def14a
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
Proxy Statement Pursuant to
Section 14(a) of the Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
§240.14a-12
CONNECTICUT WATER SERVICE, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Connecticut Water Service, Inc.
93 West Main Street
Clinton, CT 06413
April 1, 2010
Dear Shareholder:
You are cordially invited to the Annual Meeting of Shareholders
of Connecticut Water Service, Inc., scheduled to be held on
Friday, May 14, 2010, at the Mystic Marriott, 625 North
Road (Route 117), Groton, Connecticut, beginning at
2:00 P.M.
At the meeting, you will be asked to elect three directors and
ratify the appointment of our independent auditors for the
fiscal year ending December 31, 2010. In addition to the
specific matters to be voted on, there will be a report on the
progress of the Company and an opportunity for you to ask
questions of general interest to shareholders. Important
information is contained in the accompanying proxy statement,
which you are urged to carefully read.
It is important that your shares are represented and voted at
the meeting, regardless of the number you own or whether you
attend. Accordingly, please vote by mail, telephone, or
internet. It is also very helpful to us if you would call and
let us know if you plan to attend the Annual Meeting. Please
call
1-800-428-3985,
Extension 3015, and provide your name, address, and telephone
number. Directions to the Annual Meeting are printed on the back
of the proxy statement and available on the Companys Web
site. Your Board of Directors and executive officers look
forward to personally meeting you.
Also, I am pleased to report that again this year we will be
utilizing U.S. Securities and Exchange Commission rules
that permit us to furnish our proxy materials to certain
shareholders over the Internet. Accordingly, a Notice of
Internet Availability of Proxy Materials will be mailed to some
of our shareholders on or about April 1, 2010. These
shareholders will have the ability to access the proxy materials
on a Web site referred to in the Notice or request that a
printed set of the proxy materials be sent to them free of
charge, by following the instructions in the notice. For other
shareholders, we have elected to mail a full set of printed
copies of our proxy materials, as in prior years.
We believe that using Internet delivery for some shareholders
will expedite the delivery of proxy materials, reduce printing
and postage costs, and conserve natural resources.
Your interest and participation in the affairs of the Company
are appreciated.
Sincerely,
Eric W.
Thornburg
Chairman
CONNECTICUT
WATER SERVICE, INC.
NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS AND PROXY
STATEMENT
May 14, 2010
The Annual Meeting of Shareholders of Connecticut Water Service,
Inc. will be held on Friday, May 14, 2010, at the Mystic
Marriott, 625 North Road (Route 117), Groton, Connecticut, for
the following purposes:
1. to elect three (3) directors;
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2.
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to ratify the appointment of PricewaterhouseCoopers LLP,
independent registered public accountants, as independent
auditors for the Company for the fiscal year ending
December 31, 2010; and
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3. to transact such other business as may properly come
before the meeting.
Only holders of the Companys common stock and its
Cumulative Preferred Stock Series A of record
at the close of business on March 17, 2010 are entitled to
vote at this meeting.
Shareholders are cordially invited to attend the meeting.
By order of the Board of Directors,
Daniel J. Meaney
Corporate Secretary
Shareholders
can help avoid the necessity and expense of
follow-up
letters to ensure that a quorum is present at the Annual Meeting
by promptly voting their shares.
YOU CAN
VOTE IN ONE OF THREE WAYS:
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use the toll-free number on your Notice of Internet Availability
of Proxy Materials (NOIA) or proxy card to vote by phone;
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2.
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visit the Web site noted on your NOIA or proxy card to vote via
the Internet; or
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3.
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if you received a paper copy of the proxy card by mail or
printed a copy from the Web site, sign, date and return your
proxy card in the enclosed postage-paid envelope to vote by mail.
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Shareholders are invited to visit the Corporate Governance
section of our
Web site at
http://www.ctwater.com/corporategovernance.htm
and the following Web site until 11:59 P.M. on May 13,
2010: www.proxyvote.com. (Shareholders will need the 12
digit control number from the proxy card or NOIA to view proxy
materials at www.proxyvote.com)
TABLE OF
CONTENTS
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Back
Cover
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CONNECTICUT
WATER SERVICE, INC.
PROXY
STATEMENT
2010
ANNUAL MEETING OF SHAREHOLDERS
General
Information and Voting of Shares
This Proxy Statement is furnished by and on behalf of the Board
of Directors of Connecticut Water Service, Inc. (the
Company) for use at the Annual Meeting of
Shareholders to be held at Mystic Marriott, 625 North Road,
Groton, Connecticut, at 2:00 P.M., on May 14, 2010. In
that regard, a Notice of Internet Availability or this Proxy
Statement, the Companys 2009 Annual Report and
Form 10-K
are being mailed to shareholders on or about April 1, 2010.
In addition to this solicitation by mail and the Internet,
officers and regular employees of the Company may make
solicitations by telephone, mail, or personal interviews, and
arrangements may be made with banks, brokerage firms, and others
to forward proxy material to their principals. The Company has
retained Morrow & Company, Inc. to assist in the
solicitation of proxies at an estimated cost of $5,000 plus
expenses, which will be paid by the Company.
Under rules adopted in 2007 by the U.S. Securities and
Exchange Commission (SEC), we have chosen to furnish
our proxy materials, including this Proxy Statement and the
Annual Report to Shareholders, to some of our shareholders over
the Internet and to provide a Notice of Internet Availability of
Proxy Materials (NOIA) by mail, rather than mailing
a full set of the printed proxy materials. For other
shareholders, we have elected to mail a full set of printed
copies of our proxy materials, as in prior years.
If you receive a NOIA, you will not receive a printed copy of
our proxy materials unless you request them by following the
instructions provided in the NOIA. Instead, the NOIA explains
how you may access and review all of the important information
contained in the proxy materials. The NOIA also explains how you
may submit your proxy via telephone or the Internet. If you
would like to receive a printed copy of our proxy materials, you
should follow the instructions in the NOIA.
We are mailing either our NOIA or a full set of our printed
proxy materials to shareholders of record on or about
April 1, 2010. On this date, all shareholders of record and
beneficial owners will have the ability to access all of the
proxy materials at www.proxyvote.com, which is the Web
site referred to in the NOIA. These proxy materials will be
available free of charge.
Frequently
Asked Questions
What
is the purpose of the Annual Meeting of
Shareholders?
Shareholders are asked to consider and vote upon:
1. election of three (3) Directors;
2. ratification of the appointment of our independent
registered public accountants; and
3. transaction of such other business to properly come
before shareholders.
In addition, following the meeting, management will report on
the performance of the Company and respond to questions from
shareholders.
How is
a quorum determined for the Annual Meeting?
Under Connecticut law, holders of our Common Stock and Preferred
Stock Series A may take action on a matter at
the Annual Meeting only if a quorum exits with respect to that
matter. With respect to each of Proposals No. 1 and 2,
a majority of the votes entitled to be cast on each matter by
holders our Common Stock and Preferred Stock
Series A will constitute a quorum for action on that
matter. For this purpose, only shares of our Common Stock and
Preferred Stock Series A held by those persons
present at the Annual Meeting or for which proxies are properly
provided by telephone, Internet or in writing and returned to
the Company as provided herein will be considered to be
represented at the Annual Meeting. All shares of our Common
Stock and Preferred Stock Series A represented
at the Annual Meeting will be counted for quorum purposes
without regard to abstentions or broker non-votes as to any
particular item.
1
Who is
entitled to Vote?
Holders of the Companys Common Stock and its Cumulative
Preferred Stock Series A of record at the close
of business on March 17, 2010 are entitled to notice of and
to vote at the Annual Meeting. On March 1, 2010, the
Company had outstanding 8,500,881 shares of Common Stock,
15,000 shares of Cumulative Preferred Stock
Series A, $20 par value, and 29,499 shares of
$.90 Cumulative Preferred Stock, $16 par value. Each share
of Common Stock is entitled to three votes and each share of
Cumulative Preferred Stock Series A is entitled
to one vote on all matters coming before the Annual Meeting. The
holders of shares of $.90 Cumulative Preferred Stock,
$16 par value, have no general voting rights.
What
is the difference between holding shares as a shareholder of
record and in street name?
About four-fifths of Connecticut Waters shareholders hold
their shares in street name. Street name
refers to the predominant form of public company share ownership
in the United States, whereby investors indirectly own, through
banks, brokers and other intermediaries, the companies
publicly-traded shares. Under Connecticut law, only the legal
owners of stock on the record date are entitled to vote shares
or grant proxies in connection with a shareholder meeting. Some
of the key differences between these forms of ownership are
described below.
Shareholder of record If your shares are
registered directly in your name with our transfer agent, the
Registrar and Transfer Company, you are considered the
shareholder of record, and these proxy materials, or a NOIA, are
being sent directly to you by an agent on behalf of Connecticut
Water. You have the right to grant your voting proxy to the
Company or to vote in person at the Annual Meeting. You may vote
by any of the methods described below.
Owning shares in street name If
your shares are held in a securities brokerage account or by a
bank or other nominee, you are considered the beneficial owner
of shares held in street name, and these proxy
materials, or a NOIA, are being forwarded to you by your broker
or nominee who is considered to be the shareholder of record. As
the beneficial owner, you have the right to direct your broker
or other nominee on how to vote your shares and are invited to
attend the Annual Meeting. Your broker or nominee has enclosed a
voting instruction card, or their own form of NOIA, for you to
use in directing your broker or nominee on how to vote your
shares.
How do
I Vote?
Shareholders of record and most shareholders holding shares in
street name can vote in any of the following ways:
(1) You can vote through the Internet: Available to
shareholders of record and through most brokers or nominees by
going to the Web site listed on your NOIA, proxy card or voting
instruction card. You will need to follow the instructions on
your NOIA, proxy card or voting instruction card and the Web
site.
(2) You can vote by telephone: Available to
shareholders of record and through most brokers or nominees by
calling the toll-free number on your NOIA, proxy card, or voting
instruction card. You will need to follow the instructions on
your NOIA, proxy card, or proxy instruction card and follow the
voice prompts.
(3) You can vote by mail: Available to shareholders
of record and through brokers or nominees who received printed
copies of proxy materials by signing, dating and returning your
printed proxy card or voting instruction card in the enclosed
postage-paid envelope provided. Shareholders receiving a NOIA
can receive a printed proxy card by requesting a full printed
set of proxy materials following instructions on the notice.
(4) You can vote in person at the Annual Meeting:
Shareholders of record may deliver their completed proxy card in
person at the Annual Meeting of Shareholders or by completing a
ballot available upon request at the meeting. Shareholders
owning shares in street name must obtain a
legal proxy from the holder of record in order to
vote in person at the meeting.
If you vote by telephone or the Internet, your electronic vote
authorizes the named proxies in the same manner as if you
signed, dated and returned your proxy card. If you vote by
telephone or the Internet, you do not need to return your proxy
card.
2
Can I
change my vote?
Yes. You may change your proxy instructions at any time prior to
the vote at the Annual Meeting. For shares held directly in your
name, you may do this by granting a later-dated proxy,
submitting a later vote by telephone or the Internet, or by
attending the Annual Meeting and voting in person. Attendance at
the Annual Meeting will not cause your previously-granted proxy
to be revoked, unless you specifically request it. You may
change your proxy instructions for shares in street
name by submitting new voting instructions to your broker
or nominee.
How is
my vote counted?
If you are a registered shareholder and you vote on a director
nominee or the ratification of our independent registered public
accountants by selecting one of the options available on the
proxy card or via Internet and telephone voting methods, the
proxy will be voted as you have specified. However, if you do
not specify your intentions on a director nominee or the
ratification of our independent registered public accountants
then your vote will be counted FOR that director nominee or FOR
the ratification of our independent registered public
accountants.
What
is a broker non-vote?
If your shares are held in street name, you must
instruct the broker how to vote your shares. If you do not
provide voting instructions, your shares will not be voted on
any Proposal on which the broker does not have discretionary
authority to vote. This is called a broker non-vote.
In these cases, the broker can register your shares as being
present at the Annual Meeting for purposes of establishing a
quorum but will not be able to vote on those matters for which
specific authorization is required under the rules of the New
York Stock Exchange (NYSE).
If you are a beneficial owner whose shares are held on the
record date by a broker, your broker has discretionary voting
authority under NYSE rules to vote your shares on the
ratification of the appointment of PricewaterhouseCoopers LLP
even if the broker does not receive voting instructions from
you. Important Change: There is an important change this
year regarding broker non-votes and Director Elections. An NYSE
rule change that is effective for the 2010 Annual Meeting of
Shareholders no longer permits brokers to vote in the election
of Directors if the broker has not received instructions from
its customer, the beneficial owner. This represents a
significant change from prior years, when brokers had
discretionary voting authority in the election of Directors.
Accordingly, it is particularly important that beneficial owners
instruct their brokers how they wish to vote their shares on the
election of Directors.
Regardless of how you choose to vote, your interest in the
affairs of Connecticut Water Service, Inc. is important and we
encourage you to vote promptly.
How
will abstentions and broker non-votes be counted?
Broker non-votes and proxies marked to abstain or withhold from
voting with respect to any Proposal to be voted upon at the
Annual Meeting generally are not considered for purposes of
determining the tally of votes cast for or against such Proposal
and, therefore, will not affect the outcome of the voting with
regard to any Proposal.
How
many votes are needed to elect Directors?
Under Connecticut law, the election of directors requires a
plurality of the votes cast by the holders of shares present in
person or by proxy and voting at the Annual Meeting. Proxies may
be voted only for the number of nominees named by the Board of
Directors.
3
How
many votes are needed to ratify PricewaterhouseCoopers LLP as
independent registered public accountants for
2010?
Ratification of the appointment of the Companys
independent registered public accountants requires that there be
more votes cast for the Proposal than against the Proposal.
Who
counts the votes?
Representatives of Broadridge Financial Solutions, Inc. will
tally the votes and certify the results.
When
and how will the voting results be published?
We will announce the preliminary voting results at the Annual
Meeting of Shareholders and in a press release, and publish the
final voting results in a
Form 8-K
to be filed with the Securities and Exchange Commission on or
about May 18, 2010.
PROPOSAL
(1) ELECTION OF DIRECTORS
The Companys Amended and Restated Certificate of
Incorporation provides for a Board of no less than nine or no
more than fifteen directors, the exact number of directorships
to be determined from time to time by resolution adopted by
affirmative vote of a majority of the Board. The Directors are
divided into three classes, I, II and III, as nearly
equal in number as practicable, with members to hold office
until their successors are elected and qualified. Each class is
to be elected for a three-year term at successive annual
meetings. During 2009, the Board of Directors consisted of nine
persons.
The Corporate Governance Committee recommended, and the Board of
Directors selected, the three nominees listed below for
election; Ms. Heather Hunt, Mr. Arthur C. Reeds, and
Mr. Eric W. Thornburg. All are Class I Directors whose
current terms expire at the 2010 Annual Meeting. Of the
remaining Directors, the Class II terms of Directors
Hanley, Kachur, and Lentini will expire in 2011. The
Class III terms of Directors Thibdaue, Wallace, and Wilbur
will expire in 2012. The Board of Directors has determined to
fix the number of directorships for the ensuing year at nine.
Proxies cannot be voted for a greater number of persons than the
number of nominees named.
Unless otherwise directed, it is intended that the
enclosed proxy will be voted for the election of Director
nominees Hunt, Reeds, and Thornburg. If
any nominee is unable or declines to serve, the persons named in
the proxy may vote for some other person(s). The biographies of
each of the nominees and continuing directors below contains
information regarding the persons service as a director,
business experience, director positions held currently or at any
time during the last five years, information regarding
involvement in certain legal or administrative proceedings, if
applicable, and the experiences, qualifications, attributes or
skills that caused the Corporate Governance Committee and the
Board to determine that the person should serve as a director
for the Company in 2010.
4
Class I
Nominees for election at this meeting whose terms expire in 2013
(age at 2010 Annual Meeting)
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Heather Hunt, age 44, has been a director since 2006. She
has been Executive Director of the New England States
Committee on Electricity since January 2009. She is also an
attorney who had a regulatory law practice in Stratford,
Connecticut from September 2003 to 2009. Previously,
Ms. Hunt was Director of State and Local Government Affairs
at United Technologies Corporation from January 2001 to
September 2003. From June 1998 through December 2000, she was
with the Southern Connecticut Gas Company in regulatory and
public policy capacities, ultimately as Vice President. In
addition, she served as a Commissioner of the Maine Public
Utility Commission from October 1995 through May 1998 and as a
Commissioner of the Connecticut Department of Public Utility
Control (DPUC) from October 1993 through July 1995.
Ms. Hunts experience as a DPUC commissioner and as an
attorney in regulatory affairs at public utilities provides her
with extensive experience in utility regulatory matters.
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Arthur C. Reeds, age 66, has been a director since 1999. He
is also a Trustee of USAllianz Variable Insurance Products
Trust, a mutual fund group affiliated with Allianz Life
Insurance Company of North America. He was Senior Investment
Officer of the Hartford Foundation for Public Giving from
September 2000 until January 2003. From August 1999 to March
2000, he served as the CEO and as a director of Conning
Corporation, an investment banking firm. He was the Chief
Investment Officer at Cigna Corporation for nine years prior to
his retirement from Cigna in November 1997. Mr. Reeds
experience as a chief executive and chief investment officer
provide him with valuable knowledge of capital markets,
investments and executive leadership.
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Eric W. Thornburg, age 50, has been a director since 2006.
He was elected Chairman of the Board of Directors on May 8,
2007 and has been the President and Chief Executive Officer of
the Company since 2006. Prior to joining the Company,
Mr. Thornburg served as President of
Missouri-American
Water, a subsidiary of American Water Works Corporation, from
2000 to 2004. From July 2004 to January 2006 he also served as
Central Region Vice President-External Affairs for American
Water. Mr. Thornburgs entire career has been in the
water utility industry. His experience and day-to-day leadership
as Chief Executive Officer at Connecticut Water provides him
with an intimate knowledge of the industry, the Company and its
operations.
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5
Class II
Directors continuing in office whose terms expire in 2011
(age at 2010 Annual Meeting)
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Mary Ann Hanley, age 53, has been a director since 1999.
She is Assistant to the President of St. Francis Hospital and
Medical Center and Director of The Valencia Society, the
endowment fund for the hospital. She is the Governors
policy advisor for workforce development. From January 1995 to
February 1998, she was legal counsel to the Governors
Office, State of Connecticut. Ms. Hanleys experience
as legal counsel and advisor to the Governors Office of
the State of Connecticut gives her expertise on the inner
workings of Connecticuts state government.
