As filed with the Securities and Exchange Commission on December 22, 1994
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AQUARION COMPANY
(Exact name of Registrant as specified in its charter)
DELAWARE 835 MAIN STREET 06-0852232
(State or other jurisdiction of BRIDGEPORT, CONNECTICUT 06601-2353 (I.R.S. Employer
incorporation or organization) (203) 335-2333 Identification Number)
(Address, including zip code, and
telephone number, including area code,
of registrant's principal executive offices)
(Address, including zip code, and telephone number, including area code, of Registrant's principal
executive offices)
JANET M. HANSEN
Senior Vice President
and Chief Financial Officer
Aquarion Company
835 Main Street
Bridgeport, Connecticut 06601-2353
(203) 336-7632
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
JOEL S. HOFFMAN, ESQ. THOMAS T. ADAMS, ESQ.
Simpson Thacher & Bartlett Gregory and Adams
425 Lexington Avenue P.O. Box 190
New York, New York 10017 190 Old Ridgefield Road
(212) 455-2000 Wilton, Connecticut 06897
(203) 762-9000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If the Securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: [_]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE REGISTERED PROPOSED MAXIMUM PROPOSED AMOUNT OF
BE REGISTERED OFFERING PRICE MAXIMUM AGGREGATE REGISTRATION
PER UNIT OFFERING PRICE FEE
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Common Stock, no par value (4) 140,000 (1)(2)(3)(4) $22.9375 (3) $3,045,000 (3) $1,107
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(1) Represents the maximum amount of Aquarion Company ("Aquarion") Common Stock
to be issued to The New Canaan Company ("NCC") in connection with the
acquisition by Bridgeport Hydraulic Company ("BHC"), a subsidiary of
Aquarion, of substantially all the assets of NCC.
(2) The number of shares of Aquarion Common Stock to be issued to NCC is
determined by dividing the purchase price, $3,500,000 (as adjusted), by the
average of the daily closing prices as reported on the New York Stock
Exchange composite tape for the 30 consecutive business days commencing 45
business days before the Closing Date.
(3) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457 on the basis of the average of the high and low sales price of
Aquarion's Common Stock on the New York Stock Exchange Composite Tape on
December 16, 1994.
(4) Including the same number of Rights issuable under Aquarion's Preferred
Stock Purchase Rights Plan. Prior to the occurrence of certain events, the
Preferred Stock Purchase Rights will not be evidenced separately from the
Common Stock.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Aquarion Company
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CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
S-4 ITEM NUMBER AND CAPTION PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Facing Page; Cross Reference Sheet;
Statement and Outside Front Cover Outside Front Cover Page of
Page of Prospectus................ Prospectus.
2. Inside Front and Outside Back Available Information; Incorporation
Cover Pages of Prospectus......... of Certain Documents by Reference;
Table of Contents.
3. Risk Factors, Ratio of Earnings Prospectus/Proxy Statement Summary.
to Fixed Charges and Other
Information.......................
4. Terms of the Transaction.......... Prospectus/Proxy Statement Summary;
Aquarion Stock Price Ranges and
Dividends; Proposed Transaction;
Proposed Acquisition; Proposed Plan
of Liquidation; Federal Income Tax
Consequences of Acquisition, Property
Exchange and Liquidation; Description
of Aquarion Capital Stock; Comparison
of the Rights of Aquarion and NCC
Shareholders; Rights of Dissenting
Shareholders.
5. Pro Forma Financial Information... *
6. Material Contacts with the Proposed Transaction.
Company Being Acquired............
7. Additional Information Required *
for Reoffering by Persons and
Parties Deemed to be Underwriters.
8. Interests of Named Experts and Legal Matters.
Counsel...........................
9. Disclosure of Commission Position *
on Indemnification for Securities
Act Liabilities...................
i
S-4 ITEM NUMBER AND CAPTION PROSPECTUS
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B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Available Information; Incorporation
Registrants...................... of Certain Documents by Reference;
Prospectus/Proxy Statement Summary;
Information Concerning Aquarion
Company.
11. Incorporation of Certain Incorporation of Certain Documents by
Information by Reference......... Reference; Description of Aquarion
Capital Stock.
12. Information with Respect to S-2 *
or S-3 Registrants...............
13. Incorporation of Certain *
Information by Reference.........
14. Information with Respect to *
Registrants Other Than S-3 or S-2
Registrants......................
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 *
Companies........................
16. Information with Respect to S-2 *
or S-3 Companies.................
17. Information with Respect to Prospectus/Proxy Statement Summary;
Companies Other Than S-3 or S-2 Information Concerning The New Canaan
Companies........................ Company.
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents Incorporation of Certain Documents by
or Authorizations are to be Reference; Prospectus/Proxy Statement
Solicited........................ Summary; Introduction; Rights of
Dissenting Shareholders; Information
Concerning Aquarion Company;
Interests of Certain Persons in the
Transaction.
ii
S-4 ITEM NUMBER AND CAPTION PROSPECTUS
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19. Information if Proxies,
Consents or Authorizations are not
to be Solicited or in an Exchange
Offer............................ *
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* Item is omitted because answer is negative or item is inapplicable.
iii
[New Canaan Company Letterhead]
Dear Shareholder:
The enclosed information relates to a Special Meeting of the Shareholders of
The New Canaan Company ("NCC") to be held on ____________, 1995, at the offices
of NCC, 59 Grove Street, New Canaan, Connecticut, to consider (i) a proposal to
sell substantially all the assets of NCC, including all of the capital stock of
New Canaan Water Company ("NCWC") and The Ridgefield Water Supply Company
("RWSC") owned by NCC (the "Asset Sale"), to Bridgeport Hydraulic Company
("BHC"), (ii) an amendment to NCC's Certificate of Incorporation to provide that
the liquidation preference of NCC's Class A Common Stock may be paid in cash or
in other property (the "Amendment") and (iii) a Plan of Liquidation for NCC
pursuant to Internal Revenue Code Section 368(a)(1)(C) (the "Plan of
Liquidation"). All three of the proposals must be approved by the shareholders
of NCC in order for any of the proposals to become effective. If the Asset Sale,
the Amendment and the Plan of Liquidation are all approved by the shareholders
of NCC, shares of Common Stock, no par value ($1 per share stated value)
("Aquarion Common Stock"), of Aquarion Company ("Aquarion"), the parent Company
of BHC, with a value of $3.5 million, less the amount of certain transaction
costs, including a payment to an officer of NCC (see "Interests of Certain
Persons in the Transaction") and indebtedness of NCC to be paid by BHC (as
adjusted, the "Purchase Price"), will be issued by Aquarion in connection with
the Asset Sale. The shares of Aquarion Common Stock to be issued to NCC will be
valued at the average of the daily closing prices of Aquarion Common Stock as
reported on the composite tape for New York Stock Exchange listed securities for
the thirty consecutive business days commencing with the 45th business day prior
to the date of closing of the Asset Sale. The exact number of shares to be
issued is therefore not yet determinable, although the Asset Sale is subject to
the condition that no more than 140,000 shares or less than 87,500 shares be
issued by Aquarion. In addition to the Purchase Price, BHC will also pay a
specified liability of NCC in an amount not to exceed $130,000 at the closing of
the Asset Sale. Ten percent of the shares of Aquarion Common Stock issued as
payment of the Purchase Price shall be paid to the escrow agent for the escrow
fund. Pursuant to the Plan of Liquidation and the Amendment, holders of NCC
Class A Common Stock will receive, for each share of Class A Common Stock, a
number of shares of Aquarion Common Stock with a value equal to $35.00 (on the
basis of the value determined as described in the next preceding sentence) plus
all accrued but unpaid dividends on the Class A Common Stock to the date of
liquidation, and the balance shall be paid to the holders of the Class B Common
Stock, pro rata based on each such holder's ownership interest in Class B Common
Stock immediately prior to the Liquidation. Escrow shares not applied to the
payment of indemnification obligations will be distributed to the former holders
of the Class B Common Stock in accordance with the Escrow Agreement (as
hereinafter defined) after the termination thereof.
Whether or not you plan to attend the meeting, I urge you to read carefully
the information contained in the accompanying Prospectus of Aquarion and Proxy
Statement of NCC and to cast your proxy vote as soon as possible.
As you review this information, I would like to direct your attention to a
number of issues we consider crucial in making a decision on this vital matter:
. The Board of Directors of NCC has carefully reviewed the Asset Sale, the
Amendment and the Plan of Liquidation and the Board has approved the
Asset Sale, the Amendment and the Plan of Liquidation.
. The Board has concluded that the Asset Sale, the Amendment and the Plan
of Liquidation are in the best interests of the shareholders of NCC and
recommends that each shareholder vote FOR the proposal.
. The financial condition of NCC and its two subsidiaries, NCWC and RWSC,
is tenuous due to the lack of equity or other capital available to NCC or
its subsidiaries. If the Asset Sale is not approved by the shareholders
or does not occur for any reason, RWSC and NCWC will need to obtain
additional sources of financing and/or additional rate relief from the
Connecticut Department of Public Utility Control in order to repay their
respective debts and perform needed capital improvements. It is uncertain
whether RWSC or NCWC could obtain the level of financing or rate relief
needed.
We appreciate the loyalty and support our shareholders have demonstrated over
the years. We hope that you will continue this support by voting FOR the
proposals now. I and all the other officers and directors of NCC, intend to vote
FOR the proposals, and recommend that all shareholders do the same.
PLEASE SIGN AND RETURN YOUR PROXY CARD PROMPTLY. THE AFFIRMATIVE VOTE OF THE
HOLDERS OF AT LEAST TWO-THIRDS OF THE OUTSTANDING SHARES OF EACH CLASS OF COMMON
STOCK OF NCC IS REQUIRED FOR THE APPROVAL OF THE ASSET SALE AND THE AMENDMENT
AND THE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS OF THE OUTSTANDING SHARES OF
CLASS B COMMON STOCK IS REQUIRED FOR THE APPROVAL OF THE LIQUIDATION. YOUR VOTE
IS IMPORTANT. ACCORDINGLY, EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
Sincerely yours,
_______________________________
Name: Joseph J. McLinden
Title: President
NOTE: DO NOT SEND IN YOUR STOCK CERTIFICATE(S) AT THE PRESENT TIME.
IMPORTANT
If your shares are being held for you in "street name" or in a trust,
only the registered holder can sign a proxy on your behalf, and only upon
receipt of specific instructions. Please contact the person responsible for your
account and give instructions for execution of the proxy card on your behalf. If
you require additional material or assistance in voting you may contact Derrel
M. Mason, Esq., Gregory & Adams, P.C. at (203) 762-9000.
2
[New Canaan Company Letterhead]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ____________, 1995
A Special Meeting of Shareholders of The New Canaan Company ("NCC") will be
held on ____________, 1995 at ______ A.M., local time, at the offices of NCC, 59
Grove Street, New Canaan, Connecticut, for the following purposes:
(1) To consider and vote on proposals to
(a) approve the sale of substantially all of the assets of NCC to
Bridgeport Hydraulic Company,
(b) approve and adopt an amendment to NCC's Certificate of Incorporation
to provide that the liquidation preference of NCC's Class A Common
Stock may be paid in cash or in other property and
(c) approve and adopt a Plan of Liquidation of NCC pursuant to Section
368(a)(1)(C) of the Internal Revenue Code.
(2) To transact such other business as may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on ____________, 1995
as the record date for determining the shareholders entitled to notice of and to
vote at the meeting and any adjournment thereof; only shareholders of record at
the close of business on that date will be entitled to vote.
A proxy, which is solicited on behalf of the Board of Directors, is enclosed
for holders of Class A Common Stock and holders of Class B Common Stock,
together with a return envelope that requires no postage if mailed in the United
States. The affirmative vote of the holders of at least two thirds of the
outstanding shares of Class A Common Stock, no par value, and Class B Common
Stock, no par value, of NCC, each voting as a class, is required to approve the
sale of NCC's assets and the amendment to NCC's Certificate of Incorporation and
the affirmative vote of the holders of at least two-thirds of the outstanding
shares of Class B Common Stock is required to approve the Plan of Liquidation.
It is important that your shares be represented at the meeting. The
implementation of each of the proposals is conditioned upon all of the proposals
being approved. If you hold shares of Class A Common Stock AND Class B Common
Stock, please return a separate proxy with respect to each class of shares.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO INDICATE
YOUR VOTING DIRECTIONS, AND SIGN, DATE AND PROMPTLY RETURN YOUR PROXY IN THE
ENCLOSED POSTPAID ENVELOPE. IF YOU LATER DESIRE TO REVOKE YOUR PROXY, YOU MAY DO
SO AT ANY TIME BEFORE THE VOTING BY GIVING WRITTEN NOTICE OF REVOCATION TO THE
CORPORATE SECRETARY, OR BY EXECUTING A LATER PROXY, OR BY ATTENDING THE MEETING
AND VOTING IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
Secretary
New Canaan, Connecticut
____________, 1995
AQUARION COMPANY
TABLE OF CONTENTS
Prospectus/Proxy Statement Summary
Matters to be Considered at the Special Meeting
The New Canaan Company
Aquarion Company
NCC Shareholders' Meeting
Date, Time and Place of the Meeting
Purpose of the Meeting
Record Date; Voting Rights
Voting Requirements
The Acquisition
Interests of Affiliates
Acquisition Agreement
Conditions to the Acquisition
Property Exchange Agreement
Closing Date
Plan of Liquidation
The Amendment
Dissenting Shareholders' Rights
Recommendation of the Board of Directors
of NCC
Approval of the Board of Directors of BHC and Aquarion
Resale of Aquarion Common Stock
Certain Federal Income Tax Consequences
Regulatory Approvals
Introduction
Date, Time and Place of the Meeting
Business to be Transacted at the Special Meeting
Record Date, Voting Rights
Voting Requirements
Revocability of Proxies
Proxy Solicitation
Proposed Transaction
Background of the Transaction
NCC's Reasons for the Transaction; Recommendation
of the NCC Board of Directors
Aquarion's Reasons for the Transaction
Proposed Acquisition
Acquisition Agreement - Principal Provisions
Other Acquisition Agreement Provisions
Acquisition Agreement - Escrow Account
Conditions to Closing on the Acquisition Agreement
Transactions
Termination or Amendment of the Acquisition Agreement
Property Exchange Agreement - Principal Provisions
Conditions to Closing on the Property Exchange
Agreement Transactions
Termination or Amendment of the Property Exchange
Agreement
Expenses and Liability for Termination of the Acquisition
Agreement and the Property Exchange Agreement
Regulatory Approvals
Resale of Aquarion Common Stock
Accounting Treatment of the Transaction
Certain Transactions Between Aquarion and NCC
Plan of Liquidation
Provisions of Plan of Liquidation
Fractional Shares
Receipt of Aquarion Shares
Amendment to NCC's Certificate of Incorporation
Federal Income Tax Consequences of the Acquisition, Property Exchange
and Liquidation
Comparison of the Shareholder Rights
Powers of Directors in Issuance of Shares
Voting Rights
Preemptive Rights
Dissenters' Rights of Approval
Dividends and Distributions
Filling Director Vacancies
Removal of Directors
Amendments to Certificate of Incorporation
Amendments to Bylaws
Business Combinations with Interested Stockholders
Business Combination Statutes
Classification of the Board of Directors
Shareholder Meetings
Preferred Stock Purchase Rights
Indemnification of Directors and Officers
Aquarion Stock Price Ranges and Dividends
Rights of Dissenting Shareholders
Interest of Certain Persons in the Transaction
Information Concerning Aquarion Company
NCC and its Subsidiaries
Description of the Business of NCC's Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the New Canaan Company
Description of Aquarion Capital Stock
Information Concerning The New Canaan Company
Experts
Legal Matters
Financial Statements, The New Canaan Company,
Index to Consolidated Financial Statements
Exhibit A - Acquisition Agreement
Exhibit B - Acquisition Agreement Amendment
Exhibit C - Supplemental Acquisition Agreement Amendment
Exhibit D - Property Exchange Agreement
Exhibit E - Supplemental Property Exchange Agreement Amendment
Exhibit F - Plan of Complete Liquidation
Exhibit G - Amendment to Certificate of Incorporation
Exhibit H - Dissenters' Rights Statute
2
PROSPECTUS
AQUARION COMPANY
140,000 Shares
Common Stock, no par value
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PROXY STATEMENT
THE NEW CANAAN COMPANY
For a Special Meeting of Shareholders
to be Held on ____________, 1995
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This Prospectus of Aquarion Company and Proxy Statement of The New Canaan
Company (the "Prospectus/Proxy Statement") relates to the proposed acquisition
(the "Acquisition") by Bridgeport Hydraulic Company ("BHC"), a subsidiary of
Aquarion Company ("Aquarion"), of substantially all the assets of The New Canaan
Company ("NCC") for Aquarion Common Stock, no par value ($1 per share stated
value) (the "Aquarion Common Stock"), the approval and adoption by NCC of an
amendment to NCC's Certificate of Incorporation to provide that the liquidation
preference of NCC's Class A Common Stock may be paid in cash or in other
property (the "Amendment") and the adoption and approval by NCC of a Plan of
Liquidation, pursuant to Section 368(a)(1)(C) of the Internal Revenue Code (the
"Plan of Liquidation"). In return for substantially all the assets of NCC,
Aquarion will repay certain indebtedness of NCC in an amount not to exceed
$130,000 and will transfer to NCC shares of Aquarion Common Stock with a value
of $3,500,000, less the amount of certain of NCC's transaction costs, including
a payment to an officer of NCC (see "Interests of Certain Persons in the
Transaction") and indebtedness to be paid by BHC (as adjusted, the "Purchase
Price"). The Acquisition is being made pursuant to an Acquisition Agreement,
dated September 2, 1992, by and among Aquarion, BHC and NCC as thereafter
amended from time to time (the "Acquisition Agreement").
Upon completion of the Acquisition and the effectiveness of the Amendment, NCC
will proceed to implement the Plan of Liquidation by distributing the Aquarion
Common Stock received as the Purchase Price to the holders of NCC common stock
(the "NCC Shareholders"), in accordance with the provisions of NCC's Certificate
of Incorporation and the Plan of Liquidation. NCC Shareholders who dissent from
the Acquisition and Plan of Liquidation have certain rights of appraisal
pursuant to Connecticut law. See "Rights of Dissenting Shareholders." The number
of shares of Aquarion Common Stock equalling the Purchase Price to be received
and distributed by NCC is dependent on the trading price of Aquarion Common
Stock on the New York Stock Exchange ("NYSE").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION. NEITHER THE SECURITIES
AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Aquarion Common Stock is listed on the NYSE under the symbol "WTR". On
____________, 1995 the reported last sale price on the NYSE was $_____.
The consummation of the Acquisition is subject to various conditions,
including the receipt of required regulatory approvals, the approval of the
Acquisition, the Amendment and the Plan of Liquidation by the shareholders of
NCC at the Special Meeting of Shareholders of NCC to be held ____________, 1995,
and the closing of the Property Exchange Agreement dated October 21, 1992, as
amended, among Second Taxing District of the City of Norwalk, Monroe
Environmental Leasing Partnership, Aquarion and NCC, which is an integral part
of the Acquisition. See "Property Exchange Agreement."
Aquarion has filed a Registration Statement on Form S-4 pursuant to the
provisions of the Securities Act of 1933, as amended (the "Securities Act"),
covering the shares of Aquarion Common Stock to be issued in connection with the
Acquisition. This Prospectus/Proxy Statement also constitutes a Prospectus filed
as part of such Registration Statement.
This Prospectus/Proxy Statement is first being sent to the NCC Shareholders on
or about ____________, 1995.
All information concerning Aquarion and BHC included in this Prospectus/Proxy
Statement has been furnished by Aquarion and all information concerning NCC, New
Canaan Water Company and The Ridgefield Water Supply Company has been furnished
by NCC.
The date of this Prospectus/Proxy Statement is ____________, 1995.
AVAILABLE INFORMATION
Aquarion has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (the "Registration
Statement", which term shall encompass all amendments, exhibits, annexes and
schedules thereto) pursuant to the Securities Act, and the rules and regulations
promulgated thereunder, covering the Aquarion Common Stock being offered hereby.
This Prospectus/Proxy Statement does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission and to which reference is
hereby made. Statements made in this Prospectus/Proxy Statement as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
Aquarion is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy or information statements and other information
with the Commission. The Registration Statement, as well as such reports, proxy
or information statements, exhibits and other information filed by Aquarion with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048-1102 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such materials can also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such reports, proxy or information statements and other
information concerning Aquarion can also be inspected at the offices of the New
York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York
10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Aquarion's Annual Report on Form 10-K for the year ended December 31, 1993
(the "1993 10-K") and its Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994, June 30, 1994 and September 30, 1994 filed by Aquarion with the
Commission (File No. 0-4831), are incorporated by reference in this Prospectus
and shall be deemed a part hereof. All reports and other documents subsequently
filed by Aquarion pursuant to Sections 13(a) or 15(d) of the Exchange Act after
the date of this Prospectus/Proxy Statement shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing of such
reports and documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein prior to the date hereof shall be
deemed to be modified or superseded for purposes of this Prospectus/Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus/Proxy Statement.
The information relating to Aquarion contained in this Prospectus/Proxy
Statement summarizes, is based upon, or refers to, information and financial
statements contained in one or more of the documents incorporated by reference
herein; accordingly, such information contained herein is qualified in its
entirety by reference to such documents and should be read in conjunction
therewith.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM: CORPORATE SECRETARY, AQUARION COMPANY, 835 MAIN STREET,
BRIDGEPORT, CONNECTICUT
2
06601 (TELEPHONE: 203-335-2333). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ____________, 1995 [FIVE BUSINESS DAYS
PRIOR TO MEETING DATE].
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS/PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AQUARION.
THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF ANY OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS/PROXY STATEMENT NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
3
PROSPECTUS/PROXY STATEMENT SUMMARY
The following summary is qualified in its entirety by information, copies
of documents and statutes, and financial statements appearing elsewhere in this
Prospectus/Proxy Statement and the information incorporated herein by reference.
Matters to be Considered
at the Special Meeting . . . This Prospectus/Proxy Statement relates (i) to
the proposed acquisition, pursuant to the
Acquisition Agreement, by BHC of substantially
all the assets of NCC in return for the
repayment of certain indebtedness of NCC in an
amount not to exceed $130,000 and the transfer
of Aquarion Common Stock with a value,
calculated in accordance with the Acquisition
Agreement, equal to $3,500,000 subject to
adjustment for the repayment by Aquarion of
certain transaction costs and indebtedness of
NCC (as adjusted, the "Purchase Price"), (ii)
the adoption of an amendment to NCC's
Certificate of Incorporation to provide that
the liquidation preference of NCC's Class A
Common Stock, no par value ("Class A Common
Stock"), may be paid in cash or in other
property and (iii) the adoption by NCC of a
Plan of Liquidation pursuant to Section
368(a)(1)(C) of the Internal Revenue Code.
Upon completion of the sale of substantially
all of its assets, NCC will proceed with the
liquidation of NCC by distributing a portion
of the Aquarion Common Stock to an escrow fund
and the remainder to the shareholders of NCC.
Ten percent of the shares of Aquarion Common
Stock issued as payment of the Purchase Price
shall be paid by NCC to the escrow agent for
the escrow fund established pursuant to the
Acquisition Agreement (the "Escrow Shares").
Pursuant to the Plan of Liquidation and the
Amendment, holders of Class A Common Stock
will receive, for each share of Class A Common
Stock, shares of Aquarion Common Stock with a
value (calculated in accordance with the
Acquisition Agreement) equal to $35.00 plus
all accrued but unpaid dividends on the Class
A Common Stock to the date of liquidation, and
the balance shall be paid to the holders of
the NCC Class B Common Stock, no par value
("Class B Common Stock"), pro rata based on
each such holder's ownership interest in
Class B Common Stock immediately prior to the
Liquidation. Escrow Shares that are not
applied to the payment of indemnification
obligations under the Acquisition Agreement
will be distributed to the former holders of
the Class B Common Stock in accordance with
the Escrow Agreement (as hereinafter defined)
after the termination thereof. In addition,
the expenses of the administration of the
escrow fund, the liquidation of NCC and
payments, if any, to Dissenting Shareholders
will be paid by liquidating shares of Aquarion
Common Stock received as Purchase Price and
will reduce the number of shares of Aquarion
Common Stock received by holders of Class B
Common Stock.
The New Canaan Company . . . . NCC was incorporated in Connecticut in 1946.
It is a holding company, the two subsidiaries
of which are engaged in the regulated utility
business of public water supply. NCC's
subsidiaries, New Canaan Water Company
("NCWC") and The Ridgefield Water Supply
Company ("RWSC"), collect, treat and
distribute water primarily to residential and
commercial customers
4
and for fire protection in four communities in
Fairfield County, Connecticut. NCC's principal
place of business is located at 59 Grove
Street, New Canaan, Connecticut 06840, and its
telephone number is 203-966-5676 .
Aquarion Company . . . . . . . Aquarion is a holding company whose
subsidiaries are engaged both in the regulated
utility business of public water supply and in
various nonutility businesses. Aquarion's
utility subsidiary, Bridgeport Hydraulic
Company ("BHC"), and its subsidiary, Stamford
Water Company ("SWC"), collect, treat and
distribute water to residential, commercial
and industrial customers, to other utilities
for resale and for private and municipal fire
protection. BHC and SWC (collectively, the
"Utilities") provide water to customers in 22
communities in Fairfield, New Haven and
Litchfield Counties in Connecticut, including
communities served by other utilities to which
water is available on a wholesale basis for
back-up supply and peak demand purposes
through BHC's Southwest Regional Pipeline (the
"Regional Pipeline"). BHC is the largest
investor-owned water company in Connecticut
and, with its SWC subsidiary, is among the 10
largest investor-owned water companies in the
nation. Aquarion also has subsidiaries which
are engaged in nonutility activities. Aquarion
conducts an environmental testing laboratory
business through six laboratories which
analyze contaminants in hazardous waste, soil,
air and water. Additionally, Aquarion is
engaged in the business of providing various
utility management services, owns a small
forest products company and owns a small real
estate subsidiary. Aquarion's executive
offices are located at 835 Main Street,
Bridgeport, Connecticut 06601-2353, and its
telephone number is (203) 335-2333.
NCC Shareholders Meeting. . . Date, Time and Place of the Meeting. The
Special Meeting (the "Meeting") of
Shareholders of common stock of NCC (the "NCC
Shareholders") will be held on ____________,
1995 at _________________, local time, at the
offices of NCC, 59 Grove Street, New Canaan,
Connecticut.
Purpose of the Meeting. At the
Special Meeting the NCC Shareholders will:
(i) consider and vote upon the Acquisition;
(ii) consider and vote upon the approval and
adoption of the Amendment;
(iii) consider and vote upon the approval and
adoption of the Plan of Liquidation; and
(iv) transact any and all other business as
may properly come before the Special
Meeting or any adjournment thereof.
It is a condition to the effectiveness of
each of items (i), (ii) and (iii) above
that all three items be approved by the
requisite vote of NCC Shareholders.
5
Record Date; Voting Rights. Shareholders of
record of NCC Class A Common Stock and Class B
Common Stock, (the Class A Common Stock and
the Class B Stock collectively referred to as
the "NCC Common Stock") at the close of
business on ____________, 1995 (the "Record
Date") are entitled to notice of and vote at
the Special Meeting and any adjournment or
postponement thereof. As of the Record Date,
31,449 shares of Class A Common Stock and
11,791 shares of Class B Common Stock were
issued and outstanding, each of which will be
entitled to one vote on the Acquisition
Proposal and the Amendment, each voting
separately as a class. The approval of the
Plan of Liquidation requires only the vote of
the holders of Class B Common Stock and each
share of Class B Common Stock will have one
vote.
Voting Requirements. The presence, either in
person or by proxy, of the holders of a
majority of the shares of Class A Common Stock
and a majority of the shares of Class B Common
Stock outstanding on the Record Date is
necessary to constitute a quorum at the
Special Meeting.
Under the Connecticut Stock Corporation Act
("the CSCA") and NCC's Certificate of
Incorporation, the affirmative vote of (i) the
holders of at least two thirds of the
outstanding shares of NCC Class A Common Stock
and the affirmative vote of the holders of at
least two thirds of the outstanding shares of
NCC Class B Common Stock are required to
approve the Acquisition and the Amendment and
(ii) the holders of two-thirds of the
outstanding shares of Class B Common Stock is
required to approve the Plan of Liquidation.
Abstentions will have the effect of negative
votes.
Interests of Affiliates. As of the Record
Date, directors and officers of NCC and their
affiliates as a group owned approximately
9,212 shares of Class A Common Stock and
approximately 7,783 shares of Class B Common
Stock. In addition, a current officer and a
former officer of NCWC will be paid bonuses
upon the consummation of the Acquisition.
Joseph J. McLinden, the President of NCC, NCWC
and RWSC, will be entitled to receive on the
Closing Date an amount equal to 3% of the
purchase price, before reductions and
excluding the assumption of debt, pursuant to
a resolution adopted by the Board of Directors
of NCC in March, 1993. Nicholas Negria, a
former Senior Vice President of NCWC, will be
entitled to receive a cash payment equal to
approximately $50,000 within 30 days of the
Closing Date pursuant to a retirement benefit
agreement entered into by NCWC and Mr. Negria
in May 1991. See "Interests of Certain Persons
in the Transactions".
Pursuant to the Delaware General Corporation
Law ("the DGCL") no vote of the shareholders
of Aquarion is required to approve or
consummate the Acquisition.
The Acquisition. . . . . . . . Acquisition Agreement. A copy of the
Acquisition Agreement and the amendments
thereto are annexed as Exhibits A, B and C to
this Prospectus/Proxy Statement and is
incorporated herein by reference.
6
The description of its contents that follows
is necessarily incomplete; reference is made
to the Acquisition Agreement itself for a
complete description of each matter and of all
of the terms and conditions of the
Acquisition.
The Acquisition Agreement provides for the
sale of the Assets to BHC in return for BHC's
repayment of certain indebtedness of NCC in an
amount not to exceed $130,000 and Aquarion
Common Stock valued at $3,500,000 less the
amount of certain of NCC's transaction costs
and indebtedness paid by BHC in cash at the
closing. It is currently estimated that at
September 30, 1994 the amount of $3,500,000
would have been reduced by approximately
$750,000.
Such $750,000 consists of (i) approximately
$300,000 of legal fees, accountants' fees and
other transaction related expenses for which
NCC is liable, which liabilities will be
assumed and paid by BHC; (ii) a payment of
$105,000 agreed to be made by NCC to Mr.
McLinden in respect of his role in negotiating
the Acquisition, which liability will be
assumed and paid by BHC; (iii) approximately
$168,000 of liabilities of NCC and its
subsidiaries to certain of NCC's shareholders,
which will be assumed and paid by BHC at the
Closing; and (iv) approximately $177,000,
representing the estimated amount of certain
other liabilities of NCWC and RWSC.
Each share of Aquarion Common Stock will be
valued at the average of the daily closing
prices of Aquarion Common Stock as reported on
the composite tape for NYSE listed securities
for the thirty consecutive business days
commencing with the 45th business day prior to
the date of closing. The exact number of
shares to be issued is therefore not yet
determinable, although the Acquisition
Agreement provides that the obligations of
Aquarion and NCC to close the Acquisition are
subject to the requirement that no more than
140,000 or less than 87,500 shares be issued
by Aquarion for the Acquisition. The value of
the Aquarion Common Stock deliverable to NCC
is subject to adjustment if NCC's indebtedness
on a certain promissory note in the principal
amount of $130,000, which indebtedness BHC
will assume, is greater than that amount or if
indebtedness of NCWC or RWSC has increased
from the level reported on NCC's March 31,
1992 balance sheet, or if certain liabilities
of NCWC or RWSC have not been discharged prior
to the Closing Date (as defined below). The
balance payable on such $130,000 promissory
note was less than $130,000 on November 30,
1994. The Acquisition Agreement also provides
that 10% of the Aquarion Common Stock to be
issued to NCC in payment of the Purchase Price
will be placed in escrow for a period not to
exceed one year following the Closing Date to
be applied to obligations of the shareholders
of NCC to indemnify BHC and its affiliates
against certain liabilities that might result
from the consummation of the Acquisition.
Conditions to the Acquisition. In addition to
approval of the Acquisition, the Amendment and
the Plan of Liquidation by the shareholders of
NCC the respective obligations of NCC,
Aquarion and BHC to consummate the
transactions agreed to in the Acquisition
Agreement (the "Acquisition Closing") are
subject to satisfaction or waiver of certain
conditions, the most significant of which are:
(i) the obtaining of the regulatory approvals
described below under "Regulatory Approvals";
(ii) the binding and unconditional status of
the obligations of the parties to and under
7
a Property Exchange Agreement among Monroe
Environmental Leasing Partnership ("MELP"),
STD and NCWC (which requires satisfaction of
the conditions described below under "Property
Exchange Agreement"); (iii) the receipt of an
opinion satisfactory to NCC from tax counsel
relating to the tax treatment of the
Acquisition and the Plan of Liquidation; (iv)
the requirement that Aquarion not be required
to issue more than 140,000 nor less than
87,500 shares of Aquarion Common Stock in
payment of the Purchase Price and (v) that
there be no material adverse change in the
business of NCWC or RWSC.
Property Exchange Agreement. An integral part
of the Transaction is a three-cornered
property exchange pursuant to a Property
Exchange Agreement, dated October 21, 1992,
among MELP, STD, Aquarion and NCWC (the
"Property Exchange Agreement"). The Property
Exchange Agreement, which is to be consummated
immediately after the Acquisition Closing,
provides that MELP will transfer to NCWC a
commercial building and the property on which
it is situated, NCWC will in turn transfer a
reservoir and related property to STD, which
in turn will pay $2.2 million to MELP, which
will also receive $285,000 from Aquarion,
which amount will be increased by the rate of
inflation to the Property Exchange Closing (as
defined below).
A copy of the Property Exchange Agreement and
the Amendment thereto are annexed as Exhibits
D and E to this Prospectus/Proxy Statement and
is incorporated herein by reference. The
description of its contents herein is
necessarily incomplete; and reference is made
to the Property Exchange Agreement itself for
a complete description of each matter and of
all the terms and conditions of the property
exchange transaction.
Consummation of the transactions agreed to in
the Property Exchange Agreement (the "Property
Exchange Closing") is also subject to the
satisfaction or waiver of certain conditions,
the most significant of which are: (i) the
receipt of regulatory approvals described
below under "Regulatory Approvals"; (ii) the
completion of the Acquisition Closing; (iii)
receipt of certain inspection reports,
environmental assessments and easements; (iv)
receipt of a consent of the Town of New Canaan
and (v) development of a specified alternate
means of water supply for customers of NCWC.
It is anticipated that the conditions
described in (iii), (iv) and (v) will be
obtained or waived before January 31, 1995,
with the exception of one easement which it is
anticipated will be obtained before the
Closing.
Closing Date. The parties expect that the
Acquisition Closing will occur on the earliest
practicable date (the "Closing Date")
following the approval of the Acquisition, the
Amendment and the Plan of Liquidation by the
requisite vote of the NCC Shareholders and the
receipt of all requisite regulatory
approvals.
Plan of Liquidation. . . . . . The Plan of Liquidation provides that, upon
completion of the Transaction and the filing
of the Amendment, NCC will be liquidated in
accordance with the CSCA and the Aquarion
Common
8
Stock then owned by NCC will be distributed to
the NCC Shareholders. NCC will first transfer
to the Escrow Agent 10% of the number of
shares of Aquarion Common Stock received as
the Purchase Price. In addition, payments will
be made to any Dissenting Shareholders.
Holders of Class A Common Stock will receive,
for each share of Class A Common Stock, shares
of Aquarion Common Stock with a value
(calculated in accordance with the Acquisition
Agreement) equal to $35.00, plus accrued and
unpaid dividends thereon to the date of the
liquidation. The remaining shares of Aquarion
Common Stock will be distributed to holders of
Class B Common Stock. In addition, the
expenses of the administration of the escrow
fund, the liquidation of NCC, the cost of
liquidating shares of Aquarion Common Stock to
make payments in lieu of fractional shares and
payments, if any, to Dissenting Shareholders
will be paid by liquidating Aquarion shares
received as Purchase Price and will reduce the
number of shares of Aquarion Common Stock
received by holders of Class B Common Stock.
Finally, NCC has agreed to pay to Joseph J.
McLinden an amount equal to 3% of the Purchase
Price at the Closing of the Acquisition, which
amount will also reduce the distribution to
holders of Class B Common Stock. Shares held
in escrow not applied to the payment of
indemnification obligations will be
distributed to the former holders of the Class
B Common Stock in accordance with the Escrow
Agreement after the termination thereof. The
right to receive shares of Aquarion Common
Stock from the escrow account will not be
transferable by the former holders of Class B
Common Stock. The exact number of shares of
Aquarion Common Stock a holder of Class B
Common Stock will receive will be based on
each holder's proportionate ownership of Class
B Common Stock on the Closing Date. There will
be no fractional shares of Aquarion Common
Stock distributed.
The Amendment. . . . . . . . . The Certificate of Incorporation of NCC
currently provides that in the event of a
voluntary liquidation or dissolution of NCC,
the holders of the Class A Common Stock are
entitled to receive $35.00 per share plus
accrued but unpaid dividends to the date of
liquidation or dissolution. After the holders
of the Class A Common Stock are paid in full,
the remaining assets are distributed to the
holders of the Class B Common Stock, ratably
in accordance with their respective ownership
of such stock. NCC wishes to amend the
Certificate of Incorporation to provide that
the liquidation preference payable to the
holders of Class A Common Stock may be paid in
cash or in other property. Because the
Acquisition provides for the payment of the
Purchase Price in shares of Aquarion Common
Stock which will then be distributed to the
shareholders of NCC in the liquidation, NCC
will distribute such stock, and not cash, in
the liquidation. The amendment is meant to
make clear that such a distribution is
permitted under NCC's Certificate of
Incorporation.
Recommendation of the Board of
Directors of NCC. . . . . . The NCC Board of Directors believes that the
Acquisition, the Amendment and the Plan of
Liquidation are in the best interests of, and
are fair to, the shareholders of NCC and has
approved the
9
Acquisition, the Amendment and the Plan of
Liquidation. The NCC Board recommends that
each shareholder of NCC vote FOR the
Acquisition, the Amendment and the Plan of
Liquidation. In reaching their determination,
the NCC Board members considered a number of
factors, including the difficulties
experienced by NCWC and RWSC in obtaining
adequate financing and revenues to operate
their businesses as required by current laws
and regulations; the monetary terms of the
Acquisition; the fact that NCC Shareholders
will receive Aquarion Common Stock as part of
the Acquisition and Plan of Liquidation, which
represents shares of a larger company listed
on the NYSE, with a long history of
uninterrupted dividend payments; that the
receipt of Aquarion Common Stock is intended
to be a non-taxable transaction; and the
economies of scale that should result from the
Acquisition (such as reduced operating
expenses and lower costs of borrowing).
Approvals of the Boards of
Directors of BHC and Aquarion. The Aquarion and BHC Board each has approved
the Acquisition and believes it to be in the
best interests of Aquarion and BHC. Each Board
believes that the Acquisition represents an
opportunity for BHC to expand its public water
supply business in the State of Connecticut.
The service areas of both NCWC and RWSC adjoin
areas where BHC is franchised to supply water,
and most of NCWC's water supply is provided by
BHC through a regional pipeline. NCWC is also
bordered by BHC's Stamford Water Company
("SWC") subsidiary. Therefore, the
Acquisition will enable BHC, either directly
or through SWC, to supervise and coordinate
the operations of these companies with greater
economy than could be achieved through
separate ownership. The Acquisition is
therefore a natural geographic fit which will
expand Aquarion's core water supply business,
integrate water supply planning, and maximize
opportunities for shared efficiencies. The
Boards believe that the receipt by NCWC, when
it is an Aquarion subsidiary, of the
commercial building and related land from
MELP, as contemplated by the Property Exchange
Agreement, together with the acquisition of
the assets of NCC justify the gross
consideration of $3.5 million and the
assumption of $130,000 of debt to be paid for
the Acquisition. With STD's participation
through the Property Exchange Agreement, the
Boards consider the net investment in the
remaining assets of NCWC and RWSC will be
profitable in the long term. The Boards
further believe that the willingness of STD
and MELP to participate in the Property
Exchange, thereby enabling the tax liability
associated with the gain on the sale of the
Reservoir to be deferred, is beneficial.
Dissenting Shareholders' Rights. Pursuant to Connecticut General Corporation
Law Sections 33-373 et. seq. (the "Dissenters'
Rights Statute"), any NCC Shareholder who
objects to the Acquisition and Plan of
Liquidation described in this Prospectus by
notifying NCC in writing prior to the Special
Meeting and voting all of his or her shares
against the Acquisition and the Plan of
Liquidation, will have the right to be paid
the value, determined as provided in the
statute, of all of his or her shares of NCC
Common Stock upon compliance with the
provisions of the Dissenters' Rights Statute.
The amount payable
10
to Dissenting Shareholders shall be paid by
NCC and shall reduce the number of shares of
Aquarion Common Stock payable to holders of
Class B Common Stock. See "Rights of
Dissenting Shareholders".
Resale of Aquarion Common Stock. The shares of Aquarion Stock to be distributed
to NCC shareholders pursuant to the Plan of
Liquidation have been registered under the
Securities Act of 1933 (the "Securities Act")
and, in accordance with the provisions of Rule
145 thereunder ("Rule 145"), may be freely
traded by shareholders, who, at the time of
the Special Meeting are not affiliates of NCC.
See "Proposed Acquisition--Resale of Aquarion
Common Stock". The Acquisition Agreement
provides that shares of Aquarion Common Stock
distributed to NCC Shareholders may not be
sold for a period of four months from the
Acquisition Closing Date.
Certain Federal Income Tax
Consequences. . . . . . . . . It is intended that the Acquisition and the
Plan of Liquidation will qualify for federal
income tax purposes, as a reorganization
within the meaning of Section 368(a)(1)(C) of
the Internal Revenue Code of 1986, as amended.
Two important federal income tax consequences
will result from such a qualification: (1) no
taxable gain or loss will be recognized by
NCC, BHC or Aquarion as a result of the
Acquisition, and (2) each NCC Shareholder who
receives Aquarion Common Stock in a
liquidation distribution of NCC will not
recognize any taxable gain or loss as a result
of the Asset Sale and Plan of Liquidation.
The consummation of the Acquisition Agreement
is conditioned on receipt of an opinion from
NCC's tax counsel concerning certain federal
income tax consequences of the Acquisition and
the Plan of Liquidation, including (i) that
the Acquisition and the Plan of Liquidation
will qualify as a reorganization under Section
368 of the Code and (ii) that the shareholders
of NCC will generally recognize no taxable
gain or loss on the receipt of Aquarion Common
Stock in the transactions.
Regulatory Approvals . . . . . The Acquisition Closing and the Property
Exchange Closing are subject to obtaining the
approvals of several Connecticut regulatory
agencies. The DPUC must approve the transfer
to BHC of a controlling interest in the stock
of NCWC and RWSC, as well as the transfer of a
reservoir and certain related property from
NCWC to STD. The DPUC issued such approvals on
June 30, 1993, but subsequently reopened its
approval proceeding to consider the ability of
NCWC to repay an outstanding loan of $1.25
million with the proceeds of the sale of a
certain parcel of land. No final decision has
yet been issued in the reopened proceeding.
