connection with the sale of
Barnstable Waters assets. As a result of the prepayment, the Company paid the lender a prepayment
fee of $322,000.
Off-Balance Sheet Arrangements and Contractual Obligations
We do not use off-balance sheet arrangements such as securitization of receivables with any
unconsolidated entities or other parties. The Company does not engage in trading or risk management
activities (other than the interest rate swap agreement discussed above) and does not have material
transactions involving related parties.
The following table summarizes the Companys future contractual cash obligations as of December 31,
2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by Periods
|
|
|
(in thousands of dollars)
|
|
|
|
|
|
|
Less
|
|
|
|
|
|
|
|
|
|
More
|
|
|
|
|
|
|
than 1
|
|
Years
|
|
Years
|
|
than 5
|
Contractual Obligations
|
|
Total
|
|
year
|
|
2 and 3
|
|
4 and 5
|
|
years
|
Long-Term Debt (LTD)
|
|
$
|
79,735
|
|
|
$
|
2,331
|
|
|
$
|
14
|
|
|
$
|
16
|
|
|
$
|
77,374
|
|
Interest on LTD
|
|
|
83,513
|
|
|
|
3,474
|
|
|
|
6,886
|
|
|
|
6,886
|
|
|
|
66,267
|
|
Operating Lease Obligations
|
|
|
498
|
|
|
|
269
|
|
|
|
226
|
|
|
|
2
|
|
|
|
|
|
Purchase Obligations
(2)(3)
|
|
|
30,396
|
|
|
|
876
|
|
|
|
1,464
|
|
|
|
1,416
|
|
|
|
26,641
|
|
Long-Term Compensation
Agreement (1)
|
|
|
33,061
|
|
|
|
2,204
|
|
|
|
4,408
|
|
|
|
4,408
|
|
|
|
22,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (4)(5)(6)
|
|
$
|
227,203
|
|
|
$
|
9,154
|
|
|
$
|
12,998
|
|
|
$
|
12,728
|
|
|
$
|
192,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Pension and post retirement contributions cannot be reasonably estimated beyond 2006 and
may be impacted by such factors as return on pension assets, changes in the number of plan
participants and future salary increases.
|
|
(2)
|
|
Connecticut Water has an agreement with the South Central Connecticut
Regional Water Authority (RWA) to purchase water from RWA. The agreement was signed on May 13,
2005 and will remain in effect for a minimum of ten (10) years
from that date. Connecticut Water has agreed to
purchase at least three million (3,000,000) gallons of water per calendar year from RWA. Water
sales to Connecticut Water are billed monthly at the most current RWA retail rate.
|
|
(3)
|
|
Unionville has an agreement with The Metropolitan District (MDC) to
purchase water from MDC. The agreement became effective on
October 6, 2000 for a term of fifty
(50) years beginning May 19, 2003, the date the water supply facilities related to the agreement
were placed in service.
|
|
(4)
|
|
Advances for Construction are non-interest bearing.
|
|
(5)
|
|
We pay refunds on Advances for Construction over a specific period of time based on operating
revenues related to developer-installed water mains or as new customers are connected to and take
service from such mains. After all refunds are paid, any remaining balance is transferred to
Contributions in Aid of Construction. The refund amounts are not included in the above table
because the refund amounts and timing are dependent upon several variables, including new customer
connections, customer consumption levels and future rate increases, which cannot be accurately
estimated. Portions of these refund amounts are payable annually through 2020 and amounts not paid
by the contract expiration dates become non-refundable.
|
|
(6)
|
|
We will fund these contractual obligations with cash flows from operations and liquidity
sources held by or available to us.
|
22
Interim Bank Loans Payable at year-end 2005 was $4,750,000, which is $900,000 lower than at
the end of 2004.
During 2005, the Company incurred approximately $16.9 million of construction expenditures. The
Company financed such expenditures through internally generated funds, long-term debt issuances,
customers advances, contributions in aid of construction and short-term borrowings.
The Board of Directors has approved a $15.4 million construction budget for 2006, net of amounts to
be financed by customer advances and contributions in aid of construction. Funds primarily
provided by operating activities, short-term borrowings, and funds remaining in escrow from the $5
million Crystal debt issuance in November 2005, are expected to finance this
entire construction program given normal weather patterns and related operating revenue billings.
RESULTS OF OPERATIONS
On May 20, 2005, the Company completed the sale of the assets of the Barnstable Water Company to
the Town of Barnstable, Massachusetts. The sale of Barnstable Waters assets has been classified
as Discontinued Operations in the Consolidated Statements of Income due to the loss of a
management contract with the Town of Barnstable in January 2006. All of the results of Barnstable
Water, including current and prior years and the gain on the sale of the utilitys assets, have
been reclassified and are included as Discontinued Operations.
Overview of 2005 Results from Continuing Operations
Net Income from Continuing Operations for 2005 were $7,166,000, or $0.89 per basic share, a
decrease of $1,997,000, or $0.26 per basic share when compared to 2004. The decrease in earnings
was due to lower net income in our Water Activities and Real Estate business segments partially
offset by an increase in net income in our Services and Rentals segment.
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
Business segment
|
|
In Net Income
|
|
Water Activities
|
|
$
|
(846,000
|
)
|
Real Estate
|
|
|
(1,267,000
|
)
|
Services and Rentals
|
|
|
116,000
|
|
|
|
|
|
Net Decrease
|
|
$
|
(1,997,000
|
)
|
Water Activities
The decrease in net income from water activities in 2005 was $846,000, or $ 0.10 per share, lower
than it was in 2004. A breakdown of the components of this decrease is as follows:
23
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
|
|
Increase
|
|
Operating Revenues
|
|
$
|
1,445,000
|
|
Operation and Maintenance expense
|
|
|
2,178,000
|
|
Depreciation expense
|
|
|
154,000
|
|
Income Taxes
|
|
|
(256,000
|
)
|
Taxes Other than Income Taxes
|
|
|
206,000
|
|
Other Income
|
|
|
49,000
|
|
Interest and Debt Expense (net of AFUDC)
|
|
|
58,000
|
|
|
|
|
|
Net
(Decrease)
|
|
|
($846,000
|
)
|
|
|
|
|
The 3.1% increase in Operating Revenues is primarily due to the following:
|
|
a $1,220,000, or 3.3%, increase in metered revenues in 2005 which was due to increased
customer water consumption attributable to a hotter summer and a 1.5% increase in the number
of customers served; and
|
|
|
|
a $225,000, or 2.5%, increase in non-metered revenues which was primarily due to increased
fire protection charges related to the expansion of our water system which increased the
number of fire hydrants and revenue generating mains upon which these charges are based.
|
The $2,178,000 or 9.8% increase in Operation and Maintenance expense is primarily due to the
following expense increases:
|
|
|
|
|
|
|
Increase
|
|
Utility Costs
|
|
$
|
491,000
|
|
Pension expense
|
|
|
317,000
|
|
Other employee benefit costs
|
|
|
468,000
|
|
Legal services
|
|
|
260,000
|
|
Other outside services
|
|
|
133,000
|
|
Maintenance
|
|
|
185,000
|
|
Labor
|
|
|
148,000
|
|
Other
|
|
|
176,000
|
|
|
|
|
|
Total
|
|
$
|
2,178,000
|
|
|
|
|
|
The increase in Depreciation expense is due to the Companys investment in new utility plant.
The decrease in Income Tax expense is due primarily to lower pre-tax net income in 2005, partially
offset by flow through accounting related to book/tax timing differences.
The increase in Taxes Other Than Income Taxes is primarily due to increased municipal taxes related
to our increased investment in utility plant.
24
The increase in Interest and Debt Expense is due to the following:
|
|
|
Higher interest expense on long-term debt primarily due to the issuance of $15.0
million in new bonds in 2005;
|
|
|
|
|
Higher other interest charges due primarily to increased commitment fees on the letters of credit associated with bonds
issued in 2004 plus higher interest expense on interim bank loans with higher interest rates; and
|
|
|
|
|
Amortization of the debt issuance costs of the bonds issued in 2004 and 2005.
|
Real Estate
The net income generated by the Real Estate
segment decreased $1,267,000, or $0.16 per share, in
2005 because there were no large sales or donations of land compared with the two donations of land
we made in 2004 and in 2005 the Company increased its tax reserves related to prior year land
donations.
Income from this business segment is largely dependent on the tax deductions received on
donations/sales of available land. This typically occurs when utility-owned land is deemed to be
not necessary to protect water sources. The Company currently does not project completing any
material land transactions in 2006 other than the sale of the BARLACO land, completed in February
2006.
Services and Rentals
Net income generated from the services and rental segment in 2005 increased $116,000, or $0.02 per
share, over 2004 levels. The increased net income is primarily due to a 15% increase in customer
enrollment in our service line maintenance program plus an increased number of leases and higher
lease rates charged to the telecommunications companies that lease space on our water storage tanks
for their antenna sites. The table below summarizes the income from these two lines of business in
this business segment for 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
Increase
|
|
Service line contracts
|
|
$
|
377,000
|
|
|
$
|
328,000
|
|
|
$49,000 or 15%
|
Antenna leases
|
|
$
|
462,000
|
|
|
$
|
401,000
|
|
|
$61,000 or 15%
|
Overview
of 2004 Results from Continuing Operations
Net Income from Continuing Operations for 2004
were $273,000, or $0.04 per basic share higher
than in 2003. This increase in earnings from continuing operations was due to higher net income in
our Real Estate and Services and Rentals business segments, which more than offset a reduction in
net income from our Water Activities segment. The table below details the changes in net income by
business segment for Continuing Operations:
25
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
Business segment
|
|
In Net Income
|
|
Water Activities
|
|
$
|
(41,000
|
)
|
Real Estate
|
|
|
177,000
|
|
Services and Rentals
|
|
|
137,000
|
|
|
|
|
|
Net Increase
|
|
$
|
273,000
|
|
Water Activities
The net income from water activities in 2004 was $41,000 lower than it was in 2003. A breakdown of
the components of this decrease is as follows:
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
Business segment
|
|
(Decrease)
|
|
Operating Revenues
|
|
$
|
1,410,000
|
|
Operation and Maintenance expense
|
|
|
1,250,000
|
|
Depreciation expense
|
|
|
87,000
|
|
Income Taxes
|
|
|
682,000
|
|
Taxes Other than Income Taxes
|
|
|
157,000
|
|
Other Income
|
|
|
40,000
|
|
Interest and Debt Expense (net of AFUDC)
|
|
|
(685,000
|
)
|
|
|
|
|
Net
(Decrease)
|
|
$
|
(41,000
|
)
|
The 3.2% increase in Operating Revenues was primarily due to:
|
|
a 1.9% increase in metered consumption in 2004 due to a hotter and drier summer and a 1.2%
increase in the number of customers served;
|
|
|
|
a $288,000 increase in revenues from Unionvilles 30% rate surcharge that went into effect
mid-2003; and
|
|
|
|
a $205,000 increase in fire protection revenues due to system expansion which increased the
number of fire hydrants and revenue generating mains upon which these charges are based.
|
The $1,250,000 or 5.9% increase in Operation and Maintenance expense was primarily due to the
following expense increases:
|
|
|
|
|
|
|
Increase
|
|
Sarbanes-Oxley Act Section 404 compliance
|
|
$
|
738,000
|
|
Purchased Water
|
|
|
261,000
|
|
Property and Liability Insurance
|
|
|
223,000
|
|
|
|
|
|
Total
|
|
$
|
1,222,000
|
|
The increase in Depreciation expense was due to the Companys investment in new utility plant.
Income tax expense increased in 2004 due to the $641,000 increase in book pre-tax income plus a
higher 2004 effective income tax rate due to flow through accounting related to book/tax timing
differences and a 2003 reduction in estimated tax liabilities associated with non-current periods.
26
The increase in Taxes Other Than Income taxes was primarily due to increased municipal taxes
related to our increased investment in utility plant.
The 16.5% decrease in Interest and Debt Expense was primarily due to the lowering of our interest
rates through the long-term debt refinancings that were completed in 2003 and 2004.
Real Estate
The net income generated by the Real Estate segment increased from 2003 primarily due to the tax
benefits of a 2004 donation of approximately 60 acres of land to the Town of Plymouth, CT in
addition to the donation of the final parcel of land to the Town of Killingly, CT under our 3-year
agreement with the Town. The 2004 and 2003 net income in this business segment were generated from
the following:
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
Donation of land to Town of Killingly, CT
|
|
$
|
707,000
|
|
|
$
|
942,000
|
|
Donation of land to Town of Plymouth, CT
|
|
|
498,000
|
|
|
|
|
|
Miscellaneous sales of real estate
|
|
|
1,000
|
|
|
|
87,000
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
1,206,000
|
|
|
$
|
1,029,000
|
|
Services and Rentals
Net income generated from the Services and Rental segment in 2004 increased $137,000, or 20%, over
2003 levels. The increased net income was primarily due to a 19% increase in customer enrollment in
our service line maintenance program plus an increased number of leases and higher lease rates
charged to the telecommunications companies that lease space on our water storage tanks for their
antenna sites. The table below summarizes the major components of the increase in net income from
these two lines of business in this business segment for 2004 and 2003.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
Increase
|
|
Service line contracts
|
|
$
|
328,000
|
|
|
$
|
240,000
|
|
|
$88,000 or 37%
|
Antenna leases
|
|
$
|
401,000
|
|
|
$
|
330,000
|
|
|
$71,000 or 22%
|
27
COMMITMENTS AND CONTINGENCIES
Security
The Bioterrorism Response Act of 2001 required every public water system serving over
3,300 people to prepare Vulnerability Assessments (VA) of their critical utility assets. The last
of these assessments required to be filed by our companies were submitted to the U.S. Environmental
Protection Agency in June 2004 and was followed by updated Emergency Response Plans in December
2004, per statutory requirements. The information within the VA is not subject to release to the
public and is protected from Freedom of Information Act inquiries.
Investment in security-related improvements is a continuing process and management believes that
the costs associated with any such improvements would be eligible for recovery in future rate
proceedings.
Reverse Privatization
Our water companies derive their rights and franchises to operate from
state laws that are subject to alteration, amendment or repeal, and do not grant permanent
exclusive rights to our service areas. Our franchises are free from burdensome restrictions, are
unlimited as to time, and authorize us to sell potable water in all towns we now serve. There is
the possibility that states could revoke our franchises and allow a governmental entity to take
over some or all of our systems. From time to time such legislation is contemplated.
Environmental and Water Quality Regulation
The Company is subject to environmental and water
quality regulations. Costs to comply with environmental and water quality regulations are
substantial. We are presently in compliance with current regulations, but the regulations are
subject to change at any time. The costs to comply with future changes in state or federal
regulations, which could require us to modify current filtration facilities and/or construct new
ones, or to replace any reduction of the safe yield from any of our current sources of supply,
could be substantial.
28
Rate Relief
Our three Connecticut operating subsidiaries, Connecticut Water, Crystal, and
Unionville, are regulated public utilities, which provide water services to their customers. The
rates that these companies charge their water customers are subject to the jurisdiction of the
regulatory authority of the Connecticut DPUC, which sets water rates for each company independently
because the systems are not interconnected.
The DPUC may authorize the Companys operating subsidiaries to charge rates which the DPUC consider
to be sufficient to recover the normal operating expenses of our operating subsidiaries, to provide
funds for adding new or replacing water infrastructure, and to allow our operating subsidiaries to
earn what the DPUC considers to be a fair and reasonable return on our invested capital.
The Company has filed with the DPUC to merge all of its Connecticut subsidiaries into Connecticut
Water in February 2006. On March 20, 2006, the DPUC issued a Draft Decision which would approve
this merger. Further, the Company expects that Connecticut Water will apply for a rate increase
during the summer of 2006.
Land Dispositions
In the past, the Company has engaged in a program of land donations to
municipalities in Connecticut, which has resulted in net income (tax benefits) to the Company of
approximately $3.9 million. As previously disclosed, the land donation program under the Companys
agreement with the Town of Killingly, CT was completed in January 2004 with the donation of the
remaining parcel to the Town. The donation of this final parcel resulted in a net profit (tax
benefit) to the Company of $707,000 during the first quarter of 2004. The donation of land to the
Town of Plymouth, CT in December 2004 resulted in an additional $498,000 of net income. During
2005, the Company lowered the after-tax profit taken in 2002, 2003 and 2004 by $353,000. This
was due to an ongoing audit by the Internal Revenue Service, which is examining the fair market
value of the property reflected on the Companys 2002, 2003 and 2004 tax returns. The Company
continues to believe the valuations used in those tax years filings is correct.
During 2005, the Company has one significant land transaction. Connecticut Water sold 74 acres of
land in Bristol, Connecticut for $475,000 resulting in a net profit of $256,000 on the transaction.
The Company and its subsidiaries own additional parcels of land in Connecticut, which may be
suitable in the future for disposition, either by sale or by donation to municipalities, other
local governments or private charitable entities. These additional parcels would include certain
Class I and II parcels previously identified by the Connecticut DEP, which have restrictions on
development and resale.
During 2003 and 2004, the Company donated approximately 370 acres of land to municipalities in
Connecticut for public and/or open space purposes. These donations contributed approximately $1.0
million and $1.2 million, respectively to net income in those years, as a result of favorable tax
treatment under federal and Connecticut tax laws. The Company currently anticipates that it will
continue to pursue selected land sales and/or donations during fiscal years 2006, 2007 and 2008,
but at a reduced level. The Company currently does not project completing any material land
transactions in 2006, other than the BARLACO land sale. The Company is unable to predict if and
when any sales or donations of some or all of these
29
parcels may occur in the future and, if so, what amount of net income (tax benefits) may result
from any such sales or donations.
Amounts taken as tax benefits in prior years are subject to challenge by the taxing agencies. In
2005, the Company increased its tax reserves by approximately $400,000 for land valuation
allowances (See Taxes below).
Taxes
On August 18, 2005, the Company was notified by the Internal Revenue Service (IRS) that
they would be conducting an audit of the Companys 2003 Federal Income Tax Return. The field work
portion of the audit is complete and the IRS has summarized its proposed adjustments. Other than a
proposed change to the value of donated land, none of the other changes are material. The Company
continues to believe that the value of donated land included in its 2003 Federal Income Tax Return
is correct. Discussions between the Company and the IRS are continuing. The Company does not
believe that IRS proposed changes would materially affect financial results.
The Company and its subsidiaries may be subject to a higher tax burden through changes in state
legislation. Also, the Companys future property tax burden may increase if state aid to towns is
decreased.
FORWARD LOOKING INFORMATION
This report, including managements discussion and analysis, contains certain forward-looking
statements regarding the Companys results of operations and financial position. These forward
looking statements are based on current information and expectations, and are subject to risks and
uncertainties, which could cause the Companys actual results to differ materially from expected
results.
Our water companies are subject to various federal and state regulatory agencies concerning water
quality and environmental standards. Generally, the water industry is materially dependent on the
adequacy of approved rates to allow for a fair rate of return on the investment in utility plant.
The ability to maintain our operating costs at the lowest possible level, while providing good
quality water service, is beneficial to customers and stockholders. Profitability is also
dependent on the timeliness of rate relief to be sought from, and granted by, the DPUC, when
necessary, and numerous factors over which we have little or no control, such as the quantity of
rainfall and temperature, industrial demand, financing costs, energy rates, tax rates, and stock
market trends which may affect the return earned on pension assets, and compliance with
environmental and water quality regulations. The profitability of our other revenue sources is
subject to the amount of land we have available for sale and/or donation, the demand for the land,
the continuation of the current state tax benefits relating to the donation of land for open space
purposes, regulatory approval of land dispositions, the demand for telecommunications antenna site
leases and the successful extensions and expansion of our service contract work. We undertake no
obligation to update or revise forward-looking statements, whether as a result of new information,
future events, or otherwise.
30
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The primary market risk faced by the Company is interest rate risk. As of December 31, 2005,
the Company had no exposure to derivative financial instruments or financial instruments with
significant credit risk or off-balance-sheet risks. In addition, the Company is not subject in any
material respect to any currency or other commodity risk.
The Company is subject to the risk of fluctuating interest rates in the normal course of
business. The Companys exposure to interest fluctuations is managed at the Company and subsidiary
operations levels through the use of a combination of fixed rate long-term debt (and variable rate
borrowings) under financing arrangements entered into by the Company and its subsidiaries and the
use of the interest rate swap agreement discussed below. The Company has $15,500,000 current lines
of credit with four banks, under which interim bank loans payable at December 31, 2005 were
$4,750,000.
During the first quarter of 2004, Connecticut Water entered into a five-year interest rate
swap transaction in connection with the refunding of its First Mortgage Bonds (Series V). The
swap agreement provides for Connecticut Waters exchange of floating rate interest payment
obligations for fixed rate interest payment obligations on a notional principal amount of
$12,500,000. The purpose of the interest rate swap is to manage the Companys exposure to
fluctuations in prevailing interest rates. See Liquidity and Capital Resources section of Item 7
Managements Discussion and Analysis and Results of Operations above for further information.
The Company does not enter into derivative financial contracts for trading or speculative purposes
and does not use leveraged instruments.
Management believes that changes in interest rates will not have a material effect on income
or cash flow during 2006, although there can be no assurances that interest rates will not
significantly change.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Connecticut Water Service, Inc., and the Notes to
Consolidated Financial Statements together with the report of PricewaterhouseCoopers LLP are
included herein on pages F-7 through F-30.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
31
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of December 31, 2005, management, including the Companys
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and
operation of the Companys disclosure controls and procedures (as defined in Rule 13a-14(c) and
Rule13a-15(e)). Based upon, and as of the date of that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the disclosure controls and procedures were effective.
Managements Report on Internal Control Over Financial Reporting
Internal control over financial
reporting (as defined in Exchange Act Rules 13a 15(f) and 15(d) 15(f)) is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting
principles.
Management of the Company is responsible for establishing and maintaining adequate internal control
over financial reporting. We have used the criteria established in
Internal Control Integrated
Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
conducting our evaluation of the effectiveness of the internal control over financial reporting.
Based on our evaluation, we concluded that the Companys internal control over financial reporting
is effective as of December 31, 2005. Our managements assessment of the effectiveness of the
Companys internal control over financial reporting as of December 31, 2005 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their
report which appears herein.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
Beginning in 2003, the Company implemented a
comprehensive plan to review, document, test the operational effectiveness, and evaluate the
processes and systems of internal controls over financial reporting, as required under Section 404
of the Sarbanes Oxley Act of 2002 and Public Accounting Oversight Board Standard No. 2, An Audit
of Internal Control Over Financial Reporting Performed in Conjunction With An Audit of Financial
Statements (Standard No. 2), which was adopted in June 2004.
There were no changes in the Companys internal control over financial reporting that occurred
during the Companys most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial reporting.
32
ITEM 9B. OTHER INFORMATION
On January 6, 2006, the Company and Eric W. Thornburg entered into a letter agreement outlining the
terms and conditions of Mr. Thornburgs planned employment as the Companys next President and
Chief Executive Officer, effective March 1, 2006. Under the terms of employment, Mr. Thornburg
will receive an annual salary of $294,100, annual and long term incentive compensation as
determined by the Compensation Committee, certain other executive and relocation benefits, and
customary employee benefits offered to all of the Companys employees. A copy of the letter
agreement was filed by the Company as an exhibit to the Companys Form 8-K filed on January 11,
2006. On January 11, 2006, the Compensation Committee approved an award of 4,507 restricted shares
of the Companys common stock to Mr. Thornburg under the Companys 2004 Performance Stock Program.
On January 12, 2006, the Company announced that the Board of Directors at its January
11
th
meeting unanimously approved the appointment of Eric W. Thornburg as the Companys
next President and Chief Executive Officer. Mr. Thornburg, 45, was recently President of
Missouri-American Water and also led Government and Regulatory Affairs for American Waters central
region, spanning 15 states in the Midwest. He has also held leadership positions in Indiana and
Pennsylvania for American Water, a subsidiary of RWE, a German-based conglomerate and a Global 100
company. The Board of Directors also unanimously elected Mr. Thornburg to the Board of Directors,
effective January 11, 2006. Mr. Thornburg has been nominated for election as a Class III
director to serve a term expiring at the 2009 annual meeting of shareholders.
Mr. Thornburg assumed the President/CEO positions at the Company on March 1, 2006, succeeding
Marshall T. Chiaraluce, who had served as the Companys President and Chief Executive Officer since
1992 until his retirement as President and Chief Executive Officer effective March 1, 2006. Mr.
Chiaraluce will continue to serve as the full time Chairman of the Board of Directors and Executive
Officer of the Company until his planned retirement from the Company and the Board of Directors in
the spring of 2007.
33
PART III
Pursuant to General Instruction G(3), the information called for by Items 10, (except for
information concerning the executive officers of the Company) 11, 12, 13 and 14 is hereby
incorporated by reference to the Companys definitive proxy statement to be filed on EDGAR on or
about April 7, 2006. Information concerning the executive officers of the Company is included as
Item 10 of this report.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following is a list of the executive officers of the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
Age
|
|
|
|
|
|
|
|
|
in
|
|
|
|
Period Held or
|
|
Term of Office
|
Name
|
|
2006
|
|
Office
|
|
Prior Position
|
|
Expires
|
M. T. Chiaraluce
|
|
|
63
|
|
|
Chairman of the
Board and Executive
Officer
|
|
Held position of
President since
January 1992 and
position of Chief
Executive Officer
since July 1992
until his
retirement as of
March 1, 2006
|
|
2006 Annual Meeting
|
|
|
|
|
|
|
|
|
|
|
|
E. W. Thornburg
|
|
|
46
|
|
|
President, Chief
Executive Officer
|
|
Held position since
March 1, 2006
|
|
2006 Annual Meeting
|
|
|
|
|
|
|
|
|
|
|
|
D. C. Benoit
|
|
|
48
|
|
|
Vice President Finance, Chief
Financial Officer
and Treasurer
|
|
Held current
position or other
executive position
with the company
since April 1996
|
|
2006 Annual Meeting
|
|
|
|
|
|
|
|
|
|
|
|
T. P. ONeill
|
|
|
52
|
|
|
Vice President
Operations &
Engineering
|
|
Held current
position or other
engineering
position with the
Company since
February 1980
|
|
2006 Annual Meeting
|
|
|
|
|
|
|
|
|
|
|
|
M. P. Westbrook
|
|
|
46
|
|
|
Vice President
Administration and
Government Affairs
|
|
Held current position or other management position
with the Company since September
1988
|
|
2006 Annual Meeting
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
Age
|
|
|
|
|
|
|
|
|
in
|
|
|
|
Period Held or
|
|
Term of Office
|
Name
|
|
2006
|
|
Office
|
|
Prior Position
|
|
Expires
|
T. R. Marston
|
|
|
53
|
|
|
Vice President Planning &
Treatment
|
|
Held current
position or other
management position
with the Company
since June 1974.
|
|
2006 Annual Meeting
|
|
|
|
|
|
|
|
|
|
|
|
P. J. Bancroft
|
|
|
56
|
|
|
Assistant Treasurer
and Controller
|
|
Held current
position or other
accounting position
with the Company
since October 1979
|
|
2006 Annual Meeting
|
|
|
|
|
|
|
|
|
|
|
|
M. G. DiAcri
|
|
|
60
|
|
|
Corporate Secretary
|
|
Held administrative
position with the
Company since
February 1990
|
|
2006 Annual Meeting
|
For further information regarding the executive officers see the Companys Proxy Statement dated
on or about April 7, 2006.
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCHOLDER
MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
35
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
|
|
|
|
|
|
|
(a)
|
|
|
1.
|
|
|
Financial Statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The report of independent registered public accounting firm and the Companys
Consolidated Financial Statements listed in the Index to Consolidated Financial
Statements on page F-1 hereof are filed as part of this report, commencing on page F-2.
|
|
|
|
|
|
|
|
Page
|
|
Index to Consolidated Financial Statements and Schedule
|
|
|
F-1
|
|
Report of Independent Registered Public
Accounting Firm
|
|
|
F-2
|
|
Consolidated Statements of Income for the years
Ended December 31, 2005, 2004, and 2003
|
|
|
F-4
|
|
Consolidated Statements of Comprehensive Income
for the years ended December 31, 2005, 2004, and 2003
|
|
|
F-4
|
|
Consolidated Balance Sheets at December 31, 2005
and 2004
|
|
|
F-5
|
|
Consolidated Statements of Cash Flows for the
years ended December 31, 2005, 2004, and 2003
|
|
|
F-6
|
|
Notes to Consolidated Financial Statements
|
|
|
F-7
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
|
|
Financial Statement Schedule:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following schedule of the Company is included on the attached page as indicated:
|
|
|
|
Schedule II-Valuation and Qualifying Accounts
and Reserves for the years ended December 31,
2005, 2004, and 2003
|
|
S-1
|
|
|
|
|
|
|
|
|
|
|
|
|
All other schedules provided for in the applicable
regulations of the Securities and Exchange Commission have
been omitted because of the absence of conditions under
which they are required or because the required information
is set forth in the financial statements or notes thereto.
|
36
|
|
|
Exhibits for Connecticut Water Service, Inc. are in the
Index to Exhibits
|
|
E-1
|
|
|
|
|
|
|
|
|
|
Exhibits heretofore filed with the Securities and
Exchange Commission as indicated below are
incorporated herein by reference and made a part
hereof as if filed herewith. Exhibits marked by
asterisk (*) are being filed herewith.
|
F-1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
|
|
|
|
|
|
|
Page
|
|
|
|
|
F-1
|
|
|
|
|
F-2
|
|
|
|
|
F-4
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
|
|
|
S-1
|
|
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Connecticut Water Service, Inc.:
We have completed integrated audits of Connecticut Water Service, Inc.s 2005 and 2004 consolidated
financial statements and of its internal control over financial reporting as of December 31, 2005,
and an audit of its 2003 consolidated financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are
presented below.
Consolidated financial statements and financial statement schedule
In our opinion, the consolidated financial statements listed in the index appearing under Item
15(a)(1) present fairly, in all material respects, the financial position of Connecticut Water
Service, Inc. and its subsidiaries at December 31, 2005 and 2004, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2005
in conformity with accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index appearing under Item
15(a)(2) presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit of financial statements includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
Internal control over financial reporting
Also, in our opinion, managements assessment, included in Managements Report on Internal Control
Over Financial Reporting, appearing under Item 9A, that the Company maintained effective internal
control over financial reporting as of December 31, 2005 based on criteria established in
Internal
Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), is fairly stated, in all material respects, based on those criteria.
Furthermore, in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2005, based on criteria established in
Internal
Control Integrated Framework
issued by the COSO. The Companys management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express
opinions on managements assessment and on the effectiveness of the Companys internal control over
financial reporting based on our audit. We conducted our audit of internal control over financial
reporting in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control
F-3
over financial reporting was maintained in all material respects. An audit of internal control
over financial reporting includes obtaining an understanding of internal control over financial
reporting, evaluating managements assessment, testing and evaluating the design and operating
effectiveness of internal control, and performing such other procedures as we consider necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 30, 2006
F-4
Connecticut Water Service, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, (in thousands, except per share data)
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Operating Revenues
|
|
$
|
47,453
|
|
|
$
|
46,008
|
|
|
$
|
44,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Operation and Maintenance
|
|
|
24,514
|
|
|
|
22,336
|
|
|
|
21,086
|
|
Depreciation
|
|
|
5,724
|
|
|
|
5,570
|
|
|
|
5,483
|
|
Income Taxes
|
|
|
2,338
|
|
|
|
2,594
|
|
|
|
1,912
|
|
Taxes Other Than Income Taxes
|
|
|
5,385
|
|
|
|
5,179
|
|
|
|
5,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
37,961
|
|
|
|
35,679
|
|
|
|
33,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility Operating Income
|
|
|
9,492
|
|
|
|
10,329
|
|
|
|
11,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Deductions), Net of Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) on Property Transactions
|
|
|
(61
|
)
|
|
|
1,206
|
|
|
|
1,029
|
|
Non-Water Sales Earnings
|
|
|
945
|
|
|
|
829
|
|
|
|
692
|
|
Allowance for Funds Used During Construction
|
|
|
638
|
|
|
|
421
|
|
|
|
476
|
|
Other
|
|
|
169
|
|
|
|
120
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Income (Deductions), Net of Taxes
|
|
|
1,691
|
|
|
|
2,576
|
|
|
|
2,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and Debt Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on Long-Term Debt
|
|
|
2,937
|
|
|
|
2,918
|
|
|
|
3,878
|
|
Other Interest Charges
|
|
|
720
|
|
|
|
486
|
|
|
|
373
|
|
Amortization of Debt Expense
|
|
|
360
|
|
|
|
338
|
|
|
|
231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Interest and Debt Expenses
|
|
|
4,017
|
|
|
|
3,742
|
|
|
|
4,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
7,166
|
|
|
|
9,163
|
|
|
|
8,890
|
|
Discontinued Operations, Net of Tax of $1,720, $238 and $123
in 2005, 2004 and 2003, respectively
|
|
|
3,158
|
|
|
|
231
|
|
|
|
320
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
10,324
|
|
|
|
9,394
|
|
|
|
9,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock Dividend Requirement
|
|
|
38
|
|
|
|
38
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Income Applicable to Common Stock
|
|
$
|
10,286
|
|
|
$
|
9,356
|
|
|
$
|
9,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
8,094
|
|
|
|
7,999
|
|
|
|
7,956
|
|
Diluted
|
|
|
8,143
|
|
|
|
8,039
|
|
|
|
8,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Continuing Operations
|
|
$
|
0.89
|
|
|
$
|
1.15
|
|
|
$
|
1.11
|
|
Basic Discontinued Operations
|
|
|
0.38
|
|
|
|
0.02
|
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.27
|
|
|
$
|
1.17
|
|
|
$
|
1.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Continuing Operations
|
|
$
|
0.88
|
|
|
$
|
1.14
|
|
|
$
|
1.11
|
|
Diluted Discontinued Operations
|
|
|
0.38
|
|
|
$
|
0.02
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.26
|
|
|
$
|
1.16
|
|
|
$
|
1.15
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, (in thousands)
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Net Income
|
|
$
|
10,286
|
|
|
$
|
9,356
|
|
|
$
|
9,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified
cash flow hedging instrument net of tax of $188 and $58
in 2005 and 2004, respectively
|
|
|
294
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
|
$
|
10,580
|
|
|
$
|
9,443
|
|
|
$
|
9,172
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Connecticut Water Service, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
December 31, (in thousands, except share amounts)
|
|
2005
|
|
|
2004
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Utility Plant
|
|
$
|
340,755
|
|
|
$
|
333,985
|
|
Construction Work in Progress
|
|
|
5,505
|
|
|
|
7,463
|
|
Utility Plant Acquisition Adjustments
|
|
|
(1,273
|
)
|
|
|
(1,273
|
)
|
|
|
|
|
|
|
|
|
|
|
344,987
|
|
|
|
340,175
|
|
Accumulated Provision for Depreciation
|
|
|
(97,284
|
)
|
|
|
(98,399
|
)
|
|
|
|
|
|
|
|
Net Utility Plant
|
|
|
247,703
|
|
|
|
241,776
|
|
|
|
|
|
|
|
|
Other Property and Investments
|
|
|
4,542
|
|
|
|
4,298
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
|
4,439
|
|
|
|
707
|
|
Restricted Cash
|
|
|
2,628
|
|
|
|
|
|
Accounts Receivable (Less Allowance, 2005 - $256;
2004 - $212)
|
|
|
5,888
|
|
|
|
5,702
|
|
Accrued Unbilled Revenues
|
|
|
3,918
|
|
|
|
4,064
|
|
Materials and Supplies, at Average Cost
|
|
|
860
|
|
|
|
869
|
|
Prepayments and Other Current Assets
|
|
|
1,274
|
|
|
|
3,923
|
|
Short-Term Investment
|
|
|
6,815
|
|
|
|
|
|
Barlaco Assets Held for Sale
|
|
|
324
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
26,146
|
|
|
|
15,265
|
|
|
|
|
|
|
|
|
Unamortized Debt Issuance Expense
|
|
|
7,823
|
|
|
|
7,169
|
|
Unrecovered Income Taxes
|
|
|
12,986
|
|
|
|
16,173
|
|
Post-Retirement Benefits Other Than Pension
|
|
|
1,595
|
|
|
|
1,088
|
|
Goodwill
|
|
|
3,608
|
|
|
|
3,608
|
|
Deferred Charges and Other Costs
|
|
|
1,632
|
|
|
|
1,563
|
|
|
|
|
|
|
|
|
Total Regulatory and Other Long-Term Assets
|
|
|
27,644
|
|
|
|
29,601
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
306,035
|
|
|
$
|
290,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITALIZATION AND LIABILITIES
|
|
|
|
|
|
|
|
|
Common Stockholders Equity:
|
|
|
|
|
|
|
|
|
Common Stock Without Par Value:
|
|
|
|
|
|
|
|
|
Authorized - 15,000,000 Shares Issued
and Outstanding:
|
|
|
|
|
|
|
|
|
2005 - 8,169,627; 2004 - 8,035,199
|
|
$
|
58,005
|
|
|
$
|
55,514
|
|
Retained Earnings
|
|
|
35,777
|
|
|
|
32,264
|
|
Accumulated Other Comprehensive Income
|
|
|
294
|
|
|
|
87
|
|
|
|
|
|
|
|
|
Common Stockholders Equity
|
|
|
94,076
|
|
|
|
87,865
|
|
Preferred Stock
|
|
|
847
|
|
|
|
847
|
|
Long-Term Debt
|
|
|
77,404
|
|
|
|
66,399
|
|
|
|
|
|
|
|
|
Total Capitalization
|
|
|
172,327
|
|
|
|
155,111
|
|
|
|
|
|
|
|
|
Interim Bank Loans Payable
|
|
|
4,750
|
|
|
|
5,650
|
|
Current Portion of Long-Term Debt
|
|
|
2,331
|
|
|
|
326
|
|
Accounts Payable and Accrued Expenses
|
|
|
4,776
|
|
|
|
5,512
|
|
Accrued Taxes
|
|
|
154
|
|
|
|
3,300
|
|
Accrued Interest
|
|
|
699
|
|
|
|
601
|
|
Other Current Liabilities
|
|
|
519
|
|
|
|
559
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
13,229
|
|
|
|
15,948
|
|
|
|
|
|
|
|
|
Advances for Construction
|
|
|
29,355
|
|
|
|
27,157
|
|
|
|
|
|
|
|
|
Contributions in Aid of Construction
|
|
|
45,709
|
|
|
|
46,111
|
|
|
|
|
|
|
|
|
Deferred Federal and State Income Taxes
|
|
|
24,915
|
|
|
|
24,249
|
|
|
|
|
|
|
|
|
Unfunded Future Income Taxes
|
|
|
11,273
|
|
|
|
13,096
|
|
|
|
|
|
|
|
|
Long-Term Compensation Arrangements
|
|
|
7,541
|
|
|
|
7,445
|
|
|
|
|
|
|
|
|
Unamortized Investment Tax Credits
|
|
|
1,686
|
|
|
|
1,823
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
Total Capitalization and Liabilities
|
|
$
|
306,035
|
|
|
$
|
290,940
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Connecticut Water Service, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, (in thousands)
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
10,324
|
|
|
$
|
9,394
|
|
|
$
|
9,210
|
|
Discontinued Operations
|
|
|
3,158
|
|
|
|
235
|
|
|
|
324
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
7,166
|
|
|
|
9,159
|
|
|
|
8,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to Reconcile Net Income to Net Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
Provided by Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Funds Used During Construction
|
|
|
(743
|
)
|
|
|
(436
|
)
|
|
|
(476
|
)
|
Depreciation (including $188 in 2005 and $253 in 2004,
and $165 in 2003 charged to other accounts)
|
|
|
5,912
|
|
|
|
5,763
|
|
|
|
5,648
|
|
Change in Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) in Accounts Receivable and
Accrued Unbilled Revenues
|
|
|
(342
|
)
|
|
|
(769
|
)
|
|
|
(49
|
)
|
(Increase) Decrease in Other Current Assets
|
|
|
2,600
|
|
|
|
288
|
|
|
|
(51
|
)
|
(Increase) in Other Non-Current Items
|
|
|
(556
|
)
|
|
|
(469
|
)
|
|
|
(690
|
)
|
Increase (Decrease) in Accounts Payable, Accrued
Expenses and Other Current Liabilities
|
|
|
(3,603
|
)
|
|
|
1,678
|
|
|
|
(2,069
|
)
|
Increase in Deferred Income Taxes and
Investment Tax Credits, Net
|
|
|
2,332
|
|
|
|
996
|
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
|
|
Total Adjustments
|
|
|
5,600
|
|
|
|
7,051
|
|
|
|
4,713
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash and Cash Equivalents Provided by (Used In) Continuing Operations
|
|
|
12,766
|
|
|
|
16,210
|
|
|
|
13,599
|
|
Net Cash and Cash Equivalents Provided by (Used In) Discontinued Operations
|
|
|
(185
|
)
|
|
|
497
|
|
|
|
184
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash and Cash Equivalents Provided by (Used In) Operating Activities
|
|
|
12,581
|
|
|
|
16,707
|
|
|
|
13,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Financed Additions to Utility Plant
|
|
|
(14,088
|
)
|
|
|
(8,380
|
)
|
|
|
(8,486
|
)
|
Advances from Others for Construction
|
|
|
(1,955
|
)
|
|
|
(2,057
|
)
|
|
|
(592
|
)
|
|
|
|
|
|
|
|
|
|
|
Net Additions to Utility Plant Used in Continuing Operations
|
|
|
(16,043
|
)
|
|
|
(10,437
|
)
|
|
|
(9,078
|
)
|
Net Additions to Utility Plant Used in Discontinued Operations
|
|
|
(171
|
)
|
|
|
(172
|
)
|
|
|
(193
|
)
|
Proceeds from Sale of Barnstable Water Company Assets (Net of $114 in Transaction Costs)
|
|
9,885
|
|
|
|
|
|
|
|
|
Purchase of Short Term Investments
|
|
|
(6,713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash and Cash Equivalents Used in
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities in Continuing Operations
|
|
|
(12,871
|
)
|
|
|
(10,437
|
)
|
|
|
(9,078
|
)
|
Net Cash and Cash Equivalents Used in
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities in Discontinued Operations
|
|
|
(171
|
)
|
|
|
(172
|
)
|
|
|
(193
|
)
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
(13,042
|
)
|
|
|
(10,609
|
)
|
|
|
(9,271
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Proceeds from Interim Bank Loans
|
|
|
4,750
|
|
|
|
5,650
|
|
|
|
9,700
|
|
Net Repayment of Interim Bank Loans
|
|
|
(5,650
|
)
|
|
|
(9,700
|
)
|
|
|
(6,950
|
)
|
Proceeds from Issuance of Common Stock
|
|
|
2,038
|
|
|
|
1,751
|
|
|
|
699
|
|
Proceeds from Issuance of Long-Term Debt
|
|
|
12,282
|
|
|
|
23,581
|
|
|
|
22,930
|
|
Repayment of Long-Term Debt Including Current Portion
|
|
|
(665
|
)
|
|
|
(21,764
|
)
|
|
|
(22,798
|
)
|
Costs Incurred to Issue Long-Term Debt and Common Stock
|
|
|
(934
|
)
|
|
|
(1,309
|
)
|
|
|
(1,359
|
)
|
Advances from Others for Construction
|
|
|
1,955
|
|
|
|
2,057
|
|
|
|
592
|
|
Proceeds from Exercise of Stock Options
|
|
|
455
|
|
|
|
|
|
|
|
|
|
Cash Dividends Paid
|
|
|
(6,838
|
)
|
|
|
(6,525
|
)
|
|
|
(6,393
|
)
|
|
|
|
|
|
|
|
|
|
|
Net Cash and Cash Equivalents Provided by (Used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities in Continuing Operations
|
|
|
7,393
|
|
|
|
(6,259
|
)
|
|
|
(3,579
|
)
|
Net Cash and Cash Equivalents Provided by (Used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities in Discontinued Operations
|
|
|
(3,200
|
)
|
|
|
(254
|
)
|
|
|
(275
|
)
|
|
|
|
|
|
|
|
|
|
|
Net Cash and Cash Equivalents Provided by (Used in) Financing Activites
|
|
|
4,193
|
|
|
|
(6,513
|
)
|
|
|
(3,854
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
|
|
3,732
|
|
|
|
(415
|
)
|
|
|
658
|
|
Cash and Cash Equivalents at Beginning of Year
|
|
|
707
|
|
|
|
1,122
|
|
|
|
464
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year
|
|
$
|
4,439
|
|
|
$
|
707
|
|
|
$
|
1,122
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash Contributed Utility Plant (see Note 1 for details)
|
|
$
|
1,231
|
|
|
$
|
2,337
|
|
|
$
|
2,930
|
|
Short-term Investment of
Bond Proceeds Held in Restricted Cash
|
|
$
|
2,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Paid for Continuing Operations During the Year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
3,511
|
|
|
$
|
3,440
|
|
|
$
|
4,372
|
|
State and Federal Income Taxes
|
|
$
|
3,515
|
|
|
$
|
1,383
|
|
|
$
|
2,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Paid for Discontinued Operations During the Year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
106
|
|
|
$
|
141
|
|
|
$
|
150
|
|
State and Federal Income Taxes
|
|
$
|
410
|
|
|
$
|
31
|
|
|
$
|
52
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-7
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
-The consolidated financial statements include the operations of Connecticut
Water Service, Inc. (the Company), an investor-owned holding company and its ten wholly owned
subsidiaries, listed below:
The Connecticut Water Company (Connecticut Water)
Crystal Water Utilities Corporation
The Crystal Water Company of Danielson (Crystal Water)
Chester Realty, Inc.
New England Water Utility Services, Inc.
Connecticut Water Emergency Services, Inc.
The Barnstable Holding Company
The Barnstable Water Company (Barnstable Water)
BARLACO, Inc.
The Unionville Water Company (Unionville)
Connecticut Water, Crystal Water, and Unionville (our water companies) are public water utility
companies serving 81,763 customers in 41 towns throughout Connecticut.
Crystal Water Utilities
Corporation is a holding company, owning the stock of The Crystal Water Company
of Danielson and three small rental properties.
Chester Realty, Inc. is a real estate company whose net profits from rental of property are
included in the Other Income (Deductions), Net of Taxes section of the Consolidated Statements of
Income in the Non-Water Sales Earnings category.
New England Water Utility Services, Inc. is engaged in water-related services, including the
Linebacker
â
program, and contract operations. Its earnings are included in the Non-Water
Sales Earnings category in the Other Income (Deductions), Net of Taxes section of the Consolidated
Statements of Income.
Connecticut Water Emergency Services, Inc. is a provider of emergency drinking water and pool water
via tanker trucks. Its net earnings are included in the Non-Water Sales Earnings category in the
Other Income (Deductions), Net of Taxes section of the Consolidated Statements of Income.
Barnstable Holding Company is a holding company, owning the stock of Barnstable Water Company and
BARLACO, Inc. Barnstable Water was a public water utility company serving customers in Barnstable,
Massachusetts, until the Company sold the assets of Barnstable Water to the Town of Barnstable in
May 2005. After the sale and through February 2006, Barnstable Water operated the system under a
management contract for the Town of Barnstable. In February 2006, the Town of Barnstable
terminated the management contract with Barnstable Water. BARLACO, Inc. is a real estate company
which held real estate for sale. In February 2006, BARLACO sold all of its real estate holdings to
the Town of Barnstable.
Intercompany accounts and transactions have been eliminated.
PUBLIC UTILITY REGULATION
Three of our water companies are subject to regulation for rates and
other matters by the Connecticut Department of Public Utility Control (DPUC) and follow accounting
policies prescribed by the DPUC. The Company prepares its financial statements in accordance with
Generally Accepted Accounting Principles in the United States of America (GAAP), which includes the
provisions of Statement of Financial Accounting Standards No. 71, Accounting for the Effects of
Certain Types of Regulation, (FAS 71). FAS 71 requires cost-based, rate-regulated enterprises such
as our water companies to reflect the impact of regulatory decisions in their financial statements.
The state regulators, through the rate regulation process, can create regulatory assets that result
when costs are allowed for ratemaking purposes in a period after the period in which the costs
would be charged to expense by an unregulated enterprise. The balance sheets include regulatory
assets and liabilities as appropriate, primarily related to income taxes and post-retirement
benefit costs. In accordance with FAS 71, costs which benefit future periods, such as tank
painting, are expensed over the periods they benefit. The Company believes, based on current
regulatory circumstances, that the regulatory assets recorded are likely to be recovered and that
its use of regulatory accounting is appropriate and in accordance with the provisions of FAS 71.
Material regulatory assets are earning a return.
USE OF ESTIMATES
- The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from these estimates.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-8
REVENUES
- Most of our water customers are billed quarterly, with the exception of larger
commercial and industrial customers, as well as public fire protection customers who are billed
monthly. Most customers, except fire protection customers are metered. Revenues from metered
customers are based on their usage multiplied by approved, regulated rates. Public fire protection
charges are based on the length and diameter of the water main, and number of hydrants in service.
Private fire protection charges are based on the diameter of the connection to the water main. Our
water companies accrue an estimate for the amount of revenues relating to sales earned but unbilled
at the end of each quarter.
UTILITY PLANT
Utility plant is stated at the original cost of such property when first devoted to
public service. In the case of acquisitions, the difference between the original cost and the cost
to our water companies is charged or credited to utility plant acquisition adjustments. Utility
plant accounts are charged with the cost of improvements and replacements of property including an
allowance for funds used during construction. Retired or disposed of depreciable plant is charged
to accumulated provision for depreciation together with any costs applicable to retirement, less
any salvage received. Maintenance of utility plant is charged to expense. Accounting policies
relating to other areas of utility plant are listed below:
Allowance For Funds Used During Construction
- Allowance for Funds Used During Construction
(AFUDC) is the cost of debt and equity funds used to finance the construction of our water
companies utility plant. Generally, utility plant under construction is not recognized as part
of rate base for ratemaking purposes until facilities are placed into service, and accordingly,
AFUDC is charged to the construction cost of utility plant. Capitalized AFUDC, which does not
represent current cash income, is recovered through rates over the service lives of the
facilities.
In order for certain water system acquisitions made in and after 1995 to not degrade earnings,
Connecticut Water has received DPUC approval to record AFUDC on certain of its investments in
these systems. Through December 31, 2005, Connecticut Water has capitalized approximately $3.5
million of AFUDC relating to financing these acquisitions. This amount is expected to be
recovered in Connecticut Waters next rate case.
Each companys allowed rate of return on rate base is used to calculate its AFUDC.
Customers Advances For Construction, Contributed Plant And Contributions In Aid Of
Construction
- Under the terms of construction contracts with real estate developers and others,
our water companies periodically receive either advances for the costs of new main
installations or title to the main after it is constructed and financed by the developer.
Refunds are made, without interest, as services are connected to the main, over periods not
exceeding fifteen years and not in excess of the original advance. Unrefunded balances, at the
end of the contract period, are credited to contributions in aid of construction (CIAC) and are
no longer refundable.
Utility Plant is added in two ways. The majority of the Companys plant additions occur from
direct investment of Company funds that originated through operating activities or financings. The
Company manages the construction of these plant additions. These plant additions are part of the
Companys depreciable utility plant and are generally part of rate base. The Companys rate base is
a key component of how its regulated rates are set, and is recovered through the depreciation
component of the Companys rates. The second way in which plant additions occur are through
developer advances and contributions. Under this scenario either the developer funds the additions
through payments to the Company, who in turn manages the construction of the project, or the
developer pays for the plant construction directly and contributes the asset to the Company after
it is complete. Plant additions that are financed by a developer, either directly or indirectly,
are excluded from the Companys rate base and not recovered through the rates process, and are also
not depreciated.
During the past three years the following are the components that comprise Net Additions to Utility
Plant:
|
|
|
|
|
|
|
|
|
|
|
|
|
in thousands
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
Additions to Utility Plant:
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Financed
|
|
$
|
14,088
|
|
|
$
|
8,380
|
|
|
$
|
8,486
|
|
Allowance for Funds Used During Construction
|
|
|
743
|
|
|
|
436
|
|
|
|
476
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Utility Plant Increase to Rate Base
|
|
|
14,831
|
|
|
|
8,816
|
|
|
|
8,962
|
|
Non-Cash Contributed Plant
|
|
|
1,231
|
|
|
|
2,337
|
|
|
|
2,930
|
|
Advances from Others for Construction
|
|
|
1,955
|
|
|
|
2,057
|
|
|
|
592
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Gross Additions to Utility Plant
|
|
|
18,017
|
|
|
|
13,210
|
|
|
|
12,484
|
|
Less: Non-Cash Contributed Plant
|
|
|
1,231
|
|
|
|
2,337
|
|
|
|
2,930
|
|
|
|
|
|
|
|
|
|
|
|
Net Additions to Utility Plant Continuing Operations
|
|
|
16,786
|
|
|
|
10,873
|
|
|
|
9,554
|
|
Plus: Discontinued Operations
|
|
|
171
|
|
|
|
172
|
|
|
|
193
|
|
|
|
|
|
|
|
|
|
|
|
Net Additions to Utility Plant
|
|
$
|
16,957
|
|
|
$
|
11,045
|
|
|
$
|
9,747
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
- Over 99% of the Companys depreciable plant is owned by its three water
companies. Depreciation is computed on a straight-line basis at various rates as approved by the
state regulators on a company by company basis. Depreciation allows the utility to recover the
investment in utility plant over its useful life. The overall consolidated company depreciation
rate, based on the average balances of depreciable property, was 2.1% for 2005, 2004, and 2003.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-9
INCOME TAXES
- The Company provides income tax expense for its utility operations in
accordance with the regulatory accounting policies of the applicable jurisdictions. The
Connecticut DPUC requires the flow-through method of accounting for most state tax temporary
differences as well as for certain federal temporary differences.
The Company computed deferred tax reserves for all temporary book-tax differences using the
liability method prescribed in FAS 109 Accounting for Income Taxes. Under the liability method,
deferred income taxes are recognized at currently enacted income tax rates to reflect the tax
effect of temporary differences between the financial reporting and tax bases of assets and
liabilities. Such temporary differences are the result of provisions in the income tax law that
either require or permit certain items to be reported on the income tax return in a different
period than they are reported in the financial statements. Deferred tax liabilities that have not
been reflected in tax expense due to regulatory treatment are described as unfunded future income
taxes, and are expected to be recoverable in future years rates.
The Company believes that all deferred income tax assets will be realized in the future. The
majority of all unfunded future income taxes relate to deferred state income taxes.
Deferred Federal Income Taxes consist primarily of amounts that have been provided for accelerated
depreciation subsequent to 1981, as required by federal income tax regulations. Deferred taxes
have also been provided for temporary differences in the recognition of certain expenses for tax
and financial statement purposes as allowed by DPUC ratemaking policies.
MUNICIPAL TAXES
- Municipal taxes are generally expensed over the twelve-month period beginning on
July 1 following the lien date, corresponding with the period in which the municipal services are
provided.
STOCK OPTIONS
- The Company has the ability to issue stock options through its Performance Stock
Program (PSP). The Company has not issued any options since 2003. The PSP is described more
completely in Note 13. FAS No. 123 Accounting for Stock-Based Compensation, encourages entities
to recognize as expense over the vesting period the fair value of all stock-based awards on the
date of grant. Alternatively, FAS No. 123 also allows entities to continue to apply the provisions
of Accounting Principles Board (APB) opinion No. 25 Accounting for Stock Issued to Employees and
provide pro forma net income and pro forma earnings per share disclosures for employee stock grants
as if the fair-value-based method defined in FAS No. 123 had been applied. Please see New
Accounting Pronouncements below for pending changes on rules for accounting relating to stock
options.
The Company accounts for the stock options it has issued under the recognition and measurement
principles of APB No. 25. As such, no compensation cost related to the stock options is reflected
in Net Income, as all options issued through the PSP had an exercise price equal to market value of
the underlying common stock on the date of grant. The following table illustrates the effect on
Net Income and Earnings Per Share if the Company had applied the fair value recognition provisions
of FAS No. 123 to the stock options issued.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
(in thousands, except for per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, applicable to common stockholders
as reported
|
|
$
|
10,286
|
|
|
$
|
9,356
|
|
|
$
|
9,172
|
|
Add: Total stock-based employee
compensation expense determined under
intrinsic value based method for all awards,
net of related tax effects
|
|
|
233
|
|
|
|
137
|
|
|
|
151
|
|
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards, net
of related tax effects
|
|
|
(232
|
)
|
|
|
(408
|
)
|
|
|
(425
|
)
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income, applicable to common
stockholders
|
|
$
|
10,287
|
|
|
$
|
9,085
|
|
|
$
|
8,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic as reported
|
|
$
|
1.27
|
|
|
$
|
1.17
|
|
|
$
|
1.15
|
|
|
|
|
|
|
|
|
|
|
|
Basic pro forma
|
|
$
|
1.27
|
|
|
$
|
1.14
|
|
|
$
|
1.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted as reported
|
|
$
|
1.26
|
|
|
$
|
1.16
|
|
|
$
|
1.15
|
|
|
|
|
|
|
|
|
|
|
|
Diluted pro forma
|
|
$
|
1.26
|
|
|
$
|
1.13
|
|
|
$
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
Under the Companys PSP, restricted shares of Common Stock, common stock equivalents or cash units
may be awarded annually to officers and key employees. Based upon the occurrence of certain
events, including the achievement of goals established by the Compensation Committee, the
restrictions on the stock can be removed. Amounts charged to expense pursuant to the PSP were
$265,000, $228,000 and $251,000, for 2005, 2004 and 2003, respectively. These amounts are included
in Net Income, as reported.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-10
UNAMORTIZED DEBT ISSUANCE EXPENSE
The issuance costs of long-term debt, including the remaining
balance of issuance costs on long-term debt issues that have been refinanced prior to maturity, and
related call premiums, are amortized over the respective lives of the outstanding debt, as approved
by the state regulators.
GOODWILL
The Company accounts for goodwill in accordance with FAS No. 142, Goodwill and Other
Intangible Assets (FAS 142). FAS 142 requires that goodwill no longer be amortized on a ratable
basis. In accordance with FAS 142, goodwill must be allocated to reporting units and reviewed for
impairment at least annually. The Company utilized a net income valuation approach in the
performance of the annual goodwill impairment test.
EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share for the years ended December 31, 2005, 2004, and 2003.
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Basic earnings per share from Continuing Operations
|
|
$
|
0.89
|
|
|
$
|
1.15
|
|
|
$
|
1.12
|
|
Dilutive effect of unexercised stock options
|
|
|
0.01
|
|
|
|
.01
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.88
|
|
|
$
|
1.14
|
|
|
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income from Continuing Operations
|
|
$
|
7,166
|
|
|
$
|
9,163
|
|
|
$
|
8,890
|
|
Diluted income from Continuing Operations
|
|
$
|
7,166
|
|
|
$
|
9,163
|
|
|
$
|
8,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
8,094
|
|
|
|
7,999
|
|
|
|
7,956
|
|
Dilutive effect of unexercised stock options
|
|
|
19
|
|
|
|
40
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
8,113
|
|
|
|
8,039
|
|
|
|
8,002
|
|
|
RECLASSIFICATIONS AND REVISIONS
Certain reclassifications have been made to conform previously
reported data to the current presentation.
Within the Statements of Cash Flows we have revised the classification of certain items to more
clearly reflect the Developer Advances and Contributions that regularly occurred within the
regulated water subsidiaries for 2004 and 2003. The non-cash contribution of completed utility
plant by developers to the Company has been eliminated from both
Investing Activities
and
Financing
Activities
. In addition, we have eliminated AFUDC and any accrual of construction costs that had
been included in the
Operating Activities
and
Investing Activities
sections of the Statements of
Cash Flows. The resulting revised classifications have no effect on
Net Increase (Decrease) in
Cash and Cash Equivalents
during either period. For additional information please see the Utility
Plant section of Footnote 1.
NEW ACCOUNTING PRONOUNCEMENTS
- In March 2005, the Financial Accounting Standards Board
(FASB) issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations.
The Interpretation clarifies the accounting for a conditional asset retirement obligation as
identified in FAS No. 143, Accounting for Asset Retirement Obligations. Interpretation No. 47 is
effective for our 2006 fiscal year. We believe there will be no material effect on the Companys
financial position or results of operations upon adoption of this Interpretation.
In December 2004, the FASB issued SFAS No. 123(R) Share Based Payment. This statement is a
revision to SFAS 123 and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees,
and amends FASB Statement No. 95, Statement of Cash Flows. This statement requires a public
entity to expense the cost of employee services received in exchange for an award of equity
instruments. This statement also provides guidance on valuing and expensing these awards, as well
as disclosure requirements of these equity arrangements. This statement is effective for the first
interim reporting period that begins after December 15, 2005, and will be effective for the Company
in its first quarter of 2006.
SFAS 123(R) permits public companies to choose between the following two adoption methods:
1. A modified prospective method in which compensation cost is recognized beginning with
the effective date (a) based on the requirements of SFAS 123(R) for all share-based payments
granted after the effective date and (b) based on the requirements of Statement 123 for all
awards granted to employees prior to the effective date of SFAS 123R that remain unvested on
the effective date, or
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-11
2. A modified retrospective method which includes the requirements of the modified
prospective method described above, but also permits entities to restate based on the
amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either
(a) all prior periods presented or (b) prior interim periods of the year of adoption.
As permitted by SFAS 123, we currently account for share-based payments to employees using APB
Opinion 25s intrinsic value method and, as such, we generally recognize no compensation cost for
employee stock options. Valuation of employee stock options under SFAS 123(R) is similar to SFAS
123, with minor exceptions. For information about what our reported results of operations and
earnings per share would have been had we adopted SFAS 123, please see the discussion under the
heading Stock Based Compensation in Note 1 to our Consolidated Financial Statements. Accordingly,
the adoption of SFAS 123(R)s fair value method will not have a significant impact on our results
of operations, or on our overall financial position. SFAS 123(R) also requires the benefits of tax
deductions in excess of recognized compensation cost to be reported as a financing cash flow,
rather than as an operating cash flow as required under current literature. This requirement will
reduce net operating cash flows and increase net financing cash flows in periods after adoption.
The Company is currently assessing its valuation options allowed under FAS 123(R), however, we
expect FAS 123(R) to impact earnings in fiscal 2006 by approximately $35,000 before taxes using the
modified prospective method of adoption.
In November 2004, the FASB issued SFAS No. 151, Inventory Costs, which is effective for our 2006
fiscal year. This statement amends previous guidance as it relates to inventory valuation to
clarify that abnormal amounts of idle facility, expense, freight, handling costs, and spoilage
should be recorded as a current period charge. We do not anticipate a significant effect on
financial position or operations upon adoption of this statement.
In June 2005, the FASB issued SFAS 154 Accounting Changes and Error Corrections. SFAS 154
changes the requirements for the accounting for, and reporting of, a change in accounting
principle. Previously, most voluntary changes in accounting principles were required to be
recognized by way of a cumulative effect adjustment within net income during the period of change.
SFAS 154 requires retrospective application to prior periods financial statements unless it is
impracticable to determine either the period-specific effects or the cumulative effect of the
change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December
15, 2005; however, SFAS 154 does not change the transition provisions of any existing accounting
pronouncements.
NOTE 2: SALE OF BARNSTABLE WATER COMPANY ASSETS DISCONTINUED OPERATIONS
On May 20, 2005, the Company completed the sale of the assets of one of its Massachusetts
subsidiaries, the Barnstable Water Company (BWC), to the Town of Barnstable, Massachusetts. Upon
completion of the sale, the Town of Barnstable and BWC entered into a one year management contract
for BWC to provide the Town with full operating and management services for the water systems
operations. Under the terms of the one year management contract, BWC was paid $130,000 a month for
operating and management services performed by BWC for the Town of Barnstable. This management
contract could be terminated within the 12 month period by 30 days written notice by either party.
In January 2006, the Company received notice of termination. The last day of the operating
contract was February 7, 2006.
The Company received $10.0 million in gross proceeds from the sale of its water utility assets,
advances, and contribution in aid of construction. The gain, net of income taxes of $1.6 million
was $3.0 million in 2005 and has been included in Net Income from Discontinued Operations.
The sale of Barnstables assets has been classified as Discontinued Operations in the
Consolidated Statements of Income as there will be no continuing involvement due to the termination
of the management contract with the Town of Barnstable. All of the results of BWC, including
current and prior years and the gain on the sale of the utilitys assets, have been reclassified
and are included as Discontinued Operations. At December 31, 2005, assets held for sale of
approximately $300,000 remain relating to BARLACO, which was sold in February 2006.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-12
Discontinued Operations for the years ended December 31, 2005, 2004 and 2003 was comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Year ended December 31,
|
|
|
2005
|
|
2004
|
|
2003
|
Water Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenues
|
|
$
|
802
|
|
|
$
|
2,485
|
|
|
$
|
2,517
|
|
Income Taxes
|
|
$
|
(9
|
)
|
|
$
|
191
|
|
|
$
|
96
|
|
Utility Operating Income
|
|
$
|
(11
|
)
|
|
$
|
155
|
|
|
$
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services and Rentals:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,067
|
|
|
$
|
163
|
|
|
$
|
115
|
|
Income Taxes
|
|
$
|
132
|
|
|
$
|
47
|
|
|
$
|
27
|
|
Income from Services and Rentals
|
|
$
|
213
|
|
|
$
|
76
|
|
|
$
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on Sale of Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Proceeds
|
|
$
|
10,000
|
|
|
$
|
|
|
|
$
|
|
|
Income Taxes
|
|
$
|
1,597
|
|
|
$
|
|
|
|
$
|
|
|
Gain on Sale of Assets
|
|
$
|
2,956
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Income from Discontinued
Operations
|
|
$
|
3,158
|
|
|
$
|
231
|
|
|
$
|
320
|
|
|
|
|
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-13
NOTE 3: INCOME TAX EXPENSE
Income Tax Expense from Continuing Operations for the years ended December 31, is comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(
in thousands
)
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Federal Classified as Operating Expense from Continuing Operations
|
|
$
|
2,400
|
|
|
$
|
2,401
|
|
|
$
|
1,666
|
|
Federal Classified as Other Income from Continuing Operation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Land Sales
|
|
|
132
|
|
|
|
|
|
|
|
(11
|
)
|
Land Donation
|
|
|
87
|
|
|
|
(280
|
)
|
|
|
(246
|
)
|
Non-Water Sales
|
|
|
467
|
|
|
|
411
|
|
|
|
330
|
|
Other
|
|
|
179
|
|
|
|
(74
|
)
|
|
|
(66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Federal Income Tax Expense from Continuing Operations
|
|
|
3,265
|
|
|
|
2,458
|
|
|
|
1,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State Classified as Operating Expense from Continuing Operations
|
|
|
(62
|
)
|
|
|
193
|
|
|
|
246
|
|
State Classified as Other Income from Continuing Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Land Sales
|
|
|
31
|
|
|
|
|
|
|
|
(3
|
)
|
Land Donation
|
|
|
225
|
|
|
|
(965
|
)
|
|
|
(733
|
)
|
Non-Water Sales
|
|
|
119
|
|
|
|
118
|
|
|
|
86
|
|
Other
|
|
|
34
|
|
|
|
31
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total State Income Tax Expense (Benefit) from Continuing Operations
|
|
|
347
|
|
|
|
(623
|
)
|
|
|
(382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income Tax Expense from Continuing Operations
|
|
$
|
3,612
|
|
|
$
|
1,835
|
|
|
$
|
1,291
|
|
|
The components of the Federal and State income tax provisions from Continuing Operations are:
|
|
|
|
|
|
|
|
|
|
|
|
|
(
in thousands
)
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Current from Continuing Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1,758
|
|
|
$
|
1,817
|
|
|
$
|
(181
|
)
|
State
|
|
|
(
377
|
)
|
|
|
240
|
|
|
|
460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current from Continuing Operations
|
|
|
1,381
|
|
|
|
2,057
|
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Income Taxes from Continuing Operations, Net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Tax Credit
|
|
|
(62
|
)
|
|
|
(64
|
)
|
|
|
(62
|
)
|
Capitalized Interest and AFUDC
|
|
|
37
|
|
|
|
3
|
|
|
|
25
|
|
Depreciation
|
|
|
721
|
|
|
|
868
|
|
|
|
2,187
|
|
Other
|
|
|
810
|
|
|
|
(167
|
)
|
|
|
(296
|
)
|
|
Total Federal from Continuing Operations
|
|
|
1,506
|
|
|
|
640
|
|
|
|
1,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State from Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
1
|
|
|
|
8
|
|
Other
|
|
|
725
|
|
|
|
(863
|
)
|
|
|
(850
|
)
|
|
Total State from Continuing Operations
|
|
|
725
|
|
|
|
(862
|
)
|
|
|
(842
|
)
|
|
Total Deferred Income Taxes from Continuing Operations, Net
|
|
|
2,231
|
|
|
|
(222
|
)
|
|
|
1,012
|
|
|
Total from Continuing Operations
|
|
|
3,612
|
|
|
$
|
1,835
|
|
|
$
|
1,291
|
|
|
Deferred income tax (assets) and liabilities are categorized as follows on the Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
(
in thousands
)
|
|
2005
|
|
|
2004
|
|
|
Unrecovered Income Taxes
|
|
$
|
(12,986
|
)
|
|
$
|
(16,173
|
)
|
Deferred Federal and State Income Taxes
|
|
|
24,915
|
|
|
|
24,249
|
|
Unfunded Future Income Taxes
|
|
|
11,273
|
|
|
|
13,096
|
|
Unamortized Investment Tax Credit
|
|
|
1,686
|
|
|
|
1,823
|
|
Other
|
|
|
(68
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
Net Deferred Income Tax Liability
|
|
$
|
24,820
|
|
|
$
|
22,986
|
|
|
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-14
Deferred income tax (assets) and liabilities are comprised of the following:
|
|
|
|
|
|
|
|
|
(
in thousands
)
|
|
2005
|
|
|
2004
|
|
|
Charitable Contribution Carryforward (1)
|
|
$
|
290
|
|
|
$
|
(1,108
|
)
|
Tax Credit Carryforward (2)
|
|
|
(1,335
|
)
|
|
|
(1,292
|
)
|
Alternative Minimum Tax Carryforward
|
|
|
(225
|
)
|
|
|
(285
|
)
|
Prepaid Income Taxes on CIAC
|
|
|
(128
|
)
|
|
|
(179
|
)
|
Prepaid FIT on Services
|
|
|
(126
|
)
|
|
|
(107
|
)
|
Other Comprehensive Income
|
|
|
188
|
|
|
|
58
|
|
Accelerated Depreciation
|
|
|
24,628
|
|
|
|
24,247
|
|
Net of AFUDC and Capitalized Interest
|
|
|
225
|
|
|
|
161
|
|
Unamortized Investment Tax Credit
|
|
|
1,686
|
|
|
|
1,823
|
|
Other
|
|
|
(383
|
)
|
|
|
(332
|
)
|
|
|
|
|
|
|
|
|
|
|
Net Deferred Income Tax Liability
|
|
$
|
24,820
|
|
|
$
|
22,986
|
|
|
|
|
|
(1)
|
|
2005 charitable contribution carryover expires beginning in 2006 and ending in 2009.
|
|
(2)
|
|
State tax credit carry-forwards expire beginning 2016 and ending in 2019.
|
The calculation of Pre-Tax Income from Continuing Operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(
in thousands
)
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Pre-Tax Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$
|
7,166
|
|
|
$
|
9,163
|
|
|
$
|
8,890
|
|
Income Taxes
|
|
|
3,612
|
|
|
|
1,835
|
|
|
|
1,291
|
|
|
Total Pre-Tax Income from Continuing Operations
|
|
$
|
10,778
|
|
|
$
|
10,998
|
|
|
$
|
10,181
|
|
|
In accordance with required regulatory treatment, deferred income taxes are not provided for
certain timing differences. This treatment, along with other items, causes differences between the
statutory income tax rate and the effective income tax rate. The differences between the effective
income tax rate recorded by the Company and the statutory federal tax rate are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Federal Statutory Income Tax Rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
Tax Effect of Differences:
|
|
|
|
|
|
|
|
|
|
|
|
|
State Income Taxes Net of Federal Benefit:
|
|
|
|
|
|
|
|
|
|
|
|
|
State Income Tax Excluding Land Donation Credit
|
|
|
0.7
|
%
|
|
|
2.1
|
%
|
|
|
2.3
|
%
|
Land Donation Credit
|
|
|
1.4
|
%
|
|
|
(5.8
|
%)
|
|
|
(4.8
|
%)
|
Depreciation
|
|
|
1.6
|
%
|
|
|
1.7
|
%
|
|
|
0.3
|
%
|
Charitable Contribution Land Donation
|
|
|
0.8
|
%
|
|
|
(5.5
|
%)
|
|
|
(4.9
|
%)
|
Pension Costs
|
|
|
(3.3
|
%)
|
|
|
(2.7
|
%)
|
|
|
(0.3
|
%)
|
Debt Refinancing Costs
|
|
|
0.7
|
%
|
|
|
(3.7
|
%)
|
|
|
(4.6
|
%)
|
Allowance for Funds Used During Construction
|
|
|
(1.4
|
%)
|
|
|
(1.2
|
%)
|
|
|
(1.3
|
%)
|
Change in Estimate of Prior Year Income Tax Expense
|
|
|
(2.5
|
%)
|
|
|
(1.4
|
%)
|
|
|
(12.1
|
%)
|
Common Stock Equivalents
|
|
|
(
0.4
|
%)
|
|
|
0.4
|
%
|
|
|
1.0
|
%
|
Other
|
|
|
1.9
|
%
|
|
|
(1.2
|
%)
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Income Tax Rate for Continuing Operations
|
|
|
33.5
|
%
|
|
|
16.7
|
%
|
|
|
12.7
|
%
|
|
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-15
NOTE 4: COMMON STOCK
The Company has 15,000,000 authorized shares of common stock, no par value. A summary of the
changes in the common stock accounts for the period January 1, 2003 through December 31, 2005,
appears below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
|
|
|
|
|
|
|
|
(
in thousands, except share data)
|
|
Shares
|
|
|
Amount
|
|
|
Expense
|
|
|
Total
|
|
Balance, January 1, 2003
|
|
|
7,939,713
|
|
|
$
|
54,661
|
|
|
$
|
(1,592
|
)
|
|
$
|
53,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock and equivalents issued through
Performance Stock Program
|
|
|
8,347
|
|
|
|
305
|
|
|
|
|
|
|
|
305
|
|
Stock Options Exercised
|
|
|
19,319
|
|
|
|
394
|
|
|
|
(2
|
)
|
|
|
392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2003
|
|
|
7,967,379
|
|
|
$
|
55,360
|
|
|
$
|
(1,594
|
)
|
|
$
|
53,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock and equivalents issued through
Performance Stock Program
|
|
|
6,893
|
|
|
|
138
|
|
|
|
|
|
|
|
138
|
|
Dividend Reinvestment Plan
|
|
|
60,927
|
|
|
|
1,622
|
|
|
|
(3
|
)
|
|
|
1,619
|
|
Tax adjustment on prior year stock
options exercised
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2004
|
|
|
8,035,199
|
|
|
$
|
57,111
|
|
|
$
|
(1,597
|
)
|
|
$
|
55,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock and equivalents issued through
Performance Stock Program
|
|
|
29,379
|
|
|
|
99
|
|
|
|
|
|
|
|
99
|
|
Dividend Reinvestment Plan
|
|
|
60,486
|
|
|
|
1,529
|
|
|
|
|
|
|
|
1,529
|
|
Stock Options Exercised
|
|
|
44,563
|
|
|
|
865
|
|
|
|
(2
|
)
|
|
|
863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2005
(1)
|
|
|
8,169,627
|
|
|
$
|
59,604
|
|
|
$
|
(1,599
|
)
|
|
$
|
58,005
|
|
|
|
|
|
(1)
|
|
Includes 22,376 restricted shares and 49,931 common stock equivalent shares issued through
the Performance Stock Programs through December 31, 2005.
|
The Companys Shareholder Rights Plan was authorized by the Board of Directors on August 12, 1998.
Pursuant to the Plan, the Board authorized a dividend distribution of one Right to purchase one
one-hundredth of a share of Series A Junior Participating Preference Stock of the Company for each
outstanding share of the Companys common stock. The distribution was effected October 11, 1998.
Upon the terms of the Shareholder Rights Plan, each Right will entitle shareholders to buy one
one-hundredth of a share of Series A Junior Participating Preference Stock at a purchase price of
$90, and the Rights will expire October 11, 2008. The Rights will be exercisable only if a person
or group acquires 15% or more of the Companys common stock, or announces a tender or exchange
offer for 15% or more of the Companys common stock. The Board will be entitled to redeem the
Rights at $0.01 per Right at any time before such acquisition occurs, and upon certain conditions
after such a position has been acquired.
Upon the acquisition of 15% or more of the Companys common stock by any person or group, each
Right will entitle its holder to purchase, at the Rights purchase price, a number of shares of the
Companys common stock having a market value equal to twice the Rights purchase price. In such
event, Rights held by the acquiring person will not be allowed to purchase any of the Companys
common stock or other securities of the Company. If, after the acquisition of 15% or more of the
Companys common stock by any person or group, the Company should consolidate with or merge with
and into any person and the Company should not be the surviving company, or if the Company should
be the surviving company and all or part of its common stock should be exchanged for the securities
of any other person, or if more than 50% of the assets or earning power of the Company were sold,
each Right (other than Rights held by the acquiring person, which will become void) will entitle
its holder to purchase, at the Rights purchase price, a number of shares of the acquiring
Companys common stock having a market value at that time equal to twice the Rights purchase
price.
The Company may not pay any dividends on its common stock unless full cumulative dividends to the
preceding dividend date for all outstanding shares of Preferred Stock of the Company have been paid
or set aside for
payment. All such Preferred Stock dividends have been paid.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-16
NOTE 5: ANALYSIS OF RETAINED EARNINGS
The summary of the changes in Retained Earnings for the period January 1, 2003 through December 31,
2005, appears below:
|
|
|
|
|
|
|
|
|
|
|
|
|
(
in thousands, except per share data
)
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Balance, Beginning of Year
|
|
$
|
32,264
|
|
|
$
|
29,549
|
|
|
$
|
26,906
|
|
Net Income
|
|
|
10,324
|
|
|
|
9,394
|
|
|
|
9,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,588
|
|
|
|
38,943
|
|
|
|
36,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends Declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Preferred Stock, Series A, $.80 Per Share
|
|
|
12
|
|
|
|
12
|
|
|
|
12
|
|
Cumulative Preferred Stock, Series $.90, $.90 Per Share
|
|
|
26
|
|
|
|
26
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 $0.845 Per Share
|
|
|
6,773
|
|
|
|
|
|
|
|
|
|
2004 $0.835 Per Share
|
|
|
|
|
|
|
6,641
|
|
|
|
|
|
2003 $0.825 Per Share
|
|
|
|
|
|
|
|
|
|
|
6,529
|
|
|
|
|
|
6,811
|
|
|
|
6,679
|
|
|
|
6,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, End of Year
|
|
$
|
35,777
|
|
|
$
|
32,264
|
|
|
$
|
29,549
|
|
|
NOTE 6: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each of the following
financial instruments.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid instruments with original
maturities at the time of purchase of three months or less. The carrying amount approximates fair
value.
LONG-TERM DEBT
The fair value of the Companys fixed rate long-term debt is based upon borrowing
rates currently available to the Company. As of December 31, 2005 and 2004, the estimated fair
value of the
Companys long-term debt was $75,609,000 and $59,149,000, respectively, as compared to the carrying
amounts of $77,404,000 and $66,399,000, respectively.
The fair values shown above have been reported to meet the disclosure requirements of FAS No. 107,
Disclosures About Fair Values of Financial Instruments and do not purport to represent the
amounts at which those obligations would be settled.
INTEREST RATE SWAP
In 2004, the Connecticut Water Company entered into a five-year interest rate
swap associated with its $12.5 million 2004 series variable rate unsecured water facilities revenue
refinancing bonds. This was done to manage the Companys exposure to fluctuations in prevailing
interest rates. The swap agreement qualifies for hedge treatment under FAS No. 133 Accounting for
Derivative Instruments and Hedging Activities. The fair value of the interest rate swap included
in the Companys Consolidated Balance sheet in Deferred Charges and Other Costs was approximately
$482,000 and $145,000 at December 31, 2005 and December 31, 2004, respectively. Changes in the
fair value of this derivative instrument are recorded in Accumulated Other Comprehensive Income
in Common Stockholders Equity.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-17
NOTE 7: LONG-TERM DEBT
Long-Term Debt at December 31, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(
in thousands
)
|
|
|
|
|
2005
|
|
|
2004
|
|
|
Unsecured Water Facilities Revenue Bonds
|
|
|
|
|
|
|
|
|
|
5.05
|
%
|
|
1998 Series A, Due 2028
|
|
$
|
9,640
|
|
|
$
|
9,640
|
|
|
5.125
|
%
|
|
1998 Series B, Due 2028
|
|
|
7,685
|
|
|
|
7,685
|
|
|
4.40
|
%
|
|
2003A Series, Due 2020
|
|
|
8,000
|
|
|
|
8,000
|
|
|
5.00
|
%
|
|
2003C Series, Due 2022
|
|
|
14,930
|
|
|
|
14,930
|
|
Var.
|
|
2004 Series Variable Rate, Due 2029
|
|
|
12,500
|
|
|
|
12,500
|
|
Var.
|
|
2004 Series A, Due 2028
|
|
|
5,000
|
|
|
|
5,000
|
|
Var.
|
|
2004 Series B. Due 2028
|
|
|
4,550
|
|
|
|
4,550
|
|
|
5.00
|
%
|
|
2005 A Series, Due 2040
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Total Connecticut Water Company
|
|
|
72,305
|
|
|
|
62,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crystal Water Utilities Corporation
|
|
|
|
|
|
|
|
|
|
8.0
|
%
|
|
Westbank, Due 2017
|
|
|
105
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crystal Water Company of Danielson
|
|
|
|
|
|
|
|
|
|
7.82
|
%
|
|
Connecticut Development Authority, Due 2020
|
|
|
|
|
|
|
455
|
|
|
5.00
|
%
|
|
Unsecured Water Facilities Revenue Bonds 2005 A Series, Due 2040
|
|
|
5,000
|
|
|
|
|
|
|
Total Crystal Water Company of Danielson
|
|
|
5,000
|
|
|
|
455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chester Realty
|
|
|
|
|
|
|
|
|
|
6
|
%
|
|
Note Payable, Due 2006
|
|
|
12
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barnstable Water Company
|
|
|
|
|
|
|
|
|
|
10.2
|
%
|
|
Indianapolis Life Insurance, Due 2011
|
|
|
|
|
|
|
1,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unionville Water Company
|
|
|
|
|
|
|
|
|
|
8.125
|
%
|
|
Farmington Savings Bank, Due 2011
|
|
|
842
|
|
|
|
963
|
|
|
3.56
|
%
|
|
State of Connecticut, Due 2023
|
|
|
1,471
|
|
|
|
1,531
|
|
|
|
|
|
|
Total Unionville Water Company
|
|
|
2,313
|
|
|
|
2,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Connecticut Water Service, Inc.
|
|
|
79,735
|
|
|
|
66,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Current Portion
|
|
|
(2,331
|
)
|
|
|
(326
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Long-Term Debt
|
|
$
|
77,404
|
|
|
$
|
66,399
|
|
|
The Companys principal payments required for years 2006 2010 are as follows:
|
|
|
|
|
|
|
|
|
(
In thousands
)
|
|
|
|
|
2006
|
|
|
|
|
|
$
|
2,331
|
|
2007
|
|
|
|
|
|
$
|
7
|
|
2008
|
|
|
|
|
|
$
|
7
|
|
2009
|
|
|
|
|
|
$
|
8
|
|
2010
|
|
|
|
|
|
$
|
8
|
|
At December 31, 2005 a portion of the Companys utility plant was pledged as collateral for
long-term debt.
In November 2005, Connecticut Water borrowed $10 million through the issuance of Water Facilities
Revenue Bonds by the Connecticut Development Authority sold in one series with an interest rate of
five percent maturing on October 1, 2040. The proceeds from the sale of the bonds have been used
to finance construction and installation of various capital improvements to the Companys existing
water system.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-18
In November 2005, Crystal borrowed $5 million through the issuance of Water Facilities Revenue
Bonds by the Connecticut Development Authority sold in a single series with an interest rate of
five percent maturing on October 1, 2040. The proceeds of the sale of the bonds have been and will
be used to finance the construction of a water treatment plant in the Town of Killingly, CT and to
facilitate the interconnection of two systems in the Town of Killingly.
A portion
of the proceeds of the Crystal bond issuance mentioned above are held
in trust and will be released to the Company after it completes the
projects for which the bond issuance was granted. The Company expects
to complete the projects before the end of 2006. The
December 31, 2005 $2.6 million fund balance is classified
as Restricted Cash on the Balance Sheet.
Barnstable Water Companys note payable was paid off in 2005 in connection with the sale of
Barnstable Waters assets. As a result of the prepayment, the Company paid the lender a prepayment
fee of $322,000.
During the first quarter of 2004, Connecticut Water refinanced a portion of its long-term debt
through the issuance of $12,500,000 of variable rate, taxable debenture bonds Series 2004 with a
maturity date of January 4, 2029. The bonds have been secured by an irrevocable direct pay letter
of credit issued by a financial institution, with a five-year term expiring in March 2009. The
proceeds of the sale of the bonds, which are general debt obligations of Connecticut Water, were
used to redeem the $12,050,000 aggregate principal amount of Connecticut Waters First Mortgage
Bonds (Series V) and to pay a portion of the expenses associated with the bonds refunding.
In connection with the issuance of the bonds, Connecticut Water entered into an interest rate swap
transaction with a counterparty in the notional principal amount of $12,500,000. The interest rate
swap agreement provides that, beginning in April 2004 and thereafter on a monthly basis,
Connecticut Water will pay the counterparty a fixed interest rate of 3.73% on the notional amount
for a period of five years. In exchange, the counterparty will, beginning in April 2004 and
thereafter on a monthly basis, pay Connecticut Water a floating interest rate (based on 105% of the
U.S. Dollar one-month LIBOR rate) on the notional amount for a period of five years. The purpose
of the interest rate swap is to manage the Companys exposure to fluctuations in prevailing
interest rates.
In June 2004, Unionville secured $1.6 million through the Drinking Water State Revolving Fund for
costs incurred in developing a water interconnection with a neighboring water supplier. The funds
were used to pay off a portion of the balances outstanding under bank lines of credit. As of
December 31, 2005 the Company intends to prepay this debt in 2006.
On September 1, 2004, The Company refinanced a portion of its existing bond indebtedness. The
Company borrowed $9.55 Million in sale proceeds from the issuance of Water Facilities Refunding
Revenue Bonds by the Connecticut Development Authority (the Authority). The bonds were sold in two
series with the following terms:
2004 A Series: $5,000,000 Variable Interest Maturing 7/1/2028
2004 B Series: $4,550,000 Variable Interest Maturing 9/1/2028
The proceeds of the transaction were used to redeem prior obligations to the Authority that were
secured by the Series T and Series U first mortgage bonds of the Company.
There are no mandatory sinking fund payments required on Connecticut Water Companys outstanding
Unsecured Water Facilities Revenue Refinancing Bonds. However, the 1998 Series A and B and the
2003 Series A and C Unsecured Water Facilities Revenue Refinancing Bonds provide for an estate
redemption right whereby the estate of deceased bondholders or surviving joint owners may submit
bonds to the Trustee for redemption at par, subject to a $25,000 per individual holder and a 3%
annual aggregate limitation.
The outstanding Unsecured Water Facility Revenue Bonds of Connecticut Water may be initially called
for redemption at the following dates and prices 1998 Series A and B, March 1, 2008 at 100% plus
accrued interest; 2003 Series A, December 15, 2008 at 100% plus accrued interest; 2003 Series C,
September 1, 2008 at 100% plus accrued interest; and 2005 A Series, October 1, 2009 at 100% plus
accrued interest.
The Crystal Water Company Series A Water Facility Revenue Bonds may be initially called for
redemption on October 1, 2009 at 100% plus accrued interest.
Unionville Water Companys term note with Farmington Savings Bank requires monthly payments of
principal and interest. The note bears a fluctuating interest rate. The interest rate is adjusted
on each 60-month anniversary date from the effective date of May 1, 1996. On the anniversary date
(Interest Change Date) the interest rate shall be increased or decreased to a rate determined by
adding 2.5 percentage points to the most recent Federal Home Loan Bank of Boston Long-Term,
Regular, 5 year, Fixed Rate Mortgage Rate (Index), available 45 days prior to the Interest Change
Date,
rounded to the next highest one-eighth of one percentage point. Unionville may prepay the
principal balance
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-19
outstanding under the note without penalty for the thirty days preceding each Interest Change Date
upon 30 days prior
written notice to the bank. Prepayment made at any other time requires a prepayment penalty, which
is 110% of the present value of the difference between the interest on the amount prepaid for the
remaining term to the next Interest Change Date, as determined by the Current Index and the
interest on the same amount for the remaining term to the next Interest Change Date, as determined
by the Index in effect for that maturity on the day the prepayment is made. As of December 31,
2005 the Company intends to prepay this debt in 2006.
NOTE 8: PREFERRED STOCK
The Companys Preferred Stock at December 31, consisted of the following:
|
|
|
|
|
|
|
|
|
(
in thousands, except share data
)
|
|
2005
|
|
|
2004
|
|
|
Connecticut Water Service, Inc.
|
|
|
|
|
|
|
|
|
Cumulative Series A Voting, $20 Par Value; Authorized, Issued and
Outstanding 15,000 Shares
|
|
$
|
300
|
|
|
$
|
300
|
|
Cumulative Series $.90 Non-Voting, $16 Par Value; Authorized 50,000
Shares, Issued and Outstanding 29,499 Shares
|
|
|
472
|
|
|
|
472
|
|
|
|
|
|
772
|
|
|
|
772
|
|
|
|
|
|
|
|
|
|
|
Barnstable Water Company
|
|
|
|
|
|
|
|
|
6% Cumulative, $100 Par Value; Authorized, Issued and
Outstanding 750 Shares
|
|
|
75
|
|
|
|
75
|
|
|
Total Preferred Stock
|
|
$
|
847
|
|
|
$
|
847
|
|
|
All or any part of any series of either class of the Companys issued Preferred Stock may be called
for redemption by the Company at any time. The per share redemption prices of the Series A and
Series $.90 Preferred Stock, if called by the Company, are $21.00 and $16.00, respectively.
The Company is authorized to issue 400,000 shares of an additional class of Preferred Stock, $25
par value, the general preferences, voting powers, restrictions and qualifications of which are
similar to the Companys existing Preferred Stock. No shares of the $25 par value Preferred Stock
have been issued.
The Company is also authorized to issue 1,000,000 shares of $1 par value Preference Stock, junior
to the
Companys existing Preferred Stock in rights to dividends and upon liquidation of the Company.
150,000 of such shares have been designated as Series A Junior Participating Preference Stock.
Pursuant to the Shareholder Rights Plan, described in Note 4, the Company keeps reserved and
available for issuance one one-hundredth of a
share of Series A Junior Participating Preference Stock for each outstanding share of the Companys
common
stock.
Barnstable Water Company paid Preferred Dividends of $4,500 in each of 2005, 2004 and 2003. These
dividends are included in the Other category of the Other Income (Deductions) section of the
Consolidated Statements of Income. These preferred shareholders have 1/10 of a common vote for
matters related to Barnstable Water Company.
NOTE 9: BANK LINES OF CREDIT
The Companys total available lines of credit totaled $15,500,000 at December 31, 2005 and 2004,
respectively. All of the lines have one year lives and will expire at different dates in 2006.
The Company expects the lines of credit to be renewed in 2006. As of December 31, 2005 and 2004,
the outstanding bank lines of credit were $4,750,000 and $5,650,000 respectively. Bank commitment
fees associated with the lines of credit were approximately $37,500, $37,500, and $30,000 in 2005,
2004, and 2003 respectively.
At December 31, 2005 and 2004, the weighted average interest rates on short-term borrowings
outstanding were 4.62% and 2.83%, respectively.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-20
NOTE 10: UTILITY PLANT AND CONSTRUCTION PROGRAM
The components of utility plant and equipment at December 31, were as follows:
|
|
|
|
|
|
|
|
|
(
in thousands
)
|
|
2005
|
|
|
2004
|
|
|
Land
|
|
$
|
9,139
|
|
|
$
|
9,652
|
|
Source of Supply
|
|
|
24,423
|
|
|
|
20,724
|
|
Pumping
|
|
|
23,650
|
|
|
|
25,348
|
|
Water Treatment
|
|
|
46,812
|
|
|
|
47,726
|
|
Transmission and Distribution
|
|
|
216,513
|
|
|
|
209,887
|
|
General
|
|
|
19,800
|
|
|
|
20,228
|
|
Held for Future Use
|
|
|
418
|
|
|
|
420
|
|
|
Total
|
|
$
|
340,755
|
|
|
$
|
333,985
|
|
|
The amounts of depreciable utility plant at December 31, 2005 and 2004 included in total utility
plant were $295,105,000 and $291,641,000, respectively.
Barnstable Water Company had Utility Plant of $11,519,000 as of December 31, 2004 that was sold
during 2005.
NOTE 11: TAXES OTHER THAN INCOME TAXES
Taxes Other than Income Taxes consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(
in thousands
)
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Municipal Property Taxes
|
|
$
|
4,708
|
|
|
$
|
4,527
|
|
|
$
|
4,374
|
|
Payroll Taxes
|
|
|
677
|
|
|
|
652
|
|
|
|
648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,385
|
|
|
$
|
5,179
|
|
|
$
|
5,022
|
|
|
NOTE 12: PENSION AND OTHER POST-RETIREMENT EMPLOYEE BENEFITS
GENERAL
As of December 31, 2005, Connecticut Water had 167 employees, Crystal 11, Barnstable
Water 6 , and Unionville 7 for a total of 191 employees. The Companys officers are employees of
Connecticut Water. Employee expenses are charged between companies as appropriate.
Investment Strategy
The Pension Trust and Finance Committee (the Committee) reviews and approves
the investment strategy of the investments made on behalf of various pension and post-retirement
benefit plans existing under the Company and certain of its subsidiaries.
The targeted asset allocation ratios for those plans as set by the Committee at December 31, 2005
and 2004 were:
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
2004
|
Equity
|
|
|
65
|
%
|
|
|
65
|
%
|
Fixed Income
|
|
|
35
|
%
|
|
|
35
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
The Committee recognizes that a variation of up to 5% in either direction from its targeted asset
allocation mix is acceptable due to market fluctuations.
Our expected long-term rate of return on the various benefit plan assets is based upon the plans
expected asset allocation, expected returns on various classes of plan assets as well as historical
returns. The expected long-term rates of return on the Companys pension plan is 8%.
PENSION
Defined Contribution Plan
Through 2003, one of the Companys subsidiaries, Unionville, had a
noncontributory defined contribution pension plan which covered all employees who had completed one
year of service. Unionville provided a contribution to the plan based upon 10% of the
participants annual pay. The Unionville contribution charged to expense under this plan for the
twelve months ended December 31, 2003 was $31,000. Effective December 31, 2003 the Unionville
pension plan was terminated. Effective January 1, 2004, the employees of Unionville are covered by
the Companys noncontributory defined benefit pension plan.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-21
Defined Benefit Plans
The Company and certain of its subsidiaries have noncontributory defined
benefit pension plans covering qualified employees. In general, the Companys policy is to fund
accrued pension costs as permitted by federal income tax and Employee Retirement Income Security
Act of 1974 regulations. A contribution of $2,009,000 was made in 2005 for 2004 plan year. A
contribution of approximately $2,450,000 is expected to be made in 2006 for plan year 2005.
The following tables set forth the funded status of the Companys retirement plans at December 31,
the latest valuation date:
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
(in thousands)
|
|
2005
|
|
|
2004
|
|
|
Change in Benefit Obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation, beginning of year
|
|
$
|
27,049
|
|
|
$
|
23,812
|
|
Service Cost
|
|
|
1,050
|
|
|
|
951
|
|
Interest Cost
|
|
|
1,552
|
|
|
|
1,458
|
|
Actuarial loss/(gain)
|
|
|
2,008
|
|
|
|
1,807
|
|
Benefits paid
|
|
|
(1,150
|
)
|
|
|
(979
|
)
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of year
|
|
$
|
30,509
|
|
|
$
|
27,049
|
|
|
Change in Plan Assets:
|
|
|
|
|
|
|
|
|
Fair Value, beginning of year
|
|
$
|
22,250
|
|
|
$
|
20,311
|
|
Actual return on plan assets
|
|
|
1,737
|
|
|
|
2,004
|
|
Employer contribution
|
|
|
2,009
|
|
|
|
914
|
|
Benefits paid
|
|
|
(1,150
|
)
|
|
|
(979
|
)
|
|
|
|
|
|
|
|
|
|
|
Fair Value, end of year
|
|
$
|
24,846
|
|
|
$
|
22,250
|
|
|
|
Funded Status
|
|
$
|
(5,663
|
)
|
|
$
|
(4,799
|
)
|
Unrecognized net actuarial (gain) loss
|
|
|
3,171
|
|
|
|
1,577
|
|
Unrecognized transition obligation
|
|
|
13
|
|
|
|
24
|
|
Unrecognized prior service cost
|
|
|
730
|
|
|
|
827
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Cost
|
|
$
|
(1,749
|
)
|
|
$
|
(2,371
|
)
|
|
The accumulated benefit obligation for all defined benefit pension plans was approximately
$24,031,000 and $21,195,000 at December 31, 2005 and 2004, respectively.
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
Weighted-average assumptions used to determine benefit obligations at December 31:
|
|
|
|
|
|
|
Discount rate
|
|
|
5.50
|
%
|
|
|
5.75
|
%
|
Rate of compensation increase
|
|
|
4.50
|
%
|
|
|
4.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
Weighted-average assumptions used to determine net periodic cost for years ended December 31:
|
|
|
|
|
|
|
Discount rate
|
|
|
5.75
|
%
|
|
|
6.25
|
%
|
Expected long-term return on plan assets
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
Rate of compensation increase
|
|
|
4.50
|
%
|
|
|
4.50
|
%
|
The discount rate is based on interest rates for long-term, high quality, fixed income investments.
The Company looks at the general trend of several different bond indices.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
(in thousands)
|
|
2005
|
|
2004
|
|
2003
|
|
Components of net periodic benefit costs
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
1,050
|
|
|
$
|
951
|
|
|
$
|
843
|
|
Interest cost
|
|
|
1,552
|
|
|
|
1,458
|
|
|
|
1,390
|
|
Expected return on plan assets
|
|
|
(1,645
|
)
|
|
|
(1,572
|
)
|
|
|
(1,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net transition asset
|
|
|
10
|
|
|
|
12
|
|
|
|
12
|
|
Unrecognized net (gain)/loss
|
|
|
322
|
|
|
|
95
|
|
|
|
(2
|
)
|
Unrecognized prior service cost
|
|
|
98
|
|
|
|
108
|
|
|
|
108
|
|
|
Net Periodic Pension Benefit Costs
|
|
$
|
1,387
|
|
|
$
|
1,052
|
|
|
$
|
807
|
|
|
Plan Assets
The Companys pension plan weighted-average asset allocations at December 31, 2005, and 2004 by
asset category were as follows:
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
2004
|
|
Equity Securities
|
|
|
65
|
%
|
|
|
67
|
%
|
Fixed Income
|
|
|
35
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
The Plans expected future benefit payments are:
|
|
|
|
|
Year
|
|
Amount
|
2006
|
|
$
|
1,137,000
|
|
2007
|
|
|
1,238,000
|
|
2008
|
|
|
1,566,000
|
|
2009
|
|
|
1,593,000
|
|
2010
|
|
|
1,847,000
|
|
Years 2011-2015
|
|
|
12,337,000
|
|
POST-RETIREMENT BENEFITS OTHER THAN PENSION (PBOP)
- In addition to providing pension
benefits, a subsidiary company, Connecticut Water Company, provides certain medical, dental and
life insurance benefits to retired employees partially funded by a 501(c)(9) Voluntary Employee
Beneficiary Association Trust that has been approved by the DPUC. Substantially all of Connecticut
Waters employees may become eligible for these benefits if they retire on or after age 55 with 10
years of service. The contribution for calendar years 2005 and 2004 was $473,100 for each year.
A regulatory asset has been recorded to reflect the amount which represents the future FAS 106
costs expected to be recovered in customer rates. In 1997, Connecticut Water requested and
received approval from the DPUC to include FAS 106 costs in customer rates. The DPUCs 1997
limited reopener of Connecticut Waters general rate proceeding allowed it to increase customer
rates $208,000 annually for FAS 106 costs. Connecticut Waters current rates now allow for
recovery of $473,100 annually for post-retirement benefit costs other than pension.
The
Company uses no corridor, as permitted by FAS 106, when recognizing
actuarial gains and losses.
Connecticut Water has elected to recognize the transition obligation on a delayed basis over a
period equal to the plan participants 21.6 years of average future service.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-23
The Company has concluded that the postretirement welfare plans benefits will be considered
actuarially equivalent to the benefits provided by Medicare Part D. The Company does not intend to
apply for the government subsidy for postretirement prescription drug benefits, even though it
expects to be eligible. Therefore, the impact of the subsidy on the plans liabilities are not
reflected in the December 31, 2005 disclosure.
Another subsidiary company, Barnstable Water, also provides certain health care benefits to
eligible retired employees. Substantially all Barnstable Water employees may become eligible for
these benefits if they retire on or after age 65 with at least 15 years of service. Post-65
medical coverage is provided for employees up to a maximum coverage of $500 per quarter. Barnstable
Waters PBOP currently is not funded.
The following tables set forth the funded status of the Companys post-retirement health care
benefits at December 31, the latest valuation date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Connecticut Water
|
|
Barnstable Water
|
(in thousands)
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
Change in Benefit Obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, beginning of year
|
|
$
|
6,605
|
|
|
$
|
5,234
|
|
|
$
|
100
|
|
|
$
|
94
|
|
Service Cost
|
|
|
460
|
|
|
|
311
|
|
|
|
2
|
|
|
|
2
|
|
Interest Cost
|
|
|
405
|
|
|
|
323
|
|
|
|
5
|
|
|
|
6
|
|
Plan Participant Contributions
|
|
|
83
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
Actuarial loss/(gain)
|
|
|
1,186
|
|
|
|
1,067
|
|
|
|
(3
|
)
|
|
|
2
|
|
Benefits paid
|
|
|
(486
|
)
|
|
|
(405
|
)
|
|
|
(5
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of year
|
|
$
|
8,253
|
|
|
$
|
6,605
|
|
|
$
|
99
|
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value, beginning of year
|
|
$
|
3,566
|
|
|
$
|
3,179
|
|
|
$
|
|
|
|
$
|
|
|
Actual return on plan assets
|
|
|
209
|
|
|
|
244
|
|
|
|
|
|
|
|
|
|
Employer contribution
|
|
|
473
|
|
|
|
473
|
|
|
|
5
|
|
|
|
4
|
|
Participants contributions
|
|
|
83
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(486
|
)
|
|
|
(405
|
)
|
|
|
(5
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value, end of year
|
|
$
|
3,845
|
|
|
$
|
3,566
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded Status
|
|
$
|
(4,408
|
)
|
|
$
|
(3,039
|
)
|
|
$
|
(99
|
)
|
|
$
|
(100
|
)
|
Unrecognized net actuarial (gain) loss
|
|
|
1,969
|
|
|
|
988
|
|
|
|
(42
|
)
|
|
|
(40
|
)
|
Unrecognized transition obligation
|
|
|
843
|
|
|
|
963
|
|
|
|
53
|
|
|
|
58
|
|
|
Accrued Cost
|
|
$
|
(1,596
|
)
|
|
$
|
(1,088
|
)
|
|
$
|
(88
|
)
|
|
$
|
(82
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine
benefit obligations at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.50
|
%
|
|
|
5.75
|
%
|
|
|
5.50
|
%
|
|
|
5.75
|
%
|
Weighted-average assumptions used to determine net
periodic benefit cost for years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.75
|
%
|
|
|
6.25
|
%
|
|
|
5.75
|
%
|
|
|
6.25
|
%
|
Expected long-term return on plan assets
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
Rate of compensation increase
|
|
|
4.50
|
%
|
|
|
4.50
|
%
|
|
|
|
|
|
|
|
|
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-24
The discount rate is based on interest rates for long-term, high quality, fixed income investments.
The Company looks at the general trend of several different bond indices.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Connecticut Water
|
|
Barnstable Water
|
(in thousands)
|
|
2005
|
|
2004
|
|
2003
|
|
2005
|
|
2004
|
|
2003
|
|
Components of net periodic benefit costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
460
|
|
|
$
|
311
|
|
|
$
|
270
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Interest cost
|
|
|
405
|
|
|
|
323
|
|
|
|
314
|
|
|
|
5
|
|
|
|
6
|
|
|
|
6
|
|
Expected return on plan assets
|
|
|
(168
|
)
|
|
|
(158
|
)
|
|
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net transition asset
|
|
|
120
|
|
|
|
121
|
|
|
|
165
|
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
Recognized net (gain)/loss
|
|
|
164
|
|
|
|
18
|
|
|
|
(31
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
Net Periodic Pension and Post
Retirement Benefit Costs
|
|
$
|
981
|
|
|
$
|
615
|
|
|
$
|
573
|
|
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
10
|
|
|
Assumed health care cost trend rates at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
2004
|
|
|
Medical
|
|
Dental
|
|
Medical
|
|
Dental
|
|
Health care cost
trend rate assumed
for next year
|
|
|
8.5
|
%
|
|
|
8.5
|
%
|
|
|
8.5
|
%
|
|
|
8.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate to which the
cost trend rate is
assumed to decline
|
|
|
4.0
|
%
|
|
|
4.0
|
%
|
|
|
4.0
|
%
|
|
|
4.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year that the rate
reaches the
ultimate trend rate
|
|
|
2015
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
2014
|
|
Assumed health care cost trend rates have a significant effect on the amounts reported for the
health care plans.
A one-percentage-point change in assumed health care cost trend rates would have the following
effects on Connecticut Waters plan and would have no impact on the Barnstable Water plan:
|
|
|
|
|
|
|
|
|
|
|
1-Percentage-Point
|
|
1-Percentage-Point
|
(in thousands)
|
|
Increase
|
|
Decrease
|
|
Effect on total of service and interest cost components
|
|
$
|
139
|
|
|
$
|
(113
|
)
|
Effect on post-retirement benefit obligation
|
|
$
|
1,078
|
|
|
$
|
(901
|
)
|
|
Plan Assets
Barnstable Waters other post-retirement benefit plan has no assets. Connecticut Waters other
postretirement benefit plan weighted-average asset allocations at December 31, 2005 and 2004, by
asset category were as follows:
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
2004
|
|
Equity Securities
|
|
|
63
|
%
|
|
|
57
|
%
|
Fixed Income
|
|
|
37
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-25
Cash Flows
Connecticut Water contributed $473,100 to its other post-retirement benefit plan in 2005 for plan
year 2005 and expects to contribute $473,100 in 2006 for plan year 2006.
Expected future benefit payments are:
|
|
|
|
|
|
|
|
|
Year
|
|
Connecticut Water
|
|
Barnstable
|
2006
|
|
$
|
310,000
|
|
|
$
|
8,000
|
|
2007
|
|
|
338,000
|
|
|
|
8,000
|
|
2008
|
|
|
354,000
|
|
|
|
7,000
|
|
2009
|
|
|
390,000
|
|
|
|
7,000
|
|
2010
|
|
|
416,000
|
|
|
|
7,000
|
|
Years 2011 2015
|
|
|
2,750,000
|
|
|
|
38,000
|
|
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Connecticut Water and Barnstable Water provide additional
pension benefits to senior management through supplemental executive retirement contracts. At
December 31, 2005 and 2004 the actuarial present value of the projected benefit obligation of these
contracts were $1,530,000 and $1,301,000, respectively. Expense associated with these contracts
was approximately $194,000 for 2005, $105,000 for 2004, and $152,000 for 2003.
SAVINGS PLAN
The Company and certain of its subsidiaries maintain an employee savings plan which
allows participants to contribute from 1% to 15% of pre-tax compensation plus for those age 50 and
older catch-up contributions as allowed by law. The Company matches 50 cents for each dollar
contributed by the employee up to 4% of the employees compensation. The Company contribution
charged to expense in 2005, 2004 and 2003 was $168,000, $174,000, and $166,000, respectively.
The Plan creates the possibility for an incentive bonus contribution to the 401(k) plan tied to
the attainment of a specific goal or goals to be identified each year. If the specific goal or
goals are attained by the end of the year, all eligible employees, except officers and certain key
employees, may receive up to an additional 1% of their annual base salary as a direct contribution
to their 401(k) account. An incentive bonus of .6% of base pay, or a total of $50,000 was accrued
for 2005, to be paid in 2006. An incentive bonus of .6% of base pay, or a total of $51,000 was
awarded in 2005 for 2004. No incentive bonus was awarded in 2003.
NOTE 13: STOCK-BASED COMPENSATION PLANS
The Companys 2004 Performance Stock Program (2004 PSP), approved by shareholders in 2004,
authorizes the issuance of up to 700,000 shares of Company Common Stock. As of December 31, 2005
there were 665,728 shares available for grant. In total under the original Plans (1994
Plans) there were 700,000 shares authorized and 225,218 shares available for grant at December 31,
2005. There are four forms of awards under the 2004 PSP. Stock options are one form of award.
The Company has not issued any stock options since 2003, and does not anticipate issuing any more
for the foreseeable future. The other three forms of award which the Company has continued to
issue are: Restricted Stock, Performance Shares and Cash Units.
STOCK OPTIONS
The Company issued stock options between 1999 and 2003 and accounts for those
options under APB Opinion No. 25, under which no compensation cost has been recognized in the
Consolidated Statements of Income. On a pro forma basis, the Companys net income and earnings per
share are shown in Note 1. Beginning January 1, 2006, compensation expense will be recognized when
FAS 123(R) becomes effective.
For purposes of this calculation, the Company arrived at the fair value of each stock grant at the
date of grant by using the Black Scholes Option Pricing model with the following weighted average
assumptions used for grants for the years ended December 31, 2005, 2004 and 2003.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
2004
|
|
2003
|
Expected life (years)
|
|
|
|
|
|
|
|
|
|
|
5.00
|
|
Risk-free interest rate (percentage)
|
|
|
|
|
|
|
|
|
|
|
2.79
|
|
Volatility (percentage)
|
|
|
|
|
|
|
|
|
|
|
30.00
|
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
2.91
|
|
Options begin to become exercisable one year from the date of grant. Vesting periods range from
one to five years.
The maximum term ranges from five to ten years.
The per share weighted average fair value of stock options granted during 2003 was $6.42. No stock
options were granted in 2004 and 2005.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, beginning of year
|
|
|
251,835
|
|
|
$
|
22.85
|
|
|
|
251,835
|
|
|
$
|
22.85
|
|
|
|
235,101
|
|
|
$
|
21.41
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,053
|
|
|
|
29.05
|
|
Terminated
|
|
|
(5,001
|
)
|
|
|
25.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(44,563
|
)
|
|
|
17.11
|
|
|
|
|
|
|
|
|
|
|
|
(19,319
|
)
|
|
|
16.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, end of year
|
|
|
202,271
|
|
|
|
24.04
|
|
|
|
251,835
|
|
|
|
22.85
|
|
|
|
251,835
|
|
|
|
22.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, end of year
|
|
|
175,685
|
|
|
$
|
23.44
|
|
|
|
196,731
|
|
|
$
|
21.48
|
|
|
|
119,992
|
|
|
$
|
21.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No options were exercised during 2004. The following table summarizes the price ranges of the
options outstanding and options exercisable as of December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Contractual Life
|
|
|
Exercise
|
|
|
|
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
(years)
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Range of prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$12.00 - $14.99
|
|
|
19,305
|
|
|
|
3.3
|
|
|
$
|
14.83
|
|
|
|
19,305
|
|
|
$
|
14.83
|
|
$15.00 - $17.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$18.00 - $20.99
|
|
|
31,314
|
|
|
|
4.9
|
|
|
|
20.42
|
|
|
|
31,314
|
|
|
|
20.42
|
|
$21.00 - $23.99
|
|
|
47,596
|
|
|
|
3.9
|
|
|
|
22.33
|
|
|
|
47,596
|
|
|
|
22.33
|
|
$24.00 - $26.99
|
|
|
34,253
|
|
|
|
6.9
|
|
|
|
25.78
|
|
|
|
25,690
|
|
|
|
25.78
|
|
$27.00 - $29.99
|
|
|
69,803
|
|
|
|
6.6
|
|
|
|
28.52
|
|
|
|
51,780
|
|
|
|
28.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
202,271
|
|
|
|
5.5
|
|
|
$
|
24.04
|
|
|
|
175,685
|
|
|
$
|
23.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 14: SEGMENT REPORTING
Our Company operates principally in three segments: water activities, real estate transactions, and
services and rentals. The water segment is comprised of our core regulated water activities to
supply water to our customers. Our real estate transactions segment involves selling or donating
for income tax benefits our limited excess real estate holdings. Our services and rentals segment
provides services on a contract basis and also leases certain of our properties to third parties.
The accounting policies of each reportable segment are the same as those described in the summary
of significant accounting policies. Financial data for reportable segments is as follows:
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Expense
|
|
|
|
|
|
from
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
Other Income
|
|
(net of
|
|
Income
|
|
Continuing
|
(in thousands)
|
|
Revenues
|
|
Depreciation
|
|
Expenses
|
|
(Deductions)
|
|
AFUDC)
|
|
Taxes
|
|
Operations
|
|
For the year ended
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water Activities
|
|
$
|
47,453
|
|
|
$
|
5,724
|
|
|
$
|
29,899
|
|
|
$
|
276
|
|
|
$
|
3,274
|
|
|
$
|
2,550
|
|
|
$
|
6,282
|
|
Real Estate Transactions
|
|
|
495
|
|
|
|
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
475
|
|
|
|
(61
|
)
|
Services and Rentals
|
|
|
4,123
|
|
|
|
36
|
|
|
|
2,555
|
|
|
|
|
|
|
|
|
|
|
|
587
|
|
|
|
945
|
|
|
Total
|
|
$
|
52,071
|
|
|
$
|
5,760
|
|
|
$
|
32,535
|
|
|
$
|
276
|
|
|
$
|
3,274
|
|
|
$
|
3,612
|
|
|
$
|
7,166
|
|
|
For the year ended
December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water Activities
|
|
$
|
46,008
|
|
|
$
|
5,570
|
|
|
$
|
27,549
|
|
|
$
|
111
|
|
|
$
|
3,321
|
|
|
$
|
2,551
|
|
|
$
|
7,128
|
|
Real Estate Transactions
|
|
|
(12
|
)
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
(1,245
|
)
|
|
|
1,206
|
|
Services and Rentals
|
|
|
4,655
|
|
|
|
33
|
|
|
|
3,264
|
|
|
|
|
|
|
|
|
|
|
|
529
|
|
|
|
829
|
|
|
Total
|
|
$
|
50,651
|
|
|
$
|
5,603
|
|
|
$
|
30,840
|
|
|
$
|
111
|
|
|
$
|
3,321
|
|
|
$
|
1,835
|
|
|
$
|
9,163
|
|
|
For the year ended
December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water Activities
|
|
$
|
44,598
|
|
|
$
|
5,483
|
|
|
$
|
26,108
|
|
|
$
|
26
|
|
|
$
|
4,030
|
|
|
$
|
1,868
|
|
|
$
|
7,169
|
|
Real Estate Transactions
|
|
|
170
|
|
|
|
|
|
|
|
133
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(993
|
)
|
|
|
1,029
|
|
Services and Rentals
|
|
|
3,717
|
|
|
|
23
|
|
|
|
2,583
|
|
|
|
|
|
|
|
|
|
|
|
416
|
|
|
|
692
|
|
|
Total
|
|
$
|
48,485
|
|
|
$
|
5,506
|
|
|
$
|
28,824
|
|
|
$
|
25
|
|
|
$
|
4,030
|
|
|
$
|
1,291
|
|
|
$
|
8,890
|
|
|
|
|
|
|
|
|
|
|
|
At December 31 (in thousands)
|
|
2005
|
|
|
2004
|
|
|
|
|
Total Plant and Other Investments:
|
|
|
|
|
|
|
|
|
Water
|
|
$
|
251,511
|
|
|
$
|
245,085
|
|
Non-Water
|
|
|
733
|
|
|
|
989
|
|
|
|
|
|
|
|
252,244
|
|
|
|
246,074
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
Water
|
|
|
46,746
|
|
|
|
39,897
|
|
Non-Water
|
|
|
7,045
|
|
|
|
4,969
|
|
|
|
|
|
|
|
53,791
|
|
|
|
44,866
|
|
|
|
|
Total Assets
|
|
$
|
306,035
|
|
|
$
|
290,940
|
|
|
|
|
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-28
NOTE 15: COMMITMENTS AND CONTINGENCIES
SECURITY
The Bioterrorism Response Act of 2001 required every public water system serving over
3,300 people to prepare Vulnerability Assessments (VA) of their critical utility assets. The last
of these assessments required to be filed by our companies were submitted to the U.S. Environmental
Protection Agency in June 2004 and was followed by updated Emergency Response Plans in December
2004, per statutory requirements. The information within the VA is not subject to release to the
public and is protected from Freedom of Information Act inquiries.
Investment in security-related improvements is a continuing process and management believes that
the costs associated with any such improvements would be chargeable for recovery in future rate
proceedings.
REVERSE PRIVATIZATION
Our water companies derive their rights and franchises to operate from
state laws that are subject to alteration, amendment or repeal, and do not grant permanent
exclusive rights to our service areas. Our franchises are free from burdensome restrictions, are
unlimited as to time, and authorize us to sell potable water in all towns we now serve. There is
the possibility that states could revoke our franchises and allow a governmental entity to take
over some or all of our systems. From time to time such legislation is contemplated.
ENVIRONMENTAL AND WATER QUALITY REGULATION
The Company is subject to environmental and water
quality regulations. Costs to comply with environmental and water quality regulations are
substantial. We are currently in compliance with current regulations, but the regulations are
subject to change at any time. The costs to comply with future changes in state or federal
regulations, which could require us to modify current filtration facilities and/or construct new
ones, or to replace any reduction of the safe yield from any of our current sources of supply,
could be substantial.
RATE RELIEF
Our three Connecticut operating subsidiaries, Connecticut Water, Crystal, and
Unionville, are regulated public utilities which provide water services to their customers. The
rates that these companies charge their water customers are subject to the jurisdiction of the
regulatory authority of the Connecticut DPUC, which sets water rates for each company independently
because the systems are not interconnected.
The DPUC may authorize the Companys operating subsidiaries to charge rates which the DPUC consider
to be sufficient to recover the normal operating expenses of our operating subsidiaries, to provide
funds for adding new or replacing water infrastructure, and to allow our operating subsidiaries to
earn what the DPUC consider to be a fair and reasonable return on our invested capital.
The Company has filed with the DPUC to merge all of its Connecticut subsidiaries into Connecticut
Water in February 2006. On March 20, 2006, the DPUC issued a Draft Decision which would approve
this merger. Further, the Company believes that it will apply for a rate increase for Connecticut
Water during the summer of 2006.
LAND DISPOSITIONS
Starting with its first land donation in 2000, the Company has engaged in a
program of land donations to municipalities in Connecticut, which has resulted in net income (tax
benefits) to the Company of approximately $3.9 million. As previously disclosed, the land donation
program under the Companys agreement with the Town of Killingly, CT was completed in January 2004
with the donation of the remaining parcel to the Town. The donation of this final parcel resulted
in a net profit (tax benefit) to the Company of $706,000 during the first quarter of 2004. The
donation of land to the Town of Plymouth, CT in December 2004 resulted in an additional $498,000 of
net income.
The Company and its subsidiaries own additional parcels of land in Connecticut and Massachusetts
which may be suitable in the future for disposition, either by sale or by donation to
municipalities, other local governments or private charitable entities. These additional parcels
would include certain Class I and II parcels previously identified by the Connecticut DEP in the
DEP notice noted above, as well as certain lands owned by BARLACO in Barnstable, Massachusetts.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-29
During 2005, the Company had one significant land transaction. Connecticut Water sold 74 acres of
land in Bristol, Connecticut for $475,000 resulting in a net profit of $256,000 on the transaction.
During 2003 and 2004, the Company donated approximately 370 acres of land to municipalities in
Connecticut for public and/or open space purposes. These donations contributed approximately $1.0
million and $1.2 million, respectively to net income in those years, as a result of favorable tax
treatment under federal and Connecticut tax laws. The Company currently anticipates that it will
continue to pursue selected land sales and/or donations during fiscal years 2006, 2007 and 2008,
but at a reduced level. The Company currently does not project completing any material land
transactions in 2006 except for the sale of the BARLACO land. The Company is unable to predict if
and when any sales or donations of some or all of these parcels may occur in the future and, if so,
what amount of net income (tax benefits) may result from any such sales or donations.
Amounts taken as tax benefits in prior years are subject to challenge by the taxing agencies. In
2005, the Company increased its tax reserves by approximately $400,000 for land valuation
allowances.
TAXES
Due to the current environment of state budget deficits, the Company and its subsidiaries
may be subject to a higher tax burden through changes in state legislation. Also, the Companys
future property tax burden may increase as state aid to towns is decreased.
On August 18, 2005, the Company was notified by the Internal Revenue Service (IRS) that they would
be conducting an audit of the Companys 2003 Federal Income Tax Return. The field work portion of
the audit is complete and the IRS has summarized its proposed adjustments. Other than a proposed
change to the value of donated land, none of the other changes are material. The Company continues
to believe that the value of donated land included in its 2003 Federal Income Tax Return is
correct. Discussions between the Company and the IRS are continuing. The Company does not believe
that IRS proposed changes would materially affect financial results.
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
F-30
NOTE 16: QUARTERLY FINANCIAL DATA (Unaudited)
Selected quarterly financial data for the years ended December 31, 2005 and 2004 appears below:
(
in thousands, except for per share data
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
Operating Revenues
|
|
$
|
10,924
|
|
|
$
|
10,389
|
|
|
$
|
10,986
|
|
|
$
|
11,368
|
|
|
$
|
14,088
|
|
|
$
|
13,148
|
|
|
$
|
11,455
|
|
|
$
|
11,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility Operating
Income
|
|
|
2,231
|
|
|
|
1,851
|
|
|
|
1,712
|
|
|
|
2,699
|
|
|
|
3,793
|
|
|
|
4,185
|
|
|
|
1,756
|
|
|
|
1,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
Continuing
Operations
|
|
|
1,998
|
|
|
|
1,948
|
|
|
|
1,184
|
|
|
|
2,100
|
|
|
|
3,279
|
|
|
|
3,568
|
|
|
|
705
|
|
|
|
1,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
Operations
|
|
|
(13
|
)
|
|
|
33
|
|
|
|
2,904
|
|
|
|
33
|
|
|
|
48
|
|
|
|
172
|
|
|
|
219
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
1,985
|
|
|
|
1,981
|
|
|
|
4,088
|
|
|
|
2,133
|
|
|
|
3,327
|
|
|
|
3,740
|
|
|
|
924
|
|
|
|
1,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per
Common Share
Continuing
Operations
|
|
|
0.25
|
|
|
|
0.24
|
|
|
|
0.15
|
|
|
|
0.26
|
|
|
|
0.40
|
|
|
|
0.45
|
|
|
|
0.09
|
|
|
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per
Common Share
Discontinued
Operations
|
|
|
|
|
|
|
|
|
|
|
0.35
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings per Common
Share
|
|
|
0.25
|
|
|
|
0.24
|
|
|
|
0.50
|
|
|
|
0.27
|
|
|
|
0.41
|
|
|
|
0.47
|
|
|
|
0.11
|
|
|
|
0.20
|
|
CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
E-1
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
3.1
|
|
Certificate of Incorporation of Connecticut Water Service, Inc. amended
and restated as of April, 1998. (Exhibit 3.1 to Form 10-K for the year
ended 12/31/98).
|
|
|
|
3.2
|
|
By-Laws, as amended, of Connecticut Water Service, Inc. as amended and
restated as of August 12, 1999. (Exhibit 3.2 to Form 10-K for the year
ended 12/31/99).
|
|
|
|
3.3
|
|
Certification of Incorporation of The Connecticut Water Company effective
April, 1998. (Exhibit 3.3 to Form 10-K for the year ended 12/31/98).
|
|
|
|
3.4
|
|
Certificate of Amendment to the Certificate of Incorporation of
Connecticut Water Service, Inc. dated August 6, 2001. (Exhibit 3.4 to Form
10-K for the year ended 12/31/01).
|
|
|
|
3.5
|
|
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of Connecticut Water Service, Inc. dated April 23, 2004.
(Exhibit 3.5 to Form 10-Q for the quarter ended 3/31/04).
|
|
|
|
4.1
|
|
Loan Agreement dated as of February 9, 1996 between New London Trust,
F.S.B. and The Crystal Water Company of Danielson. (Exhibit 4.10 to Form
10-K for the year ended 12/31/99).
|
|
|
|
4.2
|
|
Loan Agreement dated as of April 11, 1991 between Farmington Savings Bank
and The Unionville Water Company. (Exhibit 4.11 to Form 10-K for the year
ended 12/31/02).
|
|
|
|
4.3
|
|
Loan Agreement dated as of October 1, 2003 between the Connecticut
Development Authority and The Connecticut Water Company. (Exhibit 4.12 to
Form 10-K for the year ended 12/31/03).
|
|
|
|
4.4
|
|
Indenture of Trust dated as of October 1, 2003 between the Connecticut
Development Authority and The Connecticut Water Company. (Exhibit 4.13 to
Form 10-K for the year ended 12/31/03).
|
|
|
|
4.5
|
|
Loan Agreement dated as of October 1, 2003 between the Connecticut
Development Authority and The Connecticut Water Company. (Exhibit 4.14 to
Form 10-K for the year ended 12/31/03).
|
|
|
|
4.6
|
|
Indenture of Trust dated as of October 1, 2003 between the Connecticut
Development Authority and The Connecticut Water Company. (Exhibit 4.15 to
Form 10-K for the year ended 12/31/03).
|
|
|
|
4.7
|
|
Bond Purchase Agreement dated as of October 10, 2003 among Connecticut
Development Authority, The Connecticut Water Company and A.G. Edwards and
Sons, Inc. (Exhibit 4.16 to Form 10-K for the year ended 12/31/03).
|
E-2
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
4.8
|
|
Line of Credit Agreement dated as of March 12, 2004 between Webster Bank
and Connecticut Water Service, Inc. (Exhibit 4.17 to Form 10-Q for the
quarter ended 3/31/04).
|
|
|
|
4.9
|
|
Bond Purchase Agreement dated as of March 12, 2004, among The Connecticut
Water Company and A.G. Edwards & Sons, Inc. (Exhibit 4.18 to Form 10-Q for
the quarter ended 3/31/04).
|
|
|
|
4.10
|
|
Indenture of Trust, dated as of March 1, 2004, between The Connecticut
Water Company and U.S. Bank National Association, as Trustee. (Exhibit
4.19 to Form 10-Q for the quarter ended 3/31/04).
|
|
|
|
4.11
|
|
Reimbursement and Credit Agreement, dated as of March 1, 2004, between The
Connecticut Water Company and Citizens Bank of Rhode Island. (Exhibit
4.20 to Form 10-Q for the quarter ended 3/31/04).
|
|
|
|
4.12
|
|
Letter of Credit issued by Citizens Bank of Rhode Island, dated as of
March 4, 2004. (Exhibit 4.21 to Form 10-Q for the quarter ended 3/31/04).
|
|
|
|
4.13
|
|
Agreement No. DWSRF 200103-C Project Loan Agreement between the State of
Connecticut and Unionville Water Company under the Drinking Water State
Revolving Fund (DWSRF) Program, dated as of April 19, 2004. (Exhibit 4.22
to Form 10-Q for the quarter ended 6/30/04).
|
|
|
|
4.14
|
|
Collateral Assignment of Water Service Charges and Right to Receive Water
ervice Expense Assessments and Security Agreement between Unionville
ater Company and the State of Connecticut, dated as of June 3, 2004.