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Mark G. Kachur, age 66, has been a director since 2002. He
served as Chairman, President and Chief Executive Officer of
CUNO, Inc. (filter manufacturer) from November 1999 until his
retirement in February 2006. Mr. Kachurs experience
as the chief executive officer of a filter manufacturing firm
provides him with a valuable insight into water treatment
technologies, capital markets, and executive leadership.
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David A. Lentini, age 63, has been a director since 2001.
He currently is Chairman, President and Chief Executive Officer
of The Connecticut Bank and Trust Company. He is a member
of the Board of Directors of the Federal Reserve Bank of Boston
and he also serves on the Board of Cooper-Atkins Corporation. He
serves as a director of St. Francis Hospital and Medical Center
and is a Trustee of the Renbrook School. Mr. Lentinis
experience as a bank Chief Executive Officer and director of the
Federal Reserve Bank of Boston provides him with valuable
knowledge of finance, executive leadership, employee and
customer satisfaction, and capital markets.
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6
Class III
Directors continuing in office whose terms expire in 2012
(age at 2010 Annual Meeting)
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Lisa J. Thibdaue, age 57, has been a director since 2000.
She was named the Vice President, Regulatory and Government
Affairs at Northeast Utilities in January 1998 and has served as
Vice President, Regulatory and Governmental Affairs at Northeast
Utilities between 2005 and 2009. In August 2009 she was named
Vice President, Rates and Regulatory at Northeast Utilities.
From 1996 to 1997, she was Executive Director, Rates and
Regulatory Affairs at Consumers Energy, a natural gas and
electric utility located in Michigan. She is also on the
Advisory Board of Michigan State University Institute of Public
Utilities. Ms. Thibdaues more than 12 years
experience in rates and regulatory matters, including direct
involvement with Connecticut Office of Consumer Counsel and
DPUC, at a regulated electric utility in Connecticut provides
her with extensive knowledge of the Companys regulatory
environment.
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Carol P. Wallace, age 55, has been a director since 2003.
She is Chairman of Cooper-Atkins Corporation, a manufacturer of
temperature acquisition instruments, and has served in that
capacity since 2004 in addition to serving as its President and
Chief Executive Officer since 1994. She is also a director of
Zygo Corporation and Sandstone Group, LLC, Milwaukee, WI, and
she serves as a President of the Connecticut Technical High
School System Foundation Board, and is a director of the
Connecticut Development Authority. Ms. Wallaces more
than 15 years experience as Chief Executive Officer of a
manufacturing firm with global sales gives her skills in
executive leadership, including financial management, business
strategy, financial accounting, and customer and employee
satisfaction.
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Donald B. Wilbur, age 68, has been a director since 1993.
He was formerly the Chairman of the Board for Liberty Bank in
Middletown where he served as a director for 15 years until
April 2008. He also was the Chairman of the Board at Middlesex
Hospital where he served as a director for 17 years before
retiring in 2005. Mr. Wilbur retired as the Plant Manager
of Unilever HPC, USA, a personal products manufacturer, on
December 31, 2002, after a 32 year career in personal
products manufacturing. Mr. Wilburs extensive
experience as a previous Director and Chairman provide him with
a broad knowledge of board leadership and corporate/board
governance.
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7
CORPORATE
GOVERNANCE
With the exception of Ms. Hunt and Mr. Thornburg, each
director listed above has had the same employment for more than
the past five years either in the position indicated or in other
similar or executive capacities with the same company or a
predecessor.
In 2009, the Companys Board of Directors met six times,
including one teleconference, and conducted five regular
executive sessions of the independent directors without
management present. In addition, the Companys Board of
Directors maintains a number of standing committees described
below under heading Board Committees and
Responsibilities. In 2009, each director attended at least
94% of the aggregate number of meetings of the Board and
Committees on which he or she served. All directors attended the
2009 Annual Meeting of Shareholders. Directors are expected, but
not required, to attend the 2010 Annual Meeting of Shareholders.
Two half-day
development sessions were held for directors in 2009. The
sessions were conducted outside of regular meetings and featured
experts from both outside and inside the Company and covered
matters related to executive compensation and utility accounting
and ratemaking. Directors were not required to attend the
development sessions and were not compensated for attending.
Board
Leadership Structure
The Board leadership model consists of a combined Chairman and
Chief Executive Officer role, coupled with a strong independent
Lead Director. Eric W. Thornburg is the Chairman and Chief
Executive Officer, and Donald B. Wilbur is the Lead Director.
The Board believes that the Companys Chief Executive
Officer is best suited to serve as Chairman because he is the
director most experienced in the Companys business and
industry, and most capable of effectively identifying strategic
priorities and leading discussions on and execution of the
Companys strategy.
The Lead Director has the following responsibilities:
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presiding at all meetings of the Board of Directors at which the
Chairman is not present, including executive sessions of the
independent directors;
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serving as liaison between the Chairman and the independent
directors;
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reviewing information sent to the Board;
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reviewing meeting agendas for the Board;
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reviewing Board meeting schedules to assure that there is
sufficient time for discussion of all agenda items;
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calling meetings of the independent directors, if appropriate;
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if requested by major shareholders, making himself available for
consultation and direct communications with such
shareholders; and
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any other matters that may arise consistent with these duties
and effective corporate governance.
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The Companys independent directors bring experience,
oversight and expertise from outside the company and industry.
The Board believes the combined role of Chairman and Chief
Executive Officer, together with a strong independent Lead
Director, is in the best interest of stockholders because it
provides the appropriate balance between Company and industry
expertise in strategy development and independent oversight of
management. The Lead Director is Chair of the Compensation
Committee and serves on the Corporate Governance and Corporate
Finance and Investments committees.
Board
Role in Risk Oversight
The Board has an active role, as a whole and also at the
Committee level, in overseeing management of the Companys
risks. The Board regularly receives reports from members of
senior management on areas of material risk to the Company,
including operational, financial, legal, regulatory,
environmental, and strategic and reputational risks. The full
Board or an appropriate Committee receives these reports from
the appropriate executive so
8
that it may understand and oversee the strategies to identify,
manage and mitigate risks. When it is a Committee that receives
the report, the Chairman of that Committee makes a report on the
discussion to the full Board of Directors at its next meeting.
The Companys Compensation Committee is responsible for
overseeing the management of risks relating to the
Companys executive compensation plans and arrangements.
The Audit Committee oversees management of financial, legal and
regulatory risks. The Corporate Governance Committee manages
risks associated with the independence of the Board of Directors
and potential conflicts of interest. The Corporate Finance and
Investments Committee manages risks associated with investments
related to the defined benefit, welfare and Supplemental
Executive Retirement plans, and merger and acquisition
transactions.
Board
Independence
The Companys common stock is listed on the NASDAQ Global
Select Market. NASDAQ listing rules require that a majority of
the Companys directors be independent
directors as defined by NASDAQ corporate governance
standards. Generally, a director does not qualify as an
independent director if the director has, or in the past three
years has had, certain material relationships or affiliations
with the Company, its external or internal auditors, or is an
employee of the Company. The Board has determined that directors
Hanley, Hunt, Kachur, Lentini, Reeds, Thibdaue, Wallace, and
Wilbur are independent directors under NASDAQ listing standards.
Mr. Thornburg, who is an employee of the Company, is not
considered an independent director.
The Board based these determinations primarily on a review of
the responses of the Directors and executive officers to
questions regarding employment and compensation history,
affiliations, family and other relationships, together with an
examination of those companies with whom the Company transacts
business. In making the determination that Ms. Hunt is
independent under NASDAQ rules, the Board considered the
payments (which were minimal in amount in 2009) made by the
Company to a law firm at which Ms. Hunts husband is
an equity partner.
Board
Committees and Responsibilities
The Board of Directors has established standing Audit,
Compensation, Corporate Governance, and Corporate Finance and
Investment Committees. All Committees have adopted written
charters. Copies of these charters are available at the
Companys website at
www.ctwater.com/corporategovernance.htm, or by contacting
the Company at the address appearing on page 44.
Board
Committee Membership and Functions
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Corporate
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Corporate
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Finance and
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Name
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Audit
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Compensation
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Governance
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Investments(1)
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Ms. Hanley
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X
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*
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Ms. Hunt
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X
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X
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Mr. Kachur
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X
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X
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X
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Mr. Lentini
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X
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X
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X
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Mr. Reeds
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X
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X
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*
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Ms. Thibdaue
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X
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Ms. Wallace
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X
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*
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X
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Mr. Wilbur
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X
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*
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X
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X
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* Chairman
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(1) |
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The name of the Pension Trust and Finance Committee was changed
to the Corporate Finance and Investments Committee on
May 13, 2009. |
The Audit
Committee
In 2009, the Audit Committee met five times, including three
telephonic meetings. The Audit Committee appoints, compensates,
and oversees the work of the independent registered public
accountants of the Company and The Connecticut Water Company,
and monitors the Companys financial reporting process and
internal control
9
systems. The Board has determined that each member of the Audit
Committee qualifies as an independent director for
purposes of NASDAQ listing standards and also has determined
that Carol P. Wallace is a financial expert as
defined under rules of the Securities and Exchange Commission.
The Audit Committee Charter is available on our Web site at
www.ctwater.com/corporategovernance.htm
The
Compensation Committee
In 2009, the Compensation Committee met three times, including
one telephonic meeting. The Compensation Committee determines
officer compensation and the promotion and hiring of officers,
reviews Company fringe benefit plans other than retirement
plans, and administers the Companys Performance Stock
Programs. The Compensation Committee Charter is available on our
Web site at www.ctwater.com/corporategovernance.htm.
The Compensation Committee has the authority to retain any legal
counsel, compensation consultant or other consultant to be used
to assist in the evaluation of director or executive
compensation. The Compensation Committee has engaged a
recognized independent compensation consultant every three years
to analyze executive compensation competitiveness and provide
recommendations regarding the Companys Total Pay Program,
described within the Compensation Discussion and Analysis on
page 18.
In addition, the Compensation Committee receives an annual
report from the President/Chief Executive Officer on each
individual executives historical compensation information;
each executives performance review; a progress report on
the executives results in achieving strategic objectives;
and general competitive market information pertaining to salary
increase budgets and executive compensation.
The
Corporate Governance Committee
In 2009, the Corporate Governance Committee met two times. The
Corporate Governance Committee reviews the qualifications and
independence standards of director nominees and makes
recommendations to the Board, and reviews the overall
effectiveness of the Board. The Corporate Governance Committee
Charter is available on our Web site at
www.ctwater.com/corporategovernance.htm.
The
Corporate Finance and Investments Committee
In 2009, the Corporate Finance and Investments Committee met
seven times, including three telephonic meetings. On
May 13, 2009, the Pension Trust and Finance Committee was
renamed the Corporate Finance and Investments Committee. The
Corporate Finance and Investments Committee reviews the Pension
Trust Fund of The Connecticut Water Company Employee
Retirement Fund, the employee Savings Plan (401(k)), the VEBA
Trust Fund for retiree medical benefits, and the
Supplemental Executive Retirement Program, reviews and
determines actuarial policies and investment guidelines, selects
the investment managers, and makes recommendations to and
advises the Board of Directors on financial policy issues and
the issuance of securities. The Committee also assists in the
evaluation of proposed merger and acquisition transactions. On
March 9, 2010, the Board of Directors adopted a charter for
the Corporate Finance and Investments Committee. The charter is
available on our Web site at
www.ctwater.com/corporategovernance.htm.
The
Board Nomination Process
The Corporate Governance Committee annually identifies director
nominees based primarily on recommendations from management,
Board members, shareholders, and other sources, such as water
industry and state industry associations. All candidates
submitted by a shareholder or shareholder group are reviewed and
considered in the same manner as all other candidates. The
Committee recommends to the Board nominees that are independent
of management and satisfy SEC and NASDAQ requirements and
possess qualities such as personal and professional integrity,
sound business judgment, and utility, financial, or political
expertise. The Committee also considers the age and diversity of
proposed nominees (broadly construed to mean a variety of
opinions, perspectives, personal, and professional experiences
and backgrounds, such as gender, race, and ethnicity
differences, as well as other differentiating characteristics)
in making its recommendations for nominees to the full Board.
The Committee does not have a formal policy with respect to
considering diversity; however, the Board and Corporate
Governance Committee believe that it is essential that diverse
viewpoints are represented on the Board.
10
In addition, the Committee considers whether potential director
nominees live in The Connecticut Water Companys service
regions in sufficient numbers to satisfy the representation
requirements of Connecticut General Statute
16-62a, and
also evaluates other factors that it may deem are in the best
interests of the Company and its shareholders. The Committee
may, under its charter, retain at the Companys expense one
or more search firms to identify potential board candidates. The
Committee does not currently employ an executive search firm, or
pay a fee to any other third party, to locate qualified
candidates for director positions.
The
2009 Nomination Process
The Corporate Governance Committee met on September 29,
2009 to consider the renomination of Directors Hunt, Reeds, and
Thornburg, whose terms expire at the 2010 Annual Meeting of
Shareholders. The Corporate Governance Committee reviewed the
attendance, performance, skills and independence of these
Directors, but determined to withhold the Committees
recommendation of these Director nominees to the Board until its
January 2010 meeting, in order to allow interested shareholders
to make either (i) recommendations to the Corporate
Governance Committee for Director nominees to be considered by
the Board for inclusion on the Companys proxy card, or
(ii) formal Director nominations, which, pursuant to the
Companys Bylaws procedures (described below), were due by
January 13, 2010. The Corporate Governance Committee did
not receive any formal director nominations from shareholders
prior to the deadline. After consideration of all candidates,
the Corporate Governance Committee recommended to the Board, and
the Board approved, that the number of Board members should be
set at nine and that Ms. Hunt, Mr. Reeds and
Mr. Thornburg should be submitted to shareholders as the
Companys director nominees.
Shareholder
Recommendations
The Companys Bylaws allow nomination of directors by any
shareholder who is entitled to vote for the election of
directors at either the Annual Meeting of Shareholders or a
special meeting where directors are to be elected. Shareholder
nominations must be received no later than January 14,
2011, which is 120 days prior to the first anniversary date
of the prior years Annual Meeting of Shareholders or
within 10 days of the mailing date of a Notice of Special
Meeting, and must include the following:
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name and address of person being nominated;
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name and address of the shareholder making the nomination as
they appear on the Companys records, and the number and
class of shares beneficially owned;
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a representation that the nominating shareholder is entitled to
vote at either the Annual Meeting of Shareholders or Special
Meeting, and that the shareholder will attend the meeting in
person or by proxy to place the nomination before shareholders;
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a description of all understandings and agreements between the
shareholder, the nominee and any other person or persons (naming
such person or persons) in exchange or consideration of the
nomination;
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information regarding the nominee that would be required to be
included in a proxy statement to be compliant with the rules of
the Securities and Exchange Commission; and
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consent of the nominee that they would serve if elected.
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The presiding officer at the meeting will determine if a
shareholder nomination was made in accordance with the
provisions of the Companys Bylaws. If the officer
determines that a nomination was not compliant with the Bylaws,
he shall state so at the meeting and the nomination will be
disregarded.
Mandatory
Retirement
Under the Companys Bylaws, no director shall be eligible
for election or re-election as a director of the Company after
such director has attained the age of 70.
11
Minimum
Stock Ownership
On January 27, 2010, the Board of Directors increased
minimum stock ownership for each Board member to at least
2,500 shares of Connecticut Water Service, Inc. common
stock. Incumbent Directors have until the date of the Annual
Meeting of Shareholders in 2012 to meet the minimum stock
ownership requirement. Newly-elected Directors will have a
reasonable amount of time, as determined by the Committee, to
satisfy the minimum stock ownership requirement. All independent
Directors, received an equity award of $10,000 in restricted
common stock on May 13, 2009 under the Companys
Performance Stock Program. The shares become unrestricted on the
first anniversary of the grant date (May 13, 2010), and
count toward the minimum stock ownership requirements.
Communications
with Directors
Any shareholder wishing to communicate with a Director may do so
by contacting the Companys Corporate Secretary, at the
address and telephone number listed on page 44, who will
forward to the Director a written,
e-mail, or
phone communication. The Corporate Secretary has been authorized
by the Board to screen frivolous or unlawful communications or
commercial advertisements.
Certain
Relationships and Related Person Transactions
During 2009, the Company paid $1,416,942 to Connecticut
Light & Power (CL&P) for electric utility
services at rates authorized by the Connecticut Department of
Public Utility Control. Ms. Thibdaue is a vice president at
Northeast Utilities Service Company, an affiliate of CL&P.
CL&P made payments of $7,936 to the Company during 2009 for
water services at rates authorized by the DPUC.
Practices
and Policies for Review and Approval of Related Person
Transactions
The Company recognizes that transactions between the Company and
any of its directors or executives can present potential or
actual conflicts of interest. Therefore, as a general matter and
in accordance with the Companys Code of Conduct and the
Board of Directors Code of Ethics, it is the
Companys preference to avoid such transactions.
In order to screen any potential conflicts of interest, the
Board has designated the Corporate Secretary to review the proxy
questionnaires completed by executive officers and directors and
report to the Corporate Governance Committee, Audit Committee,
and Board, if there are any such potential conflicts. The Audit
Committee reviews any matter related to audit misconduct and the
Corporate Governance Committee reviews any matter related to a
conflict of interest of current board members or those
considered for Board membership. Both committees report to the
Board on matters that may rise to the level of an actual or
potential conflict.
Code
of Conduct
Annually, employees are sent the Companys Code of Conduct.
Thereafter, each employee acknowledges their understanding and
compliance with the code, including the establishment of a
Company hotline for reporting Code of Conduct violations. To
date, the Company hotline has received no reports of conduct
violations. In addition to the Code of Conduct, the Board has
adopted an additional Code of Conduct as a result of the
Sarbanes-Oxley Act of 2002.
The Board promotes honest and ethical conduct, including the
ethical handling of actual and apparent conflicts of interest
between personal and professional relationships; full, fair,
accurate, timely and understandable disclosure in the periodic
reports required to be filed by the Company; and compliance with
applicable governmental laws and regulations and the
Companys own governing documents.
The public can access the Companys Code of Conduct on the
Companys Web site (www.ctwater.com) or by
contacting the Company at the address appearing on page 44.
12
Director
Compensation
Since the Boards of Directors of the Company and The Connecticut
Water Company are identical, regular meetings of each are
generally held on the same day.
In 2009, the Board and Committee meeting fee was $800 for
regular meetings; $900 for special meetings; whether the
directors participate in person or by phone. There were no
special meetings of the Board or any Committee held in 2009.
Committee members who participate in scheduled committee
telephone conference calls were paid $400 per call. Each Board
member was paid an annual retainer of $8,000 in quarterly
installments. Each Committee Chairman was paid an additional
retainer of $2,000 in quarterly installments. On May 13,
2009, independent members of the Board of Directors were awarded
$10,000 in restricted common stock that will become unrestricted
on May 13, 2010. It is anticipated that similar restricted
awards will be made in future years.