BHC and NCC have agreed that the Acquisition
will close if the sale of land by NCWC and the
retirement of NCWC debt do not take place
prior to the Closing. However, the effect on
the acquisition of any other terms and
provisions of a DPUC approval, not
contemplated by the agreement between BHC and
NCC, cannot be predicted. The transfer of the
reservoir to STD as a raw drinking water
supply source must be approved by the DPHAS,
before which a permit application is pending.
It is expected that the permit will be issued
upon submission of final information regarding
ownership after the
11
proposed transfer takes place of watershed and
non-watershed land. A diversion permit from
the DEP is required in order for STD to use
water from the NCWC reservoir in STD's system.
The DEP issued a diversion permit satisfactory
to STD and to a group of area residents in
July, 1994, but two local residents petitioned
the DEP to issue a declaratory ruling to the
effect that the permit should not have been
issued without a public hearing. The DEP
denied the petition, but it is possible that
the petitioners will seek judicial review of
the DEP's ruling. STD has indicated that it
will proceed with the Property Exchange
Closing notwithstanding the existence of
judicial or regulatory challenge to the
issuance by the DEP of the diversion permit.
12
SELECTED HISTORICAL FINANCIAL INFORMATION OF AQUARION
The following table sets forth selected consolidated historical financial
data of Aquarion Company and has been derived from and should be read in
conjunction with the audited consolidated financial statements of Aquarion
Company for each of the five years ended December 31, 1993 and the unaudited
interim consolidated financial statements of Aquarion Company for the nine
months ended September 30, 1994 and 1993, including the respective notes
thereto. In the opinion of management, all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation have been
included in the unaudited interim data. Interim results for the nine months
ended September 30, 1994 are not necessarily indicative of results which may be
expected for future periods, including the year ending December 31, 1994.
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- -------------------------------------------------------
1994 1993 1993 1992 1991(2) 1990 1989
---- ---- ---- ---- ------- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
RESULTS OF OPERATIONS:
Operating Revenues $ 85,118 $ 79,790 $ 107,355 $ 102,026 $ 98,898 $ 76,686 $ 78,289
Operating Income (1) 22,746 21,054 26,904 23,651 3,590 16,952 25,426
Income (Loss) before cumulative 9,565 8,628 10,990 8,609 (8,468) 7,065 9,961
effect of accounting changes
Cumulative effect of accounting 791
changes
Income (Loss) to common 9,565 8,628 10,990 9,400 (8,468) 7,065 9,961
shareholders
Weighted average number of 6,514,409 6,156,431 6,237,875 5,690,853 4,834,317 4,784,763 4,740,140
shares of Common Stock
Income (Loss) before cumulative $ 1.47 $ 1.40 $ 1.76 $ 1.51 ($1.75) $ 1.48 $ 2.10
effect of accounting changes
Cumulative effect of accounting $ 0.00 $ 0.00 $ 0.00 $ 0.14 $ 0.00 $ 0.00 $ 0.00
changes
Income (Loss) $ 1.47 $ 1.40 $ 1.76 $ 1.65 ($1.75) $ 1.48 $ 2.10
Dividends Declared Per Common $ 1.215 $ 1.215 $ 1.62 $ 1.62 $ 1.62 $ 1.60 $ 1.58
Share
BALANCE SHEET DATA (AT END OF
PERIOD):
Total Assets $ 372,892 $ 360,846 $ 362,872 $ 348,331 $ 293,802 $ 295,473 $ 254,258
Long Term Debt $ 115,538 $ 115,606 $ 115,591 $ 105,463 $ 95,283 $ 99,905 $ 68,228
Book Value Per Common Share $ 17.41 $ 17.14 $ 17.07 $ 16.33 $ 15.53 $ 18.84 $ 18.95
- ----------
(1) Operating income (loss) is defined as operating revenues less total costs
and expenses, other than interest expense, income taxes and allowance for
funds used during construction.
(2) Includes special charges of $15,000. The effect on net income was $13,980
or $2.89 per share.
13
SELECTED FINANCIAL INFORMATION OF THE NEW CANAAN COMPANY
The following table sets forth selected consolidated historical financial data
of NCC. In the opinion of management, all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation have been
included in the unaudited interim data. Interim results for the nine months
ended September 30, 1994 are not necessarily indicative of results which may be
expected for future periods, including the year ending December 31, 1994.
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- ----------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT SHARE DATA)
Results of Operations:
Operating Revenues $2,210 $2,257 $2,876 $2,668 $2,702 $2,620 $2,551
Operating Income (1) $ 297 $ 373 $ 350 $ 329 $ 306 $ 464 $ 457
Net Income $ 72 $ 236 $ 143 $ 105 $ 18 $ 74 $ 135
Balance Sheet Data (at end of
period):
Total Assets $9,456 $9,704 $9,369 $8,360 $8,094 $8,182 $8,372
Total Indebtedness (2) $3,543 $3,922 $3,878 $3,369 $3,472 $3,629 $3,709
- ----------
(1) Operating income (loss) is defined as operating revenues less total costs
and expenses, other than interest expense and allowance for funds used
during construction.
(2) Includes long-term debt (including current portion), Notes payable to bank,
shareholders and others.
14
COMPARATIVE PER SHARE DATA
The following table sets forth for Aquarion Common Stock and NCC Class A
Common Stock and Class B Common Stock certain historical per share financial
information for the nine months ended September 30, 1994 and 1993 and for each
of the three years for the period ended December 31, 1993. The information
presented herein should be read in conjunction with the financial statements and
other financial information of Aquarion incorporated by reference in this Proxy
Statement/Prospectus and the financial statements and other financial
information of NCC, including the notes thereto, appearing elsewhere in this
Proxy Statement/Prospectus.
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
----------------- -----------------------
1994 1993 1993 1992 1991
---- ---- ---- ---- ----
AQUARION COMMON STOCK
Book Value................... $ 17.41 $ 17.14 $17.07 $16.33 $ 15.53
Cash Dividends............... 1.215 1.215 1.62 1.62 1.62
Net Income................... 1.47 1.40 1.76 1.51 (1.75)
NCC COMMON STOCK
Book Value...................
Net Income...................
Cash Dividends--Class A...... 1.00 1.25
Cash Dividends--Class B......
AQUARION COMMON STOCK PRICE RANGE AND DIVIDENDS
Aquarion Company's Common Stock is traded on the NYSE under the symbol "WTR".
The following table sets forth the high and low closing sale prices as reported
on the NYSE Composite Tape and dividends paid for the period indicated.
PRICE RANGE DIVIDENDS
------------------ PAID PER
HIGH LOW SHARE
-------- --------- ---------
1992 QUARTER ENDED 24 3/4 20 1/4 .405
March 31.............................
June 30.............................. 23 1/2 20 1/8 .405
September 30......................... 24 7/8 23 1/4 .405
December 31.......................... 25 1/2 23 1/4 .405
1993 QUARTER ENDED 27 3/4 24 3/4 .405
March 31.............................
June 30.............................. 27 1/4 25 1/2 .405
September 30......................... 28 25 7/8 .405
December 31.......................... 28 3/4 26 .405
1994 QUARTER ENDED 27 3/4 24 3/4 .405
March 31.............................
June 30.............................. 26 7/8 23 .405
September 30......................... 26 23 1/2 .405
December 31 (through ________, 1994).
A recent last reported sale price for Aquarion's common stock on the NYSE
composite tape is ___________.
On April 23, 1990, the date preceding the public announcement of the execution
of the Letter of Intent relating to the Acquisition, the closing price per share
of Aquarion Common Stock, as reported on the NYSE composite tape was 23 1/8.
15
As of September 30, 1994, there were 6,871 holders of record of Aquarion's
common stock.
Aquarion has declared and paid quarterly dividends on its common stock without
interruption since its organization in 1969, and prior thereto, BHC paid
dividends on its common stock each year without interruption since 1890.
Dividends, when declared, are normally paid on the 30th day of January, April,
July and October.
The earnings of Aquarion are derived from its investments in its subsidiaries,
particularly BHC. Aquarion's future ability to pay dividends to holders of its
common stock is dependent upon the continued payment by BHC of dividends to
Aquarion. BHC's ability to pay dividends will depend upon timely and adequate
rate relief, compliance with restrictions under certain of the BHC debt
instruments and other factors. In addition, no dividends on BHC's common stock
can be paid during any period in which BHC's preferred stock dividends are in
arrears. There are no shares of BHC preferred stock outstanding.
Dividends on common stock of Aquarion can be paid only out of net profits and
surplus of Aquarion. Aquarion's ability to pay dividends is further restricted
by the terms of Aquarion's 7.8% unsecured Senior Notes due 1997 and 5.95%
unsecured Senior Notes due 1999 (the "Aquarion Notes") and by similar terms in
Revolving Credit Agreements dated as of May 14, 1993, providing short-term
borrowing arrangements from each of five banks to Aquarion (collectively, the
"Revolving Credit Agreement"). As of September 30, 1994, the applicable
restrictions would have permitted payment of additional dividends on Aquarion's
common stock of up to $34,022,000. This amount, adjusted by results for the
remainder of 1994, will be unrestricted under the Aquarion Notes and the
Revolving Credit Agreement for payment of dividends in 1994.
While Aquarion's Board of Directors intends to continue the practice of
declaring cash dividends on a quarterly basis, no assurance can be given as to
future dividends or dividend rates since they will be determined in light of a
number of factors, including earnings, cash flow, and Aquarion and BHC's
financial requirements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Capital Resources and Liquidity." Aquarion
paid dividends in 1990 and 1991 in excess of earnings, although there can be no
assurance that it would pay dividends in excess of earnings in the future.
NCC COMMON STOCK
There is no established trading market for the Class A Common Stock or the
Class B Common Stock. The holders of Class A Common Stock are entitled to
receive prior to any payment of dividends to holders of Class B common Stock,
annual dividends in the amount of $1.00 per share of Class A Common Stock, when
and as declared by the Board of Directors of NCC. Holders of Class A Common
Stock are entitled to certain voting rights if dividends on such shares are in
arrears in excess of $2.00 per share. See "Comparison of the Rights of Aquarion
and NCC Shareholders." Although there can be no assurance that NCC would
continue to pay any dividends to holders of Class A Common Stock, the policy of
the Board is to pay sufficient dividends to maintain the dividend arrearages on
such shares to equal less than $2.00 per share. NCC has paid no dividends on the
Class B Common Stock since 1983, and, to the best knowledge of officers of NCC,
no dividends were paid on the Class B Common Stock prior thereto.
NCC's Certificate of Incorporation provides that the holders of Class A Common
Stock are entitled to receive dividends from the net profits of NCC in priority
to any dividend on the Class B Common Stock. If, for any reason, dividends are
not declared on the outstanding Class A Common Stock, no dividend can be
declared on any Class B Common Stock. Furthermore, after paying the dividends on
the outstanding Class A Common Stock, the Class A Common Stock as a class, shall
be entitled to participate equally with the Class B Common Stock in the receipt
of any further dividends during any one year to the extent that the holders of
Class A Common Stock receive not more than an additional fifty cents per share.
At September 30, 1994, there were 92 record holders of Class A Common Stock
and 74 record holders of Class B Common Stock.
16
INTRODUCTION
DATE, TIME AND PLACE OF MEETING
This Prospectus/Proxy Statement is being furnished to the holders of Class A
Common Stock and the holders of Class B Common Stock in connection with the
solicitation of proxies by the NCC Board for use at a Special Meeting of NCC
Shareholders (the "Special Meeting") to be held on _______________, 1995, at the
offices of NCC, 59 Grove Street, New Canaan, Connecticut, at
_________________________, A.M., local time, and at any adjournment or
postponement thereof.
This Prospectus/Proxy Statement and accompanying proxy are first being mailed
to the NCC Shareholders on or about _______________, 1995.
BUSINESS TO BE TRANSACTED AT THE SPECIAL MEETING
At the Special Meeting, NCC shareholders will:
(i) consider and vote upon a proposal to approve the sale of substantially
all of the assets of NCC (including all the outstanding capital stock
of NCWC and substantially all of the outstanding capital stock of RWSC)
to BHC pursuant to the Acquisition Agreement;
(ii) consider and vote upon the approval and adoption of the Amendment;
(iii) consider and vote upon the approval and adoption of the Plan of
Liquidation; and
(iv) transact any and all other business as may properly come before the
Special Meeting or any adjournment thereof.
As of the date of this Prospectus/Proxy Statement, the NCC Board knows of no
other business that will come before the Special Meeting. Should any other
matter requiring a vote of the Class A Common Stock and/or Class B Common Stock
arise, the persons named in the enclosed form of proxy will vote the shares
represented by such proxy in accordance with their discretion.
None of the Acquisition, the Amendment or the Plan of Liquidation shall
become effective unless all three proposals are adopted by the requisite vote of
shareholders.
RECORD DATE, VOTING RIGHTS
Only shareholders of record of Class A Common Stock and Class B Common Stock
at the close of business on _______________, 1995 will be entitled to vote at
the Special Meeting. On that date, there were issued and outstanding 31,449
shares of Class A Common Stock and 11,791 shares of Class B Common Stock. Each
share of each class of NCC Common Stock is entitled to one vote per share on the
Acquisition and the Amendment and each share of Class B Common Stock is entitled
to one vote per share on the Plan of Liquidation, all exercisable in person or
by properly executed proxy at the Meeting or any adjournment or postponement
thereof.
VOTING REQUIREMENTS
The presence, either in person or by proxy, of the holders of a majority of
the shares of Class A Common Stock and a majority of the shares of Class B
Common Stock outstanding on the Record Date is necessary to constitute a quorum
for the transaction of business at the Special Meeting.
Under the CSCA and the Certificate of Incorporation of NCC, (i) the
affirmative vote, either in person or by proxy, of the holders of at least two
thirds of the shares of Class A Common Stock outstanding on the Record Date, and
the holders of at least two thirds of the shares of Class B Common Stock
outstanding on the Record Date, each voting separately as a class, are required
to approve each of the Acquisition and the Amendment and (ii) the affirmative
vote, either in person or by proxy of the holders of at least two-thirds of the
shares of Class B Common Stock outstanding on the Record Date is required to
approve the Plan of Liquidation. Abstentions have the effect of negative votes.
17
Shares of NCC Common Stock entitled to vote at the Special Meeting and which
are represented by properly executed proxies will, unless such proxies have been
revoked, be voted in accordance with the instructions indicated in the proxies.
Any proxies received without instructions will be voted FOR the proposals.
Action with respect to any other business that may come before the Special
Meeting and require a vote of shareholders may be taken only by the affirmative
vote of the holders of a majority of the shares of Class B Common Stock present,
in person or by proxy, at the Special Meeting, unless otherwise required by
NCC's Certificate of Incorporation or by the CSCA.
Pursuant to DGCL and Aquarion Articles of Incorporation and by-laws no vote
of the shareholders of Aquarion is required to complete the Transaction.
AFFILIATE OWNERSHIP
As of the Record Date, directors, officers and affiliates of NCC as a group
owned approximately 9,212 shares of Class A Common Stock and 7,783 shares of
Class B Common Stock, representing approximately 29.3% and 66.0%, respectively,
of the outstanding shares of these classes of NCC Common Stock.
Of these persons, holders whose ownership constitutes 23.7% of the Class A
Common Stock and 52.8% of the Class B Common Stock, have committed to vote for
the Acquisition, the Amendment and the Plan of Liquidation. Accordingly each of
the Acquisition and the Amendment will be approved if 13,516 additional shares
or 43.0% of Class A Common Stock and 1,636 additional shares or 13.9% of the
outstanding Class B Common Stock are voted in favor thereof and the Plan of
Liquidation will be approved if 1,636 additional shares, or 13.9% of the
outstanding Class B Common Stock are voted in favor thereof.
REVOCABILITY OF PROXIES
Any proxy given in response to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of NCC, at or before the taking of the vote at the Special
Meeting, a written notice of revocation bearing a later date than the proxy
given, (ii) duly executing a proxy bearing a later date than the proxy given and
delivering it to the Secretary of NCC before the vote at the Special Meeting, or
(iii) attending the Special Meeting and voting in person (although attendance at
the Special Meeting will not in and of itself constitute a revocation of a proxy
given). Any written notice of revocation or subsequent proxy should be sent so
as to be delivered to: The New Canaan Company, 59 Grove Street, New Canaan,
Connecticut 06840, Attention: Thomas Thomas, Secretary, at or before the taking
of the vote at the Meeting.
PROXY SOLICITATION
All expenses of this solicitation (other than the Commission filing fee which
will be paid by Aquarion), including the cost of preparing and mailing this
Prospectus/Proxy statement, will be borne by NCC. In addition to solicitation by
use of the mails, proxies may be solicited by directors, officers and employees
of NCC in person or by telephone, telegram or other means of communication. Such
directors, officers and employees will not be additionally compensated for, but
may be reimbursed for out-of-pocket expenses in connection with, such
solicitations. Arrangements will also be made with custodians, nominees and
fiduciaries for the forwarding of proxy solicitation materials to beneficial
owners of NCC Common Stock held of record by such custodians, nominees and
fiduciaries, and NCC may reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.
PROPOSED TRANSACTION
BACKGROUND OF THE TRANSACTION
Public water supply has been the core business of BHC since it was
established in 1857 and it remains a core business of BHC's parent company,
Aquarion. While BHC was formed originally to supply water to the City of
Bridgeport, its water supply business grew in Connecticut both through the
legislative expansion of its utility franchise into areas which were previously
not served by a public water supplier and also through acquisition of water
companies which served areas in close proximity to BHC's existing service areas,
such as the Westport Water Company and the Seymour Water Company. In 1984,
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BHC acquired Stamford Water Company and shortly thereafter completed
negotiations with public water suppliers in lower Fairfield County, including
New Canaan Water Company, to construct a regional pipeline which made BHC's
water supply available to those suppliers. Since 1989, almost all water sold by
NCWC to its customers has been provided by BHC through the regional pipeline.
BHC's strategic objectives include the growth of its public water supply
business, and the opportunity to acquire NCWC, which is bordered by the service
areas of BHC and of Stamford Water Company and can therefore be operated
economically in conjunction with BHC's existing system, will further BHC's
attainment of those objectives. The acquisition of RWSC will also serve to
extend BHC's public water supply business into a new area.
Water quality regulation became more complex and costly as a result of
amendments to the federal Safe Drinking Water Act in 1986. Water quality
standards for public drinking water and related testing and treatment
requirements demanded more operational expertise and capital investment by water
suppliers, and the costs of compliance with water quality regulations have
caused the rates charged for water to increase. Since the changes in the
regulations became effective both NCWC and RWSC have come under increasing
regulatory pressure to comply with a myriad of orders, regulations and laws,
many of which require considerable expenditures. Given the impact on rates,
economic regulators such as the DPUC have scrutinized both operational and
capital expenditures critically over the past several years. Given the weak
financial condition and limited customer base of NCC's subsidiaries and the
problems NCC has experienced in raising additional capital, attempts to resolve
these problems have proceeded at a pace unsatisfactory to NCC and the regulatory
agencies with jurisdiction over NCWC and RWSC. By contrast, BHC, serving
territories adjacent to those of NCWC and RWSC, is the largest investor-owned
water company operating in New England, and it has considerable financial
resources and an ability to attract additional equity capital.
Mr. William S. Warner, then the President of BHC and Aquarion (then known as
The Hydraulic Company), first submitted a conceptual proposal regarding a
possible acquisition of NCWC to NCC in the spring of 1985, which proposal BHC
officers discussed with members of NCC's Board of Directors, including Messrs.
Alexander Boyle, Will Garey and Thomas Thomas over the course of several
meetings. However, the initial acquisition concept excluded RWSC and failed to
produce agreement with respect to the value of NCWC's real property. In
addition, uncertainties regarding the regulatory future of NCWC's real property,
including approximately 173 acres of real property with a reservoir located
thereon and certain related property, including the reservoir dam and
improvements and several water supply wells and easements, owned by NCWC and
situated in the Town of New Canaan, Connecticut (collectively, the "Reservoir"),
were unresolved. Various suggestions regarding a flexible pricing mechanism
which would have established a minimum acquisition price and a sharing of
proceeds from the sale of any such land, depending upon the amount of such
proceeds, were explored without reaching agreement. Discussion continued
sporadically through early 1988.
In the summer of 1988, STD indicated its interest in acquiring the Reservoir
in order to meet its need for additional supply. Following discussions between
BHC and STD's General Manager, Mr. John S. Hiscock, BHC and STD agreed on the
terms of a joint proposal to purchase all of the assets of NCC whereby BHC would
acquire the transmission and distribution system of NCWC and STD would acquire
the Reservoir and related watershed property. RWSC as an asset of NCC was also
in the acquisition offer. STD's participation resolved questions pertaining to
the future use of the Reservoir and related watershed property of NCWC and
provided additional consideration which BHC would not have been willing to pay.
With the compliance and capital needs of both NCWC and RWSC intensifying and
the resources of BHC and STD in mind, representatives of the managements of NCC
and its subsidiaries and of Aquarion and its subsidiaries and representatives of
STD met several times to discuss and negotiate the acquisition proposal. In
April, 1990 NCC and BHC signed a letter of intent whereby BHC would acquire all
the stock or assets of NCC. Negotiations were then undertaken by the parties
which resulted in the preparation and execution of the Acquisition Agreement and
the formulation of a Plan of Liquidation for NCC in September of 1992 and the
Property Exchange Agreement in October 1992.
The Acquisition Agreement and the Property Exchange Agreement, if and when
performed, will result in NCWC and RWSC's becoming subsidiaries of BHC and
NCWC's acquiring improved commercial property, currently owned by MELP, in
exchange for water supply properties that are no longer required by it, and will
transform the ownership of NCC and its subsidiaries into an ownership interest
in Aquarion.
Since the Acquisition Agreement and the Property Exchange Agreement were
executed in December, 1992, certain actions were required of the parties by
regulatory authorities. See "Proposed Acquisition -- Regulatory Approval." In
addition it has been necessary to amend both agreements on two occasions to
extend the date on which such agreements would
19
terminate if the closing had not occurred. Currently, the closing date must
occur on or before February 28, 1994 or the transactions will terminate by their
terms. It is unclear whether the DPUC will grant a further extension of the
closing date for these agreements.
NCC'S REASONS FOR THE TRANSACTION; RECOMMENDATION OF THE NCC BOARD OF DIRECTORS
The NCC Board of Directors believes that the Acquisition, the Amendment and
the Liquidation should be approved by the NCC Shareholders in light of the
immediate and long-term capital needs of NCWC and RWSC and the favorable
exchange of investments that will be afforded the NCC Shareholders. The
Directors believe that BHC's strategic business plan to build a profitable,
expanding water supply business is consistent with the goals of NCWC and RWSC.
The Directors of NCC and the management of NCWC and RWSC, after careful study
and evaluation of the economic, financial and legal factors involved, believe
that the Acquisition will provide BHC with an increased opportunity for
expansion of its business, which in turn should benefit the NCC Shareholders who
become shareholders of Aquarion.
The terms of the Acquisition Agreement and the Property Exchange Agreement
were the result of arms' length negotiations over an extended period of time.
Among the positive factors considered by the NCC Board in deciding to approve
and recommend the Acquisition and Liquidation Proposal were: the monetary terms
of the Acquisition Agreement and the Property Exchange Agreement, which
management of NCC and its subsidiaries believes constitute a fair price for the
assets of NCC; the financial condition, business assets and liabilities and
management of Aquarion and its subsidiaries; the financial and business
prospects of BHC and its subsidiaries as a result of their becoming a larger
combined operating entity, including the achievement of substantial economies of
scale; and that a market exists for the Aquarion Common Stock on the NYSE,
something that is lacking for NCC Common Stock.
The NCC Board considers the Acquisition and Liquidation particularly
advantageous to NCC shareholders in that the NCC shareholders will receive a
security which, in the opinion of the NCC Directors, represents an investment of
the same character that has a potential to achieve a greater growth and market
value and that has significantly greater market liquidity than the NCC Common
Stock. The receipt of Aquarion shares as a result of the Acquisition and the
Liquidation is also intended to be a tax-free exchange, thereby affording NCC
shareholders an equity participation in Aquarion without currently incurring
federal income tax liability. See, "Federal Income Tax Consequences."
The NCC Board made its determination without the assistance of a financial
advisor and without a "fairness opinion." The Directors believe that they
devoted a sufficient amount of time to assessing the advantages and
disadvantages of the Acquisition and the Plan of Liquidation.
THE NCC BOARD OF DIRECTORS HAS CONCLUDED THAT THE ACQUISITION AND LIQUIDATION
ARE IN THE BEST INTERESTS OF NCC AND ITS SHAREHOLDERS AND RECOMMENDS UNANIMOUSLY
THAT NCC SHAREHOLDERS APPROVE THE ACQUISITION AND THE LIQUIDATION AT THE
MEETING.
AQUARION'S AND BHC'S REASONS FOR THE TRANSACTION
Aquarion's and BHC's respective Boards of Directors each believes that the
Acquisition represents an opportunity for BHC, in accordance with its strategic
business plan, to expand its public water supply business in the State of
Connecticut. The service areas of both NCWC and RWSC adjoin areas where BHC is
franchised to supply water, and most of NCWC's water supply is provided by BHC
through a regional pipeline. NCWC is also bordered by BHC's Stamford Water
Company ("SWC") subsidiary, which has a watershed extending into RWSC's service
area. Therefore, the ownership of contiguous transmission and distribution
systems would be united through the Acquisition, and the proximity of service
areas will enable BHC, either directly or through SWC, to supervise and
coordinate the operations of these companies with greater economy than could be
achieved through separate ownership. The Acquisition is therefore a natural
geographic fit which will expand Aquarion's core water supply business,
integrate water supply planning, and maximize opportunities for shared
efficiencies. The Aquarion and BHC Board each believes that the Acquisition will
contribute to the long-term stability of BHC as a regional water supplier.
The Aquarion and BHC Board each also recognizes that STD's intended purchase
of the NCWC Reservoir, as set forth in the Property Exchange Agreement, is
advantageous to both BHC and the NCC Shareholders. BHC's willingness to acquire
NCWC and RWSC for the consideration specified in the Acquisition Agreement is
dependent upon STD's purchase of the NCWC Reservoir because, the receipt by
NCWC, when it is an Aquarion subsidiary, of the commercial building and
20
related land from MELP, as contemplated by the Property Exchange Agreement,
together with the acquisition of the assets of NCC justify the gross
consideration of $3.5 million and the assumption of $130,000 of debt to be paid
for the Acquisition. With STD's participation through the Property Exchange
Agreement, the Aquarion and BHC Boards consider that the net investment in the
remaining assets of NCWC and RWSC will be profitable in the long term. The Board
further believes that the willingness of STD and MELP to participate in the
Property Exchange, thereby enabling the tax liability associated with the gain
on the sale of the Reservoir to be deferred, is beneficial.
Aquarion has not retained an outside party to evaluate the proposed
Acquisition but has instead relied upon the knowledge of its management in
utility regulation and ratemaking in Connecticut in considering the financial
viability of the Acquisition. Appraisals obtained for regulatory purposes in
1991 valued the Reservoir property to be transferred to STD at $2,264,000 and
the MELP building at $2,000,000. The MELP appraisal placed primary emphasis on
the sales comparison method of valuation but also indicated a value in excess of
$2,400,000 using the cost approach to valuation. Neither the Aquarion Board nor
the BHC Board based their approval of the Acquisition on a comparison of
appraisals but instead have determined that the difference in appraised values
of the Reservoir and the MELP building is not material over the long term and is
justified by the overall benefit of the Acquisition to Aquarion and BHC,
including the net cost of the water supply system after the property exchange
has taken place and the benefit of the deferral of tax consequences on the
property exchange transaction.
PROPOSED ACQUISITION
ACQUISITION AGREEMENT - PRINCIPAL PROVISIONS
A copy of the Acquisition Agreement is annexed as Exhibit __ to this
Prospectus/Proxy Statement and is incorporated herein by reference. The
description of the contents that follows is necessarily incomplete; and
reference is made to the exhibited Acquisition Agreement itself for a complete
description of each matter and of all of the terms and conditions of the
Acquisition.
NCC, Aquarion and BHC entered into the Acquisition Agreement on September 2,
1992. It and its subsequent amendments provide (i) for the sale by NCC of all of
its assets, which consist of all of the outstanding Common Stock, $25 par value,
of NCWC and 97.2% of the outstanding Common Stock, $25 par value, of RWSC to BHC
for (a) an assumption of NCC's obligation to repay borrowings from Charles
Perkins in an amount not to exceed $130,000 plus (b) $3,500,000, subject to
reduction for the payment of certain other indebtedness of NCC and certain
transaction costs (as adjusted, the Purchase Price), (ii) for payment of the
Purchase Price by delivery to NCC of newly-issued Aquarion Common Stock having
an aggregate value, calculated in accordance with the Acquisition Agreement,
equal to the Purchase Price, (iii) that the value of a share of Aquarion Common
Stock will be deemed to be the average of the daily closing prices of Aquarion's
Common Stock, as reported on the composite tape for NYSE listed securities, for
the 30 consecutive business days commencing with the 45th business day prior to
the closing date of the transaction, and (iv) for the deposit of 10% of the
shares of Aquarion Common Stock issued and delivered in payment of the Purchase
Price into an escrow account (described below) to be applied to satisfy
obligations of NCC to indemnify BHC for losses arising out of breaches of the
Acquisition Agreement terms and provisions and/or undisclosed liabilities of
NCC. The amount of $3,500,000 will be reduced by (i) any amount by which NCC's
obligation to Mr. Perkins exceeds $130,000, (ii) any liability of NCWC to NCC or
Ms. Anne Romo for borrowed money, (iii) any unsecured liability of NCWC to
CityTrust for borrowed money, (iv) any liability of RWSC to NCC for borrowed
money, all determined as of the Closing Date. The DPUC in its decision approving
the Acquisition Agreement and the Property Exchange Agreement modified the terms
and conditions of the Acquisition Agreement. Pursuant to the DPUC decision, NCC
or its subsidiaries must repay certain obligations, which at the time of the
DPUC decision equalled approximately $308,000 to suppliers, shareholders and
lending institutions and if they are unable to do so prior to the Closing Date,
BHC shall pay the balance of such obligations on behalf of NCC and the amount of
$3,500,000 shall be reduced accordingly.
It is currently estimated that at September 30, 1994 the $3,500,000 would
have been reduced by approximately $750,000. Such $750,000 consists of (i)
approximately $300,000 of legal fees, accountants' fees and other transaction
related expenses for which NCC is liable, which liabilities will be assumed and
paid by BHC; (ii) a payment of $105,000 agreed to be made by NCC to Mr. McLinden
in respect of his role in negotiating the Acquisition, which liability will be
assumed and paid by BHC; (iii) approximately $168,000 of liabilities of NCC and
its subsidiaries to certain of NCC's shareholders, which will be assumed and
paid by BHC at the Closing; and (iv) approximately $177,000, representing the
estimated amount of certain other liabilities of NCWC and RWSC. In addition, the
expenses of the administration of the escrow fund, the liquidation of NCC and
payments, if any, to Dissenting Shareholders will be paid by liquidating
Aquarion shares received
21
as Purchase Price and will reduce the number of shares of Aquarion Common Stock
received by holders of Class B Common Stock in the Liquidation.
The Closing Date will be the earliest practicable date following approval of
the Acquisition, the Amendment and the Liquidation by the requisite votes of the
holders of NCC Common Stock and the receipt of all requisite regulatory
approvals of the Acquisition Agreement and the Property Exchange Agreement.
Unless extended by BHC and NCC, the Acquisition Agreement will automatically
terminate if the Closing Date has not occurred on or before February 28, 1995.
OTHER ACQUISITION AGREEMENT PROVISIONS
In the Acquisition Agreement, NCC has represented and warranted that it is a
duly organized and validly existing corporation in good standing, with all
requisite power and authority to own its assets and carry on its business; that
NCWC and RWSC have rights to use the water they are using for water supply; that
the descriptions of the facilities of NCWC and RWSC given to BHC are accurate in
all material respects; that neither NCWC nor RWSC are charging more for sales of
water than the rates approved by the DPUC; that, except for requisite regulatory
approvals, no third-party approvals or consents are required for the performance
by NCC of its obligations under the Acquisition Agreement; that all material
contracts, and all pending or threatened litigation and other legal proceedings
in which NCC, NCWC and RWSC are involved, have been disclosed to BHC; that the
financial statements of NCC, NCWC and RWSC delivered to BHC are true and
correct; that NCC, NCWC and RWSC are in good standing with all tax authorities;
that the labor relations and employee benefit plans of NCC, NCWC and RWSC are in
compliance with all legal requirements; that NCC, NCWC and RWSC have good title
to all of their respective assets, including, in the case of NCC, 100% of NCWC's
outstanding Common Stock and Preferred Stock and 97.2% of the outstanding Common
Stock of RWSC; and that no fee or commission is payable to any person in
connection with the consummation of the transactions contemplated by the
Acquisition Agreement.
BHC has represented and warranted to NCC, in the Acquisition Agreement, that
BHC is a duly organized and validly existing public service company in good
standing, with all requisite power and regulatory authority to own its assets
and carry on its business; that, except for requisite regulatory approvals, no
consent or approval of any third party is required for the performance by BHC of
its obligations under the Acquisition Agreement; that BHC has disclosed to NCC
all pending or threatened material litigation and other legal proceedings in
which BHC is involved; that the financial statements of, and reports to the
Commission by Aquarion furnished to NCC are true and correct; and that Aquarion
will prepare and file an appropriate Registration Statement, including this
Prospectus/Proxy Statement, with the Commission in accordance with all legal
requirements.
In the Acquisition Agreement, NCC and BHC have covenanted with one another to
exchange information relative to their respective representations and
warranties; to take all actions necessary to satisfy the conditions to, and
consummate, the Acquisition to take no action inconsistent with their respective
obligations under the Acquisition Agreement; and to establish the escrow account
(described below). In addition, NCC has covenanted that, pending the Acquisition
Closing, neither NCWC nor RWSC will make any capital expenditure in excess of
$1,000, or any expenditures aggregating more than $25,000 without BHC's
approval.
BHC has covenanted, in the Acquisition Agreement, to indemnify and hold
harmless NCC and its affiliates, and its and their respective employees,
representatives, officers, directors and agents from any losses resulting from
any misrepresentation by BHC in the Acquisition Agreement, any breach by BHC of
any provision of the Acquisition Agreement and any claims, legal actions or
proceedings related to actions taken by BHC relative to the Acquisition
Agreement. Aquarion has agreed to indemnify and hold harmless NCC and each
person controlling NCC against any losses experienced by it or such person
arising out of any claim based on an allegation that Aquarion's Registration
Statement, including this Prospectus/Proxy Statement, contains an untrue
statement of any material fact or omits to state a material fact, except insofar
as any such claim is based on written information furnished to Aquarion by NCC,
NCWC or RWSC or the failure of NCC to have furnished to Aquarion and BHC a true
and accurate list of NCC shareholders with valid and current addresses of such
shareholders.
NCC has agreed, in the Acquisition Agreement, on behalf of itself and the NCC
shareholders, that NCC and, after its liquidation pursuant to the Plan of
Liquidation, the NCC shareholders, will indemnify and hold harmless BHC and its
affiliates, and its and their respective employees, representatives, officers,
directors and agents from any losses resulting from any misrepresentation by NCC
in the Acquisition Agreement, any breach by NCC of any provision of the
Acquisition Agreement, any claims, legal actions or proceedings related to
actions taken by NCC, NCWC or RWSC relative to the Acquisition Agreement, any
liability or obligation not assumed by BHC under the Acquisition Agreement
related to any
22
transaction or time period prior to the Acquisition Closing, or any
misinformation furnished to, or failure to furnish information to, Aquarion for
use in the preparation of its Registration Statement. The liability of each NCC
Shareholder pursuant to this indemnification commitment made on his, her or its
behalf in the Acquisition Agreement is limited to the amount of the assets of
NCC (which will consist of shares of Aquarion Common Stock) received by such
shareholder under the Plan of Liquidation.
ACQUISITION AGREEMENT - ESCROW ACCOUNT
An escrow account will be established at the Acquisition Closing, into which
NCC will deposit 10% (the "Escrow Shares") of the shares of Aquarion Common
Stock received by NCC in payment of the Purchase Price. This Escrow Account will
be used to pay indemnification obligations of NCC described in the preceding
paragraph that become payable within one year after the Closing Date; and the
balance remaining in the escrow account on the first anniversary of the Closing
Date will be paid over to NCC for distribution to the holders of the Class B
Common Stock under the Plan of Liquidation, except that a number of shares of
Aquarion Common Stock with an aggregate value sufficient to satisfy any unpaid
judgment or settlement and any outstanding or unsatisfied claims against the
Escrow Account will be retained therein until all such judgments, settlements
and claims have been satisfied and discharged and thereafter Escrow Shares not
utilized for the foregoing purposes will be distributed to the former holders of
the Class B Common Stock. The right to receive shares of Acquiror Common Stock
from the escrow account will not be transferable by the former holders of Class
B Common Stock.
CONDITIONS TO CLOSING ON THE ACQUISITION AGREEMENT TRANSACTIONS
In addition to approval of the Acquisition, the Amendment and the Liquidation
by the NCC shareholders at the Special Meeting, and to the regulatory approvals
(see "Regulatory Approvals"), the respective obligations of NCC, Aquarion and
BHC to consummate the Acquisition Closing are subject to the satisfaction or
waiver of other conditions, including: (i) the accuracy in all material respects
of the representations and warranties made by the parties in the Acquisition
Agreement; (ii) the performance by the parties of their respective obligations
under the Acquisition Agreement prior to the Closing Date; (iii) the absence of
any material adverse change in the business, operations, properties, condition
(financial or otherwise) or prospects of NCC, NCWC or RWSC; (iv) the binding and
unconditional status of the obligations of the parties to and under the Property
Exchange Agreement (which requires satisfaction of the conditions described
below under "Conditions to Closing on the Property Exchange Agreement"); (v)
receipt of an environmental assessment satisfactory to BHC of the businesses of
NCC, NCWC and RWSC; (vi) the effectiveness of the Aquarion Registration
Statement under the Securities Act with respect to the shares of the Aquarion
Common Stock to be issued pursuant to the Acquisition Agreement; (vii) the
absence of any action or proceeding enjoining the Acquisition Agreement
transactions; (viii) the absence of any action or proceeding by any governmental
agency that might result in substantial damages in respect of said transactions
or enjoining the consummation of said transactions; (ix) a requirement that no
more than 140,000 or less than 87,500 shares of Aquarion Common Stock be issued
to NCC; (x) the receipt of an opinion satisfactory to NCC from tax counsel
relating to the Plan of Liquidation; and (xi) the satisfaction of the Board of
Directors of BHC and the Board of Directors of NCC with the regulatory treatment
afforded the transactions by the DPUC.
TERMINATION OR AMENDMENT OF THE ACQUISITION AGREEMENT
The Acquisition Agreement may be terminated or amended by mutual agreement of
the Boards of Directors of NCC and BHC, or terminated by the Board of Directors
of NCC or BHC in the event that the Acquisition Closing does not occur on or
before February 28, 1995. The Acquisition Agreement can be amended only by
agreement among the Boards of Directors of NCC, BHC and Aquarion.
PROPERTY EXCHANGE AGREEMENT--PRINCIPAL PROVISIONS
A copy of the Property Exchange Agreement and the Amendment thereto are
annexed as Exhibits D and E to this Prospectus/Proxy Statement and is
incorporated herein by reference. The description of its contents that follows
is necessarily incomplete; and reference is made to the exhibited Property
Exchange Agreement itself for a complete description of each matter and of all
of the terms and conditions of the Property Exchange.
NCWC, Aquarion, MELP and STD entered into the Property Exchange Agreement on
October 21, 1992. In it, the parties agree to a three-cornered property exchange
(the "Property Exchange") whereby (i) MELP will transfer to NCWC a three-acre
23
parcel of real property and a commercial building thereon situated in the Town
of Monroe, Connecticut (the "Building Property"), (ii) NCWC will transfer to STD
title to the Reservoir, (iii) STD will pay $2,200,000 to MELP, and (iv) Aquarion
will pay $285,000 to MELP ($72,000 of which was deposited by Aquarion with MELP
at the time of execution of the Property Exchange Agreement). The amount of
$285,000 will be increased by the rate of inflation to the Property Exchange
Closing. The Property Exchange Closing will occur after the Acquisition Closing,
and the latter is conditioned on the Property Exchange Agreement's being
unconditionally binding on the parties thereto. At the Property Exchange
Closing, taxes, water and sewage use charges and other costs, charges and
expenses associated with the Building Property and the Reservoir will be
apportioned among MELP, NCWC and STD on the customary chronological basis, the
transferring entities (MELP and NCWC) will be responsible for the payment of
conveyance taxes on the property each is transferring, and the transferee
entities (NCWC and STD) will bear the costs of title examination and title
insurance on the property each will receive.
In the Property Exchange Agreement, NCWC has represented that it is a duly
organized and validly existing public service company in good standing, with all
requisite power and authority to own and convey the Reservoir and to carry on
its business; that it has rights to use the water it is using for water supply;
that the descriptions of its facilities given to the other parties are accurate
in all material respects; that, except for requisite regulatory approvals, no
third-party approvals or consents are required for the performance of its
obligations under the Property Exchange Agreement; that no pending or threatened
litigation or other legal proceeding exists that would impair the performance by
it of its obligations under the Property Exchange Agreement; that it has
operated the Reservoir in accordance with all applicable environmental and other
laws and regulations; and that it has good, marketable and insurable title to
the Reservoir.
MELP has represented, in the Property Exchange Agreement, that it is a duly
organized and validly existing general partnership with all requisite power to
own and convey the Building Property and to carry on its business; that no
third-party approvals or consents are required for the performance by it of its
obligations under the Property Exchange Agreement; that no pending or threatened
litigation or other legal proceeding exists that would impair its ability to
perform its obligations under the Property Exchange Agreement; that it has
operated the Building Property in compliance with all environmental, zoning and
other governmental laws and regulations; that it has good, marketable and fully
insurable title to the Building Property; and that neither MELP nor any of its
partners has any knowledge of any proposed, pending or threatened event that
would adversely affect the use or value of the Building Property.
STD has represented and warranted, in the Property Exchange Agreement, that
it is a municipal corporation duly organized and validly existing in good
standing, with all requisite power and authority to own its assets and carry on
its business; that except for requisite regulatory approvals, no third-party
approvals or consents are required for the performance by it of its obligations
under the Property Exchange Agreement; and that no pending or threatened
litigation or other legal proceeding exists that would impair its ability to
perform its obligations under the Property Exchange Agreement.
The parties to the Property Exchange Agreement have covenanted with one
another to exchange information relative to their respective representations and
warranties, to permit inspection of the properties to be transferred, and to
take all actions necessary to satisfy the conditions to, and consummate, the
Property Exchange Closing. In addition, MELP and NCWC have covenanted to
maintain and manage the Building Property and the Reservoir, respectively, in
accordance with good business practice and all applicable laws and regulations;
and Aquarion and STD have covenanted to inspect the Building Property and the
Reservoir, respectively.
