March 18, 1998
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders of
Connecticut Water Service, Inc., scheduled to be held on April 24, 1998, at
the Company's General Offices, 93 West Main Street, Clinton, Connecticut
commencing at 2:00 P.M. If you plan to attend the meeting, please call 1-
800-428-3985, Ext. 305 and leave your name, address and phone number.
Directions to the meeting will be mailed to you. Your Board of Directors
and management look forward to personally greeting those stockholders able
to attend.
At the Meeting, you will be asked to elect four directors, to appoint
independent auditors for the calendar year ending December 31, 1998, to
adopt proposals to amend certain provisions of the Amended and Restated
Certificate of Incorporation and Bylaws of the Company, and to transact
such other business as may properly be brought before the Meeting.
In addition to the specific matters to be acted upon, there will be a
report on the progress of the Company and an opportunity for questions of
general interest to the stockholders. Important information is contained
in the accompanying proxy statement which you are urged to read carefully.
It is important that your shares are represented and voted at the
Meeting, regardless of the number you own and whether or not you plan to
attend. Accordingly, you are requested to sign, date, and return the
enclosed proxy at your earliest convenience.
In our continuing effort to provide stockholders with information on the
Company's operations, we will provide a tour of the Customer Service and
Engineering departments and conduct a water-main tapping and leak detection
demonstration after the meeting. If you are planning to attend the tour
and demonstration, please indicate your attendance when you call the above
toll-free number.
Your interest and participation in the affairs of the Company are
sincerely appreciated.
Sincerely,
Marshall T. Chiaraluce
President and
Chief Executive Officer
CNSCM/PS/97
CONNECTICUT WATER SERVICE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
THE COMPANY'S CORPORATE OFFICES
93 WEST MAIN STREET
CLINTON, CONNECTICUT
Notice is hereby given that the Annual Meeting of Stockholders of
Connecticut Water Service, Inc. (the "Company") will be held on April 24, 1998
at 2:00 P.M. at the Company's Corporate Offices, 93 West Main Street,
Connecticut, for the following purposes:
1. To elect four directors for three-year terms;
2. To appoint Arthur Andersen LLP, independent public accountants, as
independent auditors for the Company for the calendar year ending
December 31, 1998;
3. To adopt a proposal to make various conforming changes and a
corrective change to the Certificate of Incorporation of the Company.
4. To adopt a proposal to amend the Certificate of Incorporation of the
Company to enhance the Company's ability to indemnify its directors,
officers, employees and agents.
5. To adopt a proposal to amend the Certificate of Incorporation of the
Company to require that directors' resignations be submitted in
writing.
6. To transact such other business as may properly come before said
meeting or any adjournment thereof.
Only holders of the Company's Common Stock and its Cumulative Preferred
Stock - Series A of record at the close of business on February 27, 1998 are
entitled to notice of and to vote at this meeting or any adjournment thereof.
All stockholders who find it convenient to do so are urged to attend the
meeting in person.
By Order of the Board of Directors,
Vincent F. Susco, Jr., Secretary
March 18, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, DATE, AND SIGN
THE ENCLOSED PROXY AND RETURN IT TO THE COMPANY IN THE ENVELOPE ACCOMPANYING
THIS NOTICE. IF YOU ARE PRESENT AT THE MEETING, YOU MAY VOTE IN PERSON EVEN
THOUGH YOU HAVE SENT IN YOUR PROXY.
CONNECTICUT WATER SERVICE, INC. PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
April 24, 1998
The accompanying proxy is solicited by the Board of Directors of the Company
for use at the Annual Meeting of Stockholders to be held at the Company's
Corporate Offices, 93 West Main Street, Clinton, Connecticut, on April 24, 1998
at 2:00 P.M. and at any adjournment of the meeting.
Only holders of the Company's Common Stock and its Cumulative Preferred
Stock - Series A of record at the close of business on February 27, 1998, are
entitled to notice of and to vote at the meeting. On that date, the Company
had outstanding 3,018,188 shares of Common Stock, 15,000 shares of Cumulative
Preferred Stock-Series A, $20 par value, and 29,499 shares of $.90 Cumulative
Preferred Stock, $16 par value. Each share of Common Stock is entitled to
three votes and each share of Cumulative Preferred Stock-Series A is entitled
to one vote on all matters coming before the meeting. The holders of shares of
$.90 Cumulative Preferred Stock, $16 par value, have no general voting rights.
The cost of solicitation of proxies will be borne by the Company. In
addition to this solicitation by mail being made initially on or about March
18, 1998, officers and regular employees of the Company may make solicitations
by telephone, telegraph, mail, or personal interviews, and arrangements may be
made with banks, brokerage firms, and others to forward proxy material to their
principals. The Company has retained Morrow & Company, Inc., to assist in the
solicitation of proxies at an estimated cost of $12,000 including expenses,
which will be paid by the Company.
All stockholders unable to attend the meeting in person are urged to send in
proxies to assure a good representation at the meeting. A proxy may be revoked
at any time before it is voted by a writing filed with the Secretary of the
Company, by a duly executed proxy bearing a later date or by voting in person
at the meeting.
PROPOSAL (1) - ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of not less
than nine nor more than fifteen directors, the exact number of directorships to
be determined from time to time by resolution adopted by the affirmative vote
of a majority of the Board. The directors are divided into three classes as
nearly equal in number as possible with members of each class to hold office
until successors are elected and qualified. Each class is to be elected for a
three-year term at successive annual meetings. As a result, only one class of
directors is to be elected at each Annual Meeting.
The Board of Directors has fixed the number of directors at 12, and has
selected the four nominees listed below for election to three-year terms
expiring in 2001. Of the Company's eight directors remaining in office, the
terms of four directors expire in 1999 and the terms of four directors expire
in 2000. Each nominee is presently a director of the Company except Mr.
Gooley. Messrs. Guillaume and Lichtenfels have reached the Board's age limits
and are not standing for re-election.
Unless otherwise directed, it is intended that the enclosed proxy will be
voted for the election of Marshall T. Chiaraluce, Charles E. Gooley, Marcia L.