The table below summarizes the compensation paid by us to our
directors during the fiscal year ended December 31, 2009.
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Change in
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Pension
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Value and
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Fees Earned
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Nonqualified
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or Paid in
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Stock
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Non-Equity
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Deferred
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Cash in
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Awards
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Option
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Incentive Plan
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Compensation
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All Other
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Directors
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2009
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$(1)
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Awards
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Compensation
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Earnings
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Compensation
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Total
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M. Hanley
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$
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16,000
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$
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10,000
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0
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0
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0
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0
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$
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26,000
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H. Hunt
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$
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16,400
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$
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10,000
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0
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0
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0
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0
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$
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26,400
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M. G. Kachur
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$
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21,200
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$
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10,000
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0
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0
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0
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0
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$
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31,200
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D. A. Lentini
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$
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20,800
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$
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10,000
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0
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0
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0
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0
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$
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30,800
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A. C. Reeds
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$
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22,000
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$
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10,000
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0
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0
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0
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0
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$
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32,000
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L. J. Thibdaue
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$
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15,200
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$
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10,000
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0
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0
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0
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0
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$
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25,200
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E. W. Thornburg(2)
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$
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0
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0
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0
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0
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0
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0
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$
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0
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C. P. Wallace
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$
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19,200
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$
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10,000
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0
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0
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0
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0
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$
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29,200
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D. B. Wilbur
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$
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20,400
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$
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10,000
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0
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0
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0
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0
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$
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30,400
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(1) |
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All independent directors received an equity award of $10,000 in
restricted common stock on May 13, 2009. The median of the
low and high price of the Companys common stock was
$19.905 on the day prior to the grant date. The shares awarded
become unrestricted on the first anniversary of the grant date
(May 13, 2010). |
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(2) |
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Mr. Thornburg is not compensated for his board service. |
Every three years, the Compensation Committee conducts a review
of the Boards compensation. In 2009, the Compensation
Committee retained Thomas E. Shea & Associates, an
independent compensation consultant, to review current
compensation arrangements for Board members and compare them to
Board compensation practices of the Companys peer water
companies and certain other utility companies. The review
conducted by Thomas E. Shea & Associates generally
found that the Companys total and equity based
compensation for directors was below those of its principal
competitors and comparable companies, and the Committee
determined that an increase in compensation to Board members was
necessary and appropriate.
On December 8, 2009, the Compensation Committee authorized
an increase in directors compensation, which was reported
to the Board on January 27, 2010, and which became
effective on April 1, 2010. After that date, the Board and
Committee meeting fees (excluding Audit Committee) will be
$1,000 for regular and special meetings; whether the directors
participate in person or by phone. The Audit Committee meeting
fee will be $1,200 for regular meetings; whether the directors
participate in person or by phone. Committee members (excluding
Audit Committee) who participate in scheduled telephone
conference calls will be paid $500 per call. Audit Committee
members who participate in telephone conference calls will be
paid $600 per call. Each Board member will be paid an annual
retainer of $12,000 in quarterly installments. Committee
Chairmen (excluding Audit Committee) will be paid an additional
annual retainer of $2,000 in quarterly installments. The
Chairman of the Audit Committee will be
13
paid an additional annual retainer of $4,000 in quarterly
installments. The Lead Director will be paid an additional
annual retainer of $15,000 in quarterly installments.
Under the Companys Directors Deferred Compensation Plan,
directors may elect to defer receipt of all or a specified
portion of the compensation payable to them for services as
Directors until after retiring as directors. Any amounts so
deferred are credited to accounts maintained for each
participating Director, and earn interest at an annual rate of
8.07% that is currently credited on a monthly basis to all
deferred amounts. On January 24, 2008, the Directors
Deferred Compensation was amended and restated to comply with
Section 409A of the Internal Revenue Code (IRC). As a
result, any director who retires after January 1, 2008
receives a distribution of amounts deferred and accumulated
interest in a lump sum within 60 days of their retirement
date. One of the Companys retired directors is currently
receiving annual payments under the Plan.
Compensation
Committee Interlocks and Insider Participation
None of the members of the Companys Compensation Committee
during 2009 (Directors Hunt, Kachur, Lentini, Wallace, or
Wilbur) served as an officer or employee of the Company or any
of its subsidiaries during the year. During 2009, no executive
officer of the Company served as a director or as a member of
the Compensation Committee (or other board committee performing
equivalent functions) or another entity, one of whose executive
officers served as a director of the Company, or who served on
the Boards Compensation Committee.
Security
Ownership of Certain Beneficial Owners and
Management
The following table lists, to the Companys knowledge, the
beneficial ownership of the Companys common stock and the
nature of such ownership for each Director and nominee for
Director, for each executive officer named in the Summary
Compensation Table, for all executive officers and Directors of
the Company as a group, and for each person who beneficially
owns in excess of five percent of the outstanding shares of any
class of the Companys voting securities. Unless otherwise
noted, each holder has sole voting and dispositive power with
respect to the shares listed. All information is given as of
March 16, 2010 and assumes that shares which the named
person has a contractual right to acquire within 60 days
have been acquired and are outstanding.
|
|
|
|
|
|
|
|
|
|
|
Total Amount of
|
|
|
Name of Beneficial Owners
|
|
Common Stock
|
|
Percent of Common
|
(* denotes Non-Employee Director)
|
|
Beneficially Owned
|
|
Stock Outstanding
|
|
David C. Benoit(1)
|
|
|
41,948
|
|
|
|
|
**
|
Mary Ann Hanley*(2)
|
|
|
2,325
|
|
|
|
|
**
|
Heather Hunt*(2)
|
|
|
1,614
|
|
|
|
|
**
|
Mark G. Kachur*(2)
|
|
|
1,173
|
|
|
|
|
**
|
David A. Lentini*(2)
|
|
|
2,973
|
|
|
|
|
**
|
Thomas R. Marston(3)
|
|
|
26,093
|
|
|
|
|
**
|
Terrance P. ONeill(4)
|
|
|
33,801
|
|
|
|
|
**
|
Arthur C. Reeds*(2)
|
|
|
2,475
|
|
|
|
|
**
|
Lisa J. Thibdaue*(2)
|
|
|
1,675
|
|
|
|
|
**
|
Eric W. Thornburg(5)
|
|
|
64,871
|
|
|
|
|
**
|
Carol P. Wallace*(2)
|
|
|
1,620
|
|
|
|
|
**
|
Maureen P. Westbrook(6)
|
|
|
39,250
|
|
|
|
|
**
|
Donald B. Wilbur*(2,7)
|
|
|
6,421
|
|
|
|
|
**
|
Total Directors, Nominees, and Named Executive Officers As a
Group
|
|
|
226,239
|
|
|
|
2.6
|
%
|
The above ownership individually and as a group is less than 5%
of the outstanding shares of Connecticut Water Service, Inc.
|
|
|
** |
|
indicates ownership of less than 1% of the class of securities. |
14
|
|
|
(1) |
|
Includes 2,352 shares of restricted stock, 13,422
performance share units (2,418 of these units are restricted),
and 20,946 exercisable stock options under the Companys
Performance Stock Program (PSP), and 5,228 directly-owned shares. |
|
(2) |
|
Includes 503 shares of restricted stock under the
Companys PSP. |
|
(3) |
|
Includes 1,192 shares of restricted stock, 11,726
performance share units (4,423 of these units are restricted),
9,640 exercisable stock options under the Companys PSP,
and 3,535 directly-owned shares. |
|
(4) |
|
Includes 1,192 shares of restricted stock, 11,573
performance share units (3,513 of these units are restricted),
17,217 exercisable stock options under the Companys PSP,
and 3,819 directly-owned shares. |
|
(5) |
|
Includes 2,657 shares of restricted stock, 45,999
performance share units (27,530 of these units are restricted)
under the Companys PSP, and 16,215 directly-owned shares. |
|
(6) |
|
Includes 1,192 shares of restricted stock, 10,870
performance share units (2,905 of these units are restricted),
and 19,945 exercisable stock options under the Companys
PSP, 5,934 directly-owned shares, and 1,309 shares
owned in the Companys 401(k) plan. |
|
(7) |
|
Mr. Wilburs spouse owns 2,488 shares. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Under Section 16 of the Securities Exchange Act of 1934,
directors, officers and certain beneficial owners of the
Companys equity securities are required to file reports of
their transactions in the Companys equity securities with
the Securities and Exchange Commission on specified due dates.
In 2009, all reports of transactions by all directors, officers
and such beneficial holders were timely filed. In making this
statement, the Company has relied on the written representations
of its directors, officers, and ten percent shareholders and
copies of the reports that they have filed with the Securities
and Exchange Commission.
Other
Security Holders
The following table sets forth information as of March 16,
2010 (except as otherwise indicated) as to all persons or groups
known to the Company to be beneficial owners of more than five
percent of the outstanding common stock or Preferred A Stock of
the Company.
|
|
|
|
|
|
|
|
|
|
|
Title &
|
|
|
|
Shares Beneficially
|
|
Percent of
|
Class
|
|
Name and Address of Beneficial Holder
|
|
Owned
|
|
Class
|
|
Common
|
|
BlackRock, Inc.
40 East 52nd Street
New York, NY 10022
|
|
|
550,777
|
(1)
|
|
|
6.45
|
%
|
Common
|
|
The Vanguard Group, Inc.
100 Vanguard Blvd.
Malvern, PA 19355
|
|
|
429,931
|
(2)
|
|
|
5.03
|
%
|
Preferred A
|
|
Judith A. Peterson and Kenneth Peterson
928 Brintonnial Way
Winston Salem, North Carolina 27104
|
|
|
2,025
|
(3)
|
|
|
13.5
|
%
|
|
|
|
(1) |
|
This information is based on a Schedule 13G filed with the
SEC on January 20, 2010 by BlackRock, Inc. |
|
(2) |
|
This information is based on a Schedule 13G filed with the
SEC on February 1, 2010 by The Vanguard Group, Inc. |
|
(3) |
|
This information is based on the records of the Companys
transfer agent, Registrar and Transfer Company, records of
registered shareholders. |
15
AUDIT
COMMITTEE REPORT
In connection with the preparation and filing of the
Companys audited financial statements for the fiscal year
ended December 31, 2009 (the audited financial
statements), the Audit Committee performed the following
functions:
|
|
|
|
|
The Audit Committee reviewed and discussed with senior
management and PricewaterhouseCoopers LLP, the Companys
independent registered public accountants, the audited financial
statements, managements report on the effectiveness of the
Companys internal control over financial reporting and
PricewaterhouseCoopers LLPs evaluation of the
Companys internal control over financial reporting.
|
|
|
|
The Audit Committee also discussed with PricewaterhouseCoopers
LLP the matters required to be discussed by the Statement on
Auditing Standards No. 61 (AIPCA, Professional Standards,
vol. 1, AU sec. 380), as adopted by the Public Company
Accounting Oversight Board (PCAOB) in Rule 3200T.
|
|
|
|
The Audit Committee received the written disclosures and an
independence letter from PricewaterhouseCoopers LLP confirming
their independence with respect to the Company as required by
applicable requirements of the PCAOB. The Audit Committee
discussed with PricewaterhouseCoopers LLP its independence from
the Company, including whether the provision of non-audit
services provided by PricewaterhouseCoopers LLP to the Company
is consistent with maintaining their independence.
|
Based upon the functions performed, the Audit Committee
recommended to the Board of Directors, and the Board approved,
that the audited financial statements be included in the
Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009 for filing with
the U.S. Securities and Exchange Commission.
AUDIT COMMITTEE
Carol P. Wallace (Chairman)
David A. Lentini
Lisa J. Thibdaue
Arthur C. Reeds
This report shall not be deemed to be incorporated by
reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, and shall not otherwise be deemed filed under such
statutes.
PROPOSAL
(2) RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
The Audit Committee has appointed PricewaterhouseCoopers LLP to
serve as the Companys independent registered public
accounting firm and to audit our financial statements for the
fiscal year ending December 31, 2010. Although we are not
required to seek shareholder approval of this appointment, it
has been our practice for many years to do so. No determination
has been made as to what action the Audit Committee and the
Board of Directors would take if our shareholders fail to ratify
the appointment.
Even if the appointment is ratified by shareholders, the Audit
Committee retains discretion to appoint a new independent
registered public accounting firm at any time if the Audit
Committee concludes such a change would be in the best interests
of the Company.
Representatives of PricewaterhouseCoopers LLP will attend the
Annual Meeting of Shareholders, will have the opportunity to
make a statement, if they desire to do so, and are expected to
be available to respond to appropriate questions.
Independent
Registered Public Accountants Fees and Services
During fiscal year 2009, the Company retained its independent
registered public accountants, PricewaterhouseCoopers LLP, to
provide services in the following categories and amounts.
16
Audit
Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for
professional services rendered for the audit of the
Companys annual consolidated financial statements included
in the Companys Annual Report on
Form 10-K
and for the reviews of the financial statements included in the
Companys Quarterly Reports on
Form 10-Q
were $350,000 for the fiscal year ended December 31, 2008
and $350,000 for the fiscal year-ended December 31, 2009.
Audit
Related Fees
PricewaterhouseCoopers LLP performed audit related professional
services as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Audit of ERISA Plans
|
|
$
|
5,000
|
|
|
|
0
|
|
Accounting Consultation
|
|
|
8,000
|
|
|
|
0
|
|
Tax Basis Balance Sheet Review(1)
|
|
|
17,000
|
|
|
|
0
|
|
Form S-3
Registration Statement(2)
|
|
|
1,950
|
|
|
|
0
|
|
Bond Refinancing
|
|
|
0
|
|
|
|
4,700
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
31,950
|
|
|
$
|
4,700
|
|
All
Other Fees
In addition to the services and fees stated above,
PricewaterhouseCoopers LLP billed the Company for the following:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2009
|
|
Tax Services Fee(3)
|
|
$
|
70,000
|
|
|
$
|
67,000
|
|
Out-of Pocket Expenses
|
|
$
|
10,500
|
|
|
$
|
8,800
|
|
|
|
|
(1) |
|
In the 2008 Proxy Statement, the $17,000 fee for the Tax Basis
Balance Sheet Review was included in the Audit Fee of $367,000. |
|
(2) |
|
The Fee for the
Form S-3
Registration Statement was estimated at $2,000 for the 2008
Proxy. The actual fee was $1,950. |
|
(3) |
|
PricewaterhouseCoopers LLP was engaged by the Company in 2008
and 2009 to participate in the preparation of the Companys
2007 and 2008 state and federal income tax returns. |
In accordance with its charter, the Audit Committee pre-approved
all audit and non-audit fees for 2008 and 2009 listed above.
THE BOARD
RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL (2).
17
EXECUTIVE
COMPENSATION
Equity
Compensation Plan Information
The following table provides information about the
Companys common stock that may be issued upon the exercise
of options and vesting of other awards under all of the
Companys existing equity compensation plans as of
December 31, 2009. The table also includes information
about the Companys other equity compensation plans
previously adopted without shareholder approval.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Weighted
|
|
Number of securities
|
|
|
securities to be
|
|
average
|
|
remaining available
|
|
|
issued upon
|
|
exercise price
|
|
for issuance under
|
|
|
exercise of
|
|
of
|
|
equity compensation
|
|
|
outstanding
|
|
outstanding
|
|
plans (excluding
|
|
|
options,
|
|
options,
|
|
securities
|
|
|
warrants, and
|
|
warrants,
|
|
reflected in
|
|
|
rights
|
|
and rights
|
|
column (a))
|
Plan category
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity compensation plans approved by security holders(1)
|
|
|
77,388
|
|
|
$
|
26.24
|
|
|
|
782,337
|
|
Equity compensation plans not approved by security holders(2)
|
|
|
0
|
|
|
|
NA
|
|
|
|
273,154
|
|
Total
|
|
|
77,388
|
|
|
$
|
26.24
|
|
|
|
1,055,491
|
|
|
|
|
(1) |
|
Includes the Companys 1994 Performance Stock Program, as
amended and restated and approved by shareholders on
April 26, 2002 and the 2004 Performance Stock Program,
approved by shareholders on April 23, 2004. |
|
(2) |
|
Includes the Dividend Reinvestment and Common Stock Purchase
Plan (the DRIP or Plan), amended and restated as of
December 19, 2008. Under the Plan, customers and employees
of the Company and holders of common stock who elect to
participate may automatically reinvest all or specified
percentages of their dividends in additional shares of common
stock and may also make optional cash payments of up to $1,000
per month to purchase additional shares of common stock. The
Company may issue shares directly to the Plans agent in
order to meet the requirements of the Plan, or may direct the
agent administering the Plan on the Companys behalf to buy
the shares on the open market at its discretion. The
1,500,000 shares reserved for the Plan through
Form S-3
registrations prior to 2008 expired on December 1, 2008. On
December 19, 2008, a new
Form S-3
Registration Statement filed with the Securities and Exchange
Commission became effective that registered 346,066 shares
for the Plan. In 2009, 61,462 shares were issued through
the Plan. From late 1996 to January 31, 2004, the
Plans agent purchased shares on the open market. Since
February 2004, the Plans agent credits Plan participants
with shares issued by the Company from the DRIP reserve. |
|
(3) |
|
Revised to reflect all shares previously reserved by the
Companys Board of Directors and shares resulting from the
Companys 1998 and 2001
3-for-2
stock splits. |
COMPENSATION
DISCUSSION AND ANALYSIS
At the Company, honesty is one of our core values. We believe in
the power of this value and know the only way to build and
strengthen our reputation is through trust. We hold ourselves to
the highest standard of integrity and ethical behavior and
strive for transparency. We welcome the opportunity to share
this Compensation Discussion and Analysis (CD&A) with our
shareholders and rate payers.
In this section, we provide an overview and analysis of the
Companys compensation program and policies, the material
compensation decisions we have made under those programs and
policies, and the material factors that we considered in making
those decisions. Later in this proxy statement, under the
heading Additional Information Regarding Executive
Compensation, you will find a series of tables containing
specific information about the compensation awarded to the
following individuals, our Named Executive Officers (NEOs) in
2009, Chairman and Chief Executive Officer (CEO), Mr. Eric
W. Thornburg; Vice President, Finance and Chief Financial
Officer (CFO), Mr. David C. Benoit; Vice President,
Business Development, Mr. Thomas R. Marston; Vice
President, Service
18
Delivery, Mr. Terrance P. ONeill; and
Ms. Maureen P. Westbrook, Vice President, Customer and
Regulatory Affairs.