CONDITIONS TO CLOSING ON THE PROPERTY EXCHANGE AGREEMENT TRANSACTIONS
In addition to the regulatory approvals described below at "Regulatory
Approvals," the respective obligations of NCWC, Aquarion, MELP and STD to
consummate the Property Exchange Closing are subject to the satisfaction or
waiver of several conditions, including: (i) the accuracy in all material
respects of the representations and warranties made by the parties in the
Property Exchange Agreement; (ii) the performance by the parties of their
respective obligations under the Property Exchange Agreement prior to the
Closing Date; (iii) the absence of any action or proceeding enjoining the
Property Exchange; and (iv) the absence of any action or proceeding by any
governmental agency that might result in substantial damages in respect of the
Property Exchange or enjoining the consummation of the Property Exchange. In
addition, the obligations of NCWC and Aquarion are subject to: (v) the receipt
of an environmental assessment of the Building Property indicating that no
material change in the condition of the building has occurred since tests
conducted in 1990; (vi) receipt of permission from the Town of New Canaan to
extend a water supply pipeline, for and on behalf of and at the expense of STD,
from the NCWC water supply transmission system to the boundary between the Towns
of New Canaan and Wilton, Connecticut; (vii) development, at the expense of STD,
of an alternate means of supplying water to all existing customers of NCWC on a
water supply main
24
that will be used by STD as a raw water supply main subsequent to the Property
Exchange Closing; (viii) completion of the Acquisition Closing; and (ix) DPUC
treatment, for rate-making purposes, of the assets and related expenses of NCWC
and RWSC after the Acquisition Closing and the Property Exchange Closing
satisfactory to NCWC and BHC. In addition, the obligations of STD are subject
to: (x) receipt of a satisfactory environmental assessment of the Reservoir;
(xi) receipt of an inspection report indicating that the condition of the dam at
the Reservoir is as specified in a report prepared in 1985; (xii) receipt of
easements required for the installation of a gravity water supply main from the
Reservoir that will avoid a topographic elevation in the Town of New Canaan; and
(xiii) receipt of easements for an emergency spillway at and from the Reservoir
across property owned by NCWC to the Five Mile River, which spillway, together
with other estimated costs of river channel improvements, will not exceed
$200,000. It is anticipated that the conditions described in (v) through (xii)
will either be obtained or waived by January 31, 1995 and the condition in
(xiii) will be satisfied by the Closing Date.
TERMINATION OR AMENDMENT OF THE PROPERTY EXCHANGE AGREEMENT
The Property Exchange Agreement may be terminated if the Acquisition
Agreement is terminated, if the Acquisition Closing does not occur, if the
Property Exchange Closing does not occur on or before February 28, 1995 or by
mutual written consent of MELP, STD, NCWC and Aquarion. The Property Exchange
Agreement can be amended only by agreement among MELP, STD, NCWC and Aquarion.
EXPENSES AND LIABILITY FOR TERMINATION OF THE ACQUISITION AGREEMENT AND THE
PROPERTY EXCHANGE AGREEMENT
All of the parties to each of the Acquisition Agreement and the Property
Exchange Agreement have agreed to pay their own respective costs and expenses
(including all professional and other fees) relating to such agreement, the
negotiations therefor and the transactions contemplated thereby. All of the
parties to each of said agreements have also agreed that, in the event of the
termination of such agreement, all obligations of all of the parties will
terminate and no party will have any obligation or liability to any of the other
parties with respect to any breach of such agreement, regardless of whether such
breach is outstanding or curable at the date of termination of the agreement.
REGULATORY APPROVALS
In addition to approval of the Acquisition and Plan of Liquidation by the
Shareholders of NCC, and to the satisfaction of the conditions described above
to the Acquisition Closing and Property Exchange Closing, the consummation of
the Acquisition is subject to obtaining the approvals of several state
regulatory agencies. The DPUC must approve the transfer to BHC of a controlling
interest in the stock of NCWC and RWSC, as well as the transfer of the Reservoir
from NCWC to STD. By application to the DPUC filed on June 27, 1991 and by
Supplement to Application filed on September 19, 1991, NCWC, RWSC, NCC,
Aquarion, STD and MELP requested that the DPUC approve the Acquisition
Agreement, the Property Exchange Agreement, and certain other related matters.
On or about the same time STD filed an application with the DEP for approval of
a diversion permit relating to the transfer of the Reservoir from NCWC to STD
pursuant to the Property Exchange Agreement. STD, NCWC and BHC also applied to
the DPHAS to formally approve the transfer of such reservoir.
After several hearings and submission of requested and required documents,
the DPUC, on June 17, 1993, issued its preliminary decision, and on June 30,
1993 the DPUC issued its final decision approving the Acquisition Agreement and
Property Exchange Agreement (the "DPUC Decision"). The DPUC Decision placed
certain conditions on the Acquisition which differed from the terms and
conditions of the Acquisition Agreement and Property Exchange Agreement.
Specifically, the DPUC ordered NCC or its subsidiaries to repay $308,000 in
amounts owed to suppliers, shareholders or lending institutions prior to the
Closing. If NCC is unable to do so, BHC is to pay the amounts owed at Closing
and reduce the Purchase Price by a corresponding amount. As of September 30,
1994, $287,000 of such $308,000 had been paid by NCC's subsidiaries.
The DPUC subsequently reopened its approval proceeding to consider the
potential impact of a proposed NCWC land sale on NCWC's ability to retire an
existing $1.25 million loan from Village Bank & Trust Company and appropriate
regulatory treatment of any shortfall between the net proceeds from such a sale
and the amount of the debt and to consider certain anticipated costs associated
with reregistration of RWSC supply sources. No final decision has yet been
issued in the reopened proceeding. BHC and NCC have agreed that the Acquisition
will close whether or not the sale of land by NCWC and the retirement of NCWC
debt takes place. However, the effect on the acquisition of any other terms and
provisions of a DPUC approval, not contemplated by the agreement between BHC and
NCC, cannot be predicted.
25
The transfer of the Reservoir to STD as a raw drinking water supply source
must be approved by the DPHAS, before which a permit application is pending. It
is expected that the permit will be issued upon submission of final information
regarding ownership of watershed and non-watershed land after the proposed
transfer takes place. A diversion permit from the DEP is required in order for
STD to use water from the NCWC Reservoir in STD's system. The DEP issued a
diversion permit satisfactory to STD and to a group of area residents in July,
1994, but two local residents petitioned the DEP to issue a declaratory ruling
to the effect that the permit should not have been issued without a public
hearing. The DEP denied the petition, but it is possible that the petitioners
will seek judicial review of the DEP's ruling. STD has indicated that it will
proceed with the Property Exchange Closing notwithstanding the existence of
judicial or regulatory challenge to the issuance by the DEP of the diversion
permit.
RESALE OF AQUARION COMMON STOCK
The Aquarion Common Stock to be issued pursuant to the Acquisition will be
freely transferable after four months, except that shares issued to any NCC
shareholder who may be deemed to be an "affiliate" (as defined under the
Securities Act of 1933, as amended (the "Securities Act") of NCC for purposes of
Rule 145 under the Securities Act shall not be transferable except in compliance
with the Securities Act. This Joint Proxy Statement/Prospectus does not cover
resales of Aquarion Common Stock received by any person who may be deemed to be
an affiliate of NCC. The Acquisition Agreement provides that shares of Aquarion
Common Stock distributed to NCC shareholders may not be sold for a period of
four months from the Acquisition Closing Date.
ACCOUNTING TREATMENT OF THE TRANSACTION
The Acquisition is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. Under this method of accounting,
the recorded assets and liabilities of NCC will be carried forward to Aquarion
at their recorded amounts and income of Aquarion will include income of NCC for
the entire fiscal year in which the Acquisition occurs.
CERTAIN TRANSACTIONS BETWEEN AQUARION AND NCC
In addition to the Acquisition Agreement and the Property Exchange
Agreement, and amendments thereto which increased the gross consideration for
the Acquisition from $3.25 million to $3.5 million and extended the closing
deadline for the transactions contemplated thereby, BHC, NCWC and RWSC have,
pursuant to DPUC order, submitted a proposed Management Consulting Agreement
(the "Management Agreement") to the DPUC and await the DPUC's formal approval
before executing it. The Management Agreement, which the DPUC representatives
have stated should be considered effective as of November 1, 1994, provides that
certain management services be available to NCWC and RWSC from a BHC affiliate,
Aquarion Management Services Company ("AMS"). NCWC and RWSC have been directed
by the DPUC not to make certain operational decisions or financial commitments
without consulting with AMS. The Management Agreement expires upon the earlier
of the date of the Acquisition or on March 31, 1995. Consideration payable to
AMS under the Management Agreement is based on hourly rates plus expenses for
AMS personnel which have been submitted to the DPUC.
NCWC and BHC are parties to an agreement which enables NCWC to purchase one
million gallons of treated water a day from BHC through a regional pipeline
which connects NCWC's distribution system with BHC's water supply. NCWC obtains
most of the water it distributes and sells to its customers from BHC pursuant to
this agreement, to which other water utilities in southwestern Fairfield County
are also parties. The price paid by utilities for water from the pipeline is
based on a formula which reflects BHC's costs in providing the water. The
agreement first became effective in 1984 and is subject to negotiation of price
terms and water allocations every five years and a related DEP water diversion
permit from the Connecticut Department of Environmental Protection is subject to
renewal in 1995.
PLAN OF LIQUIDATION
PROVISIONS OF PLAN OF LIQUIDATION
A copy of the Plan of Liquidation is annexed as Exhibit F to this
Prospectus/Proxy Statement and is incorporated herein by reference. The Plan of
Liquidation provides that, upon consummation of the Acquisition and the filing
of the Amendment with the Secretary of State of the State of Connecticut, NCC
will be dissolved pursuant to the provisions of the CSCA. Following the
procedures prescribed in the CSCA, the NCC Board will file with the Secretary of
the State of Connecticut
26
a Certificate of Dissolution, thereby terminating the corporate existence of
NCC. The NCC Board will, however, continue to function with authority to wind up
NCC's affairs, pay, satisfy and discharge its liabilities and obligations,
obtain all required clearances from governmental tax and other authorities, and
distribute to the NCC shareholders all of its remaining assets. It is
anticipated that these assets will consist solely of shares of Aquarion Common
Stock, the number of which will be determined as described at "Proposed
Acquisition - Acquisition Agreement - Principal Provisions" above and cannot be
predicted accurately at this time. Although the Certificate of Incorporation of
NCC provides that, on liquidation, the holders of NCC Class A Common Stock will
receive cash in the amount of $35 per share plus accrued but unpaid dividends,
the Amendment would amend NCC's Certificate of Incorporation to provide that the
amount payable to holders of Class A Common Stock may be paid in cash or in
other property. Pursuant to the terms of the Plan of Liquidation and the
Amendment, holders of Class A Common Stock will receive, for each share of Class
A Common Stock, shares of Aquarion Common stock with a value (determined in
accordance with the terms of the Acquisition Agreement) on the Closing Date
equal to $35.00 plus all accrued but unpaid dividends on the Class A Common
Stock to the date of liquidation. Ten percent of the shares of Aquarion Common
Stock issued as payment of the Purchase Price shall be paid by NCC to the escrow
agent for the Escrow Fund, which shares will be withheld from the distribution
payable to the holders of Class B Common Stock. All of the directors who are
shareholders of NCC have indicated that they intend to vote for the Plan of
Liquidation in their capacity as shareholders. The balance of the shares shall
be paid to the holders of the Class B Common Stock, pro rata based on each such
holders ownership interest in such shares immediately prior to the Liquidation.
In addition, the expenses of the administration of the escrow fund, and the
liquidation of NCC and payments, if any, to Dissenting Shareholders will be paid
by liquidating Aquarion shares received as Purchase Price and will reduce the
number of shares of Aquarion Common Stock received by holders of Class B Common
Stock. Escrow Shares not applied to indemnification obligations will be
distributed to the former holders of the Class B Common Stock in accordance with
the Escrow Agreement after the termination thereof.
FRACTIONAL SHARES
If the foregoing distribution calculation does not result in a shareholder of
NCC being entitled to a whole number of shares of Aquarion Common Stock, the NCC
shareholder will receive a cash payment in lieu of any entitlement to a
fractional share of Aquarion Common Stock from the proceeds of a sale on the
NYSE by NCC of a sufficient number of shares of Aquarion Common Stock to settle
the aggregate amount of fractional share distribution entitlements of all
similarly situated shareholders of NCC. As a result, no fractional shares of
Aquarion Common Stock will be distributed under the Plan of Liquidation.
RECEIPT OF AQUARION SHARES
It is anticipated that the shares of Aquarion Common Stock remaining
available for NCC's liquidation distribution after payment, satisfaction and
discharge of all of NCC's liabilities and obligations, and the costs of
liquidation, will be distributed to the shareholders of NCC in an initial
distribution. Although this initial distribution will be made on the earliest
practicable date following the Acquisition Closing and the dissolution of NCC,
the amount of time that will be required to wind up NCC's affairs, pay, satisfy
and discharge or make adequate provisions for all of its liabilities and
obligations and obtain all required governmental clearances cannot be predicted
accurately. It is presently estimated that the initial liquidation distribution
will occur on or about four months following the Acquisition Closing and
dissolution of NCC. The remaining Aquarion Shares will be distributed as soon as
practicable after the initial distribution.
As described above at "Proposed Acquisition - Acquisition Agreement - Escrow
Account," 10% of the shares of Aquarion Common Stock received by NCC at the
Acquisition Closing as the Purchase Price will be deposited in an Escrow Account
for the satisfaction of certain NCC indemnification obligations. On the closing
of this Escrow Account, which will occur no later than the first anniversary of
the Acquisition Closing Date, any shares of Aquarion Common Stock remaining in
the Escrow Account will be distributed by the NCC Board in a final liquidating
distribution to the former holders of NCC Class B Common Stock in the
proportional manner described above.
27
AMENDMENT TO NCC'S CERTIFICATE OF INCORPORATION
The Certificate of Incorporation of NCC currently provides that in the event
of a voluntary liquidation or dissolution of NCC, the holders of the Class A
Common Stock are entitled to receive $35.00 per share plus accrued but unpaid
dividends to the date of liquidation or dissolution. After the holders of the
Class A Common Stock are paid in full, the remaining assets shall be paid to the
holders of the Class B Common Stock, ratably in accordance with their respective
shareholdings.
NCC wishes to amend the Certificate of Incorporation to provide that the
liquidation preference payable to the holders of Class A Common Stock may be
paid in cash or in other property. Because the Acquisition provides for the
payment of the Purchase Price in shares of Aquarion Common Stock which will then
be distributed to the shareholders of NCC in the liquidation, NCC will
distribute stock and not cash in the liquidation. The amendment is meant to make
clear that such a distribution is permitted under NCC's charter.
The text of the Amendment is attached hereto as Exhibit G, and reference is
made thereto for the actual text to be included in the Certificate of
Incorporation. The Board of Directors of NCC approved the Amendment at a meeting
of the Board of Directors held on December 17, 1994. All of the directors who
are also shareholders have indicated that they intend to vote for the Amendment
in their capacity as shareholders of NCC.
FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION,
PROPERTY EXCHANGE AND LIQUIDATION
The following description summarizes the principal federal income tax
consequences that may be expected to result from the Acquisition, Property
Exchange and Liquidation.
NCC will be excused from performing its obligations under the Acquisition
Agreement unless it has received an opinion of Haythe & Curley, of New York, New
York, its tax counsel, to the effect that the transaction will constitute a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986 (the "Code"). This opinion will be based on certain
assumptions and representations of the parties to the transaction, including
that: (i) NCC will transfer to BHC at least 90% of the fair market value of
NCC's net assets, and at least 70% of the fair market value of NCC's gross
assets, determined immediately prior to the Acquisition Closing; (ii) NCC will
distribute the Aquarion Common Stock received in payment of the Acquisition
Price to NCC's Shareholders (and any creditors) in complete liquidation of NCC
within a reasonable period of time following the Acquisition Closing; (iii) on
the Closing Date, NCC's Shareholders will have no present intention to sell or
dispose of the Aquarion Common Stock received in liquidation of NCC such that,
in the aggregate, the NCC shareholders' ownership of Aquarion Common Stock will
be reduced to a number of shares having a value of less than 50% of the value of
the outstanding NCC Common Stock as of the Closing Date; (iv) the fair market
value of the Aquarion Common Stock received by each NCC Shareholder will be
approximately equal to the fair market value of such shareholder's NCC Common
Stock surrendered in liquidation; (v) the fair market value of the NCC assets
transferred to BHC in the Acquisition will exceed the sum of all liabilities
assumed by BHC under the Acquisition Agreement; (vi) the only consideration
received by NCC under the Acquisition Agreement will consist of shares of
Aquarion Common Stock, cash in lieu of any fractional share of such stock and
the assumption by BHC of certain liabilities of NCC; (vii) on the Closing Date,
BHC will have no present intention of selling or disposing of any of the assets
of NCC purchased at the Acquisition Closing, other than in the ordinary course
of business; and (viii) following the Acquisition Closing, BHC will continue the
historic businesses of NCWC and RWSC which are the regulated utility business of
public water supply.
If the transaction is treated as a reorganization under Section 368(a)(1)(C)
of the Code, generally, no gain or loss will be recognized for federal income
tax purposes by NCC, BHC or Aquarion as a result of the transaction. To the
extent, if any, that NCC is deemed to be in receipt of non-qualified
consideration by reason of the payment of its costs or otherwise, NCC may be
required to recognize a portion of its gain on the transaction. The federal
income tax basis of the stock of NCWC and the stock of RWSC in the hands of BHC
immediately after the consummation of the transaction will be the same as the
basis of those assets in NCC's hands immediately prior to the consummation of
the transaction; and the holding period of these stock assets in BHC's hands
immediately after the consummation of the transaction will include the holding
period of such stock in NCC's hands immediately prior to the consummation of the
transaction.
If the transaction is treated as a reorganization under Section 368(a)(1)(C)
of the Code, each NCC shareholder who, pursuant to the Plan of Liquidation,
receives a distribution of Aquarion Common Stock in liquidation of NCC will not
recognize any federal income tax gain or loss on such distribution. The federal
income tax basis of the Aquarion Common Stock received by such NCC Shareholder
in the liquidation distribution from NCC will be equal to the tax basis of the
28
shareholder's NCC Common Stock surrendered by the shareholder in NCC's
liquidation; and, if the shares of NCC Common Stock have been held by the
shareholder as capital assets, the federal income tax holding period of the
Aquarion Common Stock received by the shareholder in the NCC liquidation will
include the holding period of the surrendered NCC Common Stock in the
shareholder's hands.
Any cash received by an NCC shareholder in lieu of a fractional share of
Aquarion Common Stock in liquidation of such shareholder's stock ownership in
NCC will be treated as a distribution in full payment for a proportional
fractional interest of the shareholder's NCC Common Stock ownership prior to the
NCC liquidation; and federal income tax gain or loss will be recognized by the
shareholder, measured by the difference between the amount of cash received and
the shareholder's adjusted basis for the proportional fractional NCC Common
Stock ownership.
Any NCC shareholder who exercises his, her or its right to dissent from the
Transaction and to receive from NCC the fair market value of such shareholder's
NCC Common Stock in cash will be treated for federal income tax purposes as
receiving the cash in full payment for the liquidation of the shareholder's NCC
Common Stock holding. The shareholder will recognize gain or loss for federal
income tax purposes, upon receipt of the cash payment, measured by the
difference between the amount of cash received and the shareholder's adjusted
basis in the NCC Common Stock surrendered in the NCC liquidation. If the NCC
Common Stock surrendered in the NCC liquidation was held as a capital asset by
the shareholder, the gain or loss will be a capital gain or loss for federal
income tax purposes.
The Property Exchange under the Property Exchange Agreement is intended to
qualify, for federal income tax purposes, as a tax-free like-kind exchange under
Section 1031 of the Code. A ruling from the Internal Revenue Service concerning
the tax consequences of the Property Exchange has not been requested, nor will
an opinion of tax counsel be obtained by any party to the Property Exchange
Agreement. Section 1031(a)(1) of the Code provides that no gain or loss for
federal income tax purposes will be recognized on the exchange of property held
for productive use in a trade or business or for investment if the property is
exchanged solely for property of a like kind which is to be held after the
exchange either for productive use in a trade or business or for investment.
Real property is generally considered to be of a like kind to all other real
property, whether or not the property is improved or unimproved. It is
anticipated that the Building Property and the Reservoir will be treated as
like-kind property and that the Property Exchange will qualify for non-
recognition of gain or loss under Section 1031 of the Code. If the Property
Exchange so qualifies, no gain or loss for federal income tax purposes will be
recognized by NCWC as a result of its acquisition of the Building Property in
exchange for the Reservoir; and the tax basis of the Building Property in NCWC's
hands will be the same as its tax basis for the Reservoir, increased by the
amount of $200,000 cash paid to MELP by Aquarion as a part of the Property
Exchange transaction. The holding period of the Building Property in NCWC's
hands for federal income tax purposes will include the holding period of the
Reservoir in its hands prior to the Property Exchange Closing.
If the Internal Revenue Service were to challenge successfully the
qualification of the Property Exchange for non-recognition of gain under Section
1031 of the Code, the Property Exchange would result in the recognition of gain
by NCWC to the extent of the difference between the fair market value of the
Reservoir on the date of the Property Exchange and NCWC's adjusted basis in the
Reservoir. In such event, NCWC's tax basis in the Building Property would be
equal to the fair market value of the Reservoir on the date of the Property
Exchange Closing, plus the $200,000 paid by Aquarion to MELP as a part of the
Property Exchange.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. EACH NCC SHAREHOLDER IS URGED TO CONSULT HIS, HER OR ITS OWN
TAX ADVISOR AS TO SPECIFIC FEDERAL AND OTHER TAX CONSEQUENCES OF THE TRANSACTION
TO SUCH SHAREHOLDER.
RIGHTS OF DISSENTING SHAREHOLDERS
The applicable CSCA provisions (the "Dissenters' Rights Statute") provide
that NCC Shareholders ("Dissenting Shareholders") who object to the Acquisition
described in this Prospectus/Proxy Statement have the right to be paid the value
of all their shares upon compliance with the provisions of the Dissenters'
Rights Statute. Specifically, Section 33-373(d) of the CSCA provides that if a
corporation sells all or substantially all of its assets primarily in
consideration of securities of another corporation, and such transaction is part
of a general plan of liquidation and dissolution, substantially equivalent to a
merger any shareholder objecting to such sale shall have the right to be paid
the value (calculated as provided in the statute) of the shares of stock of such
corporation owned by him.
29
The following summary of the Dissenters' Rights Statute is necessarily
incomplete; and reference to the full text of the Dissenters' Rights Statutes
that is annexed as Exhibit H to this Prospectus/Proxy Statement.
Dissenting Shareholders electing to exercise their statutory rights must
satisfy all of the following requirements: (1) deliver to NCC written notice of
objection to the transaction prior to the Meeting, or at the Meeting prior to
the vote on the Acquisition; (2) not vote any of their shares in favor of the
Acquisition and Liquidation Proposal; (3) deliver to NCC, within ten (10) days
after the vote on the Acquisition, a written demand to purchase the shares; and
(4) deliver to NCC, within twenty (20) days after the demand, their share
certificates for notation thereon that such demand has been made. Failure to
deliver the share certificates will, at the option of the NCC and in the absence
of a court decision to the contrary, terminate a shareholder's rights under the
Dissenters' Rights Statute.
The notice and demand required by the Dissenters' Rights Statute should be
delivered to The New Canaan Company, 59 Grove Street, New Canaan, Connecticut
06840, Attention: Secretary. The demand must state the number and classes of
shares owned by the Dissenting Shareholder. Any shareholder making such demand
shall thereafter be entitled only to payment for the shares, and shall not be
entitled to vote, receive dividends or exercise any other shareholder rights.
Failure to make the demand required by the statute will bind a shareholder to
the terms of the Acquisition. The demand may not be withdrawn without the
consent of NCC.
At any time after receipt of the statutory notice, but not later than ten
(10) days after receipt of a demand to purchase shares or ten (10) days after
the Acquisition is consummated, whichever is later, NCC is obliged to make a
written offer to purchase the shares. The Dissenters' Rights Statute requires
that the price specified in the offer be the fair value of the shares (i)
determined as of the day prior to the date on which NCC mailed this
Prospectus/Proxy Statement and (ii) exclusive of any element of value arising
from the expectation of consummating the Transaction.
If the Dissenting Shareholder accepts NCC's offered price, NCC must make
payment upon surrender of the share certificates. If NCC defaults or refuses to
pay the price specified in its offer, the Dissenting Shareholder may file a
petition for such amount in the Superior Court for the Judicial District of
Stamford-Norwalk.
If NCC and any shareholder satisfying the Dissenters' Rights Statute's
requirements fail to agree in writing on a price for the shares within sixty
(60) days after NCC was required by the statute to make an offer to purchase,
either party may file suit in the Connecticut Superior Court for the Judicial
District of Stamford-Norwalk, requesting the court to determine the fair value
of the shares. All shareholders who have made proper demand and have not
accepted NCC's offered price must be made parties to this lawsuit. The court may
appoint one or more appraisers to determine the fair value of the shares. The
costs and expenses of such a proceeding will be assessed against NCC unless the
court finds that the refusal of all or some of the Dissenting Shareholders to
agree to the price offered by NCC was arbitrary, vexatious or not in good faith.
In such a case, the court may assess costs and expenses, including the
appraisers' reasonable compensation and reasonable expenses, against such
shareholders.
A shareholder's rights under the Dissenters' Rights Statute will terminate
and his, her or its status as a shareholder will be restored upon the occurrence
of any one of the following events: (1) the shareholder's demand is withdrawn
with the consent of NCC; (2) NCC abandons or rescinds the Transaction; (3) the
approving vote at the Meeting is revoked; (4) a demand or petition for
determination of fair value is not made within the statutory time period; or (5)
a court of competent jurisdiction determines that the shareholder is not
entitled to the relief requested.
Shareholders intending to exercise their rights under the Dissenters' Rights
Statute are advised to consult with counsel, as failure to comply strictly with
the statutory provisions may deprive such shareholders of their rights.
INTEREST OF CERTAIN PERSONS IN THE TRANSACTION
Joseph J. McLinden has served and is serving as the President, a Director and
a member of the Executive Committee of the Board of Directors of each of NCC,
NCWC and RWSC; and he has been the principal representative of NCC in
negotiating the terms of the Acquisition since March, 1990. He owns 20 shares of
NCC Class B Common Stock. On March 6, 1993, the NCC Board adopted a resolution
awarding Mr. McLinden the amount of $105,000 which represents 3% of the purchase
price before reductions and excluding the assumption of debt.
Prior to his retirement on May 31, 1991, Nicholas Negria served as the Senior
Vice President, a Director and a member of the Board of Directors of NCWC; and
he participated in the negotiations of the terms of the Transaction. On
September 15,
30
1990, the NCC Board adopted a resolution awarding Mr. Negria the amount of
$50,000 which represents to 2 1/2% of the Purchase Price. On May 16, 1991, Mr.
Negria and NCWC agreed on a retirement benefits package for Mr. Negria whereby:
(1) Mr. Negria is being paid $75,000 over a ten-year period that commenced July
1, 1991, in monthly installments of $625, provided that if the Acquisition is
consummated any unpaid balance will be paid within 30 days after the Closing
Date; (2) Mr. Negria was paid one month's salary in lieu of his accrued vacation
and unused sick time pay on the date of his retirement; (3) NCWC is providing
NCWC's group medical and hospital insurance coverage to Mr. Negria and his wife
for his lifetime; (4) Mr. Negria received the cash value of his vested interest
in the RWSC Pension Plan (in which NCWC employees also participate); and (5) Mr.
Negria was afforded the right to remain in possession of a residence on NCWC
property until June 30, 1991. The 1991 agreement superseded and replaced the
1990 resolution awarding Mr. Negria an amount equal to 2 1/2% of the Purchase
Price.
As of September 30, 1994, NCC owed an aggregate amount of $68,000 to Mr. A.
Glidden, a director of NCC and the owner of 23.1% of the Class A Common Stock
and 51.5% of the Class B Common Stock, and members of his family. At September
30, 1994, NCWC and RWSC owed an aggregate of $100,000 to A. Glidden. The
indebtedness described in this paragraph will be paid by BHC and will reduce
the amount of $3,500,000 in calculating the Purchase Price.
INFORMATION CONCERNING AQUARION COMPANY
Aquarion is a holding company whose subsidiaries are engaged both in the
regulated utility business of public water supply and in various nonutility
businesses.
The Utilities collect, treat and distribute water to residential, commercial
and industrial customers, to other utilities for resale and for private and
municipal fire protection. The Utilities provide water to customers in 22
communities with a population of approximately 490,000 people in Fairfield, New
Haven and Litchfield Counties in Connecticut, including communities served by
other utilities to which water is available on a wholesale basis for back-up
supply or peak demand purposes through the Regional Pipeline. BHC is the largest
investor-owned water company in Connecticut, and with its SWC subsidiary, is
among the 10 largest investor-owned water companies in the nation. The Utilities
are regulated by several Connecticut agencies, including the Connecticut
Department of Public Utility Control (the "DPUC").
Aquarion is also engaged in various nonutility activities. Aquarion conducts
an environmental testing laboratory business through its Industrial and
Environmental Analysts group of subsidiaries (collectively, "IEA"). IEA performs
testing to determine the nature and quantity of contamination in sampled
materials, including hazardous wastes, soil, air and water. IEA provides a range
of environmental analytical testing capabilities, including routine and
customized analysis of organic and inorganic contaminants. IEA's testing
services are conducted at six environmental testing laboratories in Connecticut,
Florida, Illinois, Massachusetts, New Jersey and North Carolina. IEA's
laboratories are subject to governmental regulation at both state and federal
levels. IEA's clients include engineering consulting firms, industrial and
commercial corporations and federal, state and local governmental entities. The
laboratories located in North Carolina, New Jersey and Connecticut participate
in the U.S. Environmental Protection Agency's Contract Laboratory Program.
Aquarion owns Timco, Inc. ("Timco"), a small forest products company based in
New Hampshire. At Timco's sawmill complex, lumber is cut and packaged for sale
to wholesalers and retailers. Aquarion is also engaged in utility management
services through its Hydrocorp, Inc. ("Hydrocorp") and Aquarion Management
Services, Inc. ("AMS") subsidiaries and owns Main Street South Corporation
("MSSC"), a small real estate subsidiary formed in 1969 to assist the Utilities
in marketing surplus land.
Aquarion was incorporated in Delaware as The Hydraulic Company in 1969 to
become the parent company to BHC, a Connecticut corporation founded in 1857. The
corporate name was changed to Aquarion company in April 1991. Aquarion's
executive offices are located at 835 Main Street, Bridgeport, Connecticut 06601-
2353 and its telephone number is (203) 335-2333.
INFORMATION CONCERNING THE NEW CANAAN COMPANY
NCC AND ITS SUBSIDIARIES
NCC was incorporated in Connecticut in 1946. It is a holding company whose
two subsidiaries are engaged in the regulated utility business of public water
supply in southwestern Connecticut. NCC owns all of the outstanding Common Stock
and Preferred Stock of New Canaan Water Company (NCWC), and 97.2% of the
outstanding Common Stock of RWSC.
NCC has the following two classes of Common Stock:
31
Class A Common Stock, the holders of which are entitled to preferential
dividends at the rate of One Dollar ($1.00) per share per annum, plus 50% of all
additional dividends paid during any year up to fifty cents ($.50) per share.
Holders of Class A Common Stock are not entitled to vote on corporate matters
except as provided by law and except when the dividends on Class A Common Stock
are in arrears two dollars ($2.00) or more per share.
Class B Common Stock, the holders of which have the exclusive common stock
voting power of the corporation (except as described above and as provided by
law) and are entitled to receive dividends when and as declared by the Board of
Directors of NCC, provided that no dividends on the Class A Common Stock are in
arrears.
At the close of business on ___________________, 1995 there were 31,449
outstanding shares of NCC Class A Common Stock, and the following shareholders
were known to NCC to be the owners of more than 5% of the outstanding shares of
its Class A Common Stock:
NAME AND ADDRESS SHARES OF CLASS A PERCENT OF
OF BENEFICIAL OWNER COMMON STOCK OWNED CLASS
- ------------------- ------------------ ----------
A. Glidden 7,255 shares 23.1%
P.O. Box 145
New Canaan, CT 06040
Geraldine Reed Hodgson 1,762 shares 5.6%
881 Ponus Street
New Canaan, CT 06840
At the close of business on ___________________, 1995 there were 11,791
outstanding shares of NCC Class B Common Stock, and the following shareholders
were known to NCC to be the owners of more than 5% of the outstanding shares of
its Class B Stock:
NAME AND ADDRESS SHARES OF CLASS B PERCENT OF
OF BENEFICIAL OWNER COMMON STOCK OWNED CLASS
- ------------------- ------------------ ----------
A. Glidden 6,076 shares 51.5%
P.O. Box 145
New Canaan, CT 06840
Muriel P. & Everett Smith, Jr. 1,558 shares 13.2%
Quaker Lane
Greenwich, CT 06831
The following table sets forth, on a quarterly basis, the dividends declared
and paid per share of NCC Class A Common Stock since January 1, 1992:
PER SHARE
PERIOD DIVIDENDS DECLARED
------ ------------------
1992
1st quarter None
2nd quarter None
3rd quarter $1.25
4th quarter None
1993
1st quarter None
2nd quarter None
3rd quarter $1.00/share
4th quarter None
1994
1st quarter None
2nd quarter None
32
3rd quarter None
No dividends have been declared or paid on the NCC Class B Common Stock in
the past ten years.
There is no established public trading market for NCC's Class A or Class B
Common Stock.
DESCRIPTION OF THE BUSINESS OF NCC'S SUBSIDIARIES
NEW CANAAN WATER COMPANY
NCWC was incorporated by Special Act of the Connecticut legislature in 1889.
It collects, treats, purchases and distributes water to residential and
commercial customers in New Canaan and to the Town of New Canaan, and to a small
portion of the adjacent town of Stamford, Connecticut. NCWC provides water
directly to approximately 3,300 customers. NCWC management does not anticipate
significant growth in residential consumption in the foreseeable future, and
expects stability or small growth in commercial water use. NCWC's water supply
is available from both company-owned and non-owned subsurface sources and from
the Regional Pipeline. During 1993, approximately 93% of the water supplied by
NCWC to its customers was obtained from the Regional Pipeline and non-owned
subsurface sources.
NCWC distributes its water by taking water from the Regional Pipeline at the
Little Brook Pump Station and pumping it into the system through 54 miles of
water mains. A booster pumping station increases the pressure for the higher
elevations at the northern end of the serviced area. A two million gallon tank
helps maintain pressure for the system and provides water storage for peak
demand times as well as for fire protection.
As a regulated utility with an assigned service area, NCWC can not attract
new business or raise or lower its rates without regulatory approval. With the
town of New Canaan showing no population growth over the past several years, the
company does not anticipate increased revenues from expansion of its customer
base. Most of the growth is occurring with respect to commercial construction.
NCWC does not anticipate any difficulty in meeting any growing demand from this
segment of its customer base.
In 1986, NCWC switched from the New Canaan Reservoir to the Regional Pipeline
for its main source of water supply. This was a result of the company's
determination that it would be less costly to participate in the construction of
the pipeline and pay for actual water usage than to install and maintain a
filtration plant at the reservoir to meet newly enacted water quality
legislation. The company purchases the water from the pipeline under an
agreement with BHC. See "Proposed Acquisition--Certain Transactions Between
Aquarion and NCC."
On May 3, 1994, NCWC filed with the DPUC an application seeking approval of
the sale of approximately forty (40) acres of unimproved land (the "Property")
currently classified as "Class III" by DPUC and the DPHAS. No part of this Class
III land has frontage on or access to a public highway, and this land abuts
Class I and Class II land of NCWC that surrounds and comprises its property
known as the New Canaan Reservoir. The terms and conditions of the sale and
purchase were set forth in the proposed contract of sale dated of March 24,
1994, as amended by an Addendum dated as of June 6, 1994. This application of
NCWC is pending before the DPUC. The purchasers will not purchase the Property
unless it has access to a public highway, the nearest of which is Michigan Road
in New Canaan. In order to provide the Property with access to Michigan Road,
either NCWC or the purchasers must acquire from owners of an adjacent parcel of
land, a strip of land at least 50 feet in width (the "Parcel") which would
provide the NCWC Class III land with access to Michigan Road by linking the
Parcel to other Class II land of NCWC which abuts its Class III land.
This access involving the Parcel and Class II land requires approval of the
DPHAS. NCWC has filed applications with DPHAS for approval to use NCWC's Class
II land to provide a 50 foot wide access strip linking NCWC's Class III land and
the Parcel. The DPHAS has not responded as yet to the NCWC application for
approval to create the 50 foot wide access strip on the Class II land. On
November 30, 1994, the purchasers and the owners of the land executed a letter
of intent with respect to the sale of the Parcel directly to the purchasers.
NCWC intends to use the proceeds from the sale of the Property to pay the
principal of a loan from the Village Bank and Trust Company to NCWC in the
amount of $1,250,000. That loan is secured by the Property, and must be paid in
order to obtain a release of the mortgage at the closing of the land sale. If
the closing of the sale of the Property does not occur prior to the Closing
Date, BHC will assume this debt and will acquire the Property by virtue of the
Acquisition. See
33
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of New Canaan Company--Financial Condition and Liquidity."
RIDGEFIELD WATER SUPPLY COMPANY
RWSC was incorporated by Special Act of the Connecticut Legislature in 1893.
It collects, treats and distributes water to residential and commercial
customers, and to the Town of Ridgefield, in Ridgefield, Connecticut. RWSC
provides water directly to approximately 2,200 customers. Fire protection is
also provided through 307 public and private fire hydrants in
the service area. Its service area is primarily residential in nature. RWSC
management does not anticipate significant growth in residential consumption,
and expects small growth in commercial water consumption in the foreseeable
future.
The Company's sources of supply are the Round Pond Reservoir, the Oscaleta
Well Field, the North Street Well Field and the Beechwood Well Field, all of
which are located in Ridgefield. The total output of these sources is
approximately 1.1 million gallons per day which, together with the 488,000
gallon capacity of the Standpipe located at Peaceable Ridge Road in Ridgefield,
is more than adequate to meet the average daily demand of 825,000 gallons per
day. Water is pumped from Round Pond Reservoir and the Oscaleta Well Field
through two separate transmission lines into the distribution system and into
the Standpipe. When the demand exceeds the volume being pumped, water is gravity
fed to the system from the Standpipe. Water from the other two well fields is
pumped directly into distribution mains.
If a prolonged dry spell occurs during the summer months, daily demand can
equal 1.1 million gallons per day. If that happens, RWSC places a ban on
watering lawns in the serviced area during the period of the shortage. (Because
of this potential shortfall, RWSC is now operating under a moratorium for all
new service connections other than single unit residences. An additional source
of supply consisting of two wells located on the Titicus River near Hessian
Drive is capable of producing approximately 300,000 gallons per day. It is
expected to be placed in service in 1995 and will allow the company to lift the
moratorium on new service connections.
RWSC's offices are located in Ridgefield, and the maintenance and supply
facility adjoins the pump house at the Round Pond Reservoir. The company has
five full time employees and two part time employees. The Company also pays a
portion of the salaries of three of its officers, who are employees of NCWC.
Four of the five full time employees are involved in the pumping, maintenance
and distribution operations of RWSC and the fifth employee performs office and
clerical work. The part time employees perform clerical and bookkeeping tasks.
SEASONALITY OF DEMAND
The businesses of both NCWC and RWSC are subject to seasonal fluctuations and
weather variations. The demand for water during the warmer months is greater
than during the cooler months, due primarily to additional water requirements of
customer cooling systems and various private and public outdoor uses, such as
lawn sprinkling. From year to year and season to season demand will vary with
rainfall and temperature levels. During dry summers when demand for water is
high, RWSC can experience water shortages as described above.
OPERATING AUTHORITY
Both NCWC and RWSC are incorporated under and operate as public water
utilities by virtue of authority granted by Special Acts adopted by the
Connecticut legislature (Acts). These Acts afford franchises, unlimited in
duration, to provide public water supply to private and public customers in
designated municipalities and adjacent areas. The Acts also authorize NCWC and
RWSC to lay their mains and conduits in public streets, highways and public
grounds, and to exercise the power of eminent domain in connection with lands,
springs, streams or ponds and any rights or interests therein which are
expedient to or necessary for furnishing public water supply. In the event of
the exercise of any condemnation powers, appropriate compensation must be paid
to those injuriously affected by the taking.
REGULATION
Both NCWC and RWSC are subject to regulation by the DPUC, which has
jurisdiction with respect to rates, service, accounting procedures, issuance of
securities, dispositions of utility property and other related economic matters.
Customer rates are subject to approval by the DPUC. Each of NCWC and RWSC has
its own rate structure and is separately regulated
34
for ratemaking and other purposes by the DPUC. The following table sets forth
information regarding rate increase requests by NCWC and RWSC, and increases
granted by the DPUC, in their respective last three rate proceedings.
DATE OF ORIGINAL AMOUNT TOTAL INCREASE ALLOWED RETURN ON
APPLICATION REQUESTED GRANTED EFFECTIVE DATE COMMON STOCK EQUITY
- ---------------- ------------ -------------- -------------- -------------------
NCWC:
08/09/82................. 18.0% 15.3%/(3)/ 01/04/83 18.31%
10/28/85................. 140.7%/(3)/ 135.7%/(3)/ 07/09/86 30.37%
08/01/88................. 25.33%/(2)/ 8.30% 07/20/89 12.9%
RWSC:
08/18/80................. 33% 30.8%/(3)/ 02/28/81 15.5%
on ratebase
07/23/83................. 31.3% 26.9%/(3)/ 11/30/82 16.9%
on ratebase
05/24/88 (reopened)...... 26.0%/(1)/ 8.58%/(4)/ 01/19/89 10.5%
on ratebase
1/13/94.................. 42.9% 33.1% 07/19/94 9.06%
on ratebase
- ---------
(1) The original application actually requested an increase of 38.9%. The
request was lowered to 26.0% in the aggregate by amendments dated July 25,
1988, October 6, 1988 and October 27, 1988.
(2) The original application actually requested an increase of 31.1%. The
request was subsequently revised to 26.2% and then to 25.33% on May 1,
1989.
(3) Indicates that the number was calculated and not given in the decision.
(4) The decision asserts that "[t]he approved revenues result in an overall
increase in revenues of 8.58%. The increase in rates charged to water
service customers is approximately 8.61%.
When RWSC applied to the DPUC for rate relief in 1988, the application
included the estimated costs of installing and operating the two new Beechwood
Wells. When it became clear that the wells would not be completed before the
rate case was decided, the company removed these costs from its application with
the belief that it would include the costs in a limited reopening of the rate
case when the project was completed. Due to the protracted process of attempting
to obtain a diversion permit for the wells from the DEP, the project was not
completed until the summer of 1993, when it was too late to reopen the 1988 rate
case to add these costs. This caused the RWSC to incur substantial expenses
which were financed from deferring account payables and from short term
borrowings.