Exhibit 4.23 to Form 10-Q for the quarter ended 6/30/04).
|
|
|
|
4.15
|
|
Bond Purchase Agreement, dated September 1, 2004, among The Connecticut
ater Company, Connecticut Development Authority, and A.G. Edwards & Sons,
nc. (Exhibit 4.24 to Form 10-Q for the quarter ended 9/30/04).
|
|
|
|
4.16
|
|
Indenture of Trust, dated August 1, 2004, between The Connecticut Water
ompany and U.S. Bank National Association, as Trustee, 2004A Series.
Exhibit 4.25 to Form 10-Q for the quarter ended 9/30/04).
|
|
|
|
4.17
|
|
Indenture of Trust, dated August 1, 2004, between The Connecticut Water
ompany and U.S. Bank National Association, as Trustee, 2004B Series.
Exhibit 4.26 to Form 10-Q for the quarter ended 9/30/04).
|
|
|
|
4.18
|
|
Loan Agreement, dated August 1, 2004, between The Connecticut Water
ompany and Connecticut Development Authority for 2004 Series. (Exhibit .27 to Form 10-Q for the quarter ended 9/30/04).
|
|
|
|
4.19
|
|
Loan Agreement, dated August 1, 2004, between The Connecticut Water
ompany and Connecticut Development Authority for 2004B Series. (Exhibit .28 to Form 10-Q for the quarter ended 9/30/04).
|
E-3
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
4.20
|
|
Reimbursement and Credit Agreement, dated as of August 1, 2004, between
The Connecticut Water Company and Citizens Bank of Rhode Island, 2004A
Series. (Exhibit 4.29 to Form 10-Q for the quarter ended 9/30/04).
|
|
|
|
4.21
|
|
Reimbursement and Credit Agreement, dated as of August 1, 2004, between
The Connecticut Water Company and Citizens Bank of Rhode Island, 2004B
Series. (Exhibit 4.30 to Form 10-Q for the quarter ended 9/30/04).
|
|
|
|
4.22
|
|
Letters of Credit, each dated September 2, 2004, between The Connecticut
Water Company and Citizens Bank of Rhode Island, with respect to each of
the 2004A and 2004B Series Bonds. (Exhibit 4.31 to Form 10-Q for the
quarter ended 9/30/04).
|
|
|
|
4.24*
|
|
Bond Purchase Agreement, dated October 28, 2005, among The Connecticut
Water Company, Connecticut Development Authority and A.G. Edwards & Sons,
Inc., Connecticut Water 2005A Series.
|
|
|
|
4.25*
|
|
Loan Agreement, dated October 1, 2005, between The Connecticut Water
Company and Connecticut Development Authority, Connecticut Water 2005A
Series.
|
|
|
|
4.26*
|
|
Indenture of Trust, dated October 1, 2005, between Connecticut Development
Authority and U.S. Bank National Association, as Trustee, Connecticut
Water 2005A Series.
|
|
|
|
4.27*
|
|
Insurance Agreement, dated November 30, 2005, between The Connecticut
Water Company and Financial Guaranty Insurance Company, as Insurer for the
Connecticut Water 2005A Series.
|
|
|
|
4.28*
|
|
Bond Purchase Agreement, dated November 16, 2005, among The Crystal Water
Company of Danielson, Connecticut Water Service, Inc., Connecticut
Development Authority and A.G. Edwards & Sons, Inc., Crystal Water 2005A
Series.
|
|
|
|
4.29*
|
|
Guaranty dated as of October 1, 2005 from Connecticut Water Service, Inc.
to U.S. Bank National Association, as Trustee, Crystal Water 2005A Series.
|
|
|
|
4.30*
|
|
Loan Agreement, dated October 1, 2005, between The Crystal Water Company
of Danielson and Connecticut Development Authority, Crystal Water 2005A
Series.
|
|
|
|
4.31*
|
|
Indenture of Trust, dated October 1, 2005, between Connecticut Development
Authority and U.S. Bank National Association, as Trustee, Crystal Water
2005A Series.
|
|
|
|
4.32*
|
|
Insurance Agreement, dated November 30, 2005, between The Crystal Water
Company of Danielson and Financial Guaranty Insurance Company, as Insurer
for the Crystal Water 2005A Series.
|
E-4
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
10.1
|
|
Pension Plan Fiduciary Liability Insurance for The Connecticut Water
Company Employees Retirement Plan and Trust, The Connecticut Water
Company Tax Credit Employee Stock Ownership Plan, as Amended and Restated,
Savings Plan of The Connecticut Water Company and The Connecticut Water
Company VEBA Trust Fund. (Exhibit 10.1 to Registration Statement No.
2-74938).
|
|
|
|
10.2
|
|
Directors and Officers Liability and Corporation Reimbursement Insurance.
(Exhibit 10.2 to Registration Statement No. 2-74938).
|
|
|
|
10.3
|
|
Directors Deferred Compensation Plan, effective as of January 1, 1980, as
amended as of April 22, 1994. (Exhibit 10.3 to Form 10-K for the year
ended 12/31/02).
|
|
|
|
10.4
|
|
The Connecticut Water Company Amended and Restated Deferred Compensation
Agreement dated May 14, 1999. (Exhibit 10.5 to Form 10-K for the year
ended 12/31/99).
|
|
a.
|
|
Marshall T. Chiaraluce
|
|
|
b.
|
|
David C. Benoit
|
|
|
c.
|
|
James R. McQueen
|
|
|
d.
|
|
Kenneth W. Kells
|
|
|
|
10.5a
|
|
The Connecticut Water Company Amended and Restated Deferred Compensation
Agreement with Thomas R. Marston, dated December 2, 2004. (Exhibit 10.5.a
to Form 10-K for the year ended 12/31/04).
|
|
|
|
10.6
|
|
The Connecticut Water Company Supplemental Executive Retirement Agreement
with William C. Stewart. (Exhibit 10.6a to Form 10-K for year ended
12/31/91).
|
|
|
|
10.7
|
|
The Connecticut Water Company Supplemental Executive Retirement Agreement
with Marshall T. Chiaraluce dated December 16, 1991. (Exhibit 10.6b to the
Form 10-K for year ended 12/31/91).
|
|
|
|
10.7.1
|
|
The Connecticut Water Company First Amended Supplemental Executive
Retirement Agreement with Marshall T. Chiaraluce dated August 1, 1999.
(Exhibit 10.7.2 to Form 10-K for the year ended 12/31/99).
|
|
|
|
10.7.1a
|
|
The Connecticut Water Company Second Amended Supplemental Executive
Retirement Agreement with Marshall T. Chiaraluce dated December 17, 2003.
(Exhibit 10.7.1a to Form 10-K for the year ended 12/31/03).
|
|
|
|
10.7.2
|
|
The Connecticut Water Company Supplemental Executive Retirement Agreement
with Michele G. DiAcri dated February 28, 2000. (Exhibit 10.7.2 to Form
10-K for the year ended 12/31/01).
|
|
|
|
10.7.2a
|
|
The Connecticut Water Company Second Amended Supplemental Executive
Retirement Agreement with Michele G. DiAcri dated December 17, 2003.
(Exhibit 10.7.2a to Form 10-K for the year ended 12/31/03).
|
E-5
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
10.8
|
|
The Connecticut Water Company Supplemental Executive Retirement Agreement
standard form for other officers, dated December 4, 1991. (Exhibit 10.6b
to Form 10-K for the year ended 12/31/91).
|
|
|
|
10.8a
|
|
The Connecticut Water Company Supplemental Executive Retirement Agreement
with Thomas R. Marston dated December 2, 2004. (Exhibit 10.8.a to Form
10-K for the year ended 12/31/04).
|
|
|
|
10.8.1
|
|
The Connecticut Water Company First Amended Supplemental Executive
Retirement Agreement standard form for other officers, dated August 1,
1999. (Exhibit 10.8.2 to Form 10-K for the year ended 12/31/99).
|
|
|
|
10.8.2
|
|
The Connecticut Water Company Second Amended Supplemental Executive
Retirement Agreement standard form for other officers, dated December
17, 2003. (Exhibit 10.8.2 to Form 10-K for the year ended 12/31/03).
|
|
a)
|
|
David C. Benoit
|
|
|
b)
|
|
Peter J. Bancroft
|
|
|
c)
|
|
James R. McQueen
|
|
|
d)
|
|
Terrance P. ONeill
|
|
|
e)
|
|
Maureen P. Westbrook
|
|
|
|
10.9
|
|
Amended and restated employment agreement between The Connecticut Water
Company and Connecticut Water Service, Inc. with officers, amended and
restated as of May 9, 2001. (Exhibit 10.9 to Form 10-K for the year ended
12/31/01).
|
|
a)
|
|
Marshall T. Chiaraluce
|
|
|
b)
|
|
Michele G. DiAcri
|
|
|
c)
|
|
James R. McQueen
|
|
|
d)
|
|
David C. Benoit
|
|
|
e)
|
|
Peter J. Bancroft
|
|
|
f)
|
|
Maureen P. Westbrook
|
|
|
g)
|
|
Terrance P. ONeill
|
|
|
|
10.9.1
|
|
Employment agreement between The Connecticut Water Company and
Connecticut Water Service, Inc. with Kevin T. Walsh, amended and restated
as of January 9, 2002. (Exhibit 10.9.1 to Form 10-K for the year ended
12/31/02).
|
|
|
|
10.9.2
|
|
Employment agreement between The Connecticut Water Company and
Connecticut Water Service, Inc. with Thomas R. Marston, amended and
restated as of December 2, 2004. (Exhibit 10.9.2 to Form 10-K for the year
ended 12/31/04).
|
|
|
|
10.10
|
|
Employment and Consulting Agreement between Richard L. Mercier and Gallup
Water Service, Inc. dated April 15, 1999. (Exhibit 10.10 to Form 10-K for
the year ended 12/31/99).
|
E-6
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
10.11
|
|
Employment and Consulting Agreement between Roger Engle and Crystal Water
Company of Danielson dated September 29, 1999. (Exhibit 10.11 to Form 10-K
for the year ended 12/31/99).
|
|
|
|
10.11.1
|
|
Employment and Consulting Agreement between James R. McQueen and The
Connecticut Water Company dated December 10, 2004. (Exhibit 10.11.1 to
Form 10-K for the year ended 12/31/04).
|
|
|
|
10.12
|
|
Savings Plan of The Connecticut Water Company, amended and restated
effective as of October 1, 2000. (Exhibit 10.12 to Form 10-K for the year
ended 12/31/01).
|
|
|
|
10.12.1
|
|
Trust Agreement between Connecticut Water Company and Riggs Bank N.A.,
Trustee, dated as of June 1, 2002. (Exhibit 10.12.1 to Form 10-K for the
year ended 12/31/03).
|
|
|
|
10.12.2
|
|
Post-EGTRRA Amendment to the Savings Plan of The Connecticut Water
Company, effective January 1, 2002. (Exhibit 10.12.2 to Form 10-K for the
year ended 12/31/03).
|
|
|
|
10.12.3
|
|
Supplemental Participation Agreement to the Savings Plan of The
Connecticut Water Company between The Unionville Water Company and
Connecticut Water Company, dated December 30, 2003. (Exhibit 10.12.3 to
Form 10-K for the year ended 12/31/03).
|
|
|
|
10.12.4
|
|
Supplemental Participation Agreement to the Savings Plan of The
Connecticut Water Company between The Crystal Water Company of Danielson
and Connecticut Water Company, dated December 30, 2003. (Exhibit 10.12.4
to Form 10-K for the year ended 12/31/03).
|
|
|
|
10.12.5
|
|
Supplemental Participation Agreement to the Savings Plan of The
Connecticut Water Company between Unionville Water Company and Connecticut
Water Company, dated February 23, 2004. (Exhibit 10.12.5 to Form 10-K for
the year ended 12/31/04).
|
|
|
|
10.13
|
|
The Connecticut Water Company Employees Retirement Plan as amended and
restated as of January 1, 1997. (Exhibit 10.11 to Form 10-K for the year
ended 12/31/98).
|
|
|
|
10.13.1
|
|
First Amendment, dated August 16, 2000 to the amended and restated
Connecticut Water Company Employees Retirement Plan effective January 1,
1997. (Exhibit 10.13.1 to Form 10-K for the year ended 12/31/02).
|
|
|
|
10.13.2
|
|
Second Amendment, dated November 14, 2000 to the amended and restated
Connecticut Water Company Employees Retirement Plan effective January 1,
1997. (Exhibit 10.13.2 to Form 10-K for the year ended 12/31/02).
|
E-7
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
10.13.3
|
|
Third Amendment, dated November 14, 2001 to the amended and restated
Connecticut Water Company Employees Retirement Plan effective January 1,
1997. (Exhibit 10.13.3 to Form 10-K for the year ended 12/31/02).
|
|
|
|
10.13.4
|
|
Fourth Amendment, dated August 14, 2002 to the amended and restated
Connecticut Water Company Employees Retirement Plan effective January 1,
1997. (Exhibit 10.13.4 to Form 10-K for the year ended 12/31/02).
|
|
|
|
10.13.5
|
|
Fifth Amendment, dated August 14, 2002 to the amended and restated
Connecticut Water Company Employees Retirement Plan effective January 1,
1997. (Exhibit 10.13.5 to Form 10-K for the year ended 12/31/02).
|
|
|
|
10.13.6
|
|
Sixth Amendment, dated November 10, 2003 to the amended and restated
Connecticut Water Company Employees Retirement Plan effective November
12, 2003. (Exhibit 10.13.6 to Form 10-K for the year ended 12/31/03).
|
|
|
|
10.13.7
|
|
Seventh Amendment, dated May 12, 2004 to the amended and restated
Connecticut Water Employees Retirement Plan effective January 1, 1997.
(Exhibit 10.13.7 to Form 10-K for the year ended 12/31/04).
|
|
|
|
10.14
|
|
November 4, 1994 Amendment to Agreement dated December 11, 1957 between
he Connecticut Water Company (successor to the Thomaston Water Company)
nd the City of Waterbury. (Exhibit 10.16 to Form 10-K for year ended
2/31/94).
|
|
|
|
10.15
|
|
Agreement dated August 13, 1986 between The Connecticut Water Company and
he Metropolitan District. (Exhibit 10.14 to Form 10-K for the year ended
2/31/86).
|
|
|
|
10.16
|
|
Report of the Commission to Study the Feasibility of Expanding the Water
upply Services of the Metropolitan District. (Exhibit 14 to Registration
tatement No. 2-61843).
|
|
|
|
10.17
|
|
Bond Exchange Agreements between Connecticut Water Service, Inc., The
onnecticut Water Company Bankers Life Company and Connecticut Mutual Life
nsurance Company dated October 23, 1978. (Exhibit 14 to Form 10-K for the
ear ended 12/31/78).
|
|
|
|
10.18
|
|
Dividend Reinvestment and Common Stock Purchase Plan, amended and restated
s of November 15, 2001. (Exhibit 99.1 to post-effective amendment filed
n December 5, 2001 to Form S-3, Registration Statement No. 33-53211).
|
|
|
|
10.19
|
|
Contract for Supplying Bradley International Airport. (Exhibit 10.21 to
orm 10-K for the year ended 12/31/84).
|
|
|
|
10.20
|
|
Report of South Windsor Task Force. (Exhibit 10.23 to Form 10-K for the
ear ended 12/31/87).
|
E-8
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
10.21
|
|
Trust Agreement for The Connecticut Water Company Welfare Benefits Plan
(VEBA) dated January 1, 1989. (Exhibit 10.21 to Form 10-K for year ended
12/31/89).
|
|
10.22
|
|
1994 Performance Stock Program, as amended and restated as of April 26,
2002. (Exhibit A to Proxy Statement dated 3/19/02).
|
|
|
|
10.22a*
|
|
First Amendment to the Connecticut Water Service, Inc. Performance Stock
Program Amended and Restated as of April 26, 2002 (the Plan) dated
December 1, 2005.
|
|
|
|
10.23
|
|
2004 Performance Stock Program, as of April 23, 2004. (Appendix A to Proxy
Statement dated 3/12/04).
|
|
|
|
10.23a
|
|
Connecticut Water Service, Inc. Performance Stock Program Incentive Stock
Option Grant Form. (Exhibit 10.1 to Form 10-Q for the quarter ended
9/30/04).
|
|
|
|
10.23b
|
|
Connecticut Water Service, Inc. Performance Stock Program Non-Qualified
Stock Option Grant Form. (Exhibit 10.2 to Form 10-Q for the quarter ended
9/30/04).
|
|
|
|
10.23c
|
|
Restricted Stock Agreement, standard form for officers, dated December 1,
2005 (Exhibit 10.1 to Form 8-K dated 1/13/06).
|
|
|
|
10.23d
|
|
Long-Term Performance Award Agreement, standard form for officers, dated
January 11, 2006 (Exhibit 10.2 to Form 8-K dated 1/13/06).
|
|
|
|
10.23e
|
|
Performance Award Agreement, standard form for officers, dated January
11, 2006 (Exhibit 10.3 to Form 8-K dated 1/13/06).
|
|
|
|
10.23f*
|
|
First Amendment to the Connecticut Water Service, Inc. 2004 Performance
Stock Program, dated January 7, 2004.
|
|
|
|
10.24
|
|
Loan Agreement dated as of February 15, 1991 between Indianapolis Life
Insurance Company and The Barnstable Water Company. (Exhibit 10.26 to Form
10-K for the year ended 12/31/01).
|
|
|
|
10.25
|
|
Guaranty Agreement by Connecticut Water Service, Inc. and Second Amendment
to Note Agreement of Barnstable Water Company dated as of February 23,
2001. (Exhibit 10.27 to Form 10-K for the year ended 12/31/01).
|
|
|
|
10.26*
|
|
Letter Agreement and Terms between Eric Thornburg and The Connecticut
Water Company dated January 6, 2006.
|
|
|
|
10.27*
|
|
Employment Agreement between The Connecticut Water Company and
Connecticut Water Service, Inc. with Thomas R. Roberts, amended and
restated as of November 9, 2005.
|
E-9
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
10.28*
|
|
Employment Agreement between The Connecticut Water Company and
Connecticut Water Service, Inc. with Daniel J. Meaney, amended and
restated as of January 12, 2006.
|
|
|
|
10.29
|
|
Employment Agreement dated March 20,
2006 between Connecticut Water Service, Inc., The
Connecticut Water Company and Eric W. Thornburg (Exhibit 10.1 to
Form 8-K dated 3/24/06).
|
|
|
|
10.30
|
|
Deferred Compensation Agreement
dated March 20, 2006 between Connecticut Water Service, Inc., The
Connecticut Water Company and Eric W. Thornburg (Exhibit 10.2 to
Form 8-K dated 3/24/06).
|
|
|
|
10.31
|
|
Supplemental Executive Retirement
Agreement dated March 20, 2006 between Connecticut Water Service, Inc., The
Connecticut Water Company and Eric W. Thornburg (Exhibit 10.3 to
Form 8-K dated 3/24/06).
|
|
|
|
23.1*
|
|
Consent of Independent Registered Public Accounting Firm
|
|
|
|
31.1*
|
|
Rule 13a-14 Certification of Marshall T. Chiaraluce, Chief Executive
Officer.
|
|
|
|
31.2*
|
|
Rule 13a-14 Certification of David C. Benoit, Chief Financial Officer.
|
|
|
|
32.1*
|
|
Certification of Marshall T. Chiaraluce, Chief Executive Officer, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2*
S
|
|
Certification of David C. Benoit, Chief Financial Officer, pursuant to
ection 906 of the Sarbanes-Oxley Act of 2002.
|
Note:
|
|
Exhibits 10.1 through 10.13.7, 10.22, 10.23, 10.26 through
10.31 set forth each
management contract or compensatory plan or arrangement required to be filed as an exhibit to
this Form 10-K.
|
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
|
|
|
CONNECTICUT WATER SERVICE, INC.
|
|
|
|
|
Registrant
|
|
|
|
|
|
|
|
|
|
|
|
By
|
|
/s/ Eric W. Thornburg
|
|
|
|
|
|
|
|
|
|
March 31, 2006
|
|
|
|
Eric W. Thornburg
|
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of Connecticut Water Service, Inc. in the capacities and
on the dates indicated.
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
/s/ Eric W. Thornburg
|
|
|
|
|
|
|
|
|
|
Eric W. Thornburg
|
|
President, Director,
|
|
March 31, 2006
|
(Principal Executive Officer)
|
|
and Chief Executive Officer
|
|
|
|
|
|
|
|
/s/ David C. Benoit
|
|
|
|
|
|
|
|
|
|
David C. Benoit
|
|
Vice President Finance,
|
|
March 31, 2006
|
(Principal Financial and Accounting Officer)
|
|
Chief Financial Officer and
Treasurer
|
|
|
39
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
/s/ Marshall T. Chiaraluce
|
|
Director and Chairman
|
|
March 14, 2006
|
|
|
|
|
|
Marshall T. Chiaraluce
|
|
of the Board
|
|
|
|
|
|
|
|
/s/ Roger Engle
|
|
Director
|
|
March 11, 2006
|
|
|
|
|
|
Roger Engle
|
|
|
|
|
|
|
|
|
|
/s/ Mary Ann Hanley
|
|
Director
|
|
March 10, 2006
|
|
|
|
|
|
Mary Ann Hanley
|
|
|
|
|
|
|
|
|
|
/s/ Marcia Hincks
|
|
Director
|
|
March 14, 2006
|
|
|
|
|
|
Marcia Hincks
|
|
|
|
|
|
|
|
|
|
/s/ Mark G. Kachur
|
|
Director
|
|
March 8, 2006
|
|
|
|
|
|
Mark G. Kachur
|
|
|
|
|
|
|
|
|
|
/s/ David A. Lentini
|
|
Director
|
|
March 14, 2006
|
|
|
|
|
|
David A. Lentini
|
|
|
|
|
|
|
|
|
|
/s/ Ronald D. Lengyel
|
|
Director
|
|
March 14, 2006
|
|
|
|
|
|
Ronald D. Lengyel
|
|
|
|
|
|
|
|
|
|
/s/ Robert F. Neal
|
|
Director
|
|
March 10, 2006
|
|
|
|
|
|
Robert F. Neal
|
|
|
|
|
|
|
|
|
|
/s/ Arthur C. Reeds
|
|
Director
|
|
March 10, 2006
|
|
|
|
|
|
Arthur C. Reeds
|
|
|
|
|
|
|
|
|
|
/s/ Lisa J. Thibdaue
|
|
Director
|
|
March 12, 2006
|
|
|
|
|
|
Lisa J. Thibdaue
|
|
|
|
|
|
|
|
|
|
/s/ Carol P. Wallace
|
|
Director
|
|
March 10, 2006
|
|
|
|
|
|
Carol P. Wallace
|
|
|
|
|
|
|
|
|
|
/s/ Donald B. Wilbur
|
|
Director
|
|
March 15, 2006
|
|
|
|
|
|
Donald B. Wilbur
|
|
|
|
|
S-1
CONNECTICUT WATER SERVICE, INC. and SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
Additions
|
|
|
Deductions
|
|
|
Balance
|
|
(in thousands)
|
|
Beginning
|
|
|
Charged to
|
|
|
From
|
|
|
End of
|
|
Description
|
|
of Year
|
|
|
Income
|
|
|
Reserves
(1)
|
|
|
Year
|
|
Allowance for Uncollectible
Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
$
|
212
|
|
|
$
|
156
|
|
|
$
|
112
|
|
|
$
|
256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2004
|
|
$
|
271
|
|
|
$
|
61
|
|
|
$
|
120
|
|
|
$
|
212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2003
|
|
$
|
240
|
|
|
$
|
186
|
|
|
$
|
155
|
|
|
$
|
271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Amounts charged off as uncollectible after deducting recoveries.
|
EXHIBIT 4.24
BOND PURCHASE AGREEMENT
among
CONNECTICUT DEVELOPMENT AUTHORITY,
THE CONNECTICUT WATER COMPANY
and
A.G. EDWARDS & SONS, INC.
Dated October 28, 2005
$10,000,000
Connecticut Development Authority
Water Facilities Revenue Bonds
(The Connecticut Water Company Project 2005A Series)
Exhibit 4.24
BOND PURCHASE AGREEMENT
AGREEMENT, dated October 28, 2005, among the Connecticut Development Authority (the
Authority), The Connecticut Water Company (the Company) and A.G. Edwards & Sons, Inc. (the
Underwriter), with respect to the sale and purchase of the Authoritys $10,000,000 Water
Facilities Revenue Bonds (The Connecticut Water Company Project 2005A Series) (the Bonds) on
the terms and subject to the conditions herein set forth:
1. The Borrower has previously filed with the Authority its application for the issuance of
the Bonds by the Authority, and the Authority has authorized the Bonds by a resolution duly adopted
August 17, 2005 (the Resolution). The Bonds will be special obligations of the Authority payable
solely out of the revenues or other receipts, funds or moneys pledged therefore, and from any
amounts otherwise available to the Trustee for the payment thereof under the indenture referred to
below. The proceeds of the sale of the Bonds will be loaned to the Company for use in the
acquisition, construction and installation of certain additions to the water system of the Company
(the Project) located in certain municipalities within the State of Connecticut (the State).
All such projects are to be used for water facilities purposes, all as more particularly described
in the Loan Agreement (the Agreement), dated as of October 1, 2005 by and between the Authority
and the Company. Pursuant to the Agreement, the Company will execute and deliver to the Authority
the Companys note (the Note) to evidence its indebtedness thereunder. Payments on the Note
shall be applied to the amounts due on the Bonds.
The Bonds shall be in all respects as described in, and shall be issued under and pursuant to,
an Indenture of Trust (the Indenture), dated as of October 1, 2005, between the Authority and
U.S. Bank National Association, as trustee (the Trustee). In connection with the execution and
delivery of the Indenture, the Authority and the Trustee will execute and deliver a Letter of
Representation (the Letter of Representation) to The Depository Trust Company (DTC). In order
to assure the exclusion of interest on the Bonds from gross income for purposes of federal income
taxation, the Company, the Authority and the Trustee will enter into a Tax Regulatory Agreement
relating to the Bonds, dated as of the date of issuance of the Bonds (the Tax Regulatory
Agreement).
In this Bond Purchase Agreement, the term Financing Documents (1) when used with respect to
the Company, means the Agreement, the Note, the Tax Regulatory Agreement, the Insurance Agreement
to be dated as of the hereinafter-defined Closing Date between the Company and Financial Guaranty
Insurance Company (the Bond Insurer), the Continuing Disclosure Agreement dated as of October 1,
2005 between the Company and the Trustee, as dissemination agent (the Disclosure Agreement), and
the general certificate of the Company delivered in connection with the issuance of the Bonds and
(2) when used with respect to the Authority, means any of the foregoing documents and agreements
referred to in (1) above to which the Authority is a direct party. The Financing Documents when
such term is used with respect to the Company, do not include any documents or agreements to which
the Company is not a direct party, including the Bonds, the Indenture or the Letter of
Representation.
1
Exhibit 4.24
2. Subject to the terms and conditions and upon the basis of the representations hereinafter
set forth, the Authority hereby agrees to sell the Bonds to the Underwriter and the Underwriter
hereby agrees to purchase the Bonds from the Authority at the purchase price of $10,000,000.00.
The Bonds shall be dated their date of delivery, shall mature on October 1, 2040 and shall bear
interest at a rate of 5% per annum, payable on April 1 and October 1 in each year, commencing April
1, 2006. It will be a condition to the Authoritys obligation to sell the Bonds to the Underwriter
and the obligation of the Underwriter to purchase the Bonds that all Bonds be sold and delivered by
the Authority and paid for by the Underwriter on the Closing Date, as hereinafter defined.
3. The date of delivery and payment for the Bonds (the Closing Date) will be November 30,
2005 unless not later than the fifth day preceding such date the Authority, the Company and the
Underwriter agree that the Closing Date will be a specified date not later than the thirtieth day
subsequent to such date, in which event the Closing Date will be the date so specified. The Bonds
shall be available for inspection and packaging at least twenty-four hours before the Closing Date.
The Authority will authorize the Trustee to authenticate and deliver the Bonds to the
Underwriter through the facilities of DTC, 55 Water Street, New York, New York, utilizing the FAST
System pursuant to which the Trustee will take custody of the Bonds as agent for DTC, at
approximately 11:00 A.M., New York City time on the Closing Date, in typewritten form, bearing
CUSIP numbers, duly executed and authenticated, registered in the name of Cede & Co., as nominee
for DTC, against payment therefor by wire transfer or other manner payable in immediately available
funds to the Trustee for the account of the Authority. The payment for the Bonds to the Authority
and the delivery thereof to the Underwriter shall be made at the offices of Murtha Cullina LLP,
City Place I, 185 Asylum Street, Hartford, Connecticut. The Bonds will be delivered in the form
and denominations and shall be otherwise as described in the Indenture.
4. The Authority represents and warrants that:
(a) It is a body corporate and politic constituting a public instrumentality and political
subdivision of the State of Connecticut duly organized and existing under the laws of the State of
Connecticut, particularly the State Commerce Act, constituting Connecticut General Statutes,
Sections 32-la through 32-23zz, as amended (the Act). The Authority is authorized to issue the
Bonds in accordance with the Act and to lend the proceeds thereof to the Company to finance the
improvements described in the Indenture.
(b) The Authority has complied with the provisions of the Act and has full power and authority
pursuant to the Act to consummate all transactions contemplated by this Bond Purchase Agreement,
the Bonds, the Resolution, the Indenture and the Financing Documents, and to issue, sell and
deliver the Bonds to the Underwriter as provided herein.
(c) The Resolution has been duly adopted by the Authority and is still in full force and
effect. The Resolution has authorized the execution, delivery and due performance of this Bond
Purchase Agreement, the Bonds, the Indenture and the Financing Documents, and the
2
Exhibit 4.24
taking of any and all action as may be required on the part of the Authority to carry out,
give effect to and consummate the transactions contemplated by this Bond Purchase Agreement, and
all approvals necessary in connection with the foregoing have been received, except the State
Treasurers approval.
(d) When delivered to and paid for by the Underwriter in accordance with the terms of this
Bond Purchase Agreement, the Bonds will have been duly authorized, executed, authenticated, issued
and delivered and will constitute valid and binding special obligations of the Authority payable
solely from revenues or other receipts, funds or moneys pledged therefor under the Indenture and
from any amounts otherwise available therefor under the Indenture, and will be entitled to the
benefit of the Indenture. Neither the State nor any municipality thereof will be obligated to pay
the Bonds or the interest thereon. Neither the faith and credit nor the taxing power of the State
nor any municipality thereof is pledged for the payment of the principal, and premium, if any, of
and interest on the Bonds.
(e) The execution and delivery of this Bond Purchase Agreement, the Bonds, the Indenture and
the Financing Documents, and compliance with the provisions thereof, will not conflict with or
constitute on the part of the Authority a violation of, breach of or default under its by-laws or
any statute, indenture, mortgage, deed of trust, note agreement or other agreement or instrument to
which the Authority is a party or by which the Authority is bound, or, to the knowledge of the
Authority, any order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Authority or any of its activities or properties, and all consents,
approvals, authorizations and orders of governmental or regulatory authorities which are required
for the consummation by the Authority of the transactions contemplated thereby have been obtained,
except the State Treasurers approval.
(f) Subject to the provisions of the Agreement and the Indenture, the Authority will apply the
proceeds from the sale of the Bonds to the purposes specified in the Indenture and the Financing
Documents.
(g) To the best knowledge of the Authority, there is no action, suit, proceeding or
investigation at law or in equity before or by any court, public board or body pending or
threatened against or affecting the Authority, or to the best knowledge of the Authority, any basis
therefor, wherein an unfavorable decision, ruling or finding would adversely affect the
transactions contemplated hereby and by the Indenture, or which, in any way, would adversely affect
the validity of the Bonds, the Resolution, the Indenture, the Financing Documents, this Bond
Purchase Agreement, or any agreement or instrument to which the Authority is a party and which is
used or contemplated for use in consummation of the transactions contemplated hereby and by the
Indenture or the exemption from taxation as set forth therein.
(h) The representations and warranties of the Authority contained in Section 2.1 of the Loan
Agreement are true and correct as of the date hereof.
3
Exhibit 4.24
(i) Any certificate signed by any Authorized Representative of the Authority under the
Resolution or this Bond Purchase Agreement and delivered to the Underwriter or to the Trustee shall
be deemed a representation and warranty by the Authority to the Underwriter and the Company as to
the statements made therein.
(j) The information with respect to the Authority in the Official Statement of the Authority,
dated the date hereof, is correct and complete, except that none of the representations and
warranties herein apply to statements in or omissions from the Official Statement made in reliance
on or in conformity with information furnished, to the Authority by the Company, or to information
under the headings THE PROJECT, THE BONDSBook-Entry Only System, BOND INSURANCE, TAX
MATTERS, LEGAL MATTERS and INDEPENDENT ACCOUNTANTS, or to anything contained or incorporated
by reference in the appendices to the Official Statement or otherwise with respect to the Company.
The Authority has authorized the use of the Official Statement in both its preliminary and final
forms and delivered duly executed copies thereof in final form to the Underwriter.
It is specifically understood and agreed that the Authority makes no representation as to the
financial position or business condition of the Company or any other person and does not, with
respect to the Official Statement or otherwise, except to the extent the Authority deems the
Preliminary Official Statement to be final as provided in Section 9 hereof, represent or warrant as
to any of the statements, materials (financial or otherwise), representations or certifications
furnished or to be made and furnished by the Company or any other person in connection with the
sale of the Bonds, or as to the correctness, completeness or accuracy of any of such statements,
materials, representations or certificates.
5. The Company represents and warrants that:
(a) The Company has been duly organized and validly exists as a corporation under the laws of
the State of Connecticut, having all requisite corporate power to carry on its business as now
constituted.
(b) The execution and delivery by the Company of the Financing Documents and this Bond
Purchase Agreement, and all other agreements herein contemplated to be performed by the Company,
and the performance of the conditions herein contained and those in each of such instruments to be
performed are not in contravention of law and will not conflict with or result in any breach of any
of the terms, conditions or provisions of, or constitute a default under any indenture, mortgage
deed of trust or other agreement or instrument to which the Company is a party, or the Certificate
of Incorporation and any special acts incorporated by reference therein or Bylaws of the Company,
or any order, rule or regulation applicable to the Company of any court or of any federal or State
regulatory body or administrative agency or other governmental body having jurisdiction over the
Company or over any of its properties, or any statute, rule or regulation of any jurisdiction
applicable to the Company, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the properties or assets of the Company pursuant to the terms of any
indenture, agreement or undertaking binding upon it; and, to the extent
4
Exhibit 4.24
required by law, the Connecticut Department of Public Utility Control (the DPUC) has approved or
waived approval of all matters relating to the Companys participation in the transactions
contemplated in the Financing Documents which require such approval or waiver of approval; such
approval or waiver of approval remains in full force and effect in the form issued; and, assuming
that the Bonds are securities described in Section 3(a)(2) of the Securities Act of 1933, as
amended (the Securities Act) and Section 3(a)(12) and (29) of the Securities Exchange Act of
1934, as amended (the Exchange Act), no other consent, approval, authorization or other order of
any regulatory body or administrative agency or other governmental body is legally required for the
Companys participation in connection therewith, except as have been obtained.
(c) Except as disclosed or incorporated by reference in the Official Statement, there is no
action, suit, proceeding, inquiry or investigation, at law or in equity, or before or by any court,
public board or body, pending, or to the knowledge of the Company threatened, wherein an
unfavorable decision, ruling or finding would (i) in the opinion of the Company, involve the
possibility of any judgment or liability to the extent not covered by insurance which would result
in any material adverse change in the business, properties or operations of the Company, (ii)
materially adversely affect the transactions contemplated by this Bond Purchase Agreement or (iii)
materially adversely affect the validity or enforceability of the Financing Documents or this Bond
Purchase Agreement.
(d) The Company will not take or omit to take any action which action or omission will in any
way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to that
provided in the Financing Documents.
(e) Except as disclosed or incorporated by reference in the Official Statement, the Company is
not a party to or bound by any contract, agreement or other instrument, or subject to any judgment,
order, writ, injunction, decree, rule or regulation which, in the Companys opinion, materially
adversely affects, or in the future may, so far as the Company can now reasonably foresee,
materially adversely affect the business, operations, properties, assets or condition, financial or
otherwise, of the Company.
(f) Neither this Bond Purchase Agreement, other than Section 4 hereof as to which no
representation is made, nor any other document, certificate or written statement furnished to the
Underwriter or the Authority by or on behalf of the Company, when read together with the
information disclosed or incorporated by reference in the Official Statement, contains any untrue
statement of a material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under which they were made,
not misleading or incomplete.
(g) The Company has not taken and will not take any action and knows of no action that any
person, firm or corporation has taken or intends to take, which would cause interest on the Bonds
to be includable in the gross income of the recipients thereof for federal income tax purposes.
5
Exhibit 4.24
(h) The Company will deliver or cause to be delivered all opinions, certificates, letters and
other instruments and documents required to be delivered by the Company pursuant to this Bond
Purchase Agreement.
(i) The Financing Documents and this Bond Purchase Agreement, when executed and delivered,
will be legal, valid, binding and enforceable obligations of the Company, except to the extent that
such enforceability may be limited by bankruptcy or insolvency or other laws affecting creditors
rights generally or by general principles of equity.
(j) The Company has authorized and consents to the use of the Official Statement by the
Underwriter. The information with respect to the Company included or incorporated by reference in
Appendix A to the Preliminary Official Statement and the descriptions contained therein of the
Indenture and the Financing Documents and the Companys participation in the transactions
contemplated thereby, with such additions or amendments as heretofore have been agreed upon between
the Authority, the Company and the Underwriter and which are reflected in the Official Statement,
are correct and do not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein in light of
circumstances under which they were made not misleading except that the Company makes no
representation as to (A) the information contained in Appendices D and F of each of the Preliminary
Official Statement and the Official Statement or the information contained in each of the
Preliminary Official Statement and the Official Statement under the captions INTRODUCTION The
Authority, THE AUTHORITY, THE BONDS Book Entry Only System, TAX MATTERS, BOND INSURANCE
and UNDERWRITING or (B) the information with respect to DTC and its book-entry system. The
financial statements included in Appendix B to each of the Preliminary Official Statement and the
Official Statement have been prepared in accordance with generally accepted accounting principles
as applied in the case of rate-regulated public utilities, comply with the Uniform System of
Accounts and ratemaking practices prescribed by the DPUC (except as otherwise disclosed in the
notes to such financial statements) and fairly present the financial position, results of
operations, retained earnings and statements of cash flows of the Company at the respective dates
and for the respective periods indicated.
(k) There has been no material adverse change in the business, properties, operations or
financial condition of the Company, taking into account seasonal revenue fluctuations, from that
shown or incorporated by reference in the Official Statement.
(l) The Company will use its best efforts to cause the delivery of the Policy (as hereinafter
defined).
(m) The representations and warranties of the Company contained in Section 2.2 of the Loan
Agreement are true and correct as of the date hereof.
(n) The Company has obtained all approvals required in connection with the execution and
delivery of, and performance by the Company of its obligations under, this Bond Purchase Agreement
and the Financing Documents.
6
Exhibit 4.24
(o) Any certificate signed by an officer of the Company and delivered to the Underwriter at
the time of the purchase and sale of the Bonds shall be deemed a representation and warranty by the
Company to the Underwriter as to the statements made therein.
(p) The Company deems the Preliminary Official Statement to be final as of its date for
purposes of Rule 15c2-12 of the SEC.
(q) No material event of default or event which, with notice or lapse of time or both, would
constitute a material event of default or default under any material agreement or material
instrument to which the Company is a party or by which the Company is bound or to which any of the
property or assets of the Company is subject has occurred and is continuing.
(r) The Company will undertake, pursuant to the Disclosure Agreement, to provide certain
annual financial information and notices of the occurrence of certain events, if material. A
description of this undertaking is set forth in the Preliminary Official Statement and will be set
forth in the Official Statement.
6. The Company agrees to indemnify and hold harmless the Authority, the Underwriter, any
member, officer, official, employee or agent of the Authority or the State or the Underwriter, and
each person, if any, who controls the Underwriter within the meaning of Section 15 of the
Securities Act, as amended (for purposes of this paragraph, collectively the Indemnified
Parties), to the extent permitted under the applicable law, against any and all losses, claims,
damages, liabilities or expenses whatsoever, joint or several, caused by (1) any breach of any
representation or warranty made by the Company in this Bond Purchase Agreement or the Financing
Documents or (2) any untrue statement or misleading statement or allegedly misleading statement of
a material fact contained in the Official Statement or caused by any omission or alleged omission
from the Official Statement of any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not misleading, except insofar
as such losses, claims, damages, liabilities or expenses are caused by any such untrue or
misleading statement or omission or allegedly untrue or misleading statement or omission in the
information contained under the captions INTRODUCTION The Authority, THE AUTHORITY, THE
BONDS Book Entry Only System, TAX MATTERS, BOND INSURANCE and UNDERWRITING or in
Appendices D and F thereto (except to the extent that the information set forth in such section is
premised on facts and representations made in writing by the Company); provided, however, that in
the case of clause (2) above such indemnity shall not inure to the benefit of the Underwriter (or
any person controlling the Underwriter or any officer or employee of the Underwriter) if (i) the
Company has caused to be delivered to the Underwriter on a timely basis sufficient quantities of
the Official Statement, as amended or supplemented, and (ii) a copy of the Official Statement, as
then so amended or supplemented, was not sent or given by or on behalf of the Underwriter to the
person asserting such loss, claim, damage, liability or expense prior to or with written
confirmation of the sale of such Bonds to such person by the Underwriter, and (iii) the receipt of
the Official Statement, as then so supplemented or amended, would have been a valid defense to the
loss, claim, damage, liability or expense asserted. This indemnity agreement shall not be
7
Exhibit 4.24
construed as a limitation on any other liability which the Company may otherwise have to any
Indemnified Party.
The Underwriter agrees to indemnify and hold harmless the Authority and the Company, and each
director, officer or employee of the Authority and the Company, and each person who controls either
of them within the meaning of Section 15 of the Securities Act (for purposes of this paragraph, an
Indemnified Party) to the same extent as the foregoing indemnity from the Company to the
Underwriter, but only with reference to written information furnished to the Authority or the
Company by or on behalf of the Underwriter specifically for inclusion in the Official Statement
under the caption UNDERWRITING. This indemnity agreement shall not be construed as a limitation
on any other liability which the Underwriter may otherwise have to any Indemnified Party.
An Indemnified Party will, promptly after receiving notice of the commencement of any action
against such Indemnified Party in respect of which indemnification may be sought against the
Company or the Underwriter, as the case may be (in any case the Indemnifying Party), notify the
Indemnifying Party in writing of the commencement of the action, enclosing a copy of all papers
served, but the omission so to notify the Indemnifying Party of any such action shall not relieve
the Indemnifying Party of any liability which it may have to any Indemnified Party otherwise than
under this Section. If such action is brought against an Indemnified Party and such Indemnified
Party notices the Indemnifying Party of its commencement, the Indemnifying Party may, or if so
requested by the Indemnified Party shall, participate in it or assume its defense, with counsel
reasonably satisfactory to the Indemnified Party, and after notice from the Indemnifying Party to
the Indemnified Party of an election to assume the defense, the Indemnifying Party will not be
liable to the Indemnified Party under this Section for any legal or other expenses subsequently
incurred by such Indemnified Party in connection with the defense other than reasonable costs of
investigation subsequently incurred by the Indemnified Party in connection with the defense
thereof. Until the Indemnifying Party assumes the defense of any such action at the request of the
Indemnified Party, the Indemnifying Party may participate at its own expense in the defense of the
action. If the Indemnifying Party does not employ counsel to have charge of the defense or if any
Indemnified Party reasonably concludes that there may be defenses available to it or them which are
different from or in addition to those available to the Indemnifying Party or the Indemnified Party
and the Indemnifying Parties may have conflicting interests which would make it inappropriate for
the same counsel to represent both of them, reasonable legal and other expenses incurred by such
Indemnified Party will be paid by the Indemnifying Party and the Indemnifying Party shall not have
the right to direct the defense of such action on behalf of such Indemnified Party (it being
understood, however, that the Indemnifying Party shall not be liable for the expenses of more than
one separate counsel (in addition to local counsel) approved by the Underwriter in the case of
paragraph (a) representing all Indemnified Parties who are parties to such action). Any obligation
under this Section 5 of an Indemnifying Party to reimburse an Indemnified Party for expenses
includes the obligation to reimburse the Indemnified Party to cover such expenses in reasonable
amounts and at reasonable periodic intervals upon receipt by the Indemnifying Party of an invoice
for such expenses not more often than monthly as requested by the Indemnifying Party.
Notwithstanding the
8
Exhibit 4.24
foregoing, the Indemnifying Party shall not be liable for any settlement of any action or claim
effected without its consent, which consent shall not be unreasonably withheld.
In order to provide for just and equitable contribution in circumstances in which the
indemnification provided for above is due in accordance with its terms but is for any reason held
by a court to be unavailable from the Company or Underwriter on grounds of policy or otherwise, the
Company and the Underwriter shall contribute to the total losses, claims, damages and liabilities
(including reasonable legal or other expenses of investigation or defense) to which they may be
subject (i) in such proportion as is appropriate to reflect the relative benefits received by the
Company and the Underwriter from the offering of the Bonds or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Underwriter in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The respective relative benefits received by the Company and the Underwriter shall
be deemed to be in the same proportion as the proceeds from the sale (i.e., the principal amount of
the Bonds) bears to the discount or fee in connection with such sale received by the Underwriter as
an underwriting fee, as set forth in Section 12 hereof. The relative fault of the Company and the
Underwriter shall be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriter and the parties relative
intent, knowledge, access to information and opportunity to correct or prevent such statement or
omission. However, no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section, each person who controls the
Underwriter within the meaning of Section 15 of the Securities Act will have the same rights to
contribution as the Underwriter, and each person who controls the Company within the meaning of
Section 15 of the Securities Act and each officer and each director of the Company will have the
same rights to contribution as the Company, subject to the foregoing sentence. Any party entitled
to contribution will, promptly after receiving notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may be made under this
paragraph, notify each party from whom contribution may be sought, but the omission to notify such
party shall not relieve any party from whom contribution may be sought from any other obligation it
may have otherwise than pursuant to this paragraph.
7. The Companys obligations hereunder, except those contained in Sections 6 and 12, will be
conditioned upon the approval by the DPUC of the issuance of the Note, the loan under the Agreement
and the transactions of the Company contemplated by the Financing Documents; the purchase of and
payment for the Bonds in accordance herewith on the Closing Date; the performance of the
obligations of the Authority and the Underwriter not dependant on the performance of the Company;
and the delivery to the Authority of the approving opinion of Winston & Strawn LLP, Bond Counsel,
in form and substance substantially in the form set forth as Appendix D to the Official Statement.
9
Exhibit 4.24
8. The Authoritys obligation to deliver the Bonds and to accept payment therefor are subject
to the performance of the obligations of the Company and the Underwriter not dependent on the
performance of the Authority, and will be conditioned upon the approval by the DPUC of the issuance
of the Note, the loan under the Agreement and the transactions of the Company contemplated by the
Financing Documents; the purchase of and payment for the Bonds in accordance herewith on the
Closing Date; the delivery by the Underwriter to the Authority of a certificate substantially in
the form of Schedule I to the Tax Regulatory Agreement; and the delivery to the Authority of the
approving opinion of Winston & Strawn LLP, Bond Counsel, in form and substance substantially in the
form set forth as Appendix D to the Official Statement, and will be subject to the further
condition that all documents, certificates, opinions and other items to be delivered at the closing
pursuant hereto and as otherwise may reasonably be requested by Bond Counsel not be unsatisfactory
in form and substance to Bond Counsel.
9. The Underwriters obligations hereunder to purchase and pay for the Bonds will be subject
to (i) the approval by the DPUC of the issuance of the Note, the loan under the Agreement and the
transactions of the Company contemplated by the Financing Documents, (ii) the performance by the
Authority of its obligations to be performed hereunder at or prior to the Closing Date, (iii) the
performance by the Company of its obligations to be performed hereunder at or prior to the Closing
Date, (iv) the continued accuracy in all material respects of the representations and warranties of
the Authority and the Company contained herein and in the Agreement as of the date hereof and as of
the Closing Date, and (v) in the reasonable judgment of the Underwriter, the following conditions:
(a) After the date hereof, no litigation may be threatened or pending in any court (i) seeking
to restrain or enjoin the issuance or delivery of the Bonds or the payment, collection or
application of the proceeds thereof or moneys and securities pledged or to be pledged under the
Indenture, or (ii) in any way questioning or affecting the validity of the Bonds or any provisions
of the Indenture, the Financing Documents or this Bond Purchase Agreement or any proceedings taken
by the Authority with respect to the foregoing, or (iii) questioning the Authoritys creation,
organization or existence or the titles to office of any of its officers authorized under the
Resolution, or its power to lend or provide money in connection with the Project as referred to in
the Indenture and the Agreement, or (iv) questioning the Companys power to enter into and perform
the Financing Documents or this Bond Purchase Agreement;
(b) The market value of the Bonds has not been adversely affected by reason of the fact that
between the date hereof and the Closing Date:
(1) legislation has been enacted by the Congress or recommended to the Congress for
passage by the President of the United States, or favorably reported for passage to either
House of the Congress by any Committee of such House to which such legislation has been
referred for consideration, or
(2) a decision has been rendered by a Court of the United States, or the United States
Tax Court, or
10
Exhibit 4.24
(3) an order, ruling, regulation or official statement has been made by the Treasury
Department of the United States or the Internal Revenue Service,
with the purpose or effect, directly or indirectly, of imposing federal income taxation upon such
revenues or other income as would be derived by the Authority under the Agreement or such interest
on the Bonds as would be received by the true owners and holders thereof, other than a person who,
within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended (the Code),
is a substantial user or related person;
(c) The market value of the Bonds has not in the opinion of the Underwriter been materially
adversely affected by reason of the fact that between the date hereof and the Closing Date any
legislation, ordinance, rule or regulation has been introduced in or enacted by any governmental
body, department or agency in the State, or a decision has been rendered by any court of competent
jurisdiction within the State with the purpose or effect, directly or indirectly, of imposing state
income taxation upon such revenues or other income as would be derived by the Authority under the
Agreement or such interest on the Bonds as would be received by the true owners and holders
thereof;
(d) No stop order, ruling, regulation or official statement by, or on behalf of, the
Securities and Exchange Commission may have been issued or made after the date hereof to the effect
that the issuance, offering or sale of obligations of the general character of the Bonds, or the
Bonds, as contemplated hereby or by the Official Statement, is in violation or would be in
violation unless registered or otherwise qualified under any provisions of the Securities Act of
1933, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then
in effect;
(e) After the date hereof, no legislation may have been introduced in or enacted by the House
of Representatives or the Senate or the Congress of the United States of America, nor shall a
decision by a court of the United States of America have been rendered, or a ruling, regulation or
official statement by or on behalf of the Securities and Exchange Commission or other governmental
agency having jurisdiction of the subject matter have been made or proposed to the effect that
obligations of the general character of the Bonds, or the Bonds, are not exempt from registration,
qualification or other requirements of the Securities Act of 1933, as amended and as then in
effect, or of the Securities Act of 1934, as amended and then in effect, or of the Trust Indenture
Act of 1939, as amended and as then in effect;
(f) (i) No event shall have occurred after the date hereof, which, in the opinion of the
Underwriter, makes untrue, incorrect or inaccurate, in any material respect, any statement or
information contained or incorporated by reference in the Official Statement (including the
Appendices thereto), or which is not reflected in the Official Statement but should be reflected
therein for the purpose for which the Official Statement is to be used in order to make the
statements and information contained therein in light of the circumstances under which they were
made not misleading in any material respect, and (ii) there shall be no material adverse
11
Exhibit 4.24
change (not in the ordinary course of business) in the condition of the Company from that set forth
in or incorporated by reference in the Official Statement and the Appendix A thereto;
(g) In the judgment of the Underwriter, the market price of the Bonds, or the market price
generally of obligations of the general character of the Bonds, shall not have been adversely
affected because: (a) additional material restrictions not in force as of the date hereof shall
have been imposed upon trading in securities generally by any governmental authority or by any
national securities exchange; (b) the New York Stock Exchange, Inc. or other national securities
exchange, or any governmental authority, shall impose, as to the Bonds or similar obligations, any
material restrictions not now in force, or increase materially those now in force, with respect to
the extension of credit by, or the charge to the net capital requirements of, underwriters; (c) a
general banking moratorium shall have been established by federal, New York or Connecticut
authorities; or (d) a war involving the United States of America shall have been declared, or any
other national calamity shall have occurred, or any conflict involving the armed forces of the
United States of America has escalated to such a magnitude as to materially adversely affect the
Underwriters ability to market the Bonds;
(h) All matters relating to this Bond Purchase Agreement, the Bonds and the sale thereof, the
Indenture, the Financing Documents and the consummation of the transactions contemplated by this
Bond Purchase Agreement must be approved by the Underwriter but such approval may not be
unreasonably withheld; and
(i) At or prior to the Closing Date the Underwriter must have received the following
documents:
(1) Certified copies of the executed Financing Documents and the Indenture.
(2) The legal opinions of the following, dated the Closing Date, in the form and
substance satisfactory to Bond Counsel and the Underwriter:
(A) Murtha Cullina LLP, counsel to the Company.
(B) Day Berry & Howard LLP, counsel to the Trustee.
(C) Winston & Strawn LLP, Bond Counsel, substantially in the form set forth as
Appendix D to the Official Statement.
(D) Winston & Strawn LLP, Bond Counsel, concerning supplementary matters.
(E) Counsel to the Bond Insurer, as described herein
below.
The respective forms of such opinions above are subject, in each case, only to such changes
therein as counsel to the Underwriter approve;
12
Exhibit 4.24
(3) The legal opinion of GluckWalrath LLP, counsel to the Underwriter, addressed to the
Underwriter in the form and substance satisfactory to the Underwriter;
(4) A certificate of an Authorized Representative of the Authority, dated the Closing
Date, to the effect that (i) on and as of the Closing Date, each of the representations and
warranties of the Authority set forth in Section 4 hereof is true, accurate and complete and
all agreements of the Authority herein provided and contemplated to be performed on or prior
to the Closing Date have been so performed; (ii) the executed copies of the Financing
Documents and the certified copies of the Resolution authorizing the Bonds are true, correct
and complete copies of such documents and have not been modified, amended, superseded or
rescinded but remain in full force and effect as of the Closing Date; (iii) the Bonds have
been duly authorized, executed and delivered by the Authority; (iv) this Bond Purchase
Agreement, the Indenture and the Financing Documents and any and all other agreements and
documents required to be executed and delivered by the Authority in order to carry out, give
effect to and consummate the transactions contemplated hereby and by the Indenture have each
been duly authorized, executed and delivered by the Authority, and as of the Closing Date
each is in full force and effect and substantially all right, title and interest inuring to
the Authority under the Agreement has been duly pledged, and the loan payments thereunder
assigned, to the Trustee under the Indenture for the benefit of the holders of the Bonds;
(v) no litigation is pending or threatened to restrain or enjoin the issuance or sale of the
Bonds or in any way contesting the validity or affecting the authority for the issuance of
the Bonds, the authorization, execution or performance of the Indenture and the Financing
Documents, or the existence or powers of the Authority or the right of the Authority to
finance the Project; and (vi) the Treasurer of the State has approved all matters and
resolutions of the Authority required by the Act to be approved by the Treasurer with
respect to the issuance, sale and delivery of the Bonds;
(5) A certificate of the Chairman, President and Chief Executive Officer, Vice
President-Chief Financial Officer, Treasurer, any Vice President, Assistant Treasurer or
Secretary of the Company, dated the Closing Date, as to the due incorporation, valid
existence of the Company under the laws of the State, and the due authorization, execution
and delivery by the Company of this Bond Purchase Agreement and the Financing Documents and
annexing resolutions of the Board of Directors or Executive Committee or both with respect
to such authorizations;
(6) A certificate of the Chairman, President and Chief Executive Officer, Vice
President-Chief Financial Officer, Treasurer, any Vice President, Assistant Treasurer or
Secretary of the Company, dated the Closing Date, certifying severally that (i) the Company
does not have any material contingent obligations or any material contractual agreements
which are not disclosed or incorporated by reference in the Official Statement, (ii) so far
as is known to the Company, there are no material pending or threatened legal proceedings to
which the Company is or may be made a party or to which any of its property is or may become
subjugated, which has not been fully disclosed or incorporated by reference in the Official
Statement, (iii) there is no action or
13
Exhibit 4.24
proceeding pending, or to its best knowledge threatened, looking toward the dissolution or
liquidation of the Company and there is no action or proceeding pending, or to its best
knowledge threatened, by or against the Company affecting the validity and enforceability of
the terms of the Financing Documents or this Bond Purchase Agreement, (iv) since December
31, 2004 there has been no material adverse change in the financial condition of the
Company, taking into account seasonal revenue fluctuations, not disclosed or incorporated by
reference in the Official Statement, and (v) the representations and warranties of the
Company contained herein are true, complete and correct as of the Closing Date, with the
same effect as if those representations and warranties had been made on and as of such date;
(7) A certificate, satisfactory in form and substance to the Underwriter, of one or
more duly authorized officers of the Trustee, dated the Closing Date, as to the due
execution and delivery of the Indenture and the Disclosure Agreement by the Trustee and the
due authentication and delivery of the Bonds by the Trustee thereunder;
(8) Letters from Standard & Poors Ratings Service, the rating agency, indicating that
the rating for the Bonds is no less than AAA;
(9) Evidence, in form and substance satisfactory to the Authority and the Underwriter,
that the Bond Insurer has delivered an insurance policy and any appropriate endorsements
thereupon guaranteeing the timely payment of principal of an interest on the Bonds (such
policy and any appropriate endorsements are herein called the Policy);
(10) A certificate of the Bond Insurer stating that the information concerning the Bond
Insurer as set forth in the Official Statement under the heading BOND INSURANCE and in
Appendix F thereto is accurate;
(11) An opinion of counsel to the Bond Insurer, dated the date of the Closing and
addressed to the Authority, the Company and the Underwriter, to the effect that: (i) the
Bond Insurer is a stock insurance corporation duly incorporated and validly existing under
the laws of the State of New York and is licensed and authorized under the laws of the State
of Connecticut to issue the Policy under the laws of the State of Connecticut; and (ii) the
Policy has been duly executed and is a valid and binding obligation of the Bond Insurer,
enforceable in accordance with its terms, except that the enforcement thereof may be limited
by laws relating to bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors rights generally and general principles of equity;
(12) A letter from PricewaterhouseCoopers LLP, independent auditors for the Company,
dated the Closing Date and addressed to the Underwriter;
(13) A copy of the order of the DPUC approving the issuance of the Bonds and the
transactions of the Company contemplated by the Financing Documents;
14
Exhibit 4.24
(14) Certificates evidencing that the insurance required to be obtained pursuant to the
Agreement is in place;
(15) A letter or other written evidence satisfactory to Bond Counsel that the State
Treasurer has approved the issuance of the Bonds in accordance with the Act;
(16) A letter or other written evidence satisfactory to Bond Counsel that an elected
official has approved the issuance of the Bonds in accordance with the applicable provisions
of the Code; and
(17) Such additional certificates, instruments or other documents as the Underwriter
may reasonably require to evidence the accuracy, as of the Closing Date, of the
representations and warranties herein contained, and the due performance and satisfaction by
the Company at or prior to such time of all agreements then to be performed and all
conditions then to be satisfied by any one or all of them in connection with this Bond
Purchase Agreement, the Financing Documents or the Indenture.
In addition:
The Authority hereby represents that the Preliminary Official Statement, with such additions
and amendments as have been heretofore agreed upon between the Authority and the Underwriter, is
deemed final as of the date thereof, except for the omission of offering prices, interest rates,
selling compensation, aggregate principal amount, principal amount per maturity, delivery dates,
ratings and other terms of the Bonds depending on such matters. Such representation is made in
reliance upon the Companys representation herein that material relating to the Company included in
the Preliminary Official Statement is true and correct. The Company has contracted with a printer
acceptable to the Underwriter for the delivery to the Underwriter at Companys expense of the
number of copies requested by the Underwriter of the Official Statement and will cooperate with the
Underwriter to secure the delivery thereof with reasonable promptness and within seven business
days. The Underwriter agrees to file a copy of such Official Statement with a nationally
recognized municipal securities information repository within five (5) days after such final
Official Statements are made available to the Underwriter and to advise the Authority as to the
location and time of such filing. Should the Underwriter require additional copies of the Official
Statement, the Authority agrees to cooperate with the Underwriter in obtaining such copies at
Companys expense if such request is made within 90 days from the date hereof and at the
Underwriters expense if such request is made thereafter. The Underwriter has taken and will
continue to take action to comply with the Securities Exchange Commission Municipal Securities
Disclosure Rule, 17 C.F.R. §240.15c2-12 and the provisions of this paragraph shall survive the
expiration hereof to the extent necessary for such purpose.
Except as provided in Sections 6 and 12 hereof, if the Authority or the Company shall fail or
be unable to satisfy the conditions of their obligations contained in this Bond Purchase Agreement,
or if the Underwriters obligations hereunder shall be terminated for any reason
15
Exhibit 4.24
permitted by this Bond Purchase Agreement, this Bond Purchase Agreement shall terminate and neither
the Authority nor the Underwriter nor the Company shall be under any further obligation hereunder.
SIMULTANEOUSLY WITH OR BEFORE DELIVERY OF THE BONDS, THE UNDERWRITER SHALL FURNISH TO THE
AUTHORITY A CERTIFICATE SUBSTANTIALLY IN FORM ATTACHED TO THE TAX REGULATORY AGREEMENT ACCEPTABLE
TO BOND COUNSEL TO THE EFFECT THAT (I) THE UNDERWRITER HAS MADE A
BONA
FIDE
PUBLIC
OFFERING OF THE BONDS TO THE PUBLIC AT INITIAL OFFERING PRICES NOT GREATER THAN THE RESPECTIVE
PRICES SHOWN ON THE COVER OF THE OFFICIAL STATEMENT, OR IN THE CASE OF DISCOUNT OBLIGATIONS SOLD ON
A YIELD BASIS, AT YIELDS NO LOWER THAN THOSE SHOWN ON THE COVER, INCLUDING INTEREST ACCRUED ON THE
BONDS FROM THE DATE THEREOF, AND (II) A SUBSTANTIAL AMOUNT OF THE FINAL AMOUNT OF EACH MATURITY OF
THE BONDS WAS SOLD TO THE FINAL PURCHASER THEREOF (NOT INCLUDING BOND HOUSES AND BROKERS OR SIMILAR
PERSONS OR ORGANIZATIONS ACTING IN THE CAPACITY OF UNDERWRITER OR WHOLESALERS) AT PRICES NOT
GREATER THAN SUCH OFFERING PRICES OR YIELDS. Bond Counsel advises that (i) such certificate must
be made on the best knowledge, information and belief of the Underwriter, (ii) the sale to the
public of 10% or more of each maturity of the Bonds at prices or yields not greater than the
Initial Offering Prices or Yields would be sufficient for the purpose of certifying as to the sale
of a substantial amount of the Bonds, and (iii) reliance on other facts as a basis for such
certification would require evaluation by Bond Counsel to assure compliance with the statutory
requirement.
10. The Authority and the Company agree that all representations, warranties and covenants
made by them herein, and in certificates or other instruments delivered pursuant hereto or in
connection herewith, shall be deemed to have been relied upon by the Underwriter notwithstanding
any investigation heretofore or hereafter made by the Underwriter on its behalf, and that all
representations, warranties and covenants made by the Authority and the Company herein and therein
and all of the Underwriters rights hereunder and thereunder shall survive the delivery of the
Bonds.
11. The Underwriter has received reasonable assurances that the Company will comply with its
written undertaking, set forth in Section 6.13 of the Agreement and in the Disclosure Agreement, to
provide certain required disclosure information to the Trustee, as dissemination agent, for the
benefit of the bondholders and that procedures are, or will be, in place such that the Trustee, as
dissemination agent, will receive prompt notice of any material event or Companys failure, in any
material respect, to comply with its undertaking.
12. The Authority shall pay, but only from proceeds of the Bonds or moneys to be provided by
the Company, any expenses incident to the performance of its obligations hereunder including but
not limited to (a) the cost of the preparation and printing (for distribution on or prior to the
date hereof) of the Financing Documents, the Indenture, the Preliminary Official
16
Exhibit 4.24
Statement and the final Official Statement (in such numbers as the Authority, the Company and the
Underwriter shall mutually agree upon), and this Bond Purchase Agreement; (b) the cost of the
preparation and printing of the Bonds; (c) the fees and disbursements of Winston & Strawn LLP, Bond
Counsel; (d) the fees of any other attorneys, experts or consultants retained by the Authority; and
(e) any fee to the rating agencies.
The Underwriter shall pay (a) the cost of the preparation and printing of the Blue Sky Survey,
if any; (b) all advertising expenses in connection with the public offering of the Bonds; (c) the
fees and disbursements of GluckWalrath LLP, counsel to the Underwriter; and (d) all other expenses
incurred by the Underwriter in connection with their public offering and distribution of the Bonds,
including the fees and disbursements of all attorneys, experts and consultants retained by them.
On or prior to the Closing Date, the Company shall pay the fees and disbursements of the
Underwriter (including counsel fees) in the aggregate amount of $295,000.
13. All communications hereunder shall be in writing and, unless otherwise directed in
writing, shall be addressed as follows: if to the Authority at 999 West Street, Rocky Hill,
Connecticut 06067, Attention: Executive Director; if to the Company at 93 West Main Street,
Clinton, Connecticut 06413, Attention: Vice PresidentChief Financial Officer and Treasurer; if to
the Underwriter at One Gateway Center, Suite 1002, Newark, New Jersey 07102, Attention: Craig A.
Hrinkevich, Vice President and Managing Director.
14. This Bond Purchase Agreement shall be construed and enforceable in accordance with the
laws of the State of Connecticut.
15. All terms used but not defined herein shall have the meanings set forth in the Official
Statement.
17
Exhibit 4.24
16. This Bond Purchase Agreement may be executed in any number of counterparts, each of which,
when so executed and delivered shall be an original; but such counterparts shall together
constitute but one and the same Bond Purchase Agreement.
17. In case any one or more of the provisions contained in this Bond Purchase Agreement shall
for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this Bond Purchase
Agreement, but this Bond Purchase Agreement shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein.
18. This Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Underwriter, the Authority and the Company. This Agreement may be signed in several
counterparts each of which shall be an original and all of which shall constitute but one and the
same instrument.
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CONNECTICUT DEVELOPMENT AUTHORITY
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By:
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/s/ Karin A. Lawrence
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Karin A. Lawrence
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Authorized Representative
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THE CONNECTICUT WATER COMPANY
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By:
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/s/ David C. Benoit
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David C. Benoit, Vice President & CFO
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A.G. EDWARDS & SONS, INC.
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By:
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/s/ Craig A. Hrinkevich
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Craig A. Hrinkevich, Vice President and
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Managing Director
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18
[EXECUTION COPY]
EXHIBIT 4.25
CONNECTICUT DEVELOPMENT AUTHORITY
and
THE CONNECTICUT WATER COMPANY
LOAN AGREEMENT
Dated as of October 1, 2005
Connecticut Development Authority
$10,000,000 Water Facilities Revenue Bonds
(The Connecticut Water Company Project 2005A Series)
Exhibit 4.25
TABLE OF CONTENTS
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Page
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PREAMBLE
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1
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ARTICLE I
DEFINITIONS AND INTERPRETATION
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Section 1.1. Definitions
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3
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Section 1.2. Interpretation
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8
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
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Section 2.1. Representations by the Authority
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10
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Section 2.2. Representations by the Borrower
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11
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ARTICLE III
THE LOAN
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Section 3.1. Loan Clauses
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14
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Section 3.2. Other Amounts Payable
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14
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Section 3.3. Manner of Payment
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15
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Section 3.4. Obligation Unconditional
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15
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Section 3.5. Securities Clauses
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15
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Section 3.6. Issuance of Bonds
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16
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Section 3.7. Effective Date and Term
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Section 3.8. No Additional Bonds
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16
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ARTICLE IV
THE PROJECT
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Section 4.1. Completion of the Project
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17
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Section 4.2. Payment of Additional Project Costs by Borrower
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18
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Section 4.3. Completion Certificate
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18
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Section 4.4. No Warranty Regarding Condition, Suitability or Cost of Project
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18
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Section 4.5. Taxes
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18
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Section 4.6. Insurance
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18
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Section 4.7. Compliance with Law
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19
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Section 4.8. Maintenance and Repair
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19
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Section 4.9. Disposition of Project Realty by Borrower
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19
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Section 4.10. Leasing of the Project Realty and the Project Equipment
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20
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Section 4.11. Project Equipment
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20
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Section 4.12. Borrower Contribution
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20
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ARTICLE V
CONDEMNATION DAMAGE AND DESTRUCTION
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Section 5.1. No Abatement of Payments Hereunder
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21
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Section 5.2. Project Disposition Upon Condemnation, Damage or Destruction
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21
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Section 5.3. Application of Net Proceeds of Insurance or Condemnation
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21
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Section 6.1. Consolidation, Merger and Transfer of Assets
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22
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Section 6.2. Restrictions on Liens and Sale and Leaseback Transactions
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23
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Section 6.3. [Reserved]
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24
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Section 6.4. Indemnification, Payment of Expenses, and Advances
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24
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Section 6.5. Incorporation of Tax Regulatory Agreement; Payments Upon Taxability
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27
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Section 6.6. Public Purpose Covenants
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27
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Section 6.7. Further Assurances and Corrective Instruments
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28
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Section 6.8. Covenant by Borrower as to Compliance with Indenture
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28
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-i-
Exhibit 4.25
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Page
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Section 6.9. Assignment of Agreement or Note
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28
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Section 6.10. Inspection
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28
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Section 6.11. Default Notification
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28
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Section 6.12. Covenant Against Discrimination
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Section 6.13. Covenant to Provide Disclosure
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29
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
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Section 7.1. Events of Default
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30
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Section 7.2. Remedies on Default
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31
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Section 7.3. Remedies on Public Purpose Default
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31
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Section 7.4. No Duty to Mitigate Damages
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32
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Section 7.5. Remedies Cumulative
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33
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ARTICLE VIII
PREPAYMENT PROVISIONS
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Section 8.1. Optional Prepayment
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34
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Section 8.2. Notices of Prepayment
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35
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Section 8.3. Mandatory Prepayment on Taxability, Receipt of Request for
Redemption of a Deceased Holders Bonds and the Occurrence of Certain Events
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35
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ARTICLE IX
GENERAL
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Section 9.1. Indenture
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36
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Section 9.2. Benefit of and Enforcement by Bondholders
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36
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Section 9.3. Force Majeure
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36
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Section 9.4. Amendments
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36
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Section 9.5. Notices
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36
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Section 9.6. Prior Agreements Superseded
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37
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Section 9.7. Execution of Counterparts
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37
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Section 9.8. Time
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37
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Section 9.9. Separability of Invalid Provisions
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37
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Section 9.10. Third Party Beneficiaries
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37
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Section 9.11. Governing Law
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37
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APPENDICES
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Appendix A Form of Promissory Note
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Appendix B Description of Project Realty
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Appendix C Description of Project Equipment
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-ii-
Exhibit 4.25
Connecticut Development Authority
The Connecticut Water Company
LOAN AGREEMENT
THIS LOAN AGREEMENT
, made and dated as of October 1, 2005, by and between the
CONNECTICUT
DEVELOPMENT AUTHORITY
, a body corporate and politic constituting a public instrumentality and
political subdivision of the State of Connecticut, and
THE CONNECTICUT WATER COMPANY
, a corporation
organized and existing under the laws of the State of Connecticut,
WITNESSETH THAT:
WHEREAS
, the State Commerce Act, constituting Connecticut General Statutes, Sections 32-1a
through 32-23zz, as amended (the Act), declares that there is a continuing need in the State (1)
for industrial development and activity to provide and maintain employment and tax revenues and to
control, abate and prevent pollution to protect the public health and safety, (2) for the
development of recreation facilities to promote tourism, provide and maintain employment and tax
revenues, and promote the public welfare, (3) for the development of commercial and retail sales
and service facilities in urban areas to provide and maintain construction and permanent employment
and tax revenues, to improve conditions of deteriorated physical development, slow economic growth
and eroded financial health of the public and private sectors in urban areas and to revitalize the
economy of urban areas, and (4) for assistance to public service businesses providing
transportation and utility services in the State, and that the availability of financial assistance
and suitable facilities are important inducements to industrial and commercial enterprises to
remain or locate in the State and to provide industrial, recreation, urban and public service
projects; and
WHEREAS
, the Act provides that (1) the term project as used therein means any facility,
plant, works, system, building, structure, utility, fixture or other real property improvement
located in the State, and the land on which it is located or which is reasonably necessary in
connection therewith, which is of a nature or which is to be used or occupied by any person for
purposes which would constitute it as an economic development project, recreation project, urban
project, public service project or health care project, and any real property improvement
reasonably related thereto, and (2) a project may also include or consist exclusively of machinery,
equipment or fixtures; and
WHEREAS
, the Act provides that the Authority shall have power to determine the location and
character of, and extend credit or make loans to any person for the planning, designing, acquiring,
improving and equipping of, a project which may be secured by loan, lease or sale agreements,
contracts and other instruments, upon such terms and conditions as the Authority shall determine to
be reasonable, to require the inclusion in any contract, loan agreement or other instrument of such
provisions for the construction, use, operation, maintenance and financing of the project as the
Authority may deem necessary or desirable, to issue its bonds for such purposes, subject to the
approval of the Treasurer of the State, and, as security for the payment of the principal or
redemption price, if any, of and interest on any such bonds, to pledge or assign such a loan, lease
or sale agreement and the revenues and receipts derived by the Authority from such a project; and
WHEREAS
, by resolution adopted on May 19, 2004, in furtherance of the purposes of the Act, the
Authority has accepted the application of The Connecticut Water Company (the Borrower) for
assistance in the financing of various capital projects located in the State of Connecticut; and
Exhibit 4.25
WHEREAS
, the Borrower currently owns certain existing facilities within certain municipalities
in the State and at this time requests assistance in the design, acquisition, installation,
improvement and construction of certain facilities consisting of water treatment and storage
facilities, transmission and distribution mains, service lines, meters, hydrants and pumping
equipment for the purpose of supplying safe potable water to the general public within its service
area; and
WHEREAS
, the Authority has by a further resolution adopted on August 17, 2005 authorized the
issuance of not to exceed $10,000,000 principal amount of its Water Facilities Revenue Bonds (The
Connecticut Water Company Project 2005A Series) for the purpose of providing funds for the
Projects; and
WHEREAS
, pursuant to such resolution the Bonds (as hereinafter defined) are to be secured by
an Indenture of Trust of even date herewith, by and between the Authority and U.S. Bank National
Association, as Trustee; and
WHEREAS
, the Bonds shall be special obligations of the Authority, payable solely from the
revenues or other receipts, funds or monies to be derived by the Authority under this Agreement or
the Indenture and from any amounts otherwise available under the Indenture for the payment of the
Bonds; and
WHEREAS
, the Authority proposes with the proceeds of the Bonds to make a loan to the Borrower
and the Borrower proposes to borrow such proceeds from the Authority for the purpose of financing
the acquisition, construction and installation of the Project; and
WHEREAS
, the Borrower acknowledges that the Authority is providing financing for the Project
in furtherance of the Authoritys corporate purposes under the Act, that the accomplishment of
these purposes is dependent upon the compliance of the Borrower with its covenants contained in
this Agreement, that the Authority has a resulting beneficial interest in the Project, and that the
Borrowers use of and interest in the Project as provided hereby are in furtherance of the
discharge of a public purpose; and
WHEREAS
, the Connecticut Department of Public Utility Control (the DPUC) has approved the
issuance of the Note;
NOW, THEREFORE
, in consideration of the premises and of the mutual representations, covenants
and agreements herein set forth, the Authority and the Borrower, each binding itself, its
successors and assigns, do mutually promise, covenant and agree as follows (provided that in the
performance of the agreements of the Authority herein contained, any obligation it may incur for
the payment of money shall not be an obligation, debt or liability of the State or any municipality
thereof and neither the State nor any municipality thereof shall be liable on any obligation so
incurred, but any such obligation shall be payable solely out of the revenues or other receipts,
funds or monies to be derived by the Authority under this Agreement or the Indenture and from any
amounts otherwise available under the Indenture for the payment of the Bonds):
-2-
Exhibit 4.25
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1.
Definitions
. For the purposes of this Agreement, the following words and
terms shall have the respective meanings set forth as follows, and any capitalized word or term
used but not defined herein is used as defined in the Indenture:
Act means the State Commerce Act, constituting Connecticut General Statutes, Sections 32-la
through 32-23zz, as amended.
Agreement means this Loan Agreement and any amendments and supplements hereto.
Attributable Debt in respect of a sale and leaseback transaction means, at the time of
determination, the present value of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction, including any period
for which such lease has been extended or may, at the option of the lessor, be extended. Such
present value shall be calculated using a discount rate equal to the rate of interest implicit in
such transaction, determined in accordance with generally accepted accounting principles.
Authority means the Connecticut Development Authority, a body corporate and politic
constituting a public instrumentality and political subdivision of the State of Connecticut, duly
organized and existing under the laws of the State, and any body, board, authority, agency or other
political subdivision or instrumentality of the State which shall hereafter succeed to the powers,
duties and functions thereof.
Authorized Representative means, in the case of the Authority, the Chairman or Vice
Chairman, the President, any Executive Vice President, Deputy Director or any Senior Vice President
or any Vice President thereof and, in the case of the Borrower, the Chairman, the President and
Chief Executive Officer, the Vice President-Chief Financial Officer and Treasurer, and any Vice
President, Assistant Treasurer or Secretary thereof and, when used with reference to the
performance of any act, the discharge of any duty or the execution of any certificate or other
document, any officer, employee or other person authorized to perform such act, discharge such duty
or execute such certificate or other document.
Beneficial Owner shall have the meaning specified in Section 2.3(F) of the Indenture. If
any person claims to the Trustee to be a Beneficial Owner, for purposes of Section 2.4(C) of the
Indenture, such person shall prove such claim to the satisfaction of the Trustee with such
documentation and signature guaranties as the Trustee may request.
Bonds means the $10,000,000 Water Facilities Revenue Bonds (The Connecticut Water Company
Project 2005A Series) authorized and issued pursuant to Section 2.3 of the Indenture.
Bond Counsel means Winston & Strawn LLP or such other nationally recognized bond counsel
selected by the Authority and reasonably satisfactory to the Borrower and the Trustee.
Bond Insurance Policy means the municipal bond new issue insurance policy issued by the Bond
Insurer that guaranties the payment when due of the principal of and interest on the Bonds as
provided therein.
Bond Insurer means Financial Guaranty Insurance Company, a New York stock insurance company,
or any successor thereto.
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Exhibit 4.25
Borrower means (i) The Connecticut Water Company, a corporation organized and existing under
the laws of the State of Connecticut, and its successors and assigns and (ii) any surviving,
resulting or transferee corporation as provided in Section 6.1 hereof.
Business Day means any day (i) that is not a Saturday or Sunday, (ii) that is a day on which
banks located in Hartford, Connecticut and New York, New York are not required or authorized to
remain closed, (iii) that is a day on which banking institutions in the cities in which the
principal offices of the Trustee and the Paying Agent are located and are not required or
authorized to remain closed and (iv) that is a day on which the New York Stock Exchange, Inc. is
not closed.
Code means the Internal Revenue Code of 1986, as amended and regulations promulgated
thereunder.
Completion Date means the date of completion of the Project as specified and established in
accordance with Section 4.3 hereof.
Debt means (A) indebtedness of the Borrower or a Significant Subsidiary for borrowed money
evidenced by a bond, debenture, note or other written instrument or agreement by which the Borrower
or a Significant Subsidiary is obligated to repay such borrowed money and (B) any guaranty by the
Borrower or a Significant Subsidiary of any such indebtedness of another Significant Subsidiary.
Debt does not include, among other things, (w) indebtedness of the Borrower or a Significant
Subsidiary under any installment sale or conditional sale agreement or any other agreement relating
to indebtedness for the deferred purchase price of property or services, or (x) any trade
obligation (including obligations under power or other commodity purchase agreements and any hedges
or derivatives associated therewith), or other obligations of the Borrower or a Significant
Subsidiary in the ordinary course of business, (y) obligations of the Borrower or a Significant
Subsidiary under any lease agreement (including any lease intended as security), whether or not
such obligations are required to be capitalized on the balance sheet of the Borrower or a
Significant Subsidiary under generally accepted accounting principles.
Debt Service Fund means the special trust fund so designated, established pursuant to
Section 5.1 of the Indenture.
Dollar or $ means a dollar or other equivalent unit in such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public and private debts.
DTC or The Depository Trust Company shall mean the limited-purpose trust company organized
under the laws of the State of New York which shall act as securities depository for the Bonds, and
any successor thereto.
Determination of Taxability means with respect to the Bonds (1) a ruling by the Internal
Revenue Service, (2) the receipt by the owner of any of the Bonds from the Internal Revenue Service
of a notice of assessment and demand for payment and (provided the Borrower has been afforded the
opportunity to participate at its own expense in all appeals and proceedings to which such owner of
the Bonds is a party relating to such assessment and demand for payment) the expiration of the
appeal period provided therein if no appeal is taken or, if an appeal is taken by such owner as
provided in Section 6.3 of this Agreement within the applicable appeal period which has the effect
of staying the demand for payment, a final unappealable decision by a court of competent
jurisdiction, or (3) the admission in writing by the Borrower, in any case to the effect that the
interest on any Bonds is includable in the gross income for federal income tax purposes (other than
for purposes of any alternative minimum tax or foreign branch profits tax) of an owner or former
owner thereof, other than for a period during which such owner or former owner is or was a
Substantial User of the Project financed by such Bonds or a Related
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Exhibit 4.25
Person as such terms are defined in the Code. For purposes of this definition, the term
owner means the Beneficial Owner of the Bonds so long as the Book-Entry System is in effect.
DPUC means the State Department of Public Utilities Control.
Disclosure Agreement means the agreement by and between the Borrower and U.S. Bank National
Association, as dissemination agent, dated the date of the initial delivery of the Bonds, providing
for the provision of certain information subsequent to the issuance of the Bonds.
Event of Default means an Event of Default as defined in subsection 7.1 hereof.
Financing Documents (1) when used with respect to the Borrower, means this Agreement, the
Tax Regulatory Agreement, the Note, the Disclosure Agreement and the general certificate of the
Borrower delivered in connection with the issuance of the Bonds, and (2) when used with respect to
the Authority, means any of the foregoing documents and agreements to which the Authority is a
direct party. The Financing Documents do not include any documents or agreements to which the
Borrower is not a direct party, including the Bonds or the Indenture.
Fitch means Fitch Inc., a corporation organized and existing under the laws of the State of
Delaware, its successors and their assigns, and if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating agency, Fitch shall be
deemed to refer to any other nationally recognized securities rating agency designated by the
Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the
prior written consent or approval of the Bond Insurer.
Indenture means the Indenture of Trust relating to the Bonds, of even date herewith, by and
between the Authority and the Trustee, together with all indentures supplemental thereto made and
entered into in accordance therewith.
Interest Payment Date shall mean April 1, 2006 and each April 1 and October 1 thereafter on
which interest is payable on the Bonds as provided in the forms of the Bonds.
Insurance Agreement means the Insurance Agreement, dated as of October 1, 2005, by and
between the Borrower and the Bond Insurer.
Lien means any mortgage, deed of trust, pledge, security interest, encumbrance, easement,
lease, reservation, restriction, servitude, charge or similar right and any other lien of any kind,
including, without limitation, any conditional sale or other title retention agreement, any lease
in the nature thereof, and any defect, irregularity, exception or limitation in record title or,
when the context so requires, any lien, claim or interest arising from any of the foregoing.
Moodys means Moodys Investors Services, Inc., a corporation organized and existing under
the laws of the State of Delaware, its successors and their assigns, and if such corporation shall
be dissolved or liquidated or shall no longer perform the functions of a securities rating agency,
Moodys shall be deemed to refer to any other nationally recognized securities rating agency
designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the
Borrower and with the prior written consent or approval of the Bond Insurer.
Net Proceeds when used with respect to any insurance or condemnation award, means the gross
proceeds from such award less all expenses (including attorneys fees and expenses and any
extraordinary expenses) incurred by the Trustee in the collection thereof.
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Exhibit 4.25
Net Tangible Assets means the total amount of the Borrowers assets determined on a
consolidated basis in accordance with generally accepted accounting principles as of a date
determined pursuant to Section 6.2 of this Agreement,
less
(i) the sum of the Borrowers
consolidated current liabilities determined in accordance with generally accepted accounting
principles, and (ii) the amount of the Borrowers consolidated assets classified as intangible
assets, determined in accordance with generally accepted accounting principles, including, but not
limited to, such items as goodwill, trademarks, trade names, patents, and unamortized debt discount
and expense and regulatory assets carried as an asset on the Borrowers consolidated balance sheet.
Note means the promissory note of the Borrower to the Authority, dated the date of initial
delivery of the Bonds in the form attached as
Appendix A
to this Agreement, and any
amendments or supplements made in conformity with this Agreement and the Indenture.
Outstanding, when used with reference to a Bond or Bonds, as of any particular date, means
all Bonds which have been authenticated and delivered under the Indenture, except:
(1) any Bonds canceled by the Trustee because of payment or redemption prior to
maturity or surrendered to the Trustee for cancellation;
(2) any Bond (or portion of a Bond) paid or redeemed or for the payment or redemption
of which there has been separately set aside and held in the Debt Service Fund either:
(a) monies in an amount sufficient to effect payment of the principal or
applicable Redemption Price thereof, together with accrued interest on such Bond to
the payment or redemption date, which payment or redemption date shall be specified
in irrevocable instructions given to the Trustee to apply such monies to such
payment on the date so specified; or
(b) obligations of the kind described in subsection 12.1(B) of the Indenture in
such principal amounts, of such maturities, bearing such interest and otherwise
having such terms and qualifications as shall be necessary to provide monies in an
amount sufficient to effect payment of the principal or applicable Redemption Price
of such Bond, together with accrued interest on such Bond to the payment or
redemption date, which payment or redemption date shall be specified in irrevocable
instructions given to the Trustee to apply such obligations to such payment on the
date so specified; or
(c) any combination of (a) and (b) above;
(3) Bonds in exchange for or in lieu of which other Bonds shall have been authenticated
and delivered under Article III of the Indenture; and
(4) any Bond deemed to have been paid as provided in subsection 12.1 of the Indenture.
Paying Agent means any paying agent for the Bonds appointed pursuant to Section 9.10 of the
Indenture (and may include the Trustee), and its successor or successors and any other corporation
which may at any time be substituted in its place in accordance with the Indenture.
Permitted Encumbrances mean, as of any particular date, (i) liens for taxes not yet due and
payable, (ii) any lien created by this Agreement and the Indenture, (iii) utility, access and other
easements and rights-of-way, that will not interfere with or impair the value or use of the Project
as herein provided,
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Exhibit 4.25
(iv) any mechanics, laborers, materialmans, suppliers or vendors lien or right in respect
thereof if payment is not yet due and payable and for which statutory lien rights exist, (v) such
minor defects, irregularities, easements, and rights-of- way (including agreements with any
railroad the purpose of which is to service the railroad siding) as normally exist with respect to
property similar in character to the Project and which do not materially impair the value or use of
the property affected thereby for the purpose for which it was acquired hereunder, and (vi) any
mortgage, lien, security interest or other encumbrance to which the Authority and the Bond Insurer
may consent as provided in Section 4.8 hereof.
Principal Property means any property of the Borrower or any Significant Subsidiary.
Principal User means any principal user of the Project within the meaning of Section
144(a)(2)(B) of the Code, including without limitation any person who is a
greater-than-10-percent-owner (or if none, the person(s) who holds the largest ownership interest
in the Project), lessee or user of more than 10% of the Project measured either by occupiable space
or fair rental value under any formal or informal agreement or, under the particular facts and
circumstances, anyone who is a principal customer of the Project. The term principal customer
means any person, who purchases output of the Project under a contract if the percentage of output
taken or to be taken by such person, multiplied by a fraction the numerator of which is the term of
such contract and the denominator of which is the economic life of the Project, exceeds 10%. In
the case of a person who purchases output of an electric or thermal energy, gas, water or other
similar facility, such person is a principal customer if the total output purchased by such person
during any one year period beginning with the date the facility is placed in service is more than
10 percent of the facilitys output during each such period. Co-owners or co-lessees who are
shareholders in a corporation or who are collectively treated as a partnership subject to
subchapter K under section 761(a) of the Code are not treated as Principal Users merely by reason
of their ownership of corporate or partnership interests.
Project means the Borrowers interest in the Project Realty and other interests in the real
property, and in all Project Equipment wherever located and whether now owned or hereafter acquired
or refinanced in whole or in part with the proceeds of the Bonds and any additions and accessions
thereto, substitutions therefor and replacements, improvements, extensions and restorations
thereof, described in the appendices hereto, as amended from time to time in accordance with this
Agreement.
Project Equipment means all personal property, goods, leasehold improvements, machinery,
equipment, furnishings, furniture, fixtures, tools and attachments wherever located and whether now
owned or hereafter acquired, financed in whole or in part with the proceeds of the Bonds, and any
additions and accessions thereto, substitutions therefor and replacements thereof, including,
without limitation the Project Equipment described in Appendix C hereto, as amended from time to
time in accordance herewith.
Project Realty means the realty and other interests in the real property financed in whole
or in part from the proceeds of the Bonds, together with all replacements, improvements,
extensions, substitutions, restorations and additions thereto which are made pursuant hereto,
including without limitation, the Project Realty described in Appendix B, as amended from time to
time in accordance herewith.
Rating Agency shall mean S&P, Moodys and Fitch, or, in each case, if such corporation shall
be dissolved or liquidated or shall no longer perform the functions of a securities rating agency,
any other nationally recognized securities rating agency designated by the Authority, at the
direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written
consent or approval of the Bond Insurer.
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Exhibit 4.25
Redemption Price means, when used with respect to a Bond or a portion thereof, the principal
amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption
thereof pursuant to the Indenture.
Related Person means, with respect to any Principal User, a person which is a related person
(as defined in Section 144(a)(3) of the Code, and by reference to Sections 267, 707(b) and 1563(a)
of the Code, except that 50% is to be substituted for 80% in Section 1563(a)).
S&P means Standard & Poors Ratings Services, a division of McGraw Hill, Inc., a corporation
organized and existing under the laws of the State of New York, its successors and their assigns,
and, if such corporation or division shall be dissolved, eliminated, reorganized, or liquidated or
shall no longer perform the functions of a securities rating agency, S&P shall be deemed to refer
to any other nationally recognized securities rating agency designated by the Authority at the
direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written
consent or approval of the Bond Insurer.
Significant Subsidiary shall have the meaning specified in Rule 1-02(w) of Regulation S-X
under the Securities Act of 1933, as amended.
State means the State of Connecticut.
Substantial User means any substantial user of the Project within the meaning of Section
147(a) of the Code.
Supplemental Indenture means any indenture supplemental to the Indenture or amendatory of
the Indenture, adopted by the Authority in accordance with Article X of the Indenture.
Tax Incidence Date means the date as of which interest on the Bonds becomes or became
includable in the gross income of the recipient thereof (other than the Borrower or another
Substantial User or Related Person) for federal income tax purposes for any cause, as determined by
a Determination of Taxability.
Tax Regulatory Agreement means the Tax Regulatory Agreement, dated as of the date of initial
issuance and delivery of the Bonds, among the Authority, the Borrower and the Trustee, and any
amendments and supplements thereto.
Term, when used with reference to this Agreement, means the term of this Agreement
determined as provided in Article III hereof.
Trustee means U.S. Bank National Association, and its successor or successors hereafter
appointed in the manner provided in the Indenture.
Section 1.2.
Interpretation. In this Agreement:
(1) The terms hereby, hereof, hereto, herein, hereunder and any similar
terms, as used in this Agreement, refer to this Agreement, and the term hereafter means
after, and the term heretofore means before, the date of this Agreement.
(2) Words of the masculine gender mean and include correlative words of the feminine
and neuter genders and words importing the singular number mean and include the plural
number and vice versa.
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Exhibit 4.25
(3) Words importing persons include firms, associations, partnerships (including
limited partnerships), trusts, corporations and other legal entities, including public
bodies, as well as natural persons.
(4) Any headings preceding the texts of the several Articles and Sections of this
Agreement, and any table of contents appended to copies hereof, shall be solely for
convenience of reference and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect.
(5) Nothing contained in this Agreement shall be construed to cause the Borrower to
become the agent for the Authority or the Trustee for any purpose whatsoever, nor shall the
Authority or the Trustee be responsible for any shortage, discrepancy, damage, loss or
destruction of any part of the Project wherever located or for whatever cause.
(6) All approvals, consents and acceptances required to be given or made by any person
or party hereunder shall be at the sole discretion of the party whose approval, consent or
acceptance is required.
(7) All notices to be given hereunder shall be given in writing within a reasonable
time unless otherwise specifically provided.
(8) If any provision of this Agreement shall be ruled invalid by any court of competent
jurisdiction, the invalidity of such provision shall not affect any of the remaining
provisions hereof.
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Exhibit 4.25
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1.
Representations by the Authority
.
The Authority represents and warrants that:
(1) It is a body corporate and politic constituting a public instrumentality and
political subdivision of the State, duly organized and existing under the laws of the State
including the Act. The Authority is authorized to issue the Bonds in accordance with the
Act and to use the proceeds thereof to finance the Project.
(2) The Authority has complied with the provisions of the Act and has full power and
authority pursuant to the Act to consummate all transactions contemplated by the Bonds, the
Indenture and the Financing Documents.
(3) By resolution duly adopted by the Authority and still in full force and effect, the
Authority has authorized the execution, delivery and due performance of the Bonds, the
Indenture and the Financing Documents, and the taking of any and all action as may be
required on the part of the Authority to carry out, give effect to and consummate the
transactions contemplated by this Agreement and the Indenture, and all approvals necessary
in connection with the foregoing have been received.
(4) The Bonds have been duly authorized, executed, authenticated, issued and delivered,
constitute valid and binding special obligations of the Authority payable solely from
revenues or other receipts, funds or monies pledged therefor under the Indenture and from
any amounts otherwise available under the Indenture, and are entitled to the benefit of the
Indenture. Neither the State nor any municipality thereof is obligated to pay the Bonds or
the interest thereon. Neither the faith and credit nor the taxing power of the State nor
any municipality thereof is pledged for the payment of the principal, and premium, if any,
of and interest on the Bonds.
(5) The execution and delivery of the Bonds, the Indenture and the Financing Documents
and compliance with the provisions thereof, will not conflict with or constitute on the part
of the Authority a violation of, breach of or default under its by-laws or any statute,
indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which
the Authority is a party or by which the Authority is bound, or, to the knowledge of the
Authority, any order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Authority or any of its activities or properties, and all consents,
approvals, authorizations and orders of governmental or regulatory authorities which are
required for the consummation by the Authority of the transactions contemplated thereby have
been obtained.
(6) Subject to the provisions of this Agreement and the Indenture, the Authority will
apply the proceeds of the Bonds to the purposes specified in the Indenture and the Financing
Documents.
(7) There is no action, suit, proceeding or investigation at law or in equity before or
by any court, public board or body pending or threatened against or affecting the Authority,
or to the best knowledge of the Authority, any basis therefor, wherein an unfavorable
decision, ruling or finding would adversely affect the transactions contemplated hereby or
by the Indenture, or
which, in any way, would adversely affect the validity of the Bonds, or the validity of
or
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Exhibit 4.25
enforceability of the Indenture or the Financing Documents, or any agreement or
instrument to which the Authority is a party and which is used or contemplated for use in
consummation of the transactions contemplated hereby and by the Indenture.
(8) It has not made any commitment or taken any action which will result in a valid
claim for any finders or similar fees or commitments in respect of the transactions
contemplated by this Agreement.
(9) The representations of the Authority set forth in the Tax Regulatory Agreement are
by this reference incorporated in this Agreement as though fully set forth herein.
Section 2.2.
Representations by the Borrower
.
The Borrower represents and warrants that:
(1) The Borrower has been duly incorporated and validly exists as a corporation under
the laws of the State of Connecticut, is not in violation of any provision of its
certificate of incorporation or its by-laws, has corporate power to enter into and perform
the Financing Documents, and by proper corporate action has duly authorized the execution
and delivery of the Financing Documents.
(2) The Financing Documents constitute valid and legally binding obligations of the
Borrower, enforceable in accordance with their respective terms, except to the extent that
such enforceability may be limited by bankruptcy or insolvency or other laws affecting
creditors rights generally or by general principles of equity.
(3) Neither the execution and delivery of the Financing Documents, the consummation of
the transactions contemplated thereby, nor the fulfillment by the Borrower of or compliance
by the Borrower with the terms and conditions thereof is prevented or limited by or
conflicts with or results in a breach of, or default under the terms, conditions or
provisions of any contractual or other restriction of the Borrower, evidence of its
indebtedness or agreement or instrument of whatever nature to which the Borrower is now a
party or by which it is bound, or constitutes a material default under any of the foregoing.
No event has occurred and no condition exists which, upon the execution and delivery of any
Financing Documents, constitutes an Event of Default hereunder or an Event of Default
thereunder or, but for the lapse of time or the giving of notice, would constitute an Event
of Default hereunder or an Event of Default thereunder.
(4) There is no action or proceeding pending or, to the knowledge of the Borrower,
threatened against the Borrower before any court, administrative agency or arbitration board
that may materially and adversely affect the ability of the Borrower to perform its
obligations under the Financing Documents and all authorizations, consents and approvals of
governmental bodies or agencies required in connection with the execution and delivery of
the Financing Documents and in connection with the performance of the Borrowers obligations
hereunder or thereunder have been obtained.
(5) The execution, delivery and performance of the Financing Documents and any other
instrument delivered by the Borrower pursuant to the terms hereof or thereof are within the
corporate powers of the Borrower and have been duly authorized and approved by the board of
directors of the Borrower and are not in contravention of law or of the Borrowers
certificate of
incorporation or by-laws, as amended to date, or of any undertaking or agreement to
which the Borrower is a party or by which it is bound.
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Exhibit 4.25
(6) The Borrower represents that it has not made any commitment or taken any action
which will result in a valid claim for any finders or similar fees or commitments in
respect of the transactions described in this Agreement other than the fees to various
parties to the transactions contemplated hereby which have been heretofore paid or provided.
(7) The Project is included within the definition of a project in the Act. The
Borrower intends the Project to continue to be an authorized project under the Act during
the Term of this Agreement.
(8) All amounts shown in Schedule D of the Tax Regulatory Agreement are eligible costs
of a project financed by bonds issued by the Authority under the Act, and may be financed by
amounts in the various Accounts of the Project Fund under the Indenture. None of the
proceeds of the Bonds will be used directly or indirectly as working capital or to finance
inventory.
(9) The Project is in material compliance with all applicable federal, State and local
laws and ordinances (including rules and regulations) relating to zoning, building, safety
and environmental quality.
(10) The Borrower intends to proceed with due diligence to complete the Project
pursuant to Section 4.1 hereof. The Borrower has obtained, or will obtain, or will cause to
be obtained, all necessary material approvals from any and all governmental agencies
requisite to the Project, and has also obtained or will cause to be obtained, all material
occupancy permits and authorizations from appropriate authorities authorizing the occupancy
and use of the Project for the purposes contemplated hereby. The Borrower further
represents and warrants that it will complete the Project, or cause the Project to be
completed, in accordance with all material federal, State and local laws, ordinances and
regulations applicable thereto.
(11) The availability of financial assistance from the Authority, among other factors,
has induced the Borrower to locate the Project in the State. The Borrower does not
presently intend to lease the Project.
(12) The Borrower will not take or omit to take any action which action or omission
will in any way cause the proceeds of the Bonds to be applied in a manner contrary to that
provided in the Indenture and the Financing Documents as in force from time to time.
(13) The Borrower has not taken and will not take any action and knows of no action
that any other person, firm or corporation, has taken or intends to take, which would cause
interest on the Bonds to be includable in the gross income of the recipients thereof for
federal income tax purposes. The representations, certifications and statements of
reasonable expectation made by the Borrower in the Tax Regulatory Agreement and relating to
Project description, composite issues, bond maturity and average asset economic life, use of
Bond proceeds, arbitrage and related matters are hereby incorporated by this reference as
though fully set forth herein.
(14) The Borrower has good and marketable title in fee simple to the Project Realty
subject only to Permitted Encumbrances and to irregularities or defects in title which may
exist which do not materially impair the use of such properties in the Borrowers business.
(15) The Borrower has good and merchantable title to the Project Equipment owned by the
Borrower as of the date hereof, free and clear of liens and encumbrances, other than
Permitted Encumbrances.
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Exhibit 4.25
(16) As of the date of hereof, neither the Borrower, nor to its knowledge anyone acting
on behalf of the Borrower, has entered into negotiations with any person for the purpose of
undertaking any borrowing concurrently with or subsequent to the issuance of the Bonds and
to be secured wholly or partially by a lien or encumbrance on the Project or any part
thereof, and the Borrower has no present intention of undertaking any such borrowing.
(17) The Borrower will use all of the proceeds of the Bonds to finance the Project
Costs.
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Exhibit 4.25
ARTICLE III
THE LOAN
Section 3.1.
Loan Clauses
. (A) Subject to the conditions and in accordance with the
terms of this Agreement, the Authority agrees to make a loan to the Borrower from the proceeds of
the Bonds in the amount of $10,000,000 and the Borrower agrees to borrow such amount from the
Authority.
(B) The loan shall be made at the time of delivery of the Bonds and receipt of payment
therefor by the Authority against receipt by the Authority of the Note duly executed and delivered
to evidence the pecuniary indebtedness of the Borrower hereunder. As and for the loan the
Authority shall apply the proceeds of the Bonds as provided in the Indenture on the terms and
conditions therein prescribed.
(C) On or before the fifth Business Day immediately preceding each due date for the payment of
the principal of or interest on the Bonds, until the principal or Redemption Price, if any, of and
interest on the Bonds shall have been fully paid or provision for the payment thereof shall have
been made in accordance with the Indenture, the Borrower shall make loan payments to the Trustee
for the account of the Authority in an amount which, when added to any moneys then on deposit in
the Debt Service Fund and available therefor, shall be equal to the amount payable on such due date
with respect to the Bonds as provided in Section 5.3 of the Indenture, including amounts due for
the payment of the principal of and interest on the Bonds. In addition, the Borrower shall pay to
the Trustee, as and when the same shall become due, all other amounts due under the Financing
Documents, together with interest thereon at the then applicable rate as set forth herein in
Section 6.4(G). The Borrower shall have the option to prepay its loan obligation in whole or in
part at the times and in the manner provided in Article VIII hereof.
(D) Anything herein to the contrary notwithstanding, any amount at any time held in the
Principal and Interest Account of the Debt Service Fund by the Trustee pursuant to this Section
shall be credited against the next succeeding loan payment obligation of the Borrower as provided
in subsection 3.1(C) hereof. If, on any due date for payments with respect to the Bonds, the
balance in the Debt Service Fund is insufficient to make such payments, the Borrower agrees
forthwith to pay to the Trustee by no later than 11:00 a.m. on such due date the amount of the
deficiency. If at any time the amount held by the Trustee in the Debt Service Fund shall be
sufficient to pay or provide for the payment of the Bonds in accordance with Section 12.1 of the
Indenture, the Borrower shall not be obligated to make any further payments under the foregoing
provisions.
Section 3.2.
Other Amounts Payable
. (A) The Borrower hereby further expressly agrees
to pay to the Trustee as and when the same shall become due, (i) an amount equal to the initial and
annual fees of the Trustee for the ordinary services of the Trustee rendered and its ordinary
expenses incurred under the Indenture, including fees and expenses as Paying Agent and the
reasonable fees and expenses of Trustees counsel, including fees and expenses as registrar and in
connection with preparation and delivery of new Bonds upon exchanges or transfers, (ii) the
reasonable fees and expenses of the Trustee and any Paying Agents on the Bonds for acting as paying
agents as provided in the Indenture, including reasonable fees and expenses of its counsel, (iii)
the reasonable fees and charges of the Trustee for extraordinary services rendered by it and
extraordinary expenses incurred by it under the Indenture, including reasonable counsel fees and
expenses, and (iv) reasonable fees and expenses of Bond Counsel and the Authority for any future
action requested of either.
(B) The Borrower also agrees to pay all amounts payable by it under the Financing Documents at
the time and in the manner therein provided.
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Exhibit 4.25
(C) The Borrower agrees to pay all Rebatable Arbitrage (and penalties, if any) due to the
United States of America pursuant to Section 148 (f) of the Code.
(D) The Borrower also agrees to pay directly to the Authority on the date of issuance and
delivery of the Bonds and on the second anniversary date of the date of issuance and delivery of
the Bonds and each anniversary date thereafter, a fee equal to 1/8th of 1% of the principal amount
of the Bonds Outstanding, such fee to be payable without notice, demand or invoice of any kind at
the Authoritys address as set forth herein or at such other address and to the attention of such
other person, or to such account as the Authority may stipulate by written notice to the Borrower.
(E) The Borrower shall pay or reimburse the Bond Insurer for any and all charges, fees, costs,
and expenses that the Bond Insurer may reasonably pay or incur in connection with the following:
(i) the administration, enforcement, defense, or preservation of any rights or security hereunder
or under any other transaction documents; (ii) the pursuit of any remedies hereunder, under any
other transaction document, or otherwise afforded by law or equity, (iii) any amendment, waiver, or
other action with respect to or related to this Agreement or any other transaction document whether
or not executed or completed; (iv) the violation by the Borrower of any law, rule, or regulation or
any judgment, order or decree applicable to it; (v) any advances or payments made by the Bond
Insurer to cure defaults of the Borrower under the transaction documents; or (vi) any litigation or
other dispute in connection with this Agreement, any other transaction document, or the
transactions contemplated hereby or thereby, other than amounts resulting from the failure of the
Bond Insurer to honor its payment obligations under the Bond Insurance Policy. The Bond Insurer
reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver, or
consent proposed in respect of this Agreement or any other transaction document. The obligations
of the Borrower to the Bond Insurer shall survive discharge and termination of this Agreement.
Section 3.3.
Manner of Payment
. The payments provided for in Section 3.1 hereof shall
be made by any reasonable method providing immediately available funds at the time and place of
payment directly to the Trustee for the account of the Authority and shall be deposited in the Debt
Service Fund. The additional payments provided for in Section 3.2 shall be made in the same manner
directly to the entitled party or to the Trustee for its own use or disbursement to the Paying
Agents, as the case may be.
Section 3.4.
Obligation Unconditional.
The obligations of the Borrower under the
Financing Documents shall be absolute and unconditional, irrespective of any defense or any rights
of setoff, recoupment or counterclaim it might otherwise have against the Authority or the Trustee.
The Borrower will not suspend or discontinue any such payment or terminate this Agreement (other
than in the manner provided for hereunder) for any cause, including, without limiting the
generality of the foregoing, any acts or circumstances that may constitute failure of
consideration, failure of title, or commercial frustration of purpose, or any damage to or
destruction of the Project, or the taking by eminent domain of title to or the right of temporary
use of all or any part of the Project, or any change in the tax or other laws of the United States,
the State or any political subdivision of either thereof, or any failure of the Authority or the
Trustee to perform and observe any agreement or covenant, whether expressed or implied, or any
duty, liability or obligation arising out of or connected with the Financing Documents.
Section 3.5.
Securities Clauses
. The Authority hereby notifies the Borrower and the
Borrower acknowledges that, among other things, the Borrowers loan payments and all of the
Authoritys right, title and interest under the Financing Documents to which it is a party (except
its rights under Sections 6.4, 6.6, 7.2(A)(2) and 7.3 hereof) are being concurrently
with the execution and delivery hereof endorsed, pledged and assigned without recourse by the
Authority to the Trustee as security for the Bonds as provided in the Indenture.
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Exhibit 4.25
Section 3.6.
Issuance of Bonds
.
The Authority has concurrently with the execution and
delivery hereof sold and delivered the Bonds under and pursuant to a resolution adopted by the
Authority on August 17, 2005, authorizing their issuance under and pursuant to the Indenture. The
proceeds of sale of the Bonds shall be applied as provided in Articles IV and V of the Indenture.
Section 3.7.
Effective Date and Term
. (A) This Agreement shall become effective upon
its execution and delivery by the parties hereto, shall remain in full force from such date and,
subject to the provisions hereof (including particularly Articles VII and VIII), shall expire on
such date as the Indenture shall be discharged and satisfied in accordance with the provisions of
subsection 12.1(A) thereof. The Borrowers obligations under Sections 6.4 and 6.5 hereof, however,
shall survive the expiration of this Agreement in accordance with the provisions of such Sections.
(B) Within 60 days of such expiration the Authority shall deliver to the Borrower any
documents and take or cause the Trustee, at the Borrowers expense, to take any such reasonable
actions as may be necessary to effect the cancellation, release and satisfaction of the Indenture
and the Financing Documents.
Section 3.8.
No Additional Bonds
. No Additional Bonds on a parity with the Bonds may
be issued under the Indenture.
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Exhibit 4.25
ARTICLE IV
THE PROJECT
Section 4.1.
Completion of the Project
. (A) The Borrower agrees that it will
undertake and complete the Project for the purposes and in the manner intended hereby and by the
Borrowers application for assistance to the Authority and that it will cause such improvements to
be made to the Project as are necessary for the operation thereof in the manner herein provided.
(B) The Borrower may modify, alter and amend the plans for the Project from time to time and
at any time, provided that such modifications, alterations and amendments do not materially impair
the operation of the Project as water facilities under the Act and provided that no material
modifications, alterations or amendments shall be made unless the Borrower shall have theretofore
delivered to the Trustee an opinion of Bond Counsel to the effect that such amendment, modification
or alteration and the expenditure of amounts from the Project Fund in connection therewith will not
cause interest on the Bonds to be subject to federal income taxation, together with any written
representations or certifications of fact made by or on behalf of the Borrower upon which such
counsel has relied in rendering such opinion.
(C) The Borrower affirms that it shall bear all of the costs and expenses in connection with
the preparation of the Financing Documents and the Indenture, the preparation and delivery of any
legal instruments and documents necessary in connection therewith and their filing and recording,
if required, and all taxes and charges payable in connection with any of the foregoing. Such costs
and all other costs of the Project shall be paid by the Borrower in the manner and to the extent
provided in the Indenture.
(D) The Borrower hereby agrees that in order to effectuate the purposes of the Financing
Documents, it will make, execute, acknowledge and deliver any contracts, orders, receipts, writings
and instructions with any other persons, firms, or corporations and in general do all things which
may be requisite or proper, all for the purpose of carrying out and completing the Project. The
Borrower will use its best efforts to complete the Project, or cause the Project to be completed,
with all reasonable dispatch. If for any reason the completion of such work is delayed, there
shall be no liability on the part of the Authority and no diminution in or postponement of the
payments required in Section 3.1 hereof to be paid by the Borrower.
(E) The Borrower has obtained or shall obtain all necessary material approvals from any and
all governmental agencies requisite to the undertaking and completion of the Project and in
compliance with all federal, State and local laws, ordinances and regulations applicable thereto.
Upon completion of the Project, the Borrower shall obtain all material required permits and
authorizations from appropriate authorities, if any be required, authorizing the operation and uses
of the Project for the purposes contemplated hereby, where failure to obtain such approvals,
permits and authorizations would have a material adverse effect on the transactions contemplated
hereby.
(F) The Borrower covenants that it will take, or cause to be taken, such action and institute
such proceedings within its power and authority as shall be necessary to cause and require all
contractors and material suppliers to complete their contracts diligently in accordance with the
terms of the contracts, including, without limitation, the correcting of any defective work.
(G) Upon the occurrence of a default by any contractor or subcontractor or supplier under any
contract made by it in connection with the Project, the Borrower will promptly proceed, to the
extent it deems appropriate in the circumstances, either separately or in conjunction with others,
to exhaust the
remedies of the Borrower against any such contractor or subcontractor or supplier for the
performance of such contract.
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Exhibit 4.25
(H) The Borrower will have good and marketable title in fee simple to the Project Realty to be
owned by it subject only to Permitted Encumbrances, sufficient for the purposes of this Agreement.
Section 4.2.
Payment of Additional Project Costs by Borrower
. In the event that
moneys in the Project Fund are not sufficient to pay Project Costs in full, the Borrower shall
nonetheless complete the Project, or cause the Project to be completed, and shall pay that portion
of the Project Costs as may be in excess of the moneys available therefor in the Project Fund and
shall not be entitled to any reimbursement therefor from the Authority or from the Trustee or from
the holders of any of the Bonds, nor shall it be entitled to any diminution of the amounts payable
under the Financing Documents.
Section 4.3.
Completion Certificate
. The date of completion of the Project shall be
evidenced to the Trustee by the certificate of an Authorized Representative of the Borrower stating
that the Project has been completed in accordance with the Agreement and in accordance with the
plans and specifications therefor. Notwithstanding the foregoing, such certificate shall state (1)
that it is given without prejudice to any rights of the Borrower against third parties which exist
at the date of such certificate or which may subsequently come into being, (2) that it is given
only for the purpose of this Section and (3) that no person other than the Trustee or the Authority
may benefit therefrom.
Section 4.4.
No Warranty Regarding Condition, Suitability or Cost of Project
. Neither
the Authority, nor the Trustee, nor any Bondholder makes any warranty, either expressed or implied,
as to the Project or its condition or that it will be suitable for the Borrowers purposes or
needs, or that the insurance required hereunder will be adequate to protect the Borrowers business
or interest, or that the proceeds of the Bonds will be sufficient to complete the Project.
Section 4.5.
Taxes
. (A) The Borrower will pay when due all material (1) taxes,
assessments, water rates and sewer use or rental charges, (2) payments in lieu thereof which may be
required by law, and (3) governmental charges and impositions of any kind whatsoever which may now
or hereafter be lawfully assessed or levied upon the Project Realty and the Project Equipment or
any part thereof, or upon the rents, issues, or profits thereof, whether directly or indirectly.
With respect to special assessments or other governmental charges that may lawfully be paid in
installments over a period of years, the Borrower shall be obligated to pay, or cause to be paid,
only such installments as are required to be paid during the Term.
(B) The Borrower may, at its expense and in its own name, in good faith contest any such
taxes, assessments and other charges and payments in lieu of taxes including assessments and, in
the event of such contest, may permit the taxes, assessments or other charges or payments in lieu
of taxes, including assessments so contested to remain unpaid, provided either (1) prior written
notice thereof has been given to the Authority and the Trustee and reserves satisfactory to the
Authority are maintained during the period of such contest and any appeal therefrom, or (2) such
contest is conducted in full compliance with Connecticut General Statutes Chapter 203 unless, in
either case, by nonpayment of such taxes, assessments or other charges or payments, the Project or
any part thereof will be subject to loss or forfeiture, and as a result thereof a lien or charge
will be placed upon any payment pursuant to this Agreement or the value or operation of the Project
Realty and the Project Equipment will be materially impaired, in which event such taxes,
assessments or other charges or payments shall be paid forthwith. Nothing herein shall preclude
the Borrower, at its expense and in its own name and behalf, from applying
for any tax exemption allowed by the federal government, the State or any political or taxing
subdivision thereof under any existing or future provision of law which grants or may grant such
tax exemption.
Section 4.6.
Insurance
. (A) The Borrower shall insure the Project Realty and the
Project Equipment against loss or damage by fire, flood, lightning, windstorm, vandalism and
malicious mischief and other hazards, casualties, contingencies and extended coverage risks in such
amounts and in such
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Exhibit 4.25
manner as is customary with companies in the same or similar business, and
shall pay when due the premiums thereon. In the event of loss or damage to the Project Realty or
Project Equipment, the Net Proceeds of any insurance provided under this subsection shall be
applied to the manner set forth in Article V hereof. Any excess proceeds of insurance remaining
after application as required by this Section shall be paid to the Borrower, but only if the
Borrower is not in default under this Agreement. If the Borrower is in default under this
Agreement, such amounts shall be applied as provided in Article VIII of the Indenture. At least
ten days prior to the expiration of any policy required under this Section the Borrower shall
furnish evidence satisfactory to the Authority and the Trustee that such policy has been renewed or
replaced.
(B) The Borrower further agrees that it will at all times carry public liability insurance
with respect to the Project Realty and the Project Equipment in a minimum amount of $5,000,000 with
provisions for a deductible amount not in excess of five percent of the amount of coverage
thereunder. In the event of a public liability occurrence, the Net Proceeds of the insurance
provided under this subsection shall be applied to satisfy or extinguish the liability.
(C) As an alternative to the hazard insurance and public liability insurance requirements of
subsections (A) or (B) above the Borrower may self-insure against hazard or public liability risks
if (1) self-insurance is the Borrowers customary method of insurance against such risks in similar
circumstances, and (2) the Borrower maintains self-insurance reserves adequate and available to
meet such risks. Amounts available under any such self-insurance arrangement upon the occurrence of
an insured event shall be applied in the same manner as the Net Proceeds of any insurance
maintained pursuant to such subsections would have been applied.
(D) The insurance coverage required by this Section may be effected under overall blanket or
excess coverage policies of the Borrower or any affiliate and may be carried with any insurer other
than an unauthorized insurer under the Connecticut Unauthorized Insurers Act. The Borrower shall
furnish evidence satisfactory to the Authority or the Trustee, promptly upon the request of either,
that the required insurance coverage is valid and in force. The Borrower shall also give the
Trustee not less than ten (10) days prior written notice of the expiration of any insurance
coverage required by this Section then in effect.
Section 4.7.
Compliance with Law
. The Borrower will observe and comply with all
material laws, regulations, ordinances, rules, and orders (including without limitation those
relating to zoning, land use, environmental protection, air, water and land pollution, wetlands,
health, equal opportunity, minimum wages, workers compensation and employment practices) of any
federal, state, municipal or other governmental authority relating to the Project Realty and the
Project Equipment except during any period during which the Borrower at its expense and in its name
shall be in good faith contesting its obligation to comply therewith.
Section 4.8.
Maintenance and Repair
. At its own expense, the Borrower will keep and
maintain the Project Realty and the Project Equipment in accordance with sound utility operating
practice and in good condition, working order and repair, will not commit or suffer any waste
thereon, and will make all material repairs and replacements thereto which may be required in
connection therewith. Nothing in this Section 4.8 shall (1) apply to any portion of the
Project beyond its useful or economic life or (2) apply to the use and disposition by the
Borrower of any part of the Project in the ordinary course of its business.
Section 4.9.
Disposition of Project Realty by Borrower
. (A) The Borrower shall not
sell, assign, encumber (other than Permitted Encumbrances), convey or otherwise dispose of its
interests in the Project Realty or any part thereof during the Term except as provided in Section
6.1 hereof.
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Exhibit 4.25
(B) The Borrower may, however, grant such rights of way or easements over, across, or under,
the Project Realty as shall be necessary or convenient for the operation or use of the Project
Realty, including but not limited to easements or rights-of-way for utility, roadway, railroad or
similar purposes in connection with the Project Realty, or for the use of the real property
adjacent to or near the Project, and owned by or leased to the Borrower, but only if such
rights-of-way or easements shall not materially or adversely affect the value and operation of the
Project. In addition, the Borrower may sell or assign, or cause to be sold or assigned, a portion
of the Project Realty or development rights in the Project Realty to the State, a municipality
within the State or a conservation organization, but only if such sale or assignment shall not
materially or adversely affect the value or operation of the Project.
(C) In the event the Authority and the Bond Insurer consent to any disposition of the
Borrowers interest in the Project Realty, the proceeds of the disposition shall be deposited in
the Redemption Account of the Debt Service Fund for the redemption of the Bonds under the
Indenture. No conveyance or release effected under the provisions of this Section shall entitle
the Borrower to any abatement or diminution of the amounts payable hereunder or under the Note, or
relieve the Borrower of the obligation to perform all of its covenants and agreements under the
Financing Documents.
Section 4.10.
Leasing of the Project Realty and the Project Equipment
. The Borrower
may not lease the Project Realty or the Project Equipment to any person during the Term of this
Agreement without the prior written consent of the Authority and the Bond Insurer. No lease shall
relieve the Borrower from primary liability for any of its obligations hereunder, and in the event
of any such lease the Borrower shall continue to remain primarily liable for payment of the
applicable amounts specified in Article III hereof and for performance and observance of the other
agreements on its part herein provided to be performed and observed by it to the same extent as
though no lease had been made.
Section 4.11.
Project Equipment
. (A) The Borrower shall have the right to install,
operate, use, remove and dispose of the Project Equipment in the normal and ordinary course of its
business operations, and shall not be required to replace any item of Project Equipment which is
discarded or sold for scrap. Except as provided in the immediately preceding sentence, the
Borrowers ability to dispose of the Project Equipment shall be governed by the provisions of
Section 6.1 hereof.
(B) The Borrower shall maintain with the Trustee separate and reasonably detailed descriptions
of each item of property constituting the Project Equipment. Without limiting the foregoing, the
Project Equipment list appended hereto at the date of execution and delivery of this Agreement
shall be modified to the extent required by this Section in connection with any disbursement for
Project Equipment from the Project Fund and any replacement of material items of Project Equipment
under this Section or under Section 5.2 hereof.
Section 4.12.
Borrower Contribution
. The Borrower agrees to deposit with the Trustee
on the date of issuance of the Bonds a contribution in the amount of $587,535.75 (which will be
applied to the payment of certain costs
and expenses incurred in connection with the issuance, execution and sale of the Bonds for
which the Borrower is responsible, including compensation and expenses of the Trustee, bond
insurance premium, legal, accounting and consulting expenses and fees, costs of printing and
engraving, underwriting expenses and recording and filing fees), which amount shall be deposited by
the Trustee in the Project Fund established pursuant to Section 5.1 of the Indenture.
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Exhibit 4.25
ARTICLE V
CONDEMNATION DAMAGE AND DESTRUCTION
Section 5.1.
No Abatement of Payments Hereunder
. If the Project Realty or Project
Equipment shall be damaged or either partially or totally destroyed, or if title to or the
temporary use of the whole or any part thereof shall be taken or condemned by a competent authority
for any public use or purpose, there shall be no abatement or reduction in the amounts payable by
the Borrower hereunder and the Borrower shall continue to be obligated to make such payments. In
any such case the Borrower shall promptly give written notice thereof to the Authority and the
Trustee.
Section 5.2.
Project Disposition Upon Condemnation, Damage or Destruction
. In the
event of any such condemnation, damage or destruction the Borrower shall:
(1) At its own cost, repair, restore or reconstruct, or cause to be repaired, restored
or reconstructured, the Project Realty and Project Equipment to substantially its condition
immediately prior to such event or to a condition of at least equivalent value, regardless
of whether or not the proceeds of any and all policies of insurance covering such damage or
destruction, or the amount of the award or compensation or damages recovered on account of
such taking or condemnation, shall be available or sufficient to pay the cost thereof;
(2) At its own cost, replace or relocate, or cause to be replaced or relocated, the
Project Realty and Project Equipment at its site in such fashion as to render the
replacement or relocated structures, improvements and items, machinery, equipment or other
property of equivalent value to the Project Realty and Project Equipment immediately prior
to such event; or
(3) If and as permitted by Section 8.1 hereof, exercise its option to prepay its loan
obligation in full.
Section 5.3.
Application of Net Proceeds of Insurance or Condemnation
. (A) The Net
Proceeds from any insurance or condemnation award with respect to the Project Realty or Project
Equipment shall be deposited either (1) in the Renewal Fund and applied to pay for the cost of
making such repairs, restorations, reconstructions, replacements or relocations, or to reimburse
the Borrower, the Authority or the Trustee for payment therefor from time to time as provided in
the Indenture or (2) if prepayment of the loan is then permitted and the Borrower exercises its
option to prepay the loan, in the Redemption Account of the Debt Service Fund and applied to the
payment of the Note and redemption of the Bonds.
(B) Notwithstanding the provisions of subsection (A) of this Section, any insurance or
condemnation proceeds attributable to improvements, machinery, equipment and other property
installed in or about the Project Realty and the Project Equipment, but which do not constitute a
portion of the Project Realty and the Project Equipment, shall be paid as the Borrower may direct.
The Trustee and the Authority agree to execute such documents as may be reasonably necessary to
accomplish the purposes of this subsection.
(C) The Borrower, the Authority and the Trustee shall cooperate and consult with each other in
all matters pertaining to the settlement or adjustment of any and all claims and demands for
damages on account of any taking or condemnation of the Project Realty or the Project Equipment or
pertaining to the settlement, compromising or arbitration of any claim on account of any damage or
destruction thereof.
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Exhibit 4.25
ARTICLE VI
COVENANTS
Section 6.1.
Consolidation, Merger and Transfer of Assets
.
(A)
Restructuring, Merger, Consolidation and Reorganization.