The compensation for these individuals is listed in tables found
in the CD&A and in the Executive Compensation sections of
this Proxy Statement.
PHILOSOPHY
AND GOALS OF OUR EXECUTIVE COMPENSATION PROGRAM
The Companys compensation philosophy is set by the
Compensation Committee (for purposes of this CD&A, the
Committee) and affirmed by the Board of Directors.
Our philosophy is described in the following table and is
intended to align executive officers compensation with the
Companys annual and long-term performance. A significant
portion of each NEOs total compensation opportunity is
directly related to the Companys earnings per share as
well as to other performance factors measuring our progress
toward the goals of our long-term strategic and business plans.
The Board of Directors has completed a risk analysis of all
Connecticut Water Company compensation policies and programs for
its employees and has determined that these policies and
programs are not reasonably likely to have a material adverse
effect on the Company. For further information please see the
Risk Assessment on page 32 of this document.
A review of our programs will highlight two core concepts of our
philosophy, pay for performance and pay at risk.
The following table highlights the primary components and
rationale of our compensation philosophy and the pay elements
that support the philosophy.
|
|
|
|
|
|
|
Philosophy/Component
|
|
|
Rational/Commentary
|
|
|
Pay Element
|
|
|
|
|
|
|
|
Compensation should reinforce business objectives and
values.
|
|
|
One of the Companys guiding principles is to provide an
enriching and rewarding workplace for our employees. Key goals
are to retain, motivate and reward executives while closely
aligning their interests with those of the Company, its
shareholders and rate payers. Our compensation practices help us
achieve these goals.
|
|
|
All elements (salary, annual and long-term equity linked
incentive awards, retirement, and health and welfare benefits).
|
|
|
|
|
|
|
|
A significant amount of compensation for NEOs should be based on
performance.
|
|
|
Risk appropriate, performance-based pay aligns the interest of
management with the Companys shareholders. Pay for a top
executive is highly dependent on performance success.
Performance-based compensation motivates and rewards individual
efforts, unit performance, and Company success. Potential
earnings under performance-based plans are structured such that
greater compensation can be realized in years of excellent
performance. Similarly, missing goals will result in lower, or
no, compensation from the performance-based plans.
|
|
|
Merit salary increases, annual and long-term equity linked
incentive awards (restricted stock, performance shares and
performance cash).
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
Philosophy/Component
|
|
|
Rational/Commentary
|
|
|
Pay Element
|
|
|
|
|
|
|
|
Compensation should be competitive.
|
|
|
The Compensation Committee has the authority to retain any legal
counsel, compensation consultant or other consultant to be used
to assist in the evaluation of director or executive
compensation. The Committee has engaged a recognized independent
compensation consultant every three years to analyze executive
compensation competitiveness and provide recommendations
regarding the Companys Total Pay Program.
|
|
|
All elements.
|
|
|
|
|
|
|
|
Key talent should be retained.
|
|
|
In order to attract and retain the highest caliber of
management, the Company seeks to provide financial security for
its executives over the long-term and to offer intangible
non-cash benefits in addition to other compensation that is
comparable with that offered by the Companys competitors.
|
|
|
Equity-linked annual and
long-term
incentive compensation, deferred compensation arrangements,
retirement benefits, employment agreements,
change-in-control
provisions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation should align interests of executives with
shareholders and rate payers.
|
|
|
Equity ownership helps ensure that the efforts of executives are
consistent with the objectives of shareholders and rate payers.
|
|
|
Equity-linked annual and
long-term
incentive compensation.
|
|
|
|
|
|
|
|
Elements
of Total Compensation
Executive
Summary
We recognize that a sound and risk appropriate management
compensation program is part of what makes a company an employer
of choice. Our compensation philosophy is to provide certain pay
elements that are directly linked to the Companys
performance results. By doing so, we are able to provide the
following: reasonable salaries that reflect each
executives responsibility level, qualifications and
contribution over time; benefits that adequately meet the needs
of our employees and their families at a reasonable shared cost;
meaningful, performance-based annual incentives; and long-term
equity incentives that reflect the creation of shareholder value
and drive other company objectives.
Of these four pay elements, we consider the annual and long-term
incentive forms of compensation to be the most important because
they enable us to attract, retain, motivate and reward talented
individuals who have the necessary skills to manage our growing
organization on a
day-to-day
basis as well as for the future.
The value of annual incentives is directly linked to specific
financial goals such as earnings per share, customer growth and
other specific individual objectives, such as customer and
employee satisfaction defined and approved by the Committee at
the beginning of each fiscal year. The long-term incentive plan
helps to mitigate the potential risk that an executive might
take short-term actions to achieve payouts through the annual
incentive plan.
Long-term incentives are provided to executive officers in three
forms: restricted stock, performance stock, and performance cash
and vest over a three year period as of 2009. This vesting
target is reviewed and established by the Committee for the
ensuing three year performance period.
To assist the Committee in executing its responsibilities, it
engages a consultant (see information on Compensation Consultant
page 23) every three years, or as needed, to provide
the Committee comparative
20
performance and pay data based upon a sample of 11
publicly-traded utilities (page 24). The peer group pay
data is derived from their proxy statements and helps the
Committee establish the salaries and target incentive award
opportunities for the NEOs. In addition to the peer utility
group compensation data, the Consultant selects certain well
known and respected published surveys on executive compensation
and includes that data, where appropriate, to provide a well
defined review.
In general, it is the intent of the Committee to have individual
base salaries fall within a plus or minus range of 25% from the
market median data established by the independent consultant.
Variations within the plus or minus 25% range can occur based on
length of service, performance, job grade, etc., and are
considered by the Committee annually in the merit increase award
process. Annual and long-term incentives are targeted at market
median for performance that meets targeted annual objectives.
Performance results can be above or below the targets set and
the Committee intends to have the incentive compensation award
levels mirror the actual performance results.
Discussion
of Specific Elements of Compensation
Our approach to total compensation is to create a comprehensive
compensation package designed to reward individual performance
based on the Companys short-term and long-term performance
and how this performance links to our corporate strategy. The
elements of our total compensation for executive officers,
including the NEOs, are as follows:
Rewarding
Short-Term Performance
|
|
|
|
|
Salary The fixed amount of compensation for
performing
day-to-day
responsibilities. Executives did not receive an increase to base
salaries in 2009.
|
|
|
|
Discretionary Bonuses In addition to annual
salaries paid to our NEOs, the Committee retains the right to
award cash bonuses to the NEOs in its sole discretion and best
business judgment, if the Committee determines that an NEO has
made a significant contribution to the Companys success in
the past year.
|
|
|
|
Annual Incentive Plan Annual incentive
compensation awards through the Companys Performance Stock
Plan (PSP). The form of these annual awards include restricted
stock with voluntary deferral opportunities into performance
shares
and/or cash
units. Awards through this plan are earned for achieving the
Companys short-term financial goals and other strategic
objectives measured for the current year and fully vest after
the completion of each fiscal year. Annual awards are structured
to provide competitively based and risk appropriate incentives
to our executives to improve Company performance.
|
21
Rewarding
Long-Term Performance
|
|
|
|
|
Long-Term Incentive Awards Long-term
performance-based awards (long-term awards) from the PSP in the
same form as the annual awards (stock option grants are
permissible under the 2004 PSP as approved by shareholders,
however, no options have been granted since 2003). Long-term
awards vest over three years as described further below. These
awards are granted to retain executives, build executive
ownership, and align compensation with achievement of the
Companys long-term financial goals, creating shareholder
value and achieving strategic objectives as measured over
multi-year periods. During 2009, we used the following equity
instruments:
|
|
|
|
LONG-TERM
|
|
|
INSTRUMENT
|
|
OBJECTIVE
|
|
Restricted Stock Units (RSUs)
|
|
Encourage retention and provide alignment with shareholders as
value received will be consistent with return to shareholders.
|
|
|
Performance Shares
|
|
This reward vehicle delivers relative shareholder return to the
NEO over a three-year performance period.
|
|
|
Performance Cash
|
|
This reward vehicle delivers relative shareholder return to the
NEO over a three-year performance period.
|
|
|
Other
Elements of Total Compensation
|
|
|
|
|
Other Welfare Benefits and Perquisites The
Company provides all active full-time employees with medical,
dental and vision benefits and life insurance coverage. We pay
all premiums for long-term disability and life insurance
coverage for all employees plus additional benefits if any
employee suffers a covered accidental loss resulting in death,
dismemberment or paralysis. The Committee granted
Mr. Thornburg a supplemental long-term disability policy in
2008, that when combined with the standard long-term disability
policy benefit provided to other NEOs, will provide a benefit
equal to 60% of his compensation in the event that he becomes
disabled. Each of our executive officers is entitled to these
benefits except for the supplemental long-term disability
policy, on the same basis as other employees. All active
full-time employees, including our executives, receive time off
with pay for vacation and sick leave in accordance with Company
policy. In accordance with Company policy, each NEO reimburses
the Company for mileage used on Company automobiles for personal
use, at rates determined by applicable Internal Revenue Service
(IRS) guidelines. Accordingly, under SEC rules, this personal
automobile use is not considered a perquisite by the Company.
|
|
|
|
Retirement Benefits Connecticut Water Company
qualified retirement plans are intended to provide competitive
retirement benefits to help attract and retain employees. Our
non-qualified retirement plans are intended to provide
executives with a retirement benefit that is comparable on a
percentage of salary basis to that of our other employees
participating in our qualified pension plan by providing the
benefits that are limited under current IRS regulations.
Specifics on these retirement related plans may be found later
in this document on page 42. Amounts accrued for the
Companys health and welfare benefits are also consistent
with those available to other Company employees.
|
|
|
|
Employment Agreements and
Change-in-Control
Severance Plans The Company has entered into
employment agreements, amended November 21, 2008 to comply
with the IRC Section 409A requirements, with the NEOs and
certain other executives in key roles. The
change-in-control
agreements entered into with executive officers are intended to
minimize the distraction and uncertainty that could affect key
management in the event we become involved in a transaction that
could result in a change of control. These agreements generally
address: role and responsibility; rights to compensation and
benefits during active employment; termination in the event of
death, disability or retirement and termination for cause or
without cause; and resignation by the employee. Contracts also
contain termination and related pay provisions in the event of a
change-in-control.
In all cases, for the
change-in-control
provisions in the employment agreements to apply,
|
22
|
|
|
|
|
there must be both (1) a
change-in-control,
as well as (2) a termination by the Company without cause
or a resignation by the executive for good reason. This is
commonly referenced as a double trigger requirement.
Further, the agreements stipulate that the executive may not
compete with the Company for prescribed periods following
termination of employment or disclose confidential information.
Each of the
change-in-control
agreements, except those agreements with the NEOs, limit the
amount of the payments that may be made under the agreements to
the Internal Revenue Services limitation on the
deductibility of these payments under Section 280G of the
Internal Revenue Code (the Code). The agreements
with the NEOs do not contain this limitation and require the
Company to reimburse them for certain tax impacts of exceeding
this limit. See The Impact of Tax Considerations on
Executive Compensation Decisions on page 32. Payments
under the NEOs agreements are, however, contingent on
their agreement to a
24-month
noncompete agreement. We believe that the multiples of
compensation and other benefits provided under the
change-in-control
agreements, as described on page 37, are consistent with
generally accepted practices in the market. The Company has no
formal
change-in-control
or severance policy. However, as noted here, individual
employment agreements generally have provisions related to both
change-in-control
and severance.
|
|
|
|
|
|
Other Compensation Matching contributions to
the Company Savings Plans and executive deferral in recognition
of service and contributions to the Company. All employees,
including NEOs, may participate in the Savings Plan of The
Connecticut Water Company (401(k)), as amended and restated in
March 2010. Effective January 1, 2009, the Company changed
its 401(k) plan to meet the requirements of a special IRS safe
harbor. Under the provisions of this safe harbor plan the
Company makes an automatic, non-elective contribution of 3% of
compensation for all eligible employees hired prior to
January 1, 2009 and an additional 1.5% non-elective
contribution to eligible employees hired after January 1,
2009, even if the employee does not make their own
contributions. Executive officers may elect to defer
compensation under a non-qualified salary deferral plan. The
Company maintains a non-qualified Executive Deferred
Compensation Plan and Director Deferred Compensation Plan that
allow eligible members of management and the Board of Directors
to defer a portion of their normal compensation. Management may
defer their salary and annual cash incentives under the
Executive Deferred Compensation Plan. Deferred amounts are
credited interest on a semi-annual basis at an interest rate
equal to Moodys AAA Corporate Bond Yield Average Rate,
plus an additional 1.5% 3%.
|
|
|
|
Other Benefits As offered to other company
employees, disability, life and supplemental life insurance as
well as customary vacation, leave of absence and other similar
policies.
|
Compensation
Consultant
The Compensation Committee retains a compensation consultant
every three years, or as needed, to review, benchmark and
provide advice on executive compensation matters. The most
recent executive compensation review was performed in 2008 when
the Committee engaged the services of Thomas E. Shea of
TES & Associates, hereafter know as the
Consultant. In 2008, the Consultant provided advice
and information regarding the design and implementation of the
Companys executive compensation programs, and updated the
Committee about regulatory and other technical developments that
may affect the Companys executive compensation programs.
In addition, the Consultant provided the Committee with
competitive market information, analyses and trends on base
salary, short-term incentives, long-term incentives, executive
benefits and perquisites. The Committee believes that the
Consultant provides candid, direct and objective advice to the
Committee, to that end:
|
|
|
|
|
the Committee directly selected and engaged the Consultant;
|
|
|
|
the Consultant is engaged by and reports directly to the
Committee and the Chair of the Committee;
|
|
|
|
the Consultant meets as needed with the Committee in executive
sessions that are not attended by any of the Companys
officers;
|
23
|
|
|
|
|
the Consultant has direct access to the Committee Chair and
members of the Committee during and between meetings; and
|
|
|
|
interactions between the Consultant and management generally are
limited to internal data gathering, discussions on behalf of the
Committee and information presented to the Committee for
approval.
|
Consultant
Independence
The Committee is solely responsible for engaging, retaining and
terminating compensation consultants and determining their terms
and conditions, including the fees. The Committee determines
whether the compensation consultants advice is objective
and free from the influence of management. It also closely
examines the safeguards and steps the Consultant takes to ensure
that its executive compensation consulting services are
independent and objective.
Competitive
Positioning
In 2008, the Committee reaffirmed a total pay compensation
philosophy, as discussed in the Executive Summary
(page 20), to target the pay of our executives in a range
of plus or minus 25% of the median of both a peer group of
utility comparators and data from selected general industry
published surveys. The competitive total annual compensation is
determined by an arithmetical average of the Utility Comparator
25th percentile; multiple regression size adjusted data for
the utility peer group and published survey data.
The utility peer comparators listed below were independently
recommended by the Consultant, and finalized and approved based
upon input from the Committee Chairman and the Companys
Chairman, President and CEO. The Committee reviewed proxy
statements for the peer group entities which provided
philosophy, program design and total direct compensation
statistical data for the Top 5 Executive Officers by rank order
of pay. The Committee then approximated the 25th percentile for
all three of the criterion. The Committee utilized 25th
percentile data as well as multiple regression analysis (with
revenue, employees and number of customers as the independent
variables) to adjust the data for size and provide comparisons
comparable to the Companys scope of operations.
Utility
Peer Group
The Committee established a utility peer group of the following
companies in 2008 and reviews this list at each compensation
study for relevance:
|
|
|
American States Water Co.
|
|
Middlesex Water Co.
|
American Water Works
|
|
Pennichuck Corp.
|
Aqua America
|
|
SJW Corp.
|
Artesian Resources
|
|
Southwest Water Co.
|
California Water Service Group
|
|
UI Holdings Corp.
|
York Water Co.
|
|
|
Published
Surveys
The Committee reviewed the following surveys in conjunction with
its 2008 executive compensation benchmarking review:
|
|
|
Watson Wyatt
|
|
|
The Survey Group Management Compensation Report (New England)
|
|
|
Mercer Executive Benchmark database
|
These published surveys were utilized in the 2008 study because
executive and officer jobs are typically viewed as part of a
broader labor market.
Using the information from this utility peer group and published
surveys, the Committee compared each executive officer position
to similar positions at other companies. Where there was no
similar position, the
24
Committee compared the Company position to a range of positions
from the two resources that were the closest matches, and then
assigned the Company position to a salary grade.
The Committee used these salary grades to determine the
preliminary salary recommendation, the preliminary target
incentive award opportunity, and the target long-term equity
incentive award value for each executive position. Each salary
grade is expressed as a range with a minimum, midpoint, and
maximum. The Committee seeks to set the midpoint for salaries,
target incentive award levels, and target annual long-term
incentive award values for our Executive Officer positions to
plus or minus 25% of the median for executives in equivalent
positions in the utility peer group and published survey data.
The minimum level of each salary grade is set close to the
bottom quartile of these groups, while the maximum level is set
close to the top quartile of each group.
This framework provides a guide for the Committees
deliberations. The actual total compensation
and/or
amount of each compensation element for an individual executive
officer may be more or less than this median figure.
How We
Make Compensation Decisions
In conjunction with the review and approval of the upcoming
years financial and strategic plans each Fall, the
Committee determines the level of potential awards through the
Companys PSP for the upcoming year, and undertakes a risk
analysis to identify any adverse material impacts and take steps
to mitigate such impacts. The specific performance goals are
established and the corresponding maximum and minimum awards are
determined by the Committee with input from the Consultant. At
the conclusion of the years performance being measured,
the Committee determines for each NEO what portion of the awards
was actually earned, based upon the achievement of performance
goals set in the financial and strategic business plans. The
awards are then made to the participants. Long-term awards have
a vesting period that must be satisfied, pre-established goals
that must be achieved and a continued employment term of three
or four years, as dictated by the individual plan year.
In the first quarter of each year, the Committee reviews the
total compensation of our leadership team, the executive
officers reporting to the CEO, including salaries, target annual
and long-term incentive award values, perquisites and other
benefits (including retirement, health, and welfare benefits),
and
change-in-control
arrangements. The Committee receives an annual report from the
CEO in executive session on each individual executives
historical compensation information; each executives
performance reviews; a progress report on the executives
results in achieving strategic objectives; and general
competitive market information pertaining to salary increase
budgets and executive compensation. Every three years, or as
frequently as the Committee desires, a recognized independent
compensation consultant is engaged to analyze executive
compensation competitiveness and reasonableness of the
Companys executive officer pay levels and program.
Comparisons have regularly been made to a sample of larger and
smaller publicly-traded water company competitors for executive
talent, including our Utility Peer Group members. The Consultant
also provides recommendations regarding Total Pay Program
strategy, mix and award practices based upon competitive market
trends as well as tax and financial efficiencies.