Hincks, and Robert F. Neal. In case any nominee is unable or declines to
serve, the persons named in the proxy may vote for some other person or
persons. Under Connecticut law, directors are elected by a plurality of the
votes cast. Votes withheld and broker non-votes are counted for purposes of
determining whether a quorum is present at the meeting but are not considered
as voted in the election of directors. Broker non votes and abstentions are,
therfore, not counted as votes cast and have no effect.
Common Stock
Committees Beneficially PERCENT
Presently Principal Occupation Director Owned as of OF
NAME SERVING (1) AGE AND DIRECTORSHIPS SINCE FEB. 27, 1998 CLASS (2)
CLASS I:
NOMINEES FOR ELECTION AT THIS MEETING FOR TERMS EXPIRING
IN 2001
Marshall T. 55 President and Chief Executive 1992 3,519(3) .12
Chiaraluce Officer of the Company.
Charles E. Gooley 44 President, Yankee Gas - 100 <.01
Services Company.
Marcia L. Hincks 1,4,5 62 Retired; formerly Vice 1983 318 .01
President and Senior Counsel,
Aetna Life & Casualty.
Robert F. Neal 3,4,5 63 Retired; formerly Senior Vice 1990 350 .01
President - Network Services;
Southern New England
Telecommunications
Corporation.
CLASS II:
DIRECTORS WHOSE TERMS CONTINUE UNTIL 1999
Harold E. Bigler, 2,3,7 66 Chairman, Bigler Investment 1983 2,000 .07
Jr. Management Company, Inc.
Astrid T. Hanzalek 1,2,5,6,7 70 Consultant - water resources 1985 776 .03
and various public policy
issues (self-employed);
formerly Connecticut State
Representative.
Frederick E. 5,6,7 71 Chairman, State of 1983 225 <.01
Hennick Connecticut Freedom of
Information Commission;
retired, formerly President
and Publisher, Naugatuck
Daily News; Director,
Naugatuck Valley Savings and
Loan, Inc.
Donald B. Wilbur 4,7 55 Plant Manager, Unilever Home 1993 349 .01
and Personal Care (personal
products manufacturing);
Director, Middlesex Hospital;
Director, Liberty Bank.
Common Stock
Committees Beneficially Percent
Presently Principal Occupation Director Owned as of of
NAME SERVING (1) AGE AND DIRECTORSHIPS SINCE FEB. 27, 1998 CLASS (2)
CLASS III
DIRECTORS WHOSE TERMS CONTINUE UNTIL 2000
Francis E. Baker 2,4,6 68 Chairman and Director, 1973(4) 125 <.01
Andersen Group, Inc.
(electronic and medical
manufacturing and services);
Chairman and Director,
Digital Graphix, Inc.
Rudolph E. 1,5 69 Real Estate Agent, D. W. 1994 300 <.01
Luginbuhl Fish, Better Homes;
Corporator, The Savings Bank
of Rockville.
Harvey G. Moger 1,2,3,7 70 President, GBAJ Associates 1981 2,345 .08
(commercial real estate
financial consultant);
Director, Ensign Bickford
Realty Corporation.
Warren C. Packard 1,3 63 Former First Selectman, Town 1991 250 <.01
of Suffield; formerly
President and Chief Executive
Officer, The Wiremold Company
(manufacturing); Director,
The Wiremold Company.
__________________________
(1)1. AUDIT COMMITTEE
2. FINANCE COMMITTEE
3. PENSION TRUST COMMITTEE
4. COMPENSATION COMMITTEE
5. PUBLIC INFORMATION COMMITTEE
6. COMMITTEE ON DIRECTORS
7. STRATEGIC PLANNING COMMITTEE
(2)The percentages have been rounded to the nearest one hundredth of one
percent. As of February 27 1998, executive officers and directors of the
Company as a group owned 22,699 shares (.75%) of the Common Stock of the
Company. No directors or officers own any shares of the Company's
Cumulative Preferred Stock.
(3)Includes both shares actually EARNED by the officer under the Company's pre-
1998 Performance Stock Programs and AWARDED under the 1998 Performance Stock
Program. Does not include shares deferred nor their earned dividend
equivalents under the Program. See Note 1 on page 7.
(4)The Connecticut Water Company is a subsidiary of the Company. The
affiliation of the Company (then Suburban Water Service, Inc.) and The
Connecticut Water Company was effected on April 10, 1975. Prior to the
affiliation, Mr. Baker was a director of The Connecticut Water Company. The
Company's Board of Directors and the Board of Directors of The Connecticut
Water Company are now identical.
With the exception of Mr. Packard whose term as First Selectman of the Town
of Suffield expired on November 21, 1995, and Mr. Neal who retired from
Southern New England Telecommunications Company in 1994, each of the nominees
listed above has had the same employment for more than the past five years
either in the position or positions indicated or in other similar or executive
capacities with the same company or a predecessor thereof.
The Company's Board of Directors met five times during 1997. In addition,
the Company has a number of committees, including an Audit Committee, a Finance
Committee, a Pension Trust Committee, a Compensation Committee, a Public
Information Committee, a Committee on Directors and a Strategic Planning
Committee which meet periodically during the year. The Audit Committee,
composed of Mmes. Hanzalek and Hincks and Messrs. Luginbuhl, Moger and Packard,
reviews the activities, procedures and recommendations of the independent
auditors of the Company and The Connecticut Water Company and recommends
annually the appointment of independent auditors for the coming year. The
Committee met twice during 1997. The Finance Committee, composed of Ms.
Hanzalek and Messrs. Baker, Bigler and Moger, recommends and advises the Board
of Directors on financial policy and issuance of securities. The Committee met
twice in 1997. The Pension Trust Committee, composed of Messrs. Bigler, Moger,
Neal and Packard, reviews the Pension Trust Fund of The Connecticut Water
Company Employee Retirement Fund and the VEBA Trust Fund for retiree medical
benefits, reviews and determines actuarial policies and investment guidelines,
and selects the investment managers. The Committee met four times in 1997.
The Compensation Committee, composed of Ms. Hincks and Messrs. Baker, Neal,
Lichtenfels and Wilbur, establishes compensation levels for officers of The
Connecticut Water Company and makes recommendations to the full Board regarding
officer succession. The Committee met twice during 1997. The Public
Information Committee, consisting of Mmes. Hanzalek and Hincks and Messrs.