The Borrower covenants and
agrees that, during the Term of this Agreement, it will maintain its corporate existence, will
continue to be a corporation either organized under the laws of or duly qualified to do business as
a foreign corporation in the State and in all jurisdictions necessary in the operation of its
business and will not merge, consolidate, restructure or reorganize with an entity without the
prior written consent of the Bond Insurer, provided, however, the Borrower (or any subsequent
obligor on the Note) may merge, consolidate, restructure or reorganize with an entity without the
prior written consent of the Bond Insurer either if (a) the Borrower (or any subsequent obligor on
the Note) continues to exist after such merger, consolidation, restructuring or reorganization and
(i) the Borrower (or any subsequent obligor on the Note) remains a public utility regulated by the
appropriate regulatory body, and (ii) the Borrower (or any subsequent obligor on the Note) remains
obligated to the Bond Insurer with respect to, and to make payments with respect to, the Bonds, the
Note and this Agreement or (b) the Borrower (or any subsequent obligor on the Note) is not the
surviving entity after such merger, consolidation, restructuring or reorganization and (i) the
surviving entity is a public utility regulated by the appropriate regulatory body, and (ii) the
surviving entity fully assumes all obligations to the Bond Insurer with respect to, and to make
payments with respect to the Bonds, the Note and this Agreement. Notwithstanding the foregoing, if
as a result of the merger, consolidation, restructuring or reorganization of the Borrower (or any
subsequent obligor on the Note) with an entity without the prior written consent of the Bond
Insurer, the unenhanced rating on the Bonds is lower than investment grade by any Rating Agency
then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to rate the
unenhanced Bonds, all obligations to the Bond Insurer with respect to, and all payments under, the
Note and this Agreement must be paid in full and the Bonds must be fully redeemed in accordance
with the Indenture.
(B)
Sale of Assets
. The Borrower (or any subsequent obligor on the Note) may sell or otherwise
dispose of its assets without the consent of the Bond Insurer, provided, however, if the Borrower
(or any subsequent obligor on the Note) sells or otherwise disposes of an aggregate of 20% or more
of its assets based upon the historical book value of the assets sold as determined as of the
issuance date of the Bonds, without the prior written consent of the Bond Insurer, and as a result
of such sale and disposition, the unenhanced rating on the Bonds is lower than investment grade by
any Rating Agency then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds
ceases to rate the unenhanced Bonds, then all obligations of the Borrower to the Bond Insurer with
respect to, and all payments under, the Note and this Agreement must be paid in full and the Bonds
must be fully redeemed in accordance with the Indenture.
(C) Upon the occurrence of an event specified in Section 6.1 (A) or (B) the Borrower shall
deliver to the Bond Insurer and the Trustee a certificate of the president or any vice president
and an opinion of counsel acceptable to the Bond Insurer and the Trustee, each stating that such
occurrence complies with this Section 6.1.
(D) Upon the occurrence of an event specified in Section 6.1(A) or (B), the successor entity
shall succeed to, and be substituted for, and may exercise every right and power under this
Agreement with the same effect as if such successor had been named herein, and thereafter, the
predecessor entity shall be relieved of all obligations and covenants hereunder.
(E) Notwithstanding anything to the contrary contained herein or in the Indenture, none of the
transactions described in this Section 6.1 shall require the consent of the Authority or the
Trustee.
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Exhibit 4.25
Section 6.2.
Restrictions on Liens and Sale and Leaseback Transactions
. (A) For so
long as the Bonds are outstanding and the Bond Insurer has fully performed all of its obligations
under the Bond Insurance Policy, the Borrower will not, nor will it permit any Significant
Subsidiary to, (1) issue, incur, assume or permit to exist any Debt, if such Debt is secured by a
Lien on any Principal Property (whether such Principal Property is now owned or hereafter
acquired), unless the Borrower provides that the Bonds will be equally and ratably secured with
such secured Debt or (2) incur or permit to exist any Attributable Debt in respect of Principal
Property; provided, however, that the foregoing restriction shall not apply to:
(i) to the extent the Borrower or any Significant Subsidiary consolidates with, or
merges with or into, another entity, Liens on the property of such entity securing Debt in
existence on the date of such consolidation or merger, provided that such Debt and Liens
were not created or incurred in anticipation of such consolidation or merger and that such
Liens do not extend to cover any Principal Property;
(ii) Liens existing on property hereafter acquired at the time of such acquisition, as
long as the Lien was not created or incurred in anticipation thereof and does not extend to
or cover any other Principal Property;
(iii) Liens of any kind, including purchase money Liens, conditional sales agreements
or title retention agreements and similar agreements, upon any property acquired,
constructed, developed or improved by the Borrower or any Significant Subsidiary (whether
alone or in association with others) which do not exceed the cost or value of the property
acquired, constructed, developed or improved and which are created prior to, at the time of,
or within 12 months after such acquisition (or in the case of property constructed,
developed or improved, within 12 months after the completion of such construction,
development or improvement and commencement of full commercial operation of such property,
whichever is later) to secure or provide for the payment of any part of the purchase price
or cost thereof; provided that the Liens shall not extend to any Principal Property other
than the property so acquired, constructed, developed or improved;
(iv) Liens in favor of the United States, any state or any foreign country or any
department, agency or instrumentality or political subdivision of any such jurisdiction to
secure payments pursuant to any contract or statute or to secure any indebtedness incurred
for the purpose of financing all or any part of the purchase price or cost of constructing
or improving the property subject to such Lien, including Liens related to governmental
obligations the interest on which is tax-exempt under Section 103 of the Internal Revenue
Code or any successor section of the Internal Revenue Code;
(v) Liens in favor of the Borrower, one or more Significant Subsidiaries of the
Borrower, one or more wholly-owned Subsidiaries of the Borrower or any of the foregoing
combination; and
(vi) replacements, extensions or renewals (or successive replacements, extensions or
renewals), in whole or in part, of any Lien, or of any agreement, referred to above in
clauses (i) through (v) inclusive, or replacements, extensions or renewals of the Debt
secured thereby (to the extent that the amount of Debt secured by any such Lien is not
increased from the amount originally so secured, plus any premium, interest, fee or expenses
payable in connection with any replacements, refundings, refinancings, remarketings,
extensions or renewals); provided that such replacement, extension or renewal is limited to
all or a part of the same property (plus improvements thereon or additions or accessions
thereto) that secured the Lien replaced, extended or renewed.
-23-
Exhibit 4.25
(B) Notwithstanding the restriction in subsection (A) of this Section 6.2, the Borrower or any
Significant Subsidiary may (1) issue, incur or assume Debt secured by a Lien not described in
clauses (i) through (vi) of subsection (A) above on any Principal Property now or hereafter owned
without providing that the Bonds be equally and ratably secured with such Debt and (2) issue or
permit to exist Attributable Debt in respect of Principal Property, in either case so long as the
aggregate amount of such secured Debt and Attributable Debt, together with the aggregate amount of
all other Debt secured by Liens not described in clauses (i) through (vi) of subsection (A) above
then outstanding and all other Attributable Debt, does not exceed 10% of the Net Tangible Assets of
the Borrower, as determined by the Borrower as of a month end not more than 90 days prior to the
closing or consummation of the proposed transaction.
(C) For purposes of determining compliance with this Section 6.2, in the event that any Lien
at any time meets the criteria of more than one of the categories described in clauses (i) through
(vi) above of Section 6.2(A), or is entitled to be created pursuant to Section 6.2(B), the Borrower
will be permitted to classify (and later reclassify) in whole or in part in its sole discretion
such Lien in any manner that complies with this Section 6.2.
(D) For purposes of determining compliance with any Dollar-denominated restriction on the
incurrence of Debt secured by Liens on Principal Property, the Dollar-equivalent principal amount
of Debt denominated in a foreign currency will be calculated based on the relevant currency
exchange rate in effect on the date such Debt was incurred, in the case of term Debt, or first
committed, in the case of revolving credit Debt; provided that if such Debt is incurred to
refinance other Debt denominated in the same foreign currency, and such refinancing would cause the
applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency
exchange rate in effect on the date of such refinancing, the Dollar-denominated restriction will be
deemed not to have been exceeded so long as the principal amount of the refinancing Debt does not
exceed the principal amount of the Debt being refinanced. Notwithstanding any other provision of
this Section 6.2, the maximum amount of Debt secured by Liens on Principal Property that the
Borrower or any Significant Subsidiary may incur pursuant to this covenant will not be deemed to be
exceeded solely as a result of fluctuations in the exchange rate of currencies.
(E) Except as provided in Section 6.2 hereof, while there are any Bonds Outstanding or any
reimbursement obligations owed to the Bond Insurer, without the prior written consent of the Bond
Insurer, the Borrower will not permit, create, assume or suffer to be created or to exist any
mortgage, lien, security interest, or encumbrance of any kind, upon, or pledge of, any of the
Borrower s properties of any character, including real, personal, tangible and intangible
properties and revenues, now owned or hereafter acquired, to secure any indebtedness without
providing that the Bonds and the reimbursement obligations hereunder have the same security.
(F) Notwithstanding anything to the contrary contained herein or in the Indenture, none of the
transactions described in this Section 6.2 shall require the consent of the Authority or the
Trustee.
Section 6.3. [
Reserved
].
Section 6.4.
Indemnification, Payment of Expenses, and Advances
. (A) The Borrower
agrees to protect, defend and hold harmless the Authority, the State, agencies of the State,
members, servants, agents, directors, officers and employees, now or forever, of the Authority or
the State (each an Authority Indemnified Party), the Trustee and the Paying Agent, agents,
directors, officers and employees, now or forever, of the Trustee and the Paying Agent (each an
Indemnified Party), from any claim, demand, suit, action or other proceeding and any liabilities,
costs, and expenses whatsoever by any person or entity whatsoever, arising or purportedly arising
from or in connection with the Financing Documents, the Indenture, the Bonds, or the transactions
contemplated thereby or actions taken thereunder by any person (including without limitation the
filing of any information, form or statement
-24-
Exhibit 4.25
with the Internal Revenue Service, if applicable), except for any willful and material
misrepresentation, willful misconduct or gross negligence on the part of the Indemnified Party or
the Authority Indemnified Party or any bad faith on the part of any indemnitee other than an
Authority Indemnified Party.
The Borrower agrees to indemnify and hold harmless any Indemnified Party against any and all
claims, demands, suits, actions or other proceedings and all liabilities, costs and expenses
whatsoever caused by any untrue statement or misleading statement or alleged untrue statement or
alleged misleading statement of a material fact contained in the written information provided by
the Borrower in connection with the issuance of the Bonds or incorporated by reference therein or
caused by any omission or alleged omission from such information of any material fact relating to
the Borrower or the Project required to be stated therein or necessary in order to make the
statements made therein in the light of the circumstances under which they were made, not
misleading.
(B) The Authority and the Trustee shall not be liable for any damage or injury to the persons
or property of the Borrower or its members, directors, officers, agents, servants or employees, or
any other person who may be about the Project due to any act or omission of any person other than
the Authority or the Trustee, respectively, or their respective members, directors, officers,
agents, servants and employees.
(C) The Borrower releases each Indemnified Party from, agrees that no Indemnified Party shall
be liable for, and agrees to hold each Indemnified Party harmless against, any reasonable attorney
fees and expenses, expenses or damages incurred because of any investigation, review or lawsuit
commenced by the Trustee or the Authority in good faith with respect to the Financing Documents,
the Indenture, the Bonds and the Projects and the Authority or the Trustee, as the case may be,
shall promptly give written notice to the Borrower with respect thereto.
(D) All covenants, stipulations, promises, agreements and obligations of the Authority and the
Trustee contained herein shall be deemed to be the covenants, stipulations, promises, agreements
and obligations of the Authority and the Trustee and not of any member, director, officer or
employee of the Authority or the Trustee in its individual capacity, and no recourse shall be had
for the payment of the Bonds or for any claim based thereon or hereunder against any member,
director, officer or employee of the Authority or the Trustee or any natural person executing the
Bonds.
(E) In case any action shall be brought against one or more of the Indemnified Parties based
upon any of the above and in respect of which indemnity may be sought against the Borrower, such
Indemnified Party shall promptly notify the Borrower in writing, enclosing a copy of all papers
served, but the omission so to notify the Borrower of any such action shall not relieve it of any
liability which it may have to any Indemnified Party otherwise than under this Section 6.4. In
case any such action shall be brought against any Indemnified Party and it shall notify the
Borrower of the commencement thereof, the Borrower shall be entitled to participate in and, to the
extent that it shall wish, to assume the defense thereof with counsel satisfactory to such
Indemnified Party, and after notice from the Borrower to such Indemnified Party of the Borrowers
election so to assume the defense thereof, the Borrower shall not be liable to such Indemnified
Party for any subsequent legal or other expenses attributable to such defense, except as set forth
below, other than reasonable costs of investigation subsequently incurred by such Indemnified Party
in connection with the defense thereof. The Indemnified Party shall have the right to employ its
own counsel in any such action, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party unless (i) the employment of counsel by such Indemnified Party has been
authorized by the Borrower, (ii) the Indemnified Party shall have reasonably concluded that there
may be a conflict of interest between the Borrower and the Indemnified Party in the conduct of the
defense of such action (in which case the Borrower shall not have the right to direct the defense
of such
-25-
Exhibit 4.25
action on behalf of the Indemnified Party); or (iii) the Borrower shall not in fact have
employed counsel satisfactory to the Indemnified Party to assume defense of such action.
(F) The Borrower also agrees to pay all reasonable or necessary out-of-pocket expenses of the
Authority and the Trustee in connection with the issuance of the Bonds, the administration of the
Financing Documents and the enforcement of its rights thereunder, including without limitation the
costs of preparation and distribution of closing transcripts relating thereto.
(G) In the event the Borrower fails to pay any amount or perform any act under the Financing
Documents, the Trustee or the Authority may pay the amount or perform the act, in which event the
costs, disbursements, expenses and reasonable counsel fees and expenses thereof, together with
interest thereon from the date the expense is paid or incurred at the prime interest rate publicly
announced from time to time by the Trustee as a commercial bank plus 1% shall be an additional
obligation hereunder payable upon demand by the Authority or the Trustee.
(H) The Borrower shall defend, indemnify, and hold the Authority, its agents, members,
officers and employees, and the Trustee and its agents, directors, officers and employees, harmless
from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs,
or expenses of whatever kind or nature, known or unknown, contingent or otherwise, related to or in
connection with the Project, arising out of, or in any way related to, (i) the presence, disposal,
release, or threatened release of any hazardous materials, asbestos, petroleum or petroleum
by-products which are on, from, or affecting the soil, water, vegetation, buildings, personal
property, persons, animals, or otherwise, except in compliance with all applicable federal, State
and local laws or regulations; (ii) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to hazardous materials, asbestos, petroleum or
petroleum by-products; (iii) any lawsuit brought or threatened, settlement reached, or government
order relating to such hazardous materials, asbestos, petroleum or petroleum by-products and/or
(iv) any violation of laws, orders, regulations, requirements or demand of government authorities
or any policies or requirements of the Authority which are based upon or in any way related to such
hazardous materials, asbestos, petroleum or petroleum by-products including, without limitation,
reasonable attorney and consultant fees, investigation and laboratory fees, court costs, and
litigation expenses. Notwithstanding the foregoing, the Borrower shall have no obligation to
defend, indemnify and hold harmless the Authority or the Trustee or their respective agents,
members, officers or employees under this Section 6.4(H) in the event and to the extent that any
such claims, demands, penalties, fines, liabilities, settlements, damages, costs or other expenses
arise out of or result from the willful misconduct or gross negligence of the Authority or the
Trustee or their respective agents, members, officers or employees. The provisions of this
paragraph shall be in addition to any and all other obligations and liabilities the Borrower may
have to the Authority or the Trustee at common law, and shall survive the termination of this
Agreement.
(I) Any obligation of the Borrower to the Authority under this Section shall be separate from
and independent of the other obligations of the Borrower hereunder, and may be enforced directly by
the Authority against the Borrower, irrespective of any action taken by or on behalf of the owners
of the Bonds.
(J) The obligations of the Borrower under this section, notwithstanding any other provisions
contained in the Financing Documents, shall survive the termination of this Agreement and shall be
recourse to the Borrower, and for the enforcement thereof any Indemnified Party shall have recourse
to the general credit of the Borrower.
-26-
Exhibit 4.25
Section 6.5.
Incorporation of Tax Regulatory Agreement; Payments Upon Taxability
. (A)
For purpose of this Section, the term owner means the Beneficial Owner of the Bonds so long as the
Book-Entry System is in effect.
(B) The representations, warranties, covenants and statements of expectation of the Borrower
set forth in the Tax Regulatory Agreement are by this reference incorporated in this Agreement as
though fully set forth herein.
(C) If any owner of the Bonds receives from the Internal Revenue Service a notice of
assessment and demand for payment with respect to interest on any Bond (except a notice and demand
based upon the assertion that the owner of the Bonds is a Substantial User or Related Person), an
appeal may be taken by the owner of the Bonds at the option of either the owner of the Bonds or the
Borrower. In either case all expenses of the appeal including reasonable counsel fees and expenses
shall be paid by the party taking such appeal, and the owner of the Bonds and the Borrower shall
cooperate and consult with each other in all matters pertaining to any such appeal, except that no
owner of the Bonds shall be required to disclose or furnish any non-publicly disclosed information,
including, without limitation, financial information and tax returns.
(D) Not later than 180 days following a Determination of Taxability, the Borrower shall pay to
the Trustee an amount sufficient, when added to the amount then in the Debt Service Fund and
available for such purpose, to retire and redeem all Bonds then Outstanding, in accordance with
Section 2.4 of the Indenture.
(E) The obligation of the Borrower to make the payments provided for in this Section shall be
absolute and unconditional, and the failure of the Authority or the Trustee to execute or deliver
or cause to be executed or delivered any documents or to take any action required under this
Agreement or otherwise shall not relieve the Borrower of its obligation under this Section.
Notwithstanding any other provision of this Agreement or the Indenture, the Borrowers obligations
under this Section shall survive the termination of this Agreement and the Indenture.
(F) The occurrence of a Determination of Taxability shall not be an Event of Default hereunder
but shall require only the performance of the obligations of the Borrower stated in this Section,
the breach of which shall constitute an Event of Default as provided in Section 7.1 hereof.
Section 6.6.
Public Purpose Covenants
. (A) The Borrower covenants that it will
operate the Project for the purposes and in a manner consistent with its application for assistance
to the Authority. The Borrower further covenants and agrees that it will, throughout the term of
this Agreement, (1) comply with all applicable laws, regulations, ordinances, rules, and orders
relating to the Project as provided in the Financing Documents, (2) maintain the Project in
accordance with the Financing Documents, (3) not cause or permit the Project to become or remain a
public nuisance, (4) not allow any change in the nature of the occupancy, use or operation of the
Project which is substantially inconsistent with the Borrowers application for assistance to the
Authority, except that the Borrower may, after notice to the Authority, permit any such change
which does not disqualify the Project as authorized projects under the Act as in effect on the date
hereof, and (5) except as permitted hereunder, not sell, assign, convey, further lease, sublease or
otherwise dispose of title to the Project without the prior written consent of the Authority.
Nothing in this Section is intended to require the Borrower to operate the Project in such manner
as, in the good faith judgment of the Borrower, shall materially and adversely impair the use and
operation of the Project.
-27-
Exhibit 4.25
(B) A breach of any covenant contained in this Section shall constitute an Event of Default
but, in order to relieve the Authority of the consequences of unanticipated failure of
consideration, shall permit only the exercise by the Authority of the remedies provided in Section
7.3 hereof.
Section 6.7.
Further Assurances and Corrective Instruments
. The Authority and the
Borrower agree that they will, from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such supplements hereto and such further instruments as may
reasonably be required for correcting any inadequate or incorrect description of the Project Realty
or Project Equipment or for carrying out the intention of or facilitating the performance of this
Agreement.
Section 6.8.
Covenant by Borrower as to Compliance with Indenture
. The Borrower
covenants and agrees that it will comply with the provisions of the Indenture with respect to the
Borrower and that the Trustee and the Bondholders shall have the power and authority provided in
the Indenture. The Borrower further agrees to aid in the furnishing to the Authority or the
Trustee of opinions that may be required under the Indenture. The Borrower covenants and agrees
that the Trustee shall be entitled to and shall have all the rights, including the right to enforce
against the Borrower the provisions of the Financing Documents, pertaining to the Trustee
notwithstanding the fact that the Trustee is not a party to the Financing Documents.
Section 6.9.
Assignment of Agreement or Note
. (A) The Borrower may not assign its
rights, interests or obligations hereunder or under the Note except as may be permitted pursuant to
Section 6.1 hereof.
(B) The Authority agrees that it will not assign or transfer any of the Financing Documents or
the revenues and other receipts, funds and monies to be received thereunder during the Term except
to the Trustee as provided in this Agreement and the Indenture.
Section 6.10.
Inspection
. The Authority and its duly authorized agents shall have (1)
the right at all reasonable times, and upon notice sufficient to permit the Borrower to take
actions necessary to comply with any security regulations then in effect at the Project, to enter
upon and to examine and inspect the Project Realty and the Project Equipment and (2) such rights of
access thereto as may be reasonably necessary for the proper maintenance and repair thereof in the
event of failure by the Borrower to perform its obligations under this Agreement. The Authority
and the Trustee shall also be permitted, at all reasonable times, to examine the books and records
of the Borrower with respect to the Project Realty and the Project Equipment.
Section 6.11.
Default Notification
. Upon becoming aware of any condition or event
which constitutes, or with the giving of notice or the passage of time would constitute, an Event
of Default, the Borrower shall deliver to the Authority and the Trustee a notice stating the
existence and nature thereof and specifying the corrective steps, if any, the Borrower is taking
with respect thereto.
Section 6.12.
Covenant Against Discrimination
. (A) The Borrower in the performance
of this Agreement will not discriminate or permit discrimination against any person or group of
persons on the grounds of race, color, religion, national origin, age, sex, sexual orientation,
marital status, physical or learning disability, political beliefs, mental retardation or history
of mental disorder in any manner prohibited by the laws of the United States or of the State.
(B) The Borrower will comply with the provisions of the resolution adopted by the Authority on
June 14, 1977, as amended, and the policy of the Authority implemented pursuant thereto concerning
the promotion of equal employment opportunity through affirmative action plans. The resolution
requires that all borrowers receiving financial assistance from the Authority adopt and implement
an affirmative
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Exhibit 4.25
action plan prior to the closing of the loan. The plan shall be updated annually as long as
the Bonds remain Outstanding.
Section 6.13.
Covenant to Provide Disclosure
. The Borrower hereby covenants and
agrees that it will execute, comply with and carry out all of the provisions of the Disclosure
Agreement. Notwithstanding any other provision of this Agreement, failure of the Borrower to
comply with the provisions of the Disclosure Agreement shall not be considered an Event of Default
hereunder; however, the Trustee may, subject to the provisions of Article IX of the Indenture (and,
at the request of the underwriter for the Bonds or the Holders of at least 25% aggregate principal
amount in Outstanding Bonds, shall), or any Bondholder or Beneficial Owner may take such actions as
may be necessary and appropriate, including seeking mandamus or specific performance by court
order, to cause the Borrower to comply with its obligations under this Section 6.13. For purposes
of this Section, Beneficial Owner means any person which (a) has the power, directly or
indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including
persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as
the owner of any Bonds for federal income tax purposes.
-29-
Exhibit 4.25
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1.
Events of Default
. Any one or more of the following shall constitute an
Event of Default hereunder:
(1) Any material representation or warranty made by the Borrower in the Financing
Documents or any certificate, statement, data or information furnished in writing to the
Authority or the Trustee by the Borrower in connection with the closing of the Bonds or
included by the Borrower in its application to the Authority for assistance proves at any
time to have been incorrect in any material respect when made.
(2) Failure by the Borrower to pay any interest, principal or premium, if any, that has
become due and payable with respect to the Bonds.
(3) Failure by the Borrower to pay any amount, other than principal, interest or
premium with respect to the Bonds, that has become due and payable with respect to the Bonds
or any other amount due and payable pursuant to the Financing Documents and the continuance
of such failure for more than thirty (30) Business Days.
(4) Failure by the Borrower to comply with the default notification provisions of
Section 6.11 hereof.
(5) The occurrence of an Event of Default under Section 8.1(A) of the Indenture.
(6) Failure by the Borrower to observe or perform any covenant, condition or agreement
hereunder or under the Financing Documents (other than the Disclosure Agreement) (except
those referred to above and except as provided in Section 6.5(F) hereof with respect to the
occurrence of a Determination of Taxability which, in and of itself, shall not constitute an
Event of Default hereunder but shall require only the performance of the obligations of the
Borrower stated in Section 6.5(F) hereof, the breach of which shall constitute an Event of
Default hereunder) and (a) continuance of such failure for a period of sixty (60) days after
receipt by the Borrower of written notice specifying the nature of such failure or (b) if by
reason of the nature of such failure the same cannot be remedied within the sixty-day
period, the Borrower fails to proceed with reasonable diligence after receipt of the notice
to cure the failure.
(7) The Borrower shall (a) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian or the like of itself or of its property, (b) admit in
writing its inability to pay its debts generally as they become due, (c) make a general
assignment for the benefit of creditors, (d) be adjudicated a bankrupt or insolvent, or (e)
commence a voluntary case under the federal bankruptcy laws of the United States of America
or file a voluntary petition or answer seeking reorganization, an arrangement with creditors
or an order for relief or seeking to take advantage of any insolvency law or file an answer
admitting the material allegations of a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding; or corporate action shall be taken by it for the
purpose of effecting any of the foregoing; or if without the application, approval or
consent of the Borrower, a proceeding shall be instituted in any court of competent
jurisdiction, seeking in respect of the Borrower an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition or arrangement with
creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or
custodian or the like of the Borrower or of all or any substantial part of its assets, or
other like relief in respect thereof under any bankruptcy or insolvency law, and, if such
proceeding is being contested by the
-30-
Exhibit 4.25
Borrower in good faith, the same shall continue undismissed, or pending and unstayed,
for any period of 75 consecutive days.
(8) Failure by the Borrower to make when due any payment of principal or interest
required under the provisions of any loan agreement (after the expiration of any applicable
grace periods) to which the Authority and the Borrower are parties.
(9) The occurrence of an Event of Default under the Insurance Agreement.
Section 7.2.
Remedies on Default
. (A) Except as provided in Section 6.6(B) hereof
and in Section 7.2(C) below, whenever any Event of Default shall have occurred, the Trustee, or the
Authority where so provided herein, may take any one or more of the following actions:
(1) The Trustee, as and to the extent provided in Article VIII of the Indenture, and
only with the prior written consent of the Bond Insurer, unless the Bond Insurer is in
default under the Bond Insurance Policy, may cause all amounts payable under the Financing
Documents to be immediately due and payable without notice or demand of any kind, whereupon
the same shall become immediately due and payable.
(2) The Authority, without the consent of the Trustee or any Bondholder, may proceed to
enforce the obligations of the Borrower to the Authority under this Agreement.
(3) The Trustee may take whatever action at law or in equity it may have to collect the
amounts then due and thereafter to become due, or to enforce the performance or observance
of the obligations, agreements, and covenants of the Borrower under the Financing Documents.
(4) The Trustee may exercise any and all rights it may have under the Financing
Documents.
(B) In the event that any Event of Default or any proceeding taken by the Authority (or by the
Trustee on behalf of the Authority) thereon shall be waived or determined adversely to the
Authority, then the Event of Default shall be annulled and the Authority and the Borrower shall be
restored to their former rights hereunder, but no such waiver or determination shall extend to any
subsequent or other default or impair any right consequent thereon.
(C) Notwithstanding any other provision hereof or of the Indenture to the contrary, only the
Bond Insurer will be permitted to exercise any rights or remedies with respect to an Event of
Default described in Section 7.1(9) hereof (in accordance with Section 8.2(E) of the Indenture);
provided, however, the Bond Insurer shall only be permitted to exercise such rights and remedies if
the Bond Insurance Policy is in effect and the Bond Insurer is not in default on its payment
obligations under the Bond Insurance Policy.
Section 7.3.
Remedies on Public Purpose Default
. (A) If the Borrower shall default in
the performance of any of the covenants contained in Section 6.6 hereof, and in the event that such
default shall also constitute an Event of Default under Section 7.1 hereof, such Event of Default
shall continue for thirty (30) days without the Trustee or Bondholders instituting the remedial
steps provided for in subsection 7.2(A)(1) hereof or subsection 8.1(B) of the Indenture, then, in
either case, the Authority may, with the prior written consent of the Bond Insurer, unless the Bond
Insurer is in default under the Bond Insurance Policy, so long as such Event of Default is
continuing, send a notice to the Trustee calling for the acceleration of all of the Borrowers
obligations under the Financing Documents and for the
redemption of all of the Bonds then Outstanding. Any such notice shall set forth in
reasonable detail the
-31-
Exhibit 4.25
default by the Borrower giving rise thereto and shall specify the date upon
which (1) notice of Bond redemption is to be given by the Trustee (which shall be not less than one
hundred twenty days from the date of the Authoritys determination notice) and (2) the redemption
of the Bonds is to occur (which shall be at least thirty (30) days after notice of redemption is
given by the Trustee). Within thirty (30) days following receipt of the notice, the Trustee shall
forward a copy thereof to the Borrower and each registered Bondholder, together with a copy of
Sections 6.6 and 7.3 of this Agreement.
(B) If, within sixty (60) days after the mailing of notice by the Trustee to the Borrower and
the Bondholders, the Trustee receives no objection (as hereinbelow provided) to such redemption,
the Trustee shall give such notice and effect the acceleration of the Borrowers obligations and
the redemption of all Outstanding Bonds in accordance with the Authoritys notice and pursuant to
Section 2.4(F) of the Indenture. If, however, the Borrower or any Bondholder disputes the
existence of such Event of Default, the Borrower or such Bondholder shall mail a notice to the
Authority and the Trustee containing a statement of such persons belief with respect to the
claimed default. The receipt of such notice by the Trustee shall serve to suspend the proceedings
for redemption of Bonds initiated by the Authoritys notice of default.
(C) If upon receipt of such notice from the Borrower or any Bondholder, the Authority
determines to affirm its earlier determination, either the Borrower or any Bondholder shall have
the right to bring an action in any court of competent jurisdiction to enjoin the proceedings for
the redemption of such Bonds, and during the pendency of any such action the redemption proceedings
shall be suspended. Neither the Authority, the Borrower nor any Bondholder shall be responsible
for any costs, fees, expenses, or reasonable counsel fees incurred by any other party in connection
with any such action, other than the Trustee (whose costs, fees and expenses shall be paid by the
Borrower). In the event the Authority is successful in such a proceeding, and a final judgment is
rendered which is not appealable or appealed within sixty (60) days thereafter finding the Borrower
in default under Section 6.6 hereof, the Trustee shall, promptly upon receipt of notice from the
Authority of the entry of the decision, give notice of the redemption of all Outstanding Bonds
under Section 6.3 of the Indenture, and redeem all such Bonds upon the date fixed for redemption in
the notice (which shall be no more than thirty-five (35) days after the notice is given). In the
event the Borrower or such Bondholders are successful in such a proceeding, and a final judgment is
rendered which is not appealable or appealed within sixty (60) days thereafter finding the Borrower
not to be in default under Section 6.6 hereof, all proceedings for the redemption of Bonds
commenced under this Section shall be terminated. No such judgment, however, shall prejudice the
exercise of the Authoritys rights under this Section upon the occurrence of such subsequent
failure of performance under Section 6.6 hereof.
(D) Within fifteen (15) days of the date the Trustee gives notice of any redemption of Bonds
pursuant to Section 7.3(B) above and subject to the last sentence of Section 7.3(B) above, the
Borrower shall pay as a final loan payment a sum sufficient, together with other funds on deposit
with the Trustee and available for such purpose, to redeem all Bonds then Outstanding under the
Indenture at 100% of the principal amount thereof plus accrued interest to the redemption date.
The Borrower shall also pay or provide for all reasonable and necessary fees and expenses of the
Trustee and any Paying Agent accrued and to accrue through the date of redemption of all such
Bonds.
(E) Nothing contained in this Section shall be deemed to prevent the Authority or the Borrower
from seeking equitable relief if it asserts or disputes, as the case may be, the existence of an
event of a public purpose default.
Section 7.4.
No Duty to Mitigate Damages
. Unless otherwise required by law, neither
the Authority, the Trustee nor any Bondholder
shall be obligated to do any act whatsoever or exercise any diligence whatsoever to mitigate
the damages to the Borrower if an Event of Default shall occur.
-32-
Exhibit 4.25
Section 7.5.
Remedies Cumulative
. No remedy herein conferred upon or reserved to the
Authority or the Trustee is intended to be exclusive of any other available remedy or remedies but
each and every such remedy shall be cumulative and shall be in addition to every remedy given under
this Agreement or now or hereafter existing at law or in equity or by statute. Delay or omission
to exercise any right or power accruing upon any default or failure by the Authority or the Trustee
to insist upon the strict performance of any of the covenants and agreements herein set forth or to
exercise any rights or remedies upon default by the Borrower hereunder shall not impair any such
right or power or be considered or taken as a waiver or relinquishment for the future of the right
to insist upon and to enforce, by injunction or other appropriate legal or equitable remedy, strict
compliance by the Borrower with all of the covenants and conditions hereof, or of the right to
exercise any such rights or remedies, if such default by the Borrower be continued or repeated.
-33-
Exhibit 4.25
ARTICLE VIII
PREPAYMENT PROVISIONS
Section 8.1.
Optional Prepayment
. (A) The Borrower shall have, and is hereby
granted, the option to prepay its loan obligation at any time, and from time to time, on or after
October 1, 2009 and to cause the corresponding optional redemption of the Bonds pursuant to Section
2.4(A) of the Indenture at such times, in such amounts, and with such premium, if any, for such
optional redemption as set forth in the form of the Bond, by delivering a written notice to the
Trustee in accordance with Section 8.2 hereof, with a copy to the Authority, setting forth the
amount to be prepaid, the amount of Bonds requested to be redeemed with the proceeds of such
prepayment, and the date on which such Bonds are to be redeemed. Such prepayment must be
sufficient to provide monies for the payment of interest and Redemption Price in accordance with
the terms of the Bonds requested to be redeemed with such prepayment and all other amounts then due
under the Financing Documents. In the event of any complete prepayment of its loan obligation, the
Borrower shall, at the time of such prepayment, also pay or provide for the payment of all
reasonable or necessary fees and expenses of the Authority, the Trustee and the Paying Agent
accrued and to accrue through the final payment of all the Bonds. Any such prepayments shall be
applied to the redemption of Bonds in the manner provided in Section 6.2 of the Indenture, and
credited against payments due hereunder in the same manner.
(B) The Borrower shall have, and is hereby granted, the option to prepay its loan obligation
in full at any time without premium if any of the following events shall have occurred, as
evidenced in each case by the filing with the Trustee of a certificate of an Authorized
Representative of the Borrower to the effect that one of such events has occurred and is
continuing, and describing the same:
(1) The Project shall have been damaged or destroyed to such extent that (a) the
Project cannot be reasonably restored within a period of six (6) months from the date of
such damage or destruction to the condition thereof immediately preceding such damage or
destruction, or (b) the Borrower is thereby prevented or likely to be prevented from
carrying on its normal operation of the Project for a period of six (6) months from the date
of such damage or destruction.
(2) Title to or the temporary use of all or substantially all of the Project shall have
been taken or condemned by a competent authority, which taking or condemnation results or is
likely to result in the Borrower being thereby prevented or likely to be prevented from
carrying on its normal operation of the Project for a period of six (6) months.
(3) A change in the Constitution of the State or of the United States of America or
legislative or executive action (whether local, state, or federal) or a final decree,
judgment or order of any court or administrative body (whether local, state, or federal)
that causes this Agreement to become void or unenforceable or impossible of performance in
accordance with the intent and purpose of the parties as expressed herein or, imposes
unreasonable burdens or excessive liabilities upon the Borrower with respect to the Project
or the operation thereof.
(4) The operation of any of the Project shall have been enjoined or shall otherwise
have been prohibited by any order, decree, rule or regulation of any court or of any local,
state, or federal regulatory body, administrative agency or other governmental body for a
period of not less than six months.
(5) Changes in the economic availability of raw materials, operating supplies or
facilities necessary for the operation of the Project or technological or other changes
shall have occurred which the Borrower cannot reasonably overcome or control and which in
the
-34-
Exhibit 4.25
Borrowers reasonable judgment renders the Project unsuitable or uneconomic for the
purposes herein specified or any tax shall be levied upon payments due under the Note in an
amount which the Borrower in its reasonable judgment believes imposes an unreasonable burden
upon the Borrower.
In any such case the final loan payment shall be a sum sufficient, together with other funds
deposited with Trustee and available for such purpose, to redeem all Bonds then Outstanding under
the Indenture at the redemption price of 100% of the principal amount thereof plus accrued interest
to the redemption date and all other amounts then due under the Financing Documents, and the
Borrower shall also pay or provide for all reasonable or necessary fees and expenses of the
Authority, the Trustee and Paying Agent accrued and to accrue through final payment for the Bonds.
The Borrower shall deliver a written notice to the Trustee, with a copy to the Authority,
requesting the redemption of the Bonds under the Indenture, which notice shall have attached
thereto the applicable certificate of the Authorized Representative of the Borrower.
In addition, the Borrower may prepay all or a portion of its loan obligation in order to
preserve the tax-exempt status of interest on the Bonds in accordance with the provisions of
Section 2.4(G) of the Indenture.
Section 8.2.
Notices of Prepayment
. To exercise any options granted in this Article,
or to consummate the acceleration of the loan payments as set forth in this Article, the written
notice to the Trustee shall be signed by an Authorized Representative of the Borrower and shall
specify therein the date of prepayment, which date shall be not less than thirty-five days nor more
than ninety days from the date the notice is mailed. A duplicate copy of any written notice
hereunder shall also be filed with the Authority by the Borrower.
Section 8.3.
Mandatory Prepayment on Taxability, Receipt of Request for Redemption of a
Deceased Holders Bonds and the Occurrence of Certain Events
. The Borrower shall pay or cause
the prepayment of all or a portion of its loan obligation, as circumstances and the provisions of
Section 2.4 of the Indenture shall warrant, following (i) a Determination of Taxability in the
manner provided in Section 6.5 of this Agreement, (ii) receipt by the Trustee of a request for
redemption of a deceased owners Bonds in accordance with Section 2.4(D) of the Indenture and (iii)
the occurrence of certain events specified in Sections 6.1(A) and (B) of this Agreement.
-35-
Exhibit 4.25
ARTICLE IX
GENERAL
Section 9.1.
Indenture
. (A) Monies received from the sale of the Bonds and all loan
payments made by the Borrower and all other monies received by the Authority or the Trustee under
the Financing Documents shall be applied solely and exclusively in the manner and for the purposes
expressed and specified in the Indenture and in the Bonds and as provided in this Agreement.
(B) The Borrower shall have and may exercise all the rights, powers and authority given the
Borrower in the Indenture and in the Bonds, and the Indenture and the Bonds shall not be modified,
altered or amended in any manner which adversely affects such rights, powers and authority or
otherwise adversely affects the Borrower without the prior written consent of the Borrower.
Section 9.2.
Benefit of and Enforcement by Bondholders
. The Authority and the
Borrower agree that this Agreement is executed in part to induce the purchase by others of the
Bonds and for the further securing of the Bonds, and accordingly that all covenants and agreements
on the part of the Authority and the Borrower as to the amounts payable with respect to the Bonds
hereunder are hereby declared to be for the benefit of the holders from time to time of the Bonds
and may be enforced as provided in the Indenture on behalf of the Bondholders by the Trustee.
Section 9.3.
Force Majeure
. In case by reason of force majeure either party hereto
shall be rendered unable wholly or in part to carry out its obligations under this Agreement, then
except as otherwise expressly provided in this Agreement, if such party shall give notice and full
particulars of such force majeure in writing to the other party within a reasonable time after
occurrence of the event or cause relied on, the obligations of the party giving such notice, other
than the obligation of the Borrower to make the payments required under the terms hereof or of the
Note, so far as they are affected by such force majeure, shall be suspended during the continuance
of the inability then claimed which shall include a reasonable time for the removal of the effect
thereof, but for no longer period, and such parties shall endeavor to remove or overcome such
inability with all reasonable dispatch. The term force majeure, as employed herein, means acts
of God, strikes, lockouts or other industrial disturbances, acts of the public enemy, orders of any
kind of the Government of the United States, of the State or any civil or military authority,
insurrections, riots, epidemics, landslides, lightning, earthquakes, volcanoes, fires, hurricanes,
tornadoes, storms, floods, washouts, droughts, arrests, restraining of government and people, civil
disturbances, explosions, partial or entire failure of utilities, shortages of labor, material,
supplies or transportation, or any other similar or different cause not reasonably within the
control of the party claiming such inability. It is understood and agreed that the settlement of
existing or impending strikes, lockouts or other industrial disturbances shall be entirely within
the discretion of the party having the difficulty and that the above requirements that any force
majeure shall be reasonably beyond the control of the party and shall be remedied with all
reasonable dispatch shall be deemed to be fulfilled even though such existing or impending strikes,
lockouts and other industrial disturbances may not be settled and could have been settled by
acceding to the demands of the opposing person or persons.
Section 9.4.
Amendments
. This Agreement may be amended only with the concurring
written consent of the Trustee and, if required by the Indenture, of the owners of the Bonds given
in accordance with the provisions of the Indenture.
Section 9.5.
Notices
. All notices, certificates or other communications hereunder
shall be sufficiently given and shall be deemed given when delivered or when mailed by registered
or certified mail, postage prepaid, addressed as follows: if to the Authority, at 999
West Street, Rocky Hill, Connecticut 06067, Attention: Program Manager Loan Administration;
if to the Borrower, 93 West Main Street, Clinton, Connecticut 06413 Attention: Vice
President-Finance; if to the Paying Agent,
-36-
Exhibit 4.25
Goodwin Square, 225 Asylum Street, Hartford, Connecticut
06103, Attention: Corporate Trust Department; if to the Trustee, Goodwin Square, 225 Asylum Street,
Hartford, Connecticut 06103, Attention: Corporate Trust Administration; and if to the Bond Insurer,
125 Park Avenue, New York, New York 10017, Attention: Risk Management. A duplicate copy of each
notice, certificate or other communication given hereunder by either the Authority or the Borrower
to the other shall also be given to the Trustee and the Bond Insurer. In addition, copies of all
amendments to this Agreement which are consented to by the Bond Insurer shall be sent to S&P. The
Authority, the Borrower, the Paying Agent, the Trustee and the Bond Insurer may, by notice given
hereunder, designate any further or different addresses to which subsequent notices, certificates
or other communications shall be sent.
Section 9.6.
Prior Agreements Superseded
. This Agreement, together with all
agreements executed by the parties concurrently herewith or in conjunction with the sale of the
Bonds, shall completely and fully supersede all other prior understandings or agreements, both
written and oral, between the Authority and the Borrower relating to the lending of money and the
Project, including those contained in any commitment letter executed in anticipation of the
issuance of the Bonds but excluding agreements entered into in connection with the financing of the
Project with other bonds previously issued by the Authority.
Section 9.7.
Execution of Counterparts
. This Agreement may be executed simultaneously
in several counterparts each of which shall be an original and all of which shall constitute but
one and the same instrument.
Section 9.8.
Time
. All references to times of day in this Agreement are references to
New York City time.
Section 9.9.
Separability of Invalid Provisions
. In case any one or more of the
provisions contained in this Agreement or in the Note shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be construed as if such
invalid or illegal or unenforceable provision had never been contained herein.
Section 9.10.
Third Party Beneficiaries
. The Authority and the Borrower agree that
the Trustee, the Paying Agent and the Bond Insurer shall be third party beneficiaries of this
Agreement to the extent that any of the provisions hereof relate to or provide rights to the
Trustee, the Paying Agent or the Bond Insurer.
Section 9.11.
Governing Law
. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, without reference to its choice of law
principles.
-37-
Exhibit 4.25
IN WITNESS WHEREOF
, the Authority has caused this Agreement to be executed in its corporate
name by a duly Authorized Representative, and the Borrower has caused this Agreement to be executed
in its corporate name by its duly authorized officer all as of the date first above written.
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CONNECTICUT DEVELOPMENT AUTHORITY
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By
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/s/ Karin A. Lawrence
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Name: Karin A. Lawrence
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Authorized Representative
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THE CONNECTICUT WATER COMPANY
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By
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/s/ David C. Benoit
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Name: David C. Benoit
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Title: Vice President Finance and
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Chief Financial Officer
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-38-
Exhibit 4.25
APPENDIX A
THE CONNECTICUT WATER COMPANY
FORM OF
PROMISSORY NOTE
2005A SERIES
The Connecticut Water Company, a corporation organized and existing under the laws of the
State of Connecticut (the Borrower), for value received, hereby promises to pay to the order of
the Connecticut Development Authority (the Authority), the principal sum of $10,000,000.00
together with interest on the unpaid principal balance thereof from the date hereof until fully and
finally paid, on the applicable Interest Payment Dates together with all taxes levied or assessed
on this Note or the debt evidenced hereby against the holder hereof. This Note shall bear interest
at the rate of interest borne by the Bonds referred to below.
This Note has been executed under and pursuant to a Loan Agreement, dated as of October 1,
2005, between the Authority and the Borrower (the Agreement). This Note is issued to evidence
the obligation of the Borrower under the Agreement to repay the loan made by the Authority from the
proceeds of its $10,000,000 Water Facilities Revenue Bonds (The Connecticut Water Company Project -
2005A Series) (the Bonds), together with interest thereon and all other amounts, fees, penalties,
premiums, adjustments, expenses, reasonable counsel fees and other payments of any kind required to
be paid by the Borrower under the Agreement. The Agreement includes provision for mandatory and
optional prepayment of this Note as a whole or in part. Advances made pursuant to Section 6.4 of
the Agreement shall bear interest at the rate specified in accordance therewith.
The Agreement and this Note (hereinafter, together with the Tax Regulatory Agreement,
collectively referred to as the Financing Documents) have been assigned to U.S. Bank National
Association (the Trustee) acting pursuant to an Indenture of Trust, dated as of October 1, 2005
(the Indenture), between the Authority and the Trustee. Such assignment is made as security for
the payment of the Bonds issued by the Authority pursuant to the Indenture.
As provided in the Agreement and subject to the provisions thereof, payments hereon are to be
made at the corporate trust office of U.S. Bank National Association in Hartford, Connecticut, or
at the office designated for such payment by any successor trustee in an amount which, together
with other moneys available therefor pursuant to the Indenture, will equal the amount payable as
principal or Redemption Price, if any, of and interest on the Bonds outstanding under the Indenture
on each such due date.
The Borrower shall make payments on this Note on the dates and in the amounts specified herein
and in the Agreement and in addition shall make such other payments as are required pursuant to the
Financing Documents, the Indenture and the Bonds. Upon the occurrence of an Event of Default, as
defined in any of the Financing Documents, the principal of and interest on this Note may be
declared immediately due and payable as provided in the Agreement. Upon any such declaration the
Borrower shall pay all cost, disbursements, expenses and reasonable counsel fees of the Authority
and the Trustee in seeking to enforce their rights under any of the Financing Documents.
A-1
Exhibit 4.25
THE BORROWER ACKNOWLEDGES THAT THE LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND
WAIVES ITS RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR
AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE
HOLDER HEREOF MAY DESIRE TO USE. The Borrower further (1) waives diligence, demand, presentment
for payment, notice of nonpayment, protest and notice of protest, notice of any renewals or
extension of this Note, and all rights under any statute of limitations, (2) agrees that the time
for payment of this Note may be changed and extended in accordance with the provisions of the
Indenture, and (3) consents to the release of all or any part of the security for the payment
thereof at the discretion of the Trustee or the release of any party liable for this obligation
without affecting the liability of the other parties hereto. Any delay on the part of the
Authority or the Trustee in exercising any right hereunder shall not operate as a waiver of any
such right, and any waiver granted with respect to one default shall not operate as a waiver in the
event of any subsequent default.
IN WITNESS WHEREOF, The Connecticut Water Company has caused this Note to be executed in its
corporate name by its duly authorized officer, dated November 30, 2005.
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THE CONNECTICUT WATER COMPANY
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By:
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/s/ David C. Benoit
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Name: David C. Benoit
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Authorized Representative
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A-2
Exhibit 4.25
AUTHORITY ENDORSEMENT
Pay to the order of U.S. Bank National Association, as Trustee, without recourse.
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CONNECTICUT DEVELOPMENT AUTHORITY
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By:
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/s/ Karin A. Lawrence
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Name: Karin A. Lawrence
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Authorized Representative
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A-3
Exhibit 4.25
APPENDIX B
DESCRIPTION OF PROJECT REALTY
NONE.
Exhibit 4.25
APPENDIX C
DESCRIPTION OF PROJECT EQUIPMENT
The Project Equipment shall consist of various improvements to certain of the Borrowers water
systems each of which collects, treats, stores, transmits and distributes water for residential,
commercial, industrial and fire protection services in certain cities, towns and communities within
Connecticut. The Borrowers systems are operationally separate and are organized into regions.
Those systems affected by the improvements and the regions to which they are allocated are as
follows: (1) Shoreline Region, consisting of the Guilford System, the Chester System, the Point O
Woods System and the Mason Islands System; (2) the Naugatuck Region, consisting of Central System
and the Terryville System and (3) the Northern Region, consisting of the Western System and the
Stafford System.
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Description
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Location
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Shoreline Region
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Killingworth Dam raise Killingworth Dam five feet,
reconstruct spillway and replace existing intake piping
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105 Deep River Rd., (Rte 80)
Killingworth, CT.
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Deep River Sewer Repaired water main Spring St. from
River west to Union St.; Union St. from Spring St. south
to Liberty St; Union St. from Rte 80 south to Church
St.; and Rogers Lane
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As Described,
Deep River, CT.
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Money Point Water Main Replacement
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Money Point Road on Masons
Island from house #30 to
end. Stonington CT.
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Wildwood Water Main Interconnection
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Route 156. Installed water
main from Point of Woods
System to Wildwood System.
Old Lyme, CT.
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Beach Park Road Water Main Replacement
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From Shore Grove Road South
to Shore Road Clinton, CT.
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Main Street Water Main Replacement
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From head of Main St. to
Back Street, Essex, CT.
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Route 1 Water Main Replacement
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From Green Acres Drive to
East River Bridge, Madison,
CT.
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Route 1 Water Main Replacement
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East River Bridge to Tanner
Marsh Rd., Guilford, CT
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Naugatuck Region
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Route 6 Water Main New installation of 12 water main.
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Route 6 between North St.
and Scott Road, Thomaston &
Plymouth, CT.
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Exhibit 4.25
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Description
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Location
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Middlebury Pump Station construction of precast
concrete building with 30 square feet of space,
containing pump and related instrumentation. Two pumps,
350 gallons per minute each, 1 million gallons per day
total.
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Directly opposite 158
Shadduck Road, Middlebury,
CT
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New Haven Road Valve Insertion New Water Valve Install
20 butterfly valve using dual line stop, maintaining
service.
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Warren Avenue and Rt. 63,
Naugatuck, CT
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Bemis Street Water Main
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Bemis St. between Armdruster
Rd. and Country Farms,
Plymouth, CT.
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Northern Region
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Talcottville PRV Installed new Pressure Reading Valve
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Talcottville Rd. south of
Kelly Rd., Vernon, CT
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Rockville Security Installed perimeter fencing, auto
gate and video surveillance.
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10 Snipsic Street, Vernon, CT
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Oak Street Water Main Replacement
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Oak St. from Center St. to
Chestnut, Windsor Locks, CT.
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Ratley Road Water Main Replacement
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On Ratley Rd. from Mountain
Rd., 800 ft. North,
Suffield, CT.
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James Street Water Main Replacement
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On James St. from Center St.
800 ft. West, Windsor Locks,
CT.
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East Street Water Main Replacement
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East St. from Hickory St.
North to CT/MA border,
Suffield, CT.
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Thompsonville Well #8 Install new production well with a
capacity of 600 gallons per minute.
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40 Booth Rd., Enfield, CT
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Stafford Water Treatment Plant Improvements
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#20 Buckley Highway (Rte.
190), Stafford, CT
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Second Water Tank, Wapping Wood Road Install new 2.3
million gallon above ground water storage tank.
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Located next to an existing
water tank at 2990 Ellington
Rd., South Windsor CT
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A-2
Exhibit 4.26
[EXECUTION COPY]
CONNECTICUT DEVELOPMENT AUTHORITY
to
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
Dated as of October 1, 2005
Connecticut Development Authority
$10,000,000 Water Facilities Revenue Bonds
(The Connecticut Water Company Project 2005A Series)
Exhibit 4.26
TABLE OF CONTENTS
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Page
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Parties and Preambles
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1
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Form of Bond
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4
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ARTICLE I
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DEFINITIONS AND INTERPRETATION
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Section 1.1. Definitions
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14
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Section 1.2. Interpretation
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22
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ARTICLE II
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AUTHORIZATION, TERMS AND ISSUANCE OF BONDS
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Section 2.1. Authorization for Indenture
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24
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Section 2.2. Authorization and Obligation of Bonds
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24
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Section 2.3. Issuance and Terms of the Bonds
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24
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Section 2.4. Redemption of Bonds
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27
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Section 2.5. Execution and Authentication of Bonds
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29
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Section 2.6. Delivery of Bonds
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30
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Section 2.7. No Additional Bonds
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30
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ARTICLE III
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GENERAL TERMS AND PROVISIONS OF BONDS
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Section 3.1. Date of Bonds
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31
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Section 3.2. Form and Denominations
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31
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Section 3.3. Legends
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31
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Section 3.4. Medium of Payment
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31
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Section 3.5. Bond Details
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31
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Section 3.6. Interchangeability, Transfer and Registry
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31
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Section 3.7. Bonds Mutilated, Destroyed, Stolen or Lost
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32
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Section 3.8. Cancellation and Destruction of Bonds
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32
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Section 3.9. Requirements With Respect To Transfers
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32
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Section 3.10. Registrar
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33
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ARTICLE IV
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APPLICATION OF BOND PROCEEDS AND OTHER AMOUNTS
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Section 4.1. Accrued Interest
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34
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Section 4.2. Bond Proceeds
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34
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Section 4.3. Borrower Contribution
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34
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ARTICLE V
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CUSTODY AND INVESTMENT OF FUNDS
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Section 5.1. Creation of Funds
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35
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Section 5.2. Project Fund
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35
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Section 5.3. Debt Service Fund
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37
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Section 5.4. Rebate Fund
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39
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Section 5.5. Renewal Fund
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39
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Section 5.6. Investment of Funds and Accounts
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39
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Section 5.7. Non-presentment of Bonds
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40
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ARTICLE VI
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REDEMPTION OF BONDS
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Section 6.1. Privilege of Redemption and Redemption Price
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40
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Section 6.2. Selection of Bonds to be Redeemed
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40
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Section 6.3. Notice of Redemption
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40
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- i -
Exhibit 4.26
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Page
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Section 6.4. Payment of Redeemed Bonds
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41
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Section 6.5. Notice to Authority and Borrower of Deceased Bondholder Redemption
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41
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Section 6.6. Cancellation of Redeemed Bonds
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41
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ARTICLE VII
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PARTICULAR COVENANTS
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Section 7.1. No Pecuniary Liability on Authority or Officers
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42
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Section 7.2. Payment of Principal, Redemption Price, if any, and Interest
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42
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Section 7.3. Performance of Covenants
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42
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Section 7.4. Further Assurances
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42
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Section 7.5. Inspection of Project Books
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42
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Section 7.6. Rights under Financing Documents
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43
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Section 7.7. Creation of Liens, Indebtedness
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43
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Section 7.8. Recording and Filing
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43
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ARTICLE VIII
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REMEDIES OF BONDHOLDERS
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Section 8.1. Events of Default; Acceleration of Due Dates
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44
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Section 8.2. Enforcement of Remedies
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45
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Section 8.3. Application of Revenue and Other Moneys After Default
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46
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Section 8.4. Actions by Trustee
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47
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Section 8.5. Majority Bondholders Control Proceedings
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47
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Section 8.6. Individual Bondholder Action Restricted
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47
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Section 8.7. Effect of Discontinuance of Proceedings
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47
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Section 8.8. Remedies Not Exclusive
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47
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Section 8.9. Delay or Omission Upon Default
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48
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Section 8.10. Notice of Default
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48
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Section 8.11. Waivers of Default
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48
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ARTICLE IX
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TRUSTEE AND PAYING AGENTS
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Section 9.1. Appointment and Acceptance of Duties
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49
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Section 9.2. Indemnity
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49
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Section 9.3. Responsibilities of Trustee
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49
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Section 9.4. Compensation
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50
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Section 9.5. Evidence on Which Trustee May Act
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50
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Section 9.6. Evidence of Signatures of Owners of the Bonds and Ownership of Bonds
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51
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Section 9.7. Trustee and any Paying Agent, May Deal in Bonds and With Borrower
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51
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Section 9.8. Resignation or Removal of Trustee
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51
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Section 9.9. Successor Trustee
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52
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Section 9.10. Appointment and Responsibilities of Paying Agent
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53
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Section 9.11. Resignation or Removal of Paying Agent; Successors
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53
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Section 9.12. Monies Held for Particular Bonds
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54
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Section 9.13. Continuation Statements
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54
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Section 9.14. Obligation to Report Defaults
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54
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Section 9.15. Payments Due on non-Business Day
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54
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Section 9.16. Appointment of Co-Trustee
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54
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Section 9.17. Project Description
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55
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ARTICLE X
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AMENDMENTS OF INDENTURE
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Section 10.1. Limitation on Modifications
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56
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Section 10.2. Supplemental Indentures Without Consent of Owners of the Bonds
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56
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Section 10.3. Supplemental Indentures With Consent of Owners of the Bonds
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|
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57
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Section 10.4. Supplemental Indenture Part of the Indenture
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58
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- ii -
Exhibit 4.26
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Page
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ARTICLE XI
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AMENDMENTS OF FINANCING DOCUMENTS
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Section 11.1. Rights of Borrower
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59
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Section 11.2. Amendments of Financing Documents Not Requiring Consent of Owners of the Bonds
|
|
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59
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Section 11.3. Amendments of Financing Documents Requiring Consent of Owners of the Bonds
|
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59
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ARTICLE XII
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DISCHARGE OF INDENTURE
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Section 12.1. Defeasance
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60
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ARTICLE XIII
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GENERAL PROVISIONS
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Section 13.1. Notices
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61
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Section 13.2. Covenant Against Discrimination
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61
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Section 13.3. Rights of Bond Insurer
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61
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Section 13.4. Bond Insurer Consent
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62
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Section 13.5. Notices to the Bond Insurer
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62
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Section 13.6. Parties Interested Herein
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62
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Section 13.7. Bond Insurer as Third Party Beneficiary
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62
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Section 13.8. Effective Date; Counterparts
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62
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Section 13.9. Date for Identification Purposes Only
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62
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Section 13.10. Separability of Invalid Provisions
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63
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APPENDICES
Appendix A Form of Requisition
- iii -
Exhibit 4.26
THIS INDENTURE OF TRUST
, made and dated as of October 1, 2005, by and between the
CONNECTICUT
DEVELOPMENT AUTHORITY
, a body corporate and politic constituting a public instrumentality and
political subdivision of the State of Connecticut, and
U.S. BANK NATIONAL ASSOCIATION
, a national
banking association organized, existing and authorized to accept and execute trusts of the
character herein set out under and by virtue of the laws of the United States of America, with a
corporate trust office located in Hartford, Connecticut, as Trustee,
WITNESSETH THAT:
WHEREAS
, the State Commerce Act, constituting Connecticut General Statutes, Sections 32-1a
through 32-23zz, as amended (the Act), declares that there is a continuing need in the State (1)
for industrial development and activity to provide and maintain employment and tax revenues and to
control, abate and prevent pollution to protect the public health and safety, (2) for the
development of recreation facilities to promote tourism, provide and maintain employment and tax
revenues, and promote the public welfare, (3) for the development of commercial and retail sales
and service facilities in urban areas to provide and maintain construction and permanent employment
and tax revenues, to improve conditions of deteriorated physical development, slow economic growth
and eroded financial health of the public and private sectors in urban areas and to revitalize the
economy of urban areas, and (4) for assistance to public service businesses providing
transportation and utility services in the State, and that the availability of financial assistance
and suitable facilities are important inducements to industrial and commercial enterprises to
remain or locate in the State and to provide industrial, recreation, urban and public service
projects; and
WHEREAS
, the Act provides that (1) the term project as used therein means any facility,
plant, works, system, building, structure, utility, fixture or other real property improvement
located in the State, and the land on which it is located or which is reasonably necessary in
connection therewith, which is of a nature or which is to be used or occupied by any person for
purposes which would constitute it as an economic development project, recreation project, urban
project, public service project or health care project, and any real property improvement
reasonably related thereto, and (2) a project may also include or consist exclusively of machinery,
equipment or fixtures; and
WHEREAS
, the Act provides that the Authority shall have power to determine the location and
character of, and extend credit or make loans to any person for the planning, designing, acquiring,
improving and equipping of, a project which may be secured by loan, lease or sale agreements,
contracts and other instruments, upon such terms and conditions as the Authority shall determine to
be reasonable, to require the inclusion in any contract, loan agreement or other instrument of such
provisions for the construction, use, operation, maintenance and financing of the project as the
Authority may deem necessary or desirable, to issue its bonds for such purposes, subject to the
approval of the Treasurer of the State, and, as security for the payment of the principal or
redemption price, if any, of and interest on any such bonds, to pledge or assign such a loan, lease
or sale agreement and the revenues and receipts derived by the Authority from such a project; and
WHEREAS
, by resolution adopted on May 19, 2004, in furtherance of the purposes of the Act, the
Authority has accepted the application of The Connecticut Water Company (the Borrower) for
assistance in the financing of various capital projects located in the State of Connecticut; and
WHEREAS
, the Borrower currently owns certain existing facilities within certain municipalities
in the State and at this time requests assistance in the design, acquisition, installation,
improvement and construction of certain facilities consisting of water treatment and storage
facilities, transmission and
Exhibit 4.26
distribution mains, service lines, meters, hydrants and pumping equipment for the purpose of
supplying safe potable water to the general public within the Borrowers service area; and
WHEREAS
, the Authority has by a further resolution adopted on August 17, 2005 authorized the
issuance of not to exceed $10,000,000 principal amount of its Water Facilities Revenue Bonds (The
Connecticut Water Company Project 2005A Series) for the purpose of providing funds for the
Project; and
WHEREAS
, the Authority has determined that the issuance, sale and delivery of the Bonds, as
hereinafter provided, is needed to finance the cost of the Project, and concurrently herewith the
Authority and the Borrower have entered into a Loan Agreement, dated as of October 1, 2005,
providing for a loan by the Authority to the Borrower for such purpose in an aggregate amount equal
to the principal amount of the Bonds; and
WHEREAS
, the Connecticut Department of Public Utility Control (the DPUC) has approved the
issuance of the Note; and
WHEREAS
, the Bonds shall be special obligations of the Authority, payable solely out of the
revenues and other receipts, funds or monies derived by the Authority under the Agreement or the
Indenture and from any amounts otherwise available under this Indenture for the payment of the
Bonds; and
WHEREAS
, the Bonds are to be originally issued as fully registered bonds and such Bonds and
the Trustees certificate of authentication to be endorsed thereon shall be in substantially the
following form, with appropriate variations, omissions and insertions as permitted or required by
this Indenture, to wit:
- 2 -
Exhibit 4.26
[FORM OF BOND]
NEITHER THE STATE OF CONNECTICUT NOR ANY MUNICIPALITY THEREOF IS OBLIGATED TO PAY, AND NEITHER
THE FAITH AND CREDIT NOR TAXING POWER OF THE STATE OF CONNECTICUT NOR ANY MUNICIPALITY
THEREOF IS PLEDGED TO THE PAYMENT OF, THE PRINCIPAL, PREMIUM, IF ANY, OF OR INTEREST ON
THIS BOND.
CONNECTICUT DEVELOPMENT AUTHORITY
WATER FACILITIES REVENUE BOND
(THE CONNECTICUT WATER COMPANY PROJECT 2005A SERIES)
BOND DATE: November 30, 2005
MATURITY DATE: October 1, 2040
INTEREST
PAYMENT DATES: April 1 and October 1
INTEREST RATE: %
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: $10,000,000.00***
CUSIP NUMBER:
CONNECTICUT DEVELOPMENT AUTHORITY (the Authority), a body corporate and politic constituting
a public instrumentality and political subdivision of the State of Connecticut (the State), for
value received, hereby promises to pay to the REGISTERED OWNER or registered assigns, on the
MATURITY DATE, solely from the sources and in the manner hereinafter provided, upon presentation
and surrender hereof, in lawful money of the United States of America, the PRINCIPAL AMOUNT and in
like manner to pay interest on the unpaid principal balance thereof until the Authoritys
obligation with respect to the payment of such sum shall be discharged. Interest shall be payable
(computed on the basis of a 360-day year consisting of twelve 30-day months) from the most recent
INTEREST PAYMENT DATE, to which interest has been paid or duly provided for or, if no interest has
been paid, from the DATE OF THIS BOND at the INTEREST RATE per annum, payable semi-annually on the
INTEREST PAYMENT DATES until the date on which this bond becomes due, whether at maturity or by
acceleration or redemption. From and after that date, any unpaid principal will bear interest at
the same rate until paid or duly provided for.
Payment of Principal and Interest
. The principal and premium, if any, of this Bond is
payable to the REGISTERED OWNER hereof but only upon presentation and surrender of this bond at the
corporate trust office of U.S. Bank National Association, as Paying Agent (with its successors, the
Paying Agent). Interest is payable by check or draft mailed by the Paying Agent to the
REGISTERED OWNER of this bond (or of one or more predecessor or successor Bonds (as defined
below)), determined as of the close of business on the applicable record date, at its address as
shown on the registration books maintained by the Paying Agent. If any payment, redemption or
maturity date for principal, premium or interest shall not be a Business Day then the payment
thereof may be made on the next succeeding Business Day with the same force and effect as if made
on the specified payment date and no interest shall accrue for the
- 3 -
Exhibit 4.26
period after the specified payment date. Payment shall be in any coin or currency of the
United States of America, which, on the respective dates of payment thereof, is legal tender for
the payment of public and private debts.
The record date for payment of interest is the fifteenth day of the month immediately
preceding each INTEREST PAYMENT DATE, provided that, with respect to overdue interest or interest
payable on redemption of this bond other than on an INTEREST PAYMENT DATE or interest on any
overdue amount, the Trustee (as defined below) may establish a special record date. The special
record date may be not more than thirty (30) days before the date set for payment. The Paying
Agent will mail notice of a special record date to the registered owners of the Bonds (the
Bondholders) at least ten (10) days before the special record date. The Paying Agent will
promptly certify to the Authority and the Trustee that it has mailed such notice to all
Bondholders, and such certificate will be conclusive evidence that such notice was given in the
manner required hereby.
Authorization and Purpose
. This bond is one of an authorized issue of Bonds of the
Authority in the aggregate principal amount of $10,000,000 designated: Water Facilities Revenue
Bonds (The Connecticut Water Company Project 2005A Series) (the Bonds) which are issued for the
purpose of providing The Connecticut Water Company (the Borrower), a corporation organized and
existing under the laws of the State of Connecticut, with funds for the purpose of financing
various capital improvements constituting a portion of the Borrowers existing water system (the
Project), and paying necessary expenses incidental thereto. The Bonds are issued pursuant to the
State Commerce Act, constituting Connecticut General Statutes, Sections 32-1a through 32-23zz, as
amended, a resolution adopted by the Authority on August 17, 2005 and an Indenture of Trust, dated
as of October 1, 2005 (which Indenture as from time to time amended and supplemented is herein
referred to as the Indenture), duly executed and delivered by the Authority to U.S. Bank National
Association, as trustee (with its successors, the Trustee), and are equally and ratably secured
by and entitled to the protection of the Indenture, which is on file in the office of the Trustee.
Pledge and Security
. Pursuant to the Indenture, the Authority has assigned to the
Trustee all of its right, title and interest in and to a Loan Agreement, dated as of October 1,
2005, as it may be amended or supplemented from time to time (the Agreement), between the
Authority and the Borrower, and the Note evidencing the Borrowers obligations under the Agreement
(except for certain enforcement and indemnification rights which are reserved in the Indenture),
including all rights to receive loan payments sufficient to pay the principal and premium if any,
of and interest and all other amounts due on the Bonds as the same become due, to be made by the
Borrower pursuant to the Agreement. The Agreement sets forth the terms and conditions under which
the Authority will provide for the financing of the Project and under which the Borrower will use
and occupy the Project and the Borrower will make loan payments to the Authority in such amounts as
are necessary to pay the principal of, premium if any, and interest on the Bonds. Reference is
hereby made to the Indenture for the definition of any capitalized word or term used but not
defined herein and for a description of the property pledged, assigned and otherwise available for
the payment of the Bonds, the provisions, among others, with respect to the nature and extent of
the security, the rights, duties and obligations of the Authority, the Trustee and the owners of
the Bonds, and the terms upon which the Bonds are issued and secured, and the holders of the Bonds
are deemed to assent to the provisions of the Indenture by the acceptance of this bond.
Event of Default
. In case any Event of Default occurs and is continuing, the
principal amount of this bond together with accrued interest may be declared due and payable in the
manner and with the effect provided in the Indenture.
General Optional Redemption
. The Bonds are subject to redemption prior to maturity
from time to time pursuant to the Indenture at the option of the Authority, which option shall be
exercised at the
- 4 -
Exhibit 4.26
direction of the Borrower, as a whole or in part on any date on or after October 1, 2009, at a
Redemption Price equal to 100% of the principal amount thereof plus accrued interest to the
redemption date.
Extraordinary Optional Redemption
. In addition, at the option of the Authority, which
option shall be exercised upon the giving of notice by the Borrower of its election to redeem Bonds
following completion of the Project in accordance with the Indenture or its intention to prepay
amounts due under the Agreement, the Bonds are subject to redemption prior to maturity as a whole
on any date at a Redemption Price equal to 100% of the principal amount thereof plus accrued
interest to the date of redemption, (a) to the extent that excess Bond proceeds are transferred to
the Redemption Account from the Project Fund in accordance with Section 5.2(F) of the Indenture, or
(b) if any one or more of the events of casualty to or condemnation of the Project or change in law
or certain economic events affecting the Project specified in subsection 8.1(B) of the Agreement
shall have occurred, as evidenced in each case by the filing of a certificate of an Authorized
Representative of the Borrower.
Mandatory Taxability Redemption
. In the event of a Determination of Taxability, the
Bonds shall be redeemed on any day selected by the Borrower that is not more than 180 days after
the occurrence of such Determination of Taxability as provided in the Indenture, at the Redemption
Price equal to 100% of the principal amount thereof plus accrued interest to the date of
redemption. Redemption under this paragraph shall be in whole unless not less than forty-five (45)
days prior to the redemption date the Borrower delivers to the Trustee an opinion of Bond Counsel
reasonably satisfactory to the Trustee to the effect that a redemption of less than all of the
Bonds will preserve the tax-exempt status of interest on the remaining Bonds outstanding subsequent
to such redemption.
Deceased Bondholder Redemption
. For purposes of this paragraph only, the owner of a
Bond shall mean the Beneficial Owner of said Bond so long as the Book-Entry Only System shall be in
effect. Notwithstanding the foregoing redemption provisions, the estate of, successor in interest
to and, in the case of jointly held Bonds (whether by joint tenancy, tenancy in common or tenancy
by the entirety) any surviving joint owner may, within two years of the date of death of a deceased
owner, request the redemption of Bonds of which such deceased owner on the date of his or her death
was an owner or joint owner (Deceased Owner Bonds), and the Authority will redeem such Bonds
within 60 days of receipt by the Trustee of such request at a Redemption Price of 100% of the
principal amount thereof plus accrued interest to the date of redemption in the manner and as
provided in Article VI of the Indenture, subject to the following limitations: (i) the Authority
shall not be obligated to redeem any Deceased Owner Bonds prior to October 1, 2007: (ii) the
maximum aggregate principal amount of Deceased Owner Bonds that the Authority shall be required to
redeem during the 12-month period commencing October 1, 2007 and each October 1 thereafter through
maturity of the Bonds is $450,000; (iii) during any such 12-month period, the Authority shall not
be required to redeem in excess of $25,000 aggregate principal amount of Deceased Owner Bonds with
respect to any one deceased owner, and (iv) such Deceased Owner Bonds had been held by such owner
for at least six months prior to his or her death. A request for redemption of Deceased Owner
Bonds shall be made by the executor of the estate of or successor in interest to the deceased owner
and, in the case of jointly owned Bonds, by any joint owner surviving the deceased owner, in
writing, in form satisfactory to the Trustee, signed by the person requesting redemption or such
persons legal representative, with such signature guarantees, evidences of due authorization to
make such request for redemption, evidence of death of the deceased owner and ownership of such
Bond(s) at the time of death, evidence of tax waivers and such other evidence as the Trustee may
require under the Indenture. A request for redemption shall specify the Bonds to be redeemed.
Subject to the limitations herein provided, requests for redemption shall be accepted and honored
by the Trustee in the order of receipt of such requests by the Trustee. Upon the receipt by the
requesting party of notice from the Trustee in accordance with Article VI of the Indenture that the
Bonds with respect to which a request for redemption has been made are eligible for redemption and
shall be redeemed, such Bonds shall be tendered to the Trustee no later than the date set for
redemption. Any
- 5 -
Exhibit 4.26
request for redemption may be withdrawn at any time prior to the Trustees sending notice of
redemption pursuant to the Indenture; after notice of redemption is sent, a request for redemption
is irrevocable.
Extraordinary Mandatory Redemption
. In the event that the Borrower shall fail to
comply with the restrictions relating to the restructuring, merger, consolidation and
reorganization of the Borrower set forth in Section 6.1(A) of the Agreement or the sale of assets
by the Borrower set forth in Section 6.1(B) of the Agreement, the Bonds shall be subject to
redemption prior to maturity as a whole on any date at the redemption price equal to 100% of the
principal amount thereof plus accrued interest to the date of redemption.
Optional Public Purpose Redemption
. If the Borrower fails to perform its obligations
under Section 6.6 of the Agreement, the Bonds shall be subject to redemption prior to maturity as a
whole on any date at the option of the Authority in accordance with Section 7.3 of the Agreement,
at the redemption price equal to 100% of the principal amount thereof plus accrued interest to the
date of redemption.
Extraordinary Optional Redemption Without Premium to Preserve Tax Exempt Status of the
Bonds
. The Bonds shall be subject to extraordinary optional redemption by the Authority, at
the direction of the Borrower, in whole or in part on any date at a Redemption Price equal to 100%
of the unpaid principal amount thereof, together with accrued interest to the date of redemption,
and without premium, if the Borrower shall have delivered to the Trustee and the Authority an
opinion of Bond Counsel addressed to the Trustee and the Authority substantially to the effect that
(i) a failure so to redeem the Bonds (or the relevant portion thereof) may adversely affect the
exclusion of interest on the Bonds from the gross income of the holders pursuant to Section 103 of
the Code, and (ii) redemption of Bonds in the amount set forth in such opinion (but in no smaller
amount than that set forth in such opinion) would permit the continuance of any exclusion so
afforded under Section 103 of the Code.
Selection of Bonds to be Redeemed
. If less than all of the Outstanding Bonds are to
be called for redemption, the Bonds (or portions thereof) to be redeemed shall be selected as
provided in the Indenture.
Notice of Redemption
. In the event this bond is selected for redemption, notice
(which notice may state that it is subject to the receipt of the redemption moneys by the Trustee
on or before the date fixed for redemption and which notice shall be of no effect unless such
moneys are so received on or before such date) will be mailed no more than forty-five (45) days nor
less than thirty (30) days prior to the redemption date to the REGISTERED OWNER at its address
shown on the registration books maintained by the Paying Agent. Failure to mail notice to the
owner of any other Bond or any defect in the notice to such an owner shall not affect the
redemption of this bond.
If this bond is of a denomination in excess of five thousand dollars ($5,000), portions of the
principal amount in the amount of five thousand dollars ($5,000) or any multiple thereof may be
redeemed. If less than all of the principal amount is to be redeemed, upon surrender of this bond
to the Paying Agent, there will be issued to the REGISTERED OWNER, without charge, a new Bond or
Bonds, at the option of the REGISTERED OWNER, for the unredeemed principal amount.
Notice of redemption having been duly mailed, and moneys for the redemption having been
deposited with the Paying Agent, this bond, or the portion called for redemption, will become due
and payable on the redemption date at the applicable redemption price from and after the date fixed
for redemption, interest on this bond (or such portion) will no longer accrue.
Transfer of Bonds
. This bond is transferable by the REGISTERED OWNER, in person or by
its attorney duly authorized in writing, at the office of the Paying Agent, upon surrender of this
bond to the Paying Agent for cancellation. Upon the transfer, a new Bond or Bonds in authorized
denominations of
- 6 -
Exhibit 4.26
the same aggregate principal amount will be issued to the transferee at the same office. This
bond may also be exchanged at the office of the Paying Agent for a new Bond or Bonds in authorized
denominations of the same aggregate principal amount without transfer to a new registered owner.
Exchanges and transfers will be without expense to the owner except for applicable taxes, fees or
other governmental charges, if any, and a sum sufficient to pay the cost of preparing and
delivering each new Bond issued upon such transfer. The Paying Agent will not be required to make
an exchange or transfer of this bond (a) during the fifteen (15) days preceding any date fixed for
selection for redemption if this bond (or any portion thereof) is eligible to be selected for
redemption or (b) if this bond is selected, called or being called for redemption in whole or in
part, except in the case of a bond to be redeemed in part, the portion not to be redeemed.
Amendment of Indenture
. The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and obligations of the Authority
and the rights of the owners of the Bonds at any time by the Authority with the consent of the Bond
Insurer, unless the Bond Insurer is in default under the Bond Insurance Policy, in which case such
amendment shall require the consent of the owners of not less than 51% in aggregate principal
amount of the Bonds at the time outstanding thereunder. Any such consent shall be conclusive and
binding upon each such owner and upon all future owners of each Bond and of any such Bond issued
upon the transfer thereof, whether or not notation of such consent is made thereon. The Indenture
also permits the amendment thereof by the Authority but without the consent of the owners of the
Bonds or the Bond Insurer for certain specified purposes.
Limitation on Bondholder Enforcement Rights
. The owner of this bond shall have no
right to enforce the provisions of the Indenture, to institute action to enforce the provisions and
covenants thereof or to institute, appear in or defend any suit or other proceedings with respect
thereto, except as provided in the Indenture. Anything in the Indenture to the contrary
notwithstanding, upon the occurrence and continuance of an Event of Default under the Indenture, so
long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default thereunder,
the Bond Insurer shall be entitled to control and direct the enforcement of all rights and remedies
granted to the holders of the Bonds or the Trustee for the benefit of the holders of the Bonds
under the Indenture.
Special Obligations of the Authority
. This bond and the issue of which it forms a
part are special obligations of the Authority, payable solely out of the revenues or other
receipts, funds or moneys of the Authority pledged under the Indenture and from any amounts
otherwise available under the Indenture for the payment of the Bonds. Neither the State nor any
municipality thereof shall be obligated to pay the principal or redemption price, if any, of or
interest on this bond and neither the faith and credit nor taxing power of the State or any
municipality thereof is pledged to such payment. The Bonds do not now and shall never constitute a
debt or liability of the State or any municipality thereof or bonds issued or guaranteed by either
of them within the meaning of any constitutional or statutory limitation.
Estoppel Clause
. This bond is issued pursuant to and in full compliance with the
Constitution and laws of the State. It is hereby certified, recited and declared that all acts,
conditions and things required to exist, happen and be performed precedent to and in the issuance
of this bond do exist, have happened and have been performed in due time, form and manner as
required by law and that the issuance of this bond and of the issue of which it forms a part,
together with all other obligations of the Authority, do not exceed or violate any constitutional
or statutory limitation.
NEITHER THE AUTHORITY, THE TRUSTEE NOR ANY PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR
OBLIGATION TO PARTICIPANTS, TO INDIRECT PARTICIPANTS OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (I)
THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY, ANY
PARTICIPANT, OR ANY INDIRECT PARTICIPANT; (II) THE PAYMENT BY DTC OR ANY SUCCESSOR
- 7 -
Exhibit 4.26
SECURITIES DEPOSITORY OR ANY PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO
THE PRINCIPAL OF, OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS; (III) THE SELECTION BY DTC OR ANY
SUCCESSOR SECURITIES DEPOSITORY OR ANY DIRECT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE
PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS; (IV) ANY CONSENT GIVEN OR OTHER ACTION
TAKEN BY DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY AS BONDHOLDER; OR (V) THE DELIVERY TO ANY
PARTICIPANT, OR INDIRECT PARTICIPANT, BENEFICIAL OWNER OR OTHER PERSON OTHER THAN DTC OR ANY
SUCCESSOR SECURITIES DEPOSITORY OF ANY NOTICE WITH RESPECT TO THE BONDS, INCLUDING BUT NOT LIMITED
TO, ANY NOTICE OF REDEMPTION.
No Personal Liability
. Neither the officers, directors or employees of the Authority
or the Trustee nor any person executing this bond shall be liable personally or be subject to any
personal liability or accountability by reason of the issuance hereof.
Authentication
. This bond shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the certificate of authentication
hereon shall have been signed by the Trustee or the Paying Agent.
Authorized Denomination
. The Bonds are issuable only in fully registered form in
denominations of $5,000 or any multiple thereof.
Persons Deemed Owners
. The Authority, the Trustee, the Paying Agent and the Borrower
may treat the REGISTERED OWNER as the absolute owner of this bond for all purposes, notwithstanding
any notice to the contrary.
- 8 -
Exhibit 4.26
IN WITNESS WHEREOF, the CONNECTICUT DEVELOPMENT AUTHORITY has caused this Bond to be executed
in its name by the manual or facsimile signature of its Authorized Representative.
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CONNECTICUT DEVELOPMENT AUTHORITY
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By :
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/s/ Karin A. Lawrence
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Karin A. Lawrence
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Authorized Representative
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- 9 -
Exhibit 4.26
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This bond is one of the Bonds of the issue described in the within mentioned Indenture.
Date of Registration:
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U.S. BANK NATIONAL ASSOCIATION, Trustee
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By:
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/s/ Cauna Silva
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Cauna M. Silva
Vice President
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U.S. BANK NATIONAL ASSOCIATION,
Paying Agent
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By:
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/s/ Cauna M. Silva
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Cauna M. Silva
Vice President
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- 10 -
Exhibit 4.26
STATEMENT OF INSURANCE
Financial Guaranty Insurance Company (Financial Guaranty) has issued a policy containing the
following provision with respect to the Bonds, such policy being on file at the principal office of
U.S. Bank National Association, as paying agent (the Paying Agent);
Financial Guaranty hereby unconditionally and irrevocably agrees to pay for disbursement to
the bondholders that portion of the principal or accreted value (if applicable) of and interest on
the Bonds which is then due for payment and which the issuer of the Bonds (the Issuer) shall have
failed to provide. Due for payment means, with respect to principal or accreted value (if
applicable), the stated maturity date thereof, or the date on which the same shall have been duly
called for mandatory sinking fund redemption and the date on which the Bonds shall have been duly
called for mandatory redemption as a result of the interest on the Bonds having been determined to
have become subject to federal income taxation, and does not refer to any earlier date on which the
payment of principal or accreted value (if applicable) of the Bonds is due by reason of call for
redemption (other than mandatory sinking fund redemption or mandatory taxability redemption),
acceleration or other advancement of maturity, and with respect to interest, the stated date for
payment of such interest.
Upon receipt of telephonic or telegraphic notice, subsequently confirmed in writing, or
written notice by registered or certified mail, from a Bondholder or the Paying Agent to Financial
Guaranty that the required payment of principal, accreted value or interest (as applicable) has not
been made by the Issuer to the Paying Agent, Financial Guaranty on the due date of such payment or
within one business day after receipt of notice of such nonpayment, whichever is later, will make a
deposit of funds, in an account with U.S. Bank Trust National Association, or its successor as its
agent (the Fiscal Agent), sufficient to make the portion of such payment not paid by the Issuer.
Upon presentation to the Fiscal Agent of evidence satisfactory to it of the Bondholders right to
receive such payment and any appropriate instruments of assignment required to vest all of such
Bondholders right to such payment in Financial Guaranty, the Fiscal Agent will disburse such
amount to the Bondholder.
As used herein the term Bondholder means the person other than the Issuer or the borrower(s)
of bond proceeds who at the time of nonpayment of a Bond is entitled under the terms of such Bond
to payment thereof.
The policy is non-cancellable for any reason.
FINANCIAL GUARANTY INSURANCE COMPANY
- 11 -
Exhibit 4.26
[FORM OF ASSIGNMENT]
ASSIGNMENT
For value received the undersigned sells, assigns and transfers this bond to
(Name and Address of Assignee)
Social Security or Other Identifying Number of Assignee
and irrevocably appoints
attorney-in-fact to transfer it on the
books kept for registration of the bond, with full power of substitution.
NOTE: The signature to this assignment must correspond with the name as written on the face of the
bond without alteration or enlargement or other change and must be guaranteed by a Participant in a
Recognized Signature Guaranty Medallion Program.
Dated:
Signature Guaranteed:
Participant in a Recognized
Signature Guaranty Medallion Program
By:
Authorized Signature
[END OF FORM OF BOND]
- 12 -
Exhibit 4.26
WHEREAS
, all things necessary to make the Bonds, when authenticated by the Trustee and issued
as in this Indenture provided, the valid, binding and legal obligations of the Authority according
to the import thereof, and to constitute this Indenture a valid pledge of revenues to the payment
of the principal or Redemption Price, if any, of and interest on the Bonds and all other amounts
due in connection therewith and a valid assignment of the rights of the Authority (except as stated
below) under the Agreement and the Note have been done and performed, and the creation, execution
and delivery of this Indenture and the creation, execution and issuance of the Bonds subject to the
terms hereof, have in all respects been duly authorized;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS:
GRANTING CLAUSES
That the Authority in consideration of the premises and the acceptance by the Trustee of the
trusts hereby created and of the purchase and acceptance of the Bonds by the holders and owners
thereof, and of the sum of One Dollar, lawful money of the United States of America, to it duly
paid by the Trustee at or before the execution and delivery of these presents, and for other good
and valuable consideration, the receipt of which is hereby acknowledged, and in order to secure the
payment of the principal of, Redemption Price, if any, and interest on the Bonds according to their
tenor and effect and all other amounts due in connection therewith and the performance and
observance by the Authority of all the covenants expressed or implied herein and in the Bonds, does
hereby grant, bargain, sell, convey, pledge and assign unto, and grant a security interest in and
to the Trustee, and unto its respective successors in trust, and to their respective assigns,
forever, for the securing of the performance of the obligations of the Authority hereinafter set
forth, the following:
I.
The Agreement and the Note (except to the extent to which any such document provides for the
indemnification or the payment of expenses of the Authority, rights of the Authority to inspect the
Projects, receive notices and grant approvals), including all extensions and renewals of the term
thereof, if any, together with all right, title and interest of the Authority therein, including,
but without limiting the generality of the foregoing, the present and continuing right to claim,
collect and receive any of the moneys, income, revenues, issues, profits and other amounts payable
or receivable thereunder, to bring actions and proceedings thereunder or for the enforcement
thereof, and to do any and all things which the Authority is or may become entitled to do under the
Agreement and the Note, but reserving, however, to the Authority rights of the Authority under
Sections 6.4, 6.6, 7.2(A)(2) and 7.3 of the Agreement upon the conditions therein set forth;
II.
All Funds and Accounts (except the Rebate Fund) and moneys therein; and
III.
All moneys and securities from time to time held by the Trustee or the Paying Agent under the
terms of this Indenture (except moneys and securities in the Rebate Fund) and any and all other
real or personal property of every name and nature concurrently herewith or from time to time
hereafter by delivery or by writing of any nature conveyed, mortgaged, pledged, assigned or
transferred as and for additional security hereunder by the Authority or by anyone in its behalf,
or with its written consent, to
- 13 -
Exhibit 4.26
the Trustee or the Paying Agent, which are hereby authorized to receive any and all such
property at any and all times and to hold and apply the same subject to the terms hereof;
TO HAVE AND TO HOLD
all and singular the trust estate, whether now owned or hereafter
acquired, unto the Trustee and its respective successors and assigns in trust forever to its and
their own proper use and behoof but:
IN TRUST NEVERTHELESS
, upon the terms and trusts herein set forth for the equal and
proportionate benefit, security and protection of all present and future holders and owners of the
Bonds from time to time issued and to be issued under and secured by this Indenture without
privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the
other Bonds;
PROVIDED, HOWEVER
, that if the Authority, its successors or assigns, shall well and truly pay,
or cause to be paid, the principal of, Redemption Price, if any, and interest on, the Bonds due or
to become due thereon, and all other amounts due thereunder, at the times and in the manner
mentioned in the Bonds according to their tenor, and shall cause the payments to be made on the
Bonds as required under Article VII hereof, or shall provide, as permitted hereby, for the payment
thereof by depositing with the Trustee the entire amount due or to become due thereon, and shall
well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of
this Indenture to be kept, performed and observed by it, and shall pay or cause to be paid to the
Trustee all sums of money due or to become due to it in accordance with the terms and provisions of
the Agreement, the Note and this Indenture, then upon the final payment thereof this Indenture and
the rights hereby granted shall cease, determine and be void; otherwise this Indenture to be and
remain in full force and effect.
THIS INDENTURE OF TRUST FURTHER WITNESSETH
, and it is expressly declared, that all Bonds
issued and secured hereunder are to be issued, authenticated and delivered and all of the property,
rights and interests, including, without limitation the loan payments and other amounts hereby
assigned and pledged are to be dealt with and disposed of under, upon and subject to the terms,
conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter
expressed, and the Authority has agreed and covenanted, and does hereby agree and covenant with the
Trustee and with the respective holders and owners of the Bonds as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1.
Definitions
.
As used in this Indenture:
Account or Accounts shall mean the Account or Accounts established pursuant to Article V
herein below.
Act means the State Commerce Act, constituting Connecticut General Statutes, Sections 32-la
through 32-23zz, as amended.
Agreement means the Loan Agreement of even date herewith between the Authority and the
Borrower, and any amendments and supplements thereto.
Authority means the Connecticut Development Authority, a body corporate and politic
constituting a public instrumentality and political subdivision of the State of Connecticut duly
organized and existing under the laws of the State, and any body, board, authority, agency or other
political subdivision or instrumentality of the State which shall hereafter succeed to the powers,
duties and functions thereof.
- 14 -
Exhibit 4.26
Authorized Investments means any of the following:
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A.
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Direct obligations of the United States of America (including obligations
issued or held in book-entry form on the books of the Department of the Treasury, and
Certificates of Accrual on Treasury Securities (CATS) and Treasury Investment Growth
Receipts (TIGRS) or obligations the principal of and interest on which are
unconditionally guaranteed by the United States of America.
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B.
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Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed
by any of the following federal agencies and provided such obligations are backed by
the full faith and credit of the United States of America (stripped securities are only
permitted if they have been stripped by the agency itself):
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1.
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U.S. Export-Import Bank
(Eximbank)
Direct obligations or fully guaranteed certificates of beneficial ownership
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2.
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Farmers Home Administration
(FmHA)
Certificates of Beneficial Ownership
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3.
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Federal Financing Bank
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4.
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Federal Housing Administration Debentures
(FHA)
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5.
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General Services Administration
Participation Certificates
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6.
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Government National Mortgage Association
(GNMA or
Ginnie Mae)
GNMA guaranteed mortgage-backed bonds
GNMA guaranteed pass-through obligations
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7.
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U.S. Maritime Administration
Guaranteed Title XI financing
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8.
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U.S. Department of Housing and Urban Development
(HUD)
Project Notes
Local Authority Bonds
New Communities Debentures U.S. government guaranteed debentures
U.S. Public Housing Notes and Bonds U.S. government guaranteed
public housing notes and bonds
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C.
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Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed
by any of the following federal agencies which are
not
backed by the full faith
and credit of the United States of America (stripped securities are only permitted if
they have been stripped by the agency itself):
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1.
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Federal Home Loan Bank System
Senior debt obligations
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2.
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Federal Home Loan Mortgage Corporation
(FHLMC or
Freddie Mac)
Participation Certificate
Senior debt obligations
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- 15 -
Exhibit 4.26
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3.
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Federal National Mortgage Association
(FNMA or Fannie
Mae)
Mortgage-backed securities and senior debt obligations
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4.
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Student Loan Marketing Association
(SLMA or Sallie Mae)
Senior debt obligations
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5.
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Resolution Funding Corp.
(REFCORP) obligations
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6.
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Farm Credit System
Consolidated systemwide bonds and notes
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D.
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Money market funds registered under the Federal Investment Company Act of 1940,
whose shares are registered under the Federal Securities Act of 1933, and having a
rating by S&P of AAAm-G; AAA-m; or AA-m and if rated by Moodys rated Aaa, Aa1 or Aa2.
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E.
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Certificates of deposit secured at all times by collateral described in (A)
and/or (B) above. Such certificates must be issued by commercial banks, savings and
loan associations or mutual savings banks. The collateral must be held by a third
party and the bondholders must have a perfected first security interest in the
collateral.
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F.
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Certificates of deposit, savings accounts, deposit accounts or money market
deposits which are fully insured by the Federal Deposit Insurance Corporation (FDIC),
including the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund
(SAIF).
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G.
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Investment Agreements, including Guaranteed Investment Contracts, Forward
Purchase Agreements and Reserve Fund Put Agreements acceptable to the Bond Insurer.
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H.
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Commercial paper rated, at the time of purchase, Prime 1 by Moodys and
A-1 or better by S&P.
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I.
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Bonds or notes issued by any state or municipality which are rated by Moodys
and S&P in one of the two highest rating categories assigned by such rating agencies.
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J.
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Federal funds or bankers acceptances with a maximum term of one year of any
bank which has an unsecured, uninsured and unguaranteed obligation rating of Prime
1 or A3 or better by Moodys and A-1 or A or better by S&P.
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K.
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Repurchase Agreements (Repos) for 30 days or less must follow the following
criteria. Repos which exceed 30 days must be acceptable to the Bond Insurer.
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Repos provide for the transfer of securities from a dealer bank or securities firm
(seller/borrower) to a municipal entity (or borrower in a conduit financing
undertaken by such municipal entity) (buyer/lender), and the transfer of cash from a
municipal entity (or borrower in a conduit financing undertaken by such municipal
entity) to the dealer bank or securities firm with an agreement that the dealer bank
or securities firm will repay the cash plus a yield to the municipal entity (or
borrower in a conduit financing undertaken by such municipal entity) in exchange for
the securities at a specified date.
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1.
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Repos must be between the municipal entity (or borrower in a
conduit financing undertaken by such municipal entity) and a dealer bank or
securities firm.
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- 16 -
Exhibit 4.26
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a.
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Primary dealers on the Federal Reserve
reporting dealer list which are rated A or better by S&P and A2 or
better by Moodys, or
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b.
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Banks rated A or better by S&P and A2 or
better by Moodys.
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2.
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The written repurchase agreement for a Repo must include the
following:
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a.
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Securities which are acceptable for transfer
are:
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(1)
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Direct obligations of the United
States of America referred to in Section A above, or
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(2)
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Obligations of federal agencies
referred to in Section B above, or
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(3)
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Obligations of FNMA and FHLMC
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b.
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The term of the Repos may be up to 30 days.
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c.
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The collateral for the Repos must be delivered
to the municipal entity (or borrower in a conduit financing undertaken
by such municipal entity), trustee (if trustee is not supplying the
collateral) or third party acting as agent for the trustee is (if the
trustee is supplying the collateral) before/simultaneous with payment
(perfection by possession of certificated securities).
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d.
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Valuation of Collateral.
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(1)
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the securities must be valued
weekly, marked-to-market at current market price
plus
accrued interest.
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(2)
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The value of collateral for the
Repos must be equal to 104% of the amount of cash transferred by
the municipal entity (or borrower in a conduit financing
undertaken by such municipal entity) to the dealer bank or
security firm under the repo plus accrued interest. If the
value of securities held as collateral slips below 104% of the
value of the cash transferred by the municipal entity, then
additional cash and/or acceptable securities must be
transferred. If, however, the securities used as collateral are
FNMA or FHLMC, then the value of collateral must equal 105%.
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(3)
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A legal opinion which must be
delivered to the municipal entity (or borrower in a conduit
financing undertaken by such municipal entity) that states that
the Repo meets guidelines under state law for legal investment
of public funds.
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Authorized Representative means, in the case of the Authority, the Chairman or Vice
Chairman, the President, the Executive Vice President, Deputy Director or any Senior Vice President
or any Vice President thereof and, in the case of the Borrower, the Chairman, the President and
Chief Executive Officer, the Vice President-Chief Financial Officer and Treasurer, and any Vice
President, Assistant Treasurer or Secretary thereof and, when used with reference to the
performance of any act, the discharge of any duty or the execution of any certificate or other
document, any officer, employee or
- 17 -
Exhibit 4.26
other person authorized to perform such act, discharge such duty or execute such certificate
or other document.
Beneficial Owner shall have the meaning specified in Section 2.3(F) hereof. If any person
claims to the Trustee to be a Beneficial Owner, for purposes of Sections 2.4(C), such person shall
prove such claim to the satisfaction of the Trustee with such documentation and signature
guaranties as the Trustee may request and shall be responsible for and pay any costs associated
with such claim.
Bonds means the $10,000,000 Water Facilities Revenue Bonds (The Connecticut Water Company
Project 2005A Series) authorized and issued pursuant to Section 2.3 hereof.
Bond Counsel means Winston & Strawn LLP or such other nationally recognized bond counsel
selected by the Authority and reasonably satisfactory to the Borrower and Trustee.
Bondholder, holder or owner or words of similar import when used with reference to
Bonds, shall unless otherwise specified, mean any person who shall be the registered owner of any
Outstanding Bond.
Bond Insurance Policy means the municipal bond new issue insurance policy issued by the Bond
Insurer that guarantees payment of principal of and interest on the Bonds.
Bond Insurer means Financial Guaranty Insurance Company, a New York stock insurance company,
or any successor thereto.
Borrower means (i) The Connecticut Water Company, a corporation organized and existing under
the laws of the State of Connecticut, and its successors and assigns and (ii) any surviving,
resulting or transferee corporation as provided in Section 6.1 of the Agreement.
Business Day means any day (i) that is not a Saturday or Sunday, (ii) that is a day on which
banks located in Hartford, Connecticut and New York, New York are not required or authorized to
remain closed, (iii) that is a day on which banking institutions in the cities in which the
principal offices of the Trustee and the Paying Agent are located and are not required or
authorized to remain closed and (iv) that is a day on which the New York Stock Exchange, Inc. is
not closed.
Cede & Co. means the nominee for The Depository Trust Company (DTC) who shall act as
securities depository for the Bonds.
Code means the Internal Revenue Code of 1986, as amended and regulations promulgated
thereunder.
Completion Date means the date of completion of the Project as specified and established in
accordance with Article IV of the Agreement.
Computation Period means each period from the date of issuance through the date on which a
determination of the Rebatable Arbitrage is made or required to be made pursuant to Section 8.3 of
the Tax Regulatory Agreement.
Debt Service Fund means the special trust fund so designated, established pursuant to
Section 5.1 hereof.
Default means any event or condition which will, with the lapse of time, or the giving of
notice, or both, become an Event of Default.
- 18 -
Exhibit 4.26
DTC or The Depository Trust Company shall mean the limited-purpose trust company organized
under the laws of the State of New York which shall act as securities depository for the Bonds, and
any successor thereto.
Depository means DTC or any other depository holding the Bonds for purpose of a book-entry
system.
Determination of Taxability means with respect to the Bonds, (1) a ruling by the Internal
Revenue Service, (2) the receipt by the owner of any of the Bonds from the Internal Revenue Service
of a notice of assessment and demand for payment (provided the Borrower has been afforded the
opportunity to participate at its own expense in all appeals and proceedings to which such owner of
any Bonds is a party relating to such assessment and demand for payment) and the expiration of the
appeal period provided therein if no appeal is taken or, if an appeal is taken by such owner of any
Bonds as provided in Section 6.5 of the Agreement within the applicable appeal period which has the
effect of staying the demand for payment, a final unappealable decision by a court of competent
jurisdiction, or (3) the admission in writing by the Borrower, in any case to the effect that the
interest on the Bonds is includable in the gross income for federal income tax purposes (other than
for purposes of alternative minimum tax or foreign branch profits tax) of an owner or former owner
thereof, other than for a period during which such owner or former owner is or was a substantial
user of the Project financed by such Bonds or a related person as such terms are defined in the
Code. For purposes of this definition only, the term owner means the Beneficial Owner of the Bonds
so long as the Book-Entry Only System is in effect.
Disclosure Agreement means the agreement by and between the Borrower and U.S. Bank National
Association, as dissemination agent, dated the date of the initial delivery of the Bonds and
providing for the provision of certain information subsequent to the issuance of the Bonds.
Event of Bankruptcy means the filing of a petition in bankruptcy or the commencement of a
proceeding under the United States Bankruptcy Code or any other applicable law concerning
insolvency, reorganization or bankruptcy by or against the Authority, the Borrower, or any
guarantor of the Bonds, as debtor.
Event of Default has the meaning given such term in Section 8.1 hereof.
Federal Securities means any direct and general obligations of, or any obligations whose
full and timely payment is unconditionally guaranteed by, the United States of America.
Financing Documents means (1), when used with respect to the Borrower, means the Agreement,
the Tax Regulatory Agreement, the Note, the Disclosure Agreement and the general certificate of the
Borrower delivered in connection with the issuance of the Bonds, and (2) when used with respect to
the Authority, means any of the foregoing documents and agreements to which the Authority is a
direct party. The Financing Documents do not include any documents or agreements to which the
Borrower is not a direct party, including the Bonds or the Indenture.
Fitch means Fitch Inc., a corporation organized and existing under the laws of the State of
Delaware, its successors and their assigns, and if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating agency, Fitch shall be
deemed to refer to any other nationally recognized securities rating agency designated by the
Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the
prior written consent or approval of the Bond Insurer.
Fund or Funds shall mean the Fund or Funds established pursuant to Article V herein below.
- 19 -
Exhibit 4.26
Indenture means this Indenture as from time to time amended or supplemented by Supplemental
Indentures in accordance with Article X hereof.
Indirect Participant shall have the meaning set forth in Section 2.3(F) hereof.
Interest Payment Date shall mean each date on which interest is payable on the Bonds as
provided in the form of the Bonds.
Loan Payments means the amounts required to be paid by the Borrower in repayment of the loan
made to the Borrower by the Authority pursuant to the provisions of the Agreement and the Note,
including all amounts realized by the Trustee thereunder in accordance with Article VIII hereof.
Moodys means Moodys Investors Service, Inc., a corporation organized and existing under
the laws of the State of Delaware, its successors and their assigns, and if such corporation shall
be dissolved or liquidated or shall no longer perform the functions of a securities rating agency,
Moodys shall be deemed to refer to any other nationally recognized securities rating agency
designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the
Borrower and with the prior written consent or approval of the Bond Insurer.
Note means the promissory note of the Borrower to the Authority, dated the date of initial
delivery of the Bonds in the form attached as Appendix A to the Agreement, and any amendments or
supplements made in conformity with the Agreement and this Indenture.
Outstanding, when used with reference to a Bond or Bonds, as of any particular date, means
all Bonds which have been authenticated and delivered hereunder, except:
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(1)
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Any Bonds cancelled by the Trustee because of payment or redemption prior to
maturity or surrendered to the Trustee for cancellation;
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(2)
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any Bond (or portion of a Bond) paid or redeemed or for the payment or
redemption of which there has been separately set aside and held in the Debt Service
Fund either:
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(a)
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moneys in an amount sufficient to effect payment of the
principal or applicable Redemption Price thereof, together with accrued
interest on such Bond to the payment or redemption date, which payment or
redemption date shall be, specified in irrevocable instructions given to the
Trustee to apply such moneys to such payment on the date so specified; or
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(b)
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obligations of the kind described in subsection 12.1(B) hereof
in such principal amounts, of such maturities, bearing such interest and
otherwise having such terms and qualifications as shall be necessary to provide
moneys in an amount sufficient to effect payment of the principal or applicable
Redemption Price of such Bond, together with accrued interest on such Bond to
the payment or redemption date, which payment or redemption date shall be
specified in irrevocable instructions given to the Trustee to apply such
obligations to such payment on the date so specified; or
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(c)
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any combination of (a) and (b) above;
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(3)
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Bonds in exchange for or in lieu of which other Bonds shall have been
authenticated and delivered under Article III hereof; and
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- 20 -
Exhibit 4.26
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(4)
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any Bond deemed to have been paid as provided in Section 12.1 hereof.
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Participant means one of the entities that deposits securities, directly or indirectly, in
the Book-Entry Only System.
Paying Agent means any paying agent for the Bonds appointed pursuant to Section 9.10 hereof
(and may include the Trustee), and its successor or successors and any other corporation which may
at any time be substituted in its place in accordance herewith.
Principal and Interest Account means the special trust account of the Debt Service Fund so
designated, established pursuant to Section 5.3 hereof.
Project means the Borrowers interest in the Project Realty and other interests in the real
property, and in all Project Equipment wherever located and whether now owned or hereafter
acquired, acquired or financed in whole or in part with the proceeds of the Bonds, and any
additions and accessions thereto, substitutions therefor and replacements, improvements, extensions
and restorations thereof, described in appendices to the Agreement, as amended from time to time in
accordance with the Agreement.
Project Costs mean all costs and expenses of the Project for which the Trustee is permitted
to make payment as provided in subsection 5.2(B) hereof.
Project Equipment means all personal property, goods, leasehold improvements, machinery,
equipment, furnishings, furniture, fixtures, tools and attachments wherever located and whether now
owned or hereafter acquired, financed in whole or in part with the proceeds of the Bonds, and any
additions and accessions thereto, substitutions therefor and replacements thereof, including
without limitation the Project Equipment described in appendices to the Agreement, as amended from
time to time in accordance herewith.
Project Fund means the special trust fund so designated, established pursuant to Section 5.1
and Section 5.2 hereof.
Project Realty means the realty and other interests in the real property financed in whole
or in part from the proceeds of the Bonds, together with all replacements, improvements,
extensions, substitutions, restorations and additions thereto which are made pursuant hereto
including without limitation the Project Realty described in appendices to the Agreement, as
amended from time to time in accordance herewith.
Redemption Account means the special trust account of the Debt Service Fund so designated,
established pursuant to Section 5.3 hereof.
Redemption Price means, when used with respect to a Bond or a portion thereof, the principal
amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption
thereof pursuant to this Indenture.
Renewal Fund means the special trust fund so designated, established pursuant to Section 5.1
hereof.
Representation Letter has the meaning given such term in Section 2.3(F) hereof.
Revenues means (a) the Loan Payments, (b) all amounts paid to the Trustee with respect to
the principal of, redemption premium, if any, or interest on, the Bonds (1) by the Borrower as
required under
- 21 -
Exhibit 4.26
the Agreement, and (2) upon deposit in the Debt Service Fund from the proceeds of the Bonds
and (c) investment income with respect to any moneys held by the Trustee in the Project Fund, the
Debt Service Fund and the Renewal Fund. The term Revenues does not include any moneys or
investments or investment income in the Rebate Fund.
S&P means Standard & Poors Ratings Services, a division of McGraw Hill, Inc., a corporation
organized and existing under the laws of the State of New York, its successors and their assigns,
and, if such corporation or division shall be dissolved, eliminated, reorganized, or liquidated or
shall no longer perform the functions of a securities rating agency, S&P shall be deemed to refer
to any other nationally recognized securities rating agency designated by the Authority, at the
direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written
consent or approval of the Bond Insurer.
State means the State of Connecticut.
Supplemental Indenture means any indenture supplemental hereto or amendatory hereof, adopted
by the Authority in accordance with Article X hereof.
Tax Incidence Date means the date as of which interest on the Bonds becomes or became
includable in the gross income of the recipient thereof (other than the Borrower or another
substantial user or related person) for federal income tax purposes for any cause, as determined by
a Determination of Taxability.
Tax Regulatory Agreement means the Tax Regulatory Agreement, dated as of the date of initial
issuance and delivery of the Bonds, among the Authority, the Borrower and the Trustee, and any
amendments and supplements thereto.
Term, when used with reference to the Agreement, means the term of the Agreement determined
as provided in Article III thereof.
Trustee means U.S. Bank National Association, and its successor or successors hereafter
appointed in the manner provided in this Indenture.
Section 1.2.
Interpretation
.
(A) In this Indenture:
(1) Any capitalized word or term used but not defined herein shall have the
meaning ascribed to such word or term in the Agreement or the Tax Regulatory
Agreement, as the case may be.
(2) The terms hereby, hereof, hereto, herein, hereunder and any
similar terms, as used in this Indenture, refer to this Indenture, and the term
hereafter means after, and the term heretofore means before, the date of
execution of this Indenture.
(3) Words of the masculine gender mean and include correlative words of the
feminine and neuter genders and words importing the singular number mean and include
the plural number and vice versa.
(4) Words importing persons include firms, associations, partnerships
(including limited partnerships), limited liability companies, trusts, corporations
and other legal entities, including public bodies, as well as natural persons.
- 22 -
Exhibit 4.26
(5) Any headings preceding the texts of the several Articles and Sections of
this Indenture, and any table of contents appended to copies hereof, shall be solely
for convenience of reference and shall not constitute a part of this Indenture, nor
shall they affect its meaning, construction or effect.
(6) All approvals, consents and acceptances required to be given or made by any
person or party hereunder shall be at the sole discretion of the party whose
approval, consent or acceptance is required.
(7) This Indenture shall be governed by and construed in accordance with the
applicable laws of the State.
(B) Whenever the Authority is named or referred to, it shall be deemed to include its
successors and assigns whether so expressed or not. All of the covenants, stipulations,
obligations, and agreements by or on behalf of, and other provisions for the benefit of, the
Authority contained in this Indenture shall bind and inure to the benefit of such successors and
assigns and shall bind and inure to the benefit of any officer, board, commission, authority,
agency or instrumentality to whom or to which there shall be transferred by or in accordance with
law any right, power or duty of the Authority, or of its successors or assigns, the possession of
which is necessary or appropriate in order to comply with any such covenants, stipulations,
obligations, agreements or other provisions hereof.
(C) If any one or more of the covenants or agreements provided herein on the part of the
Authority, the Trustee or any Paying Agent to be performed should be contrary to law, then such
covenant or covenants or agreement or agreements, shall be deemed separable from the remaining
covenants and agreements hereof, and shall in no way affect the validity of the other provisions of
this Indenture or of the Bonds.
(D) All approvals, consents and actions of the Trustee under this Indenture, the Bonds and the
Financing Documents may be given or withheld or taken or not taken in accordance with the direction
of the owners of not less than 51% of the principal amount of the Outstanding Bonds or of the Bond
Insurer as provided herein.
(E) If the Paying Agent shall be removed and the duties and obligations of such Paying Agent
discharged pursuant to Section 9.10 hereof, then each and every such duty and obligation to be
performed by such Paying Agent set forth herein and in the Financing Documents shall be performed
to the same extent and in the same manner by the Trustee, and each and every reference herein and
in the Financing Documents to the Paying Agent shall refer to and shall be deemed to refer to the
Trustee unless a successor Paying Agent shall have been appointed.
(F) For purposes hereof the Trustee shall not be deemed to have knowledge or actual knowledge
of any fact or the occurrence of any event unless and until an officer of the Trustees corporate
trust administration department has written notice thereof.
(G) In the event of any solicitation of consents from and voting by owners of the Bonds, the
Trustee shall establish a record date for such purposes and give DTC notice of such record date not
less than fifteen calendar days in advance of such record date to the extent possible.
- 23 -
Exhibit 4.26
ARTICLE II
AUTHORIZATION, TERMS AND ISSUANCE OF BONDS
Section 2.1.
Authorization for Indenture
.
This Indenture is made and entered into by
virtue of and pursuant to the provisions of the Act. The Authority has ascertained and hereby
determines and declares that the execution and delivery of this Indenture is necessary to carry out
the powers and duties expressly provided by the Act, that each and every act, matter, thing or
course of conduct as to which provision is made herein is necessary or convenient in order to carry
out and effectuate the purposes of the Authority in accordance with the Act and to carry out powers
expressly given thereby, and that each and every covenant or agreement herein contained and made is
necessary, useful or convenient in order to better secure the Bonds and necessary, useful or
convenient to carry out and effectuate its corporate purposes under the Act.
Section 2.2.
Authorization and Obligation of Bonds
.
(A) Bonds of the Authority issued
hereunder, each to be entitled Water Facilities Revenue Bonds (The Connecticut Water Company
Project 2005A Series), shall be subject to the terms, conditions and limitations established
herein. No Bonds may be authenticated and delivered except in accordance with this Article.
(B) All Bonds shall be entitled to the benefit of the continuing pledge and lien created by
this Indenture to secure the full and final payment of the principal or Redemption Price, if any,
thereof and the interest thereon and all other amounts due under the Financing Documents. The
Bonds shall be special obligations of the Authority, payable solely out of the revenues or other
receipts, funds or moneys pledged therefor pursuant to this Indenture and from any amounts
otherwise available under this Indenture for the payment of the Bonds. Neither the State nor any
municipality thereof shall be obligated to pay the principal or Redemption Price, if any, of or the
interest on the Bonds and neither the faith and credit nor the taxing power of the State or any
municipality thereof is pledged to pay such principal, Redemption Price or interest. The Bonds
shall never constitute a debt or liability of the State or any municipality thereof or bonds issued
or guaranteed by the State or any municipality thereof within the meaning of any constitutional or
statutory limitation.
Section 2.3.
Issuance and Terms of the Bonds
.
(A) There shall be issued under and
secured by this Indenture a series of Bonds to be designated Water Facilities Revenue Bonds (The
Connecticut Water Company Project 2005A Series) in the principal amount of $10,000,000. The
Bonds shall be issuable in fully registered form without coupons and shall be dated as provided in
Section 3.1 hereof.
(B) The Bonds shall mature on October 1, 2040 and bear interest at the per annum rate of 5.00%
payable on April 1, 2006 and on each April 1 and October 1 thereafter until maturity or prior
redemption.
(C) Interest on the Bonds shall be computed on the basis of a 360-day year consisting of
twelve (12) 30-day months.
(D) The Bonds shall be numbered from one upward in consecutive numerical order. Bonds issued
in exchange shall be numbered in such manner as the Trustee and the Paying Agent in their
discretion shall determine.
(E) The principal or Redemption Price, if any, of the Bonds as they respectively become due
shall be payable upon presentation and surrender of the Bonds at the corporate trust office of the
Trustee in Hartford, Connecticut, or at the office designated for such payment of any successor
Paying Agent. Payment of each installment of interest on the Bonds shall be made to the registered
owners thereof who shall appear on the registration books of the Authority maintained by the
Trustee at the close of business on the fifteenth day of the calendar month next preceding such
Interest Payment Date, by check or draft
- 24 -
Exhibit 4.26
mailed to each such registered owner at his address as it appears on such registration books.
Alternatively, payment shall be made as otherwise agreed in writing by the Bondholder and the
Trustee and, at the written request to the Trustee of and at the expense of any holder of at least
$1,000,000 in Bonds, such payment may be made by wire transfer or other reasonable method to an
account or place designated by such registered owner.
(F) Book-Entry Only System for the Bonds
(1) The Depository Trust Company (DTC), New York, New York shall act as securities
depository for the Bonds. One fully registered bond in the aggregate principal amount of the Bonds
shall be registered in the name of Cede & Co., as nominee for DTC. Notwithstanding any provision
herein to the contrary, the provisions of this Section 2.3(F) and the Representation Letter (as
defined below) shall apply with respect to any Bond registered to Cede & Co. or any other nominee
of DTC, New York, New York, while the Book-Entry Only System (meaning the system of registration
described in paragraph (2) of this Section 2.3(F)) is in effect. DTC is a limited-purpose trust
company organized under the New York Banking Law, a banking organization within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within
the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to
the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that
its participants (Participants) deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants (Direct
Participants) include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is owned by a number of its Direct Participants
and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system is also available to others such
as securities brokers and dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly (Indirect
Participants). The Rules applicable to DTC and its Participants are on file with the Securities
and Exchange Commission.
(2) The Bonds in or to be in the Book-Entry Only System shall be issued in the form of a
separate single authenticated fully registered Bond in substantially the form provided for in this
Indenture. Any legend required to be on the Bonds by DTC may be added by the Trustee or Paying
Agent. On the date of original delivery thereof, the Bonds shall be registered in the registry
books of the Paying Agent in the name of Cede & Co., as nominee of The Depository Trust Company as
agent for the Authority in maintaining the Book-Entry Only System.
WITH RESPECT TO BONDS REGISTERED IN THE REGISTRY BOOKS KEPT BY THE PAYING AGENT IN THE NAME OF
CEDE & CO., AS NOMINEE OF DTC, THE AUTHORITY, THE PAYING AGENT, THE BORROWER AND THE TRUSTEE SHALL
HAVE NO RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANT (WHICH MEANS SECURITIES BROKERS AND
DEALERS, BANKS, TRUST COMPANIES, CLEARING CORPORATIONS AND VARIOUS OTHER ENTITIES, SOME OF WHOM OR
THEIR REPRESENTATIVES OWN DTC) OR TO ANY BENEFICIAL OWNER (WHICH MEANS, WHEN USED WITH REFERENCE TO
THE BOOK-ENTRY ONLY SYSTEM, THE PERSON WHO IS CONSIDERED THE BENEFICIAL OWNER OF THE BONDS PURSUANT
TO THE ARRANGEMENTS FOR BOOK ENTRY DETERMINATION OF OWNERSHIP APPLICABLE TO DTC) WITH RESPECT TO
THE FOLLOWING: (A) THE ACCURACY OF THE RECORDS OF DTC, CEDE & CO. OR ANY PARTICIPANT WITH RESPECT
TO ANY OWNERSHIP INTEREST IN THE BONDS, (B) THE DELIVERY TO OR FROM ANY PARTICIPANT, ANY BENEFICIAL
OWNER OR ANY OTHER PERSON, OTHER THAN DTC, OF ANY NOTICE WITH RESPECT TO THE OTHER PERSON, OTHER
THAN DTC, OF ANY NOTICE WITH RESPECT TO THE BONDS, INCLUDING ANY
- 25 -
Exhibit 4.26
NOTICE OF REDEMPTION (WHETHER MANDATORY OR OPTIONAL), OR (C) THE PAYMENT TO ANY PARTICIPANT,
ANY BENEFICIAL OWNER OR ANY OTHER PERSON, OTHER THAN DTC, OF ANY AMOUNT WITH RESPECT TO THE
PRINCIPAL OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS.
The Paying Agent shall pay all principal of and premium, if any, and interest on the Bonds
only to or upon the order of DTC, and all such payments shall be valid and effective fully to
satisfy and discharge the Authoritys obligations with respect to the principal of and premium, if
any, and interest on Bonds to the extent of the sum or sums so paid. No person other than DTC
shall be entitled to receive an authenticated Bond evidencing the obligation of the Authority to
make payments of principal and premium, if any, and interest pursuant to this Indenture. Upon
delivery by DTC to the Paying Agent of written notice to the effect that DTC has determined to
substitute a new nominee in place of Cede & Co., the words Cede & Co. in this Indenture shall
refer to such new nominee of DTC.
The Authority, the Borrower, the Trustee and the Paying Agent shall be entitled to treat the
registered owner of a Bond (initially, DTC or its nominee) as the absolute owner thereof for all
purposes of this Indenture and any applicable laws, notwithstanding any notice to the contrary
received by any of them. So long as all Bonds are registered in the name of DTC or its nominee or
any qualified successor, the Borrower and the Paying Agent shall cooperate with DTC or its nominee
or any qualified successor in effecting payment of the principal of, redemption premium, if any,
and interest on the Bonds by arranging for payment in such manner that funds for such payments are
properly identified and are made to DTC when due.
(3) Upon receipt by the Trustee or the Paying Agent of written notice from DTC to the effect
that DTC is unable or unwilling to discharge its responsibilities, the Authority shall issue and
the Paying Agent shall transfer and exchange Bonds as requested by DTC in appropriate amounts and
in authorized denominations, and whenever DTC requests the Authority, the Paying Agent and the
Trustee to do so, the Trustee, the Paying Agent and the Authority will, at the expense of the
Borrower, cooperate with DTC in taking appropriate action after reasonable notice (A) to arrange
for a substitute bond depository willing and able upon reasonable and customary terms to maintain
custody of the Bonds or (B) to make available for transfer and exchange Bonds registered in
whatever name or names and in whatever authorized denominations as DTC shall designate.
(4) In such event, the Borrower shall so notify DTC, the Paying Agent and the Trustee,
whereupon DTC will notify the Participants of the availability through DTC of Bond certificates.
In such event, the Authority shall issue and the Paying Agent shall transfer and exchange Bond
certificates as requested by DTC in appropriate amounts and in authorized denominations. Whenever
DTC requests the Paying Agent to do so, the Paying Agent will cooperate with DTC in taking
appropriate action after reasonable notice to make available for transfer and exchange Bonds
registered in whatever name or names and in whatever authorized denominations as DTC shall
designate.
(5) The Authority may decide to discontinue use of the system of book-entry transfers through
DTC (or a successor securities depository). In that event, Bond certificates will be printed and
delivered.
(6) Notwithstanding any other provisions of this Indenture to the contrary, so long as any
Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to the
principal of, premium, if any, and interest on such Bond and all notices with respect to such Bond
shall be made and given, respectively, to DTC as provided in the Blanket Letter of Representation,
dated March 29, 1995, from the Authority to DTC (the Representation Letter).
- 26 -
Exhibit 4.26
(7) Notwithstanding any other provisions of this Indenture to the contrary, so long as any of
the Bonds outstanding are held in the Book-Entry Only System, if less than all of such Bonds are to
be redeemed upon any redemption of Bonds hereunder, the particular Bonds or portions of Bonds to be
converted or redeemed shall be selected by DTC in such manner as DTC may determine.
Notwithstanding any provision herein to the contrary, the Trustee and the Paying Agent may
comply with the provisions of the Letter of Representation or similar document required by DTC or
any successor securities depository in order to maintain the Book-Entry Only System for the Bonds.
Section 2.4.
Redemption of Bonds
.
(A)
General Optional Redemption
. At the
option of the Authority, which option shall be exercised upon the giving of written notice by the
Borrower of its intention to prepay amounts due under the Agreement pursuant to subsection 8.1(A)
thereof and the Note, the Bonds shall be subject to redemption prior to maturity from time to time
upon not less than 30 days notice in writing, as a whole or in part on any date on or after
October 1, 2009, at a Redemption Price equal to 100% of the principal amount thereof plus accrued
interest to the date of redemption.
(B)
Extraordinary Optional Redemption
. In addition, at the option of the Authority,
which option shall be exercised upon the giving of written notice by the Borrower of its election
to redeem Bonds following completion of Project pursuant to Section 5.2(F) hereof or its intention
to prepay amounts due under the Agreement pursuant to Section 8.1(B) thereof, the Outstanding Bonds
shall be subject to redemption prior to maturity as a whole on any date at the redemption price of
100% of the principal amount thereof plus accrued interest to the date of redemption, (a) to the
extent excess Bond proceeds are transferred to the Redemption Account from the Project Fund in
accordance with Section 5.2(F) of the Indenture, or (b) if any one or more of the events of
casualty to or condemnation of the Project, change in law, or certain economic events specified in
Section 8.1(B) of the Agreement shall have occurred, as evidenced in each case by the filing with
the Trustee of a certificate of an Authorized Representative of the Borrower.
(C)
Mandatory Taxability Redemption
. In the event of a Determination of Taxability,
the Bonds shall be redeemed in the manner and as provided in this Indenture, at the redemption
price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption
on any day selected by the Borrower, that is not more than 180 days after such Determination of
Taxability. In the case of any redemption pursuant to this subsection, the Authority or the
Borrower or any Bondholder shall deliver to the Trustee a certificate of an Authorized
Representative specifying the event giving rise to such inclusion in the gross income of the
recipient thereof and the dates which are the Tax Incidence Date and the date of the Determination
of Taxability. Such certificate shall be delivered at least ten days before notice of redemption
is required to be given. Redemption under this paragraph shall be in whole unless not less than
forty-five (45) days prior to the redemption date the Borrower delivers to the Trustee an opinion
of Bond Counsel reasonably satisfactory to the Trustee to the effect that a redemption of less than
all of the Bonds will preserve the tax-exempt status of interest on the remaining Bonds outstanding
subsequent to such redemption.
For purposes of this Subsection C only, the owner of a Bond means the Beneficial Owner of said
Bond so long as the Book-Entry Only System shall be in effect.
(D)
Deceased Bondholder Redemption
. For purposes of this paragraph, the owner of said
Bond shall mean the Beneficial Owner of said Bond so long as the Book-Entry Only System shall be in
effect. Notwithstanding the foregoing redemption provisions, the Bonds are subject to redemption
at the request of the estate of, successor in interest to and, in the case of jointly held Bonds,
any surviving joint owner with, any person who, on the date of his or her death, was an owner or
joint owner of such Bonds, in the manner and subject to the conditions set forth in the form of
Bonds contained herein. For purposes of this redemption provision, a Bond held in tenancy by the
entirety, joint tenancy or tenancy in common
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Exhibit 4.26
will be deemed to be held by a single owner and the death of a tenant by the entirety, joint
tenant or tenant in common will be deemed the death of an owner. The death of a person, who,
during his lifetime, was entitled to substantially all of the beneficial interests of ownership of
a Bond will be deemed the death of an owner, regardless of the owner, if such beneficial interest
can be established to the satisfaction of the Trustee. Such beneficial interest shall be deemed to
exist in typical cases of street name or nominee ownership, ownership under the Uniform Gifts to
Minors Act, community property or other joint ownership arrangements between a husband and wife,
and trust and certain other arrangements where one person has substantially all of the beneficial
ownership interests in the Bond during his lifetime. In the case of Bonds registered in the name
of banks, trust companies or broker/dealers who are members of a national securities exchange or
the National Association of Securities Dealers, Inc. or any securities depository (Qualified
Institutions), the redemption limitations described above apply to each beneficial owner of Bonds
held by any Qualified Institution. Beneficial interests shall include the power to sell, transfer
or otherwise dispose of a Bond and the right to receive the proceeds therefrom, as well as interest
and principal payable with respect thereto. The party requesting redemption pursuant to this
Section 2.4(D) shall pay all fees, costs and expenses of the Trustee in connection with
establishing the beneficial ownership of the Bonds requested to be redeemed, including but not
limited to the obtaining of position listings of DTC, or any successor securities depository, any
Direct Participant or Indirect Participant or any nominees.
(E)
Extraordinary Mandatory Redemption
. In the event that the Borrower shall fail to
comply with the restrictions relating to the restructuring, merger, consolidation and
reorganization of the Borrower set forth in Section 6.1(A) of the Agreement or the sale of assets
by the Borrower set forth in Section 6.1(B) of the Agreement, the Bonds shall be subject to
redemption prior to maturity as a whole on any date at the redemption price equal to 100% of the
principal amount thereof plus accrued interest to the date of redemption.
(F)
Optional Public Purpose Redemption
. If the Borrower fails to perform its
obligations under Section 6.6 of the Agreement, the Bonds shall be subject to redemption prior to
maturity as a whole on any date at the option of the Authority in accordance with Section 7.3 of
the Agreement, at the redemption price equal to 100% of the principal amount thereof plus accrued
interest to the date of redemption.