Ernst & Young LLP provided an analysis and
recommendation to the Committee on July 31, 2002, Pearl
Meyer & Partners provided an analysis and
recommendation to the Committee on August 30, 2005 and
TES & Associates did so most recently on
December 3, 2008.
The Committee then sets each executives compensation
target for the current year. Typically, this involves
establishing annual merit opportunities. Merit pay adjustments
become effective on a date determined by the Committee,
typically in the first or second quarter of the year. The
Committees decisions are then reported to and reviewed by
the Board.
Decisions about individual compensation elements and total
compensation are ultimately made by the Committee using its best
business judgment, focusing primarily on the executive
officers performance against his or her individual
financial and strategic objectives, as well as the
Companys overall performance. The Committee also considers
a variety of qualitative factors, including the business
environment in which the financial and strategic objectives were
achieved. Thus, with the exception of the performance share
awards discussed below, the compensation of our executives is
not entirely determined by formula.
25
Total
Annual Cash Compensation
The Companys executives recommended to the Compensation
Committee that they not be granted increases to base pay in 2009
based on several factors: the challenging business environment
in Connecticut, their view of the critical importance of
maintaining staffing levels without layoffs, and in response to
the continuing recessionary environment in the United States.
The Committee accepted this recommendation and made no base
salary increases for any of the NEOs in 2009. The Committee then
reviewed 2009 market data on executive grade range adjustments
and concluded that a modest two percent increase to the grade
range midpoints for each of the NEOs was appropriate to maintain
the competitiveness of ranges and to recalibrate the long and
short-term award opportunities for 2010. This grade range
increase, however, did not result in any base salary changes for
the NEOs in 2009. The following table illustrates the 2010 grade
range midpoints and annual and long-term award opportunities for
the NEOs.
|
|
|
|
|
|
|
|
|
|
|
2010 Salary Range Midpoints
|
|
|
|
|
Annual and Long-Term
|
|
|
|
|
Award% at
|
|
|
Midpoint
|
|
Target for 2009
|
|
Mr. Thornburg
|
|
$
|
374,011
|
|
|
|
40
|
%
|
Mr. Benoit
|
|
$
|
226,257
|
|
|
|
25
|
%
|
Mr. Marston
|
|
$
|
199,518
|
|
|
|
20
|
%
|
Mr. ONeill
|
|
$
|
199,518
|
|
|
|
20
|
%
|
Ms. Westbrook
|
|
$
|
199,518
|
|
|
|
20
|
%
|
The primary reasons for individual variation of salaries from
the market median include length of time in the current position
and individual performance. Based on the manner in which the
Company manages base salaries, it is expected that actual and
market salaries will eventually converge. Since annual cash
incentive targets and the annualized value of long-term
incentive targets are applied to actual base salaries, total
compensation levels may similarly differ from market median
total compensation levels.
This policy results in a greater percentage of total
compensation (excluding benefits) for the NEOs being performance
based. The table below shows 2009 total performance-related
percentages for the NEOs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
|
|
|
|
|
|
|
PSP -
|
|
Total
|
|
|
Fixed
|
|
PSP-Annual
|
|
Long-Term
|
|
Performance
|
|
|
Salary
|
|
Incentive
|
|
Incentive
|
|
Related
|
NEOs
|
|
(% of Total)
|
|
(% of Total)
|
|
(% of Total)
|
|
(% of Total)
|
|
M. Thornburg
|
|
|
82.18
|
%
|
|
|
17.82
|
%
|
|
|
0.00
|
%
|
|
|
17.82
|
%
|
Mr. Benoit
|
|
|
80.88
|
%
|
|
|
9.98
|
%
|
|
|
9.14
|
%
|
|
|
19.12
|
%
|
Mr. Marston
|
|
|
86.82
|
%
|
|
|
13.18
|
%
|
|
|
0.00
|
%
|
|
|
13.18
|
%
|
Mr. ONeill
|
|
|
85.64
|
%
|
|
|
10.65
|
%
|
|
|
3.71
|
%
|
|
|
14.36
|
%
|
Ms. Westbrook
|
|
|
87.00
|
%
|
|
|
8.95
|
%
|
|
|
4.05
|
%
|
|
|
13.00
|
%
|
Performance
Objectives and Annual Incentive Awards Though the PSP
We carefully set annual incentives through the PSP to reward our
executive officers, including the NEOs, for the Companys
annual performance in achieving pre-established financial and
strategic goals set at both the Company level and the individual
level. In the Fall of each year, based on
Mr. Thornburgs recommendations for his direct officer
reports, the Committee reviews this information to determine if
any material adverse impact may arise as a result of the
recommendations and then establishes the target annual incentive
award opportunity for each executive salary grade, approves the
performance objectives for the upcoming performance year and
reviews those actions with the Board. All references to
Mr. Thornburgs recommendations relate to executives
other than himself. All decisions related to Mr. Thornburg
are made by the Committee and are reviewed with the Board in
accordance with the Committees Charter.
26
Threshold,
Target and Maximum Award Opportunities
The Committee establishes a threshold, target, and maximum
incentive amount for each NEO expressed as a percentage of the
salary range midpoint for the annual and long-term awards as
detailed in the table below. These amounts were revised for the
2009 plan year based on the advice of the Consultant, the
Committees evaluation of competitive market data and
internal equitability and then the salary grade midpoints were
adjusted by two percent for 2010 to maintain pace with market
compensation growth levels. The PSP is used by the Committee to
pay fully competitive annual cash compensation and provide
competitive longer-term stock compensation awards when
performance against goals matches the target level. Performance
against any objective that is below threshold will result in no
award being paid for such objective. However, the Committee has
the authority in determining the amounts of annual and long-term
awards, to modify the mathematical results (for example, in a
year in that an event beyond managements control, such as
extremely wet conditions, were to decrease revenues and earnings
significantly) when the Compensation Committee, exercising its
sound business judgment, deems it prudent to do so. No such
discretion was used in determining the 2009 awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Performance Stock Plan Annual & Long-Term Awards
as
|
|
|
Percent of Salary Grade Midpoint
|
|
|
2009 Salary Grade
|
|
PSP Award at
|
|
PSP Award at
|
|
PSP Award at
|
NEOs
|
|
Midpoint
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Mr. Thornburg
|
|
$
|
366,677
|
|
|
|
20
|
%
|
|
|
40
|
%
|
|
|
60
|
%
|
Mr. Benoit
|
|
$
|
221,821
|
|
|
|
15
|
%
|
|
|
25
|
%
|
|
|
40
|
%
|
Mr. Marston
|
|
$
|
195,606
|
|
|
|
10
|
%
|
|
|
20
|
%
|
|
|
30
|
%
|
Mr. ONeill
|
|
$
|
195,606
|
|
|
|
10
|
%
|
|
|
20
|
%
|
|
|
30
|
%
|
Ms. Westbrook
|
|
$
|
195,606
|
|
|
|
10
|
%
|
|
|
20
|
%
|
|
|
30
|
%
|
Performance
Objectives
Based on Mr. Thornburgs recommendations and an
analysis of the associated potential risk points, the Committee
approves the financial and strategic performance objectives for
each executive officer, including the NEOs. In selecting the
financial performance objectives, the Committee sought to have
the executives focus on the Companys operating financial
performance, including in 2009, target earnings per share of
$1.20 at a weight of 60%, customer satisfaction, employee
satisfaction and customer growth targets at a combined weight of
20% and individual NEO objectives also set a weight of 20%.
These individual objectives were set to reward each executive
for actions successfully taken that were directly related to his
or her own job responsibilities and to reinforce accountability.
2009
Performance Process
In executive session, the Committee selected and weighted
Mr. Thornburgs goals, taking into consideration the
Companys current financial and strategic priorities. The
Committee recognizes that earnings per share should be
emphasized, but also that performance against this metric may
not be reflected in a single
12-month
period. For 2009, 60% of Mr. Thornburgs annual
incentive award opportunity was based on the Committees
assessment of the Companys total financial performance.
Each of these goals are further defined by identifying the
Threshold level of performance (80%), Target or expected
performance (100%) and Maximum level of performance (120%).
Mr. Thornburgs financial performance for 2009 was
measured by the following metrics:
|
|
|
|
|
Earnings Per Share $1.20
|
The remaining 40% of his award opportunity was based on the
Committees assessment of the following strategic goals:
|
|
|
|
|
Customer Satisfaction;
|
|
|
|
Employee Satisfaction;
|
|
|
|
Customer Growth;
|
|
|
|
Deliver results through acquisitions and non-rate revenue growth;
|
27
|
|
|
|
|
Present the Connecticut Water story at investment analyst
conferences, improve coverage and expand institutional ownership
levels; and
|
|
|
|
Achieve a top tier ranking for total shareholder return in
relation to all publicly traded water utilities.
|
The Committee selected these strategic goals based on its
judgment that they represent areas where Mr. Thornburg
should focus his energies to continue to drive the
Companys business forward. The potential risks associated
with Mr. Thornburgs performance goals were reviewed
by the Committee and with the Board and his progress was
periodically reviewed by these same entities during the year.
For 2009, annual incentives for our other NEOs were based on
performance measured against a combination of financial goals
and one or more strategic goals, related to the Companys
business for the year, as follows:
Weightings
Assigned to Each Performance Objective for the Other
NEOs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Benoit
|
|
|
Mr. Marston
|
|
|
Mr. ONeill
|
|
|
Ms. Westbrook
|
|
|
Financial Objectives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Share $1.20
|
|
|
60
|
%
|
|
|
60
|
%
|
|
|
60
|
%
|
|
|
60
|
%
|
Total Financial Objectives
|
|
|
60
|
%
|
|
|
60
|
%
|
|
|
60
|
%
|
|
|
60
|
%
|
Company Metrics (Customer Satisfaction, Employee
Satisfaction, Customer Growth)
|
|
|
20
|
%
|
|
|
20
|
%
|
|
|
20
|
%
|
|
|
20
|
%
|
Individual Strategic Objectives
|
|
|
20
|
%
|
|
|
20
|
%
|
|
|
20
|
%
|
|
|
20
|
%
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
The Committee set the target levels for the financial and
strategic objectives relating to the annual incentive awards and
concluded that the relationship between the payments generated
at the various levels of achievement for the NEOs other than
Mr. Thornburg and the degree of difficulty of attainment of
the performance targets was significant and reasonable given the
ongoing weak business environment and related factors.
Performance
Objectives and Long-Term Incentive Awards Though the
PSP
We use long-term incentives through the PSP to reward our
executive officers, including the NEOs, for the Companys
longer-term performance in achieving pre-established financial
and strategic goals set at both the Company and individual
level. In the last quarter of each year, based on
Mr. Thornburgs recommendations for his direct officer
reports, the Committee establishes the target long-term
incentive award opportunity for each executive salary grade and
approves the performance objectives for the upcoming performance
year. All references to Mr. Thornburgs
recommendations relate to executives other than himself. All
decisions related to Mr. Thornburg are made by the
Committee and are reviewed with the Board in accordance with our
Committees Charter.
Target
Award Opportunities
Each NEOs 2009 target incentive award opportunity was set
as a percentage of salary grade midpoint. The Committee
determined the target incentive levels based on its evaluation
of competitive market data and internal equity.
For 2009, target incentive opportunities for the NEOs ranged
from 20-40%
of salary grade midpoints. These target levels are at market
median for similar positions. Should an executive have
responsibilities increased during the year
and/or be
promoted, the target incentive opportunity for the year may be
adjusted pro rata to reflect the new salary range and target
bonus opportunity.
Performance
Objectives
Based on Mr. Thornburgs recommendation, the Committee
approves the financial and strategic performance objectives for
each executive officer, including all NEOs. In selecting the
financial performance objectives, the Committee sought to have
the executives focus on the Companys 2009 earnings per
share at a weight of 60% and customer growth for 40% of the
award total.
28
2009
Performance Process
The Committee selected and weighted Mr. Thornburgs
goals, taking into consideration the Companys current
financial and strategic priorities and reviewing all associated
elements of risk. The Committee recognizes that earnings per
share should be emphasized. For 2009, 60% of
Mr. Thornburgs long-term incentive award opportunity
was based on the Committees assessment of the
Companys achievement of the 2009 earnings per share target
defined in 2008. Mr. Thornburgs financial performance
for 2009 was measured by the following metrics:
|
|
|
|
|
Earnings Per Share 60%
|
|
|
|
Customer Growth 40%
|
The Committee selected these strategic goals based on its
judgment that they represent areas where Mr. Thornburg
should focus his energies to drive the Companys business
forward. Mr. Thornburgs goals were reviewed with the
Board and his progress was periodically reviewed by the
Committee and the Board during the year.
For 2009, long-term incentives for our other NEOs were based on
performance measured against a combination of financial goals
and one strategic goal, related to the Companys growth in
residential equivalents over a period of three years as follows:
Weightings
Assigned to Each Performance Objective for the Other
NEOs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Benoit
|
|
|
Mr. Marston
|
|
|
Mr. ONeill
|
|
|
Ms. Westbrook
|
|
|
Financial Objectives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Share $1.20
|
|
|
60
|
%
|
|
|
60
|
%
|
|
|
60
|
%
|
|
|
60
|
%
|
Company Metrics Customer Growth
|
|
|
40
|
%
|
|
|
40
|
%
|
|
|
40
|
%
|
|
|
40
|
%
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
The Committee set the target levels for the financial and
strategic objectives relating to the long-term incentive awards
and concluded that the relationship between the payments
generated at the various levels of achievement and the degree of
difficulty of the targets was significant and reasonable given
the ongoing weak business environment and related factors.
PSP
Achievement Process
The Companys 2009 Strategic Plan provided the targets for
awards through the 2004 PSP that were then payable in 2010.
As reported previously, the Committee met in late 2007 with the
intent of adjusting the components of the long-term incentive to
enhance the alignment of the participants incentives with
that of the Companys shareholders and rate payers. To
accomplish this, the Committee approved changes to the long-term
awards to differentiate the goals between the annual and
long-term incentive and modify the vesting period for the
long-term awards. In 2008, 2009 and succeeding plan years, the
long-term awards will be measured by attainment of earnings per
share and Company metrics (such as customer satisfaction,
employee satisfaction and customer growth), and vest 33.33% per
year ratably over three years beginning on the first anniversary
of the earning of the award as long as the participant remains
employed by the Company.
The Compensation Committee met on March 10, 2009, and
finalized amounts payable as annual and long-term incentive
awards to the NEOs. For the long-term awards, the Boards
previously established earnings per share target for 2008 of
$1.12 per common share was achieved; thus the NEOs received 100%
of their award allocation based on the Companys financial
results. The performance goal of adding 1,600 residential
equivalent customers, a two percent increase over 2007, was
exceeded in the 2008 plan year resulting in a payout over target
of 105% for a total combined payout of 102% through the
Long-Term Plan. The Short-Term Plan included the previously
detailed earnings per share target of $1.12 providing an award
equal to 100% of target for each NEO, providing 60% to the award
allocation. Achievement of the defined performance indicators,
such as customer satisfaction, employee satisfaction and growth
of residential equivalents were achieved at amounts between
threshold and maximum levels
29
and added 20.1% to the award allocation. Individual initiatives
were achieved at threshold/target/maximum levels and added
between 17% and 24% to the incentive award allocation. Thus,
each of the NEOs received between 96.5 and 104.1% of their
target award allocations for 2008 as follows:
|
|
|
|
|
|
|
|
|
|
|
2008 Annual and Long-Term PSP Awards Earned in 2009
|
|
|
Annual PSP Award
|
|
Long-Term Award
|
|
Mr. Thornburg
|
|
$
|
106,564
|
|
|
$
|
111,059
|
|
Mr. Benoit
|
|
$
|
40,205
|
|
|
$
|
44,791
|
|
Mr. Marston
|
|
$
|
38,839
|
|
|
$
|
39,497
|
|
Mr. ONeill
|
|
$
|
37,805
|
|
|
$
|
39,497
|
|
Ms. Westbrook
|
|
$
|
37,334
|
|
|
$
|
39,497
|
|
In April 2009, 33.33% of the long-term award was paid to each
NEO with the remaining 66.66% to be paid ratably on the
anniversary date of the earning of the award in April of 2010
and 2011, as long as the participant remains employed by the
Company.
The Committee also met on March 9, 2010, and finalized
amounts payable as annual and long-term incentive awards to the
NEOs through the PSP for 2009.
As previously reported, the long-term component of the PSP now
bases NEO awards on the achievement of financial performance and
strategic growth results over three years. In 2008 and 2009, the
Company worked to transition to this structure such that the
Board defined earnings per share and strategic growth goals for
2008 and 2009, established in 2007 accounting for 66.66% of the
2009 long-term award payout and goals in the same categories for
2009, established in 2008, accounted for 33.33% of the long-term
award payout. Our transition to long-term award based on three
years of performance against strategic goals will be complete at
the close of the 2010 PSP year when 33.33% of the Award will be
based on earnings per share and strategic growth targets for
2010 set in 2007, 2008 and 2009.
Following is an illustration of the business cycles, goals and
achievement levels for the 2009 awards approved for payment
beginning in 2010 and vesting ratably over a three-year period,
2010 through 2012, as long as the participant remains employed
by the Company.
Business
plan cycle 2008, established late in 2007 accounting for 66.66%
of the 2009 Long-Term Award
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
Achieved
|
|
%Earned
|
|
Earnings Per Share
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$1.15
|
|
$
|
1.20
|
|
|
|
72
|
%
|
Strategic Growth
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
1,650 Residential Equivalents
|
|
|
1,810
|
|
|
|
41.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
113.1
|
%
|
Business
plan cycle 2009, established in 2008 accounting for 33.33% of
the 2009 Long-Term Award
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
Achieved
|
|
%Earned
|
|
Earnings Per Share
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$1.20
|
|
$
|
1.20
|
|
|
|
60
|
%
|
Strategic Growth
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
1,750 Residential Equivalents
|
|
|
1,810
|
|
|
|
42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
102
|
%
|
|
|
|
|
|
|
|
|
|
2009 Performance Established in 2007
|
|
|
|
|
|
|
75.4%
|
|
2009 Performance Established in 2008
|
|
|
|
|
|
|
34.0%
|
|
30
In 2008, the Boards established an earnings per share maximum
level of performance for 2009 of $1.20 per basic common share
and a strategic growth target of increasing our customer base by
1,650 residential equivalents was exceeded; thus the NEOs will
receive 75.39% of their award allocation, based on the
Companys 2009 financial and strategic results in the
long-term plan. The Short-Term Plan included the earnings per
share target achieved at 100%, defined performance indicators,
such as customer satisfaction and customer growth were achieved
at threshold or better levels and added 14.0% to the award
allocation. Individual initiatives were achieved at various
levels per the following table and added an additional amount to
each of the NEOs awards as indicated in the tables below.