Hennick, Neal and Luginbuhl, advises management on policies for communicating
Company information to the general public, government officials, investors and
other interested parties. The Committee met twice in 1997. The Committee on
Directors, consisting of Ms. Hanzalek, Messrs. Baker, Hennick and Lichtenfels
recommends candidates for nomination as directors to the Board. The Committee
met twice in 1997. The Strategic Planning Committee, consisting of Ms.
Hanzalek and Messrs. Bigler, Hennick, Lichtenfels, Moger, and Wilbur, oversees
the preparation and implementation of the Company's Strategic Plan. The
Committee met once in 1997. All of the Company's directors, except Warren C.
Packard, attended at least 75% of the aggregate number of meetings in 1997 of
the Board and committees on which they serve.
Pursuant to the Company's Bylaws, nominations for directors may be made by
any stockholder entitled to vote for the election of directors at the meeting
who complies with the following procedures. A nomination by a stockholder
shall be made only if such stockholder has given proper and timely notice in
writing of such stockholder's intent to make such nomination to the Secretary
of the Company. To be timely a stockholder's notice must be delivered to or
mailed and received by the Secretary of the Company at the General Offices of
the Company not later than (i) with respect to an election to be held at an
annual meeting of stockholders, the close of business on a day which is not
less than 120 days prior to the anniversary date of the immediately preceding
annual meeting, and (ii) with respect to an election to be held at a special
meeting of stockholders called for the election of directors, the close of
business on the tenth day following the date on which notice of such meeting is
first mailed to stockholders. Each such notice must set forth: (a) the name
and address of the person or persons to be nominated; (b) the name and address,
as they appear on the Company's books, of the stockholder making such
nomination; (c) the class and number of shares of the Company which are
beneficially owned by the stockholder; (d) a representation that the
stockholder is a holder of record of stock of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (e) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (f) such other
information regarding each nominee proposed by the stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission; and (g) the consent of each nominee
to serve as a director of the Company if so elected. Any such notice of
nominations for consideration at the 1999Annual Meeting must be received by the
Company's Secretary by the close of business on December 24, 1998.
REPORTS UNDER SECTION 16
Under Section 16 of the Securities Exchange Act of 1934, directors, officers
and certain beneficial owners of the Company's equity securities are required
to file reports of their transactions in the Company's equity securities with
the Securities and Exchange Commission on specified due dates. In 1997, all
directors and beneficial owners of the Company's equity securities so required,
filed such reports on or before the specified due dates, except that reports of
sales by Messrs. Bancroft, Guillaume, O'Neill, Benoit, Kells and Susco in
March, 1997 of certain shares received pursuant to the Company's Performance
Stock Program were not timely filed. In making this statement, the Company
has relied on the written representations of its directors and officers and its
five percent holders and copies of the reports that they have filed with the
Securities and Exchange Commission.
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following tabulation sets forth the total compensation paid by the
Company and The Connecticut Water Company during 1997 , 1996 and 1995 to each
of the executive officers, including the Chief Executive Officer of the
Company, receiving more than $100,000 aggregate compensation in 1997. The
Company has no employees. All officers are employees of The Connecticut Water
Company and all compensation is paid by The Connecticut Water Company.
LONG-TERM COMPENSATION
Name and Principal Position Annual Compensation Awards
RESTRICTED STOCK AWARDS
YEAR SALARY($) ($)(1)
Marshall T. Chiaraluce, President and Chief Exec- 1997 222,722 52,320
utive Officer 1996 212,122 28,705
1995 200,000 47,091
David C. Benoit, Vice President Finance and 1997 118,000 17,888
Accounting and Treasurer 1996 105,000 12,346
1995 - -
James R. McQueen, Vice President Engineering and 1997 114,000 14,272
Planning 1996 101,612 8,109
1995 94,500 12,644
Terrance P. O'Neill, Vice President of Operations 1997 110,000 14,784
1996 94,562 8,109
1995 87,000 15,151
1) The value of the full number of shares of restricted stock initially
allocated to Messrs. Chiaraluce, Benoit, McQueen and O'Neill under the
Company's Stock Program was $50,370, $0, $14,212 and $14,212 respectively in
1995; and $52,111, $14,709, $18,907 and $18,907 respectively in 1996. In
1997, the value of the full number of shares of restricted stock initially
allocated to Messrs. Chiaraluce, Benoit, McQueen and O'Neill under the
Company's Performance Stock Program were $54,196, $19,664, $15,299, and $15,
299 respectively. The aggregate number of shares of restricted stock
actually EARNED by Messrs. Chiaraluce, Benoit, McQueen and O'Neill, based
upon the actual attainment of 1995 and 1996 criteria were 1,697, 0, 464 and
556 respectively in 1995; and 1,023, 440, 289 and 289 respectively in 1996.
In 1997, the aggregate number of shares of restricted stock actually EARNED
by Messrs. Chiaraluce, Benoit, McQueen, and O'Neill based upon the actual
attainment of 1997 performance criteria were 1,635, 559, 446 and 462
respectively. The values shown in the table above are the shares actually
EARNED in said year, valued on the date earned which was February 14, 1996
for the 1995 plan, February 14, 1997 for the 1996 plan, and February 13,
1998 for the 1997 plan. Pursuant to the Company's Performance Stock
Program, Messrs. Chiaraluce, Benoit, McQueen and O'Neill elected to defer
100%, 50%, 70% and 0% of their 1997 awards respectively.
RETIREMENT BENEFITS
Officers and employees of the Company and The Connecticut Water Company are
entitled to receive retirement benefits under a pension plan, and executive
officers are entitled to receive benefits under supplemental executive
retirement agreements, which provide for defined benefits in the event of
retirement at a specified age and after a specified number of years of service
based on highest average annual compensation. Examples of annual full straight
life annuity allowances payable under the pension plan and supplemental
agreements to employees and executive officers are set forth in the following
table. As of December 31, 1997, the estimated credited years of service for
Messrs. Chiaraluce, Benoit, McQueen and O'Neill are 6, 2, 32, and 17
respectively. The table assumes retirement occurs at age 65 which for Messrs.
Chiaraluce, Benoit, McQueen and O'Neill would occur with 16, 26, 42, and 39
years, respectively, of credited service. Highest average annual compensation
is the highest average regular basic compensation received by an individual
from the Company and The Connecticut Water Company during any 60 consecutive
months.