In January, 1994, RWSC applied for a 42.9% rate increase. On July 19, 1994
the DPUC granted a 33% increase in annual revenue.
On June 25, 1993, RWSC entered into a Consent Order with the Connecticut
Department of Health and Addiction Services regarding the installation of a
filtration system at the company's Round Pond Reservoir. The Public Health Code
required such installation to be completed by June 29, 1993, but the Company was
unable to meet this deadline. Under the terms of the Consent Order, voluntarily
entered into by RWSC, the compliance date was extended to June 29, 1997. Three
pilot studies on a new filtration method have been performed at the Round Pond
reservoir and design work on a system employing this method should be completed
before the January 1, 1995 deadline stipulated in the Consent Order for this
stage of the project.
In 1994, the Connecticut Department of Environmental Protection cited RWSC
for non-compliance with certain regulations and orders of that Department. The
alleged violations included failure to register sources of supply that were in
use prior to adoption of the department's Diversion Permit regulations, failure
to renew permits for two other sources of supply, and violation of certain
provisions of the Diversion Permit issued in 1992 for the company's Beechwood
Wells. The Department proposed to issue and RWSC agreed to accept a Consent
Order calling for the correction of certain violations and the payment of
$20,000, of which $15,000 represented fees that were not paid and $5,000
represented a penalty. RWSC has received a draft of the proposed Consent Order,
which is under review by the company and its counsel. RWSC 's principal defense
in the matter was that the inordinate delay in obtaining the Beechwood Wells
Diversion Permit and the
35
consequent delay in receiving rate relief deprived the Company of the funds that
were required to perform the action that the DEP required.
NCWC and RWSC are also subject to regulation by the DPHAS with respect to
water quality matters, use of water from surface and subsurface sources, the
location, construction and operation of water supply facilities and the sale of
certain properties. Plans for new water supply systems or enlargement of
existing water supply systems also must be submitted to the DPHAS for approval.
DPHAS has primary enforcement responsibility for regulations promulgated by the
federal Environmental Protection Agency under the Safe Drinking Water Act of
1974, and by the DPHAS itself, establishing minimum water quality standards and
water treatment requirements for all public drinking water.
The DEP is authorized to regulate the operations of NCWC and RWSC with
respect to water pollution abatement, diversion of water from surface and
subsurface sources, and the location, construction, alteration and operation of
dams and other water obstructions and facilities that affect, or discharge
effluents into state or interstate waters. Aquifer protection legislation in
Connecticut requires each water utility to conduct extensive groundwater data
collection and groundwater mapping of critical wellfield areas. The DEP is also
proposing land use regulations within these critical areas. The Aquifer
protection legislation also mandates that each municipality designate an Aquifer
protection agency to regulate land use in these areas.
Developments with respect to the identification and measurement of various
elements in water supplies and concern about the effect of such elements on
public health, together with possible contamination of water sources, may in the
future require NCWC and/or RWSC to modify all or portions of their respective
water supplies, to develop replacement supplies or to implement new treatment
techniques. Any such developments would significantly increase the affected
utility's operating costs and capital requirements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF THE NEW CANAAN COMPANY
CONSOLIDATED RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993 ("1993") COMPARED WITH YEAR ENDED DECEMBER 31, 1992
("1992").
Operating Revenues. Revenues of $2,875,772 in 1993 were $207,776 higher than
1992 revenues of $2,667,996, principally due to the increased demand for water
during the extremely hot summer of 1993. This increase represented a 7.8%
increase in revenues for 1993 compared with 1992.
Operating expenses and other expenses. Operating expenses for 1993 were
$1,704,724 compared with $1,608,075 in 1992. This increase of $96,649, or 6.0%,
was due primarily to higher costs of meeting the increased demand for water in
1993. Maintenance expense increased from $138,814 in 1992 to $152,539 in 1993,
an increase of $13,725 or 9.9% for the same reason. Depreciation expense for
1993 was $247,390, an increase of $16,345 over 1992. This increase was due to
the disposal by NCWC of certain vehicles that were not fully depreciated at the
time of sale.
Interest expense and taxes. Interest expense in 1993 was $264,036, compared
with 1992 interest expense of $267,576. Tax expense other than income tax
expense was $266,580 for 1993, compared with $252,014 for 1992. This increase of
5.8% was due primarily to increased payroll taxes and property taxes. Federal
and state income tax expense for 1993 totalled $135,545, an increase of $43,145
or 46.7% over combined federal and state income tax expense of $92,400 for 1992.
The increase in 1993 was due to increased income based on the increased revenues
and the timing of the recognition of income in NCC.
Operating income. NCC's operating income for 1993 was $349,554, compared with
$328,716 for 1992. This increase of $20,838, or 6.3%, resulted from NCC's higher
revenues in 1993, offset by higher taxes and operating expenses. NCC's net
income for 1993 was $142,967 compared with net income for 1992 of $104,654. This
increase was due to slightly higher operating income in 1993 and an increase of
$20,718 in the allowance for funds used during construction ("AFUDC") from
$34,620 in 1992 to $55,338 in 1993. These AFUDCs were primarily a result of the
work on the Beechwood Well project.
36
YEAR ENDED DECEMBER 31, 1992 ("1992") COMPARED WITH YEAR ENDED DECEMBER 31, 1991
("1991").
Operating Revenues. Revenues of $2,667,996 in 1992 were $33,577 less than
1991 revenues of $2,701,573, a 1.2% decrease in revenues for 1992. Revenues were
fairly constant due to flat demand and rates.
Operating expenses and other expenses. Operating expenses for 1992 were
$1,608,075 compared with $1,796,971 in 1991, representing a decrease of
$188,896, or 10.5%. This difference relates to a one time write off of deferred
land sale costs amounting to approximately $200,000 which were considered no
longer appropriate to carry on the balance sheet.
Maintenance expense increased from $86,435 in 1991 to $138,814 in 1992, an
increase of $52,379 or 60.6% This increase resulted from an increase in the
number of water main breaks in 1992. Depreciation expense for 1992 was $231,045,
an increase of $6,396 over 1992.
Interest expense and taxes. Interest expense in 1992 was $267,576, compared
with interest expense in 1991 of $312,830. This decrease of $45,254, or 14.5%,
was due to lower interest rates. Tax expense other than federal and state income
tax expense was $252,014 for 1992, compared with $245,809 in 1991. Federal and
state income tax expense for 1992 totalled $92,400, an increase of $70,029 or
313% over combined federal and state income tax expense of $22,371 for 1991.
Operating income and net income. NCC's operating income for 1992 was
$328,716, compared with $305,654 for 1991. This increase of $23,062, or 7.5%,
resulted from the company's lower operating expenses in 1992, offset by lower
revenues. NCC's net income for 1992 was $104,654 compared with net income for
1991 of $17,719. This increase was due to slightly higher operating income in
1992 and an allowance for funds used during construction of $34,620 in 1992.
This item, together with the $45,254 reduction in interest expense, contributed
directly to the improved net income in 1992.
NINE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1993
Operating Revenues. Revenues for the nine months ended September 30, 1994
were $2,209,510 compared with $2,256,665 for the nine months ended September 30,
1993, a decrease of $47,155 or 2.1%. This decrease is insignificant. The RWSC
rate increase did not take effect until July 19, 1994, and therefore such
increase did not significantly impact revenues for the period.
Operating Expenses and Operating Income. Operating expenses increased from
$1,213,954 for the nine months ended September 30, 1993, to $1,337,586 for the
corresponding period in 1994, representing an increase of 10.2%. This increase
together with the higher tax expense resulted in the decrease in operating
income from $373,079 for the nine months ended September 30, 1993 to $296,941
for the corresponding period in 1994.
Depreciation and Interest Expense. Depreciation expense for the nine month
period in 1993 was $179,747, compared with $185,856 for the corresponding period
in 1994, an increase of 3.3%. Interest expense increased from $188,933 for the
period ended September 30, 1993, compared with $234,213 for the corresponding
period in 1994.
Taxes. Tax expense other than income tax expense decreased by $29,334, from
$202,237 for the period ended September 30, 1993 to $172,903 for the
corresponding period in 1994. Federal income tax expense decreased, from
$142,926 for the nine months ended September 30, 1993, to $47,252 for the
corresponding period in 1994. State income tax expense decreased by $13,115,
from $38,882 for the period ended September 30, 1993 to $25,767 for the
corresponding period in 1994.
FINANCIAL CONDITION AND LIQUIDITY.
Neither of NCC's subsidiaries is able to obtain financing from banks or other
lending institutions due to the fact that the DPUC, the economic regulatory body
that has jurisdiction over these entities, places certain restrictions on the
debt to equity ratios of regulated utilities. Borrowing additional funds would
place the subsidiaries' ratios above those permitted by DPUC, and therefore that
body would not permit such additional borrowing. In addition, NCC has been
unable to attract new equity capital due to the fact that the Company's dividend
policy is below average for that of a regulated utility and the balance sheet of
RWSC is weak. For these reasons, the operating subsidiaries of NCC must use cash
flow from operations for all of its capital improvement requirements. Net cash
from operating activities decreased from $228,727 for the nine months ended
September 30, 1993, to $210,186 for the corresponding period in 1994. In
addition, net cash provided from financing activities was $552,410 at September
30, 1993 due to borrowings of $670,222, for that period, from The Village Bank &
Trust Company. In contrast, net cash used from financing activities for the nine
months ended September 30, 1994
37
was $128,886. Cash on hand at September 30, 1994 was $55,675, a decrease of
$144,827 from the $200,502 on hand at the end of the nine months ended September
30, 1993.
As of September 30, 1994, neither NCWC nor RWSC had any commitments for
capital expenditures. The companies do, however, have five year capital
improvement plans. These various improvements must be financed from the
operating proceeds of the companies, to the extent they are available for such
purposes.
On September 30, 1994, NCWC had outstanding long-term debt of $2,850,166, of
which $1,303,169 was due and payable within one year. This consisted principally
of a loan to NCWC from the Village Bank & Trust Company ("VBT") which is due on
February 28, 1995. If the acquisition does not occur, NCWC will have to
renegotiate this loan or attempt to refinance such loan with new borrowings.
This loan is due upon the sale by NCC of 25% or more of the capital stock of
NCWC. NCWC intends to repay this loan with the proceeds of the sale of certain
land located in New Canaan, which is more fully described in "Business of NCC."
If such sale does not occur and the Acquisition is consummated, BHC will assume
the obligation to VBT. BHC has indicated that it will refinance such loan upon
the consummation of the Acquisition. If such sale does not occur, NCWC will have
to attempt to renegotiate such loan and will continue to market such land in
order to retire such debt as soon as practicable.
RWSC had outstanding long term debt of $322,901 on September 30, 1994,
consisting of a note payable to VBT in the principal amount of $200,000 and a
secured loan from the CDA in the principal amount of $200,000. The loan from VBT
matures in five years.
In addition, RWSC has an outstanding loan of $525,000 from VBT, which is due
and payable on February 28, 1995. This loan will be refinanced by BHC if the
Acquisition is consummated. If the Acquisition is not consummated, RWSC has
obtained a commitment from the Connecticut Development Authority, which
commitment expires on April 7, 1995, to refinance this loan from VBT.
Minimum principal payments due on long term debt for both of NCC's
subsidiaries for 1995 total $45,170. Of the $74,945 of principal payments due in
1994, $47,135 was paid as of September 30, 1994.
38
DESCRIPTION OF AQUARION CAPITAL STOCK
The Aquarion Common Stock that will be delivered to NCC at the Acquisition
Closing and distribution in liquidation of NCC to NCC'S Common Stock
Shareholders, will be newly issued from the authorized but unissued shares of
Aquarion's Common Stock. These shares, when delivered pursuant to the
Acquisition Agreement, will be duly authorized, validly issued, fully paid and
non-assessable. Aquarion is authorized to issue up to 16,000,000 shares of
Common Stock, no par value (stated value $1), of which 6,570,130 were
outstanding on September 30, 1994, and 2,500,000 shares, in one or more series,
of Preferred Stock, no par value, in an aggregate stated value not in excess of
$25,000,000, of which no shares have been issued. Other significant provisions
of Aquarion's capital stock, including provisions relating to corporate
governance, are described under the caption "Comparison of Shareholder Rights."
The description herein and under the caption "Comparison of Shareholder Rights"
include brief summaries of certain provisions relating to the Aquarion Common
Stock and Aquarion's Preferred Stock contained in its Certificate of
Incorporation and do not purport to be complete.
COMMON STOCK
Holders of Aquarion Common Stock are entitled to cast one vote per share on
each matter submitted to a vote of stockholders of Aquarion. Holders of Aquarion
Common Stock do not have any cumulative voting rights, which means that the
holders of more than 50% of the outstanding Common Stock voting in the election
of directors can elect all of the directors if they so choose and, in such
event, the holders of the remaining shares will not be able to elect any
director.
Each of the outstanding shares of Aquarion Common Stock will share equally in
respect to all dividends paid on such Common Stock. The Certificate of
Incorporation empowers Aquarion's Board of Directors to issue Preferred Stock
with such preferences and other rights as the Board of Directors may provide in
the resolutions providing for the issuance of such Preferred Stock. Such
preferences and other rights may restrict or otherwise limit the rights of
holders of Aquarion Common Stock to receive dividends. For a description of the
Company debt and subsidiary debt and preferred stock provisions which could
limit payment of Common Stock dividends directly or indirectly, see "Aquarion
Stock Price Ranges and Dividends."
In the event of any liquidation, dissolution or winding up of the affairs of
Aquarion, whether voluntary or involuntary, all assets available for
distribution to its stockholders, after the payment to the holders of Preferred
Stock, if any, at the time outstanding of the full amounts to which they shall
be entitled, shall be divided and distributed pro rata among the holders of
Aquarion Common Stock.
The outstanding Aquarion Common Stock is fully paid and nonassessable, and
all of the shares of Common Stock offered hereby, when issued, will be fully
paid and nonassessable. The shares are listed on the NYSE.
All holders of record of Aquarion Common Stock are eligible to participate in
Aquarion's Dividend Reinvestment and Common Stock Purchase Plan. The holders of
Common Stock have no preemptive rights.
The Transfer Agent and Registrar of Aquarion Common Stock is Mellon Financial
Services, 85 Challenger Road, Ridgefield, New Jersey 07660.
PREFERRED STOCK
Aquarion's Board of Directors is empowered to issue up to 2,500,000 shares of
Preferred Stock in one or more series with such voting powers, full or limited,
or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
and restrictions thereof as the Board of Directors may specify in the
resolutions providing for the issuance of such Preferred Stock. The Board of
Directors, without shareholder approval, can issue Preferred Stock with voting
and conversion rights which could limit the voting rights of holders of Aquarion
Common Stock.
The issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of Aquarion. While Aquarion's Board of Directors
has no present plans to issue any Preferred Stock, it has designated a series of
Preferred Stock, which is issuable in certain circumstances, and issued rights
to purchase such Preferred Stock to holders of Common Stock. The preferred stock
purchase rights are exercisable only in the event of certain threatened changes
in control described more fully below under the caption "Comparison of
Shareholder Rights--Preferred Stock Purchase Rights."
39
COMPARISON OF SHAREHOLDER RIGHTS
Upon the consummation of the Acquisition and the Liquidation, stockholders of
NCC, a Connecticut corporation, will become shareholders of Aquarion, a Delaware
corporation. Differences between the laws of Connecticut and those of Delaware,
and between NCC's Certificate of Incorporation, as amended ("NCC's Certificate
of Incorporation"), and by-laws and Aquarion's Certificate of Incorporation, as
amended ("Aquarion's Certificate of Incorporation") and by-laws will result in
several changes in the rights of stockholders of NCC when the Acquisition and
the Liquidation are effected. A summary of the more significant changes is set
forth below.
POWERS OF DIRECTORS IN ISSUANCE OF SHARES
Both the CSCA and the DGCL provide that, subject to the limitations contained
in the certificate of incorporation of a corporation, the Board of Directors of
a corporation shall have the authority to issue additional shares of the
corporation's capital stock up to the amount authorized in its Certificate of
Incorporation, and dispose of or receive subscriptions for the corporation's
shares.
NCC's Certificate of Incorporation provides that the Board of Directors may
issue and sell all or any part of the shares of stock of any class of the
corporation, from time to time, without further action by stockholders.
Aquarion's Certificate of Incorporation empowers the Board of Directors to
issue and dispose of both Preferred Stock and Common Stock with such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights, and
qualifications, limitations and restrictions thereof as the Board may decide.
The Aquarion Board of Directors, without shareholder approval, can issue
Preferred Stock with voting and conversion rights which could limit the voting
rights of holders of Aquarion Common Stock. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of
Aquarion. Aquarion's Board of Directors has designated two series of Preferred
Stock; $5.50 Convertible Preferred Stock ("Convertible Preferred Stock") and
Series A Junior Participating Preferred Stock ("Series A Preferred Stock"). No
shares of either series are outstanding. However, the Series A Preferred Stock
is issuable in certain circumstances, and Aquarion has issued rights to purchase
such Preferred Stock to holders of Common Stock. The preferred stock purchase
rights are exercisable only in the event of certain threatened changes in
control described more fully below.
VOTING RIGHTS
Both the CSCA and the DGCL provide that every stockholder shall be entitled
to one vote for each share of capital stock held by such stockholder unless
otherwise specified in the Certificate of Incorporation. Both the DGCC and the
CSCA also provide that the holders of outstanding shares of any class of stock
shall, regardless of any limitations or restrictions in the Certificate of
Incorporation, be entitled to vote as a class upon any proposed amendment to the
Certificate of Incorporation submitted to shareholder vote which would have
certain specified effects on their rights.
NCC's Certificate of Incorporation provides that holders of Class A Common
Stock are not entitled to vote or receive notice of any stockholders meetings
unless the corporation is in default on dividends payable to such holders.
(1) If the amount in arrears reaches $2.00 or more, the holders of the
Class A Common Stock entitled to one vote per share, notice of all
shareholder meetings, and the right as a class to elect all directors in
excess of a majority of members of the Board of Directors until such time as
the corporation shall have paid all dividends in arrears.
(2) If the dividends in arrears amount to $4.00 or more, the holders of
the Class A Common Stock are entitled to one vote per share, notice of all
shareholder meetings, and the right as a class to elect a majority of members
of the Board of Directors until such time as the corporation shall have
reduced the amount of dividends in arrears to less than $4.00.
Subject to the rights of the Class A Common Stock set forth in NCC's
Certificate of Incorporation and the CSCA, the holders of Class B Common Stock
shall have exclusive voting power.
40
Holders of Aquarion Common Stock are entitled to cast one vote per share on
each matter submitted to a vote of stockholders of Aquarion. If issued, each
share of Convertible Preferred Stock would have [four] votes, representing the
number of shares of Common Stock into which a share of Convertible Preferred
Stock is convertible. If issued, each share of Series A Preferred Stock would
have 150 votes per share.
PREEMPTIVE RIGHTS
NCC's and Aquarion's Certificate of Incorporation each eliminates preemptive
rights to subscribe to any future issues of shares of Common Stock.
DISSENTERS' RIGHTS OF APPRAISAL
The CSCA grants dissenters' rights to shareholders (i.e. the right to cash
payment of the fair value of one's shares determined by judicial appraisal) in
the case of a merger or consolidation, a sale of all or substantially all of the
corporation's assets, and certain other corporate transactions. The CSCA also
grants appraisal rights to holders of preferred shares, in the case of certain
amendments to a corporation's certificate of incorporation.
The DGCL grants appraisal rights to any stockholder opposing a merger or
consolidation. Both the CSCA and the DGCL restrict the appraisal rights of
shareholders of the merging domestic corporation which is to be the surviving
corporation. The DGCL eliminates appraisal rights for such shareholders if the
merger did not require for its approval the vote of the holders of the surviving
corporation. Similarly, the CSCA grants such shareholders appraisal rights only
if the merger effects an amendment to the certificate of incorporation of the
surviving corporation which would entitle the shareholder to such a vote, or if
the merger provides for the distribution to shareholders of any form of property
in exchange for the shares of the surviving corporation.
Both the CSCA and the DGCL define the concept of "fair value" in payment for
shares upon exercise of dissenters' rights as being exclusive of any element of
value arising from the expectation or accomplishment of such corporate
transaction.
DIVIDENDS AND DISTRIBUTIONS
Each of the outstanding shares of Aquarion Common Stock will share equally in
respect to all dividends paid on such Common Stock but only after all dividends
have been paid on the Convertible Preferred Stock and the Series A Preferred
Stock.
Holders of Aquarion's Series A Preferred Stock, if issued, would be entitled
to receive dividend, voting and liquidation rights which are at least 150 times
the equivalent rights of one share of Aquarion Common Stock. The rights would
become exercisable only if a person or group acquires 20% or more of the
outstanding Aquarion Common Stock, or if a person or group announces or
commences a tender or exchange offer for 30% or more of Aquarion's Common Stock.
In the event of any liquidation, dissolution or winding up of the affairs of
Aquarion, whether voluntary or involuntary, all assets available for
distribution to its stockholders, after the payment to the holders of Preferred
Stock, shall be divided and distributed pro rata among the holders of Aquarion
Common Stock.
NCC's Certificate of Incorporation provides that the holders of Class A
Common Stock are entitled to receive dividends from the net profits of NCC in
priority to any dividend on the Class B Common Stock. If, for any reason,
dividends are not declared on the outstanding Class A Common Stock, no dividend
can be declared upon any Class B Common Stock. Furthermore, after paying the
dividends on the outstanding Class A Common Stock, the Class A Common Stock as a
class, shall be entitled to participate equally with the Class B Common Stock in
the receipt of any further dividends during any one year to the extent that the
holders of Class A Common Stock receive not more than an additional fifty cents
per share of Class A Common Stock.
In the event of any dissolution or liquidation of the Corporation, whether
voluntary or involuntary, after payment to the holders of Class A Common Stock
and before any distribution is made with respect to the Class B Common Stock,
the remaining assets shall be divided among the holders of the Class B Common
Stock, ratably in accordance with their ownership of Class B Common Stock.
41
FILLING DIRECTOR VACANCIES
Aquarion's Certificate of Incorporation and By-Laws provide that any newly
created or vacated directorship may be filled only by a majority vote of the
directors then in office, although less than a quorum. However, if an applicable
provision of the DGCL expressly confers the right to fill the vacancy on the
stockholders, then such directorship may be filled only by the affirmative vote
of at least 80 percent of the combined voting stock.
NCC's By-Laws provide that, upon the occurrence of a vacancy of any director
or directors, a majority of the remaining directors, although less than quorum,
shall choose a successor or successors.
REMOVAL OF DIRECTORS
Aquarion's By-Laws and Certificate of Incorporation provide that, subject to
the rights of preferred stockholders, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least 80 percent of the combined
voting power of all of the then-outstanding shares of the voting stock, voting
together as a class. Such director, however, shall have an opportunity, at the
expense of the corporation, to present his defense to the stockholders.
The CSCA leaves the prerequisite conditions for removal of directors up to
the corporation to develop in its By-Laws. The CSCA provides that a director
shall cease to be in office upon his removal from office in accordance with the
By-Laws adopted by shareholders or upon any other lawful removal from office.
NCC's By-Laws provides that a vacancy on the board can occur by a director's
removal from office, but does not prescribe how removal is to be effected.
AMENDMENTS TO CERTIFICATE OF INCORPORATION
Under the CSCA, amendments to the Certificate of Incorporation for a
corporation with at least one hundred recordholders requires the affirmative
vote of the majority of the voting power of the shares entitled to vote thereon,
and if any class of shares is entitled to vote thereon as a class, by the
affirmative vote of the holders of the shares of each class of shares entitled
to vote thereon as a class.
The CSCA requires the affirmative vote of at least two-thirds of the voting
power of the shares of each class of stock outstanding and entitled to vote
thereon for corporations with less than one hundred recordholders.
Under the DGCL and the CSCA, the holders of the outstanding shares of any
class, regardless of any limitations or restrictions in the Certificate of
Incorporation, shall be entitled to vote as a class upon any proposed amendment
to the Certificate of Incorporation submitted to shareholder vote which would
affect their rights in certain specified ways.
NCC's Amended Certificate of Incorporation requires the affirmative vote of
two-thirds of outstanding shares of Class A Common Stock to adopt an amendment
(i) increasing the authorized number of shares of Class A Common Stock or
authorizing any other shares ranking equally with the Class A Common Stock, (ii)
adversely affecting the Class A Common Stock or (iii) amending the purposes of
the corporation.
Under the DGCL, a majority of the stockholders entitled to vote on amendments
to the Certificate of Incorporation is necessary to effectuate adoption of such
amendment.
Aquarion's Certificate of Incorporation requires a supermajority vote of 80%
of the combined voting power of all of the then-outstanding shares of the voting
stock to alter, amend or repeal the provisions in the Certificate of
Incorporation described under "Filling Director Vacancies," "Removal of
Directors," "Business Combinations with Interested Stockholders,"
"Classification of Board of Directors" and "Shareholder Meetings."
AMENDMENTS TO BYLAWS
NCC's By-Laws provide that the bylaws may be amended or repealed by the
affirmative vote of a majority of the holders of the Class B Common Stock issued
and outstanding and entitled to vote; or may be altered or amended by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board.
42
Both Aquarion's certificate of incorporation and by-laws provide that
Aquarion's by-laws may be amended by the Board of Directors with the exception
that amendment of certain provisions requires the affirmative vote of 80% of the
outstanding shares entitled to vote. Those by-law provisions are those relating
to membership and classification of the Board, filling of Board vacancies,
removal of directors, shareholder action, calling of special meeting of
shareholders, quorum at Board meetings, business combinations with certain
stockholders or their affiliates and amendment of the foregoing voting
requirements.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
Aquarion's Certificate of Incorporation requires the approval by the holders
of 80% of the voting power of Aquarion's securities as a condition for certain
Business Combinations of Aquarion with any holder of more than 10% of such
voting power unless certain minimum price and procedural requirements or certain
other conditions are met. The term Business Combination is defined to include
certain mergers, dispositions of assets, issuances of securities and similar
transactions.
NCC's Certificate of Incorporation does not have a comparable provision.
BUSINESS COMBINATION STATUTES
The DGCL Business Combination Statute generally prohibits a corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless:
(1) prior to such date the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder, or
(2) upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation, or
(3) on or subsequent to such date the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock which is not owned by
the interested stockholder.
In general, "interested stockholder" is defined as the holder of 15% of the
outstanding voting stock of the corporation.
The CSCA Business Combination Statute does not apply to NCC because it is a
private corporation and its certificate of incorporation does not opt-in to the
CSCA Business Combination Statute.
CLASSIFICATION OF THE BOARD OF DIRECTORS
Aquarion's Certificate of Incorporation provides that directors (other than
directors who may be elected by preferred stockholders) are to be classified
into three classes, which are to hold office in staggered three-year terms.
NCC's Board of Directors is not classified into classes.
SHAREHOLDER MEETINGS
Aquarion's Certificate of Incorporation provides that shareholder action may
only be taken at an annual or special meeting of stockholders and not by written
consent. Special meetings of stockholders may be called only by the Board of
Directors and otherwise by shareholders as expressly permitted by applicable
statute.
Under the CSCA, any action which may be taken at a meeting of shareholders
may be taken without a meeting by unanimous written consent or, if so provided
by the Certificate of Incorporation, by the written consent of a majority of the
voting power of shares. The CSCA also provides that special meetings of the
shareholders may be called only by the board of directors, or by such person or
persons as may be authorized by the certificate of incorporation or the bylaws.
However, the president is required to call a special shareholders' meeting upon
the written request of the holders of not less than 1/10
43
of the voting power of all shares entitled to vote at the meeting. If the
president fails to call such meeting within 15 days after the receipt of such
shareholders' request, the shareholders may call the meeting.
PREFERRED STOCK PURCHASE RIGHTS
Aquarion has reserved 80,000 shares of Preferred Stock for issuance under its
Preferred Stock Purchase Rights Plan. Each share of Aquarion Common Stock,
including the shares offered hereby, is entitled to one right to buy, under
certain circumstances, 1/150th of a share of Series A Preferred Stock at $83.33
per 1/150th of a share.
Each share of Series A Preferred Stock, if issued, would have dividend,
voting and liquidation rights which are at least 150 times the equivalent rights
of one share of Common Stock. The rights would become exercisable only if a
person or group acquires 20% or more of Aquarion's outstanding Common Stock, or
if a person or group announces or commences a tender or exchange offer for 30%
or more of Aquarion's Common Stock. Were Aquarion to be acquired in a merger or
other business combination transaction ,each right would entitle its holder to
receive, upon payment of the exercise price, that number of shares of the
acquiring company having a market value equal to twice the exercise price. If,
under certain circumstances, a 20% or greater stockholder acquires Aquarion
through a transaction in which Aquarion and its Common Stock survive or such
stockholder engages in certain self-dealing transactions with Aquarion, each
right holder (other than a 20% or greater stockholder) would be entitled to
receive, upon payment of the exercise price, the greater of (a) the number of
shares of Series A Preferred Stock for which such right was exercisable
immediately prior to such self-dealing transaction or (b) that number of shares
of Series A Preferred Stock having a market value equal to twice the exercise
price.
Aquarion may redeem the rights at $.033 per right any time until the 10th day
after a 20% position has been acquired or a 30% tender offer has been commenced.
The redemption period is subject to extension by Aquarion's Board of Directors.
Until such time as these rights become exercisable, they will have no dilutive
effect on Aquarion's earnings and are tied to Aquarion's Common Stock and may
not be separately assigned. The rights will expire on December 3, 1996, unless
earlier redeemed.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The DGCL provides that a corporation may indemnify officers and directors for
proceedings arising by reason of the fact that such person served as an officer
or director if such person acted in good faith and in a manner he reasonably
believed "not opposed to" the best interests of the corporation. However, in the
case of a proceeding brought by or in the right of the corporation, if such
person is adjudged to be liable to the corporation, the DGCL requires that a
court determine whether, despite the adjudication of liability, such person is
fairly and reasonably entitled to indemnity for such expenses.
The CSCA provides that a corporation shall indemnify any person in any
proceeding, by reason of the fact that such person is or was a director or
officer of the corporation if:
(1) such person is successful on the merits in defense of such proceeding; or
(2) the corporation concludes that such person acted in good faith and in a
manner he reasonably believed to be in the best interests of the
corporation; or
(3) the court, upon application, shall have determined that such person is
fairly and reasonably entitled to indemnification.
In the case of an action by or in the right of a corporation, the CSCA
provides that the corporation shall indemnify an officer or director if the
individual is adjudged not to have breached his duty to the corporation or if a
court shall determine that the individual is fairly and reasonably entitled to
be indemnified. An officer or director may not be indemnified for amounts paid
in settlement of such an action without court approval.
Whereas the CSCA indemnification provision is made the exclusive remedy and
prohibits any indemnity to an extent greater or less than that authorized by the
statute (except that the corporation may procure insurance to provide greater
indemnity and may share the premium cost with a person indemnified), the DGCL
indemnification provision is non-exclusive of other rights to which prospective
indemnitees may be entitled under any by-law, agreement, vote of stockholders or
otherwise.
Aquarion's by-laws reflect the statutory provisions described above.
44
NCC's Certificate of Incorporation provides that directors and officers shall
be indemnified for expenses incurred in defending any action brought against
them by reason of their being a director or officer, unless such director or
officer is judged to be liable for negligence or misconduct in the performance
of duty. The CSCA provision is also applicable by reason of its being an
exclusive remedy.
Aquarion's By-Laws also provide that the Corporation, through action by its
Board of Directors, may purchase indemnity insurance for directors, officers,
employees or agents of the Corporation.
EXPERTS
The consolidated financial statements of NCC as of December 31, 1993 and for
each of the two years in the period ended December 31, 1993 and the consolidated
financial statements of Aquarion Company as of December 31, 1993 and 1992 and
for each of the three years in the period ended December 31, 1993 included in
this Prospectus/Proxy Statement have been so included in reliance on the reports
of Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the issuance the Aquarion Common Stock to be delivered at the
Acquisition Closing will be passed upon by Wiggin & Dana, New Haven,
Connecticut, General Counsel to Aquarion. Federal income tax matters respecting
the Transaction will be passed upon by Haythe & Curley New York, New York, tax
counsel to NCC.
45
FINANCIAL STATEMENTS
THE NEW CANAAN COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
1. Interim Financial Statements: Page
---------------------------- ----
Consolidated Balance Sheet at F-2
September 30, 1994 (unaudited) and
December 31, 1993
Consolidated Statement of Income and F-3
Retained Earnings (unaudited) for
the nine months ended September
30, 1994 and 1993
Consolidated Statement of Cash Flows F-4
(unaudited) for the nine months
ended September 30, 1994 and 1993
Notes to Consolidated Financial F-5
Statements (unaudited)
2. Annual Financial Statements:
---------------------------
Report of Independent Accountants F-6
Consolidated Balance Sheet at F-7
December 31, 1993
Consolidated Statement of Income and F-8
Retained Earnings for the years
ended December 31, 1993 and 1992
Consolidated Statement of Cash Flows F-9
for the years ended December 31,
1993 and 1992
Notes to Consolidated Financial Statements F-10
F-1
THE NEW CANAAN COMPANY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 1994 DECEMBER 31, 1993
------------------ -----------------
ASSETS
Utility plant............................... $ 11,229,179 $ 11,153,080
Accumulated depreciation.................... (3,474,481) (3,300,670)
Construction work in progress............... 73,696 73,696
------------ ------------
Net utility plant........................... 7,828,3941 7,926,106
------------ ------------
Current assets:
Cash........................................ 55,675 58,333
Accounts receivable......................... 270,650 360,573
Materials and supplies...................... 122,399 104,338
Accrued utility revenues.................... 382,559 154,633
Prepayments................................. 57,138 63,556
Other current assets........................ 1,465 2,241
------------ ------------
Total current assets........................ 889,886 743,674
Preliminary surveys......................... 184,249 156,374
Deferred debt expense....................... 53,044 59,226
Deferred charges............................ 31,100 33,869
Other assets................................ 35,790 12,794
Income taxes recoverable.................... 433,814 437,312
------------ ------------
Total assets................................ $ 9,456,277 $ 9,369,355
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Capital stock, Class A...................... $ 816,236 $ 816,236
Capital stock, Class B...................... 36,148 36,148
Paid-in capital............................. 2,094 2,094
Other capital stock......................... 11,750 11,750
Capital stock expense....................... (12,251) (12,251)
Retained earnings........................... 944,208 871,750
------------ ------------
1,798,185 1,725,727
------------ ------------
Current liabilities:
Accounts payable & accruals................. 751,379 517,061
Current portion of long term debt........... 1,303,169 74,945
Notes payable to bank....................... 525,000 525,000
Notes payable other......................... 206,442 243,357
Notes payable to shareholders............... 168,000 208,000
Accrued taxes............................... 21,627 136,986
Accrued interest............................ 47,945 44,688
Other current liabilities................... 27,032 26,788
------------ ------------
Total current liabilities................... 3,050,594 1,776,825
------------ ------------
Long-term debt.............................. 1,546,997 2,827,192
Income taxes refundable..................... 102,230 105,730
Advances for construction................... 242,056 242,056
Contribution in aid of construction......... 2,010,991 2,010,991
Deferred taxes.............................. 689,466 669,965
Other deferred credits...................... 5,712 0
Minority interest in subsidiary............. 10,046 10,869
Commitments................................. - -
------------ ------------
4,607,498 5,866,803
------------ ------------
Total liabilities and stockholders' equity.. $ 9,456,277 $ 9,369,355
============ ============
F-2
THE NEW CANAAN COMPANY
CONSOLIDATED STATEMENT OF INCOME
AND RETAINED EARNINGS
(UNAUDITED)
FOR THE NINE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------ ------------------
Operating revenues............................. $2,209,510 $2,256,665
---------- ----------
Expenses:
Operations..................................... 1,337,586 1,213,954
Maintenance.................................... 116,768 77,342
Depreciation................................... 185,868 179,747
Taxes other than income taxes.................. 172,903 202,237
Directors Fees 18,517 19,361
Federal income taxes........................... 47,252 142,926
State income taxes............................. 25,767 38,882
Miscellaneous.................................. 7,908 9,137
---------- ----------
1,912,569 1,883,586
---------- ----------
Operating income............................... 296,941 373,079
Other income (expense):
Interest expense............................... (234,213) (188,933)
Interest income................................ 120 2,431
Allowance for funds used during construction.. -- 47,607
Other, net 9,610 2,298
---------- ----------
(224,483) (136,597)
Net income..................................... 72,458 236,482
Beginning retained earnings.................... 871,750 760,232
---------- ----------
Ending retained earnings....................... $ 944,208 $ 996,714
========== ==========
F-3
THE NEW CANAAN COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE NINE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------ ------------------
Cash flows from operating activities:
Net income................................................ $ 72,458 $ 236,482
Adjustments to reconcile net income to cash provided by
operating activities:.....................................
Depreciation and amortization............................. 185,868 179,747
(Gain) Loss on disposition of assets...................... (4,200) 1,124
Provision for deferred taxes.............................. 19,501 380,000
Allowance for funds used during construction.......... -- (47,607)
(Increase) decrease in current assets:
Accounts receivable.................................... 89,923 (200,387)
Materials and supplies................................. (18,061) (18,759)
Accrued utility revenues............................... (227,926) (1,658)
Prepayments/other current assets....................... 7,194 10,935
Increase (decrease) in current liabilities:
Accounts payable....................................... 234,318 (117,450)
Accrued taxes.......................................... (115,359) 130,934
Accrued interest....................................... 3,257 35,895
Other current liabilities.............................. 244 (500)
Income taxes refundable................................ 3,500 (360,000)
Increase in other liabilities............................ 1,389 19,943
(Increase) decrease in other assets....................... (41,920) (19,972)
---------- ----------
Net cash provided by operating activities................. 210,186 228,727
---------- ----------
Cash flows from investing activities:
Additions to utility plant............................... (83,958) (593,644)
Additions to construction work-in-progress............... 0 (76,048)
---------- ----------
Net cash used in investing activities..................... (83,958) (669,692)
---------- ----------
Cash flows from financing activities:
Collection of note receivable............................ 33,000 0
Proceeds from debt obligations........................... 0 670,222
Payments under debt obligations.......................... (161,886) (117,812)
---------- ----------
Net cash provided by (used in) financing activities....... (128,886) 552,410
---------- ----------
Net (increase) decrease in cash........................... (2,658) 111,445
Cash at beginning of year................................. 58,333 89,057
---------- ----------
Cash at end of year....................................... $ 55,675 $ 200,502
========== ==========
F-4
THE NEW CANAAN COMPANY
----------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
UNAUDITED
---------
NOTE 1 - GENERAL
- ----------------
The New Canaan Company (the "Company" or "NCC") is engaged predominantly in the
collection, purification and distribution of water for domestic, commercial,
industrial and fire protection services through its utility subsidiaries, The
New Canaan Water Company ("NCWC") and The Ridgefield Water Supply Company
("RWSC"). The Company's utility subsidiaries are subject to regulation by the
Connecticut Department of Public Utility Control ("DPUC") with respect to their
rates for service and the maintenance of their accounting records.
The financial statements include the accounts of NCC, NCWC and RWSC. Minority
interest in subsidiary represents the minority shareholders' proportionate share
of the equity of The Ridgefield Water Supply Company. All intercompany items
have been eliminated in consolidation.
NOTE 2 - BASIS OF PRESENTATION
- ------------------------------
The accompanying consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information and, as applied in the case of rate-regulated public
utilities, comply with the Uniform System of Accounts and rate making practices
prescribed by the DPUC. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations are not necessarily indicative of the
results of operations for the calendar year. Water consumption is less in the
first and fourth quarters of the year than during the warmer months. For further
information, refer to the consolidated financial statements and accompanying
footnotes included in the Company's financial statements for the year ended
December 31, 1993.
NOTE 3 - DEBT
- -------------
On March 31, 1994, NCWC refinanced its mortgage loan. The new mortgage loan
bears interest at the lenders pricing rate plus 2%. Interest payments are due
quarterly on the unpaid principal balance. The loan will be amortized over
twenty years with the balance in five years. The loan is secured by a mortgage
deed and assignment of rents on certain real property and a guaranty by NCC.
This loan was entered into pending DPUC approval. During 1994 the DPUC denied
approval of this mortgage loan. The Company has subsequently revised its
agreement with the bank requiring the Company to pay the loan in full during the
first quarter of 1995. This revised mortgage loan agreement is pending approval
of the DPUC.
F-5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
The New Canaan Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of The New
Canaan Company and its subsidiaries at December 31, 1993, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 and Note 7 to the financial statements, the Company
changed its method of accounting for income taxes.