2009
Annual Plan Individual Goals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David C. Benoit, Vice President & CFO
|
|
|
2009 Annual Plan Individual Goals
|
|
|
Weighting
|
|
Achievement Level
|
|
Goal Value
|
|
Direct ERP implementation per budget and project time line;
|
|
|
7.00
|
%
|
|
|
7.00
|
%
|
|
$
|
3,882
|
|
Develop and implement short & long-term financing plan
|
|
|
6.00
|
%
|
|
|
6.00
|
%
|
|
$
|
3,327
|
|
Develop strategy and effect filing of general rate case
|
|
|
7.00
|
%
|
|
|
8.40
|
%
|
|
$
|
6,211
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
13,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas R. Marston, Vice President,
|
|
|
Business Development
|
|
|
2009 Annual Plan Individual Goals
|
|
|
Weighting
|
|
Achievement Level
|
|
Goal Value
|
|
Increase CWC customers by 2,200 residential equivalents
|
|
|
10
|
%
|
|
|
8.30
|
%
|
|
$
|
2,249
|
|
Increase Non-Rate Revenue to $1,500,000 Net After Tax
|
|
|
10
|
%
|
|
|
11.50
|
%
|
|
$
|
5,379
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
7,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terrance P. ONeill, Vice President,
|
|
|
Service Delivery
|
|
|
2009 Annual Plan Individual Goals
|
|
|
Weighting
|
|
Achievement Level
|
|
Goal Value
|
|
Drive and implement work asset management project
|
|
|
6
|
%
|
|
|
7.20
|
%
|
|
$
|
3,521
|
|
Successfully implement a WICA surcharge in 2009
|
|
|
6
|
%
|
|
|
7.20
|
%
|
|
$
|
3,521
|
|
Increase non-rate revenue earning for the Mansfield Division
|
|
|
4
|
%
|
|
|
4.00
|
%
|
|
$
|
1,565
|
|
Execute contiuing service agreement with key clients in 2009
|
|
|
4
|
%
|
|
|
3.20
|
%
|
|
$
|
782
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
9,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maureen P. Westbrook, Vice President,
|
|
|
Customer and Regulatory Affairs
|
|
|
2009 Annual Plan Individual Goals
|
|
|
Weighting
|
|
Achievement Level
|
|
Goal Value
|
|
Finalize process for land sale, deliver target earnings for
financial plan
|
|
|
6
|
%
|
|
|
6.00
|
%
|
|
$
|
2,347
|
|
Develop and implement communications plan for WICA increases and
general rate case
|
|
|
6
|
%
|
|
|
6.00
|
%
|
|
$
|
2,347
|
|
Deliver growth in non-rate revenue segment consistant with
financial plan
|
|
|
5
|
%
|
|
|
5.50
|
%
|
|
$
|
2,445
|
|
Develop and implement plan to improve Public Opinion
Leaders satisfaction
|
|
|
3
|
%
|
|
|
3.50
|
%
|
|
$
|
1,663
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
8,802
|
|
31
Total awards earned through the PSP for the 2009 plan year were
as follows:
|
|
|
|
|
|
|
|
|
|
|
2009 Annual and Long-Term PSP Awards
|
|
|
Earned in 2009
|
|
|
Annual PSP Award
|
|
Long-Term Award
|
|
Mr. Thornburg
|
|
$
|
131,270
|
|
|
$
|
179,272
|
|
Mr. Benoit
|
|
$
|
54,567
|
|
|
$
|
70,326
|
|
Mr. Marston
|
|
$
|
36,578
|
|
|
$
|
47,818
|
|
Mr. ONeill
|
|
$
|
37,752
|
|
|
$
|
47,818
|
|
Ms. Westbrook
|
|
$
|
39,121
|
|
|
$
|
47,818
|
|
The
Impact of Tax Considerations on Executive Compensation
Decisions
While the Companys executive compensation program is
structured to be sensitive to the deductibility of compensation
for federal income tax purposes, the program is principally
designed to achieve our objectives as described throughout this
Compensation Discussion and Analysis. Section 162(m) of the
Internal Revenue (IRC) Code of 1986 generally precludes the
deduction for federal income tax purposes of more than
$1 million in compensation (including long-term incentives)
paid individually to our Chief Executive Officer and the other
NEOs in any one year, subject to certain specified exceptions.
As noted above, under the amended and restated employment
agreement and
change-in-control
plan descriptions on page 37, in the event that any payment
or benefit received or to be received by the executive under the
agreement would be an excess parachute payment, as
defined in (IRC) Section 280G, and subject to the federal
excise tax imposed by IRC Section 4999, then an additional
gross-up
payment will be made to the named executive in the event that
the benefits payable to the named executive under agreement
becomes subject to the excise tax on excess parachute payments.
The gross-up
payment would compensate the named executive for the initial 20%
excise tax payable on their excess parachute payments plus the
income and excise taxes then becoming payable on the
gross-up
payment. We included these provisions in these agreements
because we did not want the potential excise tax to serve as a
disincentive to pursue a
change-in-control
transaction that might otherwise be in the best interests of our
shareholders. We believe that, in light of our NEOs record of
performance, this determination is appropriate.
COMPENSATION
COMMITTEE REPORT
We have reviewed and discussed the Compensation Discussion and
Analysis with the Companys management, and, based on our
review and discussions and such other matters deemed relevant
and appropriate by the Compensation Committee, we recommend to
the Board that the Compensation Discussion and Analysis be
included in this Proxy Statement.
THE COMPENSATION COMMITTEE
Donald B. Wilbur (Chairman)
Heather Hunt
Mark G. Kachur
David A. Lentini
Carol P. Wallace
This report shall not be deemed to be incorporated by
reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, and shall not otherwise be deemed filed under such
statutes.
Risk
Assessment
The Compensation Committee of the Board of Directors regularly
reviews the compensation policies and practices for all
employees, including executive officers and believes that our
compensation policies do not and are not reasonably likely to
create a material adverse effect on the Company. The Committee
makes this decision based
32
on analysis and discussion of the following key factors,
presented by knowledgeable industry professionals that have the
potential to encourage excessive risk-taking:
|
|
|
|
|
An excessive focus on equity compensation;
|
|
|
|
A total direct compensation mix weighted toward annual
incentives;
|
|
|
|
Uncapped payouts;
|
|
|
|
Unreasonable or undefined incentive plan goals; and,
|
|
|
|
Incentive payout cliffs that may encourage
short-term business decisions to achieve payout parameters.
|
The Committee highlights the following design features of our
PSP that operate to mitigate the concern of excessive risk
taking for participants:
|
|
|
|
|
All plan parameters, including design, metrics and payout
targets are reviewed by an independent compensation consultant
engaged by the Committee;
|
|
|
|
The incentive plan design provides for a conservative mix of
cash and equity, annual and long-term incentives and performance
metrics including earnings per share, growth in customers,
customer and employee satisfaction;
|
|
|
|
Goals are appropriately defined to avoid targets that, if not
achieved, result in a large percentage loss of compensation;
|
|
|
|
Rolling three year, long-term performance targets discourage
short-term risk taking;
|
|
|
|
Maximum payout levels for incentives are capped;
|
|
|
|
All executives participate in the same incentive plan, the
Performance Share Plan;
|
|
|
|
The company does not currently grant stock options;
|
|
|
|
The Compensation Committee has the power to reduce payouts at
their discretion; and,
|
|
|
|
As a public water utility, the Companys primary subsidiary
does not face the same level of risks associated with
compensation for employees and executives at financial services
or technology companies.
|
The Committee determined that, for all non-executive employees,
the Companys compensation programs are low risk. The
Company maintains a single discretionary annual bonus program
for non-executive employees rewarding world class customer
service satisfaction scores. This bonus, when paid is less than
a week of wages for participants.
33
ADDITIONAL
INFORMATION REGARDING EXECUTIVE COMPENSATION
2009
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Non-Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
Name & Principal
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Position
|
|
Year
|
|
|
($)(A)
|
|
|
($)
|
|
|
($)(B)
|
|
|
($)(C)
|
|
|
($)(D)
|
|
|
($)(E)
|
|
|
($)(F)
|
|
|
($)
|
|
|
Eric W. Thornburg,
|
|
|
2009
|
|
|
$
|
345,000
|
|
|
$
|
0
|
|
|
$
|
237,607
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
77,922
|
|
|
$
|
13,344
|
|
|
$
|
673,873
|
|
Chairman/President/CEO
|
|
|
2008
|
|
|
$
|
344,992
|
|
|
$
|
0
|
|
|
$
|
114,234
|
|
|
$
|
0
|
|
|
$
|
74,833
|
|
|
$
|
57,562
|
|
|
$
|
5,803
|
|
|
$
|
597,424
|
|
|
|
|
2007
|
|
|
$
|
319,269
|
|
|
$
|
0
|
|
|
$
|
220,748
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
35,800
|
|
|
$
|
4,500
|
|
|
$
|
580,317
|
|
David C. Benoit,
|
|
|
2009
|
|
|
$
|
222,041
|
|
|
$
|
0
|
|
|
$
|
19,964
|
|
|
$
|
0
|
|
|
$
|
89,402
|
|
|
$
|
125,839
|
|
|
$
|
7,710
|
|
|
$
|
464,956
|
|
VP Finance/CFO
|
|
|
2008
|
|
|
$
|
222,041
|
|
|
$
|
0
|
|
|
$
|
15,357
|
|
|
$
|
0
|
|
|
$
|
59,402
|
|
|
$
|
80,322
|
|
|
$
|
4,384
|
|
|
$
|
381,506
|
|
|
|
|
2007
|
|
|
$
|
211,468
|
|
|
$
|
0
|
|
|
$
|
22,430
|
|
|
$
|
7,684
|
|
|
$
|
61,764
|
|
|
$
|
41,893
|
|
|
$
|
4,220
|
|
|
$
|
349,459
|
|
Thomas R. Marston,
|
|
|
2009
|
|
|
$
|
181,458
|
|
|
$
|
0
|
|
|
$
|
42,251
|
|
|
$
|
0
|
|
|
$
|
24,842
|
|
|
$
|
172,397
|
|
|
$
|
5,978
|
|
|
$
|
426,925
|
|
VP, Business
|
|
|
2008
|
|
|
$
|
185,016
|
|
|
$
|
0
|
|
|
$
|
40,626
|
|
|
$
|
0
|
|
|
$
|
27,554
|
|
|
$
|
121,805
|
|
|
$
|
3,671
|
|
|
$
|
378,672
|
|
Development
|
|
|
2007
|
|
|
$
|
179,627
|
|
|
$
|
0
|
|
|
$
|
43,728
|
|
|
$
|
4,650
|
|
|
$
|
27,232
|
|
|
$
|
85,648
|
|
|
$
|
3,592
|
|
|
$
|
344,477
|
|
Terrance P. ONeill,
|
|
|
2009
|
|
|
$
|
190,580
|
|
|
$
|
0
|
|
|
$
|
26,407
|
|
|
$
|
0
|
|
|
$
|
42,133
|
|
|
$
|
114,921
|
|
|
$
|
6,530
|
|
|
$
|
380,571
|
|
VP, Service Delivery
|
|
|
2008
|
|
|
$
|
190,460
|
|
|
$
|
0
|
|
|
$
|
25,391
|
|
|
$
|
0
|
|
|
$
|
34,984
|
|
|
$
|
66,732
|
|
|
$
|
3,765
|
|
|
$
|
321,332
|
|
|
|
|
2007
|
|
|
$
|
182,001
|
|
|
$
|
0
|
|
|
$
|
37,085
|
|
|
$
|
6,775
|
|
|
$
|
35,225
|
|
|
$
|
23,676
|
|
|
$
|
3,640
|
|
|
$
|
288,402
|
|
Maureen P. Westbrook
|
|
|
2009
|
|
|
$
|
198,275
|
|
|
$
|
0
|
|
|
$
|
24,646
|
|
|
$
|
0
|
|
|
$
|
44,492
|
|
|
$
|
93,805
|
|
|
$
|
6,704
|
|
|
$
|
367,921
|
|
VP, Customer and Regulatory
|
|
|
2008
|
|
|
$
|
198,177
|
|
|
$
|
5,000
|
|
|
$
|
30,469
|
|
|
$
|
0
|
|
|
$
|
26,049
|
|
|
$
|
59,709
|
|
|
$
|
4,023
|
|
|
$
|
323,427
|
|
Affairs
|
|
|
2007
|
|
|
$
|
190,344
|
|
|
$
|
7,500
|
|
|
$
|
29,668
|
|
|
$
|
6,775
|
|
|
$
|
43,476
|
|
|
$
|
13,727
|
|
|
$
|
3,807
|
|
|
$
|
286,020
|
|
|
|
|
(A) |
|
Mr. Marston took advantage of a voluntary unpaid leave
program offered to all employees in the Company in 2009. This
accounts for the reduction in his base salary from 2008 to 2009. |
|
(B) |
|
In January 2009, NEOs received either restricted stock or
performance shares which is performance based and determined in
accordance with the Companys actual performance in
comparison to strategic goals approved by the Compensation
Committee, before the year begins. The amounts in the stock
awards columns reflect the aggregate grant date fair value
computed in accordance with FASB ASC Topic 718 and reported at
90% of target, the level of performance expected at grant. The
amounts reported for 2007 and 2008 have been recalculated to
conform to SEC regulations. If the highest level of performance
criteria were achieved the aggregate grant date fair value of
the portion of PSP awards elected by Messers. Thornburg, Benoit,
Marston, ONeill and Ms. Westbrook in performance
shares or restricted stock would be as disclosed in the
following table: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
Maximum
|
Name
|
|
Year(1)
|
|
Annual Award
|
|
Long-Term Award
|
|
Mr. Thornburg
|
|
|
2009
|
|
|
$
|
176,005
|
|
|
$
|
200,006
|
|
|
|
|
2008
|
|
|
$
|
31,732
|
|
|
$
|
158,659
|
|
|
|
|
2007
|
|
|
$
|
139,068
|
|
|
$
|
139,038
|
|
Mr. Benoit
|
|
|
2009
|
|
|
$
|
17,746
|
|
|
$
|
17,746
|
|
|
|
|
2008
|
|
|
$
|
12,797
|
|
|
$
|
12,797
|
|
|
|
|
2007
|
|
|
$
|
12,461
|
|
|
$
|
12,461
|
|
Mr. Marston
|
|
|
2009
|
|
|
$
|
11,736
|
|
|
$
|
58,682
|
|
|
|
|
2008
|
|
|
$
|
11,285
|
|
|
$
|
56,425
|
|
|
|
|
2007
|
|
|
$
|
10,988
|
|
|
$
|
54,941
|
|
Mr. ONeill
|
|
|
2009
|
|
|
$
|
14,670
|
|
|
$
|
29,341
|
|
|
|
|
2008
|
|
|
$
|
14,106
|
|
|
$
|
28,212
|
|
|
|
|
2007
|
|
|
$
|
13,735
|
|
|
$
|
27,470
|
|
Ms. Westbrook
|
|
|
2009
|
|
|
$
|
17,605
|
|
|
$
|
23,473
|
|
|
|
|
2008
|
|
|
$
|
16,927
|
|
|
$
|
33,855
|
|
|
|
|
2007
|
|
|
$
|
16,482
|
|
|
$
|
16,482
|
|
|
|
|
(1) |
|
The amounts reported in this table represent the equity portions
of the annual and long-term PSP Awards as elected by the NEOs
before the start of each year for 2007, 2008 and 2009. The
long-term incentive awards for 2007 vest ratably at 25%, per
year, over a period of four years and those for 2008 and 2009
vest ratably |
34
|
|
|
|
|
at 33.33%, per year, over a three year period. All vesting
periods also carry a requirement that the executive remain
employed by the Company to the completion of the vesting period
to receive the earned award. |
|
|
|
In addition, the compensation committee granted Mr. Benoit
1,000 shares in January 2010, in recognition of his 2009
performance. Amount of award granted will be reflected in the
2010 summary compensation table. |
|
|
|
(C) |
|
For assumptions used in valuation of Option Awards, see Footnote
12 Stock Based Compensation Plans in the
Companys 2009
Form 10-K. |
|
(D) |
|
The compensation reported in this column is in the form of cash
units issued under the PSP. Both the annual award and vested
portion of the long-term awards are included in this column for
each NEO. The long-term component has a continued employment
vesting schedule, in addition to the attainment of specific
performance measures described in the Compensation Committee
Discussion and Analysis on page 18. Amounts reported
include 100% of the annual and long-term non-equity (cash)
incentive compensation plan earned by NEO for 2009, although
portions of the long-term award were not payable in these years
and vest ratably over a three-year period. |
|
(E) |
|
Reflects the increases from 2007 through 2009 in the actuarial
present values of each NEOs accumulated benefits under the
Companys pension plan and Supplemental Executive
Retirement Program (SERP). In addition, this column reflects
Non-Qualified Deferred Compensation Plan and earned-above market
interest for Messers. Benoit and Marston, and Ms. Westbrook
of $11,451, $1,408, and $3,088 respectively.