HIGHEST AVERAGE ANNUAL
COMPENSATION DURING 5 OR MORE YEARS
60 CONSECUTIVE MONTHS OF SERVICE *
$100,000 $60,000
$125,000 $75,000
$150,000 $90,000
*In the case of each of Mr. Chiaraluce and Mr. Benoit, the amounts are
reduced by benefits payable under the retirement plan of a prior employer.
DIRECTOR COMPENSATION
Since the Boards of Directors of the Company and The Connecticut Water
Company are identical, regular meetings of each are generally held on the same
day. Directors of the Company receive $250 for each regular meeting of the
Board of Directors of the Company and $350 for each special Board meeting and
each committee meeting of the Company which they attend. In addition,
Directors of The Connecticut Water Company receive an annual retainer of
$4,000, $450 for each regular or special meeting of the Board of Directors, and
$400 for each committee meeting which they attend. Directors who are salaried
officers receive the same retainer and meeting fees as other directors. These
amounts have been included in the Summary Compensation Table on Page 5.
Directors who are not officers are not entitled to retirement benefits from the
Company or The Connecticut Water Company.
Pursuant to a Directors Deferred Compensation Plan, the Directors of the
Company and The Connecticut Water Company may elect to defer receipt of all or
a specified portion of the compensation payable to them for services as
Directors until after retiring as Directors. Any amounts so deferred are
credited to accounts maintained for each participating Director, and interest
at an annual rate of 10.74% is currently credited monthly to all deferred
amounts. Distribution of amounts deferred and accumulated interest may be
made, at the election of each participating Director, in a lump sum or in
annual installments over a period of years specified by the Director, such
distribution to commence in the year following the year in which the individual
ceases to be a Director. In 1997, five Directors elected to participate in the
Plan.
COMPENSATION COMMITTEE REPORT
The Committee is responsible for making recommendations to the Board on
executive compensation and administering the Company's Performance Stock
Program (the "Program").
EXECUTIVE COMPENSATION PRINCIPLES
The Company's executive compensation plan is designed to align executive
compensation with the Company's and/or The Connecticut Water Company's
strategic business planning which includes management initiatives and business
financial performance. Through this process the Committee has established a
program to:
o Attract and retain key executives critical to the long-term success
of the Company.
o Reward executives for the accomplishment of strategic goals which
reflect customer service and satisfaction as well as the enhancement of
stockholder value.
o Integrate compensation programs with both The Connecticut Water
Company's annual performance review and the Company's and/or The
Connecticut Water Company's strategic planning and measuring processes.
o Support a performance-oriented environment that rewards performance
with respect to overall performance goals and performance on individual
goals for each participant in the plan.
EXECUTIVE COMPENSATION PROGRAM
The total compensation program consists of both cash and equity based
compensation. The annual compensation consists of a base salary and any Common
Stock awarded through the Program. The Committee determines a salary range and
a level of salary for executive officers. The Committee determines the salary
or salary range based upon competitive norms from periodic studies of a peer
group of other water companies. Actual salary changes are based upon such norms
and upon performance. Additional incentives are provided through the
Program{1}. The Committee reviews and approves the participation of executive
officers of The Connecticut Water Company under the Program. The Committee
also approves the award value each year as a percentage of base salary and the
basis for judging performance over the following year. Awards are currently
based on whether the Company and/or The Connecticut Water Company has met
certain goals based on objective performance criteria and attainment by
participants of individual goals. The Committee determines what these criteria
and goals are each year. The Criteria for the 1997 awards were based on The
Connecticut Water Company's customer value rating and water quality measures,
the Company's return on equity, other service and financial measures, and
specific individual performance goals. The Committee has approved and
implemented an award program for 1998 based upon similar criteria and goals.
Executive officers may also participate in the Company's Savings and
Investment 401(k) Plan and other benefit plans generally available to all
levels of salaried employees. Also, executive officers may elect to defer
compensation under a non-qualified salary deferral plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee determined the compensation for 1997 of Mr. Chiaraluce, the
Chief Executive Officer ("CEO"), based upon a number of factors and criteria,
including a review of the salaries of Chief Executive Officers for similar
companies of comparable size and capitalization and a review by the Committee
of the CEO's performance. The Committee approved the CEO's participation in
the Program for 1997. The Committee noted the continued efforts of Mr.
Chiaraluce to avoid requesting a general rate increase for 7 years while
achieving consistently higher earnings and increasing shareholder value during
his 6 years as CEO. The awarding of 86% (1,635 of 1,902 shares originally
allocated) of the Common Stock allocated to Mr. Chiaraluce in 1997 was based
upon all targeted individual goals being met and the majority of corporate
performance and financial targets being met.
COMPENSATION COMMITTEE
William C. Lichtenfels, Chairman
Francis E. Baker, Jr.
Marcia L. Hincks
Robert F. Neal
Donald B. Wilbur
**FOOTNOTES**
{1} The Program provides for an aggregate maximum of up to 50,000 shares
of Common Stock of the Company to be issued as awards of restricted stock to
eligible employees. An award of a share of restricted stock is an award to a
participant of a share of the Common Stock of the Company generally conditioned
upon the attainment of performance goals established by the Committee for the
performance period to which the award relates and the continued employment of
the participant with the Company or any majority-owned subsidiary of the
Company through the end of the performance period. During the performance
period, the participant has all of the rights of a stockholder of the Company,
including the right to receive dividends, except that the participant does not
have custody of the shares of Common Stock nor the right to transfer ownership
of the shares during the performance period. Commencing with 1997 awards, the
Program has been amended to permit participants to defer income taxation of all
or a portion of such restricted stock awards by electing instead to receive
"performance shares" at the end of a chosen deferral period. Until the end of
the deferral period, a participant holding performance shares has no rights as
a stockholder of the Company. However, dividend equivalents are credited to
such participant as additional performance shares.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
stockholder return for each of the years 1992 - 1997 on the Company's Common
Stock, based on the market price of the Common Stock and assuming
reinvestment of dividends, with the cumulative total stockholder return of
companies on the Standard & Poor's 500 Stock Index and the Standard & Poor's
Utilities Index.