PRICE WATERHOUSE LLP
Stamford, CT 06901
April 12, 1994
F-6
THE NEW CANAAN COMPANY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
Assets
------
Utility plant $11,153,080
Accumulated depreciation (3,300,670)
Construction work in progress 73,696
-----------
Net utility plant 7,926,106
-----------
Current assets:
Cash 58,333
Accounts receivable, less allowance for doubtful
accounts of $24,143 360,573
Materials and supplies 104,338
Prepayments 63,556
Accrued utility revenues 154,633
Other current assets 2,241
-----------
Total current assets 743,674
-----------
Preliminary survey and investigation charges 156,374
Deferred debt expense 59,226
Deferred charges, net of accumulated amortization of
$195,941 33,869
Other assets 12,794
Income taxes recoverable 437,312
-----------
Total other assets 699,575
-----------
Total assets $9,369,355
===========
Liabilities and shareholders' equity
------------------------------------
Capital stock, Class A, no par - 35,000 shares
authorized; 31,449 shares issued in 1993 and
outstanding $ 816,236
Capital stock, Class B, no par - 15,000 shares
authorized; 11,794 shares issued and outstanding 36,148
Paid-in capital 2,094
Other capital stock 11,750
Capital stock expense (12,251)
Retained earnings 871,750
----------
1,725,727
----------
Current liabilities:
Accounts payable 517,061
Current portion of long-term debt 74,945
Notes payable to bank 525,000
Notes payable, other 243,357
Notes payable to stockholders 208,000
Accrued taxes 136,986
Accrued interest 44,688
Other current liabilities 26,788
----------
Total current liabilities 1,776,825
----------
Long-term debt 2,827,192
Deferred income taxes 669,965
Income taxes refundable 105,730
Advances for construction 242,056
Contributions in aid of construction 2,010,991
Minority interest in subsidiary 10,869
----------
5,866,803
----------
Total liabilities and shareholders' equity $9,369,355
==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
THE NEW CANAAN COMPANY
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
For the year ended
December 31,
------------------------
1993 1992
----------- -----------
Revenues $2,875,772 $2,667,996
---------- ----------
Expenses:
Operations 1,704,724 1,608,075
Maintenance 152,539 138,814
Depreciation 247,390 231,045
Taxes other than income taxes 266,580 252,014
Directors fees 6,199 6,684
Federal income tax 99,448 71,695
State income tax 36,097 20,705
Other 13,241 10,248
---------- ----------
2,526,218 2,339,280
---------- ----------
Operating income 349,554 328,716
Other income (expense):
Interest income 2,710 552
Other, net 461 10,134
Allowance for funds used during construction 55,338 34,620
Loss on sale of utility plant (1,060) (1,792)
---------- ----------
57,449 43,514
---------- ----------
407,003 372,230
Interest expense 264,036 267,576
---------- ----------
Net income 142,967 104,654
Beginning retained earnings 760,232 687,027
Dividends (31,449) (31,449)
---------- ----------
Ending retained earnings $ 871,750 $ 760,232
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
THE NEW CANAAN COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended
December 31,
----------------------
1993 1992
---------- ----------
Cash flows from operating activities:
Net income $ 142,967 $ 104,654
Adjustments to reconcile net income to cash provided by
operating activities
Depreciation and amortization 256,904 264,933
Allowance for funds used during construction (55,338) (34,620)
Write off of deferred charges 1,450 9,768
Loss on sale of utility plant, net 1,060 1,792
Deferred income taxes - 16,733
Other 1,295 (9,834)
Change in assets and liabilities:
(Increase) decrease in current assets -
Accounts receivable (63,743) 9,219
Materials and supplies (20,972) 13,254
Accrued utility revenues (1,525) (4,176)
Prepayments (2,922) 8,577
Prepaid income taxes - 7,433
Other current assets (706) 355
Increase (decrease) in current liabilities -
Accounts payable (114,985) 161,616
Accrued taxes 49,573 35,230
Accrued interest (129) 2,797
Other current liabilities 4,315 (1,040)
Income taxes recoverable, refundable (331,582) -
Deferred income taxes (30,175)
Increase in deferred charges 343,213 (123,695)
Increase in other assets - (229)
--------- ---------
Net cash provided by operating activities 178,700 462,767
--------- ---------
Cash flows (used in) from investing activities:
Additions to utility plant (668,846) (80,835)
Additions to construction work in progress (22,479) (305,382)
Proceeds from disposition of assets 700 500
--------- ---------
Net cash used in investing activities (690,625) (385,717)
--------- ---------
Cash flows (used in) from financing activities:
Proceeds from issuance of debt 670,222 110,500
Principal payments under debt obligations (157,572) (212,912)
Dividends paid (31,449) (31,449)
--------- ---------
Net cash provided by (used in) financing activities 481,201 (133,861)
--------- ---------
Net decrease in cash (30,724) (56,811)
Cash at beginning of year 89,057 145,868
--------- ---------
Cash at end of year $ 58,333 $ 89,057
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
THE NEW CANAAN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The New Canaan Company (the "Company" or "NCC") is engaged predominantly in
the collection, purification and distribution of water for domestic, commercial,
industrial and fire protection services through its utility subsidiaries, The
New Canaan Water Company ("NCWC") and The Ridgefield Water Supply Company
("RWSC"). The company's utility subsidiaries are subject to regulation by the
Connecticut Department of Public Utility Control ("DPUC") with respect to their
rates for service and the maintenance of their accounting records. The company's
accounting policies conform to generally accepted accounting principles and, as
applied in the case of regulated public utilities, comply with the accounting
requirements and ratemaking practices of the DPUC. A description of the
company's principal accounting policies follows.
PRINCIPLES OF CONSOLIDATION:
The financial statements include the accounts of The New Canaan Company
("NCC"), The New Canaan Water Company ("NCWC") and The Ridgefield Water Supply
Company ("RWSC"). Minority interest in subsidiary represents the minority
shareholders' proportionate share of the equity of The Ridgefield Water Supply
Company. All intercompany items have been eliminated in consolidation.
UTILITY PLANT:
Utility plant is stated at cost. The costs of additions to and replacements of
retired units of utility property are capitalized. Cost includes direct
material, labor, services and charges for such indirect costs as engineering,
supervision, payroll taxes, pension benefits, etc. The company also capitalizes
an allowance for funds used during construction equivalent to the cost of funds
devoted to plant under construction. Renewals and betterments of units of
property are charged to utility plant accounts, and expenditures for maintenance
and repairs are charged against income as incurred.
At the time that depreciable utility property is retired or otherwise disposed
of, the book cost together with cost of removal, less salvage, is charged to the
reserve for depreciation. This procedure is in accordance with the requirements
of the Uniform System of Accounts prescribed by the DPUC. At the time
depreciable non-utility property is retired or otherwise disposed of, the
accumulated depreciation together with any amounts realized on disposal are
offset against the cost of the applicable assets, and the resulting profit or
loss is recognized in the consolidated statement of income and retained
earnings.
DEPRECIATION:
For financial reporting purposes, all companies provide depreciation
principally by use of the composite straight-line method based on estimated
service lives. For federal income tax purposes, all Companies use accelerated
depreciation methods for eligible property, plant and equipment. From January 1,
1985 to December 31, 1986, the Accelerated Cost Recovery System (ACRS) had been
used for all utility property, plant and equipment. As a result of the Tax
Reform Act of 1986, all plant additions subsequent to December 31, 1986 are
depreciated in accordance with the Modified Accelerated Cost Recovery System.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION:
An allowance for funds used during construction (AFUDC) is made by applying
the last allowed rate of return on rate base granted by the DPUC to construction
projects exceeding $10,000 and requiring more than one month to complete. AFUDC,
as defined in the DPUC's Uniform System of Accounts, includes the net cost, for
the period of construction, of borrowed funds used for construction purposes and
a reasonable rate on other funds when so used. AFUDC, thus, represents a noncash
credit to income. Utility plant under construction is not recognized as part of
the utility subsidiaries' rate base for ratemaking purposes until facilities are
placed into service and, accordingly, the utility subsidiaries charge AFUDC to
the construction cost of utility plant until it is completed. Capitalized AFUDC
is recovered through rates over the service lives of the facilities.
F-10
REVENUE RECOGNITION:
The Company follows the practice of recognizing revenue when the bills are
rendered to customers, and accruing revenue for the estimated amount of water
sold but not billed at the end of each period.
MATERIALS AND SUPPLIES:
Materials and supplies are valued at the lower of cost or market, with cost
being determined using the weighted average cost of goods purchased during the
year.
INCOME TAXES:
Except for accelerated depreciation since 1981 (federal only) and the tax
effect of post-1986 contributions in aid of construction, for which deferred
income taxes have been provided, the Company's policy, prior to 1993, was to
reflect as income tax expense the amount of tax currently payable. This method,
known as the flow-through method of accounting, was consistent with the
ratemaking policies of the DPUC, and was based on the expectation that tax
expense payments in future years will be allowed for ratemaking purposes.
Effective January 1, 1993, the company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109),
prospectively. The adoption of SFAS 109 changes the Company's method of
accounting for income taxes from the deferred method (in accordance with
Accounting Principles Board No. 11) to an asset and liability approach. In
accordance with SFAS 109, the deferred tax provision was determined under the
liability method. Deferred tax assets and liabilities were recognized based on
differences between the book and tax bases of assets and liabilities using
presently enacted tax rates. The provision for income taxes is the sum of the
amount of income tax paid or payable as determined by applying the provisions of
enacted tax laws to the taxable income for that year and the net change during
the year in the Company's deferred tax assets and liabilities.
In addition, SFAS 109 required the Company to record an additional deferred
liability for temporary differences not previously recognized. This additional
deferred tax liability totalled $331,582 at December 31, 1993, primarily
relating to depreciation, investment tax credits and contributions in aid of
construction. Management believes that these deferred taxes will be recovered
through the ratemaking process. Accordingly, the Company has recorded an
offsetting regulatory asset and liability.
ADVANCES FOR CONSTRUCTION/CONTRIBUTIONS IN AID OF CONSTRUCTION:
Most construction contracts with real estate developers provide that the
developer advance to the utility subsidiaries an amount equal to the estimated
cost of new main installations. The utility subsidiaries refund a portion of
such advances, without interest, based upon several formulas, over periods not
exceeding ten years. After expiration of the contract the remaining balance of
the advance is transferred to "Contributions in aid of construction" and are no
longer refundable.
STATEMENT OF CASH FLOWS:
For purposes of reporting cash flows, the Company defines cash equivalents as
cash and short-term investments that are readily convertible to cash with
original maturities of three months or less. Interest paid in cash was $282,798
and $265,389 in 1993 and 1992, respectively. Income taxes paid in cash were
$33,000 and $34,500 in 1993 and 1992, respectively. Additions to utility plant
are shown net of donations.
NOTE 2 - NOTES PAYABLE TO BANK:
In December 1992, The Ridgefield Water Supply Company executed an agreement
which provides for financing totaling $525,000. The note bears interest at the
prime rate plus 2%. This note is due and payable in full on September 1, 1994.
At December 31, 1993, borrowings of $525,000 were outstanding. This note is
guaranteed by The New Canaan Company. The Company has received a commitment from
a lending institution to finance this note over a twenty year period pending
approval of the rate application filed with the DPUC. See Note 9.
F-11
NOTE 3 - NOTES PAYABLE, OTHER:
Notes payable, other, include six-month to one-year term notes payable on
demand to employees and others, bearing interest of 8.0% to 10.5%. These notes
are unsecured.
Notes payable by NCWC and RWSC to shareholders totaling $140,000 are due on
demand and bear interest rates of 9.0% to 10.0%.
Notes payable by NCC to shareholders totaling $68,000 are non-interest
bearing.
NOTE 4 - LONG-TERM DEBT:
Long-term debt at December 31, 1993 consists of the following:
1993
----
Connecticut Development Authority, 7.6%, secured (NCWC) $1,288,487
Mortgage loan, 1.5% above prime rate, secured (NCWC) 1,250,000
Mortgage note, 2% above prime, unsecured (RWSC) 200,000
Connecticut Development Authority, 9%, secured (RWSC) 139,405
Installment loan, 9.9%, secured (NCWC) 15,815
Master line of credit, 9% unsecured (NCWC) 5,399
Installment loan, 6.9%, secured (NCWC) 3,031
----------
2,902,137
Current portion of long-term debt 74,945
----------
Total long-term debt $2,827,192
==========
The Connecticut Development Authority (CDA) loan is secured by all real and
personal property except for subordination of interests in certain real property
to the mortgage loan described below.
On March 31, 1994, NCWC refinanced its mortgage loan. The loan bears interest
at the lenders pricing rate plus 2%. Interest payments are due quarterly on the
unpaid principal balance. The loan will be amortized over twenty years with the
balance in five years. The loan is secured by a mortgage deed and assignment of
rents on certain real property and a guaranty by NCC. The agreement requires
that if the NCC transfers more than 25% of the capital stock of NCWC, the entire
principal sum becomes due and payable on demand.
The master line of credit bears an annual interest rate of 9% and is payable
in equal installments, including interest, over an 18 month term ending January
1994.
In 1986, RWSC entered into a thirty-year first mortgage loan agreement with
the CDA. The loan is secured by all of RWSC's real and personal property.
Minimum principal payments due on long-term debt for the next five years are
as follows:
Year ending December 31,
------------------------
1994 $ 74,945
1995 77,844
1996 76,618
1997 81,299
1998 86,367
---------
$ 397,073
=========
F-12
NOTE 5 - CAPITAL STOCK:
The Class A shares are entitled to a preference in dividends at the cumulative
rate of $1.00 per share per year. In addition they are also entitled to equal
participation with the Class B shares in any further dividends to a maximum of
$.50 per share per year. Thereafter, any additional dividends are solely for the
benefit of the Class B shares.
The Class A stock is nonvoting except in the case of an arrearage of dividends
of $2.00 per share or more. Dividends in arrears were $1.75 at December 31,
1993.
NOTE 6 - GUARANTY AGREEMENTS:
- ----------------------------
NCC is guarantor on various notes of its subsidiaries. NCC is a guarantor on
debt of NCWC at December 31, 1993 in the amount of $1,288,487. Guarantees on
debt of RWSC at December 31, 1993 are $842,376.
NOTE 7 - INCOME TAXES:
- ---------------------
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109 (SFAS 109). The Company adopted SFAS
109 effective January 1, 1993. There was no cumulative effect as a result of the
adoption of this standard, nor was there a significant effect on the company's
1993 tax provision.
The provision for taxes on income for the two years ended December 31, 1993
consist of:
1993 1992
---- ----
Current:
Federal $87,817 $36,056
State 36,097 20,706
Deferred:
Federal:
Accelerated depreciation 64,392 63,196
Alternative minimum tax
credit (14,552) (17,451)
Other, net (28,333) -
Investment tax credit (9,876) (10,107)
------- ------
$135,545 $92,400
======= ======
A reconciliation of the income tax expense at the federal statutory tax rate
of 34 percent to the effective rate is:
For the year ended December 31,
-------------------------------
1993 1992
---- ----
Federal income tax at statutory rates $95,132 $66,714
Increase (decrease) resulting from:
State income tax, net of federal benefit 23,824 13,665
Rate case expense - 10,722
Depreciation 15,417 17,681
Water supply plan 2,879 (14,394)
Other, net 8,169 8,119
Investment tax credit (9,876) (10,107)
------ -------
Total provision for income taxes $135,545 $92,400
======= ======
F-13
Deferred tax (liabilities) assets at December 31, 1993 were comprised of the
following:
1993
----
Depreciation ($700,874)
Investment tax credits (205,241)
Contributions in aid of construction 235,439
Other, net (109,910)
Alternative minimum tax credits 110,621
-------
Net deferred tax liability ($669,965)
=======
NOTE 8 - REGULATORY MATTERS:
On January 12, 1994, RWSC filed a rate application with the DPUC for a 42%
water service rate increase designed to provide a $338,000 increase in annual
water service revenues and a return on common equity of 12.07%. As part of the
application, RWSC requested a 19.75% water service rate increase as interim rate
relief as a result of the construction of a new source of water supply.
NOTE 9 - PENDING SALE OF THE COMPANY:
- ------------------------------------
The company has entered into negotiations with Aquarion Company which has
proposed to acquire the net assets of The New Canaan Company in exchange for
Aquarion common stock with a market value of $3,500,000. The acquisition is
contingent upon the receipt of terms of the acquisition agreement and various
regulatory approvals. The acquisition is expected to occur before the end of
1994.
In connection with the acquisition, the Company has entered into an agreement
with its President which provides for a payment equal to 3% of the purchase
price of the company to be paid upon execution at closing.
NOTE 10 - PENDING LAND SALE:
- ---------------------------
On March 24, 1994, NCWC obtained a commitment from a developer to purchase
certain land located in New Canaan, Connecticut. The agreed-upon purchase price
is $1,600,000 and the sale is conditional upon the Company obtaining all
necessary DPUC approval and acquiring fee title to certain adjacent real
property providing direct access to the land. Currently, a $50,000 non-
refundable deposit has been received, the agreement stipulates completion within
thirty days after such DPUC approval has been obtained.
F-14
EXHIBIT A
ACQUISITION AGREEMENT
---------------------
THIS ACQUISITION AGREEMENT (this "Agreement") is made and entered into
on this the 2nd day of September, 1992, between the New Canaan Company, a
Connecticut corporation, having its principal place of business in New Canaan,
Connecticut, ("Seller" or "NCC"), Aquarion Company, a Delaware corporation,
having its principal place of business in Bridgeport, Connecticut ("Aquarion")
and BRIDGEPORT HYDRAULIC COMPANY, a Connecticut corporation, having its
principal place of business in Bridgeport, Connecticut or its assigns ("Buyer"
or "BHC").
W I T N E S S E T H :
-------------------
WHEREAS, Seller is the owner of all of the capital stock of New Canaan
Water Company ("NCWC") and 97.2% of the capital stock of the Ridgefield Water
Supply Company ("RWSC");
WHEREAS, Seller desires to sell and the Buyer desires to purchase all
of the assets of Seller including its NCWC and RWSC capital stock (the "Asset
Purchase");
WHEREAS, Buyer intends to enter into an agreement among the Second
Taxing District of the City of Norwalk, Connecticut ("STD") and NCWC for the
transfer to STD by Buyer and NCWC after its acquisition by Buyer of the NCWC
reservoir and certain related property including, but not limited to, the dam,
Class I, Class II and certain Class III land as well as all improvements
thereon, certain wells located on the Oenoke Ridge (the "Oenoke Ridge Wells")
and easements (collectively, the "Reservoir") as part of a three cornered
exchange in which NCHC will obtain from the Monroe Environmental Leasing
Partnership ("MELP"), certain improved property in Monroe, Connecticut (the
"Building") in
2
exchange for the Reservoir with such exchange occurring immediately after the
Asset Purchase on the Closing Date;
WHEREAS, the parties hereto intend that the transactions contemplated
by this Agreement shall constitute a reorganization within the meaning of
Section 368(4)(1)(C) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that each party will adopt a plan of reorganization, as described
in Treasury Regulation Section 1.368-3(a) promulgated under Section 368 of the
Code, incorporating therein each relevant element of the transactions
contemplated in this Agreement (including, without limitation, the transfer of
substantially all of Seller's assets to Buyer solely in exchange for shares of
common stock of Aquarion and the liquidation of Seller pursuant to which such
shares will be distributed to shareholders of Seller);
WHEREAS, the parties desire to enter into the Agreement for the Asset
Purchase; and
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter contained, the parties do represent, warrant, covenant and
agree as follows:
ARTICLE I
---------
SALE AND PURCHASE CF THE ASSETS
-------------------------------
Section 1.1 Delivery of Stock. Upon the terms and subject to the
-----------------
conditions contained herein, Seller hereby agrees to sell, transfer, convey and
deliver to Buyer, and Buyer hereby agrees to purchase, all of the property,
rights, stock, privileges and assets, subject to liabilities, as described on
Schedule 1.1 owned by Seller, including all the assets of NCWC
3
and RSC (collectively, the "Assets"). The term NCWC in this Agreement shall
mean the company owned by NCC prior to the Asset Purchase and the company as
owned by Buyer after the Asset Purchase.
Section 1.2 Assets Purchase Price. Upon the terms and subject to the
---------------------
conditions contained herein, at closing Buyer shall deliver, in accordance with
the provisions of Section 1.4 hereof, to Seller shares of Common Stock of
Aquarion, no par value (the "Aquarion Common Stock"), having an aggregate value,
established in accordance with Section 1.3 hereof, equal to Three Million Two
Hundred Fifty Thousand Dollars ($3,250,000) in return for the Assets as listed
on the Consolidated Financial Statements and Supplementary Consolidated
Financial Statements dated December 31, 1991 (the "1991 Audited Financials");
provided, however, if the liabilities of Seller to be assumed by Buyer at
- --------
Closing (as defined in Section 2.1) have increased from the liabilities as
listed in Schedule 1.1, then the amount of Aquarion Common Stock to be delivered
by Buyer shall be reduced by the amount of such increase in liabilities; and
provided, further, that if certain liabilities of either NCWC or RWSC to be paid
- -------- -------
by NCWC and RWSC, respectively, prior to Closing, as listed on Schedule 1.1,
have not been paid by Closing, the amount of Aquarion Common Stock to be
delivered by Buyer shall be reduced by the amount of the outstanding balance of
such liabilities at Closing, which shall then be assumed by the Buyer. The
amount of Aquarion Common Stock to be delivered, as reduced in accordance
4
with this Section, shall be the purchase price (the "Purchase Price").
Section 1.3 Valuation of Aquarion Common Stock. For the purpose of
----------------------------------
valuing the Aquarion Common Stock, the current market price per share of the
Aquarion Common Stock on any date shall be deemed to be the average of the daily
closing prices for the thirty consecutive business days commencing forty-five
business days before the Closing Date (as defined in Section 2.1 hereof). The
closing price for each day shall be the closing price on the New York Stock
Exchange Consolidated Tape (or any successor composite tape reporting
transactions on the New York Stock Exchange) or, if such a composite tape shall
not be in use or shall not report transactions in the Aquarion Common Stock, or
if the Aquarion Common Stock shall be listed on a stock exchange other than the
New York Stock Exchange, the last reported sales price regular way on the
principal national securities exchange on which the Aquarion Common Stock shall
be listed or admitted to trading (which shall be the national securities
exchange on which the greatest number of shares of the Aquarion Common Stock has
been traded during such thirty consecutive business days), or, in either case,
if there is no transaction on any such day, the average of the bid and asked
prices regular way on such day.
Section 1.4 Escrow. At Closing, Buyer shall deposit 10% of the
------
shares of Aquarion Common Stock into an escrow account (the "Escrow Account")
maintained with a mutually agreed upon independent escrow agent. Such stock
will be held and dividends distributed on such stock will be paid to the Seller
for
5
distribution to its shareholders as specified in the escrow agreement (the
"Escrow Agreement") to be executed by Seller and Buyer pursuant to Section 6.10
hereof. The Buyer and Seller agree that the Escrow Account shall be used to pay
any obligations of the Seller set forth in Article VII and the balance remaining
in the Escrow Account shall be paid to the Seller one year from the Closing
Date, provided that a number of shares of Aquarion Common Stock equal in value,
as determined in accordance with Section 1.3 hereof, to satisfy any unpaid
judgments and settlements and any outstanding or unsatisfied claims against the
Escrow Account shall be retained in the Escrow Account until such judgments,
settlements and claims have been satisfied and discharged, and any unused amount
remaining after such satisfaction and discharge shall be promptly paid to the
Seller.
ARTICLE II
----------
CLOSING
-------
Section 2.1 Closing. The Closing (the "Closing") shall take place at
-------
the offices of Buyer, on December 17, 1992 at a time mutually satisfactory to
the parties hereto, or at such other place and time as the parties hereto may
agree (the "Closing Date").
Section 2.2 Closing Deliveries by Seller. At the Closing, Seller
----------------------------
shall deliver, or cause to be delivered, the following to Buyer:
(a) (i) stock certificates representing all NCWC capital stock and
the capital stock of RWSC (the "Stock") that
6
Seller owns duly endorsed in blank or accompanied by stock powers duly executed
in blank, in proper form for transfer, together with evidence of payment by
Seller of any applicable transfer tax; (ii) deeds or title to real or personal
property; and (iii) a bill of sale for the Assets; and
(b) the opinions, certificates and other documents required to be
delivered pursuant to Article V of this Agreement.
Section 2.3 Closing Deliveries by Buyer. At the Closing, Buyer shall
---------------------------
deliver, or cause to be delivered, the following to Seller:
(a) Certificates representing the Aquarion Common Stock registered
with the Securities and Exchange Commission and freely tradeable (subject to
certain restrictions pursuant to Article XIII hereof) on the New York Stock
Exchange, registered in such names as the Seller may request not less than seven
(7) full business days in advance of the Closing Date; and
(b) the opinions, certificates and other documents required to be
delivered pursuant to Article V of this Agreement.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
The Seller hereby represents and warrants to the Buyer as follows:
Section 3.1 Organization, Standing, etc.
----------------------------
(a) The Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Connecticut, is duly qualified
or licensed and in good standing as a foreign corporation, and is authorized to
do
7
business in each jurisdiction in which the ownership or leasing of its property
or the character of its operations makes such qualification necessary. Seller
has all requisite corporate power and authority to awn its assets and to carry
on its business as presently conducted. Seller has the requisite corporate
power and authority to (i) execute, deliver and perform its obligations under
this Agreement and (ii) execute, deliver and perform its obligations under all
other agreements and instruments, including but not limited to, a registration
statement on Form S-4 including an information statement/prospectus relating to
the Aquarion Common Stock, executed and delivered by it, or to be issued and
delivered by it, pursuant to or in connection with this Agreement (the "Related
Agreements"). The registration statement as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement"; the information statement/
prospectus in the form first used to confirm sales of Aquarion Common Stock is
hereinafter referred to as the "Prospectus") (including, in the case of all
references to the Registration Statement and the Prospectus, documents
incorporated therein by reference).
(b) Each of NCWC and RWSC is a public service company as defined in
Section 16-1 of the General Statutes of Connecticut and is a corporation duly
organized, validly existing and in good
8
standing under the laws of the State of Connecticut, is duly qualified or
licensed and in good standing as a foreign corporation, and is authorized to do
business, in each jurisdiction in which the ownership or leasing of its property
or the character of its operations makes such qualification necessary. Each of
NCWC and RWSC has all requisite corporate power and authority to own its assets
and to carry on its business as presently conducted and as proposed to be
conducted.
Section 3.2 Due Execution, etc. This Agreement and each of the
------------------
Related Agreements has been duly authorized, executed and delivered by Seller
and, in the case of this Agreement, and if approved in accordance with
applicable state law by the shareholders of Seller, will be a valid and legally
binding obligation of Seller, enforceable against Seller in accordance with its
terms except, to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affected creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and by an implied covenant of good faith and
fair dealing.
Section 3.3 Use of Water. Each of NCWC and RWSC has the right to use
------------
the water it is using in the manner in which it is using such water. The system
maps, property maps, facility maps, as well as plans to pump stations, wells and
other related water system maps, of each of NCWC and RWSC attached hereto as
Exhibits A and B, respectively, Are accurate in all material
9
respects. Neither NCWC nor RWSC are charging rates for sales of water in excess
of those approved by the Connecticut Department of Public Utility Control
("DPUC").
Section 3.4 No Conflict. Except for regulatory approvals and such
-----------
consents as set forth in Schedule 3.4, the execution, delivery and performance
by Seller of this Agreement and the Related Agreements, and compliance by Seller
with the terms and provisions hereof and thereof, and the consummation by Seller
of the transactions contemplated hereby and thereby will not:
(a) conflict with or result in a breach or violation of any of the
terms or conditions of the Charter documents, of incorporation, or by-laws of
Seller, NCWC or RWSC;
(b) conflict with, or result in a breach, termination or violation
of, or constitute a default (or an event which with notice or passage of time or
both would constitute a default under), or result in, or acquire the creation or
imposition of, any liens, mortgages, pledges, security interests, charges,
restrictions and encumbrances ("Liens") upon or with respect to any material
part of the Assets now owned or hereafter acquired by Seller or result in the
acceleration of the performance by Seller, NCWC or RWSC under any of the terms
and conditions of any bond, indenture, mortgage, deed of trust, note, loan or
credit agreement, or any material lease, license, franchise, contract, agreement
or instrument to which Seller, NCWE or RWSC is a party or by which Seller, NCWC
or RWSC or any of their respective properties or assets are bound or affected;
10
(c) violate any provision of any law, rule, regulation, order,
judgment or decree of any court of competent authority or governmental or
regulatory authority applicable to Seller, NCWC or RWSC or any of their
properties or assets now owned or hereinafter acquired; and
(d) require Seller, NCWC or RWSC to obtain any consent or approval
of, or filing with or notice to, any governmental or regulatory authority or any
third party, except as set forth in Schedule 3.4 hereof.
Section 3.5 No Other Agreements. None of Seller, NCWC or RWSC are a
-------------------
party to, nor bound by, any material contract, agreement, instrument or
commitment relating to the transactions contemplated herein other than this
Agreement or the Related Agreements, except as set forth in Schedule 3.5 hereof.
Section 3.6 Litigation, Proceedings, etc. Except as set forth on
----------------------------
Schedule 3.6, there is no action, claim, suit, proceeding or investigation
pending or, to the best of their knowledge, threatened against or affecting
Seller, NCWC or RWSC or any of their respective assets or properties before or
by any court, governmental agency or regulatory authority (federal, state, local
or foreign) which relates to or challenges the legality, validity or
enforceability of this Agreement or the Related Agreements, or which, if
determined adversely to Seller, NCWC or RWSC (a) would have a material adverse
effect on the business, operations, properties, condition (financial or
otherwise) or prospects of Seller, NCWC or RWSC ("Material Adverse Effect"), or
(b) would (individually or in the aggregate)
11
impair the ability or obligation of Seller, NCWC or RWSC to perform fully on a
timely basis any material obligations which it has or will have under this
Agreement or the Related Agreements. Schedule 3.6 sets forth the nature and
status with respect to each suit, action or proceeding, or investigation
pending, or to the best knowledge of Seller, threatened against Seller, NCWC or
RWSC, and, to the extent applicable, with respect to each judgment, degree,
injunction, rule or order.
Section 3.7 Subsidiaries and Affiliates. Schedule 3.7 lists any
---------------------------
interest in any business, enterprise, or firm, directly or indirectly, owned by
Seller.
Section 3.8 Financial Statements. Seller has delivered to Buyer all
--------------------
available audited balance sheets of Seller, NCWC and RWSC for the years ended
December 31, 1987, through the Closing Date and the related statements of income
and cash flows as certified by Price Waterhouse, independent public accountants,
("Audited Financials"). Seller has also delivered to the Buyer all available
interim balance sheets of Seller, NCWC and RWSC and the related statements of
income and cash flows for the periods between January 1, 1992 and the Closing
Date ("Interim Unaudited Financials"). The Audited Financials, together with
the notes related thereto, are true, correct complete and present fairly the
financial position and results of operation and cash flows of Seller, NCWC and
RWSC at the dates and for the periods therein set forth in accordance with
generally accepted accounting principles consistently applied. The Interim
Unaudited Financials, (including any related notes)
12
fairly present the financial positions and results of operations and cash flows
of Seller, NCWC and RWSC at the date and for the periods therein set forth in
accordance with generally accepted accounting principles consistently applied.
Section 3.9 Licenses, Approvals, other Authorizations. Schedule 3.9
-----------------------------------------
discloses a list of all material governmental and private licenses, permits,
certifications, easements, consents, franchises, qualifications, orders and
approvals of any federal, state, local or other governmental authority possessed
by or granted to Seller, NCWC or RWSC, ("Licenses") and used or relied on in the
operation of its business in accordance with good business practices. Except as
noted in Schedule 3.9 hereto, all such Licenses are in full force and effect.
The items disclosed in Schedule 3.9 constitute all of the Licenses, necessary or
required for the operation of the businesses of Seller, NCWC, or RWSC in
accordance with sound business practices as they currently are being operated.
To the best knowledge of Seller there are no reasons why any such Licenses,
should or will:
(a) terminate except through the expiration of time as provided in
any such Licenses;
(b) not be renewed upon proper application in accordance with past
practices of the business; or
(c) terminate or cause a violation of any provision of such Licenses,
as a result of the transfer of the Stock as contemplated by this Agreement.
13
For purposes of this Agreement "knowledge of seller" shall mean the
knowledge of any officers or directors of NCC, NCWC or RWSC.
Section 3.10 Certain Fees. No fees or commissions will be payable by
------------
Seller, NCWC or RWSC to brokers, finders, investment bankers, or banks with
respect to this Agreement or the Related Agreements and the transaction
contemplated hereby or thereby.
Section 3.11 Taxes. Seller, NCWC and RWSC have prepared and filed
-----
with the appropriate federal, state and local governmental agencies all tax
returns required to be filed for taxable periods ending on or prior to the
Closing Date by them or by any joint venture or other enterprise with which they
may be associated and have paid or caused to be paid all taxes, including sales
and gross receipts taxes, shown to be due on such tax returns, which returns are
complete and accurately reflect all matters therein required to be reflected,
and on all assessments received by them to the extent that such assessments have
become due. Neither Seller, NCWC nor RWSC have executed or filed with any
governmental authority any agreement extending the period of assessment or the
collection of any tax. Neither Seller, NCWC or RWSC is a party to any pending
action or proceeding, nor to the best knowledge of Seller, is any action or
proceeding threatened, by any governmental authority for assessment or
collection of any taxes, and no claim for assessment or collection of taxes has
been assessed against Seller, NCWC or RWSC.
14
Section 3.12 Contracts and Commitments; None Burdensome, etc.
-----------------------------------------------
(a) To the best knowledge of the Seller, neither Seller, NCWC nor
RWSC is a party to or is bound by any contracts, instruments, commitments or
other agreements not made in the usual and ordinary course of their businesses,
other than those listed in Schedule 3.12 or any other schedule hereto. Neither
Seller, NCWC, RWSC nor, to the best knowledge of the Seller, any of their
employees, is a party to or bound by any contract, instrument, binding
commitment or other agreement (other than any agreement referred to in clause
(b)(ii) below), or subject to any charter, by-law or other corporate
restriction, which has a Material Adverse Effect other than those listed in
Schedule 3.12;
(b) The Seller has delivered to the Buyer true and complete copies of
the documents identified on Schedule 3.12, which Schedule contains a complete
and correct list of all contracts, commitments, agreements, plans, water supply
agreements, arrangements and undertakings, whether written or oral, express or
implied, or any other legally binding contracts (other than leases) to which any
of Seller, NCWC or RWSC is a party or by which any of them or any of their
respective properties and assets is subject that:
(i) involve binding commitments of NCWC or RWSC to others to make
payments or future payments (other than payments under any agreement
referred to in clause (ii) below) in excess of $5,000, purchases involving
$5,000 or more or sales involving $5,000 or more in any one case;
15
(ii) relate to any direct or indirect indebtedness for borrowed
money, including but not limited to loan agreements, lease-purchase
agreements, guarantees, agreements to purchase goods or services in excess
of $5,000 or to supply funds or undertakings on which others rely in
extending credit; or any conditional sales contracts, chattel mortgages,
equipment lease agreements, or other security arrangements with respect to
personal property with a value in excess of $5,000, in each instance used
or owned by Seller, NCWC or RWSC;
(iii) involve a commitment which by its terms cannot, or in
reasonable probability will not, be performed in all material respects
within a period of less than one year from the date thereof;
(iv) are joint venture, partnership or other similar contracts,
arrangements or understandings;
(v) are tax-sharing arrangements (whether written or oral) among
Seller, NCWC or RWSC and any agreements relating to tax liability that
Seller, NCWC or RWSC may have with any other entity, including formerly
affiliated companies; and
(vi) are contracts, binding understandings, binding commitments
or agreements (other than tax-sharing arrangements referred to in clause
(v) above) among Seller, NCWC and RWSC, including, without limitation,
those relating to borrowed money, shared customers, employees and
intercompany services currently being provided by NCWC or RWSC.
16
(c) To the best knowledge of the Seller, NCWC or RWSC, the contracts,
agreements, plans, arrangements and undertakings listed on Schedule 3.12 are
valid and binding obligations of the parties thereto enforceable in accordance
with their respective terms and are in full force and effect, except in each
case as could not reasonably be expected to have a Material Adverse Effect.
(d) No party with whom any of Seller, NCWC or RWSC has a material
contractual relationship is in default for more than 30 days in the payment of
any obligation involving $5,000 or more under, or to the best knowledge of the
Seller, in the performance of any material covenant or obligation to perform by
it pursuant to, any such contract, lease, agreement, plan or arrangement.
(e) To the best knowledge of the Seller, no party with whom any of
Seller, NCWC or RWSC has a material relationship has indicated that it will
terminate, or alter in any way materially adverse to Seller, NCWC or RWSC, any
such relationship as a result of the execution of this Agreement or the
consummation of the transactions contemplated hereby.
Section 3.13 Compliance with Contracts and Commitments. Except as
-----------------------------------------
described in Schedule 3.13, to the best knowledge of the Seller, neither Seller,
NCWC nor RWSC is in violation of or in default under any term of its charter
documents or bylaws or under any term of any mortgage, indenture, deed of trust,
promissory note, instrument, lease, contract or any other agreement to which it
is a party, or which it has assumed, or by which it or any of its assets or
other properties
17
may be bound, which violation or default, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect. To the best
knowledge of the Seller, no present employee of Seller, NCWC or RWSC is, or in
the ordinary course of such employee's responsibilities will be, in violation of
any term of any employment contract, non-disclosure agreement or any other
contract or agreement (whether with Seller, NCWC, RWSC or any other person)
adversely affecting the right of any such employee or proposed employee to be
employed by Seller, NCWC or RWSC.
Section 3.14 Sufficiency of Assets and Materials. As of the time of
-----------------------------------
the execution of this Agreement and as of the Closing, the Assets comprise all
of the properties and assets currently used by NCWC or RWSC and are sufficient
for the normal operation of such businesses and operations on a basis consistent
with past practices. Except as disclosed on Schedule 3.14, all material Assets
are in good operating condition, reasonable wear and tear excepted, and have
been properly maintained.
Section 3.15 Labor Matters. There are no labor unions or
-------------
associations representing employees of Seller, NCWC or RWSC. As of the date
hereof, no work stoppage against Seller, NCWC or RWSC is pending or, to the
knowledge of the Seller, threatened, and none of Seller, NCWC or RWSC is
involved in or to the best knowledge of the Seller threatened with any labor
dispute, arbitration, overtime claim, discrimination complaint, lawsuit or
administrative proceeding relating to labor matters involving the employees of
Seller, NCWC or RWSC (excluding routine workers'
18
compensation claims) that could reasonably be expected to have a Material
Adverse Effect.
Section 3.16 Employee Benefit Plans.
----------------------
(a) Schedule 3.16 contains a true and complete list of each "employee
benefit plan" (within the meaning of section 3(3) of The Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), including, without
limitation, multiemployer plans within the meaning of ERISA Section 3 (37),
stock purchase, stock option, severance, employment, change-in-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or other
arrangements, whether or not subject to ERISA (including any funding mechanism
therefor now in effect or required in the future as a result of the transactions
contemplated by this Agreement or otherwise), whether formal or informal, oral
or written, legally binding or not under which any employee or former employee
of Seller, NCWC or RWSC has any present or future right to benefits or under
which Seller, NCWC or RWSC has any present or future liability. All such plans,
agreements, programs, policies and arrangements shall be collectively referred
to as the "Company Plans".
(b) With respect to each Company Plan, the Seller has made available
to the Buyer a current, accurate and complete copy (or, to the extent no such
copy exists, an accurate description) thereof and, to the extent applicable:
(i) Any related trust agreement, annuity contract or other
funding instrument;
19
(ii) the most recent determination letter;
(iii) any summary plan description and other written
communications disseminated by Seller, NCWC or RWSC to its employees
concerning the extent of the benefits provided under a Company Plan;
and
(iv) for the three recent years flied, (A) the Iternal Revenue
Service Form 5500 and attached schedules; (B) audited financial
statements; (C) actuarial valuation reports; and (D) attorneys'
responses to auditors' requests for information.
(c) Except as set forth in Schedule 3.16:
(i) each Company Plan has been established and administered in
compliance with the applicable requirements of law, including ERISA
and the Code, where the failure to comply therewith could reasonably
be expected to have a Material Adverse Effect;
(ii) each Company Plan intended to be a qualified plan within
the meaning of Code section 401(a) has received a favorable
determination letter as to its qualification and, to the best
knowledge of Seller, nothing has occurred, whether by action or
failure to act, which would cause the loss of such qualification;
(iii) with respect to any Company Plan, no actions, suits or
claims (other than routine claims for benefits in the ordinary course)
are pending or, to the best knowledge of Seller, threatened which
could
20
reasonably be expected to have a Material Adverse Effect, no facts or
circumstances exist which could insofar as can be reasonably foreseen
give rise to any such actions, suits or claims;
(iv) neither the Seller, NCWC or RWSC nor any other party in
interest (within the meaning of Section 3(14) of ERISA) or
disqualified person (within the meaning of Section 4975 of the Code)
has engaged in a prohibited transaction, as such term is defined under
Code section 4975 or ERISA section 406, which (A) would subject
Seller, NCWC, RWSC or Buyer to any taxes, penalties or other
liabilities under Code section 4975 or ERISA sections 409 or 502(i)
and (B) could reasonably be expected to have a Material Adverse Effect
pursuant to the Code;
(v) neither Seller, NCWC nor RWSC has committed any act or
failed to take any action and, to the best knowledge of Seller, no
event has occurred and no condition exists, that would subject Seller,
NCWC or RWSC either directly or by reason of its affiliation with any
member of its Controlled Group (defined as any organization which is a
member of a controlled group of organizations within the meaning of
Code sections 414, to any tax, fine or penalty imposed by ERISA, the
Code or other applicable laws, rules and regulations that may affect
employee benefit programs including, but not limited to, the taxes
imposed by Code sections 4971,
21
4972, 4977, 4979, 4980B, 4976(a) or the fine imposed by ERISA section
502(c), which could reasonably be expected to have a Material Adverse
Effect;
(vi) for each Company Plan with respect to which a Form 5500
has been filed, no material change which could reasonably be expected
to have a Material Adverse Effect has occurred with respect to the
matters covered by the most recent Form since the date thereof;
(vii) all contributions or insurance premiums required to be
made prior Lo the Closing Date under the terms of any Company Plan,
the Code, ERISA or other applicable laws, rules and regulations have
been or will be timely made and with respect to such liabilities
attributable to service on or before the closing Date, either (A)
adequate reserves have been provided or (B) such liabilities will be
accrued on the Interim Unaudited Financials or Audited Financials,
whichever is most recent;
(viii) except as provided on Schedule 3.16, no Company Plan has
been amended to provide for an increase in benefits effective on or
after the Closing Date; and
(ix) each Company Plan may by its terms be amended or
terminated. For purposes of this Section 3.16(c), the term "Material
Adverse Effect" is deemed to include events occurring individually or
in the aggregate.
22
(d) No Company Plan and no employee benefit plan (including any
multi-employer plan within the meaning of ERISA section 3 (37)) of any member of
the Controlled Group is, or ever has been prior to the Closing Date, subject to
Title IV of ERISA, Part 3 of Title I of ERISA, or Code Section 412, and no such
plan that is a welfare benefit plan (within the meaning of Section 3(1) of
ERISA) provides or has provided coverage to employees after retirement,
including post-retirement medical benefits (except to the extent required by
law).
(e) Except as set forth in Schedule 3.16, (i) each Company Plan
which is intended to meet the requirements for tax-favored treatment under
Subchapter B of Chapter 1 of Subtitle A of the Code meets such requirements, and
(ii) the Company has received a favorable determination from the Internal
Revenue Service with respect to any trust intended to be qualified within the
meaning of Code section 501(c)(9).
(f) except as set forth in Schedule 3.16, no Company Plan is an
excess plan" (within the meaning of Section 3(36) of ERISA) or a "top hat" plan,
within the meaning of Section 201(2) of ERISA.
(g) except as set forth on Section 3.16, no employee of Seller, NCWC
or RWSC could receive under any Company Plan (i) a "parachute payment" within
the meaning of Section 28OG or Section 4999 of the Code as a result of the
transactions contemplated by this Agreement or (ii) the payment of any money or
other property or rights, or the acceleration or provision of any other rights
or benefits, as a result of the sale and
23
purchase of the Stock under this Agreement, whether or not such payment,
acceleration or provision would constitute a parachute payment.
Section 3.17 Title to and Condition of Assets.
--------------------------------
(a) Seller has good title to all of its Assets, except as reflected
on Schedule 3.17;
(b) Seller is the lawful owner, beneficially and of record, of all
the capital stock of NCWC and 97.2% of the capital stock of RWSC. The
authorized capital stock of NCWC consists of (i) 12,000 shares of common stock,
$25 par value per share, of which 10,480 shares will be issued and outstanding
as of the Closing, and (ii) 8,000 shares of 10% preferred stock, $100 par value
per share, of which 4,772 shares will be issued and outstanding as of the
Closing. The authorized capital stock of RWSC consists of (iii) 2,000 shares of
common stock of which 2,000 shares will be issued and outstanding as of the
Closing, and (iv) 3,593 shares of preferred stock, of which 3,593 shares will be
issued and outstanding as of the Closing. Seller owns 1,944 shares of RWSC
common stock and 3,593 shares of RWSC preferred stock. All of such outstanding
shares shall have been duly and validly authorized, and are or will be fully
paid and non-assessable as of the Closing. Neither NCWC nor RWSC has any stock
or securities convertible into or exchangeable for any of its capital stock, or
any rights (either preemptive or otherwise) to subscribe for or to purchase, or
any options, warrants or other rights for the purpose of, or any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
24
commitments or claims of any character relating to, any of its capital stock or
any securities convertible into or exchangeable for any of its capital stock.