(G)
Extraordinary Optional Redemption Without Premium to Preserve Tax Exempt Status of the
Bonds
. The Bonds shall be subject to extraordinary optional redemption by the Authority, at
the direction of the Borrower, in whole or in part on any date at a Redemption Price equal to 100%
of the unpaid principal amount thereof, together with accrued interest to the date of redemption,
and without premium, if the Borrower shall have delivered to the Trustee and the Authority an
opinion of Bond Counsel addressed to the Trustee and the Authority substantially to the effect that
(i) a failure so to redeem the Bonds (or the relevant portion thereof) may adversely affect the
exclusion of interest on the Bonds from the gross income of the holders pursuant to Section 103 of
the Code, and (ii) redemption of Bonds in the amount set forth in such opinion (but in no smaller
amount than that set forth in such opinion) would permit the continuance of any exclusion so
afforded under Section 103 of the Code.
(H) Upon any redemption of Bonds there shall also be due and payable, concurrently with the
payment of the Redemption Price, interest accrued on the Bonds and all other amounts then due under
the Financing Documents.
(I) Redemption of Bonds permitted or required by this Article II shall be made as follows, and
the Trustee shall give the notice of redemption referred to in Section 6.3 hereof in respect of
each such redemption:
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Exhibit 4.26
(1) Redemption shall be made pursuant to the general optional redemption provisions of
Section 2.4(A) in such principal amounts as the Borrower shall request in a written notice
to the Trustee in accordance with Section 8.2 of the Agreement.
(2) Redemption shall be made pursuant to the extraordinary optional redemption
provisions of Section 2.4(B) at such date as the Borrower shall request in a written notice
to the Authority and Trustee in accordance with Section 5.2(F) hereof or Section 8.2 of the
Agreement, as the case may be, to which shall be attached the certificates referred to in
Section 5.2(F) hereof and Section 8.1(B) thereof.
(3) Redemption shall be made pursuant to the mandatory taxability redemption provisions
of Section 2.4(C) at the earliest possible date following receipt of the certificate
prescribed in Section 2.4(C) hereof and of the payments made by the Borrower prescribed in
Section 6.5 of the Agreement, without the necessity of any instructions or further act of
the Authority or the Borrower.
(4) Redemption shall be made pursuant to the provisions of Section 2.4(D) in accordance
with said Section and with Article VI of this Indenture.
(5) Redemption shall be made pursuant to the provisions of Section 2.4(E) on such date
as the Borrower shall request in a written notice to the Bond Insurer, the Authority and the
Trustee.
(6) Redemption shall be made pursuant to the provisions of Section 2.4(F) in accordance
with Section 7.3 of the Agreement.
(7) Redemption shall be made pursuant to the provisions of Section 2.4(G) at the
earliest possible date following the delivery to the Trustee and the Authority of the
opinion of Bond Counsel described in Section 2.4(G) hereof, without the necessity of any
instructions or further act of the Authority or the Borrower.
Section 2.5.
Execution and Authentication of Bonds
.
(A) After their authorization as
provided in this Article, Bonds may be executed by or on behalf of the Authority and delivered to
the Trustee or the Paying Agent for authentication. Each Bond shall be executed in the name of the
Authority by the manual or facsimile signature of any one or more Authorized Representatives of the
Authority.
(B) In case any officer who shall have signed any of the Bonds shall cease to be such officer
before the Bonds so signed shall have been authenticated and delivered by the Trustee or the Paying
Agent, such Bonds may nevertheless be authenticated and delivered as herein provided as if the
person who so signed such Bonds had not ceased to be such officer. Any Bond may be signed on
behalf of the Authority by any person who, on the date of such act, shall hold the proper office,
notwithstanding that at the date of such Bond such person may not have held such office.
(C) The Bonds shall each bear thereon a certificate of authentication, in the form set forth
in the recitals to this Indenture, executed manually by the Trustee or the Paying Agent. Only such
Bonds as shall bear thereon such certificate of authentication shall be entitled to any right or
benefit under this Indenture and no Bond shall be valid or obligatory for any purpose until such
certificate of authentication shall have been duly executed by the Trustee or the Paying Agent.
Such certificate of the Trustee or the Paying Agent upon any Bond executed on behalf of the
Authority shall be conclusive evidence that the Bond so authenticated has been duly authenticated
and delivered under this Indenture and that the holder thereof is entitled to the benefits hereof.
- 29 -
Exhibit 4.26
Section 2.6.
Delivery of Bonds
.
The Bonds shall be executed in the form and manner
set forth herein and shall be deposited with the Trustee and thereupon shall be authenticated by
the Trustee or the Paying Agent. Upon payment to the Trustee of the proceeds of sale thereof, such
Bonds shall be delivered by the Trustee or the Paying Agent to or upon the order of the purchasers
thereof, but only upon receipt by the Trustee of:
(1) A certified copy of the Authoritys resolution authorizing the issuance of the
Bonds and, the execution and delivery of this Indenture and the Financing Documents;
(2) Original executed counterparts of the Financing Documents other than the Note, and
the originally executed Note;
(3) A request and authorization to the Trustee or the Paying Agent on behalf of the
Authority to authenticate and deliver the Bonds to the purchasers therein identified upon
payment to the Trustee, for the account of the Authority, of a sum specified in such request
and authorization, plus any accrued interest on the Bonds to the date of such delivery. The
proceeds of such payment shall be paid over to the Trustee and deposited in the Project Fund
and Debt Service Fund pursuant to Article IV hereof; and
(4) A written opinion by Bond Counsel to the effect that the issuance of such Bonds has
been duly authorized and that all conditions precedent to the delivery thereof set forth in
this Indenture have been fulfilled.
Section 2.7.
No Additional Bonds
.
No Additional Bonds on a parity with the Bonds may
be issued under this Indenture.
- 30 -
Exhibit 4.26
ARTICLE III
GENERAL TERMS AND PROVISIONS OF BONDS
Section 3.1.
Date of Bonds
.
The Bonds shall be dated and bear interest from their
date of delivery, except in the case of Bonds delivered in any exchange or transfer hereunder on or
subsequent to the first Interest Payment Date of the Bond for which it is exchanged or transferred,
which shall bear interest from the Interest Payment Date next preceding the date of such delivery,
unless, as shown by the records of the Trustee, interest on the Bond surrendered in exchange for
such Bond shall be in default, in which case such Bond shall bear interest from the date to which
interest has been paid in full on the Bond so surrendered.
Section 3.2.
Form and Denominations
.
Bonds shall be issued in fully registered form,
without coupons, in denominations of $5,000 or any multiple thereof. Subject to the provisions of
Section 3.3 hereof, the Bonds shall be in substantially the form set forth in the recitals to this
Indenture, with such variations, omissions and insertions as are permitted or required by this
Indenture.
Section 3.3.
Legends
.
Each Bond shall contain on the face thereof a statement to the
effect that neither the State nor any municipality thereof shall be obligated to pay the principal
of the Bond or interest thereon and neither the faith and credit nor taxing power of the State or
any municipality thereof is pledged to such payment. The Bonds may, in addition, contain or have
endorsed thereon such provisions, specifications and descriptive words not inconsistent with the
provisions of this Indenture as may be necessary or desirable to comply with custom or otherwise as
may be determined by the Authority prior to the delivery thereof.
Section 3.4.
Medium of Payment
.
The principal or Redemption Price, if any, of and
interest on the Bonds shall be payable in any coin or currency of the United States of America
which, on the respective dates of payment thereof, is legal tender for the payment of public and
private debts. Such payment may be made as provided in Section 2.3 hereof.
Section 3.5.
Bond Details
.
Subject to the provisions hereof, the Bonds shall be
dated, shall mature in such years and such amounts, shall bear interest at such rate or rates per
annum, shall be subject to redemption on such terms and conditions and shall be payable as to
principal or Redemption Price, if any, and interest at such place or places as shall be specified
in this Indenture.
Section 3.6.
Interchangeability, Transfer and Registry
.
(A) Each Bond shall be
transferable only upon compliance with the restrictions on transfer set forth on such Bond and only
upon the books of the Authority, which shall be kept for the purpose at the principal office of the
Paying Agent, by the registered owner thereof in person or by his attorney duly authorized in
writing, upon presentation thereof together with a written instrument of transfer satisfactory to
the Paying Agent duly executed by the registered owner or his duly authorized attorney. Upon the
transfer of any Bond, the Paying Agent shall prepare and issue in the name of the transferee one or
more new Bonds in authorized denominations of the same aggregate principal amount as the
surrendered Bond.
(B) Any Bond, upon surrender thereof at the office of the Paying Agent with a written
instrument of transfer satisfactory to the Paying Agent, duly executed by the registered owner or
his attorney duly authorized in writing, may be exchanged at the office of the Paying Agent for a
new Bond or Bonds in authorized denominations of the same aggregate principal amount without
transfer to a new registered owner. No transfer will be effective unless represented by such
surrender and reissue.
(C) Except as otherwise specifically provided herein, the Authority, the Borrower, the
Trustee, and any Paying Agent may deem and treat the person in whose name any Bond shall be
registered as the absolute owner of such Bond, whether such Bond shall be overdue or not, for the
- 31 -
Exhibit 4.26
purpose of receiving payment of, or on account of, the principal and Redemption Price, if any,
of and interest on such Bond and for all other purposes, and all payments made to any such
registered owner or upon his order shall be valid and effectual to satisfy and discharge the
liability upon such Bond to the extent of the sum or sums so paid, and neither the Authority, the
Borrower, the Trustee nor any Paying Agent, nor any agent of the foregoing, shall be affected by
any notice to the contrary.
(D) The Paying Agent shall not be required to exchange or transfer (a) any Bond during the
fifteen (15) day period preceding any Interest Payment Date or the date fixed for selection of
Bonds for redemption, or (b) any Bonds selected, called or being called for redemption in whole or
in part except, in the case of any Bond to be redeemed in part, the portion thereof not so to be
redeemed.
Section 3.7.
Bonds Mutilated, Destroyed, Stolen or Lost
.
In case any Bond shall
become mutilated or be destroyed, stolen or lost, the Authority shall execute and thereupon the
Trustee or the Paying Agent shall authenticate and deliver, a new Bond of the same principal amount
as the Bond so mutilated, destroyed, stolen or lost, in exchange and substitution for such
mutilated Bond, upon surrender and cancellation of such mutilated Bond or in lieu of and
substitution for the Bond destroyed, stolen or lost, upon filing with the Trustee of evidence
satisfactory to the Authority, the Trustee and the Paying Agent that such Bond has been destroyed,
stolen or lost and proof of ownership thereof, and upon furnishing the Authority, the Trustee and
the Paying Agent with indemnity satisfactory to them and complying with such other reasonable
requirements as the Authority and the Trustee and the Paying Agent may prescribe and paying such
expenses as the Authority, the Trustee and the Paying Agent may incur. All Bonds so surrendered to
the Trustee shall be cancelled by it. Any such new Bonds issued pursuant to this Section in
substitution for Bonds alleged to be destroyed, stolen or lost shall constitute original additional
contractual obligations on the part of the Authority, whether or not the Bonds so alleged to be
destroyed, stolen or lost be at any time enforceable by anyone, and shall be equally secured by and
entitled to equal and proportionate benefits with all other Bonds issued hereunder in any moneys or
securities held by the Authority, the Trustee or the Paying Agent for the benefit of the owners of
the Bonds.
Section 3.8.
Cancellation and Destruction of Bonds
.
All Bonds paid or redeemed in
full, either at or before maturity, shall be delivered to the Paying Agent when such payment or
redemption is made, and such Bonds together with all Bonds purchased by the Paying Agent, together
with all Bonds surrendered in any exchange or transfers, shall thereupon be promptly cancelled.
All Bonds acquired and owned by the Borrower and delivered to the Paying Agent for cancellation
shall be deemed paid and shall be promptly cancelled. Bonds so cancelled shall be cremated or
otherwise destroyed by the Paying Agent, who shall execute a certificate of cremation or
destruction in duplicate under signature of one of its authorized officers describing the Bonds so
cremated or otherwise destroyed, and one executed certificate shall be filed with the Authority and
the other executed certificate shall be retained by the Paying Agent. The Paying Agent shall
provide written notice to Moodys, if the Bonds are then rated by Moodys and to S&P, if the Bonds
are then rated by S&P, of the final payment or redemption of any of the Bonds, either at or before
maturity, upon cancellation of any such Bonds.
Section 3.9.
Requirements With Respect To Transfers
.
In all cases in which the
privilege of transferring Bonds is exercised, the Authority shall execute and the Trustee or the
Paying Agent shall authenticate and deliver Bonds in accordance with the provisions of this
Indenture. All Bonds surrendered in any such transfer shall forthwith be cancelled by the Trustee
or the Paying Agent. For every such transfer of Bonds, the Authority, the Trustee or the Paying
Agent may, as a condition precedent to the privilege of making such transfer, make a charge
sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with
respect to such transfer and may charge a sum sufficient to pay the cost of preparing and
delivering each new Bond issued upon such transfer, which sum or sums shall be paid by the person
requesting such transfer.
- 32 -
Exhibit 4.26
Section 3.10.
Registrar
.
The Trustee shall also be Registrar for the Bonds, and shall
maintain a register showing the names of all registered owners of Bonds, Bond numbers and amounts,
and other information appropriate to the discharge of its duties hereunder. The Trustee shall make
available to the Borrower for its inspection during normal business hours the registration books
for the Bonds, as may be requested by the Borrower in connection with any purchase or tender offer
by it with respect to the Bonds.
- 33 -
Exhibit 4.26
ARTICLE IV
APPLICATION OF BOND PROCEEDS AND OTHER AMOUNTS
Section 4.1.
Accrued Interest
.
Simultaneously with the delivery of any Bonds by the
Trustee, the amount received as accrued interest thereon, if any, shall be deposited in the
Principal and Interest Account of the Debt Service Fund.
Section 4.2.
Bond Proceeds
.
The proceeds of sale and delivery of any Bonds, together
with any premium received on account of the sale thereof (but excluding any accrued interest on the
Bonds), shall, simultaneously with the delivery thereof by the Trustee, be deposited as follows:
|
(A)
|
|
$10,000,000 will be deposited in the Project Account of the
Project Fund.
|
Section 4.3.
Borrower Contribution
.
A contribution of the Borrower in the amount of
$587,535.75 (which shall be applied to the payment of certain costs and expenses incurred in
connection with the issuance, execution and sale of the Bonds for which the Borrower is
responsible, including compensation and expenses of the Trustee, bond insurance premium, legal,
accounting and consulting expenses and fees, costs of printing and engraving, underwriting expenses
and recording and filing fees) shall simultaneously with the delivery of the Bonds be deposited by
the Trustee in the Costs of Issuance Account of the Project Fund. Notwithstanding anything to the
contrary contained in this Indenture, such contribution shall not be subject to the lien of this
Indenture and any portion of such contribution not disbursed for the payment of costs and expenses
incurred in connection with the issuance, execution and sale of the Bonds within sixty (60) days of
the date of issuance of the Bonds (including investment earnings, if any attributable thereto)
shall be returned to the Borrower.
- 34 -
Exhibit 4.26
ARTICLE V
CUSTODY AND INVESTMENT OF FUNDS
Section 5.1.
Creation of Funds
. (A) The Authority hereby establishes and creates the
following special trust Funds and Accounts within such Funds:
|
(a)
|
|
Project Account
|
|
|
(b)
|
|
Costs of Issuance Account
|
|
(a)
|
|
Principal and Interest Account
|
|
|
(b)
|
|
Redemption Account
|
|
(3)
|
|
Rebate Fund
|
|
|
(4)
|
|
Renewal Fund
|
(B) The Rebate Fund shall be held by the Trustee free and clear of any lien, charge or pledge
created by this Indenture. All of the Funds and Accounts created hereunder shall be held by the
Trustee, including one or more depositories in trust for the Trustee. All moneys and investments
deposited with the Trustee or any Paying Agent shall be held in trust and applied only in
accordance with this Indenture and shall be trust funds for the purposes of this Indenture.
(C) The Trustee, in its sole discretion, may establish accounts and subaccounts within the
Funds established pursuant to Section 5.1(A) for its internal administrative or accounting purposes
in order to facilitate the performance of its duties and obligations hereunder.
Section 5.2.
Project Fund
. (A) The Trustee shall establish two separate accounts
within the Project Fund to be respectively designated Project Account and Costs of Issuance
Account. There shall be deposited in the various Accounts of the Project Fund any and all amounts
required to be deposited therein pursuant to Sections 4.2 and 4.3 hereof or otherwise required to
be deposited therein pursuant to the Agreement or this Indenture.
(B) The Trustee shall apply the amounts in the various Accounts of the Project Fund, at the
direction of the Borrower, to pay the costs of the Project and the costs of issuance of the Bonds
including, but not limited to:
(1) The costs of title insurance, surveys, legal fees and recording and other
closing expenses;
(2) Obligations incurred for labor and materials;
(3) All costs of contract bonds and of insurance of all kinds that may be required
or necessary during the course of construction of the Project;
(4) All costs of engineering services, including the costs of test borings, surveys,
estimates, plans and specifications and preliminary investigation therefor and for
supervising construction, as well as for the performance of all other duties
required by or
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Exhibit 4.26
consequent upon the proper construction of, and alterations, additions and
improvements to, the Project;
(5) All expenses incurred in connection with the issuance, execution and sale of the
Bonds, including compensation and expenses of the Trustee, the Authoritys issuance
fee, Bond Counsel fees, and expenses, underwriting discount, legal, accounting and
consulting expenses and fees, costs of printing and engraving, and recording and
filing fees;
(6) All costs which the Borrower shall be required to pay, under the terms of any
contract or contracts, for the acquisition, construction, installation or equipping
of the Project, including any amounts required to reimburse the Borrower for
advances or payments made for any of the above items or for any other costs incurred
and for work done which are properly chargeable to the Project;
(7) Interest due and payable on the Bonds from the date of issuance to the
Completion Date of the Project;
(8) Any other costs and expenses relating to the Project.
(C) The Trustee is hereby authorized and directed to issue its checks or to effect wire
transfers for each disbursement from the various Accounts of the Project Fund (excepting any fees
payable to the Trustee as to which no further authority is required) upon a requisition submitted
to the Trustee and signed by an Authorized Representative of the Borrower in substantially the form
attached hereto as Appendix A. Such requisition shall state with respect to each payment to be
made: (1) the Account within the Project Fund from which such disbursement is to be made, (2) the
requisition number, (3) the name and address of the person, firm or corporation to whom payment is
due, or to whom a reimbursable advance, if any, has been made, (4) the amount to be paid, (5) that
each obligation mentioned therein has been properly incurred within the provisions of the
Agreement, is a proper charge against the Project Fund, is unpaid or unreimbursed, and has not been
the basis of any previous withdrawal, (6) that the requisition and the use of proceeds set forth
therein are consistent in all material respects with the Tax Regulatory Agreement with respect to
the Bonds, and (7) unless the Trustee has received the certificate described in subsection 5.2(F)
hereof, 95% or more of the amount requisitioned is to be applied to costs (a) paid or incurred
after the date which is sixty (60) days prior to the adoption of the Authoritys inducement
resolution for the Project, (b) for the acquisition, construction or reconstruction of land or
property of a character subject to the allowance for depreciation provided in Section 167 of the
Internal Revenue Code of 1986, as amended, and (c) which are chargeable to the capital account of
the Project or would be so chargeable either with an election by the Borrower or but for the
election of the Borrower to deduct the amount of the item.
Notwithstanding anything to the contrary contained herein, any portion of the contribution of
the Borrower made pursuant to Section 4.3 hereof remaining on deposit in the Costs of Issuance
Account of the Project Fund sixty (60) days following the date of issuance of the Bonds (including
investment earnings, if any, attributable thereto) shall be returned to the Borrower.
(D) In making any such payment from the various Accounts of the Project Fund, the Trustee may
rely on such requisitions and proof delivered to it and the Trustee shall be relieved of all
liability with respect to making such payments in accordance with the foregoing.
(E) The Trustee shall hold in the Project Fund an amount equal to 5% of the net proceeds of
the Bonds ($500,000.00) until the Trustee has received, with respect to the Bonds, a certified
statement of Project Costs together with the Borrowers certificate to the effect that Project
Costs in an amount equal
- 36 -
Exhibit 4.26
to 95% or more of the proceeds of the Bonds (as defined in the Agreement) have been paid or
incurred for the acquisition, construction or reconstruction of land or depreciable property under
the Internal Revenue Code of 1986, as amended, and have been or could be capitalized by the
Borrower for Federal income tax purposes. Such documents may be delivered upon issuance of the
Bonds and may anticipate the use of the final amounts to be requisitioned permitted by subsections
5.2(E) and (F) hereof. Upon the receipt of such documents, the Trustee shall apply the balance in
the Project Fund to or at the direction of the Borrower in accordance with such documents. The
Borrower shall notify the Trustee of any inability to deliver such documents, and in that event the
Trustee shall upon the receipt of such notification transfer the balance in the Project Fund to the
Redemption Account of the Debt Service Fund.
(F) The completion of the Project shall be evidenced by the filing with the Authority and the
Trustee of a certificate of an Authorized Representative of the Borrower in accordance with Article
IV of the Agreement, stating the date of such completion and the amount, if any, required in its
opinion for the payment of any remaining part of the costs of the Project. Upon the filing of such
certificate, the balance in the Project Fund in excess of the amount, if any, stated in such
certificate, shall be applied by the Trustee in accordance with the written order of any Authorized
Representative of the Borrower in one or more of the following ways:
(1) Deposited in the Redemption Account of the Debt Service Fund; or
(2) Used in any other manner which preserves the exemption of interest on the Bonds
from federal income taxation, provided there is delivered to the Trustee an opinion
of Bond Counsel to the effect that the use of such moneys is permitted by law and
will not adversely affect the exemption from federal income taxation of interest on
the Bonds. The Trustee may rely on such opinion in any disbursement of funds
pursuant to this subsection 5.2(F)(2).
Thereafter, upon payment of all the costs and expenses incident to the Project, any balance in the
Project Fund shall be deposited in the Redemption Account of the Debt Service Fund.
(G) Promptly following June 30 in each year, until there is no balance remaining in the
Project Fund, the Trustee shall deliver a report to the Authority setting forth the amounts
remaining in the Project Fund as of such date and a schedule of the securities in which such
amounts are invested.
(H) In the event the Borrower shall be required to or shall elect to cause the Bonds to be
redeemed in full pursuant to Article VIII of the Agreement, the balance in the Project Fund which
is not required to pay incurred Project Costs shall be deposited in the Redemption Account of the
Debt Service Fund.
Section 5.3.
Debt Service Fund
. (A) The Trustee shall establish two separate accounts
within the Debt Service Fund to be respectively designated Principal and Interest Account and
Redemption Account.
(B) The Trustee shall promptly deposit the following receipts in the Debt Service Fund:
(1) Any amount required pursuant to Section 4.1 hereof to be deposited from the proceeds of
the Bonds, which shall be credited to the Principal and Interest Account.
(2) All amounts received by the Trustee pursuant to Section 3.1 of the Agreement, which
shall be credited to the Principal and Interest Account, in the manner set forth in this
Indenture and the Agreement, and applied together with amounts available in the Principal and
Interest Account, to pay (i) the interest due on the Outstanding Bonds on the Interest Payment
Date next succeeding such
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Exhibit 4.26
payment and (ii) the principal, if any, of the Outstanding Bonds due (otherwise than by
call for redemption) on such Interest Payment Date.
(3) Excess or remaining amounts in the Project Fund required to be deposited in the
Redemption Account of the Debt Service Fund pursuant to subsections 5.2(E) and 5.2(F) hereof,
which shall be credited to the Redemption Account.
(4) Any other amounts required to be paid to the Debt Service Fund for payment of principal
and interest due on the Bonds, which shall be credited to the Principal and Interest Account.
(5) Prepayments under the Agreement received by the Trustee pursuant to Article VIII
thereof, which shall be credited to the Redemption Account.
(6) All other receipts when and if required by the Financing Documents or any subsequent
agreement or by this Indenture to be paid into the Debt Service Fund, which shall be credited to
the Principal and Interest Account or the Redemption Account, as appropriate.
(7) Any amounts constituting income or interest earned and gains realized in excess of
losses suffered by any Fund and Account hereunder, excluding the Project Fund, which shall be
credited to the Principal and Interest Account in accordance with Section 5.6(B) hereof. Income
or interest earned and gains realized in excess of losses suffered by the Project Fund shall be
retained in the Project Fund prior to the Completion Date of the Project, and transferred to the
Principal and Interest Account of the Debt Service Fund subsequent to the Completion Date.
(C) There shall be paid from the Principal and Interest Account to the respective Paying
Agents on each Interest Payment Date for the Bonds the amounts required for the payment of the
principal and interest due on the Bonds on such date. Such amounts shall be applied by the Paying
Agents to the payment of principal and interest on the Bonds when due. All other amounts payable
on the Bonds from the Principal and Interest Account shall be paid to the respective Paying Agents
upon receipt, and shall immediately be paid by such Paying Agents to the Bondholders.
(D) Amounts in the Redemption Account shall be applied, as promptly as practicable, by the
Trustee at the direction of the Borrower to the purchase of Bonds at prices not exceeding the
optional Redemption Price thereof applicable on the next redemption date plus accrued interest and
all other amounts then due under the Financing Documents in connection with such redemption. Such
redemption date shall be the earliest date upon which Bonds are subject to redemption from such
amounts. Any amount in the Redemption Account not so applied to the purchase of Bonds by
forty-five days prior to the next date on which the Bonds are so redeemable shall be applied to the
redemption of Bonds on such redemption date; provided that if such amount aggregates less than
$10,000, it need not be then applied to such redemption. Amounts in the Redemption Account to be
applied to the redemption of Bonds shall be paid to the respective Paying Agents on or before the
redemption date and applied by them on such redemption date to the payment of the Redemption Price
of the Bonds being redeemed plus interest on such Bonds accrued to the redemption date and all
other amounts then due under the Financing Documents in connection with such redemption.
(E) Any amounts remaining in the Debt Service Fund after payment in full of the Bonds, the
fees, charges and expenses of the Trustee and the Paying Agents and all other amounts required to
be paid hereunder or under the Financing Documents shall be paid to the Borrower upon the
expiration or sooner termination of the Term of the Agreement.
- 38 -
Exhibit 4.26
Section 5.4.
Rebate Fund
. (A) There shall be credited to the Rebate Fund all amounts
required to be credited thereto from interest earnings or net gain on disposition of investments
pursuant to this Article V.
(B) On the first Business Day following each Computation Period (as defined in the Tax
Regulatory Agreement), upon direction in writing from the Borrower, pursuant to the Tax Regulatory
Agreement, the Trustee shall withdraw from the Funds and Accounts and deposit to the Rebate Fund an
amount such that the amount held in the Rebate Fund after such deposit is equal to the Rebatable
Arbitrage (as defined in the Tax Regulatory Agreement) calculated as of the last day of the
Computation Period; provided, however, that the Trustee may transfer monies from any Fund or
Account only to the extent such transfer does not result in an Event of Default hereunder. In the
event of any deficiency, the balance required shall be provided by the Borrower pursuant to Section
8.3 of the Tax Regulatory Agreement. Computations of the amounts on deposit in each Fund and
Account and of the Rebatable Arbitrage shall be furnished to the Trustee by the Borrower in
accordance with Section 8.3 of the Tax Regulatory Agreement. Any amounts on deposit in the Rebate
Fund in excess of the Rebatable Arbitrage shall be deposited to the Debt Service Fund.
(C) The Trustee, upon receipt of written instructions from an Authorized Representative of the
Borrower in accordance with Section 8.3 of the Tax Regulatory Agreement, shall pay to the United
States out of amounts in the Rebate Fund (1) not later than 30 days after the end of each five-year
period following the date of issuance of the Bonds, an amount such that, together with amounts
previously paid, the total amount paid to the United States is equal to 90% of the Rebatable
Arbitrage calculated as of the end of the most recent Computation Period, and (2) not later than 30
days after the date on which all of the Bonds have been paid or redeemed, 100% of the Rebatable
Arbitrage as of the end of the final Computation Period.
(D) In transferring any funds to the Rebate Fund and making any payments to the United States
from the Rebate Fund, the Trustee may rely on the written directions and computations provided it
by the Borrower and the Trustee shall be relieved of all liability with respect to the making of
such transfers and payments in accordance with the foregoing.
Section 5.5.
Renewal Fund
. (A) There shall be paid into the Renewal Fund all amounts
to be deposited therein pursuant to Section 5.3 of the Agreement, and such amounts shall be applied
as provided therein.
(B) Any surplus remaining in the Renewal Fund after the completion of any payments for the
replacement, repair, reconstruction, alteration, relocation or restoration, of the Project with
respect to any event of damage, destruction or condemnation shall be transferred to the Redemption
Account of the Debt Service Fund, but the excess, if any, of such amount as will be sufficient to
discharge and satisfy this Indenture and pay all Bonds as provided in Section 12.1 hereof shall be
paid over to the Borrower free and clear of any pledge or lien hereunder.
Section 5.6.
Investment of Funds and Accounts
. (A) Except as otherwise provided in
this Indenture, amounts in the Funds and Accounts held hereunder shall, if and to the extent then
permitted by law, be invested in Authorized Investments. Investments authorized under this Section
shall be made by the Trustee at the written request of an Authorized Representative of the
Borrower, and may be made by the Trustee through its own bond department. Any investment hereunder
shall be made in accordance with the Tax Regulatory Agreement, including particularly the terms and
conditions of Article VII thereof relating to arbitrage. Such investments shall mature in such
amounts and at such times as may be necessary to provide funds when needed to make payments from
such Funds and Accounts, and any such investments shall, subject to the provisions hereof, at all
times be deemed to be a part of the Fund and Account, from which the investment was made.
- 39 -
Exhibit 4.26
(B) Except as provided in the following sentence, the income or interest earned and gains
realized in excess of losses suffered by any Fund and Account held hereunder from the date of
delivery of the Bonds shall be credited to the Principal and Interest Account of the Debt Service
Fund (except income or interest earned and gains realized in excess of losses suffered by the
Rebate Fund, which shall be credited to the Rebate Fund). Income or interest earned and gains
realized in excess of losses suffered by the Project Fund shall be retained therein prior to the
Completion Date of the Project and transferred to the Principal and Interest Account of the Debt
Service Fund subsequent to the Completion Date.
(C) Prior to each Interest Payment Date on the Bonds, the Trustee shall notify the Borrower of
the amount of any net investment income or gain received and collected subsequent to the preceding
interest payment date and the amount then available in the Debt Service Fund.
Section 5.7.
Non-presentment of Bonds
. In the event any Bond shall not be presented
for payment when the remaining principal thereof becomes due, either at final maturity, or at the
date fixed for redemption thereof, or otherwise, and funds sufficient to pay any such Bond shall
have been made available to the Trustee for the benefit of the holder or holders thereof, all
liability of the Authority to the holder thereof for the payment of such Bond shall forthwith
cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to
hold such funds, without liability for interest thereon, for the benefit of the holder of such
Bond, who shall thereafter be restricted exclusively to such funds, for any claim of whatever
nature on his part under this Indenture or on, or with respect to, such Bond. Funds remaining with
the Trustee as above unclaimed for six years shall be paid to the Borrower.
ARTICLE VI
REDEMPTION OF BONDS
Section 6.1.
Privilege of Redemption and Redemption Price
.
Bonds or portions thereof
subject to redemption prior to maturity shall be redeemable, upon mailed notice as provided in this
Article, at the times, at the Redemption Prices and upon such terms, in addition to and consistent
with the terms contained in this Article, as shall be specified in Section 2.4 hereof and in such
Bonds.
Section 6.2.
Selection of Bonds to be Redeemed
.
So long as the Bonds are in
book-entry form, when Bonds are called, allocation shall be made by DTC or any successor securities
depository and not by the Authority or the Trustee. In the event of redemption of less than all
the Outstanding Bonds of like maturity, the Trustee shall select by lot, using such method of
selection as it shall deem proper in its discretion, the principal amount of such Bonds to be
redeemed. For purposes of this Section, Bonds or portions of Bonds which have theretofore been
selected by lot for redemption shall not be deemed Outstanding. In the event that the book-entry
system is discontinued, if less than all of the Bonds are to be redeemed at the option of the
Borrower, the Bonds or portion thereof to be redeemed shall be selected by the Borrower.
Section 6.3.
Notice of Redemption
.
Except with respect to deceased Bondholder
redemptions as described in Section 2.4(D) hereof (the notice provisions relating to which are set
forth in the Form of Bond contained in the recitals to this Indenture), when redemption is required
or permitted by this Indenture, upon written notification of the Trustee by the Borrower of such
redemption not less than seven (7) days prior to the date on which the Trustee must give notice to
Holders as provided in this Section or the Letter of Representation among the Authority, the
Trustee and DTC (if the book entry system is still in effect), the Trustee shall give notice of
such redemption in the name of the Authority, specifying the subsection of Section 2.4 hereof under
which the redemption is to be made, the numbers and amounts of the Bonds or portions thereof to be
redeemed, the redemption date and the place or places where amounts due upon such redemption will
be payable. Such notice shall further state that on such date there shall become due and payable
upon each Bond or portion thereof to be redeemed the
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Exhibit 4.26
Redemption Price thereof together with interest accrued to the redemption date and all other
amounts then due under the Financing Documents, and that from and after such date interest thereon
shall cease to accrue and be payable. Alternatively, at the option of the Authority, such notice
may state that it is subject to the receipt of the redemption moneys by the Trustee on or before
the date fixed for redemption and which notice shall be of no effect unless such moneys are so
received on or before such date. Notice of redemption shall be given by the Trustee in the name
and on behalf of the Authority by mailing a copy of each such notice to the registered owner of
each Bond by first-class mail postage prepaid, addressed to him at his last known address as it
appears upon the bond register, no more than forty-five (45) nor less than thirty (30) days prior
to the date fixed for redemption. Such notice shall be effective when mailed and any failure to
receive such notice shall not affect the validity of the proceedings for redemption. In the event
of a postal strike, the Trustee shall give notice by other appropriate means selected by the
Trustee in its discretion.
Section 6.4.
Payment of Redeemed Bonds
.
(A) Notice having been given in the manner
provided in Section 6.3 hereof, the Bonds or portions thereof so called for redemption shall become
due and payable on the redemption dates so designated at the Redemption Price, plus interest
accrued to the redemption date and all other amounts then due under the Financing Documents. If,
on the redemption date, monies for the redemption of all the Bonds or portions thereof to be
redeemed, together with interest to the redemption date, and all other amounts then due under the
Financing Documents, shall be held by the Paying Agent so as to be available therefor on such date
and if notice of redemption shall have been given as aforesaid, then, from and after the redemption
date, interest on the Bonds or portions thereof so called for redemption shall cease to accrue and
become payable. If such monies shall not be so available on the redemption date, such Bonds or
portions thereof shall continue to bear interest until paid at the same rate as they would have
borne had they not been called for redemption.
(B) Payment of the Redemption Price together with interest and all other amounts then due to
the Bondholders under the Financing Documents shall be made to or upon the order of the registered
owner, only upon presentation of the Bond for cancellation or notation as provided in Section 6.6
hereof.
Section 6.5.
Notice to Authority and Borrower of Deceased Bondholder Redemption
.
Not
later than ten Business Days after receipt of a request for redemption pursuant to Section 2.4(D)
hereof by the Trustee, the Trustee shall give notice to the Authority and the Borrower specifying
the amount of Bonds requested to be redeemed, the amount of Bonds eligible for redemption, the date
on which such Bonds eligible for redemption shall be redeemed and the amount of funds required to
be deposited in the Redemption Account.
Section 6.6.
Cancellation of Redeemed Bonds
.
(A) All Bonds redeemed in full under the
provisions of this Article shall forthwith be cancelled and destroyed by the Trustee and a
certificate of destruction furnished to the Authority, and no Bonds shall be executed,
authenticated, issued or delivered in exchange or substitution therefor or for or in respect of any
paid portion of a fully registered Bond. In the event that a portion only of a Bond shall be so
called for redemption, then, at the option of the registered owner thereof if such owner is a
securities depository, such Bond may be either submitted to the Trustee for notation thereon of the
payment of the portion of the principal thereof called for redemption or surrendered for
redemption. If so surrendered, one or more new Bonds shall be issued for the unredeemed portion
hereof.
(B) If there shall be called for redemption less than all of a Bond, the Authority shall
execute and the Trustee shall authenticate and deliver, upon the surrender of such Bond, without
charge to the owner thereof, for the unredeemed balance of the principal amount of the Bond so
surrendered, Bonds in any of the authorized denominations.
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Exhibit 4.26
ARTICLE VII
PARTICULAR COVENANTS
Section 7.1.
No Pecuniary Liability on Authority or Officers
.
(A) No covenant or
agreement contained in this Indenture or in the Bonds or any obligations herein or therein imposed
upon the Authority or the breach thereof, shall constitute or give rise to a charge upon its
general credit, or impose upon the Authority a pecuniary liability except as set forth herein. In
making the agreements, provisions and covenants set forth in this Indenture, the Authority has not
obligated itself except with respect to the application of the Revenues as hereinabove provided.
(B) All covenants, stipulations, promises, agreements and obligations of the Authority
contained herein shall be deemed to be covenants, stipulations, promises, agreements and
obligations of the Authority and not of any member, officer, agent or employee thereof in his
individual capacity. No recourse shall be had for the payment of the principal or Redemption
Price, if any, of or interest on the Bonds, for the performance of any obligation hereunder, or for
any claim based thereon or hereunder against any such member, officer, agent or employee or against
any natural person executing the Bonds. No such member, officer, agent, employee or natural person
is or shall become personally liable for any such payment, performance or other claim, and in no
event shall any monetary or deficiency judgment be sought or secured against any such member,
officer, agent, employee or other natural person.
Section 7.2.
Payment of Principal, Redemption Price, if any, and Interest
.
The
Authority covenants that it will promptly pay, solely from the Revenues or other monies derived in
connection with the Project or otherwise available hereunder, the principal or Redemption Price, if
any, of and interest on every Bond issued under this Indenture, together with all other amounts due
under the Financing Documents, at the place, on the dates and in the manner provided herein and in
the Bonds according to the true intent and meaning thereof.
Section 7.3.
Performance of Covenants
.
The Authority covenants that it will
faithfully perform at all times any and all covenants, undertakings, stipulations and provisions
contained in this Indenture, in any and every Bond executed, authenticated and delivered hereunder
and in all of its proceedings pertaining thereto. The Authority covenants that it is duly
authorized under the Constitution and laws of the State, including particularly and without
limitation the Act, to issue the Bonds authorized hereby and to execute this Indenture, to create,
accept and assign the liens in the property described herein and created hereby, to grant the
security interest herein provided, to assign the Financing Documents and to pledge the revenues and
other amounts hereby pledged in the manner and to the extent herein set forth; that all action on
its part for the issuance of the Bonds and the execution and delivery of this Indenture has been
duly and effectively taken, and that the Bonds in the hands of the holders and owners thereof are
and will be valid and enforceable obligations according to their terms and the terms of this
Indenture, except to the extent that such enforceability may be limited by bankruptcy or insolvency
or other laws affecting creditors rights generally or by general principles of equity.
Section 7.4.
Further Assurances
.
The Authority and the Trustee each covenants that it
will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and
delivered, such indentures supplemental hereto and such further acts, instruments and transfers as
the other may reasonably require for the better assuring, transferring, conveying pledging,
assigning and confirming unto the Trustee all and singular the property and rights assigned hereby
and the amounts pledged hereby to the payment of the principal or Redemption Price, if any, of and
interest on the Bonds and all other amounts due under the Financing Documents.
Section 7.5.
Inspection of Project Books
.
The Authority covenants and agrees that all
books and documents in its possession relating to the Project and the revenues derived from the
Project shall at
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Exhibit 4.26
all times be open to inspection by such accountants or other agencies as the Trustee may from
time to time designate.
Section 7.6.
Rights under Financing Documents
.
The Financing Documents, originals or
duly executed counterparts of which have been filed with the Trustee, set forth the covenants and
obligations of the Authority and the Borrower, including provisions that subsequent to the issuance
of Bonds and prior to their payment in full or provision for payment thereof in accordance with the
provisions hereof, the Financing Documents may not be effectively amended, changed, modified,
altered or terminated without the written consents provided for therein, and reference is hereby
made to the same for a detailed statement of the covenants and obligations of the Borrower
thereunder. Subject to the provisions of Article IX hereof and to the extent explicitly set forth
herein and in the Loan Agreement, the Trustee agrees to enforce all covenants and obligations of
the Borrower under the Financing Documents and it is agreed that the Trustee may and is hereby
granted the right to enforce all rights of the Authority and all obligations of the Borrower under
and pursuant to the Financing Documents. Nothing in this Section shall permit any reduction in the
payments required to be made by the Borrower under or pursuant to the Financing Documents or any
alteration in the terms of payment thereof. All covenants and agreements on the part of the
Authority shall, except as otherwise specifically provided herein, be for the benefit of the
holders from time to time of the Bonds and may be enforced in the manner provided by Article VIII
hereof on behalf of such holders by the Trustee.
Section 7.7.
Creation of Liens, Indebtedness
.
The Authority shall not create or
suffer to be created any lien or charge upon or pledge of the Revenues, except the lien, charge and
pledge created by this Indenture and the Bonds. The Authority shall not incur any indebtedness or
issue any evidence of indebtedness, other than the Bonds herein authorized, secured by a lien on or
pledge of such Revenues.
Section 7.8.
Recording and Filing
.
The Authority covenants that it will cause the
Financing Documents, this Indenture and all supplements thereto and hereto, as well as such other
security agreements, financing statements, and other instruments as may be required from time to
time to be kept, to be recorded and filed in such manner and in such places as may be required by
law in order to fully preserve and protect the security of the holders and owners of the Bonds and
the rights of the Trustee hereunder.
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Exhibit 4.26
ARTICLE VIII
REMEDIES OF BONDHOLDERS
Section 8.1.
Events of Default; Acceleration of Due Dates
.
(A) Each of the following
events is hereby defined as and shall constitute an Event of Default:
(1) Failure to duly and punctually pay (a) the interest or (b) any installment of the
principal or Redemption Price of any Bond, whether at the stated maturity thereof or upon
proceedings for redemption thereof (excluding redemptions for which a conditional notice has
been given in accordance with Section 6.3 of this Indenture in which case the failure to pay
the Redemption Price of any Bonds shall not constitute an Event of Default under this
Section 8.1(1) unless monies are on deposit with the Trustee and available to pay the
Redemption Price on the redemption date). In determining whether an Event of Default shall
have occurred under this Section 8.1(A)(1), no effect shall be given to payments made under
the Bond Insurance Policy.
(2) Failure to duly and punctually pay any amount, other than the amounts specified in
(1) above, due under the Financing Documents and the continuance of such failure for more
than thirty (30) days.
(3) Failure to perform or observe any other of the covenants, agreements or conditions
on the part of the Authority in this Indenture or in the Bonds contained and not otherwise a
default hereunder and the continuance thereof for a period of sixty (60) days after written
notice given by the Trustee, the Bond Insurer or by the owners of not less than 51% of the
principal amount of Bonds then Outstanding.
(4) The occurrence of an Event of Default under any of the Financing Documents (other
than the Disclosure Agreement).
(B) Subject to Sections 6.6(B) and 7.2(C) of the Loan Agreement, upon the happening and
continuance of any Event of Default specified in subsection 8.1(A) hereof (unless the principal of
all the Bonds shall have already become due and payable), the Trustee (a) upon request in writing
to the Authority and the Trustee from the Bond Insurer (provided the Bond Insurer is not in default
under the Bond Insurance Policy) or, if the Bond Insurance Policy is no longer in effect and if
such Event of Default is specified in (1) or (2) above,
shall
, or (b) if the Bond Insurance
Policy is no longer in effect, the Trustee
may
, and upon request in writing from the owners
of not less than 51% in principal amount of the Bonds then Outstanding,
shall
, declare the
principal of all the Bonds then Outstanding, and the interest accrued thereon, to be due and
payable immediately, and upon such declaration the same shall become and be immediately due and
payable, anything in this Indenture or in any of the Bonds contained to the contrary
notwithstanding.
(C) The right of the Trustee or of the owners of not less than 51% in principal amount of the
Outstanding Bonds to make any declaration authorized under subsection 8.1(B) hereof with respect to
any failure under subsection 8.1(A)(1) hereof, however, is subject to the condition that if, at any
time before such declaration, all overdue installments of interest upon the Bonds and the principal
of all Bonds which shall have matured by their terms, together with the reasonable and proper
charges, expenses and liabilities of the Trustee, shall either be paid by or for account of the
Authority or provision satisfactory to the Trustee shall be made for such payment, and all other
events of default cured and waived as provided in Section 8.11 then in every such case any such
default and its consequences shall
ipso
facto
be deemed to be annulled, but no such
annulment shall extend to or affect any subsequent default or impair or exhaust any right or power
consequent thereon.
- 44 -
Exhibit 4.26
Section 8.2.
Enforcement of Remedies
.
(A) Upon the happening and continuance of any
Event of Default, then and in every case, but subject to the provisions of Section 9.2 hereof and
Sections 6.6(B) and 7.2(C) of the Loan Agreement, the Trustee, with the consent of the Bond
Insurer, may proceed, and upon the written request of the Bond Insurer or the owners of not less
than 51% in the principal amount of the Bonds Outstanding, with the consent of the Bond Insurer,
shall proceed, to protect and enforce its rights and the rights of the Bondholders under the Act,
the Bonds, the Financing Documents and this Indenture, and under any agreement executed in
connection with the foregoing, forthwith by such suits, actions or special proceedings in equity or
at law, or by proceedings in the office of any board or officer having jurisdiction, whether for
the specific performance of any covenant or agreement contained in this Indenture or the Financing
Documents or in aid of the execution of any power granted therein or in the Act or for the
enforcement of any legal or equitable rights or remedies as the Trustee, being advised by counsel,
shall deem most effectual to protect and enforce such rights or to perform any of its duties under
this Indenture;
provided
, that, no such consent of the Bond Insurer shall be required if
the Bond Insurance Policy is no longer in effect or if the Bond Insurer is in default under the
Bond Insurance Policy.
(B) [Reserved]
(C) Subject to the provisions of Section 8.2(E) below, in the enforcement of any right or
remedy under this Indenture or under the Act, the Trustee shall be entitled to sue for, enforce
payment on and receive any or all amounts then or during any default becoming, and any time
remaining, due from the Authority for principal, Redemption Price, interest or otherwise under any
of the provisions of the Financing Documents, this Indenture or of the Bonds, and unpaid, and, to
the extent permitted by law, with interest on overdue payments at the applicable rate or rates of
interest specified in the Bonds, together with any and all costs and expenses of collection and of
all proceedings under the Financing Documents, this Indenture and under the Bonds, without
prejudice to any other right or remedy of the Trustee or of the Bondholders, and to recover and
enforce judgment or decree against the Authority, but solely as provided in the Financing
Documents, this Indenture and in the Bonds, for any portion of such amounts remaining unpaid, with
interest, to the extent permitted by law, costs and expenses, and to collect in any manner provided
by law, the moneys adjudged or decreed to be payable.
(D) Regardless of the happening of an Event of Default, the Trustee, if requested in writing
by the owners of not less than 51% in principal amount of the Bonds then Outstanding with the
consent of the Bond Insurer, while the Bond Insurance Policy is in effect and the Bond Insurer is
not in default thereunder, and furnished with security and indemnity to its satisfaction, shall
institute and maintain such suits and proceedings as it may be advised shall be necessary or
expedient to prevent any impairment of the security under this Indenture by any acts which may be
unlawful or in violation of this Indenture or of any resolution authorizing Bonds, and such suits
and proceedings as the Trustee may be advised shall be necessary or expedient to preserve or
protect its interests and the interests of the Bondholders; but no such request shall be otherwise
than in accordance with the provisions of law and of the Indenture or be unduly prejudicial to the
interests of the holders of Bonds not making such request.
(E) Anything in this Indenture to the contrary notwithstanding, but subject to Section 9.2
hereinbelow, upon the occurrence and continuance of an Event of Default as defined herein, the Bond
Insurer, so long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default
thereunder, shall be entitled to control and direct the enforcement of all rights and remedies
granted to the holders of the Bonds or the Trustee for the benefit of the holders of the Bonds
under this Indenture, including, without limitation, (i) the right to accelerate the principal of
the Bonds as described in this Indenture and (ii) the right to annul any declaration of
acceleration, and the Bond Insurer shall also be entitled to approve all waivers of Events of
Default.
(F) The Bond Insurers rights under this Article VIII shall be suspended in the event that the
Bond Insurer is in default under the Bond Insurance Policy. The preceding sentence shall not
affect or
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Exhibit 4.26
limit the Bond Insurers rights obtained by virtue of subrogation upon payment of any amounts
due and owing with respect to the Bonds.
Section 8.3.
Application of Revenue and Other Moneys After Default
.
(A) All moneys
received by the Trustee pursuant to any right given or action taken under the provisions of this
Article, after payment of the cost and expenses of the proceedings resulting in the collection of
such moneys and of the fees, expenses, liabilities and advances incurred or made by the Trustee and
any Paying Agent, shall be deposited in the applicable account of the Debt Service Fund and all
moneys so deposited in such Fund and available for payment of the Bonds shall be applied as
follows:
(1) Unless the principal of all of the Bonds shall have become or have been declared
due and payable:
FIRST
To the payment of all amounts due under the Financing Documents, exclusive of
unpaid principal and interest on the Note;
SECOND
To the payment to the persons entitled thereto of all installments of
interest then due on the Bonds, in the order of the maturity of the installments of such
interest and, if the amount available shall not be sufficient to pay in full any particular
installment, then to the payment ratably, according to the amounts due on such installment,
to the persons entitled thereto, without any discrimination or preference; and
THIRD
To the payment to the persons entitled thereto of the unpaid principal or
Redemption Price, if any, of any of the Bonds which shall have become due (other than Bonds
called for redemption for the payment of which moneys are held pursuant to the provisions of
this Indenture), in order of maturity, from the respective dates upon which they become due
and, if the amount available shall not be sufficient to pay in full Bonds due on any
particular date, then to the payment ratably, according to the amount of principal or
Redemption Price due on such date, to the persons entitled thereto without any
discrimination or preference.
(2) If the principal of all the Bonds shall have become or have been declared due and
payable, to the payment of all amounts due under the Financing Documents, then to the
payment of the principal and interest (at the rate or rates expressed thereon) then due and
unpaid upon the Bonds without preference or priority of principal over interest or of
interest over principal, or of any installment of interest over any other installment of
interest, or any Bond over any other Bond, ratably, according to the amounts due
respectively for principal and interest, to the persons entitled thereto without any
discrimination or preference.
(B) Whenever moneys are to be applied pursuant to the provisions of this Section, such moneys
shall be applied at such times, and from time to time, as the Trustee shall determine, having due
regard to the amount of such moneys available for application and the likelihood of additional
moneys becoming available for such application in the future. Whenever the Trustee shall apply
such funds, it shall fix the date upon which such application shall be made. The Trustee shall
give such notice as it may deem appropriate of the deposit with it of any such moneys and of the
fixing of any such date, and shall not be required to make payment to the owner of any Bonds until
such Bonds shall be presented to the Trustee for appropriate endorsement or for cancellation if
fully paid.
(C) Whenever all Bonds and interest thereon and all other amounts due under the Financing
Documents have been paid under the provisions of this Section and all fees, expenses and charges of
the Trustee and Paying Agents and the Bond Insurer have been paid, any balance remaining in the
Debt Service Fund shall be paid to or upon the order of the Borrower.
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Exhibit 4.26
Section 8.4.
Actions by Trustee
.
All rights of action under this Indenture or under
any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the
production thereof in any trial or other proceedings relating thereto and any such suit or
proceedings instituted by the Trustee shall be brought in its name as Trustee without the necessity
of joining as plaintiffs or defendants any owners of the Bonds, and any recovery of judgment,
subject to the provisions of Section 8.3 hereof, shall be for the benefit of the holders of the
Outstanding Bonds.
Section 8.5.
Majority Bondholders Control Proceedings
.
Subject to Sections 8.2(E) and
13.3 hereof and Section 7.2(C) of the Loan Agreement, the holders of at least 51% in aggregate
principal amount of Bonds then Outstanding shall have the right, at any time, by an instrument or
instruments in writing executed and delivered to the Trustee, to direct the method and place of
conducting all proceedings to be taken in connection with the enforcement of the terms and
conditions of the Indenture, or for any other proceedings hereunder; but such direction shall not
be otherwise than in accordance with the provisions of law and of this Indenture.
Section 8.6.
Individual Bondholder Action Restricted
.
(A) No owner of the Bonds shall
have any right to institute any suit, action or proceeding at law or in equity for the enforcement
of any provision of this Indenture or the execution of any trust under this Indenture or for any
remedy under this Indenture, unless such owners shall have previously given to the Trustee written
notice of the happening of an Event of Default, as provided in this Article, and the owners of at
least 51% in principal amount of the Bonds then Outstanding shall have filed a written request with
the Trustee, and shall have offered it reasonable opportunity, either to exercise the powers
granted in this Indenture or by the Act or by the laws of the State or to institute such action,
suit or proceeding in its own name, and unless such owners shall have offered to the Trustee
adequate security and indemnity against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee shall have refused to comply with such request for a period of sixty
days after receipt by it of such notice, request and offer of indemnity, it being understood and
intended that no owner of any Bond shall have any right in any manner whatever by his or their
action to affect, disturb or prejudice the pledge created by this Indenture, or to enforce any
right under this Indenture, except in the manner herein provided; and that all proceedings at law
or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in
the manner provided in this Indenture and for the equal benefit of all owners of the Outstanding
Bonds.
(B) Nothing herein or in the Bonds contained shall affect or impair the right of any owner of
the Bonds to payment of the principal or Redemption Price, if any, of and interest on any Bond or
other amounts due under the Financing Documents at and after the maturity thereof, or the
obligation of the Authority to pay the principal or Redemption Price, if applicable, of and
interest on each of the Bonds or other amounts due under the Financing Documents to the respective
owners thereof at the time, place, from the source and in the manner herein and in such Bonds
expressed.
Section 8.7.
Effect of Discontinuance of Proceedings
.
In case any proceeding taken by
the Trustee on account of any Event of Default shall have been dismissed, discontinued or abandoned
for any reason, or shall have been determined adversely, then and in every such case the Authority,
the Trustee, and the owners of the Bonds shall be restored, respectively, to their former positions
and rights hereunder, and all rights, remedies, powers and duties of the Trustee shall continue as
though no such proceedings had been taken.
Section 8.8.
Remedies Not Exclusive
.
No remedy by the terms of this Indenture
conferred upon or reserved to the Trustee or to the owners of the Bonds is intended to be exclusive
of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to
any other remedy given hereunder or now or hereafter existing at law or in equity or by statute.
- 47 -
Exhibit 4.26
Section 8.9.
Delay or Omission Upon Default
.
No delay or omission of the Trustee or
of the owners of any Bond to exercise any right or power arising upon any Event of Default shall
impair any right or power or shall be construed to be a waiver of any such default or any
acquiescence therein; and every power and remedy given by this Article to the Trustee and the owner
of any Bond, respectively, may be exercised from time to time and as often as may be deemed
expedient by the Trustee or by the owner of the Bonds.
Section 8.10.
Notice of Default
.
The Trustee shall immediately mail (upon the
Trustees actual knowledge thereof), to each owner of the Bonds and the Bond Insurer, written
notice of an Event of Default under Section 8.1(A)(1) hereof of which it has actual knowledge. The
Trustee shall promptly mail (within thirty (30) days of the Trustees actual knowledge thereof), to
each owner of the Bonds and the Bond Insurer, written notice of the occurrence of any Event of
Default under Sections 8.1(A)(2), 8.1(A)(3) and 8.1(A)(4) hereof of which it has actual knowledge.
Actual knowledge means the actual knowledge of an officer in the Trustees corporate trust
administration department. The Trustee shall not, however, be subject to any liability to any
owner of the Bonds by reason of its failure to mail any notice required by this Section. The
Trustee shall not be required to monitor the compliance by the Authority with the terms of this
Indenture, or the Borrower with the terms of the Agreement, except as aforesaid.
Section 8.11.
Waivers of Default
.
Subject to the provisions of Section 8.2(E) hereof,
the Trustee, with the prior written consent of the Bond Insurer, shall waive any Event of Default
hereunder and its consequences upon the written request of the owners of 51% in aggregate principal
amount of the Bonds then Outstanding; except that there shall not be waived without the consent of
the owners of all the Bonds Outstanding (a) any default in the payment of the principal of and
Redemption Price on any Outstanding Bonds at the date of maturity specified therein or (b) any
default in the payment when due of the interest on any such Bonds unless, prior to such waiver, all
arrears of interest, at the rate borne by the Bonds on overdue installments of interest, to the
extent permitted by law, in respect of which such default shall have occurred or all arrears of
payments of principal due on the Bonds when due, as the case may be, and all expenses of the
Trustee and any Paying Agent in connection with such default shall have been paid or provided for,
and in case of any such waiver, or in case any proceeding taken by the Trustee on account of any
such default shall have been dismissed, discontinued or abandoned or determined adversely, then and
in every such case the Authority, the Trustee and the owners of the Bonds shall be restored to
their former positions and rights hereunder respectively, but no such waiver, dismissal,
discontinuance, abandonment or determination shall extend to any subsequent or other default, or
impair any right consequent thereon.
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Exhibit 4.26
ARTICLE IX
TRUSTEE AND PAYING AGENTS
Section 9.1.
Appointment and Acceptance of Duties
.
(A) U.S. Bank National Association
is hereby appointed as Trustee. The Trustee shall signify its acceptance of the duties and
obligations of the Trustee by executing this Indenture. All provisions of this Article shall be
construed as extending to and including all the rights, duties and obligations imposed upon the
Trustee under the Agreement and the other Financing Documents as fully for all intents and purposes
as if this Article were contained in the Agreement and the other Financing Documents.
(B) The Trustee is hereby appointed as Paying Agent for the Bonds. The Authority may also
from time to time appoint one or more other Paying Agents in the manner and subject to the
conditions set forth in Section 9.10 hereof for the appointment of a successor Paying Agent. Each
Paying Agent shall signify its acceptance of the duties and obligations imposed upon it by this
Indenture by executing and delivering to the Authority and to the Trustee a written acceptance
thereof. The principal offices of the Paying Agents are designated as the respective offices or
agencies of the Authority for the payment of the interest on and principal or Redemption Price of
the Bonds, except that interest on all registered Bonds and the principal and Redemption Price of
all registered Bonds shall be payable at the corporate trust office of the Trustee located in
Hartford, Connecticut.
Section 9.2.
Indemnity
.
The Trustee shall be under no obligation to institute any
suit, or to take any remedial proceeding under this Indenture, or to enter any appearance in or in
any way defend any suit in which it may be made defendant, or to take any steps in the execution of
the trusts hereby created or in the enforcement of any rights and powers hereunder, until it shall
be indemnified and provided with adequate security to its satisfaction against any and all
reasonable costs and expenses, outlays, and counsel fees and other disbursements, and against all
liability not due to its willful misconduct, gross negligence or bad faith.
The Trustee shall be indemnified for and held harmless against any loss, liability or expense
incurred without gross negligence or bad faith on its part arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of any of its powers
or duties hereunder. No provision of this Indenture shall require the Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds
for believing that payment of such funds or adequate indemnity against such risk or liability is
not assured to it.
Section 9.3.
Responsibilities of Trustee
.
(A) The Trustee shall have no
responsibility in respect of the validity or sufficiency of this Indenture or the security provided
hereunder or the due execution hereof by the Authority, or in respect of the title or the value of
the Project, or in respect of the validity of any Bonds authenticated and delivered by the Trustee
in accordance with this Indenture or to see to the recording or filing of the Indenture or any
financing statement (except the filing of continuation statements as provided in Section 9.13
hereof) or any other document or instrument whatsoever. The recitals, statements and
representations contained herein and in the Bonds shall be taken and construed as made by and on
the part of the Authority and not by the Trustee, and the Trustee does not assume any
responsibility for the correctness of the same; except that the Trustee shall be responsible for
its representation contained in its certificate on the Bonds. The obligation hereunder to pay or
reimburse the Trustee for expenses, advances, reimbursements and to indemnify and hold harmless the
Trustee pursuant to Section 9.2 hereof shall constitute additional indebtedness hereunder and shall
survive the satisfaction and discharge of all obligations under this Indenture.
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Exhibit 4.26
(B) The Trustee shall not be liable or responsible because of the failure of the Authority to
perform any act required of it by this Indenture or the Financing Documents or because of the loss
of any monies arising through the insolvency or the act or default or omission of any depositary
other than itself in which such monies shall have been deposited. The Trustee shall not be
responsible for the application of any of the proceeds of the Bonds or any other monies deposited
with it and paid out, invested, withdrawn or transferred in accordance herewith or for any loss
resulting from any such investment. The Trustee shall not be liable in connection with the
performance of its duties hereunder except for its own willful misconduct, gross negligence or bad
faith. The immunities and exemptions from liability of the Trustee shall extend to its directors,
officers, employees and agents.
(C) The Trustee, prior to the occurrence of an Event of Default and subsequent to an Event of
Default that has been cured, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. In case an Event of Default has occurred of which the
Trustee has actual knowledge (as defined in Section 8.10 hereinabove) and which has not been cured
the Trustee, subject to Section 9.2 hereof, shall exercise such of the rights and powers vested in
it hereby and use the same degree of care and skill in their exercise, as a prudent person would
exercise under the circumstances in the conduct of his own affairs; provided, that if in the
opinion of the Trustee such action might involve expense or liability, it shall not be obligated to
take such action (other than the payment of any Bonds when due from funds held under this Indenture
for the payment thereof or the acceleration of any Bonds pursuant to Section 8.1(B) hereof), unless
it is furnished with indemnity and security to its satisfaction therefor.
(D) The Trustee shall in all instances act in good faith in incurring costs, expenses and
legal fees in connection with the transactions contemplated by this Indenture and the Agreement.
(E) The Trustee shall not be liable or responsible for the failure of the Borrower to effect
or maintain insurance on the Project as provided in the Financing Documents nor shall it be
responsible for any loss by reason of want or insufficiency in insurance or by reason of the
failure of any insurer in which the insurance is carried to pay the full amount of any loss against
which it may have insured the Authority, the Borrower, the Trustee or any other person.
Section 9.4.
Compensation
.
The Trustee and Paying Agents shall be entitled to receive
and collect from the Borrower as provided in the Financing Documents payment for reasonable fees
for services rendered hereunder and all advances, counsel fees and expenses and other expenses
reasonably and necessarily made or incurred by the Trustee or Paying Agents in connection
therewith.
Section 9.5.
Evidence on Which Trustee May Act
.
(A) In case at any time it shall be
necessary or desirable for the Trustee to make any investigation concerning any fact preparatory to
taking or not taking any action, or doing or not doing anything, as such Trustee, and in any case
in which this Indenture or the Financing Documents provide for permitting or taking any action, it
may rely upon any certificate required or permitted to be filed with it under the provisions hereof
or of the Financing Documents, and any such certificate shall be evidence of such fact or protect
it in any action that it may or may not take, or in respect of anything it may or may not do, in
good faith, by reason of the supposed existence of such fact.
(B) The Trustee shall be protected and shall incur no liability in acting or proceeding, or in
not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this
Indenture or the Financing Documents, upon any resolution, order, notice, request, consent, waiver,
certificate, statement, affidavit, requisition, bond or other paper or document which it shall in
good faith reasonably believe to be genuine and to have been adopted or signed by the proper board
or person, or to have been prepared and furnished pursuant to any of the provisions of this
Indenture or the Financing Documents, or upon the written opinion of any attorney (who may be an
attorney for the Authority or the Borrower),
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Exhibit 4.26
engineer, appraiser, or accountant reasonably believed by the Trustee to be qualified in
relation to the subject matter. The Trustee is not required to investigate the qualifications of
any such expert.
(C) Notwithstanding any other provision of this Indenture, in determining whether the rights
of the holders of any of the Bonds will be adversely affected by any action taken pursuant to the
terms and provisions of this Indenture, the Trustee (or any Paying Agent) shall consider the effect
on the holders of the Bonds as if there were no Bond Insurance Policy then in effect.
Section 9.6.
Evidence of Signatures of Owners of the Bonds and Ownership of Bonds
(A)
Any request, consent, revocation of consent or other instrument which this Indenture may require or
permit to be signed and executed by the owners of the Bonds may be in one or more instruments of
similar tenor, and shall be signed or executed by such owners of the Bonds in person or by their
attorneys appointed in writing. Proof of (i) the execution of any such instrument, or of any
instrument appointing any such attorney, or (ii) the holding by any person of the Bonds shall be
sufficient for any purpose of this Indenture (except as otherwise herein expressly provided) if
made in the following manner, or in any other manner satisfactory to the Trustee, which may
nevertheless in its discretion require further or other proof in cases where it deems the same
desirable:
(1) The fact and date of the execution by any owner of the Bonds or his attorney of
such instruments may be proved by a guarantee of the signature thereon by an officer of a
bank or trust company or by the certificate of any notary public or other officer authorized
to take acknowledgments of deeds, that the person signing such request or other instrument
acknowledged to him the execution thereof, or by an affidavit of a witness of such
execution, duly sworn to before such notary public or other officer. Where such execution
is by an officer of a corporation or a member of an association, a limited liability company
or a partnership, on behalf of such corporation, association, limited liability company or
partnership, such signature guarantee, certificate or affidavit shall be accompanied by
sufficient proof of his authority.
(2) The ownership of registered Bonds and the amount, numbers and other identification,
and date of owning the same shall be proved by the registry books.
(B) Except as otherwise provided in Section 10.3 hereof with respect to revocation of a
consent, any request or consent by the owner of any Bond shall bind all future owners of such Bond
in respect of anything done or suffered to be done by the Authority or the Trustee or any Paying
Agent in accordance therewith.
Section 9.7.
Trustee and any Paying Agent, May Deal in Bonds and With Borrower
.
Any
national banking association, bank or trust company acting as a Trustee, or Paying Agent, and its
directors, officers, employees or agents, may in good faith buy, sell, own, hold and deal in any of
the Bonds and may join in any action which any owner of the Bonds may be entitled to take and may
otherwise deal with the Borrower with like effect as if such association, bank or trust company
were not such Trustee or Paying Agent.
Section 9.8.
Resignation or Removal of Trustee
.
(A) The Trustee may resign and
thereby become discharged from the trusts created under this Indenture by notice in writing to be
given to the Authority, the Borrower and the Bond Insurer (so long as the Bond Insurance Policy is
in effect and the Bond Insurer is not in default thereunder) and by notice mailed, postage prepaid
to the owners of the Bonds not less than sixty (60) days before such resignation is to take effect,
but such resignation shall not take effect until the appointment of a successor Trustee pursuant to
Section 9.9 hereof and such successor Trustee shall accept such trust.
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Exhibit 4.26
(B) The Trustee may be removed at any time thirty (30) days after an instrument or concurrent
instruments in writing, is filed with the Trustee and signed by either the Bond Insurer or the
owners of not less than a majority in principal amount of the Bonds then Outstanding or their
attorneys-in-fact duly authorized, but such removal shall not take effect until the appointment of
a successor Trustee pursuant to Section 9.9 hereof and such successor Trustee shall accept such
trust. The Trustee shall promptly give notice of such filing to the Authority.
Section 9.9.
Successor Trustee
.
(A) If at any time the Trustee shall resign, or shall
be removed, be dissolved or otherwise become incapable of acting or shall be adjudged a bankrupt or
insolvent, or if a receiver, liquidator or conservator thereof, or of its property, shall be
appointed, or if any public officer shall take charge or control of the Trustee or of its property
or affairs, the position of Trustee shall thereupon become vacant. If the position of Trustee
shall become vacant for any of the foregoing reasons or for any other reason, the Authority shall
appoint a successor Trustee to fill such vacancy. If the Authority fails to act prior to the date
of resignation of any Trustee or within fifteen days after the position of Trustee becomes vacant,
the Trustee may appoint a temporary successor Trustee. The Authority may thereafter appoint a
successor Trustee to succeed such temporary Trustee. Within forty-five (45) days after such
appointment, the successor Trustee shall cause notice of such appointment to be mailed, postage
prepaid, to the Borrower and all owners of the Bonds.
(B) At any time within one year after such vacancy shall have occurred, the owners of a
majority in principal amount of the Bonds then Outstanding, by an instrument or concurrent
instruments in writing, signed by such owners of the Bonds or their attorneys-in-fact thereunto
duly authorized and filed with the Authority, may appoint a successor Trustee, which shall,
immediately and without further act, supersede any Trustee theretofore appointed. If no
appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this
Section, the owner of any Bond then Outstanding or any retiring Trustee may apply to any court of
competent jurisdiction to appoint a successor Trustee. Such court may thereupon, after such
notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee. In
either event, within thirty (30) days after such appointment, the successor Trustee shall cause
notice of such appointment to be marked, postage prepaid, to the Borrower.
(C) Any Trustee appointed under this Section shall be a national banking association or a bank
or trust company duly organized under the laws of the State or under the laws of any state of the
United States authorized to exercise corporate trust powers and shall be acceptable to the Bond
Insurer (so long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default
thereunder). At the time of its appointment, any successor Trustee shall have a capital stock and
surplus aggregating not less than $100,000,000.
(D) Every successor Trustee shall execute, acknowledge and deliver to its predecessor, and
also to the Authority, an instrument in writing accepting such appointment, and thereupon such
successor Trustee, without any further act, deed, or conveyance, shall become fully vested with all
monies, estates, properties, rights, immunities, powers and trusts, and subject to all the duties
and obligations of its predecessor, with like effect as if originally named as such Trustee; but
such predecessor shall, nevertheless, on the written request of its successor or of the Authority,
and upon payment of the compensation, expenses, charges and other disbursements of such predecessor
which are due and payable pursuant to Section 9.4 hereof, execute and deliver an instrument
transferring to such successor Trustee all the estate, properties, rights, immunities, powers and
trusts of such predecessor, except any indemnification rights. Every predecessor Trustee shall
also deliver all property and monies held by it under the Indenture to its successor. Should any
instrument in writing from the Authority be required by any successor Trustee for more fully and
certainly vesting in such Trustee, the estate, properties, rights, immunities, powers and trusts
vested or intended to be vested in the predecessor Trustee any such instrument in writing shall, on
request, be executed, acknowledged and delivered by the Authority. Any successor Trustee shall
promptly notify the Paying Agents of its appointment as Trustee.
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Exhibit 4.26
(E) Any company into which the Trustee may be merged or converted or with which it may be
consolidated or any company resulting from any merger, conversion or consolidation to which it
shall be a party or any company to which the Trustee may sell or transfer all or substantially all
of its corporate trust business, provided such company shall be a national banking association or a
bank or trust company duly organized under the laws of any state of the United States, shall have a
capital stock and surplus aggregating not less than $100,000,000, and shall be authorized by law to
perform all the duties imposed upon it by the Indenture, shall be the successor to such Trustee,
both in its capacity as Trustee and in its capacity as Paying Agent if the Trustee is serving as
Paying Agent, without the execution or filing of any paper or the performance of any further act.
(F) Any Trustee which becomes incapable of acting as Trustee shall pay over, assign and
deliver to its successor any monies, funds or investments held by it in the manner provided in
Section 9.9(D) and shall render an accounting to the Authority.
Section 9.10.
Appointment and Responsibilities of Paying Agent
.
The initial Paying
Agent shall be U.S. Bank National Association. The Paying Agent shall be entitled to the advice of
counsel (who may be counsel for any party) and shall not be liable for any action taken in good
faith in reliance on such advice. The Paying Agent may rely conclusively on any telephone or
written notice, certificate or other document furnished to it under this Indenture and reasonably
believed by it to be genuine. The Paying Agent shall not be liable for any action taken or omitted
to be taken by it in good faith and reasonably believed by it to be within the discretion or power
conferred upon it, or taken by it pursuant to any direction or instruction by which it is governed
under this Indenture or omitted to be taken by it by reason of the lack of direction or instruction
required for such action, or be responsible for the consequences of any error of judgment
reasonably made by it. When any payment or other action by the Paying Agent is called for by this
Indenture, it may defer such action pending receipt of such evidence, if any, as it may reasonably
require in support thereof. A permissive right or power to act shall not be construed as a
requirement to act. The Paying Agent shall not in any event be liable for the application or
misapplication of funds, or for other acts or defaults, by any person, firm or corporation except
by the Paying Agents respective directors, officers, agents and employees. For the purposes of
this Indenture matters shall not be considered to be known to the Paying Agent unless they are
known to an officer in its corporate trust administration division. The Paying Agent shall not
require indemnification prior to making any payment when due of principal, premium or interest on
any Bond to be made by the Paying Agent to any Bondholder, except and unless such drawing or
payment is prohibited by or violates applicable law or any outstanding or pending court or
governmental order or decree.
Section 9.11.
Resignation or Removal of Paying Agent; Successors
.
(A) Any Paying
Agent may at any time resign and be discharged of the duties and obligations created by the
Indenture by giving at least sixty days written notice to the Authority, the Trustee and the
Borrower. Any successor Paying Agent shall be appointed by the Authority, at the direction of the
Borrower, with the approval of the Trustee, and shall be a bank or trust company duly organized
under the laws of any state of the United States or a national banking association, having a
capital stock and surplus aggregating at least $100,000,000, and willing and able to accept the
office on reasonable and customary terms and authorized by law to perform all the duties imposed
upon it by this Indenture. The Paying Agent may be removed at any time by the Authority at the
direction of the Borrower by a written instrument filed with the Trustee and the Paying Agent. The
Paying Agent may, but need not be, the same person as the Trustee.
(B) If the position of Paying Agent shall become vacant for any reason, or if any bankruptcy,
insolvency or similar proceeding shall be commenced by or against the Paying Agent, the Authority
shall appoint a successor Paying Agent designated by the Borrower to fill the vacancy. A written
acceptance of office shall be filed by the successor Paying Agent. The Trustee shall give notice
of the appointment of a successor Paying Agent in writing to each Bondholder. The Trustee will
promptly certify to the Borrower
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Exhibit 4.26
that it has mailed such notice to all Bondholders, and such certificate will be conclusive
evidence that such notice was given in the manner required hereby.
(C) Any corporation, association, limited liability company partnership or firm which succeeds
to the business of the Paying Agent as a whole or substantially as a whole, whether by sale,
merger, consolidation or otherwise, shall thereby become vested with all the property, rights and
powers of the Paying Agent under this Indenture and shall be subject to all the duties and
obligations of the Paying Agent under this Indenture.
The Paying Agent shall send or cause to be sent notice to Bondholders of a change of address
for the delivery of Bonds or notice or the payment of principal of Bonds.
Section 9.12.
Monies Held for Particular Bonds
.
The amounts held by the Trustee or
Paying Agents for the payment of the interest, principal or Redemption Price due on any date with
respect to particular Bonds, on and after such date and pending such payment, shall be set aside on
its books and held in trust by it for the owners of the Bonds entitled thereto. Such funds shall
be invested in Federal Securities at the direction of the Borrower for the account of the Borrower
or shall otherwise remain uninvested.
Section 9.13.
Continuation Statements
.
The Trustee shall cause all continuation
statements necessary to preserve and protect the security interest of the Trustee in the collateral
pledged by the Authority in the granting clauses hereof to be filed in the applicable State offices
so as to continue the perfected status thereof pursuant to the Uniform Commercial Code of the
State.
Section 9.14.
Obligation to Report Defaults
.
In accordance with the provisions of
Section 8.10 hereof, upon an officer in the Trustees corporate trust administration department
becoming aware of any condition or event which constitutes, or with the giving of notice or the
passage of time would constitute, an Event of Default under the Financing Documents or this
Indenture, the Trustee shall deliver to the Authority a written notice stating the existence
thereof and the action it proposes to take with respect thereto. Becoming aware means the actual
knowledge of an officer in the Trustees corporate trust department.
Section 9.15.
Payments Due on non-Business Day
.
In any case where the date of
maturity of interest on or principal of the Bonds or the date fixed for redemption of any Bonds
shall, in the city of payment, be a day other than a Business Day, then payment of such amount
shall be made as provided in the forms of the Bonds.
Section 9.16.
Appointment of Co-Trustee
.
(A) It is the purpose of this Indenture that
there shall be no violation of any law of any jurisdiction denying or restricting the right of
banking corporations or associations to transact business as trustee in such jurisdiction. It is
recognized that in case of litigation under this Indenture or the Agreement, and in particular in
case of the enforcement of either on default, or in case the Trustee deems that by reason of any
present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies
herein granted to the Trustee or hold title to the properties, in trust, as herein granted, or take
any other action which may be desirable or necessary in connection therewith, it may be necessary
that the Trustee appoint an additional individual or institution as a separate trustee or
co-Trustee. The following provisions of this Section are adapted to these ends.
(B) In the event that the Trustee appoints an additional individual or institution as a
separate trustee or co-Trustee, each and every remedy, power, right, claim, demand, cause of
action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be
exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by
and vest in such separate trustee or co-Trustee but only to the extent necessary to enable such
separate trustee or co-Trustee to exercise such
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Exhibit 4.26
powers, rights and remedies, and every covenant and obligation necessary to the exercise
thereof by such separate trustee or co-Trustee shall run to and be enforceable by either of them.
(C) Should any instrument in writing from the Authority be required by the separate trustee or
co-Trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to
him or it such properties, rights, powers, trusts, duties and obligations, any and all such
instruments in writing shall, on request, be executed, acknowledged and delivered by the Authority.
In case any separate trustee or co-Trustee, or a successor to either, shall die, become incapable
of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and
obligations of such separate trustee or co-Trustee, so far as permitted by law, shall vest in and
be exercised by the Trustee until the appointment of a new trustee or successor to such separate
trustee or co-Trustee.
Section 9.17.
Project Description
.
The Trustee shall maintain in current form as an
Appendix to the Agreement a list of the property constituting the Project Realty and the Project
Equipment and, on the basis of the descriptions furnished by the Borrower pursuant to the
Agreement, shall amend the list in writing to reflect changes in the Project Realty and the Project
Equipment.
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Exhibit 4.26
ARTICLE X
AMENDMENTS OF INDENTURE
Section 10.1.
Limitation on Modifications
.
This Indenture shall not be modified or
amended in any respect except as provided in and in accordance with and subject to the provisions
of this Article.
Section 10.2.
Supplemental Indentures Without Consent of Owners of the Bonds
.
(A)
Subject to paragraph (C) of this Section 10.2, the Authority may, from time to time and at any
time, adopt Supplemental Indentures without notice to or consent of the owners of the Bonds or the
Bond Insurer (except as otherwise provided in (6) below) for any of the following purposes:
(1) To cure any formal defect, omission or ambiguity in this Indenture or in any
description of property subject to the lien hereof, if such action is not adverse to the
interests of the owners of the Bonds.
(2) To grant to or confer upon the Trustee for the benefit of the owners of the Bonds
any additional rights, remedies, powers, authority or security which may lawfully be granted
or conferred and which are not contrary to or inconsistent with this Indenture as
theretofore in effect.
(3) To add to the covenants and agreements of the Authority in this Indenture other
covenants and agreements to be observed by the Authority which are not contrary to or
inconsistent with this Indenture as theretofore in effect.
(4) To add to the limitations and restrictions in this Indenture other limitations and
restrictions to be observed by the Authority which are not contrary to or inconsistent with
this Indenture as theretofore in effect.
(5) To confirm, as further assurance, any pledge under, and the subjection to any lien
or pledge created or to be created by, this Indenture, of Revenues or other income from or
in connection with the Project or of any other monies, securities or funds, or to subject to
the lien or pledge of this Indenture additional revenues, properties or collateral.
(6) With the prior written consent of the Bond Insurer, to make any other changes which
do not materially adversely affect the interest of owners of the Bonds, as evidenced to the
Trustee by an opinion of Bond Counsel.
(7) To enable the Authority and the Borrower to receive or maintain a rating on the
Bonds from S&P and/or Moodys; provided, however, that nothing in this Section 10.2(7) shall
limit or restrict the rights of Bondholders to consent to modifications, alterations or
amendments to this Indenture as provided in Section 10.3 hereof.
(B) Before the Authority shall adopt any Supplemental Indenture pursuant to this Section,
there shall have been filed with the Trustee an opinion of Bond Counsel satisfactory to the Trustee
stating that such Supplemental Indenture is authorized or permitted by this Indenture and the Act,
complies with the terms of this Indenture, and that upon enactment it will be valid and binding
upon the Authority in accordance with its terms.
(C) Notwithstanding anything to the contrary contained herein, any provision of this Indenture
expressly recognizing or granting rights in or to the Bond Insurer may not be amended in any manner
which affects the rights of the Bond Insurer hereunder without the prior written consent of the
Bond Insurer.
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Exhibit 4.26
Section 10.3.
Supplemental Indentures With Consent of Owners of the Bonds
.
(A)
Subject to the terms and provisions contained in this Article, the Bond Insurer, unless the Bond
Insurer is in default under the Bond Insurance Policy, in which case the owners of not less than
51% in aggregate principal amount of the Bonds then Outstanding (or in the event that the proposed
change does not affect all owners of Bonds, the owners of not less than 51% of the Bonds so
affected), shall have the right from time to time, to consent to and approve the adoption by the
Authority of any Supplemental Indenture as shall be deemed necessary or desirable by the Authority
for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any
of the terms or provisions contained herein. Nothing herein contained shall permit, or be
construed as permitting, without the consent of all of the owners of the Bonds affected thereby (i)
a change in the terms of redemption or maturity of the principal of or the interest on any
Outstanding Bond, or a reduction in the principal amount or redemption price of any Outstanding
Bond or the rate of interest thereon, without the consent of the owner of such Bond, (ii) the
creation of a lien upon or pledge of Revenues other than the lien or pledge created by this
Indenture, (iii) a preference or priority of any Bond or Bonds over any other Bond or Bonds, or
(iv) a reduction in the aggregate principal amount of the Bonds required for consent to such
Supplemental Indenture.
(B) If at any time the Authority shall determine to adopt any Supplemental Indenture for any
of the purposes of this Section, it shall cause notice of the proposed Supplemental Indenture to be
mailed, postage prepaid, to the Bond Insurer or, if the Bond Insurer is in default under the Bond
Insurance Policy, all owners of the Bonds. Such notice shall briefly set forth the nature of the
proposed Supplemental Indenture, and shall state that a copy thereof is on file at the offices of
the Trustee for inspection by the Bond Insurer or all owners of the Bonds, as the case may be.
(C) Within one year after the date of such notice, the Authority may adopt such Supplemental
Indenture in substantially the form described in such notice only if there shall have first been
filed with the Authority (i) the written consent of the Bond Insurer or, if the Bond Insurer is in
default under the Bond Insurance Policy, the written consent of the owners of not less than 51% in
aggregate principal amount of the Bonds then Outstanding so affected, and (ii) an opinion of
counsel satisfactory to the Trustee stating that such Supplemental Indenture is authorized or
permitted by this Indenture and complies with its terms, and that upon adoption it will be valid
and binding upon the Authority in accordance with its terms. Each valid consent of a Bondholder
shall be effective only if accompanied by proof of the owning, at the date of such consent, of the
Bonds with respect to which such consent is given. A certificate or certificates by the Trustee
that it has examined such proof and that such proof is sufficient in accordance with this Indenture
shall be conclusive that the consents have been given by the owners of the Bonds described in such
certificate or certificates. Any such consent shall be binding upon the owner of the Bonds giving
such consent and upon any subsequent owner of such Bonds and of any Bonds issued in exchange
therefor (whether or not such subsequent owner thereof has notice thereof), unless such consent is
revoked in writing by the owner of such Bonds giving such consent or a subsequent owner thereof by
filing such revocation with the Trustee prior to the adoption of such Supplemental Indenture.
(D) If the owners of not less than the percentage of Bonds required by this Section, or the
Bond Insurer, on their behalf, shall have consented to and approved the execution thereof as herein
provided, no owner of any Bond shall have any right to object to the enactment of such Supplemental
Indenture, or to object to any of the terms and provisions contained therein or the operation
thereof, or in any manner to question the propriety of the adoption thereof, or to enjoin or
restrain the Authority from adopting the same or from taking any action pursuant to the provisions
thereof.
(E) Upon the adoption of any Supplemental Indenture pursuant to the provisions of this
Section, this Indenture shall be deemed to be modified and amended in accordance therewith, and the
respective rights, duties and obligations under this Indenture of the Authority, the Trustee, the
Paying Agent, the Bond Insurer and all owners of Bonds then Outstanding shall thereafter be
determined,
- 57 -
Exhibit 4.26
exercised and enforced under this Indenture, subject in all respects to such modifications and
amendments.
Section 10.4.
Supplemental Indenture Part of the Indenture
.
Any Supplemental
Indenture adopted in accordance with the provisions of this Article shall thereafter form a part of
this Indenture and all the terms and conditions contained in any such Supplemental Indenture as to
any provisions authorized to be contained therein shall be deemed to be part of the terms and
conditions of this Indenture for any and all purposes. The Trustee shall execute any Supplemental
Indenture adopted in accordance with the provisions of Sections 10.2 or 10.3 hereof; provided,
however, that the Trustee may, but shall not be obligated to, enter into any such instrument which
adversely affects the Trustees own rights, duties or immunities under this Indenture or otherwise.
- 58 -
Exhibit 4.26
ARTICLE XI
AMENDMENTS OF FINANCING DOCUMENTS
Section 11.1.
Rights of Borrower
.
Anything herein to the contrary notwithstanding,
any Supplemental Indenture under Article X hereof which affects in any manner any rights, powers,
authority, duties or obligations of the Borrower under the Financing Documents or of any subsequent
user of the Project or requires a revision of the Financing Documents or subsequent agreement with
respect to the Project shall not become effective unless and until the Borrower or such subsequent
user, as the case may be, shall have given its written consent signed by its duly Authorized
Representative to such Supplemental Indenture.
Section 11.2.
Amendments of Financing Documents Not Requiring Consent of Owners of the
Bonds
.
The Authority and the Trustee may, without the consent of or notice to the owners of
the Bonds or the Bond Insurer, consent to any amendment, change or modification of the Financing
Documents for the purpose of (i) curing any ambiguity or formal defect therein or which, in the
judgment of the Trustee will not materially prejudice the Trustee or the owners of the Bonds or
(ii) to make any other changes which do not materially adversely affect the interests of the owners
of the Bonds, as evidenced to the Trustee by an opinion of counsel. The Trustee shall have no
liability to any owner of the Bonds or any other person for any action taken by it in good faith
pursuant to this Section.
Section 11.3.
Amendments of Financing Documents Requiring Consent of Owners of the
Bonds
.
(A) Except as provided in Section 11.2 hereof, the Authority and the Trustee shall not
consent to any amendment, change or modification of the Financing Documents, including the
substitution of an assignee for the Borrower and the release of the Borrower from the obligations
of the Financing Documents, without mailing of notice and the written approval or consent of the
Bond Insurer, unless the Bond Insurer is in default under the Bond Insurance Policy, in which case
such amendment, change or modification shall require the mailing of notice and the written approval
or consent of the owners of not less than 51% in aggregate principal amount of the Bonds at the
time Outstanding and so affected given and procured as in Section 10.3 hereof provided. If at any
time the Borrower or a subsequent user of the Project shall request the consent of the Trustee to
any such proposed amendment, change or modification, the Trustee shall cause notice of such
proposed amendment, change or modification to be mailed in the same manner as is provided in
Article X hereof with respect to Supplemental Indentures. Such notice shall briefly set forth the
nature of such proposed amendment, change or modification and shall state that copies of the
instrument embodying the same are on file at the principal office of the Trustee for inspection by
the Bond Insurer or all owners of the Bonds, as the case may be.
(B) Notwithstanding anything to the contrary contained herein or in the Agreement, none of the
transactions described in Section 6.1 and 6.2 of the Agreement shall require the consent of the
Authority or the Trustee.
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Exhibit 4.26
ARTICLE XII
DISCHARGE OF INDENTURE
Section 12.1.
Defeasance
.
(A) If the Authority shall pay or cause to be paid, or
there shall otherwise be paid, to the owners of all Bonds the principal or Redemption Price, if
applicable, interest and all other amounts due or to become due thereon or in respect thereof, and
all other amounts due or to become due under the Financing Documents, at the times and in the
manner stipulated therein and in this Indenture, and if all the fees, expenses and advances of the
Trustee and all Paying Agents have been paid, then the pledge of any revenues or receipts from or
in connection with the Financing Documents or the Project under this Indenture and the estate and
rights hereby granted, and all covenants, agreements and other obligations of the Authority to the
owners of the Bonds hereunder shall thereupon cease, terminate and become void and be discharged
and satisfied and such Bonds shall thereupon cease to be entitled to any lien, benefit or security
hereunder, except as to moneys or securities held by the Trustee or the Paying Agents as provided
below in this subsection. At the time of such cessation, termination discharge and satisfaction,
(1) the Trustee shall cancel and discharge the lien of this Indenture and execute and deliver to
the Borrower all such instruments as may be appropriate to satisfy such lien and to evidence such
discharge and satisfaction, and (2) the Trustee, the Authority and the Paying Agents shall pay over
or deliver to the Borrower or on its order all moneys or securities held by them pursuant to the
Indenture which are not required (a) for the payment of principal or Redemption Price, if
applicable, or interest on Bonds not theretofore surrendered for such payment or redemption, or (b)
for the payment of all such other amounts due or to become due under the Financing Documents.
(B) Bonds or interest installments for the payment or redemption of which moneys (or Federal
Securities, the principal of and interest on which when due, together with the moneys, if any, set
aside at the same time, will provide funds sufficient for such payment or redemption) shall then be
set aside and held in trust by the Trustee or Paying Agents, whether at or prior to the maturity or
the redemption date of such Bonds, shall be deemed to have been paid within the meaning and with
the effect expressed in subsection (A) of this Section, if (a) in case any such Bonds are to be
redeemed prior to maturity, all action necessary to redeem such Bonds shall have been taken and
notice of such redemption shall have been duly given or provision satisfactory to the Trustee shall
have been made for the giving of such notice, and (b) if the maturity or redemption date of any
such Bond shall not then have arrived, (i) provision shall have been made by deposit with the
Trustee or other methods satisfactory to the Trustee for the payment to the owners of any such
Bonds upon surrender thereof, whether or not prior to the maturity or redemption date thereof, of
the full amount to which they would be entitled by way of principal or Redemption Price and
interest and all other amounts then due under the Financing Documents to the date of such maturity
or redemption, (ii) provision satisfactory to the Trustee shall have been made for the mailing of a
notice to the owners of such Bonds that such moneys are so available for such payment and (iii) the
Borrower shall provide, or cause to be provided, a verification report of an independent nationally
recognized certified public accountant and an opinion of nationally recognized bond counsel
addressed to the Bond Insurer to the effect that the Bonds are no longer Outstanding under the
Indenture.
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Exhibit 4.26
ARTICLE XIII
GENERAL PROVISIONS
Section 13.1.
Notices
.
(A) Any notice, request, demand, communication, direction or
other paper shall be sufficiently given and shall be deemed given when delivered or mailed by
registered or certified mail, return receipt requested, postage prepaid, or sent by telegram,
addressed as follows: if to the Authority, at 999 West Street, Rocky Hill, Connecticut 06067,
Attention: Program Manager Loan Administration; if to the Borrower, 93 Main Street, Clinton,
Connecticut 06413, Attention: Vice President-Finance, if to the Trustee, Goodwin Square, 225
Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Administration; and if to
the Bond Insurer, 125 Park Avenue, New York, New York 10017, Attention: Risk Management (and if to
the Bond Insurers Fiscal Agent at U.S. Bank Trust National Association, 100 Wall Street, 19th
Floor, New York, New York 10005, Attention: Corporate Trust Department). A duplicate copy of each
notice required to be given hereunder by the Trustee to either the Authority or the Borrower, shall
also be given to the other and the Bond Insurer. In addition, copies of all amendments to this
Indenture which are consented to by the Bond Insurer shall be sent to S&P. Any notice party may
designate any further or different addresses to which subsequent notices, certificates or other
communications shall be sent.
(B) Notice hereunder may be waived prospectively or retrospectively by the person entitled to
such notice, but no waiver shall affect any notice requirement as to other persons.
(C) Notwithstanding anything to the contrary contained herein, all notices, requests, demands,
communications or directions to the Trustee shall be given in writing.
Section 13.2.
Covenant Against Discrimination
.
The Trustee agrees and warrants that
in the performance of this Indenture it will not discriminate against any person or group of
persons on the grounds of race, color, religion, national origin, age, sex, sexual orientation,
marital status, physical or learning disability, political beliefs, mental retardation, or history
of mental disorder in any manner prohibited by the laws of the United States or of the State.
Section 13.3.
Rights of Bond Insurer
.
(A) Notwithstanding anything to the contrary
contained herein, so long as the Bond Insurer is not in default on its payment obligations under
the Bond Insurance Policy, such Bond Insurer shall at all times be deemed to be the exclusive owner
of the Bonds insured pursuant to the Bond Insurance Policy issued by such Bond Insurer for the
purposes of all approvals, consents, waivers or institution of any action and the direction of all
remedies. To the extent that the Bond Insurer makes payment of principal of or interest on the
Bonds, it shall become the owner of such Bonds, or shall be entitled to the right to payment of
principal of or interest on such Bonds and shall be fully subrogated to all of the registered
owners rights thereunder, including the registered owners right to payment thereof. To evidence
such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee
shall note the Bond Insurers rights as subrogee on the registration books of the Authority
maintained by the Trustee upon receipt of proof from the Bond Insurer as to payment of interest
thereon to the registered owners of the Bonds, and (ii) in the case of subrogation as to claims for
past due principal, the Trustee shall note the Bond Insurers rights as subrogee on the
registration books of the Authority maintained by the Trustee upon receipt of proof from the Bond
Insurer of the surrender or transfer of the Bonds by the registered owners thereof to the Bond
Insurer. The Trustee shall deliver to the Bond Insurer or its designated agent a document in form
and substance acceptable to the Trustee and the Bond Insurer or its designated agent confirming
such subrogation rights.
(B) In the event that the principal of and/or interest on the Bonds shall be paid by the Bond
Insurer pursuant to the terms of the Bond Insurance Policy, the Bonds shall remain Outstanding, the
assignment and pledge of the trust estate and all covenants, agreements and other obligations of
the Authority to the registered owners shall continue to exist and the Bond Insurer shall be fully
subrogated to
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Exhibit 4.26
all of the rights of such registered owners in accordance with the terms and conditions of
subparagraph (A) above and the Bond Insurance Policy.
(C) Notwithstanding any provision in this Indenture or the Agreement to the contrary, the Bond
Insurer shall have no rights under this Indenture or the Agreement, other than rights of
subrogation as herein provided to the extent that the Bond Insurer has made payments under the Bond
Insurance Policy, in the event that the Bond Insurance Policy is not in effect or the Bond Insurer
is in default on its payment obligations under the Bond Insurance Policy.
Section 13.4.
Bond Insurer Consent
. Notwithstanding any other provisions of this
Indenture, unless the Bond Insurer is in default under the Bond Insurance Policy, the consent of
the owners of Bonds for which a Bond Insurance Policy has been issued shall for purposes of this
Indenture be deemed to have been obtained when the consent of the Bond Insurer is obtained, except
in the cases where approval of all Bondowners is required as provided in Section 10.3(A) hereof, in
which case the consents of the Bondowners and the Bond Insurer shall be required. Notwithstanding
any provision in this Indenture or the Agreement to the contrary, all provisions in this Indenture
or the Financing Documents requiring the consent of the Bond Insurer shall have no force and effect
if the Bond Insurance Policy is not in effect or if the Bond Insurer is in default under such Bond
Insurance Policy.
Section 13.5.
Notices to the Bond Insurer
.
While the Bond Insurance Policy is effect,
the Trustee shall furnish to the Bond Insurer a copy of any notice to be given to the registered
owners of the Bonds or any other party to this Indenture, including, without limitation, notice of
any redemption of or defeasance of Bonds (including, without limitation, the principal amount,
maturities and CUSIP numbers thereof), and any certificate rendered pursuant to this Indenture
relating to the security for the Bonds; and such additional information it may reasonably request.
Notwithstanding any other provision of this Indenture, the Trustee shall immediately notify
the Bond Insurer at any time there are insufficient moneys to make any payments of principal and/or
interest as required and as provided in Section 8.10 hereof, upon the occurrence of any Event of
Default hereunder.
Section 13.6.
Parties Interested Herein
.
Except as otherwise specifically provided
herein, nothing in this Indenture expressed or implied is intended or shall be construed to confer
upon, or to give to, any person or entity, other than the Authority, the Trustee, the Bond Insurer,
the Borrower, the Paying Agent and the registered owners of the Bonds, any right, remedy or claim
under or by reason of this Indenture or any covenant, condition or stipulation hereof, and all
covenants, stipulations, promises and agreements in this Indenture contained by and on behalf of
the Authority shall be for the sole and exclusive benefit of the Authority, the Trustee, the Bond
Insurer, the Borrower, the Paying Agent and the registered owners of the Bonds.
Section 13.7.
Bond Insurer as Third Party Beneficiary
.
To the extent that this
Indenture confers upon or gives or grants to the Bond Insurer any right, remedy or claim under or
by reason of this Indenture, the Bond Insurer is hereby explicitly recognized as being a
third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given
or granted hereunder.
Section 13.8.
Effective Date; Counterparts
.
This Indenture shall become effective on
delivery. It may be simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
Section 13.9.
Date for Identification Purposes Only
.
The date of this Indenture shall
be for identification purposes only and shall not be construed to imply that this Indenture was
executed on such date.
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Exhibit 4.26
Section 13.10.
Separability of Invalid Provisions
.
In case any one or more of the
provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Indenture, but this Indenture shall be construed as if such
invalid or illegal or unenforceable provision had never been contained herein.
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Exhibit 4.26
IN WITNESS WHEREOF,
the Connecticut Development Authority has caused these presents to be
signed in its name and behalf by an Authorized Representative, and to evidence its acceptance of
the trusts hereby created, U.S. Bank National Association, has caused these presents to be signed
in its name and behalf by its duly authorized officer, as of the date first above written.
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CONNECTICUT DEVELOPMENT AUTHORITY
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By
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/s/ Karin A. Lawrence
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Name: Karin A. Lawrence
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Authorized Representative
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U.S. BANK NATIONAL ASSOCIATION
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By
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/s/ Cauna M. Silva
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Name: Cauna M. Silva
Title: Vice President
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Exhibit 4.26
APPENDIX A TO INDENTURE
REQUISITION
The Connecticut Water Company (the Borrower) hereby requests U.S. Bank National Association,
as trustee (the Trustee) under the Indenture of Trust, dated October 1, 2005, between U.S. Bank
National Association and the Connecticut Development Authority (the Indenture), to withdraw
$___from the ___Account of the Project Fund established under the Indenture for
purposes permitted by Section 5.2 thereof. In connection with this withdrawal, the Borrower states
as follows:
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1.
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The number of this requisition is
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2.
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Payments aggregating
are due to the following persons in the following
amounts for expenditures incurred in connection with the Project:
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Person
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Address
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Amount
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Item
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Attached hereto are invoices evidencing each such amount due and the person to whom such amount is
payable.
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3.
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Payment is due to the Borrower in the total amount of $___in reimbursement for
amounts paid by the Borrower in connection with the Project:
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Attached hereto are receipts or other evidences of payment showing payment of each such amount and
the person to whom payment was made.
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4.
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Each amount set forth in paragraphs 2 and 3 hereof has been properly paid or incurred
within the provisions of the Agreement and the Indenture, is a proper charge against the Project
Fund, is unpaid or unreimbursed, and has not been the basis for any previous withdrawal.
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5.
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This requisition and the use of proceeds set forth herein are consistent in all material
respects with the Tax Regulatory Agreement.
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6.
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Ninety-five percent or more of the amount requisitioned is to be applied to costs (a) paid
or incurred not more than sixty (60) days prior to the adoption of the Authoritys inducement
resolution for the Project on May 19, 2004, (b) for the acquisition, construction or reconstruction
of land or property of a character subject to the allowance for depreciation provided in Section
167 of the Internal Revenue Code of 1986, as amended, and (c) which are chargeable to the capital
account of the Project or would be so chargeable either with an election by the Borrower or but for
the election of the Borrower to deduct the amount of the item.
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Capitalized terms used in this requisition are used as defined in the Indenture.
A
1
Exhibit 4.26
I am an Authorized Representative of the Borrower under the Agreement.
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THE CONNECTICUT WATER COMPANY
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By:
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Name:
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Title:
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A
2
EXHIBIT 4.27
Execution Copy
INSURANCE AGREEMENT
INSURANCE AGREEMENT, dated November 30, 2005, between The Connecticut Water Company, (the
Company
) and Financial Guaranty Insurance Company, a New York stock insurance company (
FGIC
).
WHEREAS
, pursuant to an Indenture of Trust, dated as of October 1, 2005 (the
Indenture
),
between Connecticut Development Authority (the
Issuer
) and U.S. Bank National Association as
trustee (the
Trustee
), the Issuer has issued $10,000,000 in aggregate principal amount of its
Water Facilities Revenue Bonds (The Connecticut Water Company Project 2005A Series) (the
Bonds
); and
WHEREAS
, the Company and the Issuer have entered into a Loan Agreement, dated as of October 1,
2005 (the
Loan Agreement
), pursuant to which the Company is obligated to make loan payments
sufficient to pay, among other items, debt service on the Bonds; and
WHEREAS
, FGIC has issued its Financial Guaranty Insurance Policy (the
Policy
), which insures
the scheduled payments of principal of and interest on the Bonds and payment of principal of and
interest on the Bonds upon a Determination of Taxability (as defined in the Indenture) as specified
in the Policy; and
WHEREAS
, the Company understands that FGIC expressly requires the delivery of this Agreement
as part of the consideration for the delivery by FGIC of the Policy;
NOW, THEREFORE
, in consideration of the premises and of the agreements herein contained and of
the execution and delivery of the Policy, the Company and FGIC agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.
Except as otherwise expressly provided herein or unless the
context otherwise requires, the terms that are capitalized herein shall have the meanings specified
in the Indenture unless otherwise defined in Annex A hereto.
ARTICLE II
PREMIUM AND REIMBURSEMENT OBLIGATIONS
OF THE COMPANY
SECTION 2.01. Premium.
In consideration of FGICs agreeing to issue the Policy hereunder, the
Company hereby agrees to pay FGIC the Premium at the times and in the amounts provided in the
Commitment. To the extent that any such payment of the Premium is not paid when due, interest
shall accrue on such unpaid amount at a rate equal to the Effective Interest Rate.
- 1 -
EXHIBIT
4.27
SECTION 2.02. Reimbursement Obligation.
The Company agrees to reimburse Financial Guaranty,
from any available funds, immediately and unconditionally upon demand, for any Policy Payment. To
the extent that any such payment due hereunder is not paid when due, interest shall accrue on such
unpaid amounts at a rate equal to the Effective Interest Rate. Following any such Policy Payment,
the payment by the Company of the amount of principal of and/or interest on the obligations in
respect of which such Policy Payment shall have been made shall satisfy and discharge, to the
extent thereof, the corresponding obligations of the Company under this Section 2.02.
SECTION 2.03. Unconditional Obligation.
The obligations of the Company hereunder are absolute
and unconditional and will be paid or performed strictly in accordance with this Agreement,
irrespective of:
(a) any lack of validity or enforceability of, or any amendment or other modification of, or
waiver with respect to the Bonds, the Indenture, the Loan Agreement or any other bond financing
document;
(b) any exchange, release or nonperfection of any security interest in property securing the
Bonds, the Indenture, the Loan Agreement or this Agreement or any obligations hereunder;
(c) any circumstances that might otherwise constitute a defense available to, or discharge of,
the Company with respect to the Bonds, the Indenture, this Agreement or the Loan Agreement; or
(d) whether or not the obligations under the Bonds, the Indenture, this Agreement or the Loan
Agreement are contingent or matured, disputed or undisputed, liquidated or unliquidated.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Company.
The Company makes the following representations as the basis for its undertakings herein
contained:
(a) The Company is a Connecticut corporation organized and existing under the laws of the
State of Connecticut and has the power to enter into and has duly authorized, by proper action, the
execution and delivery of this Agreement and the Loan Agreement (collectively, the
Company
Documents
).
(b) Neither the execution and delivery of any Company Document, the consummation of the
transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms
and conditions hereof and thereof, conflicts with or results in a breach of any of the terms,
conditions or provisions of the Companys organizational documents or of any material agreement or
instrument to which the Company is now a party or by which it is
- 2 -
EXHIBIT
4.27
bound, or constitutes a default
(with due notice or the passage of time or both) under any of the foregoing, or results in the
creation or imposition of any prohibited lien, charge or encumbrance whatsoever upon any of the
property or assets of the Company under the terms of any material instrument or agreement to which
the Company is now a party or by which it is bound.
(c) All certificates, approvals, permits and authorizations of applicable local governmental
agencies, the State of Connecticut and the federal government that are necessary (i) for the due
execution and delivery by the Company of, and the performance by the Company of its obligations
under, each Company Document and (ii) for the operation and use of the capital projects being
financed by the Bonds, in each case, have been obtained and continue in force, except, in the case
of clause (ii), for such certificates, approvals, permits and authorizations the failure of which
to obtain or to maintain in full force would not, individually or in the aggregate, materially and
adversely affect the financial condition, assets, properties or operation of the Company.
(d) No event has occurred and no condition exists that would constitute an Event of Default
under the Loan Agreement or hereunder or to the Companys knowledge the Indenture or that, with the
passing of time or with the giving of notice or both would become such an Event of Default.
(e) The Company Documents have been executed and delivered by the Company and are the legal,
valid and binding obligations of the Company, enforceable against the Company in accordance with
its terms subject to laws with respect to bankruptcy and general principals of equity.
(f) Except as disclosed in the Official Statement, dated October 28, 2005, delivered in
connection with the issuance of the Bonds, (i) there is no action, suit, proceeding or
investigation at law or in equity before or by any court or governmental agency or body pending or
to their knowledge threatened against or affecting the Company that seeks to restrain or enjoin the
issuance or delivery of the Bonds, or the collection of the payments to be made pursuant to the
Indenture, the Bonds or any Company Document or in any way contests or materially adversely affects
the validity of the Bonds, the Indenture or any Company Document or the resolutions of the Company
relating to the Bonds, or contests or affects the powers of the Company to enter into or perform
its obligations or consummate the transactions contemplated under any of the foregoing; and (ii)
the Company is not in default with respect to any order or decree of any court or any order,
regulation or demand of any federal, state, municipal or other governmental authority.
(g) The financial statements of Connecticut Water Service, Inc. and its consolidated
subsidiaries as at December 31, 2004 and September 30, 2005 contained in Connecticut Water Service,
Inc.s Annual Report on Form 10-K for the year ended December 31, 2004 as filed with the SEC on
March 30, 2005 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 as filed
with the SEC on November 9, 2005, respectively, present fairly in all material respects the
financial condition, results of operations and cash flows of Connecticut Water Service, Inc. and
have been prepared in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as otherwise
- 3 -
EXHIBIT
4.27
noted therein). Since
September 30, 2005 been no material adverse change in the financial condition, assets, properties
or operation of Connecticut Water Service, Inc.
ARTICLE IV
COVENANTS
SECTION 4.01. Consolidation, Merger and Transfer of Mortgaged Property.
(a)
Restructuring, Merger, Consolidation, Reorganization
. The Company (or any
subsequent obligor on the Note) shall not merge, consolidate, restructure or reorganize with an
entity without the prior written consent of FGIC, provided, however, the Company (or any subsequent
obligor on the Note) may merge, consolidate, restructure or reorganize with an entity without the
prior written consent of FGIC either if (a) the Company (or any subsequent obligor on the Note)
continues to exist after such merger, consolidation, restructuring or reorganization and (i) the
Company (or any subsequent obligor on the Note) remains a public utility regulated by the
appropriate regulatory body and (ii) the Company (or any subsequent obligor on the Note) remains
obligated to FGIC with respect to, and to make payments with respect to, the Bonds, the Note and
the Loan Agreement or (b) the Company (or any subsequent obligor on the Note) is not the surviving
entity after such merger, consolidation, restructuring or reorganization and (i) the surviving
entity is a public utility regulated by the appropriate regulatory body and (ii) the surviving
entity fully assumes all obligations to FGIC with respect to, and to make payments with respect to,
the Bonds, the Note and the Loan Agreement. Notwithstanding the foregoing, if as a result of the
merger, consolidation, restructuring or reorganization of the Company (or any subsequent obligor on
the Note) with an entity without the prior written consent of FGIC the unenhanced rating on the
Bonds is lower than investment grade by any Rating Agency then rating the Bonds or if any Rating
Agency then rating the unenhanced Bonds ceases to rate the unenhanced Bonds, all obligations to
FGIC with respect to, and all payments under, the Note and the Loan Agreement must be paid in full
and the Bonds must be fully redeemed in accordance with the Indenture.
(b)
Sale of Assets
. The Company (or any subsequent obligor on the Note) may sell or
otherwise dispose of its assets without the consent of FGIC, provided, however, if the Company (or
any subsequent obligor on the Note) sells or otherwise disposes of an aggregate of 20% or more of
its assets, based on historical book value of the assets sold as determined as of the date of the
issuance of the Bonds, without the prior written consent of FGIC, and as a result of such sale and
disposition, the unenhanced rating on the Bonds is lower than investment grade by any Rating Agency
then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to rate the
unenhanced Bonds, all obligations to FGIC with respect to, and all payments
under, the Note and the Loan Agreement must be paid in full and the Bonds must be fully
redeemed in accordance with the Indenture.
(c) Upon the occurrence of an event specified in section 4.01 (a) or (b) the Company shall
deliver to FGIC a certificate of the president or any vice president and an opinion of counsel
acceptable to FGIC, each stating that such occurrence complies with this Section 4.01.
(d) Upon the occurrence of an event specified in section 4.01 (a) or (b) the successor entity
formed by such occurrence shall succeed to, and be substituted for, and may exercise
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4.27
every right
and power of, the Company under this Agreement with the same effect as if such successor had been
named as the Company herein, and thereafter, the predecessor entity shall be relieved of all
obligations and covenants hereunder.
SECTION 4.02. Restrictions on Liens and Sale and Leaseback Transactions.
(a) For so long as the Bonds are outstanding and FGIC has fully performed all of its
obligations under the Policy, the Company will not, nor will it permit any Significant Subsidiary
to, (1) issue, incur, assume or permit to exist any Debt, if such Debt is secured by a Lien on any
Principal Property (whether such Principal Property is now owned or hereafter acquired), unless the
Company provides that the Bonds will be equally and ratably secured with such secured Debt or (2)
incur or permit to exist any Attributable Debt in respect of Principal Property; provided, however,
that the foregoing restriction shall not apply to:
(i) to the extent the Company or any Significant Subsidiary consolidates with, or
merges with or into, another entity, Liens on the property of such entity securing Debt in
existence on the date of such consolidation or merger, provided that such Debt and Liens
were not created or incurred in anticipation of such consolidation or merger and that such
Liens do not extend to cover any Principal Property;
(ii) Liens existing on property hereafter acquired at the time of such acquisition, as
long as the Lien was not created or incurred in anticipation thereof and does not extend to
or cover any other Principal Property;
(iii) Liens of any kind, including purchase money Liens, conditional sales agreements
or title retention agreements and similar agreements, upon any property acquired,
constructed, developed or improved by the Company or any Significant Subsidiary (whether
alone or in association with others) which do not exceed the cost or value of the property
acquired, constructed, developed or improved and which are created prior to, at the time of,
or within 12 months after such acquisition (or in the case of property constructed,
developed or improved, within 12 months after the completion of such construction,
development or improvement and commencement of full commercial operation of such property,
whichever is later) to secure or provide for the payment of any part of the purchase price
or cost thereof; provided that the Liens shall not extend to any Principal Property other
than the property so acquired, constructed, developed or improved;
(iv) Liens in favor of the United States, any state or any foreign country or any
department, agency or instrumentality or political subdivision of any such jurisdiction to
secure payments pursuant to any contract or statute or to secure any indebtedness incurred
for the purpose of financing all or any part of the purchase price or cost of constructing
or improving the property subject to such Lien, including Liens related to governmental
obligations the interest on which is tax-exempt under Section 103 of the Internal Revenue
Code or any successor section of the Internal Revenue Code;
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4.27
(v) Liens in favor of the Company, one or more Significant Subsidiaries of the Company,
one or more wholly-owned Subsidiaries of the Company or any of the foregoing combination;
and
(vi) replacements, extensions or renewals (or successive replacements, extensions or
renewals), in whole or in part, of any Lien, or of any agreement, referred to above in
clauses (i) through (v) inclusive, or replacements, extensions or renewals of the Debt
secured thereby (to the extent that the amount of Debt secured by any such Lien is not
increased from the amount originally so secured, plus any premium, interest, fee or expenses
payable in connection with any replacements, refundings, refinancings, remarketings,
extensions or renewals); provided that such replacement, extension or renewal is limited to
all or a part of the same property (plus improvements thereon or additions or accessions
thereto) that secured the Lien replaced, extended or renewed.
(b) Notwithstanding the restriction in subsection (a) of this Section 4.02, the Company or any
Significant Subsidiary may (1) issue, incur or assume Debt secured by a Lien not described in
clauses (i) through (vi) of subsection (a) above on any Principal Property now or hereafter owned
without providing that the Bonds be equally and ratably secured with such Debt and (2) issue or
permit to exist Attributable Debt in respect of Principal Property, in either case so long as the
aggregate amount of such secured Debt and Attributable Debt, together with the aggregate amount of
all other Debt secured by Liens not described in clauses (i) through (vi) of subsection (a) above
then outstanding and all other Attributable Debt, does not exceed 10% of the Net Tangible Assets of
the Company, as determined by the Company as of a month end not more than 90 days prior to the
closing or consummation of the proposed transaction.
(c) For purposes of determining compliance with this Section 4.02, in the event that any Lien
at any time meets the criteria of more than one of the categories described in clauses (i) through
(vi) above of Section 4.02(a), or is entitled to be created pursuant to Section 4.02(b), the
Company will be permitted to classify (and later reclassify) in whole or in part in its sole
discretion such Lien in any manner that complies with this Section 4.02.
(d) For purposes of determining compliance with any Dollar-denominated restriction on the
incurrence of Debt secured by Liens on Principal Property, the Dollar-equivalent principal amount
of Debt denominated in a foreign currency will be calculated based on the relevant currency
exchange rate in effect on the date such Debt was incurred, in the case of term Debt, or first
committed, in the case of revolving credit Debt; provided that if such Debt is incurred to
refinance other Debt denominated in the same foreign currency, and such refinancing would cause the
applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency
exchange rate in effect on the date of such refinancing, the Dollar-denominated
restriction will be deemed not to have been exceeded so long as the principal amount of the
refinancing Debt does not exceed the principal amount of the Debt being refinanced.
Notwithstanding any other provision of this Section 4.02, the maximum amount of Debt secured by
Liens on Principal Property that the Company or any Significant Subsidiary may incur pursuant to
this covenant will not be deemed to be exceeded solely as a result of fluctuations in the exchange
rate of currencies.
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4.27
(e) Except as provided in Section 4.02 hereof, while there are any Bonds Outstanding or any
reimbursement obligations owed to FGIC, without the prior written consent of Financial Guaranty,
the Company will not permit, create, assume or suffer to be created or to exist any mortgage, lien,
security interest, or encumbrance of any kind, upon, or pledge of, any of the Companys properties
of any character, including real, personal, tangible and intangible properties and revenues, now
owned or hereafter acquired, to secure any indebtedness without providing that the Bonds and the
reimbursement obligations hereunder have the same security.
SECTION 4.03. Liquidity Facility.
If at any time the Bonds are converted into a mode, other
than a long-term mode longer than five years or an auction mode, the Company shall provide a
Liquidity Facility to support the Bonds. The Liquidity Facility and the Liquidity Provider shall
satisfy the terms set forth in Annex B hereto or shall otherwise be subject to the prior written
approval of FGIC.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
SECTION 5.01. Events of Default.
The following events shall constitute Events of Default
hereunder:
(a) The Company shall fail to pay to FGIC any amount payable under Section 2.02 or 7.01
hereof and such failure shall have continued for a period in excess of ten days after receipt by
the Company of written notice thereof;
(b) Any representation or warranty made by the Company hereunder or under any other Company
Document or any statement in the application for the Policy or any written report, certificate,
financial statement or other instrument provided in connection with the Commitment, the Policy, or
any Company Document shall have been materially false at the time when made;
(c) Except as otherwise provided in this Section 5.01, the Company shall fail to perform any
of its other obligations hereunder, provided that such failure continues for more than thirty days
after receipt by the Company of written notice of such failure to perform;
(d) The Company shall (i) voluntarily commence any proceeding or file any petition seeking
relief under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy,
insolvency or similar law, (ii) consent to the institution of, or fail to controvert in a timely
and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or
consent to the appointment of a receiver, paying agent, custodian, sequestrator or similar official
for the Company or for a substantial part of its property, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) become unable, admit in writing its inability or
fail generally to pay its debts as they become due; or
(e) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in
a court of competent jurisdiction seeking (i) relief in respect of the Company, or of a substantial
part of its property, under the United States Bankruptcy Code or any other Federal,
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4.27
state or
foreign bankruptcy, insolvency or similar law or (ii) the appointment of a receiver, paying agent,
custodian, sequestrator or similar official for the Company or for a substantial part of its
property; and such proceeding or petition shall continue undismissed for forty-five (45) days or an
order or decree approving or ordering any of the foregoing shall continue unstayed and in effect
for thirty (30) days.
SECTION 5.02. Remedies.
If an Event of Default shall occur and be continuing, then FGIC may
take whatever action at law or in equity may appear necessary or desirable, including, without
limitation, legal action for the specific performance of any covenant made by the Company herein
and any financing document and, to the extent applicable, the pursuit of remedies available under
the Bonds, and the Loan Agreement to collect the amounts then due under this Agreement, or to
enforce performance and observance of any obligation, agreement or covenant of the Company under
the Company Documents or under the Bonds. All rights and remedies of FGIC under this Section 5.02
are cumulative and the exercise of any one remedy does not preclude the exercise of one or more of
the other available remedies under the Company Documents, the Bonds, under the Indenture or any
other financing document, or now or hereafter existing at law or in equity. No delay or omission
to exercise any right or power accruing under the Company Documents, the Bonds, under the Indenture
or any other financing document, or otherwise, upon the happening of any event set forth in Section
5.01, shall impair any such right or power or shall be construed to be a waiver thereof, but any
such right and power may be exercised from time to time and as often as may be deemed expedient.
In order to entitle FGIC to exercise any remedy reserved to FGIC in this Article, it shall not be
necessary to give any notice, other than such notice as may be required by this Article.
ARTICLE VI
SETTLEMENT
Financial Guaranty shall have the exclusive right to decide and determine whether any claim,
liability, suit or judgment made or brought against Financial Guaranty on the Policy (a Policy
Claim), shall or shall not be paid, compromised, resisted, defended, tried or appealed, and
Financial Guarantys decision thereon, if made in good faith, shall be final and binding upon the
Company. An itemized statement of payments made by Financial Guaranty, certified by an officer of
Financial Guaranty, or the voucher or vouchers for such payments, shall be prima facie evidence of
the liability of the Company.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Reimbursement of Costs and Expenses; Payments Generally
(a)
The Company shall pay or reimburse FGIC for any and all charges, fees, costs, and expenses
(including reasonable attorneys fees) that FGIC may reasonably pay or incur in connection with the
following: (i) the administration, enforcement, defense, or preservation of any rights or security
hereunder or under any other transaction document; (ii) the pursuit of any remedies hereunder,
under any other transaction document, or otherwise afforded by law or equity, (iii) any amendment,
waiver, or other action hereunder or with respect to or related to any transaction document whether
or not executed or completed; (iv) the violation by the Company
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4.27
of any law, rule, or regulation or
any judgment, order or decree applicable to it; (v) any advances or payments made by FGIC to cure
defaults of the Company under the transaction documents; or (vi) any litigation or other dispute in
connection with this Agreement or any other transaction document, or the transactions contemplated
hereby or thereby, other than amounts resulting from the failure of the FGIC to honor its payment
obligations under the Policy. FGIC reserves the right to charge a reasonable fee as a condition to
executing any amendment, waiver, or consent proposed in respect of any transaction document. The
obligations of the Company to FGIC shall survive discharge and termination of the transaction
documents. The Companys obligations under this Section 7.01 shall be unconditional and shall be
paid promptly upon receipt by the Company of demand therefor.
(b) If any payment hereunder is specified to be made on a date that is not a Business Day,
then such payment shall be made on the Business Day next succeeding the date originally specified
for such payment.
SECTION 7.02. Indemnification; Limitation of Liability.
(a) In addition to any and all rights
of indemnification or any other rights of FGIC pursuant hereto or under law or equity or under any
financing document, the Company and any successors thereto agree to pay, and to protect, indemnify
and save harmless, FGIC and its officers, directors, shareholders, employees, and agents, from and
against any and all claims, losses, liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or reasonable expenses, including, without limitation, reasonable fees and
expenses of attorneys, consultants and auditors and reasonable costs of investigations or
obligations whatsoever paid by FGIC (herein collectively referred to as Liabilities) of any
nature arising out of or relating to the transactions contemplated by the financing documents by
reason of:
(i) any untrue statement or alleged untrue statement of a material fact contained in
the offering document or in any amendment or supplement thereto or arising out of or based
upon any omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except insofar as such
Liabilities arise out of or are based upon any such untrue statement or omission or
allegation thereof based upon information which describes FGIC in the offering document set
forth under the caption Bond Insurance, or in the financial statements of FGIC, including
any information in any amendment or supplement to the offering document furnished by FGIC in
writing expressly for use therein that amends or supplements such information;
(ii) to the extent not covered by clause (i) above, any act or omission of the Company
in connection with the offering, issuance, sale or delivery of the Bonds other
than by reason of false or misleading information provided by FGIC in writing for
inclusion in the offering document as specified in clause (i) above or the allegation
thereof;
(iii) the misfeasance or malfeasance of, or negligence or theft committed by, any
director, officer, employee or agent of any of the Company; and
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4.27
(iv) any claim by any party other than the parties to be indemnified under this Section
7.02 arising out of any Event of Default under the Company Documents.
(b) This indemnity provision shall survive the termination of this Agreement and shall survive
until the statute of limitations has run on any causes of action which arise from one of these
reasons and until all suits filed as a result thereof have been finally concluded. Any party which
proposes to assert the right to be indemnified under this Section 7.02 will promptly after receipt
of notice of commencement of any action, suit or proceeding against such party in respect of which
a claim is to be made against the Company under this Section 7.02, shall notify the Company of the
commencement of such action, suit or proceeding, enclosing a copy of all papers served. In case
any action, suit or proceeding, shall be brought against any indemnified party and it shall notify
the Company of the commencement thereof, the Company shall be entitled to participate in, and, to
the extent that it shall wish, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the Company to such indemnified party of its election so
to assume the defense thereof, the Company shall not be liable to such indemnified party for any
legal expenses other than reasonable costs of investigation subsequently incurred by such
indemnified party in connection with the defense thereof. The indemnified party shall have the
right to employ its counsel in any such action the defense of which is assumed by the Company in
accordance with the terms of this subsection (b), but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless the employment of counsel by such indemnified
party has been authorized by the Company, or unless there is a conflict of interest. The Company
shall not under any circumstances be liable for any settlement of any action or claim effected
without its prior written consent.
SECTION 7.03. Exercise of Rights.
No failure or delay on the part of FGIC to exercise any
right, power or privilege under this Agreement and no course of dealing between FGIC the Company or
any other party shall operate as a waiver of any such right, power or privilege, nor shall any
single or partial exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or remedies which FGIC
would otherwise have pursuant to law or equity. No notice to or demand on any party in any case
shall entitle such party to any other or further notice or demand in similar or other
circumstances, or constitute a waiver of the right of the other party to any other or further
action in any circumstances without notice or demand.
SECTION 7.04. Amendment and Waiver.
Any provision of this Agreement may be amended, waived,
supplemented, discharged or terminated only with the prior written consent of the Company and FGIC.
The Company hereby agrees that upon the written request of the Trustee,
Financial Guaranty may make or consent to issue any substitute for the Policy to cure any
ambiguity or formal defect or omission in such Policy which does not materially change the terms of
such Policy or adversely affect the rights of the Holders, and this Agreement shall apply to such
substituted Policy. Financial Guaranty agrees to deliver to the Company and to the company or
companies, if any, rating the Bonds, a copy of such substituted Policy.
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4.27
SECTION 7.05. Payments.
The payments due by the Company under the Note and the Loan
Agreement shall be structured such that moneys are deposited with the Bond Trustee five days in
advance of debt service payments on the Bonds Insured.
SECTION 7.06. Successors and Assigns; Descriptive Headings.
This Agreement shall bind, and
the benefits thereof shall inure to, the Company and FGIC and their respective successors and
assigns, so long as any Indenture is in full force and effect. Except pursuant to an event
specified in Article IV herein neither the Company nor FGIC may transfer or assign any or all of
its rights and obligations hereunder without the prior written consent of the other party hereto
and any such transfer or assignment without such written consent shall be void.
The descriptive headings of the various provisions of this Agreement are inserted for
convenience of reference only and shall not be deemed to affect the meaning or construction of any
of the provisions hereof.
SECTION 7.07. Waiver.
The Company waives any defense that this Agreement was executed
subsequent to the date of the Policy, admitting and covenanting that such Policy was executed
pursuant to the Companys request and in reliance on the Companys promise to execute this
Agreement.
SECTION 7.08. Entire Agreement.
This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes any and all prior
agreements and understandings of the parties hereto with respect to the subject matter hereof,
including but not limited to the Commitment.
SECTION 7.09. Notices, Requests, Demands.
Except as otherwise expressly provided herein, all
written notices, requests, demands or other communications to or upon the respective parties hereto
shall be deemed to have been given or made when actually received, or in the case of telecopier
notice sent over a telecopier machine owned or operated by a party hereto, when sent, with
confirmation of receipt, addressed as specified below or at such other address as either of the
parties hereto may hereafter specify in writing to the other:
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If to the Company:
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The Connecticut Water Company
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93 West Main Street
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Clinton, Connecticut 06413
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Attention: Vice President Finance
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and Chief Financial Officer
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Fax No.: 860-669-9326
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If to FGIC:
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Financial Guaranty Insurance Company
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125 Park Avenue
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New York, New York 10017
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Attention: Manager, Global Utilities
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Fax No.: 212-312-3093
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EXHIBIT
4.27
SECTION 7.10. Survival of Representations and Warranties.
All representations, warranties and
obligations contained herein shall survive the execution and delivery of this Agreement and the
Policy.
SECTION 7.11. Governing Law.