*********
********
*** GRAPHIC CHART appears here in hardcopy document as described above
*** using the values summarized in the table below.
*******
********
1992 1993 1994 1995 1996 1997
CT Water Service, Inc. $100.00 $114.11 $ 98.94 $127.66 $144.38 $170.26
S&P 500 $100.00 $110.06 $111.51 $153.39 $188.59 $251.48
S&P Utilities $100.00 $114.44 $105.33 $149.58 $154.25 $192.28
BENEFICIAL SHAREHOLDINGS OF CERTAIN PERSONS
The Company does not know of any beneficial owner of more than 5% of its
$.90 Cumulative Preferred Stock, $16 par value. The Company does not know of
any beneficial owner of more than 5% of its Common Stock and does not know of
any beneficial owner of more than 5% of its Cumulative Preferred Stock - Series
A, $20 par value, except as follows:
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER Amount Beneficially Percent
Owned as of of
DECEMBER 31, 1997 CLASS
Common Stock Dimensional Fund Advisors, Inc. 156,400 5.18%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Cumulative Preferred Stock -Series William Neal MacKenzie 1,850 12.3%
A, $20 par value 222 North Main Street
Wallingford, CT 06492
Herbert I. Johnson and 900 6.0%
Annabelle C. Johnson
35 Carter Street, Bolton, CT 06040
Shearson Lehman American Express 900 6.0%
One Western Union Int'l Plaza
New York, NY 1004-1008
Dorothy L. Bach 825 5.5%
55 Mountain Spring Road
Tolland, CT 06084
(1)Information relating to such beneficial ownership is based on a statement on
Schedule 13G filed with the Securities and Exchange Commission.
CERTAIN TRANSACTIONS
During the year 1997, the law firm of Day, Berry & Howard, of which Michael
F. Halloran, Assistant Secretary of the Company and The Connecticut Water
Company, is a partner, performed certain legal services for the Company and The
Connecticut Water Company. The Company believes that the charges made by said
firm for legal services were not more than others would have charged for
similar services.
PROPOSAL (2) - APPOINTMENT OF AUDITORS
Arthur Andersen LLP served as independent auditors for the Company and its
subsidiary, The Connecticut Water Company, for the calendar year ending
December 31, 1997. One or more representatives of Arthur Andersen LLP will
attend the annual meeting, with the opportunity to make a statement if they
desire to do so and to respond to appropriate questions.
It is intended that unless otherwise specified, proxies will be voted in
favor of the appointment of Arthur Andersen LLP, independent public
accountants, of Hartford, Connecticut, as independent auditors for the Company
for the calendar year ending December 31, 1998. The Company's Audit Committee
has recommended that Arthur Andersen LLP be so appointed. Arthur Andersen LLP
has no direct or indirect financial interest in the Company. Proposal (2) will
be approved if the votes cast at the meeting favoring the appointment of Arthur
Andersen LLP exceed the votes cast opposing such appointment. Broker non votes
and absentions are not counted as votes cast and, therefore, have no effect.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL (2).
PROPOSED AMENDMENTS TO THE COMPANY'S CERTIFICATE AND BYLAWS
PROPOSALS (3A), (3B), (4), AND (5)
General
The Board of Directors recommends that the stockholders approve certain
amendments to the Company's Amended and Restated Certificate of Incorporation
(the "Certificate") and Bylaws. The proposed amendments are contained in three
separate Proposals. Shareholders are urged to consider carefully and approve
each Proposal. Proposal (3) is divided into two sections, Proposal (3a) and
Proposal (3b). Proposal (3a) provides for various conforming changes intended
to update citations to the Connecticut General Statutes and to ensure
consistency of language throughout the Certificate, and Proposal (3b) provides
a correction to references in the Certificate to certain voting rights of the
holders of the Company's Preferred Stock. Proposal (4) provides that the
Company will indemnify directors and officers to the fullest extent permitted
by the Connecticut Business Corporation Act (the "CBCA") and authorizes the
Company to determine, on a case by case basis, the extent of indemnification
that it will provide to employees and agents. Proposal (5) provides that
directors desiring to resign from the Board be required to submit a resignation
in writing to the Board of Directors.
These proposed amendments are designed to ensure compliance with the CBCA,
make various nonsubstantive modifications to the Certificate, and permit the
Company to provide additional indemnification rights to directors, officers,
agents and employees of the Company in an effort to promote management
stability and security. The text of the Company's Certificate, as proposed to
be amended, is set forth in Exhibit A to this Proxy Statement. Proposed
deletions are indicated as stricken-through and proposed additions are
indicated as double-underlined. The following description and discussion of
the proposed amendments is qualified in its entirety by reference to such
exhibit.
Effective January 1, 1997, the CBCA updated the statutory framework for
stock corporations in Connecticut based on the Model Business Corporation Act
(the "MBCA"). In adopting the CBCA, Connecticut has followed the lead of a
number of states which have adopted corporation codes based on the MBCA.
Despite this new framework, the CBCA provides that certificates of
incorporation of corporations organized prior to January 1, 1997, such as the
Company, will be "grandfathered." In other words, a provision in the Company's
Certificate that was valid under the law in effect prior to January 1, 1997
will continue to be valid regardless of any differences in the CBCA. The
Company is not, therefore, required to amend the Certificate to comply with the
CBCA. However, the Proposals are recommended in order to modernize the
Company's Certificate in light of the enactment of the CBCA and to enable the
Company to attract and maintain a capable and stable management by entitling
individuals serving as directors, officers, agents and employees to certain
indemnification rights. The three Proposals are being presented separately,
and if any one of the Proposals is adopted by the stockholders, it will become
effective, regardless of whether the stockholders adopt the other Proposals.
THE BOARD OF DIRECTORS BELIEVES THAT ADOPTION OF PROPOSALS (3A),
(3B), (4), AND (5) IS IN THE BEST INTERESTS OF ALL OF THE COMPANY'S
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" ADOPTION OF THE PROPOSALS.
PROPOSAL (3A) - CONFORMING AMENDMENTS AND
PROPOSAL (3B) - CORRECTIVE AMENDMENT
GENERAL
Proposals (3a) and (3b) would amend the Company's Certificate to generally
(i) ensure consistent use of language throughout the Certificate; (ii) delete
and revise references to sections of the Connecticut General Statutes that were
repealed in connection with the enactment of the CBCA; (iii) add a provision
defining the statutory references used in the Certificate (all of the
amendments referred to in clauses (i), (ii) and (iii) hereinafter referred to
as "Proposal (3a)" or the "Conforming Amendments"); and (iv) delete each
reference to "Article Fourth, Section 5" and replace it with a reference to
"Section 5 of Paragraph B of Article Fourth" ("Proposal (3b)" or the
"Corrective Amendment").