The sale of the Stock by Seller to Buyer pursuant hereto will transfer to the
Buyer legal and valid title thereto free and clear of all liens and claims
whatsoever.
(c) Seller, NCWC and RWSC each respectively have good and marketable
titles to all of its real property and good title to all of its other properties
and assets, personal and mixed, free and clear of any Liens and charges, except
as reflected on Schedule 3.17. Schedule 3.17 discloses a complete list of all
real estate or structures owned and leased by or from either of Seller, NCWC and
RWSC. All real estate owned and leased and improvements thereon conform in all
material respects to applicable laws and regulations, including but not limited
to building, health and safety ordinances, and environmental, ecological and
historical district laws. The property is zoned for the various purposes for
which the real estate is presently being used. Except as disclosed on Schedule
3.17, (i) all real estate owned or leased has been adequately maintained, is in
good condition and is suitable for the conduct of the business of Seller, NCWC
and RWSC and (ii) each building (including its electrical, plumbing and heating,
air conditioning and roof) and each structure is in all material respects in
good operating condition and repair, normal wear and tear excepted.
Section 3.18 Corporate Records. The stock certificates, stock
-----------------
registers delivered at the Closing, minutes of all directors' and stockholders'
meetings heretofore exhibited
25
to the Buyer, constitute all of the stock certificates, transfer books and
minute books and are true, complete and accurate records of all material
proceedings of the stockholders and directors of Seller, NCWC and RWSC and the
issuance and record ownership of all shares of NCWC and RWSC. The accounting
books and records of Seller, NCWC and RWSC are in all material respects true,
correct and complete, and have been maintained in accordance with good business
practices.
Section 3.19 Material Liabilities. Except as disclosed in Schedule
--------------------
3.19, there are no material liabilities of Seller, NCWC or RWSC, whether
accrued, absolute, contingent or otherwise, for which either Seller, NCWC or
RWSC is liable, which shall not be paid by either or by insurance maintained by
Seller, NCWC or RWSC on or prior to the Closing or be disclosed in this
Agreement or in the schedules attached hereto or reflected in the Interim
Unaudited Financials subject to normal year-end adjustments or in the Audited
Financials, whichever is most recent. As of the date hereof, to the best
knowledge of Seller, there are no known circumstances, conditions, happenings,
events or arrangements, contractual or otherwise, which may hereafter give rise
to such liabilities, except in the normal course of business and consistent with
past practices.
Section 3.20 Receivables. The accounts receivable of Seller, NCWC
-----------
and RWSC are actual and bona fide receivables representing obligations. To the
best knowledge of Seller, (a) the receivables are collectible in the ordinary
course of business, subject to stated reserves for doubtful accounts and
26
(b) the reserve on the Interim Unaudited Financials or Audited Financials,
whichever is most recent, with respect to such doubtful accounts is adequate.
Schedule 3.20 provides a complete and accurate list of the accounts receivable
of Seller, NCWC and RWSC as of the date of execution of this Agreement, which
list shall be updated within 30 days of the Closing Date or such other date as
agreed to by Buyer within ten (10) days of the Closing. Schedule 3.20 sets
forth all accounts receivable in excess of 120 days, 90 days and 60 days.
Section 3.21 Inventories and Prepaids. Inventory and prepaids of
------------------------
Seller, NCWC and RWSC which are reflected on the Interim Unaudited Financials or
Audited Financials, which ever is most recent, will be usable or salable in the
ordinary course of BHC's business, including the operation of NCWC and RWSC, are
not and will not be excessive in kind or amount in light of the historical
business needs and practices of BHC, NCWC and RWSC and are and will be valued at
cost or market, whichever is lower.
Section 3.22 Leases. Schedule 3.22 contains a list of all leases
------
with a fixed annual rental in excess of $5,000 pursuant to which Seller, NCWC or
RWSC leases as lessee or lessor any real or personal property. Schedule 3.22
contains the aggregate amount of fixed annual rentals under all leases for real
or personal property with a fixed annual rental in excess of $5,000. To the
best knowledge of the Seller, all material leases are valid and binding and
there is not under any such material lease any existing default or event of
default or event with
27
which notice of the lapse of time or both would constitute a default or event of
default.
Section 3.23 Intellectual Property. Seller, NCWC and RWSC have the
---------------------
free and unencumbered right to use all the patents, trademarks, tradenames,
copyrights, technology and know-how ("Intellectual Property") necessary or
currently used in the operation of its business. The conduct of the business of
NCWC and RWSC, to the best knowledge of Seller, does not conflict with or
infringe any Intellectual Property of any entity or person.
Section 3.24 Compliance with Laws. Except as disclosed in Schedule
--------------------
3.24, each of Seller, NCWC and RWSC has complied in all respects and has
operated in accordance with all foreign, federal, state, local or other laws,
statutes, ordinances, rules and regulations, orders, judgments and decrees of
any court of competent authority or governmental or regulatory authority
applicable to it or any of its businesses, operations, properties or assets,
where the failure to comply therewith, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect and Seller, except as
disclosed in Schedule 3.24, has no notice or knowledge of any claim for any
known violation thereof.
Section 3.25 Bank Accounts and/or Credit. Schedule 3.25 discloses a
---------------------------
true, correct and complete list of all financial institutions or vendors in
which an account is maintained by, or loans, lines of credit or other credit
commitments have been secured by or for NCWC or RWSC together with the names of
all persons authorized to draw thereon. Except as disclosed in
28
Schedule 3.25, NCWC or RWSC does not have any loan or other agreements for the
borrowing of money and none of the loans or lines of credit impose any
prepayment restrictions. There are no loans or other agreements which upon the
transfer of the Stock as contemplated by this Agreement will accelerate to
maturity, increase the rate or charges or otherwise change their terms or
provisions.
Section 3.26 Reports. Except as set forth in Schedule 3.26, to the
-------
best knowledge of the Seller, NCWC, RWSC and Seller have duly filed all material
reports required to be filed by them with any governmental or regulatory body
having jurisdiction over them and have previously delivered or will deliver,
upon the Buyer's reasonable request, to the Buyer complete and accurate copies
of such reports. Except as described in Schedule 3.26, to the best knowledge of
the Seller, each of such documents presented fairly the information required to
be included therein.
Section 3.27 Fundamental Changes. Except as set forth on Schedule
-------------------
3.27 hereto, since December 31, 1991,
(a) there has not been any:
(i) event or the occurrence of any condition of any
character which has a Material Adverse Effect;
(ii) change in the known contingent obligations (by way of
guaranty, endorsement, indemnity, warranty or otherwise) of Seller,
NCWC or RWSC which individually or in the aggregate has a Material
Adverse Effect;
29
(iii) damage, destruction, casualty loss or theft,
whether or not covered by insurance, which has a Material Adverse
Effect;
(iv) need to write off or any write-off of any amounts of
loans as losses which has a Material Adverse Effect; or
(v) change in the relationship of course of dealing
between Seller, NCWC or RWSC and any of their suppliers, customers,
distributors, lenders or creditors which has a Material Adverse
Effect; and
(b) Neither Seller, NCWC nor RWSC have:
(i) taken any action to alter its charter documents or by-
laws or in any other manner alter its capital stock;
(ii) issued or sold any shares of its capital stock, any
securities convertible into or exchangeable for shares of its capital
stock or any options, warrants or other rights to acquire any shares
of capital stock;
(iii) declared, set aside or paid any dividend or made
any other distribution or payment in respect of shares of the capital
stock of NCWC or RWSC, or directly or indirectly redeemed, retired,
purchased or otherwise acquired any of such capital stock;
(iv) merged, amalgamated or consolidated with any other
corporation or acquired all or substantially all of the business or
assets of any other person,
30
corporation, partnership, firm, association or business organization,
entity or enterprise, or acquired ownership or control of the
management or policies thereof;
(v) made any change in the accounting principles, methods,
policies or procedures or in amortization policies or rates;
(vi) entered into, created or assumed: (A) any obligation
for borrowed money except for borrowings in an aggregate amount up to
$20,000 for 30 days or less; (B) any deed of trust, conditional sale
or other title retention agreement or Lien; or (C) any easement or
covenant, or any restriction or other burden of record, upon any of
its properties or assets whether now owned or hereafter acquired;
(vii) assumed, guaranteed, endorsed or otherwise become
liable with respect to the obligations of any other person,
corporation, partnership, firm, association, business organization,
entity or enterprise, except for endorsements for collection of
negotiable instruments in the ordinary course of business as
heretofore conducted;
(viii) made any loan or advance in excess of $5,000 to,
or acquired the capital stock or any other securities in excess of
$5,000 of, any person, corporation, partnership, firm, association,
business organization, entity or enterprise;
31
(ix) entered into any transaction involving an amount in
excess of $5,000 with, or created or assumed any obligation of or
liability in excess of $5,000 to, any officer, director or any
affiliate of such persons, except for such transactions that had been
entered into or obligations or liabilities created or assumed pursuant
to agreements in existence prior to January 1, 1992;
(x) except in the ordinary course of business, effected any
increase in salaries, bonuses, commissions, wages, benefits or other
compensation payable to any of its officers, directors or employees
or, amended or increased benefits under any Company Plans, including
without limitation, severance pay;
(xi) cancelled, waived or compromised any debt, claim or
right owed to it which debt, claim or right, taken as a whole is
material to Seller, NCWC or RWSC;
(xii) entered into any employment contract involving an
amount in excess of $25,000, or entered into any other contract (A)
not in the ordinary course of business or (B) in excess of $25,000;
(xiii) sold, assigned, transferred or leased any vehicle
or vehicles with an aggregate value in excess of $5,000 or any of its
fixed assets with an aggregate value in excess of $5,000;
(xiv) cancelled any of its insurance policies or any of
the coverage thereunder (including any material
32
modifications thereof) or failed to maintain the Assets or properties
and assets of NCWC or RWSC in customary repair, order and condition,
reasonable wear and use and damage by unavoidable casualty excepted;
(xv) sold, leased, mortgaged, abandoned or otherwise
disposed of any interest in real property, or sold, leased, abandoned,
assigned, transferred, licensed or otherwise disposed of any brand
name, invention, process, know-how, formula, pattern, design, trade
secret or interest thereunder, or (except in the ordinary course of
business) any other intangible asset, any machinery, equipment or
other operating property, provided, however, Seller may sell Class III
-------- -------
property if the proceeds from such sale ace used to reduce the
outstanding $1,250,000 loan from The Village Bank of Ridgefield;
(xvi) disposed of or allowed to lapse any leases of real
or personal property or any license or other right to the use of any
Intellectual Property, or disposed of (except in the ordinary course
of business) any other property that is material to Seller, NCWC or
RWSC;
(xvii) made any capital expenditures in excess of $1,000
per expenditure or incur $25,000 of expense in the aggregate or
binding commitment to make any such expenditure; or
33
(xviii) made any agreement or binding commitment to take
any action described in this Section 3.27.
Section 3.28 Insurance. As of the Closing Date, each of Seller, NCWC
---------
and RWSC are covered by valid and currently effective insurance policies issued
in favor of Seller, NCWC or RWSC, and insure against hazards and risks and
liability to persons and property, including product liability insurance, dam
insurance, at least to the extent and in the manner customary, in the
jurisdictions in which it conducts its business, for similarly situated
companies, similar businesses and similar products. Schedule 3.28 hereto sets
forth a list and brief description of all insurance policies now held by Seller,
NCWC or RWSC (including carriers, policy numbers, effective and termination
dates and coverage and self-insured retention amounts). All premiums due on
such policies have been paid in full or will be accrued on the consolidated
balance sheet of Seller, NCWC and RWSC as of such date, and the Seller, NCWC and
RWSC have complied in all material respects with the provisions of such
policies. All claims, if any, made against Seller, NCWC or RWSC which are
covered by insurance are being defended by the appropriate insurance companies
without any reservation of rights to contest insurance coverage of any such
claim.
Section 3.29 Compliance with Environmental Laws. To the best
----------------------------------
knowledge of the Seller, except as described in Schedule 3.29 or as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, Seller,
34
NCWC, RWSC and their past and present subsidiaries and affiliates ("Company
Entities"):
(i) have not at any time, directly or indirectly,
"treated", "disposed of", "generated", "stored", "released" any "toxic
or hazardous wastes" or "hazardous substances", as each of the terms
is defined under the Resource Conservation and Recovery Act, the Toxic
Substances Control Act, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Federal Water Pollution
Control Act, the Federal Clean Air Act and all regulations promulgated
thereunder, and other applicable federal, state or local environmental
laws, regulations or ordinances (Environmental Laws"), or arranged for
such activities, in, on or under any parcel of land, whether or not
owned, occupied or leased by Company Entities;
(ii) are in substantial compliance with all Environmental
Laws, and have not received any notices of violation or claims
thereunder which have not been satisfactorily resolved;
(iii) there is no soil or water contamination at or
migrating from any of the facilities or properties owned, leased or
occupied by Company Entities;
(iv) there are no liens filed or threatened under any
applicable Environmental Law with respect to any of the facilities or
properties owned, leased or occupied
35
by Seller, NCWC or RWSC as a result of Company Entities' acts or
omissions;
(v) Company Entities have made no filings or notifications
to any governmental authorities regarding any on-site disposal of
toxic or hazardous wastes or hazardous substances (collectively,
"Hazardous Substances") or solid wastes other than notifications of
accidental releases as required by law; and
(vi) Company Entities have not received any notices of
responsibility, including without limitation potentially responsible
party notices, or other claims related to off-site transport,
treatment, storage, placement or disposal of Hazardous Substances,
including any claims related to land application of sludge.
To the best knowledge of the Seller, Schedule 3.29 contains a complete
list from January 1, 1981 to the present of any haulers, if any, for the
disposal of hazardous waste for Seller, NCWC or RWSC or any past or present
subsidiary and their predecessors.
Section 3.30 Health and Safety Matters. Except as disclosed in
-------------------------
Schedule 3.30 hereto, Seller, NCWC and RWSC are in substantial compliance with
all requirements of the Federal Occupational Safety and Health Act, 29 U.S.C
Section 651 et seq., ("OSHA"), regulations promulgated thereunder and any
-- ----
applicable state laws regarding health and safety the enforcement of which, if
Seller, NCWC or RWSC were not in compliance, would have a
36
Material Adverse Effect. Except as disclosed in Schedule 3.30 hereto, none of
the Seller, NCWC or RWSC have received any citation or notice of violation from
the Federal Occupational Safety and Health Administration, of any state
counterpart agency setting forth any respect in which the facilities or
operations of Seller, NCWC or RWSC are not in compliance with OSHA, the
regulations thereunder or applicable state laws which citation or notice has not
been addressed, corrected or remedied to the satisfaction of such governmental
agencies.
Section 3.31 Agreements with Employees. Schedule 3.31:
-------------------------
(a) contains a complete list or a general description of all
consulting, employment, management, bonus, incentive compensation or severance
pay or other similar agreements (other than those agreements that involve only
cash compensation in an annual amount less than $20,000) concluded with any
person, oral or written, and still in effect, to which Seller, NCWC or RWSC has
or will have outstanding obligations, copies of which have been made available
to the Buyer;
(b) lists the names of all commissioned employees and includes a copy
of the commission plans of Seller, NCWC and RWSC; and
(c) lists the names of all officers, directors and employees of NCWC
and RWSC with employment contracts and the term of such contract.
Section 3.32 Transactions with Affiliates. Except as set forth in
----------------------------
Schedule 3.32 or in the Financial Statements,
37
neither any officer or director of Seller, NCWC, RWSC nor any relative or
affiliate (as defined in Rule 405 under the Securities Act of 1933, as amended)
of Seller:
(a) owns, directly or indirectly, any interest in or is a director or
employee of any organization that is a competitor, supplier, customer, creditor
or debtor of Seller, NCWC or RWSC;
(b) has any outstanding contract, agreement or other binding
arrangement other than any employment agreement or arrangement with Seller, NCWC
or RWSC which will continue in effect after the Closing; or
(c) has engaged in any transaction with any other person or its
affiliates (other than Seller, NCWC or RWSC or the Buyer) since January 1, 1992
which was (i) material to the business, operations or properties of Seller, NCWC
and RWSC taken as a whole or (ii) undertaken in contemplation of the sale of the
Assets.
Section 3.33 Prospectus. Seller will furnish Aquarion all
----------
information relating to Seller, NCWC and RWSC as is necessary to enable Aquarion
to comply in all material respects with the requirements of federal and
applicable state law in connection with the Registration Statement to be filed
with the Securities and Exchange Commission (the "SEC") and any information
statement/preliminary prospectus (hereinafter the "preliminary prospectus") and
Prospectus to be sent to Seller's stockholders for purposes of the meeting of
stockholders. The information provided by Seller, NCWC and RWSC contained in
the Registration
38
Statement and Prospectus will not contain any untrue statements of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that Seller makes no representation or
warranty in respect of any information contained in such proxy statement
furnished by Aquarion expressly for use therein. Seller will cooperate with
Aquarion and will provide Aquarion with its stockholder lists, including correct
addresses, to enable Aquarion to send the Prospectus and any preliminary
prospectus to Seller's stockholders. Seller will also cooperate with Aquarion
to allow Aquarion to send to Seller's stockholders amendments or supplements to
the Prospectus as may be necessary, in the light of developments occurring
subsequent to the mailing of such Prospectus, to ensure that the Registration
Statement and Prospectus as so amended or supplemented, will not, on the date of
the meeting of stockholders, 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 the circumstances under which they were
made, not misleading.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to the Seller as follows:
Section 4.1 Organization, Standing, etc. Buyer is a public service
---------------------------
company as defined in Section 16-1 of the General Statutes of Connecticut and is
a corporation duly organized,
39
validly existing and in good standing under the laws of the State of
Connecticut, is duly qualified or licensed and in good standing as a foreign
corporation, and is authorized to do business in each jurisdiction in which the
ownership or leasing of its property or the character of its operations makes
such qualification necessary. Buyer has all requisite corporate power and
authority to own its assets and to carry on its business as presently conducted.
Buyer has the requisite corporate power and authority to (i) execute, deliver
and perform its obligations under this Agreement and (ii) execute, deliver and
perform its obligations under the Related Agreements.
Section 4.2 Authorization and Validity of Agreement; No Conflict.
----------------------------------------------------
(a) The execution, delivery and performance by the Buyer of this
agreement and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate action. This Agreement has
been duly executed and delivered by the Buyer and is a legal, valid and binding
obligation of the Buyer, enforceable against the Buyer in accordance with its
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and by an implied covenant of good faith and
fair dealing.
40
(b) Except for regulatory approvals such consents identified in
Schedule 4.2(b) hereto, which shall be obtained prior to the Closing, the
execution, delivery and performance by Buyer of this Agreement and the Related
Agreements and compliance by Seller with the terms and provisions hereof and
thereof and the consummation by Buyer of the transactions contemplated hereby
and thereby will not:
(i) conflict with or result in a breach or violation any
of the terms and conditions of the charter documents or by-laws of
Buyer;
(ii) conflict with, or result in the breach, termination or
violation of, (or an event which with or without notice and/or the
passage of time or both, would constitute a default under), result in,
or require the creation or imposition of any Liens upon any of the
property or assets of Buyer pursuant to, or result in the acceleration
of the performance by Buyer under, any of the material terms and
conditions of any bond, indenture, mortgage, deed of trust, lease,
license, franchise, contract, agreement or other instrument to which
Buyer is a party or by which it or any of its assets is bound or
encumbered;
(iii) violate any provisions of any law, rule,
regulation, order, judgment or decree of any court of competent
authority or governmental or regulatory authority applicable to the
Buyer or any of its assets; and
41
(iv) require Buyer to obtain any consent or approval of, or
make any filing with or notice to, any governmental or regulatory
authority or any third party, except for filings with the SEC, DPUC,
DHS, DEP and those required under the Connecticut Transfer Act.
Section 4.3 Litigation, Proceedings, etc. Except as set forth on
----------------------------
Schedule 4.3, there is no action, claim, suit, proceeding or investigation
pending or, to the best of their knowledge, threatened against or affecting
Buyer before or by any court, governmental agency or regulatory authority
(federal, state, local or foreign) which relates to or challenges the legality,
validity or enforceability of this Agreement or the Related Agreements, or
which, if determined adversely to Buyer would (individually or in the aggregate)
impair the ability or obligation of Buyer to perform fully on a timely basis any
material obligations which it has or will have under this Agreement or the
Related Agreements. Schedule 4.3 sets forth the nature and status with respect
to each suit, action or proceeding, or investigation pending, or to the best
knowledge of Buyer, threatened against Buyer, and, to the extent applicable,
with respect to each judgment, degree, injunction, rule or order.
Section 4.4 Financial Statements and SEC Filings. Buyer has delivered
------------------------------------
to Seller audited balance sheets of Aquarion for the year ended December 31,
1991 and any subsequent year-end audited financial report available prior to the
Closing Date certified by Price Waterhouse, independent public accountants, and
the related statements of income and cash flows ("Aquarion
42
Audited Financials"). Buyer has also delivered to the Seller certain interim
balance sheets of Aquarion and the related statements of income and cash flows
for the periods between January 1, 1992 and the Closing Date ("Aquarion Interim
Unaudited Financials"). The Aquarion Audited Financials, together with the
notes related thereto, are true, correct, complete and present fairly the
financial position and results of operation and cash flows of Aquarion at the
dates and for the periods therein set forth in accordance with generally
accepted accounting principles consistently applied. The Aquarion Interim
Unaudited Financials, (including any related notes) fairly present the financial
positions and results of operations and cash flows of Aquarion at the date and
for the periods therein set forth in accordance with generally accepted
accounting principles consistently applied.
Buyer has delivered to Seller Aquarion's Form 10-K for the year ended
December 31, 1991 and any subsequent Form 10-K available prior to the Closing
Date and Aquarion's Quarterly Report on Form 10-Q for quarters ended March 31,
1992 through the Closing Date. The Buyer has also delivered Aquarion's Proxy
Statement for its 1992 annual meeting.
Section 4.5 Prospectus Preparation. Aquarion will expeditiously
----------------------
prepare and file the Registration Statement with the SEC and send stockholders
of Seller for purposes of the meeting of Seller's stockholders any preliminary
prospectus and the Prospectus all of which will comply in all material respects
with the requirements of federal and applicable state law. The information
contained in the Registration Statement, any
43
preliminary prospectus or the Prospectus will 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 the light of the
circumstances under which they were made, not misleading, except that Aquarion
makes no representation or warranty in respect of any information contained in
the Registration Statement, any preliminary prospectus, or the Prospectus
furnished by Seller, NCWC and/or RWSC expressly for use therein. Aquarion also
makes no representations or warranties regarding the accuracy or completeness of
Seller's stockholder list which Seller will have provided. Aquarion will send
to Seller's stockholders such amendments and supplements to the Prospectus as
may be necessary, in the light of developments occurring subsequent to the
mailing of the Prospectus, to ensure that the Prospectus as so amended or
supplemented, will not, on the date of the meeting of Seller's stockholders,
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 the circumstances under which they were made, not misleading. Aquarion
shall give Seller, its representatives and counsel a reasonable opportunity to
participate in the drafting of the Registration Statement, any preliminary
prospectus or the Prospectus and any amendments or supplements thereto and to
review the Registration Statement, any preliminary prospectus and the Prospectus
prior to being sent to the SEC for review and to Seller's stockholders.
44
ARTICLE V
---------
CONDITIONS TO CLOSING
---------------------
Section 5.1 Conditions Precedent to Obligations of Parties. The
----------------------------------------------
respective obligations of Buyer and Seller hereunder are subject to the
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
(a) No Injunction, etc. No preliminary or permanent injunction or
-------------------
other order issued by any federal or state court of competent jurisdiction in
the United States or by any federal or state governmental or regulatory body nor
any statute, rule, regulation or executive order promulgated or enacted by any
federal or state governmental authority which restrains, enjoins or otherwise
prohibits the transactions contemplated hereby shall be in effect.
(b) No Proceeding or Litigation. No Suit, action or governmental
---------------------------
proceeding before any court or any governmental or regulatory authority shall
have been commenced and be pending by any governmental or regulatory authority
against Buyer, Seller, NCWC or RSWC or any of their affiliates, associates,
officers or directors seeking to restrain, prevent or change in any material
respect the transactions contemplated hereby or seeking material damages in
connection with any of such transactions.
Section 5.2 Conditions Precedent to Obligations of Buyer. Buyer's
--------------------------------------------
obligation to purchase and pay for the Assets at the Closing is subject to the
fulfillment on or prior to the Closing Date of the following conditions:
45
(a) Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by Seller in Article III hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date, except for changes specifically authorized,
contemplated and/or required under this Agreement;
(b) Performance. All covenants, agreements and conditions contained
-----------
in this Agreement and in the Related Agreements to be performed or complied with
by Seller on or prior to the Closing Date shall have been performed or complied
with in all material respects;
(c) Compliance Certificate. Seller shall have delivered to Buyer a
----------------------
certificate, executed by the Seller's President, dated the Closing Date,
certifying, to the best of his knowledge, to the fulfillment of the conditions
specified in paragraphs (a), (b) and (f) of this Section 5.2;
(d) Authorization. The Board to Directors of Buyer shall have
-------------
authorized and approved the Agreement and the terms and conditions of any
regulatory approvals granted in connection with the transactions contemplated by
the Agreement and the operation of NCWC and RWSC after Closing;
(e) Opinion of Seller's Counsel. Buyer shall have received from
---------------------------
Counsel to Seller an opinion dated the Closing Date in form and substance
reasonably satisfactory to Buyer;
(f) No Material Adverse Change. Since December 31, 1991, there shall
--------------------------
have been no material adverse change in the
46
business, operations, properties, condition (financial or otherwise) or
prospects of the Seller, NCWC or RWSC;
(g) Delivery of Title to Assets and Stock Certificates. Seller shall
--------------------------------------------------
have delivered to Buyer all deeds, titles and other certificates of ownership,
as well as certificates, duly endorsed in blank, or accompanied by stock powers
fully executed, representing all of the Stock, with all necessary Stock transfer
and other necessary documentary stamps, together with the Stock transfer books
and minute books of NCWC or RWSC, an affidavit from Seller's Secretary attesting
to the status of the abandoned and unclaimed RWSC shares and certificates
representing the Stock;
(h) Environmental Matters. Buyer, at its expense, shall have
---------------------
received an environmental assessment, in scope and form reasonably satisfactory
to Buyer, of the businesses conducted and the properties owned, operated or
leased by Seller, NCWC and RWSC, the results of which are reasonably
satisfactory in all respects to the Buyer;
(i) Accounts Payable. Buyer shall have received a schedule, certified
----------------
as true and accurate, to the best of his knowledge, by the chief financial or
accounting officer of Seller, NCWC and RWSC, showing the amounts and ages of
accounts payable of Seller, NCWC and RWSC as of a date not more than 30 days
prior to the Closing Date.
(j) Accounts Receivable. Buyer shall have received a schedule,
-------------------
certified as true and accurate, to the best of his knowledge, by the chief
financial or accounting officer of
47
Seller, NCWC and RWSC, showing the amounts and ages of accounts receivable of
Seller, NCWC and RWSC as of a date not more than 30 days prior to the Closing
Date;
(k) Financial Statements. Buyer shall have received the Interim
--------------------
Unaudited Financials, together with a certificate of the chief financial officer
of Seller, NCWC and RWSC stating that the balance sheet included in the Interim
Unaudited Financials (including any related notes) fairly presents the
consolidated financial positions, results of operations and changes in cash
flows of Seller, NCWC and RWSC as of its date and each of the other financial
statements included therein in accordance with generally accepted accounting
principles consistently applied during the periods involved (except as otherwise
stated therein). The Interim Unaudited Financials shall show "Ending Retained
Earnings" for each of NCWC and RWSC which is not less than those contained in
the Audited Financials dated December 31, 1991;
(l) Diversion Permit. The issuance by the DEP of a diversion permit
----------------
to allow the transfer in sufficient peak and average quantities to permit use of
600,000 gallons per day of safe yield water from the Reservoir and the Oenoke
Ridge Wells, at the option of Buyer or STD, to either the supply line of the
First Taxing District of the City of Norwalk on Valley Road or the watershed of
STD for direct addition to the existing STD supply;
(m) Dam Condition. Confirmation, through a detailed inspection and
-------------
report by a consultant hired by Buyer or STD that the condition of the dam at
the Reservoir is as specified in the
48
report by Roald Haested, Inc. of Waterbury, Connecticut to the STD dated April
11, 1985 entitled, "New Canaan Reservoir Dam Spillway Investigation Report" (the
"Haested Report") and the Phase 2 engineering investigation of the NCWC
Reservoir prepared by Lenard & Dilaj Engineering (the "Lenard & Dilaj Report");
(n) Pipeline Extension. Permission from the Town of New Canaan to
------------------
extend a pipeline from the intersection of the NCWC transmission system and
Country Club Road through appropriate roadways to the New Canaan/Wilton town
line;
(o) Easements. The granting of all easements to Buyer or its assigns
---------
required for the installation of a gravity line from the hydraulic gradient of
the New Canaan Reservoir spillway overflow to avoid the 475-foot elevation above
mean sea level at the intersection of Country Club Road and Route 123 in New
Canaan;
(p) Spillage Easements. The granting of a spillage easement for a
------------------
cut emergency spillway approximately 300 feet north of the east abutment across
existing Class III land presently owned by NCWC to meet with the Five Mile River
below the existing spillway, at a cost to STD which, together with the estimated
costs of intended channel improvements, shall not exceed $200,000;
(q) Alternate Supply. Development of an alternate means satisfactory
----------------
to Buyer of supplying any and all existing customers on the NCWC transmission
main from the Reservoir to Country club Road so that said main can be utilized
by Buyer or its assigns as a raw water supply main, which costs of developing
49
such alternate means of supply shall be paid by Buyer or its assigns;
(r) Approvals. Approvals by all state and federal and local agencies
---------
having jurisdiction over NCWC, Buyer and STD of the use of the Reservoir and
Oenoke Ridge Wells as raw drinking water supply sources for STD; and
(s) Rate Treatment. Buyer shall be satisfied with the treatment, for
--------------
ratemaking purposes, of the assets and related expenses of NCWC and RWSC, after
the Asset Purchase, any disposition of NCWC's Class III land, and the Reservoir
sale;
(t) Related Transactions. A Property Transfer Agreement by and among
--------------------
STD, NCWC and MELP shall have become binding and unconditional obligations of
the parties thereto as of the Closing Date, to effect a non-taxable three-
cornered exchange of property pursuant to which MELP will transfer the Building
to NCWC, NCWC will transfer the Reservoir to STD pursuant to the direction of
MELP, and STD will pay the amount specified in the Property Transfer Agreement
to MELP;
(u) Stock Cap. Buyer shall not be required to deliver to Seller more
---------
than 130,000 shares of Aquarion Common Stock;
(v) Registration Statement. The Registration Statement has become
----------------------
effective; no stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are pending before
or threatened by the SEC.
(w) Other Proceedings and Documents. All other corporate and other
-------------------------------
proceedings in connection with the
50
transactions contemplated hereby and all documents and instruments incident to
such transactions shall be reasonably satisfactory in substance and form to
Buyer and Buyer's counsel, and Buyer shall have received all such counterpart
originals or certified or other copies of such documents as it may reasonably
request.
Section 5.3 Conditions Precedent to Obligations of Seller. Seller's
---------------------------------------------
obligation to sell to Buyer the Assets at the Closing is subject to the
fulfillment on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by Buyer in Article IV hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date, except for changes specifically authorized,
contemplated and/or required under this Agreement;
(b) Performance. All covenants, agreements and conditions contained
-----------
in this Agreement and in the Related Agreements to be performed or complied with
by Buyer on or prior to the Closing Date shall have been performed or complied
with in all material respects;
(c) Compliance Certificate. Buyer shall have delivered to Seller a
----------------------
certificate, executed by the President of Buyer, dated the Closing Date,
certifying, to the best of his knowledge, to the fulfillment of the conditions
specified in paragraphs (a) and (b) of this Section 5.3;
51
(d) Board Authorization. The Board of Directors of Seller shall have
-------------------
authorized and approved the Agreement and the terms and conditions of any
regulatory approvals granted in connection with the transactions contemplated by
the Agreement.
(e) Shareholder Authorization. The shareholders of Seller shall have
-------------------------
authorized the sale of substantially all of the assets of NCC, including NCWC
and RWSC, and the transactions contemplated by the Agreement;
(f) Opinion of the Buyer's Counsel. Seller shall have received from
------------------------------
the Buyer's counsel an opinion, dated the Closing Date, in form and substance
reasonably satisfactory to Seller;
(g) Other Proceedings and Documents. All other corporate and other
-------------------------------
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to Seller and Seller's counsel, and Seller
shall have received all such counterpart originals or certified or other copies
of such documents as they may reasonably request;
(h) Filings; Consents. There shall have been obtained all Licenses,
-----------------
permits, franchises, consents, approvals, waivers, authorizations,
qualifications, orders of governmental authorities and parties to contracts with
Seller, NCWC, RWSC and Buyer as are necessary in connection with (i) the
purchase and sale of the Assets and the transfer of all properties and interest
in property necessary for the operation of the NCWC and RWSC water supply
systems by Buyer as such businesses are
52
presently being conducted or which, if not obtained, would be reasonably likely
to subject Buyer, Seller, NCWC or RWSC, or any such person to civil or criminal
liability or could render such transfer void or voidable; and (ii) the purchase
and use by STD of the Reservoir;
(i) Reservoir Proceeds. The proceeds from the sale of the Reservoir
------------------
shall have been allocated to shareholder of NCWC.
(j) Stock Value. Seller shall receive from Buyer shares of Aquarion
-----------
Common Stock, valued pursuant to Section 1.3 hereof, equal to the Purchase
Price, provided, that Buyer shall deliver a minimum of 81,250 shares of Aquarion
--------
Common Stock.
(k) Regulatory Approval. The terms and conditions of any regulatory
-------------------
approval of the transactions contemplated by the Agreement must be reasonably
satisfactory to the board of directors and shareholders of NCC.
(l) Tax opinion. Seller shall have received a written opinion of
-----------
Haythe & Curley, counsel to Seller, in form reasonably satisfactory to Seller,
to the effect that (i) the transactions described herein will constitute a
reorganization within the meaning of Section 368(a)(1)(C) of the Code, (ii) the
receipt of Aquarion Common Stock by Seller in exchange for its assets, and the
distribution of such stock to the shareholders of Seller will not give rise to
gain or loss to Seller or to the shareholders of Seller, (iii) the basis of the
Aquarion Common Stock received by a shareholder of Seller as aforesaid will be
the same as the shareholder's basis in the stock of Seller surrendered therefor,
and (iv) the holding period for the Aquarion Common Stock so
53
received will include such shareholder's holding period in the stock of Seller
so surrendered. In connection with such opinion, Haythe & Curley shall be
entitled to make such reasonable factual assumptions as are customary in similar
opinions, and such factual assumptions shall be confirmed by certificates (to be
negotiated by Haythe & Curley, Seller, Buyer and Aquarion) signed by responsible
officers of Seller, Buyer and Aquarion.
ARTICLE VI
----------
COVENANTS OF THE PARTIES
------------------------
Section 6.1 Access to Information Concerning Properties and Records;
--------------------------------------------------------
Confidentiality; Disclosure.
- ---------------------------
(a) After the date hereof, Seller shall and shall cause NCWC and RWSC
to afford to Aquarion or Buyer, their counsel, accountants and other authorized
representatives reasonable access during normal business hours to the offices,
plants, properties, books and records of Seller, NCWC and RWSC, in order that
Buyer may have full opportunity to make such investigations as it desires of the
affairs of Seller, NCWC and RWSC.
(b) Aquarion and Buyer agree that they will, and will cause their
directors, officers, other personnel and authorized representatives to, hold in
strict confidence, and not to use, any data and information obtained from
Seller, NCWC or RWSC (other than information which is a matter of general public
knowledge or which has heretofore been or is hereafter published for public
distribution or filed by Seller, NCWC or RWSC as public information with any
governmental authority other than as
54
a result of a breach of this covenant) and will not, and will ensure that such
other persons do not, disclose or use such data and information unless required
by legal process or applicable governmental regulations. If this Agreement is
terminated for any reason, Aquarion and Buyer will not disclose or use such data
and information and will promptly return to Seller all tangible evidence (and
all copies thereof) of such data and information which Seller, NCWC or RWSC have
furnished to Aquarion or Buyer or such other recipients.
(c) Other Requested Information. With reasonable promptness, Seller,
---------------------------
NCWC and RWSC and their respective officers, employees, accountants and other
agents will (i) deliver to Buyer all financial statements and audit reports that
became available subsequent to the date hereof and such other information as
Buyer from time to time may reasonably request and (ii) supplement or amend the
schedules to this Agreement with respect to any matters heretofore arising
which, if existing or occurring before or as of the date of this Agreement,
would have been required to be set forth or described in the Schedules to this
Agreement.
Section 6.2 Current Information. Seller shall make available to Buyer
-------------------
prior to the Closing Date any financial information with respect to Seller, NCWC
and RWSC reasonably required by Buyer. During the period from the date of this
Agreement to the Closing Date, Seller, NCWC and RWSC will make available one or
more of its designated representatives to confer on a regular and frequent basis
with a representative of Buyer and to report the general status of the ongoing
operations of
55
NCWC and RWSC. Seller will promptly notify Buyer of any material change in the
normal course of business or in the operations or the properties of Seller, NCWC
or RWSC and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the institution
or the threat of significant litigation involving Seller, NCWC or RWSC, and will
keep Buyer fully informed of such events and permit Buyer's representative
access to all materials prepared in connection therewith.
Section 6.3 Further Assurances. Seller and Buyer agree to execute and
------------------
deliver such instruments and take such other action as Buyer or Seller may
reasonably require in order to carry out the purpose and intent of this
Agreement.
Section 6.4 RWSC Minority Interest. Seller will use its best efforts
----------------------
to acquire the capital stock of RWSC that it does not own or if Seller is not
able to locate the shareholders of such capital stock, Seller will determine if
the capital stock is abandoned and unclaimed and will take such steps as are
necessary to transfer such property to the State of Connecticut.
Section 6.5 Public Announcements. Seller and Buyer will consult with
--------------------
each other before issuing any press releases or otherwise making any public
statements with respect to this Agreement or any of the transactions
contemplated hereby and shall not issue any such press release or make any
public statement prior to such consultation, except as may be required by law or
by obligations pursuant to any listing agreements with any national securities
exchange.
56
Section 6.6 Prohibited Actions. Between the date hereof and the
------------------
Closing Date:
(a) except as expressly contemplated herein or agreed to by Buyer,
neither Seller, NCWC nor RWSC shall take any action or agree to take any action
identified in Section 3.27(b);
(b) Seller will use its best efforts to preserve and keep the
business organizations of NCWC and RWSC intact and to preserve the goodwill of
customers, suppliers, employees, distributors and others having business
relations with NCWC or RWSC, and no profit sharing contributions or bonuses will
be made;
(c) each of NCWC and RWSC will maintain its books, accounts and
records in the usual and ordinary manner, on a basis consistent with prior
years;
(d) each of NCWC and RWSC will continue its business pursuant to its
Licenses and take all steps necessary to meet requirements of pending
applications for such Licenses; and
(e) each of NCWC and RWSC will notify and obtain approval of Buyer,
which shall not be unreasonably withheld, prior to spending greater than $1,000
on any capital expenditure or greater than $25,000 in the aggregate for any
expense.
Section 6.7 Further Actions. Subject to the terms and conditions
---------------
hereof, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by
57
this Agreement on or before December 31, 1992, including using all reasonable
efforts:
(i) to obtain any licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities
and parties to contracts as are required in connection with the
consummation of the transactions contemplated hereby;
(ii) to effect all necessary registrations and filings,
including, without limitation, filings to the DPUC, DHS and under the
Connecticut Transfer Act;
(iii) to defend any lawsuits or other legal proceedings,
whether judicial or administrative, whether brought derivatively or on
behalf of third parties (including governmental agencies or
officials), challenging this Agreement or the consummation of the
transactions contemplated hereby; and
(iv) to furnish to each other such information and
assistance as reasonably may be requested in connection with the
foregoing.
Section 6.8 No Inconsistent Action. Seller and Buyer shall not take
----------------------
any action inconsistent with their obligations under this Agreement or which
could materially hinder or delay the consummation of the transactions
contemplated by this Agreement.
Section 6.9 Notification of Certain Matters. Upon actual notice
-------------------------------
thereof, Seller shall give prompt notice to Buyer, of (i) the occurrence, or
failure to occur, of any event which
58
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any respect at any
time from the date hereof to the Closing Date, and (ii) any failure of Seller,
NCWC or RWSC, as the case may be, or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.
Section 6.10 Escrow Agreement. Before the Payment Date, Buyer and
----------------
Seller shall establish an escrow account pursuant to Section 1.4 and shall
execute, and shall use their best efforts to cause a mutually agreed-upon
independent escrow agent to execute, an Escrow Agreement.
Section 6.11 Prospectus Preparation. Seller will furnish Aquarion
----------------------
all information relating to Seller, NCWC and RWSC as is necessary to enable
Aquarion to comply in all material respects with the requirements of federal and
applicable state law in connection with the Registration Statement to be filed
with the SEC and any preliminary prospectus and the Prospectus to be sent to
Seller's stockholders. Seller will also provide Aquarion with its stockholders
lists, including correct addresses, so Aquarion will be able to send any
preliminary prospectus or the Prospectus to Seller's stockholders.
59
ARTICLE VII
-----------
INDEMNIFICATION
---------------
Section 7.1 Indemnification by Seller and Seller's Stockholders.
---------------------------------------------------
(a) Seller, and upon Seller's liquidation each of Seller's former
stockholders, shall indemnify, save and hold harmless Buyer and its affiliates,
and its and their respective employees, representatives, officers, directors,
and agents from and against any losses, claims, liabilities (whether or not
arising out of or third-party claims), damages, expense (including court costs,
expenses of investigation, reasonable attorneys' fees and expenses and interest
from the date thirty (30) days after the loss is incurred, paid and the
indemnity is requested until paid) or obligation related to, clause by, arising
out of or resulting from
(i) any inaccuracy, misrepresentation, breach, or failure
to fulfill any covenant, agreement, representation or warranty on the
part of Seller pursuant to this Agreement or arising out of or based
upon the omission or alleged omission to state in this Agreement a
material fact required to be stated therein or necessary to make the
statements herein not misleading;
(ii) any agreements, contracts, negotiations or other
dealings by Seller with any person (other than Buyer) concerning the
sale of Assets except as
60
disclosed in writing within ten days prior to the Closing;
(iii) arising out of or based upon or in any way related
or attributed to claims, actions or proceedings related to actions
taken or omitted to be taken by Seller, NCWC or RWSC related to this
Agreement and the transactions contemplated herein;
(iv) any liability or obligation of whatever nature not
herein assumed that related to any period or transaction on or prior
to the closing.