Messrs. Thornburg and ONeill did not participate. |
|
(F) |
|
Amounts reflected in this column include 401(k) matching
contributions for each NEO in 2009, and $1,303 for the cost of a
supplemental long-term disability policy for Mr. Thornburg,
that when combined with the standard long-term disability policy
benefit provided to other NEOs, will provide Mr. Thornburg
a benefit equal to 60% of his compensation in the event that he
is disabled. In 2008, the Company changed the merit increase
date from January to April. To compensate individuals for the
dollar value of that time lapse, all employees were provided
with an amount equal to one quarter of their 2008 merit increase
in the first quarter of 2009. The value of this benefit reported
in this column for Messers. Thornburg, Benoit, Marston, and
ONeill and Ms. Westbrook were $1,691.41, $1,048.81,
$534.52, $812.35, and $755.23 respectively. |
Grants
of Plan-Based Awards for 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Awards:
|
|
|
|
Grant Date
|
|
|
|
|
Estimated Future Payouts
|
|
Estimated Future Payouts
|
|
of
|
|
Number of
|
|
Exercise or
|
|
Fair Value
|
|
|
|
|
Under Non-Equity Incentive
|
|
Under Equity Incentive
|
|
Shares
|
|
Securities
|
|
Base Price
|
|
of Stock
|
|
|
|
|
Plan Awards
|
|
Plan Awards
|
|
of Stock
|
|
Underlying
|
|
of Option
|
|
and Option
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
or Units
|
|
Options
|
|
Awards
|
|
Awards
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)(A)
|
|
(#)(A)
|
|
(#)(A)
|
|
(#)
|
|
(#)
|
|
($/Sh)
|
|
(B)
|
|
E. W. Thornburg
|
|
|
1/7/2009
|
|
|
$
|
14,667
|
|
|
$
|
29,334
|
|
|
$
|
44,001
|
|
|
|
5,519
|
|
|
|
11,037
|
|
|
|
17,011
|
|
|
|
0
|
|
|
|
0
|
|
|
|
NA
|
|
|
$
|
396,011
|
|
D. C. Benoit
|
|
|
1/7/2009
|
|
|
$
|
53,237
|
|
|
$
|
88,728
|
|
|
$
|
141,965
|
|
|
|
556
|
|
|
|
927
|
|
|
|
1,525
|
|
|
|
0
|
|
|
|
0
|
|
|
|
NA
|
|
|
$
|
35,491
|
|
T. R. Marston
|
|
|
1/7/2009
|
|
|
$
|
15,648
|
|
|
$
|
31,297
|
|
|
$
|
46,945
|
|
|
|
981
|
|
|
|
1,963
|
|
|
|
3,025
|
|
|
|
0
|
|
|
|
0
|
|
|
|
NA
|
|
|
$
|
70,418
|
|
T. P. ONeill
|
|
|
1/7/2009
|
|
|
$
|
24,451
|
|
|
$
|
48,902
|
|
|
$
|
73,352
|
|
|
|
613
|
|
|
|
1,227
|
|
|
|
1,891
|
|
|
|
0
|
|
|
|
0
|
|
|
|
NA
|
|
|
$
|
44,011
|
|
M. P. Westbrook
|
|
|
1/7/2009
|
|
|
$
|
25,429
|
|
|
$
|
50,858
|
|
|
$
|
76,286
|
|
|
|
572
|
|
|
|
1,145
|
|
|
|
1,764
|
|
|
|
0
|
|
|
|
0
|
|
|
|
NA
|
|
|
$
|
41,077
|
|
|
|
|
(A) |
|
The weighted average of the share price of Company stock was
$23.28 on January 6, 2009, the day prior to the grant date. |
|
(B) |
|
Amounts reflect the grant date fair value of restricted stock
and performance shares issued to named executives on
January 6, 2009. Reported amounts are determined according
to generally accepted accounting principles. |
35
As described previously in the Compensation Discussion and
Analysis on page 18, the Committee allocates a threshold,
target, and maximum award for each participant annually in
December of the year proceeding the measurement period. Specific
targets disclosed on page 30 herein, covering a range of
shareholder, customer, and employee driven strategic goals are
established before the year begins. At the conclusion of the
fiscal year, the Committee reviews a management report,
comparing the actual performance against the pre-established
goals to determine the level of earned award. The award is paid
in accordance with the allocation choices made by the
participant between restricted stock, performance shares and
cash units, made prior to the fiscal year being measured.
Outstanding
Equity Awards at Fiscal Year-End 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Option Awards
|
|
|
|
|
|
Equity
|
|
Incentive Plan
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
Awards:
|
|
|
|
|
|
|
Incentive Plan
|
|
|
|
|
|
|
|
Market
|
|
Awards:
|
|
Market or
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
Number of
|
|
Value of
|
|
Number of
|
|
Payout Value
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Unearned
|
|
of Unearned
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Units of
|
|
Units of
|
|
Shares Units
|
|
Shares, Units
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Stock
|
|
Stock
|
|
or Other
|
|
or Other
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
that have
|
|
That Have
|
|
Rights that
|
|
Rights That
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Option
|
|
Not
|
|
Not
|
|
have not
|
|
Have Not
|
|
|
(#)
|
|
(#)
|
|
Options
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
|
E. W. Thornburg
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
1,803
|
|
|
$
|
44,660
|
|
|
|
13,942
|
|
|
$
|
345,343
|
|
D. C. Benoit
|
|
|
5,012
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
20.42
|
|
|
|
Dec. 2010
|
|
|
|
1,351
|
|
|
$
|
33,464
|
|
|
|
1,517
|
|
|
$
|
37,576
|
|
|
|
|
5,054
|
|
|
|
|
|
|
|
|
|
|
$
|
27.95
|
|
|
|
Dec. 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,671
|
|
|
|
|
|
|
|
|
|
|
$
|
25.78
|
|
|
|
Dec. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,209
|
|
|
|
|
|
|
|
|
|
|
$
|
29.05
|
|
|
|
Dec. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T. R. Marston
|
|
|
3,058
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
27.95
|
|
|
|
Dec. 2011
|
|
|
|
1,192
|
|
|
$
|
29,526
|
|
|
|
4,298
|
|
|
$
|
106,461
|
|
|
|
|
3,431
|
|
|
|
|
|
|
|
|
|
|
$
|
25.78
|
|
|
|
Dec. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,151
|
|
|
|
|
|
|
|
|
|
|
$
|
29.05
|
|
|
|
Dec. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T. P. ONeill
|
|
|
3,167
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
20.42
|
|
|
|
Dec. 2010
|
|
|
|
1,192
|
|
|
$
|
29,526
|
|
|
|
2,923
|
|
|
$
|
72,403
|
|
|
|
|
4,456
|
|
|
|
|
|
|
|
|
|
|
$
|
27.95
|
|
|
|
Dec. 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,001
|
|
|
|
|
|
|
|
|
|
|
$
|
25.78
|
|
|
|
Dec. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,593
|
|
|
|
|
|
|
|
|
|
|
$
|
29.05
|
|
|
|
Dec. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. P. Westbrook
|
|
|
5,895
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
20.42
|
|
|
|
Dec. 2010
|
|
|
|
1,192
|
|
|
$
|
29,526
|
|
|
|
2,583
|
|
|
$
|
63,981
|
|
|
|
|
4,456
|
|
|
|
|
|
|
|
|
|
|
$
|
27.95
|
|
|
|
Dec. 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,001
|
|
|
|
|
|
|
|
|
|
|
$
|
25.78
|
|
|
|
Dec. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,593
|
|
|
|
|
|
|
|
|
|
|
$
|
29.05
|
|
|
|
Dec. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The December 31, 2009, closing price of Connecticut Water
Service, Inc. common stock was $24.77.
Material
Features of Equity-Based Awards
The Companys 2004 PSP provides for an aggregate of up to
700,000 shares of common stock of the Company to be issued
as awards of incentive or non-qualified stock options, shares of
restricted stock or awards of performance share or performance
cash units (each, an Award). Options must be issued
at an option price no less than the fair market value of the
Companys common stock on the date of the grant. Under the
2004 PSP, 25% of the shares subject to option awards vest in
equal annual installments, beginning on the first anniversary of
the date of the grant of the award and ratably over the
following three anniversaries of such date. The Company has not
awarded any stock options under the PSP since December 2003.
Restricted stock awards are conditioned upon the attainment of
performance goals established by the Committee for the
performance period to which the award relates and the award
recipients continued employment with the Company through
the end of the performance period. During the performance
period, the participant has all of the rights of a shareholder
of the Company, including the right to vote and receive
dividends. Participants may elect to have these awards made in
the form of performance shares.
36
The Committee may also grant awards of performance share or
performance cash units pursuant to the PSP. At the completion of
a performance award period, the Committee will determine the
award to be made to each participant by multiplying the number
of performance units granted to each participant by a
performance factor representing the degree of attainment of the
performance goals. Performance share units will be paid in the
form of common stock upon the participants retirement or
termination and cash units are paid in cash. Awards through the
annual plan became 100% vested after results were evaluated at
the conclusion of the measurement period. The long-term awards
vested 25% per year ratably over four years beginning on the
first anniversary of the earning of the award as long as the
participant is employed by the Company. In periods after January
2008, the long-term awards will vest 33.33% per year ratably
over three years.
2009
Option Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
Value Realized on
|
|
Number of
|
|
Value Realized
|
|
|
Acquired on
|
|
Exercise
|
|
Shares Acquired
|
|
on Vesting
|
Name
|
|
Exercise (#)
|
|
($)
|
|
on Vesting (#)(A)
|
|
($)(B)
|
|
E. W. Thornburg
|
|
|
0
|
|
|
$
|
0
|
|
|
|
4,465
|
|
|
$
|
80,906
|
|
D. C. Benoit
|
|
|
7,085
|
|
|
$
|
162,441
|
|
|
|
1,113
|
|
|
$
|
20,168
|
|
T. R. Marston
|
|
|
0
|
|
|
$
|
0
|
|
|
|
1,896
|
|
|
$
|
34,356
|
|
T. P. ONeill
|
|
|
0
|
|
|
$
|
0
|
|
|
|
1,558
|
|
|
$
|
28,231
|
|
M. P. Westbrook
|
|
|
10,413
|
|
|
$
|
238,605
|
|
|
|
1,514
|
|
|
$
|
27,434
|
|
|
|
|
(A) |
|
Includes 33.33% of the 2009 long-term PSP award that was vested
in 2009 and 20% of the Performance Accelerated Restricted Stock
Awards (PARSA) vesting in 2009. PARSA Agreements were entered
into with all of the NEOs in December 2005, except for
Mr. Thornburg. Mr. Thornburg entered into a PARSA
agreement in January 2006. Under the PARSA agreements, 20% of
the award vests on the 2nd, 3rd, 4th, 5th, and 6th anniversaries
of the grant date. |
|
(B) |
|
The value is calculated by multiplying the number of shares
vested by the market value of Connecticut Water shares on the
vesting date. These shares vested at an average price of $18.12. |
CHANGE-IN-CONTROL
AGREEMENTS
On November 21, 2008, the Company and The Connecticut Water
Company (CWC) entered into Amended and Restated Employment
Agreements with certain executives, including
Messrs. Thornburg, Benoit, ONeill, Marston, and
Ms. Westbrook. The intent of the agreements is to ensure
continuity in the management of the Company in the event of a
change-in-control
of the Company. The agreements do not become effective until a
change-in-control
occurs (the Effective Date). A
change-in-control
is deemed to occur when (i) any person, other than the
Company, CWC or any employee benefit plan sponsored by the
Company or CWC, becomes the beneficial owner, directly or
indirectly, of 20% or more of the common stock of the Company or
CWC; (ii) the stockholders of the Company or CWC approve
(A) any consolidation or merger of the Company or CWC in
which the Company or CWC is not the continuing or surviving
corporation (other than a consolidation or merger of the Company
or CWC in which holders of the common stock of the Company or
CWC have the same proportionate ownership of common stock of the
surviving corporation) or pursuant to which the common stock of
the Company or CWC would be converted into cash, securities or
other property, or (B) any sale, lease, exchange or other
transfer of all or substantially all the assets of the Company
or CWC; (iii) there is a change in the majority of the
Board of Directors of the Company or CWC during a
24-month
period, or (iv) the Board adopts a resolution to the effect
that a
change-in-control
has occurred.
As of the Effective Date, CWC agrees to employ the executives
for a continuously renewing three-year period commencing on the
Effective Date. Compensation under the agreements is paid by CWC
and consists of (i) base salary, (ii) annual bonus,
(iii) participation in incentive, savings and retirement
plans and welfare plans applicable to executive employees,
(iv) fringe benefits, (v) an office and support staff,
and (vi) if the executive is employed on the date the Board
approves a consolidation, merger, transfer of assets or other
transaction described in clause, (ii) of the
37
definition of
change-in-control
above, and the shareholders approve such transaction, a stay-on
bonus equal to the executives then-current base salary,
plus an amount equal to the target bonus under the
Officers Incentive Program for the year in which
such date occurs, payable in a lump sum, provided the executive
is employed on the fifth day following the closing of such
transaction. The stay-on bonus is also payable if the
executives employment is terminated following such
approval but prior to the fifth day following the closing of
such transaction by the Company for any reason other than for
cause, death or attainment of age 65, or if employment is
terminated because of the executives disability, as
defined in the agreement, or if the executive voluntarily
terminates employment prior to such date for good
reason as defined in the agreement.
If the executives employment is terminated for cause or by
reason of the executives death or attainment of age 65 or
voluntarily by the executive other than for good reason, the
obligations of CWC under the agreements cease and the executive
forfeits all rights to receive any compensation or other
benefits under the agreement except compensation or benefits
accrued or earned and vested by the executive as of the date of
termination, including base salary through the date of
termination and benefits payable under the terms of any
qualified or non-qualified retirement or deferred compensation
plans maintained by CWC; provided, that if the executives
employment is terminated by reason of the executives
death, in addition to the preceding and any other death benefits
which may become payable, base salary continues to be paid at
the then current rate for a period of six months to the
executives beneficiary or estate.
If the executives employment is terminated for any reason
other than cause, death or attainment of age 65, or if the
executives employment is terminated by reason of the
executives disability, or if the executive voluntarily
terminates employment for good reason, the obligations of CWC
are, in addition to the stay-on bonus described above, payment
or provision of: (i) a lump-sum payment in consideration of
the executives covenants regarding confidential
information and non-competition (the Covenants), in
an amount determined by an independent expert to be the
reasonable value of such Covenants as the termination date (the
Covenant Value), but in no event greater than the
aggregate value of the benefits provided in subparagraphs (ii) -
(ix) below (the Termination Benefits); such
Termination Benefits are to be offset by the Covenant Value,
provided, however, that the executive may elect to receive any
Termination Benefit that would be so offset, but in such event
the Covenant Value will be reduced by the value of such
Termination Benefit; (ii) an amount equal to three times
the base salary of the executive plus three times the target
bonus for the executive under the Officers Incentive Program for
the year in which termination occurs, reduced by any amount
payable under any applicable severance plan, payable over the
three years following termination; (iii) the value of the
aggregate amounts that would have been contributed on behalf of
the executive under any qualified defined contribution
retirement plan(s) then in effect, plus estimated earnings
thereon had the executive continued to participate in such
plan(s) for an additional three years; (iv) an amount equal
to the difference between benefits which would have been payable
to the executive under any deferred compensation agreement had
the executive continued in the employ of CWC for an additional
three years and the benefits actually payable;
(v) additional retirement benefits equal to the present
value of the difference between the annual pension benefits that
would have been payable to the executive under CWCs
qualified defined benefit retirement plan and under any
non-qualified supplemental executive retirement plan covering
the executive had the executive continued to participate in such
plan(s) for an additional three years and the benefits actually
payable; (vi) if the executives employment is
terminated by reason of disability, disability benefits at least
equal to the most favorable of those provided by CWC or the
Company; (vii) a lump sum payment equal to all life,
health, disability and similar welfare benefit plans and
programs of CWC for a period of three years, plus three
additional years of credit for purposes of determining
eligibility to participate in any such plan for retirees;
(viii) three additional years of all other perquisites as
the executive was receiving at the date of termination; and
(ix) outplacement services for one year.
Post-Termination
Payments and Benefits
The Company estimates of the payments to each of the NEOs that
would be made under various triggering events described in the
tables below, which were prepared as though each of our
NEOs employment was terminated on December 31, 2009,
using a share price of $24.77.
38
2009
Change-In-Control Summary
Eric W.
Thornburg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination for
|
|
Benefit
|
|
Retirement
|
|
|
Death
|
|
|
Disability
|
|
|
for Cause
|
|
|
Change-in-Control
|
|
|
Stay-On Bonus(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
491,671
|
|
Cash Severance(B)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,475,013
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan(C)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
SERP(D)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
571,169
|
|
Deferred Compensation(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
Defined Contribution Plan(F)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,751
|
|
Equity Awards: Stock Options, Restricted Stock &
Performance Shares(G)
|
|
$
|
390,004
|
|
|
$
|
390,004
|
|
|
$
|
390,004
|
|
|
|
|
|
|
$
|
390,004
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare(H)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,186
|
|
Outplacement(I)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
280G Tax Gross Up(J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,996,794
|
|
David C.
Benoit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination for
|
|
Benefit
|
|
Retirement
|
|
|
Death
|
|
|
Disability
|
|
|
for Cause
|
|
|
Change-in-Control
|
|
|
Stay-On Bonus(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
277,496
|
|
Cash Severance(B)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
832,489
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan(C)
|
|
|
|
|
|
$
|
185,594
|
|
|
$
|
318,225
|
|
|
$
|
276,678
|
|
|
$
|
276,678
|
|
SERP(D)
|
|
|
|
|
|
|
|
|
|
$
|
477,602
|
|
|
|
|
|
|
$
|
675,934
|
|
Deferred Compensation(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
104,064
|
|
Defined Contribution Plan(F)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,833
|
|
Equity Awards: Stock Options, Restricted Stock &
Performance Shares(G)
|
|
$
|
71,040
|
|
|
$
|
71,040
|
|
|
$
|
71,040
|
|
|
|
|
|
|
$
|
71,040
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare(H)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,186
|
|
Outplacement(I)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
280G Tax Gross Up(J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
341,579
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,647,300
|
|
39
Thomas R.