REASONS FOR THE CONFORMING AMENDMENTS AND THE CORRECTIVE AMENDMENT
The Conforming Amendments and the Corrective Amendment are designed to
ensure that the terms contained in the Certificate are consistent and to
modernize the Certificate in light of the enactment of the CBCA. In addition,
the Conforming Amendments define the statutory references used in the
Certificate to include amendments to such statutes, thus permitting the
Certificate to evolve with any changes in such statutes.
DESCRIPTION OF THE CONFORMING AMENDMENTS AND THE CORRECTIVE AMENDMENT
CONSISTENCY OF LANGUAGE. Various changes are proposed to ensure that
references to the Company, the Certificate, and the Articles of the Certificate
are consistent throughout the Certificate.
Updated Statutory References. In connection with the enactment of the CBCA,
the provisions of the Connecticut General Statutes governing Connecticut stock
corporations prior to such enactment were repealed. Accordingly, Proposal (3a)
would delete any references to statutes that were repealed in connection with
the enactment of the CBCA and replace such references with statutory references
to the CBCA. For example, corrections are proposed to be made to Article Sixth
of the Certificate which limits the liability of the Company's directors to the
Company and the stockholders if such directors have complied with a specified
standard of care.
REFERENCES PROVISION. A new Article Eighth is proposed to be added to the
Certificate to reference the provisions of the CBCA and any subsequent
amendments thereto. This provision will eliminate the need to amend the
Certificate if any provision of the CBCA referenced therein is subsequently
amended or repealed.
CORRECTION OF REFERENCES TO "SECTION 5 OF PARAGRAPH B OF ARTICLE FOURTH."
Proposal (3b) would replace any reference to "Article Fourth, Section 5" with a
reference to "Section 5 of Paragraph B of Article Fourth" in order to more
accurately and precisely reference the voting rights of the Company's Preferred
Stock. Similar corrective changes would also be made to the Company's Bylaws.
Proposal (3b) would not change the existing voting rights set forth in Article
Fourth.
The Conforming Amendments and the Corrective Amendment will modernize the
Company's Certificate and make it a more workable document for the
administration of the Company. By updating statutory references, the
Conforming Amendments will guide management and others to the proper statutes
governing the Company and the Certificate. In addition, the references
provision will ensure that the Company will avoid the expense of amending the
Certificate if statutory citations are later revised or repealed.
VOTE REQUIRED AND EFFECTIVE TIME
The affirmative vote of a majority of the voting power of the outstanding
shares of the Company's Common Stock and Cumulative Preferred Stock - Series A,
$20 par value, voting together as a single class, is required to adopt the
Conforming Amendments. Abstentions and broker non-votes will not be counted as
votes cast and will have the same effect as a vote against Proposal (3a). The
Conforming Amendments, if adopted, will become effective as of the date and
time they are filed with the Office of the Secretary of the State of the State
of Connecticut.
The affirmative vote of the holders of at least eighty percent (80%) of the
Company's Common Stock and Cumulative Preferred Stock - Series A, $20 par
value, voting together as a single class, is required to adopt the Corrective
Amendment. Abstentions and broker non-votes will not be counted as votes cast
and will have the same effect as a vote against Proposal (3b). The Corrective
Amendment, if adopted, will become effective as of the date and time it is
filed with the Office of the Secretary of the State of the State of
Connecticut.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE ADOPTION OF PROPOSALS (3A) AND (3B).
PROPOSAL (4) - INDEMNIFICATION AMENDMENT
GENERAL
In recent years, lawsuits and other proceedings (including claims by
stockholders on behalf of a corporation or "derivative proceedings")
("Proceedings") directed against or involving directors or officers of publicly
held corporations have become increasingly common. Such Proceedings are
typically extremely expensive whatever their outcome. Due to the uncertainties
inherent in any litigation and particularly since questions of subjective
business judgment are usually involved, it is often prudent for corporations to
settle Proceedings in which claims against a director or officer are made.
Settlement amounts, even if not material to the corporation involved and minor
compared to the amount claimed, often exceed the financial resources of most
individual defendants. Even in Proceedings in which a director or officer is
not named as a defendant, such an individual may incur substantial expenses and
attorneys' fees if he or she becomes involved in a Proceeding as a witness or
otherwise.
At the same time that the exposure to personal liability has increased for
directors and officers, corporations have faced increasing difficulty
protecting directors and officers from the expenses and liabilities associated
with Proceedings through the purchase of directors' and officers' liability
insurance as coverage provided under such policies has diminished. Without the
assurance that directors' and officers' liability insurance will continue to
protect them financially from the expenses and liabilities associated with such
Proceedings, directors, potential candidates for director and officers must
increasingly rely upon protections offered by the corporations they serve. If
these protections are not adequate, such individuals may question whether the
risks associated with the Proceedings in which they may become involved exceed
the benefit they may realize from service to a corporation. Other
corporations, not yet including the Company, have had individuals resign or
threaten to resign from such positions because they were unwilling to risk
personal financial loss in the event the corporation failed to provide adequate
indemnification protection. The adequacy of a corporation's protection of its
directors and officers is measured, in part, by the relative certainty that
indemnification will be made promptly and without the need to resort to
additional time-consuming, and often costly, Proceedings.
Proposal (4) would amend the Company's Certificate (the "Indemnification
Amendment") generally to require the Company to indemnify its directors and
officers who are made parties to a Proceeding because he or she is or was a
director or officer of the Company against liability so long as the director or
officer satisfied a statutorily required standard of care. In addition, the
Indemnification Amendment would allow the Company to provide officers with
additional indemnification consistent with the CBCA. Finally, with respect to
indemnification of employees and agents, the Indemnification Amendment would
provide the Company with flexibility to determine such indemnification rights
on a case by case basis.