(b) Seller, and upon Seller's liquidation each of Seller's former
stockholders, agree to indemnify and hold harmless Aquarion, each of its
directors, each of its officers who have signed such Registration Statement and
each other person, if any, who controls Aquarion, within the meaning of the
Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which Aquarion, or any such director, officer or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any preliminary
prospectus or the Prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only
61
if, such statement or omission was in reliance upon and in conformity with
information furnished to Aquarion by Seller, NCWC or RWSC or specifically for
use in the preparation thereof, and will reimburse Aquarion, such directors,
officers or controlling persons for all legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action.
(c) The liability of each of the former stockholders of Seller
pursuant to Section 7.1 (a) or (b) above shall be limited to the amount of such
stockholders pro rata distribution from Seller upon liquidation; provided, that,
-------- ----
this subsection 7.1(c) shall not limit the liability of any former stockholders
who were officers, directors or controlling stockholders of Seller in such
stockholders' capacity as officer, director or controlling stockholder.
Section 7.2 Indemnification by Buyer.
------------------------
(a) Buyer shall indemnify, save and hold Seller and its affiliates,
and its and their respective employees, representatives, officers, directors and
agents harmless from and against any losses, claims, liabilities, (whether or
not arising out of or third-party claims), damages, expense (including court
costs, expenses of investigation, reasonable attorneys' fees and interest from
the date thirty (30) days after the loss is incurred, paid and the indemnity is
requested until paid) or
62
obligation related to, caused by, arising out of or resulting from
(i) any inaccuracy, misrepresentation, breach, or failure
to fulfill any covenant, agreement, representation or warranty on the
part of Buyer pursuant to this Agreement or arising out of or based
upon the emission to state in this Agreement a material fact required
to be stated therein or necessary to make the statements herein not
misleading;
(ii) any agreements, contracts, negotiations or other
dealings by Buyer with any person (other than Seller) concerning the
sale of Assets to Buyer; or
(iii) arising out of or based upon or in any way related
or attributed to claims, actions or proceedings related to actions
taken or omitted to be taken by Buyer related to this Agreement and
the transactions contemplated herein; or
(iv) any liability or obligation of whatever nature assumed
by Buyer but which Seller, for whatever reason, remains liable or for
which payment, action or damages are sought from Seller.
(b) Aquarion will indemnify and hold harmless Seller, each person, if
any, who controls Seller, against any losses, claims, damages or liabilities,
joint or several, to which Seller or any such controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out
63
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any preliminary
prospectus or the Prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse Seller and each
controlling person for all legal or other expenses reasonably incurred by it in
connection with investigating or defending or defending against such loss,
claim, damage, liability or action; provided, however, that Aquarion shall not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
any preliminary prospectus, the Prospectus, or amendment or supplement, in
reliance upon and in conformity with written information furnished to Aquarion
or Buyer by Seller, NCWC or RWSC or controlling person for use in preparation
thereof; and provided further, that Aquarion or Buyer will not be liable to
Seller under the indemnity agreement in this subsection 7.2(b) with respect to
any preliminary prospectus or the Prospectus to the extent that any such loss,
claim, damage or liability of Seller results from the fact that Seller
distributed Aquarion Common Stock to a person to whom there was not sent or
given, at or prior to the stockholders' meeting, a copy of the preliminary
prospectus (or of the Prospectus as then amended or supplemented)
64
if Seller has not provided Aquarion or Buyer a true and accurate stockholders
list with a valid and current address of Seller's stockholders.
Section 7.3 Judgment. Any claim based upon a final judgment after
--------
right to appeal has expired, decree or award of a court of competent
jurisdiction requiring the payment of money by the party claiming the right to
indemnification, or any of its officers, directors, employees, agents,
investment advisors or controlling persons ("Claimant"), shall be conclusive as
to the amount of such claim, provided a certified copy of such judgment, decree
or award accompanies the notice relating to such claim and provided further that
Claimant shall have complied with Section 7.4 of this Agreement.
Section 7.4 Procedure. In the event that any action, investigation or
---------
legal proceeding shall be instituted, or any claim or demand shall be asserted,
by any third party in respect of which indemnity may be sought pursuant to the
provisions of this Article VII, Claimant shall, with reasonable promptness after
obtaining knowledge of such action, investigation, proceeding, claim or demand,
give written notice thereof to the indemnifying party or parties ("Indemnitor"),
who shall then have the right, at its option and at its own expense, to be
represented by counsel of its choice in connection with such matter, which
counsel shall be reasonably satisfactory to Claimant (counsel representing each
party in this transaction shall be deemed satisfactory), and to defend against,
negotiate, settle or otherwise deal with any such proceeding, claim or
65
demand; provided, that without the prior written consent of Claimant, Indemnitor
--------
shall not consent to the entry of any judgment in or agree to any settlement of
any such matters. Should Indemnitor desire to settle any proceeding and
Claimant desire to continue the proceeding, Indemnitor shall have the option of
paying Claimant the amount of the proposed settlement and Claimant, at its own
expense, will take over defense of the proceeding and will be responsible for
any judgment or settlement amount. Claimant may retain counsel to represent it
and participate in connection with any such proceeding or claim or demand, at
its own expense, unless (i) the Indemnitor and the Claimant shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnitor and the
Claimant and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them.
Failure to notify or delay in notifying Indemnitor will not relieve it from any
liability which it may have to such Claimant under this Article VII except to
the extent it or they have been prejudiced in any material respect to such
failure or from any liability which it or they may have to an indemnified party
or parties otherwise than under this Agreement. Failure by Indemnitor to notify
Claimant of Indemnitor's election to defend any action, proceeding, claim or
demand with respect to which indemnity is sought within twenty (20) business
days after notice thereof shall have been received by Indemnitor, shall be
deemed a waiver by Indemnitor of its
66
right to defend against any such matter. If Indemnitor assumes defense of any
such proceeding, claim or demand, it shall take or cause to be taken all steps
necessary in connection with such defense, and Claimant shall in all events be
entitled to indemnity with respect to such matter, as provided in this Article
VII. In the event that Indemnitor does not elect to defend any Proceeding,
claim or demand with respect to which indemnity is sought, Claimant may defend
against, settle or otherwise deal with any such action, proceeding, claim or
demand in such manner as it may in its good faith discretion deem appropriate
and Indemnitor shall be liable for indemnification with respect to such matter,
including without limitation the reasonable costs of such defense, as provided
in this Article VII. In the event of any proceeding, claim or demand by a third
party with respect to which a claim for indemnification is made hereunder, the
parties hereto agree that they will cooperate fully with each other in
connection with the defense or settlement of such matter.
Section 7.5 Limitations on Indemnity.
------------------------
(a) Seller's, the Seller's former stockholders' and Buyer's
obligations for indemnification shall be limited to claims for indemnification
for which notification in writing or for which claim is made within forty-eight
(48) months of the Closing Date.
(b) Overall Limit; Basket. The indemnification obligations of either
---------------------
party to the other hereunder are subject to the overall limit of liability of
the purchase price set forth in
67
Section 1.2 above. The indemnification obligations of each formal stockholder
of Seller hereunder is limited as follows: (i) each former stockholder's
liability will be limited in the aggregate to the amount of distribution such
stockholder actually received from Seller, and (ii) each former stockholder's
liability for any individual indemnification claim will be limited to the
greater of $100,000 or such former stockholder's pro rata portion of such claim,
determined by dividing the amount of distribution to such stockholder by the
total amount distributed to all stockholders. No indemnification amount shall
be payable hereunder by a party unless and until the aggregate indemnification
liability of such party hereunder shall exceed $32,500, and after exceeding such
account, such indemnification liability shall not include such $32,500.
(c) Officers and Directors. No provision of this agreement is
----------------------
intended to alter the liability of officers and directors of Buyer or Seller in
circumstances in which such officers and directors would have personal
liability.
(d) The Seller shall use its best efforts to obtain from each of its
stockholders prior to closing written consent for the designation of one agent
to receive service of process on behalf of each such stockholder for any action
or proceeding brought by the Buyer to enforce the indemnification obligation
imposed by this Article VII on any former stockholder of Seller. The Seller
need not seek such consent from any stockholder who receives liquidating
distributions totalling less than $4,000.
68
Buyer shall pay all expenses in connection with the administration of such
agent's duties, if any.
ARTICLE VIII
------------
FURTHER AGREEMENTS OF THE PARTIES
---------------------------------
Section 8.1 Seller and each stockholder of Seller by accepting
certificates evidencing the Aquarion Common Stock agrees with and consents to
the following:
(a) the Aquarion Common Stock may not be sold for a period of four
months from the Closing Date.
(b) each certificate of Aquarion Common Stock shall bear the legend:
"Pursuant to the Acquisition Agreement dated as of September, 1992
between The New Canaan Company, Bridgeport Hydraulic Company and
Aquarion Company, the securities represented by this certificate may
not be transferred or sold for a period of four months from the
Closing Date and no transfer of the securities represented by this
certificate shall be valid or effective unless in accordance with such
terms and conditions. A copy of said Acquisition Agreement is on file
and may be inspected at the principal office of Aquarion Company, or
such other office or agency as may be designated by its transfer
agent."
(c) at Closing, Aquarion will have entered a stop transfer order with
its transfer agent against the transfer of any shares of the Aquarion Common
Stock except in compliance with the requirements of Article VIII of this
Agreement.
ARTICLE IX
----------
TERMINATION AND ABANDONMENT
---------------------------
Section 9.1 Termination Events. This Agreement may be terminated and
------------------
abandoned at any time prior to the Closing:
69
(a) by mutual agreement of Buyer and Seller;
(b) by either Buyer or Seller in the event that the Closing does not
occur on or before December 31, 1992 through no fault of the terminating party;
provided, however, that both Seller and Buyer shall have the right to extend the
- --------
Closing for 60 days.
Section 9.2 Effect of Termination. If either party has the right to
---------------------
terminate this Agreement pursuant to Section 9.1 hereof and such party shall
terminate this Agreement pursuant to such Section 9.1 hereof, all obligations
for the parties hereunder (other than those set forth in Section 10.1) shall
terminate and no party shall have any obligation or liability to any of the
other parties with respect to any breach of any of its obligations hereunder
regardless of whether such breach is outstanding or curable at the date of such
termination; provided, however, that the obligations set forth in Section 10.1
--------
shall survive any such termination.
ARTICLE X
---------
MISCELLANEOUS
-------------
Section 10.1 Expenses. Each party to this Agreement shall pay its
--------
own costs and expenses (including all legal, accounting, broker, finder and
investment banker fees) relating to this Agreement, the negotiations leading up
to this Agreement and the transactions contemplated by this Agreement.
Section 10.2 Complete Agreement. This Agreement, including schedules
------------------
and exhibits attached hereto and the documents referred to herein, shall
constitute the entire
70
agreement between the parties hereto with respect to this subject matter hereof
and shall supersede all previous negotiations, commitments and writings with
respect to such subject matter.
Section 10.3 Amendment. This Agreement may not be released,
---------
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing signed on behalf of each of the parties hereto. The
failure of any party hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of such provisions, nor in
any way to affect the validity of this Agreement or any part thereof or the
right of any party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held as a waiver of any other or
subsequent breach.
Section 10.4 Survival of Representations and Warranties.
------------------------------------------
Representations and warranties of Seller contained in this Agreement and any
documents delivered by them shall survive the Closing for a period of four (4)
years and shall terminate at such time.
Section 10.5 Notices. All notices and other communications required
-------
or permitted hereunder shall be in writing and shall be given by certified mail,
return receipt requested or overnight mail signed for by recipient, addressed,
if to Seller, to:
Joseph J. McLinden
The New Canaan Ccapany
161 Cherry Street
New Canaan, CT 06840
71
with a copy to: Thomas T. Adams
Gregory & Adams
190 Old Ridgefield Road
Wilton, CT 06897
or to such other person or to such other place as Seller shall furnish to Buyer
in writing, and
if to Buyer: James S. McInerney, Jr.
President
Bridgeport Hydraulic Company
835 Main Street
Bridgeport, Connecticut 06601
with a copy to: Anthony M. Macleod
General Counsel
Bridgeport Hydraulic Company
835 Main Street
Bridgeport, Connecticut 06601
Section 10.6 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Connecticut, without
giving effect to the choice of law provisions thereof.
Section 10.7 Waiver. Waiver of any term or condition of this
------
Agreement by any party shall only be effective if in writing and shall not be
construed as a waiver of any subsequent breach or failure of the same term or
condition, or a waiver of any other term or condition of this Agreement.
Section 10.8 Binding Effect; Assignment. This Agreement shall be
--------------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party to this Agreement may assign or
delegate all or any portion of its rights, obligations or liabilities under this
Agreement without the prior written consent of the other party to this
Agreement, except that Seller may assign its rights
72
under this Agreement to any successors in interest or affiliates and except that
Buyer may assign its right to purchase all or a portion of the Assets to one or
more of its direct or indirect wholly-owned subsidiaries with Seller's consent,
which consent shall not be unreasonably withheld, but in no event will any such
assignment relieve Buyer or Seller of any of their respective obligations and
liabilities hereunder.
Section 10.9 Execution in Counterparts. This Agreement may be
-------------------------
executed in one or more counterparts, all of which shall be considered one and
the same agreement, and shall become a binding agreement when one or more
counterparts have been signed by each of the parties and delivered to each of
the other parties.
Section 10.10 Titles and Headings. Titles and headings to sections
-------------------
and paragraphs herein are inserted for the convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of this
Agreement.
Section 10.11 Schedules. The schedules and exhibits to this
---------
Agreement shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
Section 10.12 Pronouns. Whenever required by the context herein, the
--------
singular includes the plural and the masculine includes the feminine or the
neuter.
Section 10.13 Severability. In case one or more provisions contained
------------
in this Agreement shall be invalid, illegal or unenforceable in any respect
under any applicable law, rule or
73
regulation, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed the day and year first above written.
NEW CANAAN COMPANY
By______________________
Name: J.J. McLinden
Title: President
BRIDGEPORT HYDRAULIC COMPANY
By___________________________
Name: Daniel A. Neaton
Title: Vice President
AQUARION COMPANY
By_______________________
Name: Janet M. Hansen
Title: Vice President
EXHIBIT B
ACQUISITION AGREEMENT AMENDMENT
Amendment to the Acquisition Agreement dated September __, 1992,
between The New Canaan Company ("Seller"), Aquarion Company ("Aquarion") and
Bridgeport Hydraulic Company ("Buyer"), as amended by the Decision, dated June
30, 1993, of the Department of Public Utility control (the "DPUC"), in Docket
No. 91-06-26, Joint Application for Approval of the Acquisition of New Canaan
---------------------------------------------------------------
Water Company and Ridgefield Water Supply Company by Bridgeport Hydraulic
- -------------------------------------------------------------------------
Company, a Subsidiary of Aquarion Company (the "Acquisition Agreement").
- -----------------------------------------
WHEREAS, the Seller, Buyer and Aquarion desire to amend the
Acquisition Agreement to reflect certain changes in the terms and conditions of
the transaction;
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter contained, the parties do represent, warrant, covenant and
agree as follows:
1. Section 1.2 of the Acquisition Agreement shall be amended as
follows:
The language and number "Three Million Two Hundred Fifty Thousand
Dollars ($3,250,000)" in the first sentence of Section 1.2 shall be
deleted and inserted in its place shall be the language and number
"Three Million Five Hundred Thousand Dollars ($3,500,000)".
2. Section 2.1 of the Acquisition Agreement shall be amended as
follows:
The language "December 17, 1992" in the first sentence of Section 2.1
shall be deleted and inserted in its place shall be the language "or
prior to July 31, 1994".
3. Section 5.2 of the Acquisition Agreement shall be amended as
follows:
The number "130,000" in the second line of subsection 5.2(u) shall be
deleted and inserted in its place shall be the number "140,000".
4. Section 5.3 of the Acquisition Agreement shall be amended as
follows:
The number "81,250" in the third line of subsection 5.3(j) shall be
deleted and inserted in its place shall be the number "87,500".
2
5. Section 6.7 of the Acquisition Agreement shall be amended as
follows:
The language "December 31, 1992" in the first sentence of Section 6.7
shall be deleted and inserted in its place shall be the language "July
31, 1994".
6. Section 9.1 of the Acquisition Agreement shall be amended as
follows:
The language "December 31, 1992" in the first sentence of Section
9.1(b) shall be deleted and inserted in its place shall be the
language "July 31, 1994".
7. Schedule 1.1 of the Acquisition Agreement shall be amended as
follows:
Inserted into the section entitled "Liabilities to be paid by New
Canaan Water Company and Ridgefield Water Supply Company by Closing"
after the first paragraph thereof shall be the following sentences:
"In addition to the foregoing, New Canaan Water Company ("NCWC") and
Ridgefield Water Supply Company ("RWSC") have agreed to pay BHC such
amount as BHC has billed as of Closing for water purchased from BHC
via the South Central Regional Pipeline. Any amounts so owed at
Closing to BHC for such water by NCWC and RWSC shall be deducted from
the purchase price pursuant to Section 1.2 of the Acquisition
Agreement.".
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Acquisition Agreement to be executed the day and year first above written.
THE NEW CANAAN COMPANY
By__________________________
Joseph J. McLinden
President
BRIDGEPORT HYDRAULIC COMPANY
By___________________________
James S. McInerney
President
3
AQUARION COMPANY
By____________________________
Janet M. Hansen
Senior Vice President,
Chief Financial Officer
and Treasurer
EXHIBIT C
SUPPLEMENTAL ACQUISITION AGREEMENT AMENDMENT
Amendment to the Acquisition Agreement dated in September, 1992 among
The New Canaan Company ("Seller"), Aquarion Company ("Aquarion") and Bridgeport
Hydraulic Company ("Buyer"), as amended by the Decision, dated June 30, 1993, of
the Department of Public Utility Control (the "DPUC"), in Docket No. 91-06-26,
Joint Application for Approval of the Acquisition of New Canaan Water Company
- -----------------------------------------------------------------------------
and Ridgefield Water Supply Company by Bridgeport Hydraulic Company, a
- ----------------------------------------------------------------------
Subsidiary of Aguarion Company, as amended.
- ------------------------------
WHEREAS, Seller, Buyer and Aquarion desire to amend the Acquisition
Agreement to reflect certain changes in the terms and conditions of the
transaction;
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter contained, the parties do represent, warrant, covenant and
agree as follows:
1. Section 2.1 of the Acquisition Agreement shall be amended as
follows:
The language "or prior to July 31, 1994" in the first
sentence of Section 2.1 shall be deleted and inserted in its
place shall be the language "or before February 28, 1995."
2. Section 6.7 of the Acquisition Agreement shall be amended as
follows:
The language "July 31, 1994" in the first sentence of
Section 6.7 shall be deleted and inserted in its place shall
be the language "February 28, 1995."
3. Section 9.1 of the Acquisition Agreement shall be amended as
follows:
The language "July 31, 1994" in the first sentence of
Section 9.1 (b) shall be deleted and inserted in its place
shall be the language "February 28, 1995."
2
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Acquisition Agreement to be executed as of the 15th day of November, 1994.
THE NEW CANAAN COMPANY
Dated: ______________________ By:_____________________________________
Joseph J. McLinden, President
BRIDGEPORT HYDRAULIC COMPANY
Dated: ______________________ By:_____________________________________
James S. McInerney, President
AQUARION COMPANY
Dated: ______________________ By:_____________________________________
Janet M. Hansen, Senior Vice President,
Chief Financial Officer and Treasurer
EXHIBIT D
PROPERTY EXCHANGE AGREEMENT
---------------------------
PROPERTY EXCHANGE AGREEMENT (this "Agreement"), made this 21st day of
October, 1992, among SECOND TAXING DISTRICT OF THE CITY OF NORWALK, a
Connecticut municipal corporation ("STD"), MONROE ENVIRONMENTAL LEASING
PARTNERSHIP, a Connecticut general partnership ("MELP"), AQUARION COMPANY, a
Delaware corporation ("Aquarion") mad NEW CANAAN WATER COMPANY, a Connecticut
public service corporation ("NCWC") acting on behalf of its future parent
corporation Aquarion.
W I T N E S S E T H :
-------------------
WHEREAS, MELP is the owner of record and in fact, legally and
beneficially, of a certain parcel of land situated in the Town of Monroe, County
of Fairfield and State of Connecticut containing approximately three acres of
real property and improvements thereon including buildings and personal property
(hereinafter referred to as "Parcel A" or the "Building"), and specifically and
legally described in Schedule A attached hereto and made a part hereof;
WHEREAS, NCWC is the owner of record and in fact, legally and
beneficially, of all that certain piece or parcel of land situated in the Town
of New Canaan, County of Fairfield and State of Connecticut containing
approximately 173 acres of real property, with a reservoir located thereon, and
certain related property including, but not limited to, the dam, certain land,
certain improvements therein and thereon (including real or personal property),
certain wells located on the Oenoke Ridge (the "Oenoke Ridge Wells") and certain
easements (hereinafter
2
collectively referred to as "Parcel B" or the "Reservoir"), which land is
specifically and legally described in Schedule B attached hereto and made a part
hereof;
WHEREAS, STD desires to acquire title to the Reservoir directly from
NCWC;
WHEREAS, NCWC desires to exchange the Reservoir for the Building to be
held for investment in a three-cornered exchange that will qualify for
nonrecognition of gain under Section 1031 of the United States Internal Revenue
Code of 1986, as amended, and the rules and regulations thereunder (the "Code");
NOW THEREFORE, for and in consideration of the premises and mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
I. PROPERTY TO BE TRANSFERRED. The parties to this Agreement intend
--------------------------
for NCWC and MELP to exchange the Reservoir for the Building and immediately
thereafter for STD to acquire the Reservoir from MELP.
II. VALUE OF PROPERTY.
-----------------
(a) NCWC, STD and MELP agree that the Reservoir is valued at
$2,200,000, subject to adjustment pursuant to Section III(i) hereof and the
parties hereto agree that the Building is worth $2,400,000.
(b) The purchase price for the Building is $2,400,000; provided,
--------
however, if the Closing does not occur by June 30, 1993, the Building purchase
price shall be increased by an amount
3
equal to 75% of the percentage increase from January i, 1993 to the Closing Date
in the Consumer Price Index - New York area, as published by the Bureau of Labor
Statistics, United States Department of Labor.
(c) upon the execution of this Agreement Aquarion shall pay MELP a
deposit of $72,000 which equals three percent (3%) of the Building purchase
price. The deposit shall be refunded to Aquarion if the Closing does not occur
because any of the conditions contained in Paragraphs VIII(f), VIII(k), VIII(l)
and VIII(U) are not satisfied and shall be refunded to Aquarion if its Board
disapproves of the transaction as a result of a failure of a condition contained
in Paragraphs VIII(f), VIII(k), VIII(l) or VIII(n) to be satisfied.
(d) The purchase price for the Reservoir is $2,200,000.
III. CLOSING.
-------
(a) Date and Place. The closing of the transfer of title (the
--------------
"Closing") shall take place at the offices of Aquarion, on December 17, 1992 at
a time mutually satisfactory to the parties hereto, or at such other place and
time as the parties hereto may agree (the "Closing Date").
(b) Adjustments. The following items shall be apportioned between
-----------
MELP as the transferor of the Building and NCWC as the transferor of the
Reservoir (each, a "Transferor" and collectively, the "Transferors") and STD as
transferee of the Reservoir and NCWC as transferee of the Building (each, a
"Transferee" and collectively, the "Transferees"), as the case
4
may be, on a pro rata basis determined by the number of days (up to and
including the Closing Date) in the year in which the Closing occurs each
Transferor owned its respective property:
(1) Taxes payable by MELP to the Town of Monroe and by NCWC to the
Town of New Canaan. Should any tax be undetermined on the Closing Date,
the last determined tax shall be used for the purpose of apportionment.
(2) (i) Water and sewage use charges; (ii) rents for the month of
Closing collected by MELP prior to Closing; (iii) security deposits, if
any; and (iv) any or all other apportionable operating costs, charges, and
expenses.
(c) Settlement Charges. In connection with the transactions
------------------
contemplated by this Agreement (1) the Transferors shall pay any applicable
recordation and transfer taxes, including any applicable conveyance tax imposed
by Section 12-494 through Section 12-504(h) of the General Statutes of
Connecticut, and the cost of the preparation and execution of the deed and (2)
the Transferees shall pay title company and settlement charges, title insurance
premiums, title examination, survey costs and notary fees.
(d) Deeds. Each deed of conveyance to the Reservoir and Building
-----
shall be in the form of a warranty deed in the usual Connecticut form, which
shall be duly executed, acknowledged and delivered, all at the respective
Transferor's expense, conveying the fee simple title in and to the Reservoir and
Building to the respective Transferee free and clear of all encumbrances, liens
and exceptions to title other than those set forth in Schedules A
5
and B and the body of this Agreement. Deliveries of the deeds as aforesaid and
the bills of sale and the receipt by wire transfer of the Purchase Price in the
account of MELP shall constitute full compliance by the parties hereto with all
of the terms, conditions, covenants and representations applicable to and made
by the parties hereto (except pursuant to the provisions of Section XIII(a)
hereof).
(e) Conveyance Exceptions. In addition to the exceptions to title
---------------------
mentioned in the title insurance policies, the Building and Reservoir shall be
conveyed subject to:
(1) Any restrictions or limitations imposed or to be imposed by
governmental authority, including the zoning and planning rules and
regulations of the Towns of Monroe and New Canaan and region or district,
if any, in which the Building and the Reservoir are situated to the extent
that they may be applicable, provided, that the same shall not be violated;
(2) Taxes of the Towns of Monroe and New Canaan, which become due and
payable after the date of the delivery of the deeds, the Transferees will
assume and agree to pay as part of the consideration for the respective
deeds;
(3) Taxes of any Tax District in which the Building or the Reservoir
are situated and/or any dues, fees or charges of private associations or
similar entities for which MELP and NCWC, with respect to the Building and
the Reservoir, respectively, may be liable, which become due and payable
after the date of the delivery of the deeds. Such taxes
6
and/or dues, fees or charges as are attributable to a period during which
the date of the closing of titles occurs shall be apportioned between
transferor and ultimate transferee on the basis of the period for which
levied, as of the Closing Date;
(4) Any effect on the Building or the Reservoir of the fact that same
or portions thereof are or may be located in an area which qualifies them
for government-subsidized insurance under the National Flood Insurance Act
of 1968, as amended, and the maps promulgated or to be promulgated pursuant
thereto;
(5) Any effect on the Building or the Reservoir of the fact that same
or portions thereof are or may be located in an area designated wetlands
under the Inland Wetlands and Water Courses Act, as amended, of the State
of Connecticut and the maps promulgated or to be promulgated pursuant
thereto;
(6) Covenants, easements and restrictions of record, if any,
provided, that same do not render titles to the Building or the Reservoir
--------
unmarketable; and
(7) Any such state of facts which accurate surveys or personal
inspection of the Building or the Reservoir may disclose, provided, that
--------
same do not render titles to the Building or the Reservoir unmarketable.
(f) Order of Closing. The Closing shall occur after the Closing of
----------------
the transaction described in the Acquisition Agreement dated September 2, 1992
by and among The New Canaan
7
Company ("NCC"), Aquarion and Bridgeport Hydraulic Company (the "Acquisition
Agreement") shall progress sequentially in the following order:
(1) MELP shall transfer title to the Building to NCWC, in the manner
described in Section III(g) hereof in exchange for title to the Reservoir
or, at the irrevocable election of MELP, which is hereby given, and upon a
commitment by NCWC upon direction of MELP, to have NCWC transfer title to
the Reservoir directly to STD in the manner described in Section III(h)
hereof;
(2) Since MELP has irrevocably elected to cause NCWC to transfer
title to the Reservoir directly to STD, at the time so directed by MELP,
NCWC shall transfer title to the Reservoir to STD in the manner described
in Section III(h) hereof; and
(3) STD shall transfer the sum of $2,200,000 to MELP in the manner
described in Section III(I) hereof, in consideration for MELP having
directed NCWC, and NCWC following such directions, to transfer title to the
Reservoir directly to STD. Aquarion shall pay MELP $128,000 which
represents the difference between the Building purchase price and the sum
of the deposit and the STD payment to MELP.
All transactions described in this Section III(f) are interdependent
and each stage of the transfer shall become irrevocable only upon completion of
all transfers herein described.
8
(g) Closing Deliveries by MELP. At Closing, MELP shall deliver to
--------------------------
NCWC in exchange for delivery of the items described in Section III(h) hereof,
which items MELP hereby directs NCWC to deliver to STD:
(1) A good and sufficient warranty deed for the Building;
(2) A bill of sale for all personal property owned by MELP and used in
the operation of the Building;
(3) The maintenance records, operating reports, files and other
material related to the operation of the building necessary to complete
continuity of ownership and operation of the Building;
(4) the original executed lease with the tenant of the Building,
together with a valid assignment of such lease; and
(5) the original executed contracts related to the operation of the
Building and valid assignments of each such contract that NCWC has agreed
to assume.
(6) affidavit and/or waivers relating to any mechanics liens for work
performed or materials supplied within 90 days from the Closing Date;
(7) survey relating to the Building and an affidavit of Seller
verifying the accuracy of the survey and any changes thereto;
(8) conveyance tax certificate;
(9) FIRPTA Certificate; and
9
(10) affidavit from the Seller relating to title insurance
requirements of the Building.
(h) Closing Deliveries by NCWC. At Closing, NCWC shall deliver to
--------------------------
MELP the following items, which items MELP hereby directs NCWC to deliver to
STD:
(1) a good and sufficient warranty deed for the Reservoir;
(2) a bill of sale for all personal property owned and used in the
operation of the Reservoir;
(3) the original books, records, operating reports, maps, system
plans, dam plans, permits, licenses, approvals, certifications, consents,
franchises, qualifications, orders and approvals of any federal, state,
local or other governmental authority, files and other material necessary
to complete continuity of ownership and operation of the Reservoir; and
(4) the original executed contracts related to the operation of the
Reservoir and valid assignments or novations of each such contract that STD
has agreed to assume.
(5) affidavit and/or waivers relating to any mechanics liens;
(6) survey of the Reservoir and an affidavit from a surveyor or the
Seller verifying the accuracy of the survey;
(7) conveyance tax certificate;
(8) FIRPTA Certificate; and
10
(9) affidavit from the Seller relating to the title insurance
requirements of the Reservoir.
(i) Closing Deliveries by STD. At Closing, STD shall deliver to MELP
-------------------------
the sum of $2,200,000 payable by check or by wire transfer, in either case, in
immediately available funds.
(j) Closing Deliveries by Aguarion. At Closing, Aquarion shall
------------------------------
deliver to MELP the sum of $128,000 payable by check or by wire transfer, in
either case, in immediately available funds.
IV. REPRESENTATIONS AND WARRANTIES OF NCWC.
--------------------------------------
(a) Organization, Standing, etc. NCWC is a public service company as
---------------------------
defined in Section 16-1 of the General Statutes of Connecticut and is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Connecticut. NCWC has all requisite corporate power and
authority to own the Reservoir and to carry on its business as presently
conducted and as proposed to be conducted and has all requisite corporate power
and authority to transfer and convey the Reservoir.
(b) Due Execution. Upon approval by the Board of Directors of NCWC,
-------------
this Agreement will be duly authorized, executed and delivered by NCWC and will
be a valid and legally binding obligation of NCWC, enforceable against NCWC in
accordance with its terms.
(c) Use of Water. NCWC has the right to use the water it is using in
------------
the manner in which it is using such water. The system maps, property maps,
facility maps, as well as plans to
11
pump stations, wells and other related water system maps, of NCWC attached
hereto as Exhibit C, are substantially accurate in all material respects.
(d) No Conflict. Except for regulatory approvals and consents by the
-----------
DHS, the Connecticut Department of Public Utility Control ("DPUC"), Connecticut
Department of Environmental Protection ("DEP"), state, federal and local
agencies having jurisdiction over NCWC, Bridgeport Hydraulic Company ("BHC") or
STD as listed in Schedule 4(d) (collectively, the "Regulatory Approvals"), the
execution, delivery and performance by NCWC of this Agreement, and compliance by
NCWC with the terms and provisions hereof and thereof, and the consummation by
NCWC of the transactions contemplated hereby and thereby will not:
(1) conflict with or result in a breach or violation of any of the
terms or conditions of or constitute a default under the certificate of
incorporation, by-laws or other organization documents of NCWC;
(2) conflict with, or result in a breach, termination or violation
of, or constitute a default (or an event which with notice or passage of
time or both would constitute default), or result in, or require the
creation of imposition of, any liens, mortgages, pledges, security
interests, charges, restrictions and encumbrances ("Liens") upon or with
respect to the Reservoir or result in the acceleration of the performance
by NCWC under any of the terms and conditions of any bond, indenture,
mortgage, deed of trust, note, loan or credit agreement, lease, license,
12
franchise, contract or any material agreement or instrument to which NCWC
is a party or by which NCWC or any of its respective properties or assets
are bound or affected;
(3) violate any provision of any law, rule, regulation, order,
judgment or decree of any court of competent authority or governmental or
regulatory authority applicable to NCWC or any of its properties or assets
now awned or hereinafter required; and
(4) require NCWC to obtain any consent or approval of, or filing with
or notice to, any governmental or regulatory authority or any third party.
(e) No Other Agreements. NCWC is not a party to, nor bound by, any
-------------------
material contract, agreement, instrument or commitment relating to the
transactions contemplated herein other that this Agreement or the Acquisition
Agreement.
(f) Litigation, Proceedings, etc. Except for the Regulatory
----------------------------
Approvals, there is no action, claim, suit, proceeding or investigation pending
or, to the best of their knowledge, threatened against or affecting NCWC or the
Reservoir before or by any court, governmental agency or regulatory authority
(federal, state, local or foreign) which relates to or challenges the legality,
validity or enforceability of this Agreement or the Reservoir transfer, or would
(individually or in the aggregate) impair the ability or obligation of NCWC to
perform fully on a timely basis any material obligations which it has or will
have under this Agreement.
13
(g) Compliance with Laws. Except for the Regulatory Approvals and
--------------------
except as disclosed in Schedule 4(g), NCWC has complied in all respects and has
operated the Reservoir in accordance with all foreign, federal, state, local or
other laws, statutes, ordinances, rules and regulations, orders, judgments and
decrees of any court of competent authority or governmental or regulatory
authority applicable to it or the Reservoir.
(h) Reports. Except for the Regulatory Approvals, to the best its
-------
knowledge, NCWC has duly filed all material reports required to be filed by it
with any governmental or regulatory body having jurisdiction over it and has
previously delivered or will deliver, upon STD's reasonable request, to STD
complete and accurate copies of such reports as may be in its possession,
custody or control. To the best knowledge of NCWC, each of such documents
presented fairly the information required to be included therein.
(i) Compliance with Environmental Laws. To the best knowledge of
----------------------------------
NCWC, its past and present subsidiaries and affiliates ("NCWC Entities"):
(1) have not at any time, directly or indirectly, "treated",
"disposed of", "generated", "stored", "released" any "toxic or hazardous
wastes" or "hazardous substances", as each of the terms is defined under
the Resource Conservation and Recovery Act, the Toxic Substances Control
Act, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Federal Water Pollution Control Act, the Federal Clean Air
Act and all regulations
14
promulgated thereunder, and other applicable federal, state or local
environmental laws, regulations or ordinances ("Environmental Laws"), or
arranged for such activities, in, on or under the Reservoir;
(2) are in substantial compliance with all Environmental Laws, and
have not received any notices of violation or claims thereunder which have
not been satisfactorily resolved;
(3) there is no soil or water contamination at or migrating from the
Reservoir;
(4) there are no liens filed or threatened under any applicable
Environmental Law with respect to the Reservoir, as a result of NCWC
Entities' acts or omissions; and
(5) NCWC Entities have made no filings or notifications to any
governmental authorities regarding any on-site disposal of toxic or
hazardous wastes or hazardous substances (collectively, "Hazardous
Substances") or solid wastes other than notifications or accidental
releases as required by law;
(j) Reservoir Legal Status. NCWC has no knowledge of:
----------------------
(1) proceedings pending to change or redefine the zoning
classification of ail or any portion of the Reservoir;
(2) pending annexation or condemnation proceeding or private purchase
in lieu thereof affecting or which may affect the Reservoir or any part
thereof;
15
(3) pending special assessments affecting the Reservoir or any part
thereof;
(4) penalties or interest due with respect to real estate taxes;
(5) Mortgages, liens, choate or inchoate, against the Reservoir,
except for the mortgage on the Reservoir given by NCWC to The Village Bank
securing a loan in the principal amount of $1,250,000 and a second mortgage
on the Reservoir securing a loan in the principal amount of $1,402,000 from
the Connecticut Development Authority, or as otherwise referred to herein.
(k) Title. NCWC is the owner of record and in fact, legally and
-----
beneficially, of the Reservoir, has the right to sell the Reservoir without the
agreement of any other person (except for the Regulatory Approvals and wavers of
bank liens), has title to the property that is good and marketable, and such
title is fully insurable at standard rates under a full coverage owner's title
insurance policy without material exceptions, except as otherwise disclosed
herein. The Reservoir shall be conveyed free of any encumbrances, easements, or
restrictions, except as otherwise stated herein.
V. REPRESENTATIONS AND WARRANTIES OF MELP. MELP represents and
--------------------------------------
warrants to NCWC and Aquarion:
(a) Organization, Standing, etc. MELP is a general partnership duly
---------------------------
organized and validly existing under the laws of the State of Connecticut.
MELP has ail requisite power and authority to own the Building and to carry
on its
16
business as presently conducted and has all requisite power and authority
to transfer and convey the Building.
(b) Due Execution. This Agreement has been duly authorized, executed
-------------
and delivered by MELP and is a valid and legally binding obligation of
MELP, enforceable against MELP in accordance with its terms.
(c) No Conflict. The execution, delivery and performance by MELP of
-----------
this Agreement, and compliance by MELP with the terms and provisions hereof
and thereof, and the consummation by MELP of the transactions contemplated
hereby and thereby will not:
(1) conflict with or result in a breach or violation of any of
the terms or conditions of or constitute a default under the
partnership agreement of MELP;
(2) conflict with, or result in a breach, termination or
violation of, or constitute a default (or an event which with notice
or passage of time or both would constitute a default), or result in,
or require the creation of imposition of, any Liens upon or with
respect to the Building or result in the acceleration of the
performance by MELP under any of the terms and conditions of any bond,
indenture, mortgage, deed of trust, note, loan or credit agreement,
lease, license, franchise, contract or any material agreement or
instrument to which MELP or any of its partners is a party;
17
(3) violate any provision of any law, rule, regulation, order,
judgment or decree of any court of competent authority or governmental
or regulatory authority applicable to MELP or any of its partners or
the Building any of their properties or assets now owned or
hereinafter required; and
(4) require MELP to obtain any consent or approval of, or filing
with or notice to, any governmental or regulatory authority or any
third party except as set forth in Schedule 5(c) hereof.
(d) No Other Agreements. Except as listed in Schedule 5(d) hereto,
-------------------
neither MELP nor any of its partners are parties to, nor bound by, any material
contract, service contract, agreement, instrument or commitment relating to the
transactions contemplated herein other than this Agreement.
(e) Litigation, Proceedings, etc. There is no action, claim, suit,
----------------------------
proceeding or investigation pending or, to the best of their knowledge,
threatened against or affecting MELP or any of its partners or the Building
before or by any court, governmental agency or regulatory authority (federal,
state, local or foreign) which relates to or challenges the legality, validity
or enforceability of this Agreement, or would (individually or in the aggregate)
impair the ability or obligation of MELP to perform fully on a timely basis any
material obligations which it has or will have under this Agreement.
18
(f) Compliance with Laws. MELP has complied in all respects and has
--------------------
operated the Building in accordance with all foreign, federal, state, local or
other laws, statutes, ordinances, rules and regulations, orders, judgments and
decrees of any court of competent authority or governmental or regulatory
authority applicable to it or the Building.
(g) Reports. To the best of its knowledge, MELP has duly filed all
-------
material reports required to be filed by them with any governmental or
regulatory body having jurisdiction over them and have previously delivered or
will deliver, upon the reasonable request of NCWC or its affiliate, to NCWC or
its affiliate complete and accurate copies of such reports as may be in its
possession, custody or control. To the best knowledge of MELP, each of such
documents presented fairly the information required to be included therein.
(h) Compliance with Environmental Laws. To the best knowledge of
----------------------------------
MELP or any of its partners ("MELP Entities") they:
(1) are in substantial compliance with all Environmental Laws, and
have not received any notices of violation or claims thereunder which have
not been satisfactorily resolved;
(2) there is no soil or water contamination at or migrating from the
Building;
(3) there are no liens filed or threatened under any applicable
Environmental Law with respect to the Building, as a result of MELP
Entities' acts or omissions; and
19
(4) MELP Entities have made no filings or notifications or omitted to
make such required filings to any governmental authorities regarding any
on-site disposal of hazardous substances or solid wastes other than
notifications of accidental releases as required by law.
(i) Zoning and Building Codes. MELP has complied with all applicable
-------------------------
zoning rules and regulations, as well as all applicable building codes necessary
or required for the operation, maintenance or construction of the Building.
MELP has obtained all building permits and variances necessary for the
construction, maintenance and operation of the Building.
(j) Building Legal Status. At the time of settlement, neither
-----------------------
MELP nor any of its partners has any knowledge of:
(1) proceedings pending to change or redefine the zoning
classification of ali or any portion of the Building;
(2) except for the condemnation by the State of Connecticut of
approximately .197 acres of land for the widening of Route 111, pending
annexation or condemnation proceedings or private purchases in lieu thereof
affecting or which may affect the Building or any part thereof;
(3) pending special assessments affecting the Building or any part
thereof;
(4) penalties or interest due with respect to real estate taxes;
(5) Liens, choate or inchoate, against the Building, except as
referred to herein.
20
(k) Building Title. MELP is the owner of record and in fact, legally
--------------
and beneficially, of the Building, has the right to sell the Building without
the agreement of any other person, has title to the Building that is good and
marketable, and such title is fully insurable under a full coverage owner's
title insurance policy without material exceptions at standard rates. The
Building shall be conveyed free of any encumbrances, easements, or restrictions,
except as otherwise stated herein.
VI. Representations and Warranties of STD. STD represents and
-------------------------------------
warrants to MELP and NCWC:
(a) Organization, Standing, etc. STD is a municipal corporation
---------------------------
organized and existing under a special charter granted by the General
Assembly of the State of Connecticut and is a municipal corporation duly
organized, validly existing and in good standing under the laws of the
State of Connecticut. STD has all requisite power and authority to own its
assets and to carry on its business as presently conducted and as proposed
to be conducted and has all requisite corporate power and authority to
purchase the Reservoir.
(b) Due Execution. This Agreement has been duly authorized, executed
-------------
and delivered by STD, and is a valid and legally binding obligation of STD,
enforceable against STD in accordance with its terms.
(c) No Conflict. Except for the Regulatory Approvals and as listed
-----------
in Schedule 6(c) hereto, the execution, delivery and performance by STD of
this Agreement, and
21
compliance by STD with the terms and provisions hereof and thereof, and the
consummation by STD of the transactions contemplated hereby and thereby
will not:
(1) conflict with or result in a breach or violation of any of the
terms or conditions of or constitute a default under the certificate of
incorporation, by-laws or other organization documents of STD;
(2) violate any provision of any law, rule, regulation, order,
judgment or decree of any court of competent authority or governmental or
regulatory authority applicable to STD or any of their properties or assets
now owned or hereinafter acquired; and
(3) require STD to obtain any consent or approval of, or filing with
or notice to, any governmental or regulatory authority or any third party.
(d) No Other Agreements. STD is not party to, nor bound by, any
-------------------
material contract, agreement, instrument or commitment relating to the
transactions contemplated herein other than this Agreement.
(e) Litigation, Proceedings, etc. Except for the Regulatory
----------------------------
Approvals, there is no action, claim, suit, proceeding or investigation pending
or, to the best of STD's knowledge, threatened against or affecting STD before
or by any court, governmental agency or regulatory authority (federal, state,
local or foreign) which relates to or challenges the legality, validity or
enforceability of this Agreement or would (individually or in the aggregate)
impair the ability or
22
obligation of STD to perform fully on a timely basis any material obligations
which it has or will have under this Agreement.
VII. CONDITIONS TO CLOSING. The respective obligations of parties
---------------------
hereunder are subject to the satisfaction, at or prior to the Closing Date, of
each of the following conditions:
(a) No injunction, etc. No preliminary or permanent injunction or
------------------
other order issued by any federal or state court of competent jurisdiction
in the United States or by any federal or state governmental or regulatory
body nor any statute, rule, regulation or executive order promulgated or
enacted by any federal or state governmental authority which restrains,
enjoins or otherwise prohibits the transactions contemplated hereby shall
be in effect.
(b) No Proceeding or Litigation. No suit, action or governmental
---------------------------
proceeding before any court or any governmental or regulatory authority
shall have been commenced and be pending by any governmental or regulatory
authority against MELP, NCWC, Aquarion or STD or any of their affiliates,
associates, partners, officers or directors seeking to restrain, prevent or
change in any material respect the transactions contemplated hereby or
seeking material damages in connection with any of such transactions.
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF NCWC AND AQUARION.
--------------------------------------------------------
NCWC's obligation to complete the transfer of the Reservoir to STD and, with
Aquarion, to acquire title to the
23
Building at the Closing is subject to the fulfillment on or prior to the Closing
Date of the following conditions:
(a) Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by MELP in Article V and STD in Article VI hereof shah be
true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force
and effect as if they had been made on and as of said date, except for
changes specifically authorized, contemplated and/or required under this
Agreement;
(b) Performance. All covenants, agreements and conditions contained
-----------
in this Agreement to be performed or complied with on or prior to the
Closing Date shall have been performed or complied with in all material
respects;
(c) Compliance Certificate. At the time of the Closing (1) MELP
----------------------
shall have delivered to NCWC and Aquarion a certificate, executed by MELP's
managing general partner, dated the Closing Date, certifying, to the best
of his knowledge, to the fulfillment of the conditions specified in
paragraphs (a) and (b) of this Article VIII and (2) STD shall have
delivered to NCWC and Aquarion a certificate, executed by the Chairman of
the Second Taxing District Commission, dated the Closing Date, certifying,
to the best of his knowledge, to the fulfillment of the conditions
specified in paragraphs (a) and (b) of this Article VIII.
(d) Authorization. The Board of Directors of NCWC and Aquarion shall
-------------
have authorized and approved the Agreement
24
and the terms and conditions of any regulatory approvals granted in
connection with the transactions contemplated by the Agreement and the
operation of NCWC and Aquarion after Closing;
(e) Environmental Matters. NCWC and Aquarion shall have received an
---------------------
environmental assessment of the Building, paid for after closing by NCWC
and Aquarion, in scope and form satisfactory to NCWC and Aquarion, the
results of which show that no material change in the condition of the
Building has occurred since the tests conducted by Haley & Aldrich, Inc.,
dated December, 1990;
(f) Pipeline Extension. Permission from the Town of New Canaan in
------------------
form and substance satisfactory to NCWC and BHC for NCWC, on behalf of and
at the expense of STD, to extend a pipeline from the intersection of the
NCWC transmission system and Country Club Road through appropriate roadways
to the New Canaan/Wilton town line;
(g) Alternate Supply. Development of an alternate means, at the
----------------
expense of STD, satisfactory to NCWC and BHC of supplying all existing
customers on the NCWC transmission main from the Reservoir to Country Club
Road so that said main can be utilized by STD as a raw water supply main;
(h) Approvals. Approvals by all state and federal and local agencies
---------
having jurisdiction over NCWC, BHC and STD of the use of the Reservoir as a
raw drinking water supply source for STD;
25
(i) Rate Treatment. NCWC and BHC shall be satisfied with the
--------------
treatment, for ratemaking purposes, of the assets and related expenses Of
NCWC and Ridgefield Water Supply Company ("RWSC") after the transactions
contemplated in the Acquisition Agreement and this Agreement;
(j) Related Transaction. BHC shall have acquired NCWC and RWSC from
-------------------
NCC pursuant to the Acquisition Agreement;
(k) STD Related Transaction. STD shall have acquired the Reservoir
-----------------------
from NCWC pursuant to this Agreement;
(l) Marketable Title, etc. MELP shall have good and marketable title
---------------------
to the Building which shall be free of any encumbrances, easements or
restrictions and which title shall be fully insurable under a full coverage
owner's title insurance policy without material exceptions at standard
rates; and
(m) Other Proceedings and Documents. All other corporate and other
-------------------------------
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to NCWC, Aquarion and BHC and Aquarion's
counsel, and NCWC and Aquarion shah have received all such counterpart
originals or certified or other copies of such documents as it may
reasonably request.
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF MELP. MELP'S obligation
-------------------------------------------
to transfer the Building to NCWC and to direct NCWC to transfer the Reservoir to
STD at the Closing is subject
26
to the fulfillment on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by (1) STD in Article VI hereof and (2) NCWC in Article IV
hereof shall be true and correct in all material respects when made, and
shall be true and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of said date,
except for changes specifically authorized, contemplated and/or required
under this Agreement;
(b) Performance. All covenants, agreements and conditions contained
-----------
in this Agreement to be performed or complied with on or prior to the
Closing Date shall have been performed or complied with in all material
respects;
(c) Compliance Certificate. At the time of Closing, (1) NCWC shall
----------------------
have delivered to MELP a certificate, executed by the President or a Vice
President of NCWC, dated the Closing Date, certifying, to the best of his
knowledge, to the fulfillment of the conditions specified in paragraphs (a)
and (b) of this Article IX and (2) STD shall have delivered to MELP a
certificate executed by the Chairman of the Second Taxing District
Commission, certifying, to the best of his knowledge, to the fulfillment of
the conditions specified in paragraphs (a) and (b) of this Article IX.
X. CONDITIONS PRECEDENT TO OBLIGATIONS OF STD. STD's obligation to
------------------------------------------
complete the acquisition of the Reservoir and to
27
make payment to MELP at the Closing is subject to the fulfillment on or prior to
the Closing Date of the following conditions:
(a) Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by NCWC in Article IV hereof and MELP in Article V hereof
shall be true and correct in all material respects when made, and shall be
true and correct in all material respects on the Closing Date with the same
force and effect as if they had been made on and as of said date, except
for changes specifically authorized, contemplated and/or required under
this Agreement;
(b) Performance. All covenants, agreements and conditions contained
-----------
in this Agreement to be performed or complied with by MELP or NCWC on or
prior to the Closing Date shall have been performed or complied with in all
material respects;
(c) Compliance Certificate. At the time of Closing, (1) MELP shall
----------------------
have delivered to STD a certificate, executed by the managing general
partner, dated the Closing Date, certifying, to the best of his knowledge,
to the fulfillment of the conditions specified in paragraphs (a) and (b) of
this Article X and (2) NCWC shall have delivered to STD a certificate
executed by NCWC's President, dated the Closing Date, certifying, to the
best of his knowledge, to the fulfillment of the conditions specified in
paragraphs (a)and (b) of this Article X.
28
(d) Authorization. The Commissioners of STD shall have authorized
-------------
and approved the Agreement and the terms and conditions of any regulatory
approvals granted in connection with the transactions contemplated by the
Agreement;
(e) Environmental Matters. STD shall have received a Phase I
---------------------
environmental assessment of the Reservoir, paid for by STD, the scope and
form of which and the results of which are satisfactory in all respects to
STD;
(f) Diversion Permit. The issuance by the DEP of a diversion permit,
----------------
the cost of which shall be borne by STD, to allow the transfer in
sufficient peak and average quantities to permit use of 600,000 gallons per
day of safe yield water from the Reservoir and the Oenoke Ridge Wells, at
the option of STD, to either the supply line of the First Taxing District
of the City of Norwalk on Valley Road or the watershed of STD for direct
addition to the existing STD supply;
(g) Dam Condition. Confirmation, through a detailed inspection and
-------------
report by a consultant hired by STD, that the condition of the dam at the
Reservoir is as specified in the report by Roald Haestad, Inc. of
Waterbury, Connecticut to the STD dated April 11, 1985 entitled, "New
Canaan Reservoir Dam Spillway Investigation Report" (the "Haestad Report")
and the Phase 2 engineering investigation of the NCWC Reservoir prepared by
Lenard & Delaj Engineering (the "Lenard & Delaj Report");
29
(h) Easements. The granting of all easements to STD, obtained at
---------
STD's expense, required for the installation of a gravity line from the
hydraulic gradient of the New Canaan Reservoir spillway overflow to avoid
the 475-foot elevation above mean sea level at the intersection of Country
Club Road and Route 123 in New Canaan;
(i) Spillage Easements. The granting of spillage easements for a cut
------------------
emergency spillway approximately 300 feet north of the east abutment across
existing Class III land presently owned by NCWC to meet with the Five Mile
River below the existing spillway, at a cost to STD which, together with
other estimated costs of intended channel improvements, shall not exceed
$200,000.
(j) Approvals. Approvals, including the Regulatory Approvals, the
---------
cost of which (in full or its pro rata portion) shall be borne by STD, by
all state and federal and local agencies having jurisdiction over NCWC, BHC
and STD for the use of the Reservoir as a raw drinking water supply source
for STD; and
(k) Other Proceedings and Documents. Ail other corporate and other
-------------------------------
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to STD and STD's counsel, and STD shall
have received ail such counterpart originals or certified or other copies
of such documents as it may reasonably request.
30
(l) Release of Mortgages. NCWC shall have removed the mortgage and
--------------------
liens from the Class I and Class II Reservoir property being transferred to
STD.
XI. COVENANTS OF THE PARTIES.
------------------------
(a) Access.
------
(1) MELP shall permit agents and representatives of NCWC and Aquarion
to have reasonable access to the Building during normal business hours
prior to Closing for purposes of inspection and due diligence; and
(2) NCWC shall permit agents and representatives of STD to have
reasonable access to the Reservoir during normal business hours prior to
Closing for purposes of inspection and due diligence.
(b) Public Announcements. The parties will consult with each other
--------------------
before issuing any press releases or otherwise making any public statements
with respect to this Agreement or any of the transactions contemplated
hereby and shall not issue any such press release or make any public
statement prior to such consultation, except as may be required by law.
(c) Prohibited Actions. Between the date hereof and the Closing
------------------
Date:
(1) MELP will continue to maintain the Building except for those items
which tenant under existing lease is required to maintain and NCWC will
continue to repair and maintain the Reservoir in the usual and ordinary
manner and
31
will continue the existing insurance on such property, consistent with good
business practice; and
(2) MELP will continue to manage the Building and NCWC will continue
to maintain the Reservoir in accordance with the requirements of all
applicable governmental regulations and laws.
(d) Further Actions. Subject to the terms and conditions hereof,
---------------
each of the parties hereto agrees to use its best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement on or before December 31, 1992, including using
all reasonable efforts:
(1) to obtain any licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts as are required in connection with the consummation of
the transactions contemplated hereby;
(2) to effect all necessary registrations and filings, including,
without limitation, the Regulatory.Approvals and other filings to the DPUC,
DHS, DEP and under the Connecticut Transfer Act;
(3) to defend any lawsuits or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third parties (including governmental agencies or officials), challenging
this
32
Agreement or the consummation of the transactions contemplated hereby; and
(4) to furnish to each other such information and assistance as
reasonably may be requested in connection with the foregoing.
(e) Notification of Certain Matters. Upon actual notice thereof, a
-------------------------------
party hereto shall give prompt notice to the other parties of:
(1) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any
respect at any time from the date hereof to the Closing Date; and
(2) any party, or any officer, partner, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder.
(f) Inspection, etc. The parties agree with and represent to each
---------------
other that prior to the Closing Date:
(1) Aquarion, for itself and on behalf of NCWC, will have inspected
the Building and STD will have inspected the Reservoir;
(2) that, subject to the receipt of environmental assessments, each
is satisfied with the physical condition thereof;
(3) that, subject to such environmental assessments, each accepts
such property "AS IS"; and
33
(4) that no party or their representatives has made any
representations, other than those contained herein, upon which another
party has relied concerning the condition of the Building or the Reservoir.
(g) Risk of Loss. The risk of loss or damage to the Building by fire
------------
or other casualty until recordation of the deed of conveyance shall be with MELP
and the risk of loss or damage to the Reservoir by fire, flood or other casualty
until recordation of the deed of conveyance shall be with NCWC.
(h) Further Assurances. Each party hereto agrees to execute and
------------------
deliver such instruments and take such other action as another party hereto may
reasonably require in order to carry out the purpose and intent of this
Agreement.
XII. DELAY, TERMINATION AND ABANDONMENT.
----------------------------------
(a) Termination Events: This Agreement may be terminated and
-------------------
abandoned at any time prior to the Closing:
(1) by mutual written consent of all the parties;
(2) by any party in the event the Closing does not occur before
December 31, 1992 through no fault of the terminating party, provided,
--------
that, the non-terminating parties shall have the right to extend the
Closing for 365 days, provided, further, that any extension of the Closing
-------- -------
Date pursuant hereto shall not be construed to effect the Closing Date, or
any extension thereof, set forth in the Acquisition Agreement;
(3) if the transaction contemplated by the Acquisition Agreement does
not occur or the Acquisition Agreement is terminated.
34
(b) Delay. If all of the contingencies provided in Articles IV
-----
through VI have been satisfied, waived or otherwise removed, and on the Closing
Date, either MELP or NCWC shall be unable to convey the title to its property in
accordance with the terms of this Agreement, free and clear of encumbrances,
liens or exceptions to title other than those set forth herein, then, and in
that event, Closing shall be delayed until the affected party shall have a
further period of thirty (30) days within which to clear title, and the Closing
Date shall be extended for such period, if necessary. If, at the end of said
thirty (30) day period, the Transferor is still unable to convey title to the
affected property free and clear of all encumbrances, liens or exceptions to
title, except as aforesaid, then the Transferee shall either (1) elect to accept
such title as can be conveyed, or (2) as the Transferee's sole and exclusive
remedy, shall reject the deed proposing to convey such title on that ground.
Upon such rejection, this Agreement shall terminate and became null and void.
Nothing shall constitute an encumbrance, lien or exception to title for the
purposes of this Agreement if the Standard of Title of the Connecticut Bar
-----------------
Association recommends that no corrective or curative action is necessary in
circumstances substantially similar to those presented by such encumbrance, lien
or exception to title.
(c) Casualty Loss and Condemnation. In the event that the Building
------------------------------
or the Reservoir or any part thereof is damaged or destroyed by fire or other
casualty, or in the event condemnation or eminent domain proceedings (or private
purchase in lieu
35
thereof) shall be commenced by any public or quasi-public authority having
jurisdiction against all or any part of the property, then the Transferor shall
promptly notify the other parties. The Transferee may, at its option, by giving
written notice the Transferor within thirty (30) days after receipt of notice of
such casualty or condemnation proceedings, terminate this Agreement. In the
event the Transferee does not elect to terminate this Agreement, then all
insurance proceeds and/or any awards in condemnation, as the case may be, will
be assigned to the Transferee at the time of settlement hereunder, or, if paid
to the Transferor prior thereto, shall be paid over to the Transferee. The
Transferor shall not adjust or settle any insurance claims or condemnation
awards whatsoever without the prior written approval of the Transferee; further,
the Transferee and its counsel shall have the right (prior to settlement) to
participate in all negotiations relating to any such insurance claims or
condemnation awards.
(d) Effect Of Termination. If any party has the right to terminate
---------------------
this Agreement pursuant to this Article XII and such party shall terminate this
Agreement pursuant to this Article XII, all obligations for the parties
hereunder (other than those set forth in Article XIII(a) hereof shall terminate
and no party shall have any obligation or liability to any of the other parties
with respect to any breach of any of its obligations hereunder regardless of
whether such breach is outstanding or curable at the date of such termination;
provided,
- --------
36
however, that the obligations set forth in Section XIII(a) hereof shall survive
- -------
any such termination.
XIII. Miscellaneous.
-------------
(a) Expenses. Except as otherwise provided herein, each party to
--------
this Agreement shall pay its own costs and expenses (including all legal,
accounting, broker, finder, engineering, title search, appraisal and survey
fees) relating to this Agreement, the negotiations leading up to this Agreement
and the transactions contemplated by this Agreement.
(b) Complete Agreement. This Agreement, including schedules and
------------------
exhibits attached hereto and the documents referred to herein, shall constitute
the entire agreement between the parties hereto with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter.
(c) Amendment. This Agreement may not be released, discharged,
---------
abandoned, changed or modified in any manner, except by an instrument in writing
signed on behalf of each of the parties hereto. The failure of any party hereto
to enforce at any time any of the provisions of this Agreement shall in no way
be construed to be a waiver of such provisions, nor in any way to affect the
validity of this Agreement or any part thereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held as a waiver of any other or subsequent breach.
37
(d) Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and shall be given by certified mail
addressed,
if to MELP: Stephen R. Kellogg
100 Founders Way
Stratford, Connecticut 06497
with a copy to: Stanley Goldstein, Esq.
Palmesi, Kaufman, Goldstein & Petrucelli
888 White Plains Road
Trumbull, Connecticut 06611
or to such other place as MELP shall furnish to the other parties in writing,
and
if to STD: John M. Hiscock
General Manager
Second Taxing District Water Department
City of Norwalk
164 Water Street
Post Office Box 468
South Norwalk, Connecticut 06856-0468
to NCWC (prior to Closing):
Joseph J. McLinden
President
New Canaan Water Company
161 Cherry Street
New Canaan, Connecticut 06840
with a copy to:
Thomas T. Adams, Esq.
Gregory & Adams
190 Old Ridgefield Road
Post Office Box 190
Wilton, Connecticut 06897
38
and
with a copy to: Anthony M. Macleod (see address below) to NCWC (after
Closing):
James S. McInerney, Jr.
President
Bridgeport Hydraulic Company
835 Main Street
Bridgeport, Connecticut 06601
and
Anthony M. Macleod
General Counsel
Bridgeport Hydraulic Company
835 Main Street
Bridgeport, Connecticut 06601
(e) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Connecticut, without giving effect
to the choice of law provisions thereof.
(f) Waiver. Waiver of any term or condition of this Agreement by any
------
party shall only be effective if in writing and shall not be construed as a
waiver of any subsequent breach or failure of the same term or condition, or a
waiver of any other term or condition of this Agreement.
(g) Binding Effect; Assignment. This Agreement shall be binding upon
--------------------------
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. No party to this Agreement may assign or delegate all or
any portion of its rights, obligations or liabilities under this Agreement
without the prior written consent of the other parties to this Agreement, except
that NCWC may assign its rights to Aquarion or its subsidiaries with the consent
of the other parties, which
39
consent shall not be unreasonably withheld, but in no event will any such
assignment relieve the parties hereto of any of their respective obligations and
liabilities hereunder.
(h) Execution in Counterparts. This Agreement may be executed in one
-------------------------
or more counterparts, all of which shall be considered one and the same
agreement, and shall become a binding agreement when one or more counterparts
have been signed by each of the parties and delivered to each of the other
parties.
(i) Titles and Headings. Titles and headings to section and
-------------------
paragraphs herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
(j) Schedules. The schedules and exhibits to this Agreement shall be
---------
construed with and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.
(k) Pronouns. Whenever required by the context herein, the singular
--------
includes the plural and the masculine includes the feminine or the neuter.
(l) Severability. In case one or more provisions contained in this
------------
Agreement shall be invalid, illegal or unenforceable in any respect under any
applicable law, rule or regulation, the validity, legality and enforceability of
the remaining provisions contained herein shall not be affected or impaired
thereby.
40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed the day and year first above written.
Witness: NEW CANAAN WATER COMPANY
_______________________
_______________________ By_________________________
Joseph J. McLinden
President
Witness: MONROE ENVIRONMENTAL LEASING PARTNERSHIP
_______________________
James H. Ryan
_______________________ By_________________________
Name: Stephen R. Kellogg
Title: General Partner
Witness: SECOND TAXING DISTRICT OF THE CITY OF NORWALK
_______________________
_______________________ By_________________________
Name: John M. Hiscock
Title: General Manager
AQUARION COMPANY
Witness:
_______________________
_______________________ By_________________________
Name: Daniel A. Neaton
Title: Vice President
EXHIBIT E
SUPPLEMENTAL PROPERTY EXCHANGE AGREEMENT AMENDMENT
Amendment to the Property Exchange Agreement dated in October 21, 1992
among New Canaan Water Company ("NCWC"), Aquarion Company ("Aquarion"), Second
Taxing District of the City of Norwalk ("STD") and Monroe Environmental Leasing
Partnership ("MELP"), as amended by the Decision, dated June 30, 1993, of the
Department of Public Utility Control (the "DPUC"), in Docket No. 91-06-26, Joint
-----
Application for Approval of the Acquisition of New Canaan Water Company and
- ---------------------------------------------------------------------------
Ridgefield Water Supply Company by Bridgeport Hydraulic Company, a Subsidiary of
- --------------------------------------------------------------------------------
Aquarion Company, as amended.
- ----------------
WHEREAS, NCWC, MELP, STD and Aquarion desire to amend the Property
Exchange Agreement to reflect certain changes in the terms and conditions of the
transaction;
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter contained, the parties do represent, warrant, covenant and
agree as follows:
1. Section III of the Property Exchange Agreement shall be amended
as follows:
The language "July 31, 1994" in the second line of
subsection 111(a) shall be deleted and inserted in its place
shall be the language "or before February 28, 1995."
2. Section XI of the Property Exchange Agreement shall be amended as
follows:
The language "July 31, 1994" in the fifth line of subsection
XI(d) shall be deleted and inserted in its place shall be
the language "February 28, 1995."
3. Section XII of the Property Exchange Agreement shall be amended
as follows:
The language "on or before July 31, 1994" in the second line
of subsection XII(a)(2) shall be deleted and inserted in its
place shall be the language "on or before February 28,
1995."
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Property Exchange Agreement to be executed as of the 15th day of November,
1994.
NEW CANAAN WATER COMPANY
Dated:________________________ By:________________________________________
Joseph J. McLinden, President
SECOND TAXING DISTRICT OF THE CITY OF NORWALK
Dated:________________________ By:________________________________________
Name:
Title:
AQUARION COMPANY
Dated:________________________ By:________________________________________
Janet M. Hansen, Senior Vice President,
Chief Financial Officer and Treasurer
MONROE ENVIRONMENTAL LEASING PARTNERSHIP
Dated:________________________ By:________________________________________
Stephen R. Kellogg, Managing General
Partner
EXHIBIT F
THE NEW CANAAN COMPANY
Plan of Complete Liquidation
1. Plan of Liquidation.
-------------------
After (i) the adoption of this Plan, (ii) the consummation of the
transactions contemplated in that certain Acquisition Agreement, dated as of
September __, 1992 (the "Acquisition Agreement"), as amended and (iii) the
amendment of the Corporation's certificate of incorporation to provide that
liquidation preference of the Corporation's Class A common stock, can be paid in
cash or in other property, THE NEW CANAAN COMPANY, a Connecticut corporation
(the "Corporation"), will distribute to its shareholders its properties and
assets of every description, which at that time will consist entirely of common
stock of Aquarion Company, a Connecticut corporation ("Aquarion"), together with
dividends paid thereon, received by the Corporation as the Purchase Price (as
defined in the Acquisition Agreement) for the assets of the Corporation pursuant
to the terms of the Acquisition Agreement (the "Aquarion Shares").
2. Escrow.
------
Initially, the Corporation shall retain 10% of the Aquarion Shares
(the "Escrow Shares") from the distribution that would otherwise be made to
holders of shares of Class B Common Stock of the Corporation. The Escrow Shares
shall then be transferred by the Corporation to the escrow agent pursuant to
such escrow.
2
Upon termination of the escrow, the Escrow Shares shall be distributed to the
Class B Shareholders of the Corporation in accordance with the escrow agreement
and such holders' relative holdings of Class B Common Stock on the Closing Date.
The number of shares of Aquarion common stock arrived at by subtracting the
number of Escrow Shares from the number of Aquarion Shares is referred to herein
as the "Initial Distribution Shares"
3. Final Distribution.
------------------
(a) After the escrow described in the previous paragraph has been
established, the Initial Distribution Shares shall be distributed directly to
the stockholders of the Corporation in accordance with subparagraph (b) hereof,
provided that (i) all creditors of the corporation shall first be paid in full
for the amount of their claims, (ii) possession of the Escrow Shares will remain
with the escrow agent pursuant to the terms of the escrow agreement, and (iii)
no partial shares of Aquarion stock will be distributed, but, rather, cash will
be distributed in an amount equal to the value of any such partial shares on the
date of such distribution.
(b) The distribution of the Initial Distribution Shares shall be as
follows:
(i) Holders of Class A Common Stock shall be entitled to receive,
for each share of Class A Common Stock, $35.00 per share plus all accrued but
unpaid dividends to the date of distribution.
3
(ii) The remainder of the Aquarion Shares available as part of the
Initial Distribution Shares will be distributed to the Holders of the Class B
Common Stock based on their relative holdings of such stock on the Closing Date.
(iii) Dividends paid or payable with respect to the Initial
Distribution Shares will be distributed pro-rata to the holders of the Class A
Common Stock and the Class B Common Stock together with the distribution of the
Initial Distribution Shares.
(iv) Dividends paid or payable in cash with respect to the Escrow
Shares will be distributed [as received] [upon termination of the escrow] to the
holders of the Class B Common Stock in accordance with their respective holdings
of such shares.
The foregoing distributions in complete liquidation shall be in
exchange solely for, and in complete redemption and cancellation of, and in
payment for, all of the outstanding shares of Class A Common Stock and Class B
Common Stock of the Corporation, and the shareholders shall, if the Board of
Directors so determines, surrender their certificates for such shares for
recording thereon receipt of distributions prior to the final distribution, and
shall surrender such certificates for cancellation upon receipt of the final
distribution herein authorized.
4. Dissolution and Complete Liquidation.
------------------------------------
4
The officers and the Board of Directors of the Corporation shall
proceed with the voluntary dissolution and complete liquidation of the
Corporation under the laws of the State of Connecticut as promptly as
practicable, but in any event within twelve months from the date of adoption of
this plan.
5. Authorization to Execute and File Documents.
-------------------------------------------
The officers of the Corporation are authorized, empowered and directed to
execute and file all documents which they deem necessary or advisable to carry
out the purposes and intentions of this Plan, including a Certificate of
Dissolution under the laws of the State of Connecticut, and information returns
with federal, state and local tax officials as may be required by the applicable
regulations.
6. Authorization of Necessary Acts.
-------------------------------
The officers and directors of the Corporation are authorized, empowered and
directed to do any and all other things in the name and on behalf of the
Corporation which each of them may deem necessary or advisable in order to carry
out the purposes and intentions of this Plan. They shall be held harmless by
the Corporation for any action under this Plan taken in good faith, and any
expense or liability so incurred by them shall be that of the Corporation.
ANNEX H
TEST OF SECTIONS 33-373 AND 33-374 OF THE
CONNECTICUT GENERAL CORPORATION LAW
33-373 RIGHTS OF OBJECTING SHAREHOLDERS.--(a) Any objecting holder of
preferred shares shall have the right to be paid the value of all shares of such
class owned by him in accordance with the provisions of section 33-374 if an
amendment to the certificate of incorporation is effected which would: (1)
Cancel or otherwise affect the right to accrued dividends or other arrearages in
respect of such class of shares; (2) reduce the dividend preference thereof; (3)
make noncumulative, in whole or in part, dividends thereof, which had
theretofore been cumulative; (4) reduce the redemption price thereof or make
such shares subject to redemption when not otherwise redeemable; (5) reduce any
preferential amount payable thereon upon voluntary or involuntary liquidation.
(b) If an offer is made by the corporation to holders of its shares of any
class having accrued dividends or other arrearages to exchange such shares for
other securities of the corporation which would be entitled to preference in the
receipt of any periodical payment or dividend over such shares, and if the offer
is accepted by, and such exchange is effected with, any holder of such shares,
then any other holder of such shares who objects to the terms of the offer shall
have the right to be paid the value of all shares of such class owned by him in
accordance with the provisions of section 33-374.
(c) Any shareholder of a merging or consolidating domestic corporation who
objects to the merger or consolidation shall have the right to be paid the value
of all shares of such corporation owned by him in accordance with the provisions
of section 33-374, except that a shareholder of a merging domestic corporation
which is to be the surviving corporation shall have such right only: (1) if and
to the extent that the plan of merger will effect an amendment to the
certificate of incorporation of the surviving corporation which would entitle
the shareholder to such right pursuant to the provisions of subsection (a) of
this section, or (2) if the plan of merger provides for the distribution to
shareholders of the surviving corporation of cash, securities or other property
in lieu of or in exchange for or upon conversion of outstanding shares of the
surviving corporation.
(d) If a corporation sells all or substantially all its assets primarily in
consideration for securities of another corporation, domestic or foreign, and
such transaction is part of a general plan of liquidation and distribution
substantially equivalent to a merger, any shareholder of such corporation
objecting to such sale shall have the right to be paid the value of all shares
of such corporation owned by him in accordance with the provisions of section
33-374.
(e) If a distribution to shareholders, by dividend, liquidating distribution
or otherwise, is effected by transfer of assets in kind to shareholders
collectively as co-owners, any objecting shareholder who would otherwise receive
such distribution shall have the right to be paid the value of all shares of
such corporation owned by him in accordance with the provisions of section 33-
374.
(f) Where the right to be paid the value of shares is made available to a
shareholder by this section, such remedy shall be his exclusive remedy as holder
of such shares against the corporate transactions described in this section,
whether or not he proceeds as provided in section 33-374.
33-374 PROCEDURE FOR OBJECTING SHAREHOLDER.--(a) As used in this section, the
term (1) "corporation" includes, if the context so indicates, the successor,
surviving or new corporation which acquires the property of a predecessor
corporation upon a sale of assets for securities, merger or consolidation; (2)
"the date on which the exchange was effective" means the date on which the
corporation first actually consummated an exchange of shares or, if it reserved
the right to postpone the operation or effectiveness of all acceptances of its
offer of exchange, the date on which it declared the acceptance operative or
effective; (3) "sale of assets for securities" means a sale of assets entitling
objecting shareholders to be paid the value of shares pursuant to subsection (d)
of section 33-373; (4) "shares" of a shareholder means those shares owned by him
as to which he is entitled to be paid the value pursuant to the provisions of
section 33-373.
(b) Any shareholder designated in section 33-373 as having the right to be
paid the value of shares as provided in this section may elect to exercise such
right by giving notice to the corporation, in writing, objecting to the proposed
corporate transaction giving rise to such right. (1) In the case of a
shareholder so designated in subsections (a), (c) and (d) of section 33-373 such
notice shall be delivered to the corporation prior to the meeting of
shareholders called for the purpose of voting on such transactions, or at such
meeting prior to voting on such transaction, or prior to the time action taken
by consents as
1
provided in section 33-330 shall become effective. If such transaction is
approved, any such shareholder so notifying the corporation, provided none of
his shares shall have been voted in favor thereof, may require the corporation
to purchase his shares at fair value by delivering to the corporation a demand
to that effect in writing, within ten days after the date on which the vote was
taken or action taken by consents as provided in section 33-330 became
effective. (2) In the case of a shareholder so designated in subsection (b) of
section 33-373, such notice shall be delivered to the corporation within fifteen
days after the date of mailing the offer. If an exchange is effected with any
shareholder, any such shareholder so notifying the corporation, provided none of
his shares shall have been so exchanged, may require the corporation to purchase
his shares at fair value by delivering to the corporation a demand to that
effect in writing, within ten days after the date on which the exchange was
effective if the corporation shall give notice of such date to such shareholder
or within sixty days after delivering the written notice to the corporation,
whichever is the earlier. (3) A shareholder so designated in subsection (e) of
section 33-373 may require the corporation to purchase his shares at fair value
by delivering such notice to the corporation within fifteen days after the date
of mailing the distribution or any notice thereof from the corporation,
whichever is earlier, accompanied by a demand to that effect in writing,
provided such shareholder shall not have accepted such distribution. (4) In the
case of a shareholder so designated in subsection (c) of section 33-373, where a
merger has been effected as provided in section 33-370, such notice shall be
delivered to the corporation within fifteen days after the date of mailing the
plan of merger and be accompanied by a demand in writing that the corporation
purchase his shares at fair value.
(c) Any demand to purchase shares under subsection (b) of this section shall
state the number and classes of shares of the shareholder making the demand.
Except as provided in subsection (i) of this section, any shareholder making
such demand shall thereafter be entitled only to payment as in this section
provided and shall not be entitled to vote, to receive dividends or to exercise
any other rights of a shareholder in respect of such shares. No such demand may
be withdrawn unless the corporation consents thereto. Any shareholder failing to
make demand as provided in subsection (b) shall be bound by the corporate
transaction involved in accordance with its terms.
(d) At any time after the receipt of a notice by a shareholder objecting to
the proposed corporate transaction giving rise to rights under this section, but
not later than ten days after receipt of a demand to purchase shares or ten days
after the corporate transaction is effective, whichever is later, the
corporation shall make a written offer, to each shareholder who makes demand as
provided in this section, to pay for his shares at a specified price deemed by
such corporation to be the fair value thereof as of the day prior to the date on
which notice of the proposed corporate transaction was mailed, exclusive of any
element of value arising from the expectation or accomplishment of such
corporate transaction.
(e) Within twenty days after demanding the purchase of his shares, each
shareholder so demanding shall submit the certificate or certificates
representing his shares to the corporation for notation thereon that such demand
has been made. His failure to do so shall, at the option of the corporation,
terminate his rights under this section unless a court of competent
jurisdiction, for good and sufficient cause shown, otherwise directs. If shares
represented by a certificate on which notation has been so made are transferred,
each new certificate issued therefor shall bear similar notation, together with
the name of the shareholder of such shares who made such demand, and a
transferee of such shares shall acquire by such transfer no rights in the
corporation other than those which such shareholder had after making such
demand.
(f) If the corporation and any shareholder making a demand to purchase shares
under subsection (b) of this section agree in writing as to the value of the
shares, the corporation shall pay such shareholder such value upon and
concurrently with the surrender to the corporation of the certificate or
certificates representing such shares duly endorsed for transfer. If the
corporation defaults in or refuses to make such payment, such shareholder may
file a petition in the superior court for the judicial district where the
principal office of the corporation is located, praying that judgment be entered
for such amount, and such shareholder shall be entitled to judgment for such
amount. If any such shareholder should be a party to a proceeding under
subsection (g) of this section, the court in such proceeding shall upon motion
of either the corporation or such shareholder dismiss the proceeding with
respect to such shareholder.
(g) At any time during the period of sixty days after the date the
corporation is obliged to make an offer under subsection (d) of this section,
the corporation, or any shareholder who has made a demand to purchase shares
under subsection (b) of this section and who has not accepted the offer made by
the corporation and acting in the name of the corporation, may file a petition
in the superior court for the judicial district where its principal office is
located, or before any judge thereof, praying that the value of the shares of
such shareholders be found and determined. All shareholders making demand under
subsection (b) of this section who have not accepted the offer made by the
corporation, wherever residing, shall be made parties to the proceeding as an
action against their shares quasi in rem. A copy of the petition shall be served
on each such shareholder who is a resident of this state and shall be served by
registered or certified mail on each such shareholder who
2
is an nonresident. Service on nonresidents shall also be made by publication as
provided by law. The jurisdiction of the court shall be plenary and exclusive.
All shareholders who are parties to the proceeding shall be entitled to judgment
against the corporation for the amount of the fair value of their shares as of
the day prior to the date on which notice of the proposed corporate transaction
was mailed, exclusive of any element of value arising from the expectation or
accomplishment of such corporate transaction. The court may, if it so elects,
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers shall have such power and
authority as shall be specified in the order of their appointment or an
amendment thereof. The court shall by its judgment determine the fair value of
the shares of the shareholders entitled to payment therefor and shall direct the
payment of such value, together with interest, if any, as hereinafter provided,
to the shareholders entitled thereto. The judgment may include an allowance for
interest at such rate as the court may find to be fair and equitable in all the
circumstances, from the date notice of the proposed corporate transaction was
mailed to the date of payment. The costs and expenses of any such proceeding
shall be determined by the court and shall be assessed against the corporation,
but all or any part of such costs and expenses may be apportioned and assessed
as the court may deem equitable against any or all shareholders who are parties
to the proceeding to whom the corporation has made an offer to pay for the
shares if the court finds that the action of such shareholders in failing to
accept such offer was arbitrary or vexatious or not in good faith. Such expenses
shall include reasonable compensation for and reasonable expenses of the
appraisers, but shall exclude the fees and expenses of counsel for and experts
employed by any party; but if the fair value of the shares as determined
materially exceeds the amount which the corporation offered to pay therefor, or
if no offer was made, the court in its discretion may award to any shareholder
who is a party to the proceeding such sum as the court may determine to be
reasonable compensation to any expert or experts employed by the shareholder in
the proceeding.
(h) Any judgment entered under subsection (f) or (g) of this section shall be
enforceable as other decrees of the superior court may be enforced and shall be
payable only upon and concurrently with the surrender to the corporation of the
certificate or certificates representing the shares for which payment is due,
duly endorsed for transfer. Upon payment of any such judgment, the shareholder
shall cease to have any interest in such shares. The liability to pay for shares
or to pay damages imposed by this section on a corporation extends to the
successor corporation which acquires the assets of the predecessor, whether by
merger, consolidation or sale of assets for securities. Shares acquired by a
corporation pursuant to payment of the agreed value therefor or to payment of
the judgment entered therefor, as in this section provided, may be held and
disposed of by such corporation as in the case of other treasury shares, unless
in the case of a merger or consolidation the plan of merger or consolidation
otherwise provides.
(i) If a demand to purchase shares under subsection (b) of this section is
withdrawn upon consent, or if the proposed corporate action is abandoned or
rescinded or the shareholders revoke the authority to effect such action, or if
no demand or petition for the determination of fair value by a court has been
made or filed within the time provided in this section, or if a court of
competent jurisdiction determines that such shareholder is not entitled to the
relief provided by this section, then the right of such shareholder to be paid
the fair value of his shares shall cease and his status as a shareholder shall
thereupon be restored.
3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the DGCL allows the corporation's Board of Directors to
indemnify officers and directors for certain liabilities arising from their
position as officer or director of the corporation if such person acted in good
faith and in a manner he reasonably believed "not opposed to" the best interests
of the corporation. The DGCL requires indemnification by the corporation in any
such action in which the officer or director has been successful on the merits.
The DGCL indemnification provision is non-exclusive of other rights to which
prospective indemnitees may be entitled under any by-law, agreement, vote of
stockholders or otherwise.
Article VIII of Aquarion's by-laws provides for indemnification of its
officers, directors, employees and other agents to the maximum extent permitted
by Delaware law.
The Company has also purchased directors' and officers' liability insurance
covering certain liabilities incurred by such persons in connection with the
performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
2.1 -Acquisition Agreement dated as of September 2, 1992 between The New
Canaan Company, Aquarion Company and Bridgeport Hydraulic Company
(included as Exhibit A to the Prospectus/Proxy Statement)
2.2 -Acquisition Agreement Amendment between the New Canaan Company,
Aquarion Company and Bridgeport Hydraulic Company (included as Exhibit B
to the Prospectus/Proxy Statement).
2.3 -Supplemental Acquisition Agreement Amendment among New Canaan Company,
Aquarion Company and Bridgeport Hydraulic Company (included as Exhibit C
to the Prospectus/Proxy Statement).
2.4 -Property Exchange Agreement dated as of October 21, 1992 among Second
Taxing District of the City of Norwalk, Monroe Environmental Leasing
Partnership, Aquarion Company, and The New Canaan Water Company,
(included as Annex II to the Prospectus/Proxy Statement)
2.5 -Supplemental Property Exchange Agreement Amendment among Second Taxing
District of the City of Norwalk, Monroe Environmental Leasing
Partnership, Aquarion Company, and The New Canaan Water Company,
(included as Exhibit E to the Prospectus/Proxy Statement)
2.6 -Plan of Liquidation of The New Canaan Company (included as Annex III to
the Prospectus/Proxy Statement)
5* -Opinion of Wiggin & Dana as to the legality of the securities being
registered
8* -Opinion of Haythe & Curley as to relevant tax matters
23.1* -Consents of Price Waterhouse LLP as to financial statements of NCC
and Aquarion
23.2* -Consent of Wiggin & Dana
23.3* -Consent of Haythe & Curley
24 -Power of Attorney
*filed by amendment
(b) No financial statement schedules are required to be filed herewith
pursuant to Item 21(b) or (c) of this Form.
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ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification of liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such requests, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of the responding to the request.
(e) The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on December 15, 1994.
Aquarion Company
(registrant)
By: /s/ Janet M. Hansen
-------------------------------
Name: Janet M. Hansen
Title: Senior Vice President
and Chief Financial
Officer (Principal
Financial and Accounting
Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated:
William S. Warner * Chairman of the Board of Directors
- -------------------------------------- and Director
William S. Warner
JACK E. MCGREGOR * President, Chief Executive Officer
- -------------------------------------- and Director
Jack E. McGregor (Principal Executive Officer)
JANET M. HANSEN Senior Vice President and Chief
- -------------------------------------- Financial Officer (Principal
Janet M. Hansen Financial and Accounting Officer)
GEORGE W. EDWARDS, JR. * Director
- --------------------------------------
George W. Edwards, Jr.
GEOFFREY ETHERINGTON * Director
- --------------------------------------
Geoffrey Etherington
NORWICK R.G. GOODSPEED * Director
- --------------------------------------
Norwick R.G. Goodspeed
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JANET D. GREENWOOD * Director
- --------------------------------------
Janet D. Greenwood
DONALD M. HALSTED, JR. * Director
- --------------------------------------
Donald M. Halsted, Jr.
EUGENE D. JONES * Director
- --------------------------------------
Eugene D. Jones
LARRY L. PFLIEGER * Director
- --------------------------------------
Larry L. Pflieger
G. JACKSON RATCLIFFE * Director
- --------------------------------------
G. Jackson Ratcliffe
JOHN A. URQUHART * Director
- --------------------------------------
John A. Urquhart
*By: /s/ Janet M. Hansen December 15, 1994
---------------------------------
Janet M. Hansen
Attorney-in-Fact under Powers
of Attorney filed as Exhibit 24
to this registration statement
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