This Agreement and the rights and obligations of the parties
under this Agreement shall be governed by and construed and interpreted in accordance with the laws
of the State of New York.
SECTION 7.12. Counterparts.
This Agreement may be executed in any number of copies and by the
different parties hereto on the same or separate counterparts, each of which shall be deemed to be
an original instrument. Complete counterparts of this Agreement shall be lodged with the Company
and FGIC.
SECTION 7.13. Severability.
In the event any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate
or render unenforceable any other provision hereof.
SECTION 7.14
.
Parties Interested Herein
. Nothing in this Agreement expressed or implied is
intended or shall be construed to confer upon, or to give or grant to, any person or entity, other
than the Company and Financial Guaranty, any right, remedy or claim under or by reason of this
Agreement or any covenant, condition or stipulation hereof, and all covenants, stipulations,
promises and agreements in this Agreement contained by and on behalf of the Company shall be for
the sole and exclusive benefit of the Company and Financial Guaranty.
SECTION 7.15. Term
. This Agreement shall expire upon the later of (i) the expiration of the
Policy in accordance with the terms thereof, or (ii) the repayment in full to Financial Guaranty of
any amounts due and owing to it by the Company under this Agreement or the Policy.
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EXHIBIT
4.27
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to
be duly executed and delivered as of the date first above written.
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THE CONNECTICUT WATER COMPANY
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By
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/s/ David C. Benoit
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Name: David C. Benoit
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Vice President Finance and Chief
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Financial Officer
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FINANCIAL GUARANTY INSURANCE
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COMPANY
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By
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/s/ Paul R. Morrison
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Paul R. Morrison
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Managing Director, International and Global
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Utilities
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EXHIBIT
4.27
ANNEX A
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly provided herein or unless
the context otherwise requires, all capitalized terms used herein and not otherwise defined shall
have the same meaning as in the Indenture, and all other capitalized terms shall have the meaning
as set out below.
Agreement
means this Insurance Agreement.
Attributable Debt
in respect of a sale and leaseback transaction means, at the time of
determination, the present value of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction, including any period
for which such lease has been extended or may, at the option of the lessor, be extended. Such
present value shall be calculated using a discount rate equal to the rate of interest implicit in
such transaction, determined in accordance with generally accepted accounting principles.
Bonds
has the meaning set forth in the first recital of this Agreement.
Commitment
means that certain letter, dated March 17, 2005 as amended on October 5, 2005 and
on November 18, 2005, between the Company and FGIC.
Company
has the meaning set forth in the first paragraph of this Agreement.
Company Documents
has the meaning set forth in Article III (a).
Debt
means (A) indebtedness of the Company or a Significant Subsidiary for borrowed money
evidenced by a bond, debenture, note or other written instrument or agreement by which the Company
or a Significant Subsidiary is obligated to repay such borrowed money and (B) any guaranty by the
Company or a Significant Subsidiary of any such indebtedness of another Significant Subsidiary.
Debt does not include, among other things, (w) indebtedness of the Company or a Significant
Subsidiary under any installment sale or conditional sale agreement or any other agreement relating
to indebtedness for the deferred purchase price of property or services, or (x) any trade
obligation (including obligations under power or other commodity purchase agreements and any hedges
or derivatives associated therewith), or other obligations of the Company or a Significant
Subsidiary in the ordinary course of business, (y) obligations of the Company or a Significant
Subsidiary under any lease agreement (including any lease intended as security), whether or not
such obligations are required to be capitalized on the balance sheet of the Company or a
Significant Subsidiary under generally accepted accounting principles.
Dollar
or
$
means a dollar or other equivalent unit in such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public and private debts.
Effective Interest Rate
means the lesser of the (i) the prime rate announced from time to
time by Citibank, N.A., or (ii) the maximum rate of interest permitted by then applicable law.
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EXHIBIT
4.27
Event of Default
shall mean the events of default set forth in Section 5.01 of this
Agreement.
Holder
or
Holders
means the Person in whose name a Bond is registered on the books kept
and maintained by the Trustee for registration and transfer of the Bonds.
Indenture
has the meaning set forth in the first recital of this Agreement.
Internal Revenue Code
means the Internal Revenue Code of 1986, as amended, or any successor
federal statute.
Lien
means any mortgage, deed of trust, pledge, security interest, encumbrance, easement,
lease, reservation, restriction, servitude, charge or similar right and any other lien of any kind,
including, without limitation, any conditional sale or other title retention agreement, any lease
in the nature thereof, and any defect, irregularity, exception or limitation in record title or,
when the context so requires, any lien, claim or interest arising from any of the foregoing.
Loan Agreement
has the meaning set forth in the second recital of this Agreement.
Net Tangible Assets
means the total amount of the Companys assets determined on a
consolidated basis in accordance with generally accepted accounting principles as of a date
determined pursuant to Section 4.02,
less
(i) the sum of the Companys consolidated current
liabilities determined in accordance with generally accepted accounting principles, and (ii) the
amount of the Companys consolidated assets classified as intangible assets, determined in
accordance with generally accepted accounting principles, including, but not limited to, such items
as goodwill, trademarks, trade names, patents, and unamortized debt discount and expense and
regulatory assets carried as an asset on the Companys consolidated balance sheet.
Policy Claim
has the meaning set forth in Article VI.
Policy Payment
means any payment by FGIC pursuant to the terms of the Policy.
Premium
means the premium described in the Commitment and payable by the Company to FGIC
pursuant to Section 2.01 hereof.
Principal Property
means any property of the Company or any Significant Subsidiary, as
applicable.
Significant Subsidiary
shall have the meaning specified in Rule 1-02(w) of Regulation S-X
under the Securities Act of 1933, as amended.
A-2
EXHIBIT
4.27
ANNEX B
LIQUIDITY FACILITY REQUIREMENTS
1.
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Liquidity Provider Credit Ratings:
The provider (the Provider) of a liquidity facility
(the Facility) to be used to pay the purchase price of tendered variable rate bonds (the
Bonds) shall be rated by both Moodys Investors Service (Moodys) and Standard & Poors
Ratings Services (S&P), and shall be of sufficient strength to cause the short-term ratings
for the Bond issue to be A-1+ by S&P and VMIG-1 by Moodys. Financial Guaranty will not
deliver its bond insurance policy (the Policy) until such rating or ratings have been
released. Any Provider whose long-term rating drops below A- (S&P) or A3 (Moodys) shall be
replaced at the request of Financial Guaranty.
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2.
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Initial Term of Facility:
Minimum initial term of 364 days is acceptable so long as the
notice of non-renewal (Section 9 hereof) provides adequate time for the Issuer to find a
substitute facility and the authorizing document mechanics in the event of non-renewal provide
for the Bonds to be tendered and the Facility to be drawn upon before expiration of the
Facility.
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3.
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Renewals and Amendments:
Any renewal on terms not identical to the terms of the initial (or
then renewing) Facility, or with a different Provider, shall be subject to the prior written
consent of Financial Guaranty. Financial Guaranty shall be provided with notice (and a copy)
of all Facility renewals, amendments and supplements.
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4.
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(a)
Immediate Termination Events.
Upon the occurrence of
only
the following events, the
Provider may terminate the Facility prior to the stated expiration date thereof without
offering Bondholders one last opportunity to tender the Bonds to the Provider for purchase:
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(i)
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Policy Default
. Failure by Financial Guaranty to pay
principal and interest when, as and in the amounts required under the Policy,
including interest at the bank rate due the Provider on disbursements under
the Facility if such amount is included as interest on the Bonds under the
terms of the Bonds;
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(ii)
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Payment Default Under Other Insurance
. Any default by
Financial Guaranty in making payment when, as and in the amounts required to be
made pursuant to the express terms and provisions of any other municipal bond
insurance policy or surety bond issued by Financial Guaranty;
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(iii)
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Nullity of Policy
. The Policy for any reason ceases
to be in full force and effect or is declared by a court of competent
jurisdiction to be null and void, or Financial Guaranty denies that it has any
further liability under the terms thereof; or
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(iv)
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Insolvency Proceeding Against Financial Guaranty
. A
proceeding has been instituted in a court having jurisdiction in the premises
seeking an
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B-1
EXHIBIT
4.27
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order for relief, rehabilitation, reorganization, conservation, liquidation
or dissolution in respect of Financial Guaranty under the Insurance Law of
the State of New York or any successor provision thereto and such proceeding
is not terminated for a period of 60 consecutive days or such court enters
an order granting the relief sought in such proceeding.
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(b)
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Termination Event Requiring One Last Put Opportunity.
Upon the occurrence of
only
the following events, the Provider may terminate the Facility prior to the stated
expiration date thereof but must provide Bondholders with one last opportunity to
tender their Bonds to the Provider for purchase prior to termination:
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(i)
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The financial strength rating assigned to Financial Guaranty or
the rating assigned to securities insured by Financial Guaranty, as applicable,
is withdrawn, suspended or reduced to A, A2 or A, or below by any two of S&P,
Moodys or Fitch, respectively.
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(ii)
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Failure of the Issuer to pay the Provider commitment fees for the Facility.
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(c)
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No Other Termination Events.
The only events permitting termination of the
Facility by the Provider prior to its stated expiration date are as specified in 4(a)
and 4(b) above. In particular, neither failure by the issuer to comply with any
covenants made by it in the Facility nor breach by the issuer of any representation or
warranty made by it in the Facility nor continuation of such failure or breach
following receipt by the issuer of notice thereof is a permissible event of
termination. The sole remedy allowed to the Provider upon such an event of default
shall be the ability to sue for specific performance.
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(d)
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Events Permitting Acceleration.
Upon the occurrence of an event described in
4(a), the Provider may tender its Bonds to the issuer for immediate repurchase, and no
limitations shall be imposed on the exercise by the Provider of any remedies available
to it against the issuer (
e.g.,
causing the issuer to accelerate its loan to the
ultimate borrower of Bond proceeds) should the issuer default on any such repurchase
obligation to the Provider.
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5.
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Conditions to Effectiveness of Facility:
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(a)
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As a condition to closing, Financial Guaranty may be required to provide its
customary enforceability and disclosure opinion with respect to the Policy.
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(b)
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As a condition to the issuance of the Policy, an opinion of counsel to the
Provider (including a separate opinion of foreign counsel in the case of a U.S. branch
of a foreign bank) regarding corporate matters, validity, enforceability and such other
matters as Financial Guaranty shall require, shall be addressed to (or shall be the
subject of a reliance letter addressed to) Financial Guaranty.
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B-2
EXHIBIT
4.27
6.
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Form of Liquidity Facility:
Either a letter of credit or a standby bond purchase
agreement shall be acceptable.
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7.
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Parity Payments:
(Applicable for revenue bond issues)
The Facility shall provide that only
the following amounts are payable on a parity with principal of and interest on the Bonds: (i)
the Providers periodic commitment fee and (ii) interest on the Bonds held by the Provider
calculated at the provider rate. All other amounts (
e.g.,
increased obligation of the
debtor enforceable in accordance with its terms costs, uninsured claw-back amount, penalty
interest charges and indemnification amounts) shall be payable on a subordinated basis to
payment of principal and interest on the Bonds, replenishment of any debt service reserve fund
and payment of the fees of the trustee or paying agent for the Bonds (herein, the Trustee),
and both the Facility and the authorizing document for the Bonds shall specifically so
provide.
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8.
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Increased Costs:
Any increased costs payable by the issuer pursuant to the Facility shall
be subordinated to the payment of principal and interest on the Bonds, replenishment of any
debt service reserve fund and payment of the fees of the Trustee, and the Facility shall
expressly so provide. The Facility shall limit increased costs to increases in costs to the
Provider or any participant of its obligations under the Facility as the result of the
imposition, increase or applicability of any reserve, special deposit, capital adequacy or
similar requirement against the obligations of the Provider or any participant under the
Facility (other than as a result of the acts, omissions or financial condition of the Provider
or such participant) due to any change in any law or regulation or in the interpretation
thereof by any court or administrative or governmental authority charged with the
administration thereof.
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9.
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Notice of Non-Renewal:
The Provider shall be required to give not less than 30 days notice
to the Trustee and Financial Guaranty before the Trustee under the authorizing document is
required to give Bondholders notification to tender Bonds as a result of a non-renewal
(Non-Renewal Mandatory Tender). (If the Trustee is required to send out a Mandatory Tender
Notice 30 days prior to the Facility termination, the Provider will be required to give the
Trustee notice of non-renewal 60 days prior to the expiration date of the Facility of its
intention not to renew or extend the Facility.) Early termination pursuant to paragraph 4(b)
above requires the same timing notification as described above. Early termination pursuant to
paragraph 4(a) above requires no prior notice.
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10.
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Certain Mandatory Conversions to Fixed Rate:
The Trustee shall commence the process required
by the authorizing document to effect a mandatory conversion of the interest rate on the Bonds
to a fixed rate (sufficient to accomplish the complete remarketing at par of all Bonds then
held by the Provider) on or as soon as practicable after the termination date of the Facility,
in the case of a termination pursuant to paragraph 4(a) or 4(b) and a Non-Renewal Mandatory
Tender:
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If such a remarketing cannot be effected, the Bonds shall continue to bear interest at the
variable rate and the remarketing agent shall attempt at least weekly to convert the Bonds
to a fixed interest rate sufficient to effect the remarketing at par of all Bonds then held
by the Provider.
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B-3
EXHIBIT
4.27
11.
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Holding Periods:
For amortization periods of less than 5 years, no amortization shall be
permitted prior to the first anniversary of the date the tendered Bonds are purchased by the
Provider. For amortization periods of 5 years or more, no amortization shall be permitted
prior to 6 months from the date the tendered Bonds are purchased by the Provider. Whether
during the term of the Facility or subsequent to the termination thereof, the Provider shall
not be permitted to tender unremarketed Bonds to the issuer and shall be required to hold such
Bonds for the periods and in accordance with the conditions set forth above (except that no
holding period is required in the event of a termination of the Facility pursuant to 4(a)
hereof). Financial Guaranty shall pay only principal and interest on the Bonds as scheduled,
in accordance with the terms of the Policy, unless Financial Guaranty has provided, at the
request of the Provider, an endorsement to its Policy to cover a special mandatory redemption
under the authorizing document.
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12.
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Maximum Rates:
The maximum rate payable for any interest payment period on the Bonds,
whether or not held by or pledged to the Provider at such time, shall be the lesser of 10% per
annum and the maximum rate permitted by applicable law (the Cap Rate).
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B-4
EXHIBIT 4.28
BOND PURCHASE AGREEMENT
among
CONNECTICUT DEVELOPMENT AUTHORITY,
THE CRYSTAL WATER COMPANY OF DANIELSON,
CONNECTICUT WATER SERVICE, INC.
and
A.G. EDWARDS & SONS, INC.
Dated November 16, 2005
$5,000,000
Connecticut Development Authority
Water Facilities Revenue Bonds
(The Crystal Water Company of Danielson Project 2005A Series)
EXHIBIT 4.28
BOND PURCHASE AGREEMENT
AGREEMENT, dated November 16, 2005, among the Connecticut Development Authority (the
Authority), The Crystal Water Company of Danielson (the Company), Connecticut Water Service,
Inc. (the Guarantor) and A.G. Edwards & Sons, Inc. (the Underwriter), with respect to the sale
and purchase of the Authoritys $5,000,000 Water Facilities Revenue Bonds (The Crystal Water
Company of Danielson Project 2005A Series) (the Bonds) on the terms and subject to the
conditions herein set forth:
1. The Borrower has previously filed with the Authority its application for the issuance of
the Bonds by the Authority, and the Authority has authorized the Bonds by a resolution duly adopted
August 17, 2005 (the Resolution). The Bonds will be special obligations of the Authority payable
solely out of the revenues or other receipts, funds or moneys pledged therefore, and from any
amounts otherwise available to the Trustee for the payment thereof under the indenture referred to
below. The proceeds of the sale of the Bonds will be loaned to the Company for use in the
acquisition, construction and installation of certain additions to the water system of the Company
(the Project) located in certain municipalities within the State of Connecticut (the State).
All such projects are to be used for water facilities purposes, all as more particularly described
in the Loan Agreement (the Agreement), dated as of October 1, 2005 by and between the Authority
and the Company. Pursuant to the Agreement, the Company will execute and deliver to the Authority
the Companys note (the Note) to evidence its indebtedness thereunder. Payments on the Note
shall be applied to the amounts due on the Bonds.
The Bonds shall be in all respects as described in, and shall be issued under and pursuant to,
an Indenture of Trust (the Indenture), dated as of October 1, 2005, between the Authority and
U.S. Bank National Association, as trustee (the Trustee). In connection with the execution and
delivery of the Indenture, the Authority and the Trustee will execute and deliver a Letter of
Representation (the Letter of Representation) to The Depository Trust Company (DTC). In order
to assure the exclusion of interest on the Bonds from gross income for purposes of federal income
taxation, the Company, the Authority and the Trustee will enter into a Tax Regulatory Agreement
relating to the Bonds, dated as of the date of issuance of the Bonds (the Tax Regulatory
Agreement).
The Bonds shall be additionally secured by a Guaranty, dated as of October 1, 2005, from the
Guarantor to the Trustee (the Guaranty).
In this Bond Purchase Agreement, the term Financing Documents (1) when used with respect to
the Company, means the Agreement, the Note, the Tax Regulatory Agreement, the Insurance Agreement
to be dated as of the hereinafter-defined Closing Date among the Company, the Guarantor and
Financial Guaranty Insurance Company (the Bond Insurer), the Continuing Disclosure Agreement
dated as of October 1, 2005 between the Company and the Trustee, as dissemination agent (the
Company Disclosure Agreement), and the general certificate of the Company delivered in connection
with the issuance of the Bonds, (2) when used with respect to the Guarantor, means the Guaranty,
the Continuing Disclosure Agreement dated
1
Exhibit 4.28
as of October 1, 2005 between the Guarantor and the Trustee, as dissemination agent (the
Guarantor Disclosure Agreement), and the general certificate of the Guarantor delivered in
connection with the issuance of the Bonds and (3) when used with respect to the Authority, means
any of the foregoing documents and agreements referred to in (1) above to which the Authority is a
direct party. The Financing Documents when such term is used with respect to the Company or the
Guarantor, do not include any documents or agreements to which the Company or the Guarantor, as the
case may be, is not a direct party, including the Bonds, the Indenture or the Letter of
Representation.
2. Subject to the terms and conditions and upon the basis of the representations hereinafter
set forth, the Authority hereby agrees to sell the Bonds to the Underwriter and the Underwriter
hereby agrees to purchase the Bonds from the Authority at the purchase price of $5,000,000.00. The
Bonds shall be dated their date of delivery, shall mature on October 1, 2040 and shall bear
interest at a rate of 5% per annum, payable on April 1 and October 1 in each year, commencing April
1, 2006. It will be a condition to the Authoritys obligation to sell the Bonds to the Underwriter
and the obligation of the Underwriter to purchase the Bonds that all Bonds be sold and delivered by
the Authority and paid for by the Underwriter on the Closing Date, as hereinafter defined.
3. The date of delivery and payment for the Bonds (the Closing Date) will be November 30,
2005 unless not later than the fifth day preceding such date the Authority, the Company and the
Underwriter agree that the Closing Date will be a specified date not later than the thirtieth day
subsequent to such date, in which event the Closing Date will be the date so specified. The Bonds
shall be available for inspection and packaging at least twenty-four hours before the Closing Date.
The Authority will authorize the Trustee to authenticate and deliver the Bonds to the
Underwriter through the facilities of DTC, 55 Water Street, New York, New York, utilizing the FAST
System pursuant to which the Trustee will take custody of the Bonds as agent for DTC, at
approximately 11:00 A.M., New York City time on the Closing Date, in typewritten form, bearing
CUSIP numbers, duly executed and authenticated, registered in the name of Cede & Co., as nominee
for DTC, against payment therefor by wire transfer or other manner payable in immediately available
funds to the Trustee for the account of the Authority. The payment for the Bonds to the Authority
and the delivery thereof to the Underwriter shall be made at the offices of Murtha Cullina LLP,
City Place I, 185 Asylum Street, Hartford, Connecticut. The Bonds will be delivered in the form
and denominations and shall be otherwise as described in the Indenture.
4. The Authority represents and warrants that:
(a) It is a body corporate and politic constituting a public instrumentality and political
subdivision of the State of Connecticut duly organized and existing under the laws of the State of
Connecticut, particularly the State Commerce Act, constituting Connecticut General Statutes,
Sections 32-la through 32-23zz, as amended (the Act). The Authority is authorized to issue the
Bonds in accordance with the Act and to lend the proceeds thereof to the Company to finance the
improvements described in the Indenture.
2
Exhibit 4.28
(b) The Authority has complied with the provisions of the Act and has full power and authority
pursuant to the Act to consummate all transactions contemplated by this Bond Purchase Agreement,
the Bonds, the Resolution, the Indenture and the Financing Documents, and to issue, sell and
deliver the Bonds to the Underwriter as provided herein.
(c) The Resolution has been duly adopted by the Authority and is still in full force and
effect. The Resolution has authorized the execution, delivery and due performance of this Bond
Purchase Agreement, the Bonds, the Indenture and the Financing Documents, and the taking of any and
all action as may be required on the part of the Authority to carry out, give effect to and
consummate the transactions contemplated by this Bond Purchase Agreement, and all approvals
necessary in connection with the foregoing have been received, except the State Treasurers
approval.
(d) When delivered to and paid for by the Underwriter in accordance with the terms of this
Bond Purchase Agreement, the Bonds will have been duly authorized, executed, authenticated, issued
and delivered and will constitute valid and binding special obligations of the Authority payable
solely from revenues or other receipts, funds or moneys pledged therefor under the Indenture and
from any amounts otherwise available therefor under the Indenture, and will be entitled to the
benefit of the Indenture. Neither the State nor any municipality thereof will be obligated to pay
the Bonds or the interest thereon. Neither the faith and credit nor the taxing power of the State
nor any municipality thereof is pledged for the payment of the principal, and premium, if any, of
and interest on the Bonds.
(e) The execution and delivery of this Bond Purchase Agreement, the Bonds, the Indenture and
the Financing Documents, and compliance with the provisions thereof, will not conflict with or
constitute on the part of the Authority a violation of, breach of or default under its by-laws or
any statute, indenture, mortgage, deed of trust, note agreement or other agreement or instrument to
which the Authority is a party or by which the Authority is bound, or, to the knowledge of the
Authority, any order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Authority or any of its activities or properties, and all consents,
approvals, authorizations and orders of governmental or regulatory authorities which are required
for the consummation by the Authority of the transactions contemplated thereby have been obtained,
except the State Treasurers approval.
(f) Subject to the provisions of the Agreement and the Indenture, the Authority will apply the
proceeds from the sale of the Bonds to the purposes specified in the Indenture and the Financing
Documents.
(g) To the best knowledge of the Authority, there is no action, suit, proceeding or
investigation at law or in equity before or by any court, public board or body pending or
threatened against or affecting the Authority, or to the best knowledge of the Authority, any basis
therefor, wherein an unfavorable decision, ruling or finding would adversely affect the
transactions contemplated hereby and by the Indenture, or which, in any way, would adversely affect
the validity of the Bonds, the Resolution, the Indenture, the Financing Documents, this Bond
Purchase Agreement, or any agreement or instrument to which the Authority is a party and
3
Exhibit 4.28
which is used or contemplated for use in consummation of the transactions contemplated hereby
and by the Indenture or the exemption from taxation as set forth therein.
(h) The representations and warranties of the Authority contained in Section 2.1 of the Loan
Agreement are true and correct as of the date hereof.
(i) Any certificate signed by any Authorized Representative of the Authority under the
Resolution or this Bond Purchase Agreement and delivered to the Underwriter or to the Trustee shall
be deemed a representation and warranty by the Authority to the Underwriter and the Company as to
the statements made therein.
(j) The information with respect to the Authority in the Official Statement of the Authority,
dated the date hereof, is correct and complete, except that none of the representations and
warranties herein apply to statements in or omissions from the Official Statement made in reliance
on or in conformity with information furnished, to the Authority by the Company, or to information
under the headings THE PROJECT, THE BONDSBook-Entry Only System, BOND INSURANCE, TAX
MATTERS, LEGAL MATTERS and INDEPENDENT ACCOUNTANTS, or to anything contained or incorporated
by reference in the appendices to the Official Statement or otherwise with respect to the Company.
The Authority has authorized the use of the Official Statement in both its preliminary and final
forms and delivered duly executed copies thereof in final form to the Underwriter.
It is specifically understood and agreed that the Authority makes no representation as to the
financial position or business condition of the Company or any other person and does not, with
respect to the Official Statement or otherwise, except to the extent the Authority deems the
Preliminary Official Statement to be final as provided in Section 10 hereof, represent or warrant
as to any of the statements, materials (financial or otherwise), representations or certifications
furnished or to be made and furnished by the Company or any other person in connection with the
sale of the Bonds, or as to the correctness, completeness or accuracy of any of such statements,
materials, representations or certificates.
5. The Company represents and warrants that:
(a) The Company has been duly organized and validly exists as a corporation under the laws of
the State of Connecticut, having all requisite corporate power to carry on its business as now
constituted.
(b) The execution and delivery by the Company of the Financing Documents and this Bond
Purchase Agreement, and all other agreements herein contemplated to be performed by the Company,
and the performance of the conditions herein contained and those in each of such instruments to be
performed are not in contravention of law and will not conflict with or result in any breach of any
of the terms, conditions or provisions of, or constitute a default under any indenture, mortgage
deed of trust or other agreement or instrument to which the Company is a party, or the Certificate
of Incorporation and any special acts incorporated by reference therein or Bylaws of the Company,
or any order, rule or regulation applicable to the Company of any court or of any federal or State
regulatory body or administrative agency or other governmental body
4
Exhibit 4.28
having jurisdiction over the Company or over any of its properties, or any statute, rule or
regulation of any jurisdiction applicable to the Company, or result in the creation or imposition
of any lien, charge or encumbrance upon any of the properties or assets of the Company pursuant to
the terms of any indenture, agreement or undertaking binding upon it; and, to the extent required
by law, the Connecticut Department of Public Utility Control (the DPUC) has approved or waived
approval of all matters relating to the Companys participation in the transactions contemplated in
the Financing Documents which require such approval or waiver of approval; such approval or waiver
of approval remains in full force and effect in the form issued; and, assuming that the Bonds are
securities described in Section 3(a)(2) of the Securities Act of 1933, as amended (the Securities
Act) and Section 3(a)(12) and (29) of the Securities Exchange Act of 1934, as amended (the
Exchange Act), no other consent, approval, authorization or other order of any regulatory body or
administrative agency or other governmental body is legally required for the Companys
participation in connection therewith, except as have been obtained.
(c) Except as disclosed or incorporated by reference in the Official Statement, there is no
action, suit, proceeding, inquiry or investigation, at law or in equity, or before or by any court,
public board or body, pending, or to the knowledge of the Company threatened, wherein an
unfavorable decision, ruling or finding would (i) in the opinion of the Company, involve the
possibility of any judgment or liability to the extent not covered by insurance which would result
in any material adverse change in the business, properties or operations of the Company, (ii)
materially adversely affect the transactions contemplated by this Bond Purchase Agreement or (iii)
materially adversely affect the validity or enforceability of the Financing Documents or this Bond
Purchase Agreement.
(d) The Company will not take or omit to take any action which action or omission will in any
way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to that
provided in the Financing Documents.
(e) Except as disclosed or incorporated by reference in the Official Statement, the Company is
not a party to or bound by any contract, agreement or other instrument, or subject to any judgment,
order, writ, injunction, decree, rule or regulation which, in the Companys opinion, materially
adversely affects, or in the future may, so far as the Company can now reasonably foresee,
materially adversely affect the business, operations, properties, assets or condition, financial or
otherwise, of the Company.
(f) Neither this Bond Purchase Agreement, other than Sections 4 or 6 hereof as to which no
representation is made, nor any other document, certificate or written statement furnished to the
Underwriter or the Authority by or on behalf of the Company, when read together with the
information disclosed or incorporated by reference in the Official Statement, contains any untrue
statement of a material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under which they were made,
not misleading or incomplete.
5
Exhibit 4.28
(g) The Company has not taken and will not take any action and knows of no action that any
person, firm or corporation has taken or intends to take, which would cause interest on the Bonds
to be includable in the gross income of the recipients thereof for federal income tax purposes.
(h) The Company will deliver or cause to be delivered all opinions, certificates, letters and
other instruments and documents required to be delivered by the Company pursuant to this Bond
Purchase Agreement.
(i) The Financing Documents and this Bond Purchase Agreement, when executed and delivered,
will be legal, valid, binding and enforceable obligations of the Company, except to the extent that
such enforceability may be limited by bankruptcy or insolvency or other laws affecting creditors
rights generally or by general principles of equity.
(j) The Company has authorized and consents to the use of the Official Statement by the
Underwriter. The information with respect to the Company included or incorporated by reference in
Appendix A-1 to the Preliminary Official Statement and the descriptions contained therein of the
Indenture and the Financing Documents and the Companys participation in the transactions
contemplated thereby, with such additions or amendments as heretofore have been agreed upon between
the Authority, the Company and the Underwriter and which are reflected in the Official Statement,
are correct and do not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein in light of
circumstances under which they were made not misleading except that the Company makes no
representation as to (A) the information contained in Appendices B (including the financial
statements incorporated therein by reference), D and F of each of the Preliminary Official
Statement and the Official Statement or the information contained in each of the Preliminary
Official Statement and the Official Statement under the captions INTRODUCTION The Authority,
THE AUTHORITY, THE BONDS Book Entry Only System, TAX MATTERS, BOND INSURANCE and
UNDERWRITING or (B) the information with respect to DTC and its book-entry system. The financial
statements summarized in Appendix A to each of the Preliminary Official Statement and the Official
Statement have been prepared in accordance with generally accepted accounting principles as applied
in the case of rate-regulated public utilities, comply with the Uniform System of Accounts and
ratemaking practices prescribed by the DPUC (except as otherwise disclosed in the notes to such
financial statements) and fairly present the combined financial position, results of operations,
retained earnings and statements of cash flows of the Company and of The Gallup Water Service, Inc.
(Gallup Water) at the respective dates and for the respective periods indicated.
(k) There has been no material adverse change in the business, properties, operations or
financial condition of the Company, taking into account seasonal revenue fluctuations, from that
shown or incorporated by reference in the Official Statement.
(l) The Company will use its best efforts to cause the delivery of the Policy (as hereinafter
defined).
6
Exhibit 4.28
(m) The representations and warranties of the Company contained in Section 2.2 of the Loan
Agreement are true and correct as of the date hereof.
(n) The Company has obtained all approvals required in connection with the execution and
delivery of, and performance by the Company of its obligations under, this Bond Purchase Agreement
and the Financing Documents.
(o) Any certificate signed by an officer of the Company and delivered to the Underwriter at
the time of the purchase and sale of the Bonds shall be deemed a representation and warranty by the
Company to the Underwriter as to the statements made therein.
(p) The Company deems the Preliminary Official Statement to be final as of its date for
purposes of Rule 15c2-12 of the SEC.
(q) No material event of default or event which, with notice or lapse of time or both, would
constitute a material event of default or default under any material agreement or material
instrument to which the Company is a party or by which the Company is bound or to which any of the
property or assets of the Company is subject has occurred and is continuing.
(r) The Company will undertake, pursuant to the Company Disclosure Agreement, to provide
certain annual financial information and notices of the occurrence of certain events, if material.
A description of this undertaking is set forth in the Preliminary Official Statement and will be
set forth in the Official Statement.
6. The Guarantor represents and warrants that:
(a) The Guarantor has been duly organized and validly exists as a corporation under the laws
of the State of Connecticut, having all requisite corporate power to carry on its business as now
constituted.
(b) The execution and delivery by the Guarantor of the Financing Documents and this Bond
Purchase Agreement, and all other agreements herein contemplated to be performed by the Guarantor,
and the performance of the conditions herein contained and those in each of such instruments to be
performed are not in contravention of law and will not conflict with or result in any breach of any
of the terms, conditions or provisions of, or constitute a default under any indenture, mortgage
deed of trust or other agreement or instrument to which the Guarantor is a party, or the
Certificate of Incorporation or Bylaws of the Guarantor, or any order, rule or regulation
applicable to the Guarantor of any court or of any federal or State regulatory body or
administrative agency or other governmental body having jurisdiction over the Guarantor or over any
of its properties, or any statute, rule or regulation of any jurisdiction applicable to the
Guarantor, or result in the creation or imposition of any lien, charge or encumbrance upon any of
the properties or assets of the Guarantor pursuant to the terms of any indenture, agreement or
undertaking binding upon it; and, assuming that the Bonds are securities described in Section
3(a)(2) of the Securities Act of 1933, as amended (the Securities Act) and Section 3(a)(12) and
(29) of the Securities Exchange Act of 1934, as amended (the Exchange Act), no other
7
Exhibit 4.28
consent, approval, authorization or other order of any regulatory body or administrative
agency or other governmental body is legally required for the Guarantors participation in
connection therewith, except as have been obtained.
(c) Except as disclosed or incorporated by reference in the Official Statement, there is no
action, suit, proceeding, inquiry or investigation, at law or in equity, or before or by any court,
public board or body, pending, or to the knowledge of the Guarantor threatened, wherein an
unfavorable decision, ruling or finding would (i) in the opinion of the Guarantor, involve the
possibility of any judgment or liability to the extent not covered by insurance which would result
in any material adverse change in the business, properties or operations of the Guarantor, (ii)
materially adversely affect the transactions contemplated by this Bond Purchase Agreement or (iii)
materially adversely affect the validity or enforceability of the Financing Documents or this Bond
Purchase Agreement.
(d) Except as disclosed or incorporated by reference in the Official Statement, the Guarantor
is not a party to or bound by any contract, agreement or other instrument, or subject to any
judgment, order, writ, injunction, decree, rule or regulation which, in the Guarantors opinion,
materially adversely affects, or in the future may, so far as the Guarantor can now reasonably
foresee, materially adversely affect the business, operations, properties, assets or condition,
financial or otherwise, of the Guarantor.
(e) Neither this Bond Purchase Agreement, other than Sections 4 or 5 hereof as to which no
representation is made, nor any other document, certificate or written statement furnished to the
Underwriter or the Authority by or on behalf of the Guarantor, when read together with the
information disclosed or incorporated by reference in the Official Statement, contains any untrue
statement of a material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under which they were made,
not misleading or incomplete.
(f) The Guarantor will deliver or cause to be delivered all opinions, certificates, letters
and other instruments and documents required to be delivered by the Guarantor pursuant to this Bond
Purchase Agreement.
(g) The Financing Documents and this Bond Purchase Agreement, when executed and delivered,
will be legal, valid, binding and enforceable obligations of the Guarantor, except to the extent
that such enforceability may be limited by bankruptcy or insolvency or other laws affecting
creditors rights generally or by general principles of equity.
(h) The Guarantor has authorized and consents to the use of the Official Statement by the
Underwriter. The information with respect to the Guarantor included or incorporated by reference
in Appendix B to the Preliminary Official Statement and the descriptions contained therein of the
Indenture and the Financing Documents and the Guarantors participation in the transactions
contemplated thereby, with such additions or amendments as heretofore have been agreed upon between
the Authority, the Guarantor and the Underwriter and which are reflected in the Official Statement,
are correct and do not contain any untrue statement of a material fact or
8
Exhibit 4.28
omit to state a material fact required to be stated therein or necessary to make the
statements therein in light of circumstances under which they were made not misleading except that
the Guarantor makes no representation as to (A) the information contained in Appendices D and F of
each of the Preliminary Official Statement and the Official Statement or the information contained
in each of the Preliminary Official Statement and the Official Statement under the captions
INTRODUCTION The Authority, THE AUTHORITY, THE BONDS Book Entry Only System, TAX
MATTERS, BOND INSURANCE and UNDERWRITING or (B) the information with respect to DTC and its
book-entry system. The financial statements incorporated by reference in Appendix B to each of the
Preliminary Official Statement and the Official Statement have been prepared in accordance with
generally accepted accounting principles and fairly present the financial position, results of
operations, retained earnings and statements of cash flows of the Guarantor at the respective dates
and for the respective periods indicated.
(i) There has been no material adverse change in the business, properties, operations or
financial condition of the Guarantor, taking into account seasonal revenue fluctuations, from that
shown or incorporated by reference in the Official Statement.
(j) The representations and warranties of the Guarantor contained in Section 1.1 of the
Guaranty are true and correct as of the date hereof.
(k) The Guarantor has obtained all approvals required in connection with the execution and
delivery of, and performance by the Guarantor of its obligations under, this Bond Purchase
Agreement and the Financing Documents.
(l) Any certificate signed by an officer of the Guarantor and delivered to the Underwriter at
the time of the purchase and sale of the Bonds shall be deemed a representation and warranty by the
Guarantor to the Underwriter as to the statements made therein.
(m) The Guarantor deems the Preliminary Official Statement to be final as of its date for
purposes of Rule 15c2-12 of the SEC.
(n) No material event of default or event which, with notice or lapse of time or both, would
constitute a material event of default or default under any material agreement or material
instrument to which the Guarantor is a party or by which the Guarantor is bound or to which any of
the property or assets of the Guarantor is subject has occurred and is continuing.
(o) The Guarantor will undertake, pursuant to the Guarantor Disclosure Agreement, to provide
certain annual financial information and notices of the occurrence of certain events, if material.
A description of this undertaking is set forth in the Preliminary Official Statement and will be
set forth in the Official Statement.
7. The Company and the Guarantor agree, jointly and severally, to indemnify and hold harmless
the Authority, the Underwriter, any member, officer, official, employee or agent of the Authority
or the State or the Underwriter, and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Securities Act, as amended (for purposes of
9
Exhibit 4.28
this paragraph, collectively the Indemnified Parties), to the extent permitted under the
applicable law, against any and all losses, claims, damages, liabilities or expenses whatsoever,
joint or several, caused by (1) any breach of any representation or warranty made by the Company or
the Guarantor in this Bond Purchase Agreement or the Financing Documents or (2) any untrue
statement or misleading statement or allegedly misleading statement of a material fact contained in
the Official Statement or caused by any omission or alleged omission from the Official Statement of
any material fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by any such untrue or misleading statement or omission
or allegedly untrue or misleading statement or omission in the information contained under the
captions INTRODUCTION The Authority, THE AUTHORITY, THE BONDS Book Entry Only System,
TAX MATTERS, BOND INSURANCE and UNDERWRITING or in Appendices D and F thereto (except to the
extent that the information set forth in such section is premised on facts and representations made
in writing by the Company or the Guarantor); provided, however, that in the case of clause (2)
above such indemnity shall not inure to the benefit of the Underwriter (or any person controlling
the Underwriter or any officer or employee of the Underwriter) if (i) the Company has caused to be
delivered to the Underwriter on a timely basis sufficient quantities of the Official Statement, as
amended or supplemented, and (ii) a copy of the Official Statement, as then so amended or
supplemented, was not sent or given by or on behalf of the Underwriter to the person asserting such
loss, claim, damage, liability or expense prior to or with written confirmation of the sale of such
Bonds to such person by the Underwriter, and (iii) the receipt of the Official Statement, as then
so supplemented or amended, would have been a valid defense to the loss, claim, damage, liability
or expense asserted. This indemnity agreement shall not be construed as a limitation on any other
liability which the Company or the Guarantor may otherwise have to any Indemnified Party.
The Underwriter agrees to indemnify and hold harmless the Authority, the Company and the
Guarantor, and each director, officer or employee of the Authority, the Company and the Guarantor,
and each person who controls either of them within the meaning of Section 15 of the Securities Act
(for purposes of this paragraph, an Indemnified Party) to the same extent as the foregoing
indemnity from the Company and the Guarantor to the Underwriter, but only with reference to written
information furnished to the Authority, the Company or the Guarantor by or on behalf of the
Underwriter specifically for inclusion in the Official Statement under the caption UNDERWRITING.
This indemnity agreement shall not be construed as a limitation on any other liability which the
Underwriter may otherwise have to any Indemnified Party.
An Indemnified Party will, promptly after receiving notice of the commencement of any action
against such Indemnified Party in respect of which indemnification may be sought against the
Company, the Guarantor or the Underwriter, as the case may be (in any case the Indemnifying
Party), notify the Indemnifying Party in writing of the commencement of the action, enclosing a
copy of all papers served, but the omission so to notify the Indemnifying Party of any such action
shall not relieve the Indemnifying Party of any liability which it may have to any Indemnified
Party otherwise than under this Section. If such action is brought against an Indemnified Party
and such Indemnified Party notices the Indemnifying Party of its
10
Exhibit 4.28
commencement, the Indemnifying Party may, or if so requested by the Indemnified Party shall,
participate in it or assume its defense, with counsel reasonably satisfactory to the Indemnified
Party, and after notice from the Indemnifying Party to the Indemnified Party of an election to
assume the defense, the Indemnifying Party will not be liable to the Indemnified Party under this
Section for any legal or other expenses subsequently incurred by such Indemnified Party in
connection with the defense other than reasonable costs of investigation subsequently incurred by
the Indemnified Party in connection with the defense thereof. Until the Indemnifying Party assumes
the defense of any such action at the request of the Indemnified Party, the Indemnifying Party may
participate at its own expense in the defense of the action. If the Indemnifying Party does not
employ counsel to have charge of the defense or if any Indemnified Party reasonably concludes that
there may be defenses available to it or them which are different from or in addition to those
available to the Indemnifying Party or the Indemnified Party and the Indemnifying Parties may have
conflicting interests which would make it inappropriate for the same counsel to represent both of
them, reasonable legal and other expenses incurred by such Indemnified Party will be paid by the
Indemnifying Party and the Indemnifying Party shall not have the right to direct the defense of
such action on behalf of such Indemnified Party (it being understood, however, that the
Indemnifying Party shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) approved by the Underwriter in the case of paragraph (a) representing
all Indemnified Parties who are parties to such action). Any obligation under this Section 7 of an
Indemnifying Party to reimburse an Indemnified Party for expenses includes the obligation to
reimburse the Indemnified Party to cover such expenses in reasonable amounts and at reasonable
periodic intervals upon receipt by the Indemnifying Party of an invoice for such expenses not more
often than monthly as requested by the Indemnifying Party. Notwithstanding the foregoing, the
Indemnifying Party shall not be liable for any settlement of any action or claim effected without
its consent, which consent shall not be unreasonably withheld.
In order to provide for just and equitable contribution in circumstances in which the
indemnification provided for above is due in accordance with its terms but is for any reason held
by a court to be unavailable from the Company, the Guarantor or Underwriter on grounds of policy or
otherwise, the Company and the Guarantor (on one hand) and the Underwriter shall contribute to the
total losses, claims, damages and liabilities (including reasonable legal or other expenses of
investigation or defense) to which they may be subject (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Guarantor (on one hand) and the
Underwriter from the offering of the Bonds or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of the Company and
the Guarantor (on one hand) and the Underwriter in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The respective relative benefits received by the Company and the
Guarantor (on one hand) and the Underwriter shall be deemed to be in the same proportion as the
proceeds from the sale (i.e., the principal amount of the Bonds) bears to the discount or fee in
connection with such sale received by the Underwriter as an underwriting fee, as set forth in
Section 13 hereof. The relative fault of the Company and the Guarantor (on one hand) and the
Underwriter shall be determined by reference to, among other things, whether
11
Exhibit 4.28
the untrue or alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company and the Guarantor (on one
hand) or by the Underwriter and the parties relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. However, no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be
entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section, each person who controls the Underwriter within the meaning of
Section 15 of the Securities Act will have the same rights to contribution as the Underwriter, and
each person who controls the Company or the Guarantor within the meaning of Section 15 of the
Securities Act and each officer and each director of the Company or the Guarantor will have the
same rights to contribution as the Company or the Guarantor, subject to the foregoing sentence.
Any party entitled to contribution will, promptly after receiving notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for contribution may be
made under this paragraph, notify each party from whom contribution may be sought, but the omission
to notify such party shall not relieve any party from whom contribution may be sought from any
other obligation it may have otherwise than pursuant to this paragraph.
8. (a) The Companys obligations hereunder, except those contained in Sections 7 and 13, will
be conditioned upon the approval by the DPUC of the issuance of the Note, the loan under the
Agreement and the transactions of the Company contemplated by the Financing Documents; the purchase
of and payment for the Bonds in accordance herewith on the Closing Date; the performance of the
obligations of the Authority and the Underwriter not dependant on the performance of the Company;
and the delivery to the Authority of the approving opinion of Winston & Strawn LLP, Bond Counsel,
in form and substance substantially in the form set forth as Appendix D to the Official Statement.
(b) The Guarantors obligations hereunder, except those contained in Section 7, will be
conditioned upon the approval by the DPUC of the issuance of the Note, the loan under the Agreement
and the transactions of the Guarantor contemplated by the Financing Documents; the purchase of and
payment for the Bonds in accordance herewith on the Closing Date; the performance of the
obligations of the Authority and the Underwriter not dependant on the performance of the Guarantor;
and the delivery to the Authority of the approving opinion of Winston & Strawn LLP, Bond Counsel,
in form and substance substantially in the form set forth as Appendix D to the Official Statement.
9. The Authoritys obligation to deliver the Bonds and to accept payment therefor are subject
to the performance of the obligations of the Company, the Guarantor and the Underwriter not
dependent on the performance of the Authority, and will be conditioned upon the approval by the
DPUC of the issuance of the Note, the loan under the Agreement and the transactions of the Company
contemplated by the Financing Documents; the purchase of and payment for the Bonds in accordance
herewith on the Closing Date; the delivery by the Underwriter to the Authority of a certificate
substantially in the form of Schedule I to the Tax Regulatory Agreement; and the delivery to the
Authority of the approving opinion of Winston & Strawn LLP, Bond Counsel, in form and substance
substantially in the form set forth as Appendix D to the Official Statement, and will be subject to
the further condition that all
12
Exhibit 4.28
documents, certificates, opinions and other items to be delivered at the closing pursuant
hereto and as otherwise may reasonably be requested by Bond Counsel not be unsatisfactory in form
and substance to Bond Counsel.
10. The Underwriters obligations hereunder to purchase and pay for the Bonds will be subject
to (i) the approval by the DPUC of the issuance of the Note, the loan under the Agreement and the
transactions of the Company contemplated by the Financing Documents, (ii) the performance by the
Authority of its obligations to be performed hereunder at or prior to the Closing Date, (iii) the
performance by the Company and the Guarantor of their obligations to be performed hereunder at or
prior to the Closing Date, (iv) the continued accuracy in all material respects of the
representations and warranties of the Authority, the Company and the Guarantor contained herein and
in the Agreement as of the date hereof and as of the Closing Date, and (v) in the reasonable
judgment of the Underwriter, the following conditions:
(a) After the date hereof, no litigation may be threatened or pending in any court (i) seeking
to restrain or enjoin the issuance or delivery of the Bonds or the payment, collection or
application of the proceeds thereof or moneys and securities pledged or to be pledged under the
Indenture, or (ii) in any way questioning or affecting the validity of the Bonds or any provisions
of the Indenture, the Financing Documents or this Bond Purchase Agreement or any proceedings taken
by the Authority with respect to the foregoing, or (iii) questioning the Authoritys creation,
organization or existence or the titles to office of any of its officers authorized under the
Resolution, or its power to lend or provide money in connection with the Project as referred to in
the Indenture and the Agreement, or (iv) questioning the Companys or the Guarantors power to
enter into and perform the Financing Documents or this Bond Purchase Agreement;
(b) The market value of the Bonds has not been adversely affected by reason of the fact that
between the date hereof and the Closing Date:
(1) legislation has been enacted by the Congress or recommended to the Congress for
passage by the President of the United States, or favorably reported for passage to either
House of the Congress by any Committee of such House to which such legislation has been
referred for consideration, or
(2) a decision has been rendered by a Court of the United States, or the United States
Tax Court, or
(3) an order, ruling, regulation or official statement has been made by the Treasury
Department of the United States or the Internal Revenue Service,
with the purpose or effect, directly or indirectly, of imposing federal income taxation upon such
revenues or other income as would be derived by the Authority under the Agreement or such interest
on the Bonds as would be received by the true owners and holders thereof, other than a person who,
within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended (the Code),
is a substantial user or related person;
13
Exhibit 4.28
(c) The market value of the Bonds has not in the opinion of the Underwriter been materially
adversely affected by reason of the fact that between the date hereof and the Closing Date any
legislation, ordinance, rule or regulation has been introduced in or enacted by any governmental
body, department or agency in the State, or a decision has been rendered by any court of competent
jurisdiction within the State with the purpose or effect, directly or indirectly, of imposing state
income taxation upon such revenues or other income as would be derived by the Authority under the
Agreement or such interest on the Bonds as would be received by the true owners and holders
thereof;
(d) No stop order, ruling, regulation or official statement by, or on behalf of, the
Securities and Exchange Commission may have been issued or made after the date hereof to the effect
that the issuance, offering or sale of obligations of the general character of the Bonds, or the
Bonds, as contemplated hereby or by the Official Statement, is in violation or would be in
violation unless registered or otherwise qualified under any provisions of the Securities Act of
1933, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then
in effect;
(e) After the date hereof, no legislation may have been introduced in or enacted by the House
of Representatives or the Senate or the Congress of the United States of America, nor shall a
decision by a court of the United States of America have been rendered, or a ruling, regulation or
official statement by or on behalf of the Securities and Exchange Commission or other governmental
agency having jurisdiction of the subject matter have been made or proposed to the effect that
obligations of the general character of the Bonds, or the Bonds, are not exempt from registration,
qualification or other requirements of the Securities Act of 1933, as amended and as then in
effect, or of the Securities Act of 1934, as amended and then in effect, or of the Trust Indenture
Act of 1939, as amended and as then in effect;
(f) (i) No event shall have occurred after the date hereof, which, in the opinion of the
Underwriter, makes untrue, incorrect or inaccurate, in any material respect, any statement or
information contained or incorporated by reference in the Official Statement (including the
Appendices thereto), or which is not reflected in the Official Statement but should be reflected
therein for the purpose for which the Official Statement is to be used in order to make the
statements and information contained therein in light of the circumstances under which they were
made not misleading in any material respect, and (ii) there shall be no material adverse change
(not in the ordinary course of business) in the condition of either the Company or the Guarantor
from that set forth in or incorporated by reference in the Official Statement and Appendices A or B
respectively, thereto;
(g) In the judgment of the Underwriter, the market price of the Bonds, or the market price
generally of obligations of the general character of the Bonds, shall not have been adversely
affected because: (a) additional material restrictions not in force as of the date hereof shall
have been imposed upon trading in securities generally by any governmental authority or by any
national securities exchange; (b) the New York Stock Exchange, Inc. or other national securities
exchange, or any governmental authority, shall impose, as to the Bonds or similar obligations, any
material restrictions not now in force, or increase materially those now in force,
14
Exhibit 4.28
with respect to the extension of credit by, or the charge to the net capital requirements of,
underwriters; (c) a general banking moratorium shall have been established by federal, New York or
Connecticut authorities; or (d) a war involving the United States of America shall have been
declared, or any other national calamity shall have occurred, or any conflict involving the armed
forces of the United States of America has escalated to such a magnitude as to materially adversely
affect the Underwriters ability to market the Bonds;
(h) All matters relating to this Bond Purchase Agreement, the Bonds and the sale thereof, the
Indenture, the Financing Documents and the consummation of the transactions contemplated by this
Bond Purchase Agreement must be approved by the Underwriter but such approval may not be
unreasonably withheld; and
(i) At or prior to the Closing Date the Underwriter must have received the following
documents:
(1) Certified copies of the executed Financing Documents and the Indenture.
(2) The legal opinions of the following, dated the Closing Date, in the form and
substance satisfactory to Bond Counsel and the Underwriter:
(A) Murtha Cullina LLP, counsel to the Company and the Guarantor.
(B) Day Berry & Howard LLP, counsel to the Trustee.
(C) Winston & Strawn LLP, Bond Counsel, substantially in the form set forth as
Appendix D to the Official Statement.
(D) Winston & Strawn LLP, Bond Counsel, concerning supplementary matters.
(F) Counsel to the Bond Insurer, as described herein
below.
The respective forms of such opinions above are subject, in each case, only to such changes
therein as counsel to the Underwriter approve;
(3) The legal opinion of GluckWalrath LLP, counsel to the Underwriter, addressed to the
Underwriter in the form and substance satisfactory to the Underwriter;
(4) A certificate of an Authorized Representative of the Authority, dated the Closing
Date, to the effect that (i) on and as of the Closing Date, each of the representations and
warranties of the Authority set forth in Section 4 hereof is true, accurate and complete and
all agreements of the Authority herein provided and contemplated to be performed on or prior
to the Closing Date have been so performed; (ii) the executed copies of the Financing
Documents and the certified copies of the Resolution authorizing the Bonds are true, correct
and complete copies of such
15
Exhibit 4.28
documents and have not been modified, amended, superseded or rescinded but remain in
full force and effect as of the Closing Date; (iii) the Bonds have been duly authorized,
executed and delivered by the Authority; (iv) this Bond Purchase Agreement, the Indenture
and the Financing Documents and any and all other agreements and documents required to be
executed and delivered by the Authority in order to carry out, give effect to and consummate
the transactions contemplated hereby and by the Indenture have each been duly authorized,
executed and delivered by the Authority, and as of the Closing Date each is in full force
and effect and substantially all right, title and interest inuring to the Authority under
the Agreement has been duly pledged, and the loan payments thereunder assigned, to the
Trustee under the Indenture for the benefit of the holders of the Bonds; (v) no litigation
is pending or threatened to restrain or enjoin the issuance or sale of the Bonds or in any
way contesting the validity or affecting the authority for the issuance of the Bonds, the
authorization, execution or performance of the Indenture and the Financing Documents, or the
existence or powers of the Authority or the right of the Authority to finance the Project;
and (vi) the Treasurer of the State has approved all matters and resolutions of the
Authority required by the Act to be approved by the Treasurer with respect to the issuance,
sale and delivery of the Bonds;
(5) A certificate of the Chairman, President and Chief Executive Officer, Vice
President-Chief Financial Officer, Treasurer, any Vice President, Assistant Treasurer or
Secretary of the Company, dated the Closing Date, as to the due incorporation, valid
existence of the Company under the laws of the State, and the due authorization, execution
and delivery by the Company of this Bond Purchase Agreement and the Financing Documents and
annexing resolutions of the Board of Directors or Executive Committee or both with respect
to such authorizations;
(6) A certificate of the Chairman, President and Chief Executive Officer, Vice
President-Chief Financial Officer, Treasurer, any Vice President, Assistant Treasurer or
Secretary of the Company, dated the Closing Date, certifying severally that (i) the Company
does not have any material contingent obligations or any material contractual agreements
which are not disclosed or incorporated by reference in the Official Statement, (ii) so far
as is known to the Company, there are no material pending or threatened legal proceedings to
which the Company is or may be made a party or to which any of its property is or may become
subjugated, which has not been fully disclosed or incorporated by reference in the Official
Statement, (iii) there is no action or proceeding pending, or to its best knowledge
threatened, looking toward the dissolution or liquidation of the Company and there is no
action or proceeding pending, or to its best knowledge threatened, by or against the Company
affecting the validity and enforceability of the terms of the Financing Documents or this
Bond Purchase Agreement, (iv) since December 31, 2004 there has been no material adverse
change in the financial condition of the Company, taking into account seasonal revenue
fluctuations, not disclosed or incorporated by reference in the Official Statement, and (v)
the representations and warranties of the Company contained herein are true, complete and
correct as of the Closing Date, with the same effect as if those representations and
warranties had been made on and as of such date;
16
Exhibit 4.28
(7) A certificate of the Chairman, President and Chief Executive Officer, Vice
President-Chief Financial Officer, Treasurer, any Vice President, Assistant Treasurer or
Secretary of the Guarantor, dated the Closing Date, as to the due incorporation, valid
existence of the Guarantor under the laws of the State, and the due authorization, execution
and delivery by the Guarantor of this Bond Purchase Agreement and the Financing Documents
and annexing resolutions of the Board of Directors or Executive Committee or both with
respect to such authorizations;
(8) A certificate of the Chairman, President and Chief Executive Officer, Vice
President-Chief Financial Officer, Treasurer, any Vice President, Assistant Treasurer or
Secretary of the Guarantor, dated the Closing Date, certifying severally that (i) the
Guarantor does not have any material contingent obligations or any material contractual
agreements which are not disclosed or incorporated by reference in the Official Statement,
(ii) so far as is known to the Guarantor, there are no material pending or threatened legal
proceedings to which the Guarantor is or may be made a party or to which any of its property
is or may become subjugated, which has not been fully disclosed or incorporated by reference
in the Official Statement, (iii) there is no action or proceeding pending, or to its best
knowledge threatened, looking toward the dissolution or liquidation of the Guarantor and
there is no action or proceeding pending, or to its best knowledge threatened, by or against
the Guarantor affecting the validity and enforceability of the terms of the Financing
Documents or this Bond Purchase Agreement, (iv) since June 30, 2005 there has been no
material adverse change in the financial condition of the Guarantor, taking into account
seasonal revenue fluctuations, not disclosed or incorporated by reference in the Official
Statement, and (v) the representations and warranties of the Guarantor contained herein are
true, complete and correct as of the Closing Date, with the same effect as if those
representations and warranties had been made on and as of such date;
(9) A certificate, satisfactory in form and substance to the Underwriter, of one or
more duly authorized officers of the Trustee, dated the Closing Date, as to the due
execution and delivery of the Indenture, the Company Disclosure Agreement and the Guarantor
Disclosure Agreement by the Trustee and the due authentication and delivery of the Bonds by
the Trustee thereunder;
(10) Letters from Standard & Poors Ratings Service, the rating agency, indicating that
the rating for the Bonds is no less than AAA;
(11) Evidence, in form and substance satisfactory to the Authority and the Underwriter,
that the Bond Insurer has delivered an insurance policy and any appropriate endorsements
thereupon guaranteeing the timely payment of principal of an interest on the Bonds (such
policy and any appropriate endorsements are herein called the Policy);
(12) A certificate of the Bond Insurer stating that the information concerning the Bond
Insurer as set forth in the Official Statement under the heading BOND INSURANCE and in
Appendix F thereto is accurate;
17
Exhibit 4.28
(13) An opinion of counsel to the Bond Insurer, dated the date of the Closing and
addressed to the Authority, the Company and the Underwriter, to the effect that: (i) the
Bond Insurer is a stock insurance corporation duly incorporated and validly existing under
the laws of the State of New York and is licensed and authorized under the laws of the State
of Connecticut to issue the Policy under the laws of the State of Connecticut; and (ii) the
Policy has been duly executed and is a valid and binding obligation of the Bond Insurer,
enforceable in accordance with its terms, except that the enforcement thereof may be limited
by laws relating to bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors rights generally and general principles of equity;
(14) A letter from PricewaterhouseCoopers LLP, independent auditors for the Guarantor,
dated the Closing Date and addressed to the Guarantor;
(15) A copy of the order of the DPUC approving the issuance of the Bonds and the
transactions of the Company contemplated by the Financing Documents;
(16) Certificates evidencing that the insurance required to be obtained pursuant to the
Agreement is in place;
(17) A letter or other written evidence satisfactory to Bond Counsel that the State
Treasurer has approved the issuance of the Bonds in accordance with the Act;
(18) A letter or other written evidence satisfactory to Bond Counsel that an elected
official has approved the issuance of the Bonds in accordance with the applicable provisions
of the Code; and
(19) Such additional certificates, instruments or other documents as the Underwriter
may reasonably require to evidence the accuracy, as of the Closing Date, of the
representations and warranties herein contained, and the due performance and satisfaction by
the Company and the Guarantor at or prior to such time of all agreements then to be
performed and all conditions then to be satisfied by any one or all of them in connection
with this Bond Purchase Agreement, the Financing Documents or the Indenture.
In addition:
The Authority hereby represents that the Preliminary Official Statement, with such additions
and amendments as have been heretofore agreed upon between the Authority and the Underwriter, is
deemed final as of the date thereof, except for the omission of offering prices, interest rates,
selling compensation, aggregate principal amount, principal amount per maturity, delivery dates,
ratings and other terms of the Bonds depending on such matters. Such representation is made in
reliance upon the Companys and the Guarantors representation herein that material relating to the
Company and the Guarantor included in the Preliminary Official Statement is true and correct. The
Company has contracted with a printer acceptable to the Underwriter for the delivery to the
Underwriter at Companys expense of the number of copies
18
Exhibit 4.28
requested by the Underwriter of the Official Statement and will cooperate with the Underwriter
to secure the delivery thereof with reasonable promptness and within seven business days. The
Underwriter agrees to file a copy of such Official Statement with a nationally recognized municipal
securities information repository within five (5) days after such final Official Statements are
made available to the Underwriter and to advise the Authority as to the location and time of such
filing. Should the Underwriter require additional copies of the Official Statement, the Authority
agrees to cooperate with the Underwriter in obtaining such copies at Companys expense if such
request is made within 90 days from the date hereof and at the Underwriters expense if such
request is made thereafter. The Underwriter has taken and will continue to take action to comply
with the Securities Exchange Commission Municipal Securities Disclosure Rule, 17 C.F.R.
§240.15c2-12 and the provisions of this paragraph shall survive the expiration hereof to the extent
necessary for such purpose.
Except as provided in Sections 7 and 13 hereof, if the Authority, the Company or the Guarantor
shall fail or be unable to satisfy the conditions of their obligations contained in this Bond
Purchase Agreement, or if the Underwriters obligations hereunder shall be terminated for any
reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement shall terminate and
neither the Authority nor the Underwriter nor the Company shall be under any further obligation
hereunder.
SIMULTANEOUSLY WITH OR BEFORE DELIVERY OF THE BONDS, THE UNDERWRITER SHALL FURNISH TO THE
AUTHORITY A CERTIFICATE SUBSTANTIALLY IN FORM ATTACHED TO THE TAX REGULATORY AGREEMENT ACCEPTABLE
TO BOND COUNSEL TO THE EFFECT THAT (I) THE UNDERWRITER HAS MADE A
BONA
FIDE
PUBLIC
OFFERING OF THE BONDS TO THE PUBLIC AT INITIAL OFFERING PRICES NOT GREATER THAN THE RESPECTIVE
PRICES SHOWN ON THE COVER OF THE OFFICIAL STATEMENT, OR IN THE CASE OF DISCOUNT OBLIGATIONS SOLD ON
A YIELD BASIS, AT YIELDS NO LOWER THAN THOSE SHOWN ON THE COVER, INCLUDING INTEREST ACCRUED ON THE
BONDS FROM THE DATE THEREOF, AND (II) A SUBSTANTIAL AMOUNT OF THE FINAL AMOUNT OF EACH MATURITY OF
THE BONDS WAS SOLD TO THE FINAL PURCHASER THEREOF (NOT INCLUDING BOND HOUSES AND BROKERS OR SIMILAR
PERSONS OR ORGANIZATIONS ACTING IN THE CAPACITY OF UNDERWRITER OR WHOLESALERS) AT PRICES NOT
GREATER THAN SUCH OFFERING PRICES OR YIELDS. Bond Counsel advises that (i) such certificate must
be made on the best knowledge, information and belief of the Underwriter, (ii) the sale to the
public of 10% or more of each maturity of the Bonds at prices or yields not greater than the
Initial Offering Prices or Yields would be sufficient for the purpose of certifying as to the sale
of a substantial amount of the Bonds, and (iii) reliance on other facts as a basis for such
certification would require evaluation by Bond Counsel to assure compliance with the statutory
requirement.
11. The Authority, the Company and the Guarantor agree that all representations, warranties
and covenants made by them herein, and in certificates or other instruments delivered pursuant
hereto or in connection herewith, shall be deemed to have been relied upon by the Underwriter
notwithstanding any investigation heretofore or hereafter made by the Underwriter on its behalf,
and that all representations, warranties and covenants made by the Authority, the
19
Exhibit 4.28
Company and the Guarantor herein and therein and all of the Underwriters rights hereunder and
thereunder shall survive the delivery of the Bonds.
12. The Underwriter has received reasonable assurances that the Company and the Guarantor will
comply with its written undertaking, set forth in Section 6.13 of the Agreement and in the Company
Disclosure Agreement and the Guarantor Disclosure Agreement, to provide certain required disclosure
information to the Trustee, as dissemination agent, for the benefit of the bondholders and that
procedures are, or will be, in place such that the Trustee, as dissemination agent, will receive
prompt notice of any material event or Companys failure, in any material respect, to comply with
its undertaking.
13. The Authority shall pay, but only from proceeds of the Bonds or moneys to be provided by
the Company, any expenses incident to the performance of its obligations hereunder including but
not limited to (a) the cost of the preparation and printing (for distribution on or prior to the
date hereof) of the Financing Documents, the Indenture, the Preliminary Official Statement and the
final Official Statement (in such numbers as the Authority, the Company and the Underwriter shall
mutually agree upon), and this Bond Purchase Agreement; (b) the cost of the preparation and
printing of the Bonds; (c) the fees and disbursements of Winston & Strawn LLP, Bond Counsel; (d)
the fees of any other attorneys, experts or consultants retained by the Authority; and (e) any fee
to the rating agencies.
The Underwriter shall pay (a) the cost of the preparation and printing of the Blue Sky Survey,
if any; (b) all advertising expenses in connection with the public offering of the Bonds; (c) the
fees and disbursements of GluckWalrath LLP, counsel to the Underwriter; and (d) all other expenses
incurred by the Underwriter in connection with their public offering and distribution of the Bonds,
including the fees and disbursements of all attorneys, experts and consultants retained by them.
On or prior to the Closing Date, the Company shall pay the fees and disbursements of the
Underwriter in the aggregate amount of $147,500.
14. All communications hereunder shall be in writing and, unless otherwise directed in
writing, shall be addressed as follows: if to the Authority at 999 West Street, Rocky Hill,
Connecticut 06067, Attention: Executive Director; if to the Company or the Guarantor at 93 West
Main Street, Clinton, Connecticut 06413, Attention: Vice PresidentChief Financial Officer and
Treasurer; if to the Underwriter at One Gateway Center, Suite 1002, Newark, New Jersey 07102,
Attention: Craig A. Hrinkevich, Vice President and Managing Director.
15. This Bond Purchase Agreement shall be construed and enforceable in accordance with the
laws of the State of Connecticut.
16. All terms used but not defined herein shall have the meanings set forth in the Official
Statement.
20
Exhibit 4.28
17. This Bond Purchase Agreement may be executed in any number of counterparts, each of which,
when so executed and delivered shall be an original; but such counterparts shall together
constitute but one and the same Bond Purchase Agreement.
18. In case any one or more of the provisions contained in this Bond Purchase Agreement shall
for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this Bond Purchase
Agreement, but this Bond Purchase Agreement shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein.
21
Exhibit 4.28
19. This Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Underwriter, the Authority, the Company and the Guarantor. This Agreement may be
signed in several counterparts each of which shall be an original and all of which shall constitute
but one and the same instrument.
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CONNECTICUT DEVELOPMENT AUTHORITY
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By:
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/s/ Karin A. Lawrence
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Karin A. Lawrence
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Authorized Representative
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THE CRYSTAL WATER COMPANY OF
DANIELSON
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By:
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/s/ David C. Benoit
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David C. Benoit, Vice President & CFO
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CONNECTICUT WATER SERVICE, INC.
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By:
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/s/ David C. Benoit
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David C. Benoit, Vice President & CFO
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A.G. EDWARDS & SONS, INC.
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By:
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/s/ Craig A. Hrinkevich
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Craig A. Hrinkevich, Vice President and
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Managing Director
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22
EXHIBIT 4.29
GUARANTY
from
CONNECTICUT WATER SERVICE, INC.
to
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
Dated as of October 1, 2005
Connecticut Development Authority
$5,000,000 Water Facilities Revenue Bonds
(The Crystal Water Company of Danielson Project 2005A Series)
Exhibit 4.29
TABLE OF CONTENTS
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Page
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Preambles
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1
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ARTICLE I
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REPRESENTATIONS AND WARRANTIES
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Section 1.1. Guarantor Representations and Warranties
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1
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ARTICLE II
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COVENANT AND AGREEMENTS
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Section 2.1. The Guaranty
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3
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Section 2.2. Unconditional Nature of Guaranty
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3
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Section 2.3. Waiver of Notice; Payment of Costs
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5
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Section 2.4. The Guarantor to Maintain Corporate Existence
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5
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Section 2.5. Access to Books and Records
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6
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Section 2.6. Discharge of Obligations
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6
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Section 2.7. Further Assurances
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6
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Section 2.8. Maintenance of Books and Records
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7
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Section 2.9. Indemnification, Payment of Expenses, and Advances
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7
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Section 2.10. Restrictions on Amendments
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8
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ARTICLE III
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DEFAULTS AND REMEDIES
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Section 3.1. Events of Default
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8
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Section 3.2. Right of Trustee and Bondholders to Proceed Against Guarantor
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9
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ARTICLE IV
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NOTICE AND SERVICE OF PROCESS, PLEADINGS AND OTHER PAPERS
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Section 4.1. Designation of Agent for Service of Process
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10
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Section 4.2. Consent to Service of Process
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10
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Section 4.3. Notices
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10
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ARTICLE V
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GENERAL
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Section 5.1. Amendments, etc.
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10
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Section 5.2. No Remedy Exclusive; Effect of Waiver
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Section 5.3. Continuing Guaranty
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11
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Section 5.4. Governing Law
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11
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Section 5.5. Counterparts
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11
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Section 5.6. Third Party Beneficiaries
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11
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Section 5.7. Consent of Bond Insurer
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-i -
Exhibit 4.29
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Page
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Section 5.8. Amendments to Guaranty
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11
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Section 5.9. Terms
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Section 5.10. Severability
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-ii -
Exhibit 4.29
GUARANTY
This GUARANTY made and dated as of October 1, 2005 (the Guaranty), from CONNECTICUT WATER
SERVICE, INC., a corporation duly organized and existing under the laws of the State of Connecticut
(the Guarantor), to U.S. BANK NATIONAL ASSOCIATION, a national banking association organized,
existing and authorized to accept trusts under and by virtue of the laws of the United States of
America (the Trustee), as Trustee under an Indenture of Trust, of even date herewith, between the
Connecticut Development Authority and the Trustee. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Indenture (as defined below).
WITNESSETH:
WHEREAS, the Connecticut Development Authority (the Authority), a body corporate and politic
constituting a public instrumentality and political subdivision of the State of Connecticut (the
State) intends to issue its Water Facilities Revenue Bonds (The Crystal Water Company of
Danielson Project 2005A Series) in the aggregate principal amount of $5,000,000 (the Bonds);
and
WHEREAS, the Bonds are to be issued pursuant to the State Commerce Act, constituting
Connecticut General Statutes, Sections 32-la through 32-23zz, as amended, a resolution of the
Authority adopted August 17, 2005 and under and pursuant to an Indenture of Trust dated as of
October 1, 2005, by and between the Authority and the Trustee (the Indenture); and
WHEREAS, the proceeds derived from the issuance of the Bonds are to be applied to the
financing of the Project as defined in the Loan Agreement (the Agreement) dated as of October 1,
2005 between the Authority and The Crystal Water Company of Danielson (the Borrower); and
WHEREAS, the obligation of the Borrower to the Authority under the Agreement is evidenced by
the promissory note of the Borrower dated as of November 30, 2005 (the Note); and
WHEREAS, the Borrower is a wholly owned subsidiary of the Guarantor and the Guarantor will
benefit from the loan of the proceeds of the Bonds from the Authority to the Borrower;
NOW, THEREFORE, to induce the purchase of the Bonds by all who shall at any time be holders of
the Bonds, the Guarantor does hereby, subject to the terms hereof, covenant and agree with the
Trustee as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
Section 1.1.
Guarantor Representations and Warranties
. The Guarantor hereby
represents and warrants that:
(1) The Guarantor has been duly incorporated and validly exists as a corporation under
the laws of the State, and is not in violation of any provision of its certificate of
incorporation or its by-laws, and has all requisite power and authority to own and operate
its properties, to carry on business as now conducted and proposed to be conducted, to enter
into the Guaranty and all other documents contemplated hereby to which the Guarantor is a
party, and to carry out the terms hereof and thereof.
(2) The Guarantor has delivered to the Trustee a true and complete copy of its
certificate of incorporation and all amendments thereto, and its by-laws and all amendments
thereto, as in effect on the date hereof (collectively, the Corporate Documents).
Exhibit 4.29
(3) The Guarantor is qualified or authorized to do business in the jurisdictions in
which the character of the properties to be owned by it, or the nature of the activities
conducted by it, makes such qualification or authorization necessary or in which the failure
to qualify would have a material adverse effect on the properties or business of the
Guarantor.
(4) The Guarantor has taken or caused to be taken all necessary and proper corporate
action to authorize or approve, as appropriate, the execution, issuance and delivery of, and
the performance of its obligations under this Guaranty, and any and all instruments and
documents required to be executed or delivered pursuant to or in connection therewith.
(5) The execution and delivery of, and performance by the Guarantor of its obligations
under this Guaranty and any and all instruments or documents required to be executed or
delivered pursuant to or in connection herewith, were and are within the powers of the
Guarantor and (i) will not violate any material provision of any applicable law, regulation,
decree or governmental authorization the violation of which would have a material adverse
affect upon its ability to perform its obligations under this Guaranty, and (ii) will not
violate or cause a default under any material provision of any contract, agreement,
mortgage, indenture or other undertaking to which the Guarantor is a party or which is
binding upon the Guarantor or any of its property or assets, and (iii) will not result in
the imposition or creation of any lien, charge, or encumbrance upon any of the properties or
assets of the Guarantor pursuant to the provisions of any such contract, agreement,
mortgage, indenture or other undertaking which would have a material adverse effect upon its
ability to perform its obligations under this Guaranty or the Corporate Documents.
(6) All material authorizations, licenses, permits, certificates, franchises, consents,
approvals and undertakings which are required to be obtained by the Guarantor under any
applicable law in connection with (i) the conduct of its activities, and (ii) the ownership,
use, operation or maintenance of the properties of the Guarantor, the execution, delivery
and performance by the Guarantor of its obligations to the Trustee under, or in connection
with, this Guaranty have been obtained and are in full force and effect.
(7) This Guaranty constitutes the valid and legally binding obligation of the
Guarantor, enforceable in accordance with its terms, except as the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors rights generally and provided that the
availability of equitable remedies is subject to the application of equitable principles.
(8) There is no action, suit, investigation or proceeding pending, or to the knowledge
of the Guarantor, threatened, against the Guarantor before any court, arbitrator or
administrative or governmental body which might result in any material adverse change in the
operations of the Guarantor or which might materially adversely affect the ability of the
Guarantor to comply with its obligations hereunder or in connection with the transactions
contemplated hereby.
(9) No document, certificate or statement furnished to the Trustee by or on behalf of
the Guarantor in connection with the transactions contemplated hereby contains any untrue
statement of any material fact with respect to the Guarantor or omits to state any material
fact necessary in order to make the statements contained herein or therein not misleading
with respect to the Guarantor.
(10) The Guarantor has filed or caused to be filed all tax returns required by law to
be filed and has paid or caused to be paid all taxes, assessments and other governmental
charges levied upon or in respect of any of its properties, assets, or franchises, except to
the extent such are being contested in good faith by appropriate proceedings, in which event
such may remain unpaid during the period of such contest;
provided
,
however,
that such taxes, assessments and other
-2-
Exhibit 4.29
governmental charges must be paid on or before the date on or after which failure to
pay would result in the creation of liens upon or in respect of any such properties, assets
or franchises. The charges, accruals and reserves on the books of the Guarantor in respect
of taxes for all fiscal periods are adequate, and there is no unpaid assessment for
additional taxes for any fiscal period or any basis therefor.
(11) On the date of issuance of the Bonds (as defined in the Indenture), after giving
effect to all indebtedness (including this Guaranty) being incurred by the Guarantor in
connection therewith, (i) the sum of the property, at a fair valuation, of the Guarantor
will exceed the Guarantors debts; (ii) the present fair saleable value of the assets of the
Guarantor will be greater than the amount that will be required to pay the Guarantors
liability on debts as such debts become absolute and mature; and (iii) the Guarantor will
have sufficient capital with which to conduct its business. For purposes of this clause
(11), debt means any liability in a claim, and claim means any (A) right to payment,
whether or not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or
unsecured; or (B) right to an equitable remedy for breach of performance if such breach
gives rise to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or
unsecured.
(12) The assumption by the Guarantor of its obligations hereunder will result in a
direct and material financial benefit to the Guarantor.
ARTICLE II
COVENANT AND AGREEMENTS
Section 2.1.
The Guaranty
. The Guarantor hereby unconditionally guarantees to the
Trustee for the benefit of the Trustee and the holders from time to time of the Bonds the full and
prompt payment of (1) the principal or redemption price, if any, of any Bond when and as the same
shall become due, whether at the stated maturity thereof, by acceleration, call for redemption or
otherwise; (2) the interest on any Bond when and as the same shall become due and payable; and (3)
all other amounts due under the Agreement and the Note. All payments by the Guarantor shall be paid
in lawful money of the United States of America. Each and every payment obligation or liability
guaranteed hereunder shall give rise to a separate cause of action, and separate suits may but need
not be brought hereunder as each cause of action arises.
Section 2.2.
Unconditional Nature of Guaranty
. (A) The obligations of the Guarantor
under this Guaranty shall be absolute and unconditional and shall remain in full force and effect
until every payment, obligation or liability guaranteed hereunder shall have been fully and finally
paid and performed. The Guarantor further guarantees that all payments made by the Borrower with
respect to any liabilities hereby guaranteed will, when made, be final and agrees that if any such
payment is recovered from or repaid by the Authority, the Trustee or the holders of the Bonds in
whole or in part in any bankruptcy, insolvency or similar proceeding instituted by or against the
Borrower, this Guaranty shall continue to be fully applicable to such liabilities to the same
extent as though the payment so recovered or repaid had never been originally made on such
liabilities. Such payment shall not be affected, modified or impaired upon the happening from time
to time of any event, including without limitation any of the following, whether or not with notice
to, or consent of the Guarantor:
(1) The compromise, settlement, release, change, modification whether material or
otherwise or termination of any or all of the liabilities, obligations, covenants or
agreements of the Borrower, or the release, substitution or exchange of collateral by the
Trustee or the Authority, under the Financing Documents or the Indenture;
-3-
Exhibit 4.29
(2) The failure to give notice to the Guarantor of the occurrence of an event of
default under the terms and provisions of this Guaranty, the Financing Documents, the Bonds
or the Indenture;
(3) The assignment or mortgaging or the purported assignment or mortgaging of all or
any part of the interest of the Authority, the Trustee or the Borrower in the Project or any
failure of title with respect to any such interest in the Project;
(4) The waiver of the payment, performance or observance by the Authority, the Trustee
or the Guarantor of any of the obligations, conditions, covenants or agreements of any of
them contained in the Financing Documents, the Bonds, the Indenture or this Guaranty;
(5) The extension of the time for payment of the principal of, and premium, if any, or
interest on any Bond owing or payable on such Bond, under the Agreement or under this
Guaranty or of the time for performance of any other obligations, covenants or agreements
under or arising out of the Financing Documents, the Bonds, the Indenture or this Guaranty
or the extension or the renewal of either thereof;
(6) The modification or amendment (whether material or otherwise) of any duty,
obligation, covenant or agreement set forth in the Indenture or the Bonds;
(7) The taking or the failure to take any of the actions referred to in the Financing
Documents, the Indenture or this Guaranty;
(8) Any failure, omission, delay or lack on the part of the Authority or the Trustee to
enforce, assert or exercise any right, power or remedy conferred on the Authority or the
Trustee in this Guaranty, the Financing Documents, the Bonds, or the Indenture, or any other
act or acts on the part of the Authority, the Trustee or any of the holders from time to
time of the Bonds;
(9) The full or partial discharge of the Borrower in bankruptcy or similar proceedings
or otherwise;
(10) The release or discharge of any other guarantor of the payments, obligations and
liabilities guaranteed hereby by operation of law or otherwise;
(11) The default or failure of the Guarantor fully to perform any of its obligations
set forth in this Guaranty;
(12) The addition or release of any party primarily or secondarily liable with respect
to the Bonds, whether or not notice thereof is given to the Guarantor;
(13) Any lack of validity or enforceability of the Agreement, the Note, the Indenture
or any other agreement or instrument relating thereto;
(14) The amendment or supplement of the Agreement, the Note, or the Indenture as
permitted therein; or
(15) Any other circumstance which might otherwise constitute a defense available to, or
a discharge of, the Borrower or the Guarantor.
(B) No act of commission or omission of any kind or at any time upon the part of the Borrower,
the Authority or the Trustee, or their successors and assigns, with respect to any matter
whatsoever shall in any way impair the rights of the Authority or the Trustee to enforce any right,
power or benefit under this Guaranty and no set-off, counterclaim, reduction, or diminution of any
obligation, or any defense of any kind or nature which the Guarantor has or may have against the
Borrower, the Authority or the
-4-
Exhibit 4.29
Trustee or any assignee or successor thereof shall be available hereunder to the Guarantor
against the Trustee.
(C) The Guarantor agrees that the Guarantors obligations under this Guaranty shall not be
impaired, modified, changed, revised or limited, in any manner whatsoever by any modification,
change, release or limitation of the liability of the Borrower, or its estate in bankruptcy,
resulting from the operation of any present or future provision of the Federal Bankruptcy Code or
other similar state or federal statute or from the decision of any court. If any payment made by
the Borrower to the Authority, the Trustee or the holders of the Bonds is recovered from the
Authority, the Trustee or the holders of the Bonds in whole or in part, including after payment in
full of all obligations owed to the Authority, the Trustee or the holders of the Bonds, in any
bankruptcy, insolvency or similar proceeding instituted by or against the Borrower, then this
Agreement shall continue to be fully applicable to the same extent as though the payment so
recovered or repaid had never been originally made.
Section 2.3.
Waiver of Notice; Payment of Costs
. (A) This Guaranty is a guaranty of
payment and not of collectibility or performance and is in no way conditioned or contingent upon
any attempt to collect from the Borrower or to realize upon any property subject to the lien of the
Indenture or to realize upon any property pledged as security thereunder or hereunder. The
Guarantor hereby expressly waives demand, presentment, protest, and notice of the acceptance of
this Guaranty and of any loans made, extensions granted or other action taken in reliance hereon
and all other demands and notices of any description in connection with this Guaranty, the
liabilities hereunder or otherwise.
(A) The Guarantor hereby agrees to pay all costs and expenses, including reasonable attorneys
fees and expenses, arising out of or with respect to the validity, enforcement or preservation of
this Guaranty, the Financing Documents, the Indenture or the Bonds.
(B) THE GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION CONTEMPLATED HEREIN IS A COMMERCIAL
TRANSACTION WITHIN THE MEANING OF SECTION 52-278a OF THE CONNECTICUT GENERAL STATUTES. THE TRUSTEE
HEREBY STATES THAT IN THE EVENT OF GUARANTORS DEFAULT UNDER THE GUARANTY, THE TRUSTEE INTENDS TO
PURSUE ITS RIGHTS TO OBTAIN A PREJUDGMENT REMEDY IN ACCORDANCE WITH SECTION 52-278f OF THE
CONNECTICUT GENERAL STATUTES. GUARANTOR HAS BEEN ADVISED BY COUNSEL OF ITS RIGHTS WITH RESPECT TO
PREJUDGMENT REMEDIES UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES; AS AMENDED, INCLUDING
SECTIONS 52-278 a TO 52-278g, INCLUSIVE, THEREOF. GUARANTOR HEREBY KNOWINGLY AND WILLINGLY WAIVES
ALL RIGHTS OF NOTICE, JUDICIAL HEARING OR PRIOR COURT ORDER IN CONNECTION WITH THE OBTAINING BY THE
TRUSTEE OF ANY PREJUDGMENT REMEDY IN CONNECTION WITH THE TRANSACTION EVIDENCED HEREBY OR PURSUANT
TO ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED BY THE GUARANTOR IN CONNECTION HEREWITH, INCLUDING ANY
AMENDMENTS OR EXTENSIONS HEREOF OR THEREOF. FURTHER, THE GUARANTOR WAIVES ANY REQUIREMENT OF THE
TRUSTEE TO POST A BOND OR ANY OTHER SECURITY, OR TO SHOW SOME EXIGENCY, IN CONNECTION WITH THE
OBTAINING BY THE TRUSTEE OF SUCH PREJUDGMENT REMEDY. FURTHER, THE GUARANTOR HEREBY WAIVES, TO THE
EXTENT PERMITTED BY LAW, THE BENEFITS OF ALL PRESENT AND FUTURE VALUATION, APPRAISEMENT, HOMESTEAD,
EXEMPTION, STAY, REDEMPTION AND MORATORIUM LAWS.
Section 2.4.
The Guarantor to Maintain Corporate Existence
. (A) The Guarantor
covenants and agrees that during the term of this Guaranty it will not merge, consolidate,
restructure or reorganize with an entity or sell substantially all of its assets without the prior
written consent of the Bond Insurer, provided, however, the Guarantor may merge, consolidate,
restructure or reorganize with an entity or sell substantially all of its assets without the prior
written consent of the Bond Insurer if (i) the obligor on the
-5-
Exhibit 4.29
Note remains an entity that is a public utility regulated by the appropriate regulatory body
and (ii) the Guarantor, any successor entity or the transferee of substantially all of the
Guarantors assets is obligated on the Insurance Agreement and this Guaranty. Notwithstanding the
foregoing, if the Guarantor merges, consolidates, restructures or reorganizes with an entity or
sells substantially all of its assets without the prior written consent of the Bond Insurer and the
unenhanced rating on the Bonds is lower than investment grade by any Rating Agency then rating the
Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to rate the unenhanced Bonds,
all obligations to the Bond Insurer with respect to, and all payments under the Note and Loan
Agreement must be paid in full and the Bonds must be fully redeemed in accordance with the
Indenture.
(A) Upon the occurrence of an event specified in Section 2.4(A) the Guarantor shall deliver to
the Bond Insurer and the Trustee a certificate of the president or any vice president and an
opinion of counsel acceptable to the Bond Insurer and the Trustee, each stating that such
occurrence complies with this Section 2.4.
(B) Upon the occurrence of an event specified in Section 2.4(A), the successor entity shall
succeed to, and be substituted for, and may exercise every right and power under this Guaranty with
the same effect as if such successor had been named herein, and thereafter, the predecessor entity
shall be relieved of all obligations and covenants hereunder.
(C) Notwithstanding anything to the contrary contained herein or in the Indenture, none of the
transactions described in this Section 2.4 shall require the consent of the Authority or the
Trustee.
Section 2.5.
Access to Books and Records
. Except to the extent prohibited by law, the
Guarantor will permit any person reasonably designated by the Trustee or the Bond Insurer, at the
expense of the Guarantor, to visit any of the offices of the Guarantor to examine the books and
financial records, including minutes of meetings of the Board of Directors of the Guarantor, and
make copies thereof or extracts therefrom, and to discuss the affairs, finances and accounts of the
Guarantor with its principal officials, all at such reasonable times and as often as the Trustee or
the Bond Insurer, as the case may be, may reasonably request.
Section 2.6.
Discharge of Obligations
. The Guarantor will pay and discharge all of
its obligations and liabilities, including, without limitation, all taxes, assessments and
governmental charges upon its income and properties, when due, unless and to the extent only that
such obligations, liabilities, taxes, assessments and governmental charges shall be contested in
good faith and by appropriate proceedings and then only to the extent that either (1) prior written
notice thereof has been given to the Trustee and the Authority and reserves satisfactory to the
Authority are maintained during the period of such contest and any appeal therefrom or (2) such
contest is conducted in full compliance with Connecticut General Statutes Chapter 203 unless, in
either case, nonpayment will result in the creation of a lien against any of its properties, in
which event such obligations, liabilities, taxes, assessments and governmental charges shall be
paid forthwith.
Section 2.7.
Further Assurances
. From time to time hereafter, the Guarantor will
execute and deliver such additional instruments, certificates or documents, and will take all such
actions as the Trustee may reasonably request for the purposes of implementing or effectuating the
provisions of this Guaranty or for the purpose of more fully perfecting or renewing the Trustees
rights with respect to the rights, properties or assets subject to such document (or with respect
to any additions thereto or replacements or proceeds thereof or with respect to any other property
or assets hereafter acquired by the Guarantor which may be deemed to be a part thereof) pursuant
hereto or thereto. Upon the exercise by the Trustee of any power, right, privilege or remedy of the
Trustee pursuant to the Agreement, the Indenture, or the Guaranty which requires any consent,
approval, registration, qualification or authorization of any governmental authority or
instrumentality, the Guarantor will execute and deliver all necessary applications,
-6-
Exhibit 4.29
certifications, instruments and other documents and papers that the Trustee may be required to
obtain for such governmental consent, approval, registration, qualification or authorization.
Section 2.8.
Maintenance of Books and Records
. The Guarantor will keep proper books
of record and account in which full, true and correct entries in accordance with generally accepted
accounting principles will be made of all dealings or transactions in relation to its business and
activities.
Section 2.9.
Indemnification, Payment of Expenses, and Advances
. (A) The Guarantor
agrees to protect, defend and hold harmless the Authority, the State, agencies of the State,
members, servants, agents, directors, officers and employees, now or forever, of the Authority or
the State (each an Authority Indemnified Party), the Trustee and the Paying Agent, agents,
directors, officers and employees, now or forever, of the Trustee and the Paying Agent (each an
Indemnified Party), from any claim, demand, suit, action or other proceeding and any liabilities,
costs, and expenses whatsoever by any person or entity whatsoever, arising or purportedly arising
from or in connection with this Guaranty or the transactions contemplated hereby or actions taken
hereunder by any person (including without limitation the filing of any information, form or
statement with the Internal Revenue Service, if applicable), except for any willful and material
misrepresentation, willful misconduct or gross negligence on the part of the Indemnified Party or
the Authority Indemnified Party or any bad faith on the part of any indemnitee other than an
Authority Indemnified Party. The Guarantor agrees to indemnify and hold harmless any Indemnified
Party against any and all claims, demands, suits, actions or other proceedings and all liabilities,
costs and expenses whatsoever caused by any untrue statement or misleading statement or alleged
untrue statement or alleged misleading statement of a material fact relating to or provided by the
Guarantor contained in the Preliminary Official Statement or the final Official Statement, in
connection with the issuance of the Bonds or caused by any omission or alleged omission from the
Preliminary Official Statement or the final Official Statement of such information or any material
fact relating to the Guarantor required to be stated therein or necessary in order to make the
statements made therein in the light of the circumstances under which they were made, not
misleading.
(B) The Authority and the Trustee shall not be liable for any damage or injury to the persons
or property of the Guarantor or its members, directors, officers, agents, servants or employees, or
any other person who may be about the Project due to any act or omission of any person other than
the Authority or the Trustee, respectively, or their respective members, directors, officers,
agents, servants and employees.
(C) The Guarantor releases each Indemnified Party from, agrees that no Indemnified Party shall
be liable for, and agrees to hold each Indemnified Party harmless against any reasonable attorneys
fees and expenses, expenses or damages incurred because of any investigation, review or lawsuit
commenced by the Trustee or the Authority in good faith with respect to this Guaranty and the
Authority or the Trustee shall promptly give written notice to the Guarantor with respect thereto.
(D) All covenants, stipulations, promises, agreements and obligations of the Authority and the
Trustee contained herein shall be deemed to be the covenants, stipulations, promises, agreements
and obligations of the Authority and the Trustee and not of any member, director, officer or
employee of the Authority or the Trustee in its individual capacity, and no recourse shall be had
for the payment of the Bonds or for any claim based thereon or hereunder against any member,
director, officer or employee of the Authority or the Trustee or any natural person executing the
Bonds.
(E) In case any action shall be brought against one or more of the Indemnified Parties based
upon any of the above and in respect of which indemnity may be sought against the Guarantor, such
Indemnified Party shall promptly notify the Guarantor in writing, enclosing a copy of all papers
served, but the omission so to notify the Guarantor of any such action shall not relieve it of any
liability which it may have to any Indemnified Party otherwise than under this Section 2.10. In
case any such action shall be brought against any Indemnified Party and it shall notify the
Guarantor of the commencement thereof, the Guarantor shall be entitled to participate in and, to
the extent that it shall wish, to assume the defense
-7-
Exhibit 4.29
thereof with counsel reasonably satisfactory to such Indemnified Party, and after notice from
the Guarantor to such Indemnified Party of the Guarantors election so to assume the defense
thereof, the Guarantor shall not be liable to such Indemnified Party for any subsequent legal or
other expenses attributable to such defense, except as provided below, other than reasonable costs
of investigation subsequently incurred by such Indemnified Party in connection with the defense
thereof. The Indemnified Party shall have the right to employ its own counsel in any such action,
but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless
(i) the employment of counsel by such Indemnified Party has been authorized by the Guarantor, (ii)
the Indemnified Party shall have reasonably concluded that there may be a conflict of interest
between the Guarantor and the Indemnified Party in the conduct of the defense of such action (in
which case the Guarantor shall not have the right to direct the defense of such action on the
behalf of the Indemnified Party) or (iii) the Guarantor shall not in fact have employed counsel
reasonably satisfactory to the Indemnified Party to assume the defense of such action, in all of
which cases the reasonable fees and expenses of such counsel shall be at the expense of the
Guarantor.
(F) To the extent not paid by the Borrower, the Guarantor also agrees to pay all reasonable or
necessary out-of-pocket expenses of the Authority in connection with the issuance of the Bonds, the
administration of this Guaranty and the enforcement of its rights thereunder, including
particularly any fees, charges and expenses (including reasonable counsel fees) incurred by the
Authority in connection with matters of title, collateral security and financing and continuation
statements.
(G) In the event the Guarantor fails to pay any amount or perform any act under this Guaranty,
the Trustee or Authority may pay the amount or perform the act, in which event the costs,
disbursements, expenses and reasonable counsel fees and expenses thereof, together with interest
thereon form the date the expense is paid or incurred at the prime interest rate publicly announced
from time to time by the Trustee as a commercial bank plus 1% shall be an additional obligation
hereunder payable on demand to the Authority or the Trustee.
(H) Any obligation of the Guarantor to the Authority under this Section shall be separate from
and independent of the other obligations of the Guarantor hereunder, shall not be secured by the
Financing Documents, and may be enforced directly by the Authority against the Guarantor
irrespective of any action taken by or on behalf of the Bondholders.
(I) The obligations of the Guarantor under this Section, notwithstanding any other provisions
contained in the Financing Documents, shall survive the termination of this Guaranty and shall be
recourse to the Guarantor, and for the enforcement thereof any Indemnified Party shall have
recourse to the general credit of the Guarantor.
Section 2.10.
Restrictions on Amendments
. The Guarantor will not cause, and will not
permit, the Corporate Documents or any other documents in connection therewith to be amended,
supplemented or otherwise modified so as to material adversely affect the ability of the Guarantor
to perform its obligations hereunder.
ARTICLE III
DEFAULTS AND REMEDIES
Section 3.1.
Events of Default
. As used herein, the term Event of Default shall
mean any one or more of the following events:
(a) if the Guarantor shall fail to pay, when due, any amounts required to be paid by the
Guarantor pursuant to and in accordance with Section 2.1 hereof;
-8-
Exhibit 4.29
(b) if the Guarantor shall file a voluntary petition in bankruptcy or be adjudicated a
bankrupt or insolvent or file any petition or other pleadings seeking any reorganization,
composition, readjustment, liquidation or similar relief under any present or future federal state
or local law or regulation, or shall seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of the Guarantors or of all or any substantial part of the
Guarantors assets, or shall make a general assignment for the benefit of creditors, or shall admit
in writing the inability of the Guarantor to pay the debts of the Guarantor generally as such debts
become due;
(c) if a petition or other pleadings shall be filed against the Guarantor seeking an
adjudication of bankruptcy, reorganization, composition, readjustment, liquidation or similar
relief under any present or future federal, state or local law or regulation, and such petition or
other pleading shall remain undismissed for an aggregate of ninety (90) days (whether or not
consecutive);
(d) if, by order or decree of any court of competent jurisdiction, there shall be appointed,
without the consent or acquiescence of the Guarantor, a trustee in bankruptcy or reorganization or
receiver or liquidator of the Guarantor or all or any substantial part of the property of the
Guarantor and any such order or decree shall have continued unvacated or unstayed on appeal or
otherwise and in effect for a period of ninety (90) days (whether or not consecutive);
(e) if any material representation or warranty made herein by the Guarantor proves false in
any material respect; or
(f) default on the part of the Guarantor in the performance or observance of any of its
covenants or agreements contained herein, other than the payment of amounts due hereunder, and
continuation thereof for a period of thirty (30) days after notice thereof to the Guarantor by the
Trustee, the Bond Insurer or Authority identifying such default and requesting that it be cured; or
(g) if the Guarantor shall default in the payment of any indebtedness for borrowed money,
whether such indebtedness now exists or shall hereafter be created, and any period of grace with
respect thereto shall have expired, or an event of default as defined in any mortgage, indenture or
instrument, under which there may be issued, or by which there may be secured or evidenced, any
indebtedness, whether such indebtedness now exists or shall hereafter be created, shall occur,
which default in payment or event of default shall be in respect of an indebtedness in an aggregate
principal amount of at least $5,000,000 and such indebtedness shall be due in accordance with its
terms or shall have been accelerated; provided, however that such default shall not constitute an
Event of Default within the meaning of this Section 3.1 if within the time allowed for service of a
responsive pleading in any proceeding to enforce payment of the indebtedness under the laws of the
State or other laws governing such proceeding (i) the Guarantor in good faith commences proceedings
to contest the existence or payment of such indebtedness, and (ii) sufficient moneys are escrowed
with a bank or trust corporation for the payment of such indebtedness.
Section 3.2.
Right of Trustee and Bondholders to Proceed Against Guarantor
. (A) Upon
any failure in the payment or performance of any payment, obligation or liability guaranteed
hereby, the liability of the Guarantor shall be effective immediately without notice and shall be
payable on demand without any suit or action against the Borrower. No delay or omission in
exercising any right hereunder shall operate as a waiver of such right or any other right.
(B) The Trustee, in its sole discretion, shall have the right to proceed first and directly
against the Guarantor under this Guaranty without proceeding against or exhausting any other
remedies which it may have and without resorting to any other security held by the Authority or the
Trustee. Before taking any action hereunder, the Trustee may require that a satisfactory indemnity
bond be furnished for the reimbursement of all expenses and to protect against all liability,
except liability which is adjudicated to have resulted from its gross negligence or wilful
misconduct by reason of any action so taken.
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Exhibit 4.29
(C) This Guaranty is entered into by the Guarantor for the benefit of the Trustee and the
holders from time to time of the Bonds and any successor trustee or trustees under the Indenture,
all of whom shall be entitled to enforce performance and observance of this Guaranty.
ARTICLE IV
NOTICE AND SERVICE OF PROCESS,
PLEADINGS AND OTHER PAPERS
Section 4.1.
Designation of Agent for Service of Process
. The Guarantor represents,
warrants and covenants that it is subject to service of process in the State of Connecticut, and
that it will remain so subject so long as any of the Bonds are outstanding. If for any reason the
Guarantor should not be so subject, it hereby designates and appoints, without power of revocation,
the Secretary of the State of the State of Connecticut, as its agent upon whom may be served all
process, pleadings, notices or other papers which may be served upon it as a result of any of its
obligations under this Guaranty.
Section 4.2.
Consent to Service of Process
. The Guarantor irrevocably (a) agrees that
any suit, action or other legal proceeding arising out of this Guaranty may be brought in the
courts of record of the State of Connecticut or the courts of the United States located in the
State of Connecticut; (b) consents to the jurisdiction of each such court in any such suit, action
or proceeding; and (c) waives any objection which the Guarantor may have to the laying of venue of
any such suit, action or proceeding in any of such courts. For such time as any of the Bonds shall
be unpaid in whole, or in part, the Guarantor or the Guarantors agent if designated in Section 4.1
hereof shall accept and acknowledge on the Guarantors behalf service of any and all process in any
such suit, action or proceeding brought in any such court. The Guarantor agrees and consents that
any such service of process upon such agent and written notice of such service to the Guarantor by
registered mail shall be taken and held to be valid personal service upon the Guarantor and that
any such service of process shall be of the same force and validity as if service were made upon it
according to the laws governing the validity and requirements of such service in the State of
Connecticut, and waives all claim of error by reason of any such service.
Section 4.3.
Notices
. Any communication given hereunder shall be deemed given when
delivered to or when mailed by registered or certified mail, postage prepaid, addressed to:
Connecticut Water Service, Inc. at 93 West Main Street, Clinton, Connecticut 06413 Attention: Vice
President-Finance; and to the Trustee at 225 Asylum Street, Hartford, Connecticut 06103, Attention:
Corporate Trust Department. Each party may, by notice given hereunder, designate any additional or
different addresses for receipt of notice.
ARTICLE V
GENERAL
Section 5.1.
Amendments, etc
. No amendment, change, modification, alteration or
termination of the Indenture, the Bonds or the Financing Documents shall be made which would in any
way increase the obligations of the Guarantor under this Guaranty without obtaining the prior
written consent of the Guarantor. The acts or omissions set forth in Section 2.2 hereof do not
constitute any such amendment, change, modification, alteration or termination within the meaning
of this Section.
Section 5.2.
No Remedy Exclusive; Effect of Waiver
. No remedy herein conferred upon
or reserved to Trustee or the holders of the Bonds is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Guaranty or now or hereafter existing at law or in
equity. No delay or omission to exercise any right or power accruing upon any default, omission or
failure of performance hereunder shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and
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Exhibit 4.29
power may be exercised from time to time and as often as may be deemed expedient. In order to
entitle the Trustee or the holders of the Bonds to exercise any remedy reserved to it in this
Guaranty, it shall not be necessary to give any notice, other than such notice as may be herein
expressly required. No waiver, amendment, release or modification of this Guaranty shall be
established by conduct, custom or course of dealing, but solely by an instrument in writing duly
executed by the parties thereunto duly authorized by this Guaranty. A waiver on one occasion shall
not be a bar to or waiver of any right on any other occasion.
Section 5.3.
Continuing Guaranty
. This Guaranty is a continuing guaranty and shall
(a) remain in full force and effect until payment in full of the obligations and all other amounts
payable under this Guaranty, (b) be binding upon the Guarantor, its successors and assigns, and (c)
inure to the benefit of and be enforceable by the Trustee and its successors, transferees and
assigns.
Section 5.4.
Governing Law
. This Guaranty shall be governed by, and construed in
accordance with, the laws of the State of Connecticut.
Section 5.5.
Counterparts
. This Guaranty supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the subject matter
hereof and may be executed simultaneously in several counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same instrument.
Section 5.6.
Third Party Beneficiaries
. The Guarantor and the Trustee agree that the
Authority and the Bond Insurer shall be third party beneficiaries of this Guaranty to the extent
that any of the provisions hereof relate to or provide rights to the Authority or the Bond Insurer.
Section 5.7.
Consent of Bond Insurer
. No amendment, change, modification, alteration
or termination of this Guaranty shall be made without obtaining the prior written consent of the
Bond Insurer; provided, however, that no such consent of the Bond Insurer shall be required if the
Bond Insurer is in default under the Bond Insurance Policy.
Section 5.8.
Amendments to Guaranty
. This Guaranty may be amended only with the
concurring written consent of the Trustee and, if required by the Indenture, of the owners of the
Bonds given in accordance with the provisions of the Indenture.
Section 5.9.
Terms
. All terms used herein and not otherwise defined shall have the
meanings assigned to them in the Indenture.
Section 5.10.
Severability
. The invalidity or unenforceability of any one or more
phrases, sentences, clauses or Sections contained in this Guaranty shall not affect the validity or
enforceability of the remaining portions of this Guaranty, or any part thereof.
-11-
Exhibit 4.29
IN WITNESS WHEREOF, the Guarantor has caused this agreement to be executed in its name and
behalf by its duly authorized officer on the date first above written.
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CONNECTICUT WATER SERVICE, INC.
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By:
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/s/ David C. Benoit
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Name: David C. Benoit
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Title: Vice President Finance and
Chief Financial Officer
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Accepted this 30th day of November, 2005
By: U.S. BANK NATIONAL ASSOCIATION
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By:
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/s/ Cauna M. Silva
Name: Cauna M. Silva
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Title: Vice President
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-12-
Exhibit 4.30
[EXECUTION COPY]
CONNECTICUT DEVELOPMENT AUTHORITY
and
THE CRYSTAL WATER COMPANY OF DANIELSON
LOAN AGREEMENT
Dated as of October 1, 2005
Connecticut Development Authority
$5,000,000 Water Facilities Revenue Bonds
(The Crystal Water Company of Danielson Project 2005A Series)
Exhibit 4.30
TABLE OF CONTENTS
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Page
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PREAMBLE
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1
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ARTICLE I
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DEFINITIONS AND INTERPRETATION
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Section 1.1. Definitions
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3
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Section 1.2. Interpretation
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9
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ARTICLE II
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REPRESENTATIONS AND WARRANTIES
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Section 2.1. Representations by the Authority
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10
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Section 2.2. Representations by the Borrower
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11
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ARTICLE III
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THE LOAN
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Section 3.1. Loan Clauses
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14
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Section 3.2. Other Amounts Payable
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14
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Section 3.3. Manner of Payment
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15
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Section 3.4. Obligation Unconditional
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15
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Section 3.5. Securities Clauses
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15
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Section 3.6. Issuance of Bonds
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16
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Section 3.7. Effective Date and Term
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16
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Section 3.8. No Additional Bonds
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16
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ARTICLE IV
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THE PROJECT
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Section 4.1. Completion of the Project
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17
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Section 4.2. Payment of Additional Project Costs by Borrower
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18
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Section 4.3. Completion Certificate
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18
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Section 4.4. No Warranty Regarding Condition, Suitability or Cost of Project
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18
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Section 4.5. Taxes
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18
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Section 4.6. Insurance
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18
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Section 4.7. Compliance with Law
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19
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Section 4.8. Maintenance and Repair
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19
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Section 4.9. Disposition of Project Realty by Borrower
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19
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Section 4.10. Leasing of the Project Realty and the Project Equipment
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20
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Section 4.11. Project Equipment
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20
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Section 4.12. Borrower Contribution
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20
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ARTICLE V
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CONDEMNATION DAMAGE AND DESTRUCTION
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Section 5.1. No Abatement of Payments Hereunder
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21
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Section 5.2. Project Disposition Upon Condemnation, Damage or Destruction
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21
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Section 5.3. Application of Net Proceeds of Insurance or Condemnation
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21
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ARTICLE VI
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COVENANTS
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Section 6.1. Consolidation, Merger and Transfer of Assets.
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22
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Section 6.2. Restrictions on Liens and Sale and Leaseback Transactions
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23
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Section 6.3. Covenant Merger
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25
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Section 6.4. Indemnification, Payment of Expenses, and Advances
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25
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Section 6.5. Incorporation of Tax Regulatory Agreement; Payments Upon Taxability
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27
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Section 6.6. Public Purpose Covenants
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28
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Section 6.7. Further Assurances and Corrective Instruments
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28
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Exhibit 4.30
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Page
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Section 6.8. Covenant by Borrower as to Compliance with Indenture
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28
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Section 6.9. Assignment of Agreement or Note
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29
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Section 6.10. Inspection
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29
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Section 6.11. Default Notification
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29
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Section 6.12. Covenant Against Discrimination
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29
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Section 6.13. Covenant to Provide Disclosure
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29
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ARTICLE VII
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EVENTS OF DEFAULT AND REMEDIES
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Section 7.1. Events of Default
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30
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Section 7.2. Remedies on Default
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31
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Section 7.3. Remedies on Public Purpose Default
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31
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Section 7.4. No Duty to Mitigate Damages
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33
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Section 7.5. Remedies Cumulative
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33
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ARTICLE VIII
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PREPAYMENT PROVISIONS
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Section 8.1. Optional Prepayment
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34
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Section 8.2. Notices of Prepayment
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35
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Section 8.3. Mandatory Prepayment on Taxability, Receipt of Request for
Redemption of a Deceased Holders Bonds and the Occurrence
of Certain Events
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35
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ARTICLE IX
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GENERAL
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Section 9.1. Indenture
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36
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Section 9.2. Benefit of and Enforcement by Bondholders
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36
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Section 9.3. Force Majeure
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36
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Section 9.4. Amendments
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36
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Section 9.5. Notices
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36
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Section 9.6. Prior Agreements Superseded
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37
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Section 9.7. Execution of Counterparts
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37
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Section 9.8. Time
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37
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Section 9.9. Separability of Invalid Provisions
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37
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Section 9.10. Third Party Beneficiaries
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37
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Section 9.11. Governing Law
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37
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APPENDICES
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Appendix A Form of Promissory Note
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Appendix B Description of Project Realty
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Appendix C Description of Project Equipment
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-ii-
Exhibit 4.30
Connecticut Development Authority
The Crystal Water Company of Danielson
LOAN AGREEMENT
THIS LOAN AGREEMENT
, made and dated as of October 1, 2005, by and between the
CONNECTICUT
DEVELOPMENT AUTHORITY
, a body corporate and politic constituting a public instrumentality and
political subdivision of the State of Connecticut, and
THE CRYSTAL WATER COMPANY OF DANIELSON
, a
corporation organized and existing under the laws of the State of Connecticut,
WITNESSETH THAT:
WHEREAS
, the State Commerce Act, constituting Connecticut General Statutes, Sections 32-1a
through 32-23zz, as amended (the Act), declares that there is a continuing need in the State (1)
for industrial development and activity to provide and maintain employment and tax revenues and to
control, abate and prevent pollution to protect the public health and safety, (2) for the
development of recreation facilities to promote tourism, provide and maintain employment and tax
revenues, and promote the public welfare, (3) for the development of commercial and retail sales
and service facilities in urban areas to provide and maintain construction and permanent employment
and tax revenues, to improve conditions of deteriorated physical development, slow economic growth
and eroded financial health of the public and private sectors in urban areas and to revitalize the
economy of urban areas, and (4) for assistance to public service businesses providing
transportation and utility services in the State, and that the availability of financial assistance
and suitable facilities are important inducements to industrial and commercial enterprises to
remain or locate in the State and to provide industrial, recreation, urban and public service
projects; and
WHEREAS
, the Act provides that (1) the term project as used therein means any facility,
plant, works, system, building, structure, utility, fixture or other real property improvement
located in the State, and the land on which it is located or which is reasonably necessary in
connection therewith, which is of a nature or which is to be used or occupied by any person for
purposes which would constitute it as an economic development project, recreation project, urban
project, public service project or health care project, and any real property improvement
reasonably related thereto, and (2) a project may also include or consist exclusively of machinery,
equipment or fixtures; and
WHEREAS
, the Act provides that the Authority shall have power to determine the location and
character of, and extend credit or make loans to any person for the planning, designing, acquiring,
improving and equipping of, a project which may be secured by loan, lease or sale agreements,
contracts and other instruments, upon such terms and conditions as the Authority shall determine to
be reasonable, to require the inclusion in any contract, loan agreement or other instrument of such
provisions for the construction, use, operation, maintenance and financing of the project as the
Authority may deem necessary or desirable, to issue its bonds for such purposes, subject to the
approval of the Treasurer of the State, and, as security for the payment of the principal or
redemption price, if any, of and interest on any such bonds, to pledge or assign such a loan, lease
or sale agreement and the revenues and receipts derived by the Authority from such a project; and
WHEREAS
, by resolution adopted on May 19, 2004, in furtherance of the purposes of the
Act, the Authority has accepted the application of The Crystal Water Company of Danielson (the
Borrower) for assistance in the financing of various capital projects located in the State of
Connecticut; and
Exhibit 4.30
WHEREAS
, the Borrower currently owns certain existing facilities within certain municipalities
in the State and at this time requests assistance in the design, acquisition, installation,
improvement and construction of certain facilities consisting of water treatment and storage
facilities, transmission and distribution mains, service lines, meters, hydrants and pumping
equipment for the purpose of supplying safe potable water to the general public within its service
area; and
WHEREAS
, the Authority has by a further resolution adopted on August 17, 2005 authorized the
issuance of not to exceed $5,000,000 principal amount of its Water Facilities Revenue Bonds (The
Crystal Water Company of Danielson Project 2005A Series) for the purpose of providing funds for
the Projects; and
WHEREAS
, pursuant to such resolution the Bonds (as hereinafter defined) are to be secured by
an Indenture of Trust of even date herewith, by and between the Authority and U.S. Bank National
Association, as Trustee; and
WHEREAS
, payment of the principal and redemption price, if any, of and interest on the Bonds
when due and the performance of all of the Borrowers payment obligations hereunder have been
guaranteed by Connecticut Water Service, Inc. (the Guarantor) pursuant to the Guaranty dated as
of October 1, 2005 between the Guarantor and the Trustee; and
WHEREAS
, the Bonds shall be special obligations of the Authority, payable solely from the
revenues or other receipts, funds or monies to be derived by the Authority under this Agreement or
the Indenture and from any amounts otherwise available under the Indenture for the payment of the
Bonds; and
WHEREAS
, the Authority proposes with the proceeds of the Bonds to make a loan to the Borrower
and the Borrower proposes to borrow such proceeds from the Authority for the purpose of financing
the acquisition, construction and installation of the Project; and
WHEREAS
, the Borrower acknowledges that the Authority is providing financing for the Project
in furtherance of the Authoritys corporate purposes under the Act, that the accomplishment of
these purposes is dependent upon the compliance of the Borrower with its covenants contained in
this Agreement, that the Authority has a resulting beneficial interest in the Project, and that the
Borrowers use of and interest in the Project as provided hereby are in furtherance of the
discharge of a public purpose; and
WHEREAS
, the Connecticut Department of Public Utility Control (the DPUC) has approved the
issuance of the Note;
NOW, THEREFORE
, in consideration of the premises and of the mutual representations, covenants
and agreements herein set forth, the Authority and the Borrower, each binding itself, its
successors and assigns, do mutually promise, covenant and agree as follows (provided that in the
performance of the agreements of the Authority herein contained, any obligation it may incur for
the payment of money shall not be an obligation, debt or liability of the State or any municipality
thereof and neither the State nor any municipality thereof shall be liable on any obligation so
incurred, but any such obligation shall be payable solely out of the revenues or other receipts,
funds or monies to be derived by the Authority under this Agreement or the Indenture and from any
amounts otherwise available under the Indenture for the payment of the Bonds):
-2-
Exhibit 4.30
ARTICLE I
ARTICLE II DEFINITIONS AND INTERPRETATION
Section 1.1.
Definitions
. For the purposes of this Agreement, the following words and
terms shall have the respective meanings set forth as follows, and any capitalized word or term
used but not defined herein is used as defined in the Indenture:
Act means the State Commerce Act, constituting Connecticut General Statutes, Sections 32-la
through 32-23zz, as amended.
Agreement means this Loan Agreement and any amendments and supplements hereto.
Attributable Debt in respect of a sale and leaseback transaction means, at the time of
determination, the present value of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction, including any period
for which such lease has been extended or may, at the option of the lessor, be extended. Such
present value shall be calculated using a discount rate equal to the rate of interest implicit in
such transaction, determined in accordance with generally accepted accounting principles.
Authority means the Connecticut Development Authority, a body corporate and politic
constituting a public instrumentality and political subdivision of the State of Connecticut, duly
organized and existing under the laws of the State, and any body, board, authority, agency or other
political subdivision or instrumentality of the State which shall hereafter succeed to the powers,
duties and functions thereof.
Authorized Representative means, in the case of the Authority, the Chairman or Vice
Chairman, the President, any Executive Vice President, Deputy Director or any Senior Vice President
or any Vice President thereof and, in the case of the Borrower, the Chairman, the President and
Chief Executive Officer, the Vice President-Chief Financial Officer and Treasurer, and any Vice
President, Assistant Treasurer or Secretary thereof and, when used with reference to the
performance of any act, the discharge of any duty or the execution of any certificate or other
document, any officer, employee or other person authorized to perform such act, discharge such duty
or execute such certificate or other document.
Beneficial Owner shall have the meaning specified in Section 2.3(F) of the Indenture. If
any person claims to the Trustee to be a Beneficial Owner, for purposes of Section 2.4(C) of the
Indenture, such person shall prove such claim to the satisfaction of the Trustee with such
documentation and signature guaranties as the Trustee may request.
Bonds means the $5,000,000 Water Facilities Revenue Bonds (The Crystal Water Company of
Danielson Project 2005A Series) authorized and issued pursuant to Section 2.3 of the Indenture.
Bond Counsel means Winston & Strawn LLP or such other nationally recognized bond counsel
selected by the Authority and reasonably satisfactory to the Borrower and the Trustee.
Bond Insurance Policy means the municipal bond new issue insurance policy issued by the Bond
Insurer that guarantees the payment of principal of and interest on the Bonds as provided therein.
Bond Insurer means Financial Guaranty Insurance Company, a New York stock insurance company,
or any successor thereto
-3-
Exhibit 4.30
Borrower means (i) The Crystal Water Company of Danielson, a corporation organized and
existing under the laws of the State of Connecticut, and its successors and assigns and (ii) any
surviving, resulting or transferee corporation as provided in Section 6.1 hereof.
Business Day means any day (i) that is not a Saturday or Sunday, (ii) that is a day on which
banks located in Hartford, Connecticut and New York, New York are not required or authorized to
remain closed, (iii) that is a day on which banking institutions in the cities in which the
principal offices of the Trustee and the Paying Agent are located and are not required or
authorized to remain closed and (iv) that is a day on which the New York Stock Exchange, Inc. is
not closed.
Code means the Internal Revenue Code of 1986, as amended and regulations promulgated
thereunder.
Company means The Connecticut Water Company, a corporation organized and existing under the
laws of the State of Connecticut, and its successors and assigns.
Completion Date means the date of completion of the Project as specified and established in
accordance with Section 4.3 hereof.
Debt means (A) indebtedness of the Borrower or a Significant Subsidiary for borrowed money
evidenced by a bond, debenture, note or other written instrument or agreement by which the Borrower
or a Significant Subsidiary is obligated to repay such borrowed money and (B) any guaranty by the
Borrower or a Significant Subsidiary of any such indebtedness of another Significant Subsidiary.
Debt does not include, among other things, (w) indebtedness of the Borrower or a Significant
Subsidiary under any installment sale or conditional sale agreement or any other agreement relating
to indebtedness for the deferred purchase price of property or services, or (x) any trade
obligation (including obligations under power or other commodity purchase agreements and any hedges
or derivatives associated therewith), or other obligations of the Borrower or a Significant
Subsidiary in the ordinary course of business, (y) obligations of the Borrower or a Significant
Subsidiary under any lease agreement (including any lease intended as security), whether or not
such obligations are required to be capitalized on the balance sheet of the Borrower or a
Significant Subsidiary under generally accepted accounting principles.
Debt Service Fund means the special trust fund so designated, established pursuant to
Section 5.1 of the Indenture.
Dollar or $ means a dollar or other equivalent unit in such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public and private debts.
DTC or The Depository Trust Company shall mean the limited-purpose trust company organized
under the laws of the State of New York which shall act as securities depository for the Bonds, and
any successor thereto.
Determination of Taxability means with respect to the Bonds (1) a ruling by the Internal
Revenue Service, (2) the receipt by the owner of any of the Bonds from the Internal Revenue Service
of a notice of assessment and demand for payment and (provided the Borrower has been afforded the
opportunity to participate at its own expense in all appeals and proceedings to which such owner of
the Bonds is a party relating to such assessment and demand for payment) the expiration of the
appeal period provided therein if no appeal is taken or, if an appeal is taken by such owner as
provided in Section 6.5 of this Agreement within the applicable appeal period which has the effect
of staying the demand for payment, a final unappealable decision by a court of competent
jurisdiction, or (3) the admission in writing by the Borrower, in any case to the effect that the
interest on any Bonds is includable in the gross
-4-
Exhibit 4.30
income for federal income tax purposes (other than
for purposes of any alternative minimum tax or foreign branch profits tax) of an owner or former
owner thereof, other than for a period during which such owner or former owner is or was a
Substantial User of the Project financed by such Bonds or a Related Person as such terms are
defined in the Code. For purposes of this definition, the term owner means the Beneficial Owner of
the Bonds so long as the Book-Entry System is in effect.
DPUC means the State Department of Public Utilities Control.
Disclosure Agreement means the agreement by and between the Borrower and U.S. Bank National
Association, as dissemination agent, dated the date of the initial delivery of the Bonds, providing
for the provision of certain information subsequent to the issuance of the Bonds.
Event of Default means an Event of Default as defined in subsection 7.1 hereof.
Financing Documents (1) when used with respect to the Borrower, means this Agreement, the
Tax Regulatory Agreement, the Note, the Disclosure Agreement and the general certificate of the
Borrower delivered in connection with the issuance of the Bonds, and (2) when used with respect to
the Authority, means any of the foregoing documents and agreements to which the Authority is a
direct party. The Financing Documents do not include any documents or agreements to which the
Borrower is not a direct party, including the Bonds or the Indenture.
Guarantor means Connecticut Water Service, Inc., a Connecticut corporation, and any and each
successor thereto or assignee thereof.
Guaranty means the Guaranty from the Guarantor to the Trustee, dated as of October 1, 2005,
as amended and supplemented from time to time.
Fitch means Fitch Inc., a corporation organized and existing under the laws of the State of
Delaware, its successors and their assigns, and if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating agency, Fitch shall be
deemed to refer to any other nationally recognized securities rating agency designated by the
Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the
prior written consent or approval of the Bond Insurer.
Indenture means the Indenture of Trust relating to the Bonds, of even date herewith, by and
between the Authority and the Trustee, together with all indentures supplemental thereto made and
entered into in accordance therewith.
Interest Payment Date shall mean April 1, 2006 and each April 1 and October 1 thereafter on
which interest is payable on the Bonds as provided in the forms of the Bonds.
Insurance Agreement means the Insurance Agreement, dated as of October 1, 2005, by and among
the Borrower, the Bond Insurer and the Guarantor.
Lien means any mortgage, deed of trust, pledge, security interest, encumbrance, easement,
lease, reservation, restriction, servitude, charge or similar right and any other lien of any kind,
including, without limitation, any conditional sale or other title retention agreement, any lease
in the nature thereof, and any defect, irregularity, exception or limitation in record title or,
when the context so requires, any lien, claim or interest arising from any of the foregoing.
-5-
Exhibit 4.30
Moodys means Moodys Investors Services, Inc., a corporation organized and existing
under the laws of the State of Delaware, its successors and their assigns, and if such corporation
shall be dissolved or liquidated or shall no longer perform the functions of a securities rating
agency, Moodys shall be deemed to refer to any other nationally recognized securities rating
agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and
the Borrower and with the prior written consent or approval of the Bond Insurer.
Net Proceeds when used with respect to any insurance or condemnation award, means the gross
proceeds from such award less all expenses (including attorneys fees and expenses and any
extraordinary expenses) incurred by the Trustee in the collection thereof.
Net Tangible Assets means the total amount of the Borrowers assets determined on a
consolidated basis in accordance with generally accepted accounting principles as of a date
determined pursuant to Section 6.2 of this Agreement,
less
(i) the sum of the Borrowers
consolidated current liabilities determined in accordance with generally accepted accounting
principles, and (ii) the amount of the Borrowers consolidated assets classified as intangible
assets, determined in accordance with generally accepted accounting principles, including, but not
limited to, such items as goodwill, trademarks, trade names, patents, and unamortized debt discount
and expense and regulatory assets carried as an asset on the Borrowers consolidated balance sheet.
Note means the promissory note of the Borrower to the Authority, dated the date of initial
delivery of the Bonds in the form attached as
Appendix A
to this Agreement, and any
amendments or supplements made in conformity with this Agreement and the Indenture.
Outstanding, when used with reference to a Bond or Bonds, as of any particular date, means
all Bonds which have been authenticated and delivered under the Indenture, except:
(1) any Bonds canceled by the Trustee because of payment or redemption prior to
maturity or surrendered to the Trustee for cancellation;
(2) any Bond (or portion of a Bond) paid or redeemed or for the payment or redemption
of which there has been separately set aside and held in the Debt Service Fund either:
(a) monies in an amount sufficient to effect payment of the principal or
applicable Redemption Price thereof, together with accrued interest on such Bond to
the payment or redemption date, which payment or redemption date shall be specified
in irrevocable instructions given to the Trustee to apply such monies to such
payment on the date so specified; or
(b) obligations of the kind described in subsection 12.1(B) of the Indenture in
such principal amounts, of such maturities, bearing such interest and otherwise
having such terms and qualifications as shall be necessary to provide monies in an
amount sufficient to effect payment of the principal or applicable Redemption Price
of such Bond, together with accrued interest on such Bond to the payment or
redemption date, which payment or redemption date shall be specified in irrevocable
instructions given to the Trustee to apply such obligations to such payment on the
date so specified; or
(c) any combination of (a) and (b) above;
(3) Bonds in exchange for or in lieu of which other Bonds shall have been authenticated
and delivered under Article III of the Indenture; and
-6-
Exhibit 4.30
(4) any Bond deemed to have been paid as provided in subsection 12.1 of the Indenture.
Paying Agent means any paying agent for the Bonds appointed pursuant to Section 9.10 of the
Indenture (and may include the Trustee), and its successor or successors and any other corporation
which may at any time be substituted in its place in accordance with the Indenture.
Permitted Encumbrances mean, as of any particular date, (i) liens for taxes not yet due and
payable, (ii) any lien created by this Agreement and the Indenture, (iii) utility, access and other
easements and rights-of-way, that will not interfere with or impair the value or use of the Project
as herein provided, (iv) any mechanics, laborers, materialmans, suppliers or vendors lien or
right in respect thereof if payment is not yet due and payable and for which statutory lien rights
exist, (v) such minor defects, irregularities, easements, and rights-of- way (including agreements
with any railroad the purpose of which is to service the railroad siding) as normally exist with
respect to property similar in character to the Project and which do not materially impair the
value or use of the property affected thereby for the purpose for which it was acquired hereunder,
and (vi) any mortgage, lien, security interest or other encumbrance to which the Authority and the
Bond Insurer may consent as provided in Section 4.8 hereof.
Principal Property means any property of the Borrower or any Significant Subsidiary.
Principal User means any principal user of the Project within the meaning of Section
144(a)(2)(B) of the Code, including without limitation any person who is a
greater-than-10-percent-owner (or if none, the person(s) who holds the largest ownership interest
in the Project), lessee or user of more than 10% of the Project measured either by occupiable space
or fair rental value under any formal or informal agreement or, under the particular facts and
circumstances, anyone who is a principal customer of the Project. The term principal customer
means any person, who purchases output of the Project under a contract if the percentage of output
taken or to be taken by such person, multiplied by a fraction the numerator of which is the term of
such contract and the denominator of which is the economic life of the Project, exceeds 10%. In
the case of a person who purchases output of an electric or thermal energy, gas, water or other
similar facility, such person is a principal customer if the total output purchased by such person
during any one year period beginning with the date the facility is placed in service is more than
10 percent of the facilitys output during each such period. Co-owners or co-lessees who are
shareholders in a corporation or who are collectively treated as a partnership subject to
subchapter K under section 761(a) of the Code are not treated as Principal Users merely by reason
of their ownership of corporate or partnership interests.
Project means the Borrowers interest in the Project Realty and other interests in the real
property, and in all Project Equipment wherever located and whether now owned or hereafter acquired
or refinanced in whole or in part with the proceeds of the Bonds and any additions and accessions
thereto, substitutions therefor and replacements, improvements, extensions and restorations
thereof, described in the appendices hereto, as amended from time to time in accordance with this
Agreement.
Project Equipment means all personal property, goods, leasehold improvements, machinery,
equipment, furnishings, furniture, fixtures, tools and attachments wherever located and whether now
owned or hereafter acquired, financed in whole or in part with the proceeds of the Bonds, and any
additions and accessions thereto, substitutions therefor and replacements thereof, including,
without limitation the Project Equipment described in Appendix C hereto, as amended from time to
time in accordance herewith.
Project Realty means the realty and other interests in the real property financed in whole
or in part from the proceeds of the Bonds, together with all replacements, improvements,
extensions,
-7-
Exhibit 4.30
substitutions, restorations and additions thereto which are made pursuant hereto,
including without limitation, the Project Realty described in Appendix B, as amended from time to
time in accordance herewith.
Rating Agency shall mean S&P, Moodys and Fitch, or, in each case, if such corporation shall
be dissolved or liquidated or shall no longer perform the functions of a securities rating agency,
any other nationally recognized securities rating agency designated by the Authority, at the
direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written
consent or approval of the Bond Insurer.
Redemption Price means, when used with respect to a Bond or a portion thereof, the principal
amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption
thereof pursuant to the Indenture.
Related Person means, with respect to any Principal User, a person which is a related person
(as defined in Section 144(a)(3) of the Code, and by reference to Sections 267, 707(b) and 1563(a)
of the Code, except that 50% is to be substituted for 80% in Section 1563(a)).
S&P means Standard & Poors Ratings Services, a division of McGraw Hill, Inc., a corporation
organized and existing under the laws of the State of New York, its successors and their assigns,
and, if such corporation or division shall be dissolved, eliminated, reorganized, or liquidated or
shall no longer perform the functions of a securities rating agency, S&P shall be deemed to refer
to any other nationally recognized securities rating agency designated by the Authority at the
direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written
consent or approval of the Bond Insurer.
Significant Subsidiary shall have the meaning specified in Rule 1-02(w) of Regulation S-X
under the Securities Act of 1933, as amended.
State means the State of Connecticut.
Substantial User means any substantial user of the Project within the meaning of Section
147(a) of the Code.
Supplemental Indenture means any indenture supplemental to the Indenture or amendatory of
the Indenture, adopted by the Authority in accordance with Article X of the Indenture.
Tax Incidence Date means the date as of which interest on the Bonds becomes or became
includable in the gross income of the recipient thereof (other than the Borrower or another
Substantial User or Related Person) for federal income tax purposes for any cause, as determined by
a Determination of Taxability.
Tax Regulatory Agreement means the Tax Regulatory Agreement, dated as of the date of initial
issuance and delivery of the Bonds, among the Authority, the Borrower and the Trustee, and any
amendments and supplements thereto.
Term, when used with reference to this Agreement, means the term of this Agreement
determined as provided in Article III hereof.
Trustee means U.S. Bank National Association, and its successor or successors hereafter
appointed in the manner provided in the Indenture.
-8-
Exhibit 4.30
Section 1.2.
Interpretation. In this Agreement:
(1) The terms hereby, hereof, hereto, herein, hereunder and any similar
terms, as used in this Agreement, refer to this Agreement, and the term hereafter means
after, and the term heretofore means before, the date of this Agreement.
(2) Words of the masculine gender mean and include correlative words of the feminine
and neuter genders and words importing the singular number mean and include the plural
number and vice versa.
(3) Words importing persons include firms, associations, partnerships (including
limited partnerships), trusts, corporations and other legal entities, including public
bodies, as well as natural persons.
(4) Any headings preceding the texts of the several Articles and Sections of this
Agreement, and any table of contents appended to copies hereof, shall be solely for
convenience of reference and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect.
(5) Nothing contained in this Agreement shall be construed to cause the Borrower to
become the agent for the Authority or the Trustee for any purpose whatsoever, nor shall the
Authority or the Trustee be responsible for any shortage, discrepancy, damage, loss or
destruction of any part of the Project wherever located or for whatever cause.
(6) All approvals, consents and acceptances required to be given or made by any person
or party hereunder shall be at the sole discretion of the party whose approval, consent or
acceptance is required.
(7) All notices to be given hereunder shall be given in writing within a reasonable
time unless otherwise specifically provided.
(8) If any provision of this Agreement shall be ruled invalid by any court of competent
jurisdiction, the invalidity of such provision shall not affect any of the remaining
provisions hereof.
-9-
Exhibit 4.30
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1.
Representations by the Authority
The Authority represents and warrants that:
(1) It is a body corporate and politic constituting a public instrumentality and
political subdivision of the State, duly organized and existing under the laws of the State
including the Act. The Authority is authorized to issue the Bonds in accordance with the
Act and to use the proceeds thereof to finance the Project.
(2) The Authority has complied with the provisions of the Act and has full power and
authority pursuant to the Act to consummate all transactions contemplated by the Bonds, the
Indenture and the Financing Documents.
(3) By resolution duly adopted by the Authority and still in full force and effect, the
Authority has authorized the execution, delivery and due performance of the Bonds, the
Indenture and the Financing Documents, and the taking of any and all action as may be
required on the part of the Authority to carry out, give effect to and consummate the
transactions contemplated by this Agreement and the Indenture, and all approvals necessary
in connection with the foregoing have been received.
(4) The Bonds have been duly authorized, executed, authenticated, issued and delivered,
constitute valid and binding special obligations of the Authority payable solely from
revenues or other receipts, funds or monies pledged therefor under the Indenture and from
any amounts otherwise available under the Indenture, and are entitled to the benefit of the
Indenture. Neither the State nor any municipality thereof is obligated to pay the Bonds or
the interest thereon. Neither the faith and credit nor the taxing power of the State nor
any municipality thereof is pledged for the payment of the principal, and premium, if any,
of and interest on the Bonds.
(5) The execution and delivery of the Bonds, the Indenture and the Financing Documents
and compliance with the provisions thereof, will not conflict with or constitute on the part
of the Authority a violation of, breach of or default under its by-laws or any statute,
indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which
the Authority is a party or by which the Authority is bound, or, to the knowledge of the
Authority, any order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Authority or any of its activities or properties, and all consents,
approvals, authorizations and orders of governmental or regulatory authorities which are
required for the consummation by the Authority of the transactions contemplated thereby have
been obtained.
(6) Subject to the provisions of this Agreement and the Indenture, the Authority will
apply the proceeds of the Bonds to the purposes specified in the Indenture and the Financing
Documents.
(7) There is no action, suit, proceeding or investigation at law or in equity before or
by any court, public board or body pending or threatened against or affecting the Authority,
or to the best knowledge of the Authority, any basis therefor, wherein an unfavorable
decision, ruling or finding would adversely affect the transactions contemplated hereby or
by the Indenture, or which, in any way, would adversely affect the validity of the Bonds, or
the validity of or
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Exhibit 4.30
enforceability of the Indenture or the Financing Documents, or any
agreement or instrument to which the Authority is a party and which is used or contemplated
for use in consummation of the transactions contemplated hereby and by the Indenture.
(8) It has not made any commitment or taken any action which will result in a valid
claim for any finders or similar fees or commitments in respect of the transactions
contemplated by this Agreement.
(9) The representations of the Authority set forth in the Tax Regulatory Agreement are
by this reference incorporated in this Agreement as though fully set forth herein.
Section 2.2.
Representations by the Borrower
The Borrower represents and warrants that:
(1) The Borrower has been duly incorporated and validly exists as a corporation under
the laws of the State of Connecticut, is not in violation of any provision of its
certificate of incorporation or its by-laws, has corporate power to enter into and perform
the Financing Documents, and by proper corporate action has duly authorized the execution
and delivery of the Financing Documents.
(2) The Financing Documents constitute valid and legally binding obligations of the
Borrower, enforceable in accordance with their respective terms, except to the extent that
such enforceability may be limited by bankruptcy or insolvency or other laws affecting
creditors rights generally or by general principles of equity.
(3) Neither the execution and delivery of the Financing Documents, the consummation of
the transactions contemplated thereby, nor the fulfillment by the Borrower of or compliance
by the Borrower with the terms and conditions thereof is prevented or limited by or
conflicts with or results in a breach of, or default under the terms, conditions or
provisions of any contractual or other restriction of the Borrower, evidence of its
indebtedness or agreement or instrument of whatever nature to which the Borrower is now a
party or by which it is bound, or constitutes a material default under any of the foregoing.
No event has occurred and no condition exists which, upon the execution and delivery of any
Financing Documents, constitutes an Event of Default hereunder or an Event of Default
thereunder or, but for the lapse of time or the giving of notice, would constitute an Event
of Default hereunder or an Event of Default thereunder.
(4) There is no action or proceeding pending or, to the knowledge of the Borrower,
threatened against the Borrower before any court, administrative agency or arbitration board
that may materially and adversely affect the ability of the Borrower to perform its
obligations under the Financing Documents and all authorizations, consents and approvals of
governmental bodies or agencies required in connection with the execution and delivery of
the Financing Documents and in connection with the performance of the Borrowers obligations
hereunder or thereunder have been obtained.
(5) The execution, delivery and performance of the Financing Documents and any other
instrument delivered by the Borrower pursuant to the terms hereof or thereof are within the
corporate powers of the Borrower and have been duly authorized and approved by the board of
directors of the Borrower and are not in contravention of law or of the Borrowers
certificate of incorporation or by-laws, as amended to date, or of any undertaking or
agreement to which the Borrower is a party or by which it is bound.
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Exhibit 4.30
(6) The Borrower represents that it has not made any commitment or taken any action
which will result in a valid claim for any finders or similar fees or commitments in
respect of the transactions described in this Agreement other than the fees to various
parties to the transactions contemplated hereby which have been heretofore paid or provided.
(7) The Project is included within the definition of a project in the Act. The
Borrower intends the Project to continue to be an authorized project under the Act during
the Term of this Agreement.
(8) All amounts shown in Schedule D of the Tax Regulatory Agreement are eligible costs
of a project financed by bonds issued by the Authority under the Act, and may be financed by
amounts in the various Accounts of the Project Fund under the Indenture. None of the
proceeds of the Bonds will be used directly or indirectly as working capital or to finance
inventory.
(9) The Project is in material compliance with all applicable federal, State and local
laws and ordinances (including rules and regulations) relating to zoning, building, safety
and environmental quality.
(10) The Borrower intends to proceed with due diligence to complete the Project
pursuant to Section 4.1 hereof. The Borrower has obtained, or will obtain, or will cause to
be obtained, all necessary material approvals from any and all governmental agencies
requisite to the Project, and has also obtained or will cause to be obtained, all material
occupancy permits and authorizations from appropriate authorities authorizing the occupancy
and use of the Project for the purposes contemplated hereby. The Borrower further
represents and warrants that it will complete the Project, or cause the Project to be
completed, in accordance with all material federal, State and local laws, ordinances and
regulations applicable thereto.
(11) The availability of financial assistance from the Authority, among other factors,
has induced the Borrower to locate the Project in the State. The Borrower does not
presently intend to lease the Project.
(12) The Borrower will not take or omit to take any action which action or omission
will in any way cause the proceeds of the Bonds to be applied in a manner contrary to that
provided in the Indenture and the Financing Documents as in force from time to time.
(13) The Borrower has not taken and will not take any action and knows of no action
that any other person, firm or corporation, has taken or intends to take, which would cause
interest on the Bonds to be includable in the gross income of the recipients thereof for
federal income tax purposes. The representations, certifications and statements of
reasonable expectation made by the Borrower in the Tax Regulatory Agreement and relating to
Project description, composite issues, bond maturity and average asset economic life, use of
Bond proceeds, arbitrage and related matters are hereby incorporated by this reference as
though fully set forth herein.
(14) The Borrower has good and marketable title in fee simple to the Project Realty
subject only to Permitted Encumbrances and to irregularities or defects in title which may
exist which do not materially impair the use of such properties in the Borrowers business.
(15) The Borrower has good and merchantable title to the Project Equipment owned by the
Borrower as of the date hereof, free and clear of liens and encumbrances, other than
Permitted Encumbrances.
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Exhibit 4.30
(16) As of the date of hereof, neither the Borrower, nor to its knowledge anyone acting
on behalf of the Borrower, has entered into negotiations with any person for the purpose of
undertaking any borrowing concurrently with or subsequent to the issuance of the Bonds and
to be secured wholly or partially by a lien or encumbrance on the Project or any part
thereof, and the Borrower has no present intention of undertaking any such borrowing.
(17) The Borrower will use all of the proceeds of the Bonds to finance the Project
Costs.
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Exhibit 4.30
ARTICLE
III
THE LOAN
Section 3.1.
Loan Clauses
. (A) Subject to the conditions and in accordance with the
terms of this Agreement, the Authority agrees to make a loan to the Borrower from the proceeds of
the Bonds in the amount of $5,000,000 and the Borrower agrees to borrow such amount from the
Authority.
(B) The loan shall be made at the time of delivery of the Bonds and receipt of payment
therefor by the Authority against receipt by the Authority of the Note duly executed and delivered
to evidence the pecuniary indebtedness of the Borrower hereunder. As and for the loan the
Authority shall apply the proceeds of the Bonds as provided in the Indenture on the terms and
conditions therein prescribed.
(C) On or before the fifth Business Day immediately preceding each due date for the payment of
the principal of or interest on the Bonds, until the principal or Redemption Price, if any, of and
interest on the Bonds shall have been fully paid or provision for the payment thereof shall have
been made in accordance with the Indenture, the Borrower shall make loan payments to the Trustee
for the account of the Authority in an amount which, when added to any moneys then on deposit in
the Debt Service Fund and available therefor, shall be equal to the amount payable on such due date
with respect to the Bonds as provided in Section 5.3 of the Indenture, including amounts due for
the payment of the principal of and interest on the Bonds. In addition, the Borrower shall pay to
the Trustee, as and when the same shall become due, all other amounts due under the Financing
Documents, together with interest thereon at the then applicable rate as set forth herein in
Section 6.4(G). The Borrower shall have the option to prepay its loan obligation in whole or in
part at the times and in the manner provided in Article VIII hereof.
(D) Anything herein to the contrary notwithstanding, any amount at any time held in the
Principal and Interest Account of the Debt Service Fund by the Trustee pursuant to this Section
shall be credited against the next succeeding loan payment obligation of the Borrower as provided
in subsection 3.1(C) hereof. If, on any due date for payments with respect to the Bonds, the
balance in the Debt Service Fund is insufficient to make such payments, the Borrower agrees
forthwith to pay to the Trustee by no later than 11:00 a.m. on such due date the amount of the
deficiency. If at any time the amount held by the Trustee in the Debt Service Fund shall be
sufficient to pay or provide for the payment of the Bonds in accordance with Section 12.1 of the
Indenture, the Borrower shall not be obligated to make any further payments under the foregoing
provisions.
Section 3.2.
Other Amounts Payable
. (A) The Borrower hereby further expressly agrees
to pay to the Trustee as and when the same shall become due, (i) an amount equal to the initial and
annual fees of the Trustee for the ordinary services of the Trustee rendered and its ordinary
expenses incurred under the Indenture, including fees and expenses as Paying Agent and the
reasonable fees and expenses of Trustees counsel, including fees and expenses as registrar and in
connection with preparation and delivery of new Bonds upon exchanges or transfers, (ii) the
reasonable fees and expenses of the Trustee and any Paying Agents on the Bonds for acting as paying
agents as provided in the Indenture, including reasonable fees and expenses of its counsel, (iii)
the reasonable fees and charges of the Trustee for extraordinary services rendered by it and
extraordinary expenses incurred by it under the Indenture, including reasonable counsel fees and
expenses, and (iv) reasonable fees and expenses of Bond Counsel and the Authority for any future
action requested of either.
(B) The Borrower also agrees to pay all amounts payable by it under the Financing Documents at
the time and in the manner therein provided.
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Exhibit 4.30
(C) The Borrower agrees to pay all Rebatable Arbitrage (and penalties, if any) due to the
United States of America pursuant to Section 148 (f) of the Code.
(D) The Borrower also agrees to pay directly to the Authority on the date of issuance and
delivery of the Bonds and on the second anniversary date of the date of issuance and delivery of
the Bonds and each anniversary date thereafter, a fee equal to 1/8th of 1% of the principal amount
of the Bonds Outstanding, such fee to be payable without notice, demand or invoice of any kind at
the Authoritys address as set forth herein or at such other address and to the attention of such
other person, or to such account as the Authority may stipulate by written notice to the Borrower.
(E) The Borrower shall pay or reimburse the Bond Insurer for any and all charges, fees, costs,
and expenses that the Bond Insurer may reasonably pay or incur in connection with the following:
(i) the administration, enforcement, defense, or preservation of any rights or security hereunder
or under any other transaction documents; (ii) the pursuit of any remedies hereunder, under any
other transaction document, or otherwise afforded by law or equity, (iii) any amendment, waiver, or
other action with respect to or related to this Agreement or any other transaction document whether
or not executed or completed; (iv) the violation by the Borrower of any law, rule, or regulation or
any judgment, order or decree applicable to it; (v) any advances or payments made by the Bond
Insurer to cure defaults of the Borrower under the transaction documents; or (vi) any litigation or
other dispute in connection with this Agreement, any other transaction document, or the
transactions contemplated hereby or thereby, other than amounts resulting from the failure of the
Bond Insurer to honor its payment obligations under the Bond Insurance Policy. The Bond Insurer
reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver, or
consent proposed in respect of this Agreement or any other transaction document. The obligations
of the Borrower to the Bond Insurer shall survive discharge and termination of this Agreement.
Section 3.3.
Manner of Payment
. The payments provided for in Section 3.1 hereof shall
be made by any reasonable method providing immediately available funds at the time and place of
payment directly to the Trustee for the account of the Authority and shall be deposited in the Debt
Service Fund. The additional payments provided for in Section 3.2 shall be made in the same manner
directly to the entitled party or to the Trustee for its own use or disbursement to the Paying
Agents, as the case may be.
Section 3.4.
Obligation Unconditional.
The obligations of the Borrower under the
Financing Documents shall be absolute and unconditional, irrespective of any defense or any rights
of setoff, recoupment or counterclaim it might otherwise have against the Authority or the Trustee.
The Borrower will not suspend or discontinue any such payment or terminate this Agreement (other
than in the manner provided for hereunder) for any cause, including, without limiting the
generality of the foregoing, any acts or circumstances that may constitute failure of
consideration, failure of title, or commercial frustration of purpose, or any damage to or
destruction of the Project, or the taking by eminent domain of title to or the right of temporary
use of all or any part of the Project, or any change in the tax or other laws of the United States,
the State or any political subdivision of either thereof, or any failure of the Authority or the
Trustee to perform and observe any agreement or covenant, whether expressed or implied, or any
duty, liability or obligation arising out of or connected with the Financing Documents.
Section 3.5.
Securities Clauses
. The Authority hereby notifies the Borrower and the
Borrower acknowledges that, among other things, the Borrowers loan payments and all of the
Authoritys right, title and interest under the Financing Documents to which it is a party (except
its rights under Sections 6.4, 6.6, 7.2(A)(2) and 7.3 hereof) are being concurrently with the
execution and delivery hereof endorsed, pledged and assigned without recourse by the Authority to
the Trustee as security for the Bonds as provided in the Indenture.
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Exhibit 4.30
Section 3.6.
Issuance of Bonds
.
The Authority has concurrently with the execution and
delivery hereof sold and delivered the Bonds under and pursuant to a resolution adopted by the
Authority on August 17, 2005, authorizing their issuance under and pursuant to the Indenture. The
proceeds of sale of the Bonds shall be applied as provided in Articles IV and V of the Indenture.
Section 3.7.
Effective Date and Term
. (A) This Agreement shall become effective upon
its execution and delivery by the parties hereto, shall remain in full force from such date and,
subject to the provisions hereof (including particularly Articles VII and VIII), shall expire on
such date as the Indenture shall be discharged and satisfied in accordance with the provisions of
subsection 12.1(A) thereof. The Borrowers obligations under Sections 6.4 and 6.5 hereof, however,
shall survive the expiration of this Agreement in accordance with the provisions of such Sections.
(B) Within 60 days of such expiration the Authority shall deliver to the Borrower any
documents and take or cause the Trustee, at the Borrowers expense, to take any such reasonable
actions as may be necessary to effect the cancellation, release and satisfaction of the Indenture
and the Financing Documents.
Section 3.8.
No Additional Bonds
. No Additional Bonds on a parity with the Bonds may
be issued under the Indenture.
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Exhibit 4.30
ARTICLE
IV
THE PROJECT
Section 4.1.
Completion of the Project
. (A) The Borrower agrees that it will
undertake and complete the Project for the purposes and in the manner intended hereby and by the
Borrowers application for assistance to the Authority and that it will cause such improvements to
be made to the Project as are necessary for the operation thereof in the manner herein provided.
(B) The Borrower may modify, alter and amend the plans for the Project from time to time and
at any time, provided that such modifications, alterations and amendments do not materially impair
the operation of the Project as water facilities under the Act and provided that no material
modifications, alterations or amendments shall be made unless the Borrower shall have theretofore
delivered to the Trustee an opinion of Bond Counsel to the effect that such amendment, modification
or alteration and the expenditure of amounts from the Project Fund in connection therewith will not
cause interest on the Bonds to be subject to federal income taxation, together with any written
representations or certifications of fact made by or on behalf of the Borrower upon which such
counsel has relied in rendering such opinion.
(C) The Borrower affirms that it shall bear all of the costs and expenses in connection with
the preparation of the Financing Documents and the Indenture, the preparation and delivery of any
legal instruments and documents necessary in connection therewith and their filing and recording,
if required, and all taxes and charges payable in connection with any of the foregoing. Such costs
and all other costs of the Project shall be paid by the Borrower in the manner and to the extent
provided in the Indenture.
(D) The Borrower hereby agrees that in order to effectuate the purposes of the Financing
Documents, it will make, execute, acknowledge and deliver any contracts, orders, receipts, writings
and instructions with any other persons, firms, or corporations and in general do all things which
may be requisite or proper, all for the purpose of carrying out and completing the Project. The
Borrower will use its best efforts to complete the Project, or cause the Project to be completed,
with all reasonable dispatch. If for any reason the completion of such work is delayed, there
shall be no liability on the part of the Authority and no diminution in or postponement of the
payments required in Section 3.1 hereof to be paid by the Borrower.
(E) The Borrower has obtained or shall obtain all necessary material approvals from any and
all governmental agencies requisite to the undertaking and completion of the Project and in
compliance with all federal, State and local laws, ordinances and regulations applicable thereto.
Upon completion of the Project, the Borrower shall obtain all material required permits and
authorizations from appropriate authorities, if any be required, authorizing the operation and uses
of the Project for the purposes contemplated hereby, where failure to obtain such approvals,
permits and authorizations would have a material adverse effect on the transactions contemplated
hereby.
(F) The Borrower covenants that it will take, or cause to be taken, such action and institute
such proceedings within its power and authority as shall be necessary to cause and require all
contractors and material suppliers to complete their contracts diligently in accordance with the
terms of the contracts, including, without limitation, the correcting of any defective work.
(G) Upon the occurrence of a default by any contractor or subcontractor or supplier under any
contract made by it in connection with the Project, the Borrower will promptly proceed, to the
extent it deems appropriate in the circumstances, either separately or in conjunction with others,
to exhaust the remedies of the Borrower against any such contractor or subcontractor or supplier
for the performance of such contract.
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Exhibit 4.30
(H) The Borrower will have good and marketable title in fee simple to the Project Realty to be
owned by it subject only to Permitted Encumbrances, sufficient for the purposes of this Agreement.
Section 4.2.
Payment of Additional Project Costs by Borrower
. In the event that
moneys in the Project Fund are not sufficient to pay Project Costs in full, the Borrower shall
nonetheless complete the Project, or cause the Project to be completed, and shall pay that portion
of the Project Costs as may be in excess of the moneys available therefor in the Project Fund and
shall not be entitled to any reimbursement therefor from the Authority or from the Trustee or from
the holders of any of the Bonds, nor shall it be entitled to any diminution of the amounts payable
under the Financing Documents.
Section 4.3.
Completion Certificate
. The date of completion of the Project shall be
evidenced to the Trustee by the certificate of an Authorized Representative of the Borrower stating
that the Project has been completed in accordance with the Agreement and in accordance with the
plans and specifications therefor. Notwithstanding the foregoing, such certificate shall state (1)
that it is given without prejudice to any rights of the Borrower against third parties which exist
at the date of such certificate or which may subsequently come into being, (2) that it is given
only for the purpose of this Section and (3) that no person other than the Trustee or the Authority
may benefit therefrom.
Section 4.4.
No Warranty Regarding Condition, Suitability or Cost of Project
. Neither
the Authority, nor the Trustee, nor any Bondholder makes any warranty, either expressed or implied,
as to the Project or its condition or that it will be suitable for the Borrowers purposes or
needs, or that the insurance required hereunder will be adequate to protect the Borrowers business
or interest, or that the proceeds of the Bonds will be sufficient to complete the Project.
Section 4.5.
Taxes
. (A) The Borrower will pay when due all material (1) taxes,
assessments, water rates and sewer use or rental charges, (2) payments in lieu thereof which may be
required by law, and (3) governmental charges and impositions of any kind whatsoever which may now
or hereafter be lawfully assessed or levied upon the Project Realty and the Project Equipment or
any part thereof, or upon the rents, issues, or profits thereof, whether directly or indirectly.
With respect to special assessments or other governmental charges that may lawfully be paid in
installments over a period of years, the Borrower shall be obligated to pay, or cause to be paid,
only such installments as are required to be paid during the Term.
(B) The Borrower may, at its expense and in its own name, in good faith contest any such
taxes, assessments and other charges and payments in lieu of taxes including assessments and, in
the event of such contest, may permit the taxes, assessments or other charges or payments in lieu
of taxes, including assessments so contested to remain unpaid, provided either (1) prior written
notice thereof has been given to the Authority and the Trustee and reserves satisfactory to the
Authority are maintained during the period of such contest and any appeal therefrom, or (2) such
contest is conducted in full compliance with Connecticut General Statutes Chapter 203 unless, in
either case, by nonpayment of such taxes, assessments or other charges or payments, the Project or
any part thereof will be subject to loss or forfeiture, and as a result thereof a lien or charge
will be placed upon any payment pursuant to this Agreement or the value or operation of the Project
Realty and the Project Equipment will be materially impaired, in which event such taxes,
assessments or other charges or payments shall be paid forthwith. Nothing herein shall preclude
the Borrower, at its expense and in its own name and behalf, from applying for any tax exemption
allowed by the federal government, the State or any political or taxing subdivision thereof under
any existing or future provision of law which grants or may grant such tax exemption.
Section 4.6.
Insurance
. (A) The Borrower shall insure the Project Realty and the
Project Equipment against loss or damage by fire, flood, lightning, windstorm, vandalism and
malicious mischief and other hazards, casualties, contingencies and extended coverage risks in such
amounts and in such
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Exhibit 4.30
manner as is customary with companies in the same or similar business, and
shall pay when due the premiums thereon. In the event of loss or damage to the Project Realty or
Project Equipment, the Net Proceeds of any insurance provided under this subsection shall be
applied to the manner set forth in Article V hereof. Any excess proceeds of insurance remaining
after application as required by this Section shall be paid to the Borrower, but only if the
Borrower is not in default under this Agreement. If the Borrower is in default under this
Agreement, such amounts shall be applied as provided in Article VIII of the Indenture. At least
ten days prior to the expiration of any policy required under this Section the Borrower shall
furnish evidence satisfactory to the Authority and the Trustee that such policy has been renewed or
replaced.
(B) The Borrower further agrees that it will at all times carry public liability insurance
with respect to the Project Realty and the Project Equipment in a minimum amount of $5,000,000 with
provisions for a deductible amount not in excess of five percent of the amount of coverage
thereunder. In the event of a public liability occurrence, the Net Proceeds of the insurance
provided under this subsection shall be applied to satisfy or extinguish the liability.
(C) As an alternative to the hazard insurance and public liability insurance requirements of
subsections (A) or (B) above the Borrower may self-insure against hazard or public liability risks
if (1) self-insurance is the Borrowers customary method of insurance against such risks in similar
circumstances, and (2) the Borrower maintains self-insurance reserves adequate and available to
meet such risks. Amounts available under any such self-insurance arrangement upon the occurrence of
an insured event shall be applied in the same manner as the Net Proceeds of any insurance
maintained pursuant to such subsections would have been applied.
(D) The insurance coverage required by this Section may be effected under overall blanket or
excess coverage policies of the Borrower or any affiliate and may be carried with any insurer other
than an unauthorized insurer under the Connecticut Unauthorized Insurers Act. The Borrower shall
furnish evidence satisfactory to the Authority or the Trustee, promptly upon the request of either,
that the required insurance coverage is valid and in force. The Borrower shall also give the
Trustee not less than ten (10) days prior written notice of the expiration of any insurance
coverage required by this Section then in effect.
Section 4.7.
Compliance with Law
. The Borrower will observe and comply with all
material laws, regulations, ordinances, rules, and orders (including without limitation those
relating to zoning, land use, environmental protection, air, water and land pollution, wetlands,
health, equal opportunity, minimum wages, workers compensation and employment practices) of any
federal, state, municipal or other governmental authority relating to the Project Realty and the
Project Equipment except during any period during which the Borrower at its expense and in its name
shall be in good faith contesting its obligation to comply therewith.
Section 4.8.
Maintenance and Repair
. At its own expense, the Borrower will keep and
maintain the Project Realty and the Project Equipment in accordance with sound utility operating
practice and in good condition, working order and repair, will not commit or suffer any waste
thereon, and will make all material repairs and replacements thereto which may be required in
connection therewith. Nothing in this Section 4.8 shall (1) apply to any portion of the Project
beyond its useful or economic life or (2) apply to the use and disposition by the Borrower of any
part of the Project in the ordinary course of its business.
Section 4.9.
Disposition of Project Realty by Borrower
. (A) The Borrower shall not
sell, assign, encumber (other than Permitted Encumbrances), convey or otherwise dispose of its
interests in the Project Realty or any part thereof during the Term except as provided in Section
6.1 hereof.
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Exhibit 4.30
(B) The Borrower may, however, grant such rights of way or easements over, across, or under,
the Project Realty as shall be necessary or convenient for the operation or use of the Project
Realty, including but not limited to easements or rights-of-way for utility, roadway, railroad or
similar purposes in connection with the Project Realty, or for the use of the real property
adjacent to or near the Project, and owned by or leased to the Borrower, but only if such
rights-of-way or easements shall not materially or adversely affect the value and operation of the
Project. In addition, the Borrower may sell or assign, or cause to be sold or assigned, a portion
of the Project Realty or development rights in the Project Realty to the State, a municipality
within the State or a conservation organization, but only if such sale or assignment shall not
materially or adversely affect the value or operation of the Project.
(C) In the event the Authority and the Bond Insurer consent to any disposition of the
Borrowers interest in the Project Realty, the proceeds of the disposition shall be deposited in
the Redemption Account of the Debt Service Fund for the redemption of the Bonds under the
Indenture. No conveyance or release effected under the provisions of this Section shall entitle
the Borrower to any abatement or diminution of the amounts payable hereunder or under the Note, or
relieve the Borrower of the obligation to perform all of its covenants and agreements under the
Financing Documents.
Section 4.10.
Leasing of the Project Realty and the Project Equipment
. The Borrower
may not lease the Project Realty or the Project Equipment to any person during the Term of this
Agreement without the prior written consent of the Authority and the Bond Insurer. No lease shall
relieve the Borrower from primary liability for any of its obligations hereunder, and in the event
of any such lease the Borrower shall continue to remain primarily liable for payment of the
applicable amounts specified in Article III hereof and for performance and observance of the other
agreements on its part herein provided to be performed and observed by it to the same extent as
though no lease had been made.
Section 4.11.
Project Equipment
. (A) The Borrower shall have the right to install,
operate, remove and dispose of the Project Equipment in the normal and ordinary course of its
business operations, and shall not be required to replace any item of Project Equipment which is
discarded or sold for scrap. Except as provided in the immediately preceding sentence, the
Borrowers ability to dispose of the Project Equipment shall be governed by the provisions of
Section 6.1 hereof.
(B) The Borrower shall maintain with the Trustee separate and reasonably detailed descriptions
of each item of property constituting the Project Equipment. Without limiting the foregoing, the
Project Equipment list appended hereto at the date of execution and delivery of this Agreement
shall be modified to the extent required by this Section in connection with any disbursement for
Project Equipment from the Project Fund and any replacement of material items of Project Equipment
under this Section or under Section 5.2 hereof.
Section 4.12.
Borrower Contribution
. The Borrower agrees to deposit with the Trustee
on the date of issuance of the Bonds a contribution in the amount of $242,110.45 (which will be
applied to the payment of certain costs and expenses incurred in connection with the issuance,
execution and sale of the Bonds for which the Borrower is responsible, including compensation and
expenses of the Trustee, bond insurance premium, legal, accounting and consulting expenses and
fees, costs of printing and engraving, underwriting expenses and recording and filing fees), which
amount shall be deposited by the Trustee in the Project Fund established pursuant to Section 5.1 of
the Indenture.
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Exhibit 4.30
ARTICLE V
CONDEMNATION DAMAGE AND DESTRUCTION
Section 5.1.
No Abatement of Payments Hereunder
. If the Project Realty or Project
Equipment shall be damaged or either partially or totally destroyed, or if title to or the
temporary use of the whole or any part thereof shall be taken or condemned by a competent authority
for any public use or purpose, there shall be no abatement or reduction in the amounts payable by
the Borrower hereunder and the Borrower shall continue to be obligated to make such payments. In
any such case the Borrower shall promptly give written notice thereof to the Authority and the
Trustee.
Section 5.2.
Project Disposition Upon Condemnation, Damage or Destruction
. In the
event of any such condemnation, damage or destruction the Borrower shall:
(1) At its own cost, repair, restore or reconstruct, or cause to be repaired, restored
or reconstructured, the Project Realty and Project Equipment to substantially its condition
immediately prior to such event or to a condition of at least equivalent value, regardless
of whether or not the proceeds of any and all policies of insurance covering such damage or
destruction, or the amount of the award or compensation or damages recovered on account of
such taking or condemnation, shall be available or sufficient to pay the cost thereof;
(2) At its own cost, replace or relocate, or cause to be replaced or relocated, the
Project Realty and Project Equipment at its site in such fashion as to render the
replacement or relocated structures, improvements and items, machinery, equipment or other
property of equivalent value to the Project Realty and Project Equipment immediately prior
to such event; or
(3) If and as permitted by Section 8.1 hereof, exercise its option to prepay its loan
obligation in full.
Section 5.3.
Application of Net Proceeds of Insurance or Condemnation
. (A) The Net
Proceeds from any insurance or condemnation award with respect to the Project Realty or Project
Equipment shall be deposited either (1) in the Renewal Fund and applied to pay for the cost of
making such repairs, restorations, reconstructions, replacements or relocations, or to reimburse
the Borrower, the Authority or the Trustee for payment therefor from time to time as provided in
the Indenture or (2) if prepayment of the loan is then permitted and the Borrower exercises its
option to prepay the loan, in the Redemption Account of the Debt Service Fund and applied to the
payment of the Note and redemption of the Bonds.
(B) Notwithstanding the provisions of subsection (A) of this Section, any insurance or
condemnation proceeds attributable to improvements, machinery, equipment and other property
installed in or about the Project Realty and the Project Equipment, but which do not constitute a
portion of the Project Realty and the Project Equipment, shall be paid as the Borrower may direct.
The Trustee and the Authority agree to execute such documents as may be reasonably necessary to
accomplish the purposes of this subsection.
(C) The Borrower, the Authority and the Trustee shall cooperate and consult with each other in
all matters pertaining to the settlement or adjustment of any and all claims and demands for
damages on account of any taking or condemnation of the Project Realty or the Project Equipment or
pertaining to the settlement, compromising or arbitration of any claim on account of any damage or
destruction thereof.
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Exhibit 4.30
ARTICLE VI
COVENANTS
Section 6.1.
Consolidation, Merger and Transfer of Assets
.
(A)
Restructuring, Merger, Consolidation and Reorganization
. The Borrower
covenants and agrees that, during the Term of this Agreement, it will maintain its corporate
existence, will continue to be a corporation either organized under the laws of or duly qualified
to do business as a foreign corporation in the State and in all jurisdictions necessary in the
operation of its business and will not merge, consolidate, restructure or reorganize with an entity
without the prior written consent of the Bond Insurer, provided, however, the Borrower (or any
subsequent obligor on the Note) may merge, consolidate, restructure or reorganize with an entity
without the prior written consent of the Bond Insurer either if (a) the Borrower (or any subsequent
obligor on the Note) continues to exist after such merger, consolidation, restructuring or
reorganization and (i) the Borrower (or any subsequent obligor on the Note) remains a public
utility regulated by the appropriate regulatory body, (ii) the Borrower (or any subsequent obligor
on the Note) remains obligated to the Bond Insurer with respect to, and to make payments with
respect to, the Bonds, the Note, the Insurance Agreement and this Agreement and (iii) the Guaranty
remains enforceable against the Guarantor or against an entity with a rating on its unenhanced
long-term debt that is the same or higher than the rating on the unenhanced long-term debt of the
Guarantor or (b) the Borrower (or any subsequent obligor on the Note) is not the surviving entity
after such merger, consolidation, restructuring or reorganization and (i) the surviving entity is a
public utility regulated by the appropriate regulatory body, (ii) the surviving entity fully
assumes all obligations to the Bond Insurer with respect to, and to make payments with respect to
the Bonds, the Note, the Insurance Agreement and this Agreement and (iii) the Guaranty remains
enforceable against the Guarantor or against an entity with a rating on its unenhanced long-term
debt that is the same or higher than the rating on the unenhanced long-term debt of the Guarantor.
Notwithstanding the foregoing, if as a result of the merger, consolidation, restructuring or
reorganization of the Borrower (or any subsequent obligor on the Note) with an entity without the
prior written consent of the Bond Insurer, the unenhanced rating on the Bonds is lower than
investment grade by any Rating Agency then rating the Bonds or if any Rating Agency then rating the
unenhanced Bonds ceases to rate the unenhanced Bonds, all obligations to the Bond Insurer with
respect to, and all payments under, the Note, the Insurance Agreement and this Agreement must be
paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
(B)
Sale of Assets of the Borrower.
The Borrower (or any subsequent obligor on the Note) may
sell or otherwise dispose of substantially all of the assets of the Borrower (or any subsequent
obligor on the Note) without the prior written consent of the Bond Insurer if (i) the transferee of
such assets fully assumes all obligations under the Bonds, the Note, the Insurance Agreement and
this Agreement, (ii) the transferee is a public utility regulated by the appropriate regulatory
body, (iii) the Guaranty remains enforceable against the Guarantor or an entity with a rating on
its unenhanced long-term debt that is the same or higher than the rating on the unenhanced
long-term debt of the Guarantor and (iv) the Bonds must have an unenhanced rating not lower than
investment grade by any Rating Agency then rating the unenhanced Bonds. If the Borrower (or any
subsequent obligor on the Note) sells or otherwise disposes of substantially all of the assets of
the Borrower (or any subsequent obligor on the Note) without the prior written consent of the Bond
Insurer and any of the conditions set forth in the previous sentence have not be met, then all
obligations to the Bond Insurer with respect to, and all payments under, the Note, the Insurance
Agreement and this Agreement must be paid in full and the Bonds must be fully redeemed in
accordance with the Indenture.
(C)
Sale of Assets of Connecticut Water Company.
If upon, and as a result of, the sale or
other disposition without the prior written consent of the Bond Insurer of an aggregate of 20% or
more of the assets of the Company (or of any successor to the interests of the Company) based upon
the historical
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Exhibit 4.30
book value of the assets sold as determined on the issuance date of the Bonds, the
unenhanced rating on the bonds of the Company issued on the same date as the Bonds is lower than
investment grade by any Rating Agency then rating such bonds or if any Rating Agency then rating
the unenhanced bonds ceases to rate the unenhanced bonds, then all obligations of the Borrower to
the Bond Insurer with respect to, and all payments under, the Note, the Insurance Agreement and
this Agreement must be paid in full and the Bonds must be fully redeemed in accordance with the
Indenture.
(D) Upon the occurrence of an event specified in Section 6.1 (A)(B) or (C) the Borrower and
the Guarantor shall deliver to the Bond Insurer and the Trustee a certificate of the president or
any vice president and an opinion of counsel acceptable to the Bond Insurer and the Trustee, each
stating that such occurrence complies with this Section 6.1.
(E) Upon the occurrence of an event specified in Section 6.1(A) or (B), the successor entity
shall succeed to, and be substituted for, and may exercise every right and power under this
Agreement with the same effect as if such successor had been named herein, and thereafter, the
predecessor entity shall be relieved of all obligations and covenants hereunder.
(F) Notwithstanding anything to the contrary contained herein or in the Indenture, none of the
transactions described in this Section 6.1 shall require the consent of the Authority or the
Trustee.
Section 6.2.
Restrictions on Liens and Sale and Leaseback Transactions.
(A) For so
long as the Bonds are outstanding and the Bond Insurer has fully performed all of its obligations
under the Bond Insurance Policy, the Borrower will not, nor will it permit any Significant
Subsidiary to, (1) issue, incur, assume or permit to exist any Debt, if such Debt is secured by a
Lien on any Principal Property (whether such Principal Property is now owned or hereafter
acquired), unless the Borrower provides that the Bonds will be equally and ratably secured with
such secured Debt or (2) incur or permit to exist any Attributable Debt in respect of Principal
Property; provided, however, that the foregoing restriction shall not apply to:
(i) to the extent the Borrower or any Significant Subsidiary consolidates with, or
merges with or into, another entity, Liens on the property of such entity securing Debt in
existence on the date of such consolidation or merger, provided that such Debt and Liens
were not created or incurred in anticipation of such consolidation or merger and that such
Liens do not extend to cover any Principal Property;
(ii) Liens existing on property hereafter acquired at the time of such acquisition, as
long as the Lien was not created or incurred in anticipation thereof and does not extend to
or cover any other Principal Property;
(iii) Liens of any kind, including purchase money Liens, conditional sales agreements
or title retention agreements and similar agreements, upon any property acquired,
constructed, developed or improved by the Borrower or any Significant Subsidiary (whether
alone or in association with others) which do not exceed the cost or value of the property
acquired, constructed, developed or improved and which are created prior to, at the time of,
or within 12 months after such acquisition (or in the case of property constructed,
developed or improved, within 12 months after the completion of such construction,
development or improvement and commencement of full commercial operation of such property,
whichever is later) to secure or provide for the payment of any part of the purchase price
or cost thereof; provided that the Liens shall not extend to any Principal Property other
than the property so acquired, constructed, developed or improved;
(iv) Liens in favor of the United States, any state or any foreign country or any
-23-
Exhibit 4.30
department, agency or instrumentality or political subdivision of any such jurisdiction to
secure payments pursuant to any contract or statute or to secure any indebtedness incurred
for the purpose of financing all or any part of the purchase price or cost of constructing
or improving the property subject to such Lien, including Liens related to governmental
obligations the interest on which is tax-exempt under Section 103 of the Internal Revenue
Code or any successor section of the Internal Revenue Code;
(v) Liens in favor of the Borrower, the Guarantor or one or more Significant
Subsidiaries of the Borrower, the Guarantor, or one or more wholly-owned Subsidiaries of the
Borrower or the Guarantor or any of the foregoing combination; and
(vi) replacements, extensions or renewals (or successive replacements, extensions or
renewals), in whole or in part, of any Lien, or of any agreement, referred to above in
clauses (i) through (v) inclusive, or replacements, extensions or renewals of the Debt
secured thereby (to the extent that the amount of Debt secured by any such Lien is not
increased from the amount originally so secured, plus any premium, interest, fee or expenses
payable in connection with any replacements, refundings, refinancings, remarketings,
extensions or renewals); provided that such replacement, extension or renewal is limited to
all or a part of the same property (plus improvements thereon or additions or accessions
thereto) that secured the Lien replaced, extended or renewed.
(B) Notwithstanding the restriction in subsection (A) of this Section 6.2, the Borrower or any
Significant Subsidiary may (1) issue, incur or assume Debt secured by a Lien not described in
clauses (i) through (vi) of subsection (A) above on any Principal Property now or hereafter owned
without providing that the Bonds be equally and ratably secured with such Debt and (2) issue or
permit to exist Attributable Debt in respect of Principal Property, in either case so long as the
aggregate amount of such secured Debt and Attributable Debt, together with the aggregate amount of
all other Debt secured by Liens not described in clauses (i) through (vi) of subsection (A) above
then outstanding and all other Attributable Debt, does not exceed 10% of the Net Tangible Assets of
the Borrower, as determined by the Borrower as of a month end not more than 90 days prior to the
closing or consummation of the proposed transaction.
(C) For purposes of determining compliance with this Section 6.2, in the event that any Lien
at any time meets the criteria of more than one of the categories described in clauses (i) through
(vi) above of Section 6.2(A), or is entitled to be created pursuant to Section 6.2(B), the Borrower
will be permitted to classify (and later reclassify) in whole or in part in its sole discretion
such Lien in any manner that complies with this Section 6.2.
(D) For purposes of determining compliance with any Dollar-denominated restriction on the
incurrence of Debt secured by Liens on Principal Property, the Dollar-equivalent principal amount
of Debt denominated in a foreign currency will be calculated based on the relevant currency
exchange rate in effect on the date such Debt was incurred, in the case of term Debt, or first
committed, in the case of revolving credit Debt; provided that if such Debt is incurred to
refinance other Debt denominated in the same foreign currency, and such refinancing would cause the
applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency
exchange rate in effect on the date of such refinancing, the Dollar-denominated restriction will be
deemed not to have been exceeded so long as the principal amount of the refinancing Debt does not
exceed the principal amount of the Debt being refinanced. Notwithstanding any other provision of
this Section 6.2, the maximum amount of Debt secured by Liens on Principal Property that the
Borrower or any Significant Subsidiary may incur pursuant to this covenant will not be deemed to be
exceeded solely as a result of fluctuations in the exchange rate of currencies.
-24-
Exhibit 4.30
(E) Except as provided in Section 6.2 hereof, while there are any Bonds Outstanding or any
reimbursement obligations owed to the Bond Insurer, without the prior written consent of the Bond
Insurer, the Borrower will not permit, create, assume or suffer to be created or to exist any
mortgage, lien, security interest, or encumbrance of any kind, upon, or pledge of, any of the
Borrowers properties of any character, including real, personal, tangible and intangible
properties and revenues, now owned or hereafter acquired, to secure any indebtedness without
providing that the Bonds and the reimbursement obligations hereunder have the same security.
(F) Notwithstanding anything to the contrary contained herein or in the Indenture, none of the
transactions described in this Section 6.2 shall require the consent of the Authority or the
Trustee.
Section 6.3.
Covenant Merger.
Notwithstanding anything in the foregoing covenants to
the contrary, the foregoing covenants with respect to the Borrower shall no longer be applicable if
the Borrower is merged into, consolidated with or otherwise reorganized into the Company. The
covenants with respect to the Company set forth in Sections 6.1 and 6.2 of the Loan Agreement,
dated as of October 1, 2005, by and between The Connecticut Water Company and the Authority
relating to the $10,000,000 aggregate principal amount of the Authoritys Water Facilities Revenue
Bonds (The Connecticut Water Company Project-2005A Series) (the Connecticut Water Company
Agreement) shall apply to the merged, consolidated or otherwise reorganized entity. When so
applied to the merged, consolidated or otherwise reorganized entity, all capitalized terms
appearing in Sections 6.1 and 6.2 of the Connecticut Water Company Agreement shall have the
meanings ascribed thereto in this Agreement; provided, however, that all references to the
Borrower appearing in Sections 6.1 and 6.2 of the Connecticut Water Company Agreement and in the
applicable definitions of the capitalized terms used therein shall mean the Company, as such term
is defined herein.
Section 6.4.
Indemnification, Payment of Expenses, and Advances
. (A) The Borrower
agrees to protect, defend and hold harmless the Authority, the State, agencies of the State,
members, servants, agents, directors, officers and employees, now or forever, of the Authority or
the State (each an Authority Indemnified Party), the Trustee and the Paying Agent, agents,
directors, officers and employees, now or forever, of the Trustee and the Paying Agent (each an
Indemnified Party), from any claim, demand, suit, action or other proceeding and any liabilities,
costs, and expenses whatsoever by any person or entity whatsoever, arising or purportedly arising
from or in connection with the Financing Documents, the Indenture, the Bonds, or the transactions
contemplated thereby or actions taken thereunder by any person (including without limitation the
filing of any information, form or statement with the Internal Revenue Service, if applicable),
except for any willful and material misrepresentation, willful misconduct or gross negligence on
the part of the Indemnified Party or the Authority Indemnified Party or any bad faith on the part
of any indemnitee other than an Authority Indemnified Party.
The Borrower agrees to indemnify and hold harmless any Indemnified Party against any and all
claims, demands, suits, actions or other proceedings and all liabilities, costs and expenses
whatsoever caused by any untrue statement or misleading statement or alleged untrue statement or
alleged misleading statement of a material fact contained in the written information provided by
the Borrower in connection with the issuance of the Bonds or incorporated by reference therein or
caused by any omission or alleged omission from such information of any material fact relating to
the Borrower or the Project required to be stated therein or necessary in order to make the
statements made therein in the light of the circumstances under which they were made, not
misleading.
(B) The Authority and the Trustee shall not be liable for any damage or injury to the persons
or property of the Borrower or its members, directors, officers, agents, servants or employees, or
any other person who may be about the Project due to any act or omission of any person other than
the
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Exhibit 4.30
Authority or the Trustee, respectively, or their respective members, directors, officers,
agents, servants and employees.
(C) The Borrower releases each Indemnified Party from, agrees that no Indemnified Party shall
be liable for, and agrees to hold each Indemnified Party harmless against, any reasonable attorney
fees and expenses, expenses or damages incurred because of any investigation, review or lawsuit
commenced by the Trustee or the Authority in good faith with respect to the Financing Documents,
the Indenture, the Bonds and the Projects and the Authority or the Trustee, as the case may be,
shall promptly give written notice to the Borrower with respect thereto.
(D) All covenants, stipulations, promises, agreements and obligations of the Authority and the
Trustee contained herein shall be deemed to be the covenants, stipulations, promises, agreements
and obligations of the Authority and the Trustee and not of any member, director, officer or
employee of the Authority or the Trustee in its individual capacity, and no recourse shall be had
for the payment of the Bonds or for any claim based thereon or hereunder against any member,
director, officer or employee of the Authority or the Trustee or any natural person executing the
Bonds.
(E) In case any action shall be brought against one or more of the Indemnified Parties based
upon any of the above and in respect of which indemnity may be sought against the Borrower, such
Indemnified Party shall promptly notify the Borrower in writing, enclosing a copy of all papers
served, but the omission so to notify the Borrower of any such action shall not relieve it of any
liability which it may have to any Indemnified Party otherwise than under this Section 6.4. In
case any such action shall be brought against any Indemnified Party and it shall notify the
Borrower of the commencement thereof, the Borrower shall be entitled to participate in and, to the
extent that it shall wish, to assume the defense thereof with counsel satisfactory to such
Indemnified Party, and after notice from the Borrower to such Indemnified Party of the Borrowers
election so to assume the defense thereof, the Borrower shall not be liable to such Indemnified
Party for any subsequent legal or other expenses attributable to such defense, except as set forth
below, other than reasonable costs of investigation subsequently incurred by such Indemnified Party
in connection with the defense thereof. The Indemnified Party shall have the right to employ its
own counsel in any such action, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party unless (i) the employment of counsel by such Indemnified Party has been
authorized by the Borrower, (ii) the Indemnified Party shall have reasonably concluded that there
may be a conflict of interest between the Borrower and the Indemnified Party in the conduct of the
defense of such action (in which case the Borrower shall not have the right to direct the defense
of such action on behalf of the Indemnified Party); or (iii) the Borrower shall not in fact have
employed counsel satisfactory to the Indemnified Party to assume defense of such action.
(F) The Borrower also agrees to pay all reasonable or necessary out-of-pocket expenses of the
Authority and the Trustee in connection with the issuance of the Bonds, the administration of the
Financing Documents and the enforcement of its rights thereunder, including without limitation the
costs of preparation and distribution of closing transcripts relating thereto.
(G) In the event the Borrower fails to pay any amount or perform any act under the Financing
Documents, the Trustee or the Authority may pay the amount or perform the act, in which event the
costs, disbursements, expenses and reasonable counsel fees and expenses thereof, together with
interest thereon from the date the expense is paid or incurred at the prime interest rate publicly
announced from time to time by the Trustee as a commercial bank plus 1% shall be an additional
obligation hereunder payable upon demand by the Authority or the Trustee.
(H) The Borrower shall defend, indemnify, and hold the Authority, its agents, members,
officers and employees, and the Trustee and its agents, directors, officers and employees, harmless
from
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Exhibit 4.30
and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs,
or expenses of whatever kind or nature, known or unknown, contingent or otherwise, related to or in
connection with the Project, arising out of, or in any way related to, (i) the presence, disposal,
release, or threatened release of any hazardous materials, asbestos, petroleum or petroleum
by-products which are on, from, or affecting the soil, water, vegetation, buildings, personal
property, persons, animals, or otherwise, except in compliance with all applicable federal, State
and local laws or regulations; (ii) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to hazardous materials, asbestos, petroleum or
petroleum by-products; (iii) any lawsuit brought or threatened, settlement reached, or government
order relating to such hazardous materials, asbestos, petroleum or petroleum by-products and/or
(iv) any violation of laws, orders, regulations, requirements or demand of government authorities
or any policies or requirements of the Authority which are based upon or in any way related to such
hazardous materials, asbestos, petroleum or petroleum by-products including, without limitation,
reasonable attorney and consultant fees, investigation and laboratory fees, court costs, and
litigation expenses. Notwithstanding the foregoing, the Borrower shall have no obligation to
defend, indemnify and hold harmless the Authority or the Trustee or their respective agents,
members, officers or employees under this Section 6.4(H) in the event and to the extent that any
such claims, demands, penalties, fines, liabilities, settlements, damages, costs or other expenses
arise out of or result from the willful misconduct or gross negligence of the Authority or the
Trustee or their respective agents, members, officers or employees. The provisions of this
paragraph shall be in addition to any and all other obligations and liabilities the Borrower may
have to the Authority or the Trustee at common law, and shall survive the termination of this
Agreement.
(I) Any obligation of the Borrower to the Authority under this Section shall be separate from
and independent of the other obligations of the Borrower hereunder, and may be enforced directly by
the Authority against the Borrower, irrespective of any action taken by or on behalf of the owners
of the Bonds.
(J) The obligations of the Borrower under this section, notwithstanding any other provisions
contained in the Financing Documents, shall survive the termination of this Agreement and shall be
recourse to the Borrower, and for the enforcement thereof any Indemnified Party shall have recourse
to the general credit of the Borrower.
Section 6.5.
Incorporation of Tax Regulatory Agreement; Payments Upon Taxability
. (A)
For purpose of this Section, the term owner means the Beneficial Owner of the Bonds so long as the
Book-Entry System is in effect.
(B) The representations, warranties, covenants and statements of expectation of the Borrower
set forth in the Tax Regulatory Agreement are by this reference incorporated in this Agreement as
though fully set forth herein.
(C) If any owner of the Bonds receives from the Internal Revenue Service a notice of
assessment and demand for payment with respect to interest on any Bond (except a notice and demand
based upon the assertion that the owner of the Bonds is a Substantial User or Related Person), an
appeal may be taken by the owner of the Bonds at the option of either the owner of the Bonds or the
Borrower. In either case all expenses of the appeal including reasonable counsel fees and expenses
shall be paid by the party taking such appeal, and the owner of the Bonds and the Borrower shall
cooperate and consult with each other in all matters pertaining to any such appeal, except that no
owner of the Bonds shall be required to disclose or furnish any non-publicly disclosed information,
including, without limitation, financial information and tax returns.
-27-
Exhibit 4.30
(D) Not later than 180 days following a Determination of Taxability, the Borrower shall pay to
the Trustee an amount sufficient, when added to the amount then in the Debt Service Fund and
available for such purpose, to retire and redeem all Bonds then Outstanding, in accordance with
Section 2.4 of the Indenture.
(E) The obligation of the Borrower to make the payments provided for in this Section shall be
absolute and unconditional, and the failure of the Authority or the Trustee to execute or deliver
or cause to be executed or delivered any documents or to take any action required under this
Agreement or otherwise shall not relieve the Borrower of its obligation under this Section.
Notwithstanding any other provision of this Agreement or the Indenture, the Borrowers obligations
under this Section shall survive the termination of this Agreement and the Indenture.
(F) The occurrence of a Determination of Taxability shall not be an Event of Default hereunder
but shall require only the performance of the obligations of the Borrower stated in this Section,
the breach of which shall constitute an Event of Default as provided in Section 7.1 hereof.
Section 6.6.
Public Purpose Covenants
. (A) The Borrower covenants that it will
operate the Project for the purposes and in a manner consistent with its application for assistance
to the Authority. The Borrower further covenants and agrees that it will, throughout the term of
this Agreement, (1) comply with all applicable laws, regulations, ordinances, rules, and orders
relating to the Project as provided in the Financing Documents, (2) maintain the Project in
accordance with the Financing Documents, (3) not cause or permit the Project to become or remain a
public nuisance, (4) not allow any change in the nature of the occupancy, use or operation of the
Project which is substantially inconsistent with the Borrowers application for assistance to the
Authority, except that the Borrower may, after notice to the Authority, permit any such change
which does not disqualify the Project as authorized projects under the Act as in effect on the date
hereof, and (5) except as permitted hereunder, not sell, assign, convey, further lease, sublease or
otherwise dispose of title to the Project without the prior written consent of the Authority.
Nothing in this Section is intended to require the Borrower to operate the Project in such manner
as, in the good faith judgment of the Borrower, shall materially and adversely impair the use and
operation of the Project.
(B) A breach of any covenant contained in this Section shall constitute an Event of Default
but, in order to relieve the Authority of the consequences of unanticipated failure of
consideration, shall permit only the exercise by the Authority of the remedies provided in Section
7.3 hereof.
Section 6.7.
Further Assurances and Corrective Instruments
. The Authority and the
Borrower agree that they will, from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such supplements hereto and such further instruments as may
reasonably be required for correcting any inadequate or incorrect description of the Project Realty
or Project Equipment or for carrying out the intention of or facilitating the performance of this
Agreement.
Section 6.8.
Covenant by Borrower as to Compliance with Indenture
. The Borrower
covenants and agrees that it will comply with the provisions of the Indenture with respect to the
Borrower and that the Trustee and the Bondholders shall have the power and authority provided in
the Indenture. The Borrower further agrees to aid in the furnishing to the Authority or the
Trustee of opinions that may be required under the Indenture. The Borrower covenants and agrees
that the Trustee shall be entitled to and shall have all the rights, including the right to enforce
against the Borrower the provisions of the Financing Documents, pertaining to the Trustee
notwithstanding the fact that the Trustee is not a party to the Financing Documents.
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Exhibit 4.30
Section 6.9.
Assignment of Agreement or Note
. (A) The Borrower may not assign its
rights, interests or obligations hereunder or under the Note except as may be permitted pursuant to
Section 6.1 hereof.
(B) The Authority agrees that it will not assign or transfer any of the Financing Documents or
the revenues and other receipts, funds and monies to be received thereunder during the Term except
to the Trustee as provided in this Agreement and the Indenture.
Section 6.10.
Inspection
. The Authority and its duly authorized agents shall have (1)
the right at all reasonable times, and upon notice sufficient to permit the Borrower to take
actions necessary to comply with any security regulations then in effect at the Project, to enter
upon and to examine and inspect the Project Realty and the Project Equipment and (2) such rights of
access thereto as may be reasonably necessary for the proper maintenance and repair thereof in the
event of failure by the Borrower to perform its obligations under this Agreement. The Authority
and the Trustee shall also be permitted, at all reasonable times, to examine the books and records
of the Borrower with respect to the Project Realty and the Project Equipment.
Section 6.11.
Default Notification
. Upon becoming aware of any condition or event
which constitutes, or with the giving of notice or the passage of time would constitute, an Event
of Default, the Borrower shall deliver to the Authority and the Trustee a notice stating the
existence and nature thereof and specifying the corrective steps, if any, the Borrower is taking
with respect thereto.
Section 6.12.
Covenant Against Discrimination
. (A) The Borrower in the performance
of this Agreement will not discriminate or permit discrimination against any person or group of
persons on the grounds of race, color, religion, national origin, age, sex, sexual orientation,
marital status, physical or learning disability, political beliefs, mental retardation or history
of mental disorder in any manner prohibited by the laws of the United States or of the State.
(B) The Borrower will comply with the provisions of the resolution adopted by the Authority on
June 14, 1977, as amended, and the policy of the Authority implemented pursuant thereto concerning
the promotion of equal employment opportunity through affirmative action plans. The resolution
requires that all borrowers receiving financial assistance from the Authority adopt and implement
an affirmative action plan prior to the closing of the loan. The plan shall be updated annually as
long as the Bonds remain Outstanding.
Section 6.13.
Covenant to Provide Disclosure
. The Borrower hereby covenants and
agrees that it will execute, comply with and carry out all of the provisions of the Disclosure
Agreement. Notwithstanding any other provision of this Agreement, failure of the Borrower to
comply with the provisions of the Disclosure Agreement shall not be considered an Event of Default
hereunder; however, the Trustee may, subject to the provisions of Article IX of the Indenture (and,
at the request of the underwriter for the Bonds or the Holders of at least 25% aggregate principal
amount in Outstanding Bonds, shall), or any Bondholder or Beneficial Owner may take such actions as
may be necessary and appropriate, including seeking mandamus or specific performance by court
order, to cause the Borrower to comply with its obligations under this Section 6.13. For purposes
of this Section, Beneficial Owner means any person which (a) has the power, directly or
indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including
persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as
the owner of any Bonds for federal income tax purposes.
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Exhibit 4.30
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1.
Events of Default
. Any one or more of the following shall constitute an
Event of Default hereunder:
(1) Any material representation or warranty made by the Borrower in the Financing
Documents or any certificate, statement, data or information furnished in writing to the
Authority or the Trustee by the Borrower in connection with the closing of the Bonds or
included by the Borrower in its application to the Authority for assistance proves at any
time to have been incorrect in any material respect when made.
(2) Failure by the Borrower to pay any interest, principal or premium, if any, that has
become due and payable with respect to the Bonds.
(3) Failure by the Borrower to pay any amount, other than principal, interest or
premium with respect to the Bonds, that has become due and payable with respect to the Bonds
or any other amount due and payable pursuant to the Financing Documents and the continuance
of such failure for more than thirty (30) Business Days.
(4) Failure by the Borrower to comply with the default notification provisions of
Section 6.11 hereof.
(5) The occurrence of an Event of Default under Section 8.1(A) of the Indenture.
(6) Failure by the Borrower to observe or perform any covenant, condition or agreement
hereunder or under the Financing Documents (other than the Disclosure Agreement) (except
those referred to above and except as provided in Section 6.5(F) hereof with respect to the
occurrence of a Determination of Taxability which, in and of itself, shall not constitute an
Event of Default hereunder but shall require only the performance of the obligations of the
Borrower stated in Section 6.5(F) hereof, the breach of which shall constitute an Event of
Default hereunder) and (a) continuance of such failure for a period of sixty (60) days after
receipt by the Borrower of written notice specifying the nature of such failure or (b) if by
reason of the nature of such failure the same cannot be remedied within the sixty-day
period, the Borrower fails to proceed with reasonable diligence after receipt of the notice
to cure the failure.
(7) The Borrower or the Guarantor shall (a) apply for or consent to the appointment of
a receiver, trustee, liquidator or custodian or the like of itself or of its property, (b)
admit in writing its inability to pay its debts generally as they become due, (c) make a
general assignment for the benefit of creditors, (d) be adjudicated a bankrupt or insolvent,
or (e) commence a voluntary case under the federal bankruptcy laws of the United States of
America or file a voluntary petition or answer seeking reorganization, an arrangement with
creditors or an order for relief or seeking to take advantage of any insolvency law or file
an answer admitting the material allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding; or corporate action shall be taken by
it for the purpose of effecting any of the foregoing; or if without the application,
approval or consent of the Borrower or the Guarantor, as the case may be, a proceeding shall
be instituted in any court of competent jurisdiction, seeking in respect of the Borrower or
the Guarantor, as the case may be, an adjudication in bankruptcy, reorganization,
dissolution, winding up, liquidation, a composition or arrangement with creditors, a
readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or
the like of the Borrower or the Guarantor, as the case may be, or of all or any substantial
part of its assets,
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Exhibit 4.30
or other like relief in respect thereof under any bankruptcy or
insolvency law, and, if such proceeding is being contested by the Borrower in good faith,
the same shall continue undismissed, or pending and unstayed, for any period of 75
consecutive days.
(8) Failure by the Borrower to make when due any payment of principal or interest
required under the provisions of any loan agreement (after the expiration of any applicable
grace periods) to which the Authority and the Borrower are parties.
(9) The occurrence of an Event of Default under the Insurance Agreement.
(10) The occurrence of an Event of Default under the Guaranty.
Section 7.2.
Remedies on Default
. (A) Except as provided in Section 6.6(B) hereof
and in Section 7.2(C) below, whenever any Event of Default shall have occurred, the Trustee, or the
Authority where so provided herein, may take any one or more of the following actions:
(1) The Trustee, as and to the extent provided in Article VIII of the Indenture, and
only with the prior written consent of the Bond Insurer, unless the Bond Insurer is in
default under the Bond Insurance Policy, may cause all amounts payable under the Financing
Documents to be immediately due and payable without notice or demand of any kind, whereupon
the same shall become immediately due and payable.
(2) The Authority, without the consent of the Trustee or any Bondholder, may proceed to
enforce the obligations of the Borrower to the Authority under this Agreement.
(3) The Trustee may take whatever action at law or in equity it may have to collect the
amounts then due and thereafter to become due, or to enforce the performance or observance
of the obligations, agreements, and covenants of the Borrower under the Financing Documents.
(4) The Trustee may exercise any and all rights it may have under the Financing
Documents.
(B) In the event that any Event of Default or any proceeding taken by the Authority (or by the
Trustee on behalf of the Authority) thereon shall be waived or determined adversely to the
Authority, then the Event of Default shall be annulled and the Authority and the Borrower shall be
restored to their former rights hereunder, but no such waiver or determination shall extend to any
subsequent or other default or impair any right consequent thereon.
(C) Notwithstanding any other provision hereof or of the Indenture to the contrary, only the
Bond Insurer will be permitted to exercise any rights or remedies with respect to an Event of
Default described in Section 7.1(9) hereof (in accordance with Section 8.2(E) of the Indenture);
provided, however, the Bond Insurer shall only be permitted to exercise such rights and remedies if
the Bond Insurance Policy is in effect and the Bond Insurer is not in default on its payment
obligations under the Bond Insurance Policy.
Section 7.3.
Remedies on Public Purpose Default
. (A) If the Borrower shall default in
the performance of any of the covenants contained in Section 6.6 hereof, and in the event that such
default shall also constitute an Event of Default under Section 7.1 hereof, such Event of Default
shall continue for thirty (30) days without the Trustee or Bondholders instituting the remedial
steps provided for in subsection 7.2(A)(1) hereof or subsection 8.1(B) of the Indenture, then, in
either case, the Authority may, with the prior written consent of the Bond Insurer, unless the Bond
Insurer is in default under the Bond
-31-
Exhibit 4.30
Insurance Policy, so long as such Event of Default is
continuing, send a notice to the Trustee calling for the acceleration of all of the Borrowers
obligations under the Financing Documents and for the redemption of all of the Bonds then
Outstanding. Any such notice shall set forth in reasonable detail the default by the Borrower
giving rise thereto and shall specify the date upon which (1) notice of Bond redemption is to be
given by the Trustee (which shall be not less than one hundred twenty days from the date of the
Authoritys determination notice) and (2) the redemption of the Bonds is to occur (which shall be
at least thirty (30) days after notice of redemption is given by the Trustee). Within thirty (30)
days following receipt of the notice, the Trustee shall forward a copy thereof to the Borrower and
each registered Bondholder, together with a copy of Sections 6.6 and 7.3 of this Agreement.
(B) If, within sixty (60) days after the mailing of notice by the Trustee to the Borrower and
the Bondholders, the Trustee receives no objection (as hereinbelow provided) to such redemption,
the Trustee shall give such notice and effect the acceleration of the Borrowers obligations and
the redemption of all Outstanding Bonds in accordance with the Authoritys notice and pursuant to
Section 2.4(F) of the Indenture. If, however, the Borrower or any Bondholder disputes the
existence of such Event of Default, the Borrower or such Bondholder shall mail a notice to the
Authority and the Trustee containing a statement of such persons belief with respect to the
claimed default. The receipt of such notice by the Trustee shall serve to suspend the proceedings
for redemption of Bonds initiated by the Authoritys notice of default.
(C) If upon receipt of such notice from the Borrower or any Bondholder, the Authority
determines to affirm its earlier determination, either the Borrower or any Bondholder shall have
the right to bring an action in any court of competent jurisdiction to enjoin the proceedings for
the redemption of such Bonds, and during the pendency of any such action the redemption proceedings
shall be suspended. Neither the Authority, the Borrower nor any Bondholder shall be responsible
for any costs, fees, expenses, or reasonable counsel fees incurred by any other party in connection
with any such action, other than the Trustee (whose costs, fees and expenses shall be paid by the
Borrower). In the event the Authority is successful in such a proceeding, and a final judgment is
rendered which is not appealable or appealed within sixty (60) days thereafter finding the Borrower
in default under Section 6.6 hereof, the Trustee shall, promptly upon receipt of notice from the
Authority of the entry of the decision, give notice of the redemption of all Outstanding Bonds
under Section 6.3 of the Indenture, and redeem all such Bonds upon the date fixed for redemption in
the notice (which shall be no more than thirty-five (35) days after the notice is given). In the
event the Borrower or such Bondholders are successful in such a proceeding, and a final judgment is
rendered which is not appealable or appealed within sixty (60) days thereafter finding the Borrower
not to be in default under Section 6.6 hereof, all proceedings for the redemption of Bonds
commenced under this Section shall be terminated. No such judgment, however, shall prejudice the
exercise of the Authoritys rights under this Section upon the occurrence of such subsequent
failure of performance under Section 6.6 hereof.
(D) Within fifteen (15) days of the date the Trustee gives notice of any redemption of Bonds
pursuant to Section 7.3(B) above and subject to the last sentence of Section 7.3(B) above, the
Borrower shall pay as a final loan payment a sum sufficient, together with other funds on deposit
with the Trustee and available for such purpose, to redeem all Bonds then Outstanding under the
Indenture at 100% of the principal amount thereof plus accrued interest to the redemption date.
The Borrower shall also pay or provide for all reasonable and necessary fees and expenses of the
Trustee and any Paying Agent accrued and to accrue through the date of redemption of all such
Bonds.
(E) Nothing contained in this Section shall be deemed to prevent the Authority or the Borrower
from seeking equitable relief if it asserts or disputes, as the case may be, the existence of an
event of a public purpose default.
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Exhibit 4.30
Section 7.4.
No Duty to Mitigate Damages
. Unless otherwise required by law, neither
the Authority, the Trustee nor any Bondholder shall be obligated to do any act whatsoever or
exercise any diligence whatsoever to mitigate the damages to the Borrower if an Event of Default
shall occur.
Section 7.5.
Remedies Cumulative
. No remedy herein conferred upon or reserved to the
Authority or the Trustee is intended to be exclusive of any other available remedy or remedies but
each and every such remedy shall be cumulative and shall be in addition to every remedy given under
this Agreement or now or hereafter existing at law or in equity or by statute. Delay or omission
to exercise any right or power accruing upon any default or failure by the Authority or the Trustee
to insist upon the strict performance of any of the covenants and agreements herein set forth or to
exercise any rights or remedies upon default by the Borrower hereunder shall not impair any such
right or power or be considered or taken as a waiver or relinquishment for the future of the right
to insist upon and to enforce, by injunction or other appropriate legal or equitable remedy, strict
compliance by the Borrower with all of the covenants and conditions hereof, or of the right to
exercise any such rights or remedies, if such default by the Borrower be continued or repeated.
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Exhibit 4.30
ARTICLE
VIII
PREPAYMENT PROVISIONS
Section 8.1.
Optional Prepayment
. (A) The Borrower shall have, and is hereby
granted, the option to prepay its loan obligation at any time, and from time to time, on or after
October 1, 2009 and to cause the corresponding optional redemption of the Bonds pursuant to Section
2.4(A) of the Indenture at such times, in such amounts, and with such premium, if any, for such
optional redemption as set forth in the form of the Bond, by delivering a written notice to the
Trustee in accordance with Section 8.2 hereof, with a copy to the Authority, setting forth the
amount to be prepaid, the amount of Bonds requested to be redeemed with the proceeds of such
prepayment, and the date on which such Bonds are to be redeemed. Such prepayment must be
sufficient to provide monies for the payment of interest and Redemption Price in accordance with
the terms of the Bonds requested to be redeemed with such prepayment and all other amounts then due
under the Financing Documents. In the event of any complete prepayment of its loan obligation, the
Borrower shall, at the time of such prepayment, also pay or provide for the payment of all
reasonable or necessary fees and expenses of the Authority, the Trustee and the Paying Agent
accrued and to accrue through the final payment of all the Bonds. Any such prepayments shall be
applied to the redemption of Bonds in the manner provided in Section 6.4 of the Indenture, and
credited against payments due hereunder in the same manner.
(B) The Borrower shall have, and is hereby granted, the option to prepay its loan obligation
in full at any time without premium if any of the following events shall have occurred, as
evidenced in each case by the filing with the Trustee of a certificate of an Authorized
Representative of the Borrower to the effect that one of such events has occurred and is
continuing, and describing the same:
(1) The Project shall have been damaged or destroyed to such extent that (a) the
Project cannot be reasonably restored within a period of six (6) months from the date of
such damage or destruction to the condition thereof immediately preceding such damage or
destruction, or (b) the Borrower is thereby prevented or likely to be prevented from
carrying on its normal operation of the Project for a period of six (6) months from the date
of such damage or destruction.
(2) Title to or the temporary use of all or substantially all of the Project shall have
been taken or condemned by a competent authority, which taking or condemnation results or is
likely to result in the Borrower being thereby prevented or likely to be prevented from
carrying on its normal operation of the Project for a period of six (6) months.
(3) A change in the Constitution of the State or of the United States of America or
legislative or executive action (whether local, state, or federal) or a final decree,
judgment or order of any court or administrative body (whether local, state, or federal)
that causes this Agreement to become void or unenforceable or impossible of performance in
accordance with the intent and purpose of the parties as expressed herein or, imposes
unreasonable burdens or excessive liabilities upon the Borrower with respect to the Project
or the operation thereof.
(4) The operation of any of the Project shall have been enjoined or shall otherwise
have been prohibited by any order, decree, rule or regulation of any court or of any local,
state, or federal regulatory body, administrative agency or other governmental body for a
period of not less than six months.
(5) Changes in the economic availability of raw materials, operating supplies or
facilities necessary for the operation of the Project or technological or other changes
shall have occurred which the
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Exhibit 4.30
Borrower cannot reasonably overcome or control and which in
the Borrowers reasonable judgment renders the Project unsuitable or uneconomic for the
purposes herein specified or any tax shall be levied upon payments due under the Note in an
amount which the Borrower in its reasonable judgment believes imposes an unreasonable burden
upon the Borrower.
In any such case the final loan payment shall be a sum sufficient, together with other funds
deposited with Trustee and available for such purpose, to redeem all Bonds then Outstanding under
the Indenture at the redemption price of 100% of the principal amount thereof plus accrued interest
to the redemption date and all other amounts then due under the Financing Documents, and the
Borrower shall also pay or provide for all reasonable or necessary fees and expenses of the
Authority, the Trustee and Paying Agent accrued and to accrue through final payment for the Bonds.
The Borrower shall deliver a written notice to the Trustee, with a copy to the Authority,
requesting the redemption of the Bonds under the Indenture, which notice shall have attached
thereto the applicable certificate of the Authorized Representative of the Borrower.
In addition, the Borrower may prepay all or a portion of its loan obligation in order to
preserve the tax-exempt status of interest on the Bonds in accordance with the provisions of
Section 2.4(G) of the Indenture.
Section 982.
Notices of Prepayment
. To exercise any options granted in this Article,
or to consummate the acceleration of the loan payments as set forth in this Article, the written
notice to the Trustee shall be signed by an Authorized Representative of the Borrower and shall
specify therein the date of prepayment, which date shall be not less than thirty-five days nor more
than ninety days from the date the notice is mailed. A duplicate copy of any written notice
hereunder shall also be filed with the Authority by the Borrower.
Section 8.3.
Mandatory Prepayment on Taxability, Receipt of Request for Redemption of a
Deceased Holders Bonds and the Occurrence of Certain Events
. The Borrower shall pay or cause
the prepayment of all or a portion of its loan obligation, as circumstances and the provisions of
Section 2.4 of the Indenture shall warrant, following (i) a Determination of Taxability in the
manner provided in Section 6.5 of this Agreement, (ii) receipt by the Trustee of a request for
redemption of a deceased owners Bonds in accordance with Section 2.4(D) of the Indenture and (iii)
the occurrence of certain events specified in Sections 6.1(A), (B) and (C) of this Agreement and
Section 2.4 of the Guaranty.
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Exhibit 4.30
ARTICLE
IX
GENERAL
Section 9.1.
Indenture
. (A) Monies received from the sale of the Bonds and all loan
payments made by the Borrower and all other monies received by the Authority or the Trustee under
the Financing Documents or the Guaranty shall be applied solely and exclusively in the manner and
for the purposes expressed and specified in the Indenture and in the Bonds and as provided in this
Agreement.
(B) The Borrower shall have and may exercise all the rights, powers and authority given the
Borrower in the Indenture and in the Bonds, and the Indenture and the Bonds shall not be modified,
altered or amended in any manner which adversely affects such rights, powers and authority or
otherwise adversely affects the Borrower without the prior written consent of the Borrower.
Section 9.2.
Benefit of and Enforcement by Bondholders
. The Authority and the
Borrower agree that this Agreement is executed in part to induce the purchase by others of the
Bonds and for the further securing of the Bonds, and accordingly that all covenants and agreements
on the part of the Authority and the Borrower as to the amounts payable with respect to the Bonds
hereunder are hereby declared to be for the benefit of the holders from time to time of the Bonds
and may be enforced as provided in the Indenture on behalf of the Bondholders by the Trustee.
Section 9.3.
Force Majeure
. In case by reason of force majeure either party hereto
shall be rendered unable wholly or in part to carry out its obligations under this Agreement, then
except as otherwise expressly provided in this Agreement, if such party shall give notice and full
particulars of such force majeure in writing to the other party within a reasonable time after
occurrence of the event or cause relied on, the obligations of the party giving such notice, other
than the obligation of the Borrower to make the payments required under the terms hereof or of the
Note, so far as they are affected by such force majeure, shall be suspended during the continuance
of the inability then claimed which shall include a reasonable time for the removal of the effect
thereof, but for no longer period, and such parties shall endeavor to remove or overcome such
inability with all reasonable dispatch. The term force majeure, as employed herein, means acts
of God, strikes, lockouts or other industrial disturbances, acts of the public enemy, orders of any
kind of the Government of the United States, of the State or any civil or military authority,
insurrections, riots, epidemics, landslides, lightning, earthquakes, volcanoes, fires, hurricanes,
tornadoes, storms, floods, washouts, droughts, arrests, restraining of government and people, civil
disturbances, explosions, partial or entire failure of utilities, shortages of labor, material,
supplies or transportation, or any other similar or different cause not reasonably within the
control of the party claiming such inability. It is understood and agreed that the settlement of
existing or impending strikes, lockouts or other industrial disturbances shall be entirely within
the discretion of the party having the difficulty and that the above requirements that any force
majeure shall be reasonably beyond the control of the party and shall be remedied with all
reasonable dispatch shall be deemed to be fulfilled even though such existing or impending strikes,
lockouts and other industrial disturbances may not be settled and could have been settled by
acceding to the demands of the opposing person or persons.
Section 9.4.
Amendments
. This Agreement may be amended only with the concurring
written consent of the Trustee and, if required by the Indenture, of the owners of the Bonds given
in accordance with the provisions of the Indenture.
Section 9.5.
Notices
. All notices, certificates or other communications hereunder
shall be sufficiently given and shall be deemed given when delivered or when mailed by registered
or certified mail, postage prepaid, addressed as follows: if to the Authority, at 999 West Street,
Rocky Hill, Connecticut 06067, Attention: Program Manager Loan Administration; if to the
Borrower, 93 West Main Street, Clinton, Connecticut 06413 Attention: Vice President-Finance; if to
the Paying Agent,
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Exhibit 4.30
Goodwin Square, 225 Asylum Street, Hartford, Connecticut 06103, Attention:
Corporate Trust Department; if to the Trustee, Goodwin Square, 225 Asylum Street, Hartford,
Connecticut 06103, Attention: Corporate Trust Administration; and if to the Bond Insurer, 125 Park
Avenue, New York, New York 10017, Attention: Risk Management. A duplicate copy of each notice,
certificate or other communication given hereunder by either the Authority or the Borrower to the
other shall also be given to the Trustee and the Bond Insurer. In addition, copies of all
amendments to this Agreement which are consented to by the Bond Insurer shall be sent to S&P. The
Authority, the Borrower, the Paying Agent, the Trustee and the Bond Insurer may, by notice given
hereunder, designate any further or different addresses to which subsequent notices, certificates
or other communications shall be sent.
Section 9.6.
Prior Agreements Superseded
. This Agreement, together with all
agreements executed by the parties concurrently herewith or in conjunction with the sale of the
Bonds, shall completely and fully supersede all other prior understandings or agreements, both
written and oral, between the Authority and the Borrower relating to the lending of money and the
Project, including those contained in any commitment letter executed in anticipation of the
issuance of the Bonds but excluding agreements entered into in connection with the financing of the
Project with other bonds previously issued by the Authority.
Section 9.7.
Execution of Counterparts
. This Agreement may be executed
simultaneously in several counterparts each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 9.8.
Time
. All references to times of day in this Agreement are references
to New York City time.
Section 9.9.
Separability of Invalid Provisions
. In case any one or more of the
provisions contained in this Agreement or in the Note shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be construed as if such
invalid or illegal or unenforceable provision had never been contained herein.
Section 9.10.
Third Party Beneficiaries
. The Authority and the Borrower agree that
the Trustee, the Paying Agent and the Bond Insurer shall be third party beneficiaries of this
Agreement to the extent that any of the provisions hereof relate to or provide rights to the
Trustee, the Paying Agent or the Bond Insurer.
Section 9.11.
Governing Law
. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, without reference to its choice of law
principles.
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Exhibit 4.30
IN WITNESS WHEREOF
, the Authority has caused this Agreement to be executed in its corporate
name by a duly Authorized Representative, and the Borrower has caused this Agreement to be executed
in its corporate name by its duly authorized officer all as of the date first above written.
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CONNECTICUT DEVELOPMENT AUTHORITY
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By
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/s/ Karin A. Lawrence
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Name: Karin A. Lawrence
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Authorized Representative
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THE CRYSTAL WATER COMPANY OF DANIELSON
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By
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/s/ David C. Benoit
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Name: David C. Benoit
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Title: Vice President Finance and Chief
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Financial Officer
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Exhibit 4.30
APPENDIX A
THE CRYSTAL WATER COMPANY OF DANIELSON
FORM OF
PROMISSORY NOTE
2005A SERIES
The Crystal Water Company of Danielson, a corporation organized and existing under the laws of
the State of Connecticut (the Borrower), for value received, hereby promises to pay to the order
of the Connecticut Development Authority (the Authority), the principal sum of $5,000,000.00
together with interest on the unpaid principal balance thereof from the date hereof until fully and
finally paid, on the applicable Interest Payment Dates together with all taxes levied or assessed
on this Note or the debt evidenced hereby against the holder hereof. This Note shall bear interest
at the rate of interest borne by the Bonds referred to below.
This Note has been executed under and pursuant to a Loan Agreement, dated as of October 1,
2005, between the Authority and the Borrower (the Agreement). This Note is issued to evidence
the obligation of the Borrower under the Agreement to repay the loan made by the Authority from the
proceeds of its $5,000,000 Water Facilities Revenue Bonds (The Crystal Water Company of Danielson
Project 2005A Series) (the Bonds), together with interest thereon and all other amounts, fees,
penalties, premiums, adjustments, expenses, reasonable counsel fees and other payments of any kind
required to be paid by the Borrower under the Agreement. The Agreement includes provision for
mandatory and optional prepayment of this Note as a whole or in part. Advances made pursuant to
Section 6.4 of the Agreement shall bear interest at the rate specified in accordance therewith.
The Agreement and this Note (hereinafter, together with the Tax Regulatory Agreement,
collectively referred to as the Financing Documents) have been assigned to U.S. Bank National
Association (the Trustee) acting pursuant to an Indenture of Trust, dated as of October 1, 2005
(the Indenture), between the Authority and the Trustee. Such assignment is made as security for
the payment of the Bonds issued by the Authority pursuant to the Indenture.
As provided in the Agreement and subject to the provisions thereof, payments hereon are to be
made at the corporate trust office of U.S. Bank National Association in Hartford, Connecticut, or
at the office designated for such payment by any successor trustee in an amount which, together
with other moneys available therefor pursuant to the Indenture, will equal the amount payable as
principal or Redemption Price, if any, of and interest on the Bonds outstanding under the Indenture
on each such due date.
The Borrower shall make payments on this Note on the dates and in the amounts specified herein
and in the Agreement and in addition shall make such other payments as are required pursuant to the
Financing Documents, the Indenture and the Bonds. Upon the occurrence of an Event of Default, as
defined in any of the Financing Documents, the principal of and interest on this Note may be
declared immediately due and payable as provided in the Agreement. Upon any such declaration the
Borrower shall pay all cost, disbursements, expenses and reasonable counsel fees of the Authority
and the Trustee in seeking to enforce their rights under any of the Financing Documents.
A-1
Exhibit 4.30
THE BORROWER ACKNOWLEDGES THAT THE LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND
WAIVES ITS RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR
AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE
HOLDER HEREOF MAY DESIRE TO USE. The Borrower further (1) waives diligence, demand, presentment
for payment, notice of nonpayment, protest and notice of protest, notice of any renewals or
extension of this Note, and all rights under any statute of limitations, (2) agrees that the time
for payment of this Note may be changed and extended in accordance with the provisions of the
Indenture, and (3) consents to the release of all or any part of the security for the payment
thereof at the discretion of the Trustee or the release of any party liable for this obligation
without affecting the liability of the other parties hereto. Any delay on the part of the
Authority or the Trustee in exercising any right hereunder shall not operate as a waiver of any
such right, and any waiver granted with respect to one default shall not operate as a waiver in the
event of any subsequent default.
IN WITNESS WHEREOF, The Crystal Water Company of Danielson has caused this Note to be executed
in its corporate name by its duly authorized officer, dated November 30, 2005.
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THE CRYSTAL WATER COMPANY OF
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DANIELSON
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By:
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/s/ David C. Benoit
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Name: David C. Benoit
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Authorized Representative
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A-2
Exhibit 4.30
AUTHORITY ENDORSEMENT
Pay to the order of U.S. Bank National Association, as Trustee, without recourse.
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CONNECTICUT DEVELOPMENT AUTHORITY
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By:
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/s/ Karin A. Lawrence
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Name: Karin A. Lawrence
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Authorized Representative
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A-3
Exhibit 4.30
APPENDIX B
DESCRIPTION OF PROJECT REALTY
NONE.
Exhibit 4.30
APPENDIX C
DESCRIPTION OF PROJECT EQUIPMENT
The Project Equipment shall consist of various improvements to certain of the Borrowers
water systems, each of which collects, treats, stores, transmits and distributes water for
residential, commercial, industrial and fire protection services in certain cities, towns and
communities within Connecticut. Those systems affected by the improvements are the Crystal Main
System, the Killingly Industrial Park System (KIP System) and the Powdrell and Alexander System
(P&A System). The improvements consist of (1) the new construction of a water treatment plant
with a rated capacity of 3 million gallons a day occupying 7,800 square feet, located at 1017 North
Main Street, Killingly, Connecticut and (2) a water main extension for the P&A System, such
extension to be approximately 4,100 feet located from Tracy Road through Attawaugan Crossing to
Ballouville Road in Killingly, Connecticut.
Exhibit 4.31
[EXECUTION COPY]
CONNECTICUT DEVELOPMENT AUTHORITY
to
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
INDENTURE OF TRUST
Dated as of October 1, 2005
Connecticut Development Authority
$5,000,000 Water Facilities Revenue Bonds
(The Crystal Water Company of Danielson Project 2005A Series)
Exhibit 4.31
TABLE OF CONTENTS
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Page
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Parties and Preambles
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1
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Form of Bond
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4
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ARTICLE I
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DEFINITIONS AND INTERPRETATION
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Section 1.1. Definitions
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14
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Section 1.2. Interpretation
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22
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ARTICLE II
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AUTHORIZATION, TERMS AND ISSUANCE OF BONDS
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Section 2.1. Authorization for Indenture
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24
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Section 2.2. Authorization and Obligation of Bonds
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24
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Section 2.3. Issuance and Terms of the Bonds
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24
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Section 2.4. Redemption of Bonds
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27
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Section 2.5. Execution and Authentication of Bonds
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29
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Section 2.6. Delivery of Bonds
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30
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Section 2.7. No Additional Bonds
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30
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ARTICLE III
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GENERAL TERMS AND PROVISIONS OF BONDS
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Section 3.1. Date of Bonds
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31
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Section 3.2. Form and Denominations
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31
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Section 3.3. Legends
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31
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Section 3.4. Medium of Payment
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31
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Section 3.5. Bond Details
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31
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Section 3.6. Interchangeability, Transfer and Registry
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31
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Section 3.7. Bonds Mutilated, Destroyed, Stolen or Lost
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32
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Section 3.8. Cancellation and Destruction of Bonds
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32
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Section 3.9. Requirements With Respect To Transfers
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32
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Section 3.10. Registrar
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33
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ARTICLE IV
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APPLICATION OF BOND PROCEEDS AND OTHER AMOUNTS
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Section 4.1. Accrued Interest
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34
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Section 4.2. Bond Proceeds
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34
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Section 4.3. Borrower Contribution
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34
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ARTICLE V
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CUSTODY AND INVESTMENT OF FUNDS
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Section 5.1. Creation of Funds
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35
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Section 5.2. Project Fund
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35
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Section 5.3. Debt Service Fund
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37
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Section 5.4. Rebate Fund
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39
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Section 5.5. Renewal Fund
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39
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Section 5.6. Investment of Funds and Accounts
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39
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Section 5.7. Non-presentment of Bonds
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40
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ARTICLE VI
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REDEMPTION OF BONDS
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Section 6.1. Privilege of Redemption and Redemption Price
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40
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Section 6.2. Selection of Bonds to be Redeemed
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40
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Section 6.3. Notice of Redemption
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40
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- i -
Exhibit 4.31
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Page
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Section 6.4. Payment of Redeemed Bonds
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41
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Section 6.5. Notice to Authority and Borrower of Deceased Bondholder Redemption
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41
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Section 6.6. Cancellation of Redeemed Bonds
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41
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ARTICLE VII
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PARTICULAR COVENANTS
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Section 7.1. No Pecuniary Liability on Authority or Officers
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42
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Section 7.2. Payment of Principal, Redemption Price, if any, and Interest
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42
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Section 7.3. Performance of Covenants
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42
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Section 7.4. Further Assurances
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42
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Section 7.5. Inspection of Project Books
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42
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Section 7.6. Rights under Financing Documents
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43
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Section 7.7. Creation of Liens, Indebtedness
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43
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Section 7.8. Recording and Filing
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43
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ARTICLE VIII
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REMEDIES OF BONDHOLDERS
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Section 8.1. Events of Default; Acceleration of Due Dates
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44
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Section 8.2. Enforcement of Remedies
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45
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Section 8.3. Application of Revenue and Other Moneys After Default
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46
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Section 8.4. Actions by Trustee
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47
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Section 8.5. Majority Bondholders Control Proceedings
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47
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Section 8.6. Individual Bondholder Action Restricted
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47
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Section 8.7. Effect of Discontinuance of Proceedings
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47
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Section 8.8. Remedies Not Exclusive
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47
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Section 8.9. Delay or Omission Upon Default
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48
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Section 8.10. Notice of Default
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48
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Section 8.11. Waivers of Default
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48
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ARTICLE IX
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TRUSTEE AND PAYING AGENTS
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Section 9.1. Appointment and Acceptance of Duties
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49
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Section 9.2. Indemnity
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49
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Section 9.3. Responsibilities of Trustee
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49
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Section 9.4. Compensation
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50
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Section 9.5. Evidence on Which Trustee May Act
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50
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Section 9.6. Evidence of Signatures of Owners of the Bonds and Ownership of Bonds
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51
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Section 9.7. Trustee and any Paying Agent, May Deal in Bonds and With Borrower
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51
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Section 9.8. Resignation or Removal of Trustee
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51
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Section 9.9. Successor Trustee
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52
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Section 9.10. Appointment and Responsibilities of Paying Agent
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53
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Section 9.11. Resignation or Removal of Paying Agent; Successors
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53
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Section 9.12. Monies Held for Particular Bonds
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54
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Section 9.13. Continuation Statements
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54
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Section 9.14. Obligation to Report Defaults
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54
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Section 9.15. Payments Due on non-Business Day
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54
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Section 9.16. Appointment of Co-Trustee
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54
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Section 9.17. Project Description
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55
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ARTICLE X
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AMENDMENTS OF INDENTURE
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Section 10.1. Limitation on Modifications
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56
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Section 10.2. Supplemental Indentures Without Consent of Owners of the Bonds
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56
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Section 10.3. Supplemental Indentures With Consent of Owners of the Bonds
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57
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Section 10.4. Supplemental Indenture Part of the Indenture
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58
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- ii -
Exhibit 4.31
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Page
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ARTICLE XI
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AMENDMENTS OF FINANCING DOCUMENTS
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Section 11.1. Rights of Borrower
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59
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Section 11.2. Amendments of Financing Documents Not Requiring Consent of Owners of the Bonds
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59
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Section 11.3. Amendments of Financing Documents Requiring Consent of Owners of the Bonds
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59
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ARTICLE XII
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DISCHARGE OF INDENTURE
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Section 12.1. Defeasance
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60
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ARTICLE XIII
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GENERAL PROVISIONS
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Section 13.1. Notices
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61
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Section 13.2. Covenant Against Discrimination
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61
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Section 13.3. Rights of Bond Insurer
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61
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Section 13.4. Bond Insurer Consent
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62
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Section 13.5. Notices to the Bond Insurer
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62
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Section 13.6. Parties Interested Herein
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62
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Section 13.7. Bond Insurer as Third Party Beneficiary
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62
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Section 13.8. Effective Date; Counterparts
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62
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Section 13.9. Date for Identification Purposes Only
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62
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Section 13.10. Separability of Invalid Provisions
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63
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APPENDICES
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Appendix A Form of Requisition
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- iii -
Exhibit 4.31
THIS INDENTURE OF TRUST
, made and dated as of October 1, 2005, by and between the
CONNECTICUT
DEVELOPMENT AUTHORITY
, a body corporate and politic constituting a public instrumentality and
political subdivision of the State of Connecticut, and
U.S. BANK NATIONAL ASSOCIATION
, a national
banking association organized, existing and authorized to accept and execute trusts of the
character herein set out under and by virtue of the laws of the United States of America, with a
corporate trust office located in Hartford, Connecticut, as Trustee,
WITNESSETH THAT:
WHEREAS
, the State Commerce Act, constituting Connecticut General Statutes, Sections 32-1a
through 32-23zz, as amended (the Act), declares that there is a continuing need in the State (1)
for industrial development and activity to provide and maintain employment and tax revenues and to
control, abate and prevent pollution to protect the public health and safety, (2) for the
development of recreation facilities to promote tourism, provide and maintain employment and tax
revenues, and promote the public welfare, (3) for the development of commercial and retail sales
and service facilities in urban areas to provide and maintain construction and permanent employment
and tax revenues, to improve conditions of deteriorated physical development, slow economic growth
and eroded financial health of the public and private sectors in urban areas and to revitalize the
economy of urban areas, and (4) for assistance to public service businesses providing
transportation and utility services in the State, and that the availability of financial assistance
and suitable facilities are important inducements to industrial and commercial enterprises to
remain or locate in the State and to provide industrial, recreation, urban and public service
projects; and
WHEREAS
, the Act provides that (1) the term project as used therein means any facility,
plant, works, system, building, structure, utility, fixture or other real property improvement
located in the State, and the land on which it is located or which is reasonably necessary in
connection therewith, which is of a nature or which is to be used or occupied by any person for
purposes which would constitute it as an economic development project, recreation project, urban
project, public service project or health care project, and any real property improvement
reasonably related thereto, and (2) a project may also include or consist exclusively of machinery,
equipment or fixtures; and
WHEREAS
, the Act provides that the Authority shall have power to determine the location and
character of, and extend credit or make loans to any person for the planning, designing, acquiring,
improving and equipping of, a project which may be secured by loan, lease or sale agreements,
contracts and other instruments, upon such terms and conditions as the Authority shall determine to
be reasonable, to require the inclusion in any contract, loan agreement or other instrument of such
provisions for the construction, use, operation, maintenance and financing of the project as the
Authority may deem necessary or desirable, to issue its bonds for such purposes, subject to the
approval of the Treasurer of the State, and, as security for the payment of the principal or
redemption price, if any, of and interest on any such bonds, to pledge or assign such a loan, lease
or sale agreement and the revenues and receipts derived by the Authority from such a project; and
WHEREAS
, by resolution adopted on May 19, 2004, in furtherance of the purposes of the Act, the
Authority has accepted the application of The Crystal Water Company of Danielson (the Borrower)
for assistance in the financing of various capital projects located in the State of Connecticut;
and
WHEREAS
, the Borrower currently owns certain existing facilities within certain municipalities
in the State and at this time requests assistance in the design, acquisition, installation,
improvement and construction of certain facilities consisting of water treatment and storage
facilities, transmission and
Exhibit 4.31
distribution mains, service lines, meters, hydrants and pumping
equipment for the purpose of supplying safe potable water to the general public within the
Borrowers service area; and
WHEREAS
, the Authority has by a further resolution adopted on August 17, 2005 authorized the
issuance of not to exceed $5,000,000 principal amount of its Water Facilities Revenue Bonds (The
Crystal Water Company of Danielson Project 2005A Series) for the purpose of providing funds for
the Project; and
WHEREAS
, the Authority has determined that the issuance, sale and delivery of the Bonds, as
hereinafter provided, is needed to finance the cost of the Project, and concurrently herewith the
Authority and the Borrower have entered into a Loan Agreement, dated as of October 1, 2005,
providing for a loan by the Authority to the Borrower for such purpose in an aggregate amount equal
to the principal amount of the Bonds; and
WHEREAS
, the Connecticut Department of Public Utility Control (the DPUC) has approved the
issuance of the Note; and
WHEREAS
, payment of the principal and redemption price, if any, of and interest on the Bonds
when due and the performance of all of the Borrowers payment obligations under the Agreement have
been guaranteed by Connecticut Water Service, Inc. (the Guarantor) pursuant to the Guaranty (the
Guaranty) dated as of October 1, 2005 between the Guarantor and the Trustee; and
WHEREAS
, the Bonds shall be special obligations of the Authority, payable solely out of the
revenues and other receipts, funds or monies derived by the Authority under the Agreement or the
Indenture and from any amounts otherwise available under this Indenture for the payment of the
Bonds; and
WHEREAS
, the Bonds are to be originally issued as fully registered bonds and such Bonds and
the Trustees certificate of authentication to be endorsed thereon shall be in substantially the
following form, with appropriate variations, omissions and insertions as permitted or required by
this Indenture, to wit:
-2-
Exhibit 4.31
[FORM OF BOND]
No. R- $5,000,000
NEITHER THE STATE OF CONNECTICUT NOR ANY MUNICIPALITY THEREOF IS OBLIGATED TO PAY, AND NEITHER
THE FAITH AND CREDIT NOR TAXING POWER OF THE STATE OF CONNECTICUT NOR ANY MUNICIPALITY
THEREOF IS PLEDGED TO THE PAYMENT OF, THE PRINCIPAL, PREMIUM, IF ANY, OF OR INTEREST ON
THIS BOND.
CONNECTICUT DEVELOPMENT AUTHORITY
WATER FACILITIES REVENUE BOND
(THE CRYSTAL WATER COMPANY OF DANIELSON PROJECT 2005A SERIES)
BOND DATE: November 30, 2005
MATURITY DATE: October 1, 2040
INTEREST PAYMENT DATES: April 1 and October 1
INTEREST RATE: %
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: $5,000,000.00***
CUSIP NUMBER:
CONNECTICUT DEVELOPMENT AUTHORITY (the Authority), a body corporate and politic constituting
a public instrumentality and political subdivision of the State of Connecticut (the State), for
value received, hereby promises to pay to the REGISTERED OWNER or registered assigns, on the
MATURITY DATE, solely from the sources and in the manner hereinafter provided, upon presentation
and surrender hereof, in lawful money of the United States of America, the PRINCIPAL AMOUNT and in
like manner to pay interest on the unpaid principal balance thereof until the Authoritys
obligation with respect to the payment of such sum shall be discharged. Interest shall be payable
(computed on the basis of a 360-day year consisting of twelve 30-day months) from the most recent
INTEREST PAYMENT DATE, to which interest has been paid or duly provided for or, if no interest has
been paid, from the DATE OF THIS BOND at the INTEREST RATE per annum, payable semi-annually on the
INTEREST PAYMENT DATES until the date on which this bond becomes due, whether at maturity or by
acceleration or redemption. From and after that date, any unpaid principal will bear interest at
the same rate until paid or duly provided for.
Payment of Principal and Interest
. The principal and premium, if any, of this Bond is
payable to the REGISTERED OWNER hereof but only upon presentation and surrender of this bond at the
corporate trust office of U.S. Bank National Association, as Paying Agent (with its successors, the
Paying Agent). Interest is payable by check or draft mailed by the Paying Agent to the
REGISTERED OWNER of this bond (or of one or more predecessor or successor Bonds (as defined
below)), determined as of the close of business on the applicable record date, at its address as
shown on the registration books maintained by the Paying Agent. If any payment, redemption or
maturity date for principal, premium or interest shall not be a Business Day then the payment
thereof may be made on the next succeeding Business Day with the same force and effect as if made
on the specified payment date and no interest shall accrue for the
-3-
Exhibit 4.31
period after the specified payment date. Payment shall be in any coin or currency of the
United States of America, which, on the respective dates of payment thereof, is legal tender for
the payment of public and private debts.
The record date for payment of interest is the fifteenth day of the month immediately
preceding each INTEREST PAYMENT DATE, provided that, with respect to overdue interest or interest
payable on redemption of this bond other than on an INTEREST PAYMENT DATE or interest on any
overdue amount, the Trustee (as defined below) may establish a special record date. The special
record date may be not more than thirty (30) days before the date set for payment. The Paying
Agent will mail notice of a special record date to the registered owners of the Bonds (the
Bondholders) at least ten (10) days before the special record date. The Paying Agent will
promptly certify to the Authority and the Trustee that it has mailed such notice to all
Bondholders, and such certificate will be conclusive evidence that such notice was given in the
manner required hereby.
Authorization and Purpose
. This bond is one of an authorized issue of Bonds of the
Authority in the aggregate principal amount of $5,000,000 designated: Water Facilities Revenue
Bonds (The Crystal Water Company of Danielson Project 2005A Series) (the Bonds) which are
issued for the purpose of providing The Crystal Water Company of Danielson (the Borrower), a
corporation organized and existing under the laws of the State of Connecticut, with funds for the
purpose of financing various capital improvements constituting a portion of the Borrowers existing
water system (the Project), and paying necessary expenses incidental thereto. The Bonds are
issued pursuant to the State Commerce Act, constituting Connecticut General Statutes, Sections
32-1a through 32-23zz, as amended, a resolution adopted by the Authority on August 17, 2005 and an
Indenture of Trust, dated as of October 1, 2005 (which Indenture as from time to time amended and
supplemented is herein referred to as the Indenture), duly executed and delivered by the
Authority to U.S. Bank National Association, as trustee (with its successors, the Trustee), and
are equally and ratably secured by and entitled to the protection of the Indenture, which is on
file in the office of the Trustee.
Pledge and Security
. Pursuant to the Indenture, the Authority has assigned to the
Trustee all of its right, title and interest in and to a Loan Agreement, dated as of October 1,
2005, as it may be amended or supplemented from time to time (the Agreement), between the
Authority and the Borrower, and the Note evidencing the Borrowers obligations under the Agreement
(except for certain enforcement and indemnification rights which are reserved in the Indenture),
including all rights to receive loan payments sufficient to pay the principal and premium if any,
of and interest and all other amounts due on the Bonds as the same become due, to be made by the
Borrower pursuant to the Agreement. The Agreement sets forth the terms and conditions under which
the Authority will provide for the financing of the Project and under which the Borrower will use
and occupy the Project and the Borrower will make loan payments to the Authority in such amounts as
are necessary to pay the principal of, premium if any, and interest on the Bonds. Reference is
hereby made to the Indenture for the definition of any capitalized word or term used but not
defined herein and for a description of the property pledged, assigned and otherwise available for
the payment of the Bonds, the provisions, among others, with respect to the nature and extent of
the security, the rights, duties and obligations of the Authority, the Trustee and the owners of
the Bonds, and the terms upon which the Bonds are issued and secured, and the holders of the Bonds
are deemed to assent to the provisions of the Indenture by the acceptance of this bond. The
payment of the principal and redemption price, if any, of and interest on the Bonds has been
guaranteed to the Trustee by Connecticut Water Service, Inc. pursuant to a Guaranty, dated as of
October 1, 2005.
Event of Default
. In case any Event of Default occurs and is continuing, the
principal amount of this bond together with accrued interest may be declared due and payable in the
manner and with the effect provided in the Indenture.
-4-
Exhibit 4.31
General Optional Redemption
. The Bonds are subject to redemption prior to maturity
from time to time pursuant to the Indenture at the option of the Authority, which option shall be
exercised at the direction of the Borrower, as a whole or in part on any date on or after October
1, 2009, at a Redemption Price equal to 100% of the principal amount thereof plus accrued interest
to the redemption date.
Extraordinary Optional Redemption
. In addition, at the option of the Authority, which
option shall be exercised upon the giving of notice by the Borrower of its election to redeem Bonds
following completion of the Project in accordance with the Indenture or its intention to prepay
amounts due under the Agreement, the Bonds are subject to redemption prior to maturity as a whole
on any date at a Redemption Price equal to 100% of the principal amount thereof plus accrued
interest to the date of redemption, (a) to the extent that excess Bond proceeds are transferred to
the Redemption Account from the Project Fund in accordance with Section 5.2(F) of the Indenture, or
(b) if any one or more of the events of casualty to or condemnation of the Project or change in law
or certain economic events affecting the Project specified in subsection 8.1(B) of the Agreement
shall have occurred, as evidenced in each case by the filing of a certificate of an Authorized
Representative of the Borrower.
Mandatory Taxability Redemption
. In the event of a Determination of Taxability, the
Bonds shall be redeemed on any day selected by the Borrower that is not more than 180 days after
the occurrence of such Determination of Taxability as provided in the Indenture, at the Redemption
Price equal to 100% of the principal amount thereof plus accrued interest to the date of
redemption. Redemption under this paragraph shall be in whole unless not less than forty-five (45)
days prior to the redemption date the Borrower delivers to the Trustee an opinion of Bond Counsel
reasonably satisfactory to the Trustee to the effect that a redemption of less than all of the
Bonds will preserve the tax-exempt status of interest on the remaining Bonds outstanding subsequent
to such redemption.
Deceased Bondholder Redemption
. For purposes of this paragraph only, the owner of a
Bond shall mean the Beneficial Owner of said Bond so long as the Book-Entry Only System shall be in
effect. Notwithstanding the foregoing redemption provisions, the estate of, successor in interest
to and, in the case of jointly held Bonds (whether by joint tenancy, tenancy in common or tenancy
by the entirety) any surviving joint owner may, within two years of the date of death of a deceased
owner, request the redemption of Bonds of which such deceased owner on the date of his or her death
was an owner or joint owner (Deceased Owner Bonds), and the Authority will redeem such Bonds
within 60 days of receipt by the Trustee of such request at a Redemption Price of 100% of the
principal amount thereof plus accrued interest to the date of redemption in the manner and as
provided in Article VI of the Indenture, subject to the following limitations: (i) the Authority
shall not be obligated to redeem any Deceased Owner Bonds prior to October 1, 2007: (ii) the
maximum aggregate principal amount of Deceased Owner Bonds that the Authority shall be required to
redeem during the 12-month period commencing October 1, 2007 and each October 1 thereafter through
maturity of the Bonds is $450,000; (iii) during any such 12-month period, the Authority shall not
be required to redeem in excess of $25,000 aggregate principal amount of Deceased Owner Bonds with
respect to any one deceased owner, and (iv) such Deceased Owner Bonds had been held by such owner
for at least six months prior to his or her death. A request for redemption of Deceased Owner
Bonds shall be made by the executor of the estate of or successor in interest to the deceased owner
and, in the case of jointly owned Bonds, by any joint owner surviving the deceased owner, in
writing, in form satisfactory to the Trustee, signed by the person requesting redemption or such
persons legal representative, with such signature guarantees, evidences of due authorization to
make such request for redemption, evidence of death of the deceased owner and ownership of such
Bond(s) at the time of death, evidence of tax waivers and such other evidence as the Trustee may
require under the Indenture. A request for redemption shall specify the Bonds to be redeemed.
Subject to the limitations herein provided, requests for redemption shall be accepted and honored
by the Trustee in the order of receipt of such requests by the Trustee. Upon the receipt by the
requesting party of notice from the Trustee in accordance with Article VI of the Indenture that the
Bonds with respect to which a request for redemption has been made are eligible for redemption and
shall be
-5-
Exhibit 4.31
redeemed, such Bonds shall be tendered to the Trustee no later than the date set for
redemption. Any request for redemption may be withdrawn at any time prior to the Trustees sending
notice of redemption pursuant to the Indenture; after notice of redemption is sent, a request for
redemption is irrevocable.
Extraordinary Mandatory Redemption
. In the event that the Borrower shall fail to
comply with the restrictions relating to the restructuring, merger, consolidation and
reorganization of the Borrower set forth in Section 6.1(A) of the Agreement or the sale of assets
by the Borrower set forth in Section 6.1(B) of the Agreement, or if The Connecticut Water Company
shall fail to comply with the restrictions regarding the sale of assets by The Connecticut Water
Company as set forth in Section 6.1(C) of the Agreement, or if the Guarantor shall fail to comply
with the restrictions regarding the sale of assets by the Guarantor or the merger, consolidation,
restructuring or reorganization of the Guarantor set forth in Section 2.4 of the Guaranty, the
Bonds shall be subject to redemption prior to maturity as a whole on any date at the redemption
price equal to 100% of the principal amount thereof plus accrued interest to the date of
redemption.
Optional Public Purpose Redemption
. If the Borrower fails to perform its obligations
under Section 6.6 of the Agreement, the Bonds shall be subject to redemption prior to maturity as a
whole on any date at the option of the Authority in accordance with Section 7.3 of the Agreement,
at the redemption price equal to 100% of the principal amount thereof plus accrued interest to the
date of redemption.
Extraordinary Optional Redemption Without Premium to Preserve Tax Exempt Status of the
Bonds
. The Bonds shall be subject to extraordinary optional redemption by the Authority, at
the direction of the Borrower, in whole or in part on any date at a Redemption Price equal to 100%
of the unpaid principal amount thereof, together with accrued interest to the date of redemption,
and without premium, if the Borrower shall have delivered to the Trustee and the Authority an
opinion of Bond Counsel addressed to the Trustee and the Authority substantially to the effect that
(i) a failure so to redeem the Bonds (or the relevant portion thereof) may adversely affect the
exclusion of interest on the Bonds from the gross income of the holders pursuant to Section 103 of
the Code, and (ii) redemption of Bonds in the amount set forth in such opinion (but in no smaller
amount than that set forth in such opinion) would permit the continuance of any exclusion so
afforded under Section 103 of the Code.
Selection of Bonds to be Redeemed
. If less than all of the Outstanding Bonds are to
be called for redemption, the Bonds (or portions thereof) to be redeemed shall be selected as
provided in the Indenture.
Notice of Redemption
. In the event this bond is selected for redemption, notice
(which notice may state that it is subject to the receipt of the redemption moneys by the Trustee
on or before the date fixed for redemption and which notice shall be of no effect unless such
moneys are so received on or before such date) will be mailed no more than forty-five (45) days nor
less than thirty (30) days prior to the redemption date to the REGISTERED OWNER at its address
shown on the registration books maintained by the Paying Agent. Failure to mail notice to the
owner of any other Bond or any defect in the notice to such an owner shall not affect the
redemption of this bond.
If this bond is of a denomination in excess of five thousand dollars ($5,000), portions of the
principal amount in the amount of five thousand dollars ($5,000) or any multiple thereof may be
redeemed. If less than all of the principal amount is to be redeemed, upon surrender of this bond
to the Paying Agent, there will be issued to the REGISTERED OWNER, without charge, a new Bond or
Bonds, at the option of the REGISTERED OWNER, for the unredeemed principal amount.
Notice of redemption having been duly mailed, and moneys for the redemption having been
deposited with the Paying Agent, this bond, or the portion called for redemption, will become due
and
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Exhibit 4.31
payable on the redemption date at the applicable redemption price from and after the date
fixed for redemption, interest on this bond (or such portion) will no longer accrue.
Transfer of Bonds
. This bond is transferable by the REGISTERED OWNER, in person or by
its attorney duly authorized in writing, at the office of the Paying Agent, upon surrender of this
bond to the Paying Agent for cancellation. Upon the transfer, a new Bond or Bonds in authorized
denominations of the same aggregate principal amount will be issued to the transferee at the same
office. This bond may also be exchanged at the office of the Paying Agent for a new Bond or Bonds
in authorized denominations of the same aggregate principal amount without transfer to a new
registered owner. Exchanges and transfers will be without expense to the owner except for
applicable taxes, fees or other governmental charges, if any, and a sum sufficient to pay the cost
of preparing and delivering each new Bond issued upon such transfer. The Paying Agent will not be
required to make an exchange or transfer of this bond (a) during the fifteen (15) days preceding
any date fixed for selection for redemption if this bond (or any portion thereof) is eligible to be
selected for redemption or (b) if this bond is selected, called or being called for redemption in
whole or in part, except in the case of a bond to be redeemed in part, the portion not to be
redeemed.
Amendment of Indenture
. The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and obligations of the Authority
and the rights of the owners of the Bonds at any time by the Authority with the consent of the Bond
Insurer, unless the Bond Insurer is in default under the Bond Insurance Policy, in which case such
amendment shall require the consent of the owners of not less than 51% in aggregate principal
amount of the Bonds at the time outstanding thereunder. Any such consent shall be conclusive and
binding upon each such owner and upon all future owners of each Bond and of any such Bond issued
upon the transfer thereof, whether or not notation of such consent is made thereon. The Indenture
also permits the amendment thereof by the Authority but without the consent of the owners of the
Bonds or the Bond Insurer for certain specified purposes.
Limitation on Bondholder Enforcement Rights
. The owner of this bond shall have no
right to enforce the provisions of the Indenture, to institute action to enforce the provisions and
covenants thereof or to institute, appear in or defend any suit or other proceedings with respect
thereto, except as provided in the Indenture. Anything in the Indenture to the contrary
notwithstanding, upon the occurrence and continuance of an Event of Default under the Indenture, so
long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default thereunder,
the Bond Insurer shall be entitled to control and direct the enforcement of all rights and remedies
granted to the holders of the Bonds or the Trustee for the benefit of the holders of the Bonds
under the Indenture.
Special Obligations of the Authority
. This bond and the issue of which it forms a
part are special obligations of the Authority, payable solely out of the revenues or other
receipts, funds or moneys of the Authority pledged under the Indenture and from any amounts
otherwise available under the Indenture for the payment of the Bonds. Neither the State nor any
municipality thereof shall be obligated to pay the principal or redemption price, if any, of or
interest on this bond and neither the faith and credit nor taxing power of the State or any
municipality thereof is pledged to such payment. The Bonds do not now and shall never constitute a
debt or liability of the State or any municipality thereof or bonds issued or guaranteed by either
of them within the meaning of any constitutional or statutory limitation.
Estoppel Clause
. This bond is issued pursuant to and in full compliance with the
Constitution and laws of the State. It is hereby certified, recited and declared that all acts,
conditions and things required to exist, happen and be performed precedent to and in the issuance
of this bond do exist, have happened and have been performed in due time, form and manner as
required by law and that the issuance of this bond and of the issue of which it forms a part,
together with all other obligations of the Authority, do not exceed or violate any constitutional
or statutory limitation.
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Exhibit 4.31
NEITHER THE AUTHORITY, THE TRUSTEE NOR ANY PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR
OBLIGATION TO PARTICIPANTS, TO INDIRECT PARTICIPANTS OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (I)
THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY, ANY
PARTICIPANT, OR ANY INDIRECT PARTICIPANT; (II) THE PAYMENT BY DTC OR ANY SUCCESSOR SECURITIES
DEPOSITORY OR ANY PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL
OF, OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS; (III) THE SELECTION BY DTC OR ANY SUCCESSOR
SECURITIES DEPOSITORY OR ANY DIRECT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE
EVENT OF A PARTIAL REDEMPTION OF THE BONDS; (IV) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC OR
ANY SUCCESSOR SECURITIES DEPOSITORY AS BONDHOLDER; OR (V) THE DELIVERY TO ANY PARTICIPANT, OR
INDIRECT PARTICIPANT, BENEFICIAL OWNER OR OTHER PERSON OTHER THAN DTC OR ANY SUCCESSOR SECURITIES
DEPOSITORY OF ANY NOTICE WITH RESPECT TO THE BONDS, INCLUDING BUT NOT LIMITED TO, ANY NOTICE OF
REDEMPTION.
No Personal Liability
. Neither the officers, directors or employees of the Authority
or the Trustee nor any person executing this bond shall be liable personally or be subject to any
personal liability or accountability by reason of the issuance hereof.
Authentication
. This bond shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the certificate of authentication
hereon shall have been signed by the Trustee or the Paying Agent.
Authorized Denomination
. The Bonds are issuable only in fully registered form in
denominations of $5,000 or any multiple thereof.
Persons Deemed Owners
. The Authority, the Trustee, the Paying Agent and the Borrower
may treat the REGISTERED OWNER as the absolute owner of this bond for all purposes, notwithstanding
any notice to the contrary.
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Exhibit 4.31
IN WITNESS WHEREOF, the CONNECTICUT DEVELOPMENT AUTHORITY has caused this Bond to be executed
in its name by the manual or facsimile signature of its Authorized Representative.
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CONNECTICUT DEVELOPMENT AUTHORITY
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By
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/s/ Karin A. Lawrence
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Karin A. Lawrence
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Authorized Representative
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-9-
Exhibit 4.31
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This bond is one of the Bonds of the issue described in the within mentioned Indenture.
Date of Registration:
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U.S. BANK NATIONAL ASSOCIATION, Trustee
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By:
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/s/ Cauna M. Silva
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Cauna M. Silva, Vice President
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Authorized Signature
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U.S. BANK NATIONAL ASSOCIATION,
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Paying Agent
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By
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/s/ Cauna M. Silva
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Cauna M. Silva, Vice President
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Authorized Signature
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Exhibit 4.31
STATEMENT OF INSURANCE
Financial Guaranty Insurance Company (Financial Guaranty) has issued a policy containing the
following provision with respect to the Bonds, such policy being on file at the principal office of
U.S. Bank National Association, as paying agent (the Paying Agent);
Financial Guaranty hereby unconditionally and irrevocably agrees to pay for disbursement to
the bondholders that portion of the principal or accreted value (if applicable) of and interest on
the Bonds which is then due for payment and which the issuer of the Bonds (the Issuer) shall have
failed to provide. Due for payment means, with respect to principal or accreted value (if
applicable), the stated maturity date thereof, or the date on which the same shall have been duly
called for mandatory sinking fund redemption and the date on which the Bonds shall have been duly
called for mandatory redemption as a result of the interest on the Bonds having been determined to
have become subject to federal income taxation, and does not refer to any earlier date on which the
payment of principal or accreted value (if applicable) of the Bonds is due by reason of call for
redemption (other than mandatory sinking fund redemption or mandatory taxability redemption),
acceleration or other advancement of maturity, and with respect to interest, the stated date for
payment of such interest.
Upon receipt of telephonic or telegraphic notice, subsequently confirmed in writing, or
written notice by registered or certified mail, from a Bondholder or the Paying Agent to Financial
Guaranty that the required payment of principal, accreted value or interest (as applicable) has not
been made by the Issuer to the Paying Agent, Financial Guaranty on the due date of such payment or
within one business day after receipt of notice of such nonpayment, whichever is later, will make a
deposit of funds, in an account with U.S. Bank Trust National Association, or its successor as its
agent (the Fiscal Agent), sufficient to make the portion of such payment not paid by the Issuer.
Upon presentation to the Fiscal Agent of evidence satisfactory to it of the Bondholders right to
receive such payment and any appropriate instruments of assignment required to vest all of such
Bondholders right to such payment in Financial Guaranty, the Fiscal Agent will disburse such
amount to the Bondholder.
As used herein the term Bondholder means the person other than the Issuer or the borrower(s)
of bond proceeds who at the time of nonpayment of a Bond is entitled under the terms of such Bond
to payment thereof.
The policy is non-cancellable for any reason.
FINANCIAL GUARANTY INSURANCE COMPANY
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Exhibit 4.31
[FORM OF ASSIGNMENT]
ASSIGNMENT
For value received the undersigned sells, assigns and transfers this bond to
(Name and Address of Assignee)
Social Security or Other Identifying Number of Assignee
and irrevocably appoints
attorney-in-fact to transfer it on the
books kept for registration of the bond, with full power of substitution.
NOTE: The signature to this assignment must correspond with the name as written on the face of the
bond without alteration or enlargement or other change and must be guaranteed by a Participant in a
Recognized Signature Guaranty Medallion Program.
Dated:
Signature Guaranteed:
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Participant
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in a Recognized
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Signature
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Guaranty Medallion Program
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By:
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Authorized Signature
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[END OF FORM OF BOND]
-12-
Exhibit 4.31
WHEREAS
, all things necessary to make the Bonds, when authenticated by the Trustee and issued
as in this Indenture provided, the valid, binding and legal obligations of the Authority according
to the import thereof, and to constitute this Indenture a valid pledge of revenues to the payment
of the principal or Redemption Price, if any, of and interest on the Bonds and all other amounts
due in connection therewith and a valid assignment of the rights of the Authority (except as stated
below) under the Agreement and the Note have been done and performed, and the creation, execution
and delivery of this Indenture and the creation, execution and issuance of the Bonds subject to the
terms hereof, have in all respects been duly authorized;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS:
GRANTING CLAUSES
That the Authority in consideration of the premises and the acceptance by the Trustee of the
trusts hereby created and of the purchase and acceptance of the Bonds by the holders and owners
thereof, and of the sum of One Dollar, lawful money of the United States of America, to it duly
paid by the Trustee at or before the execution and delivery of these presents, and for other good
and valuable consideration, the receipt of which is hereby acknowledged, and in order to secure the
payment of the principal of, Redemption Price, if any, and interest on the Bonds according to their
tenor and effect and all other amounts due in connection therewith and the performance and
observance by the Authority of all the covenants expressed or implied herein and in the Bonds, does
hereby grant, bargain, sell, convey, pledge and assign unto, and grant a security interest in and
to the Trustee, and unto its respective successors in trust, and to their respective assigns,
forever, for the securing of the performance of the obligations of the Authority hereinafter set
forth, the following:
I.
The Agreement and the Note (except to the extent to which any such document provides for the
indemnification or the payment of expenses of the Authority, rights of the Authority to inspect the
Projects, receive notices and grant approvals), including all extensions and renewals of the term
thereof, if any, together with all right, title and interest of the Authority therein, including,
but without limiting the generality of the foregoing, the present and continuing right to claim,
collect and receive any of the moneys, income, revenues, issues, profits and other amounts payable
or receivable thereunder, to bring actions and proceedings thereunder or for the enforcement
thereof, and to do any and all things which the Authority is or may become entitled to do under the
Agreement and the Note, but reserving, however, to the Authority rights of the Authority under
Sections 6.4, 6.6, 7.2(A)(2) and 7.3 of the Agreement upon the conditions therein set forth;
II.
All Funds and Accounts (except the Rebate Fund) and moneys therein; and
III.
All moneys and securities from time to time held by the Trustee or the Paying Agent under the
terms of this Indenture (except moneys and securities in the Rebate Fund) and any and all other
real or personal property of every name and nature concurrently herewith or from time to time
hereafter by delivery or by writing of any nature conveyed, mortgaged, pledged, assigned or
transferred as and for additional security hereunder by the Authority or by anyone in its behalf,
or with its written consent, to
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Exhibit 4.31
the Trustee or the Paying Agent, which are hereby authorized to receive any and all such
property at any and all times and to hold and apply the same subject to the terms hereof;
TO HAVE AND TO HOLD
all and singular the trust estate, whether now owned or hereafter
acquired, unto the Trustee and its respective successors and assigns in trust forever to its and
their own proper use and behoof but:
IN TRUST NEVERTHELESS
, upon the terms and trusts herein set forth for the equal and
proportionate benefit, security and protection of all present and future holders and owners of the
Bonds from time to time issued and to be issued under and secured by this Indenture without
privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the
other Bonds;
PROVIDED, HOWEVER
, that if the Authority, its successors or assigns, shall well and truly pay,
or cause to be paid, the principal of, Redemption Price, if any, and interest on, the Bonds due or
to become due thereon, and all other amounts due thereunder, at the times and in the manner
mentioned in the Bonds according to their tenor, and shall cause the payments to be made on the
Bonds as required under Article VII hereof, or shall provide, as permitted hereby, for the payment
thereof by depositing with the Trustee the entire amount due or to become due thereon, and shall
well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of
this Indenture to be kept, performed and observed by it, and shall pay or cause to be paid to the
Trustee all sums of money due or to become due to it in accordance with the terms and provisions of
the Agreement, the Note and this Indenture, then upon the final payment thereof this Indenture and
the rights hereby granted shall cease, determine and be void; otherwise this Indenture to be and
remain in full force and effect.