REASONS FOR THE INDEMNIFICATION AMENDMENT
Prior to the enactment of the CBCA, indemnification of directors, officers,
employees and agents was both mandatory and exclusive. The Connecticut Stock
Corporation Act (the "CSCA"), which was in effect prior to January 1, 1997,
required corporations to provide the indemnification it authorized, but not
more or less. In addition, the CSCA stated that no action to indemnify was
valid unless consistent therewith. The CBCA, by contrast, takes a permissive
approach to indemnification, allowing corporations to expand or limit
indemnification in their certificates of incorporation.
Pursuant to the CBCA, in the absence of a provision in its certificate of
incorporation, a corporation organized prior to January 1, 1997, such as the
Company, is required to indemnify its directors, officers, agents and employees
in a Proceeding if he or she (a) conducted himself or herself in good faith and
(b) reasonably believed (i) when acting in his or her official capacity that
the conduct was in the corporation's best interests and (ii) in all other cases
that the conduct was not opposed to its best interests. For criminal cases,
the director, officer, employee or agent must also have had no reasonable cause
to believe his or her conduct was unlawful.
The CBCA, however, permits a corporation to provide enhanced indemnification
rights by adding a provision to its certificate of incorporation that would
permit or require it to indemnify a director so long as his or her conduct met
the standards described below. Such indemnification may also be extended to
officers to the same extent as it is extended to directors. In addition, the
CBCA permits a corporation to provide even greater indemnification to officers,
employees and agents, so long as such indemnification is consistent with public
policy.
The Company's Certificate is proposed to be amended to provide such enhanced
indemnification rights and to expand the situations in which the Company will
indemnify its directors and officers in order to provide its directors and
officers with the greatest protection allowed by law. Such enhanced protection
is expected to assist the Company in attracting and maintaining a capable and
stable management. In addition, the Indemnification Amendment would provide
the Company with greater flexibility with respect to the indemnification of
employees and agents who are not officers and directors. The Indemnification
Amendment would allow the Company to determine the indemnification rights of
such individuals on a case by case basis, on such terms and conditions as may
be established by the Board of Directors.
DESCRIPTION OF THE INDEMNIFICATION AMENDMENT
The Indemnification Amendment, included as proposed Article Seventh of the
Company's Certificate as set forth in Exhibit A, implements the enhanced
indemnification protections authorized by the CBCA. If Proposal (4) is
adopted, the Indemnification Amendment will replace, for directors, officers,
employees and agents, the indemnification provisions currently contained in
Article VIII of the Company's Bylaws (the "Current Indemnification Bylaw").
Prior to the adoption of the CBCA, the CSCA set out the permissible scope of
indemnification by Connecticut corporations for directors, officers, employees
and agents (each an "eligible indemnitee"). The Current Indemnification Bylaw
provided that the Company would, to the fullest extent permitted by and in
accordance with the CSCA, indemnify each such individual entitled to
indemnification under the CSCA. Under the CSCA, an eligible indemnitee could
be indemnified only if (a) he or she was successful on the merits of a
Proceeding in respect of which indemnification was sought or (b) a
determination was made by a quorum of disinterested directors, by independent
legal counsel or by the shareholders that the eligible indemnitee had acted in
good faith and in a manner he or she reasonably believed to be in the best
interests of the corporation and, with respect to any criminal Proceeding, had
no reasonable cause to believe his or her conduct was unlawful. Corporations
were also permitted to advance expenses to eligible indemnitees provided the
indemnitee agreed to repay such amount unless it were ultimately determined
that the individual was entitled to indemnification.
In the case of suits brought by the corporation or derivative actions, the
CSCA contained significant restrictions on the scope of indemnification.
First, the CSCA did not permit indemnification for amounts paid to the
corporation, to a plaintiff or to counsel for a plaintiff in settling or
otherwise disposing of a Proceeding, with or without court approval. Second,
the CSCA did not permit indemnification for expenses incurred in defending a
Proceeding which is settled or otherwise disposed of without court approval.
The Indemnification Amendment requires the Company, to the fullest extent
permitted by the CBCA, to indemnify any person who is or was a director or
officer of the Company and permits it to provide additional indemnification to
officers, consistent with the CBCA. With respect to employees and agents of
the Company, the Indemnification Amendment permits the Board of Directors to
determine the terms and conditions of such indemnification. The Certificate
does not presently contain an express statement of the Company's authority to
indemnify such individuals.
The Indemnification Amendment is intended to implement for directors and
officers specific changes in the Connecticut law regarding indemnification that
were effected by the CBCA. In doing so, the Indemnification Amendment would
significantly broaden the rights of the Company's directors and officers to
indemnification from those contained in the Current Indemnification Bylaw as
provided by the CSCA. Under the Indemnification Amendment, the right to be
indemnified "to the fullest extent permitted by law" would mean that a director
would be indemnified against expenses and liabilities incurred in connection
with any Proceeding so long as his or her conduct did not (i) involve a knowing
and culpable violation of law by the director, (ii) enable the director or an
associate, as defined in Section 33-840 of the Connecticut General Statutes, to
receive an improper personal economic gain, (iii) show a lack of good faith and
a conscious disregard for the duty of the director to the Company under
circumstances in which the director was aware that his or her conduct or
omission created an unjustifiable risk of serious injury to the Company, (iv)
constitute a sustained and unexcused pattern of inattention that amounted to an
abdication of the director's duty to the Company, or (v) create liability under
Section 33-757 of the Connecticut General Statutes. Copies of Connecticut
General Statutes Sections 33-757 and 33-840 are attached as Exhibit B to this
Proxy Statement. The Indemnification Amendment would also afford such
indemnification rights to officers of the Company. The Indemnification
Amendment will not provide for indemnification for liabilities arising out of
the federal securities laws. If future changes to Connecticut law expand or
contract the scope of permissible indemnification, such changes would
automatically expand or contract the scope of indemnification provided under
the proposed Indemnification Amendment.
In addition, the Indemnification Amendment would permit, but not require,
the Company to provide additional indemnification rights to officers of the
Company who are not also directors, or who are directors but are made a party
to a Proceeding solely in their capacity as officers, so long as such
indemnification is consistent with public policy. The Indemnification
Amendment also provides the Company with the flexibility to determine the level
of indemnification of employees and agents on terms and conditions established
by the Board of Directors from time to time, also consistent with public
policy. These indemnification rights may be evidenced by contract, bylaws or
by resolutions of the Board.