Marston
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination for
|
|
Benefit
|
|
Retirement
|
|
|
Death
|
|
|
Disability
|
|
|
for Cause
|
|
|
Change-in-Control
|
|
|
Stay-On Bonus(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
224,137
|
|
Cash Severance(B)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
672,410
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan(C)
|
|
$
|
784,385
|
|
|
$
|
501,352
|
|
|
$
|
732,858
|
|
|
$
|
784,335
|
|
|
$
|
784,335
|
|
SERP(D)
|
|
$
|
43,475
|
|
|
$
|
20,934
|
|
|
$
|
30,866
|
|
|
|
|
|
|
$
|
172,897
|
|
Deferred Compensation(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,769
|
|
Defined Contribution Plan(F)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,776
|
|
Equity Awards: Stock Options, Restricted Stock &
Performance Shares(G)
|
|
$
|
135,987
|
|
|
$
|
135,987
|
|
|
$
|
135,987
|
|
|
|
|
|
|
$
|
135,987
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare(H)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,713
|
|
Outplacement(I)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
280G Tax Gross Up(J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
447,276
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,504,300
|
|
Terrance
P. ONeill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination for
|
|
Benefit
|
|
Retirement
|
|
|
Death
|
|
|
Disability
|
|
|
for Cause
|
|
|
Change-in-Control
|
|
|
Stay-On Bonus(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
229,701
|
|
Cash Severance(B)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
689,103
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan(C)
|
|
$
|
584,380
|
|
|
$
|
393,971
|
|
|
$
|
582,047
|
|
|
$
|
584,380
|
|
|
$
|
584,380
|
|
SERP(D)
|
|
$
|
207,362
|
|
|
$
|
98,835
|
|
|
$
|
147,154
|
|
|
|
|
|
|
$
|
295,029
|
|
Deferred Compensation(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
Defined Contribution Plan(F)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,932
|
|
Equity Awards: Stock Options, Restricted Stock &
Performance Shares(G)
|
|
$
|
101,929
|
|
|
$
|
101,929
|
|
|
$
|
101,929
|
|
|
|
|
|
|
$
|
101,929
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare(H)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,186
|
|
Outplacement(I)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
280G Tax Gross Up(J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,966,260
|
|
40
Maureen
P. Westbrook
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination for
|
|
|
|
|
|
|
|
|
Termination
|
|
Change-in-
|
Benefit
|
|
Retirement
|
|
Death
|
|
Disability
|
|
for Cause
|
|
Control
|
|
Stay-On Bonus(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
237,396
|
|
Cash Severance(B)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
712,188
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan(C)
|
|
|
|
|
|
$
|
213,818
|
|
|
$
|
563,685
|
|
|
$
|
349,628
|
|
|
$
|
349,628
|
|
SERP(D)
|
|
|
|
|
|
|
|
|
|
$
|
425,448
|
|
|
|
|
|
|
$
|
285,878
|
|
Deferred Compensation(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,290
|
|
Defined Contribution Plan(F)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,479
|
|
Equity Awards: Stock Options, Restricted Stock &
Performance Shares(G)
|
|
$
|
93,507
|
|
|
$
|
93,507
|
|
|
$
|
93,507
|
|
|
|
|
|
|
$
|
93,507
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare(H)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,186
|
|
Outplacement(I)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
280G Tax Gross Up(J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,773,552
|
|
|
|
|
(A) |
|
If the named executive is terminated after the Board approves a
consolidation, merger, or transfer of assets, or if the named
executive is employed on the fifth day following the closing of
such transaction, the named executive will receive a stay-on
bonus. This stay-on bonus is equal to the named executives
then-current base salary, plus an amount equal to the target
bonus under the short-term incentive award program. |
|
(B) |
|
If the named executives employment is terminated for any
reason other than cause, death, or the attainment of
age 65, or if the executive is terminated by reason of the
executives disability, or if the executive voluntarily
terminates employment for good reason, the Company, in return
for the executives covenants regarding confidential
information and non-competition (the Covenants), will pay an
amount equal to three times the base salary of the named
executive plus three times the target bonus for the named
executive under the short-term incentive award program. |
|
(C) |
|
The amounts reported for retirement benefits equal the present
value of the accumulated benefit at December 31, 2009 for
each of the named executives. |
|
(D) |
|
Under a change-in-control, the NEO would receive additional
retirement benefits for the three years covered under the
employment agreement. The additional retirement benefits would
be equal to the present value of the difference between the
annual pension benefits that would have been payable under the
CWC Employees Retirement Plan (the Retirement
Plan) and under the non-qualified Supplemental Executive
Retirement Program had the executive continued to participate in
the plans for an additional three years and the vested benefits
at the time of termination. |
|
(E) |
|
The amounts reported are equal to the difference between the
benefits which would have been payable to the named executive
under any deferred compensation agreement had the named
executive continued in the employ of the Company for an
additional three years and the benefits actually payable. |
|
(F) |
|
The amounts reported are aggregate amounts that would have been
contributed on behalf of the named executive under the CWC
Employee Savings Plan (401(k)) for an additional three years,
plus estimated earnings had the named executive continued to
participate. |
|
(G) |
|
Named executive will become fully vested in equity compensation
awards previously granted, such as stock options, restricted
stock and performance shares. |
|
(H) |
|
Amounts reported represent a lump sum payment equal in value of
the benefits provided to the NEOs under the life, health,
disability, and welfare benefit programs of the Company for a
period of three years, plus three years of additional credit for
purposes of determining eligibility to participate in any such
plan for retirees. |
|
(I) |
|
Represents estimate of value of outplacement services for one
year. |
41
|
|
|
(J) |
|
In the event that any payment or benefit received or to be
received by the executive under the agreement would be an
excess parachute payment, as defined in Internal
Revenue Code (IRC) Section 280G, and subject to the federal
excise tax imposed by IRC Section 4999, then a gross
up payment will be made to the named executive in the
event that the benefits payable to the named executive under
agreement becomes subject to the excise tax on excess parachute
payments. The
gross-up
payment would compensate the named executive for the initial 20%
excise tax payable on their excess parachute payments plus the
income and excise taxes then becoming payable on the
gross-up
payment. |
We have provided the following Pension Benefit Table to show the
present value of accumulated benefits payable to each of our
NEOs under their retirement plans.
Pension
Benefits Table for 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Present Value of
|
|
|
Payments
|
|
|
|
|
|
Years Credited
|
|
|
Accumulated Benefit
|
|
|
During Last
|
|
Name
|
|
Plan Name
|
|
Service (#)
|
|
|
($)(A)
|
|
|
Fiscal Year ($)
|
|
|
E. W. Thornburg
|
|
CWC Employees Retirement Plan
|
|
|
4.00
|
|
|
$
|
70,998
|
|
|
$
|
0
|
|
|
|
Supplemental Executive Retirement Program
|
|
|
3.83
|
|
|
$
|
153,015
|
|
|
$
|
0
|
|
D. C. Benoit
|
|
CWC Employees Retirement Plan
|
|
|
14.00
|
|
|
$
|
267,903
|
|
|
$
|
0
|
|
|
|
Supplemental Executive Retirement Program
|
|
|
13.67
|
|
|
$
|
252,094
|
|
|
$
|
0
|
|
T. R. Marston
|
|
CWC Employees Retirement Plan
|
|
|
36.00
|
|
|
$
|
763,846
|
|
|
$
|
0
|
|
|
|
Supplemental Executive Retirement Program
|
|
|
35.50
|
|
|
$
|
79,619
|
|
|
$
|
0
|
|
T. P. ONeill
|
|
CWC Employees Retirement Plan
|
|
|
30.00
|
|
|
$
|
567,017
|
|
|
$
|
0
|
|
|
|
Supplemental Executive Retirement Program
|
|
|
29.83
|
|
|
$
|
141,229
|
|
|
$
|
0
|
|
M. P. Westbrook
|
|
CWC Employees Retirement Plan
|
|
|
21.50
|
|
|
$
|
343,191
|
|
|
$
|
0
|
|
|
|
Supplemental Executive Retirement Program
|
|
|
21.25
|
|
|
$
|
151,555
|
|
|
$
|
0
|
|
|
|
|
(A) |
|
In determining the present value of the accumulated benefits for
the CWC Employees Retirement Plan, we used a discount rate of
5.95% for December 31, 2009. For the Supplemental Executive
Retirement Program, we used a discount rate of 5.80% for
December 31, 2009. For the CWC Employees Retirement Plan,
we have assumed the form of payment would be 75% lump sum and
25% annuity with a 5.95% lump sum discount rate. For the
Supplemental Executive Retirement Plan, we have assumed the form
of payment would be 100% annuity. For other assumptions used in
estimating these amounts, see Note 11 Long-Term
Compensation Arrangements in the Companys 2009
Form 10-K. |
Retirement
Plans
All employees and officers of CWC, hired before January 1,
2009 are entitled to participate in the Retirement Plan, a
non-contributory, qualified defined benefit plan. Retirement
benefits are based on years of credited service and average
annual earnings, which is defined to mean the highest average
regular basic compensation received by an individual from the
Company and CWC during any 60 consecutive months. Retirement
benefits under the Retirement Plan are not reduced by
employees Social Security benefits. Contributions, which
are actuarially determined, are made to the Retirement Plan by
CWC for the benefit of all employees covered by the Retirement
Plan.
The Internal Revenue Code of 1986, as amended (the
IRC), imposes limits upon the amount of compensation
that may be used in calculating retirement benefits and the
maximum annual benefit that can be paid to a participant from a
tax-qualified benefit plan. These limits affect the benefit
calculation for certain individuals and effectively reduce their
benefits under the Retirement Plan. In order to supplement
Retirement Plan benefits, CWC maintains a supplemental executive
retirement plan for certain executives, including all of the
executive officers listed in the Summary Compensation Table. If
the executive meets the age and any applicable service
requirements under such an agreement, the annual retirement
benefit payable will be equal to 60% of average annual earnings,
as defined under the Retirement Plan but without the IRC
compensation limit, offset by his or her benefit payable under
the Retirement Plan. Participants are part of CWC Employees
Retirement Plan (the Plan), a defined benefit plan covering all
Connecticut Water employees.
42
In the case of each of Messrs. Thornburg and Benoit, the
annual benefit amounts are reduced by benefits payable under the
retirement plan of a prior employer. All supplemental executive
retirement agreements provide an early retirement benefit if the
NEOs retire from service to the Company at any age between 55
and 65.
The material assumptions used in valuing the pension liability
and expense for the Retirement Plan and the SERP benefits can be
found in footnote Note 11 Long-Term Compensation
Arrangements in the Companys 2009
Form 10-K.
Participants are also parties to individual amended and restated
(November 21, 2008) supplemental executive retirement
plan agreements (SERPs) with the Company. The SERPs, in
conjunction with the Retirement Plan, provide the participant
who achieves the age of 62 with a benefit equivalent to 60% of
the average of the five highest years of total compensation,
including participating in the certain components of the
Companys PSP. Messrs. Thornburg and Benoit have
reductions in their agreements for benefits accrued with prior
employers.
Executive officers may also participate in the amended Savings
Plan (401(k)) of CWC, as amended and restated as of March 2010,
and other benefit plans generally available to all levels of
salaried employees. Also, executive officers may elect to defer
compensation under a non-qualified salary deferral plan,
described below.
Non-qualified
Deferred Compensation Table for 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
|
|
Aggregate
|
|
|
Contributions
|
|
Contributions
|
|
Earnings in
|
|
Aggregate
|
|
Balance at
|
|
|
in Last Fiscal
|
|
in Last Fiscal
|
|
Last Fiscal
|
|
Withdrawals/
|
|
Last Fiscal
|
Name
|
|
Year ($)
|
|
Year ($)
|
|
Year ($)(A)
|
|
Distributions ($)
|
|
Year End ($)
|
|
E. W. Thornburg
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
D. C. Benoit
|
|
$
|
20,800
|
|
|
$
|
0
|
|
|
$
|
34,688
|
|
|
$
|
0
|
|
|
$
|
445,724
|
|
T. P. ONeill
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
T.R. Marston
|
|
$
|
10,400
|
|
|
$
|
0
|
|
|
$
|
3,923
|
|
|
$
|
0
|
|
|
$
|
52,491
|
|
M. P. Westbrook
|
|
$
|
3,900
|
|
|
$
|
0
|
|
|
$
|
9,430
|
|
|
$
|
0
|
|
|
$
|
120,731
|
|
|
|
|
(A) |
|
Above market interest credited for Messrs. Benoit, Marston,
and Ms. Westbrook of $11,451, $1,408 and $3,088 are
reported in the 2009 Summary Compensation Table in the
Change in Pension Values and Non-Qualified Deferred
Compensation Earnings column. |
NEOs may elect to defer compensation under individual
non-qualified deferred compensation agreements. Each Deferred
Compensation Agreement permits the executive officer to elect to
defer, prior to the beginning of each calendar year, an amount
up to 12% of their annual cash salary. Such salary deferral
amounts are credited to a deferred compensation account
maintained by the Company on behalf of the executive officer.
Amounts deferred to the account are credited with interest on a
semi-annual basis at an interest rate equal to Moodys AAA
Corporate Bond Yield Average rate, plus an additional
11/2%
3%. Compensation deferred under the Deferred Compensation
Agreement, plus all accrued interest, shall be paid to each
executive officer (or to the executive officers designated
beneficiary) upon termination of employment by the Company. The
payment is in the form of an annual annuity if the participant
terminates on or after the age of 55. The payment is a lump sum
if the NEO terminates prior to age 55. If the executive
officer is terminated for cause as defined in the
Deferred Compensation Agreement, the executive officer shall be
entitled only to a return of amount deferred without payment of
accrued interest.
Other
Matters
The Board of Directors knows of no other matters which may be
presented for consideration at the meeting. However, if any
other matters properly come before the meeting, the persons
named in the enclosed proxy will vote in their discretion on
such matters.
Householding
of Annual Meeting Materials
Some banks, brokers, and other nominee record holders may
participate in the practice of householding proxy
statements, annual reports and related notices. This means that
only one copy of our NOIA, Proxy Statement
43
and/or our
2009 Annual Report may have been sent to multiple shareholders
in your household. If you would like to obtain another copy of
any of these documents, please contact our Corporate Secretary,
Daniel J. Meaney, at Connecticut Water Service, Inc.,
93 West Main Street, Clinton, Connecticut 06413, or by
telephone at
1-800-425-3985,
ext. 3016. If you want to receive separate copies of the NOIA,
Proxy Statement,
and/or
Annual Report in the future, or if you are receiving multiple
copies and would like to receive only one copy of any of these
documents for all shareholders in your household, you should
contact your bank, broker, or other nominee record holder, or
you may contact us at the above address or telephone number.
REQUIREMENTS
AND DEADLINES FOR PROXY PROPOSALS, NOMINATION OF DIRECTORS,
AND OTHER BUSINESS OF SHAREHOLDERS
For business to be properly brought before an annual meeting by
a shareholder, the business must be an appropriate matter to be
voted by the shareholders at an annual meeting and the
shareholder must have given proper and timely notice in writing
to the Secretary of the Company. To be timely, a
shareholders notice must be delivered to or mailed and
received by the Secretary of the Company at the Main Offices of
the Company, 93 West Main Street, Clinton, CT 06413, no
later than the close of business on a day which is not less than
120 days prior to the anniversary date of the immediately
preceding annual meeting, which date for purposes of the 2011
Annual Meeting of Shareholders is January 14, 2011. A
shareholders notice to the Secretary must set forth as to
each matter the shareholder proposes to bring before the annual
meeting (a) a brief description of the business desired to
be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (b) the
name and address, as they appear on the Companys books, of
the shareholder proposing such business, (c) the class and
number of shares of the Company which are beneficially owned by
the shareholder, and (d) any material interest of the
shareholder in such business.
In addition, shareholder proposals intended to be presented at
the Annual Meeting of Shareholders in 2011 must be received by
the Company no later than December 2, 2010 in order to be
considered for inclusion in the Companys proxy statement
and form of proxy relating to the 2011 Annual Meeting of
Shareholders.
Daniel J. Meaney
Corporate Secretary
April 1, 2010
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934 and files an Annual Report
on
Form 10-K
with the Securities and Exchange Commission. Additional copies
of the 2009 Annual Report on
Form 10-K
filed by the Company, including the financial statements and
schedules, but without exhibits, will be mailed to any
shareholder upon written request without charge. The exhibits
are obtainable from the Company upon payment of the reasonable
cost of copying such exhibits. Shareholders can request this
information by phone at
1-800-428-3985,
ext. 3016, by
e-mail at
dmeaney@ctwater.com, or by mail to Daniel J. Meaney, Corporate
Secretary, Connecticut Water Service, Inc., 93 West Main
Street, Clinton, Connecticut 06413.
44
DIRECTIONS
Connecticut
Water Service, Inc.
Annual Meeting of Shareholders
Held at the Mystic Marriott
625 North Road (Route 117), Groton, Connecticut
Meeting at 2:00 P.M. Doors Open at
1:00 P.M.
IF YOU
PLAN TO ATTEND THE MEETING, PLEASE CALL
1-800-428-3985,
EXT. 3015,
AND LEAVE YOUR NAME, ADDRESS, AND TELEPHONE NUMBER.
ALSO, IF YOU NEED SPECIAL ASSISTANCE AT THE MEETING,
PLEASE ALSO STATE SUCH A REQUEST WHEN YOU CALL.
The
Mystic Marriotts Web site has directions and a printable
map
(http://www.marriott.com/hotels/travel/gonmm-mystic-marriott-hotel-and-spa/)
From Hartford: Take Interstate 91 South to
Exit 22S Route 9 South. Take Route 9 South to Interstate 95
North. Take Interstate 95 North to Exit 88. Make a left at the
bottom of the exit ramp. The Mystic Marriott Hotel and Spa will
be on the right.
From the Boston/Providence: Take Interstate 95
South to Exit 88. Make a right at the bottom of the exit ramp.
The Mystic Marriott Hotel and Spa will be on the right.
From the New York City: Take Interstate 95
North to Exit 88. Make a left at the bottom of the exit ramp.
The Mystic Marriott Hotel and Spa will be on the right.
VOTEBYINTERNET-www.proxyvote.com
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ryofMnnflPMlllllfl/l/UfPfinformationupuntil11:59P.M.EasternTimethedaybeforethecut-offdateoriftf/
iiiffjfififitiWmUiOimeetingdate.Haveyourproxycardinhandwhenyouaccessthewebsiteand^followtheinstru
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CONNECTICUTWATERSERVICE,INC.9TMANSTREET
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irectorsrecommendstatyounominee(s)onthelinebelow.1.ElectionofDirectorsNominees01HeatherHunt02Arth
urC.Reeds03EricW.ThornburgTheBoardofDirectorsrecommendsyouvoteFORthefollowingproposal(s):ForAgain
stAbstain2ProposaltoratifytheappointmentofPricewaterhouseCoopersLLP,independentregisteredpublicac
countants,asindependent(inn
auditorsforthefiscalyearendingDecember31,2010.NOTE:Ifnochoiceisindicated,thisproxyshallbedeemedtogra
ntauthoritytovoteFORtheelectionofdirectornomineesandtovoteFORProposal2.Foraddresschange/comments,mar
khere.fl(seereverseforinstructions)
Pleasesignexactlyasyourname(s)appear(s)hereon.Whensigningasattorney,executor,administrator,orotherfi
duciary,pleasegivefulltitleassuch.Jointownersshouldeachsignpersonally.Allholdersmustsign.Ifacorporat
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ImportantNoticeRegardingtheAvailabilityofProxyMaterialsfortheAnnualMeeting:TheNotice&ProxyStatement,
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CONNECTICUTWATERSERVICE,INC.AnnualMeetingofShareholdersMay14,20102:00PMlocaltimeTheundersignedshareh
olderofConnecticutWaterService,Inc.herebyappointsEricW.Thornburg,DavidC.Benoit,DanielJ.Meaney,andTho
masR.Marston,oranyoneofthem,attorneysorproxiesfortheundersigned,withpowerofsubstitution,toact,andtov
ote,asdesignatedherein,withthesameforceandeffectastheundersigned,allsharesoftheCompanysCommonStocka
ndPreferredAStockstandinginthenameoftheundersignedattheAnnualMeetingofShareholdersofConnecticutWater
Service,Inc.tobeheldattheMysticMarriott,625NorthRoad(Route117),Groton,Connecticut,May14,2010,2:00PM,
andatanyadjournmentorpostponementthereof.Thisproxy,whenproperlyexecuted,willbevotedinthemannerdirect
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