THIS INDENTURE OF TRUST FURTHER WITNESSETH
, and it is expressly declared, that all Bonds
issued and secured hereunder are to be issued, authenticated and delivered and all of the property,
rights and interests, including, without limitation the loan payments and other amounts hereby
assigned and pledged are to be dealt with and disposed of under, upon and subject to the terms,
conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter
expressed, and the Authority has agreed and covenanted, and does hereby agree and covenant with the
Trustee and with the respective holders and owners of the Bonds as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1.
Definitions
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As used in this Indenture:
Account or Accounts shall mean the Account or Accounts established pursuant to Article V
herein below.
Act means the State Commerce Act, constituting Connecticut General Statutes, Sections 32-la
through 32-23zz, as amended.
Agreement means the Loan Agreement of even date herewith between the Authority and the
Borrower, and any amendments and supplements thereto.
Authority means the Connecticut Development Authority, a body corporate and politic
constituting a public instrumentality and political subdivision of the State of Connecticut duly
organized and existing under the laws of the State, and any body, board, authority, agency or other
political subdivision or instrumentality of the State which shall hereafter succeed to the powers,
duties and functions thereof.
-14-
Exhibit 4.31
Authorized Investments means any of the following:
A.
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Direct obligations of the United States of America (including obligations
issued or held in book-entry form on the books of the Department of the Treasury, and
Certificates of Accrual on Treasury Securities (CATS) and Treasury Investment Growth
Receipts (TIGRS) or obligations the principal of and interest on which are
unconditionally guaranteed by the United States of America.
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B.
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Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed
by any of the following federal agencies and provided such obligations are backed by
the full faith and credit of the United States of America (stripped securities are only
permitted if they have been stripped by the agency itself):
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1.
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U.S. Export-Import Bank
(Eximbank)
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Direct obligations or fully guaranteed certificates of beneficial ownership
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2.
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Farmers Home Administration
(FmHA)
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Certificates of Beneficial Ownership
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3.
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Federal Financing Bank
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4.
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Federal Housing Administration Debentures
(FHA)
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5.
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General Services Administration
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Participation Certificates
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6.
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Government National Mortgage Association
(GNMA or
Ginnie Mae)
GNMA guaranteed mortgage-backed bonds
GNMA guaranteed pass-through obligations
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7.
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U.S. Maritime Administration
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Guaranteed Title XI financing
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8.
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U.S. Department of Housing and Urban Development
(HUD)
Project Notes
Local Authority Bonds
New Communities Debentures U.S. government guaranteed
debentures
U.S. Public Housing Notes and Bonds U.S. government guaranteed
public housing notes and bonds
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C.
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Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed
by any of the following federal agencies which are
not
backed by the full faith
and credit of the United States of America (stripped securities are only permitted if
they have been stripped by the agency itself):
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1.
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Federal Home Loan Bank System
Senior debt obligations
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2.
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Federal Home Loan Mortgage Corporation
(FHLMC or
Freddie Mac)
Participation Certificate
Senior debt obligations
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-15-
Exhibit 4.31
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3.
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Federal National Mortgage Association
(FNMA or Fannie
Mae)
Mortgage-backed securities and senior debt obligations
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4.
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Student Loan Marketing Association
(SLMA or Sallie Mae)
Senior debt obligations
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5.
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Resolution Funding Corp.
(REFCORP) obligations
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6.
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Farm Credit System
Consolidated systemwide bonds and notes
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D.
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Money market funds registered under the Federal Investment Company Act of 1940,
whose shares are registered under the Federal Securities Act of 1933, and having a
rating by S&P of AAAm-G; AAA-m; or AA-m and if rated by Moodys rated Aaa, Aa1 or Aa2.
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E.
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Certificates of deposit secured at all times by collateral described in (A)
and/or (B) above. Such certificates must be issued by commercial banks, savings and
loan associations or mutual savings banks. The collateral must be held by a third
party and the bondholders must have a perfected first security interest in the
collateral.
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F.
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Certificates of deposit, savings accounts, deposit accounts or money market
deposits which are fully insured by the Federal Deposit Insurance Corporation (FDIC),
including the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund
(SAIF).
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G.
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Investment Agreements, including Guaranteed Investment Contracts, Forward
Purchase Agreements and Reserve Fund Put Agreements acceptable to the Bond Insurer.
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H.
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Commercial paper rated, at the time of purchase, Prime 1 by Moodys and
A-1 or better by S&P.
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I.
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Bonds or notes issued by any state or municipality which are rated by Moodys
and S&P in one of the two highest rating categories assigned by such rating agencies.
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J.
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Federal funds or bankers acceptances with a maximum term of one year of any
bank which has an unsecured, uninsured and unguaranteed obligation rating of Prime
1 or A3 or better by Moodys and A-1 or A or better by S&P.
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K.
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Repurchase Agreements (Repos) for 30 days or less must follow the following
criteria. Repos which exceed 30 days must be acceptable to the Bond Insurer.
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Repos provide for the transfer of securities from a dealer bank or securities firm
(seller/borrower) to a municipal entity (or borrower in a conduit financing
undertaken by such municipal entity) (buyer/lender), and the transfer of cash from a
municipal entity (or borrower in a conduit financing undertaken by such municipal
entity) to the dealer bank or securities firm with an agreement that the dealer bank
or securities firm will repay the cash plus a yield to the municipal entity (or
borrower in a conduit financing undertaken by such municipal entity) in exchange for
the securities at a specified date.
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1.
|
|
Repos must be between the municipal entity (or borrower in a
conduit financing undertaken by such municipal entity) and a dealer bank or
securities firm.
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-16-
Exhibit 4.31
|
a.
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Primary dealers on the Federal Reserve
reporting dealer list which are rated A or better by S&P and A2 or
better by Moodys, or
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b.
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Banks rated A or better by S&P and A2 or
better by Moodys.
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2.
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The written repurchase agreement for a Repo must include the
following:
|
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a.
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Securities which are acceptable for transfer
are:
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(1)
|
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Direct obligations of the United
States of America referred to in Section A above, or
|
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(2)
|
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Obligations of federal agencies
referred to in Section B above, or
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(3)
|
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Obligations of FNMA and FHLMC
|
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b.
|
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The term of the Repos may be up to 30 days.
|
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c.
|
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The collateral for the Repos must be delivered
to the municipal entity (or borrower in a conduit financing undertaken
by such municipal entity), trustee (if trustee is not supplying the
collateral) or third party acting as agent for the trustee is (if the
trustee is supplying the collateral) before/simultaneous with payment
(perfection by possession of certificated securities).
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d.
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Valuation of Collateral.
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(1)
|
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the securities must be valued
weekly, marked-to-market at current market price
plus
accrued interest.
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(2)
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The value of collateral for the
Repos must be equal to 104% of the amount of cash transferred by
the municipal entity (or borrower in a conduit financing
undertaken by such municipal entity) to the dealer bank or
security firm under the repo plus accrued interest. If the
value of securities held as collateral slips below 104% of the
value of the cash transferred by the municipal entity, then
additional cash and/or acceptable securities must be
transferred. If, however, the securities used as collateral are
FNMA or FHLMC, then the value of collateral must equal 105%.
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(3)
|
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A legal opinion which must be
delivered to the municipal entity (or borrower in a conduit
financing undertaken by such municipal entity) that states that
the Repo meets guidelines under state law for legal investment
of public funds.
|
Authorized Representative means, in the case of the Authority, the Chairman or Vice
Chairman, the President, the Executive Vice President, Deputy Director or any Senior Vice President
or any Vice President thereof and, in the case of the Borrower, the Chairman, the President and
Chief Executive Officer, the Vice President-Chief Financial Officer and Treasurer, and any Vice
President, Assistant Treasurer or Secretary thereof and, when used with reference to the
performance of any act, the discharge of any duty or the execution of any certificate or other
document, any officer, employee or
-17-
Exhibit 4.31
other person authorized to perform such act, discharge such duty or execute such certificate
or other document.
Beneficial Owner shall have the meaning specified in Section 2.3(F) hereof. If any person
claims to the Trustee to be a Beneficial Owner, for purposes of Sections 2.4(C), such person shall
prove such claim to the satisfaction of the Trustee with such documentation and signature
guaranties as the Trustee may request and shall be responsible for and pay any costs associated
with such claim.
Bonds means the $5,000,000 Water Facilities Revenue Bonds (The Crystal Water Company of
Danielson Project 2005A Series) authorized and issued pursuant to Section 2.3 hereof.
Bond Counsel means Winston & Strawn LLP or such other nationally recognized bond counsel
selected by the Authority and reasonably satisfactory to the Borrower and Trustee.
Bondholder, holder or owner or words of similar import when used with reference to
Bonds, shall unless otherwise specified, mean any person who shall be the registered owner of any
Outstanding Bond.
Bond Insurance Policy means the municipal bond new issue insurance policy issued by the Bond
Insurer that guarantees payment of principal of and interest on the Bonds.
Bond Insurer means Financial Guaranty Insurance Company, a New York stock insurance company,
or any successor thereto.
Borrower means (i) The Crystal Water Company of Danielson, a corporation organized and
existing under the laws of the State of Connecticut, and its successors and assigns and (ii) any
surviving, resulting or transferee corporation as provided in Section 6.1 of the Agreement.
Business Day means any day (i) that is not a Saturday or Sunday, (ii) that is a day on which
banks located in Hartford, Connecticut and New York, New York are not required or authorized to
remain closed, (iii) that is a day on which banking institutions in the cities in which the
principal offices of the Trustee and the Paying Agent are located and are not required or
authorized to remain closed and (iv) that is a day on which the New York Stock Exchange, Inc. is
not closed.
Cede & Co. means the nominee for The Depository Trust Company (DTC) who shall act as
securities depository for the Bonds.
Code means the Internal Revenue Code of 1986, as amended and regulations promulgated
thereunder.
Completion Date means the date of completion of the Project as specified and established in
accordance with Article IV of the Agreement.
Computation Period means each period from the date of issuance through the date on which a
determination of the Rebatable Arbitrage is made or required to be made pursuant to Section 8.3 of
the Tax Regulatory Agreement.
Debt Service Fund means the special trust fund so designated, established pursuant to
Section 5.1 hereof.
Default means any event or condition which will, with the lapse of time, or the giving of
notice, or both, become an Event of Default.
-18-
Exhibit 4.31
DTC or The Depository Trust Company shall mean the limited-purpose trust company organized
under the laws of the State of New York which shall act as securities depository for the Bonds, and
any successor thereto.
Depository means DTC or any other depository holding the Bonds for purpose of a book-entry
system.
Determination of Taxability means with respect to the Bonds, (1) a ruling by the Internal
Revenue Service, (2) the receipt by the owner of any of the Bonds from the Internal Revenue Service
of a notice of assessment and demand for payment (provided the Borrower has been afforded the
opportunity to participate at its own expense in all appeals and proceedings to which such owner of
any Bonds is a party relating to such assessment and demand for payment) and the expiration of the
appeal period provided therein if no appeal is taken or, if an appeal is taken by such owner of any
Bonds as provided in Section 6.5 of the Agreement within the applicable appeal period which has the
effect of staying the demand for payment, a final unappealable decision by a court of competent
jurisdiction, or (3) the admission in writing by the Borrower, in any case to the effect that the
interest on the Bonds is includable in the gross income for federal income tax purposes (other than
for purposes of alternative minimum tax or foreign branch profits tax) of an owner or former owner
thereof, other than for a period during which such owner or former owner is or was a substantial
user of the Project financed by such Bonds or a related person as such terms are defined in the
Code. For purposes of this definition only, the term owner means the Beneficial Owner of the Bonds
so long as the Book-Entry Only System is in effect.
Disclosure Agreement means the agreement by and between the Borrower and U.S. Bank National
Association, as dissemination agent, dated the date of the initial delivery of the Bonds and
providing for the provision of certain information subsequent to the issuance of the Bonds.
Event of Bankruptcy means the filing of a petition in bankruptcy or the commencement of a
proceeding under the United States Bankruptcy Code or any other applicable law concerning
insolvency, reorganization or bankruptcy by or against the Authority, the Borrower, or any
guarantor of the Bonds, as debtor.
Event of Default has the meaning given such term in Section 8.1 hereof.
Federal Securities means any direct and general obligations of, or any obligations whose
full and timely payment is unconditionally guaranteed by, the United States of America.
Financing Documents means (1), when used with respect to the Borrower, means the Agreement,
the Tax Regulatory Agreement, the Note, the Disclosure Agreement and the general certificate of the
Borrower delivered in connection with the issuance of the Bonds, and (2) when used with respect to
the Authority, means any of the foregoing documents and agreements to which the Authority is a
direct party. The Financing Documents do not include any documents or agreements to which the
Borrower is not a direct party, including the Bonds or the Indenture.
Fitch means Fitch Inc., a corporation organized and existing under the laws of the State of
Delaware, its successors and their assigns, and if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating agency, Fitch shall be
deemed to refer to any other nationally recognized securities rating agency designated by the
Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the
prior written consent or approval of the Bond Insurer.
Fund or Funds shall mean the Fund or Funds established pursuant to Article V herein below.
-19-
Exhibit 4.31
Guarantor means Connecticut Water Service, Inc., a Connecticut corporation, and any and each
successor thereto or assignee thereof.
Guaranty means the Guaranty from the Guarantor to the Trustee, dated as of October 1, 2005,
as amended and supplemented from time to time.
Indenture means this Indenture as from time to time amended or supplemented by Supplemental
Indentures in accordance with Article X hereof.
Indirect Participant shall have the meaning set forth in Section 2.3(F) hereof.
Interest Payment Date shall mean each date on which interest is payable on the Bonds as
provided in the form of the Bonds.
Loan Payments means the amounts required to be paid by the Borrower in repayment of the loan
made to the Borrower by the Authority pursuant to the provisions of the Agreement and the Note,
including all amounts realized by the Trustee thereunder in accordance with Article VIII hereof.
Moodys means Moodys Investors Service, Inc., a corporation organized and existing under
the laws of the State of Delaware, its successors and their assigns, and if such corporation shall
be dissolved or liquidated or shall no longer perform the functions of a securities rating agency,
Moodys shall be deemed to refer to any other nationally recognized securities rating agency
designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the
Borrower and with the prior written consent or approval of the Bond Insurer.
Note means the promissory note of the Borrower to the Authority, dated the date of initial
delivery of the Bonds in the form attached as Appendix A to the Agreement, and any amendments or
supplements made in conformity with the Agreement and this Indenture.
Outstanding, when used with reference to a Bond or Bonds, as of any particular date, means
all Bonds which have been authenticated and delivered hereunder, except:
(1)
|
|
Any Bonds cancelled by the Trustee because of payment or redemption prior to
maturity or surrendered to the Trustee for cancellation;
|
|
(2)
|
|
any Bond (or portion of a Bond) paid or redeemed or for the payment or
redemption of which there has been separately set aside and held in the Debt Service
Fund either:
|
|
(a)
|
|
moneys in an amount sufficient to effect payment of the
principal or applicable Redemption Price thereof, together with accrued
interest on such Bond to the payment or redemption date, which payment or
redemption date shall be, specified in irrevocable instructions given to the
Trustee to apply such moneys to such payment on the date so specified; or
|
|
|
(b)
|
|
obligations of the kind described in subsection 12.1(B) hereof
in such principal amounts, of such maturities, bearing such interest and
otherwise having such terms and qualifications as shall be necessary to provide
moneys in an amount sufficient to effect payment of the principal or applicable
Redemption Price of such Bond, together with accrued interest on such Bond to
the payment or redemption date, which payment or redemption date shall be
specified in irrevocable instructions given to the Trustee to apply such
obligations to such payment on the date so specified; or
|
-20-
Exhibit 4.31
|
(c)
|
|
any combination of (a) and (b) above;
|
(3)
|
|
Bonds in exchange for or in lieu of which other Bonds shall have been
authenticated and delivered under Article III hereof; and
|
|
(4)
|
|
any Bond deemed to have been paid as provided in Section 12.1 hereof.
|
Participant means one of the entities that deposits securities, directly or indirectly, in
the Book-Entry Only System.
Paying Agent means any paying agent for the Bonds appointed pursuant to Section 9.10 hereof
(and may include the Trustee), and its successor or successors and any other corporation which may
at any time be substituted in its place in accordance herewith.
Principal and Interest Account means the special trust account of the Debt Service Fund so
designated, established pursuant to Section 5.3 hereof.
Project means the Borrowers interest in the Project Realty and other interests in the real
property, and in all Project Equipment wherever located and whether now owned or hereafter
acquired, acquired or financed in whole or in part with the proceeds of the Bonds, and any
additions and accessions thereto, substitutions therefor and replacements, improvements, extensions
and restorations thereof, described in appendices to the Agreement, as amended from time to time in
accordance with the Agreement.
Project Costs mean all costs and expenses of the Project for which the Trustee is permitted
to make payment as provided in subsection 5.2(B) hereof.
Project Equipment means all personal property, goods, leasehold improvements, machinery,
equipment, furnishings, furniture, fixtures, tools and attachments wherever located and whether now
owned or hereafter acquired, financed in whole or in part with the proceeds of the Bonds, and any
additions and accessions thereto, substitutions therefor and replacements thereof, including
without limitation the Project Equipment described in appendices to the Agreement, as amended from
time to time in accordance herewith.
Project Fund means the special trust fund so designated, established pursuant to Section 5.1
and Section 5.2 hereof.
Project Realty means the realty and other interests in the real property financed in whole
or in part from the proceeds of the Bonds, together with all replacements, improvements,
extensions, substitutions, restorations and additions thereto which are made pursuant hereto
including without limitation the Project Realty described in appendices to the Agreement, as
amended from time to time in accordance herewith.
Redemption Account means the special trust account of the Debt Service Fund so designated,
established pursuant to Section 5.3 hereof.
Redemption Price means, when used with respect to a Bond or a portion thereof, the principal
amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption
thereof pursuant to this Indenture.
Renewal Fund means the special trust fund so designated, established pursuant to Section 5.1
hereof.
-21-
Exhibit 4.31
Representation Letter has the meaning given such term in Section 2.3(F) hereof.
Revenues means (a) the Loan Payments, (b) all amounts paid to the Trustee with respect to
the principal of, redemption premium, if any, or interest on, the Bonds (1) by the Borrower as
required under the Agreement, and (2) upon deposit in the Debt Service Fund from the proceeds of
the Bonds and (c) investment income with respect to any moneys held by the Trustee in the Project
Fund, the Debt Service Fund and the Renewal Fund. The term Revenues does not include any moneys
or investments or investment income in the Rebate Fund.
S&P means Standard & Poors Ratings Services, a division of McGraw Hill, Inc., a corporation
organized and existing under the laws of the State of New York, its successors and their assigns,
and, if such corporation or division shall be dissolved, eliminated, reorganized, or liquidated or
shall no longer perform the functions of a securities rating agency, S&P shall be deemed to refer
to any other nationally recognized securities rating agency designated by the Authority, at the
direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written
consent or approval of the Bond Insurer.
State means the State of Connecticut.
Supplemental Indenture means any indenture supplemental hereto or amendatory hereof, adopted
by the Authority in accordance with Article X hereof.
Tax Incidence Date means the date as of which interest on the Bonds becomes or became
includable in the gross income of the recipient thereof (other than the Borrower or another
substantial user or related person) for federal income tax purposes for any cause, as determined by
a Determination of Taxability.
Tax Regulatory Agreement means the Tax Regulatory Agreement, dated as of the date of initial
issuance and delivery of the Bonds, among the Authority, the Borrower and the Trustee, and any
amendments and supplements thereto.
Term, when used with reference to the Agreement, means the term of the Agreement determined
as provided in Article III thereof.
Trustee means U.S. Bank National Association, and its successor or successors hereafter
appointed in the manner provided in this Indenture.
Section 1.2.
Interpretation
.
(A) In this Indenture:
(1) Any capitalized word or term used but not defined herein shall have the
meaning ascribed to such word or term in the Agreement or the Tax Regulatory
Agreement, as the case may be.
(2) The terms hereby, hereof, hereto, herein, hereunder and any
similar terms, as used in this Indenture, refer to this Indenture, and the term
hereafter means after, and the term heretofore means before, the date of
execution of this Indenture.
(3) Words of the masculine gender mean and include correlative words of the
feminine and neuter genders and words importing the singular number mean and include
the plural number and vice versa.
-22-
Exhibit 4.31
(4) Words importing persons include firms, associations, partnerships
(including limited partnerships), limited liability companies, trusts, corporations
and other legal entities, including public bodies, as well as natural persons.
(5) Any headings preceding the texts of the several Articles and Sections of
this Indenture, and any table of contents appended to copies hereof, shall be solely
for convenience of reference and shall not constitute a part of this Indenture, nor
shall they affect its meaning, construction or effect.
(6) All approvals, consents and acceptances required to be given or made by any
person or party hereunder shall be at the sole discretion of the party whose
approval, consent or acceptance is required.
(7) This Indenture shall be governed by and construed in accordance with the
applicable laws of the State.
(B) Whenever the Authority is named or referred to, it shall be deemed to include its
successors and assigns whether so expressed or not. All of the covenants, stipulations,
obligations, and agreements by or on behalf of, and other provisions for the benefit of, the
Authority contained in this Indenture shall bind and inure to the benefit of such successors and
assigns and shall bind and inure to the benefit of any officer, board, commission, authority,
agency or instrumentality to whom or to which there shall be transferred by or in accordance with
law any right, power or duty of the Authority, or of its successors or assigns, the possession of
which is necessary or appropriate in order to comply with any such covenants, stipulations,
obligations, agreements or other provisions hereof.
(C) If any one or more of the covenants or agreements provided herein on the part of the
Authority, the Trustee or any Paying Agent to be performed should be contrary to law, then such
covenant or covenants or agreement or agreements, shall be deemed separable from the remaining
covenants and agreements hereof, and shall in no way affect the validity of the other provisions of
this Indenture or of the Bonds.
(D) All approvals, consents and actions of the Trustee under this Indenture, the Bonds and the
Financing Documents may be given or withheld or taken or not taken in accordance with the direction
of the owners of not less than 51% of the principal amount of the Outstanding Bonds or of the Bond
Insurer as provided herein.
(E) If the Paying Agent shall be removed and the duties and obligations of such Paying Agent
discharged pursuant to Section 9.10 hereof, then each and every such duty and obligation to be
performed by such Paying Agent set forth herein and in the Financing Documents shall be performed
to the same extent and in the same manner by the Trustee, and each and every reference herein and
in the Financing Documents to the Paying Agent shall refer to and shall be deemed to refer to the
Trustee unless a successor Paying Agent shall have been appointed.
(F) For purposes hereof the Trustee shall not be deemed to have knowledge or actual knowledge
of any fact or the occurrence of any event unless and until an officer of the Trustees corporate
trust administration department has written notice thereof.
(G) In the event of any solicitation of consents from and voting by owners of the Bonds, the
Trustee shall establish a record date for such purposes and give DTC notice of such record date not
less than fifteen calendar days in advance of such record date to the extent possible.
-23-
Exhibit 4.31
ARTICLE II
AUTHORIZATION, TERMS AND ISSUANCE OF BONDS
Section 2.1.
Authorization for Indenture
.
This Indenture is made and entered into by
virtue of and pursuant to the provisions of the Act. The Authority has ascertained and hereby
determines and declares that the execution and delivery of this Indenture is necessary to carry out
the powers and duties expressly provided by the Act, that each and every act, matter, thing or
course of conduct as to which provision is made herein is necessary or convenient in order to carry
out and effectuate the purposes of the Authority in accordance with the Act and to carry out powers
expressly given thereby, and that each and every covenant or agreement herein contained and made is
necessary, useful or convenient in order to better secure the Bonds and necessary, useful or
convenient to carry out and effectuate its corporate purposes under the Act.
Section 2.2.
Authorization and Obligation of Bonds
.
(A) Bonds of the Authority issued
hereunder, each to be entitled Water Facilities Revenue Bonds (The Crystal Water Company of
Danielson Project 2005A Series), shall be subject to the terms, conditions and limitations
established herein. No Bonds may be authenticated and delivered except in accordance with this
Article.
(B) All Bonds shall be entitled to the benefit of the continuing pledge and lien created by
this Indenture to secure the full and final payment of the principal or Redemption Price, if any,
thereof and the interest thereon and all other amounts due under the Financing Documents. The
Bonds shall be special obligations of the Authority, payable solely out of the revenues or other
receipts, funds or moneys pledged therefor pursuant to this Indenture and from any amounts
otherwise available under this Indenture for the payment of the Bonds. Neither the State nor any
municipality thereof shall be obligated to pay the principal or Redemption Price, if any, of or the
interest on the Bonds and neither the faith and credit nor the taxing power of the State or any
municipality thereof is pledged to pay such principal, Redemption Price or interest. The Bonds
shall never constitute a debt or liability of the State or any municipality thereof or bonds issued
or guaranteed by the State or any municipality thereof within the meaning of any constitutional or
statutory limitation.
Section 2.3.
Issuance and Terms of the Bonds
.
(A) There shall be issued under and
secured by this Indenture a series of Bonds to be designated Water Facilities Revenue Bonds (The
Crystal Water Company of Danielson Project 2005A Series) in the principal amount of $5,000,000.
The Bonds shall be issuable in fully registered form without coupons and shall be dated as provided
in Section 3.1 hereof.
(B) The Bonds shall mature on October 1, 2040 and bear interest at the per annum rate of 5.00%
payable on April 1, 2006 and on each April 1 and October 1 thereafter until maturity or prior
redemption.
(C) Interest on the Bonds shall be computed on the basis of a 360-day year consisting of
twelve (12) 30-day months.
(D) The Bonds shall be numbered from one upward in consecutive numerical order. Bonds issued
in exchange shall be numbered in such manner as the Trustee and the Paying Agent in their
discretion shall determine.
(E) The principal or Redemption Price, if any, of the Bonds as they respectively become due
shall be payable upon presentation and surrender of the Bonds at the corporate trust office of the
Trustee in Hartford, Connecticut, or at the office designated for such payment of any successor
Paying Agent. Payment of each installment of interest on the Bonds shall be made to the registered
owners thereof who
shall appear on the registration books of the Authority maintained by the Trustee at the close
of business on the fifteenth day of the calendar month next preceding such Interest Payment Date,
by check or draft
-24-
Exhibit 4.31
mailed to each such registered owner at his address as it appears on such
registration books. Alternatively, payment shall be made as otherwise agreed in writing by the
Bondholder and the Trustee and, at the written request to the Trustee of and at the expense of any
holder of at least $1,000,000 in Bonds, such payment may be made by wire transfer or other
reasonable method to an account or place designated by such registered owner.
(F) Book-Entry Only System for the Bonds
(1) The Depository Trust Company (DTC), New York, New York shall act as securities
depository for the Bonds. One fully registered bond in the aggregate principal amount of the Bonds
shall be registered in the name of Cede & Co., as nominee for DTC. Notwithstanding any provision
herein to the contrary, the provisions of this Section 2.3(F) and the Representation Letter (as
defined below) shall apply with respect to any Bond registered to Cede & Co. or any other nominee
of DTC, New York, New York, while the Book-Entry Only System (meaning the system of registration
described in paragraph (2) of this Section 2.3(F)) is in effect. DTC is a limited-purpose trust
company organized under the New York Banking Law, a banking organization within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within
the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to
the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that
its participants (Participants) deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants (Direct
Participants) include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is owned by a number of its Direct Participants
and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system is also available to others such
as securities brokers and dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly (Indirect
Participants). The Rules applicable to DTC and its Participants are on file with the Securities
and Exchange Commission.
(2) The Bonds in or to be in the Book-Entry Only System shall be issued in the form of a
separate single authenticated fully registered Bond in substantially the form provided for in this
Indenture. Any legend required to be on the Bonds by DTC may be added by the Trustee or Paying
Agent. On the date of original delivery thereof, the Bonds shall be registered in the registry
books of the Paying Agent in the name of Cede & Co., as nominee of The Depository Trust Company as
agent for the Authority in maintaining the Book-Entry Only System.
WITH RESPECT TO BONDS REGISTERED IN THE REGISTRY BOOKS KEPT BY THE PAYING AGENT IN THE NAME OF
CEDE & CO., AS NOMINEE OF DTC, THE AUTHORITY, THE PAYING AGENT, THE BORROWER AND THE TRUSTEE SHALL
HAVE NO RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANT (WHICH MEANS SECURITIES BROKERS AND
DEALERS, BANKS, TRUST COMPANIES, CLEARING CORPORATIONS AND VARIOUS OTHER ENTITIES, SOME OF WHOM OR
THEIR REPRESENTATIVES OWN DTC) OR TO ANY BENEFICIAL OWNER (WHICH MEANS, WHEN USED WITH REFERENCE TO
THE BOOK-ENTRY ONLY SYSTEM, THE PERSON WHO IS CONSIDERED THE BENEFICIAL OWNER OF THE BONDS PURSUANT
TO THE ARRANGEMENTS FOR BOOK ENTRY DETERMINATION OF OWNERSHIP APPLICABLE TO DTC) WITH RESPECT TO
THE FOLLOWING: (A) THE ACCURACY OF THE RECORDS OF DTC, CEDE & CO. OR ANY PARTICIPANT WITH RESPECT
TO ANY OWNERSHIP INTEREST IN THE BONDS, (B) THE DELIVERY TO OR FROM ANY PARTICIPANT, ANY BENEFICIAL
OWNER OR ANY OTHER
PERSON, OTHER THAN DTC, OF ANY NOTICE WITH RESPECT TO THE OTHER PERSON, OTHER THAN DTC, OF ANY
NOTICE WITH RESPECT TO THE BONDS, INCLUDING ANY
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Exhibit 4.31
NOTICE OF REDEMPTION (WHETHER MANDATORY OR
OPTIONAL), OR (C) THE PAYMENT TO ANY PARTICIPANT, ANY BENEFICIAL OWNER OR ANY OTHER PERSON, OTHER
THAN DTC, OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS.
The Paying Agent shall pay all principal of and premium, if any, and interest on the Bonds
only to or upon the order of DTC, and all such payments shall be valid and effective fully to
satisfy and discharge the Authoritys obligations with respect to the principal of and premium, if
any, and interest on Bonds to the extent of the sum or sums so paid. No person other than DTC
shall be entitled to receive an authenticated Bond evidencing the obligation of the Authority to
make payments of principal and premium, if any, and interest pursuant to this Indenture. Upon
delivery by DTC to the Paying Agent of written notice to the effect that DTC has determined to
substitute a new nominee in place of Cede & Co., the words Cede & Co. in this Indenture shall
refer to such new nominee of DTC.
The Authority, the Borrower, the Trustee and the Paying Agent shall be entitled to treat the
registered owner of a Bond (initially, DTC or its nominee) as the absolute owner thereof for all
purposes of this Indenture and any applicable laws, notwithstanding any notice to the contrary
received by any of them. So long as all Bonds are registered in the name of DTC or its nominee or
any qualified successor, the Borrower and the Paying Agent shall cooperate with DTC or its nominee
or any qualified successor in effecting payment of the principal of, redemption premium, if any,
and interest on the Bonds by arranging for payment in such manner that funds for such payments are
properly identified and are made to DTC when due.
(3) Upon receipt by the Trustee or the Paying Agent of written notice from DTC to the effect
that DTC is unable or unwilling to discharge its responsibilities, the Authority shall issue and
the Paying Agent shall transfer and exchange Bonds as requested by DTC in appropriate amounts and
in authorized denominations, and whenever DTC requests the Authority, the Paying Agent and the
Trustee to do so, the Trustee, the Paying Agent and the Authority will, at the expense of the
Borrower, cooperate with DTC in taking appropriate action after reasonable notice (A) to arrange
for a substitute bond depository willing and able upon reasonable and customary terms to maintain
custody of the Bonds or (B) to make available for transfer and exchange Bonds registered in
whatever name or names and in whatever authorized denominations as DTC shall designate.
(4) In such event, the Borrower shall so notify DTC, the Paying Agent and the Trustee,
whereupon DTC will notify the Participants of the availability through DTC of Bond certificates.
In such event, the Authority shall issue and the Paying Agent shall transfer and exchange Bond
certificates as requested by DTC in appropriate amounts and in authorized denominations. Whenever
DTC requests the Paying Agent to do so, the Paying Agent will cooperate with DTC in taking
appropriate action after reasonable notice to make available for transfer and exchange Bonds
registered in whatever name or names and in whatever authorized denominations as DTC shall
designate.
(5) The Authority may decide to discontinue use of the system of book-entry transfers through
DTC (or a successor securities depository). In that event, Bond certificates will be printed and
delivered.
(6) Notwithstanding any other provisions of this Indenture to the contrary, so long as any
Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to the
principal of, premium, if any, and interest on such Bond and all notices with respect to such Bond
shall be made and given, respectively, to DTC as provided in the Blanket Letter of Representation,
dated March 29, 1995, from the Authority to DTC (the Representation Letter).
-26-
Exhibit 4.31
(7) Notwithstanding any other provisions of this Indenture to the contrary, so long as any of
the Bonds outstanding are held in the Book-Entry Only System, if less than all of such Bonds are to
be redeemed upon any redemption of Bonds hereunder, the particular Bonds or portions of Bonds to be
converted or redeemed shall be selected by DTC in such manner as DTC may determine.
Notwithstanding any provision herein to the contrary, the Trustee and the Paying Agent may
comply with the provisions of the Letter of Representation or similar document required by DTC or
any successor securities depository in order to maintain the Book-Entry Only System for the Bonds.
Section 2.4.
Redemption of Bonds
.
(A)
General Optional Redemption
. At the
option of the Authority, which option shall be exercised upon the giving of written notice by the
Borrower of its intention to prepay amounts due under the Agreement pursuant to subsection 8.1(A)
thereof and the Note, the Bonds shall be subject to redemption prior to maturity from time to time
upon not less than 30 days notice in writing, as a whole or in part on any date on or after
October 1, 2009, at a Redemption Price equal to 100% of the principal amount thereof plus accrued
interest to the date of redemption.
(B)
Extraordinary Optional Redemption
. In addition, at the option of the Authority,
which option shall be exercised upon the giving of written notice by the Borrower of its election
to redeem Bonds following completion of Project pursuant to Section 5.2(F) hereof or its intention
to prepay amounts due under the Agreement pursuant to Section 8.1(B) thereof, the Outstanding Bonds
shall be subject to redemption prior to maturity as a whole on any date at the redemption price of
100% of the principal amount thereof plus accrued interest to the date of redemption, (a) to the
extent excess Bond proceeds are transferred to the Redemption Account from the Project Fund in
accordance with Section 5.2(F) of the Indenture, or (b) if any one or more of the events of
casualty to or condemnation of the Project, change in law, or certain economic events specified in
Section 8.1(B) of the Agreement shall have occurred, as evidenced in each case by the filing with
the Trustee of a certificate of an Authorized Representative of the Borrower.
(C)
Mandatory Taxability Redemption
. In the event of a Determination of Taxability,
the Bonds shall be redeemed in the manner and as provided in this Indenture, at the redemption
price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption
on any day selected by the Borrower, that is not more than 180 days after such Determination of
Taxability. In the case of any redemption pursuant to this subsection, the Authority or the
Borrower or any Bondholder shall deliver to the Trustee a certificate of an Authorized
Representative specifying the event giving rise to such inclusion in the gross income of the
recipient thereof and the dates which are the Tax Incidence Date and the date of the Determination
of Taxability. Such certificate shall be delivered at least ten days before notice of redemption
is required to be given. Redemption under this paragraph shall be in whole unless not less than
forty-five (45) days prior to the redemption date the Borrower delivers to the Trustee an opinion
of Bond Counsel reasonably satisfactory to the Trustee to the effect that a redemption of less than
all of the Bonds will preserve the tax-exempt status of interest on the remaining Bonds outstanding
subsequent to such redemption.
For purposes of this Subsection C only, the owner of a Bond means the Beneficial Owner of said
Bond so long as the Book-Entry Only System shall be in effect.
(D)
Deceased Bondholder Redemption
. For purposes of this paragraph, the owner of said
Bond shall mean the Beneficial Owner of said Bond so long as the Book-Entry Only System shall be in
effect. Notwithstanding the foregoing redemption provisions, the Bonds are subject to redemption
at the request of the estate of, successor in interest to and, in the case of jointly held Bonds,
any surviving joint owner with, any person who, on the date of his or her death, was an owner or
joint owner of such Bonds, in the manner and subject to the conditions set forth in the form of
Bonds contained herein. For purposes
of this redemption provision, a Bond held in tenancy by the entirety, joint tenancy or tenancy
in common
-27-
Exhibit 4.31
will be deemed to be held by a single owner and the death of a tenant by the entirety,
joint tenant or tenant in common will be deemed the death of an owner. The death of a person, who,
during his lifetime, was entitled to substantially all of the beneficial interests of ownership of
a Bond will be deemed the death of an owner, regardless of the owner, if such beneficial interest
can be established to the satisfaction of the Trustee. Such beneficial interest shall be deemed to
exist in typical cases of street name or nominee ownership, ownership under the Uniform Gifts to
Minors Act, community property or other joint ownership arrangements between a husband and wife,
and trust and certain other arrangements where one person has substantially all of the beneficial
ownership interests in the Bond during his lifetime. In the case of Bonds registered in the name
of banks, trust companies or broker/dealers who are members of a national securities exchange or
the National Association of Securities Dealers, Inc. or any securities depository (Qualified
Institutions), the redemption limitations described above apply to each beneficial owner of Bonds
held by any Qualified Institution. Beneficial interests shall include the power to sell, transfer
or otherwise dispose of a Bond and the right to receive the proceeds therefrom, as well as interest
and principal payable with respect thereto. The party requesting redemption pursuant to this
Section 2.4(D) shall pay all fees, costs and expenses of the Trustee in connection with
establishing the beneficial ownership of the Bonds requested to be redeemed, including but not
limited to the obtaining of position listings of DTC, or any successor securities depository, any
Direct Participant or Indirect Participant or any nominees.
(E)
Extraordinary Mandatory Redemption
. In the event that the Borrower shall fail to
comply with the restrictions relating to the restructuring, merger, consolidation and
reorganization of the Borrower set forth in Section 6.1(A) of the Agreement or the sale of assets
by the Borrower set forth in Section 6.1(B) of the Agreement, or if the Connecticut Water Company
shall fail to comply with the restrictions regarding the sale of assets by the Connecticut Water
Company as set forth in Section 6.1(C) of the Agreement, or if the Guarantor shall fail to comply
with the restrictions regarding the sale of assets by the Guarantor or the merger, consolidation,
restructuring or reorganization of the Guarantor set forth in Section 2.4 of the Guaranty, the
Bonds shall be subject to redemption prior to maturity as a whole on any date at the redemption
price equal to 100% of the principal amount thereof plus accrued interest to the date of
redemption.
(F)
Optional Public Purpose Redemption
. If the Borrower fails to perform its
obligations under Section 6.6 of the Agreement, the Bonds shall be subject to redemption prior to
maturity as a whole on any date at the option of the Authority in accordance with Section 7.3 of
the Agreement, at the redemption price equal to 100% of the principal amount thereof plus accrued
interest to the date of redemption.
(G)
Extraordinary Optional Redemption Without Premium to Preserve Tax Exempt Status of the
Bonds
. The Bonds shall be subject to extraordinary optional redemption by the Authority, at
the direction of the Borrower, in whole or in part on any date at a Redemption Price equal to 100%
of the unpaid principal amount thereof, together with accrued interest to the date of redemption,
and without premium, if the Borrower shall have delivered to the Trustee and the Authority an
opinion of Bond Counsel addressed to the Trustee and the Authority substantially to the effect that
(i) a failure so to redeem the Bonds (or the relevant portion thereof) may adversely affect the
exclusion of interest on the Bonds from the gross income of the holders pursuant to Section 103 of
the Code, and (ii) redemption of Bonds in the amount set forth in such opinion (but in no smaller
amount than that set forth in such opinion) would permit the continuance of any exclusion so
afforded under Section 103 of the Code.
(H) Upon any redemption of Bonds there shall also be due and payable, concurrently with the
payment of the Redemption Price, interest accrued on the Bonds and all other amounts then due under
the Financing Documents.
-28-
Exhibit 4.31
(I) Redemption of Bonds permitted or required by this Article II shall be made as follows, and
the Trustee shall give the notice of redemption referred to in Section 6.3 hereof in respect of
each such redemption:
(1) Redemption shall be made pursuant to the general optional redemption provisions of
Section 2.4(A) in such principal amounts as the Borrower shall request in a written notice
to the Trustee in accordance with Section 8.2 of the Agreement.
(2) Redemption shall be made pursuant to the extraordinary optional redemption
provisions of Section 2.4(B) at such date as the Borrower shall request in a written notice
to the Authority and Trustee in accordance with Section 5.2(F) hereof or Section 8.2 of the
Agreement, as the case may be, to which shall be attached the certificates referred to in
Section 5.2(F) hereof and Section 8.1(B) thereof.
(3) Redemption shall be made pursuant to the mandatory taxability redemption provisions
of Section 2.4(C) at the earliest possible date following receipt of the certificate
prescribed in Section 2.4(C) hereof and of the payments made by the Borrower prescribed in
Section 6.5 of the Agreement, without the necessity of any instructions or further act of
the Authority or the Borrower.
(4) Redemption shall be made pursuant to the provisions of Section 2.4(D) in accordance
with said Section and with Article VI of this Indenture.
(5) Redemption shall be made pursuant to the provisions of Section 2.4(E) on such date
as the Borrower shall request in a written notice to the Bond Insurer, the Authority and the
Trustee.
(6) Redemption shall be made pursuant to the provisions of Section 2.4(F) in accordance
with Section 7.3 of the Agreement.
(7) Redemption shall be made pursuant to the provisions of Section 2.4(G) at the
earliest possible date following the delivery to the Trustee and the Authority of the
opinion of Bond Counsel described in Section 2.4(G) hereof, without the necessity of any
instructions or further act of the Authority or the Borrower.
Section 2.5.
Execution and Authentication of Bonds
.
(A) After their authorization as
provided in this Article, Bonds may be executed by or on behalf of the Authority and delivered to
the Trustee or the Paying Agent for authentication. Each Bond shall be executed in the name of the
Authority by the manual or facsimile signature of any one or more Authorized Representatives of the
Authority.
(B) In case any officer who shall have signed any of the Bonds shall cease to be such officer
before the Bonds so signed shall have been authenticated and delivered by the Trustee or the Paying
Agent, such Bonds may nevertheless be authenticated and delivered as herein provided as if the
person who so signed such Bonds had not ceased to be such officer. Any Bond may be signed on
behalf of the Authority by any person who, on the date of such act, shall hold the proper office,
notwithstanding that at the date of such Bond such person may not have held such office.
(C) The Bonds shall each bear thereon a certificate of authentication, in the form set forth
in the recitals to this Indenture, executed manually by the Trustee or the Paying Agent. Only such
Bonds as shall bear thereon such certificate of authentication shall be entitled to any right or
benefit under this Indenture and no Bond shall be valid or obligatory for any purpose until such
certificate of authentication
shall have been duly executed by the Trustee or the Paying Agent. Such certificate of the
Trustee or the
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Exhibit 4.31
Paying Agent upon any Bond executed on behalf of the Authority shall be conclusive
evidence that the Bond so authenticated has been duly authenticated and delivered under this
Indenture and that the holder thereof is entitled to the benefits hereof.
Section 2.6.
Delivery of Bonds
.
The Bonds shall be executed in the form and manner
set forth herein and shall be deposited with the Trustee and thereupon shall be authenticated by
the Trustee or the Paying Agent. Upon payment to the Trustee of the proceeds of sale thereof, such
Bonds shall be delivered by the Trustee or the Paying Agent to or upon the order of the purchasers
thereof, but only upon receipt by the Trustee of:
(1) A certified copy of the Authoritys resolution authorizing the issuance of the
Bonds and, the execution and delivery of this Indenture and the Financing Documents;
(2) Original executed counterparts of the Guaranty and Financing Documents other than
the Note, and the originally executed Note;
(3) A request and authorization to the Trustee or the Paying Agent on behalf of the
Authority to authenticate and deliver the Bonds to the purchasers therein identified upon
payment to the Trustee, for the account of the Authority, of a sum specified in such request
and authorization, plus any accrued interest on the Bonds to the date of such delivery. The
proceeds of such payment shall be paid over to the Trustee and deposited in the Project Fund
and Debt Service Fund pursuant to Article IV hereof; and
(4) A written opinion by Bond Counsel to the effect that the issuance of such Bonds has
been duly authorized and that all conditions precedent to the delivery thereof set forth in
this Indenture have been fulfilled.
Section 2.7.
No Additional Bonds
.
No Additional Bonds on a parity with the Bonds may
be issued under this Indenture.
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Exhibit 4.31
ARTICLE III
GENERAL TERMS AND PROVISIONS OF BONDS
Section 3.1.
Date of Bonds
.
The Bonds shall be dated and bear interest from their
date of delivery, except in the case of Bonds delivered in any exchange or transfer hereunder on or
subsequent to the first Interest Payment Date of the Bond for which it is exchanged or transferred,
which shall bear interest from the Interest Payment Date next preceding the date of such delivery,
unless, as shown by the records of the Trustee, interest on the Bond surrendered in exchange for
such Bond shall be in default, in which case such Bond shall bear interest from the date to which
interest has been paid in full on the Bond so surrendered.
Section 3.2.
Form and Denominations
.
Bonds shall be issued in fully registered form,
without coupons, in denominations of $5,000 or any multiple thereof. Subject to the provisions of
Section 3.3 hereof, the Bonds shall be in substantially the form set forth in the recitals to this
Indenture, with such variations, omissions and insertions as are permitted or required by this
Indenture.
Section 3.3.
Legends
.
Each Bond shall contain on the face thereof a statement to the
effect that neither the State nor any municipality thereof shall be obligated to pay the principal
of the Bond or interest thereon and neither the faith and credit nor taxing power of the State or
any municipality thereof is pledged to such payment. The Bonds may, in addition, contain or have
endorsed thereon such provisions, specifications and descriptive words not inconsistent with the
provisions of this Indenture as may be necessary or desirable to comply with custom or otherwise as
may be determined by the Authority prior to the delivery thereof.
Section 3.4.
Medium of Payment
.
The principal or Redemption Price, if any, of and
interest on the Bonds shall be payable in any coin or currency of the United States of America
which, on the respective dates of payment thereof, is legal tender for the payment of public and
private debts. Such payment may be made as provided in Section 2.3 hereof.
Section 3.5.
Bond Details
.
Subject to the provisions hereof, the Bonds shall be
dated, shall mature in such years and such amounts, shall bear interest at such rate or rates per
annum, shall be subject to redemption on such terms and conditions and shall be payable as to
principal or Redemption Price, if any, and interest at such place or places as shall be specified
in this Indenture.
Section 3.6.
Interchangeability, Transfer and Registry
.
(A) Each Bond shall be
transferable only upon compliance with the restrictions on transfer set forth on such Bond and only
upon the books of the Authority, which shall be kept for the purpose at the principal office of the
Paying Agent, by the registered owner thereof in person or by his attorney duly authorized in
writing, upon presentation thereof together with a written instrument of transfer satisfactory to
the Paying Agent duly executed by the registered owner or his duly authorized attorney. Upon the
transfer of any Bond, the Paying Agent shall prepare and issue in the name of the transferee one or
more new Bonds in authorized denominations of the same aggregate principal amount as the
surrendered Bond.
(B) Any Bond, upon surrender thereof at the office of the Paying Agent with a written
instrument of transfer satisfactory to the Paying Agent, duly executed by the registered owner or
his attorney duly authorized in writing, may be exchanged at the office of the Paying Agent for a
new Bond or Bonds in authorized denominations of the same aggregate principal amount without
transfer to a new registered owner. No transfer will be effective unless represented by such
surrender and reissue.
(C) Except as otherwise specifically provided herein, the Authority, the Borrower, the
Trustee, and any Paying Agent may deem and treat the person in whose name any Bond shall be
registered as the absolute owner of such Bond, whether such Bond shall be overdue or not, for the
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Exhibit 4.31
purpose of receiving payment of, or on account of, the principal and Redemption Price, if any, of
and interest on such Bond and for all other purposes, and all payments made to any such registered
owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon
such Bond to the extent of the sum or sums so paid, and neither the Authority, the Borrower, the
Trustee nor any Paying Agent, nor any agent of the foregoing, shall be affected by any notice to
the contrary.
(D) The Paying Agent shall not be required to exchange or transfer (a) any Bond during the
fifteen (15) day period preceding any Interest Payment Date or the date fixed for selection of
Bonds for redemption, or (b) any Bonds selected, called or being called for redemption in whole or
in part except, in the case of any Bond to be redeemed in part, the portion thereof not so to be
redeemed.
Section 3.7.
Bonds Mutilated, Destroyed, Stolen or Lost
.
In case any Bond shall
become mutilated or be destroyed, stolen or lost, the Authority shall execute and thereupon the
Trustee or the Paying Agent shall authenticate and deliver, a new Bond of the same principal amount
as the Bond so mutilated, destroyed, stolen or lost, in exchange and substitution for such
mutilated Bond, upon surrender and cancellation of such mutilated Bond or in lieu of and
substitution for the Bond destroyed, stolen or lost, upon filing with the Trustee of evidence
satisfactory to the Authority, the Trustee and the Paying Agent that such Bond has been destroyed,
stolen or lost and proof of ownership thereof, and upon furnishing the Authority, the Trustee and
the Paying Agent with indemnity satisfactory to them and complying with such other reasonable
requirements as the Authority and the Trustee and the Paying Agent may prescribe and paying such
expenses as the Authority, the Trustee and the Paying Agent may incur. All Bonds so surrendered to
the Trustee shall be cancelled by it. Any such new Bonds issued pursuant to this Section in
substitution for Bonds alleged to be destroyed, stolen or lost shall constitute original additional
contractual obligations on the part of the Authority, whether or not the Bonds so alleged to be
destroyed, stolen or lost be at any time enforceable by anyone, and shall be equally secured by and
entitled to equal and proportionate benefits with all other Bonds issued hereunder in any moneys or
securities held by the Authority, the Trustee or the Paying Agent for the benefit of the owners of
the Bonds.
Section 3.8.
Cancellation and Destruction of Bonds
.
All Bonds paid or redeemed in
full, either at or before maturity, shall be delivered to the Paying Agent when such payment or
redemption is made, and such Bonds together with all Bonds purchased by the Paying Agent, together
with all Bonds surrendered in any exchange or transfers, shall thereupon be promptly cancelled.
All Bonds acquired and owned by the Borrower and delivered to the Paying Agent for cancellation
shall be deemed paid and shall be promptly cancelled. Bonds so cancelled shall be cremated or
otherwise destroyed by the Paying Agent, who shall execute a certificate of cremation or
destruction in duplicate under signature of one of its authorized officers describing the Bonds so
cremated or otherwise destroyed, and one executed certificate shall be filed with the Authority and
the other executed certificate shall be retained by the Paying Agent. The Paying Agent shall
provide written notice to Moodys, if the Bonds are then rated by Moodys and to S&P, if the Bonds
are then rated by S&P, of the final payment or redemption of any of the Bonds, either at or before
maturity, upon cancellation of any such Bonds.
Section 3.9.
Requirements With Respect To Transfers
.
In all cases in which the
privilege of transferring Bonds is exercised, the Authority shall execute and the Trustee or the
Paying Agent shall authenticate and deliver Bonds in accordance with the provisions of this
Indenture. All Bonds surrendered in any such transfer shall forthwith be cancelled by the Trustee
or the Paying Agent. For every such transfer of Bonds, the Authority, the Trustee or the Paying
Agent may, as a condition precedent to the privilege of making such
transfer, make a charge sufficient to reimburse it for any tax, fee or other governmental
charge required to be paid with respect to such transfer and may charge a sum sufficient to pay the
cost of preparing and delivering each new Bond issued upon such transfer, which sum or sums shall
be paid by the person requesting such transfer.
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Exhibit 4.31
Section 3.10.
Registrar
.
The Trustee shall also be Registrar for the Bonds, and shall
maintain a register showing the names of all registered owners of Bonds, Bond numbers and amounts,
and other information appropriate to the discharge of its duties hereunder. The Trustee shall make
available to the Borrower for its inspection during normal business hours the registration books
for the Bonds, as may be requested by the Borrower in connection with any purchase or tender offer
by it with respect to the Bonds.
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Exhibit 4.31
ARTICLE IV
APPLICATION OF BOND PROCEEDS AND OTHER AMOUNTS
Section 4.1.
Accrued Interest
.
Simultaneously with the delivery of any Bonds by the
Trustee, the amount received as accrued interest thereon, if any, shall be deposited in the
Principal and Interest Account of the Debt Service Fund.
Section 4.2.
Bond Proceeds
.
The proceeds of sale and delivery of any Bonds, together
with any premium received on account of the sale thereof (but excluding any accrued interest on the
Bonds), shall, simultaneously with the delivery thereof by the Trustee, be deposited as follows:
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(A)
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$4,900,000.00 will be deposited in the Project Account of the
Project Fund; and
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(B)
|
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$100,000.00 will be deposited in the Costs of Issuance Account
of the Project Fund.
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Section 4.3.
Borrower Contribution
.
A contribution of the Borrower in the amount of
$242,110.45 (which shall be applied to the payment of certain costs and expenses incurred in
connection with the issuance, execution and sale of the Bonds for which the Borrower is
responsible, including compensation and expenses of the Trustee, bond insurance premium, legal,
accounting and consulting expenses and fees, costs of printing and engraving, underwriting expenses
and recording and filing fees) shall simultaneously with the delivery of the Bonds be deposited by
the Trustee in the Costs of Issuance Account of the Project Fund. Notwithstanding anything to the
contrary contained in this Indenture, such contribution shall not be subject to the lien of this
Indenture and any portion of such contribution not disbursed for the payment of costs and expenses
incurred in connection with the issuance, execution and sale of the Bonds within sixty (60) days of
the date of issuance of the Bonds (including investment earnings, if any attributable thereto)
shall be returned to the Borrower.
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Exhibit 4.31
ARTICLE V
CUSTODY AND INVESTMENT OF FUNDS
Section 5.1.
Creation of Funds
. (A) The Authority hereby establishes and creates the
following special trust Funds and Accounts within such Funds:
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(a)
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Project Account
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(b)
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Costs of Issuance Account
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(a)
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Principal and Interest Account
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(b)
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Redemption Account
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(3)
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Rebate Fund
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(4)
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Renewal Fund
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(B) The Rebate Fund shall be held by the Trustee free and clear of any lien, charge or pledge
created by this Indenture. All of the Funds and Accounts created hereunder shall be held by the
Trustee, including one or more depositories in trust for the Trustee. All moneys and investments
deposited with the Trustee or any Paying Agent shall be held in trust and applied only in
accordance with this Indenture and shall be trust funds for the purposes of this Indenture.
(C) The Trustee, in its sole discretion, may establish accounts and subaccounts within the
Funds established pursuant to Section 5.1(A) for its internal administrative or accounting purposes
in order to facilitate the performance of its duties and obligations hereunder.
Section 5.2.
Project Fund
. (A) The Trustee shall establish two separate accounts
within the Project Fund to be respectively designated Project Account and Costs of Issuance
Account. There shall be deposited in the various Accounts of the Project Fund any and all amounts
required to be deposited therein pursuant to Sections 4.2 and 4.3 hereof or otherwise required to
be deposited therein pursuant to the Agreement or this Indenture.
(B) The Trustee shall apply the amounts in the various Accounts of the Project Fund, at the
direction of the Borrower, to pay the costs of the Project and the costs of issuance of the Bonds
including, but not limited to:
(1) The costs of title insurance, surveys, legal fees and recording and other
closing expenses;
(2) Obligations incurred for labor and materials;
(3) All costs of contract bonds and of insurance of all kinds that may be required
or necessary during the course of construction of the Project;
(4) All costs of engineering services, including the costs of test borings, surveys,
estimates, plans and specifications and preliminary investigation therefor and for
supervising construction, as well as for the performance of all other duties
required by or
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Exhibit 4.31
consequent upon the proper construction of, and alterations, additions and
improvements to, the Project;
(5) All expenses incurred in connection with the issuance, execution and sale of the
Bonds, including compensation and expenses of the Trustee, the Authoritys issuance
fee, Bond Counsel fees, and expenses, underwriting discount, legal, accounting and
consulting expenses and fees, costs of printing and engraving, and recording and
filing fees;
(6) All costs which the Borrower shall be required to pay, under the terms of any
contract or contracts, for the acquisition, construction, installation or equipping
of the Project, including any amounts required to reimburse the Borrower for
advances or payments made for any of the above items or for any other costs incurred
and for work done which are properly chargeable to the Project;
(7) Interest due and payable on the Bonds from the date of issuance to the
Completion Date of the Project;
(8) Any other costs and expenses relating to the Project.
(C) The Trustee is hereby authorized and directed to issue its checks or to effect wire
transfers for each disbursement from the various Accounts of the Project Fund (excepting any fees
payable to the Trustee as to which no further authority is required) upon a requisition submitted
to the Trustee and signed by an Authorized Representative of the Borrower in substantially the form
attached hereto as Appendix A. Such requisition shall state with respect to each payment to be
made: (1) the Account within the Project Fund from which such disbursement is to be made, (2) the
requisition number, (3) the name and address of the person, firm or corporation to whom payment is
due, or to whom a reimbursable advance, if any, has been made, (4) the amount to be paid, (5) that
each obligation mentioned therein has been properly incurred within the provisions of the
Agreement, is a proper charge against the Project Fund, is unpaid or unreimbursed, and has not been
the basis of any previous withdrawal, (6) that the requisition and the use of proceeds set forth
therein are consistent in all material respects with the Tax Regulatory Agreement with respect to
the Bonds, and (7) unless the Trustee has received the certificate described in subsection 5.2(F)
hereof, 95% or more of the amount requisitioned is to be applied to costs (a) paid or incurred
after the date which is sixty (60) days prior to the adoption of the Authoritys inducement
resolution for the Project, (b) for the acquisition, construction or reconstruction of land or
property of a character subject to the allowance for depreciation provided in Section 167 of the
Internal Revenue Code of 1986, as amended, and (c) which are chargeable to the capital account of
the Project or would be so chargeable either with an election by the Borrower or but for the
election of the Borrower to deduct the amount of the item.
Notwithstanding anything to the contrary contained herein, any portion of the contribution of
the Borrower made pursuant to Section 4.3 hereof remaining on deposit in the Costs of Issuance
Account of the Project Fund sixty (60) days following the date of issuance of the Bonds (including
investment earnings, if any, attributable thereto) shall be returned to the Borrower.
(D) In making any such payment from the various Accounts of the Project Fund, the Trustee may
rely on such requisitions and proof delivered to it and the Trustee shall be relieved of all
liability with respect to making such payments in accordance with the foregoing.
(E) The Trustee shall hold in the Project Fund an amount equal to 5% of the net proceeds of
the Bonds ($250,000.00) until the Trustee has received, with respect to the Bonds, a certified
statement of Project Costs together with the Borrowers certificate to the effect that Project
Costs in an amount equal
-36-
Exhibit 4.31
to 95% or more of the proceeds of the Bonds (as defined in the Agreement) have been paid or
incurred for the acquisition, construction or reconstruction of land or depreciable property under
the Internal Revenue Code of 1986, as amended, and have been or could be capitalized by the
Borrower for Federal income tax purposes. Such documents may be delivered upon issuance of the
Bonds and may anticipate the use of the final amounts to be requisitioned permitted by subsections
5.2(E) and (F) hereof. Upon the receipt of such documents, the Trustee shall apply the balance in
the Project Fund to or at the direction of the Borrower in accordance with such documents. The
Borrower shall notify the Trustee of any inability to deliver such documents, and in that event the
Trustee shall upon the receipt of such notification transfer the balance in the Project Fund to the
Redemption Account of the Debt Service Fund.
(F) The completion of the Project shall be evidenced by the filing with the Authority and the
Trustee of a certificate of an Authorized Representative of the Borrower in accordance with Article
IV of the Agreement, stating the date of such completion and the amount, if any, required in its
opinion for the payment of any remaining part of the costs of the Project. Upon the filing of such
certificate, the balance in the Project Fund in excess of the amount, if any, stated in such
certificate, shall be applied by the Trustee in accordance with the written order of any Authorized
Representative of the Borrower in one or more of the following ways:
(1) Deposited in the Redemption Account of the Debt Service Fund; or
(2) Used in any other manner which preserves the exemption of interest on the Bonds
from federal income taxation, provided there is delivered to the Trustee an opinion
of Bond Counsel to the effect that the use of such moneys is permitted by law and
will not adversely affect the exemption from federal income taxation of interest on
the Bonds. The Trustee may rely on such opinion in any disbursement of funds
pursuant to this subsection 5.2(F)(2).
Thereafter, upon payment of all the costs and expenses incident to the Project, any balance in the
Project Fund shall be deposited in the Redemption Account of the Debt Service Fund.
(G) Promptly following June 30 in each year, until there is no balance remaining in the
Project Fund, the Trustee shall deliver a report to the Authority setting forth the amounts
remaining in the Project Fund as of such date and a schedule of the securities in which such
amounts are invested.
(H) In the event the Borrower shall be required to or shall elect to cause the Bonds to be
redeemed in full pursuant to Article VIII of the Agreement, the balance in the Project Fund which
is not required to pay incurred Project Costs shall be deposited in the Redemption Account of the
Debt Service Fund.
Section 5.3.
Debt Service Fund
. (A) The Trustee shall establish two separate accounts
within the Debt Service Fund to be respectively designated Principal and Interest Account and
Redemption Account.
(B) The Trustee shall promptly deposit the following receipts in the Debt Service Fund:
(1) Any amount required pursuant to Section 4.1 hereof to be deposited from the proceeds of
the Bonds, which shall be credited to the Principal and Interest Account.
(2) All amounts received by the Trustee pursuant to Section 3.1 of the Agreement or Section
2.1 of the Guaranty, which shall be credited to the Principal and Interest Account, in the
manner set forth in this Indenture and the Agreement, and applied together with amounts
available in the Principal and Interest Account, to pay (i) the interest due on the Outstanding
Bonds on the Interest
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Exhibit 4.31
Payment Date next succeeding such payment and (ii) the principal, if any, of the
Outstanding Bonds due (otherwise than by call for redemption) on such Interest Payment Date.
(3) Excess or remaining amounts in the Project Fund required to be deposited in the
Redemption Account of the Debt Service Fund pursuant to subsections 5.2(E) and 5.2(F) hereof,
which shall be credited to the Redemption Account.
(4) Any other amounts required to be paid to the Debt Service Fund for payment of principal
and interest due on the Bonds, which shall be credited to the Principal and Interest Account.
(5) Prepayments under the Agreement received by the Trustee pursuant to Article VIII
thereof, which shall be credited to the Redemption Account.
(6) All other receipts when and if required by the Financing Documents or any subsequent
agreement or by this Indenture to be paid into the Debt Service Fund, which shall be credited to
the Principal and Interest Account or the Redemption Account, as appropriate.
(7) Any amounts constituting income or interest earned and gains realized in excess of
losses suffered by any Fund and Account hereunder, excluding the Project Fund, which shall be
credited to the Principal and Interest Account in accordance with Section 5.6(B) hereof. Income
or interest earned and gains realized in excess of losses suffered by the Project Fund shall be
retained in the Project Fund prior to the Completion Date of the Project, and transferred to the
Principal and Interest Account of the Debt Service Fund subsequent to the Completion Date.
(C) There shall be paid from the Principal and Interest Account to the respective Paying
Agents on each Interest Payment Date for the Bonds the amounts required for the payment of the
principal and interest due on the Bonds on such date. Such amounts shall be applied by the Paying
Agents to the payment of principal and interest on the Bonds when due. All other amounts payable
on the Bonds from the Principal and Interest Account shall be paid to the respective Paying Agents
upon receipt, and shall immediately be paid by such Paying Agents to the Bondholders.
(D) Amounts in the Redemption Account shall be applied, as promptly as practicable, by the
Trustee at the direction of the Borrower to the purchase of Bonds at prices not exceeding the
optional Redemption Price thereof applicable on the next redemption date plus accrued interest and
all other amounts then due under the Financing Documents in connection with such redemption. Such
redemption date shall be the earliest date upon which Bonds are subject to redemption from such
amounts. Any amount in the Redemption Account not so applied to the purchase of Bonds by
forty-five days prior to the next date on which the Bonds are so redeemable shall be applied to the
redemption of Bonds on such redemption date; provided that if such amount aggregates less than
$10,000, it need not be then applied to such redemption. Amounts in the Redemption Account to be
applied to the redemption of Bonds shall be paid to the respective Paying Agents on or before the
redemption date and applied by them on such redemption date to the payment of the Redemption Price
of the Bonds being redeemed plus interest on such Bonds accrued to the redemption date and all
other amounts then due under the Financing Documents in connection with such redemption.
(E) Any amounts remaining in the Debt Service Fund after payment in full of the Bonds, the
fees, charges and expenses of the Trustee and the Paying Agents and all other amounts required to
be paid hereunder or under the Financing Documents shall be paid to the Borrower upon the
expiration or sooner termination of the Term of the Agreement.
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Exhibit 4.31
Section 5.4.
Rebate Fund
. (A) There shall be credited to the Rebate Fund all amounts
required to be credited thereto from interest earnings or net gain on disposition of investments
pursuant to this Article V.
(B) On the first Business Day following each Computation Period (as defined in the Tax
Regulatory Agreement), upon direction in writing from the Borrower, pursuant to the Tax Regulatory
Agreement, the Trustee shall withdraw from the Funds and Accounts and deposit to the Rebate Fund an
amount such that the amount held in the Rebate Fund after such deposit is equal to the Rebatable
Arbitrage (as defined in the Tax Regulatory Agreement) calculated as of the last day of the
Computation Period; provided, however, that the Trustee may transfer monies from any Fund or
Account only to the extent such transfer does not result in an Event of Default hereunder. In the
event of any deficiency, the balance required shall be provided by the Borrower pursuant to Section
8.3 of the Tax Regulatory Agreement. Computations of the amounts on deposit in each Fund and
Account and of the Rebatable Arbitrage shall be furnished to the Trustee by the Borrower in
accordance with Section 8.3 of the Tax Regulatory Agreement. Any amounts on deposit in the Rebate
Fund in excess of the Rebatable Arbitrage shall be deposited to the Debt Service Fund.
(C) The Trustee, upon receipt of written instructions from an Authorized Representative of the
Borrower in accordance with Section 8.3 of the Tax Regulatory Agreement, shall pay to the United
States out of amounts in the Rebate Fund (1) not later than 30 days after the end of each five-year
period following the date of issuance of the Bonds, an amount such that, together with amounts
previously paid, the total amount paid to the United States is equal to 90% of the Rebatable
Arbitrage calculated as of the end of the most recent Computation Period, and (2) not later than 30
days after the date on which all of the Bonds have been paid or redeemed, 100% of the Rebatable
Arbitrage as of the end of the final Computation Period.
(D) In transferring any funds to the Rebate Fund and making any payments to the United States
from the Rebate Fund, the Trustee may rely on the written directions and computations provided it
by the Borrower and the Trustee shall be relieved of all liability with respect to the making of
such transfers and payments in accordance with the foregoing.
Section 5.5.
Renewal Fund
. (A) There shall be paid into the Renewal Fund all amounts
to be deposited therein pursuant to Section 5.3 of the Agreement, and such amounts shall be applied
as provided therein.
(B) Any surplus remaining in the Renewal Fund after the completion of any payments for the
replacement, repair, reconstruction, alteration, relocation or restoration, of the Project with
respect to any event of damage, destruction or condemnation shall be transferred to the Redemption
Account of the Debt Service Fund, but the excess, if any, of such amount as will be sufficient to
discharge and satisfy this Indenture and pay all Bonds as provided in Section 12.1 hereof shall be
paid over to the Borrower free and clear of any pledge or lien hereunder.
Section 5.6.
Investment of Funds and Accounts
. (A) Except as otherwise provided in
this Indenture, amounts in the Funds and Accounts held hereunder shall, if and to the extent then
permitted by law, be invested in Authorized Investments. Investments authorized under this Section
shall be made by the Trustee at the written request of an Authorized Representative of the
Borrower, and may be made by the Trustee through its own bond department. Any investment hereunder
shall be made in accordance with the Tax Regulatory Agreement, including particularly the terms and
conditions of Article VII thereof relating to arbitrage. Such investments shall mature in such
amounts and at such times as may be necessary to provide funds when needed to make payments from
such Funds and Accounts, and any such investments shall, subject to the provisions
hereof, at all times be deemed to be a part of the Fund and Account, from which the investment
was made.
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Exhibit 4.31
(B) Except as provided in the following sentence, the income or interest earned and gains
realized in excess of losses suffered by any Fund and Account held hereunder from the date of
delivery of the Bonds shall be credited to the Principal and Interest Account of the Debt Service
Fund (except income or interest earned and gains realized in excess of losses suffered by the
Rebate Fund, which shall be credited to the Rebate Fund). Income or interest earned and gains
realized in excess of losses suffered by the Project Fund shall be retained therein prior to the
Completion Date of the Project and transferred to the Principal and Interest Account of the Debt
Service Fund subsequent to the Completion Date.
(C) Prior to each Interest Payment Date on the Bonds, the Trustee shall notify the Borrower of
the amount of any net investment income or gain received and collected subsequent to the preceding
interest payment date and the amount then available in the Debt Service Fund.
Section 5.7.
Non-presentment of Bonds
. In the event any Bond shall not be presented
for payment when the remaining principal thereof becomes due, either at final maturity, or at the
date fixed for redemption thereof, or otherwise, and funds sufficient to pay any such Bond shall
have been made available to the Trustee for the benefit of the holder or holders thereof, all
liability of the Authority to the holder thereof for the payment of such Bond shall forthwith
cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to
hold such funds, without liability for interest thereon, for the benefit of the holder of such
Bond, who shall thereafter be restricted exclusively to such funds, for any claim of whatever
nature on his part under this Indenture or on, or with respect to, such Bond. Funds remaining with
the Trustee as above unclaimed for six years shall be paid to the Borrower.
ARTICLE VI
REDEMPTION OF BONDS
Section 6.1.
Privilege of Redemption and Redemption Price
.
Bonds or portions thereof
subject to redemption prior to maturity shall be redeemable, upon mailed notice as provided in this
Article, at the times, at the Redemption Prices and upon such terms, in addition to and consistent
with the terms contained in this Article, as shall be specified in Section 2.4 hereof and in such
Bonds.
Section 6.2.
Selection of Bonds to be Redeemed
.
So long as the Bonds are in
book-entry form, when Bonds are called, allocation shall be made by DTC or any successor securities
depository and not by the Authority or the Trustee. In the event of redemption of less than all
the Outstanding Bonds of like maturity, the Trustee shall select by lot, using such method of
selection as it shall deem proper in its discretion, the principal amount of such Bonds to be
redeemed. For purposes of this Section, Bonds or portions of Bonds which have theretofore been
selected by lot for redemption shall not be deemed Outstanding. In the event that the book-entry
system is discontinued, if less than all of the Bonds are to be redeemed at the option of the
Borrower, the Bonds or portion thereof to be redeemed shall be selected by the Borrower.
Section 6.3.
Notice of Redemption
.
Except with respect to deceased Bondholder
redemptions as described in Section 2.4(D) hereof (the notice provisions relating to which are set
forth in the Form of Bond contained in the recitals to this Indenture), when redemption is required
or permitted by this Indenture, upon written notification of the Trustee by the Borrower of such
redemption not less than seven (7) days prior to the date on which the Trustee must give notice to
Holders as provided in this Section or the Letter of Representation among the Authority, the
Trustee and DTC (if the book entry system is still in effect), the Trustee shall give notice of
such redemption in the name of the Authority,
specifying the subsection of Section 2.4 hereof under which the redemption is to be made, the
numbers and amounts of the Bonds or portions thereof to be redeemed, the redemption date and the
place or places where amounts due upon such redemption will be payable. Such notice shall further
state that on such date there shall become due and payable upon each Bond or portion thereof to be
redeemed the
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Exhibit 4.31
Redemption Price thereof together with interest accrued to the redemption date and all
other amounts then due under the Financing Documents, and that from and after such date interest
thereon shall cease to accrue and be payable. Alternatively, at the option of the Authority, such
notice may state that it is subject to the receipt of the redemption moneys by the Trustee on or
before the date fixed for redemption and which notice shall be of no effect unless such moneys are
so received on or before such date. Notice of redemption shall be given by the Trustee in the name
and on behalf of the Authority by mailing a copy of each such notice to the registered owner of
each Bond by first-class mail postage prepaid, addressed to him at his last known address as it
appears upon the bond register, no more than forty-five (45) nor less than thirty (30) days prior
to the date fixed for redemption. Such notice shall be effective when mailed and any failure to
receive such notice shall not affect the validity of the proceedings for redemption. In the event
of a postal strike, the Trustee shall give notice by other appropriate means selected by the
Trustee in its discretion.
Section 6.4.
Payment of Redeemed Bonds
.
(A) Notice having been given in the manner
provided in Section 6.3 hereof, the Bonds or portions thereof so called for redemption shall become
due and payable on the redemption dates so designated at the Redemption Price, plus interest
accrued to the redemption date and all other amounts then due under the Financing Documents. If,
on the redemption date, monies for the redemption of all the Bonds or portions thereof to be
redeemed, together with interest to the redemption date, and all other amounts then due under the
Financing Documents, shall be held by the Paying Agent so as to be available therefor on such date
and if notice of redemption shall have been given as aforesaid, then, from and after the redemption
date, interest on the Bonds or portions thereof so called for redemption shall cease to accrue and
become payable. If such monies shall not be so available on the redemption date, such Bonds or
portions thereof shall continue to bear interest until paid at the same rate as they would have
borne had they not been called for redemption.
(B) Payment of the Redemption Price together with interest and all other amounts then due to
the Bondholders under the Financing Documents shall be made to or upon the order of the registered
owner, only upon presentation of the Bond for cancellation or notation as provided in Section 6.6
hereof.
Section 6.5.
Notice to Authority and Borrower of Deceased Bondholder Redemption
.
Not
later than ten Business Days after receipt of a request for redemption pursuant to Section 2.4(D)
hereof by the Trustee, the Trustee shall give notice to the Authority and the Borrower specifying
the amount of Bonds requested to be redeemed, the amount of Bonds eligible for redemption, the date
on which such Bonds eligible for redemption shall be redeemed and the amount of funds required to
be deposited in the Redemption Account.
Section 6.6.
Cancellation of Redeemed Bonds
.
(A) All Bonds redeemed in full under the
provisions of this Article shall forthwith be cancelled and destroyed by the Trustee and a
certificate of destruction furnished to the Authority, and no Bonds shall be executed,
authenticated, issued or delivered in exchange or substitution therefor or for or in respect of any
paid portion of a fully registered Bond. In the event that a portion only of a Bond shall be so
called for redemption, then, at the option of the registered owner thereof if such owner is a
securities depository, such Bond may be either submitted to the Trustee for notation thereon of the
payment of the portion of the principal thereof called for redemption or surrendered for
redemption. If so surrendered, one or more new Bonds shall be issued for the unredeemed portion
hereof.
(B) If there shall be called for redemption less than all of a Bond, the Authority shall
execute and the Trustee shall authenticate and deliver, upon the surrender of such Bond, without
charge to the owner thereof, for the unredeemed balance of the principal amount of the Bond so
surrendered, Bonds in any of the authorized denominations.
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Exhibit 4.31
ARTICLE VII
PARTICULAR COVENANTS
Section 7.1.
No Pecuniary Liability on Authority or Officers
.
(A) No covenant or
agreement contained in this Indenture or in the Bonds or any obligations herein or therein imposed
upon the Authority or the breach thereof, shall constitute or give rise to a charge upon its
general credit, or impose upon the Authority a pecuniary liability except as set forth herein. In
making the agreements, provisions and covenants set forth in this Indenture, the Authority has not
obligated itself except with respect to the application of the Revenues as hereinabove provided.
(B) All covenants, stipulations, promises, agreements and obligations of the Authority
contained herein shall be deemed to be covenants, stipulations, promises, agreements and
obligations of the Authority and not of any member, officer, agent or employee thereof in his
individual capacity. No recourse shall be had for the payment of the principal or Redemption
Price, if any, of or interest on the Bonds, for the performance of any obligation hereunder, or for
any claim based thereon or hereunder against any such member, officer, agent or employee or against
any natural person executing the Bonds. No such member, officer, agent, employee or natural person
is or shall become personally liable for any such payment, performance or other claim, and in no
event shall any monetary or deficiency judgment be sought or secured against any such member,
officer, agent, employee or other natural person.
Section 7.2.
Payment of Principal, Redemption Price, if any, and Interest
.
The
Authority covenants that it will promptly pay, solely from the Revenues or other monies derived in
connection with the Project or otherwise available hereunder, the principal or Redemption Price, if
any, of and interest on every Bond issued under this Indenture, together with all other amounts due
under the Financing Documents, at the place, on the dates and in the manner provided herein and in
the Bonds according to the true intent and meaning thereof.
Section 7.3.
Performance of Covenants
.
The Authority covenants that it will
faithfully perform at all times any and all covenants, undertakings, stipulations and provisions
contained in this Indenture, in any and every Bond executed, authenticated and delivered hereunder
and in all of its proceedings pertaining thereto. The Authority covenants that it is duly
authorized under the Constitution and laws of the State, including particularly and without
limitation the Act, to issue the Bonds authorized hereby and to execute this Indenture, to create,
accept and assign the liens in the property described herein and created hereby, to grant the
security interest herein provided, to assign the Financing Documents and to pledge the revenues and
other amounts hereby pledged in the manner and to the extent herein set forth; that all action on
its part for the issuance of the Bonds and the execution and delivery of this Indenture has been
duly and effectively taken, and that the Bonds in the hands of the holders and owners thereof are
and will be valid and enforceable obligations according to their terms and the terms of this
Indenture, except to the extent that such enforceability may be limited by bankruptcy or insolvency
or other laws affecting creditors rights generally or by general principles of equity.
Section 7.4.
Further Assurances
.
The Authority and the Trustee each covenants that it
will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and
delivered, such indentures supplemental hereto and such further acts, instruments and transfers as
the other may reasonably require for the better assuring, transferring, conveying pledging,
assigning and confirming unto the Trustee all and singular the property and rights assigned hereby
and the amounts pledged hereby to the payment of the principal or Redemption Price, if any, of and
interest on the Bonds and all other amounts due under the Financing Documents.
Section 7.5.
Inspection of Project Books
.
The Authority covenants and agrees that all
books and documents in its possession relating to the Project and the revenues derived from the
Project shall at
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Exhibit 4.31
all times be open to inspection by such accountants or other agencies as the
Trustee may from time to time designate.
Section 7.6.
Rights under Financing Documents
.
The Financing Documents, originals or
duly executed counterparts of which have been filed with the Trustee, set forth the covenants and
obligations of the Authority and the Borrower, including provisions that subsequent to the issuance
of Bonds and prior to their payment in full or provision for payment thereof in accordance with the
provisions hereof, the Financing Documents may not be effectively amended, changed, modified,
altered or terminated without the written consents provided for therein, and reference is hereby
made to the same for a detailed statement of the covenants and obligations of the Borrower
thereunder. Subject to the provisions of Article IX hereof and to the extent explicitly set forth
herein and in the Loan Agreement, the Trustee agrees to enforce all covenants and obligations of
the Borrower under the Financing Documents and it is agreed that the Trustee may and is hereby
granted the right to enforce all rights of the Authority and all obligations of the Borrower under
and pursuant to the Financing Documents. Nothing in this Section shall permit any reduction in the
payments required to be made by the Borrower under or pursuant to the Financing Documents or any
alteration in the terms of payment thereof. All covenants and agreements on the part of the
Authority shall, except as otherwise specifically provided herein, be for the benefit of the
holders from time to time of the Bonds and may be enforced in the manner provided by Article VIII
hereof on behalf of such holders by the Trustee.
Section 7.7.
Creation of Liens, Indebtedness
.
The Authority shall not create or
suffer to be created any lien or charge upon or pledge of the Revenues, except the lien, charge and
pledge created by this Indenture and the Bonds. The Authority shall not incur any indebtedness or
issue any evidence of indebtedness, other than the Bonds herein authorized, secured by a lien on or
pledge of such Revenues.
Section 7.8.
Recording and Filing
.
The Authority covenants that it will cause the
Financing Documents, this Indenture and all supplements thereto and hereto, as well as such other
security agreements, financing statements, and other instruments as may be required from time to
time to be kept, to be recorded and filed in such manner and in such places as may be required by
law in order to fully preserve and protect the security of the holders and owners of the Bonds and
the rights of the Trustee hereunder.
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Exhibit 4.31
ARTICLE VIII
REMEDIES OF BONDHOLDERS
Section 8.1.
Events of Default; Acceleration of Due Dates
.
(A) Each of the following
events is hereby defined as and shall constitute an Event of Default:
(1) Failure to duly and punctually pay (a) the interest or (b) any installment of the
principal or Redemption Price of any Bond, whether at the stated maturity thereof or upon
proceedings for redemption thereof (excluding redemptions for which a conditional notice has
been given in accordance with Section 6.3 of this Indenture in which case the failure to pay
the Redemption Price of any Bonds shall not constitute an Event of Default under this
Section 8.1(1) unless monies are on deposit with the Trustee and available to pay the
Redemption Price on the redemption date). In determining whether an Event of Default shall
have occurred under this Section 8.1(A)(1), no effect shall be given to payments made under
the Bond Insurance Policy.
(2) Failure to duly and punctually pay any amount, other than the amounts specified in
(1) above, due under the Financing Documents and the continuance of such failure for more
than thirty (30) days.
(3) Failure to perform or observe any other of the covenants, agreements or conditions
on the part of the Authority in this Indenture or in the Bonds contained and not otherwise a
default hereunder and the continuance thereof for a period of sixty (60) days after written
notice given by the Trustee, the Bond Insurer or by the owners of not less than 51% of the
principal amount of Bonds then Outstanding.
(4) The occurrence of an Event of Default under any of the Financing Documents (other
than the Disclosure Agreement).
(B) Subject to Sections 6.6(B) and 7.2(C) of the Loan Agreement, upon the happening and
continuance of any Event of Default specified in subsection 8.1(A) hereof (unless the principal of
all the Bonds shall have already become due and payable), the Trustee (a) upon request in writing
to the Authority and the Trustee from the Bond Insurer (provided the Bond Insurer is not in default
under the Bond Insurance Policy) or, if the Bond Insurance Policy is no longer in effect and if
such Event of Default is specified in (1) or (2) above,
shall
, or (b) if the Bond Insurance
Policy is no longer in effect, the Trustee
may
, and upon request in writing from the owners
of not less than 51% in principal amount of the Bonds then Outstanding,
shall
, declare the
principal of all the Bonds then Outstanding, and the interest accrued thereon, to be due and
payable immediately, and upon such declaration the same shall become and be immediately due and
payable, anything in this Indenture or in any of the Bonds contained to the contrary
notwithstanding.
(C) The right of the Trustee or of the owners of not less than 51% in principal amount of the
Outstanding Bonds to make any declaration authorized under subsection 8.1(B) hereof with respect to
any failure under subsection 8.1(A)(1) hereof, however, is subject to the condition that if, at any
time before such declaration, all overdue installments of interest upon the Bonds and the principal
of all Bonds which shall have matured by their terms, together with the reasonable and proper
charges, expenses and liabilities of the Trustee, shall either be paid by or for account of the
Authority or provision satisfactory to the Trustee shall be made for such payment, and all other
events of default cured and waived as provided in Section 8.11 then in every such case any such
default and its consequences shall
ipso
facto
be deemed to be annulled, but no such
annulment shall extend to or affect any subsequent default or impair or exhaust any right or power
consequent thereon.
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Exhibit 4.31
Section 8.2.
Enforcement of Remedies
.
(A) Upon the happening and continuance of any
Event of Default, then and in every case, but subject to the provisions of Section 9.2 hereof and
Sections 6.6(B) and 7.2(C) of the Loan Agreement, the Trustee, with the consent of the Bond
Insurer, may proceed, and upon the written request of the Bond Insurer or the owners of not less
than 51% in the principal amount of the Bonds Outstanding, with the consent of the Bond Insurer,
shall proceed, to protect and enforce its rights and the rights of the Bondholders under the Act,
the Bonds, the Financing Documents, the Guaranty and this Indenture, and under any agreement
executed in connection with the foregoing, forthwith by such suits, actions or special proceedings
in equity or at law, or by proceedings in the office of any board or officer having jurisdiction,
whether for the specific performance of any covenant or agreement contained in this Indenture or
the Financing Documents or in aid of the execution of any power granted therein or in the Act or
for the enforcement of any legal or equitable rights or remedies as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce such rights or to perform any of its
duties under this Indenture;
provided
, that, no such consent of the Bond Insurer shall be
required if the Bond Insurance Policy is no longer in effect or if the Bond Insurer is in default
under the Bond Insurance Policy.
(B) [Reserved]
(C) Subject to the provisions of Section 8.2(E) below, in the enforcement of any right or
remedy under this Indenture or under the Act, the Trustee shall be entitled to sue for, enforce
payment on and receive any or all amounts then or during any default becoming, and any time
remaining, due from the Authority for principal, Redemption Price, interest or otherwise under any
of the provisions of the Financing Documents, this Indenture, the Guaranty or of the Bonds, and
unpaid, and, to the extent permitted by law, with interest on overdue payments at the applicable
rate or rates of interest specified in the Bonds, together with any and all costs and expenses of
collection and of all proceedings under the Financing Documents, this Indenture and under the
Bonds, without prejudice to any other right or remedy of the Trustee or of the Bondholders, and to
recover and enforce judgment or decree against the Authority, but solely as provided in the
Financing Documents, this Indenture, the Guaranty and in the Bonds, for any portion of such amounts
remaining unpaid, with interest, to the extent permitted by law, costs and expenses, and to collect
in any manner provided by law, the moneys adjudged or decreed to be payable.
(D) Regardless of the happening of an Event of Default, the Trustee, if requested in writing
by the owners of not less than 51% in principal amount of the Bonds then Outstanding with the
consent of the Bond Insurer, while the Bond Insurance Policy is in effect and the Bond Insurer is
not in default thereunder, and furnished with security and indemnity to its satisfaction, shall
institute and maintain such suits and proceedings as it may be advised shall be necessary or
expedient to prevent any impairment of the security under this Indenture by any acts which may be
unlawful or in violation of this Indenture or of any resolution authorizing Bonds, and such suits
and proceedings as the Trustee may be advised shall be necessary or expedient to preserve or
protect its interests and the interests of the Bondholders; but no such request shall be otherwise
than in accordance with the provisions of law and of the Indenture or be unduly prejudicial to the
interests of the holders of Bonds not making such request.
(E) Anything in this Indenture to the contrary notwithstanding, but subject to Section 9.2
hereinbelow, upon the occurrence and continuance of an Event of Default as defined herein, the Bond
Insurer, so long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default
thereunder, shall be entitled to control and direct the enforcement of all rights and remedies
granted to the holders of the Bonds or the Trustee for the benefit of the holders of the Bonds
under this Indenture, including, without limitation, (i) the right to accelerate the principal of
the Bonds as described in this Indenture and (ii) the right to annul any declaration of
acceleration, and the Bond Insurer shall also be entitled to approve all waivers of Events of
Default.
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Exhibit 4.31
(F) The Bond Insurers rights under this Article VIII shall be suspended in the event that the
Bond Insurer is in default under the Bond Insurance Policy. The preceding sentence shall not
affect or limit the Bond Insurers rights obtained by virtue of subrogation upon payment of any
amounts due and owing with respect to the Bonds.
Section 8.3.
Application of Revenue and Other Moneys After Default
.
(A) All moneys
received by the Trustee pursuant to any right given or action taken under the provisions of this
Article, after payment of the cost and expenses of the proceedings resulting in the collection of
such moneys and of the fees, expenses, liabilities and advances incurred or made by the Trustee and
any Paying Agent, shall be deposited in the applicable account of the Debt Service Fund and all
moneys so deposited in such Fund and available for payment of the Bonds shall be applied as
follows:
(1) Unless the principal of all of the Bonds shall have become or have been declared
due and payable:
FIRST
To the payment of all amounts due under the Financing Documents, exclusive of
unpaid principal and interest on the Note;
SECOND
To the payment to the persons entitled thereto of all installments of
interest then due on the Bonds, in the order of the maturity of the installments of such
interest and, if the amount available shall not be sufficient to pay in full any particular
installment, then to the payment ratably, according to the amounts due on such installment,
to the persons entitled thereto, without any discrimination or preference; and
THIRD
To the payment to the persons entitled thereto of the unpaid principal or
Redemption Price, if any, of any of the Bonds which shall have become due (other than Bonds
called for redemption for the payment of which moneys are held pursuant to the provisions of
this Indenture), in order of maturity, from the respective dates upon which they become due
and, if the amount available shall not be sufficient to pay in full Bonds due on any
particular date, then to the payment ratably, according to the amount of principal or
Redemption Price due on such date, to the persons entitled thereto without any
discrimination or preference.
(2) If the principal of all the Bonds shall have become or have been declared due and
payable, to the payment of all amounts due under the Financing Documents, then to the
payment of the principal and interest (at the rate or rates expressed thereon) then due and
unpaid upon the Bonds without preference or priority of principal over interest or of
interest over principal, or of any installment of interest over any other installment of
interest, or any Bond over any other Bond, ratably, according to the amounts due
respectively for principal and interest, to the persons entitled thereto without any
discrimination or preference.
(B) Whenever moneys are to be applied pursuant to the provisions of this Section, such moneys
shall be applied at such times, and from time to time, as the Trustee shall determine, having due
regard to the amount of such moneys available for application and the likelihood of additional
moneys becoming available for such application in the future. Whenever the Trustee shall apply
such funds, it shall fix the date upon which such application shall be made. The Trustee shall
give such notice as it may deem appropriate of the deposit with it of any such moneys and of the
fixing of any such date, and shall not be required to make payment to the owner of any Bonds until
such Bonds shall be presented to the Trustee for appropriate endorsement or for cancellation if
fully paid.
(C) Whenever all Bonds and interest thereon and all other amounts due under the Financing
Documents have been paid under the provisions of this Section and all fees, expenses and charges of
the
-46-
Exhibit 4.31
Trustee and Paying Agents and the Bond Insurer have been paid, any balance remaining in the
Debt Service Fund shall be paid to or upon the order of the Borrower.
Section 8.4.
Actions by Trustee
.
All rights of action under this Indenture or under
any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the
production thereof in any trial or other proceedings relating thereto and any such suit or
proceedings instituted by the Trustee shall be brought in its name as Trustee without the necessity
of joining as plaintiffs or defendants any owners of the Bonds, and any recovery of judgment,
subject to the provisions of Section 8.3 hereof, shall be for the benefit of the holders of the
Outstanding Bonds.
Section 8.5.
Majority Bondholders Control Proceedings
.
Subject to Sections 8.2(E) and
13.3 hereof [and Section 7.2(C) of the Loan Agreement], the holders of at least 51% in aggregate
principal amount of Bonds then Outstanding shall have the right, at any time, by an instrument or
instruments in writing executed and delivered to the Trustee, to direct the method and place of
conducting all proceedings to be taken in connection with the enforcement of the terms and
conditions of the Indenture, or for any other proceedings hereunder; but such direction shall not
be otherwise than in accordance with the provisions of law and of this Indenture.
Section 8.6.
Individual Bondholder Action Restricted
.
(A) No owner of the Bonds shall
have any right to institute any suit, action or proceeding at law or in equity for the enforcement
of any provision of this Indenture or the execution of any trust under this Indenture or for any
remedy under this Indenture, unless such owners shall have previously given to the Trustee written
notice of the happening of an Event of Default, as provided in this Article, and the owners of at
least 51% in principal amount of the Bonds then Outstanding shall have filed a written request with
the Trustee, and shall have offered it reasonable opportunity, either to exercise the powers
granted in this Indenture or by the Act or by the laws of the State or to institute such action,
suit or proceeding in its own name, and unless such owners shall have offered to the Trustee
adequate security and indemnity against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee shall have refused to comply with such request for a period of sixty
days after receipt by it of such notice, request and offer of indemnity, it being understood and
intended that no owner of any Bond shall have any right in any manner whatever by his or their
action to affect, disturb or prejudice the pledge created by this Indenture, or to enforce any
right under this Indenture, except in the manner herein provided; and that all proceedings at law
or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in
the manner provided in this Indenture and for the equal benefit of all owners of the Outstanding
Bonds.
(B) Nothing herein or in the Bonds contained shall affect or impair the right of any owner of
the Bonds to payment of the principal or Redemption Price, if any, of and interest on any Bond or
other amounts due under the Financing Documents at and after the maturity thereof, or the
obligation of the Authority to pay the principal or Redemption Price, if applicable, of and
interest on each of the Bonds or other amounts due under the Financing Documents to the respective
owners thereof at the time, place, from the source and in the manner herein and in such Bonds
expressed.
Section 8.7.
Effect of Discontinuance of Proceedings
.
In case any proceeding taken by
the Trustee on account of any Event of Default shall have been dismissed, discontinued or abandoned
for any reason, or shall have been determined adversely, then and in every such case the Authority,
the Trustee, and the owners of the Bonds shall be restored, respectively, to their former positions
and rights hereunder, and all rights, remedies, powers and duties of the Trustee shall continue as
though no such proceedings had been taken.
Section 8.8.
Remedies Not Exclusive
.
No remedy by the terms of this Indenture
conferred upon or reserved to the Trustee or to the owners of the Bonds is intended to be exclusive
of any other remedy,
-47-
Exhibit 4.31
and each and every such remedy shall be cumulative and shall be in addition to
any other remedy given hereunder or now or hereafter existing at law or in equity or by statute.
Section 8.9.
Delay or Omission Upon Default
.
No delay or omission of the Trustee or
of the owners of any Bond to exercise any right or power arising upon any Event of Default shall
impair any right or power or shall be construed to be a waiver of any such default or any
acquiescence therein; and every power and remedy given by this Article to the Trustee and the owner
of any Bond, respectively, may be exercised from time to time and as often as may be deemed
expedient by the Trustee or by the owner of the Bonds.
Section 8.10.
Notice of Default
.
The Trustee shall immediately mail (upon the
Trustees actual knowledge thereof), to each owner of the Bonds and the Bond Insurer, written
notice of an Event of Default under Section 8.1(A)(1) hereof of which it has actual knowledge. The
Trustee shall promptly mail (within thirty (30) days of the Trustees actual knowledge thereof), to
each owner of the Bonds and the Bond Insurer, written notice of the occurrence of any Event of
Default under Sections 8.1(A)(2), 8.1(A)(3) and 8.1(A)(4) hereof of which it has actual knowledge.
Actual knowledge means the actual knowledge of an officer in the Trustees corporate trust
administration department. The Trustee shall not, however, be subject to any liability to any
owner of the Bonds by reason of its failure to mail any notice required by this Section. The
Trustee shall not be required to monitor the compliance by the Authority with the terms of this
Indenture, or the Borrower with the terms of the Agreement, except as aforesaid.
Section 8.11.
Waivers of Default
.
Subject to the provisions of Section 8.2(E) hereof,
the Trustee, with the prior written consent of the Bond Insurer, shall waive any Event of Default
hereunder and its consequences upon the written request of the owners of 51% in aggregate principal
amount of the Bonds then Outstanding; except that there shall not be waived without the consent of
the owners of all the Bonds Outstanding (a) any default in the payment of the principal of and
Redemption Price on any Outstanding Bonds at the date of maturity specified therein or (b) any
default in the payment when due of the interest on any such Bonds unless, prior to such waiver, all
arrears of interest, at the rate borne by the Bonds on overdue installments of interest, to the
extent permitted by law, in respect of which such default shall have occurred or all arrears of
payments of principal due on the Bonds when due, as the case may be, and all expenses of the
Trustee and any Paying Agent in connection with such default shall have been paid or provided for,
and in case of any such waiver, or in case any proceeding taken by the Trustee on account of any
such default shall have been dismissed, discontinued or abandoned or determined adversely, then and
in every such case the Authority, the Trustee and the owners of the Bonds shall be restored to
their former positions and rights hereunder respectively, but no such waiver, dismissal,
discontinuance, abandonment or determination shall extend to any subsequent or other default, or
impair any right consequent thereon.
-48-
Exhibit 4.31
ARTICLE IX
TRUSTEE AND PAYING AGENTS
Section 9.1.
Appointment and Acceptance of Duties
.
(A) U.S. Bank National Association
is hereby appointed as Trustee. The Trustee shall signify its acceptance of the duties and
obligations of the Trustee by executing this Indenture. All provisions of this Article shall be
construed as extending to and including all the rights, duties and obligations imposed upon the
Trustee under the Agreement and the other Financing Documents as fully for all intents and purposes
as if this Article were contained in the Agreement and the other Financing Documents.
(B) The Trustee is hereby appointed as Paying Agent for the Bonds. The Authority may also
from time to time appoint one or more other Paying Agents in the manner and subject to the
conditions set forth in Section 9.10 hereof for the appointment of a successor Paying Agent. Each
Paying Agent shall signify its acceptance of the duties and obligations imposed upon it by this
Indenture by executing and delivering to the Authority and to the Trustee a written acceptance
thereof. The principal offices of the Paying Agents are designated as the respective offices or
agencies of the Authority for the payment of the interest on and principal or Redemption Price of
the Bonds, except that interest on all registered Bonds and the principal and Redemption Price of
all registered Bonds shall be payable at the corporate trust office of the Trustee located in
Hartford, Connecticut.
Section 9.2.
Indemnity
.
The Trustee shall be under no obligation to institute any
suit, or to take any remedial proceeding under this Indenture, or to enter any appearance in or in
any way defend any suit in which it may be made defendant, or to take any steps in the execution of
the trusts hereby created or in the enforcement of any rights and powers hereunder, until it shall
be indemnified and provided with adequate security to its satisfaction against any and all
reasonable costs and expenses, outlays, and counsel fees and other disbursements, and against all
liability not due to its willful misconduct, gross negligence or bad faith.
The Trustee shall be indemnified for and held harmless against any loss, liability or expense
incurred without gross negligence or bad faith on its part arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of any of its powers
or duties hereunder. No provision of this Indenture shall require the Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds
for believing that payment of such funds or adequate indemnity against such risk or liability is
not assured to it.
Section 9.3.
Responsibilities of Trustee
.
(A) The Trustee shall have no
responsibility in respect of the validity or sufficiency of this Indenture or the security provided
hereunder or the due execution hereof by the Authority, or in respect of the title or the value of
the Project, or in respect of the validity of any Bonds authenticated and delivered by the Trustee
in accordance with this Indenture or to see to the recording or filing of the Indenture or any
financing statement (except the filing of continuation statements as provided in Section 9.13
hereof) or any other document or instrument whatsoever. The recitals, statements and
representations contained herein and in the Bonds shall be taken and construed as made by and on
the part of the Authority and not by the Trustee, and the Trustee does not assume any
responsibility for the correctness of the same; except that the Trustee shall be responsible for
its representation contained in its certificate on the Bonds. The obligation hereunder to pay or
reimburse the Trustee for expenses, advances, reimbursements and to indemnify and hold harmless the
Trustee pursuant to Section 9.2 hereof shall constitute additional indebtedness hereunder and shall
survive the satisfaction and discharge of all obligations under this Indenture.
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Exhibit 4.31
(B) The Trustee shall not be liable or responsible because of the failure of the Authority to
perform any act required of it by this Indenture or the Financing Documents or because of the loss
of any monies arising through the insolvency or the act or default or omission of any depositary
other than itself in which such monies shall have been deposited. The Trustee shall not be
responsible for the application of any of the proceeds of the Bonds or any other monies deposited
with it and paid out, invested, withdrawn or transferred in accordance herewith or for any loss
resulting from any such investment. The Trustee shall not be liable in connection with the
performance of its duties hereunder except for its own willful misconduct, gross negligence or bad
faith. The immunities and exemptions from liability of the Trustee shall extend to its directors,
officers, employees and agents.
(C) The Trustee, prior to the occurrence of an Event of Default and subsequent to an Event of
Default that has been cured, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. In case an Event of Default has occurred of which the
Trustee has actual knowledge (as defined in Section 8.10 hereinabove) and which has not been cured
the Trustee, subject to Section 9.2 hereof, shall exercise such of the rights and powers vested in
it hereby and use the same degree of care and skill in their exercise, as a prudent person would
exercise under the circumstances in the conduct of his own affairs; provided, that if in the
opinion of the Trustee such action might involve expense or liability, it shall not be obligated to
take such action (other than the payment of any Bonds when due from funds held under this Indenture
for the payment thereof or the acceleration of any Bonds pursuant to Section 8.1(B) hereof), unless
it is furnished with indemnity and security to its satisfaction therefor.
(D) The Trustee shall in all instances act in good faith in incurring costs, expenses and
legal fees in connection with the transactions contemplated by this Indenture and the Agreement.
(E) The Trustee shall not be liable or responsible for the failure of the Borrower to effect
or maintain insurance on the Project as provided in the Financing Documents nor shall it be
responsible for any loss by reason of want or insufficiency in insurance or by reason of the
failure of any insurer in which the insurance is carried to pay the full amount of any loss against
which it may have insured the Authority, the Borrower, the Trustee or any other person.
Section 9.4.
Compensation
.
The Trustee and Paying Agents shall be entitled to receive
and collect from the Borrower as provided in the Financing Documents payment for reasonable fees
for services rendered hereunder and all advances, counsel fees and expenses and other expenses
reasonably and necessarily made or incurred by the Trustee or Paying Agents in connection
therewith.
Section 9.5.
Evidence on Which Trustee May Act
.
(A) In case at any time it shall be
necessary or desirable for the Trustee to make any investigation concerning any fact preparatory to
taking or not taking any action, or doing or not doing anything, as such Trustee, and in any case
in which this Indenture or the Financing Documents provide for permitting or taking any action, it
may rely upon any certificate required or permitted to be filed with it under the provisions hereof
or of the Financing Documents, and any such certificate shall be evidence of such fact or protect
it in any action that it may or may not take, or in respect of anything it may or may not do, in
good faith, by reason of the supposed existence of such fact.
(B) The Trustee shall be protected and shall incur no liability in acting or proceeding, or in
not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this
Indenture or the Financing Documents, upon any resolution, order, notice, request, consent, waiver,
certificate, statement, affidavit, requisition, bond or other paper or document which it shall in
good faith reasonably believe to be genuine and to have been adopted or signed by the proper board
or person, or to have been prepared and furnished pursuant to any of the provisions of this
Indenture or the Financing Documents, or
upon the written opinion of any attorney (who may be an attorney for the Authority or the
Borrower),
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Exhibit 4.31
engineer, appraiser, or accountant reasonably believed by the Trustee to be qualified in
relation to the subject matter. The Trustee is not required to investigate the qualifications of
any such expert.
(C) Notwithstanding any other provision of this Indenture, in determining whether the rights
of the holders of any of the Bonds will be adversely affected by any action taken pursuant to the
terms and provisions of this Indenture, the Trustee (or any Paying Agent) shall consider the effect
on the holders of the Bonds as if there were no Bond Insurance Policy then in effect.
Section 9.6.
Evidence of Signatures of Owners of the Bonds and Ownership of Bonds
.
(A) Any request, consent, revocation of consent or other instrument which this Indenture may
require or permit to be signed and executed by the owners of the Bonds may be in one or more
instruments of similar tenor, and shall be signed or executed by such owners of the Bonds in person
or by their attorneys appointed in writing. Proof of (i) the execution of any such instrument, or
of any instrument appointing any such attorney, or (ii) the holding by any person of the Bonds
shall be sufficient for any purpose of this Indenture (except as otherwise herein expressly
provided) if made in the following manner, or in any other manner satisfactory to the Trustee,
which may nevertheless in its discretion require further or other proof in cases where it deems the
same desirable:
(1) The fact and date of the execution by any owner of the Bonds or his attorney of
such instruments may be proved by a guarantee of the signature thereon by an officer of a
bank or trust company or by the certificate of any notary public or other officer authorized
to take acknowledgments of deeds, that the person signing such request or other instrument
acknowledged to him the execution thereof, or by an affidavit of a witness of such
execution, duly sworn to before such notary public or other officer. Where such execution
is by an officer of a corporation or a member of an association, a limited liability company
or a partnership, on behalf of such corporation, association, limited liability company or
partnership, such signature guarantee, certificate or affidavit shall be accompanied by
sufficient proof of his authority.
(2) The ownership of registered Bonds and the amount, numbers and other identification,
and date of owning the same shall be proved by the registry books.
(B) Except as otherwise provided in Section 10.3 hereof with respect to revocation of a
consent, any request or consent by the owner of any Bond shall bind all future owners of such Bond
in respect of anything done or suffered to be done by the Authority or the Trustee or any Paying
Agent in accordance therewith.
Section 9.7.
Trustee and any Paying Agent, May Deal in Bonds and With Borrower
.
Any
national banking association, bank or trust company acting as a Trustee, or Paying Agent, and its
directors, officers, employees or agents, may in good faith buy, sell, own, hold and deal in any of
the Bonds and may join in any action which any owner of the Bonds may be entitled to take and may
otherwise deal with the Borrower with like effect as if such association, bank or trust company
were not such Trustee or Paying Agent.
Section 9.8.
Resignation or Removal of Trustee
.
(A) The Trustee may resign and
thereby become discharged from the trusts created under this Indenture by notice in writing to be
given to the Authority, the Borrower and the Bond Insurer (so long as the Bond Insurance Policy is
in effect and the Bond Insurer is not in default thereunder) and by notice mailed, postage prepaid
to the owners of the Bonds not less than sixty (60) days
before such resignation is to take effect, but such resignation shall not take effect until
the appointment of a successor Trustee pursuant to Section 9.9 hereof and such successor Trustee
shall accept such trust.
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Exhibit 4.31
(B) The Trustee may be removed at any time thirty (30) days after an instrument or concurrent
instruments in writing, is filed with the Trustee and signed by either the Bond Insurer or the
owners of not less than a majority in principal amount of the Bonds then Outstanding or their
attorneys-in-fact duly authorized, but such removal shall not take effect until the appointment of
a successor Trustee pursuant to Section 9.9 hereof and such successor Trustee shall accept such
trust. The Trustee shall promptly give notice of such filing to the Authority.
Section 9.9.
Successor Trustee
.
(A) If at any time the Trustee shall resign, or shall
be removed, be dissolved or otherwise become incapable of acting or shall be adjudged a bankrupt or
insolvent, or if a receiver, liquidator or conservator thereof, or of its property, shall be
appointed, or if any public officer shall take charge or control of the Trustee or of its property
or affairs, the position of Trustee shall thereupon become vacant. If the position of Trustee
shall become vacant for any of the foregoing reasons or for any other reason, the Authority shall
appoint a successor Trustee to fill such vacancy. If the Authority fails to act prior to the date
of resignation of any Trustee or within fifteen days after the position of Trustee becomes vacant,
the Trustee may appoint a temporary successor Trustee. The Authority may thereafter appoint a
successor Trustee to succeed such temporary Trustee. Within forty-five (45) days after such
appointment, the successor Trustee shall cause notice of such appointment to be mailed, postage
prepaid, to the Borrower and all owners of the Bonds.
(B) At any time within one year after such vacancy shall have occurred, the owners of a
majority in principal amount of the Bonds then Outstanding, by an instrument or concurrent
instruments in writing, signed by such owners of the Bonds or their attorneys-in-fact thereunto
duly authorized and filed with the Authority, may appoint a successor Trustee, which shall,
immediately and without further act, supersede any Trustee theretofore appointed. If no
appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this
Section, the owner of any Bond then Outstanding or any retiring Trustee may apply to any court of
competent jurisdiction to appoint a successor Trustee. Such court may thereupon, after such
notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee. In
either event, within thirty (30) days after such appointment, the successor Trustee shall cause
notice of such appointment to be marked, postage prepaid, to the Borrower.
(C) Any Trustee appointed under this Section shall be a national banking association or a bank
or trust company duly organized under the laws of the State or under the laws of any state of the
United States authorized to exercise corporate trust powers and shall be acceptable to the Bond
Insurer (so long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default
thereunder). At the time of its appointment, any successor Trustee shall have a capital stock and
surplus aggregating not less than $100,000,000.
(D) Every successor Trustee shall execute, acknowledge and deliver to its predecessor, and
also to the Authority, an instrument in writing accepting such appointment, and thereupon such
successor Trustee, without any further act, deed, or conveyance, shall become fully vested with all
monies, estates, properties, rights, immunities, powers and trusts, and subject to all the duties
and obligations of its predecessor, with like effect as if originally named as such Trustee; but
such predecessor shall, nevertheless, on the written request of its successor or of the Authority,
and upon payment of the compensation, expenses, charges and other disbursements of such predecessor
which are due and payable pursuant to Section 9.4 hereof, execute and deliver an instrument
transferring to such successor Trustee all the estate, properties, rights, immunities, powers and
trusts of such predecessor, except any indemnification rights. Every predecessor Trustee shall
also deliver all property and monies held by it under the Indenture to its successor. Should any
instrument in writing from the Authority be required by any successor Trustee for more fully and
certainly vesting in such Trustee, the estate, properties, rights,
immunities, powers and trusts vested or intended to be vested in the predecessor Trustee any
such instrument in writing shall, on request, be executed, acknowledged and delivered by the
Authority. Any successor Trustee shall promptly notify the Paying Agents of its appointment as
Trustee.
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Exhibit 4.31
(E) Any company into which the Trustee may be merged or converted or with which it may be
consolidated or any company resulting from any merger, conversion or consolidation to which it
shall be a party or any company to which the Trustee may sell or transfer all or substantially all
of its corporate trust business, provided such company shall be a national banking association or a
bank or trust company duly organized under the laws of any state of the United States, shall have a
capital stock and surplus aggregating not less than $100,000,000, and shall be authorized by law to
perform all the duties imposed upon it by the Indenture, shall be the successor to such Trustee,
both in its capacity as Trustee and in its capacity as Paying Agent if the Trustee is serving as
Paying Agent, without the execution or filing of any paper or the performance of any further act.
(F) Any Trustee which becomes incapable of acting as Trustee shall pay over, assign and
deliver to its successor any monies, funds or investments held by it in the manner provided in
Section 9.9(D) and shall render an accounting to the Authority.
Section 9.10.
Appointment and Responsibilities of Paying Agent
.
The initial Paying
Agent shall be U.S. Bank National Association. The Paying Agent shall be entitled to the advice of
counsel (who may be counsel for any party) and shall not be liable for any action taken in good
faith in reliance on such advice. The Paying Agent may rely conclusively on any telephone or
written notice, certificate or other document furnished to it under this Indenture and reasonably
believed by it to be genuine. The Paying Agent shall not be liable for any action taken or omitted
to be taken by it in good faith and reasonably believed by it to be within the discretion or power
conferred upon it, or taken by it pursuant to any direction or instruction by which it is governed
under this Indenture or omitted to be taken by it by reason of the lack of direction or instruction
required for such action, or be responsible for the consequences of any error of judgment
reasonably made by it. When any payment or other action by the Paying Agent is called for by this
Indenture, it may defer such action pending receipt of such evidence, if any, as it may reasonably
require in support thereof. A permissive right or power to act shall not be construed as a
requirement to act. The Paying Agent shall not in any event be liable for the application or
misapplication of funds, or for other acts or defaults, by any person, firm or corporation except
by the Paying Agents respective directors, officers, agents and employees. For the purposes of
this Indenture matters shall not be considered to be known to the Paying Agent unless they are
known to an officer in its corporate trust administration division. The Paying Agent shall not
require indemnification prior to making any payment when due of principal, premium or interest on
any Bond to be made by the Paying Agent to any Bondholder, except and unless such drawing or
payment is prohibited by or violates applicable law or any outstanding or pending court or
governmental order or decree.
Section 9.11.
Resignation or Removal of Paying Agent; Successors
.
(A) Any Paying
Agent may at any time resign and be discharged of the duties and obligations created by the
Indenture by giving at least sixty days written notice to the Authority, the Trustee and the
Borrower. Any successor Paying Agent shall be appointed by the Authority, at the direction of the
Borrower, with the approval of the Trustee, and shall be a bank or trust company duly organized
under the laws of any state of the United States or a national banking association, having a
capital stock and surplus aggregating at least $100,000,000, and willing and able to accept the
office on reasonable and customary terms and authorized by law to perform all the duties imposed
upon it by this Indenture. The Paying Agent may be removed at any time by the Authority at the
direction of the Borrower by a written instrument filed with the Trustee and the Paying Agent. The
Paying Agent may, but need not be, the same person as the Trustee.
(B) If the position of Paying Agent shall become vacant for any reason, or if any bankruptcy,
insolvency or similar proceeding shall be commenced by or against the Paying Agent, the Authority
shall appoint a successor Paying Agent designated by the Borrower to fill the vacancy. A written
acceptance of office shall be filed by the successor Paying Agent. The Trustee shall give notice
of the appointment of a successor Paying Agent in writing to each Bondholder. The Trustee will
promptly certify to the Borrower
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Exhibit 4.31
that it has mailed such notice to all Bondholders, and such
certificate will be conclusive evidence that such notice was given in the manner required hereby.
(C) Any corporation, association, limited liability company partnership or firm which succeeds
to the business of the Paying Agent as a whole or substantially as a whole, whether by sale,
merger, consolidation or otherwise, shall thereby become vested with all the property, rights and
powers of the Paying Agent under this Indenture and shall be subject to all the duties and
obligations of the Paying Agent under this Indenture.
The Paying Agent shall send or cause to be sent notice to Bondholders of a change of address
for the delivery of Bonds or notice or the payment of principal of Bonds.
Section 9.12.
Monies Held for Particular Bonds
.
The amounts held by the Trustee or
Paying Agents for the payment of the interest, principal or Redemption Price due on any date with
respect to particular Bonds, on and after such date and pending such payment, shall be set aside on
its books and held in trust by it for the owners of the Bonds entitled thereto. Such funds shall
be invested in Federal Securities at the direction of the Borrower for the account of the Borrower
or shall otherwise remain uninvested.
Section 9.13.
Continuation Statements
.
The Trustee shall cause all continuation
statements necessary to preserve and protect the security interest of the Trustee in the collateral
pledged by the Authority in the granting clauses hereof to be filed in the applicable State offices
so as to continue the perfected status thereof pursuant to the Uniform Commercial Code of the
State.
Section 9.14.
Obligation to Report Defaults
.
In accordance with the provisions of
Section 8.10 hereof, upon an officer in the Trustees corporate trust administration department
becoming aware of any condition or event which constitutes, or with the giving of notice or the
passage of time would constitute, an Event of Default under the Financing Documents or this
Indenture, the Trustee shall deliver to the Authority a written notice stating the existence
thereof and the action it proposes to take with respect thereto. Becoming aware means the actual
knowledge of an officer in the Trustees corporate trust department.
Section 9.15.
Payments Due on non-Business Day
.
In any case where the date of
maturity of interest on or principal of the Bonds or the date fixed for redemption of any Bonds
shall, in the city of payment, be a day other than a Business Day, then payment of such amount
shall be made as provided in the forms of the Bonds.
Section 9.16.
Appointment of Co-Trustee
.
(A) It is the purpose of this Indenture that
there shall be no violation of any law of any jurisdiction denying or restricting the right of
banking corporations or associations to transact business as trustee in such jurisdiction. It is
recognized that in case of litigation under this Indenture or the Agreement, and in particular in
case of the enforcement of either on default, or in case the Trustee deems that by reason of any
present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies
herein granted to the Trustee or hold title to the properties, in trust, as herein granted, or take
any other action which may be desirable or necessary in connection therewith, it may be necessary
that
the Trustee appoint an additional individual or institution as a separate trustee or
co-Trustee. The following provisions of this Section are adapted to these ends.
(B) In the event that the Trustee appoints an additional individual or institution as a
separate trustee or co-Trustee, each and every remedy, power, right, claim, demand, cause of
action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be
exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by
and vest in such separate trustee or co-Trustee but only to the extent necessary to enable such
separate trustee or co-Trustee to exercise such
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Exhibit 4.31
powers, rights and remedies, and every covenant and
obligation necessary to the exercise thereof by such separate trustee or co-Trustee shall run to
and be enforceable by either of them.
(C) Should any instrument in writing from the Authority be required by the separate trustee or
co-Trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to
him or it such properties, rights, powers, trusts, duties and obligations, any and all such
instruments in writing shall, on request, be executed, acknowledged and delivered by the Authority.
In case any separate trustee or co-Trustee, or a successor to either, shall die, become incapable
of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and
obligations of such separate trustee or co-Trustee, so far as permitted by law, shall vest in and
be exercised by the Trustee until the appointment of a new trustee or successor to such separate
trustee or co-Trustee.
Section 9.17.
Project Description
.
The Trustee shall maintain in current form as an
Appendix to the Agreement a list of the property constituting the Project Realty and the Project
Equipment and, on the basis of the descriptions furnished by the Borrower pursuant to the
Agreement, shall amend the list in writing to reflect changes in the Project Realty and the Project
Equipment.
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Exhibit 4.31
ARTICLE X
AMENDMENTS OF INDENTURE
Section 10.1.
Limitation on Modifications
.
This Indenture shall not be modified or
amended in any respect except as provided in and in accordance with and subject to the provisions
of this Article.
Section 10.2.
Supplemental Indentures Without Consent of Owners of the Bonds
.
(A)
Subject to paragraph (C) of this Section 10.2, the Authority may, from time to time and at any
time, adopt Supplemental Indentures without notice to or consent of the owners of the Bonds or the
Bond Insurer (except as otherwise provided in (6) below) for any of the following purposes:
(1) To cure any formal defect, omission or ambiguity in this Indenture or in any
description of property subject to the lien hereof, if such action is not adverse to the
interests of the owners of the Bonds.
(2) To grant to or confer upon the Trustee for the benefit of the owners of the Bonds
any additional rights, remedies, powers, authority or security which may lawfully be granted
or conferred and which are not contrary to or inconsistent with this Indenture as
theretofore in effect.
(3) To add to the covenants and agreements of the Authority in this Indenture other
covenants and agreements to be observed by the Authority which are not contrary to or
inconsistent with this Indenture as theretofore in effect.
(4) To add to the limitations and restrictions in this Indenture other limitations and
restrictions to be observed by the Authority which are not contrary to or inconsistent with
this Indenture as theretofore in effect.
(5) To confirm, as further assurance, any pledge under, and the subjection to any lien
or pledge created or to be created by, this Indenture, of Revenues or other income from or
in connection with the Project or of any other monies, securities or funds, or to subject to
the lien or pledge of this Indenture additional revenues, properties or collateral.
(6) With the prior written consent of the Bond Insurer, to make any other changes which
do not materially adversely affect the interest of owners of the Bonds, as evidenced to the
Trustee by an opinion of Bond Counsel.
(7) To enable the Authority and the Borrower to receive or maintain a rating on the
Bonds from S&P and/or Moodys; provided, however, that nothing in this Section 10.2(7) shall
limit or restrict the rights of Bondholders to consent to modifications, alterations or
amendments to this Indenture as provided in Section 10.3 hereof.
(B) Before the Authority shall adopt any Supplemental Indenture pursuant to this Section,
there shall have been filed with the Trustee an opinion of Bond Counsel satisfactory to the Trustee
stating that such Supplemental Indenture is authorized or permitted by this Indenture and the Act,
complies with the terms of this Indenture, and that upon enactment it will be valid and binding
upon the Authority in accordance with its terms.
(C) Notwithstanding anything to the contrary contained herein, any provision of this Indenture
expressly recognizing or granting rights in or to the Bond Insurer may not be amended in any
manner which affects the rights of the Bond Insurer hereunder without the prior written
consent of the Bond Insurer.
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Exhibit 4.31
Section 10.3.
Supplemental Indentures With Consent of Owners of the Bonds
.
(A)
Subject to the terms and provisions contained in this Article, the Bond Insurer, unless the Bond
Insurer is in default under the Bond Insurance Policy, in which case the owners of not less than
51% in aggregate principal amount of the Bonds then Outstanding (or in the event that the proposed
change does not affect all owners of Bonds, the owners of not less than 51% of the Bonds so
affected), shall have the right from time to time, to consent to and approve the adoption by the
Authority of any Supplemental Indenture as shall be deemed necessary or desirable by the Authority
for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any
of the terms or provisions contained herein. Nothing herein contained shall permit, or be
construed as permitting, without the consent of all of the owners of the Bonds affected thereby (i)
a change in the terms of redemption or maturity of the principal of or the interest on any
Outstanding Bond, or a reduction in the principal amount or redemption price of any Outstanding
Bond or the rate of interest thereon, without the consent of the owner of such Bond, (ii) the
creation of a lien upon or pledge of Revenues other than the lien or pledge created by this
Indenture, (iii) a preference or priority of any Bond or Bonds over any other Bond or Bonds, or
(iv) a reduction in the aggregate principal amount of the Bonds required for consent to such
Supplemental Indenture.
(B) If at any time the Authority shall determine to adopt any Supplemental Indenture for any
of the purposes of this Section, it shall cause notice of the proposed Supplemental Indenture to be
mailed, postage prepaid, to the Bond Insurer or, if the Bond Insurer is in default under the Bond
Insurance Policy, all owners of the Bonds. Such notice shall briefly set forth the nature of the
proposed Supplemental Indenture, and shall state that a copy thereof is on file at the offices of
the Trustee for inspection by the Bond Insurer or all owners of the Bonds, as the case may be.
(C) Within one year after the date of such notice, the Authority may adopt such Supplemental
Indenture in substantially the form described in such notice only if there shall have first been
filed with the Authority (i) the written consent of the Bond Insurer or, if the Bond Insurer is in
default under the Bond Insurance Policy, the written consent of the owners of not less than 51% in
aggregate principal amount of the Bonds then Outstanding so affected, and (ii) an opinion of
counsel satisfactory to the Trustee stating that such Supplemental Indenture is authorized or
permitted by this Indenture and complies with its terms, and that upon adoption it will be valid
and binding upon the Authority in accordance with its terms. Each valid consent of a Bondholder
shall be effective only if accompanied by proof of the owning, at the date of such consent, of the
Bonds with respect to which such consent is given. A certificate or certificates by the Trustee
that it has examined such proof and that such proof is sufficient in accordance with this Indenture
shall be conclusive that the consents have been given by the owners of the Bonds described in such
certificate or certificates. Any such consent shall be binding upon the owner of the Bonds giving
such consent and upon any subsequent owner of such Bonds and of any Bonds issued in exchange
therefor (whether or not such subsequent owner thereof has notice thereof), unless such consent is
revoked in writing by the owner of such Bonds giving such consent or a subsequent owner thereof by
filing such revocation with the Trustee prior to the adoption of such Supplemental Indenture.
(D) If the owners of not less than the percentage of Bonds required by this Section, or the
Bond Insurer, on their behalf, shall have consented to and approved the execution thereof as herein
provided, no owner of any Bond shall have any right to object to the enactment of such Supplemental
Indenture, or to object to any of the terms and provisions contained therein or the operation
thereof, or in any manner to question the propriety of the adoption thereof, or to enjoin or
restrain the Authority from adopting the same or from taking any action pursuant to the provisions
thereof.
(E) Upon the adoption of any Supplemental Indenture pursuant to the provisions of this
Section, this Indenture shall be deemed to be modified and amended in accordance therewith, and the
respective rights, duties and obligations under this Indenture of the Authority, the Trustee, the
Paying Agent, the Bond Insurer and all owners of Bonds then Outstanding shall thereafter be
determined,
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Exhibit 4.31
exercised and enforced under this Indenture, subject in all respects to such
modifications and amendments.
Section 10.4.
Supplemental Indenture Part of the Indenture
.
Any Supplemental
Indenture adopted in accordance with the provisions of this Article shall thereafter form a part of
this Indenture and all the terms and conditions contained in any such Supplemental Indenture as to
any provisions authorized to be contained therein shall be deemed to be part of the terms and
conditions of this Indenture for any and all purposes. The Trustee shall execute any Supplemental
Indenture adopted in accordance with the provisions of Sections 10.2 or 10.3 hereof; provided,
however, that the Trustee may, but shall not be obligated to, enter into any such instrument which
adversely affects the Trustees own rights, duties or immunities under this Indenture or otherwise.
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Exhibit 4.31
ARTICLE XI
AMENDMENTS OF FINANCING DOCUMENTS
Section 11.1.
Rights of Borrower
.
Anything herein to the contrary notwithstanding,
any Supplemental Indenture under Article X hereof which affects in any manner any rights, powers,
authority, duties or obligations of the Borrower under the Financing Documents or of any subsequent
user of the Project or requires a revision of the Financing Documents or subsequent agreement with
respect to the Project shall not become effective unless and until the Borrower or such subsequent
user, as the case may be, shall have given its written consent signed by its duly Authorized
Representative to such Supplemental Indenture.
Section 11.2.
Amendments of Financing Documents Not Requiring Consent of Owners of the
Bonds
.
The Authority and the Trustee may, without the consent of or notice to the owners of
the Bonds or the Bond Insurer, consent to any amendment, change or modification of the Financing
Documents or the Guaranty for the purpose of (i) curing any ambiguity or formal defect therein or
which, in the judgment of the Trustee will not materially prejudice the Trustee or the owners of
the Bonds or (ii) to make any other changes which do not materially adversely affect the interests
of the owners of the Bonds, as evidenced to the Trustee by an opinion of counsel. The Trustee
shall have no liability to any owner of the Bonds or any other person for any action taken by it in
good faith pursuant to this Section.
Section 11.3.
Amendments of Financing Documents Requiring Consent of Owners of the
Bonds
.
(A) Except as provided in Section 11.2 hereof, the Authority and the Trustee shall not
consent to any amendment, change or modification of the Financing Documents or the Guaranty,
including the substitution of an assignee for the Borrower or the Guarantor and the release of the
Borrower or the Guarantor from the obligations of the Financing Documents or the Guaranty, as the
case may be, without mailing of notice and the written approval or consent of the Bond Insurer,
unless the Bond Insurer is in default under the Bond Insurance Policy, in which case such
amendment, change or modification shall require the mailing of notice and the written approval or
consent of the owners of not less than 51% in aggregate principal amount of the Bonds at the time
Outstanding and so affected given and procured as in Section 10.3 hereof provided. If at any time
the Borrower or a subsequent user of the Project or the Guarantor shall request the consent of the
Trustee to any such proposed amendment, change or modification, the Trustee shall cause notice of
such proposed amendment, change or modification to be mailed in the same manner as is provided in
Article X hereof with respect to Supplemental Indentures. Such notice shall briefly set forth the
nature of such proposed amendment, change or modification and shall state that copies of the
instrument embodying the same are on file at the principal office of the Trustee for inspection by
the Bond Insurer or all owners of the Bonds, as the case may be.
(B) Notwithstanding anything to the contrary contained herein or in the Agreement or the
Guaranty, none of the transactions described in Section 6.1 and 6.2 of the Agreement or Section 2.4
of the Guaranty shall require the consent of the Authority or the Trustee.
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Exhibit 4.31
ARTICLE XII
DISCHARGE OF INDENTURE
Section 12.1.
Defeasance
.
(A) If the Authority shall pay or cause to be paid, or
there shall otherwise be paid, to the owners of all Bonds the principal or Redemption Price, if
applicable, interest and all other amounts due or to become due thereon or in respect thereof, and
all other amounts due or to become due under the Financing Documents, at the times and in the
manner stipulated therein and in this Indenture, and if all the fees, expenses and advances of the
Trustee and all Paying Agents have been paid, then the pledge of any revenues or receipts from or
in connection with the Financing Documents or the Project under this Indenture and the estate and
rights hereby granted, and all covenants, agreements and other obligations of the Authority to the
owners of the Bonds hereunder shall thereupon cease, terminate and become void and be discharged
and satisfied and such Bonds shall thereupon cease to be entitled to any lien, benefit or security
hereunder, except as to moneys or securities held by the Trustee or the Paying Agents as provided
below in this subsection. At the time of such cessation, termination discharge and satisfaction,
(1) the Trustee shall cancel and discharge the lien of this Indenture and execute and deliver to
the Borrower all such instruments as may be appropriate to satisfy such lien and to evidence such
discharge and satisfaction, and (2) the Trustee, the Authority and the Paying Agents shall pay over
or deliver to the Borrower or on its order all moneys or securities held by them pursuant to the
Indenture which are not required (a) for the payment of principal or Redemption Price, if
applicable, or interest on Bonds not theretofore surrendered for such payment or redemption, or (b)
for the payment of all such other amounts due or to become due under the Financing Documents.
(B) Bonds or interest installments for the payment or redemption of which moneys (or Federal
Securities, the principal of and interest on which when due, together with the moneys, if any, set
aside at the same time, will provide funds sufficient for such payment or redemption) shall then be
set aside and held in trust by the Trustee or Paying Agents, whether at or prior to the maturity or
the redemption date of such Bonds, shall be deemed to have been paid within the meaning and with
the effect expressed in subsection (A) of this Section, if (a) in case any such Bonds are to be
redeemed prior to maturity, all action necessary to redeem such Bonds shall have been taken and
notice of such redemption shall have been duly given or provision satisfactory to the Trustee shall
have been made for the giving of such notice, and (b) if the maturity or redemption date of any
such Bond shall not then have arrived, (i) provision shall have been made by deposit with the
Trustee or other methods satisfactory to the Trustee for the payment to the owners of any such
Bonds upon surrender thereof, whether or not prior to the maturity or redemption date thereof, of
the full amount to which they would be entitled by way of principal or Redemption Price and
interest and all other amounts then due under the Financing Documents to the date of such maturity
or redemption, (ii) provision satisfactory to the Trustee shall have been made for the mailing of a
notice to the owners of such Bonds that such moneys are so available for such payment and (iii) the
Borrower shall provide, or cause to be provided, a verification report of an independent nationally
recognized certified public accountant and an opinion of nationally recognized bond counsel
addressed to the Bond Insurer to the effect that the Bonds are no longer Outstanding under the
Indenture.
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Exhibit 4.31
ARTICLE XIII
GENERAL PROVISIONS
Section 13.1.
Notices
.
(A) Any notice, request, demand, communication, direction or
other paper shall be sufficiently given and shall be deemed given when delivered or mailed by
registered or certified mail, return receipt requested, postage prepaid, or sent by telegram,
addressed as follows: if to the Authority, at 999 West Street, Rocky Hill, Connecticut 06067,
Attention: Program Manager Loan Administration; if to the Borrower, 93 West Main Street, Clinton,
Connecticut 06413, Attention: Vice President-Finance; if to the Trustee, Goodwin Square, 225
Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Administration; and if to
the Bond Insurer, 125 Park Avenue, New York, New York 10017, Attention: Risk Management (and if to
the Bond Insurers Fiscal Agent at U.S. Bank Trust National Association, 100 Wall Street, 19th
Floor, New York, New York 10005, Attention: Corporate Trust Department). A duplicate copy of each
notice required to be given hereunder by the Trustee to either the Authority or the Borrower, shall
also be given to the other and the Bond Insurer. In addition, copies of all amendments to this
Indenture which are consented to by the Bond Insurer shall be sent to S&P. Any notice party may
designate any further or different addresses to which subsequent notices, certificates or other
communications shall be sent.
(B) Notice hereunder may be waived prospectively or retrospectively by the person entitled to
such notice, but no waiver shall affect any notice requirement as to other persons.
(C) Notwithstanding anything to the contrary contained herein, all notices, requests, demands,
communications or directions to the Trustee shall be given in writing.
Section 13.2.
Covenant Against Discrimination
.
The Trustee agrees and warrants that
in the performance of this Indenture it will not discriminate against any person or group of
persons on the grounds of race, color, religion, national origin, age, sex, sexual orientation,
marital status, physical or learning disability, political beliefs, mental retardation, or history
of mental disorder in any manner prohibited by the laws of the United States or of the State.
Section 13.3.
Rights of Bond Insurer
.
(A) Notwithstanding anything to the contrary
contained herein, so long as the Bond Insurer is not in default on its payment obligations under
the Bond Insurance Policy, such Bond Insurer shall at all times be deemed to be the exclusive owner
of the Bonds insured pursuant to the Bond Insurance Policy issued by such Bond Insurer for the
purposes of all approvals, consents, waivers or institution of any action and the direction of all
remedies. To the extent that the Bond Insurer makes payment of principal of or interest on the
Bonds, it shall become the owner of such Bonds, or shall be entitled to the right to payment of
principal of or interest on such Bonds and shall be fully subrogated to all of the registered
owners rights thereunder, including the registered owners right to payment thereof. To evidence
such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee
shall note the Bond Insurers rights as subrogee on the registration books of the Authority
maintained by the Trustee upon receipt of proof from the Bond Insurer as to payment of interest
thereon to the registered owners of the Bonds, and (ii) in the case of subrogation as to claims for
past due principal, the Trustee shall note the Bond Insurers rights as subrogee on the
registration books of the Authority maintained by the Trustee upon receipt of proof from the Bond
Insurer of the surrender or transfer of the Bonds by the registered owners thereof to the Bond
Insurer. The Trustee shall deliver to the Bond Insurer or its designated agent a document in form
and substance acceptable to the Trustee and the Bond Insurer or its designated agent confirming
such subrogation rights.
(B) In the event that the principal of and/or interest on the Bonds shall be paid by the Bond
Insurer pursuant to the terms of the Bond Insurance Policy, the Bonds shall remain Outstanding, the
assignment and pledge of the trust estate and all covenants, agreements and other obligations
of the Authority to the registered owners shall continue to exist and the Bond Insurer shall be
fully subrogated to
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Exhibit 4.31
all of the rights of such registered owners in accordance with the terms and
conditions of subparagraph (A) above and the Bond Insurance Policy.
(C) Notwithstanding any provision in this Indenture or the Agreement to the contrary, the Bond
Insurer shall have no rights under this Indenture or the Agreement, other than rights of
subrogation as herein provided to the extent that the Bond Insurer has made payments under the Bond
Insurance Policy, in the event that the Bond Insurance Policy is not in effect or the Bond Insurer
is in default on its payment obligations under the Bond Insurance Policy.
Section 13.4.
Bond Insurer Consent
. Notwithstanding any other provisions of this
Indenture, unless the Bond Insurer is in default under the Bond Insurance Policy, the consent of
the owners of Bonds for which a Bond Insurance Policy has been issued shall for purposes of this
Indenture be deemed to have been obtained when the consent of the Bond Insurer is obtained, except
in the cases where approval of all Bondowners is required as provided in Section 10.3(A) hereof, in
which case the consents of the Bondowners and the Bond Insurer shall be required. Notwithstanding
any provision in this Indenture or the Agreement to the contrary, all provisions in this Indenture
or the Financing Documents requiring the consent of the Bond Insurer shall have no force and effect
if the Bond Insurance Policy is not in effect or if the Bond Insurer is in default under such Bond
Insurance Policy.
Section 13.5.
Notices to the Bond Insurer
.
While the Bond Insurance Policy is effect,
the Trustee shall furnish to the Bond Insurer a copy of any notice to be given to the registered
owners of the Bonds or any other party to this Indenture, including, without limitation, notice of
any redemption of or defeasance of Bonds (including, without limitation, the principal amount,
maturities and CUSIP numbers thereof), and any certificate rendered pursuant to this Indenture
relating to the security for the Bonds; and such additional information it may reasonably request.
Notwithstanding any other provision of this Indenture, the Trustee shall immediately notify
the Bond Insurer at any time there are insufficient moneys to make any payments of principal and/or
interest as required and as provided in Section 8.10 hereof, upon the occurrence of any Event of
Default hereunder.
Section 13.6.
Parties Interested Herein
.
Except as otherwise specifically provided
herein, nothing in this Indenture expressed or implied is intended or shall be construed to confer
upon, or to give to, any person or entity, other than the Authority, the Trustee, the Bond Insurer,
the Borrower, the Paying Agent and the registered owners of the Bonds, any right, remedy or claim
under or by reason of this Indenture or any covenant, condition or stipulation hereof, and all
covenants, stipulations, promises and agreements in this Indenture contained by and on behalf of
the Authority shall be for the sole and exclusive benefit of the Authority, the Trustee, the Bond
Insurer, the Borrower, the Paying Agent and the registered owners of the Bonds.
Section 13.7.
Bond Insurer as Third Party Beneficiary
.
To the extent that this
Indenture confers upon or gives or grants to the Bond Insurer any right, remedy or claim under or
by reason of this Indenture, the Bond Insurer is hereby explicitly recognized as being a
third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given
or granted hereunder.
Section 13.8.
Effective Date; Counterparts
.
This Indenture shall become effective on
delivery. It may be simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
Section 13.9.
Date for Identification Purposes Only
.
The date of this Indenture shall
be for identification purposes only and shall not be construed to imply that this Indenture was
executed on such date.
-62-
Exhibit 4.31
Section 13.10.
Separability of Invalid Provisions
.
In case any one or more of the
provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Indenture, but this Indenture shall be construed as if such
invalid or illegal or unenforceable provision had never been contained herein.
-63-
Exhibit 4.31
IN WITNESS WHEREOF,
the Connecticut Development Authority has caused these presents to be
signed in its name and behalf by an Authorized Representative, and to evidence its acceptance of
the trusts hereby created, U.S. Bank National Association, has caused these presents to be signed
in its name and behalf by its duly authorized officer, as of the date first above written.
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CONNECTICUT DEVELOPMENT AUTHORITY
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By
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/s/ Karin A. Lawrence
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Name: Karin A. Lawrence
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Authorized Representative
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U.S. BANK NATIONAL ASSOCIATION
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By
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/s/ Cauna M. Silva
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Name: Cauna M. Silva
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Title: Vice President
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-64-
Exhibit 4.31
APPENDIX A TO INDENTURE
REQUISITION
The Crystal Water Company of Danielson (the Borrower) hereby requests U.S. Bank National
Association, as trustee (the Trustee) under the Indenture of Trust, dated October 1, 2005,
between U.S. Bank National Association and the Connecticut Development Authority (the Indenture),
to withdraw $
from the
Account of the Project Fund established under the
Indenture for purposes permitted by Section 5.2 thereof. In connection with this withdrawal, the
Borrower states as follows:
1. The number of this requisition is
.
2. Payments aggregating
are due to the following persons in the following
amounts for expenditures incurred in connection with the Project:
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Person
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Address
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Amount
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Item
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Attached hereto are invoices evidencing each such amount due and the person to whom such amount is
payable.
3. Payment is due to the Borrower in the total amount of $
in reimbursement for
amounts paid by the Borrower in connection with the Project:
Attached hereto are receipts or other evidences of payment showing payment of each such amount and
the person to whom payment was made.
4. Each amount set forth in paragraphs 2 and 3 hereof has been properly paid or incurred
within the provisions of the Agreement and the Indenture, is a proper charge against the Project
Fund, is unpaid or unreimbursed, and has not been the basis for any previous withdrawal.
5. This requisition and the use of proceeds set forth herein are consistent in all material
respects with the Tax Regulatory Agreement.
6. Ninety-five percent or more of the amount requisitioned is to be applied to costs (a) paid
or incurred not more than sixty (60) days prior to the adoption of the Authoritys inducement
resolution for the Project on May 19, 2004, (b) for the acquisition, construction or reconstruction
of land or property of a character subject to the allowance for depreciation provided in Section
167 of the Internal Revenue Code of 1986, as amended, and (c) which are chargeable to the capital
account of the Project or would be so chargeable either with an election by the Borrower or but for
the election of the Borrower to deduct the amount of the item.
Capitalized terms used in this requisition are used as defined in the Indenture.
A-1
Exhibit 4.31
I am an Authorized Representative of the Borrower under the Agreement.
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THE CRYSTAL WATER COMPANY OF
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DANIELSON
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By:
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Name:
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Title:
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A-2
EXHIBIT 4.32
Execution Copy
INSURANCE AGREEMENT
INSURANCE AGREEMENT, dated November 30, 2005, among The Crystal Water Company of Danielson
(Crystal Water), Connecticut Water Service Inc. (the Holding Company) and Financial Guaranty
Insurance Company, a New York stock insurance company (
FGIC
).
WHEREAS
, pursuant to an Indenture of Trust, dated as of October 1, 2005 (the
Indenture
),
between Connecticut Development Authority (the
Issuer
) and U.S. Bank National Association as
trustee (the
Trustee
), the Issuer has issued $5,000,000 in aggregate principal amount of its
Water Facilities Revenue Bonds (The Crystal Water Company of Danielson Project 2005A Series) (the
Bonds
); and
WHEREAS
, the Crystal Water and the Issuer have entered into a Loan Agreement, dated as of
October 1, 2005 (the
Loan Agreement
), pursuant to which Crystal Water is obligated to make loan
payments sufficient to pay, among other items, debt service on the Bonds; and
WHEREAS
, the Holding Company and the Issuer have entered into a Guaranty, dated as of October
1, 2005 (the
Guaranty Agreement
), pursuant to which the Holding Company is obligated to make loan
payments sufficient to pay, among other items, debt service on the Bonds to the extent the Crystal
Water fails to make such payments; and
WHEREAS
, FGIC has issued its Financial Guaranty Insurance Policy (the
Policy
), which insures
the scheduled payments of principal of and interest on the Bonds and payment of principal of and
interest on the Bonds upon a Determination of Taxability (as defined in the Indenture) as specified
in the Policy; and
WHEREAS
, Crystal Water and the Holding Company understand that FGIC expressly requires the
delivery of this Agreement as part of the consideration for the delivery by FGIC of the Policy;
NOW, THEREFORE
, in consideration of the premises and of the agreements herein contained and of
the execution and delivery of the Policy, Crystal Water, the Holding Company and FGIC agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.
Except as otherwise expressly provided herein or unless the
context otherwise requires, the terms that are capitalized herein shall have the meanings specified
in the Indenture unless otherwise defined in Annex A hereto.
-1-
EXHIBIT 4.32
ARTICLE II
PREMIUM AND REIMBURSEMENT OBLIGATIONS
OF THE COMPANY
SECTION 2.01. Premium.
In consideration of FGICs agreeing to issue the Policy hereunder,
Crystal Water hereby agrees to pay FGIC the Premium at the times and in the amounts provided in the
Commitment. To the extent that any such payment of the Premium is not paid when due, interest
shall accrue on such unpaid amount at a rate equal to the Effective Interest Rate.
SECTION 2.02. Reimbursement Obligation.
Crystal Water and the Holding Company agree to
reimburse Financial Guaranty, from any available funds, immediately and unconditionally upon
demand, for any Policy Payment. To the extent that any such payment due hereunder is not paid when
due, interest shall accrue on such unpaid amounts at a rate equal to the Effective Interest Rate.
Following any such Policy Payment, the payment by Crystal Water and the Holding Company of the
amount of principal of and/or interest on the obligations in respect of which such Policy Payment
shall have been made shall satisfy and discharge, to the extent thereof, the corresponding
obligations of Crystal Water and the Holding Company under this Section 2.02.
SECTION 2.03. Unconditional Obligation.
The obligations of Crystal Water and the Holding
Company hereunder are absolute and unconditional and will be paid or performed strictly in
accordance with this Agreement, irrespective of:
(a) any lack of validity or enforceability of, or any amendment or other modification of, or
waiver with respect to the Bonds, the Indenture, the Loan Agreement or any other bond financing
document;
(b) any exchange, release or nonperfection of any security interest in property securing the
Bonds, the Indenture, the Loan Agreement or this Agreement or any obligations hereunder;
(c) any circumstances that might otherwise constitute a defense available to, or discharge of,
Crystal Water or the Holding Company with respect to the Bonds, the Indenture, this Agreement or
the Loan Agreement; or
(d) whether or not the obligations under the Bonds, the Indenture, this Agreement or the Loan
Agreement are contingent or matured, disputed or undisputed, liquidated or unliquidated.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01
.
Representations and Warranties of Crystal Water and the Holding Company.
(a) Crystal Water makes the following representations as the basis for its undertakings herein
contained:
-2-
EXHIBIT 4.32
(1) Crystal Water is a Connecticut corporation organized and existing under the laws of the
State of Connecticut, and has the power to enter into and has duly authorized, by proper action,
the execution and delivery of this Agreement, and the Loan Agreement (collectively, the
Company
Documents
).
(2) Neither the execution and delivery of any Company Document, the consummation of the
transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms
and conditions hereof and thereof, conflicts with or results in a breach of any of the terms,
conditions or provisions of Crystal Water organizational documents or of any material agreement or
instrument to which Crystal Water is now a party or by which it is bound, or constitutes a default
(with due notice or the passage of time or both) under any of the foregoing, or results in the
creation or imposition of any prohibited lien, charge or encumbrance whatsoever upon any of the
property or assets of Crystal Water under the terms of any material instrument or agreement to
which Crystal Water is now a party or by which it is bound.
(3) All certificates, approvals, permits and authorizations of applicable local governmental
agencies, the State of Connecticut and the federal government that are necessary (i) for the due
execution and delivery by Crystal Water of, and the performance by Crystal Water of its obligations
under, each Company Document and (ii) for the operation and use of the capital projects being
financed by the Bonds, in each case, have been obtained and continue in force, except, in the case
of clause (ii), for such certificates, approvals, permits and authorizations the failure of which
to obtain or to maintain in full force would not, individually or in the aggregate, materially and
adversely affect the financial condition, assets, properties or operation of Crystal Water.
(4) No event has occurred and no condition exists that would constitute an Event of Default
under the Company Documents or to Crystal Waters knowledge the Indenture or that, with the passing
of time or with the giving of notice or both would become such an Event of Default.
(5) The Company Documents have been executed and delivered by Crystal Water and are the legal,
valid and binding obligations of Crystal Water, enforceable against Crystal Water in accordance
with its terms, subject to laws with respect to bankruptcy and general principals of equity.
(b) The Holding Company makes the following representations as the basis for its undertakings
herein contained:
(1) The Holding Company is a Connecticut corporation organized and existing under the laws of
the State of Connecticut and has the power to enter into and has duly authorized, by proper action,
the execution and delivery of the Agreement, and the Guaranty Agreement;
(2) Neither the execution and delivery of this Agreement or the Guaranty Agreement, the
consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or
compliance with the terms and conditions hereof and thereof, conflicts with or results in a breach
of any of the terms, conditions or provisions of the Holding Companys organizational documents or
of any material actions or of any material agreement or instrument to which the
-3-
EXHIBIT 4.32
Company is now a party or by which it is bound, or constitutes a default (with due notice or
the passage of time or both) under any of the foregoing, or results in the creation or imposition
of any prohibited lien, charge or encumbrance whatsoever upon any of the property or assets of the
Holding Company under the terms of any material instrument or agreement to which the Holding
Company is now a party or by which it is bound.
(3) All certificates, approvals, permits and authorizations of applicable local governmental
agencies, the State of Connecticut and the federal government that are necessary for the due
execution and delivery by the Holding Company of, and the performance by the Holding Company of its
obligations under, this Agreement and the Guaranty Agreement have been obtained and continue in
force.
(4) No event has occurred and no condition exists that to the knowledge of the Holding Company
would constitute an Event of Default (as defined in the Indenture, the Loan Agreement or hereunder)
or that, with the passing of time or with the giving of notice or both would become such an Event
of Default.
(5) The Guaranty Agreement and this Agreement have been executed and delivered by the Holding
Company and are the legal, valid and binding obligations of the Holding Company, enforceable
against the Holding Company in accordance with its terms, subject to laws with respect to
bankruptcy and general principals of equity.
(c) Crystal Water and the Holding Company make the following representations as the basis for their
undertakings herein contained:
(1) Except as disclosed in the Official Statement, dated November 16, 2005, delivered in
connection with the issuance of the Bonds, (i) there is no action, suit, proceeding or
investigation at law or in equity before or by any court or governmental agency or body pending or
to their knowledge threatened against or affecting Crystal Water or the Holding Company that seeks
to restrain or enjoin the issuance or delivery of the Bonds, or the collection of the payments to
be made pursuant to the Indenture, the Bonds, any Company Document, the Guaranty Agreement or in
any way contests or materially adversely affects the validity of the Bonds, the Indenture, any
Company Document, the Guaranty Agreement or the resolutions of Crystal Water or the Holding Company
relating to the Bonds, or contests or affects the powers of Crystal Water or the Holding Company to
enter into or perform its obligations or consummate the transactions contemplated under any of the
foregoing; and (ii) Crystal Water or the Holding Company are not in default with respect to any
order or decree of any court or any order, regulation or demand of any federal, state, municipal or
other governmental authority.
(2) The financial statements of the Holding Company and its consolidated subsidiaries as at
December 31, 2004 and September 30, 2005 contained in the Holding Companys Annual Report on Form
10-K for the year ended December 31, 2004 as filed with the SEC on March 30, 2005 and Quarterly
Report on Form 10-Q for the quarter ended September 30, 2005 as filed with the SEC on November 9,
2005, respectively, present fairly in all material respects the financial condition, results of
operations and cash flows of the Holding Company and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis throughout the periods
involved (except as otherwise noted therein).
-4-
EXHIBIT 4.32
Since September 30, 2005, there has been no material adverse change in the financial
condition, assets, properties or operation of the Holding Company.
ARTICLE IV
COVENANTS
SECTION 4.01. Consolidation, Merger and Transfer of Mortgaged Property.
(a)
Restructuring, Merger, Consolidation, Reorganization.
Crystal Water (or any subsequent
obligor on the Note) shall not merge, consolidate, restructure or reorganize with an entity without
the prior written consent of FGIC, provided, however, Crystal Water (or any subsequent obligor on
the Note) may merge, consolidate, restructure or reorganize with an entity without the prior
written consent of FGIC either if (a) Crystal Water (or any subsequent obligor on the Note)
continues to exist after such merger, consolidation, restructuring or reorganization and (i)
Crystal Water (or any subsequent obligor on the Note) remains a public utility regulated by the
appropriate regulatory body, (ii) Crystal Water (or any subsequent obligor on the Note) remains
obligated to FGIC with respect to, and to make payments with respect to, the Bonds, the Note and
the Company Documents and (iii) the Guaranty Agreement remains enforceable against the Holding
Company or against an entity with a rating on its unenhanced long-term debt that is the same or
higher than the rating on the unenhanced long-term debt of the Holding Company or (b) Crystal Water
(or any subsequent obligor on the Note) is not the surviving entity after such merger,
consolidation, restructuring or reorganization and (i) the surviving entity is a public utility
regulated by the appropriate regulatory body, (ii) the surviving entity fully assumes all
obligations to FGIC with respect to, and to make payments with respect to the Bonds, the Note and
the Company Documents and (iii) the Guaranty Agreement remains enforceable against the Holding
Company or against an entity with a rating on its unenhanced long-term debt that is the same or
higher than the rating on the unenhanced long-term debt of the Holding Company. Notwithstanding
the foregoing, if as a result of the merger, consolidation, restructuring or reorganization of
Crystal Water (or any subsequent obligor on the Note) with an entity without the prior written
consent of FGIC, the unenhanced rating on the Bonds is lower than investment grade by any Rating
Agency then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to
rate the unenhanced Bonds, all obligations to FGIC with respect to, and all payments under, the
Note and the Company Documents must be paid in full and the Bonds must be fully redeemed in
accordance with the Indenture.
(b)
Sale of Assets of Crystal Water.
Crystal Water (or any subsequent obligor on the Note)
may sell or otherwise dispose of substantially all of the assets of Crystal Water (or any
subsequent obligor on the Note) without the prior written consent of FGIC if (i) the transferee of
such assets fully assumes all obligations under the Bonds, the Note and the Company Documents, (ii)
the transferee is a public utility regulated by the appropriate regulatory body, (iii) the Guaranty
Agreement remains enforceable against the Holding Company or an entity with a rating on its
unenhanced long-term debt that is the same or higher than the rating on the unenhanced long-term
debt of the Holding Company and (iv) the Bonds must have an unenhanced rating not lower than
investment grade by any Rating Agency then rating the unenhanced Bonds. If Crystal Water (or any
subsequent obligor on the Note) sells or otherwise disposes of substantially all of the assets of
Crystal Water (or any subsequent obligor on the Note) without the prior written consent of FGIC and
any of the conditions set forth in the
-5-
EXHIBIT 4.32
previous sentence have not be met, then all obligations to FGIC with respect to, and all
payments under, the Note and the Company Documents must be paid in full and the Bonds must be fully
redeemed in accordance with the Indenture.
(c)
Sale of Assets of Connecticut Water Company.
If upon, and as a result of, the sale or
other disposition without the prior written consent of FGIC of an aggregate of 20% or more of the
assets of Connecticut Water Company (or of any successor to the interests of Connecticut Water
Company) based upon the historical book value of the assets sold as determined on the issuance date
of the Bonds, the unenhanced rating on the bonds of the Connecticut Water Company issued on the
same date as the Bonds is lower than investment grade by any Rating Agency then rating such bonds
or if any Rating Agency then rating the unenhanced bonds ceases to rate the unenhanced bonds, then
all obligations of Crystal Water to FGIC with respect to, and all payments under, the Note, the
Insurance Agreement and the Loan Agreement must be paid in full and the Bonds must be fully
redeemed in accordance with the Indenture.
(d)
Holding Company Restructuring, Merger, Consolidation, Reorganization or Sale of Assets.
The Holding Company shall not merge, consolidate, restructure or reorganize with an entity or sell
substantially all of its assets without the prior written consent of FGIC, provided, however, the
Holding Company may merge, consolidate, restructure or reorganize with an entity or sell
substantially all of its assets without the prior written consent of FGIC if (i) the obligor on the
Note remains an entity that is a public utility regulated by the appropriate regulatory body and
(ii) the Holding Company, any successor entity or the transferee of substantially all of the
Holding Companys assets is obligated on the Insurance Agreement and the Guaranty Agreement.
Notwithstanding the foregoing, if the Holding Company merges, consolidates, restructures or
reorganizes with an entity or sells substantially all of its assets without the prior written
consent of FGIC and the unenhanced rating on the Bonds is lower than investment grade by any Rating
Agency then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to
rate the unenhanced Bonds, all obligations to FGIC with respect to, and all payments under, the
Note and Loan Agreement must be paid in full and the Bonds must be fully redeemed in accordance
with the Indenture.
(e) Upon the occurrence of an event specified in section 4.01 (a)(b)(c) or (d) Crystal Water
and the Holding Company shall deliver to FGIC a certificate of the president or any vice president
and an opinion of counsel acceptable to FGIC, each stating that such occurrence complies with this
Section 4.01.
(f) Upon the occurrence of an event specified in section 4.01(a), (b) or (d), the successor
entity shall succeed to, and be substituted for, and may exercise every right and power under this
Agreement with the same effect as if such successor had been named herein, and thereafter, the
predecessor entity shall be relieved of all obligations and covenants hereunder.
SECTION 4.02. Restrictions on Liens and Sale and Leaseback Transactions.
(a) For so long as the Bonds are outstanding and FGIC has fully performed all of its
obligations under the Policy, Crystal Water will not, nor will it permit any Significant Subsidiary
to, (1) issue, incur, assume or permit to exist any Debt, if such Debt is secured by a Lien on any
Principal Property (whether such Principal Property is now owned or hereafter acquired), unless
-6-
EXHIBIT 4.32
the Company provides that the Bonds will be equally and ratably secured with such secured Debt
or (2) incur or permit to exist any Attributable Debt in respect of Principal Property; provided,
however, that the foregoing restriction shall not apply to:
(i) to the extent Crystal Water or any Significant Subsidiary consolidates with, or
merges with or into, another entity, Liens on the property of such entity securing Debt in
existence on the date of such consolidation or merger, provided that such Debt and Liens
were not created or incurred in anticipation of such consolidation or merger and that such
Liens do not extend to cover any Principal Property;
(ii) Liens existing on property hereafter acquired at the time of such acquisition, as
long as the Lien was not created or incurred in anticipation thereof and does not extend to
or cover any other Principal Property;
(iii) Liens of any kind, including purchase money Liens, conditional sales agreements
or title retention agreements and similar agreements, upon any property acquired,
constructed, developed or improved by Crystal Water or any Significant Subsidiary (whether
alone or in association with others) which do not exceed the cost or value of the property
acquired, constructed, developed or improved and which are created prior to, at the time of,
or within 12 months after such acquisition (or in the case of property constructed,
developed or improved, within 12 months after the completion of such construction,
development or improvement and commencement of full commercial operation of such property,
whichever is later) to secure or provide for the payment of any part of the purchase price
or cost thereof; provided that the Liens shall not extend to any Principal Property other
than the property so acquired, constructed, developed or improved;
(iv) Liens in favor of the United States, any state or any foreign country or any
department, agency or instrumentality or political subdivision of any such jurisdiction to
secure payments pursuant to any contract or statute or to secure any indebtedness incurred
for the purpose of financing all or any part of the purchase price or cost of constructing
or improving the property subject to such Lien, including Liens related to governmental
obligations the interest on which is tax-exempt under Section 103 of the Internal Revenue
Code or any successor section of the Internal Revenue Code;
(v) Liens in favor of Crystal Water, the Holding Company or one or more Significant
Subsidiaries of the Crystal Water, the Holding Company, or one or more wholly-owned
Subsidiaries of Crystal Water or the Holding Company or any of the foregoing combination;
and
(vi) replacements, extensions or renewals (or successive replacements, extensions or
renewals), in whole or in part, of any Lien, or of any agreement, referred to above in
clauses (i) through (v) inclusive, or replacements, extensions or renewals of the Debt
secured thereby (to the extent that the amount of Debt secured by any such Lien is not
increased from the amount originally so secured, plus any premium, interest, fee or expenses
payable in connection with any replacements, refundings, refinancings, remarketings,
extensions or renewals); provided that such replacement, extension or
-7-
EXHIBIT 4.32
renewal is limited to all or a part of the same property (plus improvements thereon or
additions or accessions thereto) that secured the Lien replaced, extended or renewed.
(b) Notwithstanding the restriction in subsection (a) of this Section 4.02, Crystal Water or
any Significant Subsidiary may (1) issue, incur or assume Debt secured by a Lien not described in
clauses (i) through (vi) of subsection (a) above on any Principal Property now or hereafter owned
without providing that the Bonds be equally and ratably secured with such Debt and (2) issue or
permit to exist Attributable Debt in respect of Principal Property, in either case so long as the
aggregate amount of such secured Debt and Attributable Debt, together with the aggregate amount of
all other Debt secured by Liens not described in clauses (i) through (vi) of subsection (a) above
then outstanding and all other Attributable Debt, does not exceed 10% of the Net Tangible Assets of
Crystal Water, as determined by Crystal Water as of a month end not more than 90 days prior to the
closing or consummation of the proposed transaction.
(c) For purposes of determining compliance with this Section 4.02, in the event that any Lien
at any time meets the criteria of more than one of the categories described in clauses (i) through
(vi) above of Section 4.02(a), or is entitled to be created pursuant to Section 4.02(b), Crystal
Water will be permitted to classify (and later reclassify) in whole or in part in its sole
discretion such Lien in any manner that complies with this Section 4.02.
(d) For purposes of determining compliance with any Dollar-denominated restriction on the
incurrence of Debt secured by Liens on Principal Property, the Dollar-equivalent principal amount
of Debt denominated in a foreign currency will be calculated based on the relevant currency
exchange rate in effect on the date such Debt was incurred, in the case of term Debt, or first
committed, in the case of revolving credit Debt; provided that if such Debt is incurred to
refinance other Debt denominated in the same foreign currency, and such refinancing would cause the
applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency
exchange rate in effect on the date of such refinancing, the Dollar-denominated restriction will be
deemed not to have been exceeded so long as the principal amount of the refinancing Debt does not
exceed the principal amount of the Debt being refinanced. Notwithstanding any other provision of
this Section 4.02, the maximum amount of Debt secured by Liens on Principal Property that Crystal
Water or any Significant Subsidiary may incur pursuant to this covenant will not be deemed to be
exceeded solely as a result of fluctuations in the exchange rate of currencies.
(e) Except as provided in Section 4.02 hereof, while there are any Bonds Outstanding or any
reimbursement obligations owed to FGIC, without the prior written consent of Financial Guaranty,
Crystal Water will not permit, create, assume or suffer to be created or to exist any mortgage,
lien, security interest, or encumbrance of any kind, upon, or pledge of, any of Crystal Waters
properties of any character, including real, personal, tangible and intangible properties and
revenues, now owned or hereafter acquired, to secure any indebtedness without providing that the
Bonds and the reimbursement obligations hereunder have the same security.
SECTION 4.03. Liquidity Facility.
If at any time the Bonds are converted into a mode, other
than a long-term mode longer than five years or an auction mode, Crystal Water shall provide a
Liquidity Facility to support the Bonds. The Liquidity Facility and the Liquidity
-8-
EXHIBIT 4.32
Provider shall satisfy the terms set forth in Annex B hereto or shall otherwise be subject to
the prior written approval of FGIC.
SECTION 4.04. Covenant Merger.
Notwithstanding anything in the foregoing covenants to the
contrary, the foregoing covenants with respect to the Crystal Water Company Bonds shall no longer
be applicable if Crystal Water is merged into, consolidated with or otherwise reorganized into the
Connecticut Water Company. The covenants with respect to the Connecticut Water Company shall apply
to the merged, consolidated or otherwise reorganized entity.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
SECTION 5.01. Events of Default.
The following events shall constitute Events of Default
hereunder:
(a) Crystal Water or the Holding Company shall fail to pay to FGIC any amount payable under
Section 2.02 or 7.01 hereof and such failure shall have continued for a period in excess of ten
days after receipt by Crystal Water or the Holding Company of written notice thereof;
(b) Any representation or warranty made by Crystal Water or the Holding Company hereunder
under any other Company Document, the Guaranty Agreement, or any statement in the application for
the Policy or any written report, certificate, financial statement or other instrument provided in
connection with the Commitment, the Policy, the Guaranty Agreement, or any Company Document shall
have been materially false at the time when made;
(c) Except as otherwise provided in this Section 5.01, Crystal Water or the Holding Company
shall fail to perform any of its other obligations hereunder, provided that such failure continues
for more than thirty days after receipt by Crystal Water or the Holding Company of written notice
of such failure to perform;
(d) Crystal Water or the Holding Company shall (i) voluntarily commence any proceeding or file
any petition seeking relief under the United States Bankruptcy Code or any other Federal, state or
foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of, or fail to
controvert in a timely and appropriate manner, any such proceeding or the filing of any such
petition, (iii) apply for or consent to the appointment of a receiver, paying agent, custodian,
sequestrator or similar official for Crystal Water or the Holding Company or for a substantial part
of its property, (iv) file an answer admitting the material allegations of a petition filed against
it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi)
become unable, admit in writing its inability or fail generally to pay its debts as they become
due; or
(e) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in
a court of competent jurisdiction seeking (i) relief in respect of Crystal Water or the
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EXHIBIT 4.32
Holding Company, or of a substantial part of its property, under the United States Bankruptcy
Code or any other Federal, state or foreign bankruptcy, insolvency or similar law or (ii) the
appointment of a receiver, paying agent, custodian, sequestrator or similar official for Crystal
Water or the Holding Company or for a substantial part of its property; and such proceeding or
petition shall continue undismissed for forty-five (45) days or an order or decree approving or
ordering any of the foregoing shall continue unstayed and in effect for thirty (30) days.
SECTION 5.02. Remedies.
If an Event of Default shall occur and be continuing, then FGIC may
take whatever action at law or in equity may appear necessary or desirable, including, without
limitation, legal action for the specific performance of any covenant made by Crystal Water or the
Holding Company herein and any financing document and, to the extent applicable, the pursuit of
remedies available under the Bonds, the Company Documents and the Guaranty Agreement to collect the
amounts then due under this Agreement, or to enforce performance and observance of any obligation,
agreement or covenant of Crystal Water or the Holding Company under the Bonds, Company Documents
and the Guaranty Agreement. All rights and remedies of FGIC under this Section 5.02 are cumulative
and the exercise of any one remedy does not preclude the exercise of one or more of the other
available remedies under the Bonds, the Company Documents, the Indenture and the Guaranty
Agreement, or now or hereafter existing at law or in equity. No delay or omission to exercise any
right or power accruing under the Bonds, the Company Documents, the Indenture, the Guaranty
Agreement, or any other financing document, or otherwise, upon the happening of any event set forth
in Section 5.01, shall impair any such right or power or shall be construed to be a waiver thereof,
but any such right and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle FGIC to exercise any remedy reserved to FGIC in this Article, it
shall not be necessary to give any notice, other than such notice as may be required by this
Article.
ARTICLE VI
SETTLEMENT
Financial Guaranty shall have the exclusive right to decide and determine whether any claim,
liability, suit or judgment made or brought against Financial Guaranty on the Policy (a Policy
Claim), shall or shall not be paid, compromised, resisted, defended, tried or appealed, and
Financial Guarantys decision thereon, if made in good faith, shall be final and binding upon
Crystal Water and the Holding Company. An itemized statement of payments made by Financial
Guaranty, certified by an officer of Financial Guaranty, or the voucher or vouchers for such
payments, shall be prima facie evidence of the liability of Crystal Water and the Holding Company.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Reimbursement of Costs and Expenses; Payments Generally.
(a) Crystal Water and the Holding Company shall pay or reimburse FGIC for any and all charges,
fees, costs, and expenses (including reasonable attorneys fees) that FGIC may reasonably pay or
incur in connection with the following: (i) the administration, enforcement, defense, or
preservation of any rights or security hereunder or under any other transaction
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EXHIBIT 4.32
document; (ii) the pursuit of any remedies hereunder, under any other transaction document, or
otherwise afforded by law or equity, (iii) any amendment, waiver, or other action hereunder or with
respect to or related to any transaction document whether or not executed or completed; (iv) the
violation by Crystal Water and the Holding Company of any law, rule, or regulation or any judgment,
order or decree applicable to it; (v) any advances or payments made by FGIC to cure defaults of
Crystal Water and the Holding Company under the transaction documents; or (vi) any litigation or
other dispute in connection with this Agreement or any other transaction document, or the
transactions contemplated hereby or thereby, other than amounts resulting from the failure of the
FGIC to honor its payment obligations under the Policy. FGIC reserves the right to charge a
reasonable fee as a condition to executing any amendment, waiver, or consent proposed in respect of
any transaction document. The obligations of Crystal Water and the Holding Company to FGIC shall
survive discharge and termination of the transaction documents. Crystal Water and the Holding
Companys obligations under this Section 7.01 shall be unconditional and shall be paid promptly
upon receipt by the Company of demand therefor.
(b) If any payment hereunder is specified to be made on a date that is not a Business Day,
then such payment shall be made on the Business Day next succeeding the date originally specified
for such payment.
SECTION 7.02. Indemnification; Limitation of Liability.
(a) In addition to any and all rights of indemnification or any other rights of FGIC pursuant
hereto or under law or equity or under any financing document, Crystal Water and the Holding
Company and any successors thereto agree to pay, and to protect, indemnify and save harmless, FGIC
and its officers, directors, shareholders, employees, and agents, from and against any and all
claims, losses, liabilities (including penalties), actions, suits, judgments, demands, damages,
costs or reasonable expenses, including, without limitation, reasonable fees and expenses of
attorneys, consultants and auditors and reasonable costs of investigations or obligations
whatsoever paid by FGIC (herein collectively referred to as
Liabilities
) of any nature arising
out of or relating to the transactions contemplated by the financing documents by reason of:
(i) any untrue statement or alleged untrue statement of a material fact contained in
the offering document or in any amendment or supplement thereto or arising out of or based
upon any omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except insofar as such
Liabilities arise out of or are based upon any such untrue statement or omission or
allegation thereof based upon information which describes FGIC in the offering document set
forth under the caption Bond Insurance, or in the financial statements of FGIC, including
any information in any amendment or supplement to the offering document furnished by FGIC in
writing expressly for use therein that amends or supplements such information;
(ii) to the extent not covered by clause (i) above, any act or omission of Crystal
Water and the Holding Company in connection with the offering, issuance, sale or delivery of
the Bonds other than by reason of false or misleading information provided
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EXHIBIT 4.32
by FGIC in writing for inclusion in the offering document as specified in clause (i)
above or the allegation thereof;
(iii) the misfeasance or malfeasance of, or negligence or theft committed by, any
director, officer, employee or agent of any of Crystal Water and the Holding Company; and
(iv) any claim by any party other than the parties to be indemnified under this Section
7.02 arising out of any Event of Default under the Company Documents.
(b) This indemnity provision shall survive the termination of this Agreement and shall survive
until the statute of limitations has run on any causes of action which arise from one of these
reasons and until all suits filed as a result thereof have been finally concluded. Any party which
proposes to assert the right to be indemnified under this Section 7.02 will promptly after receipt
of notice of commencement of any action, suit or proceeding against such party in respect of which
a claim is to be made against Crystal Water and the Holding Company under this Section 7.02, shall
notify Crystal Water and the Holding Company of the commencement of such action, suit or
proceeding, enclosing a copy of all papers served. In case any action, suit or proceeding shall be
brought against any indemnified party and it shall notify Crystal Water and the Holding Company of
the commencement thereof, Crystal Water and the Holding Company shall be entitled to participate
in, and, to the extent that it shall wish, to assume the defense thereof, with counsel satisfactory
to such indemnified party, and after notice from Crystal Water and the Holding Company to such
indemnified party of its election so to assume the defense thereof, Crystal Water and the Holding
Company shall not be liable to such indemnified party for any legal expenses other than reasonable
costs of investigation subsequently incurred by such indemnified party in connection with the
defense thereof. The indemnified party shall have the right to employ its counsel in any such
action the defense of which is assumed by Crystal Water and the Holding Company in accordance with
the terms of this subsection (b), but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless the employment of counsel by such indemnified party has been
authorized by Crystal Water and the Holding Company, or unless there is a conflict of interest.
Crystal Water and the Holding Company shall not under any circumstances be liable for any
settlement of any action or claim effected without its prior written consent.
SECTION 7.03. Exercise of Rights.
No failure or delay on the part of FGIC to exercise any
right, power or privilege under this Agreement and no course of dealing between FGIC Crystal Water
and the Holding Company or any other party shall operate as a waiver of any such right, power or
privilege, nor shall any single or partial exercise of any such right, power or privilege preclude
any other or further exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein expressly provided are cumulative and not exclusive of any rights or
remedies which FGIC would otherwise have pursuant to law or equity. No notice to or demand on any
party in any case shall entitle such party to any other or further notice or demand in similar or
other circumstances, or constitute a waiver of the right of the other party to any other or further
action in any circumstances without notice or demand.
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EXHIBIT 4.32
SECTION 7.04. Amendment and Waiver.
Any provision of this Agreement may be amended, waived,
supplemented, discharged or terminated only with the prior written consent of Crystal Water, the
Holding Company and FGIC. Crystal Water and the Holding Company hereby agree that upon the written
request of the Trustee, Financial Guaranty may make or consent to issue any substitute for the
Policy to cure any ambiguity or formal defect or omission in such Policy which does not materially
change the terms of such Policy or adversely affect the rights of the Holders, and this Agreement
shall apply to such substituted Policy. Financial Guaranty agrees to deliver to Crystal Water and
the Holding Company and to the company or companies, if any, rating the Bonds, a copy of such
substituted Policy.
SECTION 7.05. Payments.
The payments due by Crystal Water under the Note and the Loan
Agreement shall be structured such that moneys are deposited with the Bond Trustee five days in
advance of debt service payments on the Bonds Insured.
SECTION 7.06. Successors and Assigns; Descriptive Headings.
(a) This Agreement shall bind, and the benefits thereof shall inure to, Crystal Water and the
Holding Company and FGIC and their respective successors and assigns, so long as any Indenture is
in full force and effect. Except pursuant to an event specified in Article IV herein, neither
Crystal Water, the Holding Company nor FGIC may transfer or assign any or all of its rights and
obligations hereunder without the prior written consent of the other party hereto and any such
transfer or assignment without such written consent shall be void.
(b) The descriptive headings of the various provisions of this Agreement are inserted for
convenience of reference only and shall not be deemed to affect the meaning or construction of any
of the provisions hereof.
SECTION 7.07. Waiver.
Crystal Water and the Holding Company waives any defense that this
Agreement was executed subsequent to the date of the Policy, admitting and covenanting that such
Policy was executed pursuant to Crystal Water and the Holding Companys request and in reliance on
Crystal Water and the Holding Companys promise to execute this Agreement.
SECTION 7.08. Entire Agreement.
This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes any and all prior
agreements and understandings of the parties hereto with respect to the subject matter hereof,
including but not limited to the Commitment.
SECTION 7.09. Notices, Requests, Demands.
Except as otherwise expressly provided herein, all
written notices, requests, demands or other communications to or upon the respective parties hereto
shall be deemed to have been given or made when actually received, or in the case of telecopier
notice sent over a telecopier machine owned or operated by a party hereto, when sent, with
confirmation of receipt, addressed as specified below or at such other address as either of the
parties hereto may hereafter specify in writing to the other:
If to the Company:
The Crystal Water Company of Danielson
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EXHIBIT 4.32
93 West Main Street
Clinton, Connecticut 06413
Attention: Vice President Finance
and Chief Financial Officer
Fax No.: 860-669-9326
If to the Holding Company:
Connecticut Water Service Inc.
93 West Main Street
Clinton, Connecticut 06413
Attention: Vice President Finance
and Chief Financial Officer
Fax No.: 860-669-9326
If to FGIC:
Financial Guaranty Insurance Company
125 Park Avenue
New York, New York 10017
Attention: Manager, Global Utilities
Fax No.: 212-312-3093
SECTION 7.10. Survival of Representations and Warranties.
All representations, warranties
and obligations contained herein shall survive the execution and delivery of this Agreement and the
Policy.
SECTION 7.11. Governing Law.
This Agreement and the rights and obligations of the parties
under this Agreement shall be governed by and construed and interpreted in accordance with the laws
of the State of New York.
SECTION 7.12. Counterparts.
This Agreement may be executed in any number of copies and by
the different parties hereto on the same or separate counterparts, each of which shall be deemed to
be an original instrument. Complete counterparts of this Agreement shall be lodged with Crystal
Water, the Holding Company and FGIC.
SECTION 7.13. Severability.
In the event any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate
or render unenforceable any other provision hereof.
SECTION 7.14. Parties Interested Herein
. Nothing in this Agreement expressed or implied is
intended or shall be construed to confer upon, or to give or grant to, any person or entity, other
than Crystal Water and the Holding Company and Financial Guaranty, any right, remedy or claim under
or by reason of this Agreement or any covenant, condition or stipulation hereof, and all covenants,
stipulations, promises and agreements in this Agreement contained by and on behalf of Crystal Water
and the Holding Company shall be for the sole and exclusive benefit of Crystal Water and the
Holding Company and Financial Guaranty.
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EXHIBIT 4.32
SECTION 7.15. Term
. This Agreement shall expire upon the later of (i) the expiration of the
Policy in accordance with the terms thereof, or (ii) the repayment in full to Financial Guaranty of
any amounts due and owing to it by the Company under this Agreement or the Policy.
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EXHIBIT 4.32
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to
be duly executed and delivered as of the date first above written.
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THE CRYSTAL WATER COMPANY OF DANIELSON
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By:
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/s/ David C. Benoit
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David C. Benoit
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Vice President Finance and Chief Financial
Officer
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CONNECTICUT WATER SERVICE, INC.
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By:
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/s/ David C. Benoit
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Daniel C. Benoit
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Vice President Finance and Chief Financial
Officer
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FINANCIAL GUARANTY INSURANCE COMPANY
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By:
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/s/ Paul R. Morrison
Paul R. Morrison
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Managing Director, International and Global
Utilities
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EXHIBIT 4.32
ANNEX A
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly provided herein or unless
the context otherwise requires, all capitalized terms used herein and not otherwise defined shall
have the same meaning as in the Indenture, and all other capitalized terms shall have the meaning
as set out below.
Agreement
means this Insurance Agreement.
Attributable Debt
in respect of a sale and leaseback transaction means, at the time of
determination, the present value of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction, including any period
for which such lease has been extended or may, at the option of the lessor, be extended. Such
present value shall be calculated using a discount rate equal to the rate of interest implicit in
such transaction, determined in accordance with generally accepted accounting principles.
Bonds
has the meaning set forth in the first recital of this Agreement.
Commitment
means that certain letter, dated March 17, 2005 as amended on October 5, 2005 and
on November 18, 2005, between Crystal Water, the Holding Company and FGIC.
Company Documents
has the meaning set forth in Article III(a).
Debt
means (A) indebtedness of Crystal Water or a Significant Subsidiary for borrowed money
evidenced by a bond, debenture, note or other written instrument or agreement by which Crystal
Water or a Significant Subsidiary is obligated to repay such borrowed money and (B) any guaranty by
Crystal Water or a Significant Subsidiary of any such indebtedness of another Significant
Subsidiary. Debt does not include, among other things, (w) indebtedness of Crystal Water or a
Significant Subsidiary under any installment sale or conditional sale agreement or any other
agreement relating to indebtedness for the deferred purchase price of property or services, or (x)
any trade obligation (including obligations under power or other commodity purchase agreements and
any hedges or derivatives associated therewith), or other obligations of Crystal Water or a
Significant Subsidiary in the ordinary course of business, (y) obligations of Crystal Water or a
Significant Subsidiary under any lease agreement (including any lease intended as security),
whether or not such obligations are required to be capitalized on the balance sheet of Crystal
Water or a Significant Subsidiary under generally accepted accounting principles.
Dollar
or
$
means a dollar or other equivalent unit in such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public and private debts.
Effective Interest Rate
means the lesser of the (i) the prime rate announced from time to
time by Citibank, N.A., or (ii) the maximum rate of interest permitted by then applicable law.
Event of Default
shall mean the events of default set forth in Section 5.01 of this
Agreement.
A-1
EXHIBIT 4.32
Holder
or
Holders
means the Person in whose name a Bond is registered on the books kept
and maintained by the Trustee for registration and transfer of the Bonds.
Indenture
has the meaning set forth in the first recital of this Agreement.
Internal Revenue Code
means the Internal Revenue Code of 1986, as amended, or any successor
federal statute.
Lien
means any mortgage, deed of trust, pledge, security interest, encumbrance, easement,
lease, reservation, restriction, servitude, charge or similar right and any other lien of any kind,
including, without limitation, any conditional sale or other title retention agreement, any lease
in the nature thereof, and any defect, irregularity, exception or limitation in record title or,
when the context so requires, any lien, claim or interest arising from any of the foregoing.
Loan Agreement
has the meaning set forth in the second recital of this Agreement.
Net Tangible Assets
means the total amount of Crystal Waters assets determined on a
consolidated basis in accordance with generally accepted accounting principles as of a date
determined pursuant to Section 4.02,
less
(i) the sum of Crystal Waters consolidated current
liabilities determined in accordance with generally accepted accounting principles, and (ii) the
amount of Crystal Waters consolidated assets classified as intangible assets, determined in
accordance with generally accepted accounting principles, including, but not limited to, such items
as goodwill, trademarks, trade names, patents, and unamortized debt discount and expense and
regulatory assets carried as an asset on Crystal Waters consolidated balance sheet.
Policy Claim
has the meaning set forth in Article VI.
Policy Payment
means any payment by FGIC pursuant to the terms of the Policy.
Premium
means the premium described in the Commitment and payable by Crystal Water to FGIC
pursuant to Section 2.01 hereof.
Principal Property
means any property of Crystal Water or any Significant Subsidiary.
Significant Subsidiary
shall have the meaning specified in Rule 1-02(w) of Regulation S-X
under the Securities Act of 1933, as amended.
A-2
EXHIBIT 4.32
ANNEX B
LIQUIDITY FACILITY REQUIREMENTS
1.
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Liquidity Provider Credit Ratings:
The provider (the Provider) of a liquidity facility
(the Facility) to be used to pay the purchase price of tendered variable rate bonds (the
Bonds) shall be rated by both Moodys Investors Service (Moodys) and Standard & Poors
Ratings Services (S&P), and shall be of sufficient strength to cause the short-term ratings
for the Bond issue to be A-1+ by S&P and VMIG-1 by Moodys. Financial Guaranty will not
deliver its bond insurance policy (the Policy) until such rating or ratings have been
released. Any Provider whose long-term rating drops below A- (S&P) or A3 (Moodys) shall be
replaced at the request of Financial Guaranty.
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2.
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Initial Term of Facility:
Minimum initial term of 364 days is acceptable so long as the
notice of non-renewal (Section 9 hereof) provides adequate time for the Issuer to find a
substitute facility and the authorizing document mechanics in the event of non-renewal provide
for the Bonds to be tendered and the Facility to be drawn upon before expiration of the
Facility.
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3.
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Renewals and Amendments:
Any renewal on terms not identical to the terms of the initial (or
then renewing) Facility, or with a different Provider, shall be subject to the prior written
consent of Financial Guaranty. Financial Guaranty shall be provided with notice (and a copy)
of all Facility renewals, amendments and supplements.
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4.
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(a)
Immediate Termination Events.
Upon the occurrence of
only
the following events, the
Provider may terminate the Facility prior to the stated expiration date thereof without
offering Bondholders one last opportunity to tender the Bonds to the Provider for purchase:
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(i)
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Policy Default
. Failure by Financial Guaranty to pay
principal and interest when, as and in the amounts required under the Policy,
including interest at the bank rate due the Provider on disbursements under
the Facility if such amount is included as interest on the Bonds under the
terms of the Bonds;
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(ii)
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Payment Default Under Other Insurance
. Any default by
Financial Guaranty in making payment when, as and in the amounts required to be
made pursuant to the express terms and provisions of any other municipal bond
insurance policy or surety bond issued by Financial Guaranty;
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(iii)
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Nullity of Policy
. The Policy for any reason ceases
to be in full force and effect or is declared by a court of competent
jurisdiction to be null and void, or Financial Guaranty denies that it has any
further liability under the terms thereof; or
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(iv)
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Insolvency Proceeding Against Financial Guaranty
. A
proceeding has been instituted in a court having jurisdiction in the premises
seeking an
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EXHIBIT 4.32
order for relief, rehabilitation, reorganization, conservation, liquidation
or dissolution in respect of Financial Guaranty under the Insurance Law of
the State of New York or any successor provision thereto and such proceeding
is not terminated for a period of 60 consecutive days or such court enters
an order granting the relief sought in such proceeding.
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(b)
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Termination Event Requiring One Last Put Opportunity.
Upon the occurrence of
only
the following events, the Provider may terminate the Facility prior to the stated
expiration date thereof but must provide Bondholders with one last opportunity to
tender their Bonds to the Provider for purchase prior to termination:
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(i)
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The financial strength rating assigned to Financial Guaranty or
the rating assigned to securities insured by Financial Guaranty, as applicable,
is withdrawn, suspended or reduced to A, A2 or A, or below by any two of S&P,
Moodys or Fitch, respectively.
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(ii)
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Failure of the Issuer to pay the Provider commitment fees for the Facility.
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(c)
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No Other Termination Events.
The only events permitting termination of the
Facility by the Provider prior to its stated expiration date are as specified in 4(a)
and 4(b) above. In particular, neither failure by the issuer to comply with any
covenants made by it in the Facility nor breach by the issuer of any representation or
warranty made by it in the Facility nor continuation of such failure or breach
following receipt by the issuer of notice thereof is a permissible event of
termination. The sole remedy allowed to the Provider upon such an event of default
shall be the ability to sue for specific performance.
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(d)
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Events Permitting Acceleration.
Upon the occurrence of an event described in
4(a), the Provider may tender its Bonds to the issuer for immediate repurchase, and no
limitations shall be imposed on the exercise by the Provider of any remedies available
to it against the issuer (
e.g.,
causing the issuer to accelerate its loan to the
ultimate borrower of Bond proceeds) should the issuer default on any such repurchase
obligation to the Provider.
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5.
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Conditions to Effectiveness of Facility:
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(a)
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As a condition to closing, Financial Guaranty may be required to provide its
customary enforceability and disclosure opinion with respect to the Policy.
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(b)
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As a condition to the issuance of the Policy, an opinion of counsel to the
Provider (including a separate opinion of foreign counsel in the case of a U.S. branch
of a foreign bank) regarding corporate matters, validity, enforceability and such other
matters as Financial Guaranty shall require, shall be addressed to (or shall be the
subject of a reliance letter addressed to) Financial Guaranty.
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B-2
EXHIBIT 4.32
6.
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Form of Liquidity Facility:
Either a letter of credit or a standby bond purchase
agreement shall be acceptable.
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7.
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Parity Payments:
(Applicable for revenue bond issues)
The Facility shall provide that only
the following amounts are payable on a parity with principal of and interest on the Bonds: (i)
the Providers periodic commitment fee and (ii) interest on the Bonds held by the Provider
calculated at the provider rate. All other amounts (
e.g.,
increased obligation of the
debtor enforceable in accordance with its terms costs, uninsured claw-back amount, penalty
interest charges and indemnification amounts) shall be payable on a subordinated basis to
payment of principal and interest on the Bonds, replenishment of any debt service reserve fund
and payment of the fees of the trustee or paying agent for the Bonds (herein, the Trustee),
and both the Facility and the authorizing document for the Bonds shall specifically so
provide.
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8.
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Increased Costs:
Any increased costs payable by the issuer pursuant to the Facility shall
be subordinated to the payment of principal and interest on the Bonds, replenishment of any
debt service reserve fund and payment of the fees of the Trustee, and the Facility shall
expressly so provide. The Facility shall limit increased costs to increases in costs to the
Provider or any participant of its obligations under the Facility as the result of the
imposition, increase or applicability of any reserve, special deposit, capital adequacy or
similar requirement against the obligations of the Provider or any participant under the
Facility (other than as a result of the acts, omissions or financial condition of the Provider
or such participant) due to any change in any law or regulation or in the interpretation
thereof by any court or administrative or governmental authority charged with the
administration thereof.
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9.
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Notice of Non-Renewal:
The Provider shall be required to give not less than 30 days notice
to the Trustee and Financial Guaranty before the Trustee under the authorizing document is
required to give Bondholders notification to tender Bonds as a result of a non-renewal
(Non-Renewal Mandatory Tender). (If the Trustee is required to send out a Mandatory Tender
Notice 30 days prior to the Facility termination, the Provider will be required to give the
Trustee notice of non-renewal 60 days prior to the expiration date of the Facility of its
intention not to renew or extend the Facility.) Early termination pursuant to paragraph 4(b)
above requires the same timing notification as described above. Early termination pursuant to
paragraph 4(a) above requires no prior notice.
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10.
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Certain Mandatory Conversions to Fixed Rate:
The Trustee shall commence the process required
by the authorizing document to effect a mandatory conversion of the interest rate on the Bonds
to a fixed rate (sufficient to accomplish the complete remarketing at par of all Bonds then
held by the Provider) on or as soon as practicable after the termination date of the Facility,
in the case of a termination pursuant to paragraph 4(a) or 4(b) and a Non-Renewal Mandatory
Tender:
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If such a remarketing cannot be effected, the Bonds shall continue to bear interest at the
variable rate and the remarketing agent shall attempt at least weekly to convert the Bonds
to a fixed interest rate sufficient to effect the remarketing at par of all Bonds then held
by the Provider.
B-3
EXHIBIT 4.32
11.
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Holding Periods:
For amortization periods of less than 5 years, no amortization shall be
permitted prior to the first anniversary of the date the tendered Bonds are purchased by the
Provider. For amortization periods of 5 years or more, no amortization shall be permitted
prior to 6 months from the date the tendered Bonds are purchased by the Provider. Whether
during the term of the Facility or subsequent to the termination thereof, the Provider shall
not be permitted to tender unremarketed Bonds to the issuer and shall be required to hold such
Bonds for the periods and in accordance with the conditions set forth above (except that no
holding period is required in the event of a termination of the Facility pursuant to 4(a)
hereof). Financial Guaranty shall pay only principal and interest on the Bonds as scheduled,
in accordance with the terms of the Policy, unless Financial Guaranty has provided, at the
request of the Provider, an endorsement to its Policy to cover a special mandatory redemption
under the authorizing document.
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12.
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Maximum Rates:
The maximum rate payable for any interest payment period on the Bonds,
whether or not held by or pledged to the Provider at such time, shall be the lesser of 10%
per annum and the maximum rate permitted by applicable law (the Cap Rate).
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B-4
EXHIBIT 10.27
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
between
THE CONNECTICUT WATER COMPANY
CONNECTICUT WATER SERVICE, INC.
and
Thomas R. Roberts
EXHIBIT 10.27
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT,
dated as of November 9, 2005, is made by and between The Connecticut Water
Company, a Connecticut corporation having its principal place of business in Clinton, Connecticut,
(Company), Connecticut Water Service, Inc., a Connecticut corporation and holder of all of the
outstanding capital stock of Company (Parent) and THOMAS R. ROBERTS (Executive), a resident of
Guilford, Connecticut.
W I T N E S S E T H :
WHEREAS,
Executive has been and continues to be employed by Company and Parent in an executive
capacity and has entered into an Employment Agreement between Executive and Company and Parent
dated as of November 9, 2005 which becomes effective upon a Change-in-Control, as defined herein,
of Company or Parent; and
WHEREAS,
should Company or Parent receive a proposal from or engage in discussions with a
third person concerning a possible combination with Company or Parent or the acquisition of a
substantial portion of voting securities of Company or Parent, the Boards of Directors of Company
and Parent have deemed it imperative that they and Company and Parent be able to rely on Executive
to continue to serve in Executives position and that the Boards of Directors and Company and
Parent be able to rely upon Executives advice as being in the best interests of Company and Parent
and their shareholders without concern that Executive might be distracted by the personal
uncertainties and risks that such a proposal or discussions might otherwise create; and
WHEREAS,
Company and Parent desire to reward Executive for Executives valuable, dedicated
service to Company and Parent should Executives service be terminated under circumstances
hereinafter described: and
WHEREAS,
Executive, Company and Parent are willing to enter into this Amended and Restated
Employment Agreement (Agreement) on the terms herein set forth;
NOW, THEREFORE,
to assure Company and Parent of Executives continued dedication and the
availability of Executives advice and counsel in the event of any such proposal, to induce
Executive to remain in the employ of Company and Parent and to reward Executive for Executives
valuable dedicated service to Company and Parent should Executives service be terminated under
circumstances hereinafter described, and for other good and valuable consideration, the receipt and
adequacy of which each party acknowledges, Company, Parent and Executive agree as follows:
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1.
Definitions
.
For purposes of this Agreement, the following terms shall have the
following meanings:
(a) Cause shall mean Executives serious, willful misconduct in respect of Executives
duties under this Agreement, including conviction for a felony or perpetration by Executive of a
common law fraud upon Company or Parent which has resulted or is likely to result in material
economic damage to Company or Parent, as determined by a vote of at least seventy-five percent
(75%) of all of the Directors (excluding Executive) of each of Companys and Parents Board of
Directors;
(b) Change-in-Control shall be deemed to have occurred if after the date hereof (i) a public
announcement shall be made or a report on Schedule 13D shall be filed with the Securities and
Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the Act)
disclosing that any Person (as defined below), other than Company or Parent or any employee benefit
plan sponsored by Company or Parent, is the beneficial owner (as the term is defined in Rule 13d-3
under the Act) directly or indirectly, of twenty percent (20%) or more of the total voting power
represented by Companys or Parents then outstanding voting common stock (calculated as provided
in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire voting common stock);
or (ii) any Person, other than Company or Parent or any employee benefit plan sponsored by Company
or Parent, shall purchase shares pursuant to a tender offer or exchange offer to acquire any voting
common stock of Company or Parent (or securities convertible into such voting common stock) for
cash, securities or any other consideration, provided that after consummation of the offer, the
Person in question is the beneficial owner directly or indirectly, of twenty percent (20%) or more
of the total voting power represented by Companys or Parents then outstanding voting common stock
(all as calculated under clause (i)); or (iii) the stockholders of Company or Parent shall approve
(A) any consolidation or merger of Company or Parent in which Company or Parent is not the
continuing or surviving corporation (other than a merger of Company or Parent in which holders of
the outstanding capital stock of Company or Parent immediately prior to the merger have the same
proportionate ownership of the outstanding capital stock of the surviving corporation immediately
after the merger as immediately before), or pursuant to which the outstanding capital stock of
Company or Parent would be converted into cash, securities or other property, or (B) any sale,
lease, exchange or other transfer (in one transaction or a series of related transactions) of all
or substantially all the assets of Company or Parent; or (iv) there shall have been a change in the
composition of the Board of Directors of Company or Parent at any time during any consecutive
twenty-four (24) month period such that continuing directors cease for any reason to constitute
at least a majority of the Board unless the election, or the nomination for election of each new
Director was approved by a vote of at least two-thirds (2/3) of the Directors then still in office
who were Directors at the beginning of such period; or (v) the Board of Directors of Company or
Parent, by a vote of a majority of all the Directors (excluding Executive) adopts a resolution to
the effect that a Change-in-Control has occurred for purposes of this Agreement.
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(c) Disability shall mean the incapacity of Executive by illness or any other cause as
determined under the long-term disability insurance plan of Company in effect at the time in
question, or if no such plan is in effect, then such incapacity of Executive as prevents Executive
from performing the essential functions of Executives position with or without reasonable
accommodation for a period in excess of two hundred forty (240) days (whether or not consecutive),
or one hundred eighty (180) days consecutively, as the case may be, during any twelve (12) month
period.
(d) Effective Date shall be the date on which a Change-in-Control occurs. Anything in this
Agreement to the contrary notwithstanding, if Executives employment is terminated prior to the
date on which a Change-in-Control occurs, and it is reasonably demonstrated that such termination
(i) was at the request of a third party who has taken steps reasonably calculated to effect a
Change-in-Control or (ii) otherwise arose in connection with or anticipation of a
Change-in-Control, then for all purposes of this Agreement the Effective Date shall mean the date
immediately prior to the date of such termination.
(e) Good Reason shall mean the occurrence of any action which (i) removes or changes
Executives title or reduces Executives job responsibilities or base salary; (ii) results in a
significant worsening of Executives work conditions; or (iii) moves Executives place of
employment to a location that increases Executives commute by more than thirty (30) miles over the
length of Executives commute from Executives place of principal residence at the time the move is
requested. For purposes of this subparagraph (e), any good faith determination by Executive that
any such action has occurred shall be conclusive. Notwithstanding the foregoing, at any time
during the period commencing on the Effective Date and ending on the 30th day after the first
anniversary of the Effective Date, except for purposes of Paragraph 5(g), Good Reason shall mean
any reason or no reason.
(f) Person shall mean any individual, corporation, partnership, company or other entity, and
shall include a group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934.
2.
Employment
.
(a) As of the Effective Date, Company hereby agrees to continue to employ Executive and
Executive agrees to remain in the employ of Company for the Term of this Agreement upon the terms
and conditions hereinafter set forth. Subject to the provisions of subparagraph (b) of this
Paragraph 2, and to the provisions of Paragraph 6 below, Term shall mean a continuously renewing
period of three (3) years commencing on the Effective Date.
(b) At any time during the Term, the Board of Directors of Company and Parent may, by written
notice to Executive, advise Executive of their desire to modify or amend any of the terms or
provisions of this Agreement or to delete or add any terms or provisions. Any such notice
(Notice) shall describe the proposed modifications in reasonable detail. In the event a Notice
shall be given to Executive, then Company, Parent and Executive agree to discuss
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the proposed modification(s) and to attempt in good faith to reach agreement with respect thereto
and to reduce such agreement to writing in an amendment to be executed by all the parties
(Amendment). If a Notice is given hereunder and an Amendment shall not have been executed on or
before the sixtieth (60th) day following the date on which Notice is given, then the Term shall
thereupon be automatically converted to a fixed period ending three (3) years after the expiration
of such sixty (60) days.
3.
Duties of Employment
.
(a) During the Term, Executives position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and assigned at any time
during the ninety (90)-day period immediately preceding the Effective Date and Executives services
shall be performed at such location as Executive shall determine.
(b) During the Term, Executive will serve Company faithfully, diligently and competently and
will devote full-time to Executives employment and will hold, in addition to the offices held on
the Effective Date, such other executive offices of Company or Parent, or their respective
subsidiaries and affiliates, to which Executive may be elected, appointed or assigned by the Boards
of Directors of Company or Parent from time to time and will discharge such executive duties in
connection therewith. Nothing in this Agreement shall preclude Executive, with the prior approval
of the Board of Directors of Company, from devoting reasonable periods of time required for (i)
serving as a director or member of a committee of any organization involving no conflict of
interest with Company or Parent, or (ii) engaging in charitable, religious and community
activities,
provided
, that such directorships, memberships or activities do not materially
interfere with the performance of Executives duties hereunder.
4.
Compensation
.
During the Term, Company shall pay to Executive as compensation for
the services to be rendered by Executive hereunder the following:
(a) A base salary at a rate equal to the highest base salary paid or payable to Executive by
Company during the twelve (12)-month period immediately preceding the month in which the Effective
Date occurs, or such larger sum as the Board of Directors of Company may from time to time
determine in connection with regular periodic performance reviews pursuant to Companys policies
and practices. Such compensation shall be payable in accordance with the normal payroll practices
of Company. Executive shall receive an annual increase in base salary at each normal pay
adjustment date during the Term, but no later than one (1) year after the date of Executives last
increase and annually thereafter during the Term, of not less than the percentage increase in the
cost-of-living since Executives last pay adjustment, as measured by the Consumer Price Index-All
Urban Consumers of the U.S. Bureau of Labor Statistics.
(b) In addition, Company shall pay to Executive an annual bonus, payable in cash or other form
of compensation, in accordance with the Companys practice or plan for annual bonuses for peer
executives which is at least equal to the target percentage of the
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midpoint of Executives salary grade under the Companys Officers Incentive Program for the year
preceding the fiscal year in which the Effective Date occurs.
5.
Benefits
.
During the Term, Executive shall be entitled to the following benefits:
(a)
Incentive, Savings and Retirement Plans
. In addition to base salary and bonus
payable as hereinabove provided, Executive shall be entitled to participate during the Term in all
incentive, savings and retirement plans, practices, policies and programs applicable to executive
employees of Company as may be in effect from time to time. Such plans, practices, policies and
programs, in the aggregate, shall provide Executive with compensation, benefits and reward
opportunities at least as favorable as the most favorable of such compensation, benefits and reward
opportunities provided by Company for Executive under such plans, practices, policies and programs
as in effect at any time during the ninety (90)-day period immediately preceding the Effective Date
or, if more favorable to Executive, as provided at any time thereafter with respect to other key
employees of Company or Parent.
(b)
Welfare Benefit Plans
. During the Term, Executive and/or Executives family, as
the case may be, shall be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs applicable to executive employees of
Company (including, without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident insurance plans and
programs) at least as favorable as the most favorable of such plans, practices, policies and
programs in effect at any time during the ninety (90)-day period immediately preceding the
Effective Date or, if more favorable to Executive and/or Executives family, as in effect at any
time thereafter with respect to other key employees of Company or Parent.
(c)
Expenses
. During the Term, Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by Executive in accordance with the most
favorable policies, practices and procedures of Company in effect at any time during the ninety
(90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in
effect at any time thereafter with respect to other key employees of Company or Parent.
(d)
Fringe Benefits
. During the Term, Executive shall be entitled to fringe benefits,
including use of an automobile and payment of related expenses or payment of an allowance for
automobile related expenses, in accordance with the most favorable plans, practices, programs and
policies of Company in effect at any time during the ninety (90)-day period immediately preceding
the Effective Date or, if more favorable to Executive, as in effect at any time thereafter with
respect to other key employees of Company or Parent.
(e)
Office and Support Staff
. During the Term, Executive shall be entitled to an
office or offices of a size and with furnishings and other appointments, and to secretarial and
other assistance, at least equal to the most favorable of the foregoing provided to Executive by
Company at any time during the ninety (90)-day period immediately preceding the Effective Date or,
if more favorable to Executive, as provided at any time thereafter with respect to other key
employees of Company or Parent.
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(f)
Vacation
. During the Term, Executive shall be entitled to paid vacation in
accordance with the most favorable plans, policies, programs and practices of Company as in effect
at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect at any time thereafter with respect to other key employees of
Company or Parent.
6.
End of Term and Notice of Termination
.
(a)
End of Term
. The Term shall end upon the occurrence of any of the following
events:
(i) Termination of Executives employment by Company for Cause.
(ii) The voluntary termination of Executives employment by Executive other than for Good
Reason.
(iii) The death of Executive.
(iv) Executives attainment of age sixty-five (65).
(v) Full compliance by Company with the provisions of Paragraph 7(e) below, if Executives
employment shall have been terminated by Company during the Term for any reason
other than
Cause, or if Executives employment shall have been terminated by reason of Executives Disability,
or if Executive shall have voluntarily terminated Executives employment during the Term for Good
Reason.
(b)
Notice of Termination
. Any termination by Company for Cause or by Executive for
Good Reason or on account of Executives Disability shall be communicated by notice to the other
party hereto given in accordance with Section 16 of this Agreement. For purposes of this
Agreement, a notice means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executives employment under the provision so
indicated and (iii) if the date of termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall be not more than fifteen (15) days
after the giving of such notice).
(c)
Date of Termination
. The date of termination means the date of receipt of the
notice of termination or any later date specified therein, as the case may be;
provided,
however
, that (i) if Executives employment is terminated by Company other than for Cause or on
account of Executives Disability, the date of termination shall be the date on which Company
notifies Executive of such termination and (ii) if Executives employment is terminated by reason
of death, the date of termination shall be the date of death of Executive.
7.
Payment Upon Termination
.
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(a) If Executives employment is terminated by Company for Cause, as defined in Paragraph
1(a), the obligations of Company under this Agreement shall cease and Executive shall forfeit all
right to receive any compensation or other benefits under this Agreement except only compensation
or benefits accrued or earned and vested (if applicable) by Executive as of the date of
termination, including base salary through the date of termination, benefits payable under the
terms of any qualified or nonqualified retirement plans or deferred compensation plans maintained
by Company, any accrued vacation pay as of the date of termination not yet paid by Company and any
benefits required to be paid by law such as continued health care coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) (collectively, the Accrued
Obligations).
(b) If Executive shall voluntarily terminate Executives employment during the Term, other
than for Good Reason, as defined in Paragraph 1(e), the obligations of Company under this Agreement
shall cease and Executive shall forfeit all right to receive any compensation or other benefits
under this Agreement except only the Accrued Obligations.
(c) In the event of the death of Executive during the Term, then, in addition to the Accrued
Obligations and any other benefits which may be payable by Company in respect of the death of
Executive, the base salary then payable hereunder shall continue to be paid at the then current
rate for a period of six (6) months after such death to such beneficiary as shall have been
designated in writing by Executive, or if no effective designation exists, then to the estate of
Executive.
(d) If Executives employment is terminated by reason of Executives attainment of age
sixty-five (65), the obligations of Company under this Agreement shall cease and Executive shall
forfeit all right to receive any compensation or other benefits under this Agreement except only
the Accrued Obligations.
(e) If Executives employment is terminated by Company during the Term for any reason
other than
for Cause, or Executives death, or Executives attainment of age sixty-five
(65), or if Executives employment is terminated during the Term by reason of Executives
Disability, or if Executive shall voluntarily terminate Executives employment during the Term for
Good Reason, Executive shall be entitled to receive, and Company shall be obligated to pay and
provide Executive, the following amounts:
(i) An amount in consideration of the covenants by Executive set forth in Paragraphs 8 and 9
below to be determined by a nationally recognized independent certified public accounting firm
selected and retained by Company to be the reasonable value of said covenants as of the date of
termination of Executives employment, but in no event shall such amount be greater than the
aggregate value of the benefits provided in subparagraphs (e)(ii), (iii), (iv), (v), (vii), (viii),
(ix) and (xi) hereinbelow. The benefits otherwise payable to Executive pursuant to said
subparagraphs shall be offset by the amount, if any, payable to Executive in respect of the
covenants by Executive set forth in Paragraphs 8 and 9 below. Notwithstanding the foregoing, if
any benefit otherwise payable to Executive pursuant to said subparagraphs
-8-
would be offset by the amount payable to Executive in respect of the covenants set forth in
Paragraphs 8 and 9 below, Executive may elect to receive such benefit, but the amount payable to
Executive in respect of the covenants by Executive set forth in Paragraphs 8 and 9 below shall be
reduced by the value of such benefit. Said amount paid in consideration of the covenants by
Executive set forth in Paragraphs 8 and 9 below shall be paid in cash in a lump sum in the month
next following Executives date of termination of employment and shall be treated as a supplemental
wage payment under applicable Treasury Regulations subject to federal tax withholding at the flat
percentage rate applicable thereto.
(ii) An amount equal to three (3) times the base salary of Executive, at the rate in effect
immediately prior to the date of termination, plus an amount equal to three (3) times the target
percentage of the midpoint of Executives salary grade under the Companys Officers Incentive
Program for the year in which termination occurs. There shall be subtracted from the aggregate
amount determined in accordance with the immediately preceding sentence the amount, if any, payable
to Executive under any then effective severance pay plan of Company. Such resulting amount shall
be payable in equal installments over the three (3)-year period commencing on the date of
termination of employment in accordance with the normal payroll practices of Company or, at
Companys option, the entire amount (determined without any discount) shall be paid in cash in a
lump sum in the month next following Executives date of termination of employment and shall be
treated as a supplemental wage payment under applicable Treasury Regulations subject to federal tax
withholding at the flat percentage rate applicable thereto.
(iii) An amount equal to the aggregate amounts that Company would have contributed on behalf
of Executive under Companys qualified defined contribution retirement plan(s), if any such plan(s)
shall be in effect (other than amounts attributable to Executives before-tax contributions to such
plan(s)) plus estimated earnings thereon had Executive continued in the employ of Company for the
three (3)-year period commencing on the date of termination and made contributions under said
plan(s) at a rate, as a percentage of salary, equal to the rate at which Executive had made
contributions to said plan(s) in the plan year immediately preceding Executives termination, to be
payable in a lump sum to Executive within thirty (30) days after the expiration of the
non-competition period specified in Paragraph 9(a) of this Agreement, provided that Executive shall
not have breached said non-competition provisions.
(iv) An amount equal to the difference between: (A) benefits which would have been payable to
Executive under any deferred compensation agreement between Company and Executive, if any such
agreement shall be in effect, had Executive continued in the employ of Company for the three
(3)-year period commencing on the date of termination, received compensation at least equal to that
specified in Paragraph 4 of this Agreement during such time, and deferred pursuant to said deferred
compensation agreement the amount of compensation specified therein; and (B) the benefits actually
payable to Executive under such deferred compensation agreement; such amount to be payable in a
lump sum to Executive within thirty (30) days after the expiration of the non-competition period
specified in Paragraph 9(a) of
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this Agreement, provided that Executive shall not have breached said
non-competition provisions.
(v) Additional retirement benefits equal to the difference between: (A) the annual pension
benefits that would have been payable to Executive under Companys qualified defined benefit
retirement plan (the Plan) and under any nonqualified supplemental executive retirement plan
covering Executive (the Supplemental Plan), if any such Plan or Supplemental Plan shall be in
effect, if Executive had been continued in the employ of Company for the three (3)-year period
commencing on the date of termination and had received compensation at least equal to that
specified in Paragraph 4(a) of this Agreement during such time and had been fully vested in the
benefits payable under any such Plan and Supplemental Plan; and (B) the annual benefits actually
payable to Executive under any such Plan and Supplemental Plan. The discounted present value of
such additional benefits, shall be payable to Executive in a lump sum, as calculated by the
independent actuary for the Plan using the assumptions specified in the Plan, within thirty (30)
days after the expiration of the non-competition period specified in Paragraph 9(a) of this
Agreement, provided that Executive shall not have breached said non-competition provisions.
(vi) At the date of termination of Executives employment, Executive shall be fully vested in
any form of compensation previously granted to Executive (other than benefits payable under a
qualified retirement plan), such as, by way of example only, restricted stock, stock options, and
performance share awards.
(vii) If Executives employment is terminated by reason of Executives Disability, Executive
shall be entitled to receive, in addition to the other benefits provided under this Paragraph 7(e),
disability benefits at least equal to the most favorable of those provided by Company or Parent to
disabled employees in accordance with the most favorable plans, programs, practices and policies of
Company or Parent in effect at any time during the ninety (90)-day period immediately preceding the
Effective Date or, if more favorable to Executive, as in effect on the date of Executives
Disability with respect to other key employees of Company or Parent.
(viii) During the three (3)-year period commencing on the date of termination, or such longer
period as any plan, program, practice or policy may provide, Executive shall continue to
participate in all life, health, disability and similar welfare benefit plans and programs of
Company to the extent that such continued participation is possible under the general terms and
provisions of such plans and programs, and Executive shall be credited with additional service
attributable to the three (3)-year period commencing on the date of termination for purposes of
determining eligibility to participate in any such plans or programs maintained by Company for
retirees, with Company and Executive paying the same portion of the cost of each such plan or
program as existed at the time of Executives termination. In the event that Executives continued
participation (or commencement of participation for plans or programs for retirees) is not
permitted, then in lieu thereof, Company shall acquire, with the same cost sharing, individual
insurance policies providing comparable coverage for Executive; provided, however, that Company
shall not be obligated to pay more than three (3) times
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Companys current cost for comparable group
coverage. If any such individual coverage is unavailable, then Company shall pay to Executive
annually for the three (3)-year period commencing on the date of termination an amount equal to the
sum of the average annual contributions, payments, credits, or allocations made by Company for such
coverage on Executives behalf (or the average such contributions,
payments, credits, or allocations for retirees, in the case of retiree coverage) over the
three (3) calendar years preceding the date of termination of Executives employment.
(ix) During the three (3)-year period commencing on the date of termination, Executive shall
continue to receive such perquisites, other than those specified in the preceding subparagraphs
above, as Executive was receiving at the date of termination of employment with, to the extent
applicable, the same cost sharing with Company as was in effect immediately prior to Executives
termination of employment.
(x) Company shall reimburse Executive for the amount of any reasonable legal or accounting
fees and expenses incurred by Executive to obtain or enforce any right or benefit provided to
Executive by Company hereunder or as confirmed or acknowledged hereunder.
8.
Confidential Information
.
Executive understands that in the course of Executives
employment by Company, Executive will receive or have access to confidential information concerning
the business or purposes of Company and Parent, and which Company and Parent desire to protect.
Such confidential information shall be deemed to include, but not be limited to, Companys customer
lists and information, and employee lists, including, if known, personnel information and data.
Executive agrees that Executive will not, at any time during the period ending two (2) years after
the date of termination of Executives employment, reveal to anyone outside Company or Parent or
use for Executives own benefit any such information without specific written authorization by
Company or Parent. Executive further agrees not to use any such confidential information or trade
secrets in competing with Company or Parent at any time during or in the two (2) year period
immediately following the date of termination of Executives employment with Company.
9.
Covenants by Executive Not to Compete With Company or Parent
.
(a) Upon the date of termination of Executives employment with Company for any reason,
Executive covenants and agrees that Executive will not at any time during the period of two (2)
years from and after such date of termination directly or indirectly in any manner or under any
circumstances or conditions whatsoever be or become interested, as an individual, partner,
principal, agent, clerk, employee, stockholder, officer, director, trustee, or in any other
capacity whatsoever, except as a nominal owner of stock of a public corporation, in any other
business which, at the date of Executives termination, is a Competitor (as defined herein), either
directly or indirectly, with Company or Parent, or engage or participate in, directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of an equity or debt
investment, lender or in any other manner or capacity), or lend Executives name (or any
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part or
variant thereof) to, any business which, at the date of Executives termination, is a Competitor,
either directly or indirectly, with Company or Parent, or as a result of Executives engagement or
participation would become, a Competitor, either directly or indirectly, with any aspect of the
business of Company or Parent as it exists at the time of Executives termination, or solicit any
officer, director, employee or agent of Company or Parent or any subsidiary or affiliate of
Company or Parent to become an officer, director, employee or agent of Executive, Executives
respective affiliates or anyone else. Ownership, in the aggregate, of less than one percent (1 %)
of the outstanding shares of capital stock of any corporation with one or more classes of its
capital stock listed on a national securities exchange or publicly traded in the over-the-counter
market shall not constitute a violation of the foregoing provision. For the purposes of this
Agreement, a Competitor is any business which is similar to the business of Company or Parent or in
any way in competition with the business of Company or Parent within any of the then-existing water
utility service areas of Company.
(b) Executive hereby acknowledges that Executives services are unique and extraordinary, and
are not readily replaceable, and hereby expressly agrees that Company and Parent, in enforcing the
covenants contained in Paragraphs 8 and 9 herein, in addition to any other remedies provided for
herein or otherwise available at law, shall be entitled in any court of equity having jurisdiction
to an injunction restraining Executive in the event of a breach, actual or threatened, of the
agreements and covenants contained in these Paragraphs.
(c) The parties hereto believe that the restrictive covenants of these Paragraphs are
reasonable. However, if at any time it shall be determined by any court of competent jurisdiction
that these Paragraphs or any portion of them as written, are unenforceable because the restrictions
are unreasonable, the parties hereto agree that such portions as shall have been determined to be
unreasonably restrictive shall thereupon be deemed so amended as to make such restrictions
reasonable in the determination of such court, and the said covenants, as so modified, shall be
enforceable between the parties to the same extent as if such amendments had been made prior to the
date of any alleged breach of said covenants.
(d) The provisions of this Paragraph 9 shall not apply if Company and Parent shall be
prohibited under Paragraph 15 below from making any payments to Executive pursuant to Paragraph 7
above.
10.
No Obligation to Mitigate
.
So long as Executive shall not be in breach of any
provision of Paragraph 8 or 9, Executive shall have no duty to mitigate damages in the event of a
termination and if Executive voluntarily obtains other employment (including self-employment), any
compensation or profits received or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Company and Parent to make payments
hereunder.
11.
Resignation
.
In the event that Executives services hereunder are terminated
under any of the provisions of this Agreement (except by death), Executive agrees that Executive
will deliver Executives written resignation as an officer of Company or Parent, or their
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subsidiaries and affiliates, to the Board of Directors, such resignation to become effective
immediately, or, at the option of the Board of Directors, on a later date as specified by the
Board.
12.
Insurance
.
Company shall have the right at its own cost and expense to apply for
and to secure in its own name, or otherwise, life, health or accident insurance or any or all of
them covering Executive, and Executive agrees to submit to the usual and customary medical
examination and otherwise to cooperate with Company in connection with the procurement of any
such insurance, and any claims thereunder.
13.
Release
.
As a condition of receiving payments or benefits provided for in this
Agreement, at the request of Company or Parent, Executive shall execute and deliver for the benefit
of Company and Parent, and any subsidiary or affiliate of Company or Parent, a general release in
the form set forth in Attachment A, and such release shall become effective in accordance with its
terms. The failure or refusal of Executive to sign such a release or the revocation of such a
release shall cause the termination of any and all obligations of Company and Parent to make
payments or provide benefits hereunder, and the forfeiture of the right of Executive to receive any
such payments and benefits. Executive acknowledges that Company and Parent have advised Executive
to consult with an attorney prior to signing this Agreement and that Executive has had an
opportunity to do so.
14.
Regulatory Limitation
.
Notwithstanding any other provision of this Agreement,
Company shall not be obligated to make, and Executive shall have no right to receive, any payment,
benefit or amount under this Agreement which would violate any law, regulation or regulatory order
applicable to Company or Parent at the time such payment, benefit or amount is due (Prohibited
Payment). If and to the extent Company shall at a later date be relieved of the restriction on
its ability to make any Prohibited Payment, then at such time Company or Parent shall promptly make
payment of any such amounts to Executive.
15.
Notices
.
All notices under this Agreement shall be in writing and shall be deemed
effective when delivered in person to Executive or to the Secretary of Company and Parent, or if
mailed, postage prepaid, registered or certified mail, addressed, in the case of Executive, to
Executives last known address as carried on the personnel records of Company, and, in the case of
Company and Parent, to the corporate headquarters, attention of the Secretary, or to such other
address as the party to be notified may specify by notice to the other party.
16.
Successors and Binding Agreement
.
(a) Company and Parent will require any successor, whether direct or indirect, by purchase,
merger, consolidation or otherwise to all or substantially all of the business and/or assets of
Company and/or Parent, as the case may be, expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that Company and Parent are required to perform it.
Failure of Company and Parent to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle Executive to compensation
and benefits from Company and Parent in the same amount and on the same terms as Executive would be
entitled hereunder if Executive had terminated
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employment for Good Reason, except that for purposes
of implementing the foregoing, the date on which any such succession becomes effective shall be
deemed the date on which Executives employment with Company was terminated. As used in this
Agreement, Company and Parent shall include any successor to Companys and/or Parents, as the
case may be, business and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of, and be enforceable by, Executives personal
or legal representatives, executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive dies while any amount is still payable hereunder, all such amounts shall be
paid in accordance with the terms of this Agreement to Executives devisee, legatee or other
designee or, if there is no such designee, to Executives estate.
17.
Arbitration
.
Any dispute which may arise between the parties hereto may, if both
parties agree, be submitted to binding arbitration in the State of Connecticut in accordance with
the Rules of the American Arbitration Association; provided that any such dispute shall first be
submitted to Companys Board of Directors in an effort to resolve such dispute without resort to
arbitration.
18.
Severability
.
If any of the terms or conditions of this Agreement shall be
declared void or unenforceable by any court or administrative body of competent jurisdiction, such
term or condition shall be deemed severable from the remainder of this Agreement, and the other
terms and conditions of this Agreement shall continue to be valid and enforceable.
19.
Amendment
.
This Agreement may be modified or amended only by an instrument in
writing executed by the parties hereto; provided, however, that the Board of Directors of Company
and Parent may amend this Agreement without the consent of Executive upon receipt of a written
opinion of Companys accounting firm that a provision or provisions of this Agreement would prevent
pooling accounting treatment in connection with any Change-in-Control and such pooling
accounting treatment would otherwise be available in connection with such Change-in-Control, to the
extent necessary to permit pooling accounting treatment in connection with such a
Change-in-Control, provided that such amendment may not adversely affect any benefit to which
Executive was entitled under the terms of this Agreement as in effect on November 17 1999, and must
preserve the benefits to Executive under this Agreement to the maximum extent possible consistent
with obtaining such accounting treatment.
20.
Construction
.
This Agreement shall supersede and replace all prior agreements and
understandings between the parties hereto on the subject matter covered hereby. This Agreement
shall be governed and construed under the laws of the State of Connecticut. Words of the masculine
gender mean and include correlative words of the feminine gender. Paragraph headings are for
convenience only and shall not be considered a part of the terms and provisions of the Agreement.
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IN WITNESS WHEREOF,
Company and Parent have caused this Agreement to be executed by a duly
authorized officer, and Executive has hereunto set Executives hand, this
9
th
day of November, 2005.
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The Connecticut Water Company
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By
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Michele G. DiAcri
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Corporate Secretary
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Connecticut Water Service, Inc.
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By
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Thomas R. Roberts
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(Executive)
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-15-
ATTACHMENT A
RELEASE
We advise you to consult an attorney before you sign this Release. You have until the date
which is seven (7) days after the Release is signed and returned to ___
(Company) to change your mind and revoke your Release. Your Release shall not become effective
or enforceable until after that date.
In consideration for the benefits provided under your Employment Agreement dated
______ with Company and ______ (Parent), and more specifically
enumerated in Exhibit 1 hereto, by your signature below you agree to accept such benefits and not
to make any claims of any kind against Company, its past and present and future parent
corporations, subsidiaries, divisions, subdivisions, affiliates and related companies or their
successors and assigns, including without limitation Parent, or any and all past, present and
future Directors, officers, fiduciaries or employees of any of the foregoing (all parties referred
to in the foregoing are hereinafter referred to as the Releasees) before any agency, court or
other forum, and you agree to release the Releasees from all claims, known or unknown, arising in
any way from any actions taken by the Releasees up to the date of this Release, including, without
limiting the foregoing, any claim for wrongful discharge or breach of contract or any claims
arising under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act
of 1964, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act
of 1974, Connecticuts Fair Employment Practices Act or any other federal, state or local statute
or regulation and any claim for attorneys fees, expenses or costs of litigation.
THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL HAVE WAIVED ANY RIGHT YOU
MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM AGAINST THE RELEASEES BASED ON ANY ACTIONS
TAKEN BY THE RELEASEES UP TO THE DATE OF THIS RELEASE.
By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully understand its terms;
2. You have had at least twenty-one (21) days to consider the terms of the Release;
3. You have seven (7) days from the date you sign this Release to revoke it by written
notification to Company. After this seven (7) day period, this Release is final and binding and
may not be revoked;
4. You have been advised to seek legal counsel and have had an opportunity to do so;
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5. You would not otherwise be entitled to the benefits provided under your Employment
Agreement with Company and Parent had you not agreed to waive any right you have to bring a lawsuit
or legal claim against the Releasees; and
6. Your agreement to the terms set forth above is voluntary.
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Name:
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Signature:
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Date:
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Received by:
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Date:
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EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL BENEFITS AND
PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.
Acknowledged and Agreed:
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THE CONNECTICUT WATER COMPANY
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EXECUTIVE
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Its
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CONNECTICUT WATER SERVICE, INC.
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By
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Its
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EXHIBIT 10.28
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
between
THE CONNECTICUT WATER COMPANY
CONNECTICUT WATER SERVICE, INC.
and
Daniel J. Meaney
EXHIBIT 10.28
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT,
dated as of January 12, 2006, is made by and between The Connecticut Water
Company, a Connecticut corporation having its principal place of business in Clinton, Connecticut,
(Company), Connecticut Water Service, Inc., a Connecticut corporation and holder of all of the
outstanding capital stock of Company (Parent) and DANIEL J. MEANEY (Executive), a resident of
Ellington, Connecticut.
W I T N E S S E T H :
WHEREAS,
Executive has been and continues to be employed by Company and Parent in an executive
capacity and has entered into an Employment Agreement between Executive and Company and Parent
dated as of January 12, 2006 which becomes effective upon a Change-in-Control, as defined herein,
of Company or Parent; and
WHEREAS,
should Company or Parent receive a proposal from or engage in discussions with a
third person concerning a possible combination with Company or Parent or the acquisition of a
substantial portion of voting securities of Company or Parent, the Boards of Directors of Company
and Parent have deemed it imperative that they and Company and Parent be able to rely on Executive
to continue to serve in Executives position and that the Boards of Directors and Company and
Parent be able to rely upon Executives advice as being in the best interests of Company and Parent
and their shareholders without concern that Executive might be distracted by the personal
uncertainties and risks that such a proposal or discussions might otherwise create; and
WHEREAS,
Company and Parent desire to reward Executive for Executives valuable, dedicated
service to Company and Parent should Executives service be terminated under circumstances
hereinafter described: and
WHEREAS,
Executive, Company and Parent are willing to enter into this Amended and Restated
Employment Agreement (Agreement) on the terms herein set forth;
NOW, THEREFORE,
to assure Company and Parent of Executives continued dedication and the
availability of Executives advice and counsel in the event of any such proposal, to induce
Executive to remain in the employ of Company and Parent and to reward Executive for Executives
valuable dedicated service to Company and Parent should Executives service be terminated under
circumstances hereinafter described, and for other good and valuable consideration, the receipt and
adequacy of which each party acknowledges, Company, Parent and Executive agree as follows:
-2-
1.
Definitions
.
For purposes of this Agreement, the following terms shall have the
following meanings:
(a) Cause shall mean Executives serious, willful misconduct in respect of Executives
duties under this Agreement, including conviction for a felony or perpetration by Executive of a
common law fraud upon Company or Parent which has resulted or is likely to result in material
economic damage to Company or Parent, as determined by a vote of at least seventy-five percent
(75%) of all of the Directors (excluding Executive) of each of Companys and Parents Board of
Directors;
(b) Change-in-Control shall be deemed to have occurred if after the date hereof (i) a public
announcement shall be made or a report on Schedule 13D shall be filed with the Securities and
Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the Act)
disclosing that any Person (as defined below), other than Company or Parent or any employee benefit
plan sponsored by Company or Parent, is the beneficial owner (as the term is defined in Rule 13d-3
under the Act) directly or indirectly, of twenty percent (20%) or more of the total voting power
represented by Companys or Parents then outstanding voting common stock (calculated as provided
in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire voting common stock);
or (ii) any Person, other than Company or Parent or any employee benefit plan sponsored by Company
or Parent, shall purchase shares pursuant to a tender offer or exchange offer to acquire any voting
common stock of Company or Parent (or securities convertible into such voting common stock) for
cash, securities or any other consideration, provided that after consummation of the offer, the
Person in question is the beneficial owner directly or indirectly, of twenty percent (20%) or more
of the total voting power represented by Companys or Parents then outstanding voting common stock
(all as calculated under clause (i)); or (iii) the stockholders of Company or Parent shall approve
(A) any consolidation or merger of Company or Parent in which Company or Parent is not the
continuing or surviving corporation (other than a merger of Company or Parent in which holders of
the outstanding capital stock of Company or Parent immediately prior to the merger have the same
proportionate ownership of the outstanding capital stock of the surviving corporation immediately
after the merger as immediately before), or pursuant to which the outstanding capital stock of
Company or Parent would be converted into cash, securities or other property, or (B) any sale,
lease, exchange or other transfer (in one transaction or a series of related transactions) of all
or substantially all the assets of Company or Parent; or (iv) there shall have been a change in the
composition of the Board of Directors of Company or Parent at any time during any consecutive
twenty-four (24) month period such that continuing directors cease for any reason to constitute
at least a majority of the Board unless the election, or the nomination for election of each new
Director was approved by a vote of at least two-thirds (2/3) of the Directors then still in office
who were Directors at the beginning of such period; or (v) the Board of Directors of Company or
Parent, by a vote of a majority of all the Directors (excluding Executive) adopts a resolution to
the effect that a Change-in-Control has occurred for purposes of this Agreement.
-3-
(c) Disability shall mean the incapacity of Executive by illness or any other cause as
determined under the long-term disability insurance plan of Company in effect at the time in
question, or if no such plan is in effect, then such incapacity of Executive as prevents Executive
from performing the essential functions of Executives position with or without reasonable
accommodation for a period in excess of two hundred forty (240) days (whether or not consecutive),
or one hundred eighty (180) days consecutively, as the case may be, during any twelve (12) month
period.
(d) Effective Date shall be the date on which a Change-in-Control occurs. Anything in this
Agreement to the contrary notwithstanding, if Executives employment is terminated prior to the
date on which a Change-in-Control occurs, and it is reasonably demonstrated that such termination
(i) was at the request of a third party who has taken steps reasonably calculated to effect a
Change-in-Control or (ii) otherwise arose in connection with or anticipation of a
Change-in-Control, then for all purposes of this Agreement the Effective Date shall mean the date
immediately prior to the date of such termination.
(e) Good Reason shall mean the occurrence of any action which (i) removes or changes
Executives title or reduces Executives job responsibilities or base salary; (ii) results in a
significant worsening of Executives work conditions; or (iii) moves Executives place of
employment to a location that increases Executives commute by more than thirty (30) miles over the
length of Executives commute from Executives place of principal residence at the time the move is
requested. For purposes of this subparagraph (e), any good faith determination by Executive that
any such action has occurred shall be conclusive. Notwithstanding the foregoing, at any time
during the period commencing on the Effective Date and ending on the 30th day after the first
anniversary of the Effective Date, except for purposes of Paragraph 5(g), Good Reason shall mean
any reason or no reason.
(f) Person shall mean any individual, corporation, partnership, company or other entity, and
shall include a group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934.
2.
Employment
.
(a) As of the Effective Date, Company hereby agrees to continue to employ Executive and
Executive agrees to remain in the employ of Company for the Term of this Agreement upon the terms
and conditions hereinafter set forth. Subject to the provisions of subparagraph (b) of this
Paragraph 2, and to the provisions of Paragraph 6 below, Term shall mean a continuously renewing
period of three (3) years commencing on the Effective Date.
(b) At any time during the Term, the Board of Directors of Company and Parent may, by written
notice to Executive, advise Executive of their desire to modify or amend any of the terms or
provisions of this Agreement or to delete or add any terms or provisions. Any such notice
(Notice) shall describe the proposed modifications in reasonable detail. In the event a Notice
shall be given to Executive, then Company, Parent and Executive agree to discuss
-4-
the proposed modification(s) and to attempt in good faith to reach agreement with respect thereto
and to reduce such agreement to writing in an amendment to be executed by all the parties
(Amendment). If a Notice is given hereunder and an Amendment shall not have been executed on or
before the sixtieth (60th) day following the date on which Notice is given, then the Term shall
thereupon be automatically converted to a fixed period ending three (3) years after the expiration
of such sixty (60) days.
3.
Duties of Employment
.
(a) During the Term, Executives position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and assigned at any time
during the ninety (90)-day period immediately preceding the Effective Date and Executives services
shall be performed at such location as Executive shall determine.
(b) During the Term, Executive will serve Company faithfully, diligently and competently and
will devote full-time to Executives employment and will hold, in addition to the offices held on
the Effective Date, such other executive offices of Company or Parent, or their respective
subsidiaries and affiliates, to which Executive may be elected, appointed or assigned by the Boards
of Directors of Company or Parent from time to time and will discharge such executive duties in
connection therewith. Nothing in this Agreement shall preclude Executive, with the prior approval
of the Board of Directors of Company, from devoting reasonable periods of time required for (i)
serving as a director or member of a committee of any organization involving no conflict of
interest with Company or Parent, or (ii) engaging in charitable, religious and community
activities,
provided
, that such directorships, memberships or activities do not materially
interfere with the performance of Executives duties hereunder.
4.
Compensation
.
During the Term, Company shall pay to Executive as compensation for
the services to be rendered by Executive hereunder the following:
(a) A base salary at a rate equal to the highest base salary paid or payable to Executive by
Company during the twelve (12)-month period immediately preceding the month in which the Effective
Date occurs, or such larger sum as the Board of Directors of Company may from time to time
determine in connection with regular periodic performance reviews pursuant to Companys policies
and practices. Such compensation shall be payable in accordance with the normal payroll practices
of Company. Executive shall receive an annual increase in base salary at each normal pay
adjustment date during the Term, but no later than one (1) year after the date of Executives last
increase and annually thereafter during the Term, of not less than the percentage increase in the
cost-of-living since Executives last pay adjustment, as measured by the Consumer Price Index-All
Urban Consumers of the U.S. Bureau of Labor Statistics.
(b) In addition, Company shall pay to Executive an annual bonus, payable in cash or other form
of compensation, in accordance with the Companys practice or plan for annual bonuses for peer
executives which is at least equal to the target percentage of the
-5-
midpoint of Executives salary grade under the Companys Officers Incentive Program for the year
preceding the fiscal year in which the Effective Date occurs.
5.
Benefits
.
During the Term, Executive shall be entitled to the following benefits:
(a)
Incentive, Savings and Retirement Plans
. In addition to base salary and bonus
payable as hereinabove provided, Executive shall be entitled to participate during the Term in all
incentive, savings and retirement plans, practices, policies and programs applicable to executive
employees of Company as may be in effect from time to time. Such plans, practices, policies and
programs, in the aggregate, shall provide Executive with compensation, benefits and reward
opportunities at least as favorable as the most favorable of such compensation, benefits and reward
opportunities provided by Company for Executive under such plans, practices, policies and programs
as in effect at any time during the ninety (90)-day period immediately preceding the Effective Date
or, if more favorable to Executive, as provided at any time thereafter with respect to other key
employees of Company or Parent.
(b)
Welfare Benefit Plans
. During the Term, Executive and/or Executives family, as
the case may be, shall be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs applicable to executive employees of
Company (including, without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident insurance plans and
programs) at least as favorable as the most favorable of such plans, practices, policies and
programs in effect at any time during the ninety (90)-day period immediately preceding the
Effective Date or, if more favorable to Executive and/or Executives family, as in effect at any
time thereafter with respect to other key employees of Company or Parent.
(c)
Expenses
. During the Term, Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by Executive in accordance with the most
favorable policies, practices and procedures of Company in effect at any time during the ninety
(90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in
effect at any time thereafter with respect to other key employees of Company or Parent.
(d)
Fringe Benefits
. During the Term, Executive shall be entitled to fringe benefits,
including use of an automobile and payment of related expenses or payment of an allowance for
automobile related expenses, in accordance with the most favorable plans, practices, programs and
policies of Company in effect at any time during the ninety (90)-day period immediately preceding
the Effective Date or, if more favorable to Executive, as in effect at any time thereafter with
respect to other key employees of Company or Parent.
(e)
Office and Support Staff
. During the Term, Executive shall be entitled to an
office or offices of a size and with furnishings and other appointments, and to secretarial and
other assistance, at least equal to the most favorable of the foregoing provided to Executive by
Company at any time during the ninety (90)-day period immediately preceding the Effective Date or,
if more favorable to Executive, as provided at any time thereafter with respect to other key
employees of Company or Parent.
-6-
(f)
Vacation
. During the Term, Executive shall be entitled to paid vacation in
accordance with the most favorable plans, policies, programs and practices of Company as in effect
at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect at any time thereafter with respect to other key employees of
Company or Parent.
6.
End of Term and Notice of Termination
.
(a)
End of Term
. The Term shall end upon the occurrence of any of the following
events:
(i) Termination of Executives employment by Company for Cause.
(ii) The voluntary termination of Executives employment by Executive other than for Good
Reason.
(iii) The death of Executive.
(iv) Executives attainment of age sixty-five (65).
(v) Full compliance by Company with the provisions of Paragraph 7(e) below, if Executives
employment shall have been terminated by Company during the Term for any reason
other than
Cause, or if Executives employment shall have been terminated by reason of Executives Disability,
or if Executive shall have voluntarily terminated Executives employment during the Term for Good
Reason.
(b)
Notice of Termination
. Any termination by Company for Cause or by Executive for
Good Reason or on account of Executives Disability shall be communicated by notice to the other
party hereto given in accordance with Section 16 of this Agreement. For purposes of this
Agreement, a notice means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executives employment under the provision so
indicated and (iii) if the date of termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall be not more than fifteen (15) days
after the giving of such notice).
(c)
Date of Termination
. The date of termination means the date of receipt of the
notice of termination or any later date specified therein, as the case may be;
provided,
however
, that (i) if Executives employment is terminated by Company other than for Cause or on
account of Executives Disability, the date of termination shall be the date on which Company
notifies Executive of such termination and (ii) if Executives employment is terminated by reason
of death, the date of termination shall be the date of death of Executive.
7.
Payment Upon Termination
.
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(a) If Executives employment is terminated by Company for Cause, as defined in Paragraph
1(a), the obligations of Company under this Agreement shall cease and Executive shall forfeit all
right to receive any compensation or other benefits under this Agreement except only compensation
or benefits accrued or earned and vested (if applicable) by Executive as of the date of
termination, including base salary through the date of termination, benefits payable under the
terms of any qualified or nonqualified retirement plans or deferred compensation plans maintained
by Company, any accrued vacation pay as of the date of termination not yet paid by Company and any
benefits required to be paid by law such as continued health care coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) (collectively, the Accrued
Obligations).
(b) If Executive shall voluntarily terminate Executives employment during the Term, other
than for Good Reason, as defined in Paragraph 1(e), the obligations of Company under this Agreement
shall cease and Executive shall forfeit all right to receive any compensation or other benefits
under this Agreement except only the Accrued Obligations.
(c) In the event of the death of Executive during the Term, then, in addition to the Accrued
Obligations and any other benefits which may be payable by Company in respect of the death of
Executive, the base salary then payable hereunder shall continue to be paid at the then current
rate for a period of six (6) months after such death to such beneficiary as shall have been
designated in writing by Executive, or if no effective designation exists, then to the estate of
Executive.
(d) If Executives employment is terminated by reason of Executives attainment of age
sixty-five (65), the obligations of Company under this Agreement shall cease and Executive shall
forfeit all right to receive any compensation or other benefits under this Agreement except only
the Accrued Obligations.
(e) If Executives employment is terminated by Company during the Term for any reason
other than
for Cause, or Executives death, or Executives attainment of age sixty-five
(65), or if Executives employment is terminated during the Term by reason of Executives
Disability, or if Executive shall voluntarily terminate Executives employment during the Term for
Good Reason, Executive shall be entitled to receive, and Company shall be obligated to pay and
provide Executive, the following amounts:
(i) An amount in consideration of the covenants by Executive set forth in Paragraphs 8 and 9
below to be determined by a nationally recognized independent certified public accounting firm
selected and retained by Company to be the reasonable value of said covenants as of the date of
termination of Executives employment, but in no event shall such amount be greater than the
aggregate value of the benefits provided in subparagraphs (e)(ii), (iii), (iv), (v), (vii), (viii),
(ix) and (xi) hereinbelow. The benefits otherwise payable to Executive pursuant to said
subparagraphs shall be offset by the amount, if any, payable to Executive in respect of the
covenants by Executive set forth in Paragraphs 8 and 9 below. Notwithstanding the foregoing, if
any benefit otherwise payable to Executive pursuant to said subparagraphs
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would be offset by the amount payable to Executive in respect of the covenants set forth in Paragraphs
8 and 9 below, Executive may elect to receive such benefit, but the amount payable to Executive in
respect of the covenants by Executive set forth in Paragraphs 8 and 9 below shall be reduced by the
value of such benefit. Said amount paid in consideration of the covenants by Executive set forth
in Paragraphs 8 and 9 below shall be paid in cash in a lump sum in the month next following
Executives date of termination of employment and shall be treated as a supplemental wage payment
under applicable Treasury Regulations subject to federal tax withholding at the flat percentage
rate applicable thereto.
(ii) An amount equal to three (3) times the base salary of Executive, at the rate in effect
immediately prior to the date of termination, plus an amount equal to three (3) times the target
percentage of the midpoint of Executives salary grade under the Companys Officers Incentive
Program for the year in which termination occurs. There shall be subtracted from the aggregate
amount determined in accordance with the immediately preceding sentence the amount, if any, payable
to Executive under any then effective severance pay plan of Company. Such resulting amount shall
be payable in equal installments over the three (3)-year period commencing on the date of
termination of employment in accordance with the normal payroll practices of Company or, at
Companys option, the entire amount (determined without any discount) shall be paid in cash in a
lump sum in the month next following Executives date of termination of employment and shall be
treated as a supplemental wage payment under applicable Treasury Regulations subject to federal tax
withholding at the flat percentage rate applicable thereto.
(iii) An amount equal to the aggregate amounts that Company would have contributed on behalf
of Executive under Companys qualified defined contribution retirement plan(s), if any such plan(s)
shall be in effect (other than amounts attributable to Executives before-tax contributions to such
plan(s)) plus estimated earnings thereon had Executive continued in the employ of Company for the
three (3)-year period commencing on the date of termination and made contributions under said
plan(s) at a rate, as a percentage of salary, equal to the rate at which Executive had made
contributions to said plan(s) in the plan year immediately preceding Executives termination, to be
payable in a lump sum to Executive within thirty (30) days after the expiration of the
non-competition period specified in Paragraph 9(a) of this Agreement, provided that Executive shall
not have breached said non-competition provisions.
(iv) An amount equal to the difference between: (A) benefits which would have been payable to
Executive under any deferred compensation agreement between Company and Executive, if any such
agreement shall be in effect, had Executive continued in the employ of Company for the three
(3)-year period commencing on the date of termination, received compensation at least equal to that
specified in Paragraph 4 of this Agreement during such time, and deferred pursuant to said deferred
compensation agreement the amount of compensation specified therein; and (B) the benefits actually
payable to Executive under such deferred compensation agreement; such amount to be payable in a
lump sum to Executive within thirty (30) days after the expiration of the non-competition period
specified in Paragraph 9(a) of
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this Agreement, provided that Executive shall not have breached said
non-competition provisions.
(v) Additional retirement benefits equal to the difference between: (A) the annual pension
benefits that would have been payable to Executive under Companys qualified defined benefit
retirement plan (the Plan) and under any nonqualified supplemental executive retirement plan
covering Executive (the Supplemental Plan), if any such Plan or Supplemental Plan shall be in
effect, if Executive had been continued in the employ of Company for the three (3)-year period
commencing on the date of termination and had received compensation at least equal to that
specified in Paragraph 4(a) of this Agreement during such time and had been fully vested in the
benefits payable under any such Plan and Supplemental Plan; and (B) the annual benefits actually
payable to Executive under any such Plan and Supplemental Plan. The discounted present value of
such additional benefits, shall be payable to Executive in a lump sum, as calculated by the
independent actuary for the Plan using the assumptions specified in the Plan, within thirty (30)
days after the expiration of the non-competition period specified in Paragraph 9(a) of this
Agreement, provided that Executive shall not have breached said non-competition provisions.
(vi) At the date of termination of Executives employment, Executive shall be fully vested in
any form of compensation previously granted to Executive (other than benefits payable under a
qualified retirement plan), such as, by way of example only, restricted stock, stock options, and
performance share awards.
(vii) If Executives employment is terminated by reason of Executives Disability, Executive
shall be entitled to receive, in addition to the other benefits provided under this Paragraph 7(e),
disability benefits at least equal to the most favorable of those provided by Company or Parent to
disabled employees in accordance with the most favorable plans, programs, practices and policies of
Company or Parent in effect at any time during the ninety (90)-day period immediately preceding the
Effective Date or, if more favorable to Executive, as in effect on the date of Executives
Disability with respect to other key employees of Company or Parent.
(viii) During the three (3)-year period commencing on the date of termination, or such longer
period as any plan, program, practice or policy may provide, Executive shall continue to
participate in all life, health, disability and similar welfare benefit plans and programs of
Company to the extent that such continued participation is possible under the general terms and
provisions of such plans and programs, and Executive shall be credited with additional service
attributable to the three (3)-year period commencing on the date of termination for purposes of
determining eligibility to participate in any such plans or programs maintained by Company for
retirees, with Company and Executive paying the same portion of the cost of each such plan or
program as existed at the time of Executives termination. In the event that Executives continued
participation (or commencement of participation for plans or programs for retirees) is not
permitted, then in lieu thereof, Company shall acquire, with the same cost sharing, individual
insurance policies providing comparable coverage for Executive; provided, however, that Company
shall not be obligated to pay more than three (3) times
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Companys current cost for comparable group
coverage. If any such individual coverage is unavailable, then Company shall pay to Executive
annually for the three (3)-year period commencing on the date of termination an amount equal to the
sum of the average annual contributions, payments, credits, or allocations made by Company for such
coverage on Executives behalf (or the average such contributions,
payments, credits, or allocations for retirees, in the case of retiree coverage) over the
three (3) calendar years preceding the date of termination of Executives employment.
(ix) During the three (3)-year period commencing on the date of termination, Executive shall
continue to receive such perquisites, other than those specified in the preceding subparagraphs
above, as Executive was receiving at the date of termination of employment with, to the extent
applicable, the same cost sharing with Company as was in effect immediately prior to Executives
termination of employment.
(x) Company shall reimburse Executive for the amount of any reasonable legal or accounting
fees and expenses incurred by Executive to obtain or enforce any right or benefit provided to
Executive by Company hereunder or as confirmed or acknowledged hereunder.
8.
Confidential Information
.
Executive understands that in the course of Executives
employment by Company, Executive will receive or have access to confidential information concerning
the business or purposes of Company and Parent, and which Company and Parent desire to protect.
Such confidential information shall be deemed to include, but not be limited to, Companys customer
lists and information, and employee lists, including, if known, personnel information and data.
Executive agrees that Executive will not, at any time during the period ending two (2) years after
the date of termination of Executives employment, reveal to anyone outside Company or Parent or
use for Executives own benefit any such information without specific written authorization by
Company or Parent. Executive further agrees not to use any such confidential information or trade
secrets in competing with Company or Parent at any time during or in the two (2) year period
immediately following the date of termination of Executives employment with Company.
9.
Covenants by Executive Not to Compete With Company or Parent
.
(a) Upon the date of termination of Executives employment with Company for any reason,
Executive covenants and agrees that Executive will not at any time during the period of two (2)
years from and after such date of termination directly or indirectly in any manner or under any
circumstances or conditions whatsoever be or become interested, as an individual, partner,
principal, agent, clerk, employee, stockholder, officer, director, trustee, or in any other
capacity whatsoever, except as a nominal owner of stock of a public corporation, in any other
business which, at the date of Executives termination, is a Competitor (as defined herein), either
directly or indirectly, with Company or Parent, or engage or participate in, directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of an equity or debt
investment, lender or in any other manner or capacity), or lend Executives name (or any
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part or variant thereof) to, any business which, at the date of Executives termination, is a Competitor,
either directly or indirectly, with Company or Parent, or as a result of Executives engagement or
participation would become, a Competitor, either directly or indirectly, with any aspect of the
business of Company or Parent as it exists at the time of Executives termination, or solicit any
officer, director, employee or agent of Company or Parent or any subsidiary or affiliate of
Company or Parent to become an officer, director, employee or agent of Executive, Executives
respective affiliates or anyone else. Ownership, in the aggregate, of less than one percent (1 %)
of the outstanding shares of capital stock of any corporation with one or more classes of its
capital stock listed on a national securities exchange or publicly traded in the over-the-counter
market shall not constitute a violation of the foregoing provision. For the purposes of this
Agreement, a Competitor is any business which is similar to the business of Company or Parent or in
any way in competition with the business of Company or Parent within any of the then-existing water
utility service areas of Company.
(b) Executive hereby acknowledges that Executives services are unique and extraordinary, and
are not readily replaceable, and hereby expressly agrees that Company and Parent, in enforcing the
covenants contained in Paragraphs 8 and 9 herein, in addition to any other remedies provided for
herein or otherwise available at law, shall be entitled in any court of equity having jurisdiction
to an injunction restraining Executive in the event of a breach, actual or threatened, of the
agreements and covenants contained in these Paragraphs.
(c) The parties hereto believe that the restrictive covenants of these Paragraphs are
reasonable. However, if at any time it shall be determined by any court of competent jurisdiction
that these Paragraphs or any portion of them as written, are unenforceable because the restrictions
are unreasonable, the parties hereto agree that such portions as shall have been determined to be
unreasonably restrictive shall thereupon be deemed so amended as to make such restrictions
reasonable in the determination of such court, and the said covenants, as so modified, shall be
enforceable between the parties to the same extent as if such amendments had been made prior to the
date of any alleged breach of said covenants.
(d) The provisions of this Paragraph 9 shall not apply if Company and Parent shall be
prohibited under Paragraph 15 below from making any payments to Executive pursuant to Paragraph 7
above.
10.
No Obligation to Mitigate
.
So long as Executive shall not be in breach of any
provision of Paragraph 8 or 9, Executive shall have no duty to mitigate damages in the event of a
termination and if Executive voluntarily obtains other employment (including self-employment), any
compensation or profits received or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Company and Parent to make payments
hereunder.
11.
Resignation
.
In the event that Executives services hereunder are terminated
under any of the provisions of this Agreement (except by death), Executive agrees that Executive
will deliver Executives written resignation as an officer of Company or Parent, or their
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subsidiaries and affiliates, to the Board of Directors, such resignation to become effective
immediately, or, at the option of the Board of Directors, on a later date as specified by the
Board.
12.
Insurance
.
Company shall have the right at its own cost and expense to apply for
and to secure in its own name, or otherwise, life, health or accident insurance or any or all of
them covering Executive, and Executive agrees to submit to the usual and customary medical
examination and otherwise to cooperate with Company in connection with the procurement of any
such insurance, and any claims thereunder.
13.
Release
.
As a condition of receiving payments or benefits provided for in this
Agreement, at the request of Company or Parent, Executive shall execute and deliver for the benefit
of Company and Parent, and any subsidiary or affiliate of Company or Parent, a general release in
the form set forth in Attachment A, and such release shall become effective in accordance with its
terms. The failure or refusal of Executive to sign such a release or the revocation of such a
release shall cause the termination of any and all obligations of Company and Parent to make
payments or provide benefits hereunder, and the forfeiture of the right of Executive to receive any
such payments and benefits. Executive acknowledges that Company and Parent have advised Executive
to consult with an attorney prior to signing this Agreement and that Executive has had an
opportunity to do so.
14.
Regulatory Limitation
.
Notwithstanding any other provision of this Agreement,
Company shall not be obligated to make, and Executive shall have no right to receive, any payment,
benefit or amount under this Agreement which would violate any law, regulation or regulatory order
applicable to Company or Parent at the time such payment, benefit or amount is due (Prohibited
Payment). If and to the extent Company shall at a later date be relieved of the restriction on
its ability to make any Prohibited Payment, then at such time Company or Parent shall promptly make
payment of any such amounts to Executive.
15.
Notices
.
All notices under this Agreement shall be in writing and shall be deemed
effective when delivered in person to Executive or to the Secretary of Company and Parent, or if
mailed, postage prepaid, registered or certified mail, addressed, in the case of Executive, to
Executives last known address as carried on the personnel records of Company, and, in the case of
Company and Parent, to the corporate headquarters, attention of the Secretary, or to such other
address as the party to be notified may specify by notice to the other party.
16.
Successors and Binding Agreement
.
(a) Company and Parent will require any successor, whether direct or indirect, by purchase,
merger, consolidation or otherwise to all or substantially all of the business and/or assets of
Company and/or Parent, as the case may be, expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that Company and Parent are required to perform it.
Failure of Company and Parent to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle Executive to compensation
and benefits from Company and Parent in the same amount and on the same terms as Executive would be
entitled hereunder if Executive had terminated
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employment for Good Reason, except that for purposes
of implementing the foregoing, the date on which any such succession becomes effective shall be
deemed the date on which Executives employment with Company was terminated. As used in this
Agreement, Company and Parent shall include any successor to Companys and/or Parents, as the
case may be, business and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of, and be enforceable by, Executives personal
or legal representatives, executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive dies while any amount is still payable hereunder, all such amounts shall be
paid in accordance with the terms of this Agreement to Executives devisee, legatee or other
designee or, if there is no such designee, to Executives estate.
17.
Arbitration
.
Any dispute which may arise between the parties hereto may, if both
parties agree, be submitted to binding arbitration in the State of Connecticut in accordance with
the Rules of the American Arbitration Association; provided that any such dispute shall first be
submitted to Companys Board of Directors in an effort to resolve such dispute without resort to
arbitration.
18.
Severability
.
If any of the terms or conditions of this Agreement shall be
declared void or unenforceable by any court or administrative body of competent jurisdiction, such
term or condition shall be deemed severable from the remainder of this Agreement, and the other
terms and conditions of this Agreement shall continue to be valid and enforceable.
19.
Amendment
.
This Agreement may be modified or amended only by an instrument in
writing executed by the parties hereto; provided, however, that the Board of Directors of Company
and Parent may amend this Agreement without the consent of Executive upon receipt of a written
opinion of Companys accounting firm that a provision or provisions of this Agreement would prevent
pooling accounting treatment in connection with any Change-in-Control and such pooling
accounting treatment would otherwise be available in connection with such Change-in-Control, to the
extent necessary to permit pooling accounting treatment in connection with such a
Change-in-Control, provided that such amendment may not adversely affect any benefit to which
Executive was entitled under the terms of this Agreement as in effect on November 17 1999, and must
preserve the benefits to Executive under this Agreement to the maximum extent possible consistent
with obtaining such accounting treatment.
20.
Construction
.
This Agreement shall supersede and replace all prior agreements and
understandings between the parties hereto on the subject matter covered hereby. This Agreement
shall be governed and construed under the laws of the State of Connecticut. Words of the masculine
gender mean and include correlative words of the feminine gender. Paragraph headings are for
convenience only and shall not be considered a part of the terms and provisions of the Agreement.
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IN WITNESS WHEREOF,
Company and Parent have caused this Agreement to be executed by a duly
authorized officer, and Executive has hereunto set Executives hand, this
12
th
day of January 2006.
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The Connecticut Water Company
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By
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Michele G. DiAcri
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Corporate Secretary
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Connecticut Water Service, Inc.
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By
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DANIEL J. MEANEY
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(Executive)
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ATTACHMENT A
RELEASE
We advise you to consult an attorney before you sign this Release. You have until the date
which is seven (7) days after the Release is signed and returned to ___
(Company) to change your mind and revoke your Release. Your Release shall not become effective
or enforceable until after that date.
In consideration for the benefits provided under your Employment Agreement dated
___with Company and ___(Parent), and more specifically
enumerated in Exhibit 1 hereto, by your signature below you agree to accept such benefits and not
to make any claims of any kind against Company, its past and present and future parent
corporations, subsidiaries, divisions, subdivisions, affiliates and related companies or their
successors and assigns, including without limitation Parent, or any and all past, present and
future Directors, officers, fiduciaries or employees of any of the foregoing (all parties referred
to in the foregoing are hereinafter referred to as the Releasees) before any agency, court or
other forum, and you agree to release the Releasees from all claims, known or unknown, arising in
any way from any actions taken by the Releasees up to the date of this Release, including, without
limiting the foregoing, any claim for wrongful discharge or breach of contract or any claims
arising under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act
of 1964, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act
of 1974, Connecticuts Fair Employment Practices Act or any other federal, state or local statute
or regulation and any claim for attorneys fees, expenses or costs of litigation.
THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL HAVE WAIVED ANY RIGHT YOU
MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM AGAINST THE RELEASEES BASED ON ANY ACTIONS
TAKEN BY THE RELEASEES UP TO THE DATE OF THIS RELEASE.
By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully understand its terms;
2. You have had at least twenty-one (21) days to consider the terms of the Release;
3. You have seven (7) days from the date you sign this Release to revoke it by written
notification to Company. After this seven (7) day period, this Release is final and binding and
may not be revoked;
4. You have been advised to seek legal counsel and have had an opportunity to do so;
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5. You would not otherwise be entitled to the benefits provided under your Employment
Agreement with Company and Parent had you not agreed to waive any right you have to bring a lawsuit
or legal claim against the Releasees; and
6. Your agreement to the terms set forth above is voluntary.
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Name:
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Signature:
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Date:
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Received by:
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Date:
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EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL BENEFITS AND
PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.
Acknowledged and Agreed:
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THE CONNECTICUT WATER COMPANY
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EXECUTIVE
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By
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Its
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CONNECTICUT WATER SERVICE, INC.
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By
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Its
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