In addition to the authority granted to corporations to increase or decrease
the levels of indemnification, the CBCA has eliminated the distinction drawn by
the CSCA between the indemnification protections granted in connection with
derivative actions and those granted in connection with any other type of
Proceeding. By eliminating this distinction, the CBCA makes indemnification of
directors mandatory for all types of Proceedings (both derivative and non-
derivative) unless indemnification is prohibited by law. Indemnification in
connection with derivative actions is limited, however, to reasonable expenses
incurred in connection with such Proceedings.
Further, the Indemnification Amendment proposes to obligate the Company to
advance the expenses of a director or officer so long as the director or
officer promises to repay the advance if it is later determined that he or she
is not entitled to indemnification by the Company. The Board of Directors may
establish different policies regarding the advancement of expenses to employees
and agents. Pursuant to the CBCA, a director, officer, employee or agent may
have his or her right to indemnification or to advancement of expenses
determined by a court. The CBCA does not limit the Company's power to pay for
or reimburse expenses incurred by any such individual in connection with his or
her appearance as a witness in a Proceeding at a time when he or she is not a
party thereto.
The CBCA, like the CSCA, continues to permit the Company to purchase
insurance to protect itself and any person eligible to be indemnified
thereunder against any liability or expense asserted against such person
whether or not the Company would be permitted to indemnify against such
liability or expense.
The Indemnification Amendment further provides that its provisions shall not
be deemed exclusive of any other rights of indemnification which a person
seeking indemnity may have under any Bylaw, agreement, vote of the stockholders
or disinterested directors or otherwise. If the Indemnification Amendment is
adopted by the stockholders, the rights of indemnification granted under the
Indemnification Amendment may not be limited in any way by a subsequent
amendment or repeal of proposed Article Seventh with respect to acts or
omissions that occur prior to the adoption of the amendment or repeal. The
rights to indemnification created under the Indemnification Amendment are
treated as contractual rights of the persons entitled to indemnification.
Amendment or repeal of Article Seventh would require the affirmative vote of a
majority of the voting power of the outstanding shares of the Company's Common
Stock and Cumulative Preferred Stock - Series A, $20 par value, voting together
as a single class.
If Proposal (4) is adopted, the Indemnification Amendment shall govern the
indemnification protections granted to directors, officers, employees and
agents of the Company as to all Proceedings after the date that the
Indemnification Amendment is filed with the Secretary of the State.
The CBCA has not yet been subject to judicial review due to its recent
enactment. As a consequence, its validity is untested by Connecticut courts.
The outcome of any litigation challenging the applicability of the CBCA's
provisions regarding indemnification or the effects of the Indemnification
Amendment cannot be predicted with any certainty at this time. If Proposal (4)
is adopted, the Indemnification Amendment may cause the Company to indemnify
directors and officers in situations where the Company currently is under no
obligation to do so. Accordingly, if any such indemnification is made, the
economic cost to the Company is likely to be greater than the economic cost of
its indemnity obligations if the Indemnification Amendment were not adopted.
The Company is not aware of any known or anticipated Proceeding for which a
claim for indemnification may be made by a director, officer, employee or agent
under the Indemnification Amendment.
The effect, if any, of the adoption of Proposal (4) upon the cost or
coverage of the Company's directors' and officers' liability insurance cannot
be determined at this time. The Company intends to continue to carry such
insurance whether or not Proposal (4) is approved by stockholders.
VOTE REQUIRED AND EFFECTIVE TIME
The affirmative vote of a majority of the voting power of the outstanding
shares of the Company's Common Stock and Cumulative Preferred Stock - Series A,
$20 par value, voting together as a single class, is required to adopt Proposal
(4). Abstentions and broker non-votes will not be counted as votes cast and
will have the same effect as a vote against Proposal (4). The Indemnification
Amendment, if adopted, will become effective as of the date and time it is
filed with the Office of the Secretary of the State of the State of
Connecticut.
The Board of Directors acknowledges that individual directors have a
significant personal interest in the outcome of the vote on Proposal (4) since
they would be the beneficiaries of the increased protections that Proposal (4)
authorizes. Moreover, any such personal benefit that the directors would
derive could potentially be at the stockholders' expense. Nevertheless, the
Board believes that the Indemnification Amendment is fair and in the best
interests of the Company and its stockholders and that it should enhance the
Company's ability to attract and retain qualified directors, officers,
employees and agents.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE ADOPTION OF PROPOSAL (4).
PROPOSAL (5) - CORPORATE GOVERNANCE AMENDMENT
GENERAL
Proposal (5) would amend the Company's Certificate (the "Corporate
Governance Amendment") to require that directors provide written notice of
resignation to the Board of Directors as specified in the CBCA.
REASONS FOR THE CORPORATE GOVERNANCE AMENDMENT
The Certificate currently allows directors to resign from the Board either
by oral tender of resignation at any meeting of the Board of Directors or by
giving written notice thereof to the Company. Although the CSCA did not
specify the means by which a director's resignation was required to be
communicated to a corporation, the CBCA provides that such resignation must be
in writing. The Corporate Governance Amendment would, therefore, conform the
Certificate to the CBCA and ensure that the Company is able to maintain a
comprehensive record of resignations by directors.
DESCRIPTION OF THE CORPORATE GOVERNANCE AMENDMENT
The Corporate Governance Amendment deletes from the Certificate the
reference to oral notice of resignation and requires that directors submit
resignations in writing to the Company. The Board of Directors recommends that
the stockholders approve the Corporate Governance Amendment because such
amendment will provide the Company with comprehensive records of resignations
from the Board of Directors and will make the Certificate consistent with the
requirements of the CBCA.
VOTE REQUIRED AND EFFECTIVE TIME
The affirmative vote of the holders of at least eighty percent (80%) of the
Company's Common Stock and Cumulative Preferred Stock - Series A, $20 par
value, voting together as a single class, is required to adopt Proposal (5).
Abstentions and broker non-votes will not be counted as votes cast and will
have the same effect as a vote against Proposal (5). The Corporate Governance
Amendment, if adopted, will become effective as of the date and time it is
filed with the Office of the Secretary of the State of the State of
Connecticut.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE ADOPTION OF PROPOSAL